Republic of the Philippines SUPREME COURT Manila EN BANC PEOPLES BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.

), Petitioner, G.R. No. 179652 Present: CORONA, C.J., CARPIO, VELASCO, JR., LEONARDO-DE CASTRO, BRION, PERALTA, BERSAMIN, DEL CASTILLO,* ABAD, VILLARAMA, JR., PEREZ, MENDOZA, SERENO, REYES, and PERLAS-BERNABE, JJ. Promulgated: March 6, 2012 x-----------------------------------------------------------------------------------------x RESOLUTION VELASCO, JR., J.:

- versus -

THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII, and JANDELEON JUEZAN, Respondents.

In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.) questioned the Decision and Resolution of the Court of Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855.

Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City, for illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and Philhealth.[1] After the conduct of summary investigations, and after the parties submitted their position papers, the DOLE Regional Director found that private respondent was an employee of petitioner, and was entitled to his money claims. [2] Petitioner sought reconsideration of the Directors Order, but failed. The Acting DOLE Secretary dismissed petitioners appeal on

the ground that petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety bond. When the matter was brought before the CA, where petitioner claimed that it had been denied due process, it was held that petitioner was accorded due process as it had been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional limitation imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had been repealed by Republic Act No. (RA) 7730.[3]

In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against petitioner was dismissed. The dispositive portion of the Decision reads as follows: WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSEDand SET ASIDE. The Order of the then Acting Secretary of the Department of Labor and Employment dated 27 January 2005 denying petitioners appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The complaint against petitioner is DISMISSED.[4]

The Court found that there was no employer-employee relationship between petitioner and private respondent. It was held that while the DOLE may make a determination of the existence of an employeremployee relationship, this function could not be co-extensive with the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National Labor Relations Commission (NLRC) was held to be the primary agency in determining the existence of an employer-employee relationship. This was the interpretation of the Court of the clause in cases where the relationship of employer-employee still exists in Art. 128(b).[5]

From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision (with Leave of Court). The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not considered as co-extensive with the power to determine the existence of an employer-employee relationship. [6] In its Comment,[7] the DOLE sought clarification as well, as to the extent of its visitorial and enforcement power under the Labor Code, as amended.

The Court treated the Motion for Clarification as a second motion for reconsideration, granting said motion and reinstating the petition.[8] It is apparent that there is a need to delineate the jurisdiction of the DOLE Secretary vis--vis that of the NLRC.

Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and decide any matter involving the recovery of wages and other monetary claims and benefits was qualified by the proviso that the complaint not include a claim for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial and enforcement power for claims beyond PhP 5,000. The only qualification to this expanded power of the DOLE was only that there still be an existing employer-employee relationship.

It is conceded that if there is no employer-employee relationship, whether it has been terminated or it has not existed from the start, the DOLE has no jurisdiction. Under Art. 128(b) of the Labor Code, as amended by RA 7730, the first sentence reads, Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. It is clear and beyond debate that an employer-employee relationship must exist for the exercise of the visitorial and enforcement power of the DOLE. The question now arises, may the DOLE make a determination of whether or not an employer-employee relationship exists, and if so, to what extent?

The first portion of the question must be answered in the affirmative.

The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power of the DOLE, that is, the determination of the existence of an employer-employee relationship cannot be co-extensive with the visitorial and enforcement power of the DOLE. But even in conceding the power of the DOLE to determine the existence of an employer-employee relationship, the Court held that the determination of the existence of an employer-employee relationship is still primarily within the power of the NLRC, that any finding by the DOLE is merely preliminary. This conclusion must be revisited.

No limitation in the law was placed upon the power of the DOLE to determine the existence of an employer-employee relationship. No procedure was laid down where the DOLE would only make a preliminary finding, that the power was primarily held by the NLRC. The law did not say that the DOLE would first seek the NLRCs determination of the existence of an employer-employee relationship, or that should the existence of the

employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have the power to determine whether or not an employer-employee relationship exists, and from there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.

The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to follow, the same guide the courts themselves use. The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employers power to control the employees conduct.[9] The use of this test is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test, even in the course of inspection, making use of the same evidence that would have been presented before the NLRC.

The determination of the existence of an employer-employee relationship by the DOLE must be respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the alleged employer could, by the simple expedient of disputing the employer-employee relationship, force the referral of the matter to the NLRC. The Court issued the declaration that at least a prima facie showing of the absence of an employer-employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same does successfully refute the existence of an employer-employee relationship.

If the DOLE makes a finding that there is an existing employer-employee relationship, it takes cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction only if the employer-employee relationship has already been terminated, or it appears, upon review, that no employer-employee relationship existed in the first place.

The Court, in limiting the power of the DOLE, gave the rationale that such limitation would eliminate the prospect of competing conclusions between the DOLE and the NLRC. The prospect of competing conclusions could just as well have been eliminated by according respect to the DOLE findings, to the exclusion of the NLRC, and this We believe is the more prudent course of action to take.

This is not to say that the determination by the DOLE is beyond question or review. Suffice it to say, there are judicial remedies such as a petition for certiorari under Rule 65 that may be availed of, should a party wish to dispute the findings of the DOLE.

It must also be remembered that the power of the DOLE to determine the existence of an employeremployee relationship need not necessarily result in an affirmative finding. The DOLE may well make the determination that no employer-employee relationship exists, thus divesting itself of jurisdiction over the case. It must not be precluded from being able to reach its own conclusions, not by the parties, and certainly not by this Court.

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a determination as to the existence of an employer-employee relationship in the exercise of its visitorial and enforcement power, subject to judicial review, not review by the NLRC.

There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a threshold amount set by Arts. 129 and 217 of the Labor Code when money claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the regional director of the DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that despite the wording of Art. 128(b), this would only apply in the course of regular inspections undertaken by the DOLE, as differentiated from cases under Arts. 129 and 217, which originate from complaints. There are several cases, however, where the Court has ruled that Art. 128(b) has been amended to expand the powers of the DOLE Secretary and his duly authorized representatives by RA 7730. In these cases, the Court resolved that the DOLE had the jurisdiction, despite the amount of the money claims involved. Furthermore, in these cases, the inspection held by the DOLE regional director was prompted specifically by a complaint. Therefore, the initiation of a case through a complaint does not divest the DOLE Secretary or his duly authorized representative of jurisdiction under Art. 128(b).

To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards provisions of the Labor Code or other labor legislation, and there is a finding by the DOLE that there is an existing employeremployee relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other terms and conditions of employment, if accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there is still an existing

employer-employee relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be questioned through a petition for certiorari under Rule 65 of the Rules of Court.

In the present case, the finding of the DOLE Regional Director that there was an employer-employee relationship has been subjected to review by this Court, with the finding being that there was no employeremployee relationship between petitioner and private respondent, based on the evidence presented. Private respondent presented self-serving allegations as well as self-defeating evidence.[10] The findings of the Regional Director were not based on substantial evidence, and private respondent failed to prove the existence of an employer-employee relationship. The DOLE had no jurisdiction over the case, as there was no employeremployee relationship present. Thus, the dismissal of the complaint against petitioner is proper.

WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the MODIFICATION that in the exercise of the DOLEs visitorial and enforcement power, the Labor Secretary or the latters authorized representative shall have the power to determine the existence of an employer-employee relationship, to the exclusion of the NLRC.

SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 142244 November 18, 2002

ATLAS FARMS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, JAIME O. DELA PEA and MARCIAL I. ABION, respondents. DECISION QUISUMBING, J.: Petitioner seeks the reversal of the decision1 dated January 10, 2000 of the Court of Appeals in CA-G.R. SP No. 52780, dismissing its petition for certiorari against the NLRC, as well as the resolution2 dated February 24, 2000, denying its motion for reconsideration. The antecedent facts of the case, as found by the Court of Appeals,3 are as follows: Private respondent Jaime O. dela Pea was employed as a veterinary aide by petitioner in December 1975. He was among several employees terminated in July 1989. On July 8, 1989, he was re-hired by petitioner and given the additional job of feedmill operator. He was instructed to train selected workers to operate the feedmill. On March 13, 1993,4 Pea was allegedly caught urinating and defecating on company premises not intended for the purpose. The farm manager of petitioner issued a formal notice directing him to explain within 24 hours why disciplinary action should not be taken against him for violating company rules and regulations. Pea refused, however, to receive the formal notice. He never bothered to explain, either verbally or in writing, according to petitioner. Thus, on March 20, 1993, a notice of termination with payment of his monetary benefits was sent to him. He duly acknowledged receipt of his separation pay of P13,918.67. From the start of his employment on July 8, 1989, until his termination on March 20, 1993, Pea had worked for seven days a week, including holidays, without overtime, holiday, rest day pay and service incentive leave. At the time of his dismissal from employment, he was receiving P180 pesos daily wage, or an average monthly salary ofP5,402. Co-respondent Marcial I. Abion5 was a carpenter/mason and a maintenance man whose employment by petitioner commenced on October 8, 1990. Allegedly, he caused the clogging of the fishpond drainage resulting in damages worth several hundred thousand pesos when he improperly disposed of the cut grass and other waste materials into the ponds drainage system. Petitioner sent a written notice to Abion, requiring him to explain what happened, otherwise, disciplinary action would be taken against him. He refused to receive the notice and give an explanation, according to petitioner. Consequently, the company terminated his services on October 27, 1992. He acknowledged receipt of a written notice of dismissal, with his separation pay. Like Pea, Abion worked seven days a week, including holidays, without holiday pay, rest day pay, service incentive leave pay and night shift differential pay. When terminated on October 27, 1992, Abion was receiving a monthly salary of P4,500. Pea and Abion filed separate complaints for illegal dismissal that were later consolidated. Both claimed that their termination from service was due to petitioners suspicion that they were the leaders in a plan to form a union to compete and replace the existing management-dominated union.

On November 9, 1993, the labor arbiter dismissed their complaints on the ground that the grievance machinery in the collective bargaining agreement (CBA) had not yet been exhausted. Private respondents availed of the grievance process, but later on refiled the case before the NLRC in Region IV. They alleged "lack of sympathy" on petitioners part to engage in conciliation proceedings. Their cases were consolidated in the NLRC. At the initial mandatory conference, petitioner filed a motion to dismiss, on the ground of lack of jurisdiction, alleging private respondents themselves admitted that they were members of the employees union with which petitioner had an existing CBA. This being the case, according to petitioner, jurisdiction over the case belonged to the grievance machinery and thereafter the voluntary arbitrator, as provided in the CBA. In a decision dated January 30, 1996, the labor arbiter dismissed the complaint for lack of merit, finding that the case was one of illegal dismissal and did not involve the interpretation or implementation of any CBA provision. He stated that Article 217 (c) of the Labor Code6 was inapplicable to the case. Further, the labor arbiter found that although both complainants did not substantiate their claims of illegal dismissal, there was proof that private respondents voluntarily accepted their separation pay and petitioners financial assistance. Thus, private respondents brought the case to the NLRC, which reversed the labor arbiters decision. Dissatisfied with the NLRC ruling, petitioner went to the Court of Appeals by way of a petition for review on certiorari under Rule 65, seeking reinstatement of the labor arbiters decision. The appellate court denied the petition and affirmed the NLRC resolution with some modifications, thus: WHEREFORE, the petition is DENIED. The resolution in NLRC CA No. 010520-96 is AFFIRMED with the following modifications: 1) The private respondents can not be reinstated, due to their acceptance of the separation pay offered by the petitioner; 2) The private respondents are entitled to their full back wages; and, 3) The amount of the separation pay received by private respondents from petitioner shall not be deducted from their full back wages. Costs against petitioner. SO ORDERED.7 Petitioner forthwith filed its motion for reconsideration, which was denied in a resolution dated February 24, 2000, which reads: Acting on the Motion for Reconsideration filed by petitioner[s] which drew an opposition from private respondents, the Court resolved to DENY the aforesaid motion for reconsideration, as the issues raised therein have been passed upon by the Court in its questioned decision and no substantial arguments were presented to warrant its reversal, let alone modification. SO ORDERED.8 In this petition now before us, petitioner alleges that the appellate court erred in: I. DENYING THE PETITION FOR CERTIORARI AND IN EFFECT AFFIRMING THE RULINGS OF THE PUBLIC RESPONDENT NLRC THAT THE PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED; II. RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY AND FULL BACKWAGES; III. RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT.9

Petitioner contends that the dismissal of private respondents was for a just and valid cause, pursuant to the provisions of the companys rules and regulations. It also alleges lack of jurisdiction on the part of the labor arbiter, claiming that the cases should have been resolved through the grievance machinery, and eventually referred to voluntary arbitration, as prescribed in the CBA. For their part, private respondents contend that they were illegally dismissed from employment because management discovered that they intended to form another union, and because they were vocal in asserting their rights. In any case, according to private respondents, the petition involves factual issues that cannot be properly raised in a petition for review on certiorari under Rule 45 of the Revised Rules of Court.10 In fine, there are three issues to be resolved: 1) whether private respondents were legally and validly dismissed; 2) whether the labor arbiter and the NLRC had jurisdiction to decide complaints for illegal dismissal; and 3) whether petitioner is liable for costs of the suit. The first issue primarily involves questions of fact, which can serve as basis for the conclusion that private respondents were legally and validly dismissed. The burden of proving that the dismissal of private respondents was legal and valid falls upon petitioner. The NLRC found that petitioner failed to substantiate its claim that both private respondents committed certain acts that violated company rules and regulations,11 hence we find no factual basis to say that private respondents dismissal was in order. We see no compelling reason to deviate from the NLRC ruling that their dismissal was illegal, absent a showing that it reached its conclusion arbitrarily.12Moreover, factual findings of agencies exercising quasi-judicial functions are accorded not only respect but even finality, aside from the consideration here that this Court is not a trier of facts. 13 Anent the second issue, Article 217 of the Labor Code provides that labor arbiters have original and exclusive jurisdiction over termination disputes. A possible exception is provided in Article 261 of the Labor Code, which provides thatThe 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 or panel of Voluntary Arbitrators and shall immediately dispose and refer the same to the grievance Machinery or Arbitration provided in the Collective Bargaining Agreement. But as held in Vivero vs. CA,14 "petitioner cannot arrogate into the powers of Voluntary Arbitrators the original and exclusive jurisdiction of Labor Arbiters over unfair labor practices, termination disputes, and claims for damages, in the absence of an express agreement between the parties in order for Article 262 of the Labor Code [Jurisdiction over other labor disputes] to apply in the case at bar." Moreover, per Justice Bellosillo: It may be observed that under Policy Instruction No. 56 of the Secretary of Labor, dated 6 April 1993, "Clarifying the Jurisdiction Between Voluntary Arbitrators and Labor Arbiters Over Termination Cases and Providing Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the NCMB," termination cases arising in or resulting from the interpretation and implementation of collective bargaining agreements and interpretation and enforcement of company personnel policies which were initially processed at the various steps of the plantlevel Grievance Procedures under the parties collective bargaining agreements fall within the original and exclusive jurisdiction of the voluntary arbitrator pursuant to Art. 217 (c) and Art. 261 of the Labor Code; and, if filed before the Labor Arbiter, these cases shall be dismissed by the Labor Arbiter for lack of jurisdiction and

referred to the concerned NCMB Regional Branch for appropriate action towards and expeditious selection by the parties of a Voluntary Arbitrator or Panel of Arbitrators based on the procedures agreed upon in the CBA. As earlier stated, the instant case is a termination dispute falling under the original and exclusive jurisdiction of the Labor Arbiter, and does not specifically involve the application, implementation or enforcement of company personnel policies contemplated in Policy Instruction No. 56. Consequently, Policy Instruction No. 56 does not apply in the case at bar.15 x x x Records show, however, that private respondents sought without success to avail of the grievance procedure in their CBA.16 On this point, petitioner maintains that by so doing, private respondents recognized that their cases still fell under the grievance machinery. According to petitioner, without having exhausted said machinery, the private respondents filed their action before the NLRC, in a clear act of forum-shopping.17 However, it is worth pointing out that private respondents went to the NLRC only after the labor arbiter dismissed their original complaint for illegal dismissal. Under these circumstances private respondents had to find another avenue for redress. We agree with the NLRC that it was petitioner who failed to show proof that it took steps to convene the grievance machinery after the labor arbiter first dismissed the complaints for illegal dismissal and directed the parties to avail of the grievance procedure under Article VII of the existing CBA. They could not now be faulted for attempting to find an impartial forum, after petitioner failed to listen to them and after the intercession of the labor arbiter proved futile. The NLRC had aptly concluded in part that private respondents had already exhausted the remedies under the grievance procedure.18 It erred only in finding that their cause of action was ripe for arbitration. In the case of Maneja vs. NLRC,19 we held that the dismissal case does not fall within the phrase "grievances arising from the interpretation or implementation of the collective bargaining agreement and those arising from the interpretation or enforcement of company personnel policies." In Maneja, the hotel employee was dismissed without hearing. We ruled that her dismissal was unjustified, and her right to due process was violated, absent the twin requirements of notice and hearing. We also held that the labor arbiter had original and exclusive jurisdiction over the termination case, and that it was error to give the voluntary arbitrator jurisdiction over the illegal dismissal case. In Vivero vs. CA,20 private respondents attempted to justify the jurisdiction of the voluntary arbitrator over a termination dispute alleging that the issue involved the interpretation and implementation of the grievance procedure in the CBA. There, we held that since what was challenged was the legality of the employees dismissal for lack of cause and lack of due process, the case was primarily a termination dispute. The issue of whether there was proper interpretation and implementation of the CBA provisions came into play only because the grievance procedure in the CBA was not observed, after he sought his unions assistance. Since the real issue then was whether there was a valid termination, there was no reason to invoke the need to interpret nor question an implementation of any CBA provision. One significant fact in the present petition also needs stressing. Pursuant to Article 26021 of the Labor Code, the parties to a CBA shall name or designate their respective representatives to the grievance machinery and if the grievance is unsettled in that level, it shall automatically be referred to the voluntary arbitrators designated in advance by the parties to a CBA. Consequently only disputes involving the union and the company shall be referred to the grievance machinery or voluntary arbitrators. In these termination cases of private respondents, the union had no participation, it having failed to object to the dismissal of the employees concerned by the petitioner. It is obvious that arbitration without the unions active participation on behalf of the dismissed employees would be pointless, or even prejudicial to their cause. Coming to the merits of the petition, the NLRC found that petitioner did not comply with the requirements of a valid dismissal. For a dismissal to be valid, the employer must show that: (1) the employee was accorded due process, and (2) the dismissal must be for any of the valid causes provided for by law.22 No evidence was shown that private respondents refused, as alleged, to receive the notices requiring them to show cause why no disciplinary action should be taken against them. Without proof of notice, private respondents who were subsequently dismissed without hearing were also deprived of a chance to air their side at the level of the grievance machinery. Given the fact of dismissal, it can be said that the cases were effectively removed from the jurisdiction of the voluntary arbitrator, thus placing them within the jurisdiction of the labor arbiter. Where the dispute is just in the interpretation, implementation or enforcement stage, it may be referred to the grievance

machinery set up in the CBA, or brought to voluntary arbitration. But, where there was already actual termination, with alleged violation of the employees rights, it is already cognizable by the labor arbiter.23 In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction over the cases involving private respondents dismissal, and no error was committed by the appellate court in upholding their assumption of jurisdiction. However, we find that a modification of the monetary awards is in order. As a consequence of their illegal dismissal, private respondents are entitled to reinstatement to their former positions. But since reinstatement is no longer feasible because petitioner had already closed its shop, separation pay in lieu of reinstatement shall be awarded.24 A terminated employees receipt of his separation pay and other monetary benefits does not preclude reinstatement or full benefits under the law, should reinstatement be no longer possible.25 As held in Cario vs. ACCFA:26 Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of the money. Because out of job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed it. They are deemed not to have waived their rights. Renuntiato non praesumitur. Conformably, private respondents are entitled to separation pay equivalent to one months salary for every year of service, in lieu of reinstatement.27 As regards the award of damages, in order not to further delay the disposition of this case, we find it necessary to expressly set forth the extent of the backwages as awarded by the appellate court. Pursuant to R.A. 6715, as amended, private respondents shall be entitled to full backwages computed from the time of their illegal dismissal up to the date of promulgation of this decision without qualification, considering that reinstatement is no longer practicable under the circumstances.28 Having found private respondents dismissal to be illegal, and the labor arbiter and the NLRC duly vested with jurisdiction to hear and decide their cases, we agree with the appellate court that petitioner should pay the costs of suit. WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R. SP No. 52780 is AFFIRMED with the MODIFICATION that petitioner is ordered to pay private respondents (a) separation pay, in lieu of their reinstatement, equivalent to one months salary for every year of service, (b) full backwages from the date of their dismissal up to the date of the promulgation of this decision, together with (c) the costs of suit. SO ORDERED.

SECOND DIVISION

[G.R. No. 138938. October 24, 2000]

CELESTINO VIVIERO, petitioner, vs. COURT OF APPEALS, HAMMONIA MARINE SERVICES, and HANSEATIC SHIPPING CO., LTD. respondents. DECISION BELLOSILLO, J.: CELESTINO VIVERO, in this petition for review, seeks the reversal of the Decision of the Court of Appeals of 26 May 1999 setting aside the Decision of the National Labor Relations Commission of 28 May 1998 as well as its Resolution of 23 July 1998 denying his motion for its reconsideration, and reinstating the decision of the Labor Arbiter of 21 January 1997. Petitioner Vivero, a licensed seaman, is a member of the Associated Marine Officers and Seamen's Union of the Philippines (AMOSUP). The Collective Bargaining Agreement entered into by AMOSUP and private respondents provides, among others ARTICLE XII GRIEVANCE PROCEDURE xxxx Sec. 3. A dispute or grievance arising in connection with the terms and provisions of this Agreement shall be adjusted in accordance with the following procedure: 1. Any seaman who feels that he has been unjustly treated or even subjected to an unfair consideration shall endeavor to have said grievance adjusted by the designated representative of the unlicensed department abroad the vessel in the following manner: A. Presentation of the complaint to his immediate superior. B. Appeal to the head of the department in which the seaman involved shall be employed. C. Appeal directly to the Master. Sec. 4. If the grievance cannnot be resolved under the provision of Section 3, the decision of the Master shall govern at sea x x x x in foreign ports and until the vessel arrives at a port where the Master shall refer such dispute to either the COMPANY or the UNION in order to resolve such dispute. It is understood, however, if the dispute could not be resolved then both parties shall avail of the grievance procedure. Sec. 5. In furtherance of the foregoing principle, there is hereby created a GRIEVANCE COMMITTEE to be composed of two COMPANY REPRESENTATIVES to be designated by the COMPANY and two LABOR REPRESENTATIVES to be designated by the UNION. Sec. 6. Any grievance, dispute or misunderstanding concerning any ruling, practice, wages or working conditions in the COMPANY, or any breach of the Employment Contract, or any dispute arising from the meaning or the application of the provision of this Agreement or a claim of violation thereof or any complaint that any such crewmembers may have against the COMPANY, as well as complaint which the COMPANY may have against

such crewmembers shall be brought to the attention of the GRIEVANCE COMMITTEE before either party takes any action, legal or otherwise. Sec. 7. The COMMITTEE shall resolve any dispute within seven (7) days from and after the same is submitted to it for resolution and if the same cannot be settled by the COMMITTEE or if the COMMITTEE fails to act on the dispute within the 7-day period herein provided, the same shall be referred to a VOLUNTARY ARBITRATION COMMITTEE. An "impartial arbitrator" will be appointed by mutual choice and consent of the UNION and the COMPANY who shall hear and decide the dispute or issue presented to him and his decision shall be final and unappealable x x x x[1] As found by the Labor Arbiter Complainant was hired by respondent as Chief Officer of the vessel "M.V. Sunny Prince" on 10 June 1994 under the terms and conditions, to wit: Duration of Contract - - - - 10 months Basic Monthly Salary - - - - US $1,100.00 Hours of Work - - - - 44 hrs./week Overtime - - - - 495 lump O.T. Vacation leave with pay - - - - US $220.00/mo. On grounds of very poor performance and conduct, refusal to perform his job, refusal to report to the Captain or the vessels Engineers or cooperate with other ship officers about the problem in cleaning the cargo holds or of the shipping pump and his dismal relations with the Captain of the vessel, complainant was repatriated on 15 July 1994. On 01 August 1994, complainant filed a complaint for illegal dismissal at Associated Marine Officers and Seamans Union of the Philippines (AMOSUP) of which complainant was a member. Pursuant to Article XII of the Collective Bargaining Agreement, grievance proceedings were conducted; however, parties failed to reach and settle the dispute amicably, thus, on 28 November 1994, complainant filed [a] complaint with the Philippine Overseas Employment Administration (POEA).[2] The law in force at the time petitioner filed his Complaint with the POEA was EO No. 247.[3] While the case was pending before the POEA, private respondents filed a Motion to Dismiss on the ground that the POEA had no jurisdiction over the case considering petitioner Vivero's failure to refer it to a Voluntary Arbitration Committee in accordance with the CBA between the parties. Upon the enactment of RA 8042, the Migrant Workers and Overseas Filipinos Act of 1995, the case was transferred to the Adjudication Branch of the National Labor Relations Commission. On 21 January 1997 Labor Arbiter Jovencio Ll. Mayor Jr., on the basis of the pleadings and documents available on record, rendered a decision dismissing the Complaint for want of jurisdiction.[4]According to the Labor Arbiter, since the CBA of the parties provided for the referral to a Voluntary Arbitration Committee should the Grievance Committee fail to settle the dispute, and considering the mandate of Art. 261 of the Labor Code on the original and exclusive jurisdiction of Voluntary Arbitrators, the Labor Arbiter clearly had no jurisdiction over the case.[5] Petitioner (complainant before the Labor Arbiter) appealed the dismissal of his petition to the NLRC. On 28 May 1998 the NLRC set aside the decision of the Labor Arbiter on the ground that the record was clear that petitioner had exhausted his remedy by submitting his case to the Grievance Committee of AMOSUP. Considering however that he could not obtain any settlement he had to ventilate his case before the proper forum, i.e., the Philippine Overseas Employment Administration.[6] The NLRC further held that the

contested portion in the CBA providing for the intercession of a Voluntary Arbitrator was not binding upon petitioner since both petitioner and private respondents had to agree voluntarily to submit the case before a Voluntary Arbitrator or Panel of Voluntary Arbitrators. This would entail expenses as the Voluntary Arbitrator chosen by the parties had to be paid. Inasmuch however as petitioner chose to file his Complaint originally with POEA, then the Labor Arbiter to whom the case was transferred would have to take cognizance of the case.[7] The NLRC then remanded the case to the Labor Arbiter for further proceedings. On 3 July 1998 respondents filed a Motion for Reconsideration which was denied by the NLRC on 23 July 1998. Thus, private respondents raised the case to the Court of Appeals contending that the provision in the CBA requiring a dispute which remained unresolved by the Grievance Committee to be referred to a Voluntary Arbitration Committee, was mandatory in character in view of the CBA between the parties. They stressed that "since it is a policy of the state to promote voluntary arbitration as a mode of settling labor disputes, it is clear that the public respondent gravely abused its discretion in taking cognizance of a case which was still within the mantle of the Voluntary Arbitration Commitees jurisdiction."[8] On the other hand, petitioner argued (A)s strongly suggested by its very title, referral of cases of this nature to the Voluntary Arbitration Committee is voluntary in nature. Otherwise, the committee would not have been called Voluntary Arbitration Committee but rather, a Compulsory Arbitration Committee. Moreover, if the referral of cases of similar nature to the Voluntary Arbitration Committee would be deemed mandatory by virtue of the provisions in the CBA, the [NLRC] would then be effectively deprived of its jurisdiction to try, hear and decide termination disputes, as provided for under Article 217 of the Labor Code. Lastly, [respondents] ought to be deemed to have waived their right to question the procedure followed by [petitioner], considering that they have already filed their Position Paper before belatedly filing a Motion to Dismiss x x x x [9] But the Court of Appeals ruled in favor of private respondents. It held that the CBA "is the law between the parties and compliance therewith is mandated by the express policy of the law."[10] Hence, petitioner should have followed the provision in the CBA requiring the submission of the dispute to the Voluntary Arbitration Committee once the Grievance Committee failed to settle the controversy.[11]According to the Court of Appeals, the parties did not have the choice to "volunteer" to refer the dispute to the Voluntary Arbitrator or a Panel of Arbitrators when there was already an agreement requiring them to do so. "Voluntary Arbitration" means that it is binding because of a prior agreement or contract, while "Compulsory Arbitration" is when the law declares the dispute subject to arbitration, regardless of the consent or desire of the parties.[12] The Court of Appeals further held that the Labor Code itself enumerates the original and exclusive jurisdiction of the Voluntary Arbitrator or Panel of Voluntary Arbitrators, and prohibits the NLRC and the Regional Directors of the Department of Labor and Employment (DOLE) from entertaining cases falling under the same. [13] Thus, the fact that private respondents filed their Position Paper first before filing their Motion to Dismiss was immaterial and did not operate to confer jurisdiction upon the Labor Arbiter, following the well-settled rule that jurisdiction is determined by law and not by consent or agreement of the parties or by estoppel.[14] Finally, the appellate court ruled that a case falling under the jurisdiction of the Labor Arbiter as provided under Art. 217 of the Labor Code may be lodged instead with a Voluntary Arbitrator because the law prefers, or gives primacy, to voluntary arbitration instead of compulsory arbitration.[15] Consequently, the contention that the NLRC would be deprived of its jurisdiction to try, hear and decide termination disputes under Art. 217 of the Labor Code, should the instant dispute be referred to the Voluntary Arbitration Committee, is clearly bereft of merit. [16] Besides, the Voluntary Arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency independent of, and apart from, the NLRC since his decisions are not appealable to the latter.[17] Celestino Vivero, in his petition for review assailing the Decision of the Court of Appeals, alleges that the appellate court committed grave abuse of discretion in holding that a Voluntary Arbitrator or Panel of Voluntary Arbitrators, and not the Adjudication Branch of the NLRC, has jurisdiction over his complaint for illegal dismissal. He claims that his complaint for illegal dismissal was undeniably a termination dispute and did not, in any way, involve an "interpretation or implementation of collective bargaining agreement" or "interpretation" or "enforcement" of company personnel policies. Thus, it should fall within the original and exclusive jurisdiction of the NLRC and its Labor Arbiter, and not with a Voluntary Arbitrator, in accordance with Art. 217 of the Labor Code.

