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PART TWO1 INDUSTRIAL & TRANSPORT EQUIPMENT,INC.and/or RAYMOND JARINA, Petitioners, vs.

TOMAS TUGADE and CRESENCIO TUGADE, Respondents.2 G.R. No. 158539 January 15, 2009

DECISION AZCUNA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to annul and set aside the Decision of the Court of Appeals dated March 14, 2003 which affirmed the decision of the National Labor Relations Commission (NLRC) finding petitioners liable for illegal dismissal and ordering the payment of backwages and separation pay to respondents, and the Resolution dated May 29, 2003 denying petitioners motion for reconsideration. As found by the Court of Appeals, the facts are as follows: Petitioner is a corporation engaged in the business of motor vehicle repair. Private respondents, Tomas Tugade and his brother Cresencio Tugade, were hired on November 14, 1978 and on May 11, 1984, respectively, by petitioner corporation. Tomas was employed as a diesel mechanic, while Cresencio was the officer-in-charge at petitioners shop on Visayas Avenue. Private respondents dismissal stemmed from an incident which took place on March 22, 1998, when Mr. Faustino Cabel, one of the regular customers of petitioner, arrived at the shop to have his vehicle repaired. On March 27, 1998, respondent Cresencio Tugade, after making the necessary verifications regarding the payment of the service made by Mr. Cabel, released the latters vehicle. On March 28, 1998, Felix P. Broqueza, petitioners Personnel and Administration Manager issued a memorandum against Engr. Fernando Fabros and respondents Tomas and Cresencio Tugade, suspending them for ten (10) working days from March 30, 1998 to April 11, 1998 for disobedience, incompetence and gross negligence. The memorandum stated, among others, that the three employees released the vehicle to Mr. Cabel, despite the instructions made by the Company president not to release the same, unless and until he made full settlement of his obligation which remained unpaid since 1996. After the lapse of ten (10) days suspension or on April 12, 1998, the Tugades allegedly did not report for work and were considered absent without leave. On April 13, 1998, another memorandum was issued by Felix Broqueza directing him to make the necessary explanation why he failed to report for work.
1 2

General Provisions: 3, 4, 6 3 in relation to Art. II, Sec. 18 & Art. XIII, Sec. 3 of the Constitution

On April 16, 1996, however, the Tugades filed a complaint for illegal dismissal with prayer forpayment of separation pay in lieu of reinstatement, backwages and damages against petitioner.1 On September 28, 1998, Labor Arbiter Potenciano S. Caezares rendered his Decision, dismissing the complaint for lack of merit but awarding separation pay of P56,680, the dispositive portion of which reads: WHEREFORE, the above-captioned case is hereby DISMISSED for lack of merit. However, We find it in conformity with labor justice, considering the long services of the complainants, to award them separation pay equivalent to one-half month pay for every year of service, which as computed by Patricia B. Pangilinan of the Commissions NLRC NCR Branch are the following: Separation Pay (1/2)

11/14/78-09/30/98

P218 x 13 x 20 yrs.

P56,680.00 ============

SO ORDERED. Both parties appealed the decision of the Labor Arbiter to the NLRC which rendered a decision on July 30, 1999 that reversed the Labor Arbiter by ruling that respondents were illegally dismissed and ordering payment of backwages and separation pay. The motion for reconsideration filed by petitioners was also denied by the NLRC in a Resolution dated September 20, 1999. The Court of Appeals, as stated, affirmed the NLRC decision. On July 8, 2003, petitioners filed the present petition for review on certiorari with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction assailing the Decision and Resolution of the Court of Appeals. In a Resolution dated March 10, 2004, this Court issued a temporary restraining order enjoining respondents from enforcing the assailed Decision and Resolution of the Court of Appeals. Petitioners contend that: I THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT RESPONDENTS WERE ILLEGALLY DISMISSED FROM EMPLOYMENT. II

THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE PAYMENT OF BACKWAGES AND SEPARATION PAY TO RESPONDENTS. Dismissal connotes a permanent severance or complete separation of the worker from the service on the initiative of the employer regardless of the reasons therefor.2 Based on the foregoing, it can hardly be said that respondents were dismissed from employment rather than merely temporarily suspended. Nowhere in the proceedings or pleadings filed before the Labor Arbiter or the NLRC did respondents dispute that they were merely suspended from March 30, 1998 to April 11, 1998. As shown by the contents of the memorandum issued to respondents, they were not dismissed but merely suspended from employment: xxx However, despite our Presidents direct and clear instruction you released the vehicle to Mr. Faustino Cabel without the necessary payment. This is a clear disobedience, incompetence and gross negligence of your duty as Supervisor. In view thereof, we regret to inform you that you are being suspended for ten (10) working days without pay effective March 30 to April 11, 1998. Repetition of the same offense will be dealt with accordingly in accordance with the labor law. (Annex "2" to Annex "F" to Annex "C" hereof) This piece of evidence clearly disproves the finding of the Court of Appeals that respondents were terminated from employment supposedly based on a memorandum prohibiting their entry into the company premises. A settled exception to the rule generally sustaining the factual determination of the Court of Appeals is when it disregards a vital evidence in reaching its finding. This obtains here. There is also no dispute that petitioners instructed the respondents not to release the vehicle of Mr. Faustino Cabel unless and until the latter has completely settled his obligations with the company. However, despite the fact that Mr. Cabel failed to settle his obligations and in clear defiance of the petitioners order, respondents released the car to Mr. Cabel. Petitioners were clearly acting within their rights in suspending respondents. In numerous cases, this Court has sustained the right of employers to exercise their management prerogatives to discipline erring employees, thus: However, petitioner loses sight off the fact that the right of an employer to regulate all aspects of employment is well settled. This right, aptly called management prerogative, gives employers the freedom to regulate, according to their discretion and best judgment, all aspects of employment, including work assignment, working methods, processes to be followed, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. In general, management has the prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to company rules and regulations.3 Therefore, the complaint for illegal dismissal filed by respondents was premature, since even after the expiration of their suspension period, they refused, despite due notice, to report to work. In fact, in their

Memorandum of Appeal, respondents admitted having received petitioners return-to-work memorandum which, however, became futile because they hastily filed the complaint for illegal dismissal. Since there was no dismissal to speak of, there is no basis to award any backwages to respondents. Under Article 279 of the Labor Code, an employee is entitled to reinstatement and backwages only if he was illegally dismissed. The decision of the Labor Arbiter is, therefore, sustained, finding that respondents abandoned their positions by failing to return to work despite management directives to do so, and awarding separation pay of P56,680 each to respondents. Nevertheless, this Court agrees with the Court of Appeals that petitioners failed to follow the requirements of notices after respondents abandoned their positions. Respondents are therefore entitled to an additional award of P30,000 each in accordance with the doctrine in the Agabon 4 case. WHEREFORE, the Decision dated March 14, 2003 and the Resolution dated May 29, 2003 of the Court of Appeals are hereby MODIFIED. The decision of the National Labor Relations Commission dated July 30, 1999 isREVERSED and the Decision of the Labor Arbiter dated September 28, 1998 is REINSTATED with MODIFICATION, awarding separation pay to respondents in the amount of P56,680 each plus P30,000 each in accordance with the Agabon doctrine. No costs. SO ORDERED.

[G.R. No. 140518. December 16, 2004] MANILA DIAMOND HOTEL EMPLOYEES UNION, petitioner, vs. THE HON. COURT OF APPEALS, THE SECRETARY OF LABOR AND EMPLOYMENT, and THE MANILA DIAMOND HOTEL, respondents.3 DECISION AZCUNA, J.: This petition for review of a decision of the Court of Appeals arose out of a dispute between the Philippine Diamond Hotel and Resort, Inc. (Hotel), owner of the Manila Diamond Hotel, and the Manila Diamond Hotel Employees Union (Union). The facts are as follows: On November 11, 1996, the Union filed a petition for a certification election so that it may be declared the exclusive bargaining representative of the Hotels employees for the purpose of collective bargaining. The petition was dismissed by the Department of Labor and Employment (DOLE) on January 15, 1997. After a few months, however, on August 25, 1997, the Union sent a letter to the Hotel
3

3 in relation to Art. II, Sec. 18 & Art. XIII, Sec. 3 of the Constitution

informing it of its desire to negotiate for a collective bargaining agreement.[1] In a letter dated September 11, 1997, the Hotels Human Resources Department Manager, Mary Anne Mangalindan, wrote to the Union stating that the Hotel cannot recognize it as the employees bargaining agent since its petition for certification election had been earlier dismissed by the DOLE.[2] On that same day, the Hotel received a letter from the Union stating that they were not giving the Hotel a notice to bargain, but that they were merely asking for the Hotel to engage in collective bargaining negotiations with the Union for its members only and not for all the rank and file employees of the Hotel.[3] On September 18, 1997, the Union announced that it was taking a strike vote. A Notice of Strike was thereafter filed on September 29, 1997, with the National Conciliation and Mediation Board (NCMB) for the Hotels alleged refusal x x x to bargain and for alleged acts of unfair labor practice. The NCMB summoned both parties and held a series of dialogues, the first of which was on October 6, 1997. On November 29, 1997, however, the Union staged a strike against the Hotel. Numerous confrontations between the two parties followed, creating an obvious strain between them. The Hotel claims that the strike was illegal and it had to dismiss some employees for their participation in the allegedly illegal concerted activity. The Union, on the other hand, accused the Hotel of illegally dismissing the workers. What is pertinent to this case, however, is the Order issued by the then Secretary of Labor and Employment Cresenciano B. Trajano assuming jurisdiction over the labor dispute. A Petition for Assumption of Jurisdiction was filed by the Union on April 2, 1998. Thereafter, the Secretary of Labor and Employment issued an Order dated April 15, 1998, the dispositive portion of which states: WHEREFORE, premises considered[,] this Office CERTIFIES the labor dispute at the Manila Diamond Hotel to the National Labor Relations Commission, for compulsory arbitration, pursuant to Article 263 (g) of the Labor Code, as amended. Accordingly, the striking officers and members of the Manila Diamond Hotel Employees Union --NUWHRAIN are hereby directed to return to work within twenty-four (24) hours upon receipt of this Order and the Hotel to accept them back under the same terms and conditions prevailing prior to the strike. The parties are enjoined from committing any act that may exacerbate the situation. The Union received the aforesaid Order on April 16, 1998 and its members reported for work the next day, April 17, 1998. The Hotel, however, refused to accept the returning workers and instead filed a Motion for Reconsideration of the Secretarys Order. On April 30, 1998, then Acting Secretary of Labor Jose M. Espaol, issued the disputed Order, which modified the earlier one issued by Secretary Trajano. Instead of an actual return to work, Acting Secretary Espaol directed that the strikers be reinstated only in the payroll.[4] The Union moved for the reconsideration of this Order, but its motion was denied on June 25, 1998. Hence, it filed before this Court on August 26, 1998, a petition for certiorari under Rule 65 of the Rules of Court alleging grave abuse of discretion on the part of the Secretary of Labor for modifying its earlier order and requiring instead the reinstatement of the employees in the payroll. However, in a resolution dated July 12, 1999, this Court referred the case to the Court of Appeals, pursuant to the principle embodied in National Federation of Labor v. Laguesma.[5]

