SOCIAL JUSTICE
With such a
SECOND DIVISION
G.R. No. L-34974 July 25, 1974
P. A. ALMIRA, P. M. AMURAO, J. R. ANGELES, R. N. BADIOLA,
LILIA R. BAUTISTA, G. B. LAIZ, N. A. CANLAS, C. S. DE CASTRO,
C. V. CELIS, JR., A. M. DIONISIO, V. S. ESPIRITU, E. S.
GUERRERO, J. R. GUTIERREZ, E. HERMIDA, M. O. LORENZO, R.
S. MARQUEZ, C. G. PAISO, C. DELA PAZ, O. RABULAN, A. C.
SALCEDO, C. P. SAN JUAN, D. T. SULIT, I. F. UY, FELIX BAYANI
LOPEZ, GERRY DOMINGO, Z. DACLISON, A. PANGINDIAN, T. F.
PESTANO, P. FULGAR, BEATRIZ M. LACSON, EROL A.
SUGUITAN, ROSALIE O. ROMERO, AMADOR S. JALOSJOS, R.
G. ARTEFICIO, M. R. BARTOLOME, MANUEL BASILIA, SYLVIA
CAGUIOA, REBECCA DELA CRUZ, ROGELIO I. CRUZ, LIGAYA A.
DURAN, ENRIQUE GALIERO, ANNA T. GAMBOA, FELIPE
LLAVORE ARSENIO A. MENDOZA, JUSTO MUEDEN, STALINITA
QUIJANO, PATRICIA RODRIGUEZ, ALLINAS P. ALBINDA,
RUBEN A. ANTONIO, HERMINIA CANDO, NICOLAS CRUZ,
TEREZA A. CRUZ, ANGELES Q. DELA CRUZ, DANIEL F. BAGUIO,
MARCIAL DE LA LUPO, C. DE CASTRO, AMELIA R. CEDRO ISLA,
ANDRES LACSAMANA, JOSE S. SIENA, ROLANDO S. JOSE,
GERFE P. LOHO, BERNARDO MARTINEZ, GONZALO MORALES,
DIONISIO T. ONG, AUGUSTO SANCHEZ, MANUEL V. TIBAY,
MANUEL ALMENDRALA, E. V. FRANCIA, CARMELO
CAPARROS, ROQUE DUMAGUING, F. P. ESPIRITU, G. I.
MANANSALA, CARLOS SANTOS, FELITO E. CABANGON,
ANGEL TICSAY, ROBERTO FORMELOZA, ROMEO GONZALES,
and FLORENCIO MARQUEZ, petitioners,
vs.
B. F. GOODRICH PHILIPPINES, INC., COURT OF INDUSTRIAL
RELATIONS and HONORABLE JOAQUIN
SALVADOR, respondents.
Domingo E. de Lara & Associates for petitioners.
Manuel O. Chan for private respondent. Jose K Manguiat, Jr.
for respondent Court.
FERNANDO, J.:p
What is readily apparent in this appeal from a decision of
respondent Court of Industrial Relations, declaring a strike
illegal because of the means employed, and dismissing
petitioners, was the high pitch of bitterness that marked the
relationship between labor and management in the
establishment of private respondent, B. F. Goodrich
Philippines, Inc. Even a cursory reading of the records will
make evident that on both sides, there was the feeling that
the other party was guilty of conduct the most reprehensible
LABREL FULL TEXT CASES
resulting in the flagrant disregard of its rights.
background, there was a greater need for objectivity in the
application of the authoritative legal norms to the facts as
found. It cannot be said that respondent Court, more precisely
respondent Joaquin Salvador, then the Judge whose order is
now on appeal, was fully cognizant that such should be the
1
case. It is hard not to lend credence to the contention of
petitioners that there was undue receptivity to the claim of
private respondent, no doubt induced by the skill,
competence, and resourcefulness of its counsel, Atty. Manuel
Chan. It was unfortunate that in some of the crucial stages of
the controversy, petitioners did not have the same
2
advantage. Nonetheless, as will be shown, the strike could
have been viewed with a little less disapproval and even if
declared illegal, need not have been attended with such a
drastic consequence as termination of employment
relationship. This last point is even more compelling
considering the security of tenure which is one of the notable
features in the present Constitution.
3
The facts according to the appealed order follow: "As to the
conduct of the strike and the picketing, this Court's Order of
July 1, 1971 has fully described the same. In the course of the
mass picketing, illegal and unlawful acts were committed by
the respondents such as physically blocking and preventing
the entry of complainant's customers, supplies and other
employees who were not on strike, both in complainant's
premises in Makati and Marikina, Rizal. Injuries likewise were
inflicted on certain employees of complainant. Such acts of
violence and intimidation appear to be of such a widespread
nature so as to create an impression that there is a common
pattern of action set into motion by the respondents. The
actuations of respondents are likewise illegal. In the premises
of complainant at Makati, Rizal, the respondents who picketed
the same on April 20, 1971 were identified ... . Similarly, some
of the respondents who picketed the Marikina premises of
4
complainants were identified .... Further: 'The complainant
caused the publication of notices in both the Manila Times and
Daily Mirror, newspapers of general and wide circulation ... for
all employees not participating in the illegal strike to report for
work on or before April 23, 1971, otherwise such failure will be
considered as participation therein. Such notices were
accompanied by instructions to personnel at all levels on how
reporting for work will be accomplished, considering the
precarious situation in relation to the safety of employees
brought about by the strike of respondents. With respect to
this particular aspect, certain of the respondents who were
not seen in the picket line on or before April 23, 1971 were
identified as having failed to report for work ... . It would
appear, however, that these listed respondents who failed to
report for work likewise were seen picketing the premises of
5
complainant after April 26, 1971, ... ." Then came this
portion: "It would seem that the picketing by respondents has
continued up [to] the present under the same pattern of
coercive activities narrated in our Order Of July 1, 1971.
Physical injuries where inflicted on complainants personnel
manager. Mass picketing with the employment of intimidatory
statements have again started on January 3, 1972. The roof of
Page 1 of 179
the complainants Makati Recap Plant was set on fire on
6
January 13, 1972 ..."
Based on the above facts, it was in the appealed order of
Judge Salvador; "On the basis, therefore, of the motivation as
well as the conduct of the strike, the respondent are declared
to have committed an illegal strike, which is likewise an unfair
7
labor practice" As consequence, in the dispositive portion,
petitioner where "declared to have lost their status of
employees of the complainant corporation as of April 19,
8
1971" The appealed order was handed down on February 4,
1972. Had greater awareness been displayed to the approach
followed by this court in a 1968 decision,Cebu Portland
9
Cement Co. v. Cement Workers Union, as well as to Shell Oil
10
Workers' Union v. Shell Co. of the Philippines, Ltd. there
would have been less certitude displayed in the opinion of
Judge Salvador as to the correctness of its decision. Moreover,
as stated at the outset, if there be deference to what of late
has been so evident, even on the assumption of the illegality
of the strike, there need not be the automatic termination of
the employment relationship, especially so in view of the
command of the present Constitution as to the security of
tenure.
1. It is understandable why respondent Judge Salvador was
unsympathetic to a strike in which petitioners participated,
considering the pendency of a certification election, just
because management would not consider their union as the
exclusive collective bargaining representative. At the very
least, it was premature. Nonetheless, there was this
commendable admission in the appealed order of Judge
Salvador; "Lest we be miscontrued, the ilegality of the strike
for recognition as general proposition is not absolute. We
declare such strike illegal on the basis of the attendant
11
circumstances in this case." It mentioned the attendant
circumstances, but as was apparent in an earlier portion of
such order, what respondent Judge apparently could not resist
was the compelling force of what by now should be an
outmoded view of a strike being "by its very nature ... coercive
12
... ." To display such a predisposition is to ignore the leading
case of Cebu Portland Cement Co. v. Cement Workers
13
Union. For, as was therein pointed out, the ruling in National
14
Labor Union, Inc. v. Philippine Match Factory to the effect
that a strike "is an economic weapon at war with the policy of
the Constitution and the law," resort to which "is not, in plain
15
terms, outlawed," although certainly discouraged, is
obsolete, for as was so clearly pointed out by Justice J. B. L.
Reyes in Cebu Portland Cement Co. v. Cement Workers
16
Union: "For a time, decisions on the issue under
consideration were characterized by strict adherence to the
17
ruling in the Philippine Match Factory Case." Further, it was
stated by him: "The actual break-away from the doctrine laid
down in the Philippine Match Factory case came in Dinglasan
v. National Labor Union, when the discretionary power of the
Court of Industrial Relations to grant affirmative relief was
recognized. ... Thereafter, the doctrine enunciated in
Interwood Employees Association ... that good faith of the
strikers in the staging of the strike is immaterial in the
determination of the legality or illegality of the strike, was
LABREL FULL TEXT CASES
abandoned. In the case of Ferrer v. CIR, et al. the belief of the
strikers that the management was committing unfair labor
practice was properly considered in declaring an otherwise
premature strike, not unlawful, and in affirming the order of
the Labor Court for the reinstatement without back wages of
18
said employees." This 1968 decision of this Court, if present
in the consciousness of respondent Judge Salvador, certainly
could have caused, at the very least, a hesitancy on his part to
declare the strike illegal. This is not to deny that the labor
union ought not to have declared a strike under such
circumstances, but at least, while premature, it could have
been plausibly viewed as inspired by good faith, although
perhaps not guided by sound legal advice.
2. What was set forth in the facts as found by respondent
Judge Salvador would indicate that it was during the picketing,
certainly not peaceful, that the imputed acts of violence did
occur. It cannot be ignored, however, that there were injuries
on both sides because management did not, understandably,
play a passive role confronted as it was with the unruly
disruptive tactics of labor. This is not, by any means, to
condone activities of such character, irrespective of the parties
responsible. It is merely to explain what cannot be justified.
Nonetheless, did the acts in question call for an automatic
finding of illegality? Again, the order issued on February 4,
1972 appeared to be oblivious of a 1971 decision of this
Court, Shell Oil Workers' Union v. Shell Company of the
19
Philippines, Ltd. There it was clearly held: "A strike otherwise
valid, if violent in character, may be placed beyond the pale.
Care is to be taken, however, especially where an unfair labor
practice is involved, to avoid stamping it with illegality just
because it is tainted by such acts. To avoid rendering illusory
the recognition of the right to strike, responsibility in such case
should be individual and not collective. A different conclusion
would be called for, of course, if the existence of force while
the strike lasts is pervasive and widespread, consistently and
deliberately resorted to as a matter of policy. It could be
reasonably concluded then that even if justified as to ends, it
20
becomes illegal because of the means employed. It must be
pointed out likewise that the facts as there found would seem
to indicate a greater degree of violence. Thus: "Respondent
Court must have been unduly impressed by the evidence
submitted by the Shell Company to the effect that the strike
was marred by acts of force, intimidation and violence on the
evening of June 14 and twice in the mornings of June 15 and
16, 1967 in Manila. Attention was likewise called to the fact
that even on the following day, with police officials stationed
at the strike-bound area, molotov bombs did explode and the
streets were obstructed with wooden planks containing
protruding nails. Moreover, in the branches of the Shell
Company in Iloilo City as well as in Bacolod, on dates
unspecified, physical injuries appeared to have been inflicted
on management personnel. Respondent Court in the appealed
decision did penalize with loss of employment the ten
individuals responsible for such acts. Nor is it to be lost sight of
that before the certification on June 27, 1967, one month had
elapsed during which the Union was on strike. Except on those
few days specified then, the Shell Company could not allege
that the strike was conducted in a manner other than
Page 2 of 179
peaceful. Under the circumstances, it would be going too far
21
to consider that it thereby became illegal." Then, mention
was made of a decision "in Insular Life Assurance Co., Ltd.
Employees' Association v. Insular Life Assurance Co., Ltd.
[where] there is the recognition by this Court, speaking
through Justice Castro, of picketing as such being 'inherently
explosive.' It is thus clear that not every form of violence
suffices to affix the seal of illegality on a strike or to cause the
22
loss of employment by the guilty party."
There was in that case a concurring opinion by Justice Barredo
which elicited the approval of the present Chief Justice. Thus:
"All these, however, do not mean, on the other hand, that
petitioner's strike should necessarily be held to be illegal. It is
always a wholesome attitude in cases of this nature to give but
secondary importance to strict technicalities, whether of
substantive or remedial law, and to constantly bear in mind
the human values involved which are beyond pecuniary
23
estimation.
It would seem, therefore, to reiterate a point, that on the date
of the appealed order of February 4, 1972, a less
condemnatory attitude to the appearance of violence as such
was part of the law of the land. It is to be admitted that this is
one of those close cases. What is merely emphasized is that
the imputation of illegality on the ground of the means
employed is not automatically called for.
3. This is not to say that the appealed order is totally bereft of
support in law. It is merely to point out that the facts as found
did not point automatically and unerringly to so severe a
result, namely the dismissal of petitioners. From a perspective
more attuned to the trend indicated in current decisions of
this Court, the three cited cases being representative, the
conclusion reached could have been cast in a different mold.
In labor law, as in constitutional law, it is no doubt true that
the issues submitted, in the language of Justice Malcolm, may
24
be "determined by the court's approach to them." It is
submitted that the direction indicated in the express language
of both the 1935 and the present Constitution, is that which
25
leads to protection to labor.
As previously noted, both petitioners and private respondent
were guilty of practices far from peaceful in character. The
original blame must of course be assumed by petitioners, for
they ought to have known that the picketing that comes
within the protection of the free speech guarantee is one that
is peaceful. It involves people marching to and fro with
placards to acquaint the public with the facts of a labor
dispute. So it has been ruled fromMortera v. Court of
26
Industrial Relations a 1947 decision, to Chan Bros., Inc. v.
Federacion Obrera de la Industria Tabaquera y Otros
27
Trabajadores de Filipinas decided in January of this year.
When they obstructed entrance into the premises of private
respondent, they ought to have known that they were inviting
reprisal. It has been observed of course that in labor
controversies the unstructured incoherencies of vehement
protest for grievances, sincerely even if erroneously felt, may
easily flare up into rowdy conduct. So it did come about. The
LABREL FULL TEXT CASES
appealed order took note of the resulting melee. From the
standpoint of settling a dispute, it would not suffice just to
visit recriminations on either or both parties. The more crucial
question is what to do next.
We start with the circumstances that ought to be considered.
To repeat, the breach of the peace, though started by
petitioners, was not solely their responsibility as it turned out.
For criminal charges and counter charges were filed by one
group against the other. The reply brief of private respondent,
submitted on March 8, 1973, included a memorandum from a
certain Attorney Rolando A. Velasco, speaking of the status of
the criminal cases filed by the group of petitioners against
28
management men, , and of thirteen criminal cases as well as
complaints against at least thirty individuals identified with
29
private respondent. In some of them the complainants did
not press charges, and the cases were dismissed. With the
submission of such data, its objection to the admission of
information similar in character as to the status of the criminal
cases against petitioners loses weight. What is more, it does
not appear as of this date as to who of the petitioners were
found guilty of what was referred to it in the Shell opinion as
committing serious acts of violence. As a matter of fact, the
appealed order merely referred to the instances of picketing
conducted illegally without specifically pin-pointing the
culprits to whom such kind of conduct could be ascribed. It
would seem therefore, that the wholesale dismissal of
petitioners is far from warranted. It is to be admitted though
that on a showing of having engaged in non-peaceful activities
of a serious character, the right to re-admission is defeated.
This conclusion is further fortified by the stress on the security
of tenure that is a notable feature of the present Constitution.
As pointed out in a decision rendered only last
month, Philippine Airlines, Inc. v. Philippine Air Lines Employees
30
Association: "The futility of this appeal becomes even more
apparent considering the express provision in the Constitution
already noted, requiring the State to assure workers 'security
of tenure.' It was not that specific in the 1935 Charter. The
mandate was limited to the State affording protection to
labor, especially to working women and minors, ....
... That is to conform to the ideal of the New
Society, the establishment of which was to
felicitously referred to by the First Lady as
31
the Compassionate Society. To the
possible objection that in this Philippine Air
Lines case, there was an order of
reinstatement, it suffices by way of an
answer that while the facts could be
distinguished, the basic principle in
accordance with a constitutional mandate, in
the language of Justice Cardozo, speaks with
a reverberating clang that drowns all weaker
sounds.
It would imply at the very least that where a penalty less
punitive would suffice, whatever missteps may be committed
by labor ought not to be visited with a consequence so severe.
Page 3 of 179
It is not only because of the law's concern for the workingman.
There is, in addition, his family to consider. Unemployment
brings untold hardships and sorrows on those dependent on
the wage-earner. The misery and pain attendant on the loss of
jobs then could be avoided if there be acceptance of the view
that under all the circumstances of this case, petitioners
should not be deprived of their means of livelihood. Nor is this
to condone what had been done by them. For all this while,
since private respondent considered them separated from the
service, they had not been paid. From the strictly juridical
standpoint, it cannot be too strongly stressed, to follow Davis
32
in his masterly work, Discretionary Justice, that where a
decision may be made to rest an informed judgment rather
than rigid rules, all the equities of the case must be accorded
their due weight. Finally, labor law determinations, to quote
from Bultmann, should be not only secundum rationem but
also secundum caritatem.

4. This is all that needs to be said except to remind petitioners

that the basic doctrine underlying the provisions of the
Constitution so solicitous of labor as well as the applicable
statutory norms is that both the working force and
management are necessary components of the economy. The
rights of labor have been expanded. Concern is evident for its
welfare. The advantages thus conferred, however, call for
attendant responsibilities. The ways of the law are not to be
ignored. Those who seek comfort from the Shelter that it
affords should be the last to engage in activities which negate
the very concept of a legal order as antithetical to force and
coercion. What is equally important is that in the steps to be
taken by it in the pursuit of what it believes to be its rights, the
advice of those conversant with the requirements of legal
norms should be sought and should not be ignored. It is even
more important that reason and not violence should be its
milieu.

WHEREFORE, the appealed order of February 4, 1972 as

affirmed in a resolution of March 14, 1972 is reversed and set
aside. Petitioners against whom no criminal charges filed in
relation to their acts referred to in this decision are still
pending are ordered reinstated to their employment, with the
right to backpay corresponding to eighteen (18) months, at
the respective rates of compensation they were being paid on
February 4, 1972, without any deduction corresponding to any
possible income earned elsewhere since their dismissal to the
present. Those petitioners against whom criminal complaints
have been filed shall be reinstated, with the right to backpay
as herein indicated, only upon the final dismissal of said cases
or their acquittal therein. Respondent Court is hereby ordered
to implement this decision as expeditiously as possible. No
costs.

Zaldivar, Barredo, Antonio, Fernandez and Aquino, JJ., concur.

LABREL FULL TEXT CASES Page 4 of 179

 FIRST DIVISION
[G.R. No. 47800. December 2, 1940.]
MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET
AL., Respondents.
Maximo Calalang in his own behalf. Solicitor General Ozaeta
and Assistant Solicitor General Amparo for respondents
Williams, Fragante and Bayan City Fiscal Mabanag for the
other respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF
COMMONWEALTH ACT No. 648; DELEGATION OF LEGISLATIVE
POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS AND
SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS TO
PROMULGATE RULES AND REGULATIONS. The provisions of
section 1 of Commonwealth Act No. 648 do not confer
legislative power upon the Director of Public Works and the
Secretary of Public Works and Communications. The authority
therein conferred upon them and under which they
promulgated the rules and regulations now complained of is
not to determine what public policy demands but merely to
carry out the legislative policy laid down by the National
Assembly in said Act, to wit, "to promote safe transit upon,
and avoid obstructions on, roads and streets designated as
national roads by acts of the National Assembly or by
executive orders of the President of the Philippines" and to
close them temporarily to any or all classes of traffic
"whenever the condition of the road or the traffic thereon
makes such action necessary or advisable in the public
convenience and interest." The delegated power, if at all,
therefore, is not the determination of what the law shall be,
but merely the ascertainment of the facts and circumstances
upon which the application of said law is to be predicated. To
promulgate rules and regulations on the use of national roads
and to determine when and how long a national road should
be closed to traffic, in view of the condition of the road or the
traffic thereon and the requirements of public convenience
and interest, is an administrative function which cannot be
directly discharged by the National Assembly. It must depend
on the discretion of some other government official to whom
is confided the duty of determining whether the proper
occasion exists for executing the law. But it cannot be said that
the exercise of such discretion is the making of the law.
2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY;
GOVERNMENTAL AUTHORITY. Commonwealth Act No. 548
was passed by the National Assembly in the exercise of the
paramount police power of the state. Said Act, by virtue of
which the rules and regulations complained of were
promulgated, aims to promote safe transit upon and avoid
obstructions on national roads, in the interest and
convenience of the public. In enacting said law, therefore, the
National Assembly was prompted by considerations of public
convenience and welfare. It was inspired by a desire to relieve
congestion of traffic, which is, to say the least, a menace to
LABREL FULL TEXT CASES
public safety. Public welfare, then, lies at the bottom of the
enactment of said law, and the state in order to promote the
general welfare may interfere with personal liberty, with
property, and with business and occupations. Persons and
property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and
prosperity of the state (U.S. v. Gomer Jesus, 31 Phil., 218). To
this fundamental aim of our Government the rights of the
individual are subordinated. Liberty is a blessing without which
life is a misery, but liberty should not be made to prevail over
authority because then society will fall into anarchy. Neither
should authority be made to prevail over liberty because then
the individual will fall into slavery. The citizen should achieve
the required balance of liberty and authority in his mind
through education and, personal discipline, so that there may
be established the resultant equilibrium, which means peace
and order and happiness for all. The moment greater authority
is conferred upon the government, logically so much is
withdrawn from the residuum of liberty which resides in the
people. The paradox lies in the fact that the apparent
curtailment of liberty is precisely the very means of insuring its
preservation.
3. ID.; ID.; SOCIAL JUSTICE. Social justice is "neither
communism, nor despotism, nor atomism, nor anarchy," but
the humanization of laws and the equalization of social and
economic forces by the State so that justice in its rational and
objectively secular conception may at least be approximated.
Social justice means the promotion of the welfare of all the
people, the adoption by the Government of measures
calculated to insure economic stability of all the competent
elements of society, through the maintenance of a proper
economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the
adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the
existence of all governments on the time-honored principle of
salus populi est suprema lex. Social justice, therefore, must be
founded on the recognition of the necessity of
interdependence among divers and diverse units of a society
and of the protection that should be equally and evenly
extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and
paramount objective of the state of promoting the health,
comfort, and quiet of all persons, and of bringing about "the
greatest good to the greatest number."
DECISION
LAUREL, J.:
Maximo Calalang, in his capacity as a private citizen and as a
taxpayer of Manila, brought before this court this petition for
a writ of prohibition against the respondents, A. D. Williams,
as Chairman of the National Traffic Commission; Vicente
Fragante, as Director of Public Works; Sergio Bayan, as Acting
Page 5 of 179
Secretary of Public Works and Communications; Eulogio
Rodriguez, as Mayor of the City of Manila; and Juan
Dominguez, as Acting Chief of Police of Manila.
It is alleged in the petition that the National Traffic
Commission, in its resolution of July 17, 1940, resolved to
recommend to the Director of Public Works and to the
Secretary of Public Works and Communications that animal-
drawn vehicles be prohibited from passing along Rosario
Street extending from Plaza Calderon de la Barca to
Dasmarias Street, from 7:30 a.m. to 12:30 p.m. and from 1:30
p.m. to 5:30 p.m.; and along Rizal Avenue extending from the
railroad crossing at Antipolo Street to Echague Street, from 7
a.m. to 11 p.m., from a period of one year from the date of the
opening of the Colgante Bridge to traffic; that the Chairman of
the National Traffic Commission, on July 18, 1940
recommended to the Director of Public Works the adoption of
the measure proposed in the resolution aforementioned, in
pursuance of the provisions of Commonwealth Act No. 548
which authorizes said Director of Public Works, with the
approval of the Secretary of Public Works and
Communications, to promulgate rules and regulations to
regulate and control the use of and traffic on national roads;
that on August 2, 1940, the Director of Public Works, in his
first indorsement to the Secretary of Public Works and
Communications, recommended to the latter the approval of
the recommendation made by the Chairman of the National
Traffic Commission as aforesaid, with the modification that the
closing of Rizal Avenue to traffic to animal-drawn vehicles be
limited to the portion thereof extending from the railroad
crossing at Antipolo Street to Azcarraga Street; that on August
10, 1940, the Secretary of Public Works and Communications,
in his second indorsement addressed to the Director of Public
Works, approved the recommendation of the latter that
Rosario Street and Rizal Avenue be closed to traffic of animal-
drawn vehicles, between the points and during the hours as
above indicated, for a period of one year from the date of the
opening of the Colgante Bridge to traffic; that the Mayor of
Manila and the Acting Chief of Police of Manila have enforced
and caused to be enforced the rules and regulations thus
adopted; that as a consequence of such enforcement, all
animal-drawn vehicles are not allowed to pass and pick up
passengers in the places above-mentioned to the detriment
not only of their owners but of the riding public as well.
It is contended by the petitioner that Commonwealth Act No.
548 by which the Director of Public Works, with the approval
of the Secretary of Public Works and Communications, is
authorized to promulgate rules and regulations for the
regulation and control of the use of and traffic on national
roads and streets is unconstitutional because it constitutes an
undue delegation of legislative power. This contention is
untenable. As was observed by this court in Rubi v. Provincial
Board of Mindoro (39 Phil, 660, 700), "The rule has nowhere
been better stated than in the early Ohio case decided by
Judge Ranney, and since followed in a multitude of cases,
namely: The true distinction therefore is between the
delegation of power to make the law, which necessarily
involves a discretion as to what it shall be, and conferring an
LABREL FULL TEXT CASES
authority or discretion as to its execution, to be exercised
under and in pursuance of the law. The first cannot be done;
to the latter no valid objection can be made. (Cincinnati, W. &
Z. R. Co. v. Commrs. Clinton County, 1 Ohio St., 88.)
Discretion, as held by Chief Justice Marshall in Wayman v.
Southard (10 Wheat., 1) may be committed by the Legislature
to an executive department or official. The Legislature may
make decisions of executive departments or subordinate
officials thereof, to whom it has committed the execution of
certain acts, final on questions of fact. (U.S. v. Kinkead, 248
Fed., 141.) The growing tendency in the decisions is to give
prominence to the necessity of the case."cralaw virtua1aw
library
Section 1 of Commonwealth Act No. 548 reads as
follows:jgc:chanrobles.com.ph
"SECTION 1. To promote safe transit upon, and avoid
obstructions on, roads and streets designated as national
roads by acts of the National Assembly or by executive orders
of the President of the Philippines, the Director of Public
Works, with the approval of the Secretary of Public Works and
Communications, shall promulgate the necessary rules and
regulations to regulate and control the use of and traffic on
such roads and streets. Such rules and regulations, with the
approval of the President, may contain provisions controlling
or regulating the construction of buildings or other structures
within a reasonable distance from along the national roads.
Such roads may be temporarily closed to any or all classes of
traffic by the Director of Public Works and his duly authorized
representatives whenever the condition of the road or the
traffic thereon makes such action necessary or advisable in the
public convenience and interest, or for a specified period, with
the approval of the Secretary of Public Works and
Communications."cralaw virtua1aw library
The above provisions of law do not confer legislative power
upon the Director of Public Works and the Secretary of Public
Works and Communications. The authority therein conferred
upon them and under which they promulgated the rules and
regulations now complained of is not to determine what public
policy demands but merely to carry out the legislative policy
laid down by the National Assembly in said Act, to wit, "to
promote safe transit upon and avoid obstructions on, roads
and streets designated as national roads by acts of the
National Assembly or by executive orders of the President of
the Philippines" and to close them temporarily to any or all
classes of traffic "whenever the condition of the road or the
traffic makes such action necessary or advisable in the public
convenience and interest." The delegated power, if at all,
therefore, is not the determination of what the law shall be,
but merely the ascertainment of the facts and circumstances
upon which the application of said law is to be predicated. To
promulgate rules and regulations on the use of national roads
and to determine when and how long a national road should
be closed to traffic, in view of the condition of the road or the
traffic thereon and the requirements of public convenience
and interest, is an administrative function which cannot be
directly discharged by the National Assembly. It must depend
Page 6 of 179
on the discretion of some other government official to whom
is confided the duty of determining whether the proper
occasion exists for executing the law. But it cannot be said that
the exercise of such discretion is the making of the law. As was
said in Lockes Appeal (72 Pa. 491): "To assert that a law is less
than a law, because it is made to depend on a future event or
act, is to rob the Legislature of the power to act wisely for the
public welfare whenever a law is passed relating to a state of
affairs not yet developed, or to things future and impossible to
fully know." The proper distinction the court said was this:
"The Legislature cannot delegate its power to make the law;
but it can make a law to delegate a power to determine some
fact or state of things upon which the law makes, or intends to
make, its own action depend. To deny this would be to stop
the wheels of government. There are many things upon which
wise and useful legislation must depend which cannot be
known to the law-making power, and, must, therefore, be a
subject of inquiry and determination outside of the halls of
legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmea, G.R. Nos.
46076 and 46077, promulgated June 12, 1939, and in
Pangasinan Transportation v. The Public Service Commission,
G.R. No. 47065, promulgated June 26, 1940, this Court had
occasion to observe that the principle of separation of powers
has been made to adapt itself to the complexities of modern
governments, giving rise to the adoption, within certain limits,
of the principle of "subordinate legislation," not only in the
United States and England but in practically all modern
governments. Accordingly, with the growing complexity of
modern life, the multiplication of the subjects of governmental
regulations, and the increased difficulty of administering the
laws, the rigidity of the theory of separation of governmental
powers has, to a large extent, been relaxed by permitting the
delegation of greater powers by the legislative and vesting a
larger amount of discretion in administrative and executive
officials, not only in the execution of the laws, but also in the
promulgation of certain rules and regulations calculated to
promote public interest.
The petitioner further contends that the rules and regulations
promulgated by the respondents pursuant to the provisions of
Commonwealth Act No. 548 constitute an unlawful
interference with legitimate business or trade and abridge the
right to personal liberty and freedom of locomotion.
Commonwealth Act No. 548 was passed by the National
Assembly in the exercise of the paramount police power of the
state.
Said Act, by virtue of which the rules and regulations
complained of were promulgated, aims to promote safe
transit upon and avoid obstructions on national roads, in the
interest and convenience of the public. In enacting said law,
therefore, the National Assembly was prompted by
considerations of public convenience and welfare. It was
inspired by a desire to relieve congestion of traffic. which is, to
say the least, a menace to public safety. Public welfare, then,
lies at the bottom of the enactment of said law, and the state
in order to promote the general welfare may interfere with
LABREL FULL TEXT CASES
personal liberty, with property, and with business and
occupations. Persons and property may be subjected to all
kinds of restraints and burdens, in order to secure the general
comfort, health, and prosperity of the state (U.S. v. Gomez
Jesus, 31 Phil., 218). To this fundamental aim of our
Government the rights of the individual are subordinated.
Liberty is a blessing without which life is a misery, but liberty
should not be made to prevail over authority because then
society will fall into anarchy. Neither should authority be made
to prevail over liberty because then the individual will fall into
slavery. The citizen should achieve the required balance of
liberty and authority in his mind through education and
personal discipline, so that there may be established the
resultant equilibrium, which means peace and order and
happiness for all. The moment greater authority is conferred
upon the government, logically so much is withdrawn from the
residuum of liberty which resides in the people. The paradox
lies in the fact that the apparent curtailment of liberty is
precisely the very means of insuring its preservation.
The scope of police power keeps expanding as civilization
advances. As was said in the case of Dobbins v. Los Angeles
(195 U.S. 223, 238; 49 L. ed. 169), "the right to exercise the
police power is a continuing one, and a business lawful today
may in the future, because of the changed situation, the
growth of population or other causes, become a menace to
the public health and welfare, and be required to yield to the
public good." And in People v. Pomar (46 Phil., 440), it was
observed that "advancing civilization is bringing within the
police power of the state today things which were not thought
of as being within such power yesterday. The development of
civilization, the rapidly increasing population, the growth of
public opinion, with an increasing desire on the part of the
masses and of the government to look after and care for the
interests of the individuals of the state, have brought within
the police power many questions for regulation which
formerly were not so considered."cralaw virtua1aw library
The petitioner finally avers that the rules and regulations
complained of infringe upon the constitutional precept
regarding the promotion of social justice to insure the well-
being and economic security of all the people. The promotion
of social justice, however, is to be achieved not through a
mistaken sympathy towards any given group. Social justice is
"neither communism, nor despotism, nor atomism, nor
anarchy," but the humanization of laws and the equalization of
social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be
approximated. Social justice means the promotion of the
welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the
competent elements of society, through the maintenance of a
proper economic and social equilibrium in the interrelations of
the members of the community, constitutionally, through the
adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the
existence of all governments on the time-honored principle of
salus populi est suprema lex.
Page 7 of 179
Social justice, therefore, must be founded on the recognition
of the necessity of interdependence among divers and diverse
units of a society and of the protection that should be equally
and evenly extended to all groups as a combined force in our
social and economic life, consistent with the fundamental and
paramount objective of the state of promoting the health,
comfort, and quiet of all persons, and of bringing about "the
greatest good to the greatest number."cralaw virtua1aw
library

In view of the foregoing, the writ of prohibition prayed for is

hereby denied, with costs against the petitioner. So ordered.

Avancea, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.

LABREL FULL TEXT CASES Page 8 of 179


SECOND DIVISION
G.R. No. L-30543 July 15, 1975
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
RODRIGO CAWILI, defendant-appellant.
Office of the Solicitor General Felix Q. Antonio, Assistant
Solicitor General Hector C. Fule and Solicitor Vicente A. Torres
for plaintiff-appellee.
Juan T. Aquino (as Counsel de Oficio) for defendant-appellant.
FERNANDO, J.:
The difficulty that faces appellant Rodrigo Cawili, prosecuted
and convicted for the crime of rape in the lower court, arises
from the coherent and straight-forward story narrated by the
offended party, a thirteen-year old girl, who, while asleep in
her house was taken by surprise by the accused and thus fell
victim to his carnal desires. Nonetheless, there is in the brief
submitted by counsel a sustained effort to seek a reversal
predicated on the ground that an appraisal of the testimony
offered by the prosecution would reveal that the
constitutional presumption of innocence had not been
1
overcome. A careful study of the records, however, discloses
that the lower court did consider carefully and meticulously
the evidence of both the complainant and the accused. It was
his conclusion that there was enough proof to satisfy the
requirement that guilt be shown beyond reasonable doubt.
We are not justified in viewing the matter differently. We
affirm.
The victim of rape in this case is Elizabeth de Jesus, who, at the
time of the commission of the offense, was thirteen years of
age. She was in the sixth grade. She began by stating that she
was asleep in her house at Barrio Almacen, Hermosa, Bataan,
at about 10:00 in the evening of February 11, 1968. Then she
continued: "I was awakened by a certain weight upon my body
and when I was awakened, accused Rodrigo Cawili was on top
2
of me and [I] felt pain in my private parts." She then pushed
and kicked him and shouted at the top of her voice "Inang"
3
(Mother). Asked why she had felt such pain, she answered
4 14
that his genital organ was inserted in hers. Obviously alarmed
by her shout, Rodrigo Cawili released her and ran downstairs;
her mother, awakened by the shout, went to the kitchen and
came back with a bolo to chase Cawili but she did not catch up
with
5
him. On cross-examination, Elizabeth de Jesus admitted that
when she went to bed she had her panties on, but that when
she woke up, she noticed that not only was appellant on top of
6 15
her but also that she was divested of such garment. The trial
court itself did not merely accept her story. It pursued the
LABREL FULL TEXT CASES
7
matter further. She explained that the previous night, a
Saturday, she had attended a party in Barrio Pulo, Hermosa,
Bataan, one that lasted until almost morning. All day the next
day, she pressed clothes. Thus it was that on the night of
February 11, 1968, she went to bed tired and drowsy. She
slept soundly. It was not unexpected then for appellant to be
able to remove such garment and for him to place himself on
8
top of her, without her immediately noticing it. When the
incident happened, on February 11, 1968, the young girl's
father was not at home. When he came back from work from
Subic, Zambales, on February 17, 1968, his daughter was so
ashamed of what had happened to her that she did not even
tell him specifically that appellant had succeeded in having
carnal knowledge of her. It was only after she was brought to a
doctor on February 19, 1968, and it was discovered that she
had a swollen vulva, a swollen urethral orifice and a ruptured
hymen with two healed lacerations, 9 that she admitted to her
father that appellant succeeded in his designs. Rodrigo Cawili,
a neighbor and a "compadre" of the young victim's mother,
was readily recognized by Elizabeth de Jesus because "the
house was bright inside, it being lighted by a lamp, second,
there was a light on the post just opposite our house, and
10
third, it was a moonlit night." The facts narrated above gave
rise to the charge of rape against Rodrigo Cawili.
After trial duly had, he was convicted and sentenced to suffer
the penalty of reclusion perpetua, to indemnify the offended
party and to recognize and support the offspring, if any. The
case is before us now on appeal. As noted at the outset, the
principal ground relied upon as the basis for reversal is that
the constitutional presumption of innocence had not been
overcome by proof beyond reasonable doubt. While there is a
recognition that the appraisal of the lower court of the
evidence offered is accorded deference and respect, it is
submitted that such finding cannot prevail in the absence of a
showing that suffices to overturn what is so clearly expressed
11
in the fundamental law that guilt is not to be presumed. As a
statement of juridical norm, that is correct. This Court has
repeatedly stressed that accusation cannot be considered as
synonymous with culpability, and the evidence offered by the
prosecution must meet the required standard. Only then is a
12
conviction warranted. It is on that basis that in several
recent decisions, a person accused of and sentenced for rape
13
succeeded in obtaining a reversal. This is not, however, as
already mentioned, one such case.
1. In appellant's brief, the principal authority cited in support
of the plea that the constitutional presumption of innocence
had not been overcome is an excerpt from Justice Laurel's
opinion in People v. Manoji. What was conveniently left out
was the opening phrase of the citation which certainly casts a
different light on the matter. Accuracy demands that this
particular sentence relied upon he quoted in full: "In the light
of the facts and circumstances of record, we feel that it is
better to acquit a man on reasonable doubt, even though he
may in reality be guilty, than to confine in the penitentiary for
the rest of his natural life a person who may be innocent.
..." As a matter of fact, the opening sentence of that
particular paragraph starts with this phrase: "Upon the other
Page 9 of 179
hand, there are certain facts which if taken together are
sufficient to raise in the mind of the court a grave doubt as to
16
the guilt of the defendant-appellant, ..." In this case, on the
contrary, the testimony of the offended party, so firm and so
categorical, does not give rise to any such misgivings. When
put on the stand by her counsel, she was able to narrate
clearly and concisely the untoward event that befell her in the
evening on question. Afterwards, she was cross-examined
17
intensively and exhaustively for two days. Questions
searching in character but unavoidable considering the nature
of the offense, quite embarassing for a young girl of tender
years, came not only from the defense but also from the
judge, desirous of ascertaining the truth and conscious of the
dire penalty that goes with conviction for this heinous crime.
At one stage, her counsel had to ask the court for a recess of
five minutes as she was evidently under strain and she was
18
feeling dizzy. The court granted a suspension of the session
not for five minutes sought but for ten minutes. Moreover,
19
right afterwards, it was adjourned. The grueling ordeal to
which she was subjected continued all throughout the next
day when the hearing was resumed. Her version of what
transpired came under the most rigorous scrutiny, again from
both the defense and the court itself. No contradiction was
elicited although it was quite obvious that she would rather
not remember the details of that unfortunate incident. Twice
the session had to be suspended because she was in
20
tears. The second time, the court itself was moved to
21
declare: "The witness is still crying. Let us have a recess."
2. This notwithstanding, counsel for appellant would have the
temerity to assert that the testimony of complainant was
22
"evasive." He would seek to impress on us that there was
not enough evidence to warrant conviction for the offense of
rape and would imply that perhaps only trespass to dwelling
was committed. Such a contention is devoid of merit. As was
23
stressed in People v. Baylon: "The other point raised in the
brief for appellant that the crime of rape was not shown to
have been committed defies rationality, let alone
commonsense. Time and time again, this Court had correctly
observed that no woman, especially one of tender age, would
willingly expose herself to the embarrassment of a public trial
wherein she would have not only to admit but also to narrate
the violation of her person, if such indeed were not the case.
Far better it is in not a few cases to spare herself the
humiliation if there be some other way of bringing the
offender to justice. Here, there was such a testimony coming
from the offended party, firm, categorical, straightforward. ...
It is quite a strain on one's credulity to believe that under such
circumstances, the young girl's honor remained unsullied, the
nefarious design unfulfilled. To repeat, appellant had not
24
made out a case for a reversal." The succeeding paragraph
in the opinion therein rendered likewise deserves mention:
"Nor is this all. As was noted in a recent case, People vs.
Molina, it is manifest in the decisions of this Court that where
the offended parties are young and immature girls like the
victim in this case, there is a marked receptivity on its part to
lend credence to their version of what transpired. It is not to
be wondered at. The state, as parens patriae, is under the
obligation to minimize the risk of harm to those, who, because
LABREL FULL TEXT CASES
of their minority, are as yet unable to take care of themselves
fully. Those of tender years deserve its utmost protection.
Moreover, the injury in cases of rape is not inflicted on the
unfortunate victim alone. The consternation it causes her
family must also be taken into account. It may reflect a failure
to abide by the announced concern in the fundamental law for
such institution. There is all the more reason then for the
rigorous application of the penal law with its severe penalty
25
for this offense, whenever warranted."
3. There is one other matter equally deserving of attention.
Counsel for appellant did not even mention the defense
offered by his client. It is understandable why. In the
statement of the accused taken before Corporal Cipriano
26
Vistan and subscribed before the Municipal Judge Bernabe
T. Peaflor of Hermosa, Bataan, he admitted having entered
the house of complainant with the explanation that he made a
mistake due to his being in a state of intoxication, but denied
having done anything reprehensible. At the trial, he had
another version. He would rely on alibi. This is how the lower
court disposed of the matter: "The defense interposed by the
accused is alibi. His testimony is to the effect that starting
from 9:00 o'clock in the evening of February 11, 1968, he was
in his house at Almacen, Hermosa, Bataan, asleep with his wife
and child. He asserts that the filing of the instant criminal
charge against him was ill-motivated, because his wife and the
spouses Dominador de Jesus and Rufina Santos had a
misunderstanding; that the spouses used to buy goods on
credit from their store and failed to pay their account; that
prior to February 11, 1968, the spouses tried to get some
more goods on credit which he refused, because the old debt
was not paid; that because of the incident, the spouses went
to the extent of approaching Nicanor Sioson, the owner of the
lot where his store is erected for the purpose of having him
ejected from Sioson's lot. The accused further testified that he
was forced to give his statement, Exhibit C, and had to sign it
because he was mauled. He showed a scar on the upper left
eyebrow; and [said] that he signed his statement not before
the subscribing officer, Municipal Judge Peaflor, but in jail.
The defense deserves no serious consideration. The accused
could not produce any one of the persons he mentioned ... to
corroborate his testimony. His claim that his sworn statement,
Exhibit C, was forcibly taken out of him as evidenced by his
swollen left eyebrow, was belied both by Pat. Conrado Alvaro
of the Hermosa Police Force, who fetched the accused from
his house to the Municipal Building for investigation, and by
P.C. Sgt. Cipriano Vistan. Pat. Alvaro testified that when he
made a preliminary inquiry, the accused admitted to him
having entered the house of Dominador de Jesus on the night
in question because he was drunk. Pat. Alvaro denied having
mauled the accused. Likewise Sgt. Vistan declared that in the
course of his investigation, the accused revealed to him that
he (accused) was boxed by Dominador de Jesus, father of the
complainant, [thus explaining] the swollen face and cut on the
27
upper left eyebrow." What had been stated earlier as to the
ordeal undergone by the offended party when she was placed
on the stand to give her credible and competent testimony
with a clear identification of the accused would serve to
bolster further the characterization of his defense as
Page 10 of 179
undeserving of serious consideration. Moreover, there is this
28
excerpt from the recent decision of People v. Cudalina: "It
suffices to state that this Court when confronted with the
defense of alibi in rape cases has invariably found it
29
unconvincing and unsatisfactory."

WHEREFORE, the appealed decision of March 31, 1969 by the

then Judge Tito V. Tizon of the Court of First Instance of
Bataan is affirmed. Costs against appellant.

Barredo, Antonio, Aquino and Concepcion, Jr., JJ., concur.

LABREL FULL TEXT CASES Page 11 of 179

FIRST DIVISION unlawfully and feloniously induce and/or
seduce his student at Assumption College,
MICHAEL JOHN Z. MALTO, G.R. No. 164733 complainant, AAA, a minor of 17 years old,
Petitioner, to indulge in sexual intercourse for several
Present: times with him as in fact said accused had
carnal knowledge.
PUNO, C.J., Chairperson,
[5]
SANDOVAL-GUTIERREZ, Contrary to law.
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ. This was subsequently amended as follows:

PEOPLE OF THE PHILIPPINES, The undersigned Assistant City

Respondent. Promulgated: Prosecutor accuses MICHAEL JOHN Z.
September 21, 2007 MALTO of VIOLATION OF SECTION 5(a),
ARTICLE III, REPUBLIC ACT 7610, AS
x-------------------------------------------------- AMENDED, committed as follows:
-x
That on or about and sometime
during the month of November 1997 up to
DECISION 1998, in Pasay City, Metro Manila,
CORONA, J.: Philippines and within the jurisdiction of
this Honorable Court, the above-named
accused, Michael John. Z. Malto, a
Whereas, mankind owes to the child the best it has professor, did then and there willfully,
to give. (Final preambular clause of the Declaration of unlawfully and feloniously take advantage
the Rights of the Child) and exert influence, relationship and moral
ascendancy and induce and/or seduce his
student at Assumption College,
complainant, AAA, a minor of 17 years old,
[1] [2]
This is a petition for review of the decision dated to indulge in sexual intercourse and
lascivious conduct for several times with
July 30, 2004 of the Court of Appeals (CA) in CA-G.R. CR No. him as in fact said accused has carnal
knowledge.
[3]
25925 affirming with modification the decision of Branch 109
[6]
Contrary to law.
of the Regional Trial Court of Pasay City in Criminal Case No.
Petitioner did not make a plea when arraigned;
00-0691 which found petitioner Michael John Z. Malto guilty
hence, the trial court entered for him a plea of not guilty. After
for violation of paragraph 3, Section 5(a), Article III of RA
the mandatory pre-trial, trial on the merits proceeded.
[4]
7610, as amended.
The prosecution established the following:
Petitioner was originally charged in an information

which read: At the time of the incident, private complainant AAA

The undersigned Assistant City
[7]
Prosecutor accuses MICHAEL JOHN Z. was 17 years old. She was a college student at the
MALTO of VIOLATION OF SECTION 5(b),
ARTICLE III, REPUBLIC ACT 7610, AS Assumption College in San Lorenzo Village, Makati City.
AMENDED, committed as follows:
Petitioner, then 28, was her professor in her Philosophy II class
That on or about and sometime
during the month of November 1997 up to in the first semester of the school year 1997 to 1998.
1998, in Pasay City, Metro Manila,
Philippines and within the jurisdiction of On July 18, 1997, AAA was having lunch with her
this Honorable Court, the above-named
accused, Michael John. Z. Malto, a friends when petitioner joined their group. He told them to
professor, did then and there willfully,
LABREL FULL TEXT CASES Page 12 of 179
address him simply as Mike. He handed them his organizer break came, his calls and messages became more frequent.

and asked them to list down their names and contact Their conversation always started innocently but he had a way

numbers. of veering the subject to sex. Young, naive and coming from a

On October 3, 1997, while AAA and her friends were broken family, AAA was soon overwhelmed by petitioners

discussing the movie Kama Sutra, petitioner butted in and persistence and slowly got attracted to him. He was the first

bragged that it was nothing compared to his collection of xxx- person to court her. Soon, they had a mutual understanding

rated films. To the shock of AAAs group, he lectured on and and became sweethearts.

demonstrated sexual acts he had already experienced. He When AAA secured her class card in Philosophy II at

then invited the group to view his collection. the start of the second semester, petitioner told her that he

gave her a final grade of 3. She protested, stating that her mid-
On October 10, 1997, petitioner reiterated his
term grade was 1.2. He gave her a grade of 1.5 when she
invitation to AAA and her friends to watch his collection of
promised not to disclose his intimate messages to her to
pornographic films. Afraid of offending petitioner, AAA and
anyone. He also cautioned her not to tell anyone about their
two of her friends went with him. They rode in his car and he
affair as it could jeopardize his job.
brought them to the Anito Lodge on Harrison St. in Pasay City.

They checked in at a calesa room. Petitioner was disappointed On November 19, 1997, at around 11:00 a.m., AAA

when he found out there was neither a video cassette player agreed to have lunch with petitioner outside the premises of

(on which he could play his video tapes) nor an x-rated show the college. Since she was not feeling well at that time, he

on the closed-circuit television. He suggested that they just asked her to lie down in the backseat of his car. She was
[9]
cuddle up together. AAA and her friends ignored him but he surprised when he brought her to Queensland Lodge on

pulled each of them towards him to lie with him in bed. They Harrison St. in Pasay City. Once inside the motel room, he

resisted until he relented. kissed her at the back and neck, touched her breasts and

placed his hand inside her blouse. She resisted his advances
AAA and her friends regretted having accepted
but he was too strong for her. He stopped only when she got
petitioners invitation. For fear of embarrassment in case their
angry at him.
classmates got wind of what happened, they agreed to keep
On November 26, 1997, petitioner asked AAA to
things a secret. Meanwhile, petitioner apologized for his
come with him so that they could talk in private. He again
actuations.
brought her to Queensland Lodge. As soon as they were inside
Thereafter, petitioner started to show AAA amorous
the room, he took off his shirt, lay down in bed and told
[8]
attention. He called her on the phone and paged her
her, halika na, dito na tayo mag-usap. She refused but he
romantic messages at least thrice a day. When semestral

LABREL FULL TEXT CASES Page 13 of 179

dragged her towards the bed, kissed her lips, neck and breasts
On learning what her daughter underwent in the
and unsnapped her brassiere. She struggled to stop him but he
hands of petitioner, BBB filed an administrative complaint in
overpowered her. He went on top of her, lowered her pants
Assumption College against him. She also lodged a complaint
and touched her private part. He tried to penetrate her but
in the Office of the City Prosecutor of Pasay City which led to
she pushed him away forcefully and she sat up in bed. He
the filing of Criminal Case No. 00-0691.
hugged her tightly saying, Sige na, AAA, pumayag ka na, I
In his defense, petitioner proffered denial and alibi.
wont hurt you. She refused and said, Mike, ayoko. He angrily
He claimed that the alleged incidents on October 3, 1997 and
stood up saying, Fine, hindi na tayo mag-uusap. Dont come to
October 10, 1997 did not happen. He spent October 3, 1997
the faculty room anymore. You know I need this and if you will
with his colleagues Joseph Hipolito and AJ Lagaso while he was
not give in or give it to me, let us end this. She replied, Mike,
busy checking papers and computing grades on October 10,
hindi pa ako ready and it was you who said it will be after my
1997. The last time he saw AAA during the first semester was
debut on December 3, 1997. He insisted that there was no
when she submitted her final paper on October 18, 1997.
difference between having sex then and after her debut. He
On November 19, 1997, between 10:30 a.m. and 1:00
told her, kung hindi ko makukuha ngayon, tapusin na natin
p.m., he sorted out conflicts of class schedules for the second
ngayon. Pressured and afraid of his threat to end their
semester at the Assumption College. On November 26, 1997,
relationship, she hesitantly replied Fine. On hearing this, he
he was at St. Scholasticas College (where he was also teaching)
quickly undressed while commenting ibibigay mo rin pala,
preparing a faculty concert slated on December 12, 1997. At
pinahirapan mo pa ako and laughed. They had sexual
lunch time, he attended the birthday treat of a colleague,
intercourse.
Evelyn Bancoro.
In July 1999, AAA ended her relationship with
th
petitioner. She learned that he was either intimately involved On November 29, 1997, he attended AAAs 18 birthday party.

with or was sexually harassing his students in Assumption That was the last time he saw her.

College and in other colleges where he taught. In particular, he

According to petitioner, AAA became his sweetheart when she
was dismissed from the De La Salle University-Aguinaldo for
was already 19 years old and after he was dismissed from
having sexual relations with a student and sexually harassing
Assumption College. On December 27 and 28, 1998, they
three other students. His employment was also terminated by
spent time together, shared their worries, problems and
Assumption College for sexually harassing two of his students.
dreams and kissed each other. On January 3, 1999, he brought
It was then that AAA realized that she was actually abused by
her to Queensland Lodge where they had sexual intercourse
petitioner. Depressed and distressed, she confided all that
for the first time. It was repeated for at least 20 times from
happened between her and petitioner to her mother, BBB.

LABREL FULL TEXT CASES Page 14 of 179

 (17) Years, Four (4) Months and One (1) Day
January 1999 until they broke up in July 1999, some of which of reclusion temporal as maximum; and (2)
the sum of P75,000.00 as civil indemnity
[14]
were done at either his or her house when no one was around. is DELETED.

The trial court found the evidence for the prosecution

Hence, this petition.
sufficient to sustain petitioners conviction. On March 7, 2001,
Petitioner contends that the CA erred in sustaining his
[10]
it rendered a decision finding petitioner guilty. The
conviction although it found that he did not rape AAA. For
dispositive portion read:
him, he should have been acquitted since there was no rape.
In view of the foregoing, the Court finds the
accused Michael John Malto y Zarsadias He also claims that he and AAA were sweethearts and their
guilty beyond reasonable doubt for
violation of Article III, Section 5(a)[,] sexual intercourse was consensual.
paragraph 3 of RA 7610[,] as amended and
hereby sentences him to reclusion
temporal in its medium period or an Petitioner is wrong.
imprisonment of seventeen (17) years, four
(4) months and one (1) day to twenty (20)
years and to pay civil indemnity in the THE OFFENSE STATED IN THE INFORMATION WAS
amount of Php 75,000.00 and moral and WRONGLY DESIGNATED
exemplary damages of Php 50,000.00 to
minor complainant with subsidiary
[11]
imprisonment in case of insolvency.
In all criminal prosecutions, the accused is entitled to

be informed of the nature and cause of the accusation against

Petitioner questioned the trial courts decision in the CA. In a
[15]
him. Pursuant thereto, the complaint or information against
[12]
decision dated July 30, 2004, the appellate court affirmed
him should be sufficient in form and substance. A complaint or
his conviction even if it found that his acts were not covered
information is sufficient if it states the name of the accused;
by paragraph (a) but by paragraph (b) of Section 5, Article III of
the designation of the offense by the statute; the acts or
RA 7610. It further observed that the trial court failed to fix
omissions complained of as constituting the offense; the name
the minimum term of indeterminate sentence imposed on
of the offended party; the approximate date of the
him. It also ruled that the trial court erred in awarding P75,000
commission of the offense and the place where the offense
civil indemnity in favor of AAA as it was proper only in a
[16]
was committed.
conviction for rape committed under the circumstances under
[13]
which the death penalty was authorized by law. Hence, the The complaint or information shall state the

CA modified the decision of the trial court as follows: designation of the offense given by the statute, aver the acts

WHEREFORE, the appealed or omissions constituting the offense and specify its qualifying
Decision of conviction is AFFIRMED, with
[17]
the MODIFICATION that (1) appellant and aggravating circumstances. If there is no designation of
MICHAEL JOHN MALTO y ZARSADIAS is
hereby sentenced to an indeterminate the offense, reference shall be made to the section or
penalty of Eight (8) Years and One (1) Day [18]
of prision mayor as minimum, to Seventeen subsection of the statute punishing it. The acts or omissions

LABREL FULL TEXT CASES Page 15 of 179

constituting the offense and the qualifying and aggravating
circumstances must be stated in ordinary and concise
language and not necessarily in the language used in the
statute but in terms sufficient to enable a person of common
understanding to know what offense is being charged as well
as its qualifying and aggravating circumstances and for the
[19]
court to pronounce judgment.
The designation of the offense in the information
against petitioner was changed from violation of Section 5(b),
Article III of RA 7610 to violation of Section 5(a), Article III
thereof. Paragraphs (a) and (b) of Section 5, Article III of RA
7610 provide:
Section 5. Child Prostitution and
Other Sexual Abuse. - Children, whether
male or female, who, for money, profit, or
any other consideration or due to the
coercion or influence of any adult,
syndicate or group, indulge in sexual
intercourse or lascivious conduct, are
deemed to be children exploited
in prostitution and other sexual abuse.
The penalty of reclusion temporal in its
medium period to reclusion perpetua shall
be imposed upon the following:
(a) Those who engage in or promote,
facilitate or induce child prostitution
which include, but are not limited to,
the following:
1. Acting as a procurer of
a child prostitute;
2. Inducing a person to be
a client of a child prostitute by
means of written or oral
advertisements or other similar
means;
3. Taking advantage of
influence or relationship to
procure a child as a prostitute;
4. Threatening or using
violence towards a child to engage
him as a prostitute; or
LABREL FULL TEXT CASES
5. Giving monetary
consideration, goods or other
pecuniary benefit to a child with
intent to engage such child in
prostitution.
(b) Those who commit the act of sexual
intercourse or lascivious conduct
with a child exploited in prostitution
or subjected to other sexual abuse:
Provided, That when the victim is
under twelve (12) years of age, the
perpetrators shall be prosecuted
under Article 335, paragraph 3, for
rape and Article 336 of Act No. 3815,
as amended, the Revised Penal Code,
for rape or lascivious conduct, as the
case may be: Provided, that the
penalty for lascivious conduct when
the victim is under twelve (12) years
of age shall be reclusion temporal in
its medium period; and
xxx xxx xxx (emphasis supplied)
The elements of paragraph (a) are:
1. the accused engages in, promotes,
facilitates or induces child prostitution;
2. the act is done through, but not limited
to, the following means:
a. acting as a procurer of a child
prostitute;
b. inducing a person to be a client
of a child prostitute by means of
written or oral advertisements or
other similar means;
c. taking advantage of influence
or relationship to procure a child
as a prostitute;
d. threatening or using violence
towards a child to engage him as
a prostitute or
e. giving monetary consideration,
goods or other pecuniary benefit
to a child with intent to engage
such child in prostitution;
Page 16 of 179
 3. the child is exploited or intended to be and/or seduced by petitioner who was her professor to

exploited in prostitution and indulge in sexual intercourse and lascivious conduct and AAA

4. the child, whether male or female, is was a 17-year old minor. These allegations support a charge

below 18 years of age. for violation of paragraph (b), not paragraph (a), of Section 5,

Article III, RA 7610.

On the other hand, the elements of paragraph (b) are:

1. the accused commits the act of sexual THE REAL NATURE OF THE OFFENSE IS DETERMINED BY
FACTS ALLEGED IN THE INFORMATION, NOT BY THE
intercourse or lascivious conduct; DESIGNATION

2. the act is performed with a child

exploited in prostitution or subjected to The designation in the information of the specific

other sexual abuse and statute violated is imperative to avoid surprise on the accused

3. the child, whether male or female, is and to afford him the opportunity to prepare his defense

below 18 years of age. accordingly. However, the failure to designate the offense by
[21]
statute, or to mention the specific provision penalizing the
Paragraph (a) essentially punishes acts pertaining to
[22]
act, or an erroneous specification of the law
or connected with child prostitution. It contemplates sexual
[23]
violated does not vitiate the information if the facts alleged
abuse of a child exploited in prostitution. In other words,
[24]
clearly recite the facts constituting the crime charged. What
under paragraph (a), the child is abused primarily for profit.
controls is not the title of the information or the designation

On the other hand, paragraph (b) punishes sexual of the offense but the actual facts recited in the
[25]
intercourse or lascivious conduct not only with a child information. In other words, it is the recital of facts of the

exploited in prostitution but also with a child subjected to commission of the offense, not the nomenclature of the

other sexual abuse. It covers not only a situation where a child offense, that determines the crime being charged in the
[26]
is abused for profit but also one in which a child, through information.

coercion, intimidation or influence, engages in sexual

The facts stated in the amended information against
[20]
intercourse or lascivious conduct.
petitioner correctly made out a charge for violation of Section

The information against petitioner did not allege 5(b), Article III, RA 7610. Thus, even if the trial and appellate

anything pertaining to or connected with child prostitution. It courts followed the wrong designation of the offense,

did not aver that AAA was abused for profit. What it charged petitioner could be convicted of the offense on the basis of the

was that petitioner had carnal knowledge or committed sexual facts recited in the information and duly proven during trial.

intercourse and lascivious conduct with AAA; AAA was induced

LABREL FULL TEXT CASES Page 17 of 179

PETITIONER VIOLATED SECTION 5(B), ARTICLE III
OF RA 7610, AS AMENDED
The first element of Section 5(b), Article III of RA 7610
pertains to the act or acts committed by the accused. The
second element refers to the state or condition of the
offended party. The third element corresponds to the minority
or age of the offended party.
The first element was present in this case. Petitioner
committed lascivious conduct against and had sexual
intercourse with AAA in the following instances: (1) on
November 19, 1997, when he kissed her at the back and neck,
touched her breasts and placed his hand inside her blouse to
gratify his lust; (2) on November 26, 1997, when, with lewd
designs, he dragged her towards the bed of the motel room
and forcibly kissed her on the lips, neck and breasts and (3)
when he exerted moral influence on her and pressured her
until she surrendered herself to him on November 26, 1997.
His acts were covered by the definitions of sexual abuse and
lascivious conduct under Section 2(g) and (h) of the Rules and
Regulations on the Reporting and Investigation of Child Abuse
Cases promulgated to implement the provisions of RA 7610,
particularly on child abuse:
(g) Sexual abuse includes the employment,
use, persuasion, inducement,
enticement or coercion of a child to engage
in, or assist another person to engage
in, sexual intercourse or lascivious
conduct or the molestation, prostitution, or
incest with children;
(h) Lascivious conduct means the
intentional touching, either directly or
through clothing, of the genitalia, anus,
groin, breast, inner thigh, or buttocks, or
the introduction of any object into the
LABREL FULL TEXT CASES
genitalia, anus or mouth, of any person,
whether of the same or opposite sex, with
an intent to abuse, humiliate, harass,
degrade, or arouse or gratify the sexual
desire of any person, bestiality,
masturbation, lascivious exhibition of the
genitals or public area of a person.
(emphasis supplied)
The second element was likewise present here. The
[27]
following pronouncement in People v. Larin is significant:
A child is deemed exploited in
prostitution or subjected to other sexual
abuse, when the child indulges in sexual
intercourse or lascivious conduct (a) for
money, profit, or any other consideration;
or (b) under the coercion or influence of
any adult, syndicate or group. (emphasis
supplied)
On November 19, 1997, due to the influence of
petitioner, AAA indulged in lascivious acts with or allowed him
to commit lascivious acts on her. This was repeated on
November 26, 1997 on which date AAA also indulged in sexual
intercourse with petitioner as a result of the latters influence
and moral ascendancy. Thus, she was deemed to be a child
subjected to other sexual abuse as the concept is defined in
the opening paragraph of Section 5, Article III of RA 7610 and
in Larin.
The third element of the offense was also satisfied.
Section 3 (a), Article I of RA 7610 provides:
SECTION 3. Definition of Terms.
(a) Children refers [to] persons below
eighteen (18) years of age or those over
but are unable to fully take care of
themselves or protect themselves from
abuse, neglect, cruelty, exploitation or
discrimination because of a physical or
mental disability or condition; (emphasis
supplied)
Page 18 of 179
 sexual act was consensual. It requires proof that the accused
On November 19, 2007 and November 26, 2007, AAA
and the victim were lovers and that she consented to the
was a child as she was below 18 years of age. She was
[30]
sexual relations.
therefore within the protective mantle of the law.

For purposes of sexual intercourse and lascivious

Since all three elements of the crime were present,
conduct in child abuse cases under RA 7610, the sweetheart
the conviction of petitioner was proper.
defense is unacceptable. A child exploited in prostitution or

VIOLATION OF SECTION 5(B), ARTICLE III OF RA 7610 AND subjected to other sexual abuse cannot validly give consent to
RAPE ARE SEPARATE AND DISTINCT CRIMES
sexual intercourse with another person.

Petitioner was charged and convicted for violation of The language of the law is clear: it seeks to punish

Section 5(b), Article III of RA 7610, not rape. The offense for [t]hose who commit the act of sexual
intercourse or lascivious conduct with a
which he was convicted is punished by a special law while rape child exploited in prostitution or subjected
to other sexual abuse.
[28]
is a felony under the Revised Penal Code. They have
[29]
different elements. The two are separate and distinct
Unlike rape, therefore, consent is immaterial in cases
crimes. Thus, petitioner can be held liable for violation of
involving violation of Section 5, Article III of RA 7610. The mere
Section 5(b), Article III of RA 7610 despite a finding that he did
act of having sexual intercourse or committing lascivious
not commit rape.
conduct with a child who is exploited in prostitution or

CONSENT OF THE CHILD IS IMMATERIAL IN CRIMINAL subjected to sexual abuse constitutes the offense. It is
CASES INVOLVING VIOLATION OF SECTION 5, ARTICLE
III OFRA 7610 a malum prohibitum, an evil that is proscribed.

A child cannot give consent to a contract under our

Petitioner claims that AAA welcomed his kisses and
[31]
civil laws. This is on the rationale that she can easily be the
touches and consented to have sexual intercourse with him.
victim of fraud as she is not capable of fully understanding or
They engaged in these acts out of mutual love and affection.
knowing the nature or import of her actions. The State,
But may the sweetheart theory be invoked in cases of child
as parens patriae, is under the obligation to minimize the risk
prostitution and other sexual abuse prosecuted under Section
of harm to those who, because of their minority, are as yet
5, Article III of RA 7610? No.
[32]
unable to take care of themselves fully. Those of tender
[33]
The sweetheart theory applies in acts of years deserve its protection.

lasciviousness and rape, felonies committed against or without

the consent of the victim. It operates on the theory that the

LABREL FULL TEXT CASES Page 19 of 179


The harm which results from a childs bad decision in a
sexual encounter may be infinitely more damaging to her than
a bad business deal. Thus, the law should protect her from the
[34]
harmful consequences of her attempts at adult sexual
[35]
behavior. For this reason, a child should not be deemed to
have validly consented to adult sexual activity and to
surrender herself in the act of ultimate physical intimacy
under a law which seeks to afford her special protection
against abuse, exploitation and discrimination. (Otherwise,
sexual predators like petitioner will be justified, or even
unwittingly tempted by the law, to view her as fair game and
vulnerable prey.) In other words, a child is presumed by law to
be incapable of giving rational consent to any lascivious act or
[36]
sexual intercourse.
This must be so if we are to be true to the
constitutionally enshrined State policy to promote the
physical, moral, spiritual, intellectual and social well-being of
[37]
the youth. This is consistent with the declared policy of the
State
[T]o provide special protection to children
from all forms of abuse, neglect,
cruelty, exploitation and
discrimination, and other conditions
prejudicial to their development; provide
sanctions for their commission and carry
out a program for prevention and
deterrence of and crisis intervention in
situations of child abuse, exploitation, and
[38]
discrimination. (emphasis supplied)
as well as to
intervene on behalf of the child when the
parents, guardian, teacher or person having
care or custody of the child fails or is unable
to protect the child against abuse,
exploitation, and discrimination or
when such acts against the child are
committed by the said parent,
guardian, teacher or person having care
LABREL FULL TEXT CASES
[39]
and custody of the same. (emphasis
supplied)
This is also in harmony with the foremost
consideration of the childs best interests in all actions
concerning him or her.
The best interest of children shall be the
paramount consideration in all actions
concerning them, whether undertaken by
public or private social welfare institutions,
courts of law, administrative authorities,
and legislative bodies, consistent with the
principles of First Call for Children as
enunciated in the United Nations
Convention on the Rights of the
Child. Everyeffort shall be exerted to
promote the welfare of children and
enhance their opportunities for a useful
[40]
and happy life. (emphasis supplied)
PETITIONER MAY ENJOY THE BENEFITS OF THE
INDETERMINATE SENTENCE LAW
The penalty prescribed for violation of the provisions
of Section 5, Article III of RA 7610 is reclusion temporal in its
medium period to reclusion perpetua. In the absence of any
mitigating or aggravating circumstance, the proper imposable
penalty is reclusion temporal in its maximum period, the
medium of the penalty prescribed by the
law.
[41]
Notwithstanding that RA 7610 is a special law,
petitioner may enjoy the benefits of the Indeterminate
Sentence Law.
[42]
Since the penalty provided in RA 7610 is
taken from the range of penalties in the Revised Penal Code, it
is covered by the first clause of Section 1 of the Indeterminate
[43]
Sentence Law. Thus, he is entitled to a maximum term
which should be within the range of the proper imposable
penalty of reclusion temporal in its maximum period (ranging
from 17 years, 4 months and 1 day to 20 years) and a
Page 20 of 179
 [48]
minimum term to be taken within the range of the penalty decision. Thus, moral damages and exemplary damages

next lower to that prescribed by the law: prision mayor in its should be separate items of award.

medium period to reclusion temporal in its minimum period

AAA testified that she was emotionally devastated
(ranging from 8 years and 1 day to 14 years and 8 months).
and lost touch of her inner self as a result of what petitioner

THE AWARD OF DAMAGES SHOULD BE MODIFIED did to her. Because of the mental anxiety and wounded

feelings caused by petitioner to her, she had several sessions

[49]
The trial court awarded AAA P75,000 as civil with the dean for student affairs and the guidance

indemnity, P50,000 as moral and exemplary damages. The CA counselor of Assumption College as well as with a psychiatrist.

deleted the award for civil indemnity. It correctly reasoned This was corroborated by her mother and the dean of student

that the award was proper only in a conviction for rape affairs of Assumption College. Thus, she is entitled to moral

committed under the circumstances under which the death damages of P50,000. However, in the absence of an

penalty is authorized by law. Consistent, however, with the aggravating circumstance, the grant of exemplary damages is
[50]
objective of RA 7610 to afford children special protection unwarranted.

against abuse, exploitation and discrimination and with the

Accordingly, the petition is hereby DENIED.
principle that every person who contrary to law, willfully or
Petitioner Michael John Z. Malto is hereby found guilty of
negligently causes damage to another shall indemnify the
violating Section 5(b), Article III of RA 7610, as amended, for
[44]
latter for the same, civil indemnity to the child is proper in
which he is sentenced to 14 years and 8 months of reclusion
a case involving violation of Section 5(b), Article III of RA
temporal as minimum to 20 years of reclusion temporal as
[45]
7610. Every person criminally liable is civilly liable. The rule
maximum. He is further ordered to pay AAA P50,000 as civil
is that, in crimes and quasi-delicts, the defendant shall be
indemnity and P50,000 for moral damages.
liable for all damages which are the natural and probable

consequences of the act or omission complained Costs against petitioner.

[46]
of. Thus, P50,000 civil indemnity ex delicto shall be
SO ORDERED.
awarded in cases of violation of Section 5(b), Article III of RA
[47]
7610.

Moreover, the CA erred in affirming the grant

of P50,000 as moral and exemplary damages. The rule is that,

in every case, trial courts must specify the award of each item

of damages and make a finding thereon in the body of the

LABREL FULL TEXT CASES Page 21 of 179

EN BANC
G.R. No. 80609 August 23, 1988
PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and
MARILYN ABUCAY, respondents.
Nicanor G. Nuevas for petitioner.
CRUZ, J.:
The only issue presented in the case at bar is the legality of the
award of financial assistance to an employee who had been
dismissed for cause as found by the public respondent.
Marilyn Abucay, a traffic operator of the Philippine Long
Distance Telephone Company, was accused by two
complainants of having demanded and received from them
the total amount of P3,800.00 in consideration of her promise
to facilitate approval of their applications for telephone
1
installation. Investigated and heard, she was found guilty as
2
charged and accordingly separated from the service. She
went to the Ministry of Labor and Employment claiming she
had been illegally removed. After consideration of the
evidence and arguments of the parties, the company was
sustained and the complaint was dismissed for lack of merit.
Nevertheless, the dispositive portion of labor arbiter's decision
declared:
WHEREFORE, the instant complaint
dismissed for lack of merit.
Considering that Dr. Helen Bangayan and
Mrs. Consolacion Martinez are not totally
blameless in the light of the fact that the
deal happened outhide the premises of
respondent company and that their act of
giving P3,800.00 without any receipt is
tantamount to corruption of public officers,
complainant must be given one month pay
for every year of service as financial
3
assistance.
Both the petitioner and the private respondent appealed to
the National Labor Relations Board, which upheld the said
4
decision in toto and dismissed the appeals. The private
respondent took no further action, thereby impliedly
accepting the validity of her dismissal. The petitioner,
however, is now before us to question the affirmance of the
above- quoted award as having been made with grave abuse
of discretion.
LABREL FULL TEXT CASES
In its challenged resolution of September 22, 1987, the NLRC
said:
... Anent the award of separation pay as
financial assistance in complainant's favor,
We find the same to be equitable, taking
into consideration her long years of service
to the company whereby she had
undoubtedly contributed to the success of
respondent. While we do not in any way
approve of complainants (private
respondent) mal feasance, for which she is
to suffer the penalty of dismissal, it is for
reasons of equity and compassion that we
resolve to uphold the award of financial
5
assistance in her favor.
The position of the petitioner is simply stated: It is conceded
that an employee illegally dismissed is entitled to
reinstatement and backwages as required by the labor laws.
However, an employee dismissed for cause is entitled to
neither reinstatement nor backwages and is not allowed any
relief at all because his dismissal is in accordance with law. In
the case of the private respondent, she has been awarded
financial assistance equivalent to ten months pay
corresponding to her 10 year service in the company despite
her removal for cause. She is, therefore, in effect rewarded
rather than punished for her dishonesty, and without any legal
authorization or justification. The award is made on the
ground of equity and compassion, which cannot be a
substitute for law. Moreover, such award puts a premium on
dishonesty and encourages instead of deterring corruption.
For its part, the public respondent claims that the employee is
sufficiently punished with her dismissal. The grant of financial
is assistance is not intended as a reward for her offense but
merely to help her for the loss of her employment after
working faithfully with the company for ten years. In support
of this position, the Solicitor General cites the cases of
Firestone Tire and Rubber Company of the Philippines v.
6 7
Lariosa and Soco v. Mercantile Corporation of Davao, where
the employees were dismissed for cause but were
nevertheless allowed separation pay on grounds of social and
compassionate justice. As the Court put it in the Firestone
case:
In view of the foregoing, We rule that
Firestone had valid grounds to dispense with
the services of Lariosa and that the NLRC
acted with grave abuse of discretion in
ordering his reinstatement. However,
considering that Lariosa had worked with the
company for eleven years with no known
previous bad record, the ends of social and
compassionate justice would be served if he
is paid full separation pay but not
reinstatement without backwages by the
NLRC.
Page 22 of 179
In the said case, the employee was validly dismissed for theft
but the NLRC nevertheless awarded him full separation pay for
his 11 years of service with the company. In Soco, the
employee was also legally separated for unauthorized use of a
company vehicle and refusal to attend the grievance
proceedings but he was just the same granted one-half month
separation pay for every year of his 18-year service.
8
Similar action was taken in Filipro, Inc. v. NLRC, where the
employee was validly dismissed for preferring certain dealers
in violation of company policy but was allowed separation pay
for his 2 years of service. In Metro Drug Corporation v.
9
NLRC, the employee was validly removed for loss of
confidence because of her failure to account for certain funds
but she was awarded separation pay equivalent to one-half
month's salary for every year of her service of 15 years. In
10
Engineering Equipment, Inc. v. NLRC, the dismissal of the
employee was justified because he had instigated labor unrest
among the workers and had serious differences with them,
among other grounds, but he was still granted three months
separation pay corresponding to his 3-year service. In New
11
Frontier Mines, Inc. v. NLRC, the employee's 3- year service
was held validly terminated for lack of confidence and
abandonment of work but he was nonetheless granted three
months separation pay. And in San Miguel Corporation v.
12
Deputy Minister of Labor and Employment, et al ., full
separation pay for 6, 10, and 16 years service, respectively,
was also allowed three employees who had been dismissed
after they were found guilty of misappropriating company
funds.
The rule embodied in the Labor Code is that a person
dismissed for cause as defined therein is not entitled to
13
separation pay. The cases above cited constitute the
exception, based upon considerations of equity. Equity has
14
been defined as justice outside law, being ethical rather
than jural and belonging to the sphere of morals than of
15
law. It is grounded on the precepts of conscience and not on
16
any sanction of positive law. Hence, it cannot prevail against
the expressed provision of the labor laws allowing dismissal of
employees for cause and without any provision for separation
pay.
Strictly speaking, however, it is not correct to say that there is
no express justification for the grant of separation pay to
lawfully dismissed employees other than the abstract
consideration of equity. The reason is that our Constitution is
replete with positive commands for the promotion of social
justice, and particularly the protection of the rights of the
workers. The enhancement of their welfare is one of the
primary concerns of the present charter. In fact, instead of
confining itself to the general commitment to the cause of
labor in Article II on the Declaration of Principles of State
Policies, the new Constitution contains a separate article
devoted to the promotion of social justice and human rights
with a separate sub- topic for labor. Article XIII expressly
recognizes the vital role of labor, hand in hand with
management, in the advancement of the national economy
and the welfare of the people in general. The categorical
LABREL FULL TEXT CASES
mandates in the Constitution for the improvement of the lot
of the workers are more than sufficient basis to justify the
award of separation pay in proper cases even if the dismissal
be for cause.
The Court notes, however, that where the exception has been
applied, the decisions have not been consistent as to the
justification for the grant of separation pay and the amount or
rate of such award. Thus, the employees dismissed for theft in
the Firestone case and for animosities with fellow workers in
the Engineering Equipment case were both awarded
separation pay notnvithstanding that the first cause was
certainly more serious than the second. No less curiously, the
employee in the Soco case was allowed only one-half month
pay for every year of his 18 years of service, but in Filipro the
award was two months separation pay for 2 years service. In
Firestone, the emplovee was allowed full separation pay
corresponding to his 11 years of service, but in Metro, the
employee was granted only one-half month separation pay for
every year of her 15year service. It would seem then that
length of service is not necessarily a criterion for the grant of
separation pay and neither apparently is the reason for the
dismissal.
The Court feels that distinctions are in order. We note that
heretofore the separation pay, when it was considered
warranted, was required regardless of the nature or degree of
the ground proved, be it mere inefficiency or something graver
like immorality or dishonesty. The benediction of compassion
was made to cover a multitude of sins, as it were, and to
justify the helping hand to the validly dismissed employee
whatever the reason for his dismissal. This policy should be re-
examined. It is time we rationalized the exception, to make it
fair to both labor and management, especially to labor.
There should be no question that where it comes to such valid
but not iniquitous causes as failure to comply with work
standards, the grant of separation pay to the dismissed
employee may be both just and compassionate, particularly if
he has worked for some time with the company. For example,
a subordinate who has irreconcilable policy or personal
differences with his employer may be validly dismissed for
demonstrated loss of confidence, which is an allowable
ground. A working mother who has to be frequently absent
because she has also to take care of her child may also be
removed because of her poor attendance, this being another
authorized ground. It is not the employee's fault if he does not
have the necessary aptitude for his work but on the other
hand the company cannot be required to maintain him just
the same at the expense of the efficiency of its operations. He
too may be validly replaced. Under these and similar
circumstances, however, the award to the employee of
separation pay would be sustainable under the social justice
policy even if the separation is for cause.
But where the cause of the separation is more serious than
mere inefficiency, the generosity of the law must be more
discerning. There is no doubt it is compassionate to give
separation pay to a salesman if he is dismissed for his inability
Page 23 of 179
to fill his quota but surely he does not deserve such generosity
if his offense is misappropriation of the receipts of his sales.
This is no longer mere incompetence but clear dishonesty. A
security guard found sleeping on the job is doubtless subject
to dismissal but may be allowed separation pay since his
conduct, while inept, is not depraved. But if he was in fact not
really sleeping but sleeping with a prostitute during his tour of
duty and in the company premises, the situation is changed
completely. This is not only inefficiency but immorality and the
grant of separation pay would be entirely unjustified.
We hold that henceforth separation pay shall be allowed as a
measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where
the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft
or illicit sexual relations with a fellow worker, the employer
may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever other
name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have
the effect, of rewarding rather than punishing the erring
employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay
has nothing to do with the wrong he has committed. Of course
it has. Indeed, if the employee who steals from the company is
granted separation pay even as he is validly dismissed, it is not
unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if
he is again found out. This kind of misplaced compassion is not
going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the
protection and concern of the Constitution.
loyalty that she should have strengthened instead of betraying
during all of her 10 years of service with the company. If
regarded as a justification for moderating the penalty of
dismissal, it will actually become a prize for disloyalty,
perverting the meaning of social justice and undermining the
efforts of labor to cleanse its ranks of all undesirables.
The Court also rules that the separation pay, if found due
under the circumstances of each case, should be computed at
the rate of one month salary for every year of service,
assuming the length of such service is deemed material. This is
without prejudice to the application of special agreements
between the employer and the employee stipulating a higher
rate of computation and providing for more benefits to the
17
discharged employee.
WHEREFORE, the petition is GRANTED. The challenged
resolution of September 22,1987, is AFFIRMED in totoexcept
for the grant of separation pay in the form of financial
assistance, which is hereby DISALLOWED. The temporary
restraining order dated March 23, 1988, is LIFTED. It is so
ordered.
Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano,
Gancayco, Bidin, Sarmiento, Cortes and Medialdea, JJ., concur.