Private respondents, on the other hand, allege that the case is clearly one "involving the proper interpretation and implementation of the Grievance Procedure found in the Collective Bargaining Agreement (CBA) between the parties"[18] because of petitioners allegation in his claim/assistance request form submitted to the Union, to wit: NATURE OF COMPLAINT 3. Illegal Dismissal - Reason: (1) That in this case it was the master of M.V. SUNNY PRINCE Capt. Andersen who created the trouble with physical injury and stating false allegation; (2) That there was no proper procedure of grievance; (3) No proper notice of dismissal. Is there a Notice of dismissal? _x_ Yes or ____ No What date? 11 July 1994 Is there a Grievance Procedure observed? ____ Yes or _x_ No[19] Private respondents further allege that the fact that petitioner sought the assistance of his Union evidently shows that he himself was convinced that his Complaint was within the ambit of the jurisdiction of the grievance machinery and subsequently by a Panel of Voluntary Arbitrators as provided for in their CBA, and as explicitly mandated by Art. 261 of the Labor Code.[20] Thus, the issue is whether the NLRC is deprived of jurisdiction over illegal dismissal cases whenever a CBA provides for grievance machinery and voluntary arbitration proceedings. Or, phrased in another way, does the dismissal of an employee constitute a "grievance between the parties," as defined under the provisions of the CBA, and consequently, within the exclusive original jurisdiction of the Voluntary Arbitrators, thereby rendering the NLRC without jurisdiction to decide the case? On the original and exclusive jurisdiction of Labor Arbiters, Art. 217 of the Labor Code provides Art. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: (1) Unfair labor practice cases; (2) Termination disputes; (3) If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; (4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; (5) Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and, (6) Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (c) Cases arising from the interpretation of collective bargaining agreements and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements (emphasis supplied). However, any or all of these cases may, by agreement of the parties, be submitted to a Voluntary Arbitrator or Panel of Voluntary Arbitrators for adjudication. 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 or panel 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 (emphasis supplied). Private respondents attempt to justify the conferment of jurisdiction over the case on the Voluntary Arbitrator on the ground that the issue involves the proper interpretation and implementation of the Grievance Procedure found in the CBA. They point out that when petitioner sought the assistance of his Union to avail of the grievance machinery, he in effect submitted himself to the procedure set forth in the CBA regarding submission of unresolved grievances to a Voluntary Arbitrator. The argument is untenable. The case is primarily a termination dispute. It is clear from the claim/assistance request form submitted by petitioner to AMOSUP that he was challenging the legality of his dismissal for lack of cause and lack of due process. The issue of whether there was proper interpretation and implementation of the CBA provisions comes into play only because the grievance procedure provided for in the CBA was not observed after he sought his Unions assistance in contesting his termination. Thus, the question to be resolved necessarily springs from the primary issue of whether there was a valid termination; without this, then there would be no reason to invoke the need to interpret and implement the CBA provisions properly. In San Miguel Corp. v. National Labor Relations Commission[21] this Court held that the phrase "all other labor disputes" may include termination disputes provided that the agreement between the Union and the Company states "in unequivocal language that [the parties] conform to the submission of termination disputes and unfair labor practices to voluntary arbitration."[22] Ergo, it is not sufficient to merely say that parties to the CBA agree on the principle that "all disputes" should first be submitted to a Voluntary Arbitrator. There is a need for an express stipulation in the CBA that illegal termination disputes should be resolved by a Voluntary Arbitrator or Panel of Voluntary Arbitrators, since the same fall within a special class of disputes that are generally within the exclusive original jurisdiction of Labor Arbiters by express provision of law. Absent such express stipulation, the phrase "all disputes" should be construed as limited to the areas of conflict traditionally within the jurisdiction of Voluntary Arbitrators, i.e., disputes relating to contract-interpretation, contract-implementation, or interpretation or enforcement of company personnel policies. Illegal termination disputes - not falling within any of these categories - should then be considered as a special area of interest governed by a specific provision of law. In this case, however, while the parties did agree to make termination disputes the proper subject of voluntary arbitration, such submission remains discretionary upon the parties. A perusal of the CBA provisions shows that Sec. 6, Art. XII (Grievance Procedure) of the CBA is the general agreement of the parties to refer grievances, disputes or misunderstandings to a grievance committee, and henceforth, to a voluntary arbitration committee. The requirement of specificity is fulfilled by Art. XVII (Job Security) where the parties agreed Sec. 1. Promotion, demotion, suspension, dismissal or disciplinary action of the seaman shall be left to the discretion of the Master, upon consultation with the Company and notification to the Union. This notwithstanding, any and all disciplinary action taken on board the vessel shall be provided for in Appendix B of this Agreement x x x x [23] Sec. 4. x x x x Transfer, lay-off or discipline of seamen for incompetence, inefficiency, neglect of work, bad behavior, perpetration of crime, drunkenness, insubordination, desertion, violation of x x x regulations of any port touched by the Companys vessel/s and other just and proper causes shall be at Masters discretion x x x in the high seas or foreign ports. The Master shall refer the case/dispute upon reaching port and if not satisfactorily settled, the case/dispute may be referred to the grievance machinery or procedure hereinafter provided (emphasis supplied).[24]

The use of the word "may" shows the intention of the parties to reserve the right to submit the illegal termination dispute to the jurisdiction of the Labor Arbiter, rather than to a Voluntary Arbitrator.Petitioner validly exercised his option to submit his case to a Labor Arbiter when he filed his Complaint before the proper government agency. Private respondents invoke Navarro III v. Damasco[25] wherein the Court held that "it is the policy of the state to promote voluntary arbitration as a mode of settling disputes."[26] It should be noted, however, that in Navarro III all the parties voluntarily submitted to the jurisdiction of the Voluntary Arbitrator when they filed their respective position papers and submitted documentary evidence before him. Furthermore, they manifested during the initial conference that they were not questioning the authority of the Voluntary Arbitrator.[27] In the case at bar, the dispute was never brought to a Voluntary Arbitrator for resolution; in fact, petitioner precisely requested the Court to recognize the jurisdiction of the Labor Arbiter over the case. The Court had held in San Miguel Corp. v. NLRC[28]that neither officials nor tribunals can assume jurisdiction in the absence of an express legal conferment. In the same manner, petitioner cannot arrogate into the powers of Voluntary Arbitrators the original and exclusive jurisdiction of Labor Arbiters over unfair labor practices, termination disputes, and claims for damages, in the absence of an express agreement between the parties in order for Art. 262 of the Labor Code to apply in the case at bar. In other words, the Court of Appeals is correct in holding that Voluntary Arbitration is mandatory in character if there is a specific agreement between the parties to that effect. It must be stressed however that, in the case at bar, the use of the word "may" shows the intention of the parties to reserve the right of recourse to Labor Arbiters. The CBA clarifies the proper procedure to be followed in situations where the parties expressly stipulate to submit termination disputes to the jurisdiction of a Voluntary Arbitrator or Panel of Voluntary Arbitrators. For when the parties have validly agreed on a procedure for resolving grievances and to submit a dispute to voluntary arbitration then that procedure should be strictly observed.Non-compliance therewith cannot be excused, as petitioner suggests, by the fact that he is not well-versed with the "fine prints" of the CBA. It was his responsibility to find out, through his Union, what the provisions of the CBA were and how they could affect his rights. As provided in Art. 241, par. (p), of the Labor Code (p) It shall be the duty of any labor organization and its officers to inform its members on the provisions of its constitution and by-laws, collective bargaining agreement, the prevailing labor relations system and all their rights and obligations under existing labor laws. In fact, any violation of the rights and conditions of union membership is a "ground for cancellation of union registration or expulsion of officer from office, whichever is appropriate. At least thirtypercent (30%) of all the members of a union or any member or members especially concerned may report such violation to the Bureau [of Labor Relations] x x x x"[29] It may be observed that under Policy Instruction No. 56 of the Secretary of Labor, dated 6 April 1993, "Clarifying the Jurisdiction Between Voluntary Arbitrators and Labor Arbiters Over Termination Cases and Providing Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the NCMB ," termination cases arising in or resulting from the interpretation and implementation of collective bargaining agreements and interpretation and enforcement of company personnel policies which were initially processed at the various steps of the plant-level Grievance Procedures under the parties' collective bargaining agreements fall within the original and exclusive jurisdiction of the voluntary arbitrator pursuant to Art. 217 (c) and Art. 261 of the Labor Code; and, if filed before the Labor Arbiter, these cases shall be dismissed by the Labor Arbiter for lack of jurisdiction and referred to the concerned NCMB Regional Branch for appropriate action towards an expeditious selection by the parties of a Voluntary Arbitrator or Panel of Arbitrators based on the procedures agreed upon in the CBA. As earlier stated, the instant case is a termination dispute falling under the original and exclusive jurisdiction of the Labor Arbiter, and does not specifically involve the application, implementation or enforcement of company personnel policies contemplated in Policy Instruction No. 56. Consequently, Policy Instruction No. 56 does not apply in the case at bar. In any case, private respondents never invoked the application of Policy Instruction No. 56 in their Position Papers, neither did they raise the question in their Motion to Dismiss which they filed nine (9) months after the filing of their Position Papers. At this late stage of the proceedings, it would not serve the ends of justice if this case is referred back to a Voluntary Arbitrator considering that both the AMOSUP and private respondents have submitted to the jurisdiction of the Labor Arbiter by filing their respective Position Papers and ignoring the grievance procedure set forth in their CBA.

After the grievance proceedings have failed to bring about a resolution, AMOSUP, as agent of petitioner, should have informed him of his option to settle the case through voluntary arbitration. Private respondents, on their part, should have timely invoked the provision of their CBA requiring the referral of their unresolved disputes to a Voluntary Arbitrator once it became apparent that the grievance machinery failed to resolve it prior to the filing of the case before the proper tribunal. The private respondents should not have waited for nine (9) months from the filing of their Position Paperwith the POEA before it moved to dismiss the case purportedly for lack of jurisdiction. As it is, private respondents are deemed to have waived their right to question the procedure followed by petitioner, assuming that they have the right to do so. Under their CBA, both Union and respondent companies are responsible for selecting an impartial arbitrator or for convening an arbitration committee;[30] yet,it is apparent that neither made a move towards this end. Consequently, petitioner should not be deprived of his legitimate recourse because of the refusal of both Union and respondent companies to follow the grievance procedure. WHEREFORE, the Decision of the Court of Appeals is SET ASIDE and the case is remanded to the Labor Arbiter to dispose of the case with dispatch until terminated considering the undue delay already incurred. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 118651 October 16, 1997 PIONEER TEXTURIZING CORP. and/or JULIANO LIM, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PIONEER TEXTURIZING WORKERS UNION and LOURDES A. DE JESUS, respondents.

FRANCISCO, J.: The facts are as follows: Private respondent Lourdes A. de Jesus is petitioners' reviser/trimmer since 1980. As reviser/trimmer, de Jesus based her assigned work on a paper note posted by petitioners. The posted paper which contains the corresponding price for the work to be accomplished by a worker is identified by its P.O. Number. On August 15, 1992, de Jesus worked on P.O. No. 3853 by trimming the cloths' ribs. She thereafter submitted tickets corresponding to the work done to her supervisor. Three days later, de Jesus received from petitioners' personnel manager a memorandum requiring her to explain why no disciplinary action should be taken against her for dishonesty and tampering of official records and documents with the intention of cheating as P.O. No. 3853 allegedly required no trimming. The memorandum also placed her under preventive suspension for thirty days starting from August 19, 1992. In her handwritten explanation, de Jesus maintained that she merely committed a mistake in trimming P.O. No. 3853 as it has the same style and design as P.O. No. 3824 which has an attached price list for trimming the ribs and admitted that she may have been negligent in presuming that the same work was to be done with P.O. No. 3853, but not for dishonesty or tampering. Petitioners' personnel department, nonetheless, terminated her from employment and sent her a notice of termination dated September 18, 1992. On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. The Labor Arbiter who heard the case noted that de Jesus was amply accorded procedural due process in her termination from service. Nevertheless, after observing that de Jesus made some further trimming on P.O. No. 3853 and that her dismissal was not justified, the Labor Arbiter held petitioners guilty of illegal dismissal. Petitioners were accordingly ordered to reinstate de Jesus to her previous position without loss of seniority rights and with full backwages from the time of her suspension on August 19, 1992. Dissatisfied with the Labor Arbiter's decision, petitioners appealed to public respondent National Labor Relations Commission (NLRC). In its July 21, 1994 decision, the NLRC 1 ruled that de Jesus was negligent in presuming that the ribs of P.O. No. 3853 should likewise be trimmed for having the same style and design as P.O. No. 3824, thus petitioners cannot be entirely faulted for dismissing de Jesus. The NLRC declared that the status quo between them should be maintained and affirmed the Labor Arbiter's order of reinstatement, but without backwages. The NLRC further "directed petitioner to pay de Jesus her back salaries from the date she filed her motion for execution on September 21, 1993 up to the date of the promulgation of [the] decision." 2 Petitioners filed their partial motion for reconsideration which the NLRC denied, hence this petition anchored substantially on the alleged NLRC's error in holding that de Jesus is entitled to reinstatement and back salaries. On March 6, 1996, petitioners filed its supplement to the petition amplifying further their arguments. In a resolution dated February 20, 1995, the Court required respondents to comment thereon. Private respondent de Jesus and the Office of the Solicitor General, in behalf of public respondent NLRC, subsequently filed their comments. Thereafter, petitioners filed two rejoinders [should be replies] to respondents' respective comments. Respondents in due time filed their rejoinders.

There are two interrelated and crucial issues, namely: (1) whether or not de Jesus was illegally dismissed, and (2) whether or not an order for reinstatement needs a writ of execution. Petitioners insist that the NLRC gravely abused its discretion in holding that de Jesus is entitled to reinstatement to her previous position for she was not illegally dismissed in the first place. In support thereof, petitioners quote portions of the NLRC decision which stated that "respondents [petitioners herein] cannot be entirely faulted for dismissing the complainant" 3 and that there was "no illegal dismissal to speak of in the case at bar". 4 Petitioners further add that de Jesus breached the trust reposed in her, hence her dismissal from service is proper on the basis of loss of confidence, citing as authority the cases of Ocean Terminal Services, Inc. v. NLRC, 197 SCRA 491; Coca-Cola Bottlers Phil., Inc. v. NLRC, 172 SCRA 751, and Piedad v. Lanao del Norte Electric Cooperative, 5154 SCRA 500. The arguments lack merit. The entire paragraph which comprises the gist of the NLRC's decision from where petitioners derived and isolated the aforequoted portions of the NLRC's observation reads in full as follows: We cannot fully subscribe to the complainant's claim that she trimmed the ribs of PO3853 in the light of the sworn statement of her supervisor Rebecca Madarcos (Rollo, p. 64) that no trimming was necessary because the ribs were already of the proper length. The complainant herself admitted in her sinumpaang salaysay (Rollo, p. 45) that "Aking napansin na hindi pantay-pantay ang lapad ng mga ribs PO3853 mas maigsi ang nagupit ko sa mga ribs ng PO3853 kaysa sa mga ribs ng mga nakaraang PO's. The complainant being an experienced reviser/trimmer for almost twelve (12) years should have called the attention of her supervisor regarding her observation of PO3853. It should be noted that complainant was trying to claim as production output 447 pieces of trimmed ribs of PO3853 which respondents insists that complainant did not do any. She was therefore negligent in presuming that the ribs of PO3853 should likewise be trimmed for having the same style and design as PO3824. Complainant cannot pass on the blame to her supervisor whom she claimed checked the said tickets prior to the submission to the Accounting Department. As explained by respondent, what the supervisor does is merely not the submission of tickets and do some checking before forwarding the same to the Accounting Department. It was never disputed that it is the Accounting Department who does the detailed checking and computation of the tickets as has been the company policy and practice. Based on the foregoing and considering that respondent cannot be entirely faulted for dismissing complainant as the complainant herself was also negligent in the performance of her job, We hereby rule that status quo between them should be maintained as a matter of course. We thus affirm the decision of Labor Arbiter reinstating the complainant but without backwages. The award of backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal. (Indophil Acrylic Mfg. Corporation vs. NLRC, G.R. No. 96488 September 27, 1993) There being no illegal dismissal to speak in the case at bar, the award for backwages should necessarily be deleted. 6 We note that the NLRC's decision is quite categorical in finding that de Jesus was merely negligent in the performance of her duty. Such negligence, the Labor Arbiter delineated, was brought about by the petitioners' plain improvidence. Thus: After careful assessment of the allegations and documents available on record, we are convinced that the penalty of dismissal was not justified. At the outset, it is remarkable that respondents did not deny nor dispute that P.O. 3853 has the same style and design as P.O. 3824; that P.O. 3824 was made as guide for the work done on P.O. 3853; and, most importantly, that the notation correction on P.O. 3824 was made only after the error was discovered by respondents' Accounting Department. Be that as it may, the factual issue in this case is whether or not complainant trimmed the ribs of P.O. 3853? Respondents maintained that she did not because the record in Accounting Department allegedly indicates that no trimming is to be done on P.O. 3853. Basically, this allegation is unsubstantiated.

It must be emphasized that in termination cases the burden of proof rests upon the employer. In the instant case, respondents' mere allegation that P.O. 3853 need not be trimmed does not satisfy the proof required to warrant complainant's dismissal. Now, granting that the Accounting record is correct, we still believe that complainant did some further trimming on P.O. 3853 based on the following grounds: Firstly, Supervisor Rebecca Madarcos who ought to know the work to be performed because she was incharged of assigning jobs, reported no anomally when the tickets were submitted to her. Incidentally, supervisor Madarcos testimony is suspect because if she could recall what she ordered the complainant to do seven (7) months ago (to revise the collars and plackets of shirts) there was no reason for her not to detect the alleged tampering at the time complainant submitted her tickets, after all, that was part of her job, if not her main job. Secondly, she did not exceed her quota, otherwise she could have simply asked for more. That her output was remarkably big granting it is true, is well explained in that the parts she had trimmed were lesser compared to those which she had cut before. In this connection, respondents misinterpreted the handwritten explanation of the complainant dated 20 August 1992, because the letter never admits that she never trimmed P.O. 3853, on the contrary the following sentence, Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang inalis na pala ang presyo ng Sec. 9 P.O. 3853 na ito. is crystal clear that she did trim the ribs on P.O. 3853. 7 Gleaned either from the Labor Arbiter's observations or from the NLRC's assessment, it distinctly appears that petitioners' accusation of dishonesty and tampering of official records and documents with intention of cheating against de Jesus was not substantiated by clear and convincing evidence. Petitioners simply failed, both before the Labor Arbiter and the NLRC, to discharge the burden of proof and to validly justify de Jesus' dismissal from service. The law, in this light, directs the employers, such as herein petitioners, not to terminate the services of an employee except for a just or authorized cause under the Label Code. 8 Lack of a just cause in the dismissal from service of an employee, as in this case, renders the dismissal illegal, despite the employer's observance of procedural due process. 9 And while the NLRC stated that "there was no illegal dismissal to speak of in the case at bar" and that petitioners cannot be entirely faulted therefor, said statements are inordinate pronouncements which did not remove the assailed dismissal from the realm of illegality. Neither can these pronouncements preclude us from holding otherwise. We also find the imposition of the extreme penalty of dismissal against de Jesus as certainly harsh and grossly disproportionate to the negligence committed, especially where said employee holds a faithful and an untarnished twelve-year service record. While an employer has the inherent right to discipline its employees, we have always held that this right must always be exercised humanely, and the penalty it must impose should be commensurate to the offense involved and to the degree of its infraction. 10 The employer should bear in mind that, in the exercise of such right, what is at stake is not only the employee's position but her livelihood as well. Equally unmeritorious is petitioners' assertion that the dismissal is justified on the basis of loss of confidence. While loss of confidence, as correctly argued by petitioners, is one of the valid grounds for termination of employment, the same, however, cannot be used as a pretext to vindicate each and every instance of unwarranted dismissal. To be a valid ground, it must be shown that the employee concerned is responsible for the misconduct or infraction and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position. 11 In this case, petitioners were unsuccessful in establishing their accusations of dishonesty and tampering of records with intention of cheating. Indeed, even if petitioners'

allegations against de Jesus were true, they just the same failed to prove that her position needs the continued and unceasing trust of her employers. The breach of trust must be related to the performance of the employee's functions. 12 Surely, de Jesus who occupies the position of a reviser/trimmer does not require the petitioners' perpetual and full confidence. In this regard, petitioners' reliance on the cases of Ocean Terminal Services, Inc. v.NLRC; Coca-Cola Bottlers Phil., Inc. v. NLRC; and Piedad v. Lanao del Norte Electric Cooperative, which when perused involve positions that require the employers' full trust and confidence, is wholly misplaced. In Ocean Terminal Services, for instance, the dismissed employee was designated as expediter and canvasser whose responsibility is mainly to make emergency procurements of tools and equipments and was entrusted with the necessary cash for buying them. The case of Coca-Cola Bottlers, on the other hand, involves a sales agent whose job exposes him to the everyday financial transactions involving the employer's goods and funds, while that ofPiedad concerns a bill collector who essentially handles the employer's cash collections. Undoubtedly, the position of a reviser/trimmer could not be equated with that of a canvasser, sales agent, or a bill collector. Besides, the involved employees in the three aforementioned cases were clearly proven guilty of infractions unlike private respondent in the case at bar. Thus, petitioners dependence on these cited cases is inaccurate, to say the least. More, whether or not de Jesus meets the day's quota of work she, just the same, is paid the daily minimum wage.13 Corollary to our determination that de Jesus was illegally dismissed is her imperative entitlement to reinstatement and backwages as mandated by law. 14 Whence, we move to the second issue, i.e., whether or not an order for reinstatement needs a writ of execution. Petitioners' theory is that an order for reinstatement is not self-executory. They stress that there must be a writ of execution which may be issued by the NLRC or by the Labor Arbiter motu proprio or on motion of an interested party. They further maintain that even if a writ of execution was issued, a timely appeal coupled by the posting of appropriate supersedeas bond, which they did in this case, effectively forestalled and stayed execution of the reinstatement order of the Labor Arbiter. As supporting authority, petitioners emphatically cite and bank on the case of Maranaw Hotel Resort Corporation (Century Park Sheraton Manila) v. NLRC, 238 SCRA 190. Private respondent de Jesus, for her part, maintains that petitioners should have reinstated her immediately after the decision of the Labor Arbiter ordering her reinstatement was promulgated since the law mandates that an order for reinstatement is immediately executory. An appeal, she says, could not stay the execution of a reinstatement order for she could either be admitted back to work or merely reinstated in the payroll without need of a writ of execution. De Jesus argues that a writ of execution is necessary only for the enforcement of decisions, orders, or awards which have acquired finality. In effect, de Jesus is urging the Court to re-examine the ruling laid down in Maranaw. Article 223 of the Labor Code, as amended by R.A. No. 6715 which took effect on March 21, 1989, pertinently provides: Art. 223. Appeal. Decision, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds: xxx xxx xxx In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. xxx xxx xxx We initially interpreted the aforequoted provision in Inciong v. NLRC. 15 The Court 16 made this brief comment:

The decision of the Labor Arbiter in this case was rendered on December 18, 1988, or three (3) months before Article 223 of the Labor Code was amended by Republic Act 6715 (which became law on March 21, 1989), providing that a decision of the Labor Arbiter ordering the reinstatement of a dismissed or separated employee shall be immediately executory insofar as the reinstatement aspect is concerned, and the posting of an appeal bond by the employer shall not stay such execution. Since this new law contains no provision giving it retroactive effect (Art. 4, Civil Code), the amendment may not be applied to this case. which the Court adopted and applied in Callanta v. NLRC. 17 In Zamboanga City Water District v. Buat, 18 the Court construed Article 223 to mean exactly what it says. We said: Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed or separated employee insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal. The employer shall reinstate the employee concerned either by: (a) actually admitting him back to work under the same terms and conditions prevailing prior to his dismissal or separation; or (b) at the option of the employer, merely reinstating him in the payroll. Immediate reinstatement is mandated and is not stayed by the fact that the employer has appealed, or has posted a cash or surety bond pending appeal. 19 We expressed a similar view a year earlier in Medina v. Consolidated Broadcasting System (CBS) DZWX 20 and laid down the rule that an employer who fails to comply with an order of reinstatement makes him liable for the employee's salaries. Thus: Petitioners construe the above paragraph to mean that the refusal of the employer to reinstate an employee as directed in an executory order of reinstatement would make it liable to pay the latter's salaries. This interpretation is correct. Under Article 223 of the Labor Code, as amended, an employer has two options in order for him to comply with an order of reinstatement, which is immediately executory, even pending appeal. Firstly, he can admit the dismissed employee back to work under the same terms and conditions prevailing prior to his dismissal or separation or to a substantially equivalent position if the former position is already filled up as we have ruled in Union of Supervisors (RB) NATU vs. Sec. of Labor, 128 SCRA 442 [1984]; and Pedroso vs. Castro, 141 SCRA 252 [1986]. Secondly, he can reinstate the employee merely in the payroll. Failing to exercise any of the above options, the employer can be compelled under pain of contempt, to pay instead the salary of the employee. This interpretation is more in consonance with the constitutional protection to labor (Section 3, Art. XIII, 1987 Constitution). The right of a person to his labor is deemed to be property within the meaning of the constitutional guaranty that no one shall be deprived of life, liberty, and property without due process of law. Therefore, he should be protected against any arbitrary and unjust deprivation of his job (Bondoc vs. People's Bank and Trust Co., Inc., 103 SCRA 599 [1981]). The employee should not be left without any remedy in case the employer unreasonably delays reinstatement. Therefore, we hold that the unjustified refusal of the employer to reinstate an illegally dismissed employee entitles the employee to payment of his salaries . . . . 21 The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting the import of Article 223 in Maranaw, the Court 22 declared that the reinstatement aspect of the Labor Arbiter's decision needs a writ of execution as it is not self-executory, a declaration the Court recently reiterated and adopted in Archilles Manufacturing Corp. v. NLRC. 23 We note that prior to the enactment of R.A. No. 6715, Article 223 24 of the Labor Code contains no provision dealing with the reinstatement of an illegally dismissed employee. The amendment introduced by R.A. No. 6715 is an innovation and a far departure from the old law indicating thereby the legislature's unequivocal intent to insert a new rule that will govern the reinstatement aspect of a decision or resolution in any given labor dispute. In fact, the law as now worded employs the phrase "shall immediately be executory" without qualification emphasizing the need for prompt compliance. As a rule, "shall" in a statute commonly denotes an imperative obligation and is inconsistent with the idea of discretion 25 and that the presumption is that the word "shall", when used in a statute, is mandatory. 26 An appeal or posting of bond, by plain mandate of the law, could not even forestall nor stay the executory nature of an order of reinstatement. The law, moreover, is unambiguous and clear. Thus, it must be applied according to its plain and obvious meaning, according to its express terms. In Globe-Mackay Cable and Radio Corporation v. NLRC, 27 we held that:

Under the principles of statutory construction, if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain-meaning rule or verba legis derived from themaxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by the use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure. 28 And in conformity with the executory nature of the reinstatement order, Rule V, Section 16 (3) of the New Rules of Procedure of the NLRC strictly requires the Labor Arbiter to direct the employer to immediately reinstate the dismissed employee. Thus: In case the decision includes an order of reinstatement, the Labor Arbiter shall direct the employer to immediately reinstate the dismissed or separated employee even pending appeal. The order of reinstatement shall indicate that the employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. In declaring that reinstatement order is not self-executory and needs a writ of execution, the Court, in Maranaw, adverted to the rule provided under Article 224. We said: It must be stressed, however, that although the reinstatement aspect of the decision is immediately executory, it does not follow that it is self-executory. There must be a writ of execution which may be issuedmotu proprio or on motion of an interested party. Article 224 of the Labor Code provides: Art. 224. Execution of decision, orders or awards. (a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbitter or voluntary arbitrator may, motu proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory . . . (emphasis supplied) The second paragraph of Section 1, Rule VIII of the New Rules of Procedure of the NLRC also provides: The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearing officer of origin shall, motu proprio or on motion of any interested party, issue a writ of execution on a judgment only within five (5) years from the date it becomes final and executory . . . . No motion for execution shall be entertained nor a writ he issued unless the Labor Arbiter is in possession of the records of the case which shall include an entry of judgment. (emphasis supplied) xxx xxx xxx In the absence then of an order for the issuance of a writ of execution on the reinstatement aspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation to admit back to work the private respondent under the terms and conditions prevailing prior to her dismissal or, at the petitioner's option, to merely reinstate her in the payroll. An option is a right of election to exercise a privilege, and the option in Article 223 of the Labor Code is exclusively granted to the employer. The event that gives rise for its exercise is not the reinstatement decree of a Labor Arbiter, but the writ for its execution commanding the employer to reinstate the employee, while the final act which compels the employer to exercise the option is the service upon it of the writ of execution when, instead of admitting the employee back to his work, the employer chooses to reinstate the employee in the payroll only. If the employer does not exercise this option, it must forthwith admit the employee back to work, otherwise it may be punished for contempt. 29 A closer examination, however, shows that the necessity for a writ of execution under Article 224 applies only to final and executory decisions which are not within the coverage of Article 223. For comparison, we quote the material portions of the subject articles:

Art. 223. Appeal. . . . In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. xxx xxx xxx Art. 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu propio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or awards of the Secretary of Labor and Employment or regional director, the Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the duty of the responsible officer to separately furnish immediately the counsels of record and the parties with copies of said decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such responsible officer to appropriate administrative sanctions. Article 224 states that the need for a writ of execution applies only within five (5) years from the date a decision, an order or award becomes final and executory. It can not relate to an award or order of reinstatement still to be appealed or pending appeal which Article 223 contemplates. The provision of Article 223 is clear that an award for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. 30 And where the statute is fairly susceptible of two or more constructions, that construction should be adopted which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the statute was enacted, and a construction should be rejected which would tend to render abortive other provisions of the statute and to defeat the object which the legislator sought to attain by its enactment. 31 In introducing a new rule on the reinstatement aspect of a labor decision under R.A. No. 6715, Congress should not be considered to be indulging in mere semantic exercise. On appeal, however, the appellate tribunal concerned may enjoin or suspend the reinstatement order in the exercise of its sound discretion. Furthermore, the rule is that all doubts in the interpretation and implementation of labor laws should be resolved in favor of labor. 32 In ruling that an order or award for reinstatement does not require a writ of execution the Court is simply adhering and giving meaning to this rule. Henceforth, we rule that an award or order for reinstatement is self-executory. After receipt of the decision or resolution ordering the employee's reinstatement, the employer has the right to choose whether to re-admit the employee to work under the same terms and conditions prevailing prior to his dismissal or to reinstate the employee in the payroll. In either instance, the employer has to inform the employee of his choice. The notification is based on practical considerations for without notice, the employee has no way of knowing if he has to report for work or not. WHEREFORE, the petition is DENIED and the decision of the Labor Arbiter is hereby REINSTATED. Costs against petitioner.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 85611 April 6, 1990 VICTORIANO ZAMORAS, petitioner, vs. ROQUE SU, JR., ANITA SU HORTELLANO and NATIONAL LABOR RELATIONS COMMISSION, respondents. Paulo V. Briones for petitioner. Pacifico C. Cimafranca for private respondents.