On October 19, 1999, the Court of Appeals rendered a Decision dismissing the Unions petition and affirming the Secretary of Labors Order for payroll reinstatement. The Court of Appeals held that the challenged order is merely an error of judgment and not a grave abuse of discretion and that payroll reinstatement is not prohibited by law, but may be called for under certain circumstances.[6] Hence, the Union now stands before this Court maintaining that: THE HONORABLE COURT OF APPEALS GRIEVIOUSLY ERRED IN RULING THAT THE SECRETARY OF LABORS UNAUTHORIZED ORDER OF MERE PAYROLL REINSTATEMENT IS NOT GRAVE ABUSE OF DISCRETION[7] The petition has merit. The Court of Appeals based its decision on this Courts ruling in University of Santo Tomas (UST) v. NLRC.[8] There, the Secretary assumed jurisdiction over the labor dispute between striking teachers and the university. He ordered the striking teachers to return to work and the university to accept them under the same terms and conditions. However, in a subsequent order, the NLRC provided payroll reinstatement for the striking teachers as an alternative remedy to actual reinstatement. True, this Court held therein that the NLRC did not commit grave abuse of discretion in providing for the alternative remedy of payroll reinstatement. This Court found that it was merely an error of judgment, which is not correctible by a special civil action for certiorari. The NLRC was only trying its best to work out a satisfactory ad hoc solution to a festering and serious problem. However, this Court notes that the UST ruling was made in the light of one very important fact: the teachers could not be given back their academic assignments since the order of the Secretary for them to return to work was given in the middle of the first semester of the academic year. The NLRC was, therefore, faced with a situation where the striking teachers were entitled to a return to work order, but the university could not immediately reinstate them since it would be impracticable and detrimental to the students to change teachers at that point in time. In the present case, there is no showing that the facts called for payroll reinstatement as an alternative remedy. A strained relationship between the striking employees and management is no reason for payroll reinstatement in lieu of actual reinstatement. Petitioner correctly points out that labor disputes naturally involve strained relations between labor and management, and that in most strikes, the relations between the strikers and the non-strikers will similarly be tense.[9] Bitter labor disputes always leave an aftermath of strong emotions and unpleasant situations. Nevertheless, the government must still perform its function and apply the law, especially if, as in this case, national interest is involved. After making the distinction between UST and the present case, this Court now addresses the issue of whether the Court of Appeals erred in ruling that the Secretary did not commit any grave abuse of discretion in ordering payroll reinstatement in lieu of actual reinstatement. This question is answered by the nature of Article 263(g). As a general rule, the State encourages an environment wherein employers and employees themselves must deal with their problems in a manner that mutually suits them best. This is the basic policy embodied in Article XIII, Section 3 of the Constitution,[10] which was

further echoed in Article 211 of the Labor Code.[11] Hence, a voluntary, instead of compulsory, mode of dispute settlement is the general rule. However, Article 263, paragraph (g) of the Labor Code, which allows the Secretary of Labor to assume jurisdiction over a labor dispute involving an industry indispensable to the national interest, provides an exception: (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 return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. x x x This provision is viewed as an exercise of the police power of the State. A prolonged strike or lockout can be inimical to the national economy and, therefore, the situation is imbued with public necessity and involves the right of the State and the public to self-protection.[12] Under Article 263(g), all workers must immediately return to work and all employers must readmit all of them under the same terms and conditions prevailing before the strike or lockout. This Court must point out that the law uses the precise phrase of under the same terms and conditions, revealing that it contemplates only actual reinstatement. This is in keeping with the rationale that any work stoppage or slowdown in that particular industry can be inimical to the national economy. It is clear that Article 263(g) was not written to protect labor from the excesses of management, nor was it written to ease management from expenses, which it normally incurs during a work stoppage or slowdown. It was an error on the part of the Court of Appeals to view the assumption order of the Secretary as a measure to protect the striking workers from any retaliatory action from the Hotel. This Court reiterates that this law was written as a means to be used by the State to protect itself from an emergency or crisis. It is not for labor, nor is it for management. It is, therefore, evident from the foregoing that the Secretarys subsequent order for mere payroll reinstatement constitutes grave abuse of discretion amounting to lack or excess of jurisdiction. Indeed, this Court has always recognized the great breadth of discretion by the Secretary once he assumes jurisdiction over a labor dispute. However, payroll reinstatement in lieu of actual reinstatement is a departure from the rule in these cases and there must be showing of special circumstances rendering actual reinstatement impracticable, as in the UST case aforementioned, or otherwise not conducive to attaining the purpose of the law in providing for assumption of jurisdiction by the Secretary of Labor and Employment in a labor dispute that affects the national interest. None appears to have been established in this case. Even in the exercise of his discretion under Article 236(g), the Secretary must always keep in mind the purpose of the law. Time and again, this Court has held that when an official

by-passes the law on the asserted ground of attaining a laudable objective, the same will not be maintained if the intendment or purpose of the law would be defeated.[13] WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals dated October 19, 1999 is REVERSED and SET ASIDE. The Order dated April 30, 1998 issued by the Secretary of Labor and Employment modifying the earlier Order dated April 15, 1998, is likewise SET ASIDE. No pronouncement as to costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, and Carpio, JJ., concur. Quisumbing, J., no part.

[G.R. No. 151379. January 14, 2005] UNIVERSITY OF IMMACULATE, CONCEPCION, INC., petitioner, vs. THE HONORABLE SECRETARY OF LABOR, THE UIC TEACHING ANDNON-TEACHING PERSONNEL AND EMPLOYEES UNION, LELIAN CONCON, MARY ANN DE RAMOS, JOVITA MAMBURAM, ANGELINA ABADILLA, MELANIE DE LA ROSA, ZENAIDA CANOY, ALMA VILLACARLOS, JOSIE BOSTON, PAULINA PALMA GIL, GEMMA GALOPE, LEAH CRUZA, DELFA DIAPUEZ, respondent.4 DECISION AZCUNA, J.: This is a petition for review of a decision of the Court of Appeals and the resolution denying reconsideration thereof. The principal issue to be resolved in this recourse is whether or not the Secretary of Labor, after assuming jurisdiction over a labor dispute involving an employer and the certified bargaining agent of a group of employees in the workplace, may legally order said employer to reinstate employees terminated by the employer even if those terminated employees are not part of the bargaining unit. This case stemmed from the collective bargaining negotiations between petitioner University of Immaculate Concepcion, Inc. (UNIVERSITY) and respondent The UIC Teaching and Non-Teaching Personnel and Employees Union (UNION). The UNION, as the certified bargaining agent of all rank and file employees of the UNIVERSITY, submitted its collective bargaining proposals to the latter on February 16, 1994. However, one item was left unresolved and this was the inclusion or exclusion of the following positions in the scope of the bargaining unit: a.
4

Secretaries

3 in relation to Art. II, Sec. 18 & Art. XIII, Sec. 3 of the Constitution

b. c. d.

Registrars Accounting Personnel Guidance Counselors [1]

This matter was submitted for voluntary arbitration. On November 8, 1994, the panel of voluntary arbitrators rendered a decision, the dispositive portion of which states: WHEREFORE, premises considered, the Panel hereby resolves to exclude the above-mentioned secretaries, registrars, chief of the accounting department, cashiers and guidance counselors from the coverage of the bargaining unit. The accounting clerks and the accounting staff member are hereby ordered included in the bargaining unit.[2] The UNION moved for the reconsideration of the above decision. Pending, however, the resolution of its motion, on December 9, 1994, it filed a notice of strike with the National Conciliation and Mediation Board (NCMB) of Davao City, on the grounds of bargaining deadlock and unfair labor practice. During the thirty (30) day cooling-off period, two union members were dismissed by petitioner. Consequently, the UNION went on strike on January 20, 1995. On January 23, 1995, the then Secretary of Labor, Ma. Nieves R. Confessor, issued an Order assuming jurisdiction over the labor dispute. The dispositive portion of the said Order states: WHEREFORE, ABOVE PREMISES CONSIDERED, and pursuant to Article 263 (g) of the Labor Code, as amended, this Office hereby assumes jurisdiction over the entire labor dispute at the University of the Immaculate Concepcion College. Accordingly, all workers are directed to return to work within twenty-four (24) hours upon receipt of this Order and for Management to accept them back under the same terms and conditions prevailing prior to the strike. Parties are further directed to cease and desist from committing any or all acts that might exacerbate the situation. Finally, the parties are hereby directed to submit their respective position papers within ten (10) days from receipt hereof. SO ORDERED.[3] On February 8, 1995, the panel of voluntary arbitrators denied the motion for reconsideration filed by the UNION. The UNIVERSITY then furnished copies of the panels denial of the motion for reconsideration and the Decision dated November 8, 1995 to the individual respondents herein: 1. 2. Lelian Concon Grade School Guidance Counselor Mary Ann de Ramos High School Guidance Counselor

3. 4.

Jovita Mamburam Secretary to [the] Vice President for Academic Affairs/ Dean of College Angelina Abadilla Secretary to [the] Vice President for Academic Affairs/ Dean of College

5. Melanie de la Rosa Secretary to [the] Dean of [the] College of Pharmacy/ Academic Affairs/ Dean of College 6. 7. 8. 9. 10. 11. 12. Zenaida Canoy Secretary to [the] Vice President for Academic Affairs/ Dean of College Alma Villacarlos Guidance Counselor (College) Josie Boston Grade School Psychometrician Paulina Palma Gil Cashier Gemma Galope High School Registrar Leah Cruza Guidance Counselor (College) Delfa Diapuez High School Psychometrician [4]

Thereafter, the UNIVERSITY gave the abovementioned individual respondents two choices: to resign from the UNION and remain employed as confidential employees or resign from their confidential positions and remain members of the UNION. The UNIVERSITY relayed to these employees that they could not remain as confidential employees and at the same time as members or officers of the Union. However, the individual respondents remained steadfast in their claim that they could still retain their confidential positions while being members or officers of the Union. Hence, on February 21, 1995, the UNIVERSITY sent notices of termination to the individual respondents. On March 10, 1995, the UNION filed another notice of strike, this time citing as a reason the UNIVERSITYs termination of the individual respondents. The UNION alleged that the UNIVERSITYs act of terminating the individual respondents is in violation of the Order of the Secretary of Labor dated January 23, 1995. On March 28, 1995, the Secretary of Labor issued another Order reiterating the directives contained in the January 23, 1995 Order. The Secretary also stated therein that the effects of the termination from employment of these individual respondents be suspended pending the determination of the legality thereof. Hence, the UNIVERSITY was directed to reinstate the individual respondents under the same terms and conditions prevailing prior to the labor dispute. The UNIVERSITY, thereafter, moved to reconsider the aforesaid Order on March 28, 1995. It argued that the Secretarys Order directing the reinstatement of the individual respondents would render nugatory the decision of the panel of voluntary arbitrators to exclude them from the collective bargaining unit. The UNIVERSITYs motion was denied by the Secretary in an Order dated June 16, 1995, wherein the Secretary declared that the decision of the panel of voluntary arbitrators to exclude the individual respondents from the collective bargaining unit did not authorize the UNIVERSITY to terminate their