The policy of social justice is not intended to countenance

wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it
certainly will not condone the offense. Compassion for the
poor is an imperative of every humane society but only when
the recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels
any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may
do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great
policy of our Constitution is not meant for the protection of
those who have proved they are not worthy of it, like the
workers who have tainted the cause of labor with the
blemishes of their own character.

Applying the above considerations, we hold that the grant of

separation pay in the case at bar is unjustified. The private
respondent has been dismissed for dishonesty, as found by
the labor arbiter and affirmed by the NLRC and as she herself
has impliedly admitted. The fact that she has worked with the
PLDT for more than a decade, if it is to be considered at all,
should be taken against her as it reflects a regrettable lack of
LABREL FULL TEXT CASES Page 24 of 179
FIRST DIVISION conspiracy was not proved by substantial evidence. In lieu of
reinstatement and considering the already strained relations
G.R. No. 199890 August 19, 2013 between the parties, ELA Magbanua ordered the payment to
Daabay of backwages and separation pay or retirement
JEROME M. DAABAY, PETITIONER, benefits, as may be applicable. The dispositive portion of ELA
vs. Magbanuas Decision reads:
COCA-COLA BOTTLERS PHILS., INC., RESPONDENT.
WHEREFORE, premises considered, judgment is hereby
DECISION rendered declaring the dismissal of complainant Jerome
Daabay as illegal, and ordering respondents to pay
complainant his backwages in the amount of [P]750,996.00.
REYES, J.:

Additionally, respondents are hereby ordered to pay

This resolves petitioner Jerome M. Daabays (Daabay) Verified
1 2 complainant his separation pay at one (1) month for every
Petition for Review , which assails the Decision dated June 24,
3 year of service, or his retirement benefits based on the latest
2011 and Resolution dated December 9, 2011 of the Court of
Collective Bargaining Agreement prior to his
Appeals (CA) in CA-G.R. SP No. 03369-MIN.
suspension/termination.
The case stems from a complaint for illegal dismissal, illegal
Other claims are hereby ordered dismissed for failure to
suspension, unfair labor practice and monetary claims filed by
substantiate.
Daabay against respondent Coca-Cola Bottlers Phils., Inc.
4
(Coca-Cola) and three officers of the company. The records 13
indicate that the employment of Daabay with Coca-Cola as SO ORDERED.
Sales Logistics Checker was terminated by the company in
5 Dissatisfied, Coca-Cola, Huang, Salvador and Garcia, appealed
June 2005, following receipt of information from one Cesar
Sorin (Sorin) that Daabay was part of a conspiracy that allowed from ELA Magbanuas Decision to the National Labor Relations
6
the pilferage of company property. Commission (NLRC). Daabay filed a separate appeal to ask for
his reinstatement without loss of seniority rights, the payment
The allegations of Sorin were embodied in an affidavit which of backwages instead of separation pay or retirement benefits,
7
he executed on April 16, 2005. The losses to the company and an award of litigation expenses, moral and exemplary
were also confirmed by an inventory and audit conducted by damages and attorneys fees.
Coca-Colas Territory Finance Head, Silvia Ang. Such losses
comprised of cases of assorted softdrinks, empty bottles, The NLRC reversed the finding of illegal dismissal. In a
8 14
missing shells and missing pallets valued at P20,860,913.00. Resolution dated August 27, 2009, the NLRC held that there
was "reasonable and well-founded basis to dismiss [Daabay],
Coca-Cola then served upon Daabay a Notice to Explain with not only for serious misconduct, but also for breach of trust or
Preventive Suspension, which required him to explain in loss of confidence arising from such company
15
writing his participation in the scheme that was reported to losses." Daabays participation in the conspiracy was
involve logistics checkers and gate guards. In compliance sufficiently established. Several documents such as checkers
therewith, Daabay submitted an Explanation dated April 19, receipts and sales invoices that made the fraudulent scheme
16
2005 wherein he denied any participation in the reported possible were signed by Daabay. The NLRC also found fault in
pilferage.
9 Daabay for his failure to detect the pilferage, considering that
the "timely recording and monitoring as security control for
the outgoing [sic] of company products are necessarily
A formal investigation on the matter ensued. Eventually, Coca-
connected with the functions, duties and responsibilities
Cola served upon Daabay a Notice of Termination that cited 17
reposed in him as Sales Logistics Checker." Notwithstanding
pilferage, serious misconduct and loss of trust and confidence
its ruling on the legality of the dismissal, the NLRC awarded
as grounds. At the time of his dismissal, Daabay had been a
retirement benefits in favor of Daabay. The dispositive portion
regular employee of Coca-Cola for eight years, and was
of its Resolution reads:
receiving a monthly pay ofP20,861.00, exclusive of other
10
benefits.
WHEREFORE, premises considered, the appeal of complainant
is DENIED for lack of merit, while that of respondent Coca-Cola
Daabay then filed the subject labor complaint against Coca-
Bottlers Philippines, Inc. is GRANTED.
Cola and Roberto Huang (Huang), Raymund Salvador
(Salvador) and Alvin Garcia (Garcia), who were the President
and Plant Logistics Managers, respectively, of Coca-Cola at the Accordingly, the assailed 18 April 2008 Decision of the
11
time of the dispute. On April 18, 2008, Executive Labor Executive Labor Arbiter is hereby REVERSED and SET ASIDE,
Arbiter Noel Augusto S. Magbanua (ELA Magbanua) rendered and a new judgment is entered DISMISSING the present
12
his Decision in favor of Daabay. He ruled that Daabay was complaint for want of evidence.
illegally dismissed because his participation in the alleged
LABREL FULL TEXT CASES Page 25 of 179
Let, however, this case be REMANDED to the Executive Labor
Arbiter or the Regional Arbitration Branch of origin for the
computation of complainants retirement benefits in
accordance with the latest Collective Bargaining Agreement
prior to his termination.
18
SO ORDERED.
Coca-Colas partial motion for reconsideration to assail the
award of retirement benefits was denied by the NLRC in a
19
Resolution dated October 30, 2009. The NLRC explained that
there was a need "to humanize the severe effects of
20
dismissal" and "tilt the scales of justice in favor of labor as a
21
measure of equity and compassionate social justice." Daabay
also moved to reconsider, but his motion remained unresolved
22
by the NLRC. Undaunted, Coca-Cola appealed to the CA.
The CA agreed with Coca-Cola that the award of retirement
benefits lacked basis considering that Daabay was dismissed
for just cause. It explained:
We are not oblivious of the instances where the Court
awarded financial assistance to dismissed employees, even
though they were terminated for just causes. Equity and social
justice was the vague justification. Quickly realizing the
unjustness of these [s]o-called equitable awards, the Supreme
Court took the opportunity to curb and rationalize the grant of
financial assistance to legally dismissed employees. Thus, in
Philippine Long Distance Telephone Company v. National
Labor Relations Commission, the Supreme Court recognized
the harsh realities faced by employees that forced them,
despite their good intentions, to violate company policies, for
which the employer can rightfully terminate their
employment. For these instances, the award of financial
assistance was allowed. But, in clear and unmistakable
language, the Supreme Court also held that the award of
financial assistance should not be given to validly terminated
employees, whose offenses are iniquitous or reflective of
23
some depravity in their moral character. x x x. (Citation
omitted)
Thus, the dispositive portion of its Decision dated June 24,
2011 reads:
FOR THESE REASONS, the writ of certiorari is GRANTED; the
portion of the Resolution promulgated on 27 August 2009
remanding of the case to the Executive Labor Arbiter or the
Regional Arbitration Branch of origin for computation of
retirement benefits is DELETED.
24
SO ORDERED.
Daabays motion for reconsideration was denied in a
25
Resolution dated December 9, 2011; hence, this petition.
It bears stressing that although the assailed CA decision and
resolution are confined to the issue of Daabays entitlement to
retirement benefits, Daabay attempts to revive through the
LABREL FULL TEXT CASES
present petition the issue of whether or not his dismissal had
factual and legal bases. Thus, instead of confining itself to the
issue of whether or not Daabay should be entitled to the
retirement benefits that were awarded by the NLRC, the
petition includes a plea upon the Court to affirm ELA
Magbanuas Decision, with the modification to include: (a) his
allowances and other benefits or their monetary equivalent in
the computation of his backwages; (b) his actual
reinstatement; and (c) damages, attorneys fees and litigation
expenses.
We deny the petition.
We emphasize that the appeal to the CA was brought not by
Daabay but by Coca-Cola, and was limited to the issue of
whether or not the award of retirement benefits in favor of
Daabay was proper. Insofar as CA-G.R. SP No. 03369-MIN was
concerned, the correctness of the NLRCs pronouncement on
the legality of Daabays dismissal was no longer an issue, even
beyond the appellate courts authority to modify. In Andaya v.
26
NLRC, the Court emphasized that a party who has not
appealed from a decision may not obtain any affirmative relief
from the appellate court other than what he had obtained
from the lower court, if any, whose decision is brought up on
27 28
appeal. Further, we explained in Yano v. Sanchez, that the
entrenched procedural rule in this jurisdiction is that a party
who did not appeal cannot assign such errors as are designed
to have the judgment modified. All that he can do is to make a
counter-assignment of errors or to argue on issues raised
below only for the purpose of sustaining the judgment in his
29
favor. Due process prevents the grant of additional awards
30
to parties who did not appeal. Considering that Daabay had
not yet appealed from the NLRCs Resolution to the CA, his
plea for the modification of the NLRCs findings was then
misplaced. For the Court to review all matters that are raised
in the petition would be tolerant of what Daabay was barred
to do before the appellate court.
Before the CA and this Court, Daabay attempts to justify his
plea for relief by stressing that he had filed his own motion for
reconsideration of the NLRCs Resolution dated August 27,
2009 but the same remained unacted upon by the NLRC. Such
bare allegation, however, is insufficient to allow the issue to
be disturbed through this petition. We take note of Daabays
failure to attach to his petition a copy of the motion which he
allegedly filed with the NLRC. It is also quite baffling why
Daabay does not appear to have undertaken steps to seek the
NLRCs resolution on the motion, even after it remained
unresolved for more than two years from its supposed filing.
Granting that such motion to reconsider was filed with the
NLRC, the labor tribunal shall first be given the opportunity to
review its findings and rulings on the issue of the legality of
Daabays dismissal, and then correct them should it find that it
erred in its disposition. The Court cannot, by this petition, pre-
empt the action which the NLRC, and the CA in case of an
appeal, may take on the matter.
Page 26 of 179
Even as we limit our present review to the lone issue that was
involved in the assailed CA decision and resolution, the Court
finds no cogent reason to reverse the ruling of the CA.
Daabay was declared by the NLRC to have been lawfully
dismissed by Coca-Cola on the grounds of serious misconduct,
breach of trust and loss of confidence. Our pronouncement in
31
Philippine Airlines, Inc. v. NLRC on the issue of whether an
employee who is dismissed for just cause may still claim
retirement benefits equally applies to this case. We held:
At the risk of stating the obvious, private respondent was not
separated from petitioners employ due to mandatory or
optional retirement but, rather, by termination of
employment for a just cause. Thus, any retirement pay
provided by PALs "Special Retirement & Separation Program"
dated February 15, 1988 or, in the absence or legal inadequacy
thereof, by Article 287 of the Labor Code does not operate nor
can be made to operate for the benefit of private respondent.
Even private respondents assertion that, at the time of her
lawful dismissal, she was already qualified for retirement does
not aid her case because the fact remains that private
respondent was already terminated for cause thereby
rendering nugatory any entitlement to mandatory or optional
retirement pay that she might have previously
32
possessed. (Citation omitted and emphasis ours)
In ruling against the grant of the retirement benefits, we also
take note of the NLRCs lone justification for the award, to wit:
Where from the facts obtaining, as in this case, there is a need
to humanize the severe effects of dismissal and where
complainants entitlement to retirement benefits are even
admitted in [Coca-Colas+ motion to reduce bond, *w+e can do
no less but tilt the scales of justice in favor of labor as a
measure of equity and compassionate social justice, taking
into consideration the circumstances obtaining in this
33
case. (Emphasis ours)
Being intended as a mere measure of equity and social justice,
the NLRCs award was then akin to a financial assistance or
separation pay that is granted to a dismissed employee
notwithstanding the legality of his dismissal. Jurisprudence on
such financial assistance and separation pay then equally
apply to this case. The Court has ruled, time and again, that
financial assistance, or whatever name it is called, as a
measure of social justice is allowed only in instances where
the employee is validly dismissed for causes other than serious
34
misconduct or those reflecting on his moral character. We
explained in Philippine Long Distance Telephone Company v.
35
NLRC :
[S]eparation pay shall be allowed as a measure of social justice
only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the
valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual
LABREL FULL TEXT CASES
relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the
ground of social justice.
A contrary rule would, as the petitioner correctly argues, have
the effect, of rewarding rather than punishing the erring
employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay
has nothing to do with the wrong he has committed. Of course
it has. Indeed, if the employee who steals from the company is
granted separation pay even as he is validly dismissed, it is not
unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if
he is again found out. This kind of misplaced compassion is not
going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the
36
protection and concern of the Constitution. (Emphasis ours)
Clearly, considering that Daabay was dismissed on the grounds
of serious misconduct, breach of trust and loss of confidence,
the award based on equity was unwarranted.1wphi1
Even the NLRCs reliance on the alleged admission by Coca-
Cola in its motion to reduce bond that Daabay is entitled to
retirement benefits is misplaced. Apparently, the supposed
admission by Coca-Cola was based on the following:
In support of its motion to reduce bond, Coca-cola seeks
leniency for its failure to include in the posting of the bond the
monetary award for *Daabays+ retirement benefits which, as
directed by the Executive Labor Arbiter, should be computed
in accordance with the latest Collective Bargaining Agreement
prior to his termination. Coca-Cola explains that the amount of
the retirement benefits has not been determined and there is
37
a need to compute the same on appeal. x x x.
It is patent that the statements made by Coca-Cola were in
light of ELA Magbanuas ruling that Daabay was illegally
dismissed. Furthermore, any admission was only for the
purpose of explaining the non-inclusion of the amount of
retirement benefits in the computation of the appeal bond
posted with the NLRC. Coca-Colas statements should be taken
in such context, and could not be deemed to bind the
company even after the NLRC had reversed the finding of
illegal dismissal. And although retirement benefits, where not
mandated by law, may still be granted by agreement of the
employees and their employer or as a voluntary act of the
38
employer, there is no proof that any of these incidents
attends the instant case.
WHEREFORE, the petition is DENIED. The Decision dated June
24, 2011 and Resolution dated December 9, 2011 of the Court
of Appeals in CA-G.R. SP No. 03369-MIN are AFFIRMED.
SO ORDERED.
Page 27 of 179
THIRD DIVISION
G.R. No. 165951 March 30, 2010
SOLIDBANK CORPORATION, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION; RODOLFO N.
BOMBITA, DANILO J. MEDRANO, DONALD F. MAGLEO,
RONALD M. PASIMIO, JOSE R. PACHECO, ALFREDO TAN,
JUSTICE Z. DEMERRE, SOFIA G. YAP, NICHOLAS DEL ROSARIO,
RAMON R. ABASTA, LUIS S. MASTRILL, REYNALDO E. ALLADO,
DANILO NERY, GRACIANO M. DEL ROSARIO, GEALDINO M.
PARAM, LUCINA D. DE CASTRO, GLORIA MARAYAG,
ROLANDO A. ARIO, BEDELL F. FERRANCULO, MA. BELLA A.
PERALTA, DIONILO M. MARFIL, TERESITA E. ANGELES,
ZENAIDA Q. CAETE, CHERRY KRISTIN C. BAUTISTA, CECILIA
S. ABELLA, MARIE ABIGAIL TONGSON, MADEMIOSETTE
PRINSIPE, RICARDO APOLINAR, BENJAMIN O. CASTAEDA,
JR., LUIS DEL MORAL, JR., JOSE G. RICAFORTE, JR., PATRICIA
LEE, ENRIQUE T. CASTELLVI, RENATO P. MALLARI, ESTRELLA
LOPEZ, MOISES ANGELES, ROLANDO CUNDANGAN,
CONRADO GALANG, CLARO I. NEPOMUCENO, FLORESITA
GOCE, ALBERTO CABALLERO, LEONARDO SANGA, WINIFREDO
MARTINEZ, MA. VICTORIA LABORTE, ROBERTO F. MADRID,
EVELYN S. SERVIETO, MILAGROS MUJER, GIL CABAAS, LILIA
CUAN, NORMA V. GO, IRMA M. MANAOIS, WILFREDO B.
REYES, TESSIE MATEO, RESURECCION SANTOS, BIENVENIDO
M. SILANGIL, GODOFREDO F. DE LEON, NORMAN R. REYES,
ALFONSO S. MORALES, JR., MERCEDITA I. MAGSUMBOL,
ROSARIO G. UMALI, VICENTA LOPEZ, PRISCILLA F. CRUZ, MA.
CARMEN A. YAZON, MARIE EMILLE C. DELA CRUZ, DOROTEA
YAP, RUCIA T. PO, ROMEO C. ROSARIO, RUBEN A. FELEBRICO,
RUBY ROSA M. CARZA, ROBERTO S. DE GUZMAN, LEONORA
T. COMIA, RAMON L. YU, ERLINDA T. CALUMAG, JANE CUA,
FILINO G. MARQUEZ, JAIME C. CHAM, FELOMINO V.
LEGARDA, JUANITO B. ARCEO, MANUEL B. MANZANO,
ROBERTO T. TUALE, SAMUEL Z. ARCILLA, CLEMENTE N.
AGCAMARAN, BENJAMINA D. MONCADA, ILDEFENSO F.
TAGAYON, CARMELO INAMAC, MARICEL D. SALIRE, RICARDO
M. BONDOC, ROLANDO M. HALLIG, ROMEO C. BONDOC,
HENRY F. LEE LEONG, FRANCISCA S. ZABALA, RENE G.
ALBANA, EDUARDO T. JUAN, MERLIN L. VILLASIS, EDWIN O.
CACHO, NICOLAS S. DIAZ, EDUARDO M. LIMBAGA, JESUS P.
TREYES, MAXIMO S. MUOZ, JR., MAYNARDO B. DYTUCO,
AIDA J. PALAFOX, EVANGELINE S. YANZON, DARIO V. ABOGA,
MODESTO V. BALTAZAR, ROBERTO L. MAPA, ISAURO A.
ARELLANO, MAXIMO D. SUNER, NOMER A. VIDAL, EDUARDO
V. ILAGAN, ROMEO D. MENDOZA, FLORO A. BUSTO, FREDDIE
L. UYACO, JOE M. LICAYU, YODEL C. MORALES, ALEXANDER
V. CABALLERO, HERMIN A. DOLORITO, EDWARD C. YOUNG,
MA. TERESA R. LEGASPI, ELMER F. CIERVA, ROMEO
MERCADO, HUMBERTO S. RANCO, CONCEPCION S. YADAO,
CARLO C. DELA RIARTE, EDWIN R. ERMITA, RAYMUND
NIETES, JENNIFER T. ABESAMIS, ARNULFO ALVARES, LUISITO
J. ESTEBAN, CONCHITINA C. MESINA, PING CHAN C. YAO,
LARIZA V. LLANES, LEONARDO S. AVELINO, JR., JAIME T.
ESMERALDA, EDUARDO S. BUENVENTURA, JOSEFINA M.
NIEVES, ERMENILDA P. IGNACIO, MA. VICTORIA G.
LABREL FULL TEXT CASES
CAPULONG, TERESA C. ANDRES, EVELYN C. DEL ROSARIO, and
CONSOLACION AUREA M. SAURA, Respondents.
DECISION
PERALTA, J.:
1
Before this Court is a Petition for Review on certiorari, under
Rule 45 of the Rules of Court, seeking to set aside the May 28,
2 3
2004 Decision and October 28, 2004 Resolution of the Court
of Appeals (CA), in CA-G.R. SP No. 76879. The CA awarded
financial assistance to respondents Rodolfo Bombita et al. out
of "compassionate justice" despite the fact that petitioner
Solidbank Corporation had already paid the respondents their
separation pay in accordance with Article 283 of the Labor
Code.
The facts of the case are as follows:
Sometime in May 2000, petitioner decided to cease its
commercial banking operations and forthwith surrendered to
the Bangko Central ng Pilipinas its expanded banking license.
As a result of petitioners decision to cease its operations,
1,867 of its employees would be terminated.
On July 25, 2000, petitioner sent individual letters to its
employees, including respondents, advising them of its
decision to cease operations and informing them that their
employment would be terminated. The pertinent portions of
said letter are hereunder reproduced, to wit:
With the cessation of the banking operations of Solidbank
Corporation and the surrender of its banking license to the
Bangko Sentral ng Pilipinas (BSP), the employment of all
Solidbankers will have to be terminated.
We regret that your services as an employee of Solidbank are
hereby terminated, effective the close of business hours on 31
August 2000. Your separation package will be in accordance
with the implementing guidelines issued to all officers and
staff in President/CEO D.N. Vistans Memorandum of 14 July
2000. You will receive your separation pay only upon release
of your clearance, but not later than the effectivity date of
your termination from the Bank.
4
We wish you success in your future endeavors.
On July 31, 2000, petitioner sent to the Department of Labor
5
and Employment a letter dated July 28, 2000, informing said
office of the termination of its employees, the pertinent
portions of which read:
In compliance with the provisions of Article 283 of the Labor
Code, we would like to inform the Department of Labor and
Employment that Solidbank Corporation will cease operations
and surrender its banking license to the Bangko Sentral ng
Pilipinas effective 31 August 2000.
Page 28 of 179
Due to the cessation of the Banks operations, the
employment of all officers and staff of Solidbank will be
terminated effective the close of business hours on 31 August
2000. As a result, the Bank will implement a separation
program in accordance with the attached guidelines. The
separation package offered to Solidbankers is more than what
6
is required by law.
Petitioner granted to its employees separation pay equivalent
to 150% of gross monthly pay per year of service, and cash
equivalent of earned and accrued vacation and sick leaves as a
result of their dismissal. Upon receipt of their separation pay,
the employees of petitioner, including respondents,
7
individually signed a "Release, Waiver, and Quitclaim."
On September 27, 2000, respondents filed with the Labor
Arbiter (LA) complaints for illegal dismissal, underpayment of
separation pay, plus damages and attorneys fees, and these
were docketed as NLRC NCR Case Nos. 30-09-03843-00, 30-
1004350-00, 30-10-03928-00, 30-10-04200-00, and 30-10-
04036-00.
8
On July 22, 2002, the LA rendered a Decision ruling that
respondents were validly terminated from employment as a
result of petitioners decision to cease its banking operations.
The LA, however, inspired by compassionate justice, awarded
financial assistance of one months salary to respondents. The
dispositive portion of the Decision reads:
WHEREFORE, the Complaints for illegal dismissal filed by the
complainants under the above-stated case numbers are
hereby dismissed for lack of merit. However, inspired by
compassionate justice, this Office hereby orders the
respondent Solidbank Corporation to provide each
complainant a financial assistance of one months salary.
Metrobanks motion to dismiss the claim against it for want of
jurisdiction is DENIED for lack of merit.
Complainants motion to admit annexes dated March 12,
2001, together with their motions to amend
affidavits/complaints dated January 22, 2001 are hereby
GRANTED for being meritorious.
Solidbanks counterclaim is dismissed for lack of merit.
9 WOULD RESULT IN A HIGHLY ANOMALOUS SITUATION WHERE
SO ORDERED.
Both parties appealed the LAs Decision to the National Labor
Relations Commission (NLRC).
On October 29, 2002, the NLRC rendered a
10
Decision affirming the findings of the LA that respondents
were validly terminated. The NLRC ruled that the closure of a
business is an authorized cause sanctioned under Article 283
of the Labor Code and one that is ultimately a management
prerogative. The NLRC, however, modified the LAs Decision by
increasing the amount of financial assistance to two months
LABREL FULL TEXT CASES
salary out of compassionate justice. The dispositive portion of
the Decision reads:
WHEREFORE, premises considered, the Decision appealed
from is affirmed with modification as to the award of the
financial assistance.
11
SO ORDERED.
Aggrieved by the NLRC Decision, petitioner then appealed to
the CA, specifically questioning the grant of financial
assistance to respondents.
On May 28, 2004, the CA rendered a Decision reversing the
Decision of the NLRC. The CA shared the view of the LA that
respondents should only be awarded one months salary as
financial assistance and not two months salary as previously
decreed by the NLRC. The dispositive portion of the Decision
reads:
WHEREFORE, premises considered, the assailed Decision is
hereby REVERSED, and the 22 July 2002 Decision of the Labor
Arbiter is hereby REINSTATED.
12
SO ORDERED.
Petitioner then filed a motion for reconsideration, which was,
however, denied by the CA in a Resolution dated October 28,
2004.
Hence, herein petition, with petitioner raising the following
assignment of errors, to wit:
THERE IS NO LEGAL BASIS FOR THE COURT OF APPEALS
AWARD OF FINANCIAL ASSISTANCE EQUIVALENT TO ONE-
MONTHS SALARY TO THE RESPONDENTS AFTER ITS FINDING
THAT SOLIDBANK HAS MORE THAN COMPLIED WITH THE
13
MANDATE OF THE LAW ON PAYMENT OF SEPARATION PAY.
THE AWARD OF FINANCIAL ASSISTANCE CANNOT BE JUSTIFIED
ON THE BASIS OF "COMPASSIONATE JUSTICE" AND AS A FORM
14
OF "EQUITABLE RELIEF."
TO SUSTAIN THE COURT OF APPEALS AWARD OF FINANCIAL
ASSISTANCE TO THE 140 VALIDLY-DISMISSED RESPONDENTS
THE SAID RESPONDENTS WOULD BE ACCORDED BETTER
BENEFITS THAN OTHER FORMER SOLIDBANK EMPLOYEES
WHO WERE SIMILARLY SITUATED.
15
The petition is meritorious. The errors being interrelated, this
Court shall discuss the same seriatim.
Before anything else, this Court shall first address the
16
allegations raised by respondents in their Comment, which
deal with the issue of the validity of their termination.
Respondents, in the main, claim that their termination was
Page 29 of 179
unlawful as petitioner did not really cease its
17
operations. Thus, notwithstanding their admission that the
LA, the NLRC, and the CA all ruled in unison that their
termination was in accordance with law, respondents seek this
Courts discretion to reverse such findings.
On this note, it is well settled that this Court is not a trier of
facts. To begin with, the question of whether respondents
were dismissed for authorized cause is a question of fact
which is beyond the province of a petition for review
on certiorari. It is fundamental that the scope of the Supreme
Courts judicial review under Rule 45 of the Rules of Court is
confined only to errors of law. It does not extend to questions
of fact; more so, in labor cases where the doctrine applies with
18
greater force.
The LA and the NLRC have already determined the factual
issues, and these were affirmed by the CA. Thus, they are
accorded not only great respect but also finality, and are
deemed binding upon this Court so long as they are supported
by substantial evidence. A heavy burden rests upon
respondents to convince the Court that it should take
19
exception from such a settled rule.
Moreover, what is damning to the cause of the respondents is
the fact that the issue of the validity of their dismissal is now
already final. As correctly manifested by petitioner,
respondents had earlier filed with this Court a petition for
20
review dated December 28, 2004, docketed as G.R. No.
165985, entitled Rodolfo Bombita, et al. v. Solidbank
Corporation, et al., which questioned the validity of their
termination. A perusal of said petition shows that the issues
raised therein are the very same issues respondents now raise
in their Comment. On February 21, 2005, this Courts Second
21
Division issued a Resolution denying respondents petition
for review. On September 20, 2005, an Entry of
22
Judgment was rendered. Based on the foregoing, the validity
of the termination of respondents is an issue that this Court
must no longer look into as a necessary consequence of the
denial of their petition for review before this Court.
Now, going to the issues raised by petitioner, this Court finds
the same to be impressed with merit.
Article 283 of the Labor Code provides:
ARTICLE 283. Closure of establishment and reduction of
personnel. - The employer may also terminate the
employment of any employee due to the installation of labor-
saving devices, redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-
saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his
LABREL FULL TEXT CASES
one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
23
whole year.
Based on Article 283, in case of cessation of operations, the
employer is only required to pay his employees a separation
pay of one month pay or at least one-half month pay for every
year of service, whichever is higher. That is all that the law
requires.
In the case at bar, petitioner paid respondents the following:
(a) separation pay computed at 150% of their gross monthly
pay per year of service; and (b) cash equivalent of earned and
accrued vacation and sick leaves. Clearly, petitioner had gone
over and above the requirements of the law. Despite this,
however, petitioner has been ordered to pay respondents an
additional amount, equivalent to one months salary, as a form
of financial assistance.
The LA awarded the financial assistance out of "compassionate
justice." The CA affirmed such grant also out of
"compassionate justice" and as a form of "equitable relief" for
the employees who were suddenly dismissed due to
24
exigencies of business.
After a thorough consideration of the circumstances at bar,
this Court finds that the award of financial assistance is bereft
of legal basis and serves to penalize petitioner who has
complied with the requirements of the law.
It behooves this Court as to why the CA affirmed the grant of
financial assistance notwithstanding its pronouncement that it
would be inequitable to allow respondents to receive benefits
than those prescribed by law and jurisprudence, to wit:
In the instant case, both the Labor Arbiter and the NLRC
upheld the validity of the dismissal of the employees and of
the quitclaim agreements between the affected employees
and employer Solidbank. However, it was a strange occurrence
when the NLRC granted an additional award of separation pay
in an amount equivalent to two months salary to each
employee. This means that Solidbank now has the obligation
to pay the employees not only their wages, benefits and other
privileges under the law, and separation pay in an amount
equivalent to 150% of their one months pay, but also financial
assistance equivalent to two months pay to each employee.
Such a situation cannot be upheld by this Court. As discussed
above, all that the law requires in cases of dismissal due to an
authorized cause is that the employer must pay financial
assistance or separation pay in an amount equivalent to "one
months pay or one-half months for every year of service,
whichever is higher." Solidbank has complied with the
Page 30 of 179
mandate of the law. Hence, it would be unjust and inequitable
to allow the employees to receive higher benefits than those
25
prescribed by the Labor Code and jurisprudence.
Moreover, a review of jurisprudence relating to the
application of "compassionate and social justice" in granting
financial assistance in labor cases shows that the same has
been generally used in instances when an employee has been
dismissed for a just cause under Article 282 of the Labor Code
and not when an employee has been dismissed for an
authorized cause under Article 283.
As a general rule, an employee who has been dismissed for
26
any of the just causes enumerated under Article 282 of the
27
Labor Code is not entitled to separation pay. Although by
way of exception, the grant of separation pay or some other
financial assistance may be allowed to an employee dismissed
28
for just causes on the basis of equity.
The reason that the law does not statutorily grant separation
pay or financial assistance in instances of termination due to a
just cause is precisely because the cause for termination is due
to the acts of the employee. In such instances, however, this
Court, inspired by compassionate and social justice, has in the
past awarded financial assistance to dismissed employees
when circumstances warranted such an award.1avvphi1
29
In Central Philippines Bandag Retreaders, Inc. v. Diasnes, this
Court discussed the parameters of awarding separation pay to
dismissed employees as a measure of financial assistance, viz:
To reiterate our ruling in Toyota, labor adjudicatory officials
and the CA must demur the award of separation pay based on
social justice when an employees dismissal is based on serious
misconduct or willful disobedience; gross and habitual neglect
of duty; fraud or willful breach of trust; or commission of a
crime against the person of the employer or his immediate
family - grounds under Art. 282 of the Labor Code that
sanction dismissals of employees. They must be most judicious
and circumspect in awarding separation pay or financial
assistance as the constitutional policy to provide full
protection to labor is not meant to be an instrument to
oppress the employers. The commitment of the Court to the
cause of labor should not embarrass us from sustaining the
employers when they are right, as here. In fine, we should be
more cautious in awarding financial assistance to the
undeserving and those who are unworthy of the liberality of
the law.
30
Thus, in Philippine Commercial International Bank v.
31
Abad, this Court, having considered the circumstances
present therein and as a measure of social justice, awarded
separation pay to a dismissed employee for a just cause under
Article 282. The same concession was given by this Court
in Aparente, Sr. v. National Labor Relations
32
Commission and Tanala v. National Labor Relations
33
Commission.
LABREL FULL TEXT CASES
Looking now at Article 283, this Court holds that the same was
drafted by the legislature, taking the best interest of laborers
in mind. It is clear that the causes of the termination of an
employee under Article 283 are due to circumstances beyond
their control, such as when management decides to reduce
personnel based on valid grounds, or when the employer
decides to cease operations. Thus, the bias towards labor is
very apparent, as the employer is statutorily required to pay
separation pay, the amount of which is also statutorily
prescribed.
While the CA should not be faulted for sympathizing with the
plight of respondents as they suddenly lost their means of
livelihood, this Court holds that it is precisely because of the
sudden loss of employment one that is beyond the control of
labor that the law statutorily grants separation pay and
dictates how the same should be computed. Thus, any
business establishment that decides to cease its operations
has the burden of complying with the law. This Court should
refrain from adding more than what the law requires, as the
same is within the realm of the legislature.
It bears to stress, however, that petitioner may, as it has done,
grant on a voluntary and ex gratia basis, any amount more
than what is required by the law, but to insist that more
financial assistance be given is certainly something that this
Court cannot countenance, as the same serves to penalize
petitioner, which has already given more than what the law
requires. Moreover, any award of additional financial
assistance to respondents would put them at an advantage
and in a better position than the rest of their co-employees
who similarly lost their employment because of petitioners
decision to cease its operations.
Withal, the law, in protecting the rights of the laborers,
authorizes neither oppression nor self-destruction of the
employer. While the Constitution is committed to the policy of
social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically
decided in favor of labor. The management also has its own
rights, as such, are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for those with
less privileges in life, the Supreme Court has inclined more
often than not toward the worker and upheld his cause in his
conflicts with the employer. Such favoritism, however, has not
blinded the Court to the rule that justice is in every case for
the deserving, to be dispensed in the light of the established
34
facts and applicable law and doctrine.
WHEREFORE, premises considered, the petition is GRANTED.
The May 28, 2004 Decision and October 28, 2004 Resolution of
the Court of Appeals, in CA-G.R SP No. 76879, are REVERSED
and SET ASIDE.
SO ORDERED.
Page 31 of 179
RIGHT TO SELF-ORGANIZATION
SECOND DIVISION
G.R. No. L-25246 September 12, 1974
BENJAMIN VICTORIANO, plaintiff-appellee,
vs.
ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE
FACTORY, INC., defendants, ELIZALDE ROPE WORKERS'
UNION, defendant-appellant.
Salonga, Ordonez, Yap, Sicat & Associates for plaintiff-
appellee.
Cipriano Cid & Associates for defendant-appellant.
ZALDIVAR, J.:p
Appeal to this Court on purely questions of law from the
decision of the Court of First Instance of Manila in its Civil Case
No. 58894.
The undisputed facts that spawned the instant case follow:
Benjamin Victoriano (hereinafter referred to as Appellee), a
member of the religious sect known as the "Iglesia ni Cristo",
had been in the employ of the Elizalde Rope Factory, Inc.
(hereinafter referred to as Company) since 1958. As such
employee, he was a member of the Elizalde Rope Workers'
Union (hereinafter referred to as Union) which had with the
Company a collective bargaining agreement containing a
closed shop provision which reads as follows:
Membership in the Union shall be required
as a condition of employment for all
permanent employees workers covered by
this Agreement.
The collective bargaining agreement expired on March 3, 1964
but was renewed the following day, March 4, 1964.
Under Section 4(a), paragraph 4, of Republic Act No. 875, prior
to its amendment by Republic Act No. 3350, the employer was
not precluded "from making an agreement with a labor
organization to require as a condition of employment
membership therein, if such labor organization is the
representative of the employees." On June 18, 1961, however,
Republic Act No. 3350 was enacted, introducing an
amendment to paragraph (4) subsection (a) of section 4 of
Republic Act No. 875, as follows: ... "but such agreement shall
not cover members of any religious sects which prohibit
affiliation of their members in any such labor organization".
LABREL FULL TEXT CASES
Being a member of a religious sect that prohibits the affiliation
of its members with any labor organization, Appellee
presented his resignation to appellant Union in 1962, and
when no action was taken thereon, he reiterated his
resignation on September 3, 1974. Thereupon, the Union
wrote a formal letter to the Company asking the latter to
separate Appellee from the service in view of the fact that he
was resigning from the Union as a member. The management
of the Company in turn notified Appellee and his counsel that
unless the Appellee could achieve a satisfactory arrangement
with the Union, the Company would be constrained to dismiss
him from the service. This prompted Appellee to file an action
for injunction, docketed as Civil Case No. 58894 in the Court of
First Instance of Manila to enjoin the Company and the Union
1
from dismissing Appellee. In its answer, the Union invoked
the "union security clause" of the collective bargaining
agreement; assailed the constitutionality of Republic Act No.
3350; and contended that the Court had no jurisdiction over
the case, pursuant to Republic Act No. 875, Sections 24 and 9
2
(d) and (e). Upon the facts agreed upon by the parties during
the pre-trial conference, the Court a quo rendered its decision
on August 26, 1965, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, judgment is
rendered enjoining the defendant Elizalde
Rope Factory, Inc. from dismissing the
plaintiff from his present employment and
sentencing the defendant Elizalde Rope
Workers' Union to pay the plaintiff P500 for
3
attorney's fees and the costs of this action.
From this decision, the Union appealed directly to this Court
on purely questions of law, assigning the following errors:
I. That the lower court erred when it did not
rule that Republic Act No. 3350 is
unconstitutional.
II. That the lower court erred when it
sentenced appellant herein to pay plaintiff
the sum of P500 as attorney's fees and the
cost thereof.
In support of the alleged unconstitutionality of Republic Act
No. 3350, the Union contented, firstly, that the Act infringes
on the fundamental right to form lawful associations; that "the
very phraseology of said Republic Act 3350, that membership
in a labor organization is banned to all those belonging to such
religious sect prohibiting affiliation with any labor
4
organization" , "prohibits all the members of a given religious
sect from joining any labor union if such sect prohibits
5
affiliations of their members thereto" ; and, consequently,
deprives said members of their constitutional right to form or
join lawful associations or organizations guaranteed by the Bill
of Rights, and thus becomes obnoxious to Article III, Section 1
6
(6) of the 1935 Constitution.
Page 32 of 179
Secondly, the Union contended that Republic Act No. 3350 is
unconstitutional for impairing the obligation of contracts in
that, while the Union is obliged to comply with its collective
bargaining agreement containing a "closed shop provision,"
the Act relieves the employer from its reciprocal obligation of
cooperating in the maintenance of union membership as a
condition of employment; and that said Act, furthermore,
impairs the Union's rights as it deprives the union of dues from
members who, under the Act, are relieved from the obligation
7
to continue as such members.
Thirdly, the Union contended that Republic Act No. 3350
discriminatorily favors those religious sects which ban their
members from joining labor unions, in violation of Article Ill,
Section 1 (7) of the 1935 Constitution; and while said Act
unduly protects certain religious sects, it leaves no rights or
8 depending on their religious tenets is based on substantial
protection to labor organizations.
Fourthly, Republic Act No. 3350, asserted the Union, violates
the constitutional provision that "no religious test shall be
required for the exercise of a civil right," in that the laborer's
exercise of his civil right to join associations for purposes not
contrary to law has to be determined under the Act by his
affiliation with a religious sect; that conversely, if a worker has
to sever his religious connection with a sect that prohibits
membership in a labor organization in order to be able to join
a labor organization, said Act would violate religious
9
freedom.
Fifthly, the Union contended that Republic Act No. 3350,
violates the "equal protection of laws" clause of the
Constitution, it being a discriminately legislation, inasmuch as
by exempting from the operation of closed shop agreement
the members of the "Iglesia ni Cristo", it has granted said
members undue advantages over their fellow workers, for
while the Act exempts them from union obligation and
liability, it nevertheless entitles them at the same time to the
enjoyment of all concessions, benefits and other emoluments
that the union might secure from the employer.
10
Sixthly, the Union contended that Republic Act No. 3350
violates the constitutional provision regarding the promotion
of social justice.
11
Appellant Union, furthermore, asserted that a "closed shop
provision" in a collective bargaining agreement cannot be
considered violative of religious freedom, as to call for the
12
amendment introduced by Republic Act No. 3350; and that
unless Republic Act No. 3350 is declared unconstitutional,
trade unionism in this country would be wiped out as
employers would prefer to hire or employ members of the
Iglesia ni Cristo in order to do away with labor organizations.
13
Appellee, assailing appellant's arguments, contended that
Republic Act No. 3350 does not violate the right to form lawful
associations, for the right to join associations includes the right
not to join or to resign from a labor organization, if one's
conscience does not allow his membership therein, and the
LABREL FULL TEXT CASES
Act has given substance to such right by prohibiting the
14
compulsion of workers to join labor organizations; that said
Act does not impair the obligation of contracts for said law
formed part of, and was incorporated into, the terms of the
15
closed shop agreement; that the Act does not violate the
establishment of religion clause or separation of Church and
State, for Congress, in enacting said law, merely
accommodated the religious needs of those workers whose
religion prohibits its members from joining labor unions, and
balanced the collective rights of organized labor with the
constitutional right of an individual to freely exercise his
chosen religion; that the constitutional right to the free
exercise of one's religion has primacy and preference over
16
union security measures which are merely contractual ; that
said Act does not violate the constitutional provision of equal
protection, for the classification of workers under the Act
distinction, is germane to the purpose of the law, and applies
17
to all the members of a given class; that said Act, finally,
does not violate the social justice policy of the Constitution,
for said Act was enacted precisely to equalize employment
opportunities for all citizens in the midst of the diversities of
18
their religious beliefs."
I. Before We proceed to the discussion of the first assigned
error, it is necessary to premise that there are some
thoroughly established principles which must be followed in all
cases where questions of constitutionality as obtains in the
instant case are involved. All presumptions are indulged in
favor of constitutionality; one who attacks a statute, alleging
unconstitutionality must prove its invalidity beyond a
reasonable doubt, that a law may work hardship does not
render it unconstitutional; that if any reasonable basis may be
conceived which supports the statute, it will be upheld, and
the challenger must negate all possible bases; that the courts
are not concerned with the wisdom, justice, policy, or
expediency of a statute; and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation
19
should be adopted.
1. Appellant Union's contention that Republic Act No.
3350 prohibits and bans the members of such religious sects
that forbid affiliation of their members with labor unions from
joining labor unions appears nowhere in the wording of
Republic Act No. 3350; neither can the same be deduced by
necessary implication therefrom. It is not surprising, therefore,
that appellant, having thus misread the Act, committed the
error of contending that said Act is obnoxious to the
constitutional provision on freedom of association.
Both the Constitution and Republic Act No. 875 recognize
freedom of association. Section 1 (6) of Article III of the
Constitution of 1935, as well as Section 7 of Article IV of the
Constitution of 1973, provide that the right to form
associations or societies for purposes not contrary to law shall
not be abridged. Section 3 of Republic Act No. 875 provides
that employees shall have the right to self-organization and to
form, join of assist labor organizations of their own choosing
for the purpose of collective bargaining and to engage in
Page 33 of 179
concerted activities for the purpose of collective bargaining
and other mutual aid or protection. What the Constitution and
the Industrial Peace Act recognize and guarantee is the "right"
to form or join associations. Notwithstanding the different
theories propounded by the different schools of jurisprudence
regarding the nature and contents of a "right", it can be safely
said that whatever theory one subscribes to, a right
comprehends at least two broad notions, namely: first, liberty
or freedom, i.e., the absence of legal restraint, whereby an
employee may act for himself without being prevented by law;
and second, power, whereby an employee may, as he pleases,
join or refrain from Joining an association. It is, therefore, the
employee who should decide for himself whether he should
join or not an association; and should he choose to join, he
himself makes up his mind as to which association he would
join; and even after he has joined, he still retains the liberty
and the power to leave and cancel his membership with said
20
organization at any time. It is clear, therefore, that the right
to join a union includes the right to abstain from joining any
21
union. Inasmuch as what both the Constitution and the
Industrial Peace Act have recognized, and guaranteed to the
employee, is the "right" to join associations of his choice, it
would be absurd to say that the law also imposes, in the same
breath, upon the employee the duty to join associations. The
law does not enjoin an employee to sign up with any
association.
The right to refrain from joining labor organizations recognized
by Section 3 of the Industrial Peace Act is, however, limited.
The legal protection granted to such right to refrain from
joining is withdrawn by operation of law, where a labor union
and an employer have agreed on a closed shop, by virtue of
which the employer may employ only member of the
collective bargaining union, and the employees must continue
to be members of the union for the duration of the contract in
order to keep their jobs. Thus Section 4 (a) (4) of the Industrial
Peace Act, before its amendment by Republic Act No. 3350,
provides that although it would be an unfair labor practice for
an employer "to discriminate in regard to hire or tenure of
employment or any term or condition of employment to
encourage or discourage membership in any labor
organization" the employer is, however, not precluded "from
making an agreement with a labor organization to require as a
condition of employment membership therein, if such labor
organization is the representative of the employees". By
virtue, therefore, of a closed shop agreement, before the
enactment of Republic Act No. 3350, if any person, regardless
of his religious beliefs, wishes to be employed or to keep his
employment, he must become a member of the collective
bargaining union. Hence, the right of said employee not to join
the labor union is curtailed and withdrawn.
To that all-embracing coverage of the closed shop
arrangement, Republic Act No. 3350 introduced an exception,
when it added to Section 4 (a) (4) of the Industrial Peace Act
the following proviso: "but such agreement shall not cover
members of any religious sects which prohibit affiliation of
their members in any such labor organization". Republic Act
No. 3350 merely excludes ipso jure from the application and
LABREL FULL TEXT CASES
coverage of the closed shop agreement the employees
belonging to any religious sects which prohibit affiliation of
their members with any labor organization. What the
exception provides, therefore, is that members of said
religious sects cannot be compelled or coerced to join labor
unions even when said unions have closed shop agreements
with the employers; that in spite of any closed shop
agreement, members of said religious sects cannot be refused
employment or dismissed from their jobs on the sole ground
that they are not members of the collective bargaining union.
It is clear, therefore, that the assailed Act, far from infringing
the constitutional provision on freedom of association,
upholds and reinforces it. It does not prohibit the members of
said religious sects from affiliating with labor unions. It still
leaves to said members the liberty and the power to affiliate,
or not to affiliate, with labor unions. If, notwithstanding their
religious beliefs, the members of said religious sects prefer to
sign up with the labor union, they can do so. If in deference
and fealty to their religious faith, they refuse to sign up, they
can do so; the law does not coerce them to join; neither does
the law prohibit them from joining; and neither may the
employer or labor union compel them to join. Republic Act No.
3350, therefore, does not violate the constitutional provision
on freedom of association.
2. Appellant Union also contends that the Act is
unconstitutional for impairing the obligation of its contract,
specifically, the "union security clause" embodied in its
Collective Bargaining Agreement with the Company, by virtue
of which "membership in the union was required as a
condition for employment for all permanent employees
workers". This agreement was already in existence at the time
Republic Act No. 3350 was enacted on June 18, 1961, and it
cannot, therefore, be deemed to have been incorporated into
the agreement. But by reason of this amendment, Appellee, as
well as others similarly situated, could no longer be dismissed
from his job even if he should cease to be a member, or
disaffiliate from the Union, and the Company could continue
employing him notwithstanding his disaffiliation from the
Union. The Act, therefore, introduced a change into the
express terms of the union security clause; the Company was
partly absolved by law from the contractual obligation it had
with the Union of employing only Union members in
permanent positions, It cannot be denied, therefore, that
there was indeed an impairment of said union security clause.
According to Black, any statute which introduces a change into
the express terms of the contract, or its legal construction, or
its validity, or its discharge, or the remedy for its enforcement,
impairs the contract. The extent of the change is not material.
It is not a question of degree or manner or cause, but of
encroaching in any respect on its obligation or dispensing with
any part of its force. There is an impairment of the contract if
either party is absolved by law from its
22
performance. Impairment has also been predicated on laws
which, without destroying contracts, derogate from
23
substantial contractual rights.
Page 34 of 179
It should not be overlooked, however, that the prohibition to
impair the obligation of contracts is not absolute and
unqualified. The prohibition is general, affording a broad
outline and requiring construction to fill in the details. The
prohibition is not to be read with literal exactness like a
mathematical formula, for it prohibits unreasonable
24
impairment only. In spite of the constitutional prohibition,
the State continues to possess authority to safeguard the vital
interests of its people. Legislation appropriate to safeguarding
said interests may modify or abrogate contracts already in
25
effect. For not only are existing laws read into contracts in
order to fix the obligations as between the parties, but the
reservation of essential attributes of sovereign power is also
read into contracts as a postulate of the legal order. All
contracts made with reference to any matter that is subject to
regulation under the police power must be understood as
made in reference to the possible exercise of that
26
power. Otherwise, important and valuable reforms may be
precluded by the simple device of entering into contracts for
the purpose of doing that which otherwise may be prohibited.
The policy of protecting contracts against impairment
presupposes the maintenance of a government by virtue of
which contractual relations are worthwhile a government
which retains adequate authority to secure the peace and
good order of society. The contract clause of the Constitution
must, therefore, be not only in harmony with, but also in
subordination to, in appropriate instances, the reserved power
of the state to safeguard the vital interests of the people. It
follows that not all legislations, which have the effect of
impairing a contract, are obnoxious to the constitutional
prohibition as to impairment, and a statute passed in the
legitimate exercise of police power, although it incidentally
destroys existing contract rights, must be upheld by the
courts. This has special application to contracts regulating
relations between capital and labor which are not merely
contractual, and said labor contracts, for being impressed with
27
public interest, must yield to the common good.
In several occasions this Court declared that the prohibition
against impairing the obligations of contracts has no
application to statutes relating to public subjects within the
domain of the general legislative powers of the state involving
28
public welfare. Thus, this Court also held that the Blue
Sunday Law was not an infringement of the obligation of a
contract that required the employer to furnish work on
Sundays to his employees, the law having been enacted to
secure the well-being and happiness of the laboring class, and
being, furthermore, a legitimate exercise of the police
29
power.
In order to determine whether legislation unconstitutionally
impairs contract obligations, no unchanging yardstick,
applicable at all times and under all circumstances, by which
the validity of each statute may be measured or determined,
has been fashioned, but every case must be determined upon
its own circumstances. Legislation impairing the obligation of
contracts can be sustained when it is enacted for the
promotion of the general good of the people, and when the
means adopted to secure that end are reasonable. Both the
LABREL FULL TEXT CASES
end sought and the means adopted must be legitimate, i.e.,
within the scope of the reserved power of the state construed
30
in harmony with the constitutional limitation of that power.
What then was the purpose sought to be achieved by Republic
Act No. 3350? Its purpose was to insure freedom of belief and
religion, and to promote the general welfare by preventing
discrimination against those members of religious sects which
prohibit their members from joining labor unions, confirming
thereby their natural, statutory and constitutional right to
work, the fruits of which work are usually the only means
whereby they can maintain their own life and the life of their
dependents. It cannot be gainsaid that said purpose is
legitimate.
The questioned Act also provides protection to members of
said religious sects against two aggregates of group strength
from which the individual needs protection. The individual
employee, at various times in his working life, is confronted by
two aggregates of power collective labor, directed by a
union, and collective capital, directed by management. The
union, an institution developed to organize labor into a
collective force and thus protect the individual employee from
the power of collective capital, is, paradoxically, both the
champion of employee rights, and a new source of their
frustration. Moreover, when the Union interacts with
management, it produces yet a third aggregate of group
strength from which the individual also needs protection
the collective bargaining relationship.
31
The aforementioned purpose of the amendatory law is clearly
seen in the Explanatory Note to House Bill No. 5859, which
later became Republic Act No. 3350, as follows:
It would be unthinkable indeed to refuse
employing a person who, on account of his
religious beliefs and convictions, cannot
accept membership in a labor organization
although he possesses all the qualifications
for the job. This is tantamount to punishing
such person for believing in a doctrine he has
a right under the law to believe in. The law
would not allow discrimination to flourish to
the detriment of those whose religion
discards membership in any labor
organization. Likewise, the law would not
commend the deprivation of their right to
work and pursue a modest means of
livelihood, without in any manner violating
32
their religious faith and/or belief.
It cannot be denied, furthermore, that the means adopted by
the Act to achieve that purpose exempting the members of
said religious sects from coverage of union security
agreements is reasonable.
It may not be amiss to point out here that the free exercise of
religious profession or belief is superior to contract rights. In
Page 35 of 179

case of conflict, the latter must, therefore, yield to the former.
The Supreme Court of the United States has also declared on
several occasions that the rights in the First Amendment,
which include freedom of religion, enjoy a preferred position
33
in the constitutional system. Religious freedom, although
not unlimited, is a fundamental personal right and
34
liberty, and has a preferred position in the hierarchy of
values. Contractual rights, therefore, must yield to freedom of
religion. It is only where unavoidably necessary to prevent an
immediate and grave danger to the security and welfare of the
community that infringement of religious freedom may be
justified, and only to the smallest extent necessary to avoid
the danger.
3. In further support of its contention that Republic Act No.
3350 is unconstitutional, appellant Union averred that said Act
discriminates in favor of members of said religious sects in
violation of Section 1 (7) of Article Ill of the 1935 Constitution,
and which is now Section 8 of Article IV of the 1973
Constitution, which provides:
No law shall be made respecting an
establishment of religion, or prohibiting the
free exercise thereof, and the free exercise
and enjoyment of religious profession and
worship, without discrimination and
preference, shall forever be allowed. No
religious test shall be required for the
exercise of civil or political rights.
The constitutional provision into only prohibits legislation for
the support of any religious tenets or the modes of worship of
any sect, thus forestalling compulsion by law of the
acceptance of any creed or the practice of any form of
35
worship, but also assures the free exercise of one's chosen
form of religion within limits of utmost amplitude. It has been
said that the religion clauses of the Constitution are all
designed to protect the broadest possible liberty of
conscience, to allow each man to believe as his conscience
directs, to profess his beliefs, and to live as he believes he
ought to live, consistent with the liberty of others and with the
36
common good. Any legislation whose effect or purpose is to
impede the observance of one or all religions, or to
discriminate invidiously between the religions, is invalid, even
though the burden may be characterized as being only
37
indirect. But if the stage regulates conduct by enacting,
within its power, a general law which has for its purpose and
effect to advance the state's secular goals, the statute is valid
despite its indirect burden on religious observance, unless the
state can accomplish its purpose without imposing such
38
burden.
39
In Aglipay v. Ruiz , this Court had occasion to state that the
government should not be precluded from pursuing valid
objectives secular in character even if the incidental result
would be favorable to a religion or sect. It has likewise been
held that the statute, in order to withstand the strictures of
constitutional prohibition, must have a secular legislative
purpose and a primary effect that neither advances nor
LABREL FULL TEXT CASES
40
inhibits religion. Assessed by these criteria, Republic Act No.
3350 cannot be said to violate the constitutional inhibition of
the "no-establishment" (of religion) clause of the Constitution.
The purpose of Republic Act No. 3350 is secular, worldly, and
temporal, not spiritual or religious or holy and eternal. It was
intended to serve the secular purpose of advancing the
constitutional right to the free exercise of religion, by averting
that certain persons be refused work, or be dismissed from
work, or be dispossessed of their right to work and of being
impeded to pursue a modest means of livelihood, by reason of
union security agreements. To help its citizens to find gainful
employment whereby they can make a living to support
themselves and their families is a valid objective of the state.
In fact, the state is enjoined, in the 1935 Constitution, to
afford protection to labor, and regulate the relations between
41
labor and capital and industry. More so now in the 1973
Constitution where it is mandated that "the State shall afford
protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of
sex, race or creed and regulate the relation between workers
42
and employers.
The primary effects of the exemption from closed shop
agreements in favor of members of religious sects that
prohibit their members from affiliating with a labor
organization, is the protection of said employees against the
aggregate force of the collective bargaining agreement, and
relieving certain citizens of a burden on their religious beliefs;
and by eliminating to a certain extent economic insecurity due
to unemployment, which is a serious menace to the health,
morals, and welfare of the people of the State, the Act also
promotes the well-being of society. It is our view that the
exemption from the effects of closed shop agreement does
not directly advance, or diminish, the interests of any
particular religion. Although the exemption may benefit those
who are members of religious sects that prohibit their
members from joining labor unions, the benefit upon the
religious sects is merely incidental and indirect. The
"establishment clause" (of religion) does not ban regulation on
conduct whose reason or effect merely happens to coincide or
43
harmonize with the tenets of some or all religions. The free
exercise clause of the Constitution has been interpreted to
44
require that religious exercise be preferentially aided.
We believe that in enacting Republic Act No. 3350, Congress
acted consistently with the spirit of the constitutional
provision. It acted merely to relieve the exercise of religion, by
certain persons, of a burden that is imposed by union security
agreements. It was Congress itself that imposed that burden
when it enacted the Industrial Peace Act (Republic Act 875),
and, certainly, Congress, if it so deems advisable, could take
away the same burden. It is certain that not every conscience
can be accommodated by all the laws of the land; but when
general laws conflict with scrupples of conscience, exemptions
ought to be granted unless some "compelling state interest"
45
intervenes. In the instant case, We see no such compelling
state interest to withhold exemption.
Page 36 of 179
Appellant bewails that while Republic Act No. 3350 protects
members of certain religious sects, it leaves no right to, and is
silent as to the protection of, labor organizations. The purpose
of Republic Act No. 3350 was not to grant rights to labor
unions. The rights of labor unions are amply provided for in
Republic Act No. 875 and the new Labor Code. As to the
lamented silence of the Act regarding the rights and
protection of labor unions, suffice it to say, first, that the
validity of a statute is determined by its provisions, not by its
46
silence ; and, second, the fact that the law may work
47
hardship does not render it unconstitutional.
It would not be amiss to state, regarding this matter, that to
compel persons to join and remain members of a union to
keep their jobs in violation of their religious scrupples, would
hurt, rather than help, labor unions, Congress has seen it fit to
exempt religious objectors lest their resistance spread to other
workers, for religious objections have contagious potentialities
more than political and philosophic objections.
Furthermore, let it be noted that coerced unity and loyalty
even to the country, and a fortiori to a labor union
assuming that such unity and loyalty can be attained through
coercion is not a goal that is constitutionally obtainable at
48
the expense of religious liberty. A desirable end cannot be
promoted by prohibited means.
4. Appellants' fourth contention, that Republic Act No. 3350
violates the constitutional prohibition against requiring a
religious test for the exercise of a civil right or a political right,
is not well taken. The Act does not require as a qualification,
or condition, for joining any lawful association membership in
any particular religion or in any religious sect; neither does the
Act require affiliation with a religious sect that prohibits its
members from joining a labor union as a condition or
qualification for withdrawing from a labor union. Joining or
withdrawing from a labor union requires a positive act.
Republic Act No. 3350 only exempts members with such
religious affiliation from the coverage of closed shop
agreements. So, under this Act, a religious objector is not
required to do a positive act to exercise the right to join or
to resign from the union. He is exempted ipso jure without
need of any positive act on his part. A conscientious religious
objector need not perform a positive act or exercise the right
of resigning from the labor union he is exempted from the
coverage of any closed shop agreement that a labor union may
have entered into. How then can there be a religious test
required for the exercise of a right when no right need be
exercised?
We have said that it was within the police power of the State
to enact Republic Act No. 3350, and that its purpose was legal
and in consonance with the Constitution. It is never an illegal
evasion of a constitutional provision or prohibition to
accomplish a desired result, which is lawful in itself, by
49
discovering or following a legal way to do it.
5. Appellant avers as its fifth ground that Republic Act No.
3350 is a discriminatory legislation, inasmuch as it grants to
LABREL FULL TEXT CASES
the members of certain religious sects undue advantages over
other workers, thus violating Section 1 of Article III of the 1935
Constitution which forbids the denial to any person of the
50
equal protection of the laws.
The guaranty of equal protection of the laws is not a guaranty
of equality in the application of the laws upon all citizens of
the state. It is not, therefore, a requirement, in order to avoid
the constitutional prohibition against inequality, that every
man, woman and child should be affected alike by a statute.
Equality of operation of statutes does not mean indiscriminate
operation on persons merely as such, but on persons
according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution
does not require that things which are different in fact be
treated in law as though they were the same. The equal
protection clause does not forbid discrimination as to things
51
that are different. It does not prohibit legislation which is
limited either in the object to which it is directed or by the
territory within which it is to operate.
The equal protection of the laws clause of the Constitution
allows classification. Classification in law, as in the other
departments of knowledge or practice, is the grouping of
things in speculation or practice because they agree with one
another in certain particulars. A law is not invalid because of
52
simple inequality. The very idea of classification is that of
inequality, so that it goes without saying that the mere fact of
inequality in no manner determines the matter of
53
constitutionality. All that is required of a valid classification
is that it be reasonable, which means that the classification
should be based on substantial distinctions which make for
real differences; that it must be germane to the purpose of the
law; that it must not be limited to existing conditions only; and
54
that it must apply equally to each member of the class. This
Court has held that the standard is satisfied if the classification
or distinction is based on a reasonable foundation or rational
55
basis and is not palpably arbitrary.
In the exercise of its power to make classifications for the
purpose of enacting laws over matters within its jurisdiction,
the state is recognized as enjoying a wide range of
56
discretion. It is not necessary that the classification be based
on scientific or marked differences of things or in their
57
relation. Neither is it necessary that the classification be
58
made with mathematical nicety. Hence legislative
classification may in many cases properly rest on narrow
59
distinctions, for the equal protection guaranty does not
preclude the legislature from recognizing degrees of evil or
harm, and legislation is addressed to evils as they may appear.
We believe that Republic Act No. 3350 satisfies the
aforementioned requirements. The Act classifies employees
and workers, as to the effect and coverage of union shop
security agreements, into those who by reason of their
religious beliefs and convictions cannot sign up with a labor
union, and those whose religion does not prohibit
membership in labor unions. Tile classification rests on real or
substantial, not merely imaginary or whimsical, distinctions.
Page 37 of 179
There is such real distinction in the beliefs, feelings and
sentiments of employees. Employees do not believe in the
same religious faith and different religions differ in their
dogmas and cannons. Religious beliefs, manifestations and
practices, though they are found in all places, and in all times,
take so many varied forms as to be almost beyond
imagination. There are many views that comprise the broad
spectrum of religious beliefs among the people. There are
diverse manners in which beliefs, equally paramount in the
lives of their possessors, may be articulated. Today the
country is far more heterogenous in religion than before,
differences in religion do exist, and these differences are
important and should not be ignored.
Even from the phychological point of view, the classification is
based on real and important differences. Religious beliefs are
not mere beliefs, mere ideas existing only in the mind, for they
carry with them practical consequences and are the motives of
certain rules. of human conduct and the justification of certain
60
acts. Religious sentiment makes a man view things and
events in their relation to his God. It gives to human life its
distinctive character, its tone, its happiness or unhappiness its
enjoyment or irksomeness. Usually, a strong and passionate
desire is involved in a religious belief. To certain persons, no
single factor of their experience is more important to them
than their religion, or their not having any religion. Because of
differences in religious belief and sentiments, a very poor
person may consider himself better than the rich, and the man
who even lacks the necessities of life may be more cheerful
than the one who has all possible luxuries. Due to their
religious beliefs people, like the martyrs, became resigned to
the inevitable and accepted cheerfully even the most painful
and excruciating pains. Because of differences in religious
beliefs, the world has witnessed turmoil, civil strife,
persecution, hatred, bloodshed and war, generated to a large
extent by members of sects who were intolerant of other
religious beliefs. The classification, introduced by Republic Act
No. 3350, therefore, rests on substantial distinctions.
The classification introduced by said Act is also germane to its
purpose. The purpose of the law is precisely to avoid those
who cannot, because of their religious belief, join labor unions,
from being deprived of their right to work and from being
dismissed from their work because of union shop security
agreements.
Republic Act No. 3350, furthermore, is not limited in its
application to conditions existing at the time of its enactment.
The law does not provide that it is to be effective for a certain
period of time only. It is intended to apply for all times as long
as the conditions to which the law is applicable exist. As long
as there are closed shop agreements between an employer
and a labor union, and there are employees who are
prohibited by their religion from affiliating with labor unions,
their exemption from the coverage of said agreements
continues.
Finally, the Act applies equally to all members of said religious
sects; this is evident from its provision. The fact that the law
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grants a privilege to members of said religious sects cannot by
itself render the Act unconstitutional, for as We have adverted
to, the Act only restores to them their freedom of association
which closed shop agreements have taken away, and puts
them in the same plane as the other workers who are not
prohibited by their religion from joining labor unions. The
circumstance, that the other employees, because they are
differently situated, are not granted the same privilege, does
not render the law unconstitutional, for every classification
allowed by the Constitution by its nature involves inequality.
The mere fact that the legislative classification may result in
actual inequality is not violative of the right to equal
protection, for every classification of persons or things for
regulation by law produces inequality in some degree, but the
law is not thereby rendered invalid. A classification otherwise
reasonable does not offend the constitution simply because in
61
practice it results in some inequality. Anent this matter, it
has been said that whenever it is apparent from the scope of
the law that its object is for the benefit of the public and the
means by which the benefit is to be obtained are of public
character, the law will be upheld even though incidental
advantage may occur to individuals beyond those enjoyed by
62
the general public.
6. Appellant's further contention that Republic Act No. 3350
violates the constitutional provision on social justice is also
baseless. Social justice is intended to promote the welfare of
63
all the people. Republic Act No. 3350 promotes that welfare
insofar as it looks after the welfare of those who, because of
their religious belief, cannot join labor unions; the Act
prevents their being deprived of work and of the means of
livelihood. In determining whether any particular measure is
for public advantage, it is not necessary that the entire state
be directly benefited it is sufficient that a portion of the
state be benefited thereby.
Social justice also means the adoption by the Government of
measures calculated to insure economic stability of all
component elements of society, through the maintenance of a
proper economic and social equilibrium in the inter-relations
64
of the members of the community. Republic Act No. 3350
insures economic stability to the members of a religious sect,
like the Iglesia ni Cristo, who are also component elements of
society, for it insures security in their employment,
notwithstanding their failure to join a labor union having a
closed shop agreement with the employer. The Act also
advances the proper economic and social equilibrium between
labor unions and employees who cannot join labor unions, for
it exempts the latter from the compelling necessity of joining
labor unions that have closed shop agreements and equalizes,
in so far as opportunity to work is concerned, those whose
religion prohibits membership in labor unions with those
whose religion does not prohibit said membership. Social
justice does not imply social equality, because social inequality
will always exist as long as social relations depend on personal
or subjective proclivities. Social justice does not require legal
equality because legal equality, being a relative term, is
necessarily premised on differentiations based on personal or
Page 38 of 179
 65
natural conditions. Social justice guarantees equality of
66
opportunity , and this is precisely what Republic Act No.
3350 proposes to accomplish it gives laborers, irrespective
of their religious scrupples, equal opportunity for work.
7. As its last ground, appellant contends that the amendment
introduced by Republic Act No. 3350 is not called for in
other words, the Act is not proper, necessary or desirable.
Anent this matter, it has been held that a statute which is not
necessary is not, for that reason, unconstitutional; that in
determining the constitutional validity of legislation, the
courts are unconcerned with issues as to the necessity for the
67
enactment of the legislation in question. Courts do inquire
68
into the wisdom of laws. Moreover, legislatures, being
chosen by the people, are presumed to understand and
correctly appreciate the needs of the people, and it may
69
change the laws accordingly. The fear is entertained by
appellant that unless the Act is declared unconstitutional,
employers will prefer employing members of religious sects
that prohibit their members from joining labor unions, and
thus be a fatal blow to unionism. We do not agree. The threat
to unionism will depend on the number of employees who are
members of the religious sects that control the demands of
the labor market. But there is really no occasion now to go
further and anticipate problems We cannot judge with the
material now before Us. At any rate, the validity of a statute is
to be determined from its general purpose and its efficacy to
accomplish the end desired, not from its effects on a particular
70
case. The essential basis for the exercise of power, and not a
mere incidental result arising from its exertion, is the criterion
71
by which the validity of a statute is to be measured.
II. We now pass on the second assignment of error, in support
of which the Union argued that the decision of the trial court
ordering the Union to pay P500 for attorney's fees directly
contravenes Section 24 of Republic Act No. 875, for the instant
action involves an industrial dispute wherein the Union was a
party, and said Union merely acted in the exercise of its rights
under the union shop provision of its existing collective
bargaining contract with the Company; that said order also
contravenes Article 2208 of the Civil Code; that, furthermore,
Appellee was never actually dismissed by the defendant
72
Company and did not therefore suffer any damage at all .
In refuting appellant Union's arguments, Appellee claimed that
in the instant case there was really no industrial dispute
involved in the attempt to compel Appellee to maintain its
membership in the union under pain of dismissal, and that the
Union, by its act, inflicted intentional harm on Appellee; that
since Appellee was compelled to institute an action to protect
his right to work, appellant could legally be ordered to pay
attorney's fees under Articles 1704 and 2208 of the Civil
73
Code.
The second paragraph of Section 24 of Republic Act No. 875
which is relied upon by appellant provides that:
No suit, action or other proceedings shall be
maintainable in any court against a labor
LABREL FULL TEXT CASES
organization or any officer or member
thereof for any act done by or on behalf of
such organization in furtherance of an
industrial dispute to which it is a party, on
the ground only that such act induces some
other person to break a contract of
employment or that it is in restraint of trade
or interferes with the trade, business or
employment of some other person or with
the right of some other person to dispose of
his capital or labor. (Emphasis supplied)
That there was a labor dispute in the instant case cannot be
disputed for appellant sought the discharge of respondent by
virtue of the closed shop agreement and under Section 2 (j) of
Republic Act No. 875 a question involving tenure of
74
employment is included in the term "labor dispute". The
discharge or the act of seeking it is the labor dispute itself. It
being the labor dispute itself, that very same act of the Union
in asking the employer to dismiss Appellee cannot be "an act
done ... in furtherance of an industrial dispute". The mere fact
that appellant is a labor union does not necessarily mean that
all its acts are in furtherance of an industrial
75
dispute. Appellant Union, therefore, cannot invoke in its
favor Section 24 of Republic Act No. 875. This case is not
intertwined with any unfair labor practice case existing at the
time when Appellee filed his complaint before the lower court.
Neither does Article 2208 of the Civil Code, invoked by the
Union, serve as its shield. The article provides that attorney's
fees and expenses of litigation may be awarded "when the
defendant's act or omission has compelled the plaintiff ... to
incur expenses to protect his interest"; and "in any other case
where the court deems it just and equitable that attorney's
fees and expenses of litigation should be recovered". In the
instant case, it cannot be gainsaid that appellant Union's act in
demanding Appellee's dismissal caused Appellee to incur
expenses to prevent his being dismissed from his job. Costs
according to Section 1, Rule 142, of the Rules of Court, shall be
allowed as a matter of course to the prevailing party.
WHEREFORE, the instant appeal is dismissed, and the decision,
dated August 26, 1965, of the Court of First Instance of Manila,
in its Civil Case No. 58894, appealed from is affirmed, with
costs against appellant Union. It is so ordered.
Makalintal, C.J, Castro, Teehankee, Barredo, Makasiar,
Antonio, Esguerra, Muoz Palma and Aquino, JJ., concur.
Page 39 of 179
EN BANC
G.R. No. L-19912 January 30, 1965
AURELIA ABO, ET AL., plaintiffs-appellants,
vs.
PHILAME (KG) EMPLOYEES & WORKERS UNION, PHILIPPINE
TRANSPORT & GENERAL WORKERS ORGANIZATION, ET
AL., defendants-appellees.
Paredes, Poblador, Cruz and Nazareno for plaintiffs-appellants.
Jose C. Espinas and Associates for defendants-appellees.
REGALA, J.:
This is an appeal from the decision of the Court of First
Instance of Rizal dismissing the complaint in Civil Case No.
6637 on the ground that it has no jurisdiction over the subject
matter.
Plaintiffs are employees of the Philippine American
Embroideries, Inc. On May 11, 1961, they filed a complaint in
the Court of First Instance of Rizal, alleging:
8. That from March 24, 1961 up to May 6, 1961, the
individual defendants, acting as officers and/or
members of the defendants labor unions and in their
own individual capacity, by concerted action and with
their full knowledge, approval and consent,
prevented the plaintiffs by the use of force, violence
and intimidation from entering the premises of the
KG Department of the Philippine Embroideries, Inc.
Plaintiffs asked that defendants be ordered to pay P1,410.75
for wages which they allegedly failed to earn; P5,000 for moral
damages; P5,000 for exemplary damages and P1,000 for
attorney's fees.
Instead of answering the complaint, the defendants presented
a motion to dismiss on the ground that the court had no
jurisdiction; that the labor dispute which was the cause of the
complaint had already been amicably settled, and that the
subject of the complaint was also the subject of an unfair labor
practice case then pending in the Court of Industrial Relations
where plaintiffs should instead have intervened.
In an order dated November 2, 1961, the lower court, as
indicated above, dismissed the complaint on the ground of
lack of jurisdiction and it is now contended by the plaintiffs
that in so doing the court erred. Hence, this appeal.
According to the lower court, the acts described in the
complaint constituted unfair labor practice jurisdiction over
which is vested in the Court of Industrial Relations.
LABREL FULL TEXT CASES
In support of its order, the court cited Section 4 (b) (1) and
Section 24 of the Industrial Peace Act (Republic Act No. 875).
Section 4 (b) (1) states:
It shall be unfair labor practice for a labor
organization or its agents:
(1) To restrain or coerce employees in the exercise of
their rights under section three, provided that this
paragraph shall not impair the right of a labor
organization to prescribe its own rules with respect to
the acquisition or retention of membership therein.
Section 3, which is referred to, provides:
Employees' Right to Self-Organization. Employees
shall have the right to self-organization and to form,
join or assist labor organizations of their own
choosing for the purpose of collective bargaining
through representatives of their own choosing and to
engage in concerted activities for the purpose of
collective bargaining and other mutual aid or
protection. ...
In this appeal, plaintiffs contend that these provisions cover
cases of union coercion of employees in forming, joining or
assisting labor organizations and since no right of self-
organization was alleged in the complaint, it was a mistake for
the court to hold that the acts described in the complaint
amounted to an unfair labor practice over which the Court of
Industrial Relations has exclusive jurisdiction.1wph1.t
It should be noted in this connection that Section 3 of our
Industrial Peace Act was taken from Section 7 of the Wagner
Act. This Wagner Act provision was amended in 1947 by the
Taft-Hartley Act, so that, as it now stands, Section 7 reads:
Employees shall have the right to self-organization, to
form, join, or assist labor organizations to bargain
collectively through representatives of their own
choosing, and to engage in concerted activities for
the purpose of collective bargaining or other mutual
aid or protection, and shall also have the right to
refrain from any or all of such activities except to the
extent that such right may be affected by an
agreement requiring membership in a labor
organization as a condition of employment as
authorized in section 8(a) (3). (Emphasis supplied)
The italicized portions represent the amendment.
According to Teller, the amendment as to refraining from
joining activities is nothing more than a statement of what the
National Labor Relations Board should have held under the
original law. (Labor Disputes and Collective Bargaining, 1950
supp. 79)
According to Rothenberg:
Page 40 of 179
 Although the latter right of abstention from union
affiliation was not contained in the original Act and
was newly introduced in the legislative form by the
amended Act, this right was freely recognized by the
courts prior to the enactment of the amended Act. It
has long been held that in making their choice,
whatever it be, whether to join an existing affiliated
or unaffiliated union, or to form a new union, or in
choosing to abstain from joining or aiding any union,
the employees are entitled to the full protection of
the Act." (Labor Relation 353, citing cases)
charged against the defendants-appellees are in furtherance
of an industrial dispute.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment
of the lower court is hereby reversed and the record of the
case be remanded to the court of origin for further
proceedings. Costs against the defendants-appellees.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L.,
Barrera, Paredes, Dizon, Makalintal, Bengzon, J.P., and
Zaldivar, JJ., concur.