GRIO-AQUINO, J.: The issue in this petition is whether, upon the established facts, the petitioner was an employee or tenant of the private respondents. The petitioner, Victoriano Zamoras, was hired by the respondent, Roque Su, Jr., in 1957 as overseer of his coconut land in Asenario, Dapitan City. Zamoras was charged with the task of having the land titled in Su's name, and of assigning portions to be worked by tenants, supervising the cleaning, planting, care and cultivation of the land, the harvesting of coconuts and selling of the copra. As compensation, Su paid Zamoras a salary of P2,400 per month plus one-third (1/3) of the proceeds of the sales of copra which normally occurred every two months. Another one-third of the proceeds went to the tenants and the other third to Su. This system of sharing was regularly observed up to September, 1981. As the coconut plantation yielded an average harvest of 21,000 nuts worth P18,900, based on the current market price of P3 per kilo, Zamoras' share amounted to P6,300 every two months. In May, 1981, Su informed Zamoras in writing that he obtained a loan from the other respondent, Anita Su Hortellano, and that he authorized her to harvest the coconuts from his property "while the loan was outstanding" (p. 8, Rollo). Su sent Zamoras a letter dated May 29, 1981 informing him that he was being laid-off temporarily until Su could obtain a loan from the Development Bank of the Philippines with which to pay Anita. However, Zamoras was not allowed anymore to work as overseer of the plantation. Without his knowledge and consent, Hortellano harvested the coconuts without giving him his one-third share of the copra sales. On August 8, 1983, Zamoras filed in the Regional Arbitration Branch of the Ministry of Labor and Employment in Zamboanga City a complaint against Roque Su, Jr. and Anita Su Hortellano for illegal termination and breach of contract with damages of not less than P75,600 as his uncollected share of the copra sales from September 15, 1981 to August 1983. The officer-in-charge of the NLRC Sub-Regional Office in Dipolog City who investigated the case submitted the following findings which were adopted by the Labor Arbiter The record would show that the respondent, Atty. Roque Su, Jr., is a resident of 976-A Gerardo Avenue Extension, Lahug, Cebu City and at the same time an employee in the government up to the present, while the land wherein the complainant herein was employed by the respondent as overseer of the land since 1957 up to and until his termination from the service sometime in September 1981 without just cause or causes duly authorized by law and after due process. That to prove that complainant was the overseer of the land owned by the respondent are the sworn declaration of the three witnesses, namely: Vicente Amor, Narcisa Arocha, and Wilfredo Bernaldes

who are presently working as tenants of the respondent. That the three witnesses testified that they knew the complainant personally who has been working as overseer of the land because it was through him, the complainant, that they were allowed to work and/or occupy the land as tenants ever since up to the present. In fact, they further declared that they do not know personally the owner of the land and besides, they have not seen personally the said owner as their dealing were directly done thru the complainant. That they always received their share of the produce from the complainant for every two months up to 1981. xxx xxx xxx It is very clear in the evidence of record that complainant was an employee of the respondent. This fact is even admitted by the respondent in his answer by way of controverting the claim of the complainant. (pp. 44-45, Rollo.) On July 30, 1986, the Labor Arbiter rendered a decision holding that Zamoras, as overseer of the respondent's plantation, was a regular employee whose services were necessary and desirable to the usual trade or business of his employer. The Labor Arbiter held that the dismissal of Zamoras was without just cause, hence, illegal. The private respondents were ordered to reinstate him to his former position as overseer of the plantation and to pay him backwages equivalent to P31,975.83 in the event that he opted not to be reinstated or that his reinstatement was not feasible. The private respondents appealed to the National Labor Relations Commission, alleging that the Labor Arbiter erred: 1. in disregarding respondents' evidence (a financial report showing the yearly copra sales from 1973 to 1977), proving that complainant's one-third share of the copra sales amounted to P5,985.16 only and not P6,300 per harvest; 2. in not holding that the complainant can no longer be reinstated for he is already dead; and 3. in not finding that no employer-employee relationship existed between the parties. On September 16, 1988, the NLRC rendered a decision reversing the Labor Arbiter. It held that "the right to control test used in determining the existence of an employer-employee relationship is unavailing in the instant case and that what exists between the parties is a landlord-tenant relationship" (p. 32, Rollo), because such functions as introducing permanent improvements on the land, assigning portions to tenants, supervising the cleaning, planting, care and cultivation of the plants, and deciding where and to whom to sell the copra are attributes of a landlord-tenant relationship, hence, jurisdiction over the case rests with the Court of Agrarian Relations. Zamoras filed this petition, assailing the NLRC's decision. There is merit in the petition. The NLRC's conclusion that a landlord-tenant relationship existed between Su and Zamoras is not supported by the evidence which shows that Zamoras was hired by Su not as a tenant but as overseer of his coconut plantation. As overseer, Zamoras hired the tenants and assigned their respective portions which they cultivated under Zamoras' supervision. The tenants dealt directly with Zamoras and received their one-third share of the copra produce from him. The evidence also shows that Zamoras, aside from doing administrative work for Su, regularly managed the sale of copra processed by the tenants. There is no evidence that Zamoras cultivated any portion of Su's land personally or with the aid of his immediate farm household. In fact the respondents never raised the issue of tenancy in their answer. Under Section 5 (a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid available from within his immediate household, cultivates the land belonging to or possessed by another, with the latter's consent for purposes of production, sharing the produce with the landholder or for a price certain or ascertainable in produce

or in money or both, under the leasehold tenancy system" (Matienzo vs. Servidad, 107 SCRA 276). Agricultural tenancy is defined as "the physical possession by a person of land devoted to agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the former and of the members of his immediate farm household in consideration of which the former agrees to share the harvest with the latter or to pay a price certain or ascertainable, whether in produce or in money, or both" (Sec. 3, R.A. No. 1199; 50 O.G. 4655-56; Miguel Carag vs. CA, et al., 151 SCRA 44). The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the tenant; (2) the subject is the agricultural holding; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6) there is a sharing of harvests between landlord and tenant (Antonio Castro vs. CA and De la Cruz, G.R. L-34613, January 26, 1989; Tiongson vs. CA, 130 SCRA 482; Guerrero vs. CA, 142 SCRA 138). The element of personal cultivation of the land, or with the aid of his farm household, essential in establishing a landlord-tenant or a lessor-lessee relationship, is absent in the relationship between Su and Zamoras (Co vs. IAC, 162 SCRA 390; Graza vs. CA, 163 SCRA 39), for Zamoras did not cultivate any part of Su's plantation either by himself or with the help of his household. On the other hand, the following circumstances are indicative of an employer-employee relationship between them: 1. Zamoras was selected and hired by Su as overseer of the coconut plantation. 2. His duties were specified by Su. 3. Su controlled and supervised the performance of his duties. He determined to whom Zamoras should sell the copra produced from the plantation. 4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every two months as compensation for managing the plantation. Since Zamoras was an employee, not a tenant of Su, it is the NLRC, not the Court of Agrarian Relations, that has jurisdiction to try and decide Zamora's complaint for illegal dismissal (Art. 217, Labor Code; Manila Mandarin Employees Union vs. NLRC, 154 SCRA 368; Jacqueline Industries Dunhill Bags Industries, et al. vs. NLRC, et al., 69 SCRA 242). WHEREFORE, the assailed decision is reversed and a new one is entered, declaring Zamoras to be an employee of respondent Roque Su, Jr. and that his dismissal was illegal and without lawful cause. He is entitled to reinstatement with backwages, but because he is dead and may no longer be reinstated, the private respondents are ordered to pay to his heirs the backwages due him, as well as his share of the copra sales from the plantation for a period of three (3) years from his illegal dismissal in September, 1981, plus separation pay in lieu of reinstatement. Costs against the private respondents. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 80767 April 22, 1991 BOY SCOUTS OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FORTUNATO ESGUERRA, ROBERTO MALABORBOR, ESTANISLAO MISA, VICENTE EVANGELISTA, and MARCELINO GARCIA, respondents. Julio O. Lopez for petitioner.

FELICIANO, J.:p This Petition for Certiorari is directed at (1) the Decision, 1 dated 27 February 1987, and (2) the Resolution 2dated 16 October 1987, both issued by the National Labor Relations Commission ("NLRC") in Case No. 1637-84. Private respondents Fortunato C. Esquerra, Roberto O. Malaborbor, Estanislao M. Misa, Vicente N. Evangelista and Marcelino P. Garcia, had all been rank-and-file employees of petitioner Boy Scouts of the Philippines ("BSP"). At the time of termination of their services in February 1985, private respondents were stationed at the BSP Camp in Makiling, Los Baos, Laguna. The events which led to such termination of services are as follows: On 19 October 1984, the Secretary-General of petitioner BSP issued Special Orders Nos. 80, 81, 83, 84 and 85 addressed separately to the five (5) private respondents, informing them that on 20 November 1984, they were to be transferred from the BSP Camp in Makiling to the BSP Land Grant in Asuncion, Davao del Norte. These Orders were opposed by private respondents who, on 4 November 1984, appealed the matter to the BSP National President. On 6 November 1984, petitioner BSP conducted a pre-transfer briefing at its National Headquarters in Manila. Private respondents were in attendance during the briefing and they were there assured that their transfer to Davao del Norte would not involve any diminution in salary, and that each of them would receive a relocation allowance equivalent to one (1) month's basic pay. This assurance, however, failed to persuade private respondents to abandon their opposition to the transfer orders issued by the BSP Secretary-General. On 13 November 1984, a complaint 3 (docketed as NLRC Case No. 16-84J) for illegal transfer was filed with the then Ministry of Labor and Employment, Sub-Regional Arbitration Branch IV, San Pablo City, Laguna. Private respondents there sought to enjoin implementation of Special Orders Nos. 80, 81, 83, 84 and 85, alleging, among other things, that said orders were "indubitable and irrefutable action[s] prejudicial not only to [them] but to [their] families and [would] seriously affect [their] economic stability and solvency considering the present cost of living." On 21 November 1984 (or the day immediately following the date of scheduled transfer), the BSP Camp Manager in Makiling issued a Memorandum requiring the five (5) private respondents to explain why they should not be charged administratively for insubordination. The Memorandum was a direct result of the refusal by private respondents, two (2) days earlier, to accept from petitioner BSP their respective boat tickets to Davao del Norte and their relocation allowances.

Meanwhile, in a letter of the same date, the BSP National President informed private respondents that their refusal to comply with the Special Orders was not sufficiently justified and constituted rank disobedience. Memoranda subsequently issued by the BSP Secretary-General stressed that such refusal as well as the explanations proffered therefor, were unacceptable and could altogether result in termination of employment with petitioner BSP. These warnings notwithstanding, private respondents continued pertinaciously to disobey the disputed transfer orders. Petitioner BSP consequently imposed a five-day suspension on the five (5) private respondents, in the latter part of January 1985. Subsequently, by Special Order dated 12 February 1985 issued by the BSP Secretary-General, private respondents' services were ordered terminated effective 15 February 1985. On 22 February 1985, private respondents amended their original complaint to include charges of illegal dismissal and unfair labor practice against petitioner BSP. 4 The Labor Arbiter thereafter proceeded to hear the complaint. In a decision 5 dated 31 July 1985, the Labor Arbiter ordered the dismissal of private respondents' complaint for lack of merit. On 27 February 1987, however, the ruling of the Labor Arbiter was reversed by public respondent, NLRC, which held that private respondents had been illegally dismissed by petitioner BSP. The dispositive portion of the NLRC decision read: WHEREFORE, premises considered the Decision appealed from is hereby SET ASIDE and a new one entered ordering the respondent-appellee [petitioner BSP] to reinstate the complainantsappellants [private respondents] to their former positions without loss of seniority rights and other benefits appurtenant thereto and with full backwages from the time they were illegally dismissed from the service up to the date of their actual reinstatement. SO ORDERED. The Court notes at the outset that in the Position Paper 6 filed by petitioner BSP with the Labor Arbiter, it was alleged in the second paragraph thereof, that petitioner is a "civic service, non-stock and non-profit organization, relying mostly [on] government and public support, existing under and by virtue of Commonwealth Act No. 111, as amended, by Presidential Decree No. 460 . . . " A similar allegation was contained in the Brief for Appellee 7 and in the Petition 8 and Memorandum 9 filed by petitioner BSP with public respondent NLRC and this Court, respectively. The same allegation, moreover, appeared in the Comment 10 (also treated as the Memorandum) submitted to this Court by the Solicitor General on behalf of public respondent NLRC; for their part, private respondents stated in their Appeal Memorandum 11 with the NLRC that petitioner BSP is "by mandate of law a Public Corporation," a statement reiterated by them in their Memorandum 12 before this Court. In a Resolution dated 9 August 1989, this Court required the parties and the Office of the Government Corporate Counsel to file a comment on the question of whether or not petitioner BSP is in fact a government-owned or controlled corporation. Petitioner, private respondents, the Office of the Solicitor General and the Office of the Government Corporate Counsel filed their respective comments. The central issue is whether or not the BSP is embraced within the Civil Service as that term is defined in Article IX (B) (2) (1) of the 1987 Constitution which reads as follows: The Civil Service embraces all branches, subdivisions, instrumentality mentalities and agencies of the Government, including government-owned or controlled corporations with original charters. xxx xxx xxx The answer to the central issue will determine whether or not private respondent NLRC had jurisdiction to render the Decision and Resolution which are here sought to be nullified.

The responses of the parties, on the one hand, and of the Office of the Solicitor General and the Office of the Government Corporate Counsel, upon the other hand, in compliance with the Resolution of this Court of 9 August 1989, present a noteworthy uniformity. Petitioner BSP and private respondents submit substantially the same view "that the BSP is a purely private organization". In contrast, the Solicitor General and the Government Corporate Counsel take much the same position, that is, that the BSP is a "public corporation' or a "quasi-public corporation" and, as well, a "government controlled corporation." Petitioner BSP's compliance with our Resolution invokes the following provisions of its Constitution and By-laws: The Boy Scouts of the Philippines declares that it is an independent, voluntary, non-political, nonsectarian and non-governmental organization, with obligations towards nation building and with international orientation. The BSP, petitioner stresses, does not receive any monetary or financial subsidy from the Government whether on the national or local level. 13 Petitioner declares that it is a "purely private organization" directed and controlled by its National Executive Board the members of which are, it is said, all "voluntary scouters," including seven (7) Cabinet Secretaries. 14 Private respondents submitted a supplementary memorandum arguing that while petitioner BSP was created as a public corporation, it had lost that status when Section 2 of Commonwealth Act No. 111 as amended by P.D. No. 460 conferred upon it the powers which ordinary private corporations organized under the Corporation Code have: Sec. 2. The said corporation shall have perpetual succession with power to sue and be sued; to hold such real and personal estate as shall be necessary for corporate purposes, and to receive real and personal property by gift, devise, or bequest; to adopt a seal, and to alter or destroy the same at pleasure; to have offices and conduct its business and affairs in the City of Manila and in the several provinces; to make and adopt by-laws, rules and regulations not inconsistent with the laws of the Philippines, and generally to do all such acts and things (including the establishment of regulations for the election of associates and successors: as may be necessary to carry into effect the provisions of the Act and promote the purposes of said corporation. Private respondents also point out that the BSP is registered as a private employer with the Social Security System and that all its staff members and employees are covered by the Social Security Act, indicating that the BSP had lost its personality or standing as a public corporation. It is further alleged that the BSP's assets and liabilities, official transactions and financial statements have never been subjected to audit by the government auditing office, i.e., the Commission on Audit, being audited rather by the private auditing firm of Sycip Gorres Velayo and Co. Private respondents finally state that the appointments of BSP officers and staff were not approved or confirmed by the Civil Service Commission. The views of the Office of the Solicitor General and the Office of the Government Corporate Counsel on the above issue appeared to be generally similar. The Solicitor General's Office, although it had appeared for the NLRC and filed a Comment on the latter's behalf on the merits of the Petition for Certiorari, submitted that the BSP is a government-owned or controlled corporation, having been created by virtue of Commonwealth Act No. 111 entitled "An Act to Create a Public Corporation to be known as the Boy Scouts of the Philippines and to Define its Powers and Purposes." The Solicitor General stressed that the BSP was created in order to "promote, through organization, and cooperation with other agencies the ability of boys to do things for themselves and others, to train them in scoutcraft, and to teach them patriotism, courage, self-reliance, and kindred virtues, using the methods which are now in common use by boy scouts." 5 He further noted that the BSP's objectives and purposes are "solely of a benevolent character and not for pecuniary profit by its members. 16 The Solicitor General also underscored the extent of government participation in the BSP under its charter as reflected in the composition of its governing body: The governing body of the said corporation shall consist of a National Executive Board composed of (a) thePresident of the Philippines or his representative; (b) the charter and life members of the Boy Scouts of the Philippines; (c) the Chairman of the Board of Trustees of the Philippine Scouting Foundation; (d) the Regional Chairman of the Scout Regions of the Philippines; (e) the Secretary of Education and Culture, the Secretary of Social Welfare, the Secretary of National Defense, the

Secretary of Labor, the Secretary of Finance, the Secretary of Youth and Sports, and the Secretary of local Government and Community Development; (f) an equal number of individuals from the private sector; (g) the National President of the Girl Scouts of the Philippines; (h) one Scout of Senior age from each Scout Region to represent the boy membership; and (i) three representatives of the cultural minorities. Except for the Regional Chairman who shall be elected by the Regional Scout Councils during their annual meetings, and the Scouts of their respective regions, all members of the National Executive Board shall be either by appointment or cooption, subject to ratification and confirmation by the Chief Scout, who shall be the Head of State. . . . 17 (Emphasis supplied) The Government Corporate Counsel, like the Solicitor General, describes the BSP as a "public corporation" but, unlike the Solicitor General, suggests that the BSP is more of a "quasi corporation" than a "public corporation." The BSP, unlike most public corporations which are created for a political purpose, is not vested with political or governmental powers to be exercised for the public good or public welfare in connection with the administration of civil government. The Government Corporate Counsel submits, more specifically, that the BSP falls within the ambit of the term "government-owned or controlled corporation" as defined in Section 2 of P.D. No. 2029 (approved on 4 February 1986) which reads as follows: A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by special law or if organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or its outstanding voting capital stock. xxx xxx xxx (Emphasis supplied) Examining the relevant statutory provisions and the arguments outlined above, the Court considers that the following need to be considered in arriving at the appropriate legal characterization of the BSP for purposes of determining whether its officials and staff members are embraced in the Civil Service. Firstly, BSP's functions as set out in its statutory charter do have a public aspect. BSP's functions do relate to the fostering of the public virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of our youth. The social value of activities like those to which the BSP dedicates itself by statutory mandate have in fact, been accorded constitutional recognition. Article II of the 1987 Constitution includes in the "Declaration of Principles and State Policies," the following: Sec. 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and nationalism, and encourage their involvement in public and civic affairs. At the same time, BSP's sanctions do not relate to the governance of any part of territory of the Philippines; BSP is not a public corporation in the same sense that municipal corporations or local governments are public corporations. BSP's functions can not also be described as proprietary functions in the same sense that the functions or activities of government-owned or controlled corporations like the National Development Company or the National Steel Corporation can be described as proprietary or "business-like" in character. Nevertheless, the public character of BSP's functions and activities must be conceded, for they pertain to the educational, civic and social development of the youth which constitutes a very substantial and important part of the nation. The second aspect that the Court must take into account relates to the governance of the BSP. The composition of the National Executive Board of the BSP includes, as noted from Section 5 of its charter quoted earlier, includes seven (7) Secretaries of Executive Departments. The seven (7) Secretaries (now six [6] in view of the abolition of the Department of Youth and Sports and merger thereof into the Department of Education, Culture and Sports) by themselves do not constitute a majority of the members of the National Executive Board. We must note at the same time that the appointments of members of the National Executive Board, except only the appointments of the Regional Chairman and Scouts of Senior age from the various Scout Regions, are subject to

ratification and confirmation by the Chief Scout, who is the President of the Philippines. Vacancies to the Board are filled by a majority vote of the remaining members thereof, but again subject to ratification and confirmation by the Chief Scout. 18 We must assume that such confirmation or ratification involves the exercise of choice or discretion on the part of ratifying or confirming power. It does appears therefore that there is substantial governmental (i.e., Presidential) participation or intervention in the choice of the majority of the members of the National Executive Board of the BSP. The third aspect relates to the character of the assets and funds of the BSP. The original assets of the BSP were acquired by purchase or gift or other equitable arrangement with the Boy Scouts of America, of which the BSP was part before the establishment of the Commonwealth of the Philippines. The BSP charter, however, does not indicate that such assets were public or statal in character or had originated from the Government or the State. According to petitioner BSP, its operating funds used for carrying out its purposes and programs, are derived principally from membership dues paid by the Boy Scouts themselves and from property rentals. In this respect, the BSP appears similar to private non-stock, non-profit corporations, although its charter expressly envisages donations and contributions to it from the Government and any of its agencies and instrumentalities. 19 We note only that BSP funds have not apparently heretofore been regarded as public funds by the Commission on Audit, considering that such funds have not been audited by the Commission. While the BSP may be seen to be a mixed type of entity, combining aspects of both public and private entities, we believe that considering the character of its purposes and its functions, the statutory designation of the BSP as "a public corporation" and the substantial participation of the Government in the selection of members of the National Executive Board of the BSP, the BSP, as presently constituted under its charter, is a government-controlled corporation within the meaning of Article IX. (B) (2) (1) of the Constitution. We are fortified in this conclusion when we note that the Administrative Code of 1987 designates the BSP as one of the attached agencies of the Department of Education, Culture and Sports ("DECS"). 20 An "agency of the Government" is defined as referring to any of the various units of the Government including a department, bureau, office, instrumentality, government-owned or-controlled corporation, or local government or distinct unit therein. 21"Government instrumentality" is in turn defined in the 1987 Administrative Code in the following manner: Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy usually through a charter. This term includesregulatory agencies, chartered institutions and governmentowned or controlled corporations. 22 (Emphasis supplied) The same Code describes a "chartered institution" in the following terms: Chartered institution refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges, and the monetary authority of the State. 23 (Emphasis supplied) We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987 Administrative Code. It thus appears that the BSP may be regarded as both a "government controlled corporation with an original charter" and as an "instrumentality" of the Government within the meaning of Article IX (B) (2) (1) of the Constitution. It follows that the employees of petitioner BSP are embraced within the Civil Service and are accordingly governed by the Civil Service Law and Regulations. It remains only to note that even before the effectivity of the 1987 Constitution employees of the BSP already fell within the scope of the Civil Service. In National Housing Corporation v. Juco, 24 decided in 1985, the Court, speaking through Mr. Justice Gutierrez, held:

There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by the civil service law and civil service rules and regulations. Section 1, Article XII-B of the [19731 Constitution specifically provides: The Civil Service embraces every branch, agency, subdivision and instrumentality of the Government, including every government-owned or controlled corporation. . . . The 1935 Constitution had a similar provision in its Section 1, Article XII which stated: A Civil Service embracing all branches and subdivisions of the Government shall be provided by law. The inclusion of "government-owned or controlled corporations" within the embrace of the civil service shows a deliberate effort of the framers to plug an earlier loophole which allowed government-owned or controlled corporations to avoid the full consequences of the all encompassing coverage of the civil service system. The same explicit intent is shown by the addition of "agency" and "instrumentality" to branches and subdivisions of the Government. All offices and firms of the government are covered. The amendments introduced in 1973 are not idle exercises or meaningless gestures. They carry the strong message that civil service coverage is broad and all-embracing insofar as employment in the government in any of its governmental or corporate arms is concerned. 25 The complaint in NLRC Case No. 1637-84 having been filed on 13 November 1984, when the 1973 Constitution was still in force, our ruling in Juco applies in the case at bar. 26 In view of the foregoing, we hold that both the Labor Arbiter and public respondent NLRC had no jurisdiction over the complaint filed by private respondents in NLRC Case No. 1637-84; neither labor agency had before it any matter which could validly have been passed upon by it in the exercise of original or appellate jurisdiction. The appealed Decision and Resolution in this case, having been rendered without jurisdiction, vested no rights and imposed no liabilities upon any of the parties here involved. That neither party had expressly raised the issue of jurisdiction in the pleadings poses no obstacle to this ruling of the Court, which may motu proprio take cognizance of the issue of existence or absence of jurisdiction and pass upon the same. 27 ACCORDINGLY, the Decision of the Labor Arbiter dated 31 July 1985, and the Decision dated 27 February 1987 and Resolution dated 16 October 1987, issued by public respondent NLRC, in NLRC Case No. 1637-84, are hereby SET ASIDE. All other orders and resolutions rendered in this case by the Labor Arbiter and the NLRC are likewise SET ASIDE. No pronouncement as to costs. Fernan, C.J., Gutierrez, Jr., Bidin and Davide Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 86773 February 14, 1992 SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT (SEAFDECAQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.), BEN DELOS REYES (FINANCE OFFICER), petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents. Ramon Encarnacion for petitioners. Caesar T. Corpus for private respondent.

NOCON, J.: This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor Relations Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to pay private respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits, and the resolution denying the petitioners' motion for reconsideration of said decision dated January 9, 1989. The antecedent facts of the case are as follows: SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Development Center, organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring country (Article 1, Agreement Establishing the SEAFDEC). On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a probationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5, 1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was appointed to the position of Professional III and designated as Head of External Affairs Office with the same pay and benefits. On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to private respondent informing him that due to the financial constraints being experienced by the department, his services shall be terminated at the close of office hours on May 15, 1986 and that he is entitled to separation benefits equivalent to one (1) month of his basic salary for every year of service plus other benefits (Rollo, p. 153). Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on March 18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral damages and attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of Petition for Certiorari). Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inasmuch as the SEAFDEC-AQD is an international organization and that private respondent must first secure clearances from

the proper departments for property or money accountability before any claim for separation pay will be paid, and which clearances had not yet been obtained by the private respondent. A formal hearing was conducted whereby private respondent alleged that the non-issuance of the clearances by the petitioners was politically motivated and in bad faith. On the other hand, petitioners alleged that private respondent has property accountability and an outstanding obligation to SEAFDEC-AQD in the amount of P27,532.11. Furthermore, private respondent is not entitled to accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of the same during his employment with the SEAFDEC-AQD (Annex "D", Id.). On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered ordering respondents: 1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits; 2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees. All other claims are hereby dismissed. SO ORDERED. (Rollo, p. 51, Annex "E") On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award of P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.) On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was denied on January 9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that the NLRC has no jurisdiction to hear and decide respondent Lazaga's complaint since SEAFDEC-AQD is immune from suit owing to its international character and the complaint is in effect a suit against the State which cannot be maintained without its consent. The petition is impressed with merit. Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an international agency beyond the jurisdiction of public respondent NLRC. It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of Vietnam (Annex "H", Petition). The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January 16,1968. Its purpose is as follows: The purpose of the Center is to contribute to the promotion of the fisheries development in Southeast Asia by mutual co-operation among the member governments of the Center, hereinafter called the "Members", and through collaboration with international organizations and governments external to the Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H" Petition) (p.310, Rollo) SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the Agreement establishing SEAFDEC mandates:

1. The Council shall be the supreme organ of the Center and all powers of the Center shall be vested in the Council. Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional independence and freedom from control of the state in whose territory its office is located. As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public International Law (p. 83, 1956 ed.): Permanent international commissions and administrative bodies have been created by the agreement of a considerable number of States for a variety of international purposes, economic or social and mainly non-political. Among the notable instances are the International Labor Organization, the International Institute of Agriculture, the International Danube Commission. In so far as they are autonomous and beyond the control of any one State, they have a distinct juridical personality independent of the municipal law of the State where they are situated. As such, according to one leading authority "they must be deemed to possess a species of international personality of their own." (Salonga and Yap, Public International Law, 83 [1956 ed.]) Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be represented by one Director in the governing SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par. 1, Annex "H",ibid.) and that its national laws and regulations shall apply only insofar as its contribution to SEAFDEC of "an agreed amount of money, movable and immovable property and services necessary for the establishment and operation of the Center" are concerned (Art. 11, ibid.). It expressly waived the application of the Philippine laws on the disbursement of funds of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292). The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over SEAFDEC-AQD in Opinion No. 139, Series of 1984 4. One of the basic immunities of an international organization is immunity from local jurisdiction, i.e.,that it is immune from the legal writs and processes issued by the tribunals of the country where it is found. (See Jenks, Id., pp. 37-44) The obvious reason for this is that the subjection of such an organization to the authority of the local courts would afford a convenient medium thru which the host government may interfere in there operations or even influence or control its policies and decisions of the organization; besides, such subjection to local jurisdiction would impair the capacity of such body to discharge its responsibilities impartially on behalf of its member-states. In the case at bar, for instance, the entertainment by the National Labor Relations Commission of Mr. Madamba's reinstatement cases would amount to interference by the Philippine Government in the management decisions of the SEARCA governing board; even worse, it could compromise the desired impartiality of the organization since it will have to suit its actuations to the requirements of Philippine law, which may not necessarily coincide with the interests of the other member-states. It is precisely to forestall these possibilities that in cases where the extent of the immunity is specified in the enabling instruments of international organizations, jurisdictional immunity from the host country is invariably among the first accorded. (See Jenks, Id.; See also Bowett, The Law of International Institutions, pp. 284-1285). Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action. Jurisdiction is conferred by law. Where there is none, no agreement of the parties can provide one. Settled is the rule that the decision of a tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held: A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which it stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were

obviously not contemplated therein. The exceptional circumstances involved in Sibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982]) Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286 [1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why it took cognizance of the case. Said the Court: We would note, finally, that the present petition relates to a controversy between two claimants to the same position; this is not a controversy between the SEAFDEC on the one hand, and an officer or employee, or a person claiming to be an officer or employee, of the SEAFDEC, on the other hand. There is before us no question involving immunity from the jurisdiction of the Court, there being no plea for such immunity whether by or on behalf of SEAFDEC, or by an official of SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied). WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local agency of the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988 and January 9, 1989, respectively, are hereby REVERSED and SET ASIDE for having been rendered without jurisdiction. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 89621 September 24, 1991 PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General Manager ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA, petitioners, vs. HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS & FULGENCIO LEGO, respondents. Aurelio D. Menzon for petitioners. Mario P. Nicolasora co-counsel for petitioners. Papiano L. Santo for private respondents.

CRUZ, J.:p The question now before us has been categorically resolved in earlier decisions of the Court that a little more diligent research would have disclosed to the petitioners. On the basis of those cases and the facts now before us, the petition must be denied. The private respondents were employees of the petitioner who were suspected of complicity in the irregular disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal complaint for theft against them but this was later withdrawn and substituted with a criminal complaint for falsification of private documents. On November 26, 1987, after a preliminary investigation conducted by the Municipal Trial Court of Tanauan, Leyte, the complaint was dismissed. The dismissal was affirmed on April 8, 1988, by the Office of the Provincial Prosecutor. Meantime, allegedly after an administrative investigation, the private respondents were dismissed by the petitioner company on November 23, 1987. As a result, they lodged a complaint for illegal dismissal with the Regional Arbitration Branch of the NLRC in Tacloban City on December 1, 1987, and decisions manded reinstatement with damages. In addition, they instituted in the Regional Trial Court of Leyte, on April 4, 1988, a separate civil complaint against the petitioners for damages arising from what they claimed to be their malicious prosecution. The petitioners moved to dismiss the civil complaint on the ground that the trial court had no jurisdiction over the case because it involved employee-employer relations that were exclusively cognizable by the labor arbiter. The motion was granted on February 6, 1989. On July 6, 1989, however, the respondent judge, acting on the motion for reconsideration, reinstated the complaint, saying it was "distinct from the labor case for damages now pending before the labor courts." The petitioners then came to this Court for relief. The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to support their position that the private respondents civil complaint for damages falls under the jurisdiction of the labor arbiter. They particularly cite the case of Getz Corporation v. Court of Appeals, 1 where it was held that a court of first instance had no jurisdiction over the complaint filed by a dismissed employee "for unpaid salary and other employment benefits, termination pay and moral and exemplary damages." We hold at the outset that the case is not in point because what was involved there was a claim arising from the alleged illegal dismissal of an employee, who chose to complain to the regular court and not to the labor arbiter.