employment. The UNIVERSITY filed a second motion for reconsideration, which was again denied in an Order dated July 19, 1995. Undeterred, the UNIVERSITY filed a third motion for reconsideration. In the Order dated August 18, 1995, then Acting Secretary Jose S. Brilliantes denied the third motion for reconsideration, but modified the two previous Orders by adding: xxx Anent the Unions Motion, we find that superseding circumstances would not warrant the physical reinstatement of the twelve (12) terminated employees. Hence, they are hereby ordered placed under payroll reinstatement until the validity of their termination is finally resolved.[5] x x x Still unsatisfied with the Order of the Secretary of Labor, the UNIVERSITY filed a petition for certiorari with this Court on September 15, 1995. However, its petition was referred to the Court of Appeals, following the ruling in St. Martin Funeral Homes v. Court of Appeals. [6] On October 8, 2001, the Court of Appeals promulgated its Decision, affirming the questioned Orders of the Secretary of Labor. The dispositive portion of the Decision states: WHEREFORE, the instant petition is DISMISSED for lack of merit.[7] The UNIVERSITY then moved for the reconsideration of the abovementioned Decision,[8] but on January 10, 2002, the Court of Appeals denied the motion on the ground that no new matters were raised therein that would warrant a reconsideration.[9] Hence, this petition. The UNIVERSITY assigns the following error: THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AFFIRMING THE ORDERS OF THE SECRETARY OF LABOR THAT SUSPENDED THE EFFECTS OF THE TERMINATION OF TWELVE EMPLOYEES WHO WERE NOT PART OF THE BARGAINING UNIT INVOLVED IN A LABOR DISPUTE OVER WHICH THE SECRETARY OF LABOR ASSUMED JURISDICTION.[10] The Court of Appeals relied upon the doctrine in St. Scholasticas College v. Torres.[11] In the case therein, this Court, citing International Pharmaceuticals Incorporated v. the Secretary of Labor,[12] declared that: x x x [T]he Secretary was explicitly granted by Article 263(g) of the Labor Code the authority to assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, and decide the same accordingly. Necessarily, the authority to assume jurisdiction over the said labor dispute must include and extend to all questions and controversies arising therefrom, including cases over which the Labor Arbiter has exclusive jurisdiction. The UNIVERSITY contends that the Secretary cannot take cognizance of an issue involving employees who are not part of the bargaining unit. It insists that since the individual respondents had already been

excluded from the bargaining unit by a final and executory order by the panel of voluntary arbitrators, then they cannot be covered by the Secretarys assumption order. This Court finds no merit in the UNIVERSITYs contention. In Metrolab Industries, Inc. v. RoldanConfessor,[13] this Court declared that it recognizes the exercise of management prerogatives and it often declines to interfere with the legitimate business decisions of the employer. This is in keeping with the general principle embodied in Article XIII, Section 3 of the Constitution,[14] which is further echoed in Article 211 of the Labor Code.[15] However, as expressed in PAL v. National Labor Relations Commission,[16] this privilege is not absolute, but subject to exceptions. One of these exceptions is when the Secretary of Labor assumes jurisdiction over labor disputes involving industries indispensable to the national interest under Article 263(g) of the Labor Code. This provision states: (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 return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. x x x When the Secretary of Labor ordered the UNIVERSITY to suspend the effect of the termination of the individual respondents, the Secretary did not exceed her jurisdiction, nor did the Secretary gravely abuse the same. It must be pointed out that one of the substantive evils which Article 263(g) of the Labor Code seeks to curb is the exacerbation of a labor dispute to the further detriment of the national interest. In her Order dated March 28, 1995, the Secretary of Labor rightly held: It is well to remind both parties herein that the main reason or rationale for the exercise of the Secretary of Labor and Employments power under Article 263(g) of the Labor Code, as amended, is the maintenance and upholding of the status quo while the dispute is being adjudicated. Hence, the directive to the parties to refrain from performing acts that will exacerbate the situation is intended to ensure that the dispute does not get out of hand, thereby negating the direct intervention of this office. The Universitys act of suspending and terminating union members and the Unions act of filing another Notice of Strike after this Office has assumed jurisdiction are certainly in conflict with the status quo ante. By any standards[,] these acts will not in any way help in the early resolution of the labor dispute. It is clear that the actions of both parties merely served to complicate and aggravate the already strained labor-management relations.[17] Indeed, it is clear that the act of the UNIVERSITY of dismissing the individual respondents from their employment became the impetus for the UNION to declare a second notice of strike. It is not a question anymore of whether or not the terminated employees, the individual respondents herein, are part of the bargaining unit. Any act committed during the pendency of the dispute that tends to give rise to

further contentious issues or increase the tensions between the parties should be considered an act of exacerbation and should not be allowed. With respect to the Secretarys Order allowing payroll reinstatement instead of actual reinstatement for the individual respondents herein, an amendment to the previous Orders issued by her office, the same is usually not allowed. Article 263(g) of the Labor Code aforementioned states that all workers must immediately return to work and all employers must readmit all of them under the same terms and conditions prevailing before the strike or lockout. The phrase under the same terms and conditions makes it clear that the norm is actual reinstatement. This is consistent with the idea that any work stoppage or slowdown in that particular industry can be detrimental to the national interest. In ordering payroll reinstatement in lieu of actual reinstatement, then Acting Secretary of Labor Jose S. Brillantes said: Anent the Unions Motion, we find that superseding circumstances would not warrant the physical reinstatement of the twelve (12) terminated employees. Hence, they are hereby ordered placed under payroll reinstatement until the validity of their termination is finally resolved.[18] As an exception to the rule, payroll reinstatement must rest on special circumstances that render actual reinstatement impracticable or otherwise not conducive to attaining the purposes of the law.[19] The superseding circumstances mentioned by the Acting Secretary of Labor no doubt refer to the final decision of the panel of arbitrators as to the confidential nature of the positions of the twelve private respondents, thereby rendering their actual and physical reinstatement impracticable and more likely to exacerbate the situation. The payroll reinstatement in lieu of actual reinstatement ordered in these cases, therefore, appears justified as an exception to the rule until the validity of their termination is finally resolved. This Court sees no grave abuse of discretion on the part of the Acting Secretary of Labor in ordering the same. Furthermore, the issue has not been raised by any party in this case. WHEREFORE, the Decision of the Court of Appeals dated October 8, 2001 and its Resolution dated January 10, 2002 in CA-G.R. SP No. 61693 are AFFIRMED. No costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Carpio, JJ., concur.

G.R. No. 170734

May 14, 2008

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners, vs. SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent.5 DECISION TINGA, J.: This treats of the Petition for Review1 of the Resolution2 and Decision3 of the Court of Appeals dated 9 December 2005 and 29 September 2005, respectively in CA-G.R. SP No. 85089 entitled Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,4 which ruled that the 13th month pay, vacation leave and sick leave conversion to cash shall be paid in full to the employees of petitioner regardless of the actual service they rendered within a year. Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of petitioners rank and file employees. Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave encashment of three union members in amounts proportional to the service they actually rendered in a year, which is less than a full twelve (12) months. The employees were: 1. Rante Lamadrid 2. Alberto Gamban 3. Rodelio Collantes Sickness Suspension Sickness 27 August 2003 to 27 February 2004 10 June 2003 to 1 July 2003 August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner did not prorate the payment of the same benefits to seven (7) employees who had not served for the full 12 months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the prorated payment violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the National Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary arbitration. The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of the contested benefits in full, irrespective of the actual service rendered within one year has not ripened into a practice. He noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states that the giving in full of the benefit was a mere error. He

Construction of labor 4

also interpreted the phrase "for each year of service" found in the pertinent CBA provisions to mean that an employee must have rendered one year of service in order to be entitled to the full benefits provided in the CBA.5 Unsatisfied, respondent filed a Petition for Review6 under Rule 43 before the Court of Appeals, imputing serious error to Mangabats conclusion. The Court of Appeals ruled that the CBA did not intend to foreclose the application of prorated payments of leave benefits to covered employees. The appellate court found that petitioner, however, had an existing voluntary practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim that petitioner erred in paying full benefits to its seven employees. The appellate court noted that aside from the affidavit of petitioners officer, it has not presented any evidence in support of its position that it has no voluntary practice of granting the contested benefits in full and without regard to the service actually rendered within the year. It also questioned why it took petitioner eleven (11) years before it was able to discover the alleged error. The dispositive portion of the courts decision reads: WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation leave and sick leave conversions to cash shall be paid to the employees in full, irrespective of the actual service rendered within a year.7 Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition. Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay, bonus, and leave encashment in full regardless of actual service rendered constitutes voluntary employer practice and, consequently, the prorated payment of the said benefits does not constitute diminution of benefits under Article 100 of the Labor Code.8 The petition ultimately fails. First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually rendered by an employee to the company. According to petitioner, there is a one-year cutoff in the entitlement to the benefits provided in the CBA which is evident from the wording of its pertinent provisions as well as of the existing law. We agree with petitioner on the first issue. The applicable CBA provisions read: ARTICLE XIV-VACATION LEAVE Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to sixteen (16) days vacation leave with pay for each year of service. Unused leaves shall not be cumulative but shall be converted into its cash equivalent

and shall become due and payable every 1st Saturday of December of each year. However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a holiday, the management will give the cash conversion of leaves in November 29. Section 2. In case of resignation or retirement of an employee, his vacation leave shall be paid proportionately to his days of service rendered during the year. ARTICLE XV-SICK LEAVE Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to sixteen (16) days of sick leave with pay for each year of service. Unused sick leave shall not be cumulative but shall be converted into its cash equivalent and shall become due and payable every 1st Saturday of December of each year. Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company physician or by a licensed physician. Section 3. All commutable earned leaves will be paid proportionately upon retirement or separation. ARTICLE XVI EMERGENCY LEAVE, ETC. Section 1. The Company shall grant six (6) days emergency leave to employees covered by this agreement and if unused shall be converted into cash and become due and payable on the 1st Saturday of December each year. Section 2. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to seven (7) days of Paternity Leave with pay in case the married employees legitimate spouse gave birth. Said benefit shall be non-cumulative and noncommutative and shall be deemed in compliance with the law on the same. Section 3. Maternity leaves for married female employees shall be in accordance with the SSS Law plus a cash grant of P1,500.00 per month. xxx ARTICLE XVIII- 13TH MONTH PAY & BONUS Section 1. The Company shall grant 13th Month Pay to all employees covered by this agreement. The basis of computing such pay shall be the basic salary per day of the employee multiplied by 30 and shall become due and payable every 1st Saturday of December. Section 2. The Company shall grant a bonus to all employees as practiced which shall be distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.9 (Underscoring ours) There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation and sick leave, one must have rendered at least one year of service. The clear wording of the provisions does not allow any other interpretation. Anent the 13th month pay and bonus, we agree with the findings of Mangabat that the CBA provisions did not give any meaning different from that given by the law, thus it should be computed at 1/12 of the total compensation which an employee receives for the whole calendar year. The bonus is also equivalent to the amount of the 13th month pay given, or in proportion to the actual service rendered by an employee within the year. On the second issue, however, petitioner founders. As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court.10 The rule, however, admits of several exceptions, one of which is when the findings of the Court of Appeals are contrary to that of the lower tribunals. Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the voluntary arbitrator. Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus: Name 1. Percival Bernas 2. Cezar Montero 3. Wilson Sayod 4. Nomer Becina 5. Ronnie Licuan 6. Guilbert Villaruel 7. Melandro Moque Reason Sickness Sickness Sickness Suspension Sickness Sickness Sickness Duration July 1992 to November 1992 21 Dec. 1992 to February 1993 May 1994 to July 1994 1 Sept. 1996 to 5 Oct. 1996 8 Nov. 1999 to 9 Dec. 1999 23 Aug. 2002 to 4 Feb. 2003 29 Aug. 2003 to 30 Sept. 200311