It should be noted that the quoted paragraph 8 of the

complaint does not state that the alleged acts of violence were
committed by the defendants in connection with a labor
dispute. The lower court seems to have reached the
conclusion that the acts described fell within the prohibition of
Section 4(b) (1) only because it considered the union evidence
tending to prove the existence of a labor dispute at the time of
the alleged coercion and intimidation.

On the question of whether jurisdiction should be determined

on the basis of the allegations of the complaint alone, or
whether the allegations can be read in the light of the
evidence of the other party, it was held that the jurisdiction of
a court should be determined on the basis of the allegation of
the complaint. (Campos Rueda Corp. v. Bautista, G.R. No. L-
18453, September 29, 1962)

In another case (Administrator of Hacienda Luisita Estate v.

Alberto, G.R. No. L-12133, October 31, 1958) it was held by
Justice Bengzon (now Chief Justice) that the consideration of a
motion to dismiss on the ground of lack of jurisdiction may not
be postponed in the hope that the evidence may yield other
qualifying data which would bring the case under the court's
jurisdiction.

The lower court also cited the following provisions of the

Industrial Peace Act to support its order of dismissal:

SEC. 24. ... No suit, action or other proceeding shall

be maintained in any court against a labor
organization or any officer or member thereof for any
act done by or on behalf of such organization in
furtherance of an industrial dispute to which it is
party on the ground only that such act induces some
other person to break a contract of employment or
that it is in restraint of trade or interferes with the
trade, business or employment of some other person
or with the right of some other person to dispose of
his capital or labor.

A careful reading of the above-quoted provision of law will

readily show that it cannot be invoked in this case because the
fact that the individual defendants-appellees are officers
and/or members of labor unions does not necessarily mean
that all their acts are made in furtherance of an industrial
dispute. It is not evident from the complaint that the acts

LABREL FULL TEXT CASES Page 41 of 179

THIRD DIVISION appeal. However, the petition was dismissed outright by the
Court of Appeals in a Resolution dated 10 January 2002, on the
G.R. No. 155395 June 22, 2006 ground that APC had "failed to avail of the remedy of a prior
Motion for Reconsideration" before the filing of the certiorari
IN RE: PETITION FOR CANCELLATION OF THE UNION petition, which step, it stressed, is a "condition sine qua non to
5
REGISTRATION OF AIR PHILIPPINES FLIGHT ATTENDANTS the filing of a petition for certiorari."
ASSOCIATION, AIR PHILIPPINES CORPORATION, Petitioners,
vs. APC filed a Motion for Reconsideration dated 5 February 2002,
BUREAU OF LABOR RELATIONS and AIR PHILIPPINES FLIGHT but this too was denied by the Court of Appeals in a Resolution
ATTENDANTS ASSOCIATION,Respondents. dated 13 September 2002. This time, the appellate court ruled
that the Motion for Reconsideration was "totally defective,"
DECISION for failing to contain the proof of service or registry return
receipts to the respondents. The Court of Appeals even noted
that the Affidavit of Service attached to the Motion for
TINGA, J.:
Reconsideration "failed to indicate the registry return receipts
6
of the registered mails to the respondents."
For resolution is a Petition for Review under Rule 45, filed by
petitioner Air Philippines Corporation (APC), assailing the
Hence, the present petition.
Resolutions of the Court of Appeals dated 10 January 2002 and
1
13 September 2002.
APC argues that its petition before the Court of Appeals
involved mere questions of law, among which is whether
The case initially centered on the union registration of
APFLAAs union registration may be cancelled considering that
respondent Air Philippines Flight Attendants Association
the union is allegedly composed of a mixture of supervisory
(APFLAA), which was issued a Certificate of Registration No.
and rank-and-file employees. It is posited that questions of law
NCR-UR-3-2067-99 by the Department of Labor and
may be raised directly in a petition for certiorari without need
Employment (DOLE). APFLAA filed on 17 March 1999 a petition 7
of a prior motion for reconsideration.
for certification election as the collective bargaining
representative of the flight attendants of APC. After the Med-
Arbiter rendered a ruling ordering the holding of a certification However, it is clear from the petition filed by APC before the
election, such election was held on 5 August 1999, with Court of Appeals that the issues involved do not consist of
majority of the votes cast in favor of APFLAA.
2 questions of law only. It is insisted therein that employees
holding the position of Lead Cabin Attendants are supervisory
employees and hence disallowed from joining a union of rank-
On 25 November 1999, APC filed a Petition for De-Certification 8
and-file employees. On the other hand, APFLAA countered
and Cancellation of Union Registration against APFLAA with
before the DOLE-NCR and the BLR that only rank-and-file flight
the DOLE. APC alleged that APFLAA could not be registered as 9
attendants comprised its membership. Thus, the very
a labor organization, as its composition consisted of "a mixture
question of whether Lead Cabin Attendants are indeed
of supervisory and rank-and-file flight attendants."
supervisory employees appears to be factual in nature, the
Particularly, APC alleged that flight attendants holding the
proper resolution of which necessitates a factual
position of "Lead Cabin Attendant," which according to it is
determination of the actual duties of Lead Cabin Attendants.
supervisory in character, were among those who comprised
Indeed, APC made reference therein to such documents as an
APFLAA. 10
employees manual in support of its argument, documents
that would evidently require factual evaluation before
On 18 July 2001, the DOLE-National Capital Region (NCR)
accorded proper evidentiary value.
Regional Director Alex E. Maraan rendered a Decision
dismissing the petition. The DOLE-NCR held that Article 245 of
There is admittedly some leeway for the Court of Appeals if it
the Labor Code, which states that supervisory employees are
was so minded to give due course to APCs petition,
not eligible for membership in labor organizations of rank-and-
notwithstanding the failure to file a motion for
file employees, does not provide a ground for cancellation of
reconsideration. Yet ultimately, the determination of whether
union registration, which is instead governed by Article 239 of
3 or not to admit a petition attended with such defect falls
the Labor Code.
within the sound discretion of the Court of Appeals.
APC filed a Motion for Reconsideration/Appeal regarding this
Should the Court of Appeals decide, as it did, to dismiss the
Decision of the DOLE-NCR. In a Resolution dated 18 July 2001,
petition outright on such ground, it would commit no
the Bureau of Labor Relations (BLR) denied the appeal,
4 reversible error of law nor any grave abuse of discretion,
affirming the rationale of the DOLE-NCR.
considering that the rule requiring the filing of a motion for
reconsideration before resorting to the special civil action of
APC then immediately filed a Petition for Certiorari dated 12
certiorari is well entrenched in jurisprudence.
December 2001 with the Court of Appeals, imputing grave
abuse of discretion on the part of the BLR in denying its
LABREL FULL TEXT CASES Page 42 of 179
It also does not escape the attention of the Court that the
Motion for Reconsideration filed by APC before the Court of
Appeals was itself fatally defective, allowing the appellate
court to deny the same without having to evaluate its
substantial arguments. The action of the appellate court
relative to APCs missteps is consistent with procedural rules.
Still, the Court has deigned to give a close look at the
substantial arguments raised in APCs petition before the
Court of Appeals.
There may be remedies available to enforce the proscription
set forth in Article 245 of the Labor Code on supervisory
employees joining the union of rank-and-file employees. But
consistent with jurisprudence, the rule under Article 245
barring supervisory employees from joining the union of rank-
and-file employees is not a ground for cancellation of union
registration. Accordingly, we see no error on the part of the
DOLE-NCR and the BLR in having dismissed APCs petition, and
thus no cause to compel the Court of Appeals to disregard
APCs procedural errors and accept the petition for certiorari.

The DOLE-NCR Regional Director, in dismissing the petition for WHEREFORE, the petition is DENIED. Costs against petitioner.
cancellation, cited our minute resolution in SPI Technologies
11
Incorporated v. DOLE wherein the Court observed that SO ORDERED.
12
Article 245 of the Labor Code, the legal basis for the petition
for cancellation, merely prescribed the requirements for
eligibility in joining a union and did not prescribe the grounds
13
for cancellation of union registration. Since the filing of this
petition, the Court has had occasion to rule, in Tagaytay
Highlands International Golf Club v. Tagaytay Highlands
14
Employees Union-PGTWO, that "[t]he inclusion in a union of
disqualified employees is not among the grounds for
cancellation, unless such inclusion is due to misrepresentation,
false statement or fraud under the circumstances enumerated
15 16
in Sections (a) and (c) of Article 239 of the Labor Code."

Clearly then, for the purpose of de-certifying a union, it is not

enough to establish that the rank-and-file union includes
ineligible employees in its membership. Pursuant to Article
239 (a) and (c) of the Labor Code, it must be shown that there
was misrepresentation, false statement or fraud in connection
with the adoption or ratification of the constitution and by-
laws or amendments thereto, the minutes of ratification, or in
connection with the election of officers, minutes of the
election of officers, the list of voters, or failure to submit these
documents together with the list of the newly elected-
17
appointed officers and their postal addresses to the BLR.

In its Petition for De-certification and Cancellation of Union

Registration, APC did not impute on APFLAA such
misrepresentation of the character necessitated under Article
239 (a) and (c) of the Labor Code. APC merely argued that
APFLAA was not qualified to become a legitimate labor
organization by reason of its mixed composition of rank-and-
file and supervisory employees; and that APFLAA committed
misrepresentation by making it appear that its composition
was composed purely of rank-and-file employees. Such
misrepresentation (if it can be called as such) as alleged by
APC, is not conformable to Article 239 (a) and (c) of the Labor
Code. Indeed, it appears from the record that APC instead
devoted the bulk of its arguments in establishing that
supervisory employees comprised part of the membership of
APFLAA, a ground which is not sufficient to cause the
cancellation of union registration. And this is of course all
under the assumption that Lead Cabin Attendants are indeed
supervisory employees, a claim consistently denied by APFLAA
and which was not confirmed by either the DOLE-NCR or the
BLR.

LABREL FULL TEXT CASES Page 43 of 179

EN BANC prohibits managerial employees from forming, joining or
assisting labor unions, violates Art. III, 8 of the Constitution.

In resolving these issues it would be useful to begin by defining

G.R. No. 122226 March 25, 1998 who are "managerial employees" and considering the types of
"managerial employees."
UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), petitioner,
vs. Types of Managerial Employees
HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA
PRODUCTS, PHILIPPINES, INC. respondents. The term "manager" generally refers to "anyone who is
responsible for subordinates and other organizational
1
resources." As a class, managers constitute three levels of a
pyramid:
MENDOZA, J.:
Top management
Petitioner is a union of supervisory employees. It appears that
on March 20, 1995 the union filed a petition for certification
election on behalf of the route managers at Pepsi-Cola
Products Philippines, Inc. However, its petition was denied by Middle
the med-arbiter and, on appeal, by the Secretary of Labor and
Employment, on the ground that the route managers are Management
managerial employees and, therefore, ineligible for union
membership under the first sentence of Art. 245 of the Labor
Code, which provides:
First-Line
Ineligibility of managerial employees to join any labor
organization; right of supervisory employees.
Management
Managerial employees are not eligible to join, assist
or form any labor organization. Supervisory
(also called
employees shall not be eligible for membership in a
labor organization of the rank-and-file employees but
may join, assist or form separate labor organizations Supervisor)
of their own.
====================
Petitioner brought this suit challenging the validity of the
order dated August 31, 1995, as reiterated in the order dated Operatives
September 22, 1995, of the Secretary of Labor and
Employment. Its petition was dismissed by the Third Division or
for lack of showing that respondent committed grave abuse of
discretion. But petitioner filed a motion for reconsideration, Operating
pressing for resolution its contention that the first sentence of
Art. 245 of the Labor Code, so far as it declares managerial Employees
employees to be ineligible to form, assist or join unions,
contravenes Art. III, 8 of the Constitution which provides:
FIRST-LINE MANAGERS The lowest level in an
organization at which individuals are responsible for
The right of the people, including those employed in the work of others is called first-line or first-level
the public and private sectors, to form unions, management. First-line managers direct operating
associations, or societies for purposes not contrary to employees only; they do not supervise other
law shall not be abridged. managers. Examples of first-line managers are the
"foreman" or production supervisor in a
For this reason, the petition was referred to the Court en banc. manufacturing plant, the technical supervisor in a
research department, and the clerical supervisor in a
The Issues in this Case large office. First-level managers are often called
supervisors.
Two questions are presented by the petition: (1) whether the
route managers at Pepsi-Cola Products Philippines, Inc. are MIDDLE MANAGERS The term middle
managerial employees and (2) whether Art. 245, insofar as it management can refer to more than one level in an

LABREL FULL TEXT CASES Page 44 of 179

 organization. Middle managers direct the activities of
other managers and sometimes also those of
operating employees. Middle managers' principal
responsibilities are to direct the activities that
implement their organizations' policies and to
balance the demands of their superiors with the
capacities of their subordinates. A plant manager in
an electronics firm is an example of a middle
manager.
TOP MANAGERS Composed of a comparatively
small group of executives, top management is
responsible for the overall management of the
organization. It establishes operating policies and
guides the organization's interactions with its
environment. Typical titles of top managers are "chief
executive officer,""president," and "senior vice-
president." Actual titles vary from one organization to
another and are not always a reliable guide to
membership in the highest management
2
classification.
As can be seen from this description, a distinction exists
between those who have the authority to devise, implement
and control strategic and operational policies (top and middle
managers) and those whose task is simply to ensure that such
policies are carried out by the rank-and-file employees of an
organization (first-level managers/supervisors). What
distinguishes them from the rank-and-file employees is that
they act in the interest of the employer in supervising such
rank-and-file employees.
"Managerial employees" may therefore be said to fall into two
distinct categories: the "managers" per se, who compose the
former group described above, and the "supervisors" who
form the latter group. Whether they belong to the first or the
second category, managers, vis-a-vis employers, are, likewise,
3
employees.
The first question is whether route managers are managerial
employees or supervisors.
Previous Administrative Determinations of
the Question Whether Route Managers
are Managerial Employees
It appears that this question was the subject of two previous
determinations by the Secretary of Labor and Employment, in
accordance with which this case was decided by the med-
arbiter.
In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade
Union (WATU) v. Pepsi-Cola Products Philippines, Inc., decided
on November 13, 1991, the Secretary of Labor found:
We examined carefully the pertinent job descriptions
of the subject employees and other documentary
evidence on record vis-a-vis paragraph (m), Article
LABREL FULL TEXT CASES
212 of the Labor Code, as amended, and we find that
only those employees occupying the position of route
manager and accounting manager are managerial
employees. The rest i.e. quality control manager,
yard/transport manager and warehouse operations
manager are supervisory employees.
To qualify as managerial employee, there must be a
clear showing of the exercise of managerial attributes
under paragraph (m), Article 212 of the Labor Code as
amended. Designations or titles of positions are not
controlling. In the instant case, nothing on record will
support the claim that the quality control manager,
yard/transport manager and warehouse operations
manager are vested with said attributes. The
warehouse operations manager, for example, merely
assists the plant finance manager in planning,
organizing, directing and controlling all activities
relative to development and implementation of an
effective management control information system at
the sale offices. The exercise of authority of the
quality control manager, on the other hand, needs
the concurrence of the manufacturing manager.
As to the route managers and accounting manager,
we are convinced that they are managerial
employees. Their job descriptions clearly reveal so.
On July 6, 1992, this finding was reiterated in Case No. OS-A-3-
71-92. entitled In Re: Petition for Direct Certification and/or
Certification Election-Route Managers/Supervisory Employees
of Pepsi-Cola Products Phils.Inc., as follows:
The issue brought before us is not of first impression.
At one time, we had the occasion to rule upon the
status of route manager in the same company vis a
vis the issue as to whether or not it is supervisory
employee or a managerial employee. In the case
of Workers Alliance Trade Unions (WATU) vs. Pepsi
Cola Products, Phils., Inc. (OS-MA-A-10-318-91 ), 15
November 1991, we ruled that a route manager is a
managerial employee within the context of the
definition of the law, and hence, ineligible to join,
form or assist a union. We have once more passed
upon the logic of our Decision aforecited in the light
of the issues raised in the instant appeal, as well as
the available documentary evidence on hand, and
have come to the view that there is no cogent reason
to depart from our earlier holding. Route Managers
are, by the very nature of their functions and the
authority they wield over their subordinates,
managerial employees. The prescription found in Art.
245 of the Labor Code, as amended therefore, clearly
4
applies to them.
Citing our ruling in Nasipit Lumber Co. v. National Labor
5
Relations Commission, however, petitioner argues that these
previous administrative determinations do not have the effect
of res judicata in this case, because "labor relations
Page 45 of 179
proceedings" are "non-litigious and summary in nature but requires the use of independent judgment. All
6
without regard to legal technicalities." Nasipit Lumber Co. employees not falling within any of the above
involved a clearance to dismiss an employee issued by the definitions are considered rank-and-file employees
Department of Labor. The question was whether in a for purposes of this Book.
subsequent proceeding for illegal dismissal, the clearance
was res judicata. In holding it was not, this Court made it clear At the very least, the principle of finality of administrative
that it was referring to labor relations proceedings of a non- determination compels respect for the finding of the Secretary
adversary character, thus: of Labor that route managers are managerial employees as
defined by law in the absence of anything to show that such
The requirement of a clearance to terminate determination is without substantial evidence to support it.
employment was a creation of the Department of Nonetheless, the Court, concerned that employees who are
labor to carry out the Labor Code provisions on otherwise supervisors may wittingly or unwittingly be
security of tenure and termination of employment. classified as managerial personnel and thus denied the right of
The proceeding subsequent to the filing of an self-organization, has decided to review the record of this
application for clearance to terminate employment case.
was outlined in Book V, Rule XIV of the Rules and
Regulations Implementing the Labor Code. The fact DOLE's Finding that Route Managers are
that said rule allowed a procedure for the approval of Managerial Employees Supported by
the clearance with or without the opposition of the Substantial Evidence in the Record
employee concerned (Secs. 7 & 8), demonstrates the
non-litigious and summary nature of the proceeding. The Court now finds that the job evaluation made by the
The clearance requirement was therefore necessary Secretary of Labor is indeed supported by substantial
only as an expeditious shield against arbitrary evidence. The nature of the job of route managers is given in a
dismissal without the knowledge and supervision of four-page pamphlet, prepared by the company, called "Route
the Department of Labor. Hence, a duly approved Manager Position Description," the pertinent parts of which
clearance implied that the dismissal was legal or for read:
7
cause (Sec. 2).
A. BASIC PURPOSE
But the doctrine of res judicata certainly applies to adversary
administrative proceedings. As early as 1956, inBrillantes
8 A Manager achieves objectives through others.
v. Castro, we sustained the dismissal of an action by a trial
court on the basis of a prior administrative determination of
As a Route Manager, your purpose
the same case by the Wage Administration Service, applying
9 is to meet the sales plan; and you
the principle of res judicata. Recently, in Abad v. NLRC we
achieve this objective through the
applied the related doctrine of stare decisis in holding that the
skillful MANAGEMENT OF YOUR JOB
prior determination that certain jobs at the Atlantic Gulf and
Pacific Co., were project employments was binding in another AND THE MANAGEMENT OF YOUR
PEOPLE.
case involving another group of employees of the same
company. Indeed, in Nasipit Lumber Co., this Court clarified
toward the end of its opinion that "the doctrine of res These then are your functions as
judicata applies . . . to judicial or quasi judicial proceedings and Pepsi-Cola Route Manager. Within
not to the exercise of administrative powers." Now
10 these functions managing your
proceedings for certification election, such as those involved in job and managing your people
Case No. OS-M-A-10-318-91 and Case No. OS-A-3-71-92, you are accountable to your District
are quasi judicial in nature and, therefore, decisions rendered Manager for the execution and
in such proceedings can attain finality.
11 completion of various tasks and
activities which will make it possible
for you to achieve your sales
Thus, we have in this case an expert's view that the employees
objectives.
concerned are managerial employees within the purview of
Art. 212 which provides:
B. PRINCIPAL ACCOUNTABILITIES
(m) "managerial employee" is one who is vested with
powers or prerogatives to lay down and execute 1.0 MANAGING YOUR JOB
management policies and/or to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline The Route
employees. Supervisory employees are those who, in Manager is
the interest of the employer, effectively recommend accountable for
such managerial actions if the exercise of such the following:
authority is not merely routinary or clerical in nature
LABREL FULL TEXT CASES Page 46 of 179
 1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal
contacts with dealers.
1.1.4 Inspect and ensure that all merchandizing [sic] objectives
are achieved in all outlets.
1.1.5 maintain and improve productivity of all cooling
equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested
retail pricing.
1.1.9 Study from time to time individual route coverage and
productivity for possible adjustments to maximize utilization
of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-
out and the proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other
related reports and forms required on an accurate and timely
basis.
1.2.3 Ensure proper implementation of the various company
policies and procedures incl. but not limited to shakedown;
route shortage; progressive discipline; sorting; spoilages;
credit/collection; accident; attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE
The Route
Manager is
accountable for
the following:
2.1 Route Sales Team Development
2.1.2 Conduct route rides to train, evaluate and develop all
assigned route salesmen and helpers at least 3 days a week, to
be supported by required route ride documents/reports &
back check/spot check at least 2 days a week to be supported
by required documents/reports.
LABREL FULL TEXT CASES
2.1.2 Conduct sales meetings and morning huddles. Training
should focus on the enhancement of effective sales and
merchandizing [sic] techniques of the salesmen and helpers.
Conduct group training at least 1 hour each week on a
designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict
adherence to PCPPI's code of conduct and the universal
standards of unquestioned business
12
ethics.
Earlier in this opinion, reference was made to the distinction
between managers per se (top managers and middle
managers) and supervisors (first-line managers). That
distinction is evident in the work of the route managers which
sets them apart from supervisors in general. Unlike
supervisors who basically merely direct operating employees
in line with set tasks assigned to them, route managers are
responsible for the success of the company's main line of
business through management of their respective sales teams.
Such management necessarily involves the planning, direction,
operation and evaluation of their individual teams and areas
which the work of supervisors does not entail.
The route managers cannot thus possibly be classified as mere
supervisors because their work does not only involve, but goes
far beyond, the simple direction or supervision of operating
employees to accomplish objectives set by those above them.
They are not mere functionaries with simple oversight
functions but business administrators in their own right. An
idea of the role of route managers as managers per se can be
gotten from a memo sent by the director of metro sales
operations of respondent company to one of the route
13
managers. It reads:
03 April 1995
To : CESAR T . REOLADA
From : REGGIE M. SANTOS
Subj : SALARY INCREASE
Effective 01 April 1995, your basic monthly salary of
P11,710 will be increased to P12,881 or an increase of
10%. This represents the added managerial
responsibilities you will assume due to the recent
restructuring and streamlining of Metro Sales
Operations brought about by the continuous losses
for the last nine (9) months.
Let me remind you that for our operations to be
profitable, we have to sustain the intensity and
momentum that your group and yourself have shown
last March. You just have to deliver the desired
volume targets, better negotiated concessions,
Page 47 of 179
 rationalized sustaining deals, eliminate or reduced
overdues, improved collections, more cash accounts,
controlled operating expenses, etc. Also, based on the
agreed set targets, your monthly performance will be
closely monitored.
You have proven in the past that your capable of
achieving your targets thru better planning,
managing your group as a fighting team, and thru
aggressive selling. I am looking forward to your
success and I expect that you just have to exert your
doubly best in turning around our operations from a
losing to a profitable one!
Happy Selling!!
The plasticized card given to route managers, quoted in the
separate opinion of Justice Vitug, although entitled "RM's Job
Description," is only a summary of performance standards. It
does not show whether route managers are managers per
se or supervisors. Obviously, these performance standards
have to be related to the specific tasks given to route
managers in the four-page "Route Manager Position
Description," and, when this is done, the managerial nature of
their jobs is fully revealed. Indeed, if any, the card indicates the
great latitude and discretion given to route managers from
servicing and enhancing company goodwill to supervising and
auditing accounts, from trade (new business) development to
the discipline, training and monitoring of performance of their
respective sales teams, and so forth, if they are to fulfill the
company's expectations in the "key result areas."
Article 212(m) says that "supervisory employees are those
who, in the interest of the employer,
effectivelyrecommend such managerial actions if the exercise
of such authority is not merely routinary or clerical in nature
but requires the use of independent judgment." Thus, their
only power is to recommend. Certainly, the route managers in
this case more than merely recommend effective management
action. They perform operational, human resource, financial
LABREL FULL TEXT CASES
and marketing functions for the company, all of which involve
the laying down of operating policies for themselves and their
teams. For example, with respect to marketing, route
managers, in accordance with B.1.1.1 to B.1.1.9 of the Route
Managers Job Description, are charged, among other things,
with expanding the dealership base of their respective sales
areas, maintaining the goodwill of current dealers, and
distributing the company's various promotional items as they
see fit. It is difficult to see how supervisors can be given such
responsibility when this involves not just the routine
supervision of operating employees but the protection and
expansion of the company's business vis-a-vis its competitors.
While route managers do not appear to have the power to hire
and fire people (the evidence shows that they only
"recommended" or "endorsed" the taking of disciplinary action
against certain employees), this is because ( this
is a function of the Human Resources or PersonnelSDepartment
14
of the company. And neither should it be presumed g that just
because they are given set benchmarks to observe, d they
are ipso facto supervisors. Adequate control methods
. (as
embodied in such concepts as "Management by ) Objectives
[MBO]" and "performance appraisals") which require a
delineation of the functions and responsibilities Rof managers
by means of ready reference cards as here, have . long been
recognized in management as effective tools Mfor keeping
businesses competitive. .
This brings us to the second question, whether S the first
sentence of Art. 245 of the Labor Code, prohibitingA managerial
employees from forming, assisting or joiningN any labor
organization, is constitutional in light of Art. III,
T 8 of the
Constitution which provides: O
S
The right of the people, including those employed in
the public and private sectors, to form unions,
associations, or societies for purposes not contrary to
law shall not be abridged.
As already stated, whether they belong to the first category
(managers per se) or the second category (supervisors),
managers are employees. Nonetheless, in the United States, as
Justice Puno's separate opinion notes, supervisors have no
right to form unions. They are excluded from the definition of
the term "employee" in 2(3) of the Labor-Management
15
Relations Act of 1947. In the Philippines, the question
whether managerial employees have a right of self-
organization has arisen with respect to first-level managers or
supervisors, as shown by a review of the course of labor
legislation in this country.
Right of Self-Organization of Managerial
Employees under Pre-Labor Code Laws
Before the promulgation of the Labor Code in 1974, the field of
labor relations was governed by the Industrial Peace Act (R.A.
No. 875).
Page 48 of 179
In accordance with the general definition above, this law group requires and the concessions the firm is willing
defined "supervisor" as follows: to grant. Their needs might not be attended to then in
the absence of any organization of their own. Nor is
Sec. 2. . . . this to indulge in empty theorizing. The record of
respondent Company, even the very case cited by it, is
(k) "Supervisor" means any person having authority in proof enough of their uneasy and troubled
the interest of an employer, to hire, transfer, suspend, relationship. Certainly the impression is difficult to
lay-off, recall, discharge, assign, recommend, or erase that an alien firm failed to manifest sympathy
discipline other employees, or responsibly to direct for the claims of its Filipino executives. To predicate
them, and to adjust their grievances, or effectively to under such circumstances that agreement inevitably
recommend such acts, if, in connection with the marks their relationship, ignoring that discord would
foregoing, the exercise of such authority is not of a not be unusual, is to fly in the face of reality.
merely routinary or clerical nature but requires the
16
use of independent judgment. . . . The basic question is whether the managerial
personnel can organize. What respondent Company
The right of supervisors to form their own organizations was failed to take into account is that the right to self-
affirmed: organization is not merely a statutory creation. It is
fortified by our Constitution. All are free to exercise
such right unless their purpose is contrary to law.
Sec. 3. Employees' Right to Self-Organization.
Certainly it would be to attach unorthodoxy to, not to
Employees shall have the right to self-organization
say an emasculation of, the concept of law if
and to form, join or assist labor organizations of their
managers as such were precluded from organizing.
own choosing for the purpose of collective bargaining
Having done so and having been duly registered, as
through representatives of their own choosing and to
did occur in this case, their union is entitled to all the
engage in concerted activities for the purpose of
rights under Republic Act No. 875. Considering what is
collective bargaining and other mutual aid and
denominated as unfair labor practice under Section 4
protection. Individuals employed as supervisors shall
of such Act and the facts set forth in our decision,
not be eligible for membership in a labor organization
there can be only one answer to the objection raised
of employees under their supervision but may form
17 that no unfair labor practice could be committed by
separate organizations of their own.
respondent Company insofar as managerial personnel
is concerned. It is, as is quite obvious, in the
For its part, the Supreme Court upheld in several of its 20
negative.
decisions the right of supervisors to organize for purposes of
18
labor relations.
Actually, the case involved front-line managers or supervisors
only, as the plantilla of employees, quoted in the main
Although it had a definition of the term "supervisor," the 21
opinion, clearly indicates:
Industrial Peace Act did not define the term "manager." But,
using the commonly-understood concept of "manager," as
CAFIMSA members holding the following Supervisory
above stated, it is apparent that the law used the term
Payroll Position Title are Recognized by the Company
"supervisors" to refer to the sub-group of "managerial
employees" known as front-line managers. The other sub-
group of "managerial employees," known as managers per se, Payroll Position Title
was not covered.
Assistant to Mgr. National Acct. Sales
However, in Caltex Filipino Managers and Supervisors
19
Association v. Court of Industrial Relations, the right of all Jr. Sales Engineer
managerial employees to self-organization was upheld as a
general proposition, thus: Retail Development Asst.

It would be going too far to dismiss summarily the Staff Asst. 0 Marketing
point raised by respondent Company that of the
alleged identity of interest between the managerial Sales Supervisor
staff and the employing firm. That should ordinarily
be the case, especially so where the dispute is Supervisory Assistant
between management and the rank and file. It does
not necessarily follow though that what binds the
Jr. Supervisory Assistant
managerial staff to the corporation forecloses the
possibility of conflict between them. There could be a
Credit Assistant
real difference between what the welfare of such

LABREL FULL TEXT CASES Page 49 of 179

 Lab. Supvr. Pandacan
Jr. Sales Engineer B
Operations Assistant B
Field Engineer
Sr. Opers. Supvr. MIA A/S
Purchasing Assistant
Jr. Construction Engineer
Sr. Sales Supervisor
Deport Supervisor A
Terminal Accountant B
Merchandiser
Dist. Sales Prom. Supvr.
Instr. Merchandising
Asst. Dist. Accountant B
Sr. Opers. Supervisor
Jr. Sales Engineer A
Asst. Bulk Ter. Supt.
Sr. Opers. Supvr.
Credit Supervisor A
Asst. Stores Supvr. A
Ref. Supervisory Draftsman
Refinery Shift Supvr. B
Asst. Supvr. A Operations (Refinery)
Refinery Shift Supvr. B
Asst. Lab. Supvr. A (Refinery)
St. Process Engineer B (Refinery)
Asst. Supvr. A Maintenance (Refinery)
Asst. Supvr. B Maintenance (Refinery)
LABREL FULL TEXT CASES
Supervisory Accountant (Refinery)
Communications Supervisor (Refinery)
Finally, also deemed included are all other employees
excluded from the rank and file unions but not
classified as managerial or otherwise excludable by
law or applicable judicial precedents.
Right of Self-Organization of Managerial
Employees under the Labor Code
Thus, the dictum in the Caltex case which allowed at least for
the theoretical unionization of top and middle managers by
assimilating them with the supervisory group under the broad
phrase "managerial personnel," provided the lynchpin for later
laws denying the right of self-organization not only to top and
middle management employees but to front line managers or
supervisors as well. Following the Caltex case, the Labor Code,
promulgated in 1974 under martial law, dropped the
distinction between the first and second sub-groups of
managerial employees. Instead of treating the terms
"supervisor" and "manager" separately, the law lumped them
together and called them "managerial employees," as follows:
Art. 212. Definitions . . . .
(k) "Managerial Employee" is one who is vested with
powers or prerogatives to lay down and execute
management policies and/or to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline
employees, or to effectively recommend such
managerial actions. All employees not falling within
this definition are considered rank and file employees
22
for purposes of this Book.
The definition shows that it is actually a combination of the
commonly understood definitions of both groups of
managerial employees, grammatically joined by the phrase
"and/or."
This general definition was perhaps legally necessary at that
time for two reasons. First, the 1974 Code denied supervisors
their right to self-organize as theretofore guaranteed to them
by the Industrial Peace Act. Second, it stood the dictum in the
Caltex case on its head by prohibiting all types of managers
from forming unions. The explicit general prohibition was
contained in the then Art. 246 of the Labor Code.
The practical effect of this synthesis of legal concepts was
made apparent in the Omnibus Rules Implementing the Labor
Code which the Department of Labor promulgated on January
19, 1975. Book V, Rule II, 11 of the Rules provided:
Supervisory unions and unions of security guards to
cease operation. All existing supervisory unions and
unions of security guards shall, upon the effectivity of
the Code, cease to operate as such and their
Page 50 of 179
 registration certificates shall be deemed
automatically canceled. However, existing collective
agreements with such unions, the life of which
extends beyond the date of effectivity of the Code,
shall be respected until their expiry date insofar as the
economic benefits granted therein are concerned.
Members of supervisory unions who do not fall within
the definition of managerial employees shall become
eligible to join or assist the rank and file labor
organization, and if none exists, to form or assist in
the forming of such rank and file organization. The
determination of who are managerial employees and
who are not shall be the subject of negotiation
between representatives of the supervisory union and
the employer. If no agreement is reached between the
parties, either or both of them may bring the issue to
the nearest Regional Office for determination.
The Department of Labor continued to use the term
"supervisory unions" despite the demise of the legal definition
of "supervisor" apparently because these were the unions of
front line managers which were then allowed as a result of the
statutory grant of the right of self-organization under the
Industrial Peace Act. Had the Department of Labor seen fit to
similarly ban unions of top and middle managers which may
have been formed following the dictum in Caltex, it obviously
would have done so. Yet it did not, apparently because no such
unions of top and middle managers really then existed.
Real Intent of the 1986 Constitutional Commission
This was the law as it stood at the time the Constitutional
Commission considered the draft of Art. III, 8. Commissioner
Lerum sought to amend the draft of what was later to become
Art. III, 8 of the present Constitution:
MR. LERUM. My amendment is on Section 7, page 2,
line 19, which is to insert between the words "people"
and "to" the following: WHETHER EMPLOYED BY THE
STATE OR PRIVATE ESTABLISHMENTS. In other words,
the section will now read as follows: "The right of the
people WHETHER EMPLOYED BY THE STATE OR
PRIVATE ESTABLISHMENTS to form associations,
unions, or societies for purposes not contrary to law
23
shall not be abridged."
Explaining his proposed amendment, he stated:
MR. LERUM. Under the 1935 Bill of Rights, the right to
form associations is granted to all persons whether or
not they are employed in the government. Under that
provision, we allow unions in the government, in
Lerum thus anchored his proposal on the fact that (1)
government-owned and controlled corporations and
government employees, supervisory employees, and security
in other industries in the private sector, such as the
guards, who had the right to organize under the Industrial
Philippine Government Employees' Association,
Peace Act, had been denied this right by the Labor Code, and
unions in the GSIS, the SSS, the DBP and other
(2) there was a need to reinstate the right of these employees.
government-owned and controlled corporations. Also,
In consonance with his objective to reinstate the right of
LABREL FULL TEXT CASES
we have unions of supervisory employees and of
security guards. But what is tragic about this is that
after the 1973 Constitution was approved and in spite
of an express recognition of the right to organize in
P.D. No. 442, known as the Labor Code, the right of
government workers, supervisory employees and
security guards to form unions was abolished.
And we have been fighting against this abolition. In
every tripartite conference attended by the
government, management and workers, we have
always been insisting on the return of these rights.
However, both the government and employers
opposed our proposal, so nothing came out of this
until this week when we approved a provision which
states:
Notwithstanding any provision of
this article, the right to self-
organization shall not be denied to
government employees.
We are afraid that without any corresponding
provision covering the private sector, the security
guards, the supervisory employees or majority
employees [sic] will still be excluded, and that is the
purpose of this amendment.
I will be very glad to accept any kind of wording as
long as it will amount to absolute recognition of
private sector employees, without exception, to
organize.
THE PRESIDENT. What does the Committee say?
FR. BERNAS. Certainly, the sense is very acceptable,
but the point raised by Commissioner Rodrigo is well-
taken. Perhaps, we can lengthen this a little bit more
to read: "The right of the people WHETHER
UNEMPLOYED OR EMPLOYED BY STATE OR PRIVATE
ESTABLISHMENTS.
I want to avoid also the possibility of having this
interpreted as applicable only to the employed.
MR. DE LOS REYES. Will the proponent accept an
amendment to the amendment, Madam President?
MR. LERUM. Yes, as long as it will carry the idea that
the right of the employees in the private sector is
recognized.
24
Page 51 of 179
government, security, and supervisory employees to organize,
Lerum then made his proposal:
MR. LERUM. Mr. Presiding Officer, after a
consultation with several Members of this
Commission, my amendment will now read as follows:
"The right of the people INCLUDING THOSE
EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS to
form associations, unions, or societies for purposes
not contrary to law shall not be abridged. In
proposing that amendment I ask to make of record
that I want the following provisions of the Labor Code
to be automatically abolished, which read:
Art. 245. Security guards and other
personnel employed for the
protection and security of the
person, properties and premises of
the employers shall not be eligible
for membership in a labor
organization.
Art. 246. Managerial employees are
not eligible to join, assist, and form
any labor organization.
THE PRESIDING OFFICER (Mr. Bengzon). What does
the Committee say?
FR. BERNAS. The Committee accepts.
THE PRESIDING OFFICER. (Mr. Bengzon) The
Committee has accepted the amendment, as
amended.
Is there any objection? (Silence) The Chair hears none;
25
the amendment, as amended, is approved.
The question is what Commissioner Lerum meant in seeking to
"automatically abolish" the then Art. 246 of the Labor Code.
Did he simply want "any kind of wording as long as it will
amount to absolute recognition of private sector employees,
26
without exception, to organize"? Or, did he instead intend to
have his words taken in the context of the cause which moved
him to propose the amendment in the first place, namely, the
denial of the right of supervisory employees to organize,
because he said, "We are afraid that without any
corresponding provision covering the private sector, security
guards, supervisory employees or majority [of] employees will
still be excluded, and that is the purpose of this
27
amendment"?
It would seem that Commissioner Lerum simply meant to
restore the right of supervisory employees to organize. For
even though he spoke of the need to "abolish" Art. 246 of the
Labor Code which, as already stated, prohibited "managerial
employees" in general from forming unions, the fact was that
in explaining his proposal, he repeatedly referred to
LABREL FULL TEXT CASES
"supervisory employees" whose right under the Industrial
Peace Act to organize had been taken away by Art. 246. It is
noteworthy that Commissioner Lerum never referred to the
then definition of "managerial employees" in Art. 212(m) of
the Labor Code which put together, under the broad phrase
"managerial employees," top and middle managers and
supervisors. Instead, his repeated use of the term "supervisory
employees," when such term then was no longer in the statute
books, suggests a frame of mind that remained grounded in
the language of the Industrial Peace Act.
Nor did Lerum ever refer to the dictum in Caltex recognizing
the right of all managerial employees to organize, despite the
fact that the Industrial Peace Act did not expressly provide for
the right of top and middle managers to organize. If Lerum
was aware of the Caltex dictum, then his insistence on the use
of the term "supervisory employees" could only mean that he
was excluding other managerial employees from his proposal.
If, on the other hand, he was not aware of the Caltex
statement sustaining the right to organize to top and middle
managers, then the more should his repeated use of the term
"supervisory employees" be taken at face value, as it had been
defined in the then Industrial Peace Act.
At all events, that the rest of the Commissioners understood
his proposal to refer solely to supervisors and not to other
managerial employees is clear from the following account of
Commissioner Joaquin G. Bernas, who writes:
In presenting the modification on the 1935 and 1973
texts, Commissioner Eulogio R. Lerum explained that
the modification included three categories of workers:
(1) government employees, (2) supervisory
employees, and (3) security guards. Lerum made of
record the explicit intent to repeal provisions of P.D.
442, the Labor Code. The provisions referred to were:
Art. 245. Security guards and other
personnel employed for the
protection and security of the
person, properties and premises of
the employers shall not be eligible
for membership in a labor
organization.
Art. 246. Managerial employees are
not eligible to join, assist, and form
28
any labor organization.
Implications of the Lerum Proposal
In sum, Lerum's proposal to amend Art. III, 8 of the draft
Constitution by including labor unions in the guarantee of
organizational right should be taken in the context of
statements that his aim was the removal of the statutory ban
against security guards and supervisory employees joining
labor organizations. The approval by the Constitutional
Commission of his proposal can only mean, therefore, that the
Page 52 of 179
Commission intended the absolute right to organize of
government workers, supervisory employees, and security
guards to be constitutionally guaranteed. By implication, no
similar absolute constitutional right to organize for labor
purposes should be deemed to have been granted to top-level
and middle managers. As to them the right of self-organization
may be regulated and even abridged conformably to Art. III,
8.
Constitutionality of Art. 245
Finally, the question is whether the present ban against
managerial employees, as embodied in Art. 245 (which
superseded Art. 246) of the Labor Code, is valid. This provision
reads:
Art. 245. Ineligibility of managerial employees to join
any labor organization; right of supervisory
employees. Managerial employees are not eligible
to join, assist or form any labor organization.
Supervisory employees shall not be eligible for
membership in a labor organization of the rank-and-
file employees but may join, assist or form separate
29
labor organizations of their own.
This provision is the result of the amendment of the Labor Code
in 1989 by R.A. No. 6715, otherwise known as the Herrera-
Veloso Law. Unlike the Industrial Peace Act or the provisions of
the Labor Code which it superseded, R.A. No. 6715 provides
separate definitions of the terms "managerial" and
"supervisory employees," as follows:
Art. 212. Definitions. . . .
(m) "managerial employee" is one who is vested with
powers or prerogatives to lay down and execute
management policies and/or to hire transfer,
suspend, lay off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in
the interest of the employer, effectively recommend
such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature
but requires the use of independent judgment. All
employees not falling within any of the above
definitions are considered rank-and-file employees for
purposes of this Book.
Although the definition of "supervisory employees" seems to
have been unduly restricted to the last phrase of the definition
in the Industrial Peace Act, the legal significance given to the
phrase "effectively recommends" remains the same. In fact,
the distinction between top and middle managers, who set
management policy, and front-line supervisors, who are merely
responsible for ensuring that such policies are carried out by
the rank and file, is articulated in the present
30
definition. When read in relation to this definition in Art.
212(m), it will be seen that Art. 245 faithfully carries out the
LABREL FULL TEXT CASES
intent of the Constitutional Commission in framing Art. III, 8
of the fundamental law.
Nor is the guarantee of organizational right in Art. III, 8
infringed by a ban against managerial employees forming a
union. The right guaranteed in Art. III, 8 is subject to the
condition that its exercise should be for purposes "not contrary
to law." In the case of Art. 245, there is a rational basis for
prohibiting managerial employees from forming or joining
labor organizations. As Justice Davide, Jr., himself a
constitutional commissioner, said in hisponencia in Philips
31
Industrial Development, Inc. v. NLRC:
In the first place, all these employees, with the
exception of the service engineers and the sales force
personnel, are confidential employees. Their
classification as such is not seriously disputed by PEO-
FFW; the five (5) previous CBAs between PIDI and
PEO-FFW explicitly considered them as confidential
employees. By the very nature of their functions, they
assist and act in a confidential capacity to, or have
access to confidential matters of, persons who
exercise managerial functions in the field of labor
relations. As such, the rationale behind the ineligibility
of managerial employees to form, assist or joint a
labor union equally applies to them.
In Bulletin Publishing
Co., Inc. v. Hon. Augusto Sanchez, this Court
elaborated on this rationale, thus:
. . . The rationale for this inhibition
has been stated to be, because if
these managerial employees would
belong to or be affiliated with a
Union, the latter might not be
assured of their loyalty to the Union
in view of evident conflict of
interests. The Union can also
become company-dominated with
the presence of managerial
32
employees in Union membership.
To be sure, the Court in Philips Industrial was dealing with the
right of confidential employees to organize. But the same
reason for denying them the right to organize justifies even
more the ban on managerial employees from forming unions.
After all, those who qualify as top or middle managers are
executives who receive from their employers information that
not only is confidential but also is not generally available to the
public, or to their competitors, or to other employees. It is
hardly necessary to point out that to say that the first sentence
of Art. 245 is unconstitutional would be to contradict the
decision in that case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Page 53 of 179
Narvasa, C.J., Regalado, Romero, Bellosillo, Martinez and
Purisima, JJ., concur.

LABREL FULL TEXT CASES Page 54 of 179

EN BANC
G.R. No. L-22228 February 27, 1969
PHILIPPINE ASSOCIATION OF LABOR UNIONS (PAFLU) SOCIAL
SECURITY SYSTEM EMPLOYEES ASSOCIATION-PAFLU, AL
FAJARDO AND ALL THE OTHER MEMBERS AND OFFICERS OF
THE SOCIAL SECURITY AND EMPLOYEES ASSOCIATION-
PAFLU, petitioners,
vs.
THE SECRETARY OF LABOR, THE DIRECTOR OF LABOR
RELATIONS and THE REGISTRAR OF LABOR
ORGANIZATIONS, respondents.
Cipriano Cid and Associates and Israel Bocobo for petitioners.
Office of the Solicitor General Arturo A. Alafriz and Solicitor
Camilo D. Quiason for respondents.
CONCEPCION, C.J.:
Petitioners pray for writs of certiorari and prohibition to
restrain respondents, the Secretary of Labor, the Director of
Labor Relations and the Registrar of Labor Organizations, from
enforcing an order of cancellation of the registration
certificate of the Social Security System Employees Association
hereinafter referred to as the SSSEA which is affiliated to
the Philippine Association of Free Labor Unions hereinafter
referred to as PAFLU as well as to annul all proceedings in
connection with said cancellation and to prohibit respondents
from enforcing Section 23 of Republic Act No. 875. Petitioners,
likewise, pray for a writ of preliminary injunction pending the
final determination of this case. In their answer, respondents
traversed some allegations of fact and the legal conclusions
made in the petition. No writ of preliminary
injunction pendente lite has been issued.
It appears that on September 25, 1963, the Registration of
Labor Organizations hereinafter referred to as the Registrar
issued a notice of hearing, on October 17, 1963, of the
matter of cancellation of the registration of the SSSEA,
because of:
1. Failure to furnish the Bureau of Labor Relations
with copies of the reports on the finances of that
union duly verified by affidavits which its treasurer or
treasurers rendered to said union and its members
covering the periods from September 24, 1960 to
September 23, 1961 and September 24, 1961 to
September 23, 1962, inclusive, within sixty days of
the 2 respective latter dates, which are the end of its
fiscal year; and
2. Failure to submit to this office the names, postal
addresses and non-subversive affidavits of the
officers of that union within sixty days of their
election in October (1st Sunday), 1961 and 1963, in
conformity with Article IV (1) of its constitution and
by-laws.
LABREL FULL TEXT CASES
in violation of Section 23 of Republic Act No. 875. Counsel for
the SSSEA moved to postpone the hearing to October 21,
1963, and to submit then a memorandum, as well as the
documents specified in the notice. The motion was granted,
but, nobody appeared for the SSSEA on the date last
mentioned. The next day, October 22, 1963, Manuel
Villagracia, Assistant Secretary of the SSSEA filed with the
Office of the Registrar, a letter dated October 21, 1963,
enclosing the following:
1. Joint non-subversive affidavit of the officers of the
SSS Employees' Association-PAFLU;
2. List of newly-elected officers of the Association in
its general elections held on April 29, 1963; and
3. Copy of the amended constitution and by-laws of
the Association.
Holding
1. That the joint non-subversive affidavit and the list
of officers mentioned in the letter of Mr. Manuel
Villagracia were not the documents referred to in the
notice of hearing and made the subject matter of the
present proceeding; and
2. That there is no iota of evidence on records to
show and/or warrant the dismissal of the present
proceeding.
on October 23, 1963, the Registrar rendered a decision
cancelling the SSSEA's Registration Certificate No. 1-IP169,
issued on September 30, 1960. Soon later, or on October 28,
1963, Alfredo Fajardo, president of the SSSEA moved for a
reconsideration of said decision and prayed for time, up to
November 15, within which to submit the requisite papers and
data. An opposition thereto having been filed by one Paulino
Escueta, a member of the SSSEA, upon the ground that the
latter had never submitted any financial statement to its
members, said motion was heard on November 27, 1963.
Subsequently, or on December 4, 1963, the Registrar issued an
order declaring that the SSSEA had "failed to submit the
following requirements to wit:
1. Non-subversive affidavits of Messrs. Teodoro Sison,
Alfonso Atienza, Rodolfo Zalameda, Raymundo
Sabino and Napoleon Pefianco who were elected
along with others on January 30, 1962.
2. Names, postal addresses and non-subversive
affidavits of all the officers who were supposedly
elected on October (1st Sunday), of its constitution
and by-laws.
and granting the SSSEA 15 days from notice to comply with
said requirements, as well as meanwhile holding in abeyance
the resolution of its motion for reconsideration.
Page 55 of 179
Pending such resolution, or on December 16, the PAFLU, the
SSSEA, Alfredo Fajardo "and all the officers and members" of
the SSSEA commenced the present action, for the purpose
stated at the beginning of this decision, upon the ground that
Section 23 of Republic Act No. 875 violates their freedom of
assembly and association, and is inconsistent with the
Universal Declaration of Human Rights; that it unduly
delegates judicial power to an administrative agency; that said
Section 23 should be deemed repealed by ILO-Convention No.
87; that respondents have acted without or in excess of
jurisdiction and with grave abuse of discretion in
promulgating, on November 19, 1963, its decision dated
October 22, 1963, beyond the 30-day period provided in
Section 23(c) of Republic Act No. 875; that "there is no appeal
or any other plain, speedy and adequate remedy in the
ordinary course of law"; that the decision complained of had
not been approved by the Secretary of Labor; and that the
cancellation of the SSSEA's certificate of registration would
cause irreparable injury.
The theory to the effect that Section 23 of Republic Act No.
875 unduly curtails the freedom of assembly and association
guaranteed in the Bill of Rights is devoid of factual basis. The
registration prescribed in paragraph (b) of said
1
section is not a limitation to the right of assembly or
association, which may be exercised with or withoutsaid
2 organization, association or union to the effect that
registration. The latter is merely a condition sine qua non for
the acquisition of legal personality by labor organizations,
associations or unions and the possession of the "rights and
privileges granted by law to legitimate labor organizations".
The Constitution does not guarantee these rights and
privileges, much less said personality, which are
mere statutory creations, for the possession and exercise of
which registration is required to protect both labor and the
public against abuses, fraud, or impostors who pose as
organizers, although not truly accredited agents of the union
they purport to represent. Such requirement is a valid exercise
of the police power, because the activities in which labor
organizations, associations and union of workers are engaged
affect public interest, which should be
3
protected. Furthermore, the obligation to submit financial
statements, as a condition for the non-cancellation of a
certificate of registration, is a reasonable regulation for the
benefit of the members of the organization, considering that
the same generally solicits funds or membership, as well as
oftentimes collects, on behalf of its members, huge amounts
4
of money due to them or to the organization.
For the same reasons, said Section 23 does not impinge upon
the right of organization guaranteed in the Declaration of
Human Rights, or run counter to Articles 2, 4, 7 and Section 2
of Article 8 of the ILO-Convention No. 87, which provide that
"workers and employers, ... shall have the right to establish
and ... join organizations of their own choosing, without
previous authorization"; that "workers and employers
organizations shall not be liable to be dissolved or suspended
by administrative authority"; that "the acquisition of legal
personality by workers' and employers' organizations, ... shall
not be made subject to conditions of such a character as to
LABREL FULL TEXT CASES
restrict the application of the provisions" above mentioned;
and that "the guarantees provided for in" said Convention
shall not be impaired by the law of the land.
5
In B.S.P. v. Araos, we held that there is no incompatibility
between Republic Act No. 875 and the Universal Declaration
of Human Rights. Upon the other hand, the cancellation of the
SSSEA's registration certificate would not entail a dissolution
of said association or its suspension. The existence of the
SSSEA would not be affected by said cancellation, although its
juridical personality and its statutory rights and privileges as
distinguished from those conferred by the Constitution
would be suspended thereby.
To be registered, pursuant to Section 23(b) of Republic Act No.
875, a labor organization, association or union of workers
must file with the Department of Labor the following
documents:
(1) A copy of the constitution and by-laws of the
organization together with a list of all officers of the
association, their addresses and the address of the
principal office of the organization;
(2) A sworn statement of all the officers of the said
they are not members of the Communist Party and
that they are not members of any organization which
teaches the overthrow of the Government by force or
by any illegal or unconstitutional method; and
(3) If the applicant organization has been in existence
for one or more years, a copy of its last annual
financial report.
Moreover, paragraph (d) of said-Section ordains that:
The registration and permit of a legitimate labor
organization shall be cancelled by the Department of
Labor, if the Department has reason to believe that
the labor organization no longer meets one or more of
the requirements of paragraph (b) above; or fails to
file with the Department Labor either its financial
reportwithin the sixty days of the end of its fiscal year
or the names of its new officers along with their non-
subversive affidavits as outlined in paragraph (b)
above within sixty days of their election; however,
the Department of Labor shall not order the
cancellation of the registration and permit without
due notice and hearing, as provided under paragraph
(c) above and the affected labor organization shall
have the same right of appeal to the courts as
6
previously provided.
The determination of the question whether the requirements
of paragraph (b) have been met, or whether or not the
requisite financial report or non-subversive affidavits have
been filed within the period above stated, is not judicial
Page 56 of 179
power. Indeed, all officers of the government, including those
in the executive department, are supposed, to act on the basis
of facts, as they see the same. This is specially true as regards
administrative agencies given by law the power to investigate
and render decisions concerning details related to the
execution of laws the enforcement of which is entrusted
thereto. Hence, speaking for this Court, Mr. Justice Reyes
(J.B.L.) had occassion to say:
The objections of the appellees to the
constitutionality of Republic Act No. 2056, not only as
an undue delegation of judicial power to the
Secretary of Public Works but also for being
unreasonable and arbitrary, are not tenable. It will be
noted that the Act (R.A. 2056) merely empowers the
Secretary to remove unauthorized obstructions or
encroachments upon public streams, constructions
that no private person was anyway entitled to make
because the bed of navigable streams is public
property, and ownership thereof is not acquirable by
adverse possession
(Palanca vs. Commonwealth, 69 Phil., 449).
It is true that the exercise of the Secretary's power
under the Act necessarily involves the determination
of some question of fact, such as the existence of the
stream and its previous navigable character; but
these functions, whether judicial or quasi-judicial, are
merely incidental to the exercise of the power
granted by law to clear navigable streams of
unauthorized obstructions or encroachments,
and authorities are clear that they are validly
conferable upon executive officials provided the party
affected is given opportunity to be heard, as is
expressly required by Republic Act No. 2056, section
7
2.
It should be noted also, that, admittedly, the SSSEA had not
filed the non-subversive affidavits of some of its officers
"Messrs. Sison, Tolentino, Atienza, Zalameda, Sabino and
Pefianca" although said organization avers that these
persons "were either resigned or out on leave as directors or
officers of the union", without specifying who had resigned
and who were on leave. This averment is, moreover,
controverted by respondents herein.
Again, the 30-day period invoked by the petitioners is
inapplicable to the decision complained of. Said period is
8
prescribed in paragraph (c) of Section 23, which refers to the
proceedings for the "registration" of labor organizations,
associations or unions not to the "cancellation" of said
registration, which is governed by the abovequoted paragraph
(d) of the same section.
Independently of the foregoing, we have repeatedly held that
legal provisions prescribing the period within which a decision
should be rendered are directory, not mandatory in nature
in the sense that, a judgment promulgated after the expiration
of said period is not null and void, although the officer who
LABREL FULL TEXT CASES
failed to comply with law may be dealt with administratively,
9
in consequence of his delay unless the intention to the
contrary is manifest. Such, however, is not the import of said
paragraph (c). In the language of Black:
When a statute specifies the time at or within which
an act is to be done by a public officer or body, it is
generally held to be directory only as to the time, and
not mandatory, unless time is of the essence of the
thing to be done, or the language of the statute
contains negative words, or shows that the
designation of the time was intended as a limitation
10
of power, authority or right.
Then, again, there is no law requiring the approval, by the
Secretary of Labor, of the decision of the Registrar decreeing
the cancellation of a registration certificate. In fact, the
language of paragraph (d) of Section 23, suggests that, once
the conditions therein specified are present, the office
concerned "shall" have no choice but to issue the order of
cancellation. Moreover, in the case at bar, there is nothing, as
yet, for the Secretary of Labor to approve or disapprove, since
petitioners, motion for reconsideration of the Registrar's
decision of October 23, 1963, is still pending resolution. In fact,
this circumstance shows, not only that the present action is
11
premature, but, also, that petitioners have failed to exhaust
12
the administrative remedies available to them. Indeed, they
could ask the Secretary of Labor to disapprove the Registrar's
decision or object to its execution or enforcement, in the
absence of approval of the former, if the same were
necessary, on which we need not and do not express any
opinion.
IN VIEW OF THE FOREGOING, the petition herein should be, as
it is hereby dismissed, and the writs prayed for denied, with
costs against the petitioners. It is so ordered. lawphi1.nt
Reyes, J.B.L., Dizon, Makalintal,. Zaldivar, Sanchez, Castro,
Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Page 57 of 179
FIRST DIVISION
G.R. No. 75039 January 28, 1988
FRANKLIN BAKER COMPANY OF THE PHILIPPINES, petitioner,
vs.
HONORABLE CRESENCIO B. TRAJANO, DIRECTOR OF BUREAU
OF LABOR RELATIONS, FRANKLIN BAKER BROTHERHOOD
ASSOCIATION (TECHNICAL AND OFFICE EMPLOYEES)-
ASSOCIATION OF TRADE UNIONS (ATU), respondents.
PARAS, J.:
This is a petition for certiorari seeking the annulment of. (a)
the Order of Mediator-Arbiter Conchita J. Martinez of the
Ministry of Labor and Employment, Davao City, dated
September 17, 1984 in LRD Case No. R-22 MED-ROXI-UR-28-84
entitled "In Re: Petition for Certification Election Among the
Office and Technical Employees of Franklin Baker Company of
the Philippines, Davao Plant at Coronan, Sta. Cruz, Davao del
Sur, Franklin Baker Company of the Philippines, Davao Plant,
Employer, Franklin Baker Brotherhood Association (Technical
and Office Employees)-Association of Trade Unions (ATU),"
insofar as it includes the managerial employees (inspectors,
foremen and supervisors) in the certification election; (b) the
Order of April 7, 1986 of Director Cresencio B. Trajano, also of
the MOLE, dismissing the appeal of aforesaid Order of
September 17, 1985 for lack of merit; and (c) the Order of June
6, 1986 of said Director denying reconsideration of his Order
of April 7, 1986 and affirming the same in toto (Rollo, p. 90).
In brief, the undisputed facts of this case are as follows:
On April 23, 1984, private respondent Franklin Baker
Brotherhood Association-(ATU) filed a petition for certification
election among the office and technical employees of
petitioner company with the Ministry of Labor and
Employment, Regional Office No. XI, Davao City, docketed as
LRD No. R-22, MED-ROXI-UR-2884. Among other things, it
alleges that Franklin Baker Company of the Phils. Davao Plant,
had in its employ approximately ninety (90) regular technical
and office employees, which group is separate and distinct
from the regular rank and file employees and is excluded from
the coverage of existing Collective Bargaining Agreement.
Petitioner company did not object to the holding of such an
election but manifested that out of the ninety (90) employees
sought to be represented by the respondent union, seventy
four (74) are managerial employees while two (2) others are
confidential employees, hence, must be excluded from the
certification election and from the bargaining unit that may
result from such election (Rollo, p. 3).
Hearings were held and thereafter, the parties agreed to file
their respective memoranda. Likewise, petitioner filed a reply
to private respondent's Memorandum (Rollo, p. 4).
LABREL FULL TEXT CASES
Subsequently, on September 17, 1984, Med-Arbiter Conchita
J. Martinez issued an order, the dispositive part of which
reads:
Accordingly, the petition is hereby granted
and a certification election among the office
and technical employees of Franklin Baker
Company of the Philippines, Davao Plant is
ordered within twenty (20) days from receipt
hereof. The choices shall be the following:
1. Franklin Baker Brotherhood Association-
(ATU)
2. No Union
The representation officer assigned shall call
the parties for a pre-election conference at
least five (5) days before the date of the
election to thresh out the mechanics of the
election, the finalization of the list of voters,
the posting of notices and other relevant
matters.
The company's latest payroll shall be the
basis for determining the office and technical
workers qualified to vote.
SO ORDERED. (Rollo, pp. 47-48).
From the aforequoted order petitioner Company appealed to
the Bureau of Labor Relations, docketed as BLR Case No. A-
22884, praying that the appealed order be set aside and
another be issued declaring the seventy four (74) inspectors,
foremen and supervisors as managerial employees.
During the pendency of the appeal, sixty one (61) of the
employees involved, filed a Motion to Withdraw the petition
for certification election praying therein for their exclusion
from the Bargaining Unit and for a categorical declaration that
they are managerial employees, as they are performing
managerial functions (Rollo, p. 4).
On April 7, 1986, public respondent Bureau of Labor Relations
Cresencio B. Trajano issued a Resolution affirming the order
dated September 17, 1984, the dispositive part of which reads:
WHEREFORE, the appealed Order dated
September 17, 1985 is hereby affirmed and
the appeal dismissed for lack of merit. Let
the certification election among the office
and technical employees of Franklin Baker
Company of the Philippines proceed without
delay.
The latest payrolls of the company shall be
used as basis of determining the list of
eligible voters. (Rollo, p. 77),
Page 58 of 179
Petitioner company sought the reconsideration of the
aforequoted resolution but its motion was denied by Director
Cresencio B. Trajano in his order dated June 6, 1986, the
dispositive part of which reads:
WHEREFORE, the appeal of respondent
company is, dismissed for lack of merit and
the Bureau's Resolution dated April 1986
affirmed in toto.
Let, therefore, the pertinent papers of this
case be immediately forwarded to the Office
of origin for the conduct of the certification
election. (Rollo, p. 90).
Hence, this petition.
In the resolution of July 30, 1986, the Second Division of this
Court without giving due course to the petition required the
respondents to file their comment (Rollo, p. 91). On August 28,
1986, public respondent filed its comment (Rollo, pp. 99 to
102). Likewise private respondent filed its comment on
September 5, 1986 (Rollo, pp. 104 to 107).
In the resolution of September 8, 1986, petitioner was
required to file its reply to public respondent's comment
(Rollo, p. 119) which reply was filed on September 18, 1986
(Rollo, pp. 122-127).
On October 20, 1986, this Court resolved to give due course to
the petition and required the parties to file their respective
Memoranda (Rollo, p. 133). In compliance with said resolution,
petitioner and private respondent filed their Memoranda on
December 8, 1986 and December 29, 1986, respectively (Rollo,
pp. 183-187). On the other hand, public respondent filed with
this Court a manifestation (Rollo, p. 153) to the effect that it is
adopting as its memorandum its comment dated August 18,
1986 (Rollo, p. 99) which manifestation was noted by this
Court in its resolution dated November 26, 1986
(Rollo, p. 155).
The lone assignment of error raised by petitioner states:
Public respondent acted with grave abuse of
discretion amounting to lack of jurisdiction
when he ruled that the 76 employees
subject of this petition are not managerial
employees (inspectors, foremen, supervisors
and the like) and therefore, may participate
in the certification election among the office
and technical employees. Such ruling is
contrary to jurisprudence and to the factual
evidence presented by petitioner which was
not rebutted by private respondent union
and is therefore patently baseless.
From this assigned error two questions are raised by
petitioner, namely: (1) whether or not subject employees are
LABREL FULL TEXT CASES
managerial employees under the purview of the Labor Code
and its Implementing Rules; and (2) whether the Director of
the Bureau of Labor Relations acted with abuse of discretion in
affirming the order of Mediator-Arbiter Conchita J. Martinez.
There is no question that there are in the DAVAO Plant of
petitioner company approximately 90 regular technical and
office employees which form a unit, separate and distinct from
the regular rank and file employees and are excluded from the
coverage of existing Collective Bargaining Agreement; that said
group of employees organized themselves as Franklin Baker
Brotherhood Association (technical and office employees) and
affiliated with the local chapter of the Association of trade
Unions (ATU), a legitimate labor organization with Registration
Permit No. 8745 (Fed) LC and with office located at the 3rd
Floor of Antwell Bldg., Sta. Ana, Davao City; that petitioner
company did not object to the holding of such certification,
but only sought the exclusion of inspectors, foremen and
supervisors, members of Franklin Baker Brotherhood
Association (technical and office employees) numbering 76
from the certification election on the ground that they are
managerial employees.
A managerial employee is defined as one "who is vested with
powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees, or to effectively
recommend such managerial actions." (Reynolds Phil. Corp. v.
Eslava, 137 SCRA [1985], citing Section 212 (K), Labor Code.
Also pertinent thereto is Section 1 (M) of the Implementing
Rules and Regulations, which is practically a restatement of
the above provision of law.
To sustain its posture, that the inspectors, foreman and
supervisors numbering 76 are managerial employees,
petitioner painstakingly demonstrates that subject employees
indeed participate in the formulation and execution of
company policies and regulations as to the conduct of work in
the plant, exercised the power to hire, suspend or dismiss
subordinate employees and effectively recommend such
action, by citing concrete cases, among which are: (1) Mr.
Ponciano Viola, a wet process inspector, who while in the
performance of his duty, found Mr. Enrique Asuncion, a
trimmer "forging", falsifying and simulating a company time
card (timesheet) resulting in payroll padding, immediately
recommended the dismissal of said erring employee, resulting
in the latter's discharge. (Employer's Memo, Rollo, p.18); (2)
Mr. Manuel Alipio, an opening inspector, recommended for
suspension Nut Operator Ephraim Dumayos who was caught
in the act of surreptitiously transferring to a co-worker's bin
some whole nuts which act constitutes a violation of company
policy; (3) Mr. Sofronio Abangan, a line inspector, censured
and thereafter recommended the suspension of Mr. Romeo
Fullante, for being remiss in the proper and accurate counting
of nuts; (4) Binleader Dionisio Agtang was required to explain
his inefficiency of Mr. Saturnino Bangkas, Bin Loading
Inspector; (5) for disobeying the orders of Bin Loading
Inspector Mauricio Lumanog's order, Macario Mante, Eduardo
Page 59 of 179
Adaptor, Rodolfo Irene and George Rellanos were all
recommended for suspension which culminated in an
investigation conducted by Lumanog's higher bosses (Ibid., p.
20).
It has also been shown that subject employees have the power
to hire, as evidenced by the hiring of Rolando Asis, Roy Layson,
Arcadio Gaudicos and Felix Arciaga, upon the recommendation
of Opening Inspector Serafin Suelo, Processing Inspector
Leonardo Velez and Laureano C. Lim, Opening Inspector (Ibid.,
p. 21).
It will be noted, however, that in the performance of their
duties and functions and in the exercise of their
recommendatory powers, subject employees may only
recommend, as the ultimate power to hire, fire or suspend as
the case may be, rests upon the plant personnel manager.
The test of "supervisory" or "managerial status" depends on
whether a person possesses authority to act in the interest of
his employer in the matter specified in Article 212 (k) of the
Labor Code and Section 1 (m) of its Implementing Rules and
whether such authority is not merely routinary or clerical in
nature, but requires the use of independent judgment. Thus,
where such recommendatory powers as in the case at bar, are
subject to evaluation, review and final action by the
department heads and other higher executives of the
company, the same, although present, are not effective and
not an exercise of independent judgment as required by law
(National Warehousing Corp. v. CIR, 7 SCRA 602-603 [1963]).
Furthermore, in line with the ruling of this Court, subject
employees are not managerial employees because as borne by
the records, they do not participate in policy making but are
given ready policies to execute and standard practices to
observe, thus having little freedom of action (National
Waterworks and Sewerage Authority v. NWSA Consolidated, L-
18938, 11 SCRA 766 [1964]).
Petitioner's contention that the Director of the Bureau of
Labor Relations acted with abuse of discretion amounting to
lack of jurisdiction in holding that the 76 employees are not
managerial employees and must be included in the
certification election has no basis in fact and in law. Neither is
its contention that the use of the word's "and/or" categorically
shows that performance of the functions enumerated in the
law qualifies an employee as a managerial employee.
It is well settled that the findings of fact of the Ministry of
Labor and National Labor Relations Commission are entitled to
great respect, unless the findings of fact and the conclusions
made therefrom, are not supported by substantial evidence,
or when there is grave abuse of discretion committed by said
public official (Kapisanan ng Manggagawa sa Camara Shoes,
2nd Heirs of Santos Camara, et al., 111 SCRA 477 [1982];
International hardwood and Veneer Co. of the Philippines v.
Leonardo, 117 SCRA 967 [1982]; Pan-Phil-Life, Inc. v. NLRC,
114 SCRA 866 [1982]; Pepsi-Cola Labor Union-BF LUTUPAS
LABREL FULL TEXT CASES
Local Chapter N-896 v. NLRC, 114 SCRA 930 [1982]; Egyptair v.
NLRC, 148 SCRA 125 [1987]; RJL Martinez Fishing Corp. v.
NLRC, G.R. Nos. 63550-51, 127 SCRA 455 [1984]; and Reyes v.
Phil. Duplicators, G.R. No. 54996, 109 SCRA 489 [1981]).
By "grave abuse of discretion" is meant, such capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction. The abuse of discretion must be grave as where
the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility and must be so patent
and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act at all
in contemplation of law (G.R. No. 59880, George Arguelles
[Hda. Emma Arguelles v. Romeo Yang, etc.], September 11,
1987).
Moreover, this Court has ruled that findings of administrative
agencies which have acquired expertise, like the Labor
Ministry, are accorded respect and finality (Special Events and
Central Shipping Office Workers Union v. San Miguel Corp.,
122 SCRA 557 [1983] and that the remedy of certiorari does
not lie in the absence of any showing of abuse or misuse of
power properly vested in the Ministry of Labor and
Employment (Buiser v. Leogardo, Jr., 131 SCRA 151 [1984]).
After a careful review of the records, no plausible reason could
be found to disturb the findings of fact and the conclusions of
law of the Ministry of Labor.
Even if We regard the employees concerned as "managerial
employees," they can still join the union of the rank and file
employees. They cannot however form their own exclusive
union as "managerial employees" (Bulletin Publishing
Corporation v. Sanchez, 144 SCRA 628).
PREMISES CONSIDERED, the petition is DISMISSED, and the
assailed resolution and orders are AFFIRMED.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.
Page 60 of 179
FIRST DIVISION
G.R. No. 93468 December 29, 1994
NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-
REPUBLIC PLANTERS BANK SUPERVISORS
CHAPTER, petitioner,
vs.
HON. RUBEN D. TORRES, SECRETARY OF LABOR AND
EMPLOYMENT and REPUBLIC PLANTERS BANK,respondents.
Filemon G. Tercero for petitioner.
The Government Corporate Counsel for Republic Planters Bank.
BELLOSILLO, J.:
NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC
PLANTERS BANK SUPERVISORS CHAPTER seeks nullification of
the decision of public respondent Secretary of Labor dated 23
March 1990, which modified the order of Med-Arbiter
Manases T. Cruz dated 17 August 1989 as well as his order
dated 20 April 1990 denying reconsideration.
On 17 March 1989, NATU filed a petition for certification
election to determine the exclusive bargaining representative
of respondent Bank's employees occupying supervisory
positions. On 24 April 1989, the Bank moved to dismiss the
petition on the ground that the supposed supervisory
employees were actually managerial and/or confidential
employees thus ineligible to join, assist or form a union, and
that the petition lacked the 20% signatory requirement under
the Labor Code.
On 17 August 1989, Med-Arbiter Manases T. Cruz granted the
petition thus
WHEREFORE, . . . let a certification election
be ordered conducted among all the regular
employees of the Republic Planters Bank
occupying supervisory positions or the
equivalent within 20 days from receipt of a
copy of this Order. The choice shall be: (1)
National Association of Trade Unions
(NATU)-Republic Planters Bank Supervisors
Chapter; and (2) No Union.
The payroll three months prior to the filing
of this petition shall be utilized in
1
determining the list of eligible voters . . . .
Respondent Bank appealed the order to the Secretary of Labor
on the main ground that several of the employees sought to
LABREL FULL TEXT CASES
be included in the certification election, particularly the
Department Managers, Branch Managers/OICs, Cashiers and
Controllers were managerial and/or confidential employees
and thus ineligible to join, assist or form a union. It presented
annexes detailing the job description and duties of the
positions in question and affidavits of certain employees. It
also invoked provisions of the General Banking Act and the
Central Bank Act to show the duties and responsibilities of the
bank and its branches.
On 23 March 1990, public respondent issued a decision
partially granting the appeal, which is now being challenged
before us
WHEREFORE, . . . the appeal is hereby
partially granted. Accordingly, the Order
dated 17 August 1989 is modified to the
extent that Department Managers, Assistant
Managers, Branch Managers, Cashiers and
Controllers are declared managerial
employees. Perforce, they cannot join the
union of supervisors such as Division Chiefs,
Accounts Officers, Staff Assistants and OIC's
(sic) unless the latter are regular managerial
2
employees . . . .
NATU filed a motion for reconsideration but the same was
3
denied on 20 April 1990. Hence this recourse assailing public
respondent for rendering the decision of 23 March 1990 and
the order of 20 April 1990 both with grave abuse of discretion.
The crucial issue presented for our resolution is whether the
Department Managers, Assistant Managers, Branch
Managers/OICs, Cashiers and Controllers of respondent Bank
are managerial and/or confidential employees hence ineligible
to join or assist the union of petitioner.
NATU submits that an analysis of the decision of public
respondent readily yields certain flaws that result in erroneous
conclusions. Firstly, a branch does not enjoy relative autonomy
precisely because it is treated as one unit with the head office
and has to comply with uniform policies and guidelines set by
the bank itself. It would be absurd if each branch of a
particular bank would be adopting and implementing different
policies covering multifarious banking transactions. Moreover,
respondent Bank's own evidence clearly shows that policies
and guidelines covering the various branches are set by the
head office. Secondly, there is absolutely no evidence showing
that bank policies are laid down through the collective action
of the Branch Manager, the Cashier and the Controller.
Thirdly, the organizational setup where the Branch Manager
exercises control over branch operations, the Controller
controls the Accounting Division, and the Cashier controls the
Cash Division, is nothing but a proper delineation of duties and
responsibilities. This delineation is a Central Bank prescribed
internal control measure intended to objectively establish
responsibilities among the officers to easily pinpoint
culpability in case of error. The "dual control" and "joint
custody" aspects mentioned in the decision of public
Page 61 of 179
respondent are likewise internal control measures prescribed positions and thus remain prohibited from forming or joining
by the Central Bank. any labor organization.