Obviously, the claim arose from employee-employer relations and so came under Article 217 of the Labor Code which then provided as follows: ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the original and exclusive jurisdiction to hear and decide within thirty (30) working days after submission of the case by the parties for decision, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Those that workers may file involving wages, hours of work and other terms and conditions of employment; 3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees' compensation, social security, medicare and maternity benefits; 4. Cases involving household services; and 5. Cases arising from any violation of Article 265 of this Code, including questions involving the legality of strikes and lockouts. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by labor Arbiters. 2 It must be stressed that not every controversy involving workers and their employers can be resolved only by the labor arbiters. This will be so only if there is a "reasonable causal connection" between the claim asserted and employee-employer relations to put the case under the provisions of Article 217. Absent such a link, the complaint will be cognizable by the regular courts of justice in the exercise of their civil and criminal jurisdiction. In Medina v. Castro-Bartolome, 3 two employees filed in the Court of First Instance of Rizal a civil complaint for damages against their employer for slanderous remarks made against them by the company president. On the order dismissing the case because it came under the jurisdiction of the labor arbiters, Justice Vicente Abad Santos said for the Court: It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple action for damages for tortious acts allegedly committed by the defendants. Such being the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise. In Singapore Airlines Ltd. v. Pao, 4 where the plaintiff was suing for damages for alleged violation by the defendant of an "Agreement for a Course of Conversion Training at the Expense of Singapore Airlines Limited," the jurisdiction of the Court of First Instance of Rizal over the case was questioned. The Court, citing the earlier case of Quisaba v. Sta. Ines Melale Veneer and Plywood, Inc., 5 declared through Justice Herrera: Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. In Molave Sales, Inc. v. Laron, 6 the same Justice held for the Court that the claim of the plaintiff against its sales manager for payment of certain accounts pertaining to his purchase of vehicles and automotive parts, repairs of such vehicles, and cash advances from the corporation was properly cognizable by the Regional Trial Court of

Dagupan City and not the labor arbiter, because "although a controversy is between an employer and an employee, the Labor Arbiters have nojurisdiction if the Labor Code is not involved." The latest ruling on this issue is found in San Miguel Corporation v. NLRC, 7 where the above cases are cited and the changes in Article 217 are recounted. That case involved a claim of an employee for a P60,000.00 prize for a proposal made by him which he alleged had been accepted and implemented by the defendant corporation in the processing of one of its beer products. The claim was filed with the labor arbiter, who dismissed it for lack of jurisdiction but was reversed by the NLRC on appeal. In setting aside the appealed decision and dismissing the complaint, the Court observed through Justice Feliciano: It is the character of the principal relief sought that appears essential, in this connection. Where such principal relief is to be granted under labor legislation or a collective bargaining agreement, the case should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages might be asserted as an incident to such claim. 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. While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the entire universe of money claims that might be asserted by workers against their employers has been absorbed into the original and exclusive jurisdiction of Labor Arbiters. For it cannot be presumed that money claims of workers which do not arise out of or in connection with their employer-employee relationship, and which would therefore fall within the general jurisdiction of the regular courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the 'money claims of workers" referred to in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the employeremployee relationship, or some aspect or incident of such relationship. Put a little differently, that money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connection with the employer-employee relationship (Ibid.). The case now before the Court involves a complaint for damages for malicious prosecution which was filed with the Regional Trial Court of Leyte by the employees of the defendant company. It does not appear that there is a "reasonable causal connection" between the complaint and the relations of the parties as employer and employees. The complaint did not arise from such relations and in fact could have arisen independently of an employment relationship between the parties. No such relationship or any unfair labor practice is asserted. What the employees are alleging is that the petitioners acted with bad faith when they filed the criminal complaint which the Municipal Trial Court said was intended "to harass the poor employees" and the dismissal of which was affirmed by the Provincial Prosecutor "for lack of evidence to establish even a slightest probability that all the respondents herein have committed the crime imputed against them." This is a matter which the labor arbiter has no competence to resolve as the applicable law is not the Labor Code but the Revised Penal Code. "Talents differ, all is well and wisely put," so observed the philosopher-poet. 8 So it must be in the case we here decide. WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs against the petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 149578 April 10, 2003

EVELYN TOLOSA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, QWANA KAIUN (through its resident-agent, FUMIO NAKAGAWA), ASIA BULK TRANSPORT PHILS. INC., PEDRO GARATE and MARIO ASIS, respondents. PANGANIBAN, J.: As a rule, labor arbiters and the National Labor Relations Commission have no power or authority to grant reliefs from claims that do not arise from employer-employee relations. They have no jurisdiction over torts that have no reasonable causal connection to any of the claims provided for in the Labor Code, other labor statutes, or collective bargaining agreements. The Case The Petition for Review before us assails the April 18, 2001 Decision1 of the Court of Appeals (CA) in CA-GR SP No. 57660, as well as the April 17, 2001 CA Resolution2 denying petitioner's Motion for Reconsideration. The dispositive portion of the challenged Decision reads as follows: "WHEREFORE, premises considered, the instant petition for certiorari is hereby DENIED and accordingly DISMISSED, without prejudice to the right of herein petitioner to file a suit before the proper court, if she so desires. No pronouncement as to costs."3 The Facts The appellate court narrated the facts of the case in this manner: "Evelyn Tolosa (hereafter EVELYN), was the widow of Captain Virgilio Tolosa (hereafter CAPT. TOLOSA) who was hired by Qwana-Kaiun, through its manning agent, Asia Bulk Transport Phils. Inc., (ASIA BULK for brevity), to be the master of the Vessel named M/V Lady Dona. CAPT. TOLOSA had a monthly compensation of US$1700, plus US$400.00 monthly overtime allowance. His contract officially began on November 1, 1992, as supported by his contract of employment when he assumed command of the vessel in Yokohama, Japan. The vessel departed for Long Beach California, passing by Hawaii in the middle of the voyage. At the time of embarkation, CAPT. TOLOSA was allegedly shown to be in good health. "During 'channeling activities' upon the vessel's departure from Yokohama sometime on November 6, 1992, CAPT. TOLOSA was drenched with rainwater. The following day, November 7, 1992, he had a slight fever and in the succeeding twelve (12) days, his health rapidly deteriorated resulting in his death on November 18, 1992. "According to Pedro Garate, Chief Mate of the Vessel, in his statement submitted to the U.S. Coast Guard on November 23, 1992 upon arrival in Long Beach, California CAPT. TOLOSA experienced high fever between November 11-15, 1992 and suffered from loose bowel movement (LBM) beginning November 9, 1992. By November 11, 1992, his temperature was 39.5 although his LBM had 'slightly' stopped. The next day, his temperature rose to 39.8 and had lost his appetite. In the evening of that day, November 13, 1992, he slipped in the toilet and suffered scratches at the back of his waist. First aid was applied and CAPT. TOLOSA was henceforth confined to his quarters with an able seaman to watch him 24 hours a day until November 15, 1992, when his conditioned worsened.

"On the same day, November 15, 1992, the Chief Engineer initiated the move and contacted ASIA BULK which left CAPT. TOLOSA's fate in the hands of Pedro Garate and Mario Asis, Second Mate of the same vessel who was in-charge of the primary medical care of its officers and crew. Contact with the U.S. Coast Guard in Honolulu, Hawaii (USCGHH) was likewise initiated to seek medical advice. "On November 17, 1992, CAPT. TOLOSA was 'losing resistance' and his 'condition was getting serious.' At 2215 GMT, a telex was sent to ASIA BULK requesting for the immediate evacuation of CAPT. TOLOSA and thereafter an airlift was set on November 19, 1992. However, on November 18, 1992, at 0753 GMT, CAPT. TOLOSA was officially recorded as having breathed his last. "Because of the death of CAPT. TOLOSA, his wife, EVELYN, as petitioner, filed a Complaint/Position Paper before the POEA (POEA Case No. 93-06-1080) against Qwana-Kaiun, thru its resident-agent, Mr. Fumio Nakagawa, ASIA BULK, Pedro Garate and Mario Asis, as respondents. "After initial hearings and submissions of pleadings, the case was however transferred to the Department of Labor and Employment, National Labor Relations Commission (NLRC), when the amendatory legislation expanding its jurisdiction, and removing overseas employment related claims from the ambit of POEA jurisdiction. The case was then raffled to Labor Arbiter, Vladimir Sampang. xxx xxx xxx

"After considering the pleadings and evidences, on July 8, 1997, the Labor Arbiter Vladimir P. L. Sampang, in conformity with petitioner's plea to hold respondents solidarily liable, granted all the damages, (plus legal interest), as prayed for by the petitioner. The dispositive portion of his Decision reads: 'WHEREFORE, premises considered, the respondents are hereby ordered to jointly and solidarily pay complainants the following: 1. US$176,400.00 (US$2,100.00 x 12 months x 7 years) or P4,586,400.00 (at P26.00 per US$1.00) by way of lost income; 2. interest at the legal rate of six percent (6%) per annum or P1,238,328.00 (from November 1992 to May 1997 or 4 years); 3. moral damages of P200,000.00; 4. exemplary damages of P100,000.00; and 5. 10% of the total award, or P612,472.80, as attorney's fees.' xxx xxx xxx

"On appeal, private respondents raised before the National Labor Relations Commission (NLRC) the following grounds: (a) the action before the Arbiter, as he himself concedes, is a complaint based on torts due to negligence. It is the regular courts of law which have jurisdiction over the action; (b) Labor Arbiters have jurisdiction over claims for damages arising from employer-employee relationship (Art. 217, Section (a) (3)); (c) In this case, gross negligence is imputed to respondents Garate and Asis, who have no employer-employee relationship with the late Capt. Virgilio Tolosa; (d) The labor arbiter has no jurisdiction over the controversy;

xxx

xxx

xxx

"Despite other peripheral issues raised by the parties in their respective pleadings, the NLRC on September 10, 1998, vacated the appealed decision dated July 8, 1997 of the Labor Arbiter and dismissed petitioner's case for lack of jurisdiction over the subject matter of the action pursuant to the provisions of the Labor Code, as amended."4 (Citations omitted) Ruling of the Court of Appeals Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction over the subject matter of the action filed by petitioner. Her cause did not arise from an employer-employee relation, but from a quasi delict or tort. Further, there is no reasonable causal connection between her suit for damages and her claim under Article 217 (a)(4) of the Labor Code, which allows an award of damages incident to an employer-employee relation. Hence, this Petition.5 Issues Petitioner raises the following issues for our consideration: "I "Whether or not the NLRC has jurisdiction over the case. "II "Whether or not Evelyn is entitled to the monetary awards granted by the labor arbiter."6 After reviewing petitioner's Memorandum, we find that we are specifically being asked to determine 1) whether the labor arbiter and the NLRC had jurisdiction over petitioner's action, and 2) whether the monetary award granted by the labor arbiter has already reached finality. The Court's Ruling The Petition has no merit. First Issue: Jurisdiction over the Action Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the failure of private respondents -- as employers of her husband (Captain Tolosa) -- to provide him with timely, adequate and competent medical services under Article 161 of the Labor Code: "ART 161. Assistance of employer. -- It shall be the duty of any employer to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency." Likewise, she contends that Article 217 (a) (4)7 of the Labor Code vests labor arbiters and the NLRC with jurisdiction to award all kinds of damages in cases arising from employer-employee relations. Petitioner also alleges that the "reasonable causal connection" rule should be applied in her favor. Citing San Miguel Corporation v. Etcuban,8 she insists that a reasonable causal connection between the claim asserted and the employer-employee relation confers jurisdiction upon labor tribunals. She adds that she has satisfied the required conditions: 1) the dispute arose from an employer-employee relation, considering that the claim was for damages based on the failure of private respondents to comply with their obligation under Article 161 of the Labor Code; and 2) the dispute can be resolved by reference to the Labor Code, because the material issue is whether

private respondents complied with their legal obligation to provide timely, adequate and competent medical services to guarantee Captain Tolosa's occupational safety.9 We disagree. We affirm the CA's ruling that the NLRC and the labor arbiter had no jurisdiction over petitioner's claim for damages, because that ruling was based on a quasi delict or tort per Article 2176 of the Civil Code.10 Time and time again, we have held that the allegations in the complaint determine the nature of the action and, consequently, the jurisdiction of the courts.11 After carefully examining the complaint/position paper of petitioner, we are convinced that the allegations therein are in the nature of an action based on a quasi delict or tort. It is evident that she sued Pedro Garate and Mario Asis for gross negligence. Petitioner's complaint/position paper refers to and extensively discusses the negligent acts of shipmates Garate and Asis, who had no employer-employee relation with Captain Tolosa. Specifically, the paper alleges the following tortious acts: "x x x [R]espondent Asis was the medical officer of the Vessel, who failed to regularly monitor Capt. Tolosa's condition, and who needed the USCG to prod him to take the latter's vital signs. In fact, he failed to keep a medical record, like a patient's card or folder, of Capt. Tolosa's illness."12 "Respondents, however, failed Capt. Tolosa because Garate never initiated actions to save him. x x x In fact, Garate rarely checked personally on Capt. Tolosa's condition, to wit:"13 "x x x Noticeably, the History (Annex "D") fails to mention any instance when Garate consulted the other officers, much less Capt. Tolosa, regarding the possibility of deviation. To save Capt. Tolosa's life was surely a just cause for the change in course, which the other officers would have concurred in had they been consulted by respondent Garate which he grossly neglected to do. "Garate's poor judgement, since he was the officer effectively in command of the vessel, prevented him from undertaking these emergency measures, the neglect of which resulted in Capt. Tolosa's untimely demise."14 The labor arbiter himself classified petitioner's case as "a complaint for damages, blacklisting and watchlisting (pending inquiry) for gross negligence resulting in the death of complainant's husband, Capt. Virgilio Tolosa."15 We stress that the case does not involve the adjudication of a labor dispute, but the recovery of damages based on a quasi delict. The jurisdiction of labor tribunals is limited to disputes arising from employer-employee relations, as we ruled in Georg Grotjahn GMBH & Co. v. Isnani:16 "Not every dispute between an employer and employee involves matters that only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employeremployee relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining agreement."17 The pivotal question is whether the Labor Code has any relevance to the relief sought by petitioner. From her paper, it is evident that the primary reliefs she seeks are as follows: (a) loss of earning capacity denominated therein as "actual damages" or "lost income" and (b) blacklisting. The loss she claims does not refer to the actual earnings of the deceased, but to his earning capacity based on a life expectancy of 65 years. This amount is recoverable if the action is based on a quasi delict as provided for in Article 2206 of the Civil Code,18 but not in the Labor Code. 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,19 these reliefs must still he based on an action that has a reasonable causal connection with the Labor Code, other labor statutes, or collective bargaining agreements.20

The central issue is determined essentially from the relief sought in the complaint. In San Miguel Corporation v. NLRC,21 this Court held: "It is the character of the principal relief sought that appears essential in this connection. Where suchprincipal 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."22 The labor arbiter found private respondents to be grossly negligent. He ruled that Captain Tolosa, who died at age 58, could expect to live up to 65 years and to have an earning capacity of US$176,400. It must be noted that a worker's loss of earning capacity and blacklisting are not to be equated with wages, overtime compensation or separation pay, and other labor benefits that are generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting from a quasi delict or a similar cause within the realm of civil law. "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."23 In the present case, petitioner's claim for damages is not related to any other claim under Article 217, other labor statutes, or collective bargaining agreements. Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or specify a claim or relief. This provision is only a safety and health standard under Book IV of the same Code. The enforcement of this labor standard rests with the labor secretary.24 Thus, claims for an employer's violation thereof are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor standard provided for in Article 161 by suing for damages before the labor arbiter. It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the employeremployee relation is merely incidental, and in which the cause of action proceeds from a different source of obligation such as a tort.25 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 courts26 -- not with the NLRC or the labor arbiters. Second Issue: Finality of the Monetary Award Petitioner contends that the labor arbiter's monetary award has already reached finality, since private respondents were not able to file a timely appeal before the NLRC. This argument cannot be passed upon in this appeal, because it was not raised in the tribunals a quo. Wellsettled is the rule that issues not raised below cannot be raised for the first time on appeal. Thus, points of law, theories, and arguments not brought to the attention of the Court of Appeals need not -- and ordinarily will not -be considered by this Court.27 Petitioner's allegation cannot be accepted by this Court on its face; to do so would be tantamount to a denial of respondents' right to due process.28 Furthermore, whether respondents were able to appeal on time is a question of fact that cannot be entertained in a petition for review under Rule 45 of the Rules of Court. In general, the jurisdiction of this Court in cases brought before it from the Court of Appeals is limited to a review of errors of law allegedly committed by the court a quo.29 WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner. SO ORDERED.

SECOND DIVISION

[G.R. No. 123646. July 14, 1999]

NAZARIO C. AUSTRIA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ABETO A. UY and PHILIPPINE STEEL COATING CORPORATION, respondents. DECISION BELLOSILLO, J.: PHILIPPINE STEEL COATING CORPORATION (PHILSTEEL), private respondent, is engaged in the manufacture of prefabricated steel, galvanized iron and other metal products. On 19 December 1985 it hired petitioner Nazario C. Austria as its Credit and Collection Manager.[1] On 11 August 1987 petitioner and private respondent PHILSTEEL entered into a "Confidentiality Agreement" whereby he agreed not to disclose to anyone outside the company any technical, operational and other such information acquired in the course of his employment, unless otherwise duly authorized by private respondent, on pain of immediate dismissal.[2] A smooth and satisfactory employee-employer relationship ensued between the two (2) parties until 17 August 1989 when petitioner was unceremoniously terminated by private respondent company on the ground that he allegedly disclosed confidential information to prospective competitors and had undertaken activities far beyond his official duties and responsibilities.[3] On 30 August 1989 Austria filed a case for illegal dismissal against PHILSTEEL. He alleged that on 5 August 1989 the President of PHILSTEEL, Abeto Uy, demanded his resignation purportedly due to loss of confidence but refused to shed light on the reasons therefor.[4] Austria further alleged that on 17 August 1989, without any prior written notice, he was summoned to a meeting with the Vice-President for Finance, Primo Valerio, and VicePresident for Legal and Personnel, Gregorio Vega. Therein he was questioned about a certain 13 July 1989 telefax message sent by one Felix Lukban to PHILSTEEL's Australian supplier of equipment and machinery, Bliss Fox Manufacturing Corporation (BLISS FOX). The telefax showed that, on behalf of an unnamed client, Lukban was asking for the purchase price of a complete line of machinery and equipment for a steel galvanizing plant. Austria denied any knowledge of the telex. Petitioner was also asked about his close relationship with Lukban, which the former admitted, Lukban being the godfather of his child.[5] Immediately after the meeting Austria was given his notice of termination and required to surrender the keys to his company car and to his room which were in his possession. When he returned to his room it was already padlocked; when he passed by his car it was barricaded.[6] Austria submitted in support of his complaint the affidavit of Felix Lukban executed on 13 December 1989 disclaiming any participation of petitioner in the sending of the telefax message.[7] In addition, Lukban testified to the same effect and denied hearing any answer from BLISS FOX on his telefax.[8] PHILSTEEL, on the other hand, contended that any information as to the sources of its supply was highly confidential as the steel industry was very competitive, and the information was disclosed by Austria to Lukban. The basis for this contention was the incident of 5 August 1989 when a representative of BLISS FOX named Charles Villa informed Abeto Uy, in the presence of Primo Valerio and Gregorio Vega, of the fax message sent by Lukban to BLISS FOX. Charles Villa was said to have stated that Lukban represented himself to be acting for PHILSTEEL so he verified the representation from Uy who however denied it. Forthwith, Villa dialed a certain number from the telefax message.[9] After a brief exchange with the person on the other end of the phone, during which time Villa scribbled a name at the back of the telex, he informed Uy that he just talked with Lukban who informed him that his contact with PHILSTEEL was Rudy Austria whose name he had just written.[10] After Villa left, Austria was immediately investigated on the matter. Petitioner admitted having a close relationship with Lukban. Austria also volunteered to disclose secret meetings at Manila Garden Hotel with Lukban and the latter's son-in-law regarding plans to put up a rival galvanizing business either here in the Philippines or in Singapore, as well as meetings at company premises with a group of Australians on the same subject. A second investigation held on 17 August 1989 yielded the same result. [11] Testimonies of Vega and

Valerio, as well as the latter's 29 November 1989 affidavit, the confidentiality agreement and the termination letter were presented to buttress private respondents' evidence. The Labor Arbiter found the evidence of private respondents credible on the ground that no other inference other than Austria's guilt could be drawn from these established circumstances: the Australian representative of BLISS FOX did not know Austria nor the latter's nickname (Rudy) when he called Lukban and inquired who Lukban's contact person was at PHILSTEEL; Lukban was not only known to Austria, he was close to him; and, Austria signified his intention to join the rival company which Lukban planned to form.[12] The Labor Arbiter pointed out that petitioner failed to establish any motive on the part of private respondents and of Valerio and Vega in terminating his employment or in testifying against him since his services were still highly satisfactory as of July 1989. Thus, the Labor Arbiter declared the dismissal to be legal but ordered private respondents to pay petitioner P24,000.00 separation pay considering that the company suffered no loss and that there was no proof of a rival company later established by petitioner.[13] On appeal the NLRC agreed with the thesis of the Labor Arbiter that petitioner failed to prove any other motive by private respondents for his termination considering his excellent job performance. The Commission however modified the Labor Arbiter's decision by directing PHILSTEEL to pay petitioner an indemnity of P1,000.00 for non-observance of due process in failing to provide petitioner with a prior written notice of the investigation and for not giving him time to answer charges and to seek assistance of counsel.[14] Hence, this petition which is anchored on the following perceived errors:[15] 1. Respondent NLRC committed grave abuse of discretion in upholding the validity of petitioner's dismissal a. The alleged "loss of trust" in petitioner was not based on convincing and substantial evidence of any actual misconduct on his part, but merely on private respondents' suspicions, speculations and conjectures built around Lukban's telefax of 13 July 1989; b. The alleged mention of petitioner as a "contact person" of Lukban in respondent PHILSTEEL is not in itself proof of any breach of duty on petitioner's part, nor was such "identification" even established as a fact by competent and reliable evidence; c. The inconsistent and incredible testimonies of private respondents' witnesses on material and relevant facts clearly show that the charge of "loss of trust" is baseless, simulated and a mere capricious concoction of private respondents; 2. The denial of reliefs to petitioner for his illegal dismissal was an arbitrary, whimsical and capricious exercise of judgment by respondent NLRC. Petitioner, in effect, assigns grave abuse of discretion on the part of public respondent NLRC for its misappreciation of the evidence and giving it undue weight. Basic is the rule that judicial review of labor cases does not go so far as to evaluate the sufficiency of evidence on which the labor officials' findings rest;[16] more so when both the Labor Arbiter and the NLRC share the same findings. This, notwithstanding, we cannot affirm the decision of the NLRC especially when its findings of fact on which the conclusion was based are not supported by substantial evidence. By substantial evidence, we mean the amount of relevant evidence which a reasonable mind might accept as adequate to justify the conclusion.[17] The NLRC grounded its findings on the following postulates: (a) the witnesses of PHILSTEEL are credible for petitioner failed to show any ground for them to falsely testify, especially in the light of his excellent job performance; and, (b) respondents' witnesses are more credible than petitioner's - Lukban who, insofar as the source of the information is concerned, impressed the NLRC as evasive.[18] The NLRC however entertained a patent misapprehension of the burden of proof rule in labor termination cases. Unlike in other cases where the complainant has the burden of proof to discharge, in labor cases concerning illegal dismissals, the burden of proving that the employee was dismissed with just cause rests upon the employer. [19] Such is the mandate of Art. 278 of the Labor Code.[20] In brief, the evidence of PHILSTEEL rests upon the following bases: (a) the allegation of Charles Villa, representative of BLISS FOX, that Lukban named petitioner Austria as his contact in PHILSTEEL; (b) the close

relationship of Lukban and Austria; and, (c) the admissions of Austria during the investigation relative to both the close relationship with Lukban and their plans to set up a rival business. Like a house of cards, the evidence of private respondents collapses when we take into account the fact that its foundation is made of hearsay evidence or mere speculations. It must be noted that the testimonies of Valerio and Vega relied mainly on the veracity of the assertions of Villa. They did not say that they actually heard or observed Lukban admit to Villa that the former's client was PHILSTEEL and that his contact with PHILSTEEL was Austria. What they seemingly saw was Villa scribbling a name on the telefax purportedly dictated by Lukban. In short, what they appear to have observed was what Villa wanted them to observe, no matter whether it was the truth or not. Thus, their testimony was clearly hearsay and must not be given weight. Moreover, the veracity of Villa's assertions, even as to his being a representative of BLISS FOX, is suspect. For not only were the circumstances attending the assertions incredible, considering that Lukban's message was by telex sent to Australia and would thus be more convenient for BLISS FOX to reply by the same mode and not by spending so much by sending a representative over merely to inquire upon a prospective customer, but also, the assertions were not subjected to the sifting process of cross examination. Neither Villa nor Uy was presented as a witness, hence, could not be cross examined by petitioner. The reliance both by the Labor Arbiter and the NLRC on the hearsay testimonies in assessing the evidence of private respondents reflects a dangerous propensity for baseless conclusions amounting to grave abuse of discretion.[21] Such propensity is further shown when public respondent gave imprimatur to PHILSTEEL's conclusion that Austria was the one who divulged the so-called confidential information due mainly to his close affinity with Lukban. As we held in Globe Mackay Cable and Radio Corporation v. NLRC[22]In the instant case, petitioner has predicated its dismissal of Salazar on loss of confidence. As we have held countless times, while loss of confidence or breach of trust is a valid ground for termination, it must rest on some basis which must be convincingly established. An employee may not be dismissed on mere presumptions and supposition. Petitioner's allegation that since Salazar and Saldivar lived together in the same apartment, it "presumes reasonably that complainant's sympathy would be with Saldivar" and its averment that Saldivar's investigation although unverified, was probably true, do not pass this Court's test. While we should not condone the acts of disloyalty of an employee, neither should we dismiss him on the basis of suspicion derived from speculative inferences. Of significance here is the fact that nowhere in all the allegations of PHILSTEEL was there proof of any concrete action by Austria of divulging confidential information and of setting up a rival business. Everything was according to what Villa said or what Lukban supposedly said. Thus, PHILSTEEL's resort to Austria's "admissions." The admission of close relationship is certainly true as it was affirmed by both Austria and Lukban. The "admission" however, of their setting up a rival business strikes this Court as somewhat forced like squeezing a stone for water. The reality of such admission is negated by subsequent events. At no time did such an envisioned "rival" company come to being. Indeed, after his dismissal, petitioner had to languish for several months in uncertainty while looking for employment, instead of just joining the alleged company. Until he died on 15 March 1997,[23] petitioner never went into partnership with Lukban nor joined any other company. Accusation cannot take the place of proof. A suspicion or belief no matter how sincerely felt cannot be a substitute for factual findings carefully established through an orderly procedure.[24] Such orderly procedure was denied petitioner by PHILSTEEL, as correctly found by the NLRC, thus[25]In the instant case, there was at least a partial denial of the complainant's right to due process because there was no showing: (1) that he was given the required first written notice; (2) that he was given sufficient time to answer the charges against him; and, (3) that he had the chance to obtain the assistance of counsel. As there is a finding of illegal dismissal, an award of back wages, instead of indemnity, computed from the time of dismissal up to the time of his death, with legal interest plus attorney's fees, might properly assuage the hurt and damages caused by such illegal dismissal.
WHEREFORE, the petition is GRANTED. Private respondent PHILIPPINE STEEL COATING CORPORATION (PHILSTEEL) is ORDERED to pay the heirs of petitioner NAZARIO C. AUSTRIA his back wages inclusive of allowances and other benefits, including death benefits, from 17 August 1989 up to 15 March 1997, with legal interest plus attorney's fees. The Labor Arbiter is DIRECTED to compute immediately the monetary benefits due petitioner as aforestated in accordance with law.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 120567 March 20, 1998 PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FERDINAND PINEDA and GOGFREDO CABLING, respondents.