Petitioner claims that its full payment of benefits regardless of the length of service to the company does not constitute voluntary employer practice. It points out that the payments had

been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003 that the accounting department discovered the error "when there were already three (3) employees involved with prolonged absences and the error was corrected by implementing the pro-rata payment of benefits pursuant to law and their existing CBA."12 It adds that the seven earlier cases of full payment of benefits went unnoticed considering the proportion of one employee concerned (per year) vis vis the 170 employees of the company. Petitioner describes the situation as a "clear oversight" which should not be taken against it.13 To further bolster its case, petitioner argues that for a grant of a benefit to be considered a practice, it should have been practiced over a long period of time and must be shown to be consistent, deliberate and intentional, which is not what happened in this case. Petitioner tries to make a case out of the fact that the CBA has not been modified to incorporate the giving of full benefits regardless of the length of service, proof that the grant has not ripened into company practice. We disagree. Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or eliminated by the employer.14 The principle of non-diminution of benefits is founded on the Constitutional mandate to "protect the rights of workers and promote their welfare,"15 and "to afford labor full protection."16 Said mandate in turn is the basis of Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations shall be rendered in favor of labor." Jurisprudence is replete with cases which recognize the right of employees to benefits which were voluntarily given by the employer and which ripened into company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.17 where an employer had freely and continuously included in the computation of the 13th month pay those items that were expressly excluded by the law, we held that the act which was favorable to the employees though not conforming to law had thus ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana,18 we ruled that the employers act of including non-basic benefits in the computation of the 13th month pay was a voluntary act and had ripened into a company practice which cannot be peremptorily withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez,19 the Court ordered the payment of the cash equivalent of the unenjoyed sick leave benefits to its intermittent workers after finding that said workers had received these benefits for almost four years until the grant was stopped due to a different interpretation of the CBA provisions. We held that the employer cannot unilaterally withdraw the existing privilege of commutation or conversion to cash given to said workers, and as also noted that the employer had in fact granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to some intermittent workers. In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and consistently granting full benefits to its employees regardless of the length of

service rendered. True, there were only a total of seven employees who benefited from such a practice, but it was an established practice nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of years within which a company practice must be exercised in order to constitute voluntary company practice.20 Thus, it can be six (6) years,21 three (3) years,22 or even as short as two (2) years.23 Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an error, supported only by an affidavit of its manufacturing group head portions of which read: 5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and emergency leave are computed and paid in full to employees who rendered services to the company for the entire year and proportionately to those employees who rendered service to the company for a period less than one (1) year or twelve (12) months in accordance with the CBA provision relative thereto. 6. It was never the intention much less the policy of the management to grant the aforesaid benefits to the employees in full regardless of whether or not the employee has rendered services to the company for the entire year, otherwise, it would be unjust and inequitable not only to the company but to other employees as well.24 In cases involving money claims of employees, the employer has the burden of proving that the employees did receive the wages and benefits and that the same were paid in accordance with law.25 Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily presented other proofs, such as the names of other employees who did not fully serve for one year and thus were given prorated benefits. Experientially, a perfect attendance in the workplace is always the goal but it is seldom achieved. There must have been other employees who had reported for work less than a full year and who, as a consequence received only prorated benefits. This could have easily bolstered petitioners theory of mistake/error, but sadly, no evidence to that effect was presented. IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 85089 dated 29 September 2005 is and its Resolution dated 9 December 2005 are hereby AFFIRMED. SO ORDERED. Quisumbing,Chairperson, Carpio-Morales, Velasco, Jr., JJ., concur. Brion, J., Separate Concurring Opinion. BRION, J.:

I fully agree with the ponencia that the enhanced 13th month pay and bonus computations made by the company have ripened into an established benefit that can no longer be unilaterally withdrawn. The company claim - supported solely by the affidavit of a company officer that the computations were "clear oversights" that should not be taken against it - must fail as against the undisputed evidence of the number of times and years the enhanced computations have been in place. At most, the company claim raises a doubt about the real character of these computations but any such doubt we have to resolve in favor of labor (Article 4, Labor Code).

I concur separately to clarify that the basis for the prohibition against diminution of established benefits is not really Article 100 of the Labor Code as the respondents claimed and as the cases cited in the ponencia mentioned. Article 100 refers solely to the non-diminution of benefits enjoyed at the time of the promulgation of the Labor Code. Employer-employee relationship is contractual and is based on the express terms of the employment contract as well as on its implied terms, among them, those not expressly agreed upon but which the employer has freely, voluntarily and consistently extended to its employees. Under the principle of mutuality of contracts embodied in Article 1308 of the Civil Code, the terms of a contract - both express and implied - cannot be withdrawn except by mutual consent or agreement of the contracting parties. In the present case, the lack of consent or agreement was precisely the basis for the employees' complaint.

ARTURO D. BRION Associate Justice

G.R. No. 159832

May 5, 2006

MERCEDITA ACUA, MYRNA RAMONES, and JULIET MENDEZ, Petitioners, vs. HON. COURT OF APPEALS and JOIN INTERNATIONAL CORPORATION and/or ELIZABETH ALAON,Respondents.6 DECISION QUISUMBING, J.: This petition seeks the review and reversal of the Court of Appeals Decision1 dated January 27, 2003, in CA-G.R. SP No. 70724, entitled Join International Corporation and/or Elizabeth Alaon v. National Labor
6

Construction in favor of labor 4

Relations Commission (Third Division), Mercedita Acua, Juliet Mendez, and Myrna Ramones, setting aside the resolutions of the NLRC and dismissing the complaint of petitioners. Petitioners are Filipino overseas workers deployed by private respondent Join International Corporation (JIC), a licensed recruitment agency, to its principal, 3D Pre-Color Plastic, Inc., (3D) in Taiwan, Republic of China, under a uniformly-worded employment contract for a period of two years. Herein private respondent Elizabeth Alaon is the president of Join International Corporation. Sometime in September 1999, petitioners filed with private respondents applications for employment abroad. They submitted their passports, NBI clearances, medical clearances and other requirements and each paid a placement fee of P14,850, evidenced by official receipts2 issued by private respondents. After their papers were processed, petitioners claimed they signed a uniformly-worded employment contract3 with private respondents which stipulated that they were to work as machine operators with a monthly salary of NT$15,840.00, exclusive of overtime, for a period of two years. On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the job site, a factory owned by 3D, they were made to sign another contract which stated that their salary was only NT$11,840.00.4They were likewise informed that the dormitory which would serve as their living quarters was still under construction. They were requested to temporarily bear with the inconvenience but were assured that their dormitory would be completed in a short time.5 Petitioners alleged that they were brought to a "small room with a cement floor so dirty and smelling with foul odor (sic)". Forty women were jampacked in the room and each person was given a pillow. Since the ladies comfort room was out of order, they had to ask permission to use the mens comfort room.6 Petitioners claim they were made to work twelve hours a day, from 8:00 p.m. to 8:00 a.m. The petitioners averred that on December 16, 1999, due to unbearable working conditions, they were constrained to inform management that they were leaving. They booked a flight home, at their own expense. Before they left, they were made to sign a written waiver.7 In addition, petitioners were not paid any salary for work rendered on December 11-15, 1999.8 Immediately upon arrival in the Philippines, petitioners went to private respondents office, narrated what happened, and demanded the return of their placement fees and plane fare. Private respondents refused. On December 28, 1999, private respondents offered a settlement. Petitioner Mendez received P15,080.9 The next day, petitioners Acua and Ramones went back and received P13,64010 and P16,200,11 respectively. They claim they signed a waiver, otherwise they would not be refunded.12 On January 14, 2000, petitioners Acua and Mendez invoking Republic Act No. 8042,13 filed a complaint for illegal dismissal and non-payment/underpayment of salaries or wages, overtime pay, refund of transportation fare, payment of salaries/wages for 3 months, moral and exemplary damages, and refund

of placement fee before the National Labor Relations Commission (NLRC). Petitioner Ramones filed her complaint on January 20, 2000. The Labor Arbiter ruled in favor of petitioners, declaring that Myrna Ramones, Juliet Mendez and Mercedita Acua did not resign voluntarily from their jobs. Thus, private respondents were ordered to pay jointly and severally, in Philippine Peso, at the rate of exchange prevailing at the time of payment, the following: 1. MERCEDITA ACUA a. Unexpired Portion b. Salary for 4 days c. Overtime pay for 4 hrs. in 4 days NT$95,000.00 2,436.92 1,523.07

NT$98,960.00 d. Refund of placement fee (Less: Amount received per Quitclaim) PHP45,000.00 13,640.00 31,360.00

e. Moral damages f. Exemplary damages

25,000.00 40,000.00

2.

JULIET C. MENDEZ a. Unexpired Portion b. Salary for 4 days c. Overtime pay for 4 hrs. in 4 days NT$95,000.00 2,436.92 1,523.07

NT$98,960.00 d. Refund of placement fee (Less: Amount received per Quitclaim) PHP45,000.00 15,080.0014 29,920.00

e. Moral damages f. Exemplary damages

25,000.00 40,000.00

3.

MYRNA R. RAMONES a. Unexpired Portion b. Salary for 4 days c. Overtime pay for 4 hrs. in 4 days NT$95,000.00 2,436.92 1,523.07

NT$98,960.00 d. Refund of placement fee (Less: Amount received per Quitclaim) e. Moral damages f. Exemplary damages PHP45,000.00 16,200.00 28,800.00 25,000.00 40,000.0015

The Labor Arbiter likewise ordered the payment of attorneys fees equivalent to ten percent (10%) of the award which totaled NT$296,880.00 and P285,080.00 The other claims were dismissed for lack of merit.

Private respondents thereafter appealed the decision to the National Labor Relations Commission. The NLRC ruled that the inclusion of Alaon as party respondent in this case had no basis since respondent JIC, being a juridical person, has a legal personality, separate and distinct from its officers.16 It partially granted the appeal and ordered that the amounts of P15,080, P13,640 and P16,200 received under the quitclaim by Mendez, Acua and Ramones, respectively, be deducted from their respective awards. They were awarded attorneys fees equivalent to ten percent (10%) of their awarded labor-standards claims for unpaid wages and overtime pays. No moral and exemplary damages and placement fees were awarded.17 Private respondents motion for partial reconsideration was denied. On appeal, the Court of Appeals ruled for private respondents. It set aside the resolutions dated February 26, 2002 and December 10, 2001 of the NLRC and dismissed the complaint of petitioners.18 In their petition before us, petitioners raise the following issues: I Whether or not public respondent court of appeals erred and/or GRAVELY abused its discretion, amounting to lack of jurisdiction, in taking cognizance of the petition for certiorari filed by the private respondents, despite the fact that the nlrcs resolution of December 10, 2001 had already become final and executory, private respondents motion for partial reconsideration with the nlrc having been filed out of time II Alternatively, whether or not public respondent court of appeals erred in setting aside the resolutions of the nlrc, and in dismissing the complaint of the petitioners.19 Prefatorily, petitioners aver that private respondents Verification and Certification of the Petition for Certiorari stated that the copy of the resolution of the NLRC dated December 10, 2001 was received on January 4, 2002 and its partial motion for reconsideration filed on January 29, 2002, or 15 days beyond the reglementary period. However, a perusal of the Partial Motion for Reconsideration20 filed by private respondents show that the NLRC Resolution dated December 10, 2001 was in fact received by private respondents on January 24, 2002 and not on January 4, 2002. Hence, the appeal was properly filed within the 10-day reglementary period. In this petition the issue left for resolution is whether petitioners were illegally dismissed under Rep. Act No. 8042, thus entitling them to benefits plus damages. The Labor Arbiter and the NLRC found that petitioners admitted they resigned from their jobs without force, coercion, intimidation and pressure from private respondents principal abroad.21 According to the Labor Arbiter, while it may be true that petitioners were not coerced into giving up their jobs, the deplorable, oppressive and sub-human working conditions drove petitioners to resign. In effect, according to the Labor Arbiter, the petitioners did not voluntarily resign.22

The NLRC also ruled that there was constructive dismissal since working under said conditions was unbearable.23 As we have held previously, constructive dismissal covers the involuntary resignation resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee.24 In this case, the appellate court found that petitioners did not deny that the accommodations were not as homely as expected. In the petitioners memorandum, they admitted that they were told by the principal, upon their arrival, that the dormitory was still under construction and were requested to bear with the temporary inconvenience and the dormitory would soon be finished. We likewise note that petitioners did not refute private respondents assertion that they had deployed approximately sixty other workers to their principal, and to the best of their knowledge, no other worker assigned to the same principal has resigned, much less, filed a case for illegal dismissal.25 To our mind these cited circumstances do not reflect malice by private respondents nor do they show the principals intention to subject petitioners to unhealthy accommodations. Under these facts, we cannot rule that there was constructive dismissal. Private respondents also claim that petitioners were not entitled to overtime pay, since they had offered no proof that they actually rendered overtime work. Petitioners, on the other hand, say that they could not show any documentary proof since their employment records were all in the custody of the principal employer. It was sufficient, they claim, that they alleged the same with particularity. On this matter, we rule for the petitioners. The claim for overtime pay should not have been disallowed because of the failure of the petitioners to substantiate them.26 The claim of overseas workers against foreign employers could not be subjected to same rules of evidence and procedure easily obtained by complainants whose employers are locally based.27 While normally we would require the presentation of payrolls, daily time records and similar documents before allowing claims for overtime pay, in this case, that would be requiring the near-impossible. To our mind, it is private respondents who could have obtained the records of their principal to refute petitioners claim for overtime pay. By their failure to do so, private respondents waived their defense and in effect admitted the allegations of the petitioners. It is a time-honored rule that in controversies between a worker and his employer, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in the workers favor.28 The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.29 Accordingly, we rule that private respondents are solidarily liable with the foreign principal for the overtime pay claims of petitioners.