Neither is there evidence showing that subject employees are
vested with powers or prerogatives to hire, transfer, suspend,
lay off, recall, discharge, assign or discipline employees. The
bare allegations in the affidavits of respondent Bank's
4
Executive Assistant to the President and the Senior Manager
5
of the Human Resource Management Department that those
powers and prerogatives are inherent in subject positions are
self-serving. Their claim cannot be made to prevail upon the
actual duties and responsibilities of subject employees.
The other evidence of respondent Bank which purports to
show that subject employees exercise managerial functions
even belies such claim. Insofar as Department Managers and
Assistant Managers are concerned, there is absolutely no
reason mentioned in the decision why they are managerial
employees. Not even respondent Bank in its appeal
questioned the inclusion of Assistant Managers among the
qualified petitioning employees. Public respondent has
deviated from the real issue in this case, which is, the
determination of whether subject employees are managerial
employees within the contemplation of the Labor Code, as
amended by RA 6715; instead, he merely concentrated on the
nature, conduct and management of banks conformably with
the General Banking Act and the Central Bank Act.
Respondent Bank has no legal personality to move for the
dismissal of the petition for certification election on the
ground that its supervisory employees are in reality
managerial employees. An employer has no standing to
question the process since this is the sole concern of the
workers. The only exception is where the employer itself has
to file the petition pursuant to Art. 258 of the Labor Code
6
because of a request to bargain collectively.
Public respondent, invoking RA 6715 and the inherent
functions of Department Managers, Assistant Managers,
Branch Managers, Cashiers and Controllers, held that these
officers properly fall within the definition of managerial
employees. The ratiocination in his Decision of 23 March
7
1990 is that
Republic Act No. 6715, otherwise known as
the Herrera-Veloso Law, restored the right of
supervisors to form their own unions while
maintaining the proscription on the right to
self-organization of managerial employees.
Accordingly, the Labor Code, as amended,
distinguishes managerial, supervisory and
rank-and-file employees thus:

Petitioner concludes that subject employees are not Art. 212 (m) Managerial
managerial employees but supervisors. Even assuming that employee is one who is
they are confidential employees, there is no legal prohibition vested with powers or
against confidential employees who are not performing prerogatives to lay down
managerial functions to form and join a union. and execute management
policies and/or to hire,
On the other hand, respondent Bank maintains that the transfer, suspend, lay-off,
Department Managers, Branch Managers, Cashiers and recall, discharge, assign or
Controllers are inherently possessed of the powers discipline
enumerated in Art. 212, par. (m), of the Labor Code. It relies employees. Supervisory em
heavily on the affidavits of its Executive Assistant to the ployees are those who, in
President and Senior Manager of the Human Resource the interest of the
Department. The Branch Managers, Cashiers and Controllers employer, effectively
are vested not only with policy-making powers necessary to recommend such
run the affairs of the branch, given the independence and managerial actions, if the
relative autonomy which it enjoys in the pursuit of its goals exercise of such
and objectives, but also with the concomitant disciplinary managerial authority is not
authority over the employees. routinary in nature but
requires the use of
The Solicitor General argues that NATU loses sight of the fact independent judgment. All
that by virtue of the appeal of respondent Bank, the whole employees not falling
case is thrown open for consideration by public respondent. within any of the above
Even errors not assigned in the appeal, such as the exclusion definitions are considered
by the Med-Arbiter of Assistant Managers from the rank-and-file employees
managerial employees category, is within his discretion to (emphasis supplied).
consider as it is closely related to the errors properly assigned.
The fact that Department Managers are managerial employees At first glance, pursuant to the above-
is borne out by the evidence of petitioner itself. Furthermore, definitions and based on their job
while it assails public respondent's finding that subject descriptions as guideposts, there would
employees are managerial employees, petitioner never seem to be no difficulty in distinguishing a
questioned the fact that said officers also occupy confidential managerial employee from that of a
LABREL FULL TEXT CASES Page 62 of 179
 supervisor, or from that of a mere rank-and-
file employee. Yet, this task takes on a
different dimension when applied to banks,
particularly the branches thereof. This is so
because unlike ordinary corporations, a
bank's organizational operation is governed
and regulated by the General Banking Act
and the Central Bank Act, both special laws .
...
As pointed out by the respondent, in the
banking industry, a branch is the microcosm
of a banking institution, uniquely
autonomous and
self-governing.
This relative autonomy of a branch finds
legal basis in Section 27 of the General
Banking Act, as amended, thus:
. . . . The bank shall be
responsible for all business
conducted in such
branches to the same
extent and in the same
manner as though such
business had all been
conducted in the head
office.
For the purpose of this Act,
a bank and its branches
shall be treated as a
unit (emphasis supplied).
Conformably with the above, bank policies
are laid down and/or executed through the
collective action of the Branch Manager,
Cashier and Controller at the branch level.
The Branch Manager exercises over-all
control and supervision over branch
operation being on the top of the branch's
pyramid structure. However, both the
controller and the cashier who are called in
banking parlance as "Financial Managers"
due to their fiscal functions are given such a
share and sphere of responsibility in the
operations of the bank. The cashier controls
and supervises the cash division while the
controller that of the Accounting Division.
Likewise, their assigned task is of great
significance, without which a bank or branch
for that matter cannot operate or function.
Through the collective action of these three
branch officers operational transactions are
carried out like: The two (2)-signature
requirement of the manager, on one hand,
LABREL FULL TEXT CASES
and that of the controller or cashier on the
other hand as required in bank's issuances
and releases. This is the so-called "dual
control" through check-and-balance as
prescribed by the Central Bank, per Section
1166.6, Book I, Manual of Regulations for
Banks and Financial Intermediaries. Another
is in the joint custody of the branch's cash in
vault, accountable forms, collaterals,
documents of title, deposit, ledgers and
others, among the branch manager and at
least two (2) officers of the branch as
required under Section 1166.6 of the Manual
of Regulations for Banks and Other Financial
Intermediaries.
This structural set-up creates a triad of
managerial authority among the branch
manager, cashier and controller. Hence, no
officer of the bank ". . . have (sic) complete
authority and responsibility for handling all
phases of any transaction from beginning to
end without some control or balance from
some other part of the organization"
(Section 1166.3, Division of Duties and
Responsibilities, Ibid).This aspect in the
banking system which calls for the division of
duties and responsibilities is a clear
manifestation of managerial power and
authority. No operational transaction at
branch level is carried out by the singular act
of the Branch Manager but rather through
the collective act of the Branch Manager,
Cashier/Controller (emphasis supplied).
Noteworthy is the "on call client" set up in
banks. Under this scheme, the branch
manager is tasked with the responsibility of
business development and marketing of the
bank's services which place him on client
call. During such usual physical absences
from the branch, the cashier assumes the
reins of branch control and administration.
On those occasions, the "dual control
system" is clearly manifest in the
transactions and operations of the branch
bank as it will then require the necessary
joint action of the controller and the cashier.
The grave abuse of discretion committed by public respondent
is at once apparent. Art. 212, par. (m), of the Labor Code is
explicit. A managerial employee is (a) one who is vested with
powers or prerogatives to lay down and execute management
policies, or to hire, transfer, suspend, lay off, recall, discharge,
assign or discipline employees; or (b) one who is vested with
both powers or prerogatives. A supervisory employee is
different from a managerial employee in the sense that the
supervisory employee, in the interest of the
employer, effectively recommends such managerial actions, if
Page 63 of 179
the exercise of such managerial authority is not routinary in
nature but requires the use of independent judgment.
Ranged against these definitions and after a thorough
examination of the evidence submitted by both parties, we
arrive at a contrary conclusion. Branch Managers, Cashiers and
Controllers of respondent Bank are not managerial employees
but supervisory employees. The finding of public respondent
that bank policies are laid down and/or executed through the
collective action of these employees is simply erroneous. His
discussion on the division of their duties and responsibilities
does not logically lead to the conclusion that they are
managerial employees, as the term is defined in Art. 212, par.
(m).
Among the general duties and responsibilities of a Branch
Manager is "[t]o discharge his duties and authority with a high
sense of responsibility and integrity and shall at all times be
guided by prudence like a good father of the family, and sound
judgment in accordance with and within the limitations of the
policy/policies promulgated by the Board of Directors and
implemented by the Management until suspended,
superseded, revoked or modified" (par. 5, emphasis
8
supplied). Similarly, the job summary of a Controller states:
"Supervises the Accounting Unit of the branch;sees to the
compliance by the Branch with established procedures,
policies, rules and regulations of the Bank and external
supervising authorities; sees to the strict implementation of
9
control procedures (emphasis supplied). The job description
of a Cashier does not mention any authority on his part to lay
10
down policies, either. On the basis of the foregoing
evidence, it is clear that subject employees do not participate
in policy-making but are given approved and established
policies to execute and standard practices to
11
observe, leaving little or no discretion at all whether to
12
implement said policies or not. It is the nature of the
employee's functions, and not the nomenclature or title given
to his job, which determines whether he has rank-and-file,
13
supervisory or managerial status.
Moreover, the bare statement in the affidavit of the Executive
Assistant to the President of respondent Bank that the Branch
Managers, Cashiers and Controllers "formulate and implement
the plans, policies and marketing strategies of the branch
towards the successful accomplishment of its profit targets
14
and objectives," is contradicted by the following evidence
submitted by respondent Bank itself:
(a) Memorandum issued by respondent
Bank's Assistant Vice President to all
Regional Managers and Branch Managers
giving them temporary discretionary
authority to grant additional interest over
the prescribed board rates for both short-
term and long-term CTDs subject, however,
to specific limitations and guidelines set
15
forth in the same memorandum;
LABREL FULL TEXT CASES
(b) Memorandum issued by respondent
Bank's Executive Vice President to all
Regional Managers and Branch Officers
regarding the policy and guidelines on
drawing against uncollected deposits
16
(DAUD);
(c) Memorandum issued by respondent
Bank's President to all Field Offices regarding
the guidelines on domestic bills purchased
17
(DBP); and
(d) Memorandum issued by the same officer
to all Branch Managers regarding lending
authority at the branch level and the terms
18
and conditions thereof.
As a consequence, the affidavit of the Executive Assistant
cannot be given any weight at all.
Neither do the Branch Managers, Cashiers and Controllers
have the power to hire, transfer, suspend, lay off, recall,
discharge, assign or discipline employees. The Senior Manager
of the Human Resource Management Department of
respondent Bank, in her affidavit, stated that "the power to
hire, fire, suspend, transfer, assign or otherwise impose
discipline among subordinates within their respective
jurisdictions is lodged with the heads of the various
departments, the branch managers and officers-in-charge, the
branch cashiers and the branch controllers. Inherent as it is in
the aforementioned positions, the authority to hire, fire,
suspend, transfer, assign or otherwise discipline employees
within their respective domains was deemed unnecessary to
be incorporated in their individual job descriptions; By way of
illustration, on August 24, 1989, Mr. Renato A. Tuates, the
Officer-in-Charge/Branch Cashier of the Bank's Dumaguete
Branch, placed under preventive suspension and thereafter
terminated the teller of the same branch . . . . Likewise, on
February 22, 1989, Mr. Francis D. Robite, Sr., the Officer-in-
Charge of International Department, assigned the cable
assistant of the International Department as the concurrent
19
FCDU Accountable Forms Custodian."
However, a close scrutiny of the memorandum of Mr. Tuates
reveals that he does not have said managerial power because
as plainly stated therein, it was issued "upon instruction from
20
Head Office." With regard to the memorandum of Mr.
Robite, Sr., it appears that the power he exercised was merely
in an isolated instance, taking into account the other evidence
submitted by respondent Bank itself showing lack of said
power by other Branch Managers/OICs:
(a) Memorandum from the Branch Manager
for the
AVP-Manpower Management Department
expressing the opinion that a certain
employee, due to habitual absenteeism and
tardiness, must be penalized in accordance
Page 64 of 179
 with respondent Bank's Code of Discipline;
and
(b) Memorandum from a Branch OIC for the
Assistant Vice President recommending a
certain employee's promotional adjustment
to the present position he occupies.
Clearly, those officials or employees possess only
recommendatory powers subject to evaluation, review and
final action by higher officials. Therefore, the foregoing
affidavit cannot bolster the stand of respondent Bank.
The positions of Department Managers and Assistant
Managers were also declared by public respondent as
managerial, without providing any basis therefor. Petitioner
asserts that the position of Assistant Manager was not even
included in the appeal filed by respondent Bank. While we
agree with the Office of the Solicitor General that it is within
the discretion of public respondent to consider an unassigned
issue that is closely related to an issue properly assigned, still,
public respondent's error lies in the fact that his finding has no
leg to stand on. Anyway, inasmuch as the entire records are
before us, now is the opportunity to discuss this issue.
We analyzed the evidence submitted by respondent Bank in
support of its claim that Department Managers are managerial
21
employees and concluded that they are not. Like Branch
Managers, Cashiers and Controllers, Department Managers do
not possess the power to lay down policies nor to hire,
transfer, suspend, lay off, recall, discharge, assign or discipline
employees. They occupy supervisory positions, charged with
the duty among others to "recommend proposals to improve
22
and streamline operations." With respect to Assistant
Managers, there is absolutely no evidence submitted to
substantiate public respondent's finding that they are
managerial employees; understandably so, because this
position is not included in the appeal of respondent Bank.
As regards the other claim of respondent Bank that Branch
Managers/OICs, Cashiers and Controllers are confidential
employees, having control, custody and/or access to
confidential matters, e.g., the branch's cash position,
statements of financial condition, vault combination, cash
codes for telegraphic transfers, demand drafts and other
23
negotiable instruments, pursuant to Sec. 1166.4 of the
24
Central Bank Manual regarding joint custody, this claim is
not even disputed by petitioner. A confidential employee is
one entrusted with confidence on delicate matters, or with the
custody, handling, or care and protection of the employer's
25
property. While Art. 245 of the Labor Code singles out
managerial employees as ineligible to join, assist or form any
labor organization, under the doctrine of necessary
implication, confidential employees are similarly disqualified.
This doctrine states that what is implied in a statute is as much
a part thereof as that which is expressed, as elucidated in
26
several cases the latest of which is Chua v. Civil Service
27
Commission where we said:
LABREL FULL TEXT CASES
No statute can be enacted that can provide
all the details involved in its application.
There is always an omission that may not
meet a particular situation. What is thought,
at the time of enactment, to be an all-
embracing legislation may be inadequate to
provide for the unfolding events of the
future. So-called gaps in the law develop as
the law is enforced. One of the rules of
statutory construction used to fill in the gap
is the doctrine of necessary implication . . . .
Every statute is understood, by implication,
to contain all such provisions as may be
necessary to effectuate its object and
purpose, or to make effective rights, powers,
privileges or jurisdiction which it grants,
including all such collateral and subsidiary
consequences as may be fairly and logically
inferred from its terms. Ex necessitate
legis . . . .
In applying the doctrine of necessary implication, we took into
consideration the rationale behind the disqualification of
managerial employees expressed in Bulletin Publishing
28
Corporation v. Sanchez, thus: ". . . if these managerial
employees would belong to or be affiliated with a Union, the
latter might not be assured of their loyalty to the Union in
view of evident conflict of interests. The Union can also
become company-dominated with the presence of managerial
employees in Union membership." Stated differently, in the
collective bargaining process, managerial employees are
supposed to be on the side of the employer, to act as its
representatives, and to see to it that its interests are well
protected. The employer is not assured of such protection if
these employees themselves are union members. Collective
29
bargaining in such a situation can become one-sided. It is the
same reason that impelled this Court to consider the position
of confidential employees as included in the disqualification
found in Art. 245 as if the disqualification of confidential
employees were written in the provision. If confidential
employees could unionize in order to bargain for advantages
for themselves, then they could be governed by their own
motives rather than the interest of the employers. Moreover,
unionization of confidential employees for the purpose of
collective bargaining would mean the extension of the law to
persons or individuals who are supposed to act "in the interest
30
of" the employers. It is not farfetched that in the course of
collective bargaining, they might jeopardize that interest
which they are duty-bound to protect. Along the same line of
reasoning we held in Golden Farms, Inc. v. Ferrer-
31
Calleja reiterated in Philips Industrial Development, Inc. v.
32
NLRC, that "confidential employees such as accounting
personnel, radio and telegraph operators who, having access
to confidential information, may become the source of undue
advantage. Said employee(s) may act as spy or spies of either
party to a collective bargaining agreement."
In fine, only the Branch Managers/OICs, Cashiers and
Controllers of respondent Bank, being confidential employees,
Page 65 of 179
are disqualified from joining or assisting petitioner Union, or
joining, assisting or forming any other labor organization. But
this ruling should be understood to apply only to the present
case based on the evidence of the parties, as well as to those
similarly situated. It should not be understood in any way to
apply to banks in general.

WHEREFORE, the petition is partially GRANTED. The decision

of public respondent Secretary of Labor dated 23 March 1990
and his order dated 20 April 1990 are MODIFIED, hereby
declaring that only the Branch Managers/OICs, Cashiers and
Controllers of respondent Republic Planters Bank are ineligible
to join or assist petitioner National Association of Trade
Unions (NATU)-Republic Planters Bank Supervisors Chapter, or
join, assist or form any other labor organization.

SO ORDERED.

Davide, Jr., Quiason and Kapunan, JJ., concur.

LABREL FULL TEXT CASES Page 66 of 179

THIRD DIVISION
G.R. No. 162025 August 3, 2010
TUNAY NA PAGKAKAISA NG MANGGAGAWA SA ASIA
BREWERY, Petitioner,
vs.
ASIA BREWERY, INC., Respondent.
DECISION
VILLARAMA, JR., J.:
For resolution is an appeal by certiorari filed by petitioner
under Rule 45 of the 1997 Rules of Civil Procedure, as
1
amended, assailing the Decision dated November 22, 2002
2
and Resolution dated January 28, 2004 rendered by the Court
of Appeals (CA) in CA-G.R. SP No. 55578, granting the petition
of respondent company and reversing the Voluntary
3
Arbitrators Decision dated October 14, 1999.
The facts are:
Respondent Asia Brewery, Inc. (ABI) is engaged in the
manufacture, sale and distribution of beer, shandy, bottled
water and glass products. ABI entered into a Collective
4
Bargaining Agreement (CBA), effective for five (5) years from
August 1, 1997 to July 31, 2002, with Bisig at Lakas ng mga
Manggagawa sa Asia-Independent (BLMA-INDEPENDENT), the
exclusive bargaining representative of ABIs rank-and-file
employees. On October 3, 2000, ABI and BLMA-INDEPENDENT
signed a renegotiated CBA effective from August 1, 2000 to 31
5 BLMA-INDEPENDENT claimed that ABIs actions restrained the
July 2003.
Article I of the CBA defined the scope of the bargaining unit, as
follows:
Section 1. Recognition. The COMPANY recognizes the UNION
as the sole and exclusive bargaining representative of all the
regular rank-and-file daily paid employees within the scope of
the appropriate bargaining unit with respect to rates of pay,
hours of work and other terms and conditions of employment.
The UNION shall not represent or accept for membership
employees outside the scope of the bargaining unit herein
defined.
Section 2. Bargaining Unit. The bargaining unit shall be
comprised of all regular rank-and-file daily-paid employees of
the COMPANY. However, the following jobs/positions as
herein defined shall be excluded from the bargaining unit, to
wit:
1. Managers
2. Assistant Managers
3. Section Heads
LABREL FULL TEXT CASES
4. Supervisors
5. Superintendents
6. Confidential and Executive Secretaries
7. Personnel, Accounting and Marketing Staff
8. Communications Personnel
9. Probationary Employees
10. Security and Fire Brigade Personnel
11. Monthly Employees
6
12. Purchasing and Quality Control Staff [emphasis
supplied.]
Subsequently, a dispute arose when ABIs management
stopped deducting union dues from eighty-one (81)
employees, believing that their membership in BLMA-
INDEPENDENT violated the CBA. Eighteen (18) of these
affected employees are QA Sampling Inspectors/Inspectresses
and Machine Gauge Technician who formed part of the
Quality Control Staff. Twenty (20) checkers are assigned at the
Materials Department of the Administration Division, Full
Goods Department of the Brewery Division and Packaging
Division. The rest are secretaries/clerks directly under their
respective division managers.
7
employees right to self-organization and brought the matter
to the grievance machinery. As the parties failed to amicably
settle the controversy, BLMA-INDEPENDENT lodged a
complaint before the National Conciliation and Mediation
Board (NCMB). The parties eventually agreed to submit the
case for arbitration to resolve the issue of "[w]hether or not
there is restraint to employees in the exercise of their right to
8
self-organization."
In his Decision, Voluntary Arbitrator Bienvenido Devera
sustained the BLMA-INDEPENDENT after finding that the
records submitted by ABI showed that the positions of the
subject employees qualify under the rank-and-file category
because their functions are merely routinary and clerical. He
noted that the positions occupied by the checkers and
secretaries/clerks in the different divisions are not managerial
or supervisory, as evident from the duties and responsibilities
assigned to them. With respect to QA Sampling
Inspectors/Inspectresses and Machine Gauge Technician, he
ruled that ABI failed to establish with sufficient clarity their
basic functions as to consider them Quality Control Staff who
were excluded from the coverage of the CBA. Accordingly, the
subject employees were declared eligible for inclusion within
9
the bargaining unit represented by BLMA-INDEPENDENT.
Page 67 of 179
On appeal, the CA reversed the Voluntary Arbitrator, ruling
that:
WHEREFORE, foregoing premises considered, the questioned
decision of the Honorable Voluntary Arbitrator Bienvenido De
Vera is hereby REVERSED and SET ASIDE, and A NEW ONE
ENTERED DECLARING THAT:
a) the 81 employees are excluded from and are not
eligible for inclusion in the bargaining unit as defined
in Section 2, Article I of the CBA;
b) the 81 employees cannot validly become members
of respondent and/or if already members, that their
membership is violative of the CBA and that they
should disaffiliate from respondent; and
c) petitioner has not committed any act that
restrained or tended to restrain its employees in the
exercise of their right to self-organization.
NO COSTS.
10
SO ORDERED.
BLMA-INDEPENDENT filed a motion for reconsideration. In the
meantime, a certification election was held on August 10,
2002 wherein petitioner Tunay na Pagkakaisa ng Manggagawa
sa Asia (TPMA) won. As the incumbent bargaining
representative of ABIs rank-and-file employees claiming
interest in the outcome of the case, petitioner filed with the
CA an omnibus motion for reconsideration of the decision and
intervention, with attached petition signed by the union
11 12
officers. Both motions were denied by the CA.
The petition is anchored on the following grounds:
(1)
THE COURT OF APPEALS ERRED IN RULING THAT THE 81
EMPLOYEES ARE EXCLUDED FROM AND ARE NOT ELIGIBLE FOR
INCLUSION IN THE BARGAINING UNIT AS DEFINED IN SECTION
2, ARTICLE 1 OF THE CBA[;]
(2)
THE COURT OF APPEALS ERRED IN HOLDING THAT THE 81
EMPLOYEES CANNOT VALIDLY BECOME UNION MEMBERS,
THAT THEIR MEMBERSHIP IS VIOLATIVE OF THE CBA AND
THAT THEY SHOULD DISAFFILIATE FROM RESPONDENT;
(3)
THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT
PETITIONER (NOW PRIVATE RESPONDENT) HAS NOT
COMMITTED ANY ACT THAT RESTRAINED OR TENDED TO
LABREL FULL TEXT CASES
RESTRAIN ITS EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO
13
SELF-ORGANIZATION.
Although Article 245 of the Labor Code limits the ineligibility to
join, form and assist any labor organization to managerial
employees, jurisprudence has extended this prohibition to
confidential employees or those who by reason of their
positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees and hence, are
likewise privy to sensitive and highly confidential
14
records. Confidential employees are thus excluded from the
rank-and-file bargaining unit. The rationale for their separate
category and disqualification to join any labor organization is
similar to the inhibition for managerial employees because if
allowed to be affiliated with a Union, the latter might not be
assured of their loyalty in view of evident conflict of interests
and the Union can also become company-denominated with
the presence of managerial employees in the Union
15
membership. Having access to confidential information,
confidential employees may also become the source of undue
advantage. Said employees may act as a spy or spies of either
16
party to a collective bargaining agreement.
17
In Philips Industrial Development, Inc. v. NLRC, this Court
held that petitioners "division secretaries, all Staff of General
Management, Personnel and Industrial Relations Department,
Secretaries of Audit, EDP and Financial Systems" are
confidential employees not included within the rank-and-file
18
bargaining unit. Earlier, in Pier 8 Arrastre & Stevedoring
19
Services, Inc. v. Roldan-Confesor, we declared that legal
secretaries who are tasked with, among others, the typing of
legal documents, memoranda and correspondence, the
keeping of records and files, the giving of and receiving
notices, and such other duties as required by the legal
personnel of the corporation, fall under the category of
confidential employees and hence excluded from the
20
bargaining unit composed of rank-and-file employees.
Also considered having access to "vital labor information" are
the executive secretaries of the General Manager and the
executive secretaries of the Quality Assurance Manager,
Product Development Manager, Finance Director,
Management System Manager, Human Resources Manager,
Marketing Director, Engineering Manager, Materials Manager
21
and Production Manager.
In the present case, the CBA expressly excluded "Confidential
and Executive Secretaries" from the rank-and-file bargaining
unit, for which reason ABI seeks their disaffiliation from
petitioner. Petitioner, however, maintains that except for
Daisy Laloon, Evelyn Mabilangan and Lennie Saguan who had
been promoted to monthly paid positions, the following
secretaries/clerks are deemed included among the rank-and-
22
file employees of ABI:
NAME DEPARTMENT
C1 ADMIN DIVISION
1. Angeles, Cristina C. Transportation
Page 68 of 179
 2. Barraquio, Carina P.
3. Cabalo, Marivic B.
4. Fameronag, Leodigario C.
1. Abalos, Andrea A.
2. Algire, Juvy L.
3. Anouevo, Shirley P.
4. Aviso, Rosita S.
5. Barachina, Pauline C.
6. Briones, Catalina P.
7. Caralipio, Juanita P.
8. Elmido, Ma. Rebecca S.
9. Giron, Laura P.
10. Mane, Edna A.
xxxx
C2 BREWERY DIVISION
1. Laloon, Daisy S.
1. Arabit, Myrna F.
2. Burgos, Adelaida D.
3. Menil, Emmanuel S.
4. Nevalga, Marcelo G.
1. Mapola, Ma. Esraliza T.
2. Velez, Carmelito A.
1. Bordamonte, Rhumela D.
2. Deauna, Edna R.
3. Punongbayan, Marylou F.
4. Saguan, Lennie Y.
1. Alcoran, Simeon A.
2. Cervantes, Ma. Sherley Y.
3. Diongco, Ma. Teresa M.
4. Mabilangan, Evelyn M.
5. Rivera, Aurora M.
6. Salandanan, Nancy G.
1. Magbag, Ma. Corazon C.
1. Capiroso, Francisca A.
1. Alconaba, Elvira C.
2. Bustillo, Bernardita E.
3. Catindig, Ruel A.
4. Sison, Claudia B.
xxxx
LABREL FULL TEXT CASES
Transportation Mr. Melito K. Tan
Transportation C3Mr.
PACKAGING
Melito K.DIVISION
Tan
Transportation Mr. Melito K. Tan
1. Alvarez, Ma. Luningning L. GP Administration
Materials 2. Caiza,
Mr. AndresAlmaG.A.Co GP Technical
Materials 3. Cantalejo,
Mr. AndresAida G. Co
S. GP Engineering
Materials 4. Castillo,
Mr. Andres Ma.G.Riza
Co R. GP Production
Materials 5. Lamadrid,
Mr. AndresSusanaG. Co C. GP Production
Materials 6. Mendoza,
Mr. AndresJennifer
G. Co L. GP Technical
Materials Mr. Andres G. Co
Materials As can be gleaned
Mr. Andres from G.the
Co above listing, it is rather curious
Materials that there would be several
Mr. Andres G. Co secretaries/clerks for just one (1)
Materials department/division
Mr. Andresperforming
G. Co tasks which are mostly
routine and clerical. Respondent insisted they fall under the
Materials Mr. Andres G. Co
"Confidential and Executive Secretaries" expressly excluded by
the CBA from the rank-and-file bargaining unit. However,
perusal of the job descriptions of these secretaries/clerks
reveals that their assigned duties and responsibilities involve
routine activities of recording and monitoring, and other paper
works for their respective departments while secretarial tasks
Brewhouse such as receiving
Mr. William telephone
Tan calls and filing of office
correspondence appear to have been commonly imposed as
23
additional duties.
Bottling Production Mr. JuliusRespondent
Palmares failed to indicate who among
these numerous secretaries/clerks have access to confidential
Bottling Production Mr. Julius Palmares
data relating to management policies that could give rise to
Bottling Production Mr. Julius
potential conflict of Palmares
interest with their Union membership.
Bottling Production
Clearly, theMr.rationale
Julius Palmares
under our previous rulings for the
exclusion of executive secretaries or division secretaries would
have little or
Bottling Maintenance Mr.no significance
Ernesto Ang considering the lack of or very
limited access
Bottling Maintenance to confidential
Mr. Ernesto Ang information of these
secretaries/clerks. It is not even farfetched that the job
Bottled Water category may Mr.exist only Tetonche
Faustino on paper since they are all daily-paid
workers. Quite understandably, petitioner had earlier
Bottled Water Mr. Faustino Tetonche
expressed the view that the positions were just being
Bottled Water Mr.asFaustino
"reclassified" Tetonche actually discharged routine
these employees
Bottled Water functions. Mr. Faustino Tetonche
Full Goods We thus holdMr. Tsoi
that Wah
the Tung
secretaries/clerks, numbering about
Full Goods forty (40), Mr.
are Tsoi Wah Tungemployees and not confidential
rank-and-file
Full Goods employees.Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods With respect toTsoi
Mr. the Sampling
Wah TungInspectors/Inspectresses and the
Full Goods Gauge Machine Technician,
Mr. Tsoi Wah Tung there seems no dispute that they
form part of the Quality Control Staff who, under the express
terms of the CBA, fall under a distinct category. But we
Tank Farm/ Mr. Manuel Yu Liat
disagree with respondents contention that the twenty (20)
checkers are similarly confidential employees being "quality
Cella Services control staff" entrusted with the handling and custody of
company properties and sensitive information.
Quality Assurance Ms. Regina Mirasol
Again, the job descriptions of these checkers assigned in the
Engineering storeroom Mr.
section of the
Clemente WongMaterials Department, finishing
Electrical section of the Packaging Department,
Mr. Jorge Villarosa and the decorating and
Civil Works glass sections of the Production
Mr. Roger Giron Department plainly showed
that they perform routine and mechanical tasks preparatory to
Utilities Mr. Venancio Alconaba 24
the delivery of the finished products. While it may be argued
that quality control extends to post-production phase --
proper packaging of the finished products -- no evidence was
Page 69 of 179
presented by the respondent to prove that these daily-paid their right to self-organization, nor have thereby
checkers actually form part of the companys Quality Control demonstrated an anti-union stance.
Staff who as such "were exposed to sensitive, vital and
confidential information about *companys+ products" or WHEREFORE, the petition is GRANTED. The Decision dated
"have knowledge of mixtures of the products, their defects, November 22, 2002 and Resolution dated January 28, 2004 of
and even their formulas" which are considered trade secrets. the Court of Appeals in CA-G.R. SP No. 55578 are
Such allegations of respondent must be supported by hereby REVERSED and SET ASIDE. The checkers and
25
evidence. secretaries/clerks of respondent company are hereby declared
rank-and-file employees who are eligible to join the Union of
Consequently, we hold that the twenty (20) checkers may not the rank-and-file employees.
be considered confidential employees under the category of
Quality Control Staff who were expressly excluded from the No costs.
CBA of the rank-and-file bargaining unit.
SO ORDERED.
Confidential employees are defined as those who (1) assist or
act in a confidential capacity, (2) to persons who formulate,
determine, and effectuate management policies in the field of
labor relations. The two (2) criteria are cumulative, and both
must be met if an employee is to be considered a confidential
employee that is, the confidential relationship must exist
between the employee and his supervisor, and the supervisor
must handle the prescribed responsibilities relating to labor
relations. The exclusion from bargaining units of employees
who, in the normal course of their duties, become aware of
management policies relating to labor relations is a principal
objective sought to be accomplished by the "confidential
26
employee rule." There is no showing in this case that the
secretaries/clerks and checkers assisted or acted in a
confidential capacity to managerial employees and obtained
confidential information relating to labor relations policies.
And even assuming that they had exposure to internal
business operations of the company, respondent claimed, this
is not per se ground for their exclusion in the bargaining unit
27
of the daily-paid rank-and-file employees.

Not being confidential employees, the secretaries/clerks and

checkers are not disqualified from membership in the Union of
respondents rank-and-file employees. Petitioner argues that
respondents act of unilaterally stopping the deduction of
union dues from these employees constitutes unfair labor
practice as it "restrained" the workers exercise of their right
to self-organization, as provided in Article 248 (a) of the Labor
Code.

Unfair labor practice refers to "acts that violate the workers

right to organize." The prohibited acts are related to the
workers right to self organization and to the observance of a
CBA. For a charge of unfair labor practice to prosper, it must
be shown that ABI was motivated by ill will, "bad faith, or
fraud, or was oppressive to labor, or done in a manner
contrary to morals, good customs, or public policy, and, of
course, that social humiliation, wounded feelings or grave
28
anxiety resulted x x x" from ABIs act in discontinuing the
union dues deduction from those employees it believed were
excluded by the CBA. Considering that the herein dispute
arose from a simple disagreement in the interpretation of the
CBA provision on excluded employees from the bargaining
unit, respondent cannot be said to have committed unfair
labor practice that restrained its employees in the exercise of
LABREL FULL TEXT CASES Page 70 of 179
FIRST DIVISION November 1992 or two (2) days before the
filing of the said petition, it was issued a
certificate of registration.

G.R. No. 121084 February 19, 1997 We also agree with petitioner-appellant that
the Med-Arbiter should have not dismissed
TOYOTA MOTOR PHILIPPINES CORPORATION , petitioner, the petition for certification election based
vs. on the ground that the proposed bargaining
TOYOTA MOTOR PHILIPPINES CORPORATION LABOR UNION unit is a mixture of supervisory and rank-
AND THE SECRETARY OF LABOR AND and-file employees, hence, violative of
EMPLOYMENT, respondents. Article 245 of the Labor Code as amended.

A perusal of the petition and the other

documents submitted by petitioner-
appellant will readily show that what the
KAPUNAN, J.:
former really seeks to represent are the
regular rank-and-file employees in the
On November 26, 1992, the Toyota Motor Philippines
company numbering about 1,800 more or
Corporation Labor Union (TMPCLU) filed a petition for
less, a unit which is obviously appropriate for
certification election with the Department of Labor, National
bargaining purposes. This being the case, the
Capital Region, for all rank-and-file employees of the Toyota
1 mere allegation of respondent-appellee that
Motor Corporation.
there are about 42 supervisoy employees in
the proposed bargaining unit should have
In response, petitioner filed a Position Paper on February 23, not caused the dismissal of the instant
1993 seeking the denial of the issuance of an Order directing petition. Said issue could very well be taken
the holding of a certification election on two grounds: first, cared of during the pre-election conference
that the respondent union, being "in the process of where inclusion/exclusion proceedings will
registration" had no legal personality to file the same as it was be conducted to determine the list of eligible
not a legitimate labor organization as of the date of the filing voters.
7

of the petition; and second, that the union was composed of

both rank-and-file and supervisory employees in violation of
2 Not satisfied with the decision of the Office of the Secretary of
law. Attached to the position paper was a list of union
Labor, petitioner filed a Motion for Reconsideration of the
members and their respective job classifications, indicating
Resolution of March 3, 1993, reiterating its claim that as of the
that many of the signatories to the petition for certification
date of filing of petition for certification election, respondent
election occupied supervisory positions and were not in fact
3 TMPCLU had not yet acquired the status of a legitimate labor
rank-and-file employees.
organization as required by the Labor Code, and that the
proposed bargaining unit was inappropriate.
The Med-Arbiter, Paterno D. Adap, dismissed respondent
union's petition for certification election for lack of merit. In
Acting on petitioner's motion for reconsideration, the public
his March 8, 1993 Order, the Med-Arbiter found that the labor
respondent, on July 13, 1994 set aside its earlier resolution
organization's membership was composed of supervisory and
and remanded the case to the Med-Arbiter concluding that
rank-and-file employees in violation of Article 245 of the Labor
4 the issues raised by petitioner both on appeal and in its
Code, and that at the time of the filing of its petition,
motion for reconsideration were factual issues requiring
respondent union had not even acquired legal personality 8
5 further hearing and production of evidence. The Order stated
yet.
We carefully re-examined the records vis-a-
On appeal, the Office of the Secretary of Labor, in a
6 vis the arguments raised by the movant, and
Resolution dated November 9, 1993 signed by
we note that movant correctly pointed out
Undersecretary Bienvenido E. Laguesma, set aside the Med-
that petitioner submitted a copy of its
Arbiter's Order of March 3, 1993, and directed the holding of a
certificate of registration for the first time on
certification election among the regular rank.-and-file appeal and that in its petition, petitioner
employees of Toyota Motor Corporation. In setting aside the
alleges that it is an independent organization
questioned Order, the Office of the Secretary contended that:
which is in the process of registration."
Movant strongly argues that the foregoing
Contrary to the allegation of herein only confirms what it has been pointing out
respondent-appellee, petitioner-appellant all along, that at the time the petition was
was already a legitimate labor organization filed petitioner is (sic) not yet the holder of a
at the time of the filing of the petition on 26 registration certificate; that what was
November 1992. Records show that on 24 actually issued on 24 November 1992 or two
LABREL FULL TEXT CASES Page 71 of 179
 (2) days before the filing of the petition was
an official receipt of payment for the
application fee; and, that the date appearing
in the Registration certificate which is
November 24, 1992 is not the date when
petitioner was actually registered, but the
date when the registration certificate was
prepared by the processor. Movant also
ratiocinates that if indeed petitioner has
been in possession of the registration
certificate at the time this petition was filed
on November 26, 1992, it would have
attached the same to the petition.
The foregoing issues are factual ones, the
resolution of which is crucial to the petition.
For if indeed it is true that at the time of
filing of the petition, the said registration
certificate has not been approved yet, then,
petitioner lacks the legal personality to file
the petition and the dismissal order is
proper. Sadly, we can not resolve the said
questions by merely perusing the records.
Further hearing and introduction of evidence
are required. Thus, there is a need to
remand the case to the Med-Arbiter solely
for the purpose.
WHEREFORE, the motion is hereby granted
and our Resolution is hereby set aside. Let
the case be remanded to the Med-Arbiter
for the purpose aforestated.
9
SO ORDERED.
Pursuant to the Order, quoted above, Med-Arbiter Brigida C.
Fodrigon submitted her findings on September 28, 1994,
10
stating the following:
[T]he controvertible fact is that petitioner
could not have been issued its Certificate of
Registration on November 24, 1992 when it
applied for registration only on November
23, 1992 as shown by the official receipt of
payment of filing fee. As Enrique Nalus, Chief
LEG, this office, would attest in his letter
dated September 8, 1994 addressed to Mr.
Porfirio T. Reyes, Industrial Relations Officer
of respondent company, in response to a
query posed by the latter, "It is unlikely that
an application for registration is approved on
the date that it is filed or the day thereafter
as the processing course has to pass thought
routing, screening, and assignment,
evaluation, review and initialing, and
approval/disapproval procedure, among
others, so that a 30-day period is provided
for under the Labor Code for this purpose,
LABREL FULL TEXT CASES
let alone opposition thereto by interested
parties which must be also given due course.
Another evidence which petitioner
presented. . . is the "Union Registration 1992
Logbook of IRD". . . and the entry date
November 25, 1992 as allegedly the date of
the release of the registration certificate. . .
On the other hand, respondent company
presented . . . a certified true copy of an
entry on page 265 of the Union Registration
Logbook showing the pertinent facts about
petitioner but which do not show the
petitioner's registration was issued on or
11
before November 26, 1992.
Further citing other pieces of evidence presented before her,
the Med-Arbiter concluded that respondent TMPCLU could
not have "acquire[d] legal personality at the time of the filing
12
of (its) petition."
On April 20, 1996, the public respondent issued a new
Resolution, "directing the conduct of a certification election
among the regular rank-and-file employees of the Toyota
13
Motor Philippines Corporation. Petitioner's motion for
reconsideration was denied by public respondent in his Order
dated July 14, 1995.
14
Hence, this special civil action for certiorari under Rule 65 of
the Revised Rules of Court, where petitioner contends that
"the Secretary of Labor and Employment committed grave
abuse of discretion amounting to lack or excess of jurisdiction
in reversing, contrary to law and facts the findings of the Med-
Arbiters to the effect that: 1) the inclusion of the prohibited
mix of rank-and file and supervisory employees in the roster of
members and officers of the union cannot be cured by a
simple inclusion-exclusion proceeding; and that 2) the
respondent union had no legal standing at the time of the
15
filing of its petition for certification election.
We grant the petition.
The purpose of every certification election is to determine the
exclusive representative of employees in an appropriate
bargaining unit for the purpose of collective bargaining. A
certification election for the collective bargaining process is
one of the fairest and most effective ways of determining
which labor organization can truly represent the working
16
force. In determining the labor organization which
represents the interests of the workforce, those interests must
be, as far as reasonably possible, homogeneous, so as to
genuinely reach the concerns of the individual members of a
labor organization.
17
According to Rothenberg, an appropriate bargaining unit is a
group of employees of a given employer, composed of all or
less than the entire body of employees, which the collective
interests of all the employees, consistent with equity to the
Page 72 of 179
employer indicate to be best suited to serve reciprocal rights
and duties of the parties under the collective bargaining
18
provisions of law. In Belyca Corporation v. Ferrer Calleja, we
defined the bargaining unit as "the legal collectivity for
collective bargaining purposes whose members have
substantially mutual bargaining interests in terms and
conditions of employment as will assure to all employees their
collective bargaining rights." This in mind, the Labor Code has
made it a clear statutory policy to prevent supervisory
employees from joining labor organizations consisting of rank-
and-file employees as the concerns which involve members of
either group are normally disparate and contradictory. Article
245 provides:
Art. 245 Ineligibility of managerial employees
to join any labor organization; right of
supervisory employees. Managerial
Employees are not eligible to join, assist or
form any labor organization. Supervisory
employees shall not be eligible for
membership in a labor organization of the
rank-and-file employees but may join, assist
or form separate labor organizations of their
own.
Clearly, based on this provision, a labor organization
composed of both rank-and-file and supervisory employees is
no labor organization at all. It cannot, for any guise or
purpose, be a legitimate labor organization. Not being one, an
organization which carries a mixture of rank-and-file and
supervisory employees cannot possess any of the rights of a
legitimate labor organization, including the right to file a
petition for certification election for the purpose of collective
bargaining. It becomes necessary, therefore, anterior to the
granting of an order allowing a certification election, to inquire
into the composition of any labor organization whenever the
status of the labor organization is challenged on the basis of
Article 245 of the Labor Code.
It is the petitioner's contention that forty-two (42) of the
respondent union's members, including three of its officers,
19
occupy supervisory positions In its position paper dated
February 22, 1993, petitioner identified fourteen (14) union
members occupying the position of Junior Group Chief
20
11 and twenty-seven (27) members in level five positions.
Their respective job-descriptions are quoted below:
LEVEL 4 (JUNIOR GROUP CHIEF II) He is
responsible for all operators and assigned
stations, prepares production reports related
to daily production output. He oversees
smooth flow of production, quality of
production, availability of manpower, parts
and equipments. He also coordinates with
other sections in the Production
Department.
LEVEL 5 He is responsible for overseeing
initial production of new models, prepares
LABREL FULL TEXT CASES
and monitors construction schedules for new
models, identifies manpower requirements
for production, facilities and equipment, and
lay-out processes. He also oversees other
sections in the production process (e.g.
assembly, welding, painting)." (Annex "V" of
Respondent TMP's Position Paper; which is
the Job Description for an Engineer holding
Level 5 position in the Production
Engineering Section of the Production
Planning and Control Department).
While there may be a genuine divergence of opinion as to
whether or not union members occupying Level 4 positions
are supervisory employees, it is fairly obvious, from a reading
of the Labor Code's definition of the term that those
occupying Level 5 positions are unquestionably supervisory
employees. Supervisory employees, as defined above, are
those who, in the interest of the employer, effectively
recommend managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but
21
require the use of independent judgment. Under the job
description for level five employees, such personnel all
engineers having a number of personnel under them, not
only oversee production of new models but also determine
manpower requirements, thereby influencing important hiring
decisions at the highest levels. This determination is neither
routine nor clerical but involves the independent assessment
of factors affecting production, which in turn affect decisions
to hire or transfer workers. The use of independent judgment
in making the decision to hire, fire or transfer in the
identification of manpower requirements would be greatly
impaired if the employee's loyalties are torn between the
interests of the union and the interests of management. A
supervisory employee occupying a level five position would
therefore find it difficult to objectively identify the exact
manpower requirements dictated by production demands.
This is precisely what the Labor Code, in requiring separate
unions among rank-and-file employees on one hand, and
supervisory employees on the other, seeks to avoid. The
rationale behind the Code's exclusion of supervisors from
unions of rank-and-file employees is that such employees,
while in the performance of supervisory functions, become the
alter ego of management in the making and the implementing
of key decisions at the sub-managerial level. Certainly, it would
be difficult to find unity or mutuality of interests in a
bargaining unit consisting of a mixture of rank-and-file and
supervisory employees. And this is so because the
fundamental test of a bargaining unit's acceptability is
whether or not such a unit will best advance to all employees
within the unit the proper exercise of their collective
22
bargaining rights. The Code itself has recognized this, in
preventing supervisory employees from joining unions of rank-
and-file employees.
In the case at bar, as respondent union's membership list
contains the names of at least twenty-seven (27) supervisory
employees in Level Five positions. the union could not, prior to
Page 73 of 179
purging itself of its supervisory employee members, attain the
status of a legitimate labor organization. Not being one, it
cannot possess the requisite personality to file a petition for
certification election.

The foregoing discussion, therefore, renders entirely

irrelevant, the technical issue raised as to whether or not
respondent union was in possession of the status of a
legitimate labor organization at the time of filing, when, as
petitioner vigorously claims, the former was still at the stage
of processing of its application for recognition as a legitimate
labor organization. The union's composition being in violation
of the Labor Code's Prohibition of unions composed of
supervisory and rank-and-file employees, it could not possess
the requisite personality to file for recognition as a legitimate
labor organization. In any case, the factual issue, albeit ignored
by the public respondent's assailed Resolution, was
adequately threshed out in the Med-Arbiter's September 28,
1994 Order

The holding of a certification election is based on clear

23
statutory policy which cannot be circumvented. Its rules,
strictly construed by this Court, are designed to eliminate
fraud and manipulation. As we emphasized in Progressive
Development Corporation v. Secretary, Department of Labor
24
and Employment, the Court's conclusion should not be
interpreted as impairing any union's right to be certified as the
employees' bargaining agent in the petitioner's establishment.
Workers of an appropriate bargaining unit must be allowed to
freely express their choice in an election where everything is
open to sound judgment and the possibility for fraud and
25
misrepresentation is absent.

WHEREFORE, the petition is GRANTED. The assailed Resolution

dated April 20, 1995 and Order dated July 14, 1995 of
respondent Secretary of Labor are hereby SET ASIDE. The
Order dated September 28, 1994 of the Med-Arbiter is
REINSTATED.

SO ORDERED.

Padilla, Belosillo, Vitug and Hermosisima, Jr., JJ., concur.

LABREL FULL TEXT CASES Page 74 of 179

FIRST DIVISION
G.R. No. 169717 March 16, 2011
SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL
SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR
EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS
JERRY VICTORIO-Union President,Petitioner,
vs.
CHARTER CHEMICAL and COATING
CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
The right to file a petition for certification election is accorded
to a labor organization provided that it complies with the
requirements of law for proper registration. The inclusion of
supervisory employees in a labor organization seeking to
represent the bargaining unit of rank-and-file employees does
not divest it of its status as a legitimate labor organization. We
apply these principles to this case.
This Petition for Review on Certiorari seeks to reverse and set
1
aside the Court of Appeals March 15, 2005 Decision in CA-
G.R. SP No. 58203, which annulled and set aside the January
2
13, 2000 Decision of the Department of Labor and
Employment (DOLE) in OS-A-6-53-99 (NCR-OD-M-9902-019)
3
and the September 16, 2005 Resolution denying petitioner
unions motion for reconsideration.
Factual Antecedents
On February 19, 1999, Samahang Manggagawa sa Charter
Chemical Solidarity of Unions in the Philippines for
Empowerment and Reforms (petitioner union) filed a petition
for certification election among the regular rank-and-file
employees of Charter Chemical and Coating Corporation
(respondent company) with the Mediation Arbitration Unit of
the DOLE, National Capital Region.
On April 14, 1999, respondent company filed an Answer with
4 found that a review of the records indicates that no
Motion to Dismiss on the ground that petitioner union is not
a legitimate labor organization because of (1) failure to comply
with the documentation requirements set by law, and (2) the
5 by Pinag-isang Lakas Manggagawa sa Charter Chemical and
inclusion of supervisory employees within petitioner union.
Med-Arbiters Ruling
On April 30, 1999, Med-Arbiter Tomas F. Falconitin issued a
6
Decision dismissing the petition for certification election. The
Med-Arbiter ruled that petitioner union is not a legitimate
labor organization because the Charter Certificate, "Sama-
samang Pahayag ng Pagsapi at Authorization," and "Listahan
ng mga Dumalo sa Pangkalahatang Pulong at mga Sumang-
ayon at Nagratipika sa Saligang Batas" were not executed
under oath and certified by the union secretary and attested
LABREL FULL TEXT CASES
to by the union president as required by Section 235 of the
7
Labor Code in relation to Section 1, Rule VI of Department
Order (D.O.) No. 9, series of 1997. The union registration was,
thus, fatally defective.
The Med-Arbiter further held that the list of membership of
petitioner union consisted of 12 batchman, mill operator and
leadman who performed supervisory functions. Under Article
245 of the Labor Code, said supervisory employees are
prohibited from joining petitioner union which seeks to
represent the rank-and-file employees of respondent
company.
As a result, not being a legitimate labor organization,
petitioner union has no right to file a petition for certification
election for the purpose of collective bargaining.
Department of Labor and Employments Ruling
8
On July 16, 1999, the DOLE initially issued a Decision in favor
of respondent company dismissing petitioner unions appeal
on the ground that the latters petition for certification
election was filed out of time. Although the DOLE ruled,
contrary to the findings of the Med-Arbiter, that the charter
certificate need not be verified and that there was no
independent evidence presented to establish respondent
companys claim that some members of petitioner union were
holding supervisory positions, the DOLE sustained the
dismissal of the petition for certification after it took judicial
notice that another union, i.e., Pinag-isang Lakas Manggagawa
sa Charter Chemical and Coating Corporation, previously filed
a petition for certification election on January 16, 1998. The
Decision granting the said petition became final and executory
on September 16, 1998 and was remanded for immediate
implementation. Under Section 7, Rule XI of D.O. No. 9, series
of 1997, a motion for intervention involving a certification
election in an unorganized establishment should be filed prior
to the finality of the decision calling for a certification election.
Considering that petitioner union filed its petition only on
February 14, 1999, the same was filed out of time.
On motion for reconsideration, however, the DOLE reversed
its earlier ruling. In its January 13, 2000 Decision, the DOLE
certification election was previously conducted in respondent
company. On the contrary, the prior certification election filed
Coating Corporation was, likewise, denied by the Med-Arbiter
and, on appeal, was dismissed by the DOLE for being filed out
of time. Hence, there was no obstacle to the grant of
petitioner unions petition for certification election, viz:
WHEREFORE, the motion for reconsideration is
hereby GRANTED and the decision of this Office dated 16 July
1999 is MODIFIED to allow the certification election among
the regular rank-and-file employees of Charter Chemical and
Coating Corporation with the following choices:
Page 75 of 179
 1. Samahang Manggagawa sa Charter Chemical-
Solidarity of Unions in the Philippines for
Empowerment and Reform (SMCC-SUPER); and
2. No Union.
Let the records of this case be remanded to the Regional
Office of origin for the immediate conduct of a certification
election, subject to the usual pre-election conference.
9 *is a ground+ for the cancellation of petitioner *unions+ legal
SO DECIDED.
Court of Appeals Ruling
On March 15, 2005, the CA promulgated the assailed Decision,
viz:
WHEREFORE, the petition is hereby GRANTED. The assailed
Decision and Resolution dated January 13, 2000 and February
17, 2000 are hereby [ANNULLED] and SET ASIDE.
10
SO ORDERED.
In nullifying the decision of the DOLE, the appellate court gave
credence to the findings of the Med-Arbiter that petitioner
union failed to comply with the documentation requirements
under the Labor Code. It, likewise, upheld the Med-Arbiters
finding that petitioner union consisted of both rank-and-file
and supervisory employees. Moreover, the CA held that the
issues as to the legitimacy of petitioner union may be attacked
collaterally in a petition for certification election and the
infirmity in the membership of petitioner union cannot be
remedied through the exclusion-inclusion proceedings in a
pre-election conference pursuant to the ruling in Toyota
Motor Philippines v. Toyota Motor Philippines Corporation
11
Labor Union. Thus, considering that petitioner union is not a
legitimate labor organization, it has no legal right to file a
petition for certification election.
Issues
I
Whether x x x the Honorable Court of Appeals committed
grave abuse of discretion tantamount to lack of jurisdiction in
granting the respondent *companys+ petition for certiorari (CA
G.R. No. SP No. 58203) in spite of the fact that the issues
subject of the respondent company*s+ petition was already
settled with finality and barred from being re-litigated.
II
Whether x x x the Honorable Court of Appeals committed
grave abuse of discretion tantamount to lack of jurisdiction in
holding that the alleged mixture of rank-and-file and
supervisory employee*s+ of petitioner *unions+ membership is
*a+ ground for the cancellation of petitioner *unions+ legal
LABREL FULL TEXT CASES
personality and dismissal of [the] petition for certification
election.
III
Whether x x x the Honorable Court of Appeals committed
grave abuse of discretion tantamount to lack of jurisdiction in
holding that the alleged failure to certify under oath the local
charter certificate issued by its mother federation and list of
the union membership attending the organizational meeting
personality as a labor organization and for the dismissal of the
12
petition for certification election.
Petitioner Unions Arguments
Petitioner union claims that the litigation of the issue as to its
legal personality to file the subject petition for certification
election is barred by the July 16, 1999 Decision of the DOLE. In
this decision, the DOLE ruled that petitioner union complied
with all the documentation requirements and that there was
no independent evidence presented to prove an illegal
mixture of supervisory and rank-and-file employees in
petitioner union. After the promulgation of this Decision,
respondent company did not move for reconsideration, thus,
this issue must be deemed settled.
Petitioner union further argues that the lack of verification of
its charter certificate and the alleged illegal composition of its
membership are not grounds for the dismissal of a petition for
certification election under Section 11, Rule XI of D.O. No. 9,
series of 1997, as amended, nor are they grounds for the
cancellation of a unions registration under Section 3, Rule VIII
of said issuance. It contends that what is required to be
certified under oath by the local unions secretary or treasurer
and attested to by the local unions president are limited to
the unions constitution and by-laws, statement of the set of
officers, and the books of accounts.
Finally, the legal personality of petitioner union cannot be
collaterally attacked but may be questioned only in an
independent petition for cancellation pursuant to Section 5,
Rule V, Book IV of the Rules to Implement the Labor Code and
the doctrine enunciated in Tagaytay Highlands International
Golf Club Incoprorated v. Tagaytay Highlands Empoyees
Union-PTGWO.
13
Respondent Companys Arguments
Respondent company asserts that it cannot be precluded from
challenging the July 16, 1999 Decision of the DOLE. The said
decision did not attain finality because the DOLE subsequently
reversed its earlier ruling and, from this decision, respondent
company timely filed its motion for reconsideration.
On the issue of lack of verification of the charter certificate,
respondent company notes that Article 235 of the Labor Code
and Section 1, Rule VI of the Implementing Rules of Book V, as
Page 76 of 179
amended by D.O. No. 9, series of 1997, expressly requires that
the charter certificate be certified under oath.
It also contends that petitioner union is not a legitimate labor
organization because its composition is a mixture of
supervisory and rank-and-file employees in violation of Article
245 of the Labor Code. Respondent company maintains that
the ruling in Toyota Motor Philippines vs. Toyota Motor
14
Philippines Labor Union continues to be good case law. Thus,
the illegal composition of petitioner union nullifies its legal
personality to file the subject petition for certification election
and its legal personality may be collaterally attacked in the
proceedings for a petition for certification election as was
done here.
Our Ruling
The petition is meritorious.
The issue as to the legal personality of petitioner union is not
barred by the July 16, 1999 Decision of the DOLE.
A review of the records indicates that the issue as to petitioner
unions legal personality has been timely and consistently
raised by respondent company before the Med-Arbiter, DOLE,
CA and now this Court. In its July 16, 1999 Decision, the DOLE
found that petitioner union complied with the documentation
requirements of the Labor Code and that the evidence was
insufficient to establish that there was an illegal mixture of
supervisory and rank-and-file employees in its membership.
Nonetheless, the petition for certification election was
dismissed on the ground that another union had previously
filed a petition for certification election seeking to represent
the same bargaining unit in respondent company.
Upon motion for reconsideration by petitioner union on
January 13, 2000, the DOLE reversed its previous ruling. It
upheld the right of petitioner union to file the subject petition
for certification election because its previous decision was
15
based on a mistaken appreciation of facts. From this adverse
decision, respondent company timely moved for
reconsideration by reiterating its previous arguments before
the Med-Arbiter that petitioner union has no legal personality
to file the subject petition for certification election.
The July 16, 1999 Decision of the DOLE, therefore, never
attained finality because the parties timely moved for
reconsideration. The issue then as to the legal personality of
petitioner union to file the certification election was properly
raised before the DOLE, the appellate court and now this
Court.
The charter certificate need not be certified under oath by the
local unions secretary or treasurer and attested to by its
president.
Preliminarily, we must note that Congress enacted Republic
16 17
Act (R.A.) No. 9481 which took effect on June 14, 2007. This
LABREL FULL TEXT CASES
law introduced substantial amendments to the Labor Code.
However, since the operative facts in this case occurred in
1999, we shall decide the issues under the pertinent legal
18
provisions then in force (i.e., R.A. No. 6715, amending Book V
of the Labor Code, and the rules and
19
regulations implementing R.A. No. 6715, as amended by D.O.
20
No. 9,
series of 1997) pursuant to our ruling in Republic v.
21
Kawashima Textile Mfg., Philippines, Inc.
In the main, the CA ruled that petitioner union failed to
comply with the requisite documents for registration under
Article 235 of the Labor Code and its implementing rules. It
agreed with the Med-Arbiter that the Charter Certificate,
Sama-samang Pahayag ng Pagsapi at Authorization, and
Listahan ng mga Dumalo sa Pangkalahatang Pulong at mga
Sumang-ayon at Nagratipika sa Saligang Batas were not
executed under oath. Thus, petitioner union cannot be
accorded the status of a legitimate labor organization.
We disagree.
The then prevailing Section 1, Rule VI of the Implementing
Rules of Book V, as amended by D.O. No. 9, series of 1997,
provides:
Section 1. Chartering and creation of a local chapter A duly
registered federation or national union may directly create a
local/chapter by submitting to the Regional Office or to the
Bureau two (2) copies of the following:
(a) A charter certificate issued by the federation or
national union indicating the creation or
establishment of the local/chapter;
(b) The names of the local/chapters officers, their
addresses, and the principal office of the
local/chapter; and
(c) The local/chapters constitution and by-laws
provided that where the local/chapters constitution
and by-laws [are] the same as [those] of the
federation or national union, this fact shall be
indicated accordingly.
All the foregoing supporting requirements shall be certified
under oath by the Secretary or the Treasurer of the
local/chapter and attested to by its President.
As readily seen, the Sama-samang Pahayag ng Pagsapi at
Authorization and Listahan ng mga Dumalo sa Pangkalahatang
Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas
are not among the documents that need to be submitted to
the Regional Office or Bureau of Labor Relations in order to
register a labor organization. As to the charter certificate, the
above-quoted rule indicates that it should be executed under
oath. Petitioner union concedes and the records confirm that
Page 77 of 179
its charter certificate was not executed under oath. However,
in San Miguel Corporation (Mandaue Packaging Products
Plants) v. Mandaue Packing Products Plants-San Miguel
Corporation Monthlies Rank-and-File Union-FFW (MPPP-SMPP-
22
SMAMRFU-FFW), which was decided under the auspices of
D.O. No. 9, Series of 1997, we ruled
In San Miguel Foods-Cebu B-Meg Feed Plant v. Hon. Laguesma,
331 Phil. 356 (1996), the Court ruled that it wasnot
necessary for the charter certificate to be certified and
attested by the local/chapter officers. Id. While this ruling was
based on the interpretation of the previous Implementing
Rules provisions which were supplanted by the 1997
amendments, we believe that the same doctrine obtains in
this case. Considering that the charter certificate is prepared
and issued by the national union and not the local/chapter, it
does not make sense to have the local/chapters officers x x
x certify or attest to a document which they had no hand in
23
the preparation of. (Emphasis supplied)
In accordance with this ruling, petitioner unions charter
certificate need not be executed under oath. Consequently, it
validly acquired the status of a legitimate labor organization
24
upon submission of (1) its charter certificate, (2) the names
25
of its officers, their addresses, and its principal office, and (3)
26
its constitution and by-laws the last two requirements
having been executed under oath by the proper union officials
as borne out by the records.
The mixture of rank-and-file and supervisory employees in
petitioner union does not nullify its legal personality as a
legitimate labor organization.
The CA found that petitioner union has for its membership
both rank-and-file and supervisory employees. However,
petitioner union sought to represent the bargaining unit
27
consisting of rank-and-file employees. Under Article 245 of
the Labor Code, supervisory employees are not eligible for
membership in a labor organization of rank-and-file
employees. Thus, the appellate court ruled that petitioner
union cannot be considered a legitimate labor organization
pursuant to Toyota Motor Philippines v. Toyota Motor
28
Philippines Corporation Labor Union (hereinafter Toyota).
Preliminarily, we note that petitioner union questions the
factual findings of the Med-Arbiter, as upheld by the appellate
court, that 12 of its members, consisting of batchman, mill
operator and leadman, are supervisory employees. However,
petitioner union failed to present any rebuttal evidence in the
proceedings below after respondent company submitted in
29
evidence the job descriptions of the aforesaid employees.
The job descriptions indicate that the aforesaid employees
exercise recommendatory managerial actions which are not
merely routinary but require the use of independent
judgment, hence, falling within the definition of supervisory
30
employees under Article 212(m) of the Labor Code. For this
reason, we are constrained to agree with the Med-Arbiter, as
upheld by the appellate court, that petitioner union consisted
of both rank-and-file and supervisory employees.
LABREL FULL TEXT CASES
Nonetheless, the inclusion of the aforesaid supervisory
employees in petitioner union does not divest it of its status as
a legitimate labor organization. The appellate courts reliance
on Toyota is misplaced in view of this Courts subsequent
ruling in Republic v. Kawashima Textile Mfg., Philippines,
31
Inc. (hereinafter Kawashima). InKawashima, we explained at
length how and why the Toyota doctrine no longer holds sway
under the altered state of the law and rules applicable to this
case, viz:
R.A. No. 6715 omitted specifying the exact effect any
violation of the prohibition [on the co-mingling of
supervisory and rank-and-file employees] would bring about
on the legitimacy of a labor organization.
It was the Rules and Regulations Implementing R.A. No. 6715
(1989 Amended Omnibus Rules) which supplied the deficiency
by introducing the following amendment to Rule II
(Registration of Unions):
"Sec. 1. Who may join unions. - x x x Supervisory employees
and security guards shall not be eligible for membership in a
labor organization of the rank-and-file employees but may
join, assist or form separate labor organizations of their own;
Provided, that those supervisory employees who are included
in an existing rank-and-file bargaining unit, upon the effectivity
of Republic Act No. 6715, shall remain in that unit x x x.
(Emphasis supplied) and Rule V (Representation Cases and
Internal-Union Conflicts) of the Omnibus Rules, viz:
"Sec. 1. Where to file. - A petition for certification election may
be filed with the Regional Office which has jurisdiction over
the principal office of the employer. The petition shall be in
writing and under oath.
Sec. 2. Who may file. - Any legitimate labor organization or the
employer, when requested to bargain collectively, may file the
petition.
The petition, when filed by a legitimate labor organization,
shall contain, among others:
xxxx
(c) description of the bargaining unit which shall be the
employer unit unless circumstances otherwise require; and
provided further, that the appropriate bargaining unit of the
rank-and-file employees shall not include supervisory
employees and/or security guards. (Emphasis supplied)
By that provision, any questioned mingling will prevent an
otherwise legitimate and duly registered labor organization
from exercising its right to file a petition for certification
election.
Thus, when the issue of the effect of mingling was brought to
the fore in Toyota, the Court, citing Article 245 of the Labor
Code, as amended by R.A. No. 6715, held:
Page 78 of 179
"Clearly, based on this provision, a labor organization
composed of both rank-and-file and supervisory employees is
no labor organization at all. It cannot, for any guise or
purpose, be a legitimate labor organization. Not being one, an
organization which carries a mixture of rank-and-file and
supervisory employees cannot possess any of the rights of a
legitimate labor organization, including the right to file a
petition for certification election for the purpose of collective
bargaining. It becomes necessary, therefore, anterior to the
granting of an order allowing a certification election, to
inquire into the composition of any labor organization
whenever the status of the labor organization is challenged
on the basis of Article 245 of the Labor Code.
xxxx
In the case at bar, as respondent union's membership list
contains the names of at least twenty-seven (27) supervisory
employees in Level Five positions, the union could not, prior to
purging itself of its supervisory employee members, attain the
status of a legitimate labor organization. Not being one, it
cannot possess the requisite personality to file a petition for
certification election." (Emphasis supplied)
In Dunlop, in which the labor organization that filed a petition
for certification election was one for supervisory employees,
but in which the membership included rank-and-file
employees, the Court reiterated that such labor organization
had no legal right to file a certification election to represent a
bargaining unit composed of supervisors for as long as it
counted rank-and-file employees among its members.
It should be emphasized that the petitions for certification
election involved in Toyota and Dunlop were filed on
November 26, 1992 and September 15, 1995, respectively;
hence, the 1989 Rules was applied in both cases.
But then, on June 21, 1997, the 1989 Amended Omnibus Rules
was further amended by Department Order No. 9, series of
1997 (1997 Amended Omnibus Rules). Specifically, the
requirement under Sec. 2(c) of the 1989 Amended Omnibus
Rules that the petition for certification election indicate that
the bargaining unit of rank-and-file employees has not been
mingled with supervisory employees was removed. Instead,
what the 1997 Amended Omnibus Rules requires is a plain
description of the bargaining unit, thus:
Rule XI
Certification Elections
xxxx
Sec. 4. Forms and contents of petition. - The petition shall be in
writing and under oath and shall contain, among others, the
following: x x x (c) The description of the bargaining unit.
In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to
uphold the validity of the 1997 Amended Omnibus Rules,
LABREL FULL TEXT CASES
although the specific provision involved therein was only Sec.
1, Rule VI, to wit:
"Section. 1. Chartering and creation of a local/chapter.- A duly
registered federation or national union may directly create a
local/chapter by submitting to the Regional Office or to the
Bureau two (2) copies of the following: a) a charter certificate
issued by the federation or national union indicating the
creation or establishment of the local/chapter; (b) the names
of the local/chapter's officers, their addresses, and the
principal office of the local/chapter; and (c) the local/
chapter's constitution and by-laws; provided that where the
local/chapter's constitution and by-laws is the same as that of
the federation or national union, this fact shall be indicated
accordingly.
All the foregoing supporting requirements shall be certified
under oath by the Secretary or the Treasurer of the
local/chapter and attested to by its President."
which does not require that, for its creation and registration, a
local or chapter submit a list of its members.
Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay
Highlands Employees Union-PGTWO in which the core issue
was whether mingling affects the legitimacy of a labor
organization and its right to file a petition for certification
election. This time, given the altered legal milieu, the Court
abandoned the view in Toyota and Dunlopand reverted to its
pronouncement in Lopez that while there is a prohibition
against the mingling of supervisory and rank-and-file
employees in one labor organization, the Labor Code does not
provide for the effects thereof. Thus, the Court held that after
a labor organization has been registered, it may exercise all
the rights and privileges of a legitimate labor organization. Any
mingling between supervisory and rank-and-file employees in
its membership cannot affect its legitimacy for that is not
among the grounds for cancellation of its registration, unless
such mingling was brought about by misrepresentation, false
statement or fraud under Article 239 of the Labor Code.
In San Miguel Corp. (Mandaue Packaging Products Plants) v.
Mandaue Packing Products Plants-San Miguel Packaging
Products-San Miguel Corp. Monthlies Rank-and-File Union-
FFW, the Court explained that since the 1997 Amended
Omnibus Rules does not require a local or chapter to provide a
list of its members, it would be improper for the DOLE to deny
recognition to said local or chapter on account of any question
pertaining to its individual members.
More to the point is Air Philippines Corporation v. Bureau of
Labor Relations, which involved a petition for cancellation of
union registration filed by the employer in 1999 against a
rank-and-file labor organization on the ground of mixed
membership: the Court therein reiterated its ruling
in Tagaytay Highlands that the inclusion in a union of
disqualified employees is not among the grounds for
cancellation, unless such inclusion is due to misrepresentation,
Page 79 of 179
false statement or fraud under the circumstances enumerated MARIANO C. DEL CASTILLO
in Sections (a) and (c) of Article 239 of the Labor Code. Associate Justice

All said, while the latest issuance is R.A. No. 9481, the 1997
Amended Omnibus Rules, as interpreted by the Court
in Tagaytay Highlands, San Miguel and Air Philippines, had
already set the tone for it. Toyota and Dunlopno longer hold
sway in the present altered state of the law and the
32
rules. [Underline supplied]

The applicable law and rules in the instant case are the same
as those in Kawashima because the present petition for
certification election was filed in 1999 when D.O. No. 9, series
of 1997, was still in effect. Hence,Kawashima applies with
equal force here. As a result, petitioner union was not divested
of its status as a legitimate labor organization even if some of
its members were supervisory employees; it had the right to
file the subject petition for certification election.

The legal personality of petitioner union cannot be collaterally

attacked by respondent company in the certification election
proceedings.

Petitioner union correctly argues that its legal personality

cannot be collaterally attacked in the certification election
proceedings. As we explained in Kawashima:

Except when it is requested to bargain collectively, an

employer is a mere bystander to any petition for certification
election; such proceeding is non-adversarial and merely
investigative, for the purpose thereof is to determine which
organization will represent the employees in their collective
bargaining with the employer. The choice of their
representative is the exclusive concern of the employees; the
employer cannot have any partisan interest therein; it cannot
interfere with, much less oppose, the process by filing a
motion to dismiss or an appeal from it; not even a mere
allegation that some employees participating in a petition for
certification election are actually managerial employees will
lend an employer legal personality to block the certification
election. The employer's only right in the proceeding is to be
notified or informed thereof.

The amendments to the Labor Code and its implementing

33
rules have buttressed that policy even more.

WHEREFORE, the petition is GRANTED. The March 15, 2005

Decision and September 16, 2005 Resolution of the Court of
Appeals in CA-G.R. SP No. 58203 are REVERSED and SET ASIDE.
The January 13, 2000 Decision of the Department of Labor and
Employment in OS-A-6-53-99 (NCR-OD-M-9902-019)
is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

LABREL FULL TEXT CASES Page 80 of 179

THIRD DIVISION WHEREFORE, premises considered, a
certification election among the supervisory
employees belonging to the Administrative,
Personnel, Production, Accounting
G.R. No. 96566 January 6, 1992 Departments as well as confidential
employees performing supervisory functions
of Atlas Lithographic Services, Incorporated
ATLAS LITHOGRAPHIC SERVICES, INC., petitioner,
is hereby ordered conducted within 20 days
vs.
from receipt hereof, subject to usual pre-
UNDERSECRETARY BIENVENIDO E. LAGUESMA (Department
election conference, with the following
of Labor and Employment) and ATLAS LITHOGRAPHIC
choices:
SERVICES, INC. SUPERVISORY, ADMINISTRATIVE, PERSONNEL,
PRODUCTION, ACCOUNTING AND CONFIDENTIAL EMPLOYEES
ASSOCIATION-KAISAHAN NG MANGGAWANG PILIPINO 1. KAMPIL (KATIPUNAN);
(KAMPIL-KATIPUNAN), respondents.
2. No union.
Romero, Lagman, Valdecantos & Arreza Law Offices for
petitioner. SO ORDERED. (Rollo, pp. 39-40)

Esteban M. Mendoza for private respondent. The petitioners, as expected, appealed for the reversal of the
above order. The public respondent, however, issued a
resolution affirming the Med-Arbiter's order.

GUTIERREZ, JR., J.:p The petitioners, in turn, filed a motion for reconsideration but
the same was denied. Hence, this petition forcertiorari.
This is a petition for certiorari under Rule 65 of the Rules of
Court seeking the modification of the Order dated 14 The sole issue to be resolved in this case is whether or not,
December 1990 and the Resolution dated 21 November 1990 under Article 245 of the Labor Code, a local union of
issued by the public respondents. supervisory employees may be allowed to affiliate with a
national federation of labor organizations of rank-and-file
employees and which national federation actively represents
The antecedent facts of the case as gathered from the records
its affiliates in collective bargaining negotiations with the same
are as follows:
employer of the supervisors and in the implementation of
resulting collective bargaining agreements.
On July 16, 1990, the supervisory, administrative personnel,
production, accounting and confidential employees of the
The petitioner argues that KAMPIL-KATIPUNAN already
petitioner Atlas Lithographic Services, Inc. (ALSI) affiliated with
represents its rank-and-file employees and, therefore, to allow
private respondent Kaisahan ng Manggagawang Pilipino, a
the supervisors of those employees to affiliate with the private
national labor organization. The local union adopted the name
respondent is tantamount to allowing the circumvention of
Atlas Lithographic Services, Inc. Supervisory, Administrative,
the principle of the separation of unions under Article 245 of
Personnel, Production, Accounting and Confidential
the Labor Code.
Employees Association or ALSI-SAPPACEA-KAMPIL in short and
which we shall hereafter refer to as the "supervisors" union.
It further argues that the intent of the law is to prevent a
single labor organization from representing different classes of
Shortly thereafter, private respondent Kampil-Katipunan filed
employees with conflicting interests.
on behalf of the "supervisors" union a petition for certification
election so that it could be the sole and exclusive bargaining
agent of the supervisory employees. The public respondent, on the other hand, contends that
despite affiliation with a national federation, the local union
does not lose its personality which is separate, and distinct
The petitioners opposed the private respondent's petition
from the national federation. It cites as its legal basis the case
claiming that under Article 245 of the Labor bode the private
of Adamson & Adamson, Inc. v. CIR (127 SCRA 268 [1984]).
respondent cannot represent the supervisory employees for
collective bargaining purposeless because the private
respondent also represents the rank-and-file employees' It maintains that Rep. Act No. 6715 contemplates the principle
union. laid down by this Court in the Adamson case interpreting
Section 3 of Rep. Act No. 875 (the Industrial Peace Act) on the
right of a supervisor's union to affiliate. The private
On September 18, 1990, the Med-Arbiter issued an order in
respondent asserts that the legislature must have noted
favor of the private respondent, the dispositive portion of
the Adamson ruling then prevailing when it conceived the
which provides:

LABREL FULL TEXT CASES Page 81 of 179

reinstatement in the present Labor Code of a similar provision
on the right of supervisors to organize.
Under the Industrial Peace Act of 1953, employees were
classified into three groups, namely: (1) managerial
employees; (2) supervisors; and (3) rank-and file employees.
Supervisors, who were considered employees in relation to
their employer could join a union but not a union of rank-and-
file employees.
With the enactment in 1974 of the Labor Code (Pres Decree
No. 442), employees were classified into managerial and rank-
and-file employees. Neither the category of supervisors nor
their right to organize under the old statute were recognized.
So that, in Bulletin Publishing Corporation v. Sanchez (144
SCRA 628 [1986]), the Court interpreted the superseding labor
law to have removed from supervisors the right to unionize
among themselves. The Court ruled:
In the light of the factual background of this
case, We are constrained to hold that the
supervisory employees of petitioner firm
may not, under the law, form a supervisors
union, separate and distinct from the
existing bargaining unit (BEU), composed of
the rank-and-file employees of the Bulletin
Publishing Corporation. It is evident that
most of the private respondents are
considered managerial employees. Also, it is
distinctly stated in Section 11, Rule II, of the
Omnibus Rules Implementing the Labor
Code, that supervisory unions are presently
no longer recognized nor allowed to exist
and operate as such. (pp. 633, 634)
In Section 11, Rule II, Book V of the Omnibus Rules
implementing Pres. Decree No. 442, the supervisory unions
existing since the effectivity of the New Code in January 1,
1975 ceased to operate as such and the members who did not
qualify as managerial employees under this definition in
Article 212 (k) therein became eligible to form, to join or assist
a rank-and-file union.
A revision of the Labor Code undertaken by the bicameral
Congress brought about the enactment of Rep. Act No. 6715 in
March 1989 in which employees were reclassified into three
groups, namely: (1) the managerial employees; (2) supervisors;
and (3) the rank and file employees. Under the present law,
the category of supervisory employees is once again
recognized. Hence, Art. 212 (m) states:
(m) . . . Supervisory employees are those
who, in the interest of the employer,
effectively recommend such managerial
actions if the exercise of such authority is not
merely routinary or clerical in nature but
requires the use of independent judgment. .
..
LABREL FULL TEXT CASES
The rationale for the amendment is the government's
recognition of the right of supervisors to organize with the
qualification that they shall not join or assist in the
organization of rank-and-file employees. The reason behind
the Industrial Peace Act provision on the same subject matter
has been adopted in the present statute. The interests of
supervisors on the one hand, and the rank-and-file employees
on the other, are separate and distinct. The functions of
supervisors, being recommendatory in nature, are more
identified with the interests of the employer. The performance
of those functions may, thus, run counter to the interests of
the rank-and-file.
This intent of the law is made clear in the deliberations of the
legislators on then Senate Bill 530 now enacted as Rep. Act
No. 6715.
The definition of managerial employees was limited to those
having authority to hire and fire while those who only
recommend effectively the hiring or firing or transfers of
personnel would be considered as closer to rank-and-file
employees. The exclusion, therefore, of middle level
executives from the category of managers brought about a
third classification, the supervisory employees. These
supervisory employees are allowed to form their own union
but they are not allowed to join the rank-and-file union
because of conflict of interest (Journal of the Senate, First
Regular Session, 1987, 1988, Volume 3,
p. 2245).
In terms of classification, however, while they are more closely
identified with the rank-and-file they are still not allowed to
join the union of rank-and-file employees. To quote the Senate
Journal:
In reply to Sen. Guingona's query whether
"supervisors" are included in the term
"employee", Sen. Herrera stated that while
they are considered as rank-and-file
employees, they cannot join the union and
they would have to form their own
supervisors' union pursuant to Rep. Act 875.
(supra, p. 2288)
The peculiar role of supervisors is such that while they are not
managers, when they recommend action implementing
management policy or ask for the discipline or dismissal of
subordinates, they identify with the interests of the employer
and may act contrary to the interests of the rank-and-file.
We agree with the petitioner's contention that a conflict of
interest may arise in the areas of discipline, collective
bargaining and strikes.
Members of the supervisory union might refuse to carry out
disciplinary measures against their co-member rank-and-file
employees.
Page 82 of 179
In the area of bargaining, their interests cannot be considered
identical. The needs of one are different from those of the
other. Moreover, in the event of a strike, the national
federation might influence the supervisors' union to conduct a
sympathy strike on the sole basis of affiliation.
More important, the factual issues in the Adamson case are
different from the present case. First, the rank-and-file
employees in the Adamson case are not directly under the
supervisors who comprise the supervisors' union. In the case
at bar, the rank-and file employees are directly under the
supervisors organized by one and the same federation.
The contemplation of the law in Sec. 3 of the Industrial Peace
Act is to prohibit supervisors from joining a labor organization
of employees under their supervision. Sec. 3 of the Industrial
Peace Act provides:
Sec. 3 Employees' Right to Self
Organization. Employees shall have the right
to self-organization and to form, join or
assist labor organizations of their own
choosing for the purpose of collective
bargaining through representatives of their
own choosing and to engage in concerted
activities for the purpose of collective
bargaining and other mutual aid or
protection. Individuals employed as
supervisors shall not be eligible for
membership in a labor organization of
employees under their supervision but may
form separate organizations of their own
(Emphasis supplied).
This was not the consideration in the Adamson case because
as mentioned earlier, the rank-and-file employees in
the Adamson case were not under the supervision of the
supervisors involved.
Meanwhile, Article 245 of the Labor Code as amended by Rep.
Act No. 6715 provides:
Art. 245. Ineligibility of managerial
employees to join any labor organization:
right of supervisory employees.
Managerial employees are not eligible to
join, assist or form any labor organization.
Supervisory employees shall not be eligible
for membership in a labor organization of
the rank-and-file employees but may join,
assist or form separate labor organizations of
their own.
The Court construes Article 245 to mean that, as in Section 3
of the Industrial Peace Act, supervisors shall not be given an
occasion to bargain together with the rank-and-file against the
interests of the employer regarding terms and conditions of
work
LABREL FULL TEXT CASES
Second, the national union in the Adamson case did not
actively represent its local chapters. In the present case, the
local union is actively represented by the national federation.
In fact, it was the national federation, theKAMPIL-KATIPUNAN,
which initially filed a petition for certification in behalf of the
respondent union.
Thus, if the intent of the law is to avoid a situation where
supervisors would merge with the rank and-file or where the
supervisors' labor organization would represent conflicting
interests, then a local supervisors' union should not be
allowed to affiliate with the national federation of union of
rank-and-file employees where that federation actively
participates in union activity in the company.
The petitioner further contends that the term labor
organization includes a federation considering that Art. 212 (g)
mentions "any union or association of employees."
The respondent, however, argues that the phrase refers to a
local union only in which case, the prohibition in Art. 245 is
inapplicable to the case at bar.
The prohibition against a supervisors' union joining a local
union of rank-and-file is replete with jurisprudence. The Court
emphasizes that the limitation is not confined to a case of
supervisors wanting to join a rank-and-file local union. The
prohibition extends to a supervisors' local union applying for
membership in a national federation the members of which
include local unions of rank-and-file employees. The intent of
the law is clear especially where, as in the case at bar, the
supervisors will be co-mingling with those employees whom
they directly supervise in their own bargaining unit.
Technicalities should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations
of the parties. (Rapid Manpower Consultants, Inc. v. NLRC, 190
SCRA 747 [1990]) What should be paramount is the intent
behind the law, not its literal construction. Where one
interpretation would result in mischievous consequences
while another would bring about equity, justice, and the
promotion of labor peace, there can be no doubt as to what
interpretation shall prevail.
Finally, the respondent contends that the law prohibits the
employer from interfering with the employees' right to self-
organization.
There is no question about this intendment of the law. There
is, however, in the present case, no violation of such a
guarantee to the employee. Supervisors are not prohibited
from forming their own union. What the law prohibits is their
membership in a labor organization of rank-and-file
employees (Art. 245, Labor Code) or their joining a national
federation of rank-and-file employees that includes the very
local union which they are not allowed to directly join.
Page 83 of 179
In a motion dated November 15, 1991 it appears that the
petitioner has knuckled under to the respondents' pressures
and agreed to let the national federation KAMPIL-KATIPUNAN
represent its supervisors in negotiating a collective bargaining
agreement. Against the advise of its own counsel and on the
basis of alleged "industrial peace", the petitioner expressed a
loss of interest in pursuing this action. The petitioner is, of
course, free to grant whatever concessions it wishes to give to
its employees unilaterally or through negotiations but we
cannot allow the resulting validation of an erroneous ruling
and policy of the Department of Labor and Employment
(DOLE) to remain on the basis of the petitioner's loss of
interest. The December 14, 1990 order and the November 21,
1990 resolution of DOLE are contrary to law and must be
declared as such.