MARTINEZ, J.: Can the National Labor Relations Commission (NLRC), even without a complaint for illegal dismissal tiled before the labor arbiter, entertain an action for injunction and issue such writ enjoining petitioner Philippine Airlines, inc. from enforcing its Orders of dismissal against private respondents, and ordering petitioner to reinstate the private respondents to their previous positions? This is the pivotal issue presented before us in this petition for certiorari under Rule 65 of the Revised Rules of Court which seeks the nullification of the injunctive writ dated April 3, 1995 issued by the NLRC and the Order denying petitioner's motion for reconsideration on the ground that the said Orders were issued in excess of jurisdiction. Private respondents are flight stewards of the petitioner. Both were dismissed from the service for their alleged involvement in the April 3, 1993 currency smuggling in Hong Kong. Aggrieved by said dismissal, private respondents filed with the NLRC a petition 1 for injunction praying that: I. Upon filing of this Petition, a temporary restraining order be issued, prohibiting respondents (petitioner herein) from effecting or enforcing the Decision dated Feb. 22, 1995, or to reinstate petitioners temporarily while a hearing on the propriety of the issuance of a writ of preliminary injunction is being undertaken; II. After hearing, a writ of preliminary mandatory injunction be issued ordering respondent to reinstate petitioners to their former positions pending the hearing of this case, or, prohibiting respondent from enforcing its Decision dated February 22, 1995 while this case is pending adjudication; III. After hearing, that the writ of preliminary injunction as to the reliefs sought for be made permanent, that petitioners be awarded full backwages, moral damages of PHP 500,000.00 each and exemplary damages of PHP 500,000.00 each, attorney's fees equivalent to ten percent of whatever amount is awarded, and the costs of suit. On April 3, 1995, the NLRC issued a temporary mandatory injunction 2 enjoining petitioner to cease and desist from enforcing its February 22, 1995 Memorandum of dismissal. In granting the writ, the NLRC considered the following facts, to wit: . . . that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were instructed to attend an investigation by respondent's "Security and Fraud Prevention Sub-Department" regarding an April 3, 1993 incident in Hongkong at which Joseph Abaca, respondent's Avionics Mechanic in

Hongkong "was intercepted by the Hongkong Airport Police at Gate 05 . . . the ramp area of the Kai Tak International Airport while . . . about to exit said gate carrying a . . . bag said to contain some 2.5 million pesos in Philippine Currencies. That at the Police Station. Mr. Abaca claimed that he just found said plastic bag at the Skybed Section of the arrival flight PR300/03 April 93," where petitioners served as flight stewards of said flight PR300; . . the petitioners sought "a more detailed account of what this HKG incident is all about"; but instead, the petitioners were administratively charged, "a hearing" on which "did not push through" until almost two (2) years after, i.e, "on January 20, 1995 . . . where a confrontation between Mr. Abaca and petitioners herein was compulsorily arranged by the respondent's disciplinary board" at which hearing, Abaca was made to identify petitioners as coconspirators; that despite the fact that the procedure of identification adopted by respondent's Disciplinary Board was anomalous "as there was no one else in the line-up (which could not be called one) but petitioners . . . Joseph Abaca still had difficulty in identifying petitioner Pineda as his co-conspirator, and as to petitioner Cabling, he was implicated and pointed by Abaca only after respondent's Atty. Cabatuando pressed the former to identify petitioner Cabling as co-conspirator"; that with the hearing reset to January 25, 1995, "Mr. Joseph Abaca finally gave exculpating statements to the board in that he cleared petitioners from any participation or from being the owners of the currencies, and at which hearing Mr. Joseph Abaca volunteered the information that the real owner of said money was one who frequented his headquarters in Hongkong to which information, the Disciplinary Board Chairman, Mr. Ismael Khan," opined "for the need for another hearing to go to the bottom of the incident"; that from said statement, it appeared "that Mr. Joseph Abaca was the courier, and had another mechanic in Manila who hid the currency at the plane's skybed for Abaca to retrieve in Hongkong, which findings of how the money was found was previously confirmed by Mr. Joseph Abaca himself when he was first investigated by the Hongkong authorities"; that just as petitioners "thought that they were already fully cleared of the charges, as they no longer received any summons/notices on the intended "additional hearings" mandated by the Disciplinary Board," they were surprised to receive "on February 23, 1995. . . a Memorandum dated February 22, 1995" terminating their services for alleged violation of respondent's Code of Discipline "effective immediately"; that sometime . . . first week of March, 1995, petitioner Pineda received another Memorandum from respondent Mr. Juan Paraiso, advising him of his termination effective February 3, 1995, likewise for violation of respondent's Code of Discipline; . . . In support of the issuance of the writ of temporary injunction, the NLRC adapted the view that: (1) private respondents cannot be validly dismissed on the strength of petitioner's Code of Discipline which was declared illegal by this Court in the ease at PAL, Inc. vs. NLRC, (G.R. No. 85985), promulgated August 13, 1993, for the reason that it was formulated by the petitioner without the participation of its employees as required in R.A. 6715, amending Article 211 of the Labor Code; (2) the whimsical, baseless and premature dismissals of private respondents which "caused them grave and irreparable injury" is enjoinable as private respondents are left "with no speedy and adequate remedy at law" except the issuance of a temporary mandatory injunction; (3) the NLRC is empowered under Article 218 (e) of the Labor Code not only to restrain any actual or threatened commission of any or all prohibited or unlawful acts but also to require the performance of a particular act in any labor dispute, which, if not restrained or performed forthwith, may cause grave or irreparable damage to any party; and (4) the temporary power of the NLRC was recognized by this Court in the case of Chemo-Technische Mfg., Inc.Employees Union, DFA, et. al. vs. Chemo-Technische Mfg., Inc. [G.R. No. 107031, January 25, 1993]. On May 4, 1995, petitioner moved for reconsideration 3 arguing that the NLRC erred: 1. . . . in granting a temporary injunction order when it has no jurisdiction to issue an injunction or restraining order since this may be issued only under Article 218 of the Labor Code if the case involves or arises from labor disputes; 2. . . . in granting a temporary injunction order when the termination of private respondents have long been carried out; 3. . . . in ordering the reinstatement of private respondents on the basis of their mere allegations, in violation of PAL's right to due process:

4. . . . in arrogating unto itself management prerogative to discipline its employees and divesting the labor arbiter of its original and exclusive jurisdiction over illegal dismissal cases; 5. . . . in suspending the effects of termination when such action is exclusively within the jurisdiction of the Secretary of Labor; 6. . . . in issuing the temporary injunction in the absence of any irreparable or substantial injury to both private respondents. On May 31, 1995, the NLRC denied petitioner's motion for reconsideration, ruling: "The respondent (now petitioner), for one, cannot validly claim that we cannot exercise our injunctive power under Article 218 (e) of the Labor Code on the pretext that what we have here is not a labor dispute as long as it concedes that as defined by law, a" (l) "Labor Dispute" includes any controversy or matter concerning terms or conditions of employment." If security of tenure, which has been breached by respondent and which, precisely, is sought to be protected by our temporary mandatory injunction (the core of controversy in this case) is not a "term or condition of employment", what then is? xxx xxx xxx Anent respondent's second argument . . . . Article 218 (e) of the Labor Code . . . empowered the Commission not only to issue a prohibitory injunction, but a mandatory ("to require the performance") one as well. Besides, as earlier discussed, we already exercised (on August 23, 1991) this temporary mandatory injunctive power in the case of "Chemo-Technische Mfg., Inc. Employees Union-DFA et. al. vs. Chemo-Technische Mfg., Inc., et. al." (supra) and effectively enjoined one (1) month old dismissals by Chemo-Technische and that our aforesaid mandatory exercise of injunctive power, when questioned through a petition for certiorari, was sustained by the Third Division of the Supreme court per its Resolution dated January 25, 1993. xxx xxx xxx Respondent's fourth argument that petitioner's remedy for their dismissals is "to file an illegal dismissal case against PAL which cases are within the original and exclusive jurisdiction of the Labor Arbiter' is ignorant. In requiring as a condition for the issuance of a "temporary or permanent injunction" "(4) That complainant has no adequate remedy at law;" Article 218 (e) of the Labor Code clearly envisioned adequacy, and not plain availability of a remedy at law as an alternative bar to the issuance of an injunction. An illegal dismissal suit (which takes, on its expeditious side, three (3) years before it can be disposed of) while available as a remedy under Article 217 (a) of the Labor Code, is certainly not an "adequate; remedy at law, Ergo, it cannot as an alternative remedy, bar our exercise of that injunctive power given us by Article 218 (e) of the Code. xxx xxx xxx Thus, Article 218 (e), as earlier discussed [which empowers this Commission "to require the performance of a particular act" (such as our requiring respondent "to cease and desist from enforcing" its whimsical memoranda of dismissals and "instead to reinstate petitioners to their respective position held prior to their subject dismissals") in "any labor dispute which, if not . . . performed forthwith, may cause grave and irreparable damage to any party"] stands as the sole "adequate remedy at law" for petitioners here. Finally, the respondent, in its sixth argument claims that even if its acts of dismissing petitioners "may be great, still the same is capable of compensation", and that consequently, "injunction need not be issued where adequate compensation at law could be obtained". Actually,

what respondent PAL argues here is that we need not interfere in its whimsical dismissals of petitioners as, after all, it can pay the latter its backwages. . . . But just the same, we have to stress that Article 279 does not speak alone of backwages as an obtainable relief for illegal dismissal; that reinstatement as well is the concern of said law, enforceable when necessary, through Article 218 (e) of the Labor Code (without need of an illegal dismissal suit under Article 217 (a) of the Code) if such whimsical and capricious act of illegal dismissal will "cause grave or irreparable injury to a party". . . . . 4 Hence, the present recourse. Generally, injunction is a preservative remedy for the protection of one's substantive rights or interest. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. It is resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard of compensation. The application of the injunctive writ rests upon the existence of an emergency or of a special reason before the main case be regularly heard. The essential conditions for granting such temporary injunctive relief are that the complaint alleges facts which appear to be sufficient to constitute a proper basis for injunction and that on the entire showing from the contending parties, the injunction is reasonably necessary to protect the legal rights of the plaintiff pending the litigation. 5 Injunction is also a special equitable relief granted only in cases where there is no plain, adequate and complete remedy at law. 6 In labor cases, Article 218 of the Labor Code empowers the NLRC (e) To enjoin or restrain any actual or threatened commission of any or all prohibited or unlawful acts or to require the performance of a particular act in any labor dispute which, if not restrained or performed forthwith, may cause grave or irreparable damage to any party or render ineffectual any decision in favor of such party; . . ." (Emphasis Ours) Complementing the above-quoted provision, Sec. 1, Rule XI of the New Rules of Procedure of the NLRC, pertinently provides as follows: Sec. 1. Injunction in Ordinary Labor Dispute. A preliminary injunction or a restraining order may be granted by the Commission through its divisions pursuant to the provisions of paragraph (e) of Article 218 of the Labor Code, as amended, when it is established on the bases of the sworn allegations in the petition that the acts complained of, involving or arising from any labor dispute before the Commission, which, if not restrained or performed forthwith, may cause grave or irreparable damage to any party or render ineffectual any decision in favor of such party. xxx xxx xxx The foregoing ancillary power may be exercised by the Labor Arbiters only as an incident to the cases pending before them in order to preserve the rights of the parties during the pendency of the case, but excluding labor disputes involving strikes or lockout. 7 (Emphasis Ours) From the foregoing provisions of law, the power of the NLRC to issue an injunctive writ originates from "any labor dispute" upon application by a party thereof, which application if not granted "may cause grave or irreparable damage to any party or render ineffectual any decision in favor of such party." The term "labor dispute" is defined as "any controversy or matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing. maintaining, changing, or arranging the terms and conditions of employment regardless of whether or not the disputants stand in the proximate relation of employers and employees." 8 The term "controversy" is likewise defined as "a litigated question; adversary proceeding in a court of law; a civil action or suit, either at law or in equity; a justiciable dispute." 9

A "justiciable controversy" is "one involving an active antagonistic assertion of a legal right on one side and a denial thereof on the other concerning a real, and not a mere theoretical question or issue." 10 Taking into account the foregoing definitions, it is an essential requirement that there must first be a labor dispute between the contending parties before the labor arbiter. In the present case, there is no labor dispute between the petitioner and private respondents as there has yet been no complaint for illegal dismissal filed with the labor arbiter by the private respondents against the petitioner. The petition for injunction directly filed before the NLRC is in reality an action for illegal dismissal. This is clear from the allegations in the petition which prays for; reinstatement of private respondents; award of full backwages, moral and exemplary damages; and attorney's fees. As such, the petition should have been filed with the labor arbiter who has the original and exclusive jurisdiction to hear and decide the following cases involving all workers, whether agricultural or non-agricultural: (1) Unfair labor practice; (2) Termination disputes; (3) If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; (4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; (5) Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and (6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer- employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00), whether or not accompanied with a claim for reinstatement. 11 The jurisdiction conferred by the foregoing legal provision to the labor arbiter is both original and exclusive, meaning, no other officer or tribunal can take cognizance of, hear and decide any of the cases therein enumerated. The only exceptions are where the Secretary of Labor and Employment or the NLRC exercises the power of compulsory arbitration, or the parties agree to submit the matter to voluntary arbitration pursuant to Article 263 (g) of the Labor Code, the pertinent portions of which reads: (g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same. On the other hand, the NLRC shall have exclusive appellate jurisdiction over all cases decided by labor arbiters as provided in Article 217(b) of the Labor Code. In short, the jurisdiction of the NLRC in illegal dismissal cases is appellate in nature and, therefore, it cannot entertain the private respondents' petition for injunction which challenges the dismissal orders of petitioner. Article 218(e) of the Labor Code does not provide blanket authority

to the NLRC or any of its divisions to issue writs of injunction, considering that Section 1 of Rule XI of the New Rules of Procedure of the NLRC makes injunction only an ancillary remedy in ordinary labor disputes." 12 Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order granting private respondents' petition for injunction and ordering the petitioner to reinstate private respondents. The argument of the NLRC in its assailed Order that to file an illegal dismissal suit with the labor arbiter is not an "adequate" remedy since it takes three (3) years before it can be disposed of, is patently erroneous. An "adequate" remedy at law has been defined as one "that affords relief with reference to the matter in controversy, and which is appropriate to the particular circumstances of the case." 13 It is a remedy which is equally, beneficial, speedy and sufficient which will promptly relieve the petitioner from the injurious effects of the acts complained of.14 Under the Labor Code, the ordinary and proper recourse of an illegally dismissed employee is to file a complaint for illegal dismissal with the labor arbiter. 15 In the case at bar, private respondents disregarded this rule and directly went to the NLRC through a petition for injunction praying that petitioner be enjoined from enforcing its dismissal orders. In Lamb vs. Phipps, 16 we ruled that if the remedy is specifically provided by law, it is presumed to be adequate. Moreover, the preliminary mandatory injunction prayed for by the private respondents in their petition before the NLRC can also be entertained by the labor arbiter who, as shown earlier, has the ancillary power to issue preliminary injunctions or restraining orders as an incident in the cases pending before him in order to preserve the rights of the parties during the pendency of the case. 17 Furthermore, an examination of private respondents' petition for injunction reveals that it has no basis since there is no showing of any urgency or irreparable injury which the private respondents might suffer. An injury is considered irreparable if it is of such constant and frequent recurrence that no fair and reasonable redress can be had therefor in a court of law, 18 or where there is no standard by which their amount can be measured with reasonable accuracy, that is, it is not susceptible of mathematical computation. It is considered irreparable injury when it cannot be adequately compensated in damages due to the nature of the injury itself or the nature of the right or property injured or when there exists no certain pecuniary standard for the measurement of damages. 19 In the case at bar, the alleged injury which private respondents stand to suffer by reason of their alleged illegal dismissal can be adequately compensated and therefore, there exists no "irreparable injury," as defined above which would necessitate the issuance of the injunction sought for. Article 279 of the Labor Code provides that an employee who is unjustly dismissed from employment shall be entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment of full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.
The ruling of the NLRC that the Supreme Court upheld its power to issue temporary mandatory injunction orders in the case of Chemo-Technische Mfg., Inc. Employees Union-DFA, et. al. vs. Chemo-Technische Mfg., Inc. et. al., docketed as G.R. No. 107031, is misleading. As correctly argued by the petitioner, no such pronouncement was made by this Court in said case. On January 25, 1993, we issued a Minute Resolution in the subject case stating as follows: Considering the allegations contained, the issues raised and the arguments adduced in the petition for certiorari, as well as the comments of both public and private respondents thereon, and the reply of the petitioners to private respondent's motion to dismiss the petition, the Court Resolved to DENY the same for being premature. It is clear from the above resolution that we did not in anyway sustain the action of the NLRC in issuing such temporary mandatory injunction but rather we dismissed the petition as the NLRC had yet to rule upon the motion for reconsideration filed by petitioner. Thus, the minute resolution denying the petition for being prematurely filed. Finally, an injunction, as an extraordinary remedy, is not favored in labor law considering that it generally has not proved to be an effective means of settling labor disputes. 20 It has been the policy of the State to encourage the parties to use the non-judicial process of negotiation and compromise, mediation and arbitration. 21 Thus, injunctions may be issued only in cases of extreme necessity based on legal grounds clearly established, after due consultations or hearing and when all efforts at conciliation are exhausted which factors, however, are clearly absent in the present case. WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated April 3, 1995 and May 31, 1995, issued by the National Labor Relations Commission (First Division), in NLRC NCR IC No. 000563-95, are hereby REVERSED and SET ASIDE. SO ORDERED.

Republic of the Philippines Supreme Court Manila

SECOND DIVISION

THE HERITAGE HOTEL MANILA, acting through its owner, GRAND PLAZA HOTEL CORPORATION, Petitioner, - versus NATIONAL UNION OF WORKERS IN THE HOTEL, RESTAURANT AND ALLIED INDUSTRIES-HERITAGE HOTEL MANILA SUPERVISORS CHAPTER (NUWHRAINHHMSC), Respondent.

G.R. No. 178296 Present: CARPIO, J., Chairperson, NACHURA, LEONARDO-DE CASTRO,* ABAD, and MENDOZA, JJ. Promulgated:

January 12, 2011 x----------------------------------------------------------------------------------x DECISION NACHURA, J.:

Before the Court is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) dated May 30, 2005 and Resolution dated June 4, 2007. The assailed Decision affirmed the dismissal of a petition for cancellation of union registration filed by petitioner, Grand Plaza Hotel Corporation, owner of Heritage Hotel Manila, against respondent, National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC), a labor organization of the supervisory employees of Heritage Hotel Manila.

The case stemmed from the following antecedents:

On October 11, 1995, respondent filed with the Department of Labor and Employment-National Capital Region (DOLE-NCR) a petition for certification election.[2] The Med-Arbiter granted the petition on February 14, 1996 and ordered the holding of a certification election.[3] On appeal, the DOLE Secretary, in a Resolution dated August 15, 1996, affirmed the Med-Arbiters order and remanded the case to the Med-Arbiter for the holding of a

preelection conference on February 26, 1997. Petitioner filed a motion for reconsideration, but it was denied on September 23, 1996.

The preelection conference was not held as initially scheduled; it was held a year later, or on February 20, 1998. Petitioner moved to archive or to dismiss the petition due to alleged repeated non-appearance of respondent. The latter agreed to suspend proceedings until further notice. The preelection conference resumed on January 29, 2000.

Subsequently, petitioner discovered that respondent had failed to submit to the Bureau of Labor Relations (BLR) its annual financial report for several years and the list of its members since it filed its registration papers in 1995. Consequently, on May 19, 2000, petitioner filed a Petition for Cancellation of Registration of respondent, on the ground of the non-submission of the said documents. Petitioner prayed that respondents Certificate of Creation of Local/Chapter be cancelled and its name be deleted from the list of legitimate labor organizations. It further requested the suspension of the certification election proceedings.[4]

On June 1, 2000, petitioner reiterated its request by filing a Motion to Dismiss or Suspend the [Certification Election] Proceedings,[5] arguing that the dismissal or suspension of the proceedings is warranted, considering that the legitimacy of respondent is seriously being challenged in the petition for cancellation of registration. Petitioner maintained that the resolution of the issue of whether respondent is a legitimate labor organization is crucial to the issue of whether it may exercise rights of a legitimate labor organization, which include the right to be certified as the bargaining agent of the covered employees.

Nevertheless, the certification election pushed through on June 23, 2000. Respondent emerged as the winner.[6]

On June 28, 2000, petitioner filed a Protest with Motion to Defer Certification of Election Results and Winner,[7] stating that the certification election held on June 23, 2000 was an exercise in futility because, once respondents registration is cancelled, it would no longer be entitled to be certified as the exclusive bargaining agent of the supervisory employees. Petitioner also claimed that some of respondents members were not qualified to join the union because they were either confidential employees or managerial employees. It then prayed that the certification of the election results and winner be deferred until the petition for cancellation shall have been resolved, and that respondents members who held confidential or managerial positions be excluded from the supervisors bargaining unit.

Meanwhile, respondent filed its Answer[8] to the petition for the cancellation of its registration. It averred that the petition was filed primarily to delay the conduct of the certification election, the respondents certification as the exclusive bargaining representative of the supervisory employees, and the commencement of bargaining negotiations. Respondent prayed for the dismissal of the petition for the following reasons: (a) petitioner is estopped from questioning respondents status as a legitimate labor organization as it had already recognized respondent as such during the preelection conferences; (b) petitioner is not the party-in-interest, as the union members are the ones who would be disadvantaged by the non-submission of financial reports; (c) it has already complied with the reportorial requirements, having submitted its financial statements for 1996, 1997, 1998, and 1999, its updated list of officers, and its list of members for the years 1995, 1996, 1997, 1998, and 1999; (d) the petition is already moot and academic, considering that the certification election had already been held, and the members had manifested their will to be represented by respondent.

Citing National Union of Bank Employees v. Minister of Labor, et al.[9] and Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma,[10] the Med-Arbiter held that the pendency of a petition for cancellation of registration is not a bar to the holding of a certification election. Thus, in an Order[11] dated January 26, 2001, the Med-Arbiter dismissed petitioners protest, and certified respondent as the sole and exclusive bargaining agent of all supervisory employees.

Petitioner subsequently appealed the said Order to the DOLE Secretary.[12] The appeal was later dismissed by DOLE Secretary Patricia A. Sto. Tomas (DOLE Secretary Sto. Tomas) in the Resolution of August 21, 2002.
[13]

Petitioner moved for reconsideration, but the motion was also denied.[14]

In the meantime, Regional Director Alex E. Maraan (Regional Director Maraan) of DOLE-NCR finally resolved the petition for cancellation of registration. While finding that respondent had indeed failed to file financial reports and the list of its members for several years, he, nonetheless, denied the petition, ratiocinating that freedom of association and the employees right to self-organization are more substantive considerations. He took into account the fact that respondent won the certification election and that it had already been certified as the exclusive bargaining agent of the supervisory employees. In view of the foregoing, Regional Director Maraan while emphasizing that the non-compliance with the law is not viewed with favorconsidered the belated submission of the annual financial reports and the list of members as sufficient compliance thereof and considered them as having been submitted on time. The dispositive portion of the decision [15] dated December 29, 2001 reads:

WHEREFORE, premises considered, the instant petition to delist the National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter from the roll of legitimate labor organizations is hereby DENIED. SO ORDERED.[16]

Aggrieved, petitioner appealed the decision to the BLR.[17] BLR Director Hans Leo Cacdac inhibited himself from the case because he had been a former counsel of respondent.

In view of Director Cacdacs inhibition, DOLE Secretary Sto. Tomas took cognizance of the appeal. In a resolution[18] dated February 21, 2003, she dismissed the appeal, holding that the constitutionally guaranteed freedom of association and right of workers to self-organization outweighed respondents noncompliance with the statutory requirements to maintain its status as a legitimate labor organization.

Petitioner filed a motion for reconsideration,[19] but the motion was likewise denied in a resolution[20] dated May 30, 2003. DOLE Secretary Sto. Tomas admitted that it was the BLR which had jurisdiction over the appeal, but she pointed out that the BLR Director had voluntarily inhibited himself from the case because he used to appear as counsel for respondent. In order to maintain the integrity of the decision and of the BLR, she therefore accepted the motion to inhibit and took cognizance of the appeal.

Petitioner filed a petition for certiorari with the CA, raising the issue of whether the DOLE Secretary acted with grave abuse of discretion in taking cognizance of the appeal and affirming the dismissal of its petition for cancellation of respondents registration.

In a Decision dated May 30, 2005, the CA denied the petition. The CA opined that the DOLE Secretary may legally assume jurisdiction over an appeal from the decision of the Regional Director in the event that the Director of the BLR inhibits himself from the case. According to the CA, in the absence of the BLR Director, there is no person more competent to resolve the appeal than the DOLE Secretary. The CA brushed aside the allegation of bias and partiality on the part of the DOLE Secretary, considering that such allegation was not supported by any evidence.

The CA also found that the DOLE Secretary did not commit grave abuse of discretion when she affirmed the dismissal of the petition for cancellation of respondents registration as a labor organization. Echoing the DOLE Secretary, the CA held that the requirements of registration of labor organizations are an exercise of the overriding police power of the State, designed for the protection of workers against potential abuse by the union

that recruits them. These requirements, the CA opined, should not be exploited to work against the workers constitutionally protected right to self-organization.

Petitioner filed a motion for reconsideration, invoking this Courts ruling in Abbott Labs. Phils., Inc. v. Abbott Labs. Employees Union,[21] which categorically declared that the DOLE Secretary has no authority to review the decision of the Regional Director in a petition for cancellation of union registration, and Section 4,[22] Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code.

In its Resolution[23] dated June 4, 2007, the CA denied petitioners motion, stating that the BLR Directors inhibition from the case was a peculiarity not present in the Abbottcase, and that such inhibition justified the assumption of jurisdiction by the DOLE Secretary. In this petition, petitioner argues that: I. The Court of Appeals seriously erred in ruling that the Labor Secretary properly assumed jurisdiction over Petitioners appeal of the Regional Directors Decision in the Cancellation Petition x x x. A. Jurisdiction is conferred only by law. The Labor Secretary had no jurisdiction to review the decision of the Regional Director in a petition for cancellation. Such jurisdiction is conferred by law to the BLR. The unilateral inhibition by the BLR Director cannot justify the Labor Secretarys exercise of jurisdiction over the Appeal. The Labor Secretarys assumption of jurisdiction over the Appeal without notice violated Petitioners right to due process. II. The Court of Appeals gravely erred in affirming the dismissal of the Cancellation Petition despite the mandatory and unequivocal provisions of the Labor Code and its Implementing Rules.[24]

B. C.

The petition has no merit.

Jurisdiction to review the decision of the Regional Director lies with the BLR. This is clearly provided in the Implementing Rules of the Labor Code and enunciated by the Court inAbbott. But as pointed out by the CA, the present case involves a peculiar circumstance that was not present or covered by the ruling in Abbott. In this case, the BLR Director inhibited himself from the case because he was a former counsel of respondent. Who, then, shall resolve the case in his place?

In Abbott, the appeal from the Regional Directors decision was directly filed with the Office of the DOLE Secretary, and we ruled that the latter has no appellate jurisdiction. In the instant case, the appeal was filed by petitioner with the BLR, which, undisputedly, acquired jurisdiction over the case. Once jurisdiction is acquired by the court, it remains with it until the full termination of the case.[25]

Thus, jurisdiction remained with the BLR despite the BLR Directors inhibition. When the DOLE Secretary resolved the appeal, she merely stepped into the shoes of the BLR Director and performed a function that the latter could not himself perform. She did so pursuant to her power of supervision and control over the BLR.[26]

Expounding on the extent of the power of control, the Court, in Araneta, et al. v. Hon. M. Gatmaitan, et al.,
[27]

pronounced that, if a certain power or authority is vested by law upon the Department Secretary, then such

power or authority may be exercised directly by the President, who exercises supervision and control over the departments. This principle was incorporated in the Administrative Code of 1987, which defines supervision and control as including the authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate.[28] Applying the foregoing to the present case, it is clear that the DOLE Secretary, as the person exercising the power of supervision and control over the BLR, has the authority to directly exercise the quasijudicial function entrusted by law to the BLR Director.

It is true that the power of control and supervision does not give the Department Secretary unbridled authority to take over the functions of his or her subordinate. Such authority is subject to certain guidelines which are stated in Book IV, Chapter 8, Section 39(1)(a) of the Administrative Code of 1987. [29] However, in the present case, the DOLE Secretarys act of taking over the function of the BLR Director was warranted and necessitated by the latters inhibition from the case and the objective to maintain the integrity of the decision, as well as the Bureau itself.[30]

Petitioner insists that the BLR Directors subordinates should have resolved the appeal, citing the provision under the Administrative Code of 1987 which states, in case of the absence or disability of the head of a bureau or office, his duties shall be performed by the assistant head.[31] The provision clearly does not apply considering that the BLR Director was neither absent nor suffering from any disability; he remained as head of the BLR. Thus, to dispel any suspicion of bias, the DOLE Secretary opted to resolve the appeal herself.

Petitioner was not denied the right to due process when it was not notified in advance of the BLR Directors inhibition and the DOLE Secretarys assumption of the case. Well-settled is the rule that the essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings,

an opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling complained of.[32] Petitioner had the opportunity to question the BLR Directors inhibition and the DOLE Secretarys taking cognizance of the case when it filed a motion for reconsideration of the latters decision. It would be well to state that a critical component of due process is a hearing before an impartial and disinterested tribunal, for all the elements of due process, like notice and hearing, would be meaningless if the ultimate decision would come from a partial and biased judge.[33] It was precisely to ensure a fair trial that moved the BLR Director to inhibit himself from the case and the DOLE Secretary to take over his function.

Petitioner also insists that respondents registration as a legitimate labor union should be cancelled. Petitioner posits that once it is determined that a ground enumerated in Article 239 of the Labor Code is present, cancellation of registration should follow; it becomes the ministerial duty of the Regional Director to cancel the registration of the labor organization, hence, the use of the word shall. Petitioner points out that the Regional Director has admitted in its decision that respondent failed to submit the required documents for a number of years; therefore, cancellation of its registration should have followed as a matter of course.

We are not persuaded. Articles 238 and 239 of the Labor Code read: ART. 238. CANCELLATION OF REGISTRATION; APPEAL The certificate of registration of any legitimate labor organization, whether national or local, shall be canceled by the Bureau if it has reason to believe, after due hearing, that the said labor organization no longer meets one or more of the requirements herein prescribed.[34] ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION. The following shall constitute grounds for cancellation of union registration: xxxx (d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the closing of every fiscal year and misrepresentation, false entries or fraud in the preparation of the financial report itself; xxxx (i) Failure to submit list of individual members to the Bureau once a year or whenever required by the Bureau.[35]

These provisions give the Regional Director ample discretion in dealing with a petition for cancellation of a unions registration, particularly, determining whether the union still meets the requirements prescribed by law. It is sufficient to give the Regional Director license to treat the late filing of required documents as sufficient compliance with the requirements of the law. After all, the law requires the labor organization to submit the annual financial report and list of members in order to verify if it is still viable and financially sustainable as an organization so as to protect the employer and employees from fraudulent or fly-by-night unions. With the submission of the required documents by respondent, the purpose of the law has been achieved, though belatedly.

We cannot ascribe abuse of discretion to the Regional Director and the DOLE Secretary in denying the petition for cancellation of respondents registration. The union members and, in fact, all the employees belonging to the appropriate bargaining unit should not be deprived of a bargaining agent, merely because of the negligence of the union officers who were responsible for the submission of the documents to the BLR.

Labor authorities should, indeed, act with circumspection in treating petitions for cancellation of union registration, lest they be accused of interfering with union activities. In resolving the petition, consideration must be taken of the fundamental rights guaranteed by Article XIII, Section 3 of the Constitution, i.e., the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities. Labor authorities should bear in mind that registration confers upon a union the status of legitimacy and the concomitant right and privileges granted by law to a legitimate labor organization, particularly the right to participate in or ask for certification election in a bargaining unit.[36] Thus, the cancellation of a certificate of registration is the equivalent of snuffing out the life of a labor organization. For without such registration, it loses - as a rule - its rights under the Labor Code.[37]

It is worth mentioning that the Labor Codes provisions on cancellation of union registration and on reportorial requirements have been recently amended by Republic Act (R.A.) No. 9481, An Act Strengthening the Workers Constitutional Right to Self-Organization, Amending for the Purpose Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines, which lapsed into law on May 25, 2007 and became effective on June 14, 2007. The amendment sought to strengthen the workers right to self-organization and enhance the Philippines compliance with its international obligations as embodied in the International Labour Organization (ILO) Convention No. 87,[38] pertaining to the non-dissolution of workers organizations by administrative authority.[39] Thus, R.A. No. 9481 amended Article 239 to read:

ART. 239. Grounds for Cancellation of Union Registration.The following may constitute grounds for cancellation of union registration: (a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification; (b) Misrepresentation, false statements or fraud in connection with the election of officers, minutes of the election of officers, and the list of voters; (c) Voluntary dissolution by the members.

R.A. No. 9481 also inserted in the Labor Code Article 242-A, which provides: ART. 242-A. Reportorial Requirements.The following are documents required to be submitted to the Bureau by the legitimate labor organization concerned: (a) Its constitution and by-laws, or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification of the constitution and by-laws within thirty (30) days from adoption or ratification of the constitution and by-laws or amendments thereto; (b) Its list of officers, minutes of the election of officers, and list of voters within thirty (30) days from election; (c) Its annual financial report within thirty (30) days after the close of every fiscal year; and (d) Its list of members at least once a year or whenever required by the Bureau. Failure to comply with the above requirements shall not be a ground for cancellation of union registration but shall subject the erring officers or members to suspension, expulsion from membership, or any appropriate penalty.