On the award of moral and exemplary damages, we hold that such award lacks legal basis. Moral and exemplary damages are recoverable only where the dismissal of an employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.30 The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence, for the law always presumes good faith.31 Petitioners allege they suffered humiliation, sleepless nights and mental anguish, thinking how they would pay the money they borrowed for their placement fees.32 Even so, they failed to prove bad faith, fraud or ill motive on the part of private respondents.33 Moral damages cannot be awarded. Without the award of moral damages, there can be no award of exemplary damages, nor attorneys fees.34 Quitclaims executed by the employees are commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the workers legal rights, considering the economic disadvantage of the employee and the inevitable pressure upon him by financial necessity.35 Nonetheless, the so-called "economic difficulties and financial crises" allegedly confronting the employee is not an acceptable ground to annul the compromise agreement36 unless it is accompanied by a gross disparity between the actual claim and the amount of the settlement.37 A perusal of the records reveals that petitioners were not in any way deceived, coerced or intimidated into signing a quitclaim waiver in the amounts of P13,640, P15,080 and P16,200 respectively. Nor was there a disparity between the amount of the quitclaim and the amount actually due the petitioners. Conformably then the petitioners are entitled to the following amounts in Philippine Peso at the rate of exchange prevailing at the time of payment: 1. MERCEDITA ACUA a. Salary for 4 days b. Overtime pay for 4 hours in 4 days NT $ 2,436.92 1,523.07 NT $ 3,959.99

2.

JULIET C. MENDEZ a. Salary for 4 days b. Overtime pay for 4 hours in 4 days NT $ 2,436.92 1,523.07

NT $ 3,959.99

3.

MYRNA R. RAMONES a. Salary for 4 days b. Overtime pay for 4 hours in 4 days NT $ 2,436.92 1,523.07 NT $ 3,959.99

According to the Bangko Sentral Treasury Department, the prevailing exchange rates on December 1999 was NT$1 to P1.268805. Hence, after conversion to Philippine pesos, the amount of the quitclaim paid to petitioners was actually higher than the amount due them. WHEREFORE, the petition is DISMISSED, without prejudice to the filing of illegal recruitment complaint against the respondents pursuant to Section 6(i) of The Migrant Workers and Overseas Filipino Act of 1995 (Rep. Act No. 8042). SO ORDERED. LEONARDO A. QUISUMBING Associate Justice

G.R. No. L-63742 April 17, 1989 TANJAY WATER DISTRICT, represented by Engr. JOEL B. BORROMEO, Manager, petitioner, vs. HON. PEDRO GABATON, MUN. OF PAMPLONA, APOLINARIO ARNAIZ, ROMULO ALPAS, WENCESLAO DURAN, SERGIO SALMA, APOLLO BOBON, CATALINO ORTEGA, FRANCISCO ZERNA, ANTONIO DIVINAGRACIA, PEDRO SINCERO, DIONISIO TABALOC, ROMEO RAMIREZ, FRANCISCO CABILAO and ESPERIDION MOSO, respondents.7 G.R. No. 84300 April 17, 1989

Coverage of the Labor Code 6

JOSEFINO DATUIN, petitioner, vs. TARLAC WATER DISTRICT, respondent. Rodulfo O. Navarro and Baldomero Limbaga for petitioner in G.R. No. 63742. Joaquin R. Hitosis for respondents in G.R. No. 63742. Isabelo C. Salamida for petitioner in G.R. No. 84300. Conrado C. Ginelo Jr. for respondent in G.R. No. 84300. Bernardito A. Florido for Philippine Association of Water Districts. Reuben A. Espancho for Esperidion Moso.

GRIO-AQUINO, J.: The common issue in these consolidated cases is whether or not water districts created under PD No. 198, as amended, are private corporations or government-owned or controlled corporations. Another issue in G.R. No. 63742 is whether respondent Judge acted without, or in excess of, jurisdiction or with grave abuse of discretion in dismissing Civil Case No. 8144 for alleged lack of jurisdiction over the subject matter. I. G.R. No. 63742 On March 3, 1983, petitioner Tanjay Water District, represented by its manager, Joel B. Borromeo, filed in the Regional Trial Court of Negros Oriental, Dumaguete City, 7th Judicial Region, Civil Case No. 8144, an action for injunction with preliminary mandatory injunction and damages, against respondent Municipality of Pamplona and its officials to prevent them from interfering in the management of the Tanjay Waterworks System. Respondent Judge set the hearing of the application for injunction on March 16, 1983. The Municipality and its officials answered the complaint. Esperidion Moso filed a separate answer. When the case was called for hearing on March 16, 1983, respondent Judge gave the parties five (5) days to submit their respective position papers on the issue of the court's jurisdiction (or lack of it), over the action. The respondents' position paper questioned the court's jurisdiction over the case and asked for its dismissal of the complaint (Annex F). Instead of a position paper, the petitioner filed a reply with opposition to the motion to dismiss (Annex G). On March 25, 1983, respondent Judge issued an order dismissing the complaint for lack of jurisdiction over the subject matter (water) and over the parties (both being government instrumentalities) by virtue of Art. 88 of PD No. 1067 and PD No. 242. He declared that the petitioner's recourse to the court was premature because the controversy should have been ventilated first before the National Water

Resources Council pursuant to Arts. 88 and 89 of PD No. 1067. He further ruled that as the parties are government instrumentalities, the dispute should be administratively settled in accordance with PD No. 242. Petitioner filed a petition for certiorari in this Court alleging that respondent Judge acted without or in excess of jurisdiction or with grave abuse of discretion in dismissing the case. II. G.R. No. 84300 Petitioner Josefino Datuin filed a complaint for illegal dismissal against respondent Tarlac Water District in the Department of Labor and Employment (DOLE) which decided in his favor. However, upon respondent's motion for reconsideration (which was treated as an appeal) the National Labor Relations Commission (NLRC) reversed the decision and dismissed the complaint "for lack of jurisdiction," holding that as the respondent Tarlac Water District is a corporation created by a special law (PD No. 198), its officers and employees belong to the civil service and their separation from office should be governed by Civil Service Rules and Regulations. Petitioner contends that this case is similar to the case of Tanjay Water District versus Hon. Pedro C. Gabaton, et al., G.R. No. 63742, because the lone issue in both cases is whether or not water districts created under PD No. 198, as amended, are private corporations or government-owned or controlled corporations. The two cases were consolidated pursuant to the resolution dated July 25, 1988 of this Court. Actually the question of the corporate personality of local water districts is not new. The Court ruled in the recent case of Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988, that they are quasi public corporations whose employees belong to the civil service, hence, the dismissal of those employees shall be governed by the civil service law, rules and regulations. The pertinent part of this Court's decision reads as follows: The only question here is whether or not local water districts are government owned or controlled corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential Decree No. 198, known as the 'Provincial Water Utilities Act of 1973' which went into effect on 25 May 1973, and which provides as follows: Exemption from Civil Service. The district and its employees, being engaged in a proprietary function, are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below supervisory levels: Provided, however, That the total of all salaries, wages, emoluments, benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthly revenue, said net revenue representing income from water sales and sewerage service charges, less pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding fiscal year.

The Labor Arbiter failed to take into account the provisions of Presidential, Decree No. 1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as Section 25 in the following manner: Section 26. of the same decree P.D. 198 is hereby amended to read as Section 25 as follows: Section 25. Authorization. The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration. Thus, Section 25 of P.D. 198 exempting the employees of water districts from the application of the Civil Service Law was removed from the statute books. This is not the first time that officials of the Department of Labor and Employment have taken the position that the Labor Arbiter here adopted. In Baguio Water District vs. Cresenciano B. Trajano etc., et al. (127 SCRA 730 [1984]), the petitioner Water District sought review of a decision of the Bureau of Labor Relations which affirmed that of a Med-Arbiter calling for a certification election among the regular rank-and-file employees of the Baguio Water District (BWD). In granting the petition, the Court said The Baguio Water District was formed pursuant to Title II Local Water District Law of P.D. No. 198, as amended. The BWD is by Sec. 6 of that decree 'a quasi-public corporation performing public service and supplying public wants'. xxxxxx We grant the petition for the following reasons: I. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Section 26 of P.E. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory decree took effect on June 11, 1978. xxxxxxxxx 3. The BWD is a corporation created pursuant to a special law P.D. No. 198, as amended. As such its officers and employees are part of the Civil Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 868.) The hiring and firing of employees of government-owned or controlled corporations are governed by the Civil Service Law and Civil Service Rules and Regulations. In National Housing Corporation vs. Juco, 134 SCRA 172,176, We 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 [1973] 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. xxxxxxxxx Section 1 of Article XII-B, 1973 Constitution uses the word 'every' to modify the phrase 'governmentowned or controlled corporation' 'Every' means each one of a group, without exception. It means all possible and all, taken one by one. Of course, our decision in this case refers to a corporation created as a government-owned or controlled entity. It does not cover cases involving private firms taken over by the government in foreclosure or similar proceedings. We reserve judgment on these latter cases when the appropriate controversy is brought to this Court. (Emphasis ours) Significantly, Article XIB Section 2(l) of the 1987 Constitution provides that "(t)he civil service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including governmentowned or controlled corporations with original charters." Inasmuch as PD No. 198, as amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country, they come under the coverage of the civil service law, rules and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD No. 807.) In G.R. No. 63742, respondent Judge ruled that as the subject matter of Civil Case No. 8144 was water, the case should have been brought first to the National Water Resources Council in accordance with Articles 88 and 89 of PD No. 1067, and, as the parties are government instrumentalities (The Tanjay Water District and the Municipality of Pamplona), the dispute should be administratively settled in accordance with PD No. 242. Articles 88 and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as follows:

ART. 88. The [Water Resources] Council shall have original jurisdiction over all disputes relating to appropriation, utilization, exploitation, development, control, conservation and protection of waters within the meaning and context of the provisions of this Code. The decisions of the Council on water rights controversies shall be immediately executory and the enforcement thereof may be suspended only when a bond, in an amount fixed by the Council to answer for damages occasioned by the suspension or stay of execution, shall have been filed by the appealing party, unless the suspension is by virtue of an order of a competent court. All disputes shall be decided within sixty (60) days after the parties submit the same for decision or resolution. The Council shall have the power to issue writs of execution and enforce its decisions with the assistance of local or national police agencies. ART. 89. The decisions of the Council on water rights controversies may be appealed to the Court of First Instance of the province where the subject matter of the controversy is situated within fifteen (15) days from the date the party appealing receives a copy of the decision, on any of the following grounds: (2) grave abuse of discretion question of law; and (3) questions of fact and law. (Emphasis supplied.) Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of water, We hold that the jurisdiction to hear and decide the dispute in the first instance, pertains to the Water Resources Council as provided in PD No. 1067 which is the special law on the subject. The Court of First Instance (now Regional Trial Court) has only appellate jurisdiction over the case. P.D. No. 242 which was issued on July 9, 1973, prescribes administrative procedures for the settlement of: .... all disputes, claims and controversies solely between or among the departments, bureaus, offices, agencies and instrumentalities of the National Government, including government-owned or controlled corporations but excluding constitutional offices or agencies, arising from the interpretation and application of statutes, contracts or agreements. by either the Secretary of Justice, or the Solicitor General, or the Government Corporate Counsel, depending on the parties involved and whether the case raises pure questions of law or mixed questions of law and fact. P.D. No. 242 is inapplicable to this case because the controversy herein did not arise from the "interpretation and application of statutes, contracts, or agreements" of the parties herein. As previously stated, it involves the appropriation, utilization, and control of water. Our determination in the earlier cases (Baguio Water District vs. Trajano, 127 SCRA 730; Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988) that water districts are government instrumentalities and that their employees belong to the civil service, disposes of Datuin's petition in G.R. No. 84300. The National Labor Relations Commission has no jurisdiction over his complaint for illegal dismissal.