WHEREFORE, the petition is hereby GRANTED. The private

respondent is disqualified from affiliating with a national
federation of labor organizations which includes the
petitioner's rank-and-file employees.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

LABREL FULL TEXT CASES Page 84 of 179

SECOND DIVISION
G.R. No. 102084 August 12, 1998
DE LA SALLE UNIVERSITY MEDICAL CENTER AND COLLEGE OF
MEDICINE, petitioner,
vs.
HON. BIENVENIDO E. LAGUESMA, Undersecretary of Labor
and Employment; ROLANDO S. DE LA CRUZ, Med-Arbiter
Regional Office No. IV, DE LA SALLE UNIVERSITY MEDICAL
CENTER AND COLLEGE OF MEDICINE SUPERVISORY UNION-
FEDERATION OF FREE WORKERS, respondents.
MENDOZA, J.:
Petitioner De La Salle University Medical Center and College of
Medicine (DLSUMCCM) is a hospital and medical school at
Dasmarias, Cavite. Private respondent Federation of Free
Workers-De La Salle University Medical Center and College of
Medicine Supervisory Union Chapter (FFW-DLSUMCCMSUC),
on the other hand, is a labor organization composed of the
supervisory employees of petitioner DLSUMCCM.
On April 17, 1991, the Federation of Free Workers (FFW), a
national federation of labor unions, issued a certificate to
private respondent FFW-DLSUMCCMSUC recognizing it as a
local chapter. On the same day, it filed on behalf of private
respondent FFW-DLSUMCCMSUC a petition for certification
election among the supervisory employees of petitioner
DLSUMCCM. Its petition was opposed by petitioner
DLSUMCCM on the grounds that several employees who
signed the petition for certification election were managerial
employees and that the FFW-DLSUMCCMSUC was composed
of both supervisory and rank-and-file employees in the
company.
1 qualified to join or form a labor organization
In its reply dated May 29, 1991, private respondent FFW-
DLSUMCCMSUC denied petitioner's allegations. It contended
that
2. Herein petition seeks for the holding of a
certification election among the supervisory
employees of herein respondent. It does not
intend to include managerial employees.
xxx xxx xxx
6. It is not true that supervisory employees
are joining the rank-and-file employees'
union. While it is true that both regular rank-
and-file employees and supervisory
employees of herein respondent have
affiliated with FFW, yet there are two
separate unions organized by FFW. The
LABREL FULL TEXT CASES
supervisory employees have a separate
2
charter certificate issued by FFW.
On July 5, 1991, respondent Rolando S. de la Cruz, med-arbiter
of the Department of Labor and Employment Regional Office
No. IV, issued an order granting respondent union's petition
for certification election. He said;
. . . [petitioner] . . . claims that based on the
job descriptions which will be presented at
the hearing, the covered employees who are
considered managers occupy the positions of
purchasing officers, personnel officers,
property officers, cashiers, heads of various
sections and the like.
[Petitioner] also argues that assuming that
some of the employees concerned are not
managerial but mere supervisory employees,
the Federation of Free Workers (FFW)
cannot extend a charter certificate to this
group of employees without violating the
express provision of Article 245 which
provides that "supervisory employees shall
not be eligible for membership in a labor
organization of the rank-and-file employees
but may join, assist or form separate labor
organizations of their own" because the FFW
had similarly issued a charter certificate to
its rank-and-file employees.
xxx xxx xxx
In its position paper, [petitioner] stated that
most, if not all, of the employees listed in . . .
the petition are considered managerial
employees, thereby admitting that it has
supervisory employees who are undoubtedly
of their own. The record likewise shows that
[petitioner] promised to present the job
descriptions of the concerned employees
during the hearing but failed to do so. Thus,
this office has no basis in determining at this
point in time who among them are
considered managerial or supervisory
employees. At any rate, there is now no
question that [petitioner] has in its employ
supervisory employees who are qualified to
join or form a labor union. Consequently,
this office is left with no alternative but to
order the holding of certification election
pursuant to Article 257 of the Labor Code, as
amended, which mandates the holding of
certification election if a petition is filed by a
legitimate labor organization involving an
unorganized establishment, as in the case of
herein respondent.
Page 85 of 179
 As to the allegation of [petitioner] that the
act of the supervisory employees in
affiliating with FFW to whom the rank-and-
file employees are also affiliated is violative
of Article 245 of the Labor Code, suffice it to
state that the two groups are considered
separate bargaining units and local chapters
of FFW. They are, for all intents and
purposes, separate with each other and their
affiliation with FFW would not make them
members of the same labor union. This must
be the case because it is settled that the
locals are considered the basic unit or
principal with the labor federation assuming
the role of an agent. The mere fact,
therefore, that they are represented by or
under the same agent is of no moment. They
are still considered separate with each
3
other.
On July 30, 1991, petitioner DLSUMCCM appealed to the
Secretary of Labor and Employment, citing substantially the
same arguments it had raised before the med-arbiter.
However, its appeal was dismissed. In his resolution, dated
August 30, 1991, respondent Undersecretary of Labor and
Employment Bienvenido E. Laguesma found the evidence
presented by petitioner DLSUMCCM concerning the alleged
managerial status of several employees to be insufficient. He
also held that, following the ruling of this Court in Adamson &
4
Adamson, Inc. v. CIR, unions formed independently by
supervisory and rank-and-file employees of a company may
legally affiliate with the same national federation.
Petitioner moved for a reconsideration but its motion was
denied. In his order dated September 19, 1991, respondent
Laguesma stated:
We reviewed the records once more, and
find that the issues and arguments adduced
by movant have been squarely passed upon
in the Resolution sought to be reconsidered.
Accordingly, we find no legal justification to
alter, much less set aside, the aforesaid
resolution. Perforce, the motion for
reconsideration must fail.
WHEREFORE, the instant motion for
reconsideration is hereby denied for lack of
merit and the resolution of this office dated
30 August 1991 STANDS.
No further motions of a similar nature shall
5
hereinafter be entertained.
Hence, this petition for certiorari.
Petitioner DLSUMCCM contends that respondent Laguesma
gravely abused his discretion. While it does not anymore insist
LABREL FULL TEXT CASES
that several of those who joined the petition for certification
election are holding managerial positions in the company,
petitioner nonetheless pursues the question whether unions
formed independently by supervisory and rank-and-file
employees of a company may validly affiliate with the same
national federation. With respect to this question, it argues:
THE PUBLIC RESPONDENT, HONORABLE
BIENVENIDO E. LAGUESMA,
UNDERSECRETARY OF LABOR AND
EMPLOYMENT, IN A CAPRICIOUS, ARBITRARY
AND WHIMSICAL EXERCISE OF POWER
ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO ACTING
WITHOUT OR IN EXCESS OF JURISDICTION
WHEN HE DENIED THE PETITIONER'S APPEAL
AND ORDERED THE HOLDING OF A
CERTIFICATION ELECTION AMONG THE
MEMBERS OF THE SUPERVISORY UNION
EMPLOYED IN PETITIONER'S COMPANY
DESPITE THE FACT THAT SAID SUPERVISORY
UNION WAS AFFILIATED WITH THE
FEDERATION OF FREE WORKERS TO WHICH
THE RANK-AND-FILE EMPLOYEES OF THE
SAME COMPANY ARE LIKEWISE AFFILIATED,
CONTRARY TO THE EXPRESS PROVISIONS OF
ARTICLE 245 OF THE LABOR CODE, AS
6
AMENDED.
The contention has no merit.
Supervisory employees have the right to self-organization as
do other classes of employees save only managerial ones. The
Constitution states that "the right of the people, including
those employed in the public and private sectors, to form
unions, associations or societies for purposes not contrary to
7
law, shall not be abridged." As we recently held in United
8
Pepsi-Cola Supervisory Union v. Loguesma, the framers of the
Constitution intended, by this provision, to restore the right of
supervisory employees to self-organization which had been
withdrawn from them during the period of martial law. Thus:
Commissioner Lerum sought to amend the
draft of what was later to become Art. 111,
8 of the present Constitution:
xxx xxx xxx
MR. LERUM. . . . Also, we
have unions of supervisory
employees and of security
guards. But what is tragic
about this is that after the
1973 Constitution was
approved and in spite of an
express recognition of the
right to organize in P.D. No.
442, known as the Labor
Page 86 of 179
 Code, the right of
government workers,
supervisory employees and
security guards to form
unions was abolished.
xxx xxx xxx
We are afraid that without
any corresponding
provision covering the
private sector, the security
guards, the supervisory
employees . . . will still be
excluded and that is the
purpose of this
amendment.
xxx xxx xxx
In sum, Lerum's proposal to amend Art. III,
8 of the draft Constitution by including labor
unions in the guarantee of organizational
right should be taken in the context of
statements that his aim was the removal of
the statutory ban against security guards and
supervisory employees joining labor
organizations. The approval by the
Constitutional Commission of his proposal
can only mean, therefore, that the
Commission intended the absolute right to
organize of government workers,
supervisory employees, and security guards
9
to be constitutionally guaranteed.
Conformably with the constitutional mandate, Art. 245 of the
Labor Code now provides for the right of supervisory
employees to self-organization, subject to the limitation that
they cannot join an organization of rank-and-file employees:
Supervisory employees shall not be eligible
for membership in a labor organization of
the rank-and-file employees but may join,
assist or form separate labor organizations of
their own.
The reason for the segregation of supervisory and rank-and-
file employees of a company with respect to the exercise of
the right to self-organization is the difference in their interests.
Supervisory employees are more closely identified with the
employer than with the rank-and-file employees. If
supervisory and rank-and-file employees in a company are
allowed to form a single union, the conflicting interests of
these groups impair their relationship and adversely affect
10
discipline, collective bargaining and strikes. These
consequences can obtain not only in cases where supervisory
and rank-and-file employees in the same company belong to a
single union but also where unions formed independently by
LABREL FULL TEXT CASES
supervisory and rank-and-file employees of a company are
allowed to affiliate with the same national federation.
Consequently, this Court has held in Atlas Lithographic
11
Services Inc. v. Laguesma that
To avoid a situation where supervisors would
merge with the rank-and-file or where the
supervisors' labor organization would
represent conflicting interests, then a local
supervisors' union should not be allowed to
affiliate with a national federation of unions
of rank-and-file employees where that
federation actively participates in union
activities in the company.
As we explained in that case, however, such a situation would
obtain only where two conditions concur: First, the rank-and-
file employees are directly under the authority of supervisory
12
employees. Second, the national federation is actively
13
involved in union activities in the company. Indeed, it is the
presence of these two conditions which distinguished Atlas
Lithographic Services, Inc. v. Laguesma from Adamson &
14
Adamson, Inc. v. CIR where a different conclusion was
reached.
The affiliation of two local unions in a company with the same
national federation is not by itself a negation of their
independence since in relation to the employer, the local
unions are considered as the principals, while the federation is
deemed to be merely their agent. This conclusion is in accord
with the policy that any limitation on the exercise by
employees of the right to self-organization guaranteed in the
Constitution must be construed strictly. Workers should be
allowed the practice of this freedom to the extent recognized
in the fundamental law. As held in Liberty Cotton Mills
15
Workers Union v. Liberty Cotton Mills, Inc.:
The locals are separate and distinct units
primarily designed to secure and maintain an
equality of bargaining power between the
employer and their employee members in
the economic struggle for the fruits of the
joint productive effort of labor and capital;
and the association of locals into the
national union . . . was in furtherance of the
same end. These associations are consensual
entities capable of entering into such legal
relations with their members. The essential
purpose was the affiliation of the local
unions into a common enterprise to increase
by collective action the common bargaining
power in respect of the terms and conditions
of labor. Yet the locals remained the basic
units of association, free to serve their own
and the common interest of all, . . . and free
also to renounce the affiliation for mutual
welfare upon the terms laid down in the
16
agreement which brought it to existence.
Page 87 of 179
The questions in this case, therefore, are whether the rank- Regalado, Melo and Martinez, JJ., concur.
and-file employees of petitioner DLSUMCCM who compose a
labor union are directly under the supervisory employees
whose own union is affiliated with the same national
federation (Federation of Free Workers) and whether such
national federation is actively involved in union activities in the
company so as to make the two unions in the same company,
in reality, just one union.

Although private respondent FFW-DLSUMCCMSUC and

another union composed of rank-and-file employees of
petitioner DLSUMCCM are indeed affiliated with the same
national federation, the FFW, petitioner DLSUMCCM has not
presented any evidence showing that the rank-and-file
employees composing the other union are directly under the
authority of the supervisory employees. As held in Adamson &
17
Adamson, Inc. v. CIR, the fact that the two groups of workers
are employed by the same company and the fact that they are
affiliated with a common national federation are not sufficient
to justify the conclusion that their organizations are actually
just one. Their immediate professional relationship must be
established. To borrow the language of Adamson & Adamson,
18
Inc. v. CIR:

We find without merit the contention of

petitioner that if affiliation will be allowed,
only one union will in fact represent both
supervisors and rank-and-file employees of
the petitioner; that there would be an
indirect affiliation of supervisors and rank-
and-file employees with one labor
organization; that there would be a merging
of the two bargaining units; and that the
respondent union will lose its independence
because it becomes an alter ego of the
19
federation.

Mention has already been made of the fact that the petition
for certification election in this case was filed by the FFW on
behalf of the local union. This circumstance, while showing
active involvement by the FFW in union activities at the
company, is by itself insufficient to justify a finding of violation
of Art. 245 since there is no proof that the supervisors who
compose the local union have direct authority over the rank-
and-file employees composing the other local union which is
also affiliated with the FFW. This fact differentiates the case
20
from Atlas Lithographic Services. Inc. v. Laguesma, in which,
in addition to the fact that the petition for certification
election had been filed by the national federation, it was
shown that the rank-and-file employees were directly under
the supervisors organized by the same federation.

It follows that respondent labor officials did not gravely abuse

their discretion.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

LABREL FULL TEXT CASES Page 88 of 179

EN BANC
G.R. No. 107590 February 21, 1995
PAMANTASAN NG LUNGSOD NG MAYNILA (PLM), petitioner,
vs.
CIVIL SERVICE COMMISSION (CSC), PAMANTASAN NG
LUNGSOD NG MAYNILA FACULTY ORGANIZATION (PLMFO),
ROBERTO AMORES, ROLANDO AUSTRIA, VICENTE
BANAGALE, NEMENCIO CABATUANDO, MANOLO HINA,
ELEANOR JIMENEZ, ANITA LEYSON, JONATHAN MANZANO,
JOSE MEJIA, ESTELITA PINEDA, LORDEO POQUIZ, ALFREDO
RAZON, MA. ZELDA REYES, SALVACION RODRIGUEZ, BELINDA
SANTOS, and VIRGILIO ZAMORA respondents.
VITUG, J.:
This petition stemmed from a complaint for illegal dismissal
and unfair labor practice filed with public respondent Civil
Service Commission ("CSC") by private respondents, through
Pamantasan Ng Lungsod Ng Maynila Faculty Organization
("PLMFO"), against petitioner Pamantasan Ng Lungsod Ng
Maynila ("PLM") and its officers.
The sixteen (16) individual private respondents were full-time
instructors of PLM under "temporary contracts" of
employment renewable on a yearly basis. They, among other
instructors, joined the PLMFO.
Uniform notices of termination, all dated 24 April 1990, were
individually sent to private respondents informing them of
"the expiration of their temporary appointments at the close
of office hours on 31 May 1990" and the non-renewal of their
appointments for the school year (SY) 1990-1991. A series of
letter-complaints addressed to the CSC by private respondents
evoked a letter-response from PLM, dated 16 May 1990,
traversing the complainants' right to compel a renewal of the
appointments. They were advised that their retention was not
recommended by their respective Deans.
On 29 May 1990, private respondents, through PLMFO, filed
with the CSC a verified complaint for illegal dismissal and
unfair labor practice against petitioner and its officers.
In a letter-comment, dated 13 July 1990, petitioner denied
having committed any unfair labor practice or having illegally
dismissed private respondents. In its defense, PLM interposed
(1) the temporary nature of private respondents' contracts of
employment and (2) reasons that could justify the non-
renewal of the contracts.
Public respondent CSC referred the case to the Public Sector
1 Alfredo Razon, Virgilio Zamora, Roberto
Labor-Management Council ("PSLMC"). The latter, through its
deputized hearing officer, Med-Arbiter Hope Ruiz-Valenzuela
LABREL FULL TEXT CASES
of the Bureau of Labor Relations of the Department of Labor
and Employment, after due notice, heard the case (PSLMC
Case No. 00-06-91). During the proceedings, petitioner relied
in main on the temporary nature of private respondents'
employment contracts.
2
In a Resolution, dated 16 December 1991, the PSLMC found
petitioner guilty of "Unfair Labor Practice" and held that
private respondents "should be reinstated." The dispositive
portion of its Resolution read:
WHEREFORE, premises considered, the
Council finds that PLM Management
committed Unfair Labor Practice when it
terminated the services of herein
complainants, and for which the latter
should be reinstated.
Accordingly, let this Resolution be forwarded
to the Civil Service Commission for
appropriate action.
3
SO ORDERED.
Petitioner's request for reconsideration was denied in PSLMC's
Order of 30 April 1992. Forthwith, the PSLMC transmitted the
case to the CSC for appropriate action.
On 15 May 1992, petitioner filed with this Court a petition
for certiorari, entitled "Pamantasan Ng Lungsod Ng Maynila vs.
Public Sector Labor-Management Council, et al.," docketed
G.R. No. 105157, that sought the annulment of the
aforementioned PSLMC resolutions. In a Minute Resolution,
dated 27 May 1992, the Court dismissed the petition for PLM's
failure to submit the certification required under Circular 28-
91 on forum-shopping. The motion for the reconsideration of
this resolution was dismissed with finality, no compelling
reason having been shown to reconsider the dismissal of the
petition. On 30 July 1992, the resolution became final and
executory and, in due course, was recorded in the Book of
Entries of Judgment.
In the meantime, public respondent CSC, acting on the case
forwarded to it by the PSLMC, issued its Resolution No. 92-
814, dated 25 June 1992, sustaining the findings of the PSLMC.
The CSC, accordingly, directed the reinstatement, with back
salaries, of private respondents; thus
WHEREFORE, foregoing premises
considered, the Commission hereby resolves
to rule that the termination of the services of
Estelita Pineda, Vicente Banagale, Salvacion
Rodriguez, Anita Leyson, Eleanor Jimenez,
Ma. Zelda Reyes, Belinda Santos, Lordeo
Poquiz, Rolando Austria, Jonathan Manzano,
Manolo Hina, Nemencio Cabatuando,
Amores and Jose Mejia, all of the
Page 89 of 179
 Pamantasan ng Lungsod ng Maynila, is
illegal.
The PLM Management is hereby directed to
reinstate these employees to their former or
equivalent positions and pay them back
salaries and other benefits from the time of
their illegal termination until their actual
4
reinstatement.
The request for the reconsideration of the order was denied
by the CSC in its Resolution No. 92-1573 of 20 October 1992.
Respondent CSC, in denying petitioner's motion, held, among
other things, that the findings of fact by the PSLMC deserved
the respect of the Commission and that there was no further
need for it, to conduct a hearing of its own.
The PLM cites the following reasons for its instant petition
for certiorari (under Rule 65, not Rule 45 such as mistakenly
referred to by petitioner):
1. The Civil Service Commission acted with
grave abuse of discretion tantamount to lack
of jurisdiction and denial of due process
when it adopted entirely, without according
the petitioner the opportunity to be heard,
the findings of facts and resolutions of the
Public Sector Labor and Management
Council, a body separate and distinct and
with different jurisdiction from that of the
Commission.
2. The Civil Service Commission acted with
grave abuse discretion in effectively denying
the petitioner the opportunity to present
evidence to substantiate its allegations in its
defense against the charge of illegal
dismissal, to the prejudice of civil service and
public interest.
3. The Civil Service Commission committed a
grave abuse of discretion in directing
reinstatement and payment of backwages to
private respondents whose temporary
contracts of employment had already
expired.
On 11 May 1993, this Court, acting on petitioner's motion for
the issuance of a writ of preliminary injunction, issued, on 18
May 1993, a temporary restraining order directing respondent
CSC "to cease and desist from executing (its) assailed
5
Resolutions No. 92-814 and No. 92-1573.
In our resolution, dated 17 August 1993, following the receipt
of respondents' comment, we gave due course to the petition
and ordered the parties to file their respective memoranda.
LABREL FULL TEXT CASES
The Solicitor General took an adverse position to that of public
respondent and prayed that the petition be given due course,
contending that it was inappropriate for respondent CSC to
rule on the aspect of illegal dismissal, an act that involved an
exercise of its original jurisdiction, without affording anew
petitioner an opportunity to be heard.
Public respondent CSC manifested its intention to file its own
comment to the instant petition; however, it failed to file any
such comment within the allotted period. The Court finally
dispensed with the filing of the comment and ordered CSC to
instead file its memorandum in accordance with this Court's
6
resolution of 24 August 1993.
On 20 January 1994, the Court dismissed the petition for
failure to prosecute on the part of petitioner, which likewise
failed to file its memorandum, as well as because of the
7
"evident lack of interest of the parties" to pursue the case.
On petitioner's motion for reconsideration, however, the
Court resolved, on 24 February 1994, to reinstate the petition.
Petitioner stresses that the CSC and the PSLMC both exercise
quasi-judicial functions but not on identical issues and subject
matter; that the PSLMC possesses jurisdiction only over the
unfair labor practice aspect of private respondents' complaint
but that it is the CSC which alone can take cognizance over the
question of illegal dismissal; and that, therefore, when the CSC
has simply adopted the recommendations of the PSLMC in the
unfair labor practice case in resolving the issue of illegal
dismissal and ordering the reinstatement of private
respondents without conducting further proceedings of its
own, it has effectively denied petitioner of its right to due
process.
PSLMC's jurisdiction over the unfair labor practice case filed by
private respondents against petitioner is not disputed. The
PSLMC, in case No. 00-06-91, has conducted its proceedings in
8
accordance with its legal mandate. The proceedings before
Med-Arbiter Valenzuela, who had been deputized to so act as
the hearing officer, conform with the "Rules and Regulations
to Govern the Exercise of the Right of Government Employees
to Self Organization"
Sec. 3. The Council may call on any officer or
agency for assistance. It may deputize
officers to hear and recommend action on
complaints or grievances filed with the
council.
Sec. 4. The procedure in the Council shall be
non-adversarial in nature. The parties may
be required to submit their respective
position papers, together with all evidences
available in support of their respective
positions within 15 days from receipt of
notices.
Page 90 of 179
 Sec. 5. The decision of the Council shall be
final.
The conclusion of the PSLMC regarding petitioner's alleged
commission of unfair labor practice against private
respondents can no longer be considered a proper issue either
before the CSC or in this instance since this particular matter
has already been adjudged with finality in accordance with this
Court's resolution in G.R. No. 105157 heretofore mentioned.
The PSLMC, in part, said:
. . . Individual sixteen (16) complainants were
part of the original founders of the PLMFO
and claim to be active members thereof.
Complainants Vicente Benagale, Roberto
Amores, and Anita Leyson were the
President, Treasurer and Secretary,
respectively, of the PLMFO. At the time of
complainants separation, the union had just
secured its public sector union registration.
All 16 complainants had temporary
employment contracts that were renewed
on a yearly basis. Half of the complainants
had been with the PLM for a long time,
ranging from four (4) to six and one-half (6
1/2) years.
It appears that the Faculty had many long-
standing issues with the PLM Management,
which complainants claim motivated the
organization of the PLMFO. As gathered
from the evidence, the following are some of
the more salient issues:
1. Failure to appoint a true faculty
representative to the Board of Regents as
provided in the PLM Charter;
2 No faculty participation in areas where
normally the faculty input is sought. i.e.
a. revision of the student
curriculum
b. the development of
criteria/policies regarding
faculty development and
promotion
3. While PLM has identified the academic
qualifications and teaching experience
required for each level of hierarchy in the
faculty, the actual mechanics of promotion
are vague. The faculty remains in the dark as
to whether they have already qualified and
therefore can apply for the next faculty rank
as a matter of right. The PLMFO maintains
LABREL FULL TEXT CASES
that this vagueness in the procedure/policies
for promotion is a deliberate scheme to
enable PLM management to establish the
faculty according to its whim;
4. On the matter of promotion scheme, the
faculty is not given the complete results of
their performance evaluation;
5. The faculty is kept guessing about the
official salary scale according to rank, so that
the implementation of such official salary
scale can be arbitrary and discriminatory . . .;
6. Management refuses to allow the
concerned faculty to participate in choosing
the Chairperson in their respective
departments;
7. PLM's existing practice in the promotion
of faculty members either for permanent
status or to the next higher rank as
undermined the university's standard of
excellence. Out of the 223, close to 30% of
the faculty had no previous teaching
experience before joining PLM. There are
only 29 assistant professors and 6 with the
rank of professor. The teachers holding
temporary appointments comprise, almost
half of the faculty.
After securing its union registration, PLMFO
began asserting its rights.
xxx xxx xxx
In its complaint, PLMFO alleged that their
actions and determination to see changes in
the management of PLM angered PLM which
prompted its decision to terminate the
services of the complainants.
xxx xxx xxx
Ordinarily, there is merit to respondent's
argument that employees who hold
temporary contracts of employment may not
expect renewal of appointment as a matter
of right, the decision being a management
prerogative. However, when the exercise of
this privilege is alleged to be the means by
which management hinders unionism or
outrightly bust unions and such allegation is
supported by evidence, the act needs to be
examined and studied. It then becomes
incumbent upon Management to show that
its intentions are otherwise. Records of the
case, however, reveal that despite numerous
Page 91 of 179
 opportunities to do so, PLM makes little
attempt to rebut the specific charges and
instead rests its defense largely on the
argument that since complainants possess
only temporary contracts of employment,
PLM has the right not to renew their
contracts without any need for justification.
There is sufficient evidence to show that the
management of PLM is not particularly
enthusiastic about faculty participation in
the formulation of policies concerning the
University and the Faculty itself, as shown
from the very nature of the majority of the
complaints of the faculty against the
administration and the response/reaction of
the management to earlier attempts by the
faculty to bring about changes. . . .
. . . . The facts on record show that
management did not respond to any of the
faculty issues. One accurate example is the
matter of the teachers' performance
evaluation ratings which were the basis for
"renewal of appointment and
recommendation for permanent status." It
was discussed in the dialogue that the over-
all rating score of the faculty would include
the Peer's evaluation. However, as can be
seen from the ratings of the complainants
who were accused of having poor
performance, the Peer's evaluation was not
included as one of the factors for their
evaluation.
xxx xxx xxx
. . . . In its position paper and other
subsequent pleadings, PLM has however,
abandoned all efforts to pursue its line of
defense. It would appear therefore that the
charges are false and untenable. If this is so,
why was PLM so bold as to present them as
grounds for the separation of complainants
in the first place? Perhaps, it was confident
that because complainants possessed
temporary contracts of employment, no
serious attempt would be made to examine
PLMFO's complaint. Whatever other reasons
PLM may have, the circumstances obtaining
in the instant case show that these charges
were created as an attempt to
confuse/mislead PLM's real motivations on
9 basic right. This constitutional right of
the matter.
In agreeing with the PSLMC, the CSC, in its own resolution of
25 June 1992, stated:
LABREL FULL TEXT CASES
In the arbitration proceedings, the PSLMC
found that PLM committed unfair labor
practice when it terminated the services of
the complainants. It is undisputed that the
PLM Management did not renew the
appointments of these members of the
faculty with temporary contracts but those
who were hired as replacements possess
even lesser qualifications than the 16
complainants. Further, the PLM
Management refused and still refuses to
produce the results of their evaluation of the
performance of the complainants which can
be an indication that presentation of such
evidence would be detrimental to its case.
Hence, this issue before us.
Had complainants not been among those
active officers and/or members of the
PLMFO, and had their qualifications, training,
experience and performance rating not been
impressive, the Commission would have
agreed that the termination or non-renewal
of the contracts of complainants does not
constitute unfair labor practice. But the
records reveal otherwise. Hence, there is
indeed no reason for PLM Management to
terminate the services of these employees
except to bust their organization. The
Commission finds no reason to disagree with
the findings of facts by the PSLMC that PLM
Management committed an unfair labor
practice.
xxx xxx xxx
Even temporary employees enjoy that basic
right to form organization or association for
purposes not contrary to law. PLMFO is that
organization. Thus, its members cannot be
separated from the service for the simple
reason of membership in the said
organization. And when the appointment
status of these members happens to be
temporary in nature, such becomes merely
incidental and the doctrine that temporary
employees have no security of tenure must
yield or is not applicable. When the clear
intent therefore of PLM Management in
terminating the services of these employees
is to abridge their constitutional right to self-
organization, the Commission has the duty
to give them protection and uphold their
employees is superior to the right of
management not to renew the temporary
appointment of its employees. When the
exercise of discretion by the management is
calculated to bust the union as what PLM
Page 92 of 179
 Management had done, the Commission has
no choice but to declare it as a grave abuse
10
of discretion.
Petitioner insists that when CSC has ruled on the matter of
illegal dismissal without conducting any further hearing of its
own, relying, instead, on PSLMC's finding of unfair labor
practice on the part of petitioner, the latter has thereby been
denied due process. Unfortunately for petitioner, however,
the two supposed independent issues,i.e., the unfair labor
practice charge and the complaint for illegal dismissal both
filed by private respondents, are, in fact, here unavoidably
interlinked. The non-renewal of an employment contract with
a term, it is true, is ordinarily a valid mode of removal at the
end of each
11
period. This rule, however, must yield to the superior
constitutional right of employees, permanent or temporary, to
self-organization. While, a temporary employment may be
ended with or without cause, it certainly may not, however, be
terminated for an illegal cause.
Petitioner claims that it was denied "due process." It itself
admitted, however, that "it manifested (before the PSLMC) its
intention to submit evidence (that it had other valid grounds
for not renewing private respondents' temporary contracts of
employment) which, inadvertently or otherwise, it failed to
12
present . . . This supposed evidence, if true and being
material to substantiate its defense against the unfair labor
charge, should have been duly presented, but it did not.
Petitioner should not now be heard to complain that it was
denied due process. We ruled, time and again, that "due
process" was designed to afford an opportunity to be
13
heard, not that an actual hearing should always and
indispensably be held.
In any case, in its reply to public respondents' comment, PLM
enumerates the alleged causes for the non-renewal of the
contracts, to wit:
Name Cause
1. Zamora, Virgilio Failure to finish MA after 2 years
2. Benagale, Vicente Poor over-all performance
3. Mejia, Jose Worked with DAR while with PLM
4. Amores, Roberto Failure to complete MA
5. Reyes, Zelda Poor Performance
6. Santos, Belinda Tardiness in class, says negative
comments during faculty meeting
7. Poquiz, Lorredo Seldom returns test papers, taught in
another university
LABREL FULL TEXT CASES
8. Austria, Rolando Taught in another school for 2nd Semester
of 1989-1990
9. Manzano, Jonathan Taught in another university
10. Hina, Manalo Poor class performance
11. Cabatuando, Nemensio Poor class performance, taught in
another university
12. Rodriguez, Salvacion none given
13. Razon, Alfredo none given
14. Jimenez, Eleanor Tardiness during 2nd sem. in school
15. Leyson, Anita Enrolled in another law school
14
16. Pineda, Estelita Unbecoming conduct, tardiness
The PSLMC has noted, however, that the charges are
either false or untenable; hence, its following
findings:
. . . In the case of complainants Zelda Reyes,
Hina Manalo and Nemencio Cabatuando,
PLM alleged that they scored poorly in their
performance evaluation ratings. However,
check with their actual performance scores
(see pp. 252-264, records) shows that their
grades are near perfect. PLMFO's President
Vicente Benagale was accused of having
poor class performance scores. His
evaluation forms were, however, not
available for scrutiny.
On two occasions, PLM was directed to
produce the evaluation results of the 16
complainants, the first, through an Order of
Director Salvador Fernandez dated May 28,
1990 (see p. 148 records) and the second, in
the conference of January 24, 1990 (see p.
278, records). PLM failed to comply on both
occasions. This Council can only deduce that
the presentation of such evidence would be
detrimental to its case.
Roberto Amores and Virgilio Zamora were
separated on the ground that they failed to
complete their MA degrees. A glance at their
number of years of service makes PLM's
charge spurious. In the case of Roberto
Amores, records show that he has been with
PLM for 6 1/2 years and was still on a
temporary appointment basis. Under Board
Resolution 1025, he should be considered as
a permanent employee, his contract of
Page 93 of 179
 employment having been renewed after the
interim period. If PLM were sincere in
applying the rule that all permanent faculty
must have a Masters Degree, it should have
disqualified Mr. Amores after his interim
period of appointment. It therefore appears
that PLM sought to enforce this rule only
after Mr. Amores was elected union
treasurer. On the other hand, PLM's
objection as regards Virgilio Zamora is
premature. Mr. Zamora was only in his 4th
year at the university. Based on the concept
of interim appointment, he is given up to the
fifth year to complete his Masters.
The cause for termination of Leyson's
services was her enrollment in another
school without allegedly asking permission
from PLM management. On record (p. 507,
records) is a letter dated January 7, 1989 of
Anita Leyson to the University, asking
permission to continue her studies at the
Arellano Law School for the 2nd semester of
1989. PLM challenges complainant to show
proof that her request had been granted.
Even if complainant, however, cannot
produce any document showing that she
was granted permission, in like manner,
neither can PLM present any document
expressly prohibiting her to enroll at the
Arellano University. PLM's non-response, if
this is indeed the case, must be construed as
consent. Complainant's request was for
continuance of her studies. If this act was
truly objectionable, PLM should have
questioned about her previous enrollment at
the Arellano University.
Perhaps, it was confident that because
complainants possessed, temporary
contracts of employment, no serious
attempt would be made to examine PLMFO's
complaint. Whatever other reasons PLM
may have, the circumstances obtaining in
the instant case show that these charges
were created as an attempt to
confuse/mislead PLM's real motivations on
15
the matter.
The finding of the PSLMC that the non-renewal by petitioner
of the questioned contracts of employment had been
motivated by private respondents' union activities is
conclusive on the parties. Indeed, this Court's resolution in
G.R. No. 105157 (PLM vs. PSLMC et al.) which has long become
final and executory should now render that matter a fait
accompli.
When the case was thus referred to the CSC by the PSLMC to
take "appropriate action" it understandably meant that the
CSC should take the necessary steps of reinstating the illegally
dismissed employees.
WHEREFORE, the petition for certiorari is DISMISSED and the
appealed resolutions of the Civil Service Commission are
AFFIRMED. The temporary restraining order issued by this
Court on 18 May 1993, is LIFTED. No costs.
SO ORDERED.
Narvasa, Feliciano, Padilla, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno, Kapunan, Mendoza
and Francisco, JJ., concur.

Moreover, this Council cannot help but

comment that as part of every person's basic
human right, there is nothing to prevent nor
prohibit Ms. Leyson to enroll in the law
school of her choice. As borne out by
her excellent performance ratings,
complainant has rendered an exemplary
service.Penalizing complainant for seeking to
further improve herself is bordering on
oppression.

In the same conference of January 24, 1991,

PLM was directed to further substantiate the
validity of its charges against complainants.
In its position paper and other subsequent
pleadings, PLM has however, abandoned all
efforts to pursue its line of defense. It would
appear therefore that the charges are false
and untenable. If this is so, why was PLM so
bold as to present them as grounds for the
separation of complainants in the first place?
LABREL FULL TEXT CASES Page 94 of 179
SECOND DIVISION
G.R. No. 123375 February 28, 2005
GENARO BAUTISTA, petitioner,
vs.
HON. COURT OF APPEALS and THE OFFICIALS AND BOARD OF
DIRECTORS OF KAISAHAN AT KAPATIRAN NG MGA
MANGGAGAWA AT KAWANI SA METROPOLITAN
WATERWORKS AND SEWERAGE SYSTEM UNION,
REPRESENTED BY ITS PRESIDENT, PRUDENCIO
CRUZ, respondents.
DECISION
CHICO-NAZARIO, J.:
Before us is a petition for review on certiorari under Rule 45 of
1
the 1997 Rules of Civil Procedure, assailing the Decision and
2 Wherefore, the instant appeal is hereby dismissed for lack of
Resolution of the Court of Appeals, dated 09 October 1995
and 08 January 1996, respectively. The court a quo, in said
Decision, held that the jurisdiction to determine the proper
representative of employees in the Metropolitan Waterworks
and Sewerage System pertains to the Department of Labor
and Employment, more particularly to the Bureau of Labor
Relations.
The Facts
On 07 May 1993, after a petition for election of officers of
Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa
Metropolitan Waterworks and Sewerage System (KKMK-
MWSS) was filed by Bonifacio De Guzman, former auditor of
KKMK-MWSS, a Resolution was issued by Perlita Bathan-
Velasco, in her capacity as Director of the Bureau of Labor
Relations (BLR), the decretal portion of which states:
Wherefore, the instant petition is hereby granted and the
Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa
Metropolitan Waterworks and Sewerage System (KKMK-
MWSS) is hereby directed to immediately conduct an election
of the following union officers: 1. President, 2. 1st Vice
President, 3. 2nd Vice President, 4. Executive Secretary, 5.
Assistant Executive Secretary, 6. Treasurer, 7. Assistant
Treasurer, 8. Auditor, 9. Assistant Auditor, 10. Public Relations
Officer, 11. Twenty Three (23) Directors, 12. Four Sergeants at
Arms, and 13. Business Manager, after the usual pre-election
conferences.
The Labor Organizations Division, this Bureau, shall supervise
3
the conduct of said election.
A Motion for Reconsideration was filed by the incumbent
officers of KKMK-MWSS, led by its President, Genaro Bautista,
with the BLR, but was denied by Perlita Bathan-Velasco on 08
July 1993.1awphi1.nt
LABREL FULL TEXT CASES
An appeal was filed with the Office of the Secretary of Labor
and Employment where the order of the BLR was assailed as
having been issued with grave abuse of discretion and without
4
jurisdiction.
On 24 August 1993, an Order was issued by the Office of the
Secretary of Labor and Employment, through Undersecretary
Bienvenido Laguesma, part of which reads:
Records clearly show that the subject of the present
controversy is an intra union conflict involving an employees
organization in the public sector created and registered
pursuant to Executive Order No. 180. Consequently, this office
(referring to the Secretary of Labor and Employment) has no
other recourse but to dismiss the appeal for lack of
jurisdiction.
...
jurisdiction. Accordingly, let the entire records of this case be
returned to the Bureau of Labor Relations, for appropriate
5
action.
The then incumbent officers of KKMK-MWSS, represented by
its President, Genaro C. Bautista, filed a special civil action
for certiorari which was, however, dismissed.l^vvphi1.net The
Court, on 20 September 1993, issued the following Resolution:
G.R. No. 111635 (Incumbent Officers of KKMK-MWSS
represented by its President Genaro C. Bautista v. Hon.
Bienvenido E. Laguesma, in his capacity as Undersecretary of
Labor and Employment, Hon. Perlita Bathan-Velasco, in her
capacity as Officer-In-Charge of the Bureau of Labor Relations,
Bonifacio De Guzman and 544 other members of KKMK-
MWSS). Acting on the special civil action for certiorari, with
prayer for the issuance of a temporary restraining order, the
Court Resolved to DISMISS the petition for being insufficient in
form and substance, and for want of a genuine justiciable
issue.
Petitioners claim to be incumbent officers of the Kaisahan at
Kapatiran ng mga Manggagawa sa Metropolitan Waterworks
and Sewerage System (KKMK-MWSS). However, they are not
individually named in the petition.
In the main, the petition argues that public respondents have
no jurisdiction over an intra-union dispute among government
employees, hence, cannot order a new election of officers. A
cursory reading of the Order of 24 August 1993 issued by
respondent Undersecretary reveals that he agrees with this
view. Thus
Records clearly show that the subject of the present
controversy is an intra-union conflict involving an employees
organization in the public sector created and registered
pursuant to Executive Order No. 180. Consequently, this Office
(referring to the Secretary of Labor and Employment) has no
Page 95 of 179
other recourse but to dismiss the appeal for lack of
jurisdiction.
There is no valid issue therefore to be resolved in the instant
6
petition.
This Resolution of the Court became final and executory on 27
October 1994 and was recorded in the Book of Entries of
7
Judgments.
Earlier, or on 25 November 1993, a Petition for Prohibition
8 The defendants in this case together with Teofilo Asuncion and
with Prayer for a Temporary Restraining Order/Injunction was
filed by Genaro Bautista, et al., against Perlita Bathan-Velasco,
Director, Eugenia Fernandez, Med-Arbiter, and Johnny P.
Garcia, Chief, Labor Organizations Division, all of the BLR,
before the Regional Trial Court (RTC), Quezon City, Branch 87.
The petition sought to enjoin the herein respondents from
proceeding with the election of officers of KKMK-MWSS
scheduled on 02 December 1993, and to permanently prohibit
them from exercising jurisdiction over the conduct of election
of the officers of the KKMK-MWSS.1a\^/phi1.net
On 26 November 1993, the RTC, Quezon City, Branch 87,
through Judge Elsie Ligot Telan, issued a temporary restraining
order, quoted as follows:
A verified petition for prohibition with prayer for a temporary
restraining order/injunction has been filed by the plaintiffs.
The petition being sufficient in form and substance, and so as
not to render the issues raised moot and academic, the
defendants are hereby ordered to temporarily refrain from
proceeding with the election of officers of the KKMK-MWSS
scheduled on December 2, 1993, until further orders from the
Court.
Let the prayer for issuance of injunction be set for hearing on
December 7, 1993 at 8:30 a.m., at which date and time,
defendants may show cause why the same should not be
granted.
Let summons together with copies of the complaint be served
upon the defendants.
9 elected. Further, the persons allegedly elected in said elections
Copies of this Order were served upon the defendants therein
10
on 29 November 1993.
On 02 December 1993, the election of the officers of KKMK-
MWSS pushed through despite the issuance of the temporary
restraining order. Another Order was issued by Branch 87 on
the same date, hereunder quoted:
Counsel for petitioners appeared today with an urgent ex-
parte manifestation stating that despite the order of this
Court, dated November 26, 1993, restraining the defendants
temporarily from proceeding with the election of officers of
the KKMK-MWSS scheduled for today, until further orders,
and that the officials of the MWSS had been served copy of
LABREL FULL TEXT CASES
this order, the election is now being held in utter defiance and
disobedience of the said order of this Court.
To substantiate the above manifestation report are affidavits
attached thereto executed by Angelito Ignacio, alleged
incumbent Asst. Treasurer of the KKMK-MWSS and Mario
Perez, incumbent assistant auditor, respectively, swearing to
the truth that the prohibited elections are now being held at
the compounds of the MWSS, Balara, Quezon City, and at
Arroceros, Manila.
Gregorio Garcia, who were furnished copy of the order and
such other persons who are involved in conducting [of] the
election and/or sanctioning the same are hereby given up to
4:30 oclock this afternoon to explain why they should not be
punished for contempt in defying the order of this Court dated
November 26, 1993.1awphi1.nt
The Court hereby reiterates its order restraining the
defendants, their agents, assigns and representatives, and any
or all persons having to do with such elections, specifically the
management of the MWSS and all others acting in cooperation
with them or acting on their behalf or direction, from
conducting or continuing or tolerating the elections scheduled
11
today.
On 07 December 1993, another Order was issued by the RTC,
Quezon City, Branch 87, part of which reads:
. . . [T]he defendants, as well as all their agents, assigns,
representatives and any or all persons having to do with the
elections, scheduled on December 2, 1993, including the BLR
officials and the management of the Metropolitan Waterworks
and Sewerage System, and all others cooperating with them,
or acting on their behalf and direction, are hereby restrained
from continuing or tolerating the election process in question
at any stage thereof, and if already accomplished in defiance
of the orders of this Court, the said defendants are ordered to
refrain from giving effect to the election by ratifying and
registering the same and recognizing the persons supposedly
are hereby ordered to refrain from assuming office and acting
12
as officers of the KKMK-MWSS.
On 28 December 1993, an order for the issuance of a writ of
13
preliminary injunction was issued by Branch 87. A day later,
or on 29 December 1993, a Writ of Preliminary Injunction was
issued by the RTC, the pertinent portion of which reads:
NOW THEREFORE, you the respondents, your agents and
representatives, particularly the officers concerned ordering
them until further orders of this Court to refrain from giving
any effect to the elections above adverted to by ratifying and
registering the same, and recognizing as officers the persons
supposedly elected; and for the latter to refrain from assuming
14
office and acting as officers of the KKMK-MWSS.
Page 96 of 179
After the case was re-raffled to Branch 220, RTC, Quezon
15
City, presided by Judge Prudencio Altre Castillo, Jr., the
respondents, on 20 June 1994, filed a Reiteration of Motion to
16
Dismiss and Motion to Lift Writ of Preliminary Injunction, on
the ground of lack of jurisdiction and that the injunction does
17
not anymore serve its purpose. Branch 220 issued an Order
dated 01 July 1994, dismissing the case, the decretal portion of
which states:
WHEREFORE, the instant case is dismissed. The Writ is ordered
quashed and Petitioners are hereby ordered to show cause
why their injunction bond should not be confiscated in favor of
18
the respondents.
A motion for reconsideration was filed by Bautista, et al.,
dated 16 July 1994, alleging among other things, that the RTC
has jurisdiction considering that the case before it was an
19
action for prohibition, which was cognizable by it. As a result
20
of which Branch 220 issued another Order dated 27
December 1994 reinstating the Writ of Preliminary Injunction
and injunction bond.1a\^/phi1.net
A motion for reconsideration was filed by the private
respondents but was denied by Branch 220 in its order dated
21
27 April 1995.
On 18 May 1995, a petition for certiorari, prohibition
and mandamus with prayer for Preliminary Injunction and/or
Restraining Order was filed before the Court of Appeals by
22
private respondents herein. In it, the orders of Branch 220
dated 27 December 1994 and 27 April 1995 were assailed for
having been issued with grave abuse of discretion.
On 09 October 1995, a Decision was rendered by the Court of
Appeals finding for the private respondents, upholding that
the BLR had jurisdiction over an intra-union dispute, the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING PREMISES, the instant petition
for certiorari, prohibition and mandamus is hereby GRANTED.
The assailed orders of December 27, 1994 and April 27, 1995
are hereby SET ASIDE and NULLIFIED for reasons above-stated.
23
No costs.
Petitioner then filed a motion for reconsideration dated 27
24
October 1995, but was denied by the court a quo in its
Resolution dated 08 January 1996, which is quoted hereunder:
This Court hereby resolves the following:
(1) to DENY the motion for the issuance of temporary
restraining order of the petitioners, considering that
the instant case has already been decided on October
9, 1995;
(2) to DENY the motion for reconsideration of the
respondents, it appearing that there are no new
LABREL FULL TEXT CASES
issues raised which would warrant the reversal or
25
modification of Our decision.
On 13 February 1996, a petition for review on certiorari was
26
filed before this Court by Genaro Bautista seeking the
reversal and setting aside of the Decision and Resolution of
the Court of Appeals cited earlier.
Meanwhile, on 28 May 1996, a petition for mandamus was
filed by Genaro Bautista, as President, and by the other
27 28
officers and members of the board of KKMK-MWSS against
Angel L. Lazaro III, Administrator, MWSS, and the Board of
Trustees of MWSS, before the RTC, Quezon City, raffled again
29
to Branch 220, docketed as Sp. Proc. No. Q-96-27586. In this
petition, it was prayed, among other things, that Angel Lazaro
III and the Board of Trustees of MWSS give due recognition to
Genaro Bautista, et al., as officers of KKMK-MWSS, and that
the union dues be released to the latter.
On 27 June 1996, an Urgent Motion for Issuance of Temporary
30
Restraining Order was filed before this Court by the private
respondents praying that Regional Trial Court Judge Prudencio
Altre Castillo be enjoined from hearing the mandamus case.
Then Associate Justice Teodoro R. Padilla, as Chairman of the
First Division, issued a Temporary Restraining Order on 08 July
1996, a portion of which reads:
NOW, THEREFORE, you (respondents), your officers, agents,
representatives, and/or persons acting upon your orders or, in
your place or stead, are hereby ENJOINED to desist from
hearing the case in SP Case No. Q-96-27586 entitled "Genaro
Bautista, et al. vs. Angel L. Lazaro, Administrator, Metropolitan
Waterworks and Sewerage System (MWSS), Board of Trustees
(MWSS)."
31
A Motion to Lift Temporary Restraining Order and a
32
Supplemental Motion thereto were later filed by Genaro
Bautista, et al.
Thereafter, petitioner Genaro Bautista filed an urgent motion
to declare the administrator, Angel L. Lazaro III, and manager,
Erlich V. Barraquias, of the Legal Department of the MWSS in
33
indirect contempt of court. The petitioner, in this motion,
alleged that Lazaro and Barraquias both failed to follow the
opinions rendered by the Office of the Government Corporate
Counsel (OGCC) to the effect that the petitioner and his set of
officers are still the rightful parties with whom MWSS
management has to deal with in all union matters as they
34
continue to be the incumbent officers. The Court issued a
35
Resolution dated 18 June 1997 requiring the said
administrator and manager to comment on the motion. A joint
comment was thereafter filed by Lazaro and Barraquias dated
28 July 1997. In it, they contended that the first two opinions
rendered by the OGCC were overtaken by the Decision and
Resolution of the Court of Appeals, now the subjects of this
petition for review on certiorari, wherein it declared that the
regular courts have no jurisdiction to prohibit the holding of
Page 97 of 179
the election of the officers and members of the board of
KKMK-MWSS, as it is lodged with the BLR. When they again
sought the guidance of the OGCC as to the effect of the
aforementioned Decision of the Court of Appeals, another
opinion was issued by the OGCC which, they said, did not
resolve that question but instead merely reiterated its
previous opinions deviant to the conclusions of the Court of
36
Appeals.
THE ISSUE AND PENDING INCIDENTS
The bombardment of cases filed before several fora
notwithstanding, the solitary question raised by the petitioner
is simply whether or not the RTC has jurisdiction over a case
involving an intra-union dispute (election of officers) of an
37
employees organization in the public sector (MWSS).
Stated in another way, does the BLR have jurisdiction to call
for and conduct the election of officers of an employees
association in the public sector?
Pending resolution in the instant case are the motions to lift
the temporary restraining order in the mandamuscase before
the lower court and to declare the administrator and the
manager of the Legal Department of the MWSS in indirect
contempt of court.
THE COURTS RULINGS
The decision of the Court of Appeals relied on our earlier
ruling in the case of Association of Court of Appeals Employees
38
(ACAE) v. Ferrer-Calleja. In this case, we held that the BLR has
the jurisdiction to call for and supervise the conduct of
certification elections in the public sector, viz:
. . . In the same way that CSC validly conducts competitive
examinations to grant requisite eligibilities to court
employees, we see no constitutional objection to DOLE
handling the certification process in the Court of Appeals,
considering its expertise, machinery, and experience in this
particular activity. Executive Order No. 180 requires
organizations of government employees to register with both
CSC and DOLE.l^vvphi1.net This ambivalence notwithstanding,
the CSC has no facilities, personnel, or experience in the
conduct of certification elections. The BLR has to do the job.
Executive Order No. 180 states that certificates of registration
of the legitimate employee representatives must be jointly
approved by the CSC Chairman and the DOLE Secretary.
Executive Order No. 180 is not too helpful in determining
whose opinion shall prevail if the CSC Chairman and the DOLE
Secretary arrive at different conclusions. At any rate, we shall
deal with that problem when it occurs. Insofar as power to
call for and supervise the conduct of certification elections is
39
concerned, we rule against the petitioner.
The petitioner contends that the aforecited case finds no
application in the case at bar for the following reasons.
LABREL FULL TEXT CASES
First, the ACAE case involved a conflict between two
government unions in the Court of Appeals, a situation not
obtaining in the instant case because what is involved here is
only one and the same employees organization, the KKMK-
40
MWSS.
Second, the ACAE case concerned a certification election, i.e.,
which between the two government unions should be
considered as the bargaining unit before the Court of Appeals,
while the present case embraces the issue of who among the
members of the organization shall be elected as officers and
41
members of the board.
The petitioner likewise advances the theory that the power of
the BLR, as found in Executive Order No. 180, is limited only to
the registration of a union in a government corporation, and
42
to call for a certification election.
Moreover, the petitioner assails the ruling of the court a
quo to the effect that his group participated in the questioned
elections and submitted themselves to the jurisdiction of the
BLR. According to him, the records will readily show that they
43
did not in any way join in it.
We disagree in petitioners assertions, hence, the petition
must fail.
It may be true that the ACAE case involved a certification
election between two unions in a government entity.
However, this does not mean that our previous ruling cannot
apply in the instant case.
The authority of the BLR in assuming jurisdiction over a
certification election, or any inter-union or intra-union
conflicts, is found in Article 226 of the Labor Code of the
Philippines, which reads:
Art. 226. BUREAU OF LABOR RELATIONS. The Bureau of
Labor Relations and the Labor Relations Division in the
regional offices of the Department of Labor shall have original
and exclusive authority to act, at their own initiative or upon
request of either or both parties, on all inter-union and intra-
union conflicts, and all disputes, grievances or problems
arising from or affecting labor-management relations in all
workplaces whether agricultural or nonagricultural, except
those arising from the implementation or interpretation of
collective bargaining agreements which shall be the subject of
grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on labor
cases before it, subject to extension by agreement of the
parties.
It is quite clear from this provision that BLR has the original
and exclusive jurisdiction on all inter-union and intra-union
conflicts. An intra-union conflict would refer to a conflict
within or inside a labor union, and an inter-union controversy
or dispute, one occurring or carried on between or among
Page 98 of 179
 44
unions. The subject of the case at bar, which is the election Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ.,
of the officers and members of the board of KMKK-MWSS, is, concur.
clearly, an intra-union conflict, being within or inside a labor
union. It is well within the powers of the BLR to act upon. The
petitioner is asking us to make an illogical edict by declaring
that our ruling in the ACAE case, considering that it involved an
inter-union conflict, should not apply to the instant case for
the reason that the latter involves an intra-union conflict. This,
we cannot do because the law is very clear on this matter.

45
Executive Order No. 180 (1987), particularly Section 16
thereof, is completely lucid as to the settlement of disputes
involving government employees, viz:

SEC. 16. The Civil Service and labor laws and procedures,
whenever applicable, shall be followed in the resolution of
complaints, grievances and cases involving government
46
employees.

Since Article 226 of the Labor Code has declared that the BLR
shall have original and exclusive authority to act on all inter-
union and intra-union conflicts, then there should be no more
doubt as to its jurisdiction.

We likewise find bereft of merit petitioners claim that his

group did not in any way participate in the subject elections,
and therefore, the principle of estoppel cannot apply.

In the Order of the RTC dated 01 July 1994, it appears that the
petitioner, indeed, participated in the election. A portion of
the Order states:

Candidate Votes
Genaro C. Bautista 288
Prudencio Cruz 1080
47
Bonifacio De Guzman 1081

The petitioner was, undoubtedly, a candidate in the election.

The 288 votes for him were counted in his favor.

Further, the petitioner and his group submitted a list of

48
candidates before the BLR dated 04 October 1993 , which
included the name of petitioner himself.

WHEREFORE, in view of all the foregoing, the assailed Decision

and Resolution of the Court of Appeals being in accord with
law, are hereby AFFIRMED. Accordingly, the Urgent Motion to
Declare the Administrator and Manager, Legal Department,
MWSS, in indirect contempt of court is DENIED, and the
temporary restraining order earlier issued is hereby made
permanent. Costs against the petitioner.

SO ORDERED.

LABREL FULL TEXT CASES Page 99 of 179

EN BANC
G.R. No. L-60403 August 3, 1983
ALLIANCE OF GOVERNMENT WORKERS (AGW); PNB-FEMA
BANK EMPLOYEES ASSOCIATION (AGW); KAISAHAN AT
KAPATIRAN NG MGA MANGAGAWA AT KAWANI NG MWSS
(AGW); BALARA EMPLOYEES ASSOCIATION (AGW); GSIS
WORKERS ASSOCIATION (AGW); SSS EMPLOYEES
ASSOCIATION (AGW); PVTA EMPLOYEES ASSOCIATION
(AGW); NATIONAL ALLIANCE OF TEACHERS AND OFFICE
WORKERS (AGW); , petitioners,
vs.
THE HONORABLE MINISTER OF LABOR and EMPLOYMENT,
PHILIPPINE NATIONAL BANK (PNB); METROPOLITAN
WATERWORKS and SEWERAGE SYSTEM (MWSS);
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS); SOCIAL
SECURITY SYSTEM (SSS); PHILIPPINE VIRGINIA TOBACCO
ADMINISTRATION (PVTA) PHILIPPINE NORMAL COLLEGE
(PNC); POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
(PUP),respondents.
The Solicitor General for MOLE, PNB, SSS, PNC and PUP.
Oliver Gesmundo for petitioners.
Jesus C. Gentiles for petitioner SSSEA-AGW.
GUTIERREZ, JR., J.:
Are the branches, agencies, subdivisions, and instrumentalities
of the Government, including government owned or
controlled corporations included among the 4 "employers""
under Presidential Decree No. 851 which are required to pay
an their employees receiving a basic salary of not more than
P1,000.00 a month, a thirteenth (13th) month pay not later
than December 24 of every year?
Petitioner Alliance of Government Workers (AGW) is a
registered labor federation while the other petitioners are its
affiliate unions with members from among the employees of
the following offices, schools, or government owned or
controlled corporations:
1. Philippine National Bank (PNB) Escolta
Street, Manila
2. Metropolitan Waterworks and Sewerage
System (MWSS) Katipunan Road, Balara,
Quezon City
3. Government Service Insurance System
(GSIS) Arroceros Street, Manila
LABREL FULL TEXT CASES
4. Social Security System (SSS) East Avenue,
Quezon City
5. Philippine Virginia Tobacco Administration
(PVTA) Consolacion Building, Cubao, Quezon
City
6. Philippine Normal College (PNC) Ayala
Boulevard, Manila
7. Polytechnic University of the Philippines
(PUP) Hippodromo Street, Sta. Mesa, Manila
On February 28, 1983, the Philippine Government Employees
Association (PGEA) filed a motion to come in as an additional
petitioner.
Presidential Decree No. 851 provides in its entirety:
WHEREAS, it is necessary to further protect
the level of real f wages from the ravage of
world-wide inflation;
WHEREAS, there has been no increase case
in the legal minimum wage rates since 1970;
WHEREAS, the Christmas season is an
opportune time for society to show its
concern for the plight of the working masses
so they may properly celebrate Christmas
and New Year.
NOW, THEREFORE, I, FERDINAND E.
MARCOS, by virtue of the powers vested in
me by the Constitution do hereby decree as
follows:
SECTION 1. All employers are hereby
required to pay all their employees receiving
a basic salary of not more than Pl,000 a
month, regardless of the nature of their
employment, a 13th-month pay not later
than December 24 of every year.
SECTION 2. Employers already paying their
employees a 13th-month pay or its
equivalent are not covered by this Decree.
SECTION 3. This Decree shall take effect
immediately. Done in the City of Manila, this
16th day of December 1975.
According to the petitioners, P.D. No. 851 requires all
employers to pay the 13th-month pay to their employees with
one sole exception found in Section 2 which states that
"(E)mployers already paying their employees a 13th month
pay or its equivalent are not covered by this Decree. " The
Page 100 of 179
petitioners contend that Section 3 of the Rules and
Regulations Implementing Presidential Decree No. 851
included other types of employers not exempted by the
decree. They state that nowhere in the decree is the secretary,
now Minister of Labor and Employment, authorized to exempt
other types of employers from the requirement.
Section 3 of the Rules and Regulations Implementing
Presidential Decree No. 851 provides:
Section 3. Employers covered The Decree
shall apply to all employers except to:
a) Distressed employers, such as (1) those
which are currently incurring substantial
losses or 112) in the case of non-profit
institutions and organizations, where their
income, whether from donations,
contributions, grants and other earnings
from any source, has consistently declined
by more than forty (40%) per cent of their
normal income for the last two (2) )years,
subject to the provision of Section 7 of this
issuance.
b) The Government and any of its political
subdivisions, including government-owned
and controlled corporations, except)t those
corporation, operating essentially as private,
,subsidiaries of the government;
c) Employers already paying their employees
13th-month pay or more in a calendar year
or its equivalent at the of this issuance;
d) Employers of household helpers and
persons in the personal service of another in
relation to such workers: and
e) Employers of those who are paid on
purely commission, boundary, or task basis
and those who are paid a fixed for
performing a specific work, irrespective of
the time consumed in the performance
thereof, except where the workers are paid
an piece- rate basis in which case the
employer shall be covered by this issuance
:insofar ab such workers are concerned ...
The petitioners assail this rule as ultra vires and void. Citing
Philippine Apparel Workers'Union v. NIRC et al., (106 SCRA
444); Teoxon v. Members of the Board of' Administators (33
SCRA 585); Santos u. Hon. Estenzo et al., (109 Phil. 419); Hilado
u. Collector of Internal Revenue (100 Phil. 288), and Olsen &
Co. Inc. v. Aldanese and Trinidad (43 Phil. 259), the petitioners
argue that regulations adopted under legislative authority
must be in harmony with the provisions of the law and for the
sole purpose of carrying into effect its general provisions. They
LABREL FULL TEXT CASES
state that a legislative act cannot be amended by a rule and an
administrative officer cannot change the law. Section 3 is
challenged as a substantial modification by rule of a
Presidential Decree and an unlawful exercise of legislative
power.
Our initial reaction was to deny due course to the petition in a
minute resolution, however, considering the important issues
propounded and the fact, that constitutional principles are
involved, we have now decided to give due course to the
petition, to consider the various comments as answers and to
resolve the questions raised through a full length decision in
the exercise of this Court's symbolic function as an aspect of
the power of judicial review.
At the outset, the petitioners are faced with a procedural
barrier. The petition is one for declaratory relief, an action not
embraced within the original jurisdiction of the Supreme
Court. (Remotigue v. Osmena,, Jr., 21 SCRA 837; Rural Bank of
Olongapo v. Commission of Land Registration, 102 SCRA
794; De la Llana v. Alba, 112 SCRA 294). There is no statutory
or jurisprudential basis for the petitioners' statement that the
Supreme Court has original and exclusive jurisdiction over
declaratory relief suits where only questions of law are
involved. Jurisdiction is conferred by law. The petitioners have
not pointed to any provision of the Constitution or statute
which sustains their sweeping assertion. On this ground alone,
the petition could have been dismissed outright.
Following similar action taken in Nacionalista Party v. Angelo
Bautista (85 Phil. 101) and Aquino v. Commission on
Elections (62 SCRA 275) we have, however, decided to treat
the petition as one for mandamus. The petition has far
reaching implications and raises questions that should be
resolved. Have the respondents unlawfully excluded the
petitioners from the use and enjoyment of rights to which
they are entitled under the law?
An analysis of the "whereases" of P.D. No. 851 shows that the
President had in mind only workers in private employment
when he issued the decree. There was no intention to cover
persons working in the government service. The decree states:
xxx xxx xxx
WHEREAS, there has been no increase in the
legal minimum wage rates since 1970;
xxx xxx xxx
As pointed out by the Solicitor General in his comment for the
Minister of Labor and Employment, the Social Security System
the Philippine Normal College, and Polytechnic University, the
contention that govermment owned and controlled
corporations and state colleges and universities are covered by
the term "all employers" is belied by the nature of the 13-
month pay and the intent behind the decree.
Page 101 of 179
The Solicitor General states:
"Presidential Decree No. 851 is a labor standard law which
requires covered employers to pay their employees receiving
not more than P1,000.00 a month an additional thirteenth-
month pay. Its purpose is to increase the real wage of the
worker (Marcopper Mining Corp. v. Ople, 105 SCRA 75; and
National Federation of Sugar Workers v. Ovejera, G.R. No.
59743, May 31, 1982) as explained in the'whereas'clause
which read:
WHEREAS, it is necessary
to further protect the level
of real wages from the
ravage of world-wide
inflation;
WHEREAS, there has been
no increase in the legal
minimum wage rates since
1970; 11
WHEREAS, the Christmas
season is an opportune
time for society to show its
concern for the plight of
the working masses so
they may celebrate the
Christmas and New Year.
xxx xxx xxx
What the P.D. No. 851 intended to cover, as
explained in the prefatory statement of the
Decree, are only those in the private sector
whose real wages require protection from
world-wide inflation. This is emphasized by
the "whereas" clause which states that
'there has been no increase in the legal
minimum wage rates since 1970'. This could
only refer to the private sector, and not to
those in the government service because at
the time of the enactment of Presidential
Decree No. 851 in 1975, only the employees
in the private sector had not been given any
increase in their minimum wage. The
employees in the government service had
already been granted in 1974 a ten percent
across-the-board increase on their salaries as
stated in P.D. No. 525, Section 4.
Moreover, where employees in the
government service were to benefit from
labor standard laws, their coverage is
explicitly stated in the statute or presidential
enactment. This is evident in (a) Presidential
Decree No. 390, Sec. 1 which granted
emergency cost of living allowance to
LABREL FULL TEXT CASES
employees in the national government; (b)
Republic Act No. 6111, Sec. 10 on medicare
benefits; (c) Presidential Decree No -442,
Title II, Article 97 on the applicable minimum
wage rates; (d) Presidential Decree No. 442,
Title 11, Article 167 (g) on workmen's
compensation; (e) Presidential Decree No.
1123 which provides for increases in
emergency allowance to employees in the
private sector and in salary to government
employees in Section 2 thereof; and (f)
Executive Order No. 752 granting
government employees a year-end bonus
equivalent to one week's pay. Thus, had the
intention been to include government
employees under the coverage of
Presidential Decree No. 851, said Decree
should have expressly so provided and there
should have been accompanying yearly
appropriation measures to implement the
same. That no such express provision was
provided and no accompanying
appropriation measure to was passed clearly
show the intent to exclude government
employees from the coverage of P. D. No. 85
1.
We agree.
It is an old rule of statutory construction that restrictive
statutes and acts which impose burdens on the public treasury
or which diminish rights and interests, no matter how broad
their terms do not embrace the Sovereign, unless the
Sovereign is specifically mentioned. (See Dollar Savings Bank v.
United States, 19 Wall (U.S.) 227; United States v. United Mine
Workers of America, 330 U.S. 265). The Republic of the
Philippines, as sovereign, cannot be covered by a general term
like "employer" unless the language used in the law is clear
and specific to that effect.
The issue raised in this petition, however, is more basic and
fundamental than a mere ascertainment of intent or a
construction of statutory provisions. It is concerned with a
revisiting of the traditional classification of government
employment into governmental functions and proprietary
functions and of the many ramifications that this dichotomous
treatment presents in the handling of concerted activities,
collective bargaining, and strikes by government employees to
wrest concessions in compensation, fringe benefits, hiring and
firing, and other terms and conditions of employment.
The workers in the respondent institutions have not directly
petitioned the heads of their respective offices nor their
representatives in the Batasang Pambansa. They have acted
through a labor federation and its affiliated unions. In other
words, the workers and employees of these state firms,
college, and university are taking collective action through a
labor federation which uses the bargaining power of organized
labor to secure increased compensation for its members.
Page 102 of 179
Under the present state of the law and pursuant to the
express language of the Constitution, this resort to concerted
activity with the ever present threat of a strike can no longer
be allowed.
The general rule in the past and up to the present is that "the
terms and conditions of employment in the Government,
including any political subdivision or instrumentality thereof
are governed by law" (Section 11, the Industrial Peace Act,
R.A. No. 875, as amended and Article 277, the Labor Code,
P.D. No. 442, as amended). Since the terms and conditions of
government employment are fixed by law, government
workers cannot use the same weapons employed by workers
in the private sector to secure concessions from their
employers. The principle behind labor unionism in private
industry is that industrial peace cannot be secured through
compulsion by law. Relations between private employers and
their employees rest on an essentially voluntary basis. Subject
to the minimum requirements of wage laws and other labor
and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled
through the process of collective bargaining. In government
employment, however, it is the legislature and, where
properly given delegated power, the administrative heads of
government which fix the terms and conditions of
employment. And this is effected through statutes or
administrative circulars, rules, and regulations, not through
collective bargaining agreements.
At the same time, the old Industrial Peace Act excepted
employees and workers in proprietary functions of
government from the above compulsion of law. Thus, in the
past, government employees performing proprietary functions
could belong to labor organizations imposing the obligation to
join in strikes or engage in other concerted action. (Section 11,
R.A. 875, as amended). They could and they did engage in
concerted activities and various strikes against government
owned and controlled corporations and other government
institutions discharging proprietary functions. Among the
institutions as falling under the exception in Section 11 of the
Industrial Peace Act were respondents Government Service
Insurance System (GSISEA v. Alvendia, 108 Phil. 505) and Social
Security System (SSSEA v. Soriano, 7 SCRA 1016). And this
Court has supported labor completely in the various strikes
and concerted activities in firms and agencies discharging
proprietary functions because the Constitution and the laws
allowed these activities.
The exception, however belongs to the past.
The petitioners state in their counter comment filed July 23,
1982 that the 1973 Constitution is categorical about the grant
of the rights to self- organization and collective bargaining to
all workers and that no amount of stretched interpretation of
lesser laws like the Labor Code and the Civil Service Act can
overturn the clear message of the Constitution with respect to
these rights to self-organization and collective bargaining.
LABREL FULL TEXT CASES
These statements of the petitioners are error insofar as
government workers are now concerned.
Under the present Constitution, govemment-owned or
controlled corporations are specifically mentioned as
embraced by the civil service. (Section 1, Article XII-B,
Constitution). The inclusion of the clause "including every
government owned or controlled corporation" in the 1973
amendments to the Constitution was a deliberate amendment
for an express purpose. There may be those who disagree with
the intent of the framers of the amendment but because it is
fundamental law, we are all bound by it. The amendment was
intended to correct the situation where more favored
employees of the government could enjoy the benefits of two
worlds. They were protected by the laws governing
government employment. They could also engage in collective
bargaining and join in strikes to secure higher wages and
fringe benefits which equally hardworking employees engaged
in government functions could only envy but not enjoy.
Presidential Decree No. 807, the Civil Service Decree of the
Philippines has implemented the 1973 Constitutional
amendment. It is categorical about the inclusion of personnel
of government-owned or controlled corporations in the civil
service and their being subject to civil service requirements:
SECTION 56. Government- owned or
Controlled Corporations Personnel.All
permanent personnel of government-
owned or controlled corporations whose
positions are now embraced in the civil
service shall continue in the service until
they have been given a chance to qualify in
an appropriate examination, but in the
meantime, those who do not possess the
appropriate civil service eligibility shall not
be promoted until they qualify in an
appropriate civil service examination.
Services of temporary personnel ma be y
terminated any time.
Personnel of government-owned or controlled corporations
are now part of the civil service. It would not be fair to allow
them to engage in concerted activities to wring higher salaries
or fringe benefits from Government even as other civil service
personnel such as the hundreds of thousands of public school
teachers, soldiers, policemen, health personnel, and other
government workers are denied the right to engage in similar
activities.
To say that the words "all employers" in P.D. No. 851 includes
the Government and all its agencies, instrumentalities, and
government-owned or controlled corporations would also
result in nightmarish budgetary problems.
For instance, the Supreme Court is trying its best to alleviate
the financial difficulties of courts, judges, and court personnel
in the entire country but it can do so only within the limits of
Page 103 of 179
budgetary appropriations. Public school teachers have been applying to public
resorting to what was formerly unthinkable, to mass leaves employees and civil service
and demonstrations, to get not a 13th-month pay but employees. It has been
promised increases in basic salaries and small allowances for stated that the
school uniforms. The budget of the Ministry of Education, Government, in contrast to
Culture and Sports has to be supplemented every now and the private employer,
then for this purpose. The point is, salaries and fringe benefits protects the interests of all
of those embraced by the civil service are fixed by law. Any people in the public
increases must come from law, from appropriations or savings service, and that
under the law, and not from concerted activity. accordingly, such
conflicting interests as are
The Government Corporate Counsel, Justice Manuel Lazaro, in present in private labor
his consolidated comment * for respondents GSIS, MWSS, and relations could not exist in
PVTA gives the background of the amendment which the relations between
includes every government-owned or controlled corporation in government and those
the embrace of the civil service: whom they employ.

Records of the 1971 Constitutional Moreover, determination

Convention show that in the deliberations of employment conditions
held relative to what is now Section 1(1) as well as supervision of
Article XII-B, supra the issue of the inclusion the management of the
of government-owned or controlled public service is in the
corporations figured prominently. hands of legislative bodies.
It is further emphasized
The late delegate Roberto S. Oca, a that government agencies
recognized labor leader, vehemently in the performance of their
objected to the inclusion of government- duties have a right to
owned or controlled corporations in the Civil demand undivided
Service. He argued that such inclusion would allegiance from their
put asunder the right of workers in workers and must always
government corporations, recognized in maintain a pronounced
jurisprudence under the 1935 Constitution, esprit de corps or firm
to form and join labor unions for purposes of discipline among their staff
collective bargaining with their employers in members. It would be
the same manner as in the private section highly incompatible with
(see: records of 1971 Constitutional these requirements of the
Convention). public service, if personnel
took orders from union
leaders or put solidarity
In contrast, other labor experts and
with members of the
delegates to the 1971 Constitutional
working class above
Convention enlightened the members of the
solidarity with the
Committee on Labor on the divergent
Government. This would
situation of government workers under the
be inimical to the public
1935 Constitution, and called for its
interest.
rectification. Thus, in a Position Paper dated
November-22, 1971, submitted to the
Committee on Labor, 1971 Constitutional Moreover, it is asserted
Convention, then Acting Commissioner of that public employees by
Civil Service Epi Rev Pangramuyen declared: joining labor unions may
be compelled to support
objectives which are
It is the stand, therefore, of
political in nature and thus
this Commission that by
jeopardize the
reason of the nature of the
fundamental principle that
public employer and the
the governmental
peculiar character of the
machinery must be
public service, it must
impartial and non-political
necessarily regard the right
in the sense of party
to strike given to unions in
politics.' (see: Records of
private industry as not
LABREL FULL TEXT CASES Page 104 of 179
 1971 Constitutional
Convention).
Similarly, Delegate Leandro P. Garcia,
expressing support for the inclusion of
government-owned or controlled
corporations in the Civil Service, argued:
It is meretricious to
contend that because
Govermnent owned or
controlled corporations
yield profits, their
employees are entitled to
better wages and fringe
benefits than employees of
Government other than
Government- owned and
controlled cor orations
which are not making
profits. There is no
gainsaying the fact that the
capital they use is the
people's (see Records of
the 1971 Constitutional
Convention).
Summarizing the deliberations of the 1971
Constitutional Convention on the inclusion of
Government owned or controlled
corporations, Dean Joaquin G. Bernas, SJ., of
the Ateneo de Manila University Professional
School of Law, stated that government-
owned corporations came under attack as
milking cows of a privileged few enjoying
salaries far higher than their counterparts in
the various branches of government, while
the capital of these corporations belongs to
the Government and government money is
pumped into them whenever on the brink of
disaster, and they should therefore come
under the strick surveillance of the Civil
Service System. (Bernas, The 1973 Philippine
Constitution, Notes and Cases, 1974 ed., p.
524).
The Government Corporate Counsel cites the precedent
setting decision in Agricultural- Credit and Cooperative
Financing Administration (ACCFA v. Confederation of Unions in
Government Corporations and Offtces CUGCO et al., 30 SCRA
649) as giving the rationale for coverage of government-
owned or controlled corporations by the civil service. We
stated ACCFA v. CUGCO that:
... The ACA is a government office or agency
engaged in governmental, not proprietary
functions. These functions may not be
strictly what President Wilson described as
"constituent" (as distinguished from
LABREL FULL TEXT CASES
'ministrant'), [Bacani vs. National Coconut
Corporation, G.R. No. L-9657, Nov. 29,1956,
53 O.G. p. 2800] such as those relating to the
maintenance of peace and the prevention of
crime, those regulating property and
property rights, those relating to the
administration of justice and the
determination of political duties of citizens,
and those relating to national defense and
foreign relations. Under this traditional
classification, such constituent functions are
exercised by the State as attributes of
sovereignty, and not merely to promote the
welfare, progress and prosperity of the
people these latter functions being
ministrant, the exercise of which is optional
on the part of the government.
The growing complexities of modern society,
however, have rendered this traditional
classification of the functions of government
quite unrealistic, not to say obsolete. The
areas which used to be left to private
enterprise and initiative and which the
government was called upon to enter
optionally, and only "because it was better
equipped to administer for the public
welfare than is any private individual or
group of individuals," (Malcolm, The
Government of the Philippines, pp. 19-20;
Bacani vs. National Coconut Corporation,
supra) continue to lose their well- defined
boundaries and to be absorbed within
activities that the government must
undertake in its sovereign capacity if it is to
meet the increasing social challenges of the
times. Here as almost everywhere else the
tendency is undoubtedly towards a greater
socialization of economic forces, Here of
course this development was envisioned,
indeed adopted as a national policy, by the
Constitution itself in its declaration of
principle concerning the promotion of social
justice.
Chief Justice Fernando, then an Associate Justice of this Court,
observed in a concurring opinion that the traditional
classification into constituent and ministrant functions reflects
the primacy at that time of the now discredited and
repudiated laissez faire concept carried over into government.
He stated:
The influence exerted by American
constitutional doctrines unavoidable when
the Philippines was still under American rule
notwithstanding, an influence that has not
altogether vanished even after
independence, the laissez faire principle
never found fun acceptance in this
Page 105 of 179
 jurisdiction, even during the period of its full
flowering in the United States. Moreover, to
erase any doubts, the Constitutional
Convention saw to it that our fundamental
law embodies a policy of the responsibility
thrust on government to cope with social
and economic problems and an earnest and
sincere commitment to the promotion of the
general welfare through state action. It
would thus follow that the force of any legal
objection to regulatory measures adversely
affecting property rights or to statutes
organizing public corporations that may
engage in competition with private
enterprise has been blunted. Unless there be
a clear showing of any invasion of rights
guaranteed by the Constitution, their validity
is a foregone conclusion. No fear need be
entertained that thereby spheres hitherto
deemed outside government domain have
been encroached upon. With our explicit
disavowal of the 'constituent-ministrant'
test, the ghost of the laissez-faire concept no
longer stalks the juridical stage."
Our dismissal of this petiti/n should not, by any means, be
interpreted to imply that workers in government-owned and
controlled corporations or in state colleges and universities
may not enjoy freedom of association. The workers whom the
petitioners purport to represent have the right, which may not
be abridged, to form associations or societies for purposes not
contrary to law. (Constitution, Article IV, Section 7). This is a
right which share with all public officers and employees and, in
fact, by everybody living in this country. But they may not join
associations which impose the obligation to engage in
concerted activities in order to get salaries, fringe benefits,
and other emoluments higher than or different frm that
provided by law and regulation.
The very Labor Code, P.D. No. 442 as amended,, which governs
the registration and provides for the rights of legitimate labor
organizations states:
ART. 277. Government employees. The
terms and conditions of employment of all
government employees, including
employees of government-owned and
controlled corporations, shall be governed
by the Civil Service Law, rules and
regulations. Their salaries shall be
standardized by the National Assembly as
provided for in the new constitution.
However, there shall be no reduction of
existing wages, benefits, and other terms
and conditions of employment being
enjoyed by them at the time of the adoption
of this code.
LABREL FULL TEXT CASES
Section 6, Article XII-B of the Constitution gives added reasons
why the government employees represented by the
petitioners cannot expect treatment in matters of salaries
different from that extended to all others government
personnel. The provision states:
SEC. 6. The National Assembly shall provide
for the standardization of compensation of
government officials and employees,
including those in government-owned or
controlled corporations, taking into account
the nature of the responsibilities pertaining
to, and the qualifications required for the
positions concerned.
It is the legislature or, in proper cases, the administrative
heads of government and not the collective bargaining process
nor the concessions wrung by labor unions from management
that determine how much the workers in government-owned
or controlled corporations may receive in terms of salaries,
13th month pay, and other conditions or terms of
employment. There are government institutions which can
afford to pay two weeks, three weeks, or even 13th-month
salaries to their personnel from their budgetary
appropriations. However, these payments must be pursuant to
law or regulation. Presidential Decree No. 985 as amended
provides:
xxx xxx xxx
SEC. 2. Declaration of Policy. It is hereby
declared to be the policy, of the national
government to provide equal pay for
substantially, equal work and to base
differences in pay upon substantive
differences in duties and responsibilities, and
qualification requirements of the positions.
In determining rates of pay, due regard shall
be given to, among others, prevailing rates in
private industry for comparable work. For
this purpose, there is hereby established a
system of compensation standardization and
position classification in the national
government for all departments, bureaus,
agencies, and officers including government-
owned or controlled corporations and
financial institutions: Provided, That
notwithstanding a standardized salary
system established for all employees,
additional financial incentives may be
established by government corporations and
financial institutions for their employees to
be supported fully from their corporate
funds and for such technical positions as may
be approved by the President in critical
government agencies.
The Solicitor-General correctly points out that to interpret P.D.
No. 851 as including government employees would upset the
Page 106 of 179
compensation levels of government employees in violation of
those fixed according to P.D. No. 985.