ILO Convention No. 87, which we have ratified in 1953, provides that workers and employers organizations shall not be liable to be dissolved or suspended by administrative authority. The ILO has expressed the opinion that the cancellation of union registration by the registrar of labor unions, which in our case is the BLR, is tantamount to dissolution of the organization by administrative authority when such measure would give rise to the loss of legal personality of the union or loss of advantages necessary for it to carry out its activities, which is true in our jurisdiction. Although the ILO has allowed such measure to be taken, provided that judicial safeguards are in place, i.e., the right to appeal to a judicial body, it has nonetheless reminded its members that dissolution of a union, and cancellation of registration for that matter, involve serious consequences for occupational representation. It has, therefore, deemed it preferable if such actions were to be taken only as a last resort and after exhausting other possibilities with less serious effects on the organization.[40] The aforesaid amendments and the ILOs opinion on this matter serve to fortify our ruling in this case. We therefore quote with approval the DOLE Secretarys rationale for denying the petition, thus:

It is undisputed that appellee failed to submit its annual financial reports and list of individual members in accordance with Article 239 of the Labor Code. However, the existence of this ground should not necessarily lead to the cancellation of union registration. Article 239 recognizes the regulatory authority of the State to exact compliance with reporting requirements. Yet there is more at stake in this case than merely monitoring union activities and requiring periodic documentation thereof. The more substantive considerations involve the constitutionally guaranteed freedom of association and right of workers to self-organization. Also involved is the public policy to promote free trade unionism and collective bargaining as instruments of industrial peace and democracy. An overly stringent interpretation of the statute governing cancellation of union registration without regard to surrounding circumstances cannot be allowed. Otherwise, it would lead to an unconstitutional application of the statute and emasculation of public policy objectives. Worse, it can render nugatory the protection to labor and social justice clauses that pervades the Constitution and the Labor Code. Moreover, submission of the required documents is the duty of the officers of the union. It would be unreasonable for this Office to order the cancellation of the union and penalize the entire union membership on the basis of the negligence of its officers. In National Union of Bank Employees vs. Minister of Labor, L-53406, 14 December 1981, 110 SCRA 296, the Supreme Court ruled: As aptly ruled by respondent Bureau of Labor Relations Director Noriel: The rights of workers to self-organization finds general and specific constitutional guarantees. x x x Such constitutional guarantees should not be lightly taken much less nullified. A healthy respect for the freedom of association demands that acts imputable to officers or members be not easily visited with capital punishments against the association itself. At any rate, we note that on 19 May 2000, appellee had submitted its financial statement for the years 1996-1999. With this submission, appellee has substantially complied with its duty to submit its financial report for the said period. To rule differently would be to preclude the union, after having failed to meet its periodic obligations promptly, from taking appropriate measures to correct its omissions. For the record, we do not view with favor appellees late submission. Punctuality on the part of the union and its officers could have prevented this petition.[41]

WHEREFORE, premises considered, the Court of Appeals Decision dated May 30, 2005 and Resolution dated June 4, 2007 are AFFIRMED. SO ORDERED.

Republic of the Philippines Supreme Court Manila FIRST DIVISION LEGEND INTERNATIONAL RESORTS LIMITED, Petitioner, G.R. No. 169754

Present: - versus CORONA, C.J., Chairperson, VELASCO, JR., NACHURA, DEL CASTILLO, and PEREZ, JJ.

KILUSANG MANGGAGAWA NG LEGENDA (KMLINDEPENDENT), Promulgated: Respondent. February 23, 2011 x-------------------------------------------------------------------x DECISION DEL CASTILLO, J.: This Petition for Review on Certiorari assails the September 18, 2003 Decision of the Court of Appeals in CA-G.R. SP No. 72848 which found no grave abuse of discretion on the part of the Office of the Secretary of the Department of Labor and Employment (DOLE) which ruled in favor of Kilusang Manggagawa ng Legenda (KML). Also assailed is the September 14, 2005 Resolution denying petitioners motion for reconsideration.

Factual Antecedents

On June 6, 2001, KML filed with the Med-Arbitration Unit of the DOLE, San Fernando, Pampanga, a Petition for Certification Election[1] docketed as Case No. RO300-0106-RU-001. KML alleged that it is a legitimate labor organization of the rank and file employees of Legend International Resorts Limited (LEGEND). KML claimed that it was issued its Certificate of Registration No. RO300-0105-UR-002 by the DOLE on May 18, 2001.

LEGEND moved to dismiss[2] the petition alleging that KML is not a legitimate labor organization because its membership is a mixture of rank and file and supervisory employees in violation of Article 245 of the Labor Code. LEGEND also claimed that KML committed acts of fraud and misrepresentation when it made it appear that certain employees attended its general membership meeting on April 5, 2001 when in reality some of them were either at work; have already resigned as of March 2001; or were abroad.

In its Comment,[3] KML argued that even if 41 of its members are indeed supervisory employees and therefore excluded from its membership, the certification election could still proceed because the required number of the total rank and file employees necessary for certification purposes is still sustained. KML also claimed that its legitimacy as a labor union could not be collaterally attacked in the certification election proceedings but only through a separate and independent action for cancellation of union registration. Finally, as to the alleged acts of misrepresentation, KML asserted that LEGEND failed to substantiate its claim.

Ruling of the Med-Arbiter

On September 20, 2001, the Med-Arbiter[4] rendered judgment[5] dismissing for lack of merit the petition for certification election. The Med-Arbiter found that indeed there were several supervisory employees in KMLs membership. Since Article 245 of the Labor Code expressly prohibits supervisory employees from joining the union of rank and file employees, the Med-Arbiter concluded that KML is not a legitimate labor organization. KML was also found to have fraudulently procured its registration certificate by misrepresenting that 70 employees were among those who attended its organizational meeting on April 5, 2001 when in fact they were either at work or elsewhere.

KML thus appealed to the Office of the Secretary of the DOLE.

Ruling of the Office of the Secretary of DOLE

On May 22, 2002, the Office of the Secretary of DOLE rendered its Decision [6] granting KMLs appeal thereby reversing and setting aside the Med-Arbiters Decision. The Office of the Secretary of DOLE held that KMLs legitimacy as a union could not be collaterally attacked, citing Section 5,[7] Rule V of Department Order No. 9, series of 1997.

The Office of the Secretary of DOLE also opined that Article 245 of the Labor Code merely provides for the prohibition on managerial employees to form or join a union and the ineligibility of supervisors to join the union of the rank and file employees and vice versa. It declared that any violation of the provision of Article 245 does not ipso facto render the existence of the labor organization illegal. Moreover, it held that Section 11, paragraph II of Rule XI which provides for the grounds for dismissal of a petition for certification election does not include mixed membership in one union.

The dispositive portion of the Office of the Secretary of DOLEs Decision reads: WHEREFORE, the appeal is hereby GRANTED and the order of the Med-Arbiter dated 20 September 2001 is REVERSED and SET ASIDE.

Accordingly, let the entire record of the case be remanded to the regional office of origin for the immediate conduct of the certification election, subject to the usual pre-election conference, among the rank and file employees of LEGEND INTERNATIONAL RESORTS LIMITED with the following choices: 1. 2. KILUSANG MANGGAGAWA NG LEGENDA (KML-INDEPENDENT); and NO UNION.

Pursuant to Rule XI, Section II.1 of D.O. No. 9, the employer is hereby directed to submit to the office of origin, within ten days from receipt of the decision, the certified list of employees in the bargaining unit for the last three (3) months prior to the issuance of this decision. SO DECIDED.[8]

LEGEND filed its Motion for Reconsideration[9] reiterating its earlier arguments. It also alleged that on August 24, 2001, it filed a Petition[10] for Cancellation of Union Registration of KML docketed as Case No. RO300-0108-CP-001 which was granted[11] by the DOLE Regional Office No. III of San Fernando, Pampanga in its Decision[12] dated November 7, 2001.

In a Resolution[13] dated August 20, 2002, the Office of the Secretary of DOLE denied LEGENDs motion for reconsideration. It opined that Section 11, paragraph II(a), Rule XI of Department Order No. 9 requires a final order of cancellation before a petition for certification election may be dismissed on the ground of lack of legal personality. Besides, it noted that the November 7, 2001 Decision of DOLE Regional Office No. III of San Fernando, Pampanga in Case No. RO300-0108-CP-001 was reversed by the Bureau of Labor Relations in a Decision dated March 26, 2002.

Ruling of the Court of Appeals

Undeterred, LEGEND filed a Petition for Certiorari[14] with the Court of Appeals docketed as CA-G.R. SP No. 72848. LEGEND alleged that the Office of the Secretary of DOLE gravely abused its discretion in reversing and setting aside the Decision of the Med-Arbiter despite substantial and overwhelming evidence against KML.

For its part, KML alleged that the Decision dated March 26, 2002 of the Bureau of Labor Relations in Case No. RO300-0108-CP-001 denying LEGENDs petition for cancellation and upholding KMLs legitimacy as a labor organization has already become final and executory, entry of judgment having been made on August 21, 2002.[15]

The Office of the Secretary of DOLE also filed its Comment[16] asserting that KMLs legitimacy cannot be attacked collaterally. Finally, the Office of the Secretary of DOLE stressed that LEGEND has no legal personality to participate in the certification election proceedings.

On September 18, 2003, the Court of Appeals rendered its Decision[17] finding no grave abuse of discretion on the part of the Office of the Secretary of DOLE. The appellate court held that the issue on the legitimacy of KML as a labor organization has already been settled with finality in Case No. RO300-0108-CP-001. The March 26, 2002 Decision of the Bureau of Labor Relations upholding the legitimacy of KML as a labor organization had long become final and executory for failure of LEGEND to appeal the same. Thus, having already been settled that KML is a legitimate labor organization, the latter could properly file a petition for certification election. There was nothing left for the Office of the Secretary of DOLE to do but to order the holding of such certification election.

The dispositive portion of the Decision reads: WHEREFORE, in view of the foregoing, and finding that no grave abuse of discretion amounting to lack or excess of jurisdiction has been committed by the Department of Labor and Employment, the assailed May 22, 2002 Decision and August 20, 2002 Resolution in Case No. RO300-106-RU-001 are UPHELD and AFFIRMED. The instant petition is DENIED due course and, accordingly, DISMISSED for lack of merit.[18]

LEGEND filed a Motion for Reconsideration [19] alleging, among others, that it has appealed to the Court of Appeals the March 26, 2002 Decision in Case No. RO300-0108-CP-001 denying its petition for cancellation and that it is still pending resolution.

On September 14, 2005, the appellate court denied LEGENDs motion for reconsideration.

Hence, this Petition for Review on Certiorari raising the lone assignment of error, viz: WHETHER X X X THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN THE APPLICATION OF LAW IN DENYING THE PETITIONERS PETITION FOR CERTIORARI.[20]

Petitioners Arguments

LEGEND submits that the Court of Appeals grievously erred in ruling that the March 26, 2002 Decision denying its Petition for Cancellation of KMLs registration has already become final and executory. It asserts that it has seasonably filed a Petition for Certiorari[21] before the CA docketed as CA-G.R. SP No. 72659 assailing said Decision. In fact, on June 30, 2005, the Court of Appeals granted the petition, reversed the March 26, 2002 Decision of the Bureau of Labor Relations and reinstated the November 7, 2001 Decision of the DOLE Regional Office III ordering the cancellation of KMLs registration.

Finally, LEGEND posits that the cancellation of KMLs certificate of registration should retroact to the time of its issuance.[22] It thus claims that the petition for certification election and all of KMLs activities should be nullified because it has no legal personality to file the same, much less demand collective bargaining with LEGEND.[23]

LEGEND thus prays that the September 20, 2001 Decision of the Med-Arbiter dismissing KMLs petition for certification election be reinstated.[24]

Respondents Arguments In its Comment filed before this Court dated March 21, 2006, KML insists that the Decision of the Bureau of Labor Relations upholding its legitimacy as a labor organization has already attained finality [25] hence there was no more hindrance to the holding of a certification election. Moreover, it claims that the instant petition has become moot because the certification election sought to be prevented had already been conducted.

Our Ruling

The petition is partly meritorious. LEGEND has timely appealed the March 26, 2002 Decision of the Bureau of Labor Relations to the Court of Appeals.

We cannot understand why the Court of Appeals totally disregarded LEGENDs allegation in its Motion for Reconsideration that the March 26, 2002 Decision of the Bureau of Labor Relations has not yet attained finality considering that it has timely appealed the same to the Court of Appeals and which at that time is still pending resolution. The Court of Appeals never bothered to look into this allegation and instead dismissed outright LEGENDs motion for reconsideration. By doing so, the Court of Appeals in effect maintained its earlier ruling that the March 26, 2002 Decision of the Bureau of Labor Relations upholding the legitimacy of KML as a labor organization has long become final and executory for failure of LEGEND to appeal the same.

This is inaccurate. Records show that (in the cancellation of registration case) LEGEND has timely filed on September 6, 2002 a petition for certiorari[26] before the Court of Appeals which was docketed as CA-G.R. SP No. 72659 assailing the March 26, 2002 Decision of the Bureau of Labor Relations. In fact, KML received a copy of said petition on September 10, 2002[27] and has filed its Comment thereto on December 2, 2002. [28] Thus, we find it quite interesting for KML to claim in its Comment (in the certification petition case) before this Court dated March 21, 2006 [29] that the Bureau of

Labor Relations Decision in the petition for cancellation case has already attained finality. Even in its Memorandum[30] dated March 13, 2007 filed before us, KML is still insisting that the Bureau of Labor Relations Decision has become final and executory.

Our perusal of the records shows that on June 30, 2005, the Court of Appeals rendered its Decision[31] in CA-G.R. SP No. 72659 reversing the March 26, 2002 Decision of the Bureau of Labor Relations and reinstating the November 7, 2001 Decision of the Med-Arbiter which canceled the certificate of registration of KML. [32] On September 30, 2005, KMLs motion for reconsideration was denied for lack of merit.[33] On November 25, 2005, KML filed its Petition for Review on Certiorari[34] before this Court which was docketed as G.R. No. 169972. However, the same was denied in a Resolution[35] dated February 13, 2006 for having been filed out of time. KML moved for reconsideration but it was denied with finality in a Resolution[36] dated June 7, 2006. Thereafter, the said Decision canceling the certificate of registration of KML as a labor organization became final and executory and entry of judgment was made on July 18, 2006.[37] The cancellation of KMLs certificate of registration should not retroact to the time of its issuance.

Notwithstanding the finality of the Decision canceling the certificate of registration of KML, we cannot subscribe to LEGENDs proposition that the cancellation of KMLs certificate of registration should retroact to the time of its issuance. LEGEND claims that KMLs petition for certification election filed during the pendency of the petition for cancellation and its demand to enter into collective bargaining agreement with LEGEND should be dismissed due to KMLs lack of legal personality.

This issue is not new or novel. In Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor,[38] we already ruled that: Anent the issue of whether or not the Petition to cancel/revoke registration is a prejudicial question to the petition for certification election, the following ruling in the case of Association of the Court of Appeals Employees (ACAE) v. Hon. Pura Ferrer-Calleja, x x x is in point, to wit: x x x It is well-settled rule that a certification proceedings is not a litigation in the sense that the term is ordinarily understood, but an investigation of a non-adversarial and fact finding character. (Associated Labor Unions (ALU) v. Ferrer-Calleja , 179 SCRA 127 [1989]; Philippine Telegraph and Telephone Corporation v. NLRC, 183 SCRA 451 [1990]. Thus, the technical rules of evidence do not apply if the decision to grant it proceeds from an examination of the sufficiency of the petition as well as a careful look into the arguments contained in the position papers and other documents. At any rate, the Court applies the established rule correctly followed by the public respondent that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union

filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation.[39] (Emphasis supplied.)

In Capitol Medical Center, Inc. v. Hon. Trajano,[40] we also held that the pendency of a petition for cancellation of union registration does not preclude collective bargaining.[41] Citing the Secretary of Labor, we held viz: That there is a pending cancellation proceedings against the respondent Union is not a bar to set in motion the mechanics of collective bargaining. If a certification election may still be ordered despite the pendency of a petition to cancel the unions registration certificate x x x more so should the collective bargaining process continue despite its pendency. [42] (Emphasis supplied.)

In Association of Court of Appeals Employees v. Ferrer-Calleja ,[43] this Court was tasked to resolve the issue of whether the certification proceedings should be suspended pending [the petitioners] petition for the cancellation of union registration of the UCECA[44].[45] The Court resolved the issue in the negative holding that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing a cancellation. [46] We reiterated this view in Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma[47] where we declared that a certification election can be conducted despite pendency of a petition to cancel the union registration certificate. For the fact is that at the time the respondent union filed its petition for certification, it still had the legal personality to perform such act absent an order directing its cancellation.[48]

Based on the foregoing jurisprudence, it is clear that a certification election may be conducted during the pendency of the cancellation proceedings. This is because at the time the petition for certification was filed, the petitioning union is presumed to possess the legal personality to file the same. There is therefore no basis for LEGENDs assertion that the cancellation of KMLs certificate of registration should retroact to the time of its issuance or that it effectively nullified all of KMLs activities, including its filing of the petition for certification election and its demand to collectively bargain. The legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election.

We agree with the ruling of the Office of the Secretary of DOLE that the legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election proceeding. This is in consonance with our ruling in Laguna Autoparts Manufacturing Corporation v. Office of the Secretary, Department of Labor and Employment [49]that such legal personality may not be subject to a collateral attack but only through a separate action instituted particularly for the purpose of assailing it.[50] We further held therein that:

This is categorically prescribed by Section 5, Rule V of the Implementing Rules of Book V, which states as follows: SEC. 5.[51] Effect of registration. The labor organization or workers association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack but may be questioned only in an independent petition for cancellation in accordance with these Rules. Hence, to raise the issue of the respondent unions legal personality is not proper in this case. The pronouncement of the Labor Relations Division Chief, that the respondent union acquired a legal personality x x x cannot be challenged in a petition for certification election. The discussion of the Secretary of Labor and Employment on this point is also enlightening, thus: . . . Section 5, Rule V of D.O. 9 is instructive on the matter. It provides that the legal personality of a union cannot be the subject of collateral attack in a petition for certification election, but may be questioned only in an independent petition for cancellation of union registration. This has been the rule since NUBE v. Minister of Labor, 110 SCRA 274 (1981). What applies in this case is the principle that once a union acquires a legitimate status as a labor organization, it continues as such until its certificate of registration is cancelled or revoked in an independent action for cancellation. Equally important is Section 11, Paragraph II, Rule IX of D.O. 9, which provides for the dismissal of a petition for certification election based on the lack of legal personality of a labor organization only in the following instances: (1) appellant is not listed by the Regional Office or the BLR in its registry of legitimate labor organizations; or (2) appellants legal personality has been revoked or cancelled with finality. Since appellant is listed in the registry of legitimate labor organizations, and its legitimacy has not been revoked or cancelled with finality, the granting of its petition for certification election is proper.[52]

[T]he legal personality of a legitimate labor organization x x x cannot be subject to a collateral attack. The law is very clear on this matter. x x x The Implementing Rules stipulate that a labor organization shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Once a certificate of registration is issued to a union, its legal personality cannot be subject to a collateral attack. In may be questioned only in an independent petition for cancellation in accordance with Section 5 of Rule V, Book V of the Implementing Rules.[53]

WHEREFORE, in view of the foregoing, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 18, 2003 in CA-G.R. SP No. 72848 insofar as it affirms the May 22, 2002 Decision and August 20, 2002 Resolution of the Office of the Secretary of Department of Labor and Employment is AFFIRMED. The Decision of the Court of Appeals insofar as it declares that the March 26, 2002 Decision of the Bureau of Labor Relations in Case No. RO300-0108-CP-001 upholding that the legitimacy of KML as a labor organization has long become final and executory for failure of LEGEND to appeal the same, is REVERSED and SET ASIDE.

SO ORDERED.

Republic of the Philippines Supreme Court Manila

THIRD DIVISION

SAN MIGUEL FOODS, INCORPORATED, G.R. No. 146206 Petitioner, Present:

CARPIO,* J., VELASCO, J., Chairperson, -versusPERALTA, ABAD, and SERENO,**JJ.

SAN MIGUEL CORPORATION SUPERVISORS and EXEMPT UNION, Respondent.

Promulgated:

August 1, 2011 x---------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

The issues in the present case, relating to the inclusion of employees in supervisor levels 3 and 4 and the exempt employees in the proposed bargaining unit, thereby allowing their participation in the certification election; the application of the community or mutuality of interests test; and the determination of the employees who belong to the category of confidential employees, are not novel. In G.R. No. 110399, entitled San Miguel Corporation Supervisors and Exempt Union v. Laguesma, [1] the Court held that even if they handle confidential data regarding technical and internal business operations, supervisory employees 3 and 4 and the exempt employees of petitioner San Miguel Foods, Inc. (SMFI) are not to be considered confidential employees, because the same do not pertain to labor relations, particularly, negotiation and settlement of grievances. Consequently, they were allowed to form an appropriate bargaining unit for the purpose of collective bargaining. The Court also declared that the employees belonging to the three different plants of San Miguel Corporation Magnolia Poultry Products Plants in Cabuyao, San Fernando, and Otis, having community or mutuality of interests, constitute a single bargaining unit. They perform work of the same nature, receive the same wages and compensation, and most importantly, share a common stake in concerted activities. It was immaterial that the three plants have different locations as they did not impede the operations of a single bargaining representative.[2]

Pursuant to the Court's decision in G.R. No. 110399, the Department of Labor and Employment National Capital Region (DOLE-NCR) conducted pre-election conferences.[3] However, there was a discrepancy in the list of eligible voters, i.e., petitioner submitted a list of 23 employees for the San Fernando plant and 33 for the Cabuyao plant, while respondent listed 60 and 82, respectively.[4]

On August 31, 1998, Med-Arbiter Agatha Ann L. Daquigan issued an Order[5] directing Election Officer Cynthia Tolentino to proceed with the conduct of certification election in accordance with Section 2, Rule XII of Department Order No. 9.

On September 30, 1998, a certification election was conducted and it yielded the following results,[6] thus:

Cabuyao Plant Yes No 23 0

San Fernando Plant 23 0

Total

46 0

Spoiled Segregated Total Votes Cast

2 41

0 35

2 76

66

58

124

On the date of the election, September 30, 1998, petitioner filed the Omnibus Objections and Challenge to Voters,[7] questioning the eligibility to vote by some of its employees on the grounds that some employees do not belong to the bargaining unit which respondent seeks to represent or that there is no existence of employeremployee relationship with petitioner. Specifically, it argued that certain employees should not be allowed to vote as they are: (1) confidential employees; (2) employees assigned to the live chicken operations, which are not covered by the bargaining unit; (3) employees whose job grade is level 4, but are performing managerial work and scheduled to be promoted; (4) employees who belong to the Barrio Ugong plant; (5) non-SMFI employees; and (6) employees who are members of other unions.

On October 21, 1998, the Med-Arbiter issued an Order directing respondent to submit proof showing that the employees in the submitted list are covered by the original petition for certification election and belong to the bargaining unit it seeks to represent and, likewise, directing petitioner to substantiate the allegations contained in its Omnibus Objections and Challenge to Voters.[8]

In compliance thereto, respondent averred that (1) the bargaining unit contemplated in the original petition is the Poultry Division of San Miguel Corporation, now known as San Miguel Foods, Inc.; (2) it covered the operations in Calamba, Laguna, Cavite, and Batangas and its home base is either in Cabuyao, Laguna or San Fernando, Pampanga; and (3) it submitted individual and separate declarations of the employees whose votes were challenged in the election.[9]

Adding the results to the number of votes canvassed during the September 30, 1998 certification election, the final tally showed that: number of eligible voters 149; number of valid votes cast 121; number of spoiled ballots - 3; total number of votes cast 124, with 118 (i.e., 46 + 72 = 118 ) Yes votes and 3 No votes.[10]

The Med-Arbiter issued the Resolution[11] dated February 17, 1999 directing the parties to appear before the Election Officer of the Labor Relations Division on March 9, 1999, 10:00 a.m., for the opening of the

segregated ballots. Thereafter, on April 12, 1999, the segregated ballots were opened, showing that out of the 76 segregated votes, 72 were cast for Yes and 3 for No, with one spoiled ballot.[12]

Based on the results, the Med-Arbiter issued the Order[13] dated April 13, 1999, stating that since the Yes vote received 97% of the valid votes cast, respondent is certified to be the exclusive bargaining agent of the supervisors and exempt employees of petitioner's Magnolia Poultry Products Plants in Cabuyao, San Fernando, and Otis.

On appeal, the then Acting DOLE Undersecretary, in the Resolution[14] dated July 30, 1999, in OS-A-2-7091 (NCR-OD-M-9010-017), affirmed the Order dated April 13, 1999, with modification that George C. Matias, Alma Maria M. Lozano, Joannabel T. Delos Reyes, and Marilyn G. Pajaron be excluded from the bargaining unit which respondent seeks to represent. She opined that the challenged voters should be excluded from the bargaining unit, because Matias and Lozano are members of Magnolia Poultry Processing Plants Monthly Employees Union, while Delos Reyes and Pajaron are employees of San Miguel Corporation, which is a separate and distinct entity from petitioner.

Petitioners Partial Motion for Reconsideration[15] dated August 14, 1999 was denied by the then Acting DOLE Undersecretary in the Order[16] dated August 27, 1999.

In the Decision[17] dated April 28, 2000, in CA-G.R. SP No. 55510, entitled San Miguel Foods, Inc. v. The Honorable Office of the Secretary of Labor, Bureau of Labor Relations, and San Miguel Corporation Supervisors and Exempt Union, the Court of Appeals (CA) affirmed with modification the Resolution dated July 30, 1999 of the DOLE Undersecretary, stating that those holding the positions of Human Resource Assistant and Personnel Assistant are excluded from the bargaining unit. Petitioners Motion for Partial Reconsideration[18] dated May 23, 2000 was denied by the CA in the Resolution[19] dated November 28, 2000.

Hence, petitioner filed this present petition raising the following issues:

I. WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE WHEN IT EXPANDED THE SCOPE OF THE BARGAINING UNIT DEFINED BY THIS COURT'S RULING IN G.R. NO. 110399.

II. WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE - SPECIFICALLY, THIS COURT'S DEFINITION OF A CONFIDENTIAL EMPLOYEE - WHEN IT RULED FOR THE INCLUSION OF THE PAYROLL MASTER POSITION IN THE BARGAINING UNIT.

III. WHETHER THIS PETITION IS A REHASH OR A RESURRECTION OF THE ISSUES RAISED IN G.R. NO. 110399, AS ARGUED BY PRIVATE RESPONDENT.

Petitioner contends that with the Court's ruling in G.R. No. 110399[20] identifying the specific employees who can participate in the certification election, i.e., the supervisors (levels 1 to 4) and exempt employees of San Miguel Poultry Products Plants in Cabuyao, San Fernando, and Otis, the CA erred in expanding the scope of the bargaining unit so as to include employees who do not belong to or who are not based in its Cabuyao or San Fernando plants. It also alleges that the employees of the Cabuyao, San Fernando, and Otis plants of petitioners predecessor, San Miguel Corporation, as stated in G.R. No. 110399, were engaged in dressed chicken processing, i.e., handling and packaging of chicken meat, while the new bargaining unit, as defined by the CA in the present case, includes employees engaged in live chicken operations, i.e., those who breed chicks and grow chickens.

Respondent counters that petitioners proposed exclusion of certain employees from the bargaining unit was a rehashed issue which was already settled in G.R. No. 110399. It maintains that the issue of union membership coverage should no longer be raised as a certification election already took place on September 30, 1998, wherein respondent won with 97% votes.

Petitioners contentions are erroneous. In G.R. No. 110399, the Court explained that the employees of San Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and Otis constitute a single bargaining unit, which is not contrary to the one-company, one-union policy. An appropriate bargaining unit is

defined as a group of employees of a given employer, comprised of all or less than all of the entire body of employees, which the collective interest of all the employees, consistent with equity to the employer, indicate to be best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law.[21]

In National Association of Free Trade Unions v. Mainit Lumber Development Company Workers Union United Lumber and General Workers of the Phils,[22] the Court, taking into account the community or mutuality of interests test, ordered the formation of a single bargaining unit consisting of the Sawmill Division in Butuan City and the Logging Division in Zapanta Valley, Kitcharao, Agusan [Del] Norte of the Mainit Lumber Development Company. It held that while the existence of a bargaining history is a factor that may be reckoned with in determining the appropriate bargaining unit, the same is not decisive or conclusive. Other factors must be considered. The test of grouping is community or mutuality of interest. This is so because the basic test of an asserted bargaining units acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights.[23] Certainly, there is a mutuality of interest among the employees of the Sawmill Division and the Logging Division. Their functions mesh with one another. One group needs the other in the same way that the company needs them both. There may be differences as to the nature of their individual assignments, but the distinctions are not enough to warrant the formation of a separate bargaining unit.[24]

Thus, applying the ruling to the present case, the Court affirms the finding of the CA that there should be only one bargaining unit for the employees in Cabuyao, San Fernando, and Otis[25] of Magnolia Poultry Products Plant involved in dressed chicken processing and Magnolia Poultry Farms engaged in live chicken operations. Certain factors, such as specific line of work, working conditions, location of work, mode of compensation, and other relevant conditions do not affect or impede their commonality of interest. Although they seem separate and distinct from each other, the specific tasks of each division are actually interrelated and there exists mutuality of interests which warrants the formation of a single bargaining unit.

Petitioner asserts that the CA erred in not excluding the position of Payroll Master in the definition of a confidential employee and, thus, prays that the said position and all other positions with access to salary and compensation data be excluded from the bargaining unit.

This argument must fail. Confidential employees are defined as those who (1) assist or act in a confidential capacity, in regard (2) to persons who formulate, determine, and effectuate management policies in the field of labor relations.[26] The two criteria are cumulative, and both must be met if an employee is to be considered a confidential employee -that is, the confidential relationship must exist between the employee and his supervisor, and the supervisor must handle the prescribed responsibilities relating to labor relations. The exclusion from bargaining units of employees who, in the normal course of their duties, become aware of management policies relating to labor relations is a principal objective sought to be accomplished by the confidential employee rule.[27]

A confidential employee is one entrusted with confidence on delicate, or with the custody, handling or care and protection of the employers property.[28] Confidential employees, such as accounting personnel, should be excluded from the bargaining unit, as their access to confidential information may become the source of undue advantage.[29] However, such fact does not apply to the position of Payroll Master and the whole gamut of employees who, as perceived by petitioner, has access to salary and compensation data. The CA correctly held that the position of Payroll Master does not involve dealing with confidential labor relations information in the course of the performance of his functions. Since the nature of his work does not pertain to company rules and regulations and confidential labor relations, it follows that he cannot be excluded from the subject bargaining unit.

Corollarily, although Article 245[30] of the Labor Code limits the ineligibility to join, form and assist any labor organization to managerial employees, jurisprudence has extended this prohibition to confidential employees or those who by reason of their positions or nature of work are required to assist or act in a fiduciary manner to managerial employees and, hence, are likewise privy to sensitive and highly confidential records.[31] Confidential employees are thus excluded from the rank-and-file bargaining unit. The rationale for their separate category and disqualification to join any labor organization is similar to the inhibition for managerial employees, because if allowed to be affiliated with a union, the latter might not be assured of their loyalty in view of evident conflict of interests and the union can also become company-denominated with the presence of managerial employees in the union membership.[32] Having access to confidential information, confidential employees may also become the source of undue advantage. Said employees may act as a spy or spies of either party to a collective bargaining agreement.[33]

In this regard, the CA correctly ruled that the positions of Human Resource Assistant and Personnel Assistant belong to the category of confidential employees and, hence, are excluded from the bargaining unit,

considering their respective positions and job descriptions. As Human Resource Assistant,[34] the scope of ones work necessarily involves labor relations, recruitment and selection of employees, access to employees' personal files and compensation package, and human resource management. As regards a Personnel Assistant,
[35]

one's work includes the recording of minutes for management during collective bargaining negotiations, for labor issues from the petitioners team of lawyers, and implementation of company

assistance to management during grievance meetings and administrative investigations, and securing legal advice programs. Therefore, in the discharge of their functions, both gain access to vital labor relations information which outrightly disqualifies them from union membership.

The proceedings for certification election are quasi-judicial in nature and, therefore, decisions rendered in such proceedings can attain finality.[36] Applying the doctrine of res judicata, the issue in the

present case pertaining to the coverage of the employees who would constitute the bargaining unit is now a foregone conclusion.