WHEREFORE, both petitions in G.R. Nos. 63742 and 84300 are dismissed without prejudice to the petitioners in G.R. No. 63742 filing their complaint in the National Water Resources Council and the petitioner in G.R. No. 84300 seeking redress in the Civil Service Commission. No costs. SO ORDERED. Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

G.R. No. 155146 DR. PERLA A. POSTIGO, FRANCISCO F. ALMACEN, NARCISO M. ALMENDRAL, NENA E. BASTO, JUANITO M. BERNARDINO, ADELFA B. CRESCINI, MARCIAL R. DE JESUS, DR. PEDRO LOPEZ DE LEON, PREMIA M. DUMLAO, DAVID F. ESTACIO, LINA G. ESTRELLA, GENOVEVA V. HERNANDEZ, PEDRO A. PARIL, PEDRO H. SINGSON, ALBERTO A. TUDIO, MARIETTA B. ULIT, LOURDES C. LEGASPI, PEDRO PEROCHO, LANI CORTEZ, GUADALUPE B. MACATANGAY, DOLORES C. FERNANDEZ, LUMINOSA G. REYNO, ESTRELLA P. SURATOS, LYDIA E. DE BOSCH, ZENAIDA C. CARRIEDO, DR. FINAFLOR C. TAN, Petitioners, - versus PHILIPPINE TUBERCULOSIS SOCIETY, INC., Respondent.8 Promulgated: January 24, 2006_ DECISION QUISUMBING, J.: This petition assails the Decision[1] dated June 13, 2002 of the Court of Appeals in CA-G.R. SP No. 59597, which set aside the Resolution[2] dated January 31, 2000 of the National Labor Relations Commission (NLRC) in NLRC NCR CN 00-02-02148-99. The NLRC had dismissed the respondents appeal from the Decision of the Labor Arbiter, who ordered the payment of retirement benefits under Republic Act No. 7641 to petitioners. This petition likewise assails the Resolution[3] dated September 3, 2002 of the Court of Appeals denying petitioners motion for reconsideration. The antecedent facts, as summarized by the Court of Appeals and borne by the records, are as follows: Petitioners Dr. Perla A. Postigo, et al., were regular employees of the respondent Philippine Tuberculosis Society, Inc. (PTSI). They retired on various dates from 1996 to 1998. Upon retirement from service, some of the petitioners who were compulsory members of the Government Service Insurance System (GSIS) obtained retirement benefits from the GSIS.

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At the time the petitioners retired, Article 287 of the Labor Code had been amended by Republic Act No. 7641.[4] Rep. Act No. 7641 granted retirement pay to qualified employees in the private sector, in the absence of any retirement plan or agreement with the company. As the respondent did not have a retirement plan for its employees, aside from its contribution to the GSIS, petitioners claimed from the respondent their retirement benefits under Rep. Act No. 7641. The respondent denied their claims on the ground that the accommodation extended by the GSIS to the petitioners removed them from the coverage of the law. The petitioners then sought the opinion of the Bureau of Working Conditions (BWC) of the Department of Labor and Employment regarding their entitlement to the retirement benefits provided in Rep. Act No. 7641.[5] The BWC confirmed their entitlement.[6] The same opinion was rendered and submitted by the respondents legal counsel, Atty. Rene V. Sarmiento, to its Board of Directors.*7+ Despite this, respondent PTSI refused to pay the petitioners their retirement benefits. The petitioners then filed a complaint before the Labor Arbiter. In a Decision[8] dated June 30, 1999, the Labor Arbiter declared petitioners entitled to retirement benefits under Rep. Act No. 7641. However, one petitioner, Dr. Finaflor C. Tan who was awarded her terminal leave pay, was not included in the award of retirement benefits. Aggrieved, respondent PTSI appealed to the NLRC. Instead of posting the required cash or surety bond equivalent to the amount of the award, the respondent filed a Motion to Reduce Bond on the ground that the amount awarded by the Labor Arbiter was erroneous. On January 31, 2000, the NLRC dismissed the appeal for failure to post the required cash or surety bond. Undaunted, the respondent elevated the matter to the Court of Appeals. On June 13, 2002, the CA reversed the NLRCs decision in this wise: Indeed, in several occasions, the Supreme Court has cautioned the NLRC to give Article 223 of the Labor Code, as amended, particularly the provisions on requiring a bond on appeals involving monetary awards, a liberal interpretation in line with the desired objective of resolving controversies on the merits. Hence, considering the timeliness of the filing of the motion to reduce the appeal bond and the meritorious ground upon which it relies, We believe and so hold that the legal requirement of posting an appeal bond has been substantially satisfied. Public respondent acted with grave abuse of discretion in dismissing the appeal without passing upon the motion to reduce the appeal bond. WHEREFORE, the petition is hereby GRANTED. Resolutions dated 31 January 2000 and 24 May 2000 in NLRC-NCR CN 00-02-02148-99 of public respondent National Labor Relations Commission are hereby SET ASIDE. The NLRC is directed to act on the Motion to Reduce Bond and to give due course to the Appeal. SO ORDERED.[9]

The petitioners now submit the following issues for our consideration: I. Whether or not the remand of the case to the NLRC would only further delay the resolution of this case. II. Whether or not the Honorable Court of Appeals decided the instant case in accordance with law and applicable jurisprudence and based on the evidence on record for having failed to apply the jurisprudential precepts that: a. errors in the computation of the monetary award are properly a subject of appeal and should be ventilated at the appropriate time, not in a mere motion to reduce bond; and b. the posting of a bond is an indispensable requirement to perfect an employers appeal. III. Whether or not Petitioners are entitled to the benefits of the Retirement Pay Law.

IV. Whether or not Petitioners are entitled to interest on their retirement benefits for the unjustified withholding thereof. V. Whether or not Petitioner Dr. Tan should be made similarly entitled to her retirement pay, which was inadvertently excluded by the Labor Arbiter, pursuant to the timely motion to render judgment nunc pro tunc she filed before the Labor Arbiter and which was consistently raised all the way up to this Honorable Court, in order to effect a complete disposition of the instant case.[10] In short, petitioners raise for our resolution these issues: (1) Did the Court of Appeals err in granting the petition and directing the NLRC to act on the Motion to Reduce Bond and to give due course to the appeal? and (2) Are the petitioners entitled to benefits under Rep. Act No. 7641? On the first issue, petitioners contend that (1) errors in the computation of the monetary award are properly a subject of appeal and should be ventilated at the appropriate time, not in a mere motion to reduce bond; and (2) the posting of a bond is an indispensable requirement to perfect an employers appeal. Respondent counters that in case the monetary award is being disputed, an appeal may still be filed without the appeal bond, provided that a motion to reduce bond is filed within the reglementary period. We think that the Court of Appeals did not err in granting the petition and holding that there was substantial compliance in the posting of a cash or surety bond. We likewise find Nationwide Security and Allied Services, Inc. v. NLRC[11] and Rosewood Processing, Inc. v. NLRC[12] inapplicable to this case. In Nationwide Security, the petitioners therein filed a motion to reduce bond instead of an appeal or surety bond. The NLRC denied the motion on the grounds that petitioners alleged inability to post the bond was without basis, and to grant the motion on the grounds stated therein would be tantamount to ruling on the merits. In affirming the decision of the NLRC, the Court noted that petitioners had funds from its other businesses to post the required bond. Further, the errors raised in the motion dealt with matters that would go into the merits of the case and were thus more appropriate in an appeal.

In this case, respondent deferred the posting of the surety bond in view of the alleged erroneous computation by the Labor Arbiter of the monetary award. While the Labor Arbiter awarded P5,480,484.25[13] as retirement benefits, only P5,072,277.73,*14+ according to the respondents computation was due and owing to the petitioners. Since the motion raised a pure mathematical error, the same may be resolved without going into the merits of the case. In Rosewood, the petitioner therein filed a motion to reduce the bond with the appeal bond, albeit not in the amount equivalent to the monetary award in the judgment appealed from. The Court held that the NLRC gravely abused its discretion in dismissing the appeal since a consideration of the merits appearing in the appeal as well as the filing of the appeal bond show that there was substantial compliance with the rules governing appeal. Here, aside from the fact that the filing of the motion was justified, the respondent immediately submitted a supersedeas bond[15] with its motion for reconsideration of the NLRC resolution dismissing its appeal. In Ong v. Court of Appeals,[16] we ruled that the aggrieved party may file the appeal bond within the ten-day reglementary period following the receipt of the resolution of the NLRC to forestall the finality of such resolution.[17] Hence, while the appeal of a decision involving a monetary award in labor cases may be perfected only upon the posting of a cash or surety bond and the posting of the bond is an indispensable requirement to perfect such an appeal, a relaxation of the appeal bond requirement could be justified by substantial compliance with the rule. Article 223 of the Labor Code provides that an appeal from a decision of the Labor Arbiter must be made within ten calendar days from receipt of a copy of the decision by the aggrieved party; and if the decision involves a monetary award, an appeal by the aggrieved party may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the NLRC in the amount equivalent to the monetary award. In addition, Section 6, Rule VI of the New Rules of Procedure of the NLRC provides that the Commission may, in justifiable cases and upon motion of the aggrieved party, reduce the amount of the bond. Further, the filing of the motion to reduce bond does not stop the running of the period to perfect appeal. Time and again, this Court has ruled that while the above-mentioned rule treats the filing of a cash or surety bond in the amount equivalent to the monetary award in the judgment appealed from, as a jurisdictional requirement to perfect an appeal, the bond requirement on appeals involving awards is sometimes given a liberal interpretation in line with the desired objective of resolving controversies on the merits.[18] The special circumstances in this case, upon which the motion to reduce the bond was predicated, justify the relaxation of the appeal bond requirement. However, considering that the claim for retirement benefits was made sometime in 1999 to support the petitioners during the twilight years of their lives, there is no doubt that a remand of the case to the NLRC will only unduly delay the determination of their entitlement to such benefits. Moreover, since the case calls for the resolution of a question of law, we consider it more appropriate to resolve the appeal at this juncture, rather than remand the case to the NLRC.