Here as in other countries, government salaries and wages

have always been lower than salaries, wages, and bonuses in
the private sector. However, civil servants have no cause for
despair. Service in the government may at times be a sacrifice
but it is also a welcome privilege. Apart from the emotional
and psychic satisfactions, there are various material
advantages. The security of tenure guaranteed to those in the
civil service by the Constitution and statutes, the knowledge
that one is working for the most stable of employers and not
for private persons, the merit system in appointments and
promotions, the scheme of vacation, sick, and maternity leave
privileges, and the prestige and dignity associated with public
office are only a few of the joys of government employment.

Section 3 of the Rules and Regulations Implementing

Presidential Decree No. 851 is, therefore, a correct
interpretation of the decree. It has been implemented and
enforced from December 22, 1975 to the present, The
petitioners have shown no valid reason why it should be
nullified because of their petition filed six and a half years
after the issuance and implementation of the rule.

WHEREFORE, the petition is hereby DISMISSED for lack of

merit.

SO ORDERED.

Concepcion, Jr., Guerrero Relova, JJ., concur.

Aquino, Melencio-Herrera and Plana, JJ., concur in the result.

LABREL FULL TEXT CASES Page 107 of 179

SECOND DIVISION On October 28, 1998, public respondent issued the second
7
assailed Order denying petitioner's motion for
G.R. No. 136374 February 9, 2000 reconsideration. Hence, this recourse.

FRANCISCA S. BALUYOT, petitioner, We dismiss the petition.

vs.
PAUL E. HOLGANZA and the OFFICE OF THE OMBUDSMAN Petitioner contends that the Ombudsman has no jurisdiction
(VISAYAS) represented by its Deputy Ombudsman for the over the subject matter of the controversy since the PNRC is
Visayas ARTURO C. MOJICA, Director VIRGINIA PALANCA- allegedly a private voluntary organization. The following
SANTIAGO, and Graft Investigation Officer I ANNA MARIE P. circumstances, she insists, are indicative of the private
MILITANTE, respondents. character of the organization: (1) the PNRC does not receive
any budgetary support from the government, and that all
DE LEON, JR., J.: money given to it by the latter and its instrumentalities
become private funds of the organization; (2) funds for the
Before us is a special civil action for certiorari, seeking the payment of personnel's salaries and other emoluments come
reversal of the Orders dated August 21, 1998 and October 28, from yearly fund campaigns, private contributions and rentals
1998 issued by the Office of the Ombudsman, which denied from its properties; and (3) it is not audited by the Commission
petitioner's motion to dismiss and motion for reconsideration, on Audit. Petitioner states that the PNRC falls under the
respectively.1wphi1.nt International Federation of Red Cross, a Switzerland-based
organization, and that the power to discipline employees
accused of misconduct, malfeasance, or immorality belongs to
The facts are:
the PNRC Secretary General by virtue of Section "G", Article IX
8
of its by-laws. She threatens that "to classify the PNRC as a
During a spot audit conducted on March 21, 1977 by a team of
government-owned or controlled corporation would create a
auditors from the Philippine National Red Cross (PNRC)
dangerous precedent as it would lose its neutrality,
headquarters, a cash shortage of P154,350.13 was discovered 9
independence and impartiality . . . .
in the funds of its Bohol chapter. The chapter administrator,
petitioner Francisca S. Baluyot, was held accountable for the
Practically the same issue was addressed in Camporedondo
shortage. Thereafter, on January 8, 1998, private respondent 10
v. National Labor Relations Commission, et. al., where an
Paul E. Holganza, in his capacity as a member of the board of
almost identical set of facts obtained. Petitioner therein was
directors of the Bohol chapter, filed an affidavit-
1 the administrator of the Surigao del Norte chapter of the
complaint before the Office of the Ombudsman charging
PNRC. An audit conducted by a field auditor revealed a
petitioner of malversation under Article 217 of the Revised
shortage in the chapter funds in the sum of P109,000.00.
Penal Code. The complaint was docketed as OMB-VIS-CRIM-
When required to restitute the amount of P135,927.78,
98-0022. However, upon recommendation by respondent
petitioner therein instead applied for early retirement, which
Anna Marie P. Militante, Graft Investigation Officer I, an
was denied by the Secretary General of the PNRC.
administrative docket for dishonesty was also opened against
2 Subsequently, the petitioner filed a complaint for illegal
petitioner; hence, OMB-VIS-ADM-98-0063.
dismissal and damages against PNRC before the National
Labor Relations Commission. In turn, PNRC moved to dismiss
On February 6, 1998, public respondent issued an
3 the complaint on the ground of lack of jurisdiction, averring
Order requiring petitioner to file her counter-affidavit to the
that PNRC was a government corporation whose employees
charges of malversation and dishonesty within ten days from
are embraced by civil service regulation. The labor arbiter
notice, with a warning that her failure to comply would be
dismissed the complaint, and the Commission sustained his
construed as a waiver on her part to refute the charges, and
order. The petitioner assailed the dismissal of his complaint via
that the case would be resolved based on the evidence on
a petition for certiorari, contending that the PNRC is a private
record. On March 14, 1998, petitioner filed her counter-
4 organization and not a government-owned or controlled
affidavit, raising principally the defense that public
corporation. In dismissing the petition, we ruled thus:
respondent had no jurisdiction over the controversy. She
argued that the Ombudsman had authority only over
Resolving the issue set out in the opening paragraph
government-owned or controlled corporations, which the
of this opinion, we rule that the Philippine National
PNRC was not, or so she claimed.
Red Cross (PNRC) is a government owned and
controlled corporation, with an original charter under
On August 21, 1998, public respondent issued the first assailed
5 Republic Act No. 95, as amended. The test to
Order denying petitioner's motion to dismiss. It further
determine whether a corporation is government
scheduled a clarificatory hearing on the criminal aspect of the
owned or controlled, or private in nature is simple. Is
complaint and a preliminary conference on its administrative
it created by its own charter for the exercise of a
aspect on September 2, 1998. Petitioner received the order on
public function, or by incorporation under the general
August 26, 1998 and she filed a motion for
6 corporation law? Those with special charters are
reconsideration the next day.
government corporations subject to its provisions,
LABREL FULL TEXT CASES Page 108 of 179
 and its employees are under the jurisdiction of the
Civil Service Commission, and are compulsory
members of the Government Service Insurance
System. The PNRC was not "impliedly converted to a
private corporation" simply because its charter was
amended to vest in it the authority to secure loans,
be exempted from payment of all duties, taxes, fees
and other charges of all kinds on all importations and
purchases for its exclusive use, on donations for its
disaster relief work and other services and in its
benefits and fund raising drives, and be allotted one
lottery draw a year by the Philippine Charity
Sweepstakes Office for the support of its disaster
relief operation in addition to its existing lottery
draws for blood program.

Clearly then, public respondent has jurisdiction over the

matter, pursuant to Section 13, of Republic Act No. 6770,
otherwise known as "The Ombudsman Act of 1989", to wit:

Sec. 13. Mandate. The Ombudsman and his

Deputies, as protectors of the people, shall act
promptly on complaints filed in any form or manner
against officers or employees of the Government, or
of any subdivision, agency or instrumentality thereof,
including government-owned or controlled
corporations, and enforce their administrative, civil
and criminal liability in ever case where the evidence
warrants in order to promote efficient service by the
11
Government to the people.

WHEREFORE, the petition for certiorari is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.1wphi1.nt

Quisumbing and Buena, JJ., concur.

Bellosillo, J., no part due relation of a party.
Mendoza, J., no part due to personal relation to one of parties.

LABREL FULL TEXT CASES Page 109 of 179

FIRST DIVISION
G.R. No. 129049 August 6, 1999
BALTAZAR G. CAMPOREDONDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), Fifth
Division, Cagayan de Oro City,
THE PHILIPPINE NATIONAL RED CROSS (PNRC), represented
by GOVERNOR ROMEO C. ESPINO and DR. CELSO
SAMSON, respondent.
PARDO, J.:
At issue in this case is whether the Philippine National Red
Cross (PNRC for short) is a government owned and controlled
corporation or it has been "impliedly converted to a private
organization" subject to the jurisdiction of labor tribunals in a
complaint filed by petitioner, a former PNRC chapter
administrator in Surigao del Norte, for illegal dismissal and
damages, as he was forced to "retire" after he was required to
restitute shortages and unremitted collections in the total sum
of P135,927.78.
Having obviously no merit, we dismiss the
petition.1wphi1.nt
All suitors must come to court with clean hands. This is
especially true of paid staff of the Philippine National Red
Cross. Like its unpaid volunteers, they must be men of
unquestioned honesty and integrity serving in selfless manner
to aid the sick and wounded of armed forces in time of war,
acting in voluntary relief in time of peace and war, maintaining
a system of national and international relief in meeting
emergency relief needs caused by typhoons, floods, fires,
earthquakes, and other natural disasters, and promoting such
service in time of peace and war to improve the health, safety
1
and welfare of the Filipino people. Paid staff of the PNRC are
government employees who are members of the Government
Service Insurance System and covered by the Civil Service Law.
Unlike government service in other agencies, Red Cross service
demands of its paid staff uberrima fides, the utmost good faith
and dedication to work.
Since 1980, petitioner was employed with the PNRC, and until
his early "retirement" on December 15, 1995, he was
administrator of the Surigao del Norte Chapter, Philippine
2
National Red Cross.
In July, 1995, a field auditor of the PNRC conducted an audit of
the books of account of the Surigao del Norte Chapter headed
by petitioner and found him short in the total sum of
3 On August 7, 1997, respondent Philippine National Red Cross
P109,000.00.
On November 21, 1995, Dr. Celso Samson, Secretary General
of the PNRC wrote petitioner requiring him to restitute within
seventy two (72) hours from notice, the total sum of
LABREL FULL TEXT CASES
P135,927.78 representing cash shortage, technical shortage
4
and unremitted collections.
On December 15, 1995, petitioner applied for early retirement
from the service, and later wrote Dr. Samson requesting for a
re-audit by an independent auditor of his accounts. However,
5
Dr. Samson denied the request.
On May 28, 1996, petitioner filed with the National Labor
Relations Commission, Sub-Regional Arbitration Branch X,
Butuan City, a complaint for illegal dismissal, damages and
underpayment of wages against the Philippine National Red
6
Cross and its key officials.
On June 14, 1996, respondent Philippine National Red Cross
filed with the Surigao del Norte provincial office, Department
of Labor and Employment, a motion to dismiss the complaint
for lack of jurisdiction over the subject matter of the case
because the PNRC is a government corporation whose
employees are members of the Government Service Insurance
System (GSIS), and embraced within the Civil Service Law and
7
regulations.
On July 25, 1996, petitioner filed an opposition to motion to
dismiss arguing that there was between the PNRC and its duly
appointed paid staff, an employer-employee relationship,
8
governed by the Labor Code of the Philippines.
On October 11, 1996, the Labor Arbiter issued an order
dismissing the complaint for lack of jurisdiction, finding that
the Philippine National Red Cross is a government corporation
with an original charter, having been created by Republic Act
9
No. 95.
On November 12, 1996, the Labor Arbiter denied petitioner's
10
motion for reconsideration filed on October 14, 1996.
On November 20, 1996, petitioner filed a notice of appeal and
appeal memorandum with the National Labor Relations
11
Commission.
On March 21, 1997, the National Labor Relations Commission,
Fifth Division, issued a resolution dismissing the appeal and
confirming the decision of the Labor Arbiter that dismissed
12
petitioner's complaint for lack of jurisdiction.
Hence, this recourse.
On July 7, 1997, we resolved to require respondents to
comment on the petition within ten (10) days from notice.
13
14
filed its comment. On November 7, 1997, the Solicitor
15
General filed its comments.
Resolving the issue set out in the opening paragraph of this
opinion, we rule that the Philippine National Red Cross (PNRC)
Page 110 of 179
is a government owned and controlled corporation, with an
original charter under Republic Act No. 95, as amended. The
test to determine whether a corporation is government owned
or controlled, or private in nature is simple. Is it created by its
own charter for the exercise of a public function, or by
incorporation under the general corporation law? Those with
special charters are government corporations subject to its
provisions, and its employees are under the jurisdiction of the
Civil Service Commission, and are compulsory members of the
Government Service Insurance System. The PNRC was not
"impliedly converted to a private corporation" simply because
its charter was amended to vest in it the authority to secure
loans, be exempted from payment of all duties, taxes, fees and
other charges of all kinds on all importations and purchases for
its exclusive use, on donations for its disaster relief work and
other services and in its benefits and fund raising drives, and
be alloted one lottery draw a year by the Philippine Charity
Sweepstakes Office for the support of its disaster relief
operation in addition to its existing lottery draws for blood
program.

Having served in the Philippine National Red Cross for a

number of years since his initial employment, he must know
that it is a government corporation with its own charter and
that he was covered by compulsory membership in the
Government Service Insurance System, which is why he could
apply, as he did, for "early" retirement from the service under
16
Presidential Decree No. 1146 or Republic Act No. 1616.

WHEREFORE, the Court hereby DISMISSES the petition, and

AFFIRMS the ruling of the National Labor Relations
Commission.1wphi1.nt

Double costs taxed against petitioner.

SO ORDERED.

Davide, Jr., C.J., Puno, Kapunan and Ynares-Santiago, JJ.,

concur.

LABREL FULL TEXT CASES Page 111 of 179

EN BANC
G.R. No. 169752 September 25, 2007
PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO
ANIMALS, Petitioners,
vs.
COMMISSION ON AUDIT, DIR. RODULFO J. ARIESGA (in his
official capacity as Director of the Commission on Audit), MS.
MERLE M. VALENTIN and MS. SUSAN GUARDIAN (in their
official capacities as Team Leader and Team Member,
respectively, of the audit Team of the Commission on
Audit),Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a special civil action
for Certiorari and Prohibition under Rule 65 of the Rules of
Court, in relation to Section 2 of Rule 64, filed by the petitioner
1
assailing Office Order No. 2005-021 dated September 14,
2005 issued by the respondents which constituted the audit
2
team, as well as its September 23, 2005 Letter informing the
petitioner that respondents audit team shall conduct an audit
survey on the petitioner for a detailed audit of its accounts,
operations, and financial transactions. No temporary
restraining order was issued.
The petitioner was incorporated as a juridical entity over one
hundred years ago by virtue of Act No. 1285, enacted on
January 19, 1905, by the Philippine Commission. The
petitioner, at the time it was created, was composed of animal
aficionados and animal propagandists. The objects of the
petitioner, as stated in Section 2 of its charter, shall be to
enforce laws relating to cruelty inflicted upon animals or the
protection of animals in the Philippine Islands, and generally,
to do and perform all things which may tend in any way to
3
alleviate the suffering of animals and promote their welfare.
At the time of the enactment of Act No. 1285, the original
Corporation Law, Act No. 1459, was not yet in existence. Act
No. 1285 antedated both the Corporation Law and the
constitution of the Securities and Exchange Commission.
Important to note is that the nature of the petitioner as a
corporate entity is distinguished from thesociedad
anonimas under the Spanish Code of Commerce.
For the purpose of enhancing its powers in promoting animal
welfare and enforcing laws for the protection of animals, the
petitioner was initially imbued under its charter with the
power to apprehend violators of animal welfare laws. In
addition, the petitioner was to share one-half (1/2) of the fines
imposed and collected through its efforts for violations of the
laws related thereto. As originally worded, Sections 4 and 5 of
Act No. 1285 provide:
LABREL FULL TEXT CASES
SEC. 4. The said society is authorized to appoint not to exceed
five agents in the City of Manila, and not to exceed two in each
of the provinces of the Philippine Islands who shall have all the
power and authority of a police officer to make arrests for
violation of the laws enacted for the prevention of cruelty to
animals and the protection of animals, and to serve any
process in connection with the execution of such laws; and in
addition thereto, all the police force of the Philippine Islands,
wherever organized, shall, as occasion requires, assist said
society, its members or agents, in the enforcement of all such
laws.
SEC. 5. One-half of all the fines imposed and collected through
the efforts of said society, its members or its agents, for
violations of the laws enacted for the prevention of cruelty to
animals and for their protection, shall belong to said society
and shall be used to promote its objects.
(emphasis supplied)
Subsequently, however, the power to make arrests as well as
the privilege to retain a portion of the fines collected for
violation of animal-related laws were recalled by virtue of
4
Commonwealth Act (C.A.) No. 148, which reads, in its
entirety, thus:
Be it enacted by the National Assembly of the Philippines:
Section 1. Section four of Act Numbered Twelve hundred and
eighty-five as amended by Act Numbered Thirty five hundred
and forty-eight, is hereby further amended so as to read as
follows:
Sec. 4. The said society is authorized to appoint not to exceed
ten agents in the City of Manila, and not to exceed one in each
municipality of the Philippines who shall have the authority to
denounce to regular peace officers any violation of the laws
enacted for the prevention of cruelty to animals and the
protection of animals and to cooperate with said peace
officers in the prosecution of transgressors of such laws.
Sec. 2. The full amount of the fines collected for violation of
the laws against cruelty to animals and for the protection of
animals, shall accrue to the general fund of the
Municipality where the offense was committed.
Sec. 3. This Act shall take effect upon its approval.
Approved, November 8, 1936. (Emphasis supplied)
Immediately thereafter, then President Manuel L. Quezon
issued Executive Order (E.O.) No. 63 dated November 12,
1936, portions of which provide:
Whereas, during the first regular session of the National
Assembly, Commonwealth Act Numbered One Hundred Forty
Eight was enacted depriving the agents of the Society for the
Prevention of Cruelty to Animals of their power to arrest
Page 112 of 179
persons who have violated the laws prohibiting cruelty to
animals thereby correcting a serious defect in one of the laws
existing in our statute books.
xxxx
Whereas, the cruel treatment of animals is an offense against
the State, penalized under our statutes, which the
Government is duty bound to enforce;
Now, therefore, I, Manuel L. Quezon, President of the
Philippines, pursuant to the authority conferred upon me by
the Constitution, hereby decree, order, and direct the
Commissioner of Public Safety, the Provost Marshal General as
head of the Constabulary Division of the Philippine Army,
every Mayor of a chartered city, and every municipal
president to detail and organize special members of the police
force, local, national, and the Constabulary to watch, capture,
and prosecute offenders against the laws enacted to prevent
cruelty to animals. (Emphasis supplied)
On December 1, 2003, an audit team from respondent
Commission on Audit (COA) visited the office of the petitioner
to conduct an audit survey pursuant to COA Office Order No.
5
2003-051 dated November 18, 2003 addressed to the
petitioner. The petitioner demurred on the ground that it was
a private entity not under the jurisdiction of COA, citing
Section 2(1) of Article IX of the Constitution which specifies
the general jurisdiction of the COA, viz:
Section 1. General Jurisdiction. The Commission on Audit shall
have the power, authority, and duty to examine, audit, and
settle all accounts pertaining to the revenue and receipts of,
and expenditures or uses of funds and property, owned or held
in trust by, or pertaining to the Government, or any of its
subdivisions, agencies, or instrumentalities, including
government-owned and controlled corporations with original
charters, and on a post-audit basis: (a) constitutional bodies,
commissions and officers that have been granted fiscal
autonomy under the Constitution; (b) autonomous state
colleges and universities; (c) other government-owned or
controlled corporations and their subsidiaries; and (d) such
non-governmental entities receiving subsidy or equity, directly
or indirectly, from or through the government, which are
required by law or the granting institution to submit to such
audit as a condition of subsidy or equity. However, where the
internal control system of the audited agencies is inadequate,
the Commission may adopt such measures, including
temporary or special pre-audit, as are necessary and
appropriate to correct the deficiencies. It shall keep the
general accounts of the Government, and for such period as
may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto. (Emphasis supplied)
Petitioner explained thus:
a. Although the petitioner was created by special
legislation, this necessarily came about because in
LABREL FULL TEXT CASES
January 1905 there was as yet neither a Corporation
Law or any other general law under which it may be
organized and incorporated, nor a Securities and
Exchange Commission which would have passed upon
its organization and incorporation.
b. That Executive Order No. 63, issued during the
Commonwealth period, effectively deprived the
petitioner of its power to make arrests, and that the
petitioner lost its operational funding, underscore the
fact that it exercises no governmental function. In
fine, the government itself, by its overt acts,
confirmed petitioners status as a private juridical
entity.
6
The COA General Counsel issued a Memorandum dated May
6, 2004, asserting that the petitioner was subject to its audit
7
authority. In a letter dated May 17, 2004, respondent COA
informed the petitioner of the result of the evaluation,
furnishing it with a copy of said Memorandum dated May 6,
2004 of the General Counsel.
Petitioner thereafter filed with the respondent COA a Request
8
for Re-evaluation dated May 19, 2004, insisting that it was a
private domestic corporation.
Acting on the said request, the General Counsel of respondent
9
COA, in a Memorandum dated July 13, 2004, affirmed her
earlier opinion that the petitioner was a government entity
that was subject to the audit jurisdiction of respondent COA.
In a letter dated September 14, 2004, the respondent COA
informed the petitioner of the result of the re-evaluation,
maintaining its position that the petitioner was subject to its
audit jurisdiction, and requested an initial conference with the
respondents.
In a Memorandum dated September 16, 2004, Director Delfin
Aguilar reported to COA Assistant Commissioner Juanito
Espino, Corporate Government Sector, that the audit survey
was not conducted due to the refusal of the petitioner
because the latter maintained that it was a private
corporation.
Petitioner received on September 27, 2005 the subject COA
Office Order 2005-021 dated September 14, 2005 and the COA
Letter dated September 23, 2005.
Hence, herein Petition on the following grounds:
A.
RESPONDENT COMMISSION ON AUDIT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION WHEN IT RULED THAT
PETITIONER IS SUBJECT TO ITS AUDIT AUTHORITY.
B.
Page 113 of 179
 PETITIONER IS ENTITLED TO THE RELIEF SOUGHT,
THERE BEING NO APPEAL, NOR ANY PLAIN, SPEEDY
AND ADEQUATE REMEDY IN THE ORDINARY COURSE
10
OF LAW AVAILABLE TO IT.
The essential question before this Court is whether the
petitioner qualifies as a government agency that may be
subject to audit by respondent COA.
Petitioner argues: first, even though it was created by special
legislation in 1905 as there was no general law then existing
under which it may be organized or incorporated, it exercises
no governmental functions because these have been revoked
by C.A. No. 148 and E.O. No. 63; second, nowhere in its charter
is it indicated that it is a public corporation, unlike, for
instance, C.A. No. 111 which created the Boy Scouts of the
Philippines, defined its powers and purposes, and specifically
stated that it was "An Act to Create a Public Corporation" in
which, even as amended by Presidential Decree No. 460, the
law still adverted to the Boy Scouts of the Philippines as a
"public corporation," all of which are not obtaining in the
charter of the petitioner; third, if it were a government body,
there would have been no need for the State to grant it tax
exemptions under Republic Act No. 1178, and the fact that it
was so exempted strengthens its position that it is a private
institution; fourth, the employees of the petitioner are
registered and covered by the Social Security System at the
latters initiative and not through the Government Service
Insurance System, which should have been the case had the
employees been considered government employees; fifth, the
petitioner does not receive any form of financial assistance
from the government, since C.A. No. 148, amending Section 5
of Act No. 1285, states that the "full amount of the fines,
collected for violation of the laws against cruelty to animals
and for the protection of animals, shall accrue to the general
fund of the Municipality where the offense was
committed"; sixth, C.A. No. 148 effectively deprived the
petitioner of its powers to make arrests and serve processes as
these functions were placed in the hands of the police
force; seventh, no government appointee or representative
sits on the board of trustees of the petitioner;eighth, a reading
of the provisions of its charter (Act No. 1285) fails to show that
any act or decision of the petitioner is subject to the approval
of or control by any government agency, except to the extent
that it is governed by the law on private corporations in
general; and finally, ninth, the Committee on Animal Welfare,
under the Animal Welfare Act of 1998, includes members from
both the private and the public sectors.
The respondents contend that since the petitioner is a "body
politic" created by virtue of a special legislation and endowed
with a governmental purpose, then, indubitably, the COA may
audit the financial activities of the latter. Respondents in effect
divide their contentions into six strains: first, the test to
determine whether an entity is a government corporation lies
in the manner of its creation, and, since the petitioner was
created by virtue of a special charter, it is thus a government
corporation subject to respondents auditing power; second,
the petitioner exercises "sovereign powers," that is, it is tasked
LABREL FULL TEXT CASES
to enforce the laws for the protection and welfare of animals
which "ultimately redound to the public good and welfare,"
and, therefore, it is deemed to be a government
"instrumentality" as defined under the Administrative Code of
1987, the purpose of which is connected with the
administration of government, as purportedly affirmed by
11
American jurisprudence; third, by virtue of Section 23, Title II,
Book III of the same Code, the Office of the President exercises
supervision or control over the petitioner;fourth, under the
same Code, the requirement under its special charter for the
petitioner to render a report to the Civil Governor, whose
functions have been inherited by the Office of the President,
clearly reflects the nature of the petitioner as a government
instrumentality; fifth, despite the passage of the Corporation
Code, the law creating the petitioner had not been abolished,
nor had it been re-incorporated under any general corporation
law; and finally, sixth, Republic Act No. 8485, otherwise known
as the "Animal Welfare Act of 1998," designates the petitioner
as a member of its Committee on Animal Welfare which is
attached to the Department of Agriculture.
In view of the phrase "One-half of all the fines imposed and
collected through the efforts of said society," the Court, in a
Resolution dated January 30, 2007, required the Office of the
Solicitor General (OSG) and the parties to comment on: a)
petitioner's authority to impose fines and the validity of the
provisions of Act No. 1285 and Commonwealth Act No. 148
considering that there are no standard measures provided for
in the aforecited laws as to the manner of implementation, the
specific violations of the law, the person/s authorized to
impose fine and in what amount; and, b) the effect of the 1935
and 1987 Constitutions on whether petitioner continues to
exist or should organize as a private corporation under the
Corporation Code, B.P. Blg. 68 as amended.
Petitioner and the OSG filed their respective Comments.
Respondents filed a Manifestation stating that since they were
being represented by the OSG which filed its Comment, they
opted to dispense with the filing of a separate one and adopt
for the purpose that of the OSG.
The petitioner avers that it does not have the authority to
impose fines for violation of animal welfare laws; it only
enjoyed the privilege of sharing in the fines imposed and
collected from its efforts in the enforcement of animal welfare
laws; such privilege, however, was subsequently abolished by
C.A. No. 148; that it continues to exist as a private corporation
since it was created by the Philippine Commission before the
effectivity of the Corporation law, Act No. 1459; and the 1935
and 1987 Constitutions.
The OSG submits that Act No. 1285 and its amendatory laws
did not give petitioner the authority to impose fines for
12
violation of laws relating to the prevention of cruelty to
animals and the protection of animals; that even prior to the
amendment of Act No. 1285, petitioner was only entitled to
share in the fines imposed; C.A. No. 148 abolished that
privilege to share in the fines collected; that petitioner is a
public corporation and has continued to exist since Act No.
Page 114 of 179
1285; petitioner was not repealed by the 1935 and 1987
Constitutions which contain transitory provisions maintaining
all laws issued not inconsistent therewith until amended,
modified or repealed.
The petition is impressed with merit.
The arguments of the parties, interlaced as they are, can be
disposed of in five points.
First, the Court agrees with the petitioner that the "charter
test" cannot be applied.
Essentially, the "charter test" as it stands today provides:
[T]he test to determine whether a corporation is government
owned or controlled, or private in nature is simple. Is it
created by its own charter for the exercise of a public function,
or by incorporation under the general corporation law? Those
with special charters are government corporations subject to
its provisions, and its employees are under the jurisdiction of
the Civil Service Commission, and are compulsory members of
the Government Service Insurance System. xxx (Emphasis
supplied)
13
The petitioner is correct in stating that the charter test is
predicated, at best, on the legal regime established by the
1935 Constitution, Section 7, Article XIII, which states:
Sec. 7. The National Assembly shall not, except by general law,
provide for the formation, organization, or regulation of
private corporations, unless such corporations are owned or
controlled by the Government or any subdivision or
14
instrumentality thereof.
The foregoing proscription has been carried over to the 1973
and the 1987 Constitutions. Section 16 of Article XII of the
present Constitution provides:
Sec. 16. The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations
may be created or established by special charters in the
interest of the common good and subject to the test of
economic viability.
Section 16 is essentially a re-enactment of Section 7 of Article
XVI of the 1935 Constitution and Section 4 of Article XIV of the
1973 Constitution.
During the formulation of the 1935 Constitution, the
Committee on Franchises recommended the foregoing
proscription to prevent the pressure of special interests upon
the lawmaking body in the creation of corporations or in the
regulation of the same. To permit the lawmaking body by
special law to provide for the organization, formation, or
regulation of private corporations would be in effect to offer
to it the temptation in many cases to favor certain groups, to
LABREL FULL TEXT CASES
the prejudice of others or to the prejudice of the interests of
15
the country.
And since the underpinnings of the charter test had been
introduced by the 1935 Constitution and not earlier, it follows
that the test cannot apply to the petitioner, which was
incorporated by virtue of Act No. 1285, enacted on January 19,
1905. Settled is the rule that laws in general have no
16
retroactive effect, unless the contrary is provided. All
statutes are to be construed as having only a prospective
operation, unless the purpose and intention of the legislature
to give them a retrospective effect is expressly declared or is
necessarily implied from the language used. In case of doubt,
17
the doubt must be resolved against the retrospective effect.
There are a few exceptions. Statutes can be given retroactive
effect in the following cases: (1) when the law itself so
expressly provides; (2) in case of remedial statutes; (3) in case
of curative statutes; (4) in case of laws interpreting others; and
18
(5) in case of laws creating new rights. None of the
exceptions is present in the instant case.
The general principle of prospectivity of the law likewise
applies to Act No. 1459, otherwise known as the Corporation
Law, which had been enacted by virtue of the plenary powers
of the Philippine Commission on March 1, 1906, a little over a
year after January 19, 1905, the time the petitioner emerged
as a juridical entity. Even the Corporation Law respects the
rights and powers of juridical entities organized beforehand,
viz:
SEC. 75. Any corporation or sociedad anonima formed,
organized, and existing under the laws of the Philippine Islands
and lawfully transacting business in the Philippine Islands on
the date of the passage of this Act, shall be subject to the
provisions hereof so far as such provisions may be applicable
and shall be entitled at its optioneither to continue business as
such corporation or to reform and organize under and by virtue
of the provisions of this Act, transferring all corporate interests
to the new corporation which, if a stock corporation, is
authorized to issue its shares of stock at par to the
stockholders or members of the old corporation according to
their interests. (Emphasis supplied).
As pointed out by the OSG, both the 1935 and 1987
Constitutions contain transitory provisions maintaining all laws
issued not inconsistent therewith until amended, modified or
repealed.
19
In a legal regime where the charter test doctrine cannot be
applied, the mere fact that a corporation has been created by
virtue of a special law does not necessarily qualify it as a public
corporation.
What then is the nature of the petitioner as a corporate
entity? What legal regime governs its rights, powers, and
duties?
Page 115 of 179
As stated, at the time the petitioner was formed, the
applicable law was the Philippine Bill of 1902, and,
emphatically, as also stated above, no proscription similar to
the charter test can be found therein.
The textual foundation of the charter test, which placed a
limitation on the power of the legislature, first appeared in the
1935 Constitution. However, the petitioner was incorporated
in 1905 by virtue of Act No. 1258, a law antedating the
Corporation Law (Act No. 1459) by a year, and the 1935
Constitution, by thirty years. There being neither a general law
on the formation and organization of private corporations nor
a restriction on the legislature to create private corporations
by direct legislation, the Philippine Commission at that
moment in history was well within its powers in 1905 to
constitute the petitioner as a private juridical entity.1wphi1
Time and again the Court must caution even the most brilliant
scholars of the law and all constitutional historians on the
danger of imposing legal concepts of a later date on facts of an
20
earlier date.
The amendments introduced by C.A. No. 148 made it clear
that the petitioner was a private corporation and not an
agency of the government. This was evident in Executive
Order No. 63, issued by then President of the Philippines
Manuel L. Quezon, declaring that the revocation of the powers
of the petitioner to appoint agents with powers of arrest
"corrected a serious defect" in one of the laws existing in the
statute books.
As a curative statute, and based on the doctrines so far
discussed, C.A. No. 148 has to be given retroactive effect,
thereby freeing all doubt as to which class of corporations the
petitioner belongs, that is, it is a quasi-public corporation, a
kind of private domestic corporation, which the Court will
further elaborate on under the fourthpoint.
Second, a reading of petitioners charter shows that it is not
subject to control or supervision by any agency of the State,
unlike government-owned and -controlled corporations. No
government representative sits on the board of trustees of the
petitioner. Like all private corporations, the successors of its
members are determined voluntarily and solely by the
petitioner in accordance with its by-laws, and may exercise
those powers generally accorded to private corporations, such
as the powers to hold property, to sue and be sued, to use a
common seal, and so forth. It may adopt by-laws for its
internal operations: the petitioner shall be managed or
operated by its officers "in accordance with its by-laws in
force." The pertinent provisions of the charter provide:
Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain,
William F. Tucker, Mary S. Fergusson, Amasa S. Crossfield,
Spencer Cosby, Sealy B. Rossiter, Richard P. Strong, Jose
Robles Lahesa, Josefina R. de Luzuriaga, and such other
persons as may be associated with them in conformity with
this act, and their successors, are hereby constituted and
LABREL FULL TEXT CASES
created a body politic and corporate at law, under the name
and style of "The Philippines Society for the Prevention of
Cruelty to Animals."
As incorporated by this Act, said society shall have the power
to add to its organization such and as many members as it
desires, to provide for and choose such officers as it may deem
advisable, and in such manner as it may wish, and to remove
members as it shall provide.
It shall have the right to sue and be sued, to use a common
seal, to receive legacies and donations, to conduct social
enterprises for the purpose of obtaining funds, to levy dues
upon its members and provide for their collection to hold real
and personal estate such as may be necessary for the
accomplishment of the purposes of the society, and to adopt
such by-laws for its government as may not be inconsistent
with law or this charter.
xxxx
Sec. 3. The said society shall be operated under the direction
of its officers, in accordance with its by-laws in force, and this
charter.
xxxx
Sec. 6. The principal office of the society shall be kept in the
city of Manila, and the society shall have full power to locate
and establish branch offices of the society wherever it may
deem advisable in the Philippine Islands, such branch offices to
be under the supervision and control of the principal office.
Third. The employees of the petitioner are registered and
covered by the Social Security System at the latters initiative,
and not through the Government Service Insurance System,
which should be the case if the employees are considered
government employees. This is another indication of
petitioners nature as a private entity. Section 1 of Republic
Act No. 1161, as amended by Republic Act No. 8282,
otherwise known as the Social Security Act of 1997, defines
the employer:
Employer 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, except the Government and any of its
political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government:
Provided, That a self-employed person shall be both employee
and employer at the same time. (Emphasis supplied)
Fourth. The respondents contend that the petitioner is a "body
politic" because its primary purpose is to secure the protection
and welfare of animals which, in turn, redounds to the public
good.
Page 116 of 179
This argument, is, at best, specious. The fact that a certain
juridical entity is impressed with public interest does not, by
that circumstance alone, make the entity a public corporation,
inasmuch as a corporation may be private although its charter
contains provisions of a public character, incorporated solely
for the public good. This class of corporations may be
considered quasi-public corporations, which are private
corporations that render public service, supply public
21
wants, or pursue other eleemosynary objectives. While
purposely organized for the gain or benefit of its members,
they are required by law to discharge functions for the public
22
benefit. Examples of these corporations are utility, railroad,
warehouse, telegraph, telephone, water supply corporations
23
and transportation companies. It must be stressed that a
quasi-public corporation is a species of private corporations,
but the qualifying factor is the type of service the former
renders to the public: if it performs a public service, then it
24
becomes a quasi-public corporation. 1wphi1
Authorities are of the view that the purpose alone of the
corporation cannot be taken as a safe guide, for the fact is that
almost all corporations are nowadays created to promote the
interest, good, or convenience of the public. A bank, for
example, is a private corporation; yet, it is created for a public
benefit. Private schools and universities are likewise private
corporations; and yet, they are rendering public service.
Private hospitals and wards are charged with heavy social
responsibilities. More so with all common carriers. On the
other hand, there may exist a public corporation even if it is
endowed with gifts or donations from private individuals.
The true criterion, therefore, to determine whether a
corporation is public or private is found in the totality of the
relation of the corporation to the State. If the corporation is
created by the State as the latters own agency or
instrumentality to help it in carrying out its governmental
functions, then that corporation is considered public;
otherwise, it is private. Applying the above test, provinces,
chartered cities, and barangays can best exemplify public
corporations. They are created by the State as its own device
and agency for the accomplishment of parts of its own public
25
works.
It is clear that the amendments introduced by C.A. No. 148
revoked the powers of the petitioner to arrest offenders of
animal welfare laws and the power to serve processes in
connection therewith.
Fifth. The respondents argue that since the charter of the
petitioner requires the latter to render periodic reports to the
Civil Governor, whose functions have been inherited by the
President, the petitioner is, therefore, a government
instrumentality.
This contention is inconclusive. By virtue of the fiction that all
corporations owe their very existence and powers to the State,
the reportorial requirement is applicable to all corporations of
whatever nature, whether they are public, quasi-public, or
private corporationsas creatures of the State, there is a
LABREL FULL TEXT CASES
reserved right in the legislature to investigate the activities of
a corporation to determine whether it acted within its powers.
In other words, the reportorial requirement is the principal
means by which the State may see to it that its creature acted
according to the powers and functions conferred upon it.
These principles were extensively discussed in Bataan
Shipyard & Engineering Co., Inc. v. Presidential Commission on
26
Good Government. Here, the Court, in holding that the
subject corporation could not invoke the right against self-
incrimination whenever the State demanded the production of
its corporate books and papers, extensively discussed the
purpose of reportorial requirements, viz:
x x x The corporation is a creature of the state. It is presumed
to be incorporated for the benefit of the public. It received
certain special privileges and franchises, and holds them
subject to the laws of the state and the limitations of its
charter. Its powers are limited by law. It can make no contract
not authorized by its charter. Its rights to act as a corporation
are only preserved to it so long as it obeys the laws of its
creation. There is a reserve[d] right in the legislature to
investigate its contracts and find out whether it has exceeded
its powers. It would be a strange anomaly to hold that a state,
having chartered a corporation to make use of certain
franchises, could not, in the exercise of sovereignty, inquire
how these franchises had been employed, and whether they
had been abused, and demand the production of the corporate
books and papers for that purpose. The defense amounts to
this, that an officer of the corporation which is charged with a
criminal violation of the statute may plead the criminality of
such corporation as a refusal to produce its books. To state
this proposition is to answer it. While an individual may
lawfully refuse to answer incriminating questions unless
protected by an immunity statute, it does not follow that a
corporation vested with special privileges and franchises may
refuse to show its hand when charged with an abuse of such
27
privileges. (Wilson v. United States, 55 Law Ed., 771, 780.)
WHEREFORE, the petition is GRANTED. Petitioner
is DECLARED a private domestic corporation subject to the
jurisdiction of the Securities and Exchange Commission. The
respondents are ENJOINED from investigating, examining and
auditing the petitioner's fiscal and financial affairs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
Page 117 of 179
THIRD DIVISION
G.R. No. 157647 October 15, 2007
GOVERNMENT SERVICE INSURANCE SYSTEM
(GSIS), Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LANTING
SECURITY and WATCHMAN AGENCY, TOMAS LANTING,
* **
DANIEL FANILA, HECTOR MORENO, ISAURO FERRER, RUBIN
WILFREDO, JESUS DELIMA, JR., MARIA LEGASPI, SANTIAGO
NOTO, JR., and VIRGILIO SORIANO, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari of the
1
Decision dated July 25, 2002 of the Court of Appeals (CA) in
2
CA-G.R. SP No. 61570 and the CA Resolution dated March 19,
2003 which denied the motion for reconsideration thereof.
The facts:
Tomas Lanting, doing business under the name and style of
Lanting Security and Watchman Agency (LSWA) entered into a
Security Service Contract to provide security guards to the
properties of the Government Service Insurance System (GSIS)
3
at the contract rate of P3,000.00 per guard per month.
During the effectivity of the contract, LSWA requested the
GSIS for an upward adjustment of the contract rate in view of
Section 7 of Wage Order No. 1 and Section 3 of Wage Order
No. 2, which were issued by the Regional Tripartite Wages and
Productivity Board-NCR pursuant to Republic Act No. 6727,
otherwise known as the Wage Rationalization Act.
Acting on the request of LSWA, the GSIS, through its Board of
Trustees and under Board Resolution No. 207, dated May 24,
1991, approved the upward adjustments of the contract price
from P3,000.00 to P3,716.07 per guard, per month effective
November 1, 1990 to January 7, 1991, and P4,200.00 effective
4
January 8, 1991 to May 31, 1991.
LSWA assigned security guards Daniel Fanila, Hector Moreno,
Isauro Ferrer, Rubin Wilfredo, Jesus Delima, Jr., Maria Legaspi,
Santiago Noto, Jr., and Virgilio Soriano (hereafter
complainants) to guard one of GSIS's properties. The
complainants have the following dates of employment and
compensation package with LSWA:
1. Daniel Fanila 3/28/91-3/15/93 P3,100/month
2. Virgilio Soriano 10/0/91-3/15/93 P3,100/month
3. Hector Moreno 1/04/89-3/15/93 P3,100/month
LABREL FULL TEXT CASES
4. Isauro Torres 11/ /88-3/15/93 P3,100/month
5. Rubin Wilfredo 3/08/91-3/15/93 P3,100/month
6. Jesus Delima, Jr. 3/28/91-3/15/93 P3,100/month
7. Maria Legaspi 3/13/91-3/15/93 P3,100/month
On March 15, 1993, GSIS terminated the Security Service
Contract with LSWA. All the complainants, except Virgilio
Soriano, were absorbed by the incoming security agency.
On March 7, 1994, complainants filed separate complaints
against LSWA for underpayment of wages and non-payment of
labor standard benefits from March 1991 to March 15, 1993.
Virgilio Soriano also complained of illegal dismissal.
In its Position Paper, LSWA alleged that complainants were
estopped from claiming that they were underpaid because
they were informed that the pay and benefits given to them
were based on the contract rate of P103.00 per eight hours of
work or about P3,100.00 per month.
On August 9, 1994, LSWA filed a Third-Party
5
Complaint against GSIS for underpayment of complainants'
wages.
6
In its Position Paper, GSIS alleged that the Third-Party
Complaint states no cause of action against it; that LSWA
obligated itself in the Security Service Contract to be solely
liable for the enforcement of and compliance with all existing
labor laws, rules and regulations; that the GSIS Board of
Trustees approved the upward adjustment on a month-to-
month basis, at P4,200 per guard per month, effective January
8, 1991 to May 31, 1991, under Board Resolution No. 207
dated May 24, 1991, which was incorporated in the Security
Service Contract; that GSIS fully paid the services of the
security guards as agreed upon in the Security Service
Contract.
On August 27, 1996, Labor Arbiter Renato Bugarin rendered a
7
Decision in favor of complainants, the dispositive portion of
which reads:
WHEREFORE, premises considered judgment is hereby
rendered:
1. Ordering respondents Lanting Security and
Watchman Agency and Tomas Lanting to reinstate
complainant Virgilio Soriano without loss of seniority
rights and benefits and to pay his backwages
amounting to P161,400.47, computed up to the
promulgation of this decision. Failure to reinstate
complainant to his former position as hereby
ordered, his backwages shall continue to run but in
no case shall exceed three (3) years;
Page 118 of 179
 2. Ordering, respondents Lanting Security and
Watchman Agency and/or Thomas Lanting and the
Government Service Insurance System, jointly and
severally liable to pay the complainants, their salary
differentials; cash equivalent of their service incentive
leaves and proportionate 13th month pay covering
the period from June 1, 1991 to March 15, 1993,
hereto indicated as follows:
1.Daniel Fanila,Jr. P18, 439.50
2. Hector Moreno - P18, 439.50
3. Isauro Torres - P18, 439.50
4. Rubin Wilfredo - P18, 439.50
5. Jesus Delima, Jr. - P18, 439.50
6. Maria Legaspi - P18, 439.50
7. Virgilio Soriano - P18, 439.50
3. All other claims are hereby dismissed for lack of
merit.
8 Reconsideration. In a Resolution dated March 19, 2003, the
SO ORDERED.
The Labor Arbiter held LSWA and GSIS jointly and severally
liable for the payment of complainants' money claims,
pursuant to Articles 106 and 107 of the Labor Code.
LSWA appealed to the NLRC. On April 14, 2000, the NLRC
9 REVERSIBLE ERROR IN HOLDING THAT PETITIONER GSIS IS
issued a Resolution, the dispositive portion of which reads:
WHEREFORE, premises considered, the Appeal is hereby
GRANTED. Accordingly, the Decision appealed from is
SUSTAINED subject to the modification that Complainant-
Appellee Soriano was not illegally dismissed and hence, is not
entitled to reinstatement to his former position and to
payment of any backwages; that from the other Complainants-
Appellees' awarded salary differentials from 7 March 1991 to 1
June 1991 in the amount of (sic) each should be deducted
from their awarded total salary differentials in the sum of
P10,917.00 each; and that the Third-Party Respondent GSIS is
alone liable for payment of their salary differentials.
10
SO ORDERED.
The NLRC held the GSIS solely liable for payment of
complainants' money claims.
Dissatisfied, the GSIS filed on May 15, 2000 a Motion for
11
Reconsideration. On August 20, 2000, the NLRC issued a
12
Resolution denying GSIS's Motion for Reconsideration.
LABREL FULL TEXT CASES
On November 6, 2000, the GSIS filed a Petition
13
for Certiorari with the CA arguing that the NLRC gravely
abused its discretion in holding GSIS solely liable for
complainants' money claims.
14
On July 25, 2002, the CA rendered a Decision, the dispositive
portion of which reads:
WHEREFORE, the petition is GRANTED for being meritorious.
The questioned resolution dated 14 April 2000 of the NLRC is
hereby modified insofar as it holds petitioner GSIS solely liable
for the salary differentials of the complainants. Instead, We
revert back to the ruling of the Honorable Labor Arbiter and
hold petitioner GSIS and respondent Lanting Security and
Watchman Agency and/or Tomas Lanting jointly and severally
liable for the payment of complainants' salary differentials.
15
SO ORDERED.
While finding that the GSIS complied with its obligations under
Wage Order Nos. 1 and 2 by incorporating the mandated
increase in the Security Service Contract, the CA held the GSIS
jointly and severally liable with LSWA for complainants' money
claims pursuant to Articles 106 and 107 of the Labor Code.
On September 3, 2002, the GSIS filed a Motion for
16 17
CA denied the motion for reconsideration.
Hence, the present petition anchored on the following
assigned error:
THE HONORABLE COURT OF APPEALS COMMITTED
SOLIDARILY LIABLE FOR PAYMENT OF COMPLAINANTS-
18
RESPONDNENTS' SALARY DIFFERENTIALS.
The GSIS avers that it cannot twice be held liable for
complainants' salary differentials since it fully paid
complainants' salaries by incorporating in the Security Service
Contract the salary rate increases mandated by Wage Order
Nos. 1 and 2; otherwise, it would be unjust enrichment on the
part of complainants and/or LSWA at its expense. It submits
that Articles 106 and 107 of the Labor Code were not
contemplated by its framers to cover principals or clients of
service contractors who had already paid for the wages of the
contractor or subcontractor.
19
In its Comment, LSWA maintains that the GSIS is jointly and
severally liable with LSWA because Articles 106 and 107 of the
Labor Code provide so and these provisions were intended to
ensure that employees are paid the wages due them in case of
violation of the Labor Code of either the contractor or the
principal; that the GSIS cannot claim that holding it jointly and
severally liable with LSWA would result in grave injustice since
the law did not leave it without recourse as the GSIS has the
right of reimbursement from its co-debtor under Article
20
1217 of the Civil Code.
Page 119 of 179
 21
In their Comment, complainants argue that the GSIS is jointly
and severally liable with LSWA for complainants' money claims
since LSWA actually paid only the sum of P3,100.00 a month,
even though the GSIS incorporated in the Security Service
Contract the mandated wage increases in Wage Order Nos. 1
and 2; that although the Security Service Contract provided
that there shall be employer-employer relationship between
LSWA and/or its security guards and the GSIS, Article 106 of
the Labor Code establishes an employer-employee
relationship between the employer and the job contractor's
employees for a limited purpose, that is, in order to ensure
that the latter get paid the wages due them.
The Court gave due course to the petition and required the
22
parties to submit their respective memoranda. Only the GSIS
23
complied. In the interest of justice and speedy disposition of
cases, the Court resolved to dispense with the filing of the
respective memoranda of LSWA and the complainants and to
24
decide the case based on the pleadings filed.
The petition is bereft of merit.
Articles 106 and 107 of the Labor Code provide:
ART. 106. Contractor or subcontractor. Whenever an
employer enters into contract with another person for the
performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wage of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.
xxx
ART. 107 Indirect employer. The provisions of the
immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.
(Emphasis supplied.)
In this case, the GSIS cannot evade liability by claiming that it
had fully paid complainants' salaries by incorporating in the
Security Service Contract the salary rate increases mandated
by Wage Order Nos. 1 and 2 by increasing the contract price
from P3,000.00 to P3,176.07 per guard per month effective
November 1, 1990 to January 7, 1991, and P4,200.00 effective
January 8, 1991 to May 31, 1991.
In Rosewood Processing, Inc. v. National Labor Relations
25
Commission, the Court explained the rationale for the joint
and several liability of the employer, thus:
LABREL FULL TEXT CASES
The joint and several liability of the employer or principal
was enacted to ensure compliance with the provisions of the
Code, principally those on statutory minimum wage. The
contractor or subcontractor is made liable by virtue of his or
her status as a direct employer, and the principal as the
indirect employer of the contractors employees. This liability
facilitates, if not guarantees, payment of the workers
compensation, thus, giving the workers ample protection as
mandated by the 1987 Constitution. This is not unduly
burdensome to the employer. Should the indirect employer
be constrained to pay the workers, it can recover whatever
amount it had paid in accordance with the terms of the
service contract between itself and the contractor.(Emphasis
26
supplied)
Thus, the Court does not agree with the GSIS's claim that a
double burden would be imposed upon the latter because it
would be paying twice for complainants' services. Such fears
are unfounded. Under Article 1217 of the Civil Code, if the
GSIS should pay the money claims of complainants, it has the
right to recover from LSWA whatever amount it has paid in
accordance with the terms of the service contract between
the LSWA and the GSIS.1wphi1
Joint and solidary liability is simply meant to assure aggrieved
workers of immediate and sufficient payment of what is due
them. This is in line with the policy of the State to protect and
alleviate the plight of the working class.
WHEREFORE, the petition is DENIED. The Decision dated July
25, 2002 and the Resolution dated March 19, 2003 of the
Court of Appeals (CA) in CA-G.R. SP No. 61570
are AFFIRMED with the MODIFICATION that the joint and
solidary liability of LSWA and the GSIS to pay complainants'
salary differentials shall be without prejudice to the GSIS's
right of reimbursement from LSWA.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
Page 120 of 179
EN BANC
G. R. No. 155027 February 28, 2006
THE VETERANS FEDERATION OF THE PHILIPPINES represented
by Esmeraldo R. Acorda, Petitioner,
vs.
Hon. ANGELO T. REYES in his capacity as Secretary of
National Defense; and Hon. EDGARDO E. BATENGA in his
capacity as Undersecretary for Civil Relations and
Administration of the Department of National
Defense, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Certiorari with Prohibition under Rule 65
of the 1997 Rules of Civil Procedure, with a prayer to declare
as void Department Circular No. 04 of the Department of
National Defense (DND), dated 10 June 2002.
Petitioner in this case is the Veterans Federation of the
Philippines (VFP), a corporate body organized under Republic
Act No. 2640, dated 18 June 1960, as amended, and duly
registered with the Securities and Exchange Commission.
Respondent Angelo T. Reyes was the Secretary of National
Defense (DND Secretary) who issued the assailed Department
Circular No. 04, dated 10 June 2002. Respondent Edgardo E.
Batenga was the DND Undersecretary for Civil Relations and
Administration who was tasked by the respondent DND
Secretary to conduct an extensive management audit of the
records of petitioner.
The factual and procedural antecedents of this case are as
follows:
1
Petitioner VFP was created under Rep. Act No. 2640, a statute
approved on 18 June 1960.
On 15 April 2002, petitioners incumbent president received a
letter dated 13 April 2002 which reads:
Col. Emmanuel V. De Ocampo (Ret.)
President
Veterans Federation of the Philippines
Makati, Metro Manila
Dear Col. De Ocampo:
Please be informed that during the preparation of my briefing
before the Cabinet and the President last March 9, 2002, we
came across some legal bases which tended to show that
there is an organizational and management relationship
LABREL FULL TEXT CASES
between Veterans Federation of the Philippines and the
Philippine Veterans Bank which for many years have been
inadvertently overlooked.
I refer to Republic Act 2640 creating the body corporate
known as the VFP and Republic Act 3518 creating the Phil.
Vets [sic] Bank.
1. RA 2640 dated 18 June 60 Section 1 ... "hereby
created a body corporate, under the control and
supervision of the Secretary of National Defense."
2. RA 2640 Section 12 ... "On or before the last day of
the month following the end of each fiscal year, the
Federation shall make and transmit to the President
of the Philippines or to the Secretary of National
Defense, a report of its proceedings for the past year,
including a full, complete and itemized report of
receipts and expenditures of whatever kind."
3. Republic Act 3518 dated 18 June 1963 (An Act
Creating the Philippine Veterans Bank, and for Other
Purposes) provides in Section 6 that ... "the affairs
and business of the Philippine Veterans Bank shall be
directed and its property managed, controlled and
preserved, unless otherwise provided in this Act, by a
Board of Directors consisting of eleven (11) members
to be composed of three ex officio members to wit:
the Philippine Veterans Administrator, the President
of the Veterans Federation of the Philippines and the
Secretary of National Defense x x x.
It is therefore in the context of clarification and rectification of
what should have been done by the DND (Department of
National Defense) for and about the VFP and PVB that I am
requesting appropriate information and report about these
two corporate bodies.
Therefore it may become necessary that a conference with
your staffs in these two bodies be set.
Thank you and anticipating your action on this request.
Very truly yours,
(SGD) ANGELO T. REYES
[DND] Secretary
On 10 June 2002, respondent DND Secretary issued the
assailed DND Department Circular No. 04 entitled, "Further
2 3
Implementing the Provisions of Sections 1 and 2 of Republic
Act No. 2640," the full text of which appears as follows:
Department of National Defense
Department Circular No. 04
Page 121 of 179
Subject: Further Implementing the Provisions of Sections 1 & 2 wholly or, where applicable as in the case of stock
of corporations, to the extent of at least 50% of its capital stock.

Republic Act No. 2640 Fund sum of money or other resources set aside for the
purpose of carrying out specific activities or attaining certain
Authority: Republic Act No. 2640 objectives in accordance with special regulations, restrictions
or limitations and constitutes an independent, fiscal and
Executive Order No. 292 dated July 25, 1987 accounting entity.

Section 1 Government Fund includes public monies of every sort and

other resources pertaining to any agency of the government.
These rules shall govern and apply to the management and
operations of the Veterans Federation of the Philippines (VFP) Veteran any person who rendered military service in the
within the context provided by EO 292 s-1987. land, sea or air forces of the Philippines during the revolution
against Spain, the Philippine American War, World War II,
including Filipino citizens who served in Allied Forces in the
Section 2 DEFINITION OF TERMS for the purpose of these
Philippine territory and foreign nationals who served in
rules, the terms, phrases or words used herein shall, unless
Philippine forces; the Korean campaign, the Vietnam
the context indicates otherwise, mean or be understood as
campaign, the Anti-dissidence campaign, or other wars or
follows:
military campaigns; or who rendered military service in the
Armed Forces of the Philippines and has been honorably
Supervision and Control it shall include authority to act
discharged or separated after at least six (6) years total
directly whenever a specific function is entrusted by law or
cumulative active service or sooner separated due to the
regulation to a subordinate; direct the performance of a duty;
death or disability arising from a wound or injury received or
restrain the commission of acts; approve, reverse or modify
sickness or disease incurred in line of duty while in the active
acts and decisions of subordinate officials or units; determine
service.
priorities in the execution of plans and programs; and
prescribe standards, guidelines, plans and programs.
Section 3 Relationship Between the DND and the VFP
Power of Control power to alter, modify, nullify or set aside
3.1 Sec 1 of RA 3140 provides "... the following persons (heads
what a subordinate officer had done in the performance of his
of various veterans associations and organizations in the
duties and to substitute the judgment of the former to that of
Philippines) and their associates and successors are hereby
the latter.
created a body corporate, under the control and supervision
of the Secretary of National Defense, under the name, style
Supervision means overseeing or the power of an officer to
and title of "Veterans Federation of the Philippines ..."
see to it that their subordinate officers perform their duties; it
does not allow the superior to annul the acts of the
The Secretary of National Defense shall be charged with the
subordinate.
duty of supervising the veterans and allied program under the
jurisdiction of the Department. It shall also have the
Administrative Process embraces matter concerning the
responsibility of overseeing and ensuring the judicious and
procedure in the disposition of both routine and contested
effective implementation of veterans assistance, benefits, and
matters, and the matter in which determinations are made,
utilization of VFP assets.
enforced or reviewed.
3.2 To effectively supervise and control the corporate affairs of
Government Agency as defined under PD 1445, a
the Federation and to safeguard the interests and welfare of
government agency or agency of government or "agency"
the veterans who are also wards of the State entrusted under
refers to any department, bureau or office of the national
the protection of the DND, the Secretary may personally or
government, or any of its branches or instrumentalities, of any
through a designated representative, require the submission
political subdivision, as well as any government owned or
of reports, documents and other papers regarding any or all of
controlled corporation, including its subsidiaries, or other self-
the Federations business transactions particularly those
governing board or commission of the government.
relating to the VFP functions under Section 2 of RA 2640.

Government Owned and Controlled Corporation (GOCC)

refer to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs
whether governmental or proprietary in nature, and owned by
the government directly or through its instrumentalities
LABREL FULL TEXT CASES
The Secretary or his representative may attend conferences of
the supreme council of the VFP and such other activities he
may deem relevant.
3.3 The Secretary shall from time to time issue guidelines,
directives and other orders governing vital government
Page 122 of 179
activities including, but not limited to, the conduct of
elections; the acquisition, management and dispositions of
properties, the accounting of funds, financial interests, stocks
and bonds, corporate investments, etc. and such other
transactions which may affect the interests of the veterans.
3.4 Financial transactions of the Federation shall follow the
provisions of the government auditing code (PD 1445) i.e.
government funds shall be spent or used for public purposes;
trust funds shall be available and may be spent only for the
specific purpose for which the trust was created or the funds
received; fiscal responsibility shall, to the greatest extent, be
shared by all those exercising authority over the financial
affairs, transactions, and operations of the federation;
disbursements or dispositions of government funds or
property shall invariably bear the approval of the proper
officials.
Section 4 Records of the FEDERATION
As a corporate body and in accordance with appropriate laws,
it shall keep and carefully preserve records of all business
transactions, minutes of meetings of stockholders/members of
the board of directors reflecting all details about such activity.
All such records and minutes shall be open to directors,
trustees, stockholders, and other members for inspection and
copies of which may be requested.
As a body corporate, it shall submit the following: annual
report; proceedings of council meetings; report of operations
together with financial statement of its assets and liabilities
and fund balance per year; statement of revenues and
expenses per year; statement of cash flows per year as
certified by the accountant; and other documents/reports as
may be necessary or required by the SND.
Section 5 Submission of Annual and Periodic Report
As mandated under appropriate laws, the following reports
shall be submitted to the SND, to wit:
a. Annual Report to be submitted not later than every
January 31 of the following year. Said report shall
consist of the following:
1. Financial Report of the Federation, signed
by the Treasurer General and Auditor
General;
2. Roster of Members of the Supreme
Council;
3. Roster of Members of the Executive Board
and National Officers; and
LABREL FULL TEXT CASES
4. Current listing of officers and
management of VFP.
b. Report on the proceedings of each Supreme
Council Meeting to be submitted not later than one
month after the meeting;
c. Report of the VFP President as may be required by
SND or as may be found necessary by the President of
the Federation;
d. Resolutions passed by the Executive Board and the
Supreme Council for confirmation to be submitted
not later than one month after the approval of the
resolution;
e. After Operation/Activity Reports to be submitted
not later than one month after such operation or
activity;
Section 6 Penal Sanctions
As an attached agency to a regular department of the
government, the VFP and all its instrumentalities, officials and
personnel shall be subject to the penal provisions of such laws,
rules and regulations applicable to the attached agencies of
the government.
In a letter dated 6 August 2002 addressed to the President of
petitioner, respondent DND Secretary reiterated his
instructions in his earlier letter of 13 April 2002.
Thereafter, petitioners President received a letter dated 23
August 2002 from respondent Undersecretary, informing him
that Department Order No. 129 dated 23 August 2002
directed "the conduct of a Management Audit of the Veterans
4
Federation of the Philippines." The letter went on to state
that respondent DND Secretary "believes that the mandate
given by said law can be meaningfully exercised if this
department can better appreciate the functions,
responsibilities and situation on the ground and this can be
5
done by undertaking a thorough study of the organization."
Respondent Undersecretary also requested both for a briefing
and for documents on personnel, ongoing projects and
petitioners financial condition. The letter ended by stating
that, after the briefing, the support staff of the Audit
Committee would begin their work to meet the one-month
target within which to submit a report.
A letter dated 28 August 2003 informed petitioners President
that the Management Audit Group headed by the
Undersecretary would be paying petitioner a visit on 30
August 2002 for an update on VFPs different affiliates and the
financial statement of the Federation.
Subsequently, the Secretary General of the VFP sent an
undated letter to respondent DND Secretary, with notice to
Page 123 of 179
respondent Undersecretary for Civil Relations and
Administration, complaining about the alleged broadness of
the scope of the management audit and requesting the
suspension thereof until such time that specific areas of the
audit shall have been agreed upon.
The request was, however, denied by the Undersecretary in a
letter dated 4 September 2002 on the ground that a specific
timeframe had been set for the activity.
Petitioner thus filed this Petition for Certiorari with Prohibition
under Rule 65 of the 1997 Rules of Civil Procedure, praying for
the following reliefs:
1. For this Court to issue a temporary restraining
order and a writ of preliminary prohibitory and
mandatory injunction to enjoin respondent Secretary
and all those acting under his discretion and authority
from: (a) implementing DND Department Circular No.
04; and (b) continuing with the ongoing management
audit of petitioners books of account;
2. After hearing the issues on notice
a. Declare DND Department Circular No. 04
as null and void for being ultra vires;
b. Convert the writ of prohibition,
preliminary prohibitory and mandatory
6
injunction into a permanent one.
GIVING DUE COURSE TO THE PETITION
Petitioner asserts that, although cases which question the
constitutionality or validity of administrative issuances are
ordinarily filed with the lower courts, the urgency and
substantive importance of the question on hand and the
public interest attendant to the subject matter of the petition
justify its being filed with this Court directly as an original
7
action.
It is settled that the Regional Trial Court and the Court of
Appeals also exercise original jurisdiction over petitions for
certiorari and prohibition. As we have held in numerous
occasions, however, such concurrence of original jurisdiction
does not mean that the party seeking extraordinary writs has
the absolute freedom to file his petition in the court of his
8 civilian organization, within the ambit of statutes only
choice. Thus, in Commissioner of Internal Revenue v.
9 applying to government entities?
Leal, we held that:
Such concurrence of original jurisdiction among the Regional
Trial Court, the Court of Appeals and this Court, however, does
not mean that the party seeking any of the extraordinary writs
has the absolute freedom to file his petition in the court of his
choice. The hierarchy of courts in our judicial system
determines the appropriate forum for these petitions. Thus,
petitions for the issuance of the said writs against the first
level (inferior) courts must be filed with the Regional Trial
LABREL FULL TEXT CASES
Court and those against the latter, with the Court of Appeals.
A direct invocation of this Courts original jurisdiction to issue
these writs should be allowed only where there are special
and important reasons therefor, specifically and sufficiently
set forth in the petition. This is the established policy to
prevent inordinate demands upon the Courts time and
attention, which are better devoted to matters within its
exclusive jurisdiction, and to prevent further over-crowding of
the Courts docket. Thus, it was proper for petitioner to
institute the special civil action for certiorari with the Court of
Appeals assailing the RTC order denying his motion to dismiss
based on lack of jurisdiction.
The petition itself, in this case, does not specifically and
sufficiently set forth the special and important reasons why
the Court should give due course to this petition in the first
instance, hereby failing to fulfill the conditions set forth in
10
Commissioner of Internal Revenue v. Leal. While we reiterate
the policies set forth in Leal and allied cases and continue to
abhor the propensity of a number of litigants to disregard the
principle of hierarchy of courts in our judicial system, we,
however, resolve to take judicial notice of the fact that the
persons who stand to lose in a possible protracted litigation in
this case are war veterans, many of whom have precious little
time left to enjoy the benefits that can be conferred by
petitioner corporation. This bickering for the power over
petitioner corporation, an entity created to represent and
defend the interests of Filipino veterans, should be resolved as
soon as possible in order for it to once and for all direct its
resources to its rightful beneficiaries all over the country. All
these said, we hereby resolve to give due course to this
petition.
ISSUES
Petitioner mainly alleges that the rules and guidelines laid
down in the assailed Department Circular No. 04 expanded the
scope of "control and supervision" beyond what has been laid
11
down in Rep. Act No. 2640. Petitioner further submits the
following issues to this Court:
1. Was the challenged department circular passed in
the valid exercise of the respondent Secretarys
"control and supervision"?
2. Could the challenged department circular validly
lay standards classifying the VFP, an essentially
3. Does the department circular, which grants
respondent direct management control on the VFP,
unduly encroach on the prerogatives of VFPs
governing body?
At the heart of all these issues and all of petitioners prayers
and assertions in this case is petitioners claim that it is a
private non-government corporation.
Page 124 of 179
CENTRAL ISSUE:
IS THE VFP A PRIVATE CORPORATION?
Petitioner claims that it is not a public nor a governmental
entity but a private organization, and advances this claim to
prove that the issuance of DND Department Circular No. 04 is
an invalid exercise of respondent Secretarys control and
12
supervision.
This Court has defined the power of control as "the power of
an officer to alter or modify or nullify or set aside what a
subordinate has done in the performance of his duties and to
substitute the judgment of the former to that of the
13
latter." The power of supervision, on the other hand, means
"overseeing, or the power or authority of an officer to see that
subordinate officers perform their duties. If the latter fail or
neglect to fulfill them, the former may take such action or step
as prescribed by law to make them perform their
14
duties." These definitions are synonymous with the
definitions in the assailed Department Circular No. 04, while
the other provisions of the assailed department circular are
mere consequences of control and supervision as defined.
Thus, in order for petitioners premise to be able to support its
conclusion, petitioners should be deemed to imply either of
the following: (1) that it is unconstitutional/impermissible for
the law (Rep. Act No. 2640) to grant control and/or
supervision to the Secretary of National Defense over a private
organization, or (2) that the control and/or supervision that
can be granted to the Secretary of National Defense over a
private organization is limited, and is not as strong as they are
defined above.
The following provision of the 1935 Constitution, the organic
act controlling at the time of the creation of the VFP in 1960, is
relevant:
Section 7. The Congress shall not, except by general law,
provide for the formation, organization, or regulation of
private corporations, unless such corporations are owned and
controlled by the Government or any subdivision or
15
instrumentality thereof.
On the other hand, its counterparts in the 1973 and 1987
constitutions are the following:
Section 4. The National Assembly shall not, except by general
law, provide for the formation, organization, or regulation of
private corporations, unless such corporations are owned or
controlled by the government or any subdivision or
16
instrumentality thereof.
Sec. 16. The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations. Government-owned and controlled corporations
may be created or established by special charters in the
LABREL FULL TEXT CASES
interest of the common good and subject to the test of
17
economic viability.
From the foregoing, it is crystal clear that our constitutions
explicitly prohibit the regulation by special laws of private
corporations, with the exception of government-owned or
controlled corporations (GOCCs). Hence, it would be
impermissible for the law to grant control of the VFP to a
public official if it were neither a public corporation, an
18
unincorporated governmental entity, nor a GOCC. Said
constitutional provisions can even be read to prohibit the
creation itself of the VFP if it were neither of the three
mentioned above, but we cannot go into that in this case since
there is no challenge to the creation of the VFP in the petition
as to permit this Court from considering its nullity.
Petitioner vigorously argues that the VFP is a private non-
government organization, pressing on the following
contentions:
1. The VFP does not possess the elements which
would qualify it as a public office, particularly the
possession/delegation of a portion of sovereign
power of government to be exercised for the benefit
of the public;
2. VFP funds are not public funds because
a) No budgetary appropriations or
government funds have been released to the
VFP directly or indirectly from the
Department of Budget and Management
(DBM);
b) VFP funds come from membership dues;
c) The lease rentals raised from the use of
government lands reserved for the VFP are
private in character and do not belong to the
government. Said rentals are fruits of VFPs
labor and efforts in managing and
administering the lands for VFP purposes
and objectives. A close analogy would be any
Filipino citizen settling on government land
and who tills the land for his livelihood and
sustenance. The fruits of his labor belong to
him and not to the owner of the land. Such
fruits are not public funds.
3. Although the juridical personality of the VFP
emanates from a statutory charter, the VFP retains its
essential character as a private, civilian federation of
veterans voluntarily formed by the veterans
themselves to attain a unity of effort, purpose and
objectives, e.g.
Page 125 of 179
 a. The members of the VFP are individual
members and retirees from the public and
military service;
b. Membership in the VFP is voluntary, not
compulsory;
c. The VFP is governed, not by the Civil
Service Law, the Articles of War nor the GSIS
Law, but by the Labor Code and the SSS Law;
d. The VFP has its own Constitution and By-
Laws and is governed by a Supreme Council
who are elected from and by the members
themselves;
4. The Administrative Code of 1987 does not provide
that the VFP is an attached agency, nor does it
provide that it is an entity under the control and
supervision of the DND in the context of the
provisions of said code.
5. The DBM declared that the VFP is a non-
government organization and issued a certificate that
the VFP has not been a direct recipient of any funds
released by the DBM.
These arguments of petitioner notwithstanding, we are
constrained to rule that petitioner is in fact a public
corporation. Before responding to petitioners allegations one
by one, here are the more evident reasons why the VFP is a
public corporation:
(1) Rep. Act No. 2640 is entitled "An Act to Create a
Public Corporation to be Known as the Veterans
Federation of the Philippines, Defining its Powers,
and for Other Purposes."
(2) Any action or decision of the Federation or of the
Supreme Council shall be subject to the approval of
19
the Secretary of Defense.
(3) The VFP is required to submit annual reports of its
proceedings for the past year, including a full,
complete and itemized report of receipts and
expenditures of whatever kind, to the President of
the Philippines or to the Secretary of National
20
Defense.
(4) Under Executive Order No. 37 dated 2 December
1992, the VFP was listed as among the government-
owned and controlled corporations that will not be
privatized.
(5) In Ang Bagong Bayani OFW Labor Party v.
21
COMELEC, this Court held in a minute resolution
that the "VFP [Veterans Federation Party] is an
adjunct of the government, as it is merely an
LABREL FULL TEXT CASES
incarnation of the Veterans Federation of the
Philippines.
And now to answer petitioners reasons for insisting that it is a
private corporation:
1. Petitioner claims that the VFP does not possess the
elements which would qualify it as a public office, particularly
the possession/delegation of a portion of sovereign power of
government to be exercised for the benefit of the public;
22
In Laurel v. Desierto, we adopted the definition of Mechem
of a public office, that it is "the right, authority and duty,
created and conferred by law, by which, for a given period,
either fixed by law or enduring at the pleasure of the creating
power, an individual is invested with some portion of the
sovereign functions of the government, to be exercised by him
for the benefit of the public."
In the same case, we went on to adopt Mechems view that
the delegation to the individual of some of the sovereign
functions of government is "[t]he most important
characteristic" in determining whether a position is a public
23
office or not. Such portion of the sovereignty of the country,
either legislative, executive or judicial, must attach to the
office for the time being, to be exercised for the public benefit.
Unless the powers conferred are of this nature, the individual
is not a public officer. The most important characteristic which
distinguishes an office from an employment or contract is that
the creation and conferring of an office involves a delegation
to the individual of some of the sovereign functions of
government, to be exercised by him for the benefit of the
public; that some portion of the sovereignty of the country,
either legislative, executive or judicial, attaches, for the time
being, to be exercised for the public benefit. Unless the
powers conferred are of this nature, the individual is not a
24
public officer. The issue, therefore, is whether the VFAs
officers have been delegated some portion of the sovereignty
of the country, to be exercised for the public benefit.
In several cases, we have dealt with the issue of whether
certain specific activities can be classified as sovereign
functions. These cases, which deal with activities not
immediately apparent to be sovereign functions, upheld the
public sovereign nature of operations needed either to
25
promote social justice or to stimulate patriotic sentiments
26
and love of country.
As regards the promotion of social justice as a sovereign
function, we held in Agricultural Credit and Cooperative
Financing Administration (ACCFA) v. Confederation of Unions
27
in Government Corporations and Offices (CUGCO), that the
compelling urgency with which the Constitution speaks of
social justice does not leave any doubt that land reform is not
an optional but a compulsory function of sovereignty. The
same reason was used in our declaration that socialized
28
housing is likewise a sovereign function. Highly significant
Page 126 of 179
here is the observation of former Chief Justice Querube
Makalintal:
The growing complexities of modern society, however, have
rendered this traditional classification of the functions of
government [into constituent and ministrant functions] quite
unrealistic, not to say obsolete. The areas which used to be
left to private enterprise and initiative and which the
government was called upon to enter optionally, and only
"because it was better equipped to administer for the public
welfare than is any private individual or group of individuals,"
continue to lose their well-defined boundaries and to be
absorbed within activities that the government must
undertake in its sovereign capacity if it is to meet the
increasing social challenges of the times. Here[,] as almost
everywhere else[,] the tendency is undoubtedly towards a
greater socialization of economic forces. Here, of course, this
development was envisioned, indeed adopted as a national
policy, by the Constitution itself in its declaration of principle
29
concerning the promotion of social justice. (Emphasis
supplied.)
It was, on the other hand, the fact that the National
Centennial Celebrations was calculated to arouse and
stimulate patriotic sentiments and love of country that it was
30
considered as a sovereign function in Laurel v. Desierto. In
Laurel, the Court then took its cue from a similar case in the
United States involving a Fourth of July fireworks display. The
holding of the Centennial Celebrations was held to be an
executive function, as it was intended to enforce Article XIV of
the Constitution which provides for the conservation,
promotion and popularization of the nations historical and
cultural heritage and resources, and artistic relations.
In the case at bar, the functions of petitioner corporation
31
enshrined in Section 4 of Rep. Act No. 2640 should most
certainly fall within the category of sovereign functions. The
protection of the interests of war veterans is not only meant
to promote social justice, but is also intended to reward
patriotism. All of the functions in Section 4 concern the well-
being of war veterans, our countrymen who risked their lives
and lost their limbs in fighting for and defending our nation. It
would be injustice of catastrophic proportions to say that it is
beyond sovereigntys power to reward the people who
defended her.
Like the holding of the National Centennial Celebrations, the
functions of the VFP are executive functions, designed to
implement not just the provisions of Rep. Act No. 2640, but
also, and more importantly, the Constitutional mandate for
the State to provide immediate and adequate care, benefits
and other forms of assistance to war veterans and veterans of
32
military campaigns, their surviving spouses and orphans.
2. Petitioner claims that VFP funds are not public funds.
Petitioner claims that its funds are not public funds because no
budgetary appropriations or government funds have been
LABREL FULL TEXT CASES
released to the VFP directly or indirectly from the DBM, and
because VFP funds come from membership dues and lease
rentals earned from administering government lands reserved
for the VFP.
The fact that no budgetary appropriations have been released
to the VFP does not prove that it is a private corporation. The
DBM indeed did not see it fit to propose budgetary
appropriations to the VFP, having itself believed that the VFP is
33
a private corporation. If the DBM, however, is mistaken as to
its conclusion regarding the nature of VFPs incorporation, its
previous assertions will not prevent future budgetary
appropriations to the VFP. The erroneous application of the
law by public officers does not bar a subsequent correct
34
application of the law.
Nevertheless, funds in the hands of the VFP from whatever
source are public funds, and can be used only for public
purposes. This is mandated by the following provisions of Rep.
Act No. 2640:
(1) Section 2 provides that the VFP can only "invest its
funds for the exclusive benefit of the Veterans of the
Philippines;"
(2) Section 2 likewise provides that "(a)ny action or
decision of the Federation or of the Supreme Council
shall be subject to the approval of the Secretary of
National Defense." Hence, all activities of the VFP to
which the Supreme Council can apply its funds are
subject to the approval of the Secretary of National
Defense;
(3) Section 4 provides that "the Federation shall exist
solely for the purposes of a benevolent character, and
not for the pecuniary benefit of its
members;"1avvphil.net
(4) Section 6 provides that all funds of the VFP in
excess of operating expenses are "reserved for
disbursement, as the Supreme Council may authorize,
for the purposes stated in Section two of this Act;"
(5) Section 10 provides that "(a)ny donation or
contribution which from time to time may be made to
the Federation by the Government of the Philippines
or any of its subdivisions, branches, offices, agencies
or instrumentalities shall be expended by the
Supreme Council only for the purposes mentioned in
this Act."; and finally,
(6) Section 12 requires the submission of annual
reports of VFP proceedings for the past year,
including a full, complete and itemized report of
receipts and expenditures of whatever kind, to the
President of the Philippines or to the Secretary of
National Defense.
Page 127 of 179
It is important to note here that the membership dues
collected from the individual members of VFPs affiliate
organizations do not become public funds while they are still
funds of the affiliate organizations. A close reading of Section
35
1 of Rep. Act No. 2640 reveals that what has been created as
a body corporate is not the individual membership of the
affiliate organizations, but merely the aggregation of the
heads of the affiliate organizations. Thus, only the money
remitted by the affiliate organizations to the VFP partake in
the public nature of the VFP funds.
36
In Republic v. COCOFED, we held that the Coconut Levy
Funds are public funds because, inter alia, (1) they were meant
to be for the benefit of the coconut industry, one of the major
industries supporting the national economy, and its farmers;
and (2) the very laws governing coconut levies recognize their
public character. The same is true with regard to the VFP
funds. No less public is the use for the VFP funds, as such use
is limited to the purposes of the VFP which we have ruled to
be sovereign functions. Likewise, the law governing VFP funds
(Rep. Act No. 2640) recognizes the public character of the
funds as shown in the enumerated provisions above.
We also observed in the same COCOFED case that "(e)ven if
the money is allocated for a special purpose and raised by
37
special means, it is still public in character." In the case at
bar, some of the funds were raised by even more special
means, as the contributions from affiliate organizations of the
VFP can hardly be regarded as enforced contributions as to be
considered taxes. They are more in the nature of donations
which have always been recognized as a source of public
funding. Affiliate organizations of the VFP cannot complain of
their contributions becoming public funds upon the receipt by
the VFP, since they are presumed aware of the provisions of
Rep. Act No. 2640 which not only specifies the exclusive
purposes for which VFP funds can be used, but also provides
for the regulation of such funds by the national government
through the Secretary of National Defense. There is nothing
wrong, whether legally or morally, from raising revenues
through non-traditional methods. As remarked by Justice
Florentino Feliciano in his concurring opinion in Kilosbayan,
38
Incorporated v. Guingona, Jr. where he explained that the
funds raised by the On-line Lottery System were also public in
nature, thus:
x x x [T]he more successful the government is in raising
revenues by non-traditional methods such as PAGCOR
operations and privatization measures, the lesser will be the
pressure upon the traditional sources of public revenues, i.e.,
the pocket books of individual taxpayers and importers.
Petitioner additionally harps on the inapplicability of the case
39
of Laurel v. Desierto which was cited by Respondents.
Petitioner claims that among the reasons National Centennial
Commission Chair Salvador Laurel was considered a public
officer was the fact that his compensation was derived from
public funds. Having ruled that VFP funds from whatever
source are public funds, we can safely conclude that the
Supreme Councils compensation, taken as they are from VFP
LABREL FULL TEXT CASES
funds under the term "operating expenses" in Section 6 of
Rep. Act No. 2640, are derived from public funds. The
particular nomenclature of the compensation taken from VFP
funds is not even of relevance here. As we said in Laurel
concerning compensation as an element of public office:
Under particular circumstances, "compensation" has been
held to include allowance for personal expenses, commissions,
expenses, fees, an honorarium, mileage or traveling expenses,
payments for services, restitution or a balancing of accounts,
40
salary, and wages.
3. Petitioner argues that it is a civilian federation where
membership is voluntary.
Petitioner claims that the Secretary of National Defense
"historically did not indulge in the direct or
micromanagement of the VFP precisely because it is
essentially a civilian organization where membership is
41
voluntary." This reliance of petitioner on what has
"historically" been done is erroneous, since laws are not
repealed by disuse, custom, or practice to the
42
contrary. Furthermore, as earlier stated, the erroneous
application of the law by public officers does not bar a
43
subsequent correct application of the law.
Neither is the civilian nature of VFP relevant in this case. The
Constitution does not contain any prohibition, express or
implied, against the grant of control and/or supervision to the
Secretary of National Defense over a civilian organization. The
Office of the Secretary of National Defense is itself a civilian
office, its occupant being an alter ego of the civilian
Commander-in-Chief. This set-up is the manifestation of the
constitutional principle that civilian authority is, at all times,
44
supreme over the military. There being no such
constitutional prohibition, the creation of a civilian public
organization by Rep. Act No. 2640 is not rendered invalid by its
being placed under the control and supervision of the
Secretary of National Defense.
Petitioners stand that the VFP is a private corporation
because membership thereto is voluntary is likewise
erroneous. As stated above, the membership of the VFP is not
the individual membership of the affiliate organizations, but
merely the aggregation of the heads of such affiliate
organizations. These heads forming the VFP then elect the
45
Supreme Council and the other officers, of this public
corporation.
4. Petitioner claims that the Administrative Code of 1987 does
not provide that the VFP is an attached agency, and nor does it
provide that it is an entity under the control and supervision of
the DND in the context of the provisions of said code.
The Administrative Code, by giving definitions of the various
entities covered by it, acknowledges that its enumeration is
not exclusive. The Administrative Code could not be said to
have repealed nor enormously modified Rep. Act No. 2640 by
Page 128 of 179
implication, as such repeal or enormous modification by
46
implication is not favored in statutory construction.
5. Petitioner offers as evidence the DBM opinion that the VFP
is a non-government organization in its certification that the
VFP "has not been a direct recipient of any funds released by
the DBM."
Respondents claim that the supposed declaration of the DBM
that petitioner is a non-government organization is not
persuasive, since DBM is not a quasi-judicial agency. They aver
that what we have said of the Bureau of Local Government
Finance (BLGF) in Philippine Long Distance Telephone
47
Company (PLDT) v. City of Davao can be applied to DBM:
In any case, it is contended, the ruling of the Bureau of Local
Government Finance (BLGF) that petitioners exemption from
local taxes has been restored is a contemporaneous
construction of Section 23 [of R.A. No. 7925 and, as such, is
entitled to great weight.
The ruling of the BLGF has been considered in this case. But
unlike the Court of Tax Appeals, which is a special court
created for the purpose of reviewing tax cases, the BLGF was
created merely to provide consultative services and technical
assistance to local governments and the general public on
local taxation and other related matters. Thus, the rule that
the "Court will not set aside conclusions rendered by the CTA,
which is, by the very nature of its function, dedicated
exclusively to the study and consideration of tax problems and
has necessarily developed an expertise on the subject, unless
there has been an abuse or improvident exercise of authority"
cannot apply in the case of the BLGF.
On this score, though, we disagree with respondents and hold
that the DBMs appraisal is considered persuasive.
Respondents misread the PLDT case in asserting that only
quasi-judicial agencies determination can be considered
persuasive. What the PLDT case points out is that, for an
administrative agencys opinion to be persuasive, the
administrative agency involved (whether it has quasi-judicial
powers or not) must be an expert in the field they are giving
their opinion on.
The DBM is indeed an expert on determining what the various
government agencies and corporations are. This
determination is necessary for the DBM to fulfill its mandate:
Sec. 2. Mandate. - The Department shall be responsible for the
formulation and implementation of the National Budget with
the goal of attaining our national socio-economic plans and
objectives.
The Department shall be responsible for the efficient and
sound utilization of government funds and revenues to
effectively achieve our country's development objectives.
48
LABREL FULL TEXT CASES
The persuasiveness of the DBM opinion has, however, been
overcome by all the previous explanations we have laid so far.
It has also been eclipsed by another similarly persuasive
opinion, that of the Department of National Defense
embodied in Department Circular No. 04. The DND is clearly
more of an expert with respect to the determination of the
entities under it, and its Administrative Rules and Regulations
are entitled to great respect and have in their favor the
49
presumption of legality.
The DBM opinion furthermore suffers from its lack of
explanation and justification in the "certification of non-
receipt" where said opinion was given. The DBM has not
furnished, in said certification or elsewhere, an explanation for
its opinion that VFP is a non-government organization.
THE FATE OF DEPARTMENT CIRCULAR NO. 04
Our ruling that petitioner is a public corporation is
determinative of whether or not we should grant petitioners
prayer to declare Department Circular No. 04 void.
Petitioner assails Department Circular No. 04 on the ground
that it expanded the scope of control and supervision beyond
what has been laid down in Rep. Act No. 2640. Petitioner
alleges that "(t)he equation of the meaning of `control and
`supervision of the Administrative Code of 1987 as the same
`control and supervision under Rep. Act No. 2640, takes out
the context of the original legislative intent from the peculiar
surrounding circumstances and conditions that brought about
50
the creation of the VFP." Petitioner claims that the VFP "was
intended as a self-governing autonomous body with a
Supreme Council as governing authority," and that the assailed
circular "pre-empts VFPs original self-governance and
autonomy (in) representing veterans organizations, and
substitutes government discretion and decisions to that of the
51
veterans own determination." Petitioner says that the
circulars provisions practically render the Supreme Council
inutile, despite its being the statutory governing body of the
52
VFP.
As previously mentioned, this Court has defined the power of
control as "the power of an officer to alter or modify or nullify
or set aside what a subordinate has done in the performance
of his duties and to substitute the judgment of the former to
53
that of the latter." The power of supervision, on the other
hand, means "overseeing, or the power or authority of an
officer to see that subordinate officers perform their
54 55
duties." Under the Administrative Code of 1987:
Supervision and control shall include the authority to act
directly whenever a specific function is entrusted by law or
regulation to a subordinate; direct the performance of duty;
restrain the commission of acts; review, approve, reverse or
modify acts and decisions of subordinate officials or units;
determine priorities in the execution of plans and programs;
and prescribe standards, guidelines, plans and programs. x x x
Page 129 of 179
The definition of the power of control and supervision under
Section 2 of the assailed Department Circular are synonymous
with the foregoing definitions. Consequently, and considering
that petitioner is a public corporation, the provisions of the
assailed Department Circular No. 04 did not supplant nor
modify the provisions of Republic Act No. 2640, thus not
violating the settled rule that "all such (administrative)
issuances must not override, but must remain consistent and
in harmony with the law they seek to apply or implement.
Administrative rules and regulations are intended to carry out,
56
neither to supplant nor to modify, the law."
Section 3.2 of the assailed department circular, which
authorizes the Secretary of National Defense to "x x x
personally or through a designated representative, require the
submission of reports, documents and other papers regarding
any or all of the Federations business functions, x x x."
as well as Section 3.3 which allows the Secretary of DND to
x x x [F]rom time to time issue guidelines, directives and other
orders governing vital government activities including, but not
limited to, the conduct of elections, the acquisition,
management and dispositions of properties, the accounting of
funds, financial interests, stocks and bonds, corporate
investments, etc. and such other transactions which may
affect the interests of the veterans.
are merely consequences of both the power of control and
supervision granted by Rep. Act No. 2640. The power to alter
or modify or nullify or set aside what a subordinate has done
in the performance of his duties, or to see to it that
subordinate officers perform their duties in accordance with
law, necessarily requires the ability of the superior officer to
monitor, as closely as it desires, the acts of the subordinate.
The same is true with respect to Sections 4 and 5 of the
assailed Department Circular No. 04, which requires the
preservation of the records of the Federation and the
submission to the Secretary of National Defense of annual and
periodic reports.
Petitioner likewise claims that the assailed DND Department
Circular No. 04 was never published, and hence
57 58
void. Respondents deny such non-publication.
We have put forth both the rule and the exception on the
publication of administrative rules and regulations in the case
59
of Taada v. Tuvera:
x x x Administrative rules and regulations must also be
published if their purpose is to enforce or implement existing
law pursuant also to a valid delegation.
Interpretative regulations and those merely internal in nature,
that is, regulating only the personnel of the administrative
agency and not the public, need not be published. Neither is
publication required of the so-called letters of instructions
LABREL FULL TEXT CASES
issued by administrative superiors concerning the rules on
guidelines to be followed by their subordinates in the
performance of their duties.
Even assuming that the assailed circular was not published, its
validity is not affected by such non-publication for the reason
that its provisions fall under two of the exceptions
enumerated in Taada.
Department Circular No. 04 is an internal regulation. As we
have ruled, they are meant to regulate a public corporation
under the control of DND, and not the public in general. As
likewise discussed above, what has been created as a body
corporate by Rep. Act No. 2640 is not the individual
membership of the affiliate organizations of the VFP, but
merely the aggregation of the heads of the affiliate
organizations. Consequently, the individual members of the
affiliate organizations, who are not public officers, are beyond
the regulation of the circular.
Sections 2, 3 and 6 of the assailed circular are additionally
merely interpretative in nature. They add nothing to the law.
They do not affect the substantial rights of any person,
whether party to the case at bar or not. In Sections 2 and 3,
control and supervision are defined, mentioning actions that
can be performed as consequences of such control and
supervision, but without specifying the particular actions that
shall be rendered to control and supervise the VFP. Section 6,
in the same vein, merely state what the drafters of the circular
perceived to be consequences of being an attached agency to
a regular department of the government, enumerating
sanctions and remedies provided by law that may be availed of
whenever desired.
Petitioner then objects to the implementation of Sec. 3.4 of
the assailed Department Circular, which provides that
3.4 Financial transactions of the Federation shall follow the
provisions of the government auditing code (PD 1445) i.e.
government funds shall be spent or used for public purposes;
trust funds shall be available and may be spent only for the
specific purpose for which the trust was created or the funds
received; fiscal responsibility shall, to the greatest extent, be
shared by all those exercising authority over the financial
affairs, transactions, and operations of the federation;
disbursements or dispositions of government funds or
property shall invariably bear the approval of the proper
officials.
Since we have also previously determined that VFP funds are
public funds, there is likewise no reason to declare this
provision invalid. Section 3.4 is correct in requiring the VFP
funds to be used for public purposes, but only insofar the term
"public purposes" is construed to mean "public purposes
enumerated in Rep. Act No. 2640."
Page 130 of 179
Having in their possession public funds, the officers of the VFP,
especially its fiscal officers, must indeed share in the fiscal
responsibility to the greatest extent.