It bears stressing that a certification election is the sole concern of the workers; hence, an employer lacks the personality to dispute the same. The general rule is that an employer has no standing to question the process of certification election, since this is the sole concern of the workers.[37] Law and policy demand that employers take a strict, hands-off stance in certification elections. The bargaining representative of employees should be chosen free from any extraneous influence of management. A labor bargaining representative, to be effective, must owe its loyalty to the employees alone and to no other. [38] The only exception is where the employer itself has to file the petition pursuant to Article 258[39] of the Labor Code because of a request to bargain collectively.[40]

With the foregoing disquisition, the Court writes finis to the issues raised so as to forestall future suits of similar nature.

WHEREFORE, the petition is DENIED. The Decision dated April 28, 2000 and Resolution dated November 28, 2000 of the Court of Appeals, in CA-G.R. SP No. 55510, which affirmed with modification the Resolutions dated July 30, 1999 and August 27, 1999 of the Secretary of Labor, are AFFIRMED.

SO ORDERED.

SECOND DIVISION [G.R. No. 79526 : December 21, 1990.] 192 SCRA 598 NATIONAL ASSOCIATION OF FREE TRADE UNIONS (NAFTU), Petitioner, vs.MAINIT LUMBER DEVELOPMENT COMPANY WORKERS UNION-UNITED LUMBER AND GENERAL WORKERS OF THE PHILIPPINES. (MALDECOWU-ULGWP), Respondents. DECISION PARAS, J.: This is a petition for Certiorari to annul and set aside the resolution ** of the public respondent Bureau of Labor Relation dated January 29,1987 in BLR Case No. A-5-99-85 entitled: IN RE: Petition for Direct Certification or Certification Election, Mainit Lumber Development Company Workers Union-United Lumber and General Workers of the Philippines (MALDECOWU-ULGWP), petitioner-appellee vs. Mainit Lumber and Development Company, Inc. (MALDECO), respondent; National Association of Free Trade Unions (NAFTU), compulsory intervenorappellant, affirming the Order of the Med-Arbiter date September 24, 1986 and denying petitioner's motion for reconsideration. The facts are as follows: On January 28, 1985, private respondent Mainit Lumber Development Company Workers Union-United Lumber and General Workers of the Philippines, MALDECOWU-ULGWP (ULGWP, for short), a legitimate labor organization duly registered with the Ministry of Labor and Employment under Registry No. 2944-IP, filed with Regional Office No. 10, Ministry of Labor and Employment at Cagayan de Oro City, a petition for certification election to determine the sole and exclusive collective bargaining representative among the rank and file workers/employees of Mainit Lumber Development Company Inc. (MALDECO), a duly organized, registered and existing corporation engaged in the business of logging and saw-mill operations employing approximately 136 rank and file employees/workers (Rollo, p. 11; Petition; Annex "A"). The case was scheduled for hearing two (2) times. During the first scheduled hearing on February 20, 1985, the counsel for compulsory intervenor (now petitioner), National Association of Free Trade Union (NAFTU) requested for postponement on the ground that he was leaving for abroad. During the scheduled hearing of March 13, 1985, they, however, agreed to submit simultaneously their respective position papers within twenty (20) days (Rollo, p. 17; Petition; Annex "D"). Petitioner ULGWP, private respondent herein, in its petition and position paper alleged, among others: (1) that there was no certification election conducted within 12 months prior to the filing of the petition; (2) that the petition was filed within the 60 day freedom period, i.e. CBA expired on February 28, 1985; (3) that the petition is supported by the signatures of 101 rank and file employees out of a total of 201 employees of the employer or more than thirty percent (30%) than that required by law (Rollo, p. 13; Petition; Annex "B").:-cralaw On April 11, 1985, the Med-Arbiter granted the petition for certification election. On April 26, 1985, NAFTU appealed the decision of the Med-Arbiter on the ground that MALDECO was composed of two (2) bargaining units, the Sawmill Division and the Logging Division, but both the petition and decision treated these separate and distinct units only as one (Rollo, p. 20; Petition; Annex "E"). On April 28, 1986, the Bureau of Labor Relations affirmed the decision (Rollo, p. 26; Petition; Annex "J"). Thus, a certification election was held on separate dates at the employer's sawmill division and logging area respectively. In said election MALDECOWU-ULGWP garnered a total vote of 146 while NAFTU garnered a total of 2 votes (Rollo, p. 42; Petition; Annex "O"). On July 26, 1986, NAFTU filed an election protest alleging massive vote buying accompanied with grave and serious threat force and intimidation on the lives of 25 applicants as stated in a Joint Affidavit attached thereto (Rollo, p. 28; Petition; Annexes "K", "K-3").

MALDECO filed its Manifestation on August 3, 1986, which corroborated petitioner's stand. Attached to the said Manifestation was a joint affidavit executed by thirty five (35) of its employees/workers (Rollo, p. 33; Petition; Annexes "L", "L-1"). On September 3, 1986, private respondent filed its position paper (Rollo, p. 36; Petition; Annex "I"). On September 8, 1986 petitioner filed its opposition to private respondent's position paper (Rollo, p. 39; Petition; Annex "N"). On September 24, 1986, the Med-Arbiter dismissed the election protest (Rollo, p. 42; Petition; Annex "O"). On October 10, 1986, petitioner NAFTU appealed the order of the Med-Arbiter to the Bureau of Labor Relations in Manila (Rollo, p. 46) which denied the appeal (Rollo, p. 48) and the two motions for reconsideration (Rollo, pp. 51, 55). Hence, this petition. The issues raised in this petition are: I WHETHER OR NOT IT WAS RIGHT FOR THE MED-ARBITER TO CHANGE THE EMPLOYER FROM TWO SEPARATE BARGAINING UNITS TO ONLY ONE. II WHETHER OR NOT THERE WAS MASSIVE VOTE BUYING AND SERIOUS THREAT TO LIFE TO JUSTIFY INVALIDATING THE RESULT OF THE ELECTION. III WHETHER OR NOT AN ELECTION PROTEST IN A CERTIFICATION ELECTION CAN BE GIVEN DUE COURSE EVEN IF NOT ENTERED IN THE MINUTES OF THE ELECTION. In the case at bar, petitioner alleges that the employer MALDECO was composed of two bargaining units, the Sawmill Division in Butuan City and the Logging Division, in Zapanta Valley, Kitcharao, Agusan Norte, about 80 kilometers distant from each other and in fact, had then two separate CBA's, one for the Sawmill Division and another for the Logging Division, both the petition and decision referred only to one bargaining unit; that from 1979 to 1985, the Ministry of Labor and Employment recognized the existence of two (2) separate bargaining units at MALDECO, one for its Logging Division and another for its Sawmill Division. Significantly, out of two hundred and one (201) employees of MALDECO, one hundred seventy five (175) consented and supported the petition for certification election, thereby confirming their desire for one bargaining representative (Rollo, p. 104).:- nad Moreover, while the existence of a bargaining history is a factor that may be reckoned with in determining the appropriate bargaining unit, the same is not decisive or conclusive. Other factors must be considered. The test of grouping is community or mutuality of interests. This is so because "the basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights." (Democratic Labor Association v. Cebu Stevedoring Company, Inc., et al., 103 Phil. 1103 [1958]). Certainly, there is a mutuality of interest among the employees of the Sawmill Division and the Logging Division. Their functions mesh with one another. One group needs the other in the same way that the company needs them both. There may be difference as to the nature of their individual assignments but the distinctions are not enough to warrant the formation of a separate bargaining unit. Secondly, the issue had been raised earlier by petitioner. The respondent Bureau of Labor Relations had already ruled on the same in its decision dated April 28, 1986 affirming the Med-Arbiter's Order dated April 11, 1985 which granted the petition for Certification Election. NAFTU did not elevate the April 28, 1986 decision to this Court. On the contrary, it participated in the questioned election and later it did not raise the issue in its election protest (Rollo, p. 210). Hence, the principle of res judicata applies. It was settled as early as 1956 that "the rule which forbids the reopening of a matter once judicially determined by competent authority applies as well to the judicial and quasi-judicial acts of public, executive or administrative officers and boards acting within their jurisdiction as to the judgments of courts having general judicial powers . . ." (B.F. Goodrich Philippines, Inc. v. Workmen's Compensation Commission and Leandro M. Castro, 159 SCRA 355 [1988]).

With regard to the second and third issues raised by petitioner, the public respondent Bureau of Labor Relations in its order dated September 24, 1986 found the following, to wit: "After a careful perusal of the records of this case and after considering, adducing and weighing all the pleadings, arguments, etc. and the circumstances attendant to the instant case, this Office is of the opinion that the grounds relied upon by the protestant NAFTU in its protest are bereft of any merit, hence, this Office finds no cogent reason to order the invalidation or annulment of the certification election under protest or the holding of a run-off election thereat between no union and the protestee, MALDECOWU-ULGWP. Indeed, the minutes of said certification elections conducted both at the sawmill and logging departments on August 15 and 21, 1986 respectively, of the respondent/employer showed that there was no protest on massive vote buying accompanied with grave and serious threats, force and intimidation raised by any of the parties who were ably represented in said elections. Paragraph 2, Section 9, Rule 6 of the Rules and Regulations implementing the Labor Code of the Philippines (now Section 3, Rule VI, Book 5 of the Omnibus Rules Implementing the Labor Code) provides that protests not so raised and contained in the minutes of the proceedings are deemed waived. Allegations of vote buying, grave and serious threats, force and intimidation are questions of fact which should be contained in the minutes of said proceedings. There is no clear and convincing proof presented by the protestant in support of its contention, hence, we have no other alternative than to uphold the election results." In the case of Philippine Airlines Employees' Association (PALEA) v. Hon. Pura Ferrer-Calleja, et al., 162 SCRA 425 [1988]), this Court held that factual findings of the Bureau of Labor Relations which are supported by substantial evidence are binding on this Court and must be respected.: nad PREMISES CONSIDERED, the resolution of public respondent Bureau of Labor Relations dated January 29, 1987 is hereby AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 88957 June 25, 1992 PHILIPS INDUSTRIAL DEVELOPMENT, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and PHILIPS EMPLOYEES ORGANIZATION (FFW),respondents.

DAVIDE, JR., J.: In this petition for certiorari and prohibition under Rule 65 of the Rules of Court with a prayer for a temporary restraining order and/or a writ of preliminary injunction, petitioner Philips Industrial Development, Inc. (PIDI) seeks to set aside the Decision and Resolution, dated 16 January 1989 and 17 March 1989, respectively, of the National Labor Relations Commission (NLRC) in Case No. NLRC-NCR-00-11-03936-87 on the ground that it committed grave abuse of discretion amounting to lack of jurisdiction in holding that service engineers, sales representatives and confidential employees of PIDI are qualified to be included in the existing bargaining unit. PIDI is a domestic corporation engaged in the manufacturing and marketing of electronic products Since 1971, it had a total of six (6) collective bargaining agreements (CBAs) with private respondent Philips Employees Organization-FFW (PEO-FFW), a registered labor union and the certified bargaining agent of all the rank and file employees of PIDI. In the first CBA (1971-1974), the supervisors referred to in R.A. No. 875, confidential employees, security guards, temporary employees and sales representatives were excluded from the bargaining unit. In the second to the fifth CBAs (1975-1977; 1978-1980; 1981-1983; and 1984-1986), the sales force, confidential employees and heads of small units, together with the managerial employees, temporary employees and security personnel, were specifically excluded from the bargaining unit. 1 The confidential employees are the division secretaries of light/telecom/data and consumer electronics, marketing managers, secretaries of the corporate planning and business manager, fiscal and financial system manager and audit and EDP manager, and the staff of both the General Management and the Personnel Department. 2 In the sixth CBA covering the years 1987 to 1989, it was agreed upon, among others, that the subject of inclusion or exclusion of service engineers, sales personnel and confidential employees in the coverage of the bargaining unit would be submitted for arbitration. Pursuant thereto, on June 1987, PEO-FFW filed a petition before the Bureau of Labor Relations (BLR) praying for an order "directing the parties to select a voluntary arbitrator in accordance with its rules and regulations." As the parties failed to agree on a voluntary arbitrator, the BLR endorsed the petition to the Executive Labor Arbiter of the National Capital Region for compulsory arbitration pursuant to Article 228 of the Labor Code. Docketed as Case No. NLRC-NCR-00-11-03936-87, the case was assigned to Executive Labor Arbiter Arthur Amansec. On 17 March 1988, Labor Arbiter Amansec rendered a decision, the dispositive portion of which states: In view of the foregoing, a decision is hereby rendered, ordering the respondent to conduct a referendum to determine the will of the service engineers, sales representatives as to their inclusion or exclusion in the bargaining unit.

It is hereby declared that the Division Secretaries and all Staff of general management, personnel and industrial relations department, secretaries of audit, EDP, financial system are confidential employees and as such are hereby deemed excluded in the bargaining unit. SO ORDERED. PEO-FFW appealed from the decision to the NLRC. On 16 January 1989, the NLRC rendered the questioned decision, the dispositive portion of which reads: WHEREFORE, the foregoing premises considered, the appealed decision of the Executive Labor Arbiter is hereby SET ASIDE and a new one entered declaring respondent company's Service Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank and file bargaining unit. SO ORDERED. The reversal is anchored on the respondent NLRC's conclusion that based on Section 1, 3 Rule II, Book V of the Omnibus Rules Implementing the Labor Code, as amended by Section 3, Implementing Rules of E.O. No. 111; paragraph (c) Section 2, Rule V of the same Code, as amended by Section 6 4 of the Implementing Rules of E.O. No. 111; and Article 245 5 of the Labor Code, as amended: . . . all workers, except managerial employees and security personnel, are qualified to join or be a part of the bargaining unit. . . . It further ruled that: The Executive Labor Arbiters directive that the service engineers and sales representatives to (sic) conduct a referendum among themselves is erroneous inasmuch as it arrogates unto said employees the right to define what the law means. It would not be amiss to state at this point that there would be no one more interested in excluding the subject employees from the bargaining unit than management and that it would not be improbable for the latter to lobby and/or exert pressure on the employees concerned, thus agitating unrest among the rank-and-file. Likewise, the Executive Labor Arbiter's declaration that the Division Secretaries and all Staff of general management, personnel and industrial relations department, secretaries of audit, EDP and financial system "are confidential employees and as such are hereby deemed excluded in (sic) the bargaining unit" is contrary to law for the simple reason that the law, as earlier quoted, does not mention them as among those to be excluded from the bargaining unit only (sic) managerial employees and security guards. As a matter of fact, supervisory unions have already been dissolved and their members who do not fall within the definition of managerial employees have become eligible to join or assist the rank-and-file organization. 6 Its motion for the reconsideration of this decision having been denied by the NLRC in its Resolution of 16 March 1989, a copy of which it received on 8 June 1989, petitioner PIDI filed the instant petition on 20 July 1989, alleging that: I THE NLRC COMMITTED ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN HOLDING THAT SERVICE ENGINEERS, SALES REPRESENTATIVES AND CONFIDENTIAL EMPLOYEES OF PETITIONER ARE QUALIFIED TO BE PART OF THE EXISTING BARGAINING UNIT. II

THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT APPLYING THE TIME HONORED "GLOBE DOCTRINE." 7 On 31 July 1989, this Court; required the respondents to comment on the petition, which PEO-FFW complied with on 28 August 1989. Public respondent NLRC, thru its counsel, the Solicitor General, moved for, and was granted a 30-day extension to file its Comment. On 18 September 1989, this Court required the parties to show cause why the petition should not be dismissed in view of the finality of the NLRC decision as provided for by the penultimate sentence of Article 223 of the Labor Code, as amended by R.A. No. 6715 R..A. No. 6715, which amended Article 223 of the Labor Code, was enacted on 2 March 1989 and took effect on 21 March 1989. The parties subsequently complied with the Resolution. On 16 May 1990, this Court required the parties to submit Memoranda explaining the effect in this case of Article 223 of the Labor Code, as amended by Section 12 of R.A. No-6715 with respect to the finality of decisions of the NLRC. The parties complied separately with the same. On 10 September 1990, this Court gave due course to the petition and required the parties to submit their respective Memoranda. The petitioner and the Office of the Solicitor General filed their separate Memoranda. On the other hand, PEO-FFW moved that its Motion and manifestation dated 23 August 1989 be considered as its Memorandum; this Court granted the same. As stated earlier, the principal issue in this case is whether the NLRC committed grave abuse of discretion in holding that service engineers, sales representatives and confidential employees (division secretaries, staff of general management, personnel and industrial relations department, secretaries of audit, EDP and financial system) are qualified to be included in the existing bargaining unit. Petitioner maintains that it did, and in support of its stand that said employees should not be absorbed by the existing bargaining unit, it urges this Court to consider these points: 1) The inclusion of the group in the existing bargaining unit would run counter to the history of this parties CBA. The parties' five (5) previous CBAs consistently excluded this group of employees from the scope of the bargaining unit. The rationale for such exclusion is that these employees hold positions which are highly sensitive, confidential and of a highly fiduciary nature; to include them in the bargaining unit may subject the company to breaches in security and the possible revelation of highly sensitive and confidential matters. It would cripple the company's bargaining position and would give undue advantage to the union. 2) The absence of mutuality of interests between this group of employees and the regular rank and file militates against such inclusion. A table prepared by the petitioner shows the disparity of interests between the said groups: SERVICE ENGINEERS SERVICE SALES REPRESENTATIVES TECHNICIANS (Non-Bargaining (Bargaining AREAS OF INTEREST Unit Employees) Unit Employees) Qualifications Professional Employees High School/ Vocational Grads. Work Schedule With Night Shift None Schedule Night Shift 10% of Basic Rate None Differential Pay Stand-By Call & On Stand-By Call with: None Allowance First Line:15% of basic rate Second Line: 10% of

basic rate Uniforms None 2 sets of polo & pants every 6 months Retirement Benefits 15 yrs. ser.70% 15 yrs. serv. 50% 16 75% 16 85% 17 80% 17 90% 18 85% 18 100% 19 90% 19 115% 20 100% 20 135% Year End Performance Merit Increase system None Evaluation Sales Commission Yes None Car Loan Yes None Precalculated Yes None Kilometer allowance

The Office of the Solicitor General supports the decision of the Executive Labor Arbiter and refuses to uphold the position of the NLRC. It holds the view that the division Secretaries; the staff members of General Management, Personnel and the Industrial Relations Department; and the secretaries of Audit, EDP and Financial Systems, are disqualified from joining the PEO-FFW as they are confidential employees. They cannot even form a union of their own for, as held in Golden Farms, Inc. vs. Ferrer-Calleja, 8 the rationale for the disqualification of managerial employees from joining unions holds true also for confidential employees. As regards the sales representatives and service engineers, however, there is no doubt that they are entitled to join or form a union, as they are not disqualified by law from doing so. Considering that they have interests dissimilar to those of the rank and file employees comprising the existing bargaining unit, and following the Globe Doctrine enunciated in In Re: Globe Machine and Stamping Company 9 to the effect that in determining the proper bargaining unit the express will or desire of the employees shall be considered, they should be allowed to determine for themselves what union to join or form. The best way to determine their preference is through a referendum. As shown by the records, such a. referendum was decreed by the Executive Labor Arbiter. The petition is impressed with merit. At the outset, We express Our agreement with the petitioner's view that respondent NLRC did not quite accurately comprehend the issue raised before it. Indeed, the issue is not whether the subject employees may join or form a union, but rather, whether or not they may be part of the existing bargaining unit for the rank and file employees of PIDI. Even if the issue was, indeed, as perceived by the NLRC, still, a palpable error was committed by it in ruling that under the law, all workers, except managerial employees and security personnel, are qualified to join a union, or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-11-03936-87 was filed in 1987, security personnel were no longer disqualified from joining or forming a union. Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the original provisions of Article 245 of the Labor Code, reading as follows: Art. 245. Ineligibility of security personnel to join any labor organization. Security guards and other personnel employed for the protection and security of the person, properties and premises of the employer shall not be eligible for membership, in any labor organization. and substituted it with the following provision: Art. 245. Right of employees in the public service. 10

xxx xxx xxx By virtue of such repeal and substitution, security guards became eligible for membership in any labor organization. 11 On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave abuse of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that PIDI's "Service Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank and file bargaining unit." 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. 12 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. vs. Hon Augusto Sanchez, 13 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. In Golden Farms, Inc. vs. Ferrer-Calleja, 14 this Court explicitly made this rationale applicable to confidential employees: This rationale holds true also for confidential employees such as accounting personnel, radio and telegraph operators, who having access to confidential information, may become the source of undue advantage. Said employee(s) may act as a spy or, spies of either party to a collective bargainingagreement. This is specially true in the present case where the petitioning Union is already the bargaining agent of the rank-and-file employees in the establishment. To allow the confidential employees to join the existing Union of the rank-and-file would be in violation of the terms of the Collective Bargaining Agreement wherein this kind of employees by the nature of their functions/ positions are expressly excluded. As regards the service engineers and the sales representatives, two (2) points which respondent NLRC likewise arbitrarily and erroneously ruled upon agreed to be discussed. Firstly, in holding that they are included in the bargaining unit for the rank and file employees of PIDI, the NLRC practically forced them to become members of PEO-FFW or to be subject to its sphere of influence, it being the certified bargaining agent for the subject bargaining unit. This violates, obstructs, impairs and impedes the service engineers' and the sales representatives' constitutional right to form unions or associations 15 and to self-organization. 16 In Victoriano vs. Elizalde Rope Workers Union, 17 this Court already ruled: . . . Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being prevented by law; and second, power, whereby an employee may, as he pleases, join or refrain from joining an association. It is, therefore, the employee who should decide for himself whether he should join or not an association; and should he choose to join, he himself makes up his mind as to which association he would join; and even after he has joined, he still retains the liberty and the power to leave and cancel his membership with said organization at any time. 18 It is clear, therefore, that the right to join a union includes the right to abstain from joining any union. 19 Inasmuch as what both the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd

to say that the law also imposes, in the same breath, upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any association. The decision then of the Executive Labor Arbiter in merely directing the holding of a referendum "to determine the will of the service engineers, sales representatives as to their inclusion or exclusion in (sic) the bargaining unit" is the most appropriate procedure that conforms with their right to form, assist or join in labor union or organization. However, since this decision was rendered before the effectivity of R.A. No. 6715, it must now be stressed that its future application to the private parties in this case should, insofar as service engineers and sales representatives holding supervisory positions or functions are concerned, take into account the present Article 245 20 of the Labor Code which, as amended by R.A. No. 6715, now reads: ARTICLE 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees. Managerial employees are not eligible to join, assist or form any labor organization.Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own. (emphasis supplied) The foregoing disquisitions render unnecessary a discussion on the second ground on the alleged grave abuse of discretion on the part of the NLRC in not applying the "Globe Doctrine". Suffice it to state here that since the only issue is the subject employees' inclusion in or exclusion from the bargaining unit in question, and PIDI never questioned the decision of the Executive Labor Arbiter, the Globe Doctrine finds no application. Besides, this doctrine applies only in instances of evenly balanced claims by competitive groups for the right to be established as the bargaining unit, 21 which do not obtain in this case. WHEREFORE, the petition is hereby GRANTED. The Decision of public respondent National Labor Relations Commission in Case No. NLRC-NCR-00-11-03936-87, promulgated on 16 January 1989, is hereby SET ASIDE while the Decision of the Executive Labor Arbiter in said case dated 17 March 1988 is hereby REINSTATED, subject to the modifications above indicated. Costs against private respondent. SO ORDERED. Gutierrez, Feliciano, Bidin and Romero, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 77951 September 26, 1988 COOPERATIVE RURAL BANK OF DAVAO CITY, INC., petitioner, vs. PURA FERRER-CALLEJA, DIRECTOR, BUREAU OF LABOR RELATIONS, MOLE, MANILA; FELIZARDO T. SERAPIO, MED-ARBITER DESIGNATE, REGIONAL OFFICE NO. XI, MOLE, DAVAO CITY; and FEDERATION OF FREE WORKERS, respondents. Herbert P. Artes for petitioner. The Solicitor General for Public respondent.

GANCAYCO, J.: This is a Petition for certiorari under Rule 65 of the Rules of Court where the issue is whether or not the employees of a cooperative can organize themselves for purposes of collective bargaining. The record of the case discloses that the herein petitioner Cooperative Rural Bank of Davao City, Inc. is a cooperative banking corporation operating in Davao City. It is owned in part by the Government and its employees are members and co-owners of the same. The petitioner has around 16 rank-and-file employees. As of August, 1986, there was no existing collective bargaining agreement between the said employees and the establishment. On the other hand, the herein private respondent Federation of Free Workers is a labor organization registered with the Department of Labor and Employment. It is interested in representing the said employees for purposes of collective bargaining. On August 27, 1986, the private respondent filed with the Davao City Regional Office of the then Ministry of Labor and Employment a verified Petition for certification election among the rank-and-file employees of the petitioner. 1The same was docketed as Case No. R-325 ROXI MED-UR-73-86. On September 18, 1986, the herein public respondent issued an Order granting the Petition for certification election. On October 3, 1986, the petitioner filed an Appeal Memorandum and sought a reversal of the Order of the MedArbiter. 2 The petitioner argues therein that, among others, a cooperative is not covered by the Rules governing certification elections inasmuch as it is not an institution operating for profit. The petitioner also adds that two of the alleged rank-and-file employees seeking the certification election are managerial employees disqualified from joining concerted labor activities. In sum, the petitioner insists that its employees are disqualified from forming labor organizations for purposes of collective bargaining. On October 8, 1986, the private respondent filed a "Motion to Dismiss the Appeal." On October 15, 1986, the petitioner filed its opposition to the said Motion. On February 11, 1987, the herein public respondent Bureau of Labor Relations Director Pura Ferrer-Calleja issued a Resolution affirming the Order of the Med-Arbiter and dismissing the Appeal. 3 The pertinent portions of the said Resolution are as follows It is beyond doubt that respondent-appellant, Cooperative Rural Bank of Davao City falls within the purview of Article 212, paragraph C of the Labor Code, acting as such in the interest of an employer. To argue otherwise would amount to closing one's eyes to the realities of today's cooperative banking institutions. ....

Moreover, basic is the right of every worker in any establishment whether operated for profit or not to organize and engage in concerted activity, mutually beneficial to their interest. Such right is sacredly enshrined and protected in our fundamental law, granting every worker the right to organize into a collective group and engage in concerted activities for purposes of promoting their well being, subject only to such limitations as may be provided for by law. xxx xxx xxx As this Office has consistently ruled and applied in various cases, being a member of a cooperative organization does not preclude one from forming or joining a labor union provided that such person or persons are not among those disqualified by law. Nowhere in the records can we find any piece of evidence showing that the signatories in the petition are among those disqualified to form or join a union. Finally, we cannot give credence to (the) employer's allegation that two of the signatories thereof, are managerial employees, since no evidence showing such fact can be found from the records. xxx xxx xxx In a Motion dated March 2, 1987, the petitioner asked for a reconsideration of the said Resolution. 4 The petitioner reiterated therein its view that its employees are disqualified from forming the labor organization so contemplated. The petitioner also called attention to an Opinion rendered by then Solicitor General and Minister of Justice Estelito P. Mendoza dated August 14, 1981. 5 The Opinion states that employees of an electric cooperative who are themselves members/co-owners of the same cannot form or join labor organizations for purposes of collective bargaining. The Opinion also states that the duty to bargain exists only between an employer and his/its employees, and that an employer has no duty to bargain with his co-owners of a corporation who are also its employees. The petitioner submits that the said Opinion calls for application in the present controversy. On March 26, 1987, director Calleja issued a Resolution denying the reconsideration sought by the petitioner. 6Thus, the certification election was scheduled in the morning of April 23, 1987. Finding the action taken by the Bureau unsatisfactory, the petitioner brought the case directly to this Court on April 9, 1987 by way of the instant Petition for certiorari. The petitioner maintains that the public respondents both acted without jurisdiction or in excess thereof, or with grave abuse of discretion amounting to lack of jurisdiction, in allowing the certification election sought by the private respondent despite the arguments of the petitioner in opposition thereto. The petitioner reiterates its argument that employees of cooperatives who are members and co-owners of the same cannot form and join labor organizations for purposes of collective bargaining. On April 15, 1987, this Court issued a temporary restraining order enjoining the Bureau of Labor Relations from proceeding with the certification election scheduled on April 23, 1987. 7 The certification election nonetheless pushed through as scheduled for the alleged reason that the temporary restraining order was not seasonably transmitted to Davao City. 8 This court also required the respondents to file their Comment on the Petition. The respondents complied as instructed. The Office of the Solicitor General represented the public respondents. The Solicitor General intimated to this Court that the instant Petition has been rendered moot and academic inasmuch as the certification election sought to be enjoined had already been conducted. The Solicitor General added that the public respondents did not commit any jurisdictional error. 10 In due time, the parties submitted other pleadings. On January 6, 1988, the case was deemed submitted for decision. After a careful examination of the entire record of the case, We find the instant Petition meritorious.

Contrary to the view espoused by the Solicitor General, this case cannot be considered moot and academic simply because the certification election sought to be enjoined went on as scheduled. The instant Petition is one for certiorari as a special civil action. Errors of jurisdiction on the part of the public respondents are alleged in the Petition itself. If the public respondents had indeed committed jurisdictional errors, the action taken by both the Med-Arbiter and the Bureau Director will be deemed null and void ab initio. 11 And if this were so, the certification election would, necessarily, have no legal justification. The arguments raised in the instant Petition strike at the very heart of the validity of the certification election itself. We come now to the main aspect of the case. Article 243 of the Labor Code 12 enumerates who are eligible to form, join, or assist labor organizations for purposes of collective bargaining, to wit ART. 243. Coverage and employees' right to self-organization. All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational institutions whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective bargaining. .... The recognized exception to this enumeration is found in Article 245 of the same code, which provides for the ineligibility of managerial employees to join any labor reorganization, vizART. 245. Ineligibility of managerial employees to join any labor organization. Managerial employees are not eligible to join, assist or form any labor organization. From the foregoing provisions of law it would appear at first blush that all the rank and file employees of a cooperative who are not managerial employees are eligible to form, join or assist any labor organization of their own choosing for the purpose of collective bargaining. However, under Section 2 of P.D. No. 175, a cooperative is defined to mean "organizations composed primarily of small producers and of consumers who voluntarily join together to form business enterprises which they themselves own, control, and patronize." Its creation and growth were declared as a policy of the State as a means of increasing the income and purchasing power of the low-income sector of the population in order to attain a more equitable distribution of income and wealth . 13 The principles governing it are: a) Open membership"Should be voluntary and available without artificial restriction, or any social, political, racial or religious discrimination, to all persons who can make use of its services and are willing to accept responsibilities of membership;" b) Democratic control."Irrespective of the number of shares owned, each member can only cast one vote in deciding upon the affairs of the cooperative;" c) Limited interests to capital. "Share capital shall earn only limited interest, the maximum rate of interest to be established by the Department of Local Government and Community Development from time to time;" and d) Patronage refund "Net income after the interest on capital has been paid shall be redistributed among the members in proposition to their patronage." 14 While cooperatives may exercise the same rights and privileges given to persons, partnership and corporations provided under existing laws, operate business enterprises of all kinds, establish rural banks, enjoy all the privileges and incentives granted by the NACIDA Act and other government agencies to business organizations under existing laws, to expropriate idle urban or rural lands for its purposes, to own and dispose of properties, enter into contracts, to sue and be sued and perform other acts necessary to pursue its objectives, 15 such cooperatives enjoy such privileges as:

a) Exemption from income tax and sales taxes; b) Preferential right to supply rice, corn and other grains, and other commodities produced by them to State agencies administering price stabilization program; and c) In appropriate cases, exemption from application of minimum wage law upon recommendation of the Bureau of Cooperative Development subject to the approval of the Secretary of Labor. 16 A cooperative development loan fund has been created for the development of the cooperative movement. 17 It may be, further stated that the Department of Local Govemment and Community Development through the Bureau of Cooperative Development is vested with full authority to promulgate rules and regulations to cover the promotion, organization, registration, regulation and supervision of all types of cooperatives. 18 Electric cooperatives, however, are under the regulation and supervision of the National Electrification Ad. Administration,19 while it is the Monetary Board of the Central Bank that has exclusive responsibility and authority over the banking functions and operations of cooperative banks . 20 A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the others are its employees. As above stated, irrespective of the number of shares owned by each member they are entitled to cast one vote each in deciding upon the affairs of the cooperative. Their share capital earn limited interests. They enjoy special privileges as exemption from income tax and sales taxes, preferential right to supply their products to State agencies and even exemption from the minimum wages laws. An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for being themselves co-owners of the cooperative. 21 However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country. 22 The questioned ruling therefore of public respondent Pura Ferrer-Calleja must be upheld insofar as it refers to the employees of petitioner who are not members or co-owners of petitioner. It cannot extend to the other employees who are at the same time its members or co-owners. The Court upholds the findings of said public respondent that no persuasive evidence has been presented to show that two of the signatories in the petition for certification election are managerial employees who under the law are disqualified from pursuing union activities. WHEREFORE, the herein petition is hereby GRANTED and the resolution of public respondent Pura FerrerCalleja, Director, Bureau of Labor Relations, of February 11, 1987 is hereby MODIFIED to the effect that only the rank and file employees of petitioner who are not its members or co-owners are entitled to self-organization, collective bargaining, and negotiations, while the other employees who are members or co-owners thereof can not enjoy such right. SO ORDERED. Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 94045 September 13, 1991 CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), petitioner, vs. HONORABLE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, and CENECO UNION OF RATIONAL EMPLOYEES (CURE), respondents. Enrique S. Tabino for petitioner. Edmundo G. Manlapao for private respondent.