We come now to the second issue. The petitioners contend that despite their compulsory membership in the GSIS, they are still covered by Rep. Act No. 7641 for the following reasons: (1) the respondent is registered with the Securities and Exchange Commission as a non-stock and non-profit corporation; hence, it is a private entity and its employees are employees in the private sector; and (2) the petitioners are not included in the exemptions from coverage of Rep. Act No. 7641. Respondent PTSI counters that as an employer in the public sector, it is not covered by Rep. Act No. 7641 which applies only to employees in the private sector. It relies on Section 3, Rule I of the Amended Rules Implementing Title II, Book IV of the Labor Code, to wit: SEC. 3. Employer(a) The term shall mean any person natural or juridical, domestic or foreign, who carries on in the Philippines any trade, business, industry, undertaking or activity of any kind and uses the services of another person who is under his orders as regards the employment. (b) An employer shall belong to either: (1) The public sector covered by the GSIS, comprising the National Government, including governmentowned or controlled corporations, the Philippine Tuberculosis Society, the Philippine National Red Cross, and the Philippine Veterans Bank; or (2) The private sector covered by the SSS, comprising all employers other than those defined in the immediately preceding paragraph. Respondents reliance on the afore-quoted rules is unfounded. The definition of a public sector employer as quoted above is relevant only for purposes of coverage under the Employees Compensation and State Insurance Fund. Instead, it is the implementing rules of Title II, Book VI of the Labor Code, which provides for the coverage and exemptions of retirement benefits. Thus: SECTION 1. General Statement on Coverage. This Rule shall apply to all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those specifically exempted under Section 2 hereof. As used herein, the term Act shall refer to Republic Act No. 7641 which took effect on January 7, 1993. SEC. 2. Exemption. This Rule shall not apply to the following employees: 2.1 Employees of the National Government and its political subdivisions, including Governmentowned and/or controlled corporations, if they are covered by the Civil Service Law and its regulations. ... Having determined the applicable implementing rules, we now proceed to resolve whether the respondent is a private corporation or a public corporation; and consequently, whether the petitioners are employees in the private sector or in the public sector. On this score, the case of Feliciano v. Commission on Audit,[19] finds strong relevance. Although with different factual circumstances, the Court discussed therein the two classes of corporations recognized

by the 1987 Constitution. The first refers to private corporations created under a general law; the second refers to government-owned or controlled corporations created by special charters. We also reiterated that under Section 14 of the Corporation Code, *a+ll corporations organized under this Code shall file with the Securities and Exchange Commission articles of incorporation The respondent was incorporated on March 11, 1960 as a non-profit, benevolent and non-stock corporation under the Corporation Code.[20] Having been created under the general corporation law instead of a special charter, we hold that the respondent is a private and not a governmental corporation. More so, Section 2(1), Article IX(B) of the 1987 Constitution provides: SECTION 2. (1) The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. Extant on the records is the respondents admission that although its employees are compulsory members of the GSIS, said employees are not governed by the Civil Service Law. If the respondent is truly a government-owned or controlled corporation, and petitioners are employees in the public sector, then, they should have been covered by said law. The truth, however, is that, the respondent is a nonprofit but private corporation organized under the Corporation Code, and the petitioners are covered by the Labor Code and not by the Civil Service Law. From the foregoing, it is clear to us that the petitioners are employees in the private sector, hence entitled to the benefits of Rep. Act No. 7641. Even assuming that by virtue of their compulsory inclusion in the GSIS, the petitioners became employees in the public sector, they are still entitled to the benefits of Rep. Act No. 7641 since they are not covered by the Civil Service Law and its regulations. This much is certain upon reading the implementing rules of Title II, Book VI of the Labor Code as afore-cited as well as the Labor Advisory on Retirement Pay Law.[21] Under the said advisory, the coverage of, as well as the exclusion from, Rep. Act No. 7641 has been delineated as follows: RA 7641 or the Retirement Pay Law shall apply to all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid. They shall include part-time employees, employees of service and other job contractors and domestic helpers or persons in the personal service of another. The law does not cover employees of retail, service and agricultural establishments or operations employing not more than (10) employees or workers and employees of the National Government and its political subdivisions, including Government-owned and/or controlled corporations, if they are covered by the Civil Service Law and its regulations. (Underscoring ours.) Neither do we find merit in the respondents argument that the rationale behind the enactment of Rep. Act No. 7641 justifies the exclusion of employees in the public sector, who are already enjoying retirement benefits under the GSIS law, from the New Retirement Law. We direct the respondents attention to Section 2 of Rep. Act No. 7641, to wit:

SEC. 2. Nothing in this Act shall deprive any employee of benefits to which he may be entitled under existing laws or company policies or practices. In addition, Rule II of the Rules Implementing Book VI of the Labor Code provides as follows: SEC. 8. Relation to agreements and regulations. Nothing in this Rule shall justify an employer from withdrawing or reducing any benefits, supplements or payments as provided in existing laws, individual or collective agreements or employment practices or policies. ... In Juco v. NLRC,[22] we clarified that employees of government-owned and controlled corporations with special charters are covered under the Civil Service. On the other hand, employees of governmentowned and controlled corporations under the Corporation Code are governed by the provisions of the Labor Code. The Philippine Tuberculosis Society, Inc. (PTSI) belongs to the latter category and, therefore, covered by Rep. Act No. 7641 which is an amendment to the Labor Code. The accommodation under Rep. Act No. 1820 extending GSIS coverage to PTSI employees did not take away from petitioners the beneficial coverage afforded by Rep. Act No. 7641. Hence, the retirement pay payable under Article 287 of the Labor Code as amended by Rep. Act No. 7641 should be considered apart from the retirement benefit claimable by the petitioners under the social security law or, as in this case, the GSIS law. As to the alleged prolonged refusal by the respondent to pay the petitioners their retirement benefits, we do not think that the respondents stance was entirely in bad faith. The respondent harbored the honest belief that their compulsory coverage in the GSIS converted it into a public corporation excluded from the coverage of Rep. Act No. 7641. As noted by this Court, the respondent even filed a supersedeas bond, albeit belatedly, with its motion for reconsideration of the NLRC resolution dismissing its appeal. Such act only demonstrates that the respondent filed the appeal in good faith. We could not speculate and say that respondent did not intend to pay the petitioners their retirement benefits in case the appeal is dismissed. On the matter of petitioner Dr. Finaflor C. Tan, records show she has two causes of action: (1) nonpayment of terminal leave pay; and (2) non-payment of retirement benefits.[23] While the Labor Arbiter ruled that she is entitled to the commutation into cash of her unused leave credits which is the equivalent of her terminal leave pay, the former did not include her in the award of retirement benefits. This was properly raised in the Motion to Render Judgment Nunc Pro Tunc[24] filed by the petitioners on October 29, 1999 before the NLRC. We see no cogent reason why she should be excluded from the over-all award of retirement benefits considering that she has participated in the proceedings before the Labor Arbiter. WHEREFORE, this petition is PARTIALLY GRANTED. The Decision dated June 13, 2002 of the Court of Appeals in CA-G.R. SP No. 59597, directing the NLRC to act on the Motion to Reduce Bond and to give

due course to the Appeal, as well as its Resolution denying the petitioners motion for reconsideration, are MODIFIED. Consequently, it is DECLARED that the petitioners are entitled to retirement benefits under Rep. Act No. 7641. In addition to retirement benefits, petitioner Dr. Finaflor C. Tan is entitled to the commutation into cash of her unused leave credits which is the equivalent of her terminal leave pay. Likewise, the petitioners are entitled to attorneys fees, equivalent to 10% of the total monetary award. Let this case be remanded to the Labor Arbiter for the computation of the retirement benefits and terminal leave pay above-mentioned. No pronouncement as to costs. SO ORDERED.

G.R. No. 80774 May 31, 1988 SAN MIGUEL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and RUSTICO VEGA, respondents.9 Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner. The Solicitor General for public respondent.

FELICIANO, J.: In line with an Innovation Program sponsored by petitioner San Miguel Corporation ("Corporation;" "SMC") and under which management undertook to grant cash awards to "all SMC employees ... except [ED-HO staff, Division Managers and higher-ranked personnel" who submit to the Corporation Ideas and suggestions found to be beneficial to the Corporation, private respondent Rustico Vega submitted on 23 September 1980 an innovation proposal. Mr. Vega's proposal was entitled "Modified Grande Pasteurization Process," and was supposed to eliminate certain alleged defects in the quality and taste of the product "San Miguel Beer Grande:" Title of Proposal Modified Grande Pasteurization Process Present Condition or Procedure At the early stage of beer grande production, several cases of beer grande full goods were received by MB as returned beer fulls (RBF). The RBF's were found to have sediments and their contents were hazy.
9

Coverage of the Labor Code 6

These effects are usually caused by underpasteurization time and the pasteurzation units for beer grande were almost similar to those of the steinie. Proposed lnnovation (Attach necessary information) In order to minimize if not elienate underpasteurization of beer grande, reduce the speed of the beer grande pasteurizer thereby, increasing the pasteurization time and the pasteurization acts for grande beer. In this way, the self-life (sic) of beer grande will also be increased. 1 Mr. Vega at that time had been in the employ of petitioner Corporation for thirteen (1 3) years and was then holding the position of "mechanic in the Bottling Department of the SMC Plant Brewery situated in Tipolo, Mandaue City. Petitioner Corporation, however, did not find the aforequoted proposal acceptable and consequently refused Mr. Vega's subsequent demands for a cash award under the Innovation Program. On 22 February 1983., a Complaint2 (docketed as Case No. RAB-VII-0170-83) was filed against petitioner Corporation with Regional Arbitration Branch No. VII (Cebu City) of the then.", Ministry of Labor and Employment. Frivate respondent Vega alleged there that his proposal "[had] been accepted by the methods analyst and implemented by the Corporation [in] October 1980," and that the same "ultimately and finally solved the problem of the Corporation in the production of Beer Grande." Private respondent thus claimed entitlement to a cash prize of P60,000.00 (the maximum award per proposal offered under the Innovation Program) and attorney's fees. In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation alleged that private respondent had no cause of action. It denied ever having approved or adopted Mr. Vega's proposal as part of the Corporation's brewing procedure in the production of San Miguel Beer Grande. Among other things, petitioner stated that Mr. Vega's proposal was tumed down by the company "for lack of originality" and that the same, "even if implemented [could not] achieve the desired result." Petitioner further alleged that the Labor Arbiter had no jurisdiction, Mr. Vega having improperly bypassed the grievance machinery procedure prescribed under a then existing collective bargaining agreement between management and employees, and available administrative remedies provided under the rules of the Innovation Program. A counterclaim for moral and exemplary damages, attorney's fees, and litigation expenses closed out petitioner's pleading. In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money claim of complainant Vega in this case is "not a necessary incident of his employment" and that said claim is not among those mentioned in Article 217 of the Labor Code, dismissed the complaint for lack of jurisdiction. However, in a gesture of "compassion and to show the government's concern for the workingman," the Labor Arbiter also directed petitioner to pay Mr. Vega the sum of P2,000.00 as "financial assistance." The Labor Arbiter's order was subsequently appealed by both parties, private respondent Vega assailing the dismissal of his complaint for lack of jurisdiction and petitioner Corporation questioning the propriety of the award of "financial assistance" to Mr. Vega. Acting on the appeals, the public

respondent National Labor Relations Commission, on 4 September 1987, rendered a Decision, 5 the dispositive portion of which reads: WHEREFORE, the appealed Order is hereby set aside and another udgment entered, order the respondent to pay the complainant the amount of P60,000.00 as explained above. SO ORDERED. In the present Petition for certiorari filed on 4 December 1987, petitioner Corporation, invoking Article 217 of the Labor Code, seeks to annul the Decision of public respondent Commission in Case No. RABVII-01 70-83 upon the ground that the Labor Arbiter and the Commission have no jurisdiction over the subject matter of the case. The jurisdiction of Labor Arbiters and the National Labor Relations Commission is outlined in Article 217 of the Labor Code, as last amended by Batas Pambansa Blg. 227 which took effect on 1 June 1982: ART. 217. Jurisdiction of Labor Arbiters and the commission. (a) The Labor Arbiters shall have theoriginal 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 are workers, whether agricultural or nonagricultural: 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. (Emphasis supplied) 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. In the first place, paragraph 3 should be read not in isolation from but rather within the context formed by paragraph 1 related to unfair labor practices), paragraph 2 (relating to claims concerning terms and conditions of employment), paragraph 4 (claims relating to household services, a particular species of employer-employee relations), and paragraph 5 (relating to certain activities prohibited to employees or to