As to petitioners allegation that VFP was intended as a self-

governing autonomous body with a Supreme Council as
governing authority, we find that the provisions of Rep. Act
No. 2640 concerning the control and supervision of the
Secretary of National Defense clearly withholds from the VFP
complete autonomy. To say, however, that such provisions
render the VFP inutile is an exaggeration. An office is not
rendered inutile by the fact that it is placed under the control
of a higher office. These subordinate offices, such as the
executive offices under the control of the President, exercise
discretion at the first instance. While their acts can be altered
or even set aside by the superior, these acts are effective and
are deemed the acts of the superior until they are modified.
Surely, we cannot say that the offices of all the Department
Secretaries are worthless positions.

In sum, the assailed DND Department Circular No. 04 does not

supplant nor modify and is, on the contrary, perfectly in
consonance with Rep. Act No. 2640. Petitioner VFP is a public
corporation. As such, it can be placed under the control and
supervision of the Secretary of National Defense, who
consequently has the power to conduct an extensive
management audit of petitioner corporation.

WHEREFORE, the Petition is hereby DISMISSED for lack of

merit. The validity of the Department of National Defense
Department Circular No. 04 is AFFIRMED.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

LABREL FULL TEXT CASES Page 131 of 179

THIRD DIVISION
G.R. No. 80767 April 22, 1991
BOY SCOUTS OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FORTUNATO
ESGUERRA, ROBERTO MALABORBOR, ESTANISLAO MISA,
VICENTE EVANGELISTA, and MARCELINO
GARCIA, respondents.
Julio O. Lopez for petitioner.
FELICIANO, J.:
This Petition for Certiorari is directed at (1)
1
Decision, dated 27 February 1987, and (2)
2 Meanwhile, in a letter of the same date, the BSP National
Resolution dated 16 October 1987, both issued by
National Labor Relations Commission ("NLRC") in Case
1637-84.
Private respondents Fortunato C. Esquerra, Roberto O.
Malaborbor, Estanislao M. Misa, Vicente N. Evangelista and
Marcelino P. Garcia, had all been rank-and-file employees of
petitioner Boy Scouts of the Philippines ("BSP"). At the time of
termination of their services in February 1985, private
respondents were stationed at the BSP Camp in Makiling, Los
Baos, Laguna.
The events which led to such termination of services are as
follows:
On 19 October 1984, the Secretary-General of petitioner BSP
issued Special Orders Nos. 80, 81, 83, 84 and 85 addressed
separately to the five (5) private respondents, informing them
that on 20 November 1984, they were to be transferred from
the BSP Camp in Makiling to the BSP Land Grant in Asuncion,
Davao del Norte. These Orders were opposed by private
respondents who, on 4 November 1984, appealed the matter
to the BSP National President.
On 6 November 1984, petitioner BSP conducted a pre-transfer
briefing at its National Headquarters in Manila. Private
respondents were in attendance during the briefing and they
were there assured that their transfer to Davao del Norte
would not involve any diminution in salary, and that each of
them would receive a relocation allowance equivalent to one
(1) month's basic pay. This assurance, however, failed to
persuade private respondents to abandon their opposition to
the transfer orders issued by the BSP Secretary-General.
3 entered ordering the respondent-appellee [petitioner
On 13 November 1984, a complaint
LABREL FULL TEXT CASES
(docketed as NLRC Case No. 16-84J) for illegal transfer was
filed with the then Ministry of Labor and Employment, Sub-
Regional Arbitration Branch IV, San Pablo City, Laguna. Private
respondents there sought to enjoin implementation of Special
Orders Nos. 80, 81, 83, 84 and 85, alleging, among other
things, that said orders were "indubitable and irrefutable
action[s] prejudicial not only to [them] but to [their] families
and [would] seriously affect [their] economic stability and
solvency considering the present cost of living."
On 21 November 1984 (or the day immediately following the
date of scheduled transfer), the BSP Camp Manager in
Makiling issued a Memorandum requiring the five (5) private
respondents to explain why they should not be charged
administratively for insubordination. The Memorandum was a
direct result of the refusal by private respondents, two (2)
days earlier, to accept from petitioner BSP their respective
boat tickets to Davao del Norte and their relocation
allowances.
the
the
the
President informed private respondents that their refusal to
No.
comply with the Special Orders was not sufficiently justified
and constituted rank disobedience. Memoranda subsequently
issued by the BSP Secretary-General stressed that such refusal
as well as the explanations proffered therefor, were
unacceptable and could altogether result in termination of
employment with petitioner BSP. These warnings
notwithstanding, private respondents continued
pertinaciously to disobey the disputed transfer orders.
Petitioner BSP consequently imposed a five-day suspension on
the five (5) private respondents, in the latter part of January
1985. Subsequently, by Special Order dated 12 February 1985
issued by the BSP Secretary-General, private respondents'
services were ordered terminated effective 15 February 1985.
On 22 February 1985, private respondents amended their
original complaint to include charges of illegal dismissal and
unfair labor practice against petitioner BSP.
4
The Labor Arbiter thereafter proceeded to hear the complaint.
5
In a decision dated 31 July 1985, the Labor Arbiter ordered
the dismissal of private respondents' complaint for lack of
merit.
On 27 February 1987, however, the ruling of the Labor Arbiter
was reversed by public respondent, NLRC, which held that
private respondents had been illegally dismissed by petitioner
BSP. The dispositive portion of the NLRC decision read:
WHEREFORE, premises considered the Decision
appealed from is hereby SET ASIDE and a new one
BSP] to reinstate the complainants-appellants [private
respondents] to their former positions without loss of
seniority rights and other benefits appurtenant
Page 132 of 179
 thereto and with full backwages from the time they
were illegally dismissed from the service up to the
date of their actual reinstatement.
SO ORDERED.
6
The Court notes at the outset that in the Position Paper filed
by petitioner BSP with the Labor Arbiter, it was alleged in the
second paragraph thereof, that petitioner is a "civic service,
non-stock and non-profit organization, relying mostly [on]
government and public support, existing under and by virtue of
Commonwealth Act No. 111, as amended, by Presidential
Decree No. 460 . . . " A similar allegation was contained in the
7 8
Brief for Appellee and in the Petition and
9
Memorandum filed by petitioner BSP with public respondent
NLRC and this Court, respectively. The same allegation,
10
moreover, appeared in the Comment (also treated as the
Memorandum) submitted to this Court by the Solicitor
General on behalf of public respondent NLRC; for their part,
private respondents stated in their Appeal
11
Memorandum with the NLRC that petitioner BSP is "by
mandate of law a Public Corporation," a statement reiterated
12
by them in their Memorandum before this Court.
In a Resolution dated 9 August 1989, this Court required the
parties and the Office of the Government Corporate Counsel
to file a comment on the question of whether or not petitioner
BSP is in fact a government-owned or controlled corporation.
Petitioner, private respondents, the Office of the Solicitor
General and the Office of the Government Corporate Counsel
filed their respective comments.
The central issue is whether or not the BSP is embraced within
the Civil Service as that term is defined in Article IX (B) (2) (1)
of the 1987 Constitution which reads as follows:
The Civil Service embraces all branches, subdivisions,
instrumentality mentalities and agencies of the
Government, including government-owned or
controlled corporations with original charters.
xxx xxx xxx
The answer to the central issue will determine whether or not
private respondent NLRC had jurisdiction to render the
Decision and Resolution which are here sought to be nullified.
The responses of the parties, on the one hand, and of the
Office of the Solicitor General and the Office of the
Government Corporate Counsel, upon the other hand, in
compliance with the Resolution of this Court of 9 August 1989,
present a noteworthy uniformity. Petitioner BSP and private
respondents submit substantially the same view "that the BSP
is a purely private organization". In contrast, the Solicitor
General and the Government Corporate Counsel take much
the same position, that is, that the BSP is a "public
corporation' or a "quasi-public corporation" and, as well, a
LABREL FULL TEXT CASES
"government controlled corporation." Petitioner BSP's
compliance with our Resolution invokes the following
provisions of its Constitution and By-laws:
The Boy Scouts of the Philippines declares that it is an
independent, voluntary, non-political, non-sectarian
and non-governmental organization, with obligations
towards nation building and with international
orientation.
The BSP, petitioner stresses, does not receive any monetary or
financial subsidy from the Government whether on the
13
national or local level. Petitioner declares that it is a "purely
private organization" directed and controlled by its National
Executive Board the members of which are, it is said, all
14
"voluntary scouters," including seven (7) Cabinet Secretaries.
Private respondents submitted a supplementary
memorandum arguing that while petitioner BSP was created
as a public corporation, it had lost that status when Section 2
of Commonwealth Act No. 111 as amended by P.D. No. 460
conferred upon it the powers which ordinary private
corporations organized under the Corporation Code have:
Sec. 2. The said corporation shall have perpetual
succession with power to sue and be sued; to hold
such real and personal estate as shall be necessary for
corporate purposes, and to receive real and personal
property by gift, devise, or bequest; to adopt a seal,
and to alter or destroy the same at pleasure; to have
offices and conduct its business and affairs in the City
of Manila and in the several provinces; to make and
adopt by-laws, rules and regulations not inconsistent
with the laws of the Philippines, and generally to do
all such acts and things (including the establishment
of regulations for the election of associates and
successors: as may be necessary to carry into effect
the provisions of the Act and promote the purposes
of said corporation.
Private respondents also point out that the BSP is registered as
a private employer with the Social Security System and that all
its staff members and employees are covered by the Social
Security Act, indicating that the BSP had lost its personality or
standing as a public corporation. It is further alleged that the
BSP's assets and liabilities, official transactions and financial
statements have never been subjected to audit by the
government auditing office, i.e., the Commission on Audit,
being audited rather by the private auditing firm of Sycip
Gorres Velayo and Co. Private respondents finally state that
the appointments of BSP officers and staff were not approved
or confirmed by the Civil Service Commission.
The views of the Office of the Solicitor General and the Office
of the Government Corporate Counsel on the above issue
appeared to be generally similar. The Solicitor General's Office,
although it had appeared for the NLRC and filed a Comment
on the latter's behalf on the merits of the Petition
Page 133 of 179
for Certiorari, submitted that the BSP is a government-owned directly chartered by special law or if organized under
or controlled corporation, having been created by virtue of the general corporation law is owned or controlled by
Commonwealth Act No. 111 entitled "An Act to Create a Public the government directly, or indirectly through a
Corporation to be known as the Boy Scouts of the Philippines parent corporation or subsidiary corporation, to the
and to Define its Powers and Purposes." The Solicitor General extent of at least a majority of its outstanding capital
stressed that the BSP was created in order to "promote, stock or its outstanding voting capital stock.
through organization, and cooperation with other agencies the
ability of boys to do things for themselves and others, to train xxx xxx xxx
them in scoutcraft, and to teach them patriotism, courage,
self-reliance, and kindred virtues, using the methods which are (Emphasis supplied)
5
now in common use by boy scouts." He further noted that the
BSP's objectives and purposes are "solely of a benevolent
16 Examining the relevant statutory provisions and the
character and not for pecuniary profit by its members. The
arguments outlined above, the Court considers that the
Solicitor General also underscored the extent of government
following need to be considered in arriving at the appropriate
participation in the BSP under its charter as reflected in the
legal characterization of the BSP for purposes of determining
composition of its governing body:
whether its officials and staff members are embraced in the
Civil Service. Firstly, BSP's functions as set out in its statutory
The governing body of the said corporation shall charter do have a public aspect. BSP's functions do relate to
consist of a National Executive Board composed of (a) the fostering of the public virtues of citizenship and patriotism
thePresident of the Philippines or his representative; and the general improvement of the moral spirit and fiber of
(b) the charter and life members of the Boy Scouts of our youth. The social value of activities like those to which the
the Philippines; (c) the Chairman of the Board of BSP dedicates itself by statutory mandate have in fact, been
Trustees of the Philippine Scouting Foundation; (d) accorded constitutional recognition. Article II of the 1987
the Regional Chairman of the Scout Regions of the Constitution includes in the "Declaration of Principles and
Philippines; (e) the Secretary of Education and State Policies," the following:
Culture, the Secretary of Social Welfare, the Secretary
of National Defense, the Secretary of Labor, the
Sec. 13. The State recognizes the vital role of the
Secretary of Finance, the Secretary of Youth and
youth in nation-building and shall promote and
Sports, and the Secretary of local Government and
protect their physical, moral, spiritual, intellectual,
Community Development; (f) an equal number of
and social well-being. It shall inculcate in the youth
individuals from the private sector; (g) the National
patriotism and nationalism, and encourage their
President of the Girl Scouts of the Philippines; (h) one
involvement in public and civic affairs.
Scout of Senior age from each Scout Region to
represent the boy membership; and (i) three
At the same time, BSP's sanctions do not relate to the
representatives of the cultural minorities. Except for
governance of any part of territory of the Philippines; BSP is
the Regional Chairman who shall be elected by the
not a public corporation in the same sense that municipal
Regional Scout Councils during their annual meetings,
corporations or local governments are public corporations.
and the Scouts of their respective regions, all
BSP's functions can not also be described as proprietary
members of the National Executive Board shall be
functions in the same sense that the functions or activities of
either by appointment or cooption, subject to
government-owned or controlled corporations like the
ratification and confirmation by the Chief Scout, who
17 National Development Company or the National Steel
shall be the Head of State. . . . (Emphasis supplied)
Corporation can be described as proprietary or "business-like"
in character. Nevertheless, the public character of BSP's
The Government Corporate Counsel, like the Solicitor General,
functions and activities must be conceded, for they pertain to
describes the BSP as a "public corporation" but, unlike the
the educational, civic and social development of the youth
Solicitor General, suggests that the BSP is more of a "quasi
which constitutes a very substantial and important part of the
corporation" than a "public corporation." The BSP, unlike most
nation.
public corporations which are created for a political purpose,
is not vested with political or governmental powers to be
The second aspect that the Court must take into account
exercised for the public good or public welfare in connection
relates to the governance of the BSP. The composition of the
with the administration of civil government. The Government
National Executive Board of the BSP includes, as noted from
Corporate Counsel submits, more specifically, that the BSP
Section 5 of its charter quoted earlier, includes seven (7)
falls within the ambit of the term "government-owned or
Secretaries of Executive Departments. The seven (7)
controlled corporation" as defined in Section 2 of P.D. No.
Secretaries (now six [6] in view of the abolition of the
2029 (approved on 4 February 1986) which reads as follows:
Department of Youth and Sports and merger thereof into the
Department of Education, Culture and Sports) by themselves
A government-owned or controlled corporation is a
do not constitute a majority of the members of the National
stock or a non-stock corporation, whether performing
Executive Board. We must note at the same time that the
governmental or proprietary functions, which is
LABREL FULL TEXT CASES Page 134 of 179
appointments of members of the National Executive Board,
except only the appointments of the Regional Chairman and
Scouts of Senior age from the various Scout Regions, are
subject to ratification and confirmation by the Chief Scout,
who is the President of the Philippines. Vacancies to the Board
are filled by a majority vote of the remaining members
thereof, but again subject to ratification and confirmation by
18
the Chief Scout. We must assume that such confirmation or
ratification involves the exercise of choice or discretion on the
part of ratifying or confirming power. It does appears
therefore that there is substantial governmental (i.e.,
Presidential) participation or intervention in the choice of the
majority of the members of the National Executive Board of
the BSP.
The third aspect relates to the character of the assets and
funds of the BSP. The original assets of the BSP were acquired
by purchase or gift or other equitable arrangement with the
Boy Scouts of America, of which the BSP was part before the
establishment of the Commonwealth of the Philippines. The
BSP charter, however, does not indicate that such assets were
public or statal in character or had originated from the
Government or the State. According to petitioner BSP, its
operating funds used for carrying out its purposes and
programs, are derived principally from membership dues paid
by the Boy Scouts themselves and from property rentals. In
this respect, the BSP appears similar to private non-stock, non-
profit corporations, although its charter expressly envisages
donations and contributions to it from the Government and
19
any of its agencies and instrumentalities. We note only that
BSP funds have not apparently heretofore been regarded as
public funds by the Commission on Audit, considering that
such funds have not been audited by the Commission.
While the BSP may be seen to be a mixed type of entity,
combining aspects of both public and private entities, we
believe that considering the character of its purposes and its
functions, the statutory designation of the BSP as "a public
corporation" and the substantial participation of the
Government in the selection of members of the National
Executive Board of the BSP, the BSP, as presently constituted
under its charter, is a government-controlled corporation
within the meaning of Article IX. (B) (2) (1) of the Constitution.
We are fortified in this conclusion when we note that the
Administrative Code of 1987 designates the BSP as one of the
attached agencies of the Department of Education, Culture
20
and Sports ("DECS"). An "agency of the Government" is
defined as referring to any of the various units of the
Government including a department, bureau, office,
instrumentality, government-owned or-controlled
corporation, or local government or distinct unit
21
therein. "Government instrumentality" is in turn defined in
the 1987 Administrative Code in the following manner:
Instrumentality refers to any agency of the
National Government, not integrated within the
department framework, vested with special functions
or jurisdiction by law, endowed with some if not all
LABREL FULL TEXT CASES
corporate powers, administering special funds,
and enjoying operational autonomy usually through a
charter. This term includes regulatory agencies,
chartered institutions and government-owned or
22
controlled corporations. (Emphasis supplied)
The same Code describes a "chartered institution" in the
following terms:
Chartered institution refers to any agency
organized or operating under a special charter, and
vested by law with functions relating to specific
constitutional policies or objectives. This term
includes the state universities and colleges, and the
23
monetary authority of the State. (Emphasis
supplied)
We believe that the BSP is appropriately regarded as "a
government instrumentality" under the 1987 Administrative
Code.
It thus appears that the BSP may be regarded as both a
"government controlled corporation with an original charter"
and as an "instrumentality" of the Government within the
meaning of Article IX (B) (2) (1) of the Constitution. It follows
that the employees of petitioner BSP are embraced within the
Civil Service and are accordingly governed by the Civil Service
Law and Regulations.
It remains only to note that even before the effectivity of the
1987 Constitution employees of the BSP already fell within the
scope of the Civil Service. In National Housing Corporation v.
24
Juco, decided in 1985, the Court, speaking through Mr.
Justice Gutierrez, held:
There should no longer be any question at this time
that employees of government-owned or controlled
corporations are governed by the civil service law and
civil service rules and regulations.
Section 1, Article XII-B of the [19731 Constitution
specifically provides:
The Civil Service embraces every branch, agency,
subdivision and instrumentality of the Government,
including every government-owned or controlled
corporation. . . .
The 1935 Constitution had a similar provision in its
Section 1, Article XII which stated:
A Civil Service embracing all branches and
subdivisions of the Government shall be provided by
law.1wphi1
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
Page 135 of 179
 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
25
corporate arms is concerned.

The complaint in NLRC Case No. 1637-84 having been filed on

13 November 1984, when the 1973 Constitution was still in
26
force, our ruling in Juco applies in the case at bar.

In view of the foregoing, we hold that both the Labor Arbiter

and public respondent NLRC had no jurisdiction over the
complaint filed by private respondents in NLRC Case No. 1637-
84; neither labor agency had before it any matter which could
validly have been passed upon by it in the exercise of original
or appellate jurisdiction. The appealed Decision and
Resolution in this case, having been rendered without
jurisdiction, vested no rights and imposed no liabilities upon
any of the parties here involved. That neither party had
expressly raised the issue of jurisdiction in the pleadings poses
no obstacle to this ruling of the Court, which may motu
proprio take cognizance of the issue of existence or absence of
27
jurisdiction and pass upon the same.

ACCORDINGLY, the Decision of the Labor Arbiter dated 31 July

1985, and the Decision dated 27 February 1987 and Resolution
dated 16 October 1987, issued by public respondent NLRC, in
NLRC Case No. 1637-84, are hereby SET ASIDE. All other orders
and resolutions rendered in this case by the Labor Arbiter and
the NLRC are likewise SET ASIDE. No pronouncement as to
costs.

Fernan, C.J., Gutierrez, Jr., Bidin and Davide Jr., JJ., concur.

LABREL FULL TEXT CASES Page 136 of 179

FIRST DIVISION
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.
G.R. No. 84300 April 17, 1989
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.
LABREL FULL TEXT CASES
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
Page 137 of 179
those employees shall be governed by the civil service law, application of the Civil Service Law
rules and regulations. The pertinent part of this Court's was removed from the statute books.
decision reads as follows:
This is not the first time that officials of the
The only question here is whether or not Department of Labor and Employment have
local water districts are government owned taken the position that the Labor Arbiter
or controlled corporations whose employees here adopted. In Baguio Water District vs.
are subject to the provisions of the Civil Cresenciano B. Trajano etc., et al. (127 SCRA
Service Law. The Labor Arbiter asserted 730 [1984]), the petitioner Water District
jurisdiction over the alleged illegal dismissal sought review of a decision of the Bureau of
of private respondent Villanueva by relying Labor Relations which affirmed that of a
on Section 25 of Presidential Decree No. 198, Med-Arbiter calling for a certification
known as the 'Provincial Water Utilities Act election among the regular rank-and-file
of 1973' which went into effect on 25 May employees of the Baguio Water District
1973, and which provides as follows: (BWD). In granting the petition, the Court
said
Exemption from Civil Service. The district
and its employees, being engaged in a The Baguio Water District was formed
proprietary function, are hereby exempt pursuant to Title II Local Water District
from the provisions of the Civil Service Law. Law of P.D. No. 198, as amended. The
Collective Bargaining shall be available only BWD is by Sec. 6 of that decree 'a quasi-
to personnel below supervisory public corporation performing public service
levels: Provided, however, That the total of and supplying public wants'.
all salaries, wages, emoluments, benefits or
other compensation paid to all employees in xxxxxx
any month shall not exceed fifty percent
(50%) of average net monthly revenue, said We grant the petition for the following
net revenue representing income from water reasons:
sales and sewerage service charges, less pro-
rata share of debt service and expenses for
I. Section 25 of P.D. No. 198 was repealed by
fuel or energy for pumping during the
Sec. 3 of P.D. No. 1479; Section 26 of P.E. No.
preceding fiscal year.
198 was amended to read as Sec. 25 by Sec.
4 of P.D. No. 1479. The amendatory decree
The Labor Arbiter failed to take into account took effect on June 11, 1978.
the provisions of Presidential, Decree No.
1479, which went into effect on 11 June
xxxxxxxxx
1978. P.D. No. 1479 wiped away Section 25
of P.D. 198 quoted above, and Section 26 of
3. The BWD is a corporation created
P.D. 198 was renumbered as Section 25 in
pursuant to a special law P.D. No. 198, as
the following manner:
amended. As such its officers and employees
are part of the Civil Service. (Sec. 1, Art. XII-
Section 26. of the same decree P.D. 198 is
B, [1973] Constitution; P.D. No. 868.)
hereby amended to read as Section 25 as
follows:
The hiring and firing of employees of government-owned or
controlled corporations are governed by the Civil Service Law
Section 25. Authorization. The district may
and Civil Service Rules and Regulations. In National Housing
exercise all the powers which are expressly
Corporation vs. Juco, 134 SCRA 172,176, We held:
granted by this Title or which are necessarily
implied from or incidental to the powers and
There should no longer be any question at
purposes herein stated. For the purpose of
carrying out the objectives of this Act, a this time that employees of government-
owned or controlled corporations are
district is hereby granted the power of
governed by the civil service law and civil
eminent domain, the exercise thereof shall,
service rules and regulations.
however, be subject to review by the
Administration.
Section 1, Article XII-B of the [1973]
Constitution specifically provides:
Thus, Section 25 of P.D. 198 exempting the
employees of water districts from the

LABREL FULL TEXT CASES Page 138 of 179

 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
'government-owned 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 government-owned or controlled
LABREL FULL TEXT CASES
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
Page 139 of 179
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.

LABREL FULL TEXT CASES Page 140 of 179

FIRST DIVISION the complaint should be resolved by the labor arbiters.
Instead, he now asserts that: (a) PAGCOR is a part of the Civil
G.R. No. 93396 September 30, 1991 Service and not a private corporation governed by the Labor
Code; (b) the complaint flied by Montoya is cognizable by the
PHILIPPINE AMUSEMENT AND GAMING Merit System Protection Board and not the Regional Trial
CORPORATION, petitioner, Court; (c) the plaintiff has not exhausted administrative
vs. remedies; and (d) in any case, the termination of the plaintiff s
THE COURT OF APPEALS, HON. ELIODORO B. GUINTO, in his service was not unlawful.
capacity as Presiding Judge, Br. LVIII, RTC of Angeles City and
JOEL MONTOYA, respondents. We gave due course to the petition and required the parties to
submit their respective memoranda. After considering the
Ranel L. Trinidad for private respondent. same and the pertinent laws and jurisprudence, we find that
the petition must be granted.

It must be stated at the outset that the ruling in the Juico Case
has since been modified under the 1987 Constitution as
CRUZ, J.:p
applied in the later case of National Services Corporation v.
4
NLRC. It is now settled that, conformably to Article EK-
On May 3, 1988, the Philippine Amusement & Gaming
B,Section 2(1), government-owned or controlled corporations
Corporation (PAGCOR) terminated the services of private
shall be considered part of the Civil Service only if they have
respondent Joel Montoya as Table Supervisor at Casino
original charters, as distinguished from those created under
Filipino on the ground of loss of confidence. He was formally
general law.
notified of this action on May 5, 1988.
PAGCOR belongs to the Civil Service because it was created
Alleging that he had been dismissed without due process of
directly by PD 1869 on July 11, 1983. Consequently,
law, Montoya lodged with the Regional Trial Court of Angeles
controversies concerning the relations of the employees with
City on June 7, 1988, a complaint for damages and attorney's
the management of PAGCOR should come under the
fees against PAGCOR. PAGCOR filed a motion to dismiss
jurisdiction of the Merit System Protection Board and the Civil
challenging the jurisdiction of the court.
Service Commission, conformably to the Administrative Code
of 1987.
The movant contended that, being a money claim arising from
the plaintiffs alleged illegal dismissal, the complaint was
Section 16(2) of the said Code vest in the Merit System
cognizable only by the labor arbiter and the National Labor Protection Board the power inter alia to:
Relations Commission. Montoya insisted, however, that
PAGCOR was a government-controlled corporation created
(a) Hear and decide on appeal administrative
under PD 1869 and therefore not covered by the Labor Code.
cases involving officials and employees of
the Civil Service. Its decision shall be final
The trial court denied the motion. In his Order dated
1 except those involving dismissal or
November 18, 1988, Judge Eliodoro B. Guinto applied the
2 separation from the service which may be
ruling in the case of National Housing Authority v. Juico and appealed to the Commission.
held that PAGCOR, being a government-owned or controlled
corporation, belonged to the Civil Service. Nevertheless, he
Applying this rule, we have upheld the jurisdiction of the Civil
added, PD 807 did not vest exclusive jurisdiction on the Civil
Service authorities, as against Chat of the labor authorities, in
Service Commission over complaints of government
controversies involving the terms of employment, and other
employees, as these could also come under the "broad and
related issues, of the Civil Service officials and employees.
encompassing" jurisdiction of the regional trial courts under 5
Thus, in Tanjay Water District v. Gabaton, to take only one
BP 129.
example, we held:
The order was affirmed on appeal in the decision of the
3 Significantly, Article IX(B), Section 2(1) of the 1987
respondent court dated February 16, 1990. It was there held
Constitution provides that "(t)he civil service embraces all
that the issue raised in the lower court did not involve a labor
branches, subdivisions, instrumentalities, and agencies of the
dispute because the allegations of the plaintiff were "not
government, including government-owned or controlled
grounded on the dismissal per se but on the manner by which
corporations with original charters." Inasmuch as PD 198, as
he was dismissed." Hence, it did not come under the
amended, is the original charter of the petitioner, Tanjay
jurisdiction of the labor authorities but of the courts of justice.
Water District, and respondent Tarlac Water District and all
water districts in the country, they come under the coverage
In the present petition, the Solicitor General argues that the
of the civil service law, rules and regulations. (Sec. 35, Art, VIII
respondent court erred in affirming the order of the trial
and Sec. 37, Art. EK of PD 807.)
court. He does not maintain the original stand of PAGCOR that
LABREL FULL TEXT CASES Page 141 of 179
Like most rules, however, Section 16(2) is not without
execution. We have held in a number of cases that labor
arbiter exercise original and exclusive jurisdiction over
conflicts between employees and their employers but not
when the La Code is not involved. In San Miguel Corporation v.
6
NLRC, observed that "it is not necessary to suppose that the
e universe of money claims that might be asserted by work
against their employers has been absorbed into the original a
exclusive jurisdiction of Labor Arbiters. Accordingly, we that
the regular courts had jurisdiction over claims not involving
labor disputes in Quisaba v. Sta. Ines-Melale Veneer a
7 8
Plywood, Inc.; Medina v. Castro-Bartolome; Molave Motor
9 10
Sales Inc. v. Laron; Singapore Airlines. Ltd. v. Pao; San
11
Miguel Corporation v. NLRC; and, only recently,Pepsi
12
Distributors of the Phils., Inc. v. Gal-lang. The justification
this exception was explained by Justice Vicente Abad Santo
Medina thus:
It is obvious from the complaint that the
plaintiffs have alleged any unfair labor
practice. Theirs is a simple action for d ages
for tortious acts allegedly committed by the
defendants. S being the case, the governing
statute is the Civil Code and not Labor Code.
It results that the orders under review are
based o wrong premise.
A similar exception is applicable to the Civil Service authorities.
There are also instances when the Merit System Protection
Board and the Civil Service Commission have to yield juris tion
to the civil courts even if the conflict involves civil servants.
Following the doctrine laid down in the above-mentioned
cases, which we here apply by analogy, the Civil Service
authorities will have jurisdiction over a case involving civil
servants only if it can be regarded as equivalent to a labor
dispute resoluble under the Labor Code. Conversely, the
regular courts will have jurisdiction if the case can be decided
under the general laws, as where the complaint is, say, for the
recovery of private debts, as in Molave; or for damages due to
the slanderous remarks of the employer, as in Medina; or for
malicious prosecution of the employees, as in Pepsi Cola. The
mere fact that the parties are members of the Civil Service
does not remove such controversies from the general
jurisdiction of the courts of justice and place them under the
special jurisdiction of the Board and the Commission.
It was the exception and not the rule that the respondent
court applied in upholding the challenged order of the trial
court denying the petitioner's motion to dismiss the complaint
for damages. As the ponencia explained:
In the case at bar, a scrutiny of the records
reveal private respondent's complaint
specifically alleged that he was not claiming
for reinstatement nor back wages or any
labor-related benefits but damages arising
from the manner by which he was dis by
petitioner corporation which allegedly
LABREL FULL TEXT CASES
contravened the due process clause of the
constitution. Private respondent claimed
that petitioner never conducted a hearing
with regard to his conduct as an employee of
the said corporation but charged him of
being dishonest in his work while he was
then an employee of PAGCOR. Because of
the gravity of the imputation, PAGCOR
dismissed him from employment without
any hearing at all in wanton disregard of his
individual rights.
Seemingly, it would appear that the
foregoing allegations of private respondent
is not grounded on the dismiss per se but on
the manner by which he was dismiss. This it
the crux of private respondent's complaint
being oppressive as to constitute a proper
case for civil action for damages.
After considering the issues and the arguments of the parties
in their respective pleadings, we find we cannot agree with the
respondent court.
The record shows that the separation of the private
respondent was done in accordance with PD 1869, which
provides that the employees of the PAGCOR hold confidential
positions. Montoya is not assailing the validity of that law. The
act that he is questioning is what he calls the arbitrary manner
of his dismissal thereunder that he avers entitles him to
damages un the Civil Code.
This is not an unfamiliar controversy. The labor cases viewed
by us where the employees claimed they had bee illegally
dismissed are numberless. The jurisdiction of the I arbiters and
the NLRC was never in issue because it w conceded that the
applicable law was the Labor Code who validity was assumed.
What we are asked to resolve only w whether or not the
procedure prescribed therein for the separation of employees
had been observed. We never caned on t civil courts to take
over those cases from the labor authorities for there was no
question that the latter had the competence act. To do so now
would be to reverse all those past decision and cause undue
trauma on settled jurisprudence.
A similar situation obtains in the case at bar for what private
respondent is asserting is that he has been illegal dismissed
under PD 1869. He admits its validity; in fact, he invoking it to
support his claim for damages. The truth is th although he is
claiming damages under the Civil Code, th claim is based on his
submission that his separation was violative of PD 1869.
Shall we apply one rule for workers under the Labor Code an
another rule for the herein private respondent because
belongs to the Civil Service?
Even as the labor authorities have original jurisdiction
interpret and apply the Labor Code, so too have the C Service
Page 142 of 179
authorities the original jurisdiction to resolve question coming
under PD 1869. The civil courts are excluded from either case
because the general civil and criminal laws are n involved.
Obviously, the same rule applied to workers in private sector
should also apply to civil servants, for what sauce for the
goose is sauce for the gander.
There is no parity between this case and the case of Medina
13
Castro-Bartolome, because what the employees were
protecting in the latter case were the invectives hurled at
them by employer when they were dismissed. They were not
questioning their dismissal before the court of justice. What
they we claiming was damages for the slander committed
against them when they were dismissed. The case at bar is
different because the real issue here is the validity of the
dismissal itself, not only the alleged lack of due process in the
private respondent's separation. In fact, the issue goes deeper,
to the very nature of the position occupied by Montoya.
Our conclusion is that the trial court erred in denying motion
to dismiss and that the respondent court also erred sustaining
it. The issue raised by the private respondent, to the correct
interpretation and application of PD 1869, properly comes
under the jurisdiction of the Merit System Protection Board,
subject to appeal to the Civil Service Commission, a ultimately
to review by this Court.
WHEREFORE, the petition is GRANTED. The appealed decision
of the Court of Appeals dated February 16, 1990, and
resolution dated April 30, 1990, are REVERSED. The Regional
Trial Court of Angeles City, Branch 57, is directed to DISMISS
Civil Case No. 5412.
SO ORDERED.
Narvasa (Chairman), Grio-Aquino and Medialdea, concur.

PD 1869 provides in Section 16 thereof as follows:

Sec. 16. Exemption. All positions in the

Corporation, whether technical,
administrative, professional or managerial
are exempt from the provisions of the Civil
Service Law, rules and regulations, and shall
be governed only by the personnel
management policies set by the Board of
Directors. All employees of the casinos and
related services shall be classified as
"Confidential" appointee. (Emphasis
supplied.)

The private respondent's services as a confidential appointee

were terminated not by virtue of a dismissal or removal, which
imports the separation of the incumbent before the expiration
14
of his term. Montoya did not have a fixed term of office. His
tenure was dependent on his retention of the confidence of
his superiors. That confidence was lost because of the
disclosure of his involvement in the Angeles City casino
scandal of 1984. He was separated because his term had
15
expired as a result of the loss of confidence in him.

Whether such loss of confidence had really been established is

a matter that we believe should be determined in the first
instance by the Civil Service authorities. Absent such a
determination, the question of damages cannot be resolved as
the two issues are inseparable. The trial court cannot make an
independent finding that the private respondent is entitled to
damages unless it is first ascertained that he was arbitrarily
separated. This is a factual question best examined by the Civil
Service authorities. Moreover, even if it be assumed that the
Regional Trial Court of Angeles City has or may eventually
exercise jurisdiction over the question of damages, the
Solicitor General would still be correct in pointing out that the
doctrine of exhaustion of administrative remedies has not
been served. There would be no cause of action before it at
this time.

LABREL FULL TEXT CASES Page 143 of 179

EN BANC consolidation of allowances and additional compensation into
standardized salary rates save for certain additional
compensation such as representation and transportation
allowances which were exempted from consolidation into the
G.R. No. 132593 June 25, 1999 standardized rate. Said section likewise provides that other
additional compensation being received by incumbents as by
of July 1, 1989 not integrated into the standardized salary
PHILIPPINE INTERNATIONAL TRADING
rates shall continue to be authorized.
CORPORATION, petitioner,
vs.
COMMISSION ON AUDIT, respondent. Sec. 12, RA 6758, reads

Sec. 12. Consolidation of All Allowances and

Compensation. All allowances, except for
representation and transportation
GONZAGA-REYES, J.:
allowances; clothing and laundry allowances;
subsistence allowance of marine officers and
This is a petition for certiorari under Rule 64 of the 1997 Rules
crew on board government vessels and
of Civil Procedure to annul Decision No. 2447 dated July 27,
hospital personnel; hazard pay; allowances
1992 of the Commission on Audit (COA) denying Philippine
of foreign service personnel stationed
International Trading Corporation's (PITC) appeal from the
abroad; and such other additional
disallowances made by the resident COA auditor on PITC's car
compensation not otherwise specified herein
plan benefits; and Decision No. 98-048 dated January 27, 1998
as may be determined by the DBM, shall be
of the COA denying PITC's motion for reconsideration.
deemed included in the standardized salary
rates herein prescribed. Such other
The following facts are undisputed: additional compensation, whether in cash or
in kind, being received by incumbents only
The PITC is a government-owned and controlled corporation as of July 1, 1989 not integrated into the
created under Presidential Decree (PD) No. 252 on July 21, standardized salary rates shall continue to be
1
1973 , primarily for the purpose of promoting and developing authorized.
Philippine trade in pursuance of national economic
development. On October 19, 1988, the PITC Board of To implement RA 6758, the Department of Budget and
Directors approved a Car Plan Program for qualified PITC Management (DBM) issued Corporate Compensation Circular
2
officers. Under such car plan program, an eligible officer is No. 10 (DBM-CCC No. 10). Paragraph 5.6 of DBM-CCC No. 10
entitled to purchase a vehicle, fifty percent (50%) of the value discontinued effective November 1, 1989, all allowances and
of which shall be shouldered by PITC while the remaining fifty fringe benefits granted on top of basic salary, not otherwise
percent (50%) will be shouldered by the officer through salary enumerated under paragraphs 5.4 and 5.5 thereof.
deduction over a period of five (5) years. Maximum value of
the vehicle to be purchased ranges from Two Hundred
Paragraph 5.6 of DBM-CCC No. 10 provides:
Thousand Pesos (P200,000.00) to Three Hundred and Fifty
Thousand Pesos (P350,000.00), depending on the position of
5.6 Payment of other allowances/fringe
the officer in the corporation. In addition, PITC will reimburse
benefits and all other forms of compensation
the officer concerned fifty percent (50%) of the annual car
granted on top of basic salary, whether in
registration, insurance premiums and costs of registration of
cash or in kind, not mentioned in Sub-
the chattel mortgage over the car for a period of five (5) years 6
paragraphs 5.4 and 5.5 above shall be
from the date the vehicle was purchased. The terms and
discontinued effective November 1, 1989.
conditions of the car plan are embodied in a "Car Loan
3 Payment made for such allowance/fringe
Agreement". Per PITC's car plan guidelines, the purpose of
benefits after said date shall be considered
the plan is to provide financial assistance to qualified
as illegal disbursement of public funds.
employees in purchasing their own transportation facilities in
the performanced of their work, for representation, and
4
personal use. The plan is envisioned to facilitate greater On post audit, the payment/reimbursement of the above-
mobility during official trips especially within Metro Manila or mentioned expenses (50% of the yearly car registration and
the employee's principal place of assignment, without having insurance premiums and 50% of the costs of registration of the
to rely on PITC vehicles, taxis or cars for hire.
5 chattel mortgage over the car) made after November 1, 1989
was disallowed by the resident COA auditor. The disallowance
was made on the ground that the subject car plan benefits
On July 1, 1989, Republic Act No. 6758 (RA 6758), entitled "An
were not one of the fringe benefits or form of compensation
Act Prescribing a Revised Compensation and Position
allowed to be continued after said date under the aforequoted
Classification System in the Government and For Other
Purposes", took effect. Section 12 of said law provides for the
LABREL FULL TEXT CASES Page 144 of 179
 7
paragraph 5.6 of DBM-CCC No. 10 , in relation to Paragraphs officers pursuant to PITC's
5.4 and 5.5 thereof. Car Plan Program,
including the Car Loan
PITC, on its behalf, and that of the affected PITC officials, Agreements, duly executed
appealed the decision of the resident COA auditor to the COA. prior to the effectivity of
On July 27, 1992, COA denied PITC's appeal and affirmed the RA 6758, constitute the
disallowance of the said car plan expenses in the assailed law between the parties
Decision No. 2447 dated July 27, 1992. Relevant portions of and as such, protected by
the decision read thus: Section 10, Article III of the
1987 Philippine
Upon circumspect evaluation thereof, this Constitution which
Commission finds the instant appeal to be prohibits the impairment
devoid of merit. It should be noted that the of contracts; and
reimbursement/payment of expenses in
question is based on the Car Plan benefit 3. Finally, that the
granted under Board Resolution No. 10-88- provisions of PD 985 do
03 adopted by the PITC Board of Directors on not apply to PITC inasmuch
October 19, 1988. The Car Plan is undeniably as under its Revised
a fringe benefit as appearing in PITC's Charter, PD 1071, as
"Compensation Policy under the heading "3. amended by E.O. 756 and
Other Fringe Benefits", particularly Item No. E.O. 1067, PITC is not only
3.13 thereof. Inasmuch as PITC is a expressly exempted from
government-owned and/or controlled OCPC rules and regulations
corporation, the grant of the Car Plan (being but its Board of Directors
a fringe benefit) should be governed by the was expressly authorized
provisions of Corporate Compensation to adopt compensation
Circular No. 10, implementing RA 6758. policies and other related
Under sub-paragraph 5.6 of said Circular, it benefits to its
explicitly provides: officers/employees
without need for further
xxx xxx xxx approval thereof by any
government office, agency
10
or authority.
Since the Car Plan benefit is not one of those
fringe benefits or other forms of
compensation mentioned in Sub-paragraphs The petition is meritorious.
5.4 and 5.5 of CCC No. 10, consequently the
reimbursement of the 50% share of PITC in First of all, we must mention that this Court has confirmed
11
the yearly registration and insurance in Philippine Post Authority vs. Commission on Audit the
premium of the cars purchased under said legislative intent to protect incumbents who are receiving
8
Car Plan benefit should not be allowed. . . . salaries and/or allowances over and above those authorized
by RA 6758 to continue to receive the same even after RA
PITC's motion for reconsideration was denied by the COA in its 6758 took effect. In reserving the benefit to incumbents, the
Resolution dated January 27, 1998.
9 legislature has manifested its intent to gradually phase out this
privilege without upsetting the policy of non-diminution of pay
and consistent with the rule that laws should only be applied
Hence, the instant petition on the following grounds: 12
prospectively in the spirit of fairness and justice. Addressing
the issue as to whether the petitioners-officials may still
1. That the legislature did
receive their representation and transportation allowance
not intend to revoke
(RATA) at the higher rates provided by Letter of
existing benefits being
Implementation (LOI) No. 97 in light of Section 12, RA 6758,
received by incumbent
this Court said:
government employees as
of July 1, 1989 (including
Now, under the second sentence of Section
subject car plan benefits)
12, first paragraph, the RATA enjoyed by
when RA 6758 was passed;
these PPA officials shall continue to be
authorized only if they are "being received
2. That the Car Loan
by incumbents only as of July 1, 1989." RA
Agreements signed
6758 has therefore, to this extent, amended
between PITC and its
LOI No. 97. By limiting the benefit of the
LABREL FULL TEXT CASES Page 145 of 179
 RATA granted by LOI No. 97 to incumbents,
Congress has manifested its intent to
gradually phase out this privilege without
upsetting its policy of non-diminution of pay.
The legislature has similarly adhered to this
policy of non-diminution of pay when it
provided for the transition allowance under
Section 17 of RA 6758 which reads:
Sec. 17. Salaries of
Incumbents.
Incumbents of position
presently receiving salaries
and additional
compensation/fringe
benefits including those
absorbed from local
government units and
other emoluments the
aggregate of which
exceeds the standardized
salary rate as herein
prescribed, shall continue
to receive such excess
compensation, which shall
be referred to as transition
allowance. The transition
allowance shall be reduced
by the amount of salary
adjustment that the
incumbent shall receive in
the future.
While Section 12 refers to allowances that
are not integrated into the standardized
salaries whereas Section 17 refers to salaries
and additional compensation or fringe
benefits, both sections are intended to
protect incumbents who are receiving said
salaries and/or allowances at the time RA
13
6758 took effect. (Emphasis supplied.)
Based on the foregoing pronouncement, petitioner correctly
pointed out that there was no intention on the part of the
legislature to revoke existing benefits being enjoyed
by incumbents of government positions at the time of the
virtue of Sections 12 and 17 thereof. There is no dispute that
the PITC officials who availed of the subject car plan benefits
were incumbents of their positions as of July 1, 1989. Thus, it
was legal and proper for them to continue enjoying said
benefits within the five year period from date of purchase of
the vehicle allowed by their Car Loan Agreements with PITC.
Further, we see the rationale for the corporation's fifty
percent (50%) participation and contribution to the subject
expenses. As to the insurance premium, PITC, at least, up to
the extent of 50% of the value of the vehicle, has an insurable
interest in said vehicle in case of loss or damage thereto. As to
LABREL FULL TEXT CASES
the costs of registration of the vehicle in the employee's name
and of the chattel mortgage in favor of PITC, this is to secure
PITC of the repayment of the "Car Loan Agreement" and the
fulfillment of the other obligations contained therein by the
employee.
Still further, the vehicle being utilized by the officer is actually
being used for corporate purposes because the officer
concerned is no longer entitled to utilize company-owned
vehicles for official business once he/she has availed of a car
plan. Neither is said officer allowed to reimburse the costs of
other land transportation used within his principal place of
assignment (i.e. Metro Manila) as the vehicle is presumed to
14
be his official vehicle. In the event that the employee
resigns, retires or is separated from the company without
cause prior to the completion of the 60-month car plan, the
employee shall be given the privilege to buy the car provided
he pays the remaining installments of the loan and the amount
equivalent to that portion of the company's contribution
corresponding to the unexpired period of the car plan. On the
other hand, if the employee has been separated from the
company for cause, the company has the other option aside
from the foregoing to repossess the car from the employee, in
which case, the company shall pay back to the employee all
amortizations already made by the employee to the company,
15
interest free.
16
Secondly, COA relied on DBM-CCC No. 10 as basis for the
disallowance of the subject car plan benefits. DBM-CCC No. 10
17
which was issued by the DBM pursuant to Section 23 of RA
6758 mandating the said agency to issue the necessary
guidelines to implement RA 6758 has been declared by this
18
Court in De Jesus, et al. vs. Commission on Audit,et al. as of
no force and effect due to the absence of publication thereof
in the Official Gazette or in a newspaper of general circulation.
Salient portions of said decision read:
On the need publication of subject DBM-CCC
No. 10, we rule in the affirmative. Following
19
the doctrine enunciated in Tanada ,
publication in the Official Gazette or in a
newspaper of general circulation in the
Philippines is required since DBM-CCC No. 10
is in the nature of an administrative circular
the purpose of which is to enforce or
implement an existing law. Stated
differently, to be effective and enforceable,
DBM-CCC No. 10 must go through the
requisite publication in the Official Gazette
or in a newspaper of general circulation in
the Philippines.
In the present case under scrutiny, it is
decisively clear that DBM-CCC No. 10, which
completely disallows payment of allowances
and other additional compensation to
government officials and employees, starting
November 1, 1989, is not a mere
interpretative or internal regulation. It is
Page 146 of 179
 something more than that. And why not,
when it tends to deprive government
workers of their allowances and additional
compensation sorely needed to keep body
and soul together. At the very least, before
the circular under attack may be permitted
to substantially reduce their income, the
government officials and employees
concerned should be apprised and alerted by
the publication of said circular in the Official
Gazette or in a newspaper or general
circulation in the Philippines to the end
that they be given amplest opportunity to
voice out whatever opposition they may
have, and to ventilate their stance on the
matter. This approach is more in keeping
with democratic precepts and rudiments of
fairness and transparency.
In the case at bar, the disallowance of the subject car plan
benefits would hamper the officials in the performance of
their functions to promote and develop trade which requires
mobility in the performance of official business. Indeed, the
car plan benefits are supportive of the implementation of the
objectives and mission of the agency relative to the nature of
its operation and responsive to the exigencies of the service.
It has come to our knowledge that DBM-CCC No. 10 has been
re-issued in its entirety and submitted for publication in the
Official Gazette per letter to the National Printing Office dated
March 9, 1999. Would the subsequent publication thereof
cure the defect and retroact to the time that the above-
mentioned items were disallowed in audit?
The answer is in the negative, precisely, for the reason that
publication is required as a condition precedent to the
effectivity of a law to inform the public of the contents of the
law or rules and regulations before their rights and interests
are affected by the same. From the time the COA disallowed
the expenses in audit up to the filing of herein petition the
subject circular remained in legal limbo due to its non-
21
publication. As was stated in Tanada vs.Tuvera, , "prior
publication of laws before they become effective cannot be
dispensed with, for the reason that such omission would
offend due process insofar as it would deny the public
knowledge of the laws that are supposed to govern it.
In view of the nullity of DBM-CCC No. 10 relied upon by the
COA as basis for the disallowance of the subject car plan
benefits, we deem it unnecessary to discuss the second issue
raised in the instant petition.
We deem it necessary though to resolve the third issue as to
22
whether PITC is exempt from RA 985 as subsequently
amended by RA 6758. According to petitioner, PITC's Revised
Charter, PD 1071 dated January 25, 1977, as amended by EO
756 dated December 29, 1981, and further amended by EO
1067 dated November 25, 1985, expressly exempted PITC
from the Office of the Compensation and Position
LABREL FULL TEXT CASES
Classification (OCPC) rules and regulations. Petitioner cites
23 24
Section 28 of P.D. 1071 ; Section 6 of EO 756 ; and Section 3
25
of EO 1067.
According to the COA in its Decision No. 98-048 dated January
27, 1998, the exemption granted to the PITC has been
repealed and revoked by the repealing provisions of RA 6758,
particularly Section 16 thereof which provides:
Sec. 16. Repeal of Special Salary Laws and
Regulations. All laws, decrees, executive,
orders, corporate charters, and other
issuances or parts thereof, that exempt
agencies from the coverage of the System, or
that authorize and fix position classifications,
salaries, pay rates or allowances of specified
positions, or groups of officials, and
employees or of agencies, which are
inconsistent with the System, including
the proviso under Section 2 and Section 16
of PD No. 985 are hereby repealed.
To this, petitioner argues that RA 6758 which is a law of
general application cannot repeal provisions of the Revised
Charter of PITC and its amendatory laws expressly exempting
PITC from OCPC coverage being special laws. Our rules on
statutory construction provide that a special law cannot be
repealed, amended or altered by a subsequent general law by
mere
26
implication ; that a statute, general in character as to its
terms and application, is not to be construed as repealing a
special or specific enactment, unless the legislative purpose to
27
do so is manifested ; that if repeal of particular or specific
28
law or laws is intended, the proper step is to so express it.
In the case at bar, the repeal by Section 16 of RA 6758 of "all
corporate charters that exempt agencies from the coverage of
the System" was clear and expressed necessarily to achieve
the purposes for which the law was enacted, that is, the
standardization of salaries of all employees in government
owned and/or controlled corporations to achieve "equal pay
for substantially equal work". Henceforth, PITC should now be
considered as covered by laws prescribing a compensation and
position classification system in the government including RA
6758. This is without prejudice, however, as discussed above,
to the non-diminution of pay of incumbents as of July 1, 1989
as provided in Sections 12 and 17 of said law.
WHEREFORE, the Petition is hereby GRANTED, the assailed
Decisions of the Commission on Audit are SET ASIDE.
SO ORDERED.
Davide, Jr., C.J., Romero, Bellosillo, Melo, Puno, Vitug,
Kapunan, Mendoza, Quisumbing, Purisima, Pardo and Ynares-
Santiago, JJ., concur.
Panganiban and Buena, JJ., are on leave.
Page 147 of 179
LABREL FULL TEXT CASES Page 148 of 179
SECOND DIVISION 2. In the same transaction stated above, the
supplier agreed to give the company a
G.R. No. 79182 September 11, 1991 discount of P70.00 which Danilo Mercado
did not report to the company;
PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,
vs. 3. On March 28, 1985, Danilo Mercado was
NATIONAL LABOR RELATIONS COMMISSION (Third Division) instructed to contract the services of Fred R.
and DANILO MERCADO, respondents. Melon of Dumaguete City, for the fabrication
of rubber stamps, for the total amount of
Bacorro & Associates for petitioner. P28.66. Danilo Mercado paid the amount of
P20.00 to Fred R. Melon and appropriated
for his personal use the balance of P8.66.
Alberto L. Dalmacion for private respondent.

In addition, private respondent, Danilo

Mercado violated company rules and
regulations in the following instances:
PARAS, J.:p
1. On June 5, 1985, Danilo Mercado was
This is a petition for certiorari to set aside the
absent from work without leave, without
Resolution * dated July 3, 1987 of respondent National Labor
proper turn-over of his work, causing
Relations Commission (NLRC for brevity) which affirmed the
disruption and delay of company work
decision dated April 30, 1986 of Labor Arbiter Vito J. Minoria
activities;
of the NLRC, Regional Arbitration Branch No. VII at Cebu City in
Case No. RAB-VII-0556-85 entitled "Danilo Mercado,
2. On June 15, 1985, Danilo Mercado went
Complainant, vs. Philippine National Oil Company-Energy
on vacation leave without prior leave,
Development Corporation, Respondent", ordering the
against company policy, rules and
reinstatement of complainant Danilo Mercado and the award
regulations. (Petitioner's Memorandum,
of various monetary claims.
Rollo, p. 195).
The factual background of this case is as follows:
On September 23, 1985, private respondent Mercado filed a
complaint for illegal dismissal, retirement benefits, separation
Private respondent Danilo Mercado was first employed by
pay, unpaid wages, etc. against petitioner PNOC-EDC before
herein petitioner Philippine National Oil Company-Energy
the NLRC Regional Arbitration Branch No. VII docketed as Case
Development Corporation (PNOC-EDC for brevity) on August
No. RAB-VII-0556-85.
13, 1979. He held various positions ranging from clerk, general
clerk to shipping clerk during his employment at its Cebu office
After private respondent Mercado filed his position paper on
until his transfer to its establishment at Palimpinon,
December 16, 1985 (Annex "B" of the Petition, Rollo, pp. 28-
Dumaguete, Oriental Negros on September 5, 1984. On June
40), petitioner PNOC-EDC filed its Position Paper/Motion to
30, 1985, private respondent Mercado was dismissed. His last
Dismiss on January 15, 1986, praying for the dismissal of the
salary was P1,585.00 a month basic pay plus P800.00 living
case on the ground that the Labor Arbiter and/or the NLRC
allowance (Labor Arbiter's Decision, Annex "E" of Petition,
had no jurisdiction over the case (Annex "C" of the Petition,
Rollo, p. 52).
Rollo, pp. 41-45), which was assailed by private respondent
Mercado in his Opposition to the Position Paper/Motion to
The grounds for the dismissal of Mercado are allegedly serious
Dismiss dated March 12, 1986 (Annex "D" of the Petition,
acts of dishonesty committed as follows:
Rollo, pp. 46-50).

1. On ApriI 12, 1985, Danilo Mercado was

The Labor Arbiter ruled in favor of private respondent
ordered to purchase 1,400 pieces of nipa
Mercado. The dispositive onion of said decision reads as
shingles from Mrs. Leonardo Nodado of
follows:
Banilad, Dumaguete City, for the total
purchase price of Pl,680.00. Against
WHEREFORE, in view of the foregoing,
company policy, regulations and specific
respondents are hereby ordered:
orders, Danilo Mercado withdrew the nipa
shingles from the supplier but paid the
amount of P1,000.00 only. Danilo Mercado 1) To reinstate complainant to his former
appropriated the balance of P680.00 for his position with full back wages from the date
personal use; of his dismissal up to the time of his actual
reinstatement without loss of seniority rights
and other privileges;
LABREL FULL TEXT CASES Page 149 of 179
 2) To pay complainant the amount of
P10,000.00 representing his personal share
of his savings account with the respondents;
3) To pay complainants the amount of
P30,000.00 moral damages; P20,000.00
exemplary damages and P5,000.00
attorney's fees;
4) To pay complainant the amount of
P792.50 as his proportionate 13th month
pay for 1985.
Respondents are hereby further ordered to
deposit the aforementioned amounts with
this Office within ten days from receipt of a
copy of this decision for further disposition.
SO ORDERED.
(Labor Arbiter's Decision, Rollo, p. 56)
The appeal to the NLRC was dismissed for lack of merit on July
3, 1987 and the assailed decision was affirmed.
Hence, this petition.
The issues raised by petitioner in this instant petition are:
1. Whether or not matters of employment
affecting the PNOC-EDC, a government-
owned and controlled corporation, are
within the jurisdiction of the Labor Arbiter
and the NLRC.
2. Assuming the affirmative, whether or not
the Labor Arbiter and the NLRC are justified
in ordering the reinstatement of private
respondent, payment of his savings, and
proportionate 13th month pay and payment
of damages as well as attorney's fee.
Petitioner PNOC-EDC alleges that it is a corporation wholly
owned and controlled by the government; that the Energy
Development Corporation is a subsidiary of the Philippine
National Oil Company which is a government entity created
under Presidential Decree No. 334, as amended; that being a
government-owned and controlled corporation, it is governed
by the Civil Service Law as provided for in Section 1, Article XII-
B of the 1973 Constitution, Section 56 of Presidential Decree
No. 807 (Civil Service Decree) and Article 277 of Presidential
Decree No. 442, as amended (Labor Code).
The 1973 Constitution provides:
The Civil Service embraces every branch,
agency, subdivision and instrumentality of
LABREL FULL TEXT CASES
the government including government-
owned or controlled corporations.
Petitioner PNOC-EDC argued that since Labor Arbiter Minoria
rendered the decision at the time when the 1973 Constitution
was in force, said decision is null and void because under the
1973 Constitution, government-owned and controlled
corporations were governed by the Civil Service Law. Even
assuming that PNOC-EDC has no original or special charter and
Section 2(i), Article IX-B of the 1987 Constitution provides that:
The Civil Service embraces all branches,
subdivision, instrumentalities and agencies
of the Government, including government-
owned or controlled corporations with
original charters.
such circumstances cannot give validity to the decision of the
Labor Arbiter (Ibid., pp. 192-193).
This issue has already been laid to rest in the case of PNOC-
EDC vs. Leogardo, 175 SCRA 26 (July 5, 1989), involving the
same petitioner and the same issue, where this Court ruled
that the doctrine that employees of government-owned
and/or con controlled corporations, whether created by
special law or formed as subsidiaries under the General
Corporation law are governed by the Civil Service Law and not
by the Labor Code, has been supplanted by the present
Constitution. "Thus, under the present state of the law, the
test in determining whether a government-owned or
controlled corporation is subject to the Civil Service Law are
the manner of its creation, such that government corporations
created by special charter are subject to its provisions while
those incorporated under the General Corporation Law are
not within its coverage."
Specifically, the PNOC-EDC having been incorporated under
the General Corporation Law was held to be a government
owned or controlled corporation whose employees are subject
to the provisions of the Labor Code (Ibid.).
The fact that the case arose at the time when the 1973
Constitution was still in effect, does not deprive the NLRC of
jurisdiction on the premise that it is the 1987 Constitution that
governs because it is the Constitution in place at the time of
the decision (NASECO v. NLRC, G.R. No. 69870, 168 SCRA 122
[1988]).
In the case at bar, the decision of the NLRC was promulgated
on July 3, 1987. Accordingly, this case falls squarely under the
rulings of the aforementioned cases.
As regards the second issue, the record shows that PNOC-
EDC's accusations of dishonesty and violations of company
rules are not supported by evidence. Nonetheless, while
acknowledging the rule that administrative bodies are not
governed by the strict rules of evidence, petitioner PNOC-EDC
alleges that the labor arbiter's propensity to decide the case
Page 150 of 179
through the position papers submitted by the parties is
violative of due process thereby rendering the decision null
and void (Ibid., p. 196).
On the other hand, private respondent contends that as can
be seen from petitioner's Motion for Reconsideration and/or
Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo,
pp. 57- 64), the latter never questioned the findings of facts of
the Labor Arbiter but simply limited its objection to the lack of
legal basis in view of its stand that the NLRC had no
jurisdiction over the case (Private Respondent's
Memorandum, Rollo, p. 104).
rules. On the contrary, he found respondent Mercado's
explanation in his affidavit (Rollo, pp. 38-40) as to the alleged
violations to be satisfactory. Moreover, these findings were
never contradicted by petitioner petitioner PNOC-EDC.
PREMISES CONSIDERED, the petition is DENIED and the
resolution of respondent NLRC dated July 3, 1987 is AFFIRMED
with the modification that the moral damages are reduced to
Ten Thousand (P10,000.00) Pesos, and the exemplary
damages reduced to Five Thousand (P5,000.00) Pesos.
SO ORDERED.

Petitioner PNOC-EDC filed its Position Paper/Motion to Melencio-Herrera (Chairperson), Padilla and Regalado, JJ.,
Dismiss dated January 15, 1986 (Annex "C" of the Petition concur.
Rollo, pp. 41-45) before the Regional Arbitration Branch No.
VII of Cebu City and its Motion for Reconsideration and/or Sarmiento, J., is on leave.
Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo,
pp. 57-64) before the NLRC of Cebu City. Indisputably, the
requirements of due process are satisfied when the parties are
given an opportunity to submit position papers. What the
fundamental law abhors is not the absence of previous notice
but rather the absolute lack of opportunity to ventilate a
party's side. There is no denial of due process where the party
submitted its position paper and flied its motion for
reconsideration (Odin Security Agency vs. De la Serna, 182
SCRA 472 [February 21, 1990]). Petitioner's subsequent
Motion for Reconsideration and/or Appeal has the effect of
curing whatever irregularity might have been committed in
the proceedings below (T.H. Valderama and Sons, Inc. vs.
Drilon, 181 SCRA 308 [January 22, 1990]).

Furthermore, it has been consistently held that findings of

administrative agencies which have acquired expertise
because their jurisdiction is confined to specific matters are
accorded not only respect but even finality (Asian Construction
and Development Corporation vs. NLRC, 187 SCRA 784 [July
27, 1990]; Lopez Sugar Corporation vs. Federation of Free
Workers, 189 SCRA 179 [August 30, 1990]). Judicial review by
this Court does not go so far as to evaluate the sufficiency of
the evidence but is limited to issues of jurisdiction or grave
abuse of discretion (Filipinas Manufacturers Bank vs. NLRC,
182 SCRA 848 [February 28, 1990]). A careful study of the
records shows no substantive reason to depart from these
established principles.