REGALADO, J.:p In this special civil action for certiorari, petitioner Central Negros Electric Cooperative, Inc. (CENECO) seeks to annul the order 1 issued by then Acting Secretary of Labor Bienvenido E. Laguesma on June 6, 1990, declaring the projected certification election unnecessary and directing petitioner CENECO to continue recognizing private respondent CENECO Union of Rational Employees (CURE) as the sole and exclusive bargaining representative of all the rank-and-file employees of petitioner's electric cooperative for purposes of collective bargaining. It appears from the records that on August 15, 1987, CENECO entered into a collective bargaining agreement with CURE, a labor union representing its rank-and-file employees, providing for a term of three years retroactive to April 1, 1987 and extending up to March 31, 1990. On December 28, 1989, CURE wrote CENECO proposing that negotiations be conducted for a new collective bargaining agreement (CBA). On January 18, 1990, CENECO denied CURE's request on the ground that, under applicable decisions of the Supreme Court, employees who at the same time are members of an electric cooperative are not entitled to form or join a union. 2 Prior to the submission of the proposal for CBA renegotiation, CURE members, in a general assembly held on December 9, 1989, approved Resolution No. 35 whereby it was agreed that 'tall union members shall withdraw, retract, or recall the union members' membership from Central Negros Electric Cooperative, Inc. in order to avail (of) the full benefits under the existing Collective Bargaining Agreement entered into by and between CENECO and CURE, and the supposed benefits that our union may avail (of) under the renewed CBA. 3 This was ratified by 259 of the 362 union members. CENECO and the Department of Labor and Employment, Bacolod District, were furnished copies of this resolution. However, the withdrawal from membership was denied by CENECO on February 27, 1990 under Resolution No. 90 "for the reason that the basis of withdrawal is not among the grounds covered by Board Resolution No. 5023, dated November 22, 1989 and that said request is contrary to Board Resolution No. 5033 dated December 13, 1989, ..." 4 By reason of CENECO's refusal to renegotiate a new CBA, CURE filed a petition for direct recognition or for certification election, supported by 282 or 72% of the 388 rank-and-file employees in the bargaining unit of CENECO. CENECO filed a motion to dismiss on the ground that there are legal constraints to the filing of the certification election, citing the ruling laid down by this Court in Batangas I Electric Cooperative Labor Union vs. Romeo A. Young, 5 (BATANGAS case) to the effect that "employees who at the same time are members of an electric

cooperative are not entitled to form or join unions for purposes of collective bargaining agreement, for certainly an owner cannot bargain with himself or his co-owners." Med-Arbiter Felizardo T. Serapio issued an order, 6 granting the petition for certification election which, in effect, was a denial of CENECO's motion to dismiss, and directing the holding of a certification election between CURE and No Union. CENECO appealed to the Department of Labor and Employment which issued the questioned order modifying the aforestated order of the med-arbiter by directly certifying CURE as the exclusive bargaining representative of the rank-and-file employees of CURE. Hence, this petition. Petitioner CENECO argues that respondent Secretary committed a grave abuse of discretion in not applying to the present case the doctrine enunciated in the BATANGAS case that employees of an electric cooperative who at the same time are members of the electric cooperative are prohibited from forming or joining labor unions for purposes of a collective bargaining agreement. While CENECO recognizes the employees' right to selforganization, it avers that this is not absolute. Thus, it opines that employees of an electric cooperative who at the same time are members thereof are not allowed to form or join labor unions for purposes of collective bargaining. However, petitioner does not hesitate to admit that the prohibition does not extend to employees of an electric cooperative who are not members of the cooperative. The issue, therefore, actually involves a determination of whether or not the employees of CENECO who withdrew their membership from the cooperative are entitled to form or join CURE for purposes of the negotiations for a collective bargaining agreement proposed by the latter. As culled from the records, it is the submission of CENECO that the withdrawal from membership in the cooperative and, as a consequence, the employees' acquisition of membership in the union cannot be allowed for the following reasons: 1. It was made as a subterfuge or to subvert the ruling in the BATANGAS case: 2. To allow the withdrawal of the members of CENECO from the cooperative without justifiable reason would greatly affect the objectives and goals of petitioner as an electric cooperative; 3. The Secretary of Labor, as well as the Med-Arbiter, has no jurisdiction over the issue of the withdrawal from membership which is vested in the National Electrification Administration (NEA) which has direct control and supervision over the operations of electric cooperatives; and 4. Assuming that the Secretary has jurisdiction, CURE failed to exhaust administrative remedies by not referring the matter of membership withdrawal to the NEA. The petition is destitute of merit; certiorari will not lie. We first rule on the alleged procedural infirmities affecting the instant case. CENECO avers that the med-arbiter has no jurisdiction to rule on the issue of withdrawal from membership of its employees in the cooperative which, it claims, is properly vested in the NEA which has control and supervision over all electric cooperatives. From a perusal of petitioner's motion to dismiss filed with the med-arbiter, it becomes readily apparent that the sole basis for petitioner's motion is the illegality of the employees' membership in respondent union despite the fact that they allegedly are still members of the cooperative. Petitioner itself adopted the aforesaid argument in seeking the dismissal of the petition for certification election filed with the med-arbiter, and the finding made by the latter was merely in answer to the arguments advanced by petitioner. Hence, petitioner is deemed to have submitted the issue of membership withdrawal from the cooperative to the jurisdiction of the med-arbiter and it is now estopped from questioning that same jurisdiction which it invoked in its motion to dismiss after obtaining an adverse ruling thereon.

Under Article 256 of the Labor Code, to have a valid certification election at least a majority of all eligible voters in the unit must have cast their votes. It is apparent that incidental to the power of the med-arbiter to hear and decide representation cases is the power to determine who the eligible voters are. In so doing, it is axiomatic that the med-arbiter should determine the legality of the employees' membership in the union. In the case at bar, it obviously becomes necessary to consider first the propriety of the employees' membership withdrawal from the cooperative before a certification election can be had. Lastly, it is petitioner herein who is actually questioning the propriety of the withdrawal of its members from the cooperative. Petitioner could have brought the matter before the NEA if it wanted to and. if such remedy had really been available, and there is nothing to prevent it from doing so. It would be absurd to fault the employees for the neglect or laxity of petitioner in protecting its own interests. The argument of CENECO that the withdrawal was merely to subvert the ruling of this Court in the BATANGAS case is without merit. The case referred to merely declared that employees who are at the same time members of the cooperative cannot join labor unions for purposes of collective bargaining. However, nowhere in said case is it stated that member-employees are prohibited from withdrawing their membership in the cooperative in order to join a labor union. As discussed by the Solicitor General, Article I, Section 9 of the Articles of Incorporation and By- Laws of CENECO provides that "any member may withdraw from membership upon compliance with such uniform terms and conditions as the Board may prescribe." The same section provides that upon withdrawal, the member is merely required to surrender his membership certificate and he is to be refunded his membership fee less any obligation that he has with the cooperative. There appears to be no other condition or requirement imposed upon a withdrawing member. Hence, there is no just cause for petitioner's denial of the withdrawal from membership of its employees who are also members of the union. 7 The alleged board resolutions relied upon by petitioner in denying the withdrawal of the members concerned were never presented nor their contents disclosed either before the med-arbiter or the Secretary of Labor if only to prove the ratiocination for said denial. Furthermore, CENECO never averred non-compliance with the terms and conditions for withdrawal, if any. It appears that the Articles of Incorporation of CENECO do not provide any ground for withdrawal from membership which accordingly gives rise to the presumption that the same may be done at any time and for whatever reason. In addition, membership in the cooperative is on a voluntary basis. Hence, withdrawal therefrom cannot be restricted unnecessarily. The right to join an organization necessarily includes the equivalent right not to join the same. The right of the employees to self-organization is a compelling reason why their withdrawal from the cooperative must be allowed. As pointed out by CURE, the resignation of the member- employees is an expression of their preference for union membership over that of membership in the cooperative. The avowed policy of the State to afford fall protection to labor and to promote the primacy of free collective bargaining mandates that the employees' right to form and join unions for purposes of collective bargaining be accorded the highest consideration. Membership in an electric cooperative which merely vests in the member a right to vote during the annual meeting becomes too trivial and insubstantial vis-a-vis the primordial and more important constitutional right of an employee to join a union of his choice. Besides, the 390 employees of CENECO, some of whom have never been members of the cooperative, represent a very small percentage of the cooperative's total membership of 44,000. It is inconceivable how the withdrawal of a negligible number of members could adversely affect the business concerns and operations of CENECO. We rule, however, that the direct certification ordered by respondent Secretary is not proper. By virtue of Executive Order No. 111, which became effective on March 4, 1987, the direct certification originally allowed under Article 257 of the Labor Code has apparently been discontinued as a method of selecting the exclusive bargaining agent of the workers. This amendment affirms the superiority of the certification election over the direct certification which is no longer available now under the change in said provision. 8

We have said that where a union has filed a petition for certification election, the mere fact that no opposition is made does not warrant a direct certification. 9 In said case which has similar features to that at bar, wherein the respondent Minister directly certified the union, we held that: ... As pointed out by petitioner in its petition, what the respondent Minister achieved in rendering the assailed orders was to make a mockery of the procedure provided under the law for representation cases because: ... (c) By directly certifying a Union without sufficient proof of majority representation, he has in effect arrogated unto himself the right, vested naturally in the employee's to choose their collective bargaining representative. (d) He has in effect imposed upon the petitioner the obligation to negotiate with a union whose majority representation is under serious question. This is highly irregular because while the Union enjoys the blessing of the Minister, it does not enjoy the blessing of the employees. Petitioner is therefore under threat of being held liable for refusing to negotiate with a union whose right to bargaining status has not been legally established. While there may be some factual variances, the rationale therein is applicable to the present case in the sense that it is not alone sufficient that a union has the support of the majority. What is equally important is that everyone be given a democratic space in the bargaining unit concerned. The most effective way of determining which labor organization can truly represent the working force is by certification election. 10 WHEREFORE, the questioned order for the direct certification of respondent CURE as the bargaining representative of the employees of petitioner CENECO is hereby ANNULLED and SET ASIDE. The med-arbiter is hereby ordered to conduct a certification election among the rank-and- file employees of CENECO with CURE and No Union as the choices therein. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 91902 May 20, 1991 MANILA ELECTRIC COMPANY, petitioner, vs. THE HON. SECRETARY OF LABOR AND EMPLOYMENT, STAFF AND TECHNICAL EMPLOYEES ASSOCIATION OF MERALCO, and FIRST LINE ASSOCIATION OF MERALCO SUPERVISORY EMPLOYEES,respondents. Rolando R. Arbues, Atilano S. Guevarra, Jr. and Gil S. San Diego for petitioner. The Solicitor General for public respondent. Felipe Gojar for STEAM-PCWF. Wakay & Wakay Legal Services for First Line Association of Meralco Supervisory Employees.

MEDIALDEA, J.:p This petition seeks to review the Resolution of respondent Secretary of Labor and Employment Franklin M. Drilon dated November 3, 1989 which affirmed an Order of Med-Arbiter Renato P. Parungo (Case No. NCR-O-D-M-170), directing the holding of a certification election among certain employees of petitioner Manila Electric Company (hereafter "MERALCO") as well as the Order dated January 16, 1990 which denied the Motion for Reconsideration of MERALCO. The facts are as follows: On November 22, 1988, the Staff and Technical Employees Association of MERALCO (hereafter "STEAMPCWF") a labor organization of staff and technical employees of MERALCO, filed a petition for certification election, seeking to represent regular employees of MERALCO who are: (a) non-managerial employees with Pay Grades VII and above; (b) non-managerial employees in the Patrol Division, Treasury Security Services Section, Secretaries who are automatically removed from the bargaining unit; and (c) employees within the rank and file unit who are automatically disqualified from becoming union members of any organization within the same bargaining unit. Among others, the petition alleged that "while there exists a duly-organized union for rank and file employees in Pay Grade I-VI, which is the MERALCO Employees and Worker's Association (MEWA) which holds a valid CBA for the rank and file employees, 1 there is no other labor organization except STEAM-PCWF claiming to represent the MERALCO employees. The petition was premised on the exclusion/disqualification of certain MERALCO employees pursuant to Art. I, Secs. 2 and 3 of the existing MEWA CBA as follows: ARTICLE I SCOPE

xxx xxx xxx Sec. 2. Excluded from the appropriate bargaining unit and therefore outside the scope of this Agreement are: (a) Employees in Patrol Division; (b) Employees in Treasury Security Services Section; (c) Managerial Employees; and (d) Secretaries. Any member of the Union who may now or hereafter be assigned or transferred to Patrol Division or Treasury Security Services Section, or becomes Managerial Employee or a Secretary, shall be considered automatically removed from the bargaining unit and excluded from the coverage of this agreement. He shall thereby likewise be deemed automatically to have ceased to be member of the union, and shall desist from further engaging in union activity of any kind. Sec. 3. Regular rank-and-file employees in the organization elements herein below listed shall be covered within the bargaining unit, but shall be automatically disqualified from becoming union members: 1. Office of the Corporate Secretary 2. Corporate Staff Services Department 3. Managerial Payroll Office 4. Legal Service Department 5. Labor Relations Division 6. Personnel Administration Division 7. Manpower Planning & Research Division 8. Computer Services Department 9. Financial Planning & Control Department 10. Treasury Department, except Cash Section 11. General Accounting Section xxx xxx xxx (p. 19, Rollo) MERALCO moved for the dismissal of the petition on the following grounds: I The employees sought to be represented by petitioner are either 1) managerial who are prohibited by law from forming or joining supervisory union; 2) security services personnel who are prohibited

from joining or assisting the rank-and-file union; 3) secretaries who do not consent to the petitioner's representation and whom petitioner can not represent; and 4) rank-and-file employees represented by the certified or duly recognized bargaining representative of the only rank-and-file bargaining unit in the company, the Meralco Employees Workers Association (MEWA), in accordance with the existing Collective Bargaining Agreement with the latter. II The petition for certification election will disturb the administration of the existing Collective Bargaining Agreement in violation of Art. 232 of the Labor Code. III The petition itself shows that it is not supported by the written consent of at least twenty percent (20%) of the alleged 2,500 employees sought to be represented. (Resolution, Sec. of Labor, pp. 223-224, Rollo) Before Med-Arbiter R. Parungo, MERALCO contended that employees from Pay Grades VII and above are classified as managerial employees who, under the law, are prohibited from forming, joining or assisting a labor organization of the rank and file. As regards those in the Patrol Division and Treasury Security Service Section, MERALCO maintains that since these employees are tasked with providing security to the company, they are not eligible to join the rank and file bargaining unit, pursuant to Sec. 2(c), Rule V, Book V of the then Implementing Rules and Regulations of the Labor Code (1988) which reads as follows: Sec. 2. Who may file petition. The employer or any legitimate labor organization may file the petition. The petition, when filed by a legitimate labor organization, shall contain, among others: xxx xxx xxx (c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise require, and provided, further: that the appropriate bargaining unit of the rank and file employees shall not include security guards (As amended by Sec. 6, Implementing Rules of EO 111) xxx xxx xxx (p. 111, Labor Code, 1988 Ed.) As regards those rank and file employees enumerated in Sec. 3, Art. I, MERALCO contends that since they are already beneficiaries of the MEWA-CBA, they may not be treated as a separate and distinct appropriate bargaining unit. MERALCO raised the same argument with respect to employees sought to be represented by STEAM-PCWF, claiming that these were already covered by the MEWA-CBA. On March 15, 1989, the Med-Arbiter ruled that having been excluded from the existing Collective Bargaining Agreement for rank and file employees, these employees have the right to form a union of their own, except those employees performing managerial functions. With respect to those employees who had resented their alleged involuntary membership in the existing CBA, the Med-Arbiter stated that the holding of a certification election would allow them to fully translate their sentiment on the matter, and thus directed the holding of a certification election. The dispositive portion of the Resolution provides as follows: WHEREFORE, premises considered, a certification election is hereby ordered conducted among the regular rank-and-file employees of MERALCO to wit:

1. Non-managerial employees with Pay Grades VII and above; 2. Non-managerial employees of Patrol Division, Treasury Security Services Section and Secretaries; and 3. Employees prohibited from actively participating as members of the union. within 20 days from receipt hereof, subject to the usual pre-election conference with the following choices: 1. Staff and Technical, Employees Association of MERALCO (STEAM-PCWF); 2. No Union. SO ORDERED. (p. 222, Rollo) On April 4, 1989, MERALCO appealed, contending that "until such time that a judicial finding is made to the effect that they are not managerial employee, STEAM-PCWF cannot represent employees from Pay Grades VII and above, additionally reiterating the same reasons they had advanced for disqualifying respondent STEAM-PCWF. On April 7, 1989, MEWA filed an appeal-in-intervention, submitting as follows: A. The Order of the Med-Arbiter is null and void for being in violation of Article 245 of the Labor Code; B. The Order of the Med-Arbiter violates Article 232 of the Labor Code; and C. The Order is invalid because the bargaining unit it delineated is not an appropriated (sic) bargaining unit. On May 4, 1989, STEAM-PCWF opposed the appeal-in-intervention. With the enactment of RA 6715 and the rules and regulations implementing the same, STEAM-PCWF renounced its representation of the employees in Patrol Division, Treasury Security Services Section and rank-and-file employees in Pay Grades I-VI. On September 13, 1989, the First Line Association of Meralco Supervisory Employees. (hereafter FLAMES) filed a similar petition (NCR-OD-M-9-731-89) seeking to represent those employees with Pay Grades VII to XIV, since "there is no other supervisory union at MERALCO." (p. 266,Rollo). The petition was consolidated with that of STEAM-PCWF. On November 3, 1989, the Secretary of Labor affirmed with modification, the assailed order of the Med-Arbiter, disposing as follows: WHEREFORE, premises considered, the Order appealed from is hereby affirmed but modified as far as the employees covered by Section 3, Article I of the exist CBA in the Company are concerned. Said employees shall remain in the unit of the rank-and-file already existing and may exercise their right to self organization as above enunciated. Further, the First Line Association of Meralco Supervisory Employees (FLAMES) is included as among the choices in the certification election. Let, therefore, the pertinent records of the case be immediately forwarded to the Office of origin for the conduct of the certification election.

SO ORDERED. (p. 7, Rollo) MERALCO's motion for reconsideration was denied on January 16, 1990. On February 9, 1990, MERALCO filed this petition, premised on the following ground: RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF DISCRETION AND/OR IN EXCESS OF JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN RULING THAT: I. ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE ESTABLISHED INDEPENDENT, DISTINCT AND SEPARATE FROM THE EXISTING RANK-AND-FILE BARGAINING UNIT. II. THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE RANK-AND-FILE EMPLOYEES. III. THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED TOGETHER WITH THE RANK-AND-FILE UNION AND/OR THE SUPERVISORY UNION. (p. 8, Rollo) On February 26, 1990, We issued a temporary restraining order (TRO) against the implementation of the disputed resolution. In its petition, MERALCO has relented and recognized respondents STEAM-PCWF and FLAMES' desired representation of supervisory employees from Grades VII up. However, it believes that all that the Secretary of Labor has to do is to establish a demarcation line between supervisory and managerial rank, and not to classify outright the group of employees represented by STEAM-PCWF and FLAMES as rank and file employees. In questioning the Secretary of Labor's directive allowing security guards (Treasury/Patrol Services Section) to be represented by respondents, MERALCO contends that this contravenes the provisions of the recently passed RA 6715 and its implementing rules (specifically par. 2, Sec. 1, Rule II, Book V) which disqualifies supervisory employees and security guards from membership in a labor organization of the rank and file (p. 11, Rollo). The Secretary of Labor's Resolution was obviously premised on the provisions of Art. 212, then par. (k), of the 1988 Labor Code defining "managerial" and "rank and file" employees, the law then in force when the complaint was filed. At the time, only two groups of employees were recognized, the managerial and rank and file. This explains the absence of evidence on job descriptions on who would be classified managerial employees. It is perhaps also for this reason why the Secretary of Labor limited his classification of the Meralco employees belonging to Pay Grades VII and up, to only two groups, the managerial and rank and file. However, pursuant to the Department of Labor's goal of strenghthening the constitutional right of workers to selforganization, RA 6715 was subsequently passed which reorganized the employee-ranks by including a third group, or the supervisory employees, and laying down the distinction between supervisory employees and those of managerial ranks in Art. 212, renumbered par. [m], depending on whether the employee concerned has the power to lay down and execute management policies, in the case of managerial employees, or merely to recommend them, in case of supervisory employees. In this petition, MERALCO has admitted that the employees belonging to Pay Grades VII and up are supervisory (p. 10, Rollo). The records also show that STEAM-PCWF had "renounced its representation of the employees in Patrol Division, Treasury Security Service Section and rank and file employees in Pay Grades I-VI" (p. 6, Rollo); while FLAMES, on the other hand, had limited its representation to employees belonging to Pay Grades VIIXIV,generally accepted as supervisory employees, as follows: It must be emphasized that private respondent First Line Association of Meralco Supervisory Employees seeks to represent only the Supervisory Employees with Pay Grades VII to XIV.

Supervisory Employees with Pay Grades VII to XIV are not managerial employees. In fact the petition itself of petitioner Manila Electric Company on page 9, paragraph 3 of the petition stated as follows, to wit: There was no need for petitioner to prove that these employees are not rank-andfile. As adverted to above, the private respondents admit that these are not the rankand-file but the supervisory employees, whom they seek to represent. What needs to be established is the rank where supervisory ends and managerial begins. and First Line Association of Meralco Supervisory Employees herein states that Pay Grades VII to XIV are not managerial employees. In fact, although employees with Pay Grade XV carry the Rank of Department Managers, these employees only enjoys (sic) the Rank Manager but their recommendatory powers are subject to evaluation, review and final action by the department heads and other higher executives of the company. (FLAMES' Memorandum, p. 305, Rollo) Based on the foregoing, it is clear that the employees from Pay Grades VII and up have been recognized and accepted as supervisory. On the other hand, those employees who have been automatically disqualified have been directed by the Secretary of Labor to remain in the existing labor organization for the rank and file, (the condition in the CBA deemed as not having been written into the contract, as unduly restrictive of an employee's exercise of the right to self-organization). We shall discuss the rights of the excluded employees (or those covered by Sec. 2, Art. I, MEWA-CBA later. Anent the instant petition therefore, STEAM-PCWF, and FLAMES would therefore represent supervisory employees only. In this regard, the authority given by the Secretary of Labor for the establishment of two labor organizations for the rank and file will have to be disregarded since We hereby uphold certification elections only for supervisory employees from Pay Grade VII and up, with STEAM-PCWF and FLAMES as choices. As to the alleged failure of the Secretary of Labor to establish a demarcation line for purposes of segregating the supervisory from the managerial employees, the required parameter is really not necessary since the law itself, Art. 212-m, (as amended by Sec. 4 of RA 6715) has already laid down the corresponding guidelines: Art. 212. Definitions. . . . (m) "Managerial employee" is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of to Book. In his resolution, the Secretary of Labor further elaborated: . . . Thus, the determinative factor in classifying an employee as managerial, supervisory or rankand-file is the nature of the work of the employee concerned. In National Waterworks and Sewerage Authority vs. National Waterworks and Sewerage Authority Consolidated Unions (11 SCRA 766) the Supreme Court had the occasion to come out with an enlightening dissertation of the nature of the work of a managerial employees as follows: . . . that the employee's primary duty consists of the management of the establishment or of a customarily recognized department or subdivision thereof, that he customarily and regularly directs the work of other employees therein, that he has the authority to hire or discharge other employees or that his suggestions and recommendations as to the hiring and discharging and or to the advancement and promotion or any other change of status of other employees are given particular

weight, that he customarily and regularly exercises discretionary powers . . . (56 CJS, pp. 666-668. (p. 226, Rollo) We shall now discuss the rights of the security guards to self-organize. MERALCO has questioned the legality of allowing them to join either the rank and file or the supervisory union, claiming that this is a violation of par. 2, Sec. 1, Rule II, Book V of the Implementing Rules of RA 6715, which states as follows: Sec 1. Who may join unions. . . . xxx xxx xxx Supervisory employees and security guards shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own; . . . xxx xxx xxx (emphasis ours) Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c), Rule V, also of Book V of the implementing rules of RA 6715: Rule V. REPRESENTATION CASES AND INTERNAL-UNION CONFLICTS Sec. 1. . . . Sec. 2. Who may file.Any legitimate labor organization or the employer, when requested to bargain collectively, may file the petition. The petition, when filed by a legitimate labor-organization shall contain, among others: (a) . . . (b) . . . (c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise require; and provided further, that the appropriate bargaining unit of the rank-and-file employees shall not include supervisory employees and/or security guards; xxx xxx xxx (emphasis ours) Both rules, barring security guards from joining a rank and file organization, appear to have been carried over from the old rules which implemented then Art. 245 of the Labor Code, and which provided thus: Art. 245. Ineligibility of security personnel to join any labor organization.Security guards and other personnel employed for the protection and security of the person, properties and premises of the employer shall not be eligible for membership in any labor organization. On December 24, 1986, Pres. Corazon C. Aquino issued E.O. No. 111 which eliminated the above-cited provision on the disqualification of security guards. What was retained was the disqualification of managerial employees, renumbered as Art. 245 (previously Art. 246), as follows:

Art. 245. Ineligibility of managerial employees to joint any labor organization.Managerial employees are not eligible to join, assist or form any labor organization. With the elimination, security guards were thus free to join a rank and file organization. On March 2, 1989, the present Congress passed RA 6715. 2 Section 18 thereof amended Art. 245, to read as follows: Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees.Managerial employees are not eligible to join, assist or form any labor organization.Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist, or form separate labor organizations of their own. (emphasis ours) As will be noted, the second sentence of Art. 245 embodies an amendment disqualifying supervisory employeesfrom membership in a labor organization of the rank-and-file employees. It does not include security guards in the disqualification. The implementing rules of RA 6715, therefore, insofar as they disqualify security guards from joining a rank and file organization are null and void, for being not germane to the object and purposes of EO 111 and RA 6715 upon which such rules purportedly derive statutory moorings. In Shell Philippines, Inc. vs. Central Bank, G.R. No. 51353, June 27, 1988, 162 SCRA 628, We stated: The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. (citing University of Sto. Tomas vs. Board of Tax Appeals, 93 Phil. 376). While therefore under the old rules, security guards were barred from joining a labor organization of the rank and file, under RA 6715, they may now freely join a labor organization of the rank and file or that of the supervisory union, depending on their rank. By accommodating supervisory employees, the Secretary of Labor must likewise apply the provisions of RA 6715 to security guards by favorably allowing them free access to a labor organization, whether rank and file or supervisory, in recognition of their constitutional right to self-organization. We are aware however of possible consequences in the implementation of the law in allowing security personnel to join labor unions within the company they serve. The law is apt to produce divided loyalties in the faithful performance of their duties. Economic reasons would present the employees concerned with the temptation to subordinate their duties to the allegiance they owe the union of which they are members, aware as they are that it is usually union action that obtains for them increased pecuniary benefits. Thus, in the event of a strike declared by their union, security personnel may neglect or outrightly abandon their duties, such as protection of property of their employer and the persons of its officials and employees, the control of access to the employer's premises, and the maintenance of order in the event of emergencies and untoward incidents. It is hoped that the corresponding amendatory and/or suppletory laws be passed by Congress to avoid possible conflict of interest in security personnel. ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM with modification the Resolution of the Secretary of Labor dated November 3, 1989 upholding an employee's right to self-organization. A certification election is hereby ordered conducted among supervisory employees of MERALCO, belonging to Pay Grades VII and above, using as guideliness an employee's power to either recommend or execute management policies, pursuant to Art. 212 (m), of the Labor Code, as amended by Sec. 4 of RA 6715, with respondents STEAM-PCWF and FLAMES as choices.

Employees of the Patrol Division, Treasury Security Services Section and Secretaries may freely join either the labor organization of the rank and file or that of the supervisory union depending on their employee rank. Disqualified employees covered by Sec. 3, Art. I of the MEWA-CBA, shall remain with the existing labor organization of the rank and file, pursuant to the Secretary of Labor's directive: By the parties' own agreement, they find the bargaining unit, which includes the positions enumerated in Section 3, Article I of their CBA, appropriate for purposes of collective bargaining. The composition of the bargaining unit should be left to the agreement of the parties, and unless there are legal infirmities in such agreement, this Office will not substitute its judgment for that of the parties. Consistent with the story of collective bargaining in the company, the membership of said group of employees in the existing rank-and-file unit should continue, for it will enhance stability in that unit already well establish. However, we cannot approve of the condition set in Section 3, Article I of the CBA that the employees covered are automatically disqualified from becoming union members. The condition unduly restricts the exercise of the right to self organization by the employees in question. It is contrary to law and public policy and, therefore, should be considered to have not been written into the contract. Accordingly, the option to join or not to join the union should be left entirely to the employees themselves. (p. 229, Rollo) The Temporary Restraining Order (TRO) issued on February 26, 1990 is hereby LIFTED. Costs against petitioner. SO ORDERED.