employers).<re||an1w> It is evident that there is a unifying element which runs through paragraphs 1 to 5 and that is, that they all refer to cases or disputes arising out of or in connection with an employer-employee relationship. This is, in other words, a situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as amended. We reach the above conclusion from an examination of the terms themselves of Article 217, as last amended by B.P. Blg. 227, and even though earlier versions of Article 217 of the Labor Code expressly brought within the jurisdiction of the Labor Arbiters and the NLRC "cases arising from employer employee relations," 6 which clause was not expressly carried over, in printer's ink, in Article 217 as it exists today. For it cannot be presumed that money claims of workers which do not arise out of or in connection with their employer-employee relationship, and which would therefore fall within the general jurisdiction of the regular courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the money claims of workers" referred to in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the employer-employee relationship, or some aspect or incident of such relationship. Put a little differently, that money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connection with the employer-employee relationship. Applying the foregoing reading to the present case, we note that petitioner's Innovation Program is an employee incentive scheme offered and open only to employees of petitioner Corporation, more specifically to employees below the rank of manager. Without the existing employer-employee relationship between the parties here, there would have been no occasion to consider the petitioner's Innovation Program or the submission by Mr. Vega of his proposal concerning beer grande; without that relationship, private respondent Vega's suit against petitioner Corporation would never have arisen. The money claim of private respondent Vega in this case, therefore, arose out of or in connection with his employment relationship with petitioner. The next issue that must logically be confronted is whether the fact that the money claim of private respondent Vega arose out of or in connection with his employment relation" with petitioner Corporation, is enough to bring such money claim within the original and exclusive jurisdiction of Labor Arbiters. In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation engaged in the sale and repair of motor vehicles, while private respondent was the sales Manager of petitioner. Petitioner had sued private respondent for non-payment of accounts which had arisen from private respondent's own purchases of vehicles and parts, repair jobs on cars personally owned by him, and cash advances from the corporation. At the pre-trial in the lower court, private respondent raised the question of lack of jurisdiction of the court, stating that because petitioner's complaint arose out of the employeremployee relationship, it fell outside the jurisdiction of the court and consequently should be dismissed. Respondent Judge did dismiss the case, holding that the sum of money and damages sued for by the employer arose from the employer-employee relationship and, hence, fell within the jurisdiction of the

Labor Arbiter and the NLRC. In reversing the order of dismissal and requiring respondent Judge to take cognizance of the case below, this Court, speaking through Mme. Justice Melencio-Herrera, said: Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the Labor Code had jurisdiction over" all other cases arising from employer-employee relation, unless, expressly excluded by this Code." Even then, the principle followed by this Court was that, although a controversy is between an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, 604, in negating jurisdiction of the Labor Arbiter, although the parties were an employer and two employees, Mr. Justice Abad Santos stated: The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary. It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple action for damages for tortious acts allegedly committed by the defendants. Such being the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise. And in Singapore Airlines Limited v. Pao, 122 SCRA 671, 677, the following was said: Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his personal cars, and for the purchase price of vehicles and parts sold to him. Those accounts have no relevance to the Labor Code. The cause of action was one under the civil laws, and it does not breach any provision of the Labor Code or the contract of employment of DEFENDANT. Hence the civil courts, not the Labor Arbiters and the NLRC should have jurisdiction. 8 It seems worth noting that Medina v. Castro-Bartolome, referred to in the above excerpt, involved a claim for damages by two (2) employees against the employer company and the General Manager thereof, arising from the use of slanderous language on the occasion when the General Manager fired the two (2) employees (the Plant General Manager and the Plant Comptroller). The Court treated the claim for damages as "a simple action for damages for tortious acts" allegedly committed by private respondents, clearly if impliedly suggesting that the claim for damages did not necessarily arise out of or in connection with the employer-employee relationship.Singapore Airlines Limited v. Pao, also cited in Molave, involved a claim for liquidated damages not by a worker but by the employer company, unlike Medina. The important principle that runs through these three (3) cases is that where the claim to the principal relief sought 9 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. Applying the foregoing to the instant case, the Court notes that the SMC Innovation Program was essentially an invitation from petitioner Corporation to its employees to submit innovation proposals, and that petitioner Corporation undertook to grant cash awards to employees who accept such invitation and whose innovation suggestions, in the judgment of the Corporation's officials, satisfied the standards and requirements of the Innovation Program 10 and which, therefore, could be translated into some substantial benefit to the Corporation. Such undertaking, though unilateral in origin, could nonetheless ripen into an enforceable contractual (facio ut des) 11 obligation on the part of petitioner Corporation under certain circumstances. Thus, whether or not an enforceable contract, albeit implied arid innominate, had arisen between petitioner Corporation and private respondent Vega in the circumstances of this case, and if so, whether or not it had been breached, are preeminently legal questions, questions not to be resolved by referring to labor legislation and having nothing to do with wages or other terms and conditions of employment, but rather having recourse to our law on contracts. WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4 September 1987 of public respondent National Labor Relations Commission is SET ASIDE and the complaint in Case No. RAB-VII0170-83 is hereby DISMISSED, without prejudice to the right of private respondent Vega to file a suit before the proper court, if he so desires. No pronouncement as to costs. SO ORDERED. Fernan, Gutierrez, Jr., Bidin and Cortes, JJ., concur.

G.R. No. 185567 ARSENIO Z. LOCSIN, Petitioner, versus -

NISSAN CAR LEASE PHILS., INC. and LUIS BANSON, Respondents.10

10

Coverage of the Labor Code 6

Promulgated: October 20, 2010

DECISION

BRION, J.:

Through a petition for review on certiorari,[1] petitioner Arsenio Z. Locsin (Locsin) seeks the reversal of the Decision*2+ of the Court of Appeals (CA) dated August 28, 2008,*3+ in Arsenio Z. Locsin v. Nissan Car Lease Phils., Inc. and Luis Banson, docketed as CA-G.R. SP No. 103720 and the Resolution dated December 9, 2008,*4+ denying Locsins Motion for Reconsideration. The assailed ruling of the CA reversed and set aside the Decision[5] of the Hon. Labor Arbiter Thelma Concepcion (Labor Arbiter Concepcion) which denied Nissan Lease Phils. Inc.s (NCLPI) and Luis T. Bansons (Banson) Motion to Dismiss.

THE FACTUAL ANTECEDENTS

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

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

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

The Compulsory Arbitration Proceedings before the Labor Arbiter.

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

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

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

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

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

On August 28, 2008,*13+ the CA reversed and set aside the Labor Arbiters Order denying the Motion to Dismiss and ruled that Locsin was a corporate officer. Citing PD 902-A, the CA defined corporate officers as those officers of a corporation who are given that character either by the Corporation Code or by the corporations by-laws. In this regard, the CA held:

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

That private respondent is a corporate officer cannot be disputed. The position of Executive VicePresident/Treasurer is specifically included in the roster of officers provided for by the (Amended) ByLaws of petitioner corporation, his duties and responsibilities, as well as compensation as such officer are likewise set forth therein.[14]

Article 280 of the Labor Code, the receipt of salaries by Locsin, SSS deductions on that salary, and the element of control in the performance of work duties indicia used by the Labor Arbiter to conclude that Locsin was a regular employee were held inapplicable by the CA.[15] The CA noted the Labor Arbiters failure to address the fact that the position of EVP/Treasurer is specifically enumerated as an office in the corporations by-laws.[16]

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

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

Private respondent, in belatedly filing this suit before the Labor Arbiter, questioned the legality of his dismissal but in essence, he raises the issue of whether or not the Board of Directors had the authority to remove him from the corporate office to which he was elected pursuant to the By-Laws of the petitioner corporation. Indeed, had private respondent been an ordinary employee, an election

conducted by the Board of Directors would not have been necessary to remove him as Executive VicePresident/Treasurer. However, in an obvious attempt to preclude the application of settled jurisprudence that corporate officers whose position is provided in the by-laws, their election, removal or dismissal is subject to Section 5 of P.D. No. 902-A (now R.A. No. 8799), private respondent would even claim in his Position Paper, that since his responsibilities were akin to that of the companys Executive Vice-President/Treasurer, he was hired under the pretext that he was being elected into said post.[18] [Emphasis supplied.]

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

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

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

THE PETITIONERS ARGUMENTS

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

(1)

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

(2) Whether he is a regular employee of NCLPI under the definition of Article 280 of the Labor Code? and

(3) Whether Locsins position as Executive Vice-President/Treasurer makes him a corporate officer thereby excluding him from the coverage of the Labor Code?

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

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

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

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

THE RESPONDENTS ARGUMENTS

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

THE COURTS RULING

We resolve to deny the petition for lack of merit.

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

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

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

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

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

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

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

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

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

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

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

Section 1. Petition for certiorari.

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

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

ART. 223. APPEAL

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

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

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

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

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

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

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

In Metro Drug, as in the present case, the defect imputed through the NCLPI Motion to Dismiss is the labor arbiters lack of jurisdiction since Locsin is alleged to be a corporate officer, not an employee. Parallelisms between the two cases is undeniable, as they are similar on the following points: (1) in Metro Drug, as in this case, the Labor Arbiter issued an Order denying the Motion to Dismiss by one of the parties; (2) the basis of the Motion to Dismiss is also the alleged lack of jurisdiction by the Labor

Arbiter to settle the dispute; and (3) dissatisfied with the Order of the Labor Arbiter, the aggrieved party likewise elevated the case to the CA via Rule 65.

The similarities end there, however. Unlike in the present case, the CA denied the petition for certiorari and the subsequent Motion for Reconsideration in Metro Drug; the CA correctly found that the proper appellate mechanism was an appeal to the NLRC and not a petition for certiorari under Rule 65. In the present case, the CA took a different position despite our clear ruling in Metro Drug, and allowed, not only the use of Rule 65, but also ruled on the merits.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Third. Even as Executive Vice-President/Treasurer, Locsin already acted as a corporate officer because the position of Executive Vice-President/Treasurer is provided for in Nissans By-Laws. Article IV, Section 4 of these By-Laws specifically provides for this position, as follows:

ARTICLE IV

Officers

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

x x x x

Section 4. Executive Vice-President/Treasurer The Executive Vice-President/Treasurer shall have such powers and perform such duties as are prescribed by these By-Laws, and as may be required of him by the Board of Directors. As the concurrent Treasurer of the Corporation, he shall have the charge of the funds, securities, receipts, and disbursements of the Corporation. He shall deposit, or cause to be deposited, the credit of the Corporation in such banks or trust companies, or with such banks of other depositories, as the Board of Directors may from time to time designate. He shall tender to the President or to the Board of Directors whenever required an account of the financial condition of the corporation and of all his transactions as Treasurer. As soon as practicable after the close of each fiscal year, he shall make and submit to the Board of Directors a like report of such fiscal year. He shall keep correct books of account of all the business and transactions of the Corporation.

In Okol v. Slimmers World International,[40] citing Tabang v. National Labor Relations Commission,[41] we held that

x x x an office is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. [Emphasis supplied.]

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

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

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

a. The Question of Jurisdiction

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

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

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

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

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

x x x x

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

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

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

b.

Precedence of Substantive Merits;

Primacy of Element of Jurisdiction

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

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

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

No pronouncement as to costs.

SO ORDERED.

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