While it is true that loss of trust or breach of confidence is a

valid ground for dismissing an employee, such loss or breach
of trust must have some basis (Gubac v. NLRC, 187 SCRA 412
[July 13, 1990]). As found by the Labor Arbiter, the accusations
of petitioner PNOC-EDC against private respondent Mercado
have no basis. Mrs. Leonardo Nodado, from whom the nipa
shingles were purchased, sufficiently explained in her affidavit
(Rollo, p. 36) that the total purchase price of P1,680.00 was
paid by respondent Mercado as agreed upon. The alleged
discount given by Mrs. Nodado is not supported by evidence
as well as the alleged appropriation of P8.66 from the cost of
fabrication of rubber stamps. The Labor Arbiter, likewise,
found no evidence to support the alleged violation of company
LABREL FULL TEXT CASES Page 151 of 179

EN BANC
G.R. No. L-49677 May 4, 1989
TRADE UNIONS OF THE PHILIPPINES AND ALLIED
SERVICES, petitioner,
vs.
NATIONAL HOUSING CORPORATION and ATTY. VIRGILIO SY,
as Officer-in-Charge of the Bureau of Labor
Relations, respondents.
Bonifacio V. Tupaz for petitioner.
The Government Corporate Counsel for respondent NHC.
Raul E. Espinosa for intervenor PACIWU.
REGALADO, J.:
The employees of the public sector comprise the largest bloc
of workers in our national work force. Governmental
bureaucracy is continually being reorganized to cope with the
growing complexity of the problems and needs of political and
administrative governance. As the increase in the number of
government employees grows space, the need to enhance
their welfare correspondingly becomes more imperative.
While it may be assumed that the Government is exerting
efforts to advance the interests of its employees, it is quite
understandable that the employees themselves should
actively seek arrangements where by they can participate
more meaningfully in management and employment
relationships. There is, thus, a proliferation of unions or
employees' organizations, each seeking concomitant
representational recognition.
The antecedent facts which led to the filing of this special civil
action for certiorari are clear and undisputed. The juridical
status and relevant circumstances of respondent corporation
have been established in a case of illegal dismissal filed against
it, as previously decided by the Court and hereinafter
discussed. However, submitted this time for Our resolution is a
controversy on the propriety of and requirements for
certification elections in government-owned or controlled
corporations like the respondent.
Respondent National Housing Corporation (hereinafter
referred to as NHC) is a corporation organized in 1959 in
accordance with Executive Order No. 399, otherwise known as
the Uniform Charter of Government Corporations, dated
January 1, 1951. Its shares of stock are and have been one
hundred percent (100%) owned by the Government from its
incorporation under Act 459, the former corporation law. The
government entities that own its shares of stock are the
Government Service Insurance System, the Social Security
System, the Development Bank of the Philippines, the National
Investment and Development Corporation and the People's
LABREL FULL TEXT CASES
1
Homesite and Housing Corporation. Petitioner Trade Unions
of the Philippines and Allied Services (TUPAS, for brevity) is a
legitimate labor organization with a chapter in NHC.
On July 13, 1977, TUPAS filed a petition for the conduct of a
certification election with Regional Office No. IV of the
Department of Labor in order to determine the exclusive
bargaining representative of the workers in NHC. It was
claimed that its members comprised the majority of the
2
employees of the corporation. The petition was dismissed by
med-arbiter Eusebio M. Jimenez in an order, dated November
7, 1977, holding that NHC "being a government-owned and/or
controlled corporation its employees/workers are prohibited
to form, join or assist any labor organization for purposes of
collective bargaining pursuant to Section 1, Rule II, Book V of
3
the Rules and Regulations Implementing the Labor Code."
From this order of dismissal, TUPAS appealed to the Bureau of
4
Labor Relations where, acting thereon in BLR Case No. A-984-
77 (RO4-MED-1090-77), Director Carmelo C. Noriel reversed
the order of dismissal and ordered the holding of a
5
certification election. This order was, however, set aside by
Officer-in-Charge Virgilio S.J. Sy in his resolution of November
6
21, 1978 upon a motion for reconsideration of respondent
NHC.
In the instant petition for certiorari, TUPAS seeks the reversal
of the said resolution and prays that a certification election be
held among the rank and file employees of NHC.
In retrospect, it will be recalled that in a former case of illegal
7
dismissal involving the same respondent corporation, We
had ruled that the employees of NHC and of other government
owned or controlled corporations were governed by civil
service laws, rules and regulations pursuant to the 1973
Constitution which provided that "the civil service embraces
every branch, agency, subdivision and instrumentality of the
government, including government-owned or controlled
corporations."
8
It was therein stressed that to allow subsidiary corporations to
be excluded from the civil service laws would be to permit the
circumvention or emasculation of the above-quoted
constitutional provision. As perceptively analyzed therein, "(i)t
would be possible for a regular ministry of government to
create a host of subsidiary corporations under the Corporation
Code funded by a willing legislature. A government-owned
corporation could create several subsidiary corporations.
These subsidiary corporation rations would enjoy the best of
two worlds. Their officials and employees would be privileged
individuals, free from the strict accountability required by the
Civil Service Decree and the regulations of the Commission on
Audit. Their incomes would not be subject to the competitive
restraints of the open market nor to the terms and conditions
of civil service employment."
The rule, however, was modified in the 1987 Constitution, the
corresponding provision whereof declares that "(t)he civil
Page 152 of 179
service embraces all branches, subdivisions, instrumentalities
and agencies of the government, including government-owned
9
or controlled corporations with original charters."
Consequently, the civil service now covers only government
owned or controlled corporations with original or legislative
charters, that is those created by an act of Congress or by
special law, and not those incorporated under and pursuant to
a general legislation. As We recently held
..., the situations sought to be avoided by the
1973 Constitution and expressed by this
Court in theNational Housing
Corporation case ... appear relegated to
relative insignificance by the 1987
Constitutional provision that the Civil Service
embraces government-owned controlled
corporationswith original charters and
therefore, by clear implication, the Civil
Service does not include government-owned
or controlled corporations which are
organized as subsidiaries of government-
owned or controlled corporations under the
general corporation law.
10
While the aforecited cases sought different reliefs, that is,
reinstatement consequent to illegal dismissal, the samelis
mota determinative of the present special civil action was
involved therein.
The workers or employees of NHC undoubtedly have the right
to form unions or employees' organizations. The right to
unionize or to form organizations is now explicitly recognized
and granted to employees in both the governmental and the
private sectors. The Bill of Rights provides that "(t)he right of
the people, including those employed in the public and private
sectors, to form unions, associations or societies for purposes
11
not contrary to law shall not be abridged"
This guarantee is reiterated in the second paragraph of Section
3, Article XIII, on Social Justice and Human Rights, which
mandates that the State "shall guarantee the rights of all
workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the
right to strike in accordance with law ...."
Specifically with respect to government employees, the right
to unionize is recognized in Paragraph (5), Section 2, Article IX
12
B which provides that "(t)he right to self-organization shall
not be denied to government employees." The rationale of
and justification for this innovation which found expression in
the aforesaid provision was explained by its proponents as
follows:
... The government is in a sense the
repository of the national sovereignty and, in
that respect, it must be held in reverence if
not in awe. It symbolizes the unity of the
LABREL FULL TEXT CASES
nation, but it does perform a mundane task
as well. It is an employer in every sense of
the word except that terms and conditions
of work are set forth through a Civil Service
Commission. The government is the biggest
employer in the Philippines. There is an
employer-employee relationship and we all
know that the accumulated grievances of
several decades are now beginning to
explode in our faces among government
workers who feel that the rights afforded by
the Labor Code, for example, to workers in
the private sector have been effectively
denied to workers in government in what
looks like a grotesque, (sic) a caricature of
the equal protection of the laws. For
example, ... there were many occasions
under the old government when wages and
cost of living allowances were granted to
workers in the private sector but denied to
workers in the government for some reason
or another, and the government did not
even state the reasons why. The government
employees were being discriminated against.
As a general rule, the majority of the world's
countries now entertain public service
unions. What they really add up to is that the
employees of the government form their
own association. Generally, they do not
bargain for wages because these are fixed in
the budget but they do acquire a forum
where, among other things, professional and
self-development is (sic) promoted and
encouraged. They also act as watchdogs of
their own bosses so that when graft and
corruption is committed, generally, it is the
unions who are no longer afraid by virtue of
the armor of self-organization that become
the public's own allies for detecting graft and
13
corruption and for exposing it....
There is, therefore, no impediment to the holding of a
certification election among the workers of NHC for it is clear
that they are covered by the Labor Code, the NHC being a
government-owned and/or controlled corporation without an
original charter. Statutory implementation of the last cited
section of the Constitution is found in Article 244 of the Labor
Code, as amended by Executive Order No. 111, thus:
... Right of employees in the public service
Employees of the government corporations
established under the Corporation Code shall
have the right to organize and to bargain
collectively with their respective employers.
All other employees in the civil service shall
have the right to form associations for
purposes not contrary to law.
Page 153 of 179
The records do not show that supervening factual events have Gancayco, J., on leave.
mooted the present action. It is meet, however, to also call
attention to the fact that, insofar as certification elections are
concerned, subsequent statutory developments have
rendered academic even the distinction between the two
types of government-owned or controlled corporations and
the laws governing employment relations therein, as
hereinbefore discussed. For, whether the employees of NHC
are covered by the Labor Code or by the civil service laws, a
certification election may be conducted.

For employees in corporations and entities covered by the

Labor Code, the determination of the exclusive bargaining
representative is particularly governed by Articles 255 to 259
of said Code. Article 256 provides for the procedure when
there is a representation issue in organized establishments,
while Article 257 covers unorganized establishments. These
Labor Code provisions are fleshed out by Rules V to VII, Book V
of the Omnibus Implementing Rules.

With respect to other civil servants, that is, employees of all

branches, subdivisions, instrumentalities and agencies of the
government including government-owned or controlled
corporations with original charters and who are, therefore,
covered by the civil service laws, the guidelines for the
exercise of their right to organize is provided for under
Executive Order No. 180. Chapter IV thereof, consisting of
Sections 9 to 12, regulates the determination of the "sole and
exclusive employees representative"; Under Section 12,
"where there are two or more duly registered employees'
organizations in the appropriate organization unit, the Bureau
of Labor Relations shall, upon petition order the conduct of
certification election and shall certify the winner as the
exclusive representative of the rank-and-file employees in said
organizational unit."

Parenthetically, note should be taken of the specific

qualification in the Constitution that the State "shall guarantee
the rights of all workers to self-organization, collective
bargaining, and peaceful concerted activities, including the
right to strike in accordance with law" and that they shall also
participate in policy and decision-making processes affecting
their rights and benefits as may be provided by
14
law." (Emphasis supplied.)

ON THE FOREGOING CONSIDERATIONS, the assailed resolution

of the Bureau of Labor Relations, dated November 21, 1978, is
ANNULLED and SET ASIDE and the conduct of a certification
election among the affected employees of respondent
National Housing Corporation in accordance with the rules
therefor is hereby GRANTED.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz,

Paras, Feliciano, Padilla, Bidin, Sarmiento, Cortes Grio Aquino
and Medialdea, JJ., concur.

LABREL FULL TEXT CASES Page 154 of 179

EN BANC
G.R. No. 149240 July 11, 2002
SOCIAL SECURITY SYSTEM, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
BELLOSILLO, J.:
THE FUNDS contributed to the Social Security System (SSS) are
not only imbued with public interest, they are part and parcel
of the fruits of the workers labors pooled into one enormous
trust fund under the administration of the System designed to
insure against the vicissitudes and hazards of their working
lives. In a very real sense, the trust funds are the workers
property which they could turn to when necessity beckons and
are thus more personal to them than the taxes they pay. It is
therefore only fair and proper that charges against the trust
fund be strictly scrutinized for every lawful and judicious
opportunity to keep it intact and viable in the interest of
enhancing the welfare of their true and ultimate beneficiaries.
This is a petition for certiorari under Rule 64 of the 1997 Rules
of Civil Procedure praying that this Court assess against the
workers social security fund the amount of P5,000.00 as
contract signing bonus of each official and employee of the
SSS. The gratuity emanated from the collective negotiation
agreement (CNA) executed on 10 July 1996 between the Social
Security Commission (SSC) in behalf of the SSS and the Alert
and Concerned Employees for Better SSS (ACCESS), the sole
1 the present proceedings is similarly questionable because
and exclusive negotiating agent for employees of the SSS. In
particular, Art. XIII of the CNA provided -
As a gesture of good will and benevolence, the
Management agrees that once the Collective
Negotiation Agreement is approved and signed by the
parties, Management shall grant each official and
employee of the SYSTEM the amount of P5,000.00 as
2 manner prescribed by law and that the DoJ has not delegated
contract signing bonus.
To fund this undertaking, the SSC allocated P15,000,000.00 in
3
the budgetary appropriation of the SSS.
On 18 February 1997 the Department of Budget and
Management (DBM) declared as illegal the contract signing
bonus which the CNA authorized to be distributed among the
4
personnel of the SSS. On 1 July 1997 the SSS Corporate
Auditor disallowed fund releases for the signing bonus since it
was "an allowance in the form of additional compensation
5
prohibited by the Constitution."
Two (2) years later, in a letter dated 29 September 1999,
ACCESS appealed the disallowance to the Commission on
6 19
Audit (COA). On 5 July 2001 despite the delay in the filing of
the appeal, a procedural matter which COA considered to be
7
inconsequential, COA affirmed the disallowance and ruled
8
that the grant of the signing bonus was improper. It held that
LABREL FULL TEXT CASES
the provision on the signing bonus in the CNA had no legal
9
basis since Sec. 16 of RA 7658 (1989) had repealed the
authority of the SSC to fix the compensation of its
10
personnel. Hence the instant petition which, curiously, was
filed in the name of the Social Security System (and not
ACCESS) by authority of the officer-in-charge for the
11 12
SSS through its legal staff.
Petitioner SSS argues that a signing bonus may be granted
upon the conclusion of negotiations leading to the execution
of a CNA where it is specifically authorized by law and that in
the case at bar such legal authority is found in Sec. 3, par. (c),
of RA 1161 as amended (Charter of the SSS) which allows the
SSC to fix the compensation of its personnel. On the other
hand, respondent COA asserts that the authority of the SSC to
fix the compensation of its personnel has been repealed by
Secs. 12 and 16 of RA 6758 and is therefore no longer
effective.
We find no legitimate and compelling reason to reverse the
COA. To begin with, the instant petition is fatally defective. It
was filed in the name of the SSS although no directive from
the SSC authorized the instant suit and only the officer-in-
charge in behalf of petitioner executed the purported
directive. Clearly, this is irregular since under Sec. 4, par. 10, in
13
relation to par. 7, RA 1161 as amended by RA 8282 (The
14
Social Security Act of 1997,which was already effective when
the instant petition was filed), it is the SSC as a collegiate body
which has the power to approve, confirm, pass upon or review
the action of the SSS to sue in court. Moreover, the
appearance of the internal legal staff of the SSS as counsel in
under both RA 1161 and RA 8282 it is the Department of
Justice (DoJ) that has the authority to act as counsel of the
15
SSS. It is well settled that the legality of the representation of
an unauthorized counsel may be raised at any stage of the
16
proceedings and that such illicit representation produces no
17
legal effect. Since nothing in the case at bar shows that the
approval or ratification of the SSC has been undertaken in the
the authority to act as counsel and appear herein, the instant
petition must necessarily fail. These procedural deficiencies
are serious matters which this Court cannot take lightly and
simply ignore since the SSS is in reality confessing judgment to
charge expenditure against the trust fund under its
custodianship.
In Premium Marble Resources v. Court of Appeals we held
18
that no person, not even its officers, could validly sue in behalf
of a corporation in the absence of any resolution from the
governing body authorizing the filing of such suit. Moreover,
where the corporate officers power as an agent of the
corporation did not derive from such resolution, it would
nonetheless be necessary to show a clear source of authority
from the charter, the by-laws or the implied acts of the
governing body. Unfortunately there is no palpable evidence
in the records to show that the officer-in-charge could all by
himself order the filing of the instant petition without the
intervention of the SSC, nor that the legal staff of SSS could act
Page 155 of 179
as its counsel and appear therein without the intervention of
the DoJ. The power of attorney supposedly authorizing this
suit as well as the signature of the legal counsel appearing on
the signing page of the instant petition is therefore ineffectual.
Indeed we find no merit in the claim that the employees and
officers of SSS are entitled to the signing bonus provided for in
the CNA. In the first place, the process of collective
negotiations in the public sector does not encompass terms
and conditions of employment requiring the appropriation of
public funds -
Sec. 13. Terms and conditions of employment or
improvements thereof, except those that are fixed by
law, may be the subject of negotiations between duly
recognized employees organizations and appropriate
20
government authorities.
More particularly -
Sec. 3. Those that require appropriation of funds,
such as the following, are not negotiable: (a) Increase
in salary emoluments and other allowances not
presently provided for by law; (b) Facilities requiring
capital outlays; (c) Car plan; (d) Provident fund; (e)
Special hospitalization, medical and dental services;
(f) Rice/sugar/other subsidies; (g) Travel expenses; (h)
Increase in retirement benefits.
Sec. 4. Matters that involve the exercise of
management prerogatives, such as the following, are
likewise not subject to negotiation: (a) Appointment;
(b) Promotion; (c) Assignment/Detail; (d)
Reclassification/ upgrading of position; (e) Revision of
compensation structure; (f) Penalties imposed as a
result of disciplinary actions; (g) Selection of
personnel to attend seminar, trainings, study grants;
(h) Distribution of work load; (I) External
communication linkages.
21
Petitioner however argues that the charter of SSS authorizes
the SSC to fix the compensation of its employees and officers
so that in reality the signing bonus is merely the fruit of the
exercise of such fundamental power. On this issue, we have to
explain the relevant amendments to the SSS charter in relation
to the passage of RA 6758(1989) entitled "An Act Prescribing a
Revised Compensation and Position Classification in the
Government and for other Purposes."
When the signing bonus was bestowed upon each employee
and officer of the SSS on 10 July 1996, which was earlier
approved by the SSC on 3 July 1996, the governing charter of
the SSS was RA 1161 as amended by Sec. 1, RA 2658, and Sec.
1, PD 735. Under this amended statute, the SSC was
empowered to "appoint an actuary, and such other personnel
as may be deemed necessary" and to "fix their
22
compensation." The law also provided that "the personnel of
LABREL FULL TEXT CASES
the SSS shall be selected only from civil service eligibles and be
23
subject to civil service rules and regulations."
On 9 August 1989 Congress passed RA 6758 which took effect
24
on 1 July 1989. Its goal was to "provide equal pay for
substantially equal work and to base differences in pay upon
substantive differences in duties and responsibilities, and
25
qualification requirements of the positions." Towards this
end, RA 6758 provided for the consolidation of allowances and
compensation in the prescribed standardized salary rates
26
except certain specified allowances and such other
additional compensation as may be determined by the
27
Department of Budget and Management. The law also
repealed "[a]ll laws, decrees, executive orders, corporate
charters, and other issuances or parts thereof, that exempt
agencies from the coverage of the System, or that authorize
and fix position classification, salaries, pay rates or allowances
of specified positions, or groups of officials and employees or
of agencies, which are inconsistent with the System, including
the proviso under Section 2 and Section 16 of Presidential
28
Decree No. 985."
Although it was the clear policy intent of RA 6758 to
standardize salary rates among government personnel, the
29 30
Legislature under Secs. 12 and 17 of the law nonetheless
saw the need for equity and justice in adopting the policy of
non-diminution of pay when it authorized incumbents as of 1
July 1989 to receive salaries and/or allowances over and above
those authorized by RA 6758. In Philippine Ports Authority v.
31
Commission on Audit we held that no financial or non-
financial incentive could be awarded to employees of
government owned and controlled corporations aside from
benefits which were being received by incumbent officials and
employees as of 1 July 1989. This Court also observed -
The consequential outcome, under sections 12 and
17, is that if the incumbent resigns or is promoted to
a higher position, his successor is no longer entitled
to his predecessors RATA privilege x x x or to the
transition allowance x x x x [A]fter July 1, 1989,
additional financial incentives such as RATA may no
longer be given by GOCCs with the exception of those
which were authorized to be continued under Section
12 of RA 6758.
Evidently, while RA 6758 intended to do away with multiple
allowances and other incentive packages and the resulting
differences in compensation among government personnel,
the statute clearly did not revoke existing benefits being
enjoyed by incumbents of government positions at the time of
the passage of RA 6758 by virtue of Secs. 12 and 17 thereof. In
previous rulings of this Court, among the financial and non-
financial incentives which we allowed certain government
employees to enjoy after the effectivity of RA 6758 were car
32 33
plan benefits and educational funding assistance for
incumbents of existing positions as of 1 July 1989 until such
gratuity packages were gradually phased out.
Page 156 of 179
We have no doubt that RA 6758 modified, if not repealed, Sec.
3, par. (c), of RA 1161 as amended, at least insofar as it
concerned the authority of SSC to fix the compensation of SSS
employees and officers. This means that whatever salaries and
other financial and non-financial inducements that the SSC
was minded to fix for them, the compensation must comply
with the terms of RA 6758. Consequently, only the
remuneration which was being offered as of 1 July 1989, and
which was then being enjoyed by incumbent SSS employees
and officers, could be availed of exclusively by the same
employees and officers separate from and independent of the
prescribed standardized salary rates. Unfortunately, however,
the signing bonus in question did not qualify under Secs. 12
and 17 of RA 6758. It was non-existent as of 1 July 1989 as it
accrued only in 1996 when the CNA was entered into by and
between SSC and ACCESS. The signing bonus therefore could
not have been included in the salutary provisions of the
statute nor would it be legal to disburse to the intended
recipients.
Philippine International Trading Corporation v. Commission on
34
Audit is instructive on this point. Like the SSS, the Philippine
International Trading Corporation (PITC) is a government-
owned and controlled corporation which was created
under PD 252 (1973) primarily for the purpose of promoting
and developing Philippine trade in pursuance of national
economic development. In the same judgment which affirmed
the car financing program and allied incentives being
implemented prior to 1 July 1989 we held that the charter of
PITC was impliedly repealed by RA 6758 -
We deem it necessary though to resolve the third
issue as to whether PITC is exempt from PD 985 as
subsequently amended by RA 6758. According to
petitioner, PITCs Revised Charter, PD 1071 dated
January 25, 1977, as amended by EO 756 dated
December 29, 1981, and further amended by EO 1067
dated November 25, 1985, expressly exempted PITC
from the Office of the Compensation and Position
Classification (OCPC) rules and regulations. Petitioner
cites Section 28 of P.D. 1071; Section 6 of EO 756; and
Section 3 of EO 1067. According to the COA in its
Decision No. 98-048 dated January 27, 1998, the
exemption granted to the PITC has been repealed and
revoked by the repealing provisions of RA 6758,
particularly Section 16 thereof which provides:
Sec. 16. Repeal of Special Salary Laws and
Regulations. - All laws, decrees, executive
orders, corporate charters, and other
issuances or parts thereof, that exempt
agencies from the coverage of the System, or
that authorize and fix position classifications,
salaries, pay rates or allowances of specified
positions, or groups of officials, and
employees or of agencies, which are
inconsistent with the System, including the
proviso under Section 2 and Section 16 of PD
No. 985 are hereby repealed.
LABREL FULL TEXT CASES
To this, [PITC] argues that RA 6758 which is a law of
general application cannot repeal provisions of the
Revised Charter of PITC and its amendatory laws
expressly exempting PITC from OCPC coverage being
special laws x x x x In the case at bar, the repeal by
Section 16 of RA 6758 of "all corporate charters that
exempt agencies from the coverage of the System"
was clear and expressed necessarily to achieve the
purposes for which the law was enacted, that is, the
standardization of salaries of all employees in
government owned and / or controlled corporations
to achieve "equal pay for substantially equal work."
Henceforth, PITC should now be considered as
covered by laws prescribing a compensation and
position classification system in the government
including RA 6758. This is without prejudice, however,
as discussed above, to the non-diminution of pay of
incumbents as of July 1, 1989 as provided in Sections
12 and 17 of said law.
So we also rule in the instant case involving the charter of the
SSS or RA 1161 as amended.
The enactment of RA 8282 entitled "The Social Security Act of
1997" does not change our holding. While it is true that Sec. 3,
par. (c), of RA 8282 expressly exempted the SSS from the
provisions of RA 6758 and RA 7430 (The Attrition Law of
1992) thus -
The Commission, upon the recommendation of the
SSS President, shall appoint an actuary and such other
personnel as may be deemed necessary; fix their
reasonable compensation, allowances and other
benefits x x x x [t]hat the personnel of the SSS shall be
selected only from civil service eligibles and be
subject to civil service rules and regulations:
Provided, finally, That the SSS shall be exempt from
the provisions of Republic Act No. 6758 and Republic
Act No. 7430,
it bears emphasis that RA 8282 took effect only on 23 May
1997, i.e., fifteen (15) days after its complete publication in
two (2) newspapers of general circulation on 7 May 1997 and
35
36
8 May 1997. It holds to reason that the prospective
application of the statute renders irrelevant to the case at bar
whatever effects this exemption may have on the power of
the SSC to fix the compensation of SSS personnel.
Ironically, RA 8282 in fact buttresses our ruling that the signing
bonus cannot escape the provisions of RA 6758. The need to
expressly stipulate the exemption of the SSS can only mean
that prior to the effectivity of RA 8282, the SSS was subject
toRA 6758 and even RA 7430 for, otherwise, there would have
been no reason to rope in such provision in RA 8282.
This Court has been very consistent in characterizing the funds
being administered by SSS as a trust fund for the welfare and
benefit of workers and employees in the private
37
sector. In United Christian Missionary v. Social Security
38
Commission we were unequivocal in declaring the funds
Page 157 of 179
contributed to the Social Security System by compulsion of law
as funds belonging to the members which were merely held in
trust by the government, and resolutely imposed the duty
upon the trustee to desist from any and all acts which would
diminish the property rights of owners and beneficiaries of the
trust fund. Consistent with this declaration, it would indeed be
very reasonable to construe the authority of the SSC to
provide for the compensation of SSS personnel in accordance
with the established rules governing the remuneration of
trustees -

x x x x the modern rule is to give the trustee a

reasonable remuneration for his skill and industry x x
x x In deciding what is a reasonable compensation for
a trustee the court will consider the amount of
income and capital received and disbursed, the pay
customarily given to agents or servants for similar
work, the success or failure of the work of the
trustee, any unusual skill which the trustee had and
used, the amount of risk and responsibility, the time
consumed, the character of the work done (whether
routine or of unusual difficulty) and any other factors
which prove the worth of the trustees services to the
cestuis x x x x The court has power to make
extraordinary compensation allowances, but will not
do so unless the trustee can prove that he has
performed work beyond the ordinary duties of his
39
office and has engaged in especially arduous work.

On the basis of the foregoing pronouncement, we do not find

the signing bonus to be a truly reasonable compensation. The
gratuity was of course the SSCs gesture of good will and
benevolence for the conclusion of collective negotiations
between SSC and ACCESS, as the CNA would itself state, but
for what objective? Agitation and propaganda which are so
commonly practiced in private sector labor-management
relations have no place in the bureaucracy and that only a
peaceful collective negotiation which is concluded within a
reasonable time must be the standard for interaction in the
public sector. This desired conduct among civil servants should
not come, we must stress, with a price tag which is what the
signing bonus appears to be.

WHEREFORE, the instant Petition for Certiorari under Rule

64, 1997 Rules of Civil Procedure, is DISMISSED. TheDecision
No. 2001-123 of the Commission on Audit and the Notice of
Disallowance No. 97-002-0101 (96) of the Social Security
System Corporate Auditor prohibiting the payment
of P5,000.00 signing bonus to each employee and officer of
the Social Security System as stipulated in Art. XIII of the
Collective Negotiation Agreement and as approved in
Resolution No. 593 of the Social Security Commission
are AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Davide, Jr., Puno, Vitug, Kapunan, Mendoza, Panganiban,

Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Austria-Martinez, and Corona, JJ., concur.
LABREL FULL TEXT CASES Page 158 of 179
FIRST DIVISION On May 4, 2001, respondent filed with the Regional Trial Court
of Quezon, City, Branch 83, a case for recovery of sum of
G.R. No. 163448. March 08, 2005 money against NFA. Docketed as Civil Case No. Q-01-43988,
6
the complaint sought reimbursement of the following
NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, amounts allegedly paid by respondent to the security guards,
in his capacity as Regional Director, NFA Regional Office No. to wit: P2,949,302.84, for unpaid wage related benefits
1, San Juan, La Union, Petitioners, brought about by the effectivity of Wage Order Nos. RB 1-05
7 8
vs. and RB CAR-04; RB 1-06 and RB CAR-05; RB 1-07 and RB CAR-
9
MASADA SECURITY AGENCY, INC., represented by its Acting 06; and P975,493.04 for additional cost and margin, plus
10
President & General Manager, COL. EDWIN S. ESPEJO interest. It also prayed for damages and litigation expenses.
(RET.), Respondents.
11
In its answer with counterclaim, NFA denied that respondent
DECISION paid the security guards their wage related benefits and that it
shouldered the additional costs and margin arising from the
implementation of the wage orders. It admitted, however,
YNARES-SANTIAGO, J.:
that it heeded respondents request for adjustment only with
respect to increase in the minimum wage and not with respect
Assailed in this petition for review under Rule 45 of the Rules
1 to the other wage related benefits. NFA argued that
of Court is the February 12, 2004 decision of the Court of respondent cannot demand an adjustment on said salary
Appeals in CA-G.R. CV No. 76677, which dismissed the appeal
related benefits because it is bound by their contract expressly
filed by petitioner National Food Authority (NFA) and its April
limiting NFAs obligation to pay only the increment in the daily
30, 2004 resolution denying petitioners motion for
wage.
reconsideration.
At the pre-trial, the only issue raised was whether or not
The antecedent facts show that on September 17, 1996,
respondent is entitled to recover from NFA the wage related
respondent MASADA Security Agency, Inc., entered into a one 12
2 3 benefits of the security guards.
year contract to provide security services to the various
offices, warehouses and installations of NFA within the scope
On September 19, 2002, the trial court rendered a
of the NFA Region I, comprised of the provinces of Pangasinan, 13
decision in favor of respondent holding that NFA is liable to
La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the
pay the security guards wage related benefits pursuant to RA
expiration of said contract, the parties extended the effectivity
4 6727, because the basis of the computation of said benefits,
thereof on a monthly basis under same terms and condition.
like overtime pay, holiday pay, SSS and Pag-ibig premium, is
the increased minimum wage. It also found NFA liable for the
Meanwhile, the Regional Tripartite Wages and Productivity
consequential adjustments in administrative costs and margin.
Board issued several wage orders mandating increases in the
The trial court absolved defendant Juanito M. David having
daily wage rate. Accordingly, respondent requested NFA for a
been impleaded in his official capacity as Regional Director of
corresponding upward adjustment in the monthly contract
NFA Regional Office No. 1, San Juan, La Union. The dispositive
rate consisting of the increases in the daily minimum wage of
portion thereof, reads:
the security guards as well as the corresponding raise in their
overtime pay, holiday pay, 13th month pay, holiday and rest
WHEREFORE, judgment is hereby rendered in favor of plaintiff
day pay. It also claimed increases in Social Security System
MASADA Security Agency, Inc., and against defendant National
(SSS) and Pag-ibig premiums as well as in the administrative
Food Authority ordering said defendant to make the
costs and margin. NFA, however, granted the request only
corresponding adjustment in the contract price in accordance
with respect to the increase in the daily wage by multiplying
with the increment mandated under the various wage orders,
the amount of the mandated increase by 30 days and denied
particularly Wage Order Nos. RBI-05, RBCAR-04, RBI-06,
the same with respect to the adjustments in the other benefits
RBCAR-05, RBI-07 and RBCAR-06 and to pay plaintiff the
and remunerations computed on the basis of the daily wage.
amounts representing the adjustments in the wage-related
benefits of the security guards and consequential increase in
Respondent sought the intervention of the Office of the
its administrative cost and margin upon presentment by
Regional Director, Regional Office No. I, La Union, as Chairman
plaintiff of the corresponding voucher claims.
of the Regional Tripartite Wages and Productivity Board and
the DOLE Secretary through the Executive Director of the
Plaintiffs claims for damages and attorneys fees and
National Wages and Productivity Commission. Despite the
5 defendants counterclaim for damages are hereby denied.
advisory of said offices sustaining the claim of respondent
that the increase mandated by Republic Act No. 6727 (RA
6727) and the wage orders issued by the RTWPB is not limited Defendant Juanito M. David is hereby absolved from any
to the daily pay, NFA maintained its stance that it is not liable liability.
to pay the corresponding adjustments in the wage related
14
benefits of respondents security guards. SO ORDERED.

LABREL FULL TEXT CASES Page 159 of 179

NFA appealed to the Court of Appeals but the same was
dismissed on February 12, 2004. The appellate court held that
the proper recourse of NFA is to file a petition for review
under Rule 45 with this Court, considering that the appeal
raised a pure question of law. Nevertheless, it proceeded to
discuss the merits of the case for "purposes of academic
discussion" and eventually sustained the ruling of the trial
court that NFA is under obligation to pay the administrative
costs and margin and the wage related benefits of the
15
respondents security guards.
On April 30, 2004, the Court of Appeals denied NFAs motion
16
for reconsideration. Hence, the instant petition.
The issue for resolution is whether or not the liability of
principals in service contracts under Section 6 of RA 6727 and
the wage orders issued by the Regional Tripartite Wages and
Productivity Board is limited only to the increment in the
minimum wage.
At the outset, it should be noted that the proper remedy of
NFA from the adverse decision of the trial court is a petition
for review under Rule 45 directly with this Court because the
issue involved a question of law. However, in the interest of
justice we deem it wise to overlook the procedural
technicalities if only to demonstrate that despite the
procedural infirmity, the instant petition is impressed with
17
merit.
18
RA 6727 (Wage Rationalization Act), which took effect on
19
July 1, 1989, declared it a policy of the State to rationalize
the fixing of minimum wages and to promote productivity-
improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to
guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the
countryside through industrial dispersal; and to allow business
and industry reasonable returns on investment, expansion and
20
growth.
In line with its declared policy, RA 6727, created the National
21
Wages and Productivity Commission (NWPC), vested, inter
alia, with the power to prescribe rules and guidelines for the
determination of appropriate minimum wage and productivity
22
measures at the regional, provincial or industry levels; and
the Regional Tripartite Wages and Productivity Boards
(RTWPB) which, among others, determine and fix the
minimum wage rates applicable in their respective region,
provinces, or industries therein and issue the corresponding
wage orders, subject to the guidelines issued by the
23
NWPC. Pursuant to its wage fixing authority, the RTWPB
24
issue wage orders which set the daily minimum wage rates.
Payment of the increases in the wage rate of workers is
ordinarily shouldered by the employer. Section 6 of RA 6727,
however, expressly lodged said obligation to the principals or
indirect employers in construction projects and establishments
providing security, janitorial and similar services. Substantially
LABREL FULL TEXT CASES
the same provision is incorporated in the wage orders issued
25
by the RTWPB. Section 6 of RA 6727, provides:
SEC. 6. In the case of contracts for construction projects and
for security, janitorial and similar services, the
prescribed increases in the wage rates of the workers shall be
borne by the principals or clients of the construction/service
contractors and the contract shall be deemed amended
accordingly. In the event, however, that the principal or client
fails to pay the prescribed wage rates, the construction/service
contractor shall be jointly and severally liable with his principal
or client. (Emphasis supplied)
NFA claims that its additional liability under the aforecited
provision is limited only to the payment of the increment in
the statutory minimum wage rate, i.e., the rate for a regular
eight (8) hour work day.
The contention is meritorious.
In construing the word "wage" in Section 6 of RA 6727,
reference must be had to Section 4 (a) of the same Act. It
states:
SEC. 4. (a) Upon the effectivity of this Act, the statutory
minimum wage rates for all workers and employees in the
private sector, whether agricultural or non-agricultural, shall
be increased by twenty-five pesos (P25) per day (Emphasis
supplied)
The term "wage" as used in Section 6 of RA 6727 pertains to
no other than the "statutory minimum wage" which is defined
under the Rules Implementing RA 6727 as the lowest wage
rate fixed by law that an employer can pay his worker. The
26
basis thereof under Section 7 of the same Rules is the normal
working hours, which shall not exceed eight hours a day.
Hence, the prescribed increases or the additional liability to be
borne by the principal under Section 6 of RA 6727 is the
increment or amount added to the remuneration of an
employee for an 8-hour work.
Expresio unius est exclusio alterius. Where a statute, by its
terms, is expressly limited to certain matters, it may not, by
27
interpretation or construction, be extended to others. Since
the increase in wage referred to in Section 6 pertains to the
"statutory minimum wage" as defined herein, principals in
service contracts cannot be made to pay the corresponding
wage increase in the overtime pay, night shift differential,
holiday and rest day pay, premium pay and other benefits
granted to workers. While basis of said remuneration and
benefits is the statutory minimum wage, the law cannot be
unduly expanded as to include those not stated in the subject
provision.
The settled rule in statutory construction is that if the statute
is clear, plain and free from ambiguity, it must be given its
literal meaning and applied without interpretation. This plain
meaning rule or verba legis derived from the maxim index
Page 160 of 179
animi sermo est (speech is the index of intention) rests on the
valid presumption that the words employed by the legislature
in a statute correctly express its intention or will and preclude
the court from construing it differently. The legislature is
presumed to know the meaning of the words, to have used
words advisedly, and to have expressed its intent by use of
such words as are found in the statute. Verba legis non est
recedendum, or from the words of a statute there should be
28
no departure.
The presumption therefore is that lawmakers are well aware
that the word "wage" as used in Section 6 means the statutory
minimum wage. If their intention was to extend the obligation
of principals in service contracts to the payment of the
increment in the other benefits and remuneration of workers,
it would have so expressly specified. In not so doing, the only
logical conclusion is that the legislature intended to limit the
additional obligation imposed on principals in service contracts
to the payment of the increment in the statutory minimum
wage.
The general rule is that construction of a statute by an
administrative agency charged with the task of interpreting or
applying the same is entitled to great weight and respect. The
Court, however, is not bound to apply said rule where such
executive interpretation, is clearly erroneous, or when there is
no ambiguity in the law interpreted, or when the language of
the words used is clear and plain, as in the case at bar.
Besides, administrative interpretations are at best advisory for
it is the Court that finally determines what the law
29
means. Hence, the interpretation given by the labor agencies
in the instant case which went as far as supplementing what is
otherwise not stated in the law cannot bind this Court.
It is not within the province of this Court to inquire into the
wisdom of the law for indeed, we are bound by the words of
30
the statute. The law is applied as it is. At any rate, the
interest of the employees will not be adversely affected if the
obligation of principals under the subject provision will be
limited to the increase in the statutory minimum wage. This is
so because all remuneration and benefits other than the
increased statutory minimum wage would be shouldered and
paid by the employer or service contractor to the workers
concerned. Thus, in the end, all allowances and benefits as
computed under the increased rate mandated by RA 6727 and
the wage orders will be received by the workers.
Moreover, the law secures the welfare of the workers by
imposing a solidary liability on principals and the service
contractors. Under the second sentence of Section 6 of RA
6727, in the event that the principal or client fails to pay the
prescribed wage rates, the service contractor shall be held
solidarily liable with the former. Likewise, Articles 106, 107
and 109 of the Labor Code provides:
ART. 106. Contractor or Subcontractor. Whenever an
employer enters into contract with another person for the
performance of the formers work, the employees of the
LABREL FULL TEXT CASES
contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wage of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.
ART. 107. Indirect Employer. The provisions of the
immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.
ART. 109. Solidary Liability. The provisions of existing laws to
the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code.
For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct
employers.
Based on the foregoing interpretation of Section 6 of RA 6727,
the parties may enter into stipulations increasing the liability
of the principal. So long as the minimum obligation of the
principal, i.e., payment of the increased statutory minimum
wage is complied with, the Wage Rationalization Act is not
violated.
In the instant case, Article IV.4 of the service contract
provides:
IV.4. In the event of a legislated increase in the minimum wage
of security guards and/or in the PADPAO rate, the AGENCY
may negotiate for an adjustment in the contract price. Any
adjustment shall be applicable only to the increment, based on
31
published and circulated rates and not on mere certification.
In the same vein, paragraph 3 of NFA Memorandum AO-98-03-
states:
3. For purposes of wage adjustments, consider only the rate
based on the wage Order issued by the Regional Tripartite
Wage Productivity Board (RTWPB). Unless otherwise provided
in the Wage Order issued by the RTWPB, the wage adjustment
shall be limited to the increment in the legislated minimum
32
wage;
The parties therefore acknowledged the application to their
contract of the wage orders issued by the RTWPB pursuant to
RA 6727. There being no assumption by NFA of a greater
liability than that mandated by Section 6 of the Act, its
obligation is limited to the payment of the increased statutory
Page 161 of 179
minimum wage rates which, as admitted by respondent, had
33
already been satisfied by NFA. Under Article 1231 of the Civil
Code, one of the modes of extinguishing an obligation is by
payment. Having discharged its obligation to respondent, NFA
no longer have a duty that will give rise to a correlative legal
right of respondent. The latters complaint for collection of
remuneration and benefits other than the increased minimum
wage rate, should therefore be dismissed for lack of cause of
action.

The same goes for respondents claim for administrative cost

and margin. Considering that respondent failed to establish a
clear obligation on the part of NFA to pay the same as well as
to substantiate the amount thereof with documentary
evidence, the claim should be denied.

WHEREFORE, the petition is GRANTED. The February 12, 2004

decision and the April 30, 2004 resolution of the Court of
Appeals which dismissed petitioner National Food Authoritys
appeal and motion for reconsideration, respectively, in CA-
G.R. CV No. 76677, are REVERSED and SET ASIDE. The
complaint filed by respondent MASADA Security Agency, Inc.,
docketed as Civil Case No. Q-01-43988, before the Regional
Trial Court of Quezon, City, Branch 83, is ordered DISMISSED.

SO ORDERED.

Davide Jr., C.J., (Chairman), Quisumbing, Carpio and Azcuna,

JJ., concur.

LABREL FULL TEXT CASES Page 162 of 179

EN BANC
G.R. No. 175352
DANTE V. LIBAN, REYNALDO M. BERNARDO, and SALVADOR
M. VIARI, Petitioners,
vs.
RICHARD J. GORDON, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition to declare Senator Richard J. Gordon
(respondent) as having forfeited his seat in the Senate.
The Facts
Petitioners Dante V. Liban, Reynaldo M. Bernardo, and
Salvador M. Viari (petitioners) filed with this Court a Petition
to Declare Richard J. Gordon as Having Forfeited His Seat in
the Senate. Petitioners are officers of the Board of Directors of
the Quezon City Red Cross Chapter while respondent is
Chairman of the Philippine National Red Cross (PNRC) Board of
Governors.
During respondents incumbency as a member of the Senate
1
of the Philippines, he was elected Chairman of the PNRC
during the 23 February 2006 meeting of the PNRC Board of
Governors. Petitioners allege that by accepting the
chairmanship of the PNRC Board of Governors, respondent has
ceased to be a member of the Senate as provided in Section
13, Article VI of the Constitution, which reads:
SEC. 13. No Senator or Member of the House of
Representatives may hold any other office or employment in
the Government, or any subdivision, agency, or
instrumentality thereof, including government-owned or
controlled corporations or their subsidiaries, during his term
without forfeiting his seat. Neither shall he be appointed to
any office which may have been created or the emoluments
thereof increased during the term for which he was elected.
2
Petitioners cite Camporedondo v. NLRC, which held that the
PNRC is a government-owned or controlled corporation.
Petitioners claim that in accepting and holding the position of
Chairman of the PNRC Board of Governors, respondent has
automatically forfeited his seat in the Senate, pursuant
3
to Flores v. Drilon, which held that incumbent national
legislators lose their elective posts upon their appointment to
another government office.
In his Comment, respondent asserts that petitioners have no
standing to file this petition which appears to be an action for
quo warranto, since the petition alleges that respondent
LABREL FULL TEXT CASES
committed an act which, by provision of law, constitutes a
ground for forfeiture of his public office. Petitioners do not
claim to be entitled to the Senate office of respondent. Under
Section 5, Rule 66 of the Rules of Civil Procedure, only a
person claiming to be entitled to a public office usurped or
unlawfully held by another may bring an action for quo
warranto in his own name. If the petition is one for quo
warranto, it is already barred by prescription since under
Section 11, Rule 66 of the Rules of Civil Procedure, the action
should be commenced within one year after the cause of the
public officers forfeiture of office. In this case, respondent has
been working as a Red Cross volunteer for the past 40 years.
Respondent was already Chairman of the PNRC Board of
Governors when he was elected Senator in May 2004, having
been elected Chairman in 2003 and re-elected in 2005.
Respondent contends that even if the present petition is
treated as a taxpayers suit, petitioners cannot be allowed to
raise a constitutional question in the absence of any claim that
they suffered some actual damage or threatened injury as a
result of the allegedly illegal act of respondent. Furthermore,
taxpayers are allowed to sue only when there is a claim of
illegal disbursement of public funds, or that public money is
being diverted to any improper purpose, or where petitioners
seek to restrain respondent from enforcing an invalid law that
results in wastage of public funds.
Respondent also maintains that if the petition is treated as
one for declaratory relief, this Court would have no jurisdiction
since original jurisdiction for declaratory relief lies with the
Regional Trial Court.
Respondent further insists that the PNRC is not a government-
owned or controlled corporation and that the prohibition
under Section 13, Article VI of the Constitution does not apply
in the present case since volunteer service to the PNRC is
neither an office nor an employment.
In their Reply, petitioners claim that their petition is neither an
action for quo warranto nor an action for declaratory relief.
Petitioners maintain that the present petition is a taxpayers
suit questioning the unlawful disbursement of funds,
considering that respondent has been drawing his salaries and
other compensation as a Senator even if he is no longer
entitled to his office. Petitioners point out that this Court has
jurisdiction over this petition since it involves a legal or
constitutional issue which is of transcendental importance.
The Issues
Petitioners raise the following issues:
1. Whether the Philippine National Red Cross (PNRC)
is a government- owned or controlled corporation;
2. Whether Section 13, Article VI of the Philippine
Constitution applies to the case of respondent who is
Page 163 of 179
 Chairman of the PNRC and at the same time a
Member of the Senate;
3. Whether respondent should be automatically
removed as a Senator pursuant to Section 13, Article
VI of the Philippine Constitution; and
4. Whether petitioners may legally institute this
4
petition against respondent.
The substantial issue boils down to whether the office of the
PNRC Chairman is a government office or an office in a
government-owned or controlled corporation for purposes of
the prohibition in Section 13, Article VI of the Constitution.
The Courts Ruling
We find the petition without merit.
Petitioners Have No Standing to File this Petition
A careful reading of the petition reveals that it is an action for
quo warranto. Section 1, Rule 66 of the Rules of Court
provides:
Section 1. Action by Government against individuals. An
action for the usurpation of a public office, position or
franchise may be commenced by a verified petition brought in
the name of the Republic of the Philippines against:
(a) A person who usurps, intrudes into, or unlawfully
holds or exercises a public office, position or
franchise;
(b) A public officer who does or suffers an act which
by provision of law, constitutes a ground for the
forfeiture of his office; or
(c) An association which acts as a corporation within
the Philippines without being legally incorporated or
without lawful authority so to act. (Emphasis
supplied)
Petitioners allege in their petition that:
4. Respondent became the Chairman of the PNRC
when he was elected as such during the First Regular
Luncheon-Meeting of the Board of Governors of the
PNRC held on February 23, 2006, the minutes of
which is hereto attached and made integral part
hereof as Annex "A."
5. Respondent was elected as Chairman of the PNRC
Board of Governors, during his incumbency as a
Member of the House of Senate of the Congress of
the Philippines, having been elected as such during
the national elections last May 2004.
LABREL FULL TEXT CASES
6. Since his election as Chairman of the PNRC Board
of Governors, which position he duly accepted,
respondent has been exercising the powers and
discharging the functions and duties of said office,
despite the fact that he is still a senator.
7. It is the respectful submission of the petitioner[s]
that by accepting the chairmanship of the Board of
Governors of the PNRC, respondent has ceased to be
a Member of the House of Senate as provided in
Section 13, Article VI of the Philippine Constitution, x
xx
xxxx
10. It is respectfully submitted that in accepting the
position of Chairman of the Board of Governors of the
PNRC on February 23, 2006, respondent has
automatically forfeited his seat in the House of
Senate and, therefore, has long ceased to be a
Senator, pursuant to the ruling of this Honorable
Court in the case of FLORES, ET AL. VS. DRILON AND
GORDON, G.R. No. 104732, x x x
11. Despite the fact that he is no longer a senator,
respondent continues to act as such and still
performs the powers, functions and duties of a
senator, contrary to the constitution, law and
jurisprudence.
12. Unless restrained, therefore, respondent will
continue to falsely act and represent himself as a
senator or member of the House of Senate, collecting
the salaries, emoluments and other compensations,
benefits and privileges appertaining and due only to
the legitimate senators, to the damage, great and
irreparable injury of the Government and the Filipino
5
people. (Emphasis supplied)
Thus, petitioners are alleging that by accepting the position of
Chairman of the PNRC Board of Governors, respondent has
automatically forfeited his seat in the Senate. In short,
petitioners filed an action for usurpation of public office
against respondent, a public officer who allegedly committed
an act which constitutes a ground for the forfeiture of his
public office. Clearly, such an action is for quo warranto,
specifically under Section 1(b), Rule 66 of the Rules of Court.
Quo warranto is generally commenced by the Government as
the proper party plaintiff. However, under Section 5, Rule 66
of the Rules of Court, an individual may commence such an
action if he claims to be entitled to the public office allegedly
usurped by another, in which case he can bring the action in
his own name. The person instituting quo warranto
proceedings in his own behalf must claim and be able to show
that he is entitled to the office in dispute, otherwise the action
6
may be dismissed at any stage. In the present case,
petitioners do not claim to be entitled to the Senate office of
Page 164 of 179
respondent. Clearly, petitioners have no standing to file the
present petition.
Even if the Court disregards the infirmities of the petition and
treats it as a taxpayers suit, the petition would still fail on the
merits.
PNRC is a Private Organization Performing Public Functions
On 22 March 1947, President Manuel A. Roxas signed Republic
7
Act No. 95, otherwise known as the PNRC Charter. The PNRC
is a non-profit, donor-funded, voluntary, humanitarian
organization, whose mission is to bring timely, effective, and
compassionate humanitarian assistance for the most
vulnerable without consideration of nationality, race, religion,
8
gender, social status, or political affiliation. The PNRC
provides six major services: Blood Services, Disaster
Management, Safety Services, Community Health and Nursing,
9
Social Services and Voluntary Service.
The Republic of the Philippines, adhering to the Geneva
Conventions, established the PNRC as a voluntary organization
for the purpose contemplated in the Geneva Convention of 27
10
July 1929. The Whereas clauses of the PNRC Charter read:
WHEREAS, there was developed at Geneva, Switzerland, on
August 22, 1864, a convention by which the nations of the
world were invited to join together in diminishing, so far lies
within their power, the evils inherent in war;
WHEREAS, more than sixty nations of the world have ratified
or adhered to the subsequent revision of said convention,
namely the "Convention of Geneva of July 29 [sic], 1929 for
the Amelioration of the Condition of the Wounded and Sick of
Armies in the Field" (referred to in this Charter as the Geneva
Red Cross Convention);
WHEREAS, the Geneva Red Cross Convention envisages the
establishment in each country of a voluntary organization to
assist in caring for the wounded and sick of the armed forces
and to furnish supplies for that purpose;
WHEREAS, the Republic of the Philippines became an
independent nation on July 4, 1946 and proclaimed its
adherence to the Geneva Red Cross Convention on February
14, 1947, and by that action indicated its desire to participate
with the nations of the world in mitigating the suffering
caused by war and to establish in the Philippines a voluntary
organization for that purpose as contemplated by the Geneva
Red Cross Convention;
WHEREAS, there existed in the Philippines since 1917 a
Charter of the American National Red Cross which must be
terminated in view of the independence of the Philippines;
and
WHEREAS, the volunteer organizations established in the
other countries which have ratified or adhered to the Geneva
LABREL FULL TEXT CASES
Red Cross Convention assist in promoting the health and
welfare of their people in peace and in war, and through their
mutual assistance and cooperation directly and through their
international organizations promote better understanding and
sympathy among the peoples of the world. (Emphasis
supplied)
The PNRC is a member National Society of the International
Red Cross and Red Crescent Movement (Movement), which is
composed of the International Committee of the Red Cross
(ICRC), the International Federation of Red Cross and Red
Crescent Societies (International Federation), and the National
Red Cross and Red Crescent Societies (National Societies). The
Movement is united and guided by its seven Fundamental
Principles:
1. HUMANITY The International Red Cross and Red
Crescent Movement, born of a desire to bring
assistance without discrimination to the wounded on
the battlefield, endeavors, in its international and
national capacity, to prevent and alleviate human
suffering wherever it may be found. Its purpose is to
protect life and health and to ensure respect for the
human being. It promotes mutual understanding,
friendship, cooperation and lasting peace amongst all
peoples.
2. IMPARTIALITY It makes no discrimination as to
nationality, race, religious beliefs, class or political
opinions. It endeavors to relieve the suffering of
individuals, being guided solely by their needs, and to
give priority to the most urgent cases of distress.
3. NEUTRALITY In order to continue to enjoy the
confidence of all, the Movement may not take sides
in hostilities or engage at any time in controversies of
a political, racial, religious or ideological nature.
4. INDEPENDENCE The Movement is independent.
The National Societies, while auxiliaries in the
humanitarian services of their governments and
subject to the laws of their respective countries, must
always maintain their autonomy so that they may be
able at all times to act in accordance with the
principles of the Movement.
5. VOLUNTARY SERVICE It is a voluntary relief
movement not prompted in any manner by desire for
gain.
6. UNITY There can be only one Red Cross or one
Red Crescent Society in any one country. It must be
open to all. It must carry on its humanitarian work
throughout its territory.
7. UNIVERSALITY The International Red Cross and
Red Crescent Movement, in which all Societies have
equal status and share equal responsibilities and
Page 165 of 179
 duties in helping each other, is worldwide. (Emphasis
supplied)
The Fundamental Principles provide a universal standard of
reference for all members of the Movement. The PNRC, as a
member National Society of the Movement, has the duty to
uphold the Fundamental Principles and ideals of the
Movement. In order to be recognized as a National Society,
the PNRC has to be autonomous and must operate in
conformity with the Fundamental Principles of the
11
Movement.
The reason for this autonomy is fundamental. To be accepted
by warring belligerents as neutral workers during international
or internal armed conflicts, the PNRC volunteers must not be
seen as belonging to any side of the armed conflict. In the
Philippines where there is a communist insurgency and a
Muslim separatist rebellion, the PNRC cannot be seen as
government-owned or controlled, and neither can the PNRC
volunteers be identified as government personnel or as
instruments of government policy. Otherwise, the insurgents
or separatists will treat PNRC volunteers as enemies when the
volunteers tend to the wounded in the battlefield or the
displaced civilians in conflict areas.
Thus, the PNRC must not only be, but must also be seen to be,
autonomous, neutral and independent in order to conduct its
activities in accordance with the Fundamental Principles. The
PNRC must not appear to be an instrument or agency that
implements government policy; otherwise, it cannot merit the
trust of all and cannot effectively carry out its mission as a
12
National Red Cross Society. It is imperative that the PNRC
must be autonomous, neutral, and independent in relation to
the State.
To ensure and maintain its autonomy, neutrality, and
independence, the PNRC cannot be owned or controlled by
the government. Indeed, the Philippine government does not
own the PNRC. The PNRC does not have government assets
and does not receive any appropriation from the Philippine
13
Congress. The PNRC is financed primarily by contributions
from private individuals and private entities obtained through
solicitation campaigns organized by its Board of Governors, as
provided under Section 11 of the PNRC Charter:
SECTION 11. As a national voluntary organization, the
Philippine National Red Cross shall be financed primarily by
contributions obtained through solicitation campaigns
throughout the year which shall be organized by the Board of
Governors and conducted by the Chapters in their respective
jurisdictions. These fund raising campaigns shall be conducted
independently of other fund drives by other organizations.
(Emphasis supplied)
The government does not control the PNRC. Under the PNRC
Charter, as amended, only six of the thirty members of the
PNRC Board of Governors are appointed by the President of
the Philippines. Thus, twenty-four members, or four-fifths
LABREL FULL TEXT CASES
(4/5), of the PNRC Board of Governors are not appointed by
the President. Section 6 of the PNRC Charter, as amended,
provides:
SECTION 6. The governing powers and authority shall be
vested in a Board of Governors composed of thirty members,
six of whom shall be appointed by the President of the
Philippines, eighteen shall be elected by chapter delegates in
biennial conventions and the remaining six shall be selected by
the twenty-four members of the Board already chosen. x x x.
Thus, of the twenty-four members of the PNRC Board,
eighteen are elected by the chapter delegates of the PNRC,
and six are elected by the twenty-four members already
chosen a select group where the private sector members
have three-fourths majority. Clearly, an overwhelming
majority of four-fifths of the PNRC Board are elected or chosen
by the private sector members of the PNRC.
The PNRC Board of Governors, which exercises all corporate
powers of the PNRC, elects the PNRC Chairman and all other
officers of the PNRC. The incumbent Chairman of PNRC,
respondent Senator Gordon, was elected, as all PNRC
Chairmen are elected, by a private sector-controlled PNRC
Board four-fifths of whom are private sector members of the
PNRC. The PNRC Chairman is not appointed by the President
or by any subordinate government official.
14
Under Section 16, Article VII of the Constitution, the
President appoints all officials and employees in the Executive
branch whose appointments are vested in the President by the
Constitution or by law. The President also appoints those
whose appointments are not otherwise provided by law.
Under this Section 16, the law may also authorize the
"heads of departments, agencies, commissions, or boards" to
appoint officers lower in rank than such heads of departments,
15 16
agencies, commissions or boards. In Rufino v. Endriga, the
Court explained appointments under Section 16 in this wise:
Under Section 16, Article VII of the 1987 Constitution, the
President appoints three groups of officers. The first group
refers to the heads of the Executive departments,
ambassadors, other public ministers and consuls, officers of
the armed forces from the rank of colonel or naval captain,
and other officers whose appointments are vested in the
President by the Constitution. The second group refers to
those whom the President may be authorized by law to
appoint. The third group refers to all other officers of the
Government whose appointments are not otherwise provided
by law.
Under the same Section 16, there is a fourth group of lower-
ranked officers whose appointments Congress may by law vest
in the heads of departments, agencies, commissions, or
boards. x x x
xxx
Page 166 of 179
In a department in the Executive branch, the head is the
Secretary. The law may not authorize the Undersecretary,
acting as such Undersecretary, to appoint lower-ranked
officers in the Executive department. In an agency, the power
is vested in the head of the agency for it would be
preposterous to vest it in the agency itself. In a commission,
the head is the chairperson of the commission. In a board, the
head is also the chairperson of the board. In the last three
situations, the law may not also authorize officers other than
the heads of the agency, commission, or board to appoint
lower-ranked officers.
xxx
The Constitution authorizes Congress to vest the power to
appoint lower-ranked officers specifically in the "heads" of the
specified offices, and in no other person. The word "heads"
refers to the chairpersons of the commissions or boards and
not to their members, for several reasons.
The President does not appoint the Chairman of the PNRC.
Neither does the head of any department, agency, commission
or board appoint the PNRC Chairman. Thus, the PNRC
Chairman is not an official or employee of the Executive
branch since his appointment does not fall under Section 16,
Article VII of the Constitution. Certainly, the PNRC Chairman is
not an official or employee of the Judiciary or Legislature. This
leads us to the obvious conclusion that the PNRC Chairman is
not an official or employee of the Philippine Government. Not
being a government official or employee, the PNRC Chairman,
as such, does not hold a government office or employment.
17
Under Section 17, Article VII of the Constitution, the
President exercises control over all government offices in the
Executive branch. If an office is legally not under the control
of the President, then such office is not part of the Executive
18
branch. In Rufino v. Endriga, the Court explained the
Presidents power of control over all government offices as
follows:
Every government office, entity, or agency must fall under the
Executive, Legislative, or Judicial branches, or must belong to
one of the independent constitutional bodies, or must be a
quasi-judicial body or local government unit. Otherwise, such
government office, entity, or agency has no legal and
constitutional basis for its existence.
The CCP does not fall under the Legislative or Judicial branches
of government. The CCP is also not one of the independent
constitutional bodies. Neither is the CCP a quasi-judicial body
nor a local government unit. Thus, the CCP must fall under the
Executive branch. Under the Revised Administrative Code of
1987, any agency "not placed by law or order creating them
under any specific department" falls "under the Office of the
President."
Since the President exercises control over "all the executive
departments, bureaus, and offices," the President necessarily
LABREL FULL TEXT CASES
exercises control over the CCP which is an office in the
Executive branch. In mandating that the President "shall have
control of all executive . . . offices," Section 17, Article VII of
the 1987 Constitution does not exempt any executive office
one performing executive functions outside of the
independent constitutional bodies from the Presidents
power of control. There is no dispute that the CCP performs
executive, and not legislative, judicial, or quasi-judicial
functions.
The Presidents power of control applies to the acts or
decisions of all officers in the Executive branch. This is true
whether such officers are appointed by the President or by
heads of departments, agencies, commissions, or boards. The
power of control means the power to revise or reverse the
acts or decisions of a subordinate officer involving the exercise
of discretion.
In short, the President sits at the apex of the Executive branch,
and exercises "control of all the executive departments,
bureaus, and offices." There can be no instance under the
Constitution where an officer of the Executive branch is
outside the control of the President. The Executive branch is
unitary since there is only one President vested with executive
power exercising control over the entire Executive branch. Any
office in the Executive branch that is not under the control of
the President is a lost command whose existence is without
any legal or constitutional basis. (Emphasis supplied)
An overwhelming four-fifths majority of the PNRC Board are
private sector individuals elected to the PNRC Board by the
private sector members of the PNRC. The PNRC Board
exercises all corporate powers of the PNRC. The PNRC is
controlled by private sector individuals. Decisions or actions of
the PNRC Board are not reviewable by the President. The
President cannot reverse or modify the decisions or actions of
the PNRC Board. Neither can the President reverse or modify
the decisions or actions of the PNRC Chairman. It is the PNRC
Board that can review, reverse or modify the decisions or
actions of the PNRC Chairman. This proves again that the
office of the PNRC Chairman is a private office, not a
government office.1avvphi1
Although the State is often represented in the governing
bodies of a National Society, this can be justified by the need
for proper coordination with the public authorities, and the
government representatives may take part in decision-making
within a National Society. However, the freely-elected
representatives of a National Societys active members must
remain in a large majority in a National Societys governing
19
bodies.
The PNRC is not government-owned but privately owned. The
vast majority of the thousands of PNRC members are private
individuals, including students. Under the PNRC Charter, those
who contribute to the annual fund campaign of the PNRC are
entitled to membership in the PNRC for one year. Thus, any
one between 6 and 65 years of age can be a PNRC member for
one year upon contributing P35, P100, P300, P500 or P1,000
Page 167 of 179
 20
for the year. Even foreigners, whether residents or not, can
be members of the PNRC. Section 5 of the PNRC Charter, as
21
amended by Presidential Decree No. 1264, reads:
SEC. 5. Membership in the Philippine National Red Cross shall
be open to the entire population in the Philippines regardless
of citizenship. Any contribution to the Philippine National Red
Cross Annual Fund Campaign shall entitle the contributor to
membership for one year and said contribution shall be
deductible in full for taxation purposes.
Thus, the PNRC is a privately owned, privately funded, and
privately run charitable organization. The PNRC is not a
government-owned or controlled corporation.
Petitioners anchor their petition on the 1999 case of
22
Camporedondo v. NLRC, which ruled that the PNRC is a
government-owned or controlled corporation. In ruling that
the PNRC is a government-owned or controlled corporation,
the simple test used was whether the corporation was created
by its own special charter for the exercise of a public function
or by incorporation under the general corporation law. Since
the PNRC was created under a special charter, the Court then
ruled that it is a government corporation. However,
the Camporedondoruling failed to consider the definition of a
government-owned or controlled corporation as provided
under Section 2(13) of the Introductory Provisions of the
Administrative Code of 1987:
SEC. 2. General Terms Defined. x x x
(13) Government-owned or controlled corporation refers to
any agency organized as a stock or non-stock corporation,
vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either
wholly, or where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of
its capital stock: Provided, That government-owned or
controlled corporations may be further categorized by the
Department of the Budget, the Civil Service Commission, and
the Commission on Audit for purposes of the exercise and
discharge of their respective powers, functions and
responsibilities with respect to such corporations.(Boldfacing
and underscoring supplied)
A government-owned or controlled corporation must be
owned by the government, and in the case of a stock
corporation, at least a majority of its capital stock must be
owned by the government. In the case of a non-stock
corporation, by analogy at least a majority of the members
must be government officials holding such membership by
appointment or designation by the government. Under this
criterion, and as discussed earlier, the government does not
own or control PNRC.
LABREL FULL TEXT CASES
The PNRC Charter is Violative of the Constitutional
Proscription against the Creation of Private Corporations by
Special Law
The 1935 Constitution, as amended, was in force when the
PNRC was created by special charter on 22 March 1947.
Section 7, Article XIV of the 1935 Constitution, as amended,
reads:
SEC. 7. The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations, unless such corporations are owned or
controlled by the Government or any subdivision or
instrumentality thereof.
The subsequent 1973 and 1987 Constitutions contain similar
provisions prohibiting Congress from creating private
corporations except by general law. Section 1 of the PNRC
Charter, as amended, creates the PNRC as a "body corporate
and politic," thus:
SECTION 1. There is hereby created in the Republic of the
Philippines a body corporate and politic to be the voluntary
organization officially designated to assist the Republic of the
Philippines in discharging the obligations set forth in the
Geneva Conventions and to perform such other duties as are
inherent upon a National Red Cross Society. The national
headquarters of this Corporation shall be located in
Metropolitan Manila. (Emphasis supplied)
23
In Feliciano v. Commission on Audit, the Court explained the
constitutional provision prohibiting Congress from creating
private corporations in this wise:
We begin by explaining the general framework under the
fundamental law. The Constitution recognizes two classes of
corporations. The first refers to private corporations created
under a general law. The second refers to government-owned
or controlled corporations created by special charters. Section
16, Article XII of the Constitution provides:
Sec. 16. The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations
may be created or established by special charters in the
interest of the common good and subject to the test of
economic viability.
The Constitution emphatically prohibits the creation of private
corporations except by general law applicable to all citizens.
The purpose of this constitutional provision is to ban private
corporations created by special charters, which historically
gave certain individuals, families or groups special privileges
denied to other citizens.
In short, Congress cannot enact a law creating a private
corporation with a special charter. Such legislation would be
unconstitutional. Private corporations may exist only under a
Page 168 of 179

general law. If the corporation is private, it must necessarily
exist under a general law. Stated differently, only corporations
created under a general law can qualify as private
corporations. Under existing laws, the general law is the
Corporation Code, except that the Cooperative Code governs
the incorporation of cooperatives.
The Constitution authorizes Congress to create government-
owned or controlled corporations through special charters.
Since private corporations cannot have special charters, it
follows that Congress can create corporations with special
charters only if such corporations are government-owned or
24
controlled. (Emphasis supplied)
In Feliciano, the Court held that the Local Water Districts are
government-owned or controlled corporations since they exist
by virtue of Presidential Decree No. 198, which constitutes
their special charter. The seed capital assets of the Local
Water Districts, such as waterworks and sewerage facilities,
were public property which were managed, operated by or
under the control of the city, municipality or province before
the assets were transferred to the Local Water Districts. The
Local Water Districts also receive subsidies and loans from the
Local Water Utilities Administration (LWUA). In fact, under the
25
2009 General Appropriations Act, the LWUA has a budget
amounting to P400,000,000 for its subsidy
26
requirements. There is no private capital invested in the
Local Water Districts. The capital assets and operating funds
of the Local Water Districts all come from the government,
either through transfer of assets, loans, subsidies or the
income from such assets or funds.
The government also controls the Local Water Districts
because the municipal or city mayor, or the provincial
governor, appoints all the board directors of the Local Water
Districts. Furthermore, the board directors and other
personnel of the Local Water Districts are government
employees subject to civil service laws and anti-graft laws.
Clearly, the Local Water Districts are considered government-
owned or controlled corporations not only because of their
creation by special charter but also because the government in
fact owns and controls the Local Water Districts.
Just like the Local Water Districts, the PNRC was created
through a special charter. However, unlike the Local Water
Districts, the elements of government ownership and control
are clearly lacking in the PNRC. Thus, although the PNRC is
created by a special charter, it cannot be considered a
government-owned or controlled corporation in the absence
of the essential elements of ownership and control by the
government. In creating the PNRC as a corporate entity,
Congress was in fact creating a private corporation. However,
the constitutional prohibition against the creation of private
corporations by special charters provides no exception even
for non-profit or charitable corporations. Consequently, the
PNRC Charter, insofar as it creates the PNRC as a private
27
corporation and grants it corporate powers, is void for being
unconstitutional. Thus, Sections
LABREL FULL TEXT CASES
28 29 30 31 32 33 34 35 36 37 38 39
1, 2, 3, 4(a), 5, 6, 7, 8, 9, 10, 11, 12, and
40
13 of the PNRC Charter, as amended, are void.
41
The other provisions of the PNRC Charter remain valid as
they can be considered as a recognition by the State that the
unincorporated PNRC is the local National Society of the
International Red Cross and Red Crescent Movement, and thus
entitled to the benefits, exemptions and privileges set forth in
the PNRC Charter. The other provisions of the PNRC Charter
implement the Philippine Governments treaty obligations
under Article 4(5) of the Statutes of the International Red
Cross and Red Crescent Movement, which provides that to be
recognized as a National Society, the Society must be "duly
recognized by the legal government of its country on the basis
of the Geneva Conventions and of the national legislation as a
voluntary aid society, auxiliary to the public authorities in the
humanitarian field."
In sum, we hold that the office of the PNRC Chairman is not a
government office or an office in a government-owned or
controlled corporation for purposes of the prohibition in
Section 13, Article VI of the 1987 Constitution. However, since
the PNRC Charter is void insofar as it creates the PNRC as a
private corporation, the PNRC should incorporate under the
Corporation Code and register with the Securities and
Exchange Commission if it wants to be a private corporation.
WHEREFORE, we declare that the office of the Chairman of the
Philippine National Red Cross is not a government office or an
office in a government-owned or controlled corporation for
purposes of the prohibition in Section 13, Article VI of the
1987 Constitution. We also declare that Sections 1, 2, 3, 4(a),
5, 6, 7, 8, 9, 10, 11, 12, and 13 of the Charter of the Philippine
National Red Cross, or Republic Act No. 95, as amended by
Presidential Decree Nos. 1264 and 1643, are VOID because
they create the PNRC as a private corporation or grant it
corporate powers.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
Page 169 of 179
FIRST DIVISION
G.R. No. 77951 September 26, 1988
COOPERATIVE RURAL BANK OF DAVAO CITY, INC., petitioner,
vs.
PURA FERRER-CALLEJA, DIRECTOR, BUREAU OF LABOR
RELATIONS, MOLE, MANILA; FELIZARDO T. SERAPIO, MED-
ARBITER DESIGNATE, REGIONAL OFFICE NO. XI, MOLE,
DAVAO CITY; and FEDERATION OF FREE
WORKERS, respondents.
Herbert P. Artes for petitioner.
The Solicitor General for Public respondent.
GANCAYCO, J.:
This is a Petition for certiorari under Rule 65 of the Rules of
Court where the issue is whether or not the employees of a
cooperative can organize themselves for purposes of collective
bargaining.
The record of the case discloses that the herein petitioner
Cooperative Rural Bank of Davao City, Inc. is a cooperative
banking corporation operating in Davao City. It is owned in
part by the Government and its employees are members and
co-owners of the same. The petitioner has around 16 rank-
and-file employees. As of August, 1986, there was no existing
collective bargaining agreement between the said employees
and the establishment. On the other hand, the herein private
respondent Federation of Free Workers is a labor organization
registered with the Department of Labor and Employment. It
is interested in representing the said employees for purposes
of collective bargaining.
On August 27, 1986, the private respondent filed with the
Davao City Regional Office of the then Ministry of Labor and
Employment a verified Petition for certification election
1 piece of evidence showing that the
among the rank-and-file employees of the petitioner. The
same was docketed as Case No. R-325 ROXI MED-UR-73-86.
On September 18, 1986, the herein public respondent issued
an Order granting the Petition for certification election.
On October 3, 1986, the petitioner filed an Appeal
Memorandum and sought a reversal of the Order of the Med-
2 employees, since no evidence showing such
Arbiter. The petitioner argues therein that, among others, a
cooperative is not covered by the Rules governing certification
elections inasmuch as it is not an institution operating for
profit. The petitioner also adds that two of the alleged rank-
and-file employees seeking the certification election are
managerial employees disqualified from joining concerted
labor activities. In sum, the petitioner insists that its
employees are disqualified from forming labor organizations
for purposes of collective bargaining.
LABREL FULL TEXT CASES
On October 8, 1986, the private respondent filed a "Motion to
Dismiss the Appeal." On October 15, 1986, the petitioner filed
its opposition to the said Motion.
On February 11, 1987, the herein public respondent Bureau of
Labor Relations Director Pura Ferrer-Calleja issued a
Resolution affirming the Order of the Med-Arbiter and
3
dismissing the Appeal. The pertinent portions of the said
Resolution are as follows
It is beyond doubt that respondent-
appellant, Cooperative Rural Bank of Davao
City falls within the purview of Article 212,
paragraph C of the Labor Code, acting as
such in the interest of an employer. To argue
otherwise would amount to closing one's
eyes to the realities of today's cooperative
banking institutions. ....
Moreover, basic is the right of every worker
in any establishment whether operated for
profit or not to organize and engage in
concerted activity, mutually beneficial to
their interest. Such right is sacredly
enshrined and protected in our fundamental
law, granting every worker the right to
organize into a collective group and engage
in concerted activities for purposes of
promoting their well being, subject only to
such limitations as may be provided for by
law.
xxx xxx xxx
As this Office has consistently ruled and
applied in various cases, being a member of
a cooperative organization does not
preclude one from forming or joining a labor
union provided that such person or persons
are not among those disqualified by law.
Nowhere in the records can we find any
signatories in the petition are among those
disqualified to form or join a union.
Finally, we cannot give credence to (the)
employer's allegation that two of the
signatories thereof, are managerial
fact can be found from the records.
xxx xxx xxx
In a Motion dated March 2, 1987, the petitioner asked for a
4
reconsideration of the said Resolution. The petitioner
reiterated therein its view that its employees are disqualified
from forming the labor organization so contemplated. The
petitioner also called attention to an Opinion rendered by
Page 170 of 179
then Solicitor General and Minister of Justice Estelito P.
5
Mendoza dated August 14, 1981. The Opinion states that
employees of an electric cooperative who are themselves
members/co-owners of the same cannot form or join labor
organizations for purposes of collective bargaining. The
Opinion also states that the duty to bargain exists only
between an employer and his/its employees, and that an
employer has no duty to bargain with his co-owners of a
corporation who are also its employees. The petitioner
submits that the said Opinion calls for application in the
present controversy.
On March 26, 1987, director Calleja issued a Resolution
6 12
denying the reconsideration sought by the petitioner. Thus,
the certification election was scheduled in the morning of April
23, 1987.
Finding the action taken by the Bureau unsatisfactory, the
petitioner brought the case directly to this Court on April 9,
1987 by way of the instant Petition for certiorari. The
petitioner maintains that the public respondents both acted
without jurisdiction or in excess thereof, or with grave abuse
of discretion amounting to lack of jurisdiction, in allowing the
certification election sought by the private respondent despite
the arguments of the petitioner in opposition thereto. The
petitioner reiterates its argument that employees of
cooperatives who are members and co-owners of the same
cannot form and join labor organizations for purposes of
collective bargaining.
On April 15, 1987, this Court issued a temporary restraining
order enjoining the Bureau of Labor Relations from proceeding
with the certification election scheduled on April 23,
7
1987. The certification election nonetheless pushed through
as scheduled for the alleged reason that the temporary
restraining order was not seasonably transmitted to Davao
8
City.
This court also required the respondents to file their Comment
on the Petition. The respondents complied as instructed. The
Office of the Solicitor General represented the public
respondents.
The Solicitor General intimated to this Court that the instant
Petition has been rendered moot and academic inasmuch as
the certification election sought to be enjoined had already
been conducted. The Solicitor General added that the public
10
respondents did not commit any jurisdictional error.
In due time, the parties submitted other pleadings. On January
6, 1988, the case was deemed submitted for decision.
After a careful examination of the entire record of the case,
We find the instant Petition meritorious.
Contrary to the view espoused by the Solicitor General, this
case cannot be considered moot and academic simply because
the certification election sought to be enjoined went on as
LABREL FULL TEXT CASES
scheduled. The instant Petition is one for certiorari as a special
civil action. Errors of jurisdiction on the part of the public
respondents are alleged in the Petition itself. If the public
respondents had indeed committed jurisdictional errors, the
action taken by both the Med-Arbiter and the Bureau Director
11
will be deemed null and void ab initio. And if this were so,
the certification election would, necessarily, have no legal
justification. The arguments raised in the instant Petition strike
at the very heart of the validity of the certification election
itself.
We come now to the main aspect of the case.
Article 243 of the Labor Code enumerates who are eligible
to form, join, or assist labor organizations for purposes of
collective bargaining, to wit
ART. 243. Coverage and employees' right to
self-organization. All persons employed in
commercial, industrial and agricultural
enterprises and in religious, charitable,
medical or educational institutions whether
operating for profit or not, shall have the
right to self-organization and to form, join,
or assist labor organizations of their own
choosing for purposes of collective
bargaining. ....
The recognized exception to this enumeration is found in
Article 245 of the same code, which provides for the
ineligibility of managerial employees to join any labor
reorganization, viz-
ART. 245. Ineligibility of managerial
employees to join any labor organization.
Managerial employees are not eligible to
join, assist or form any labor organization.
From the foregoing provisions of law it would appear at first
blush that all the rank and file employees of a cooperative who
are not managerial employees are eligible to form, join or
assist any labor organization of their own choosing for the
purpose of collective bargaining.
However, under Section 2 of P.D. No. 175, a cooperative is
defined to mean "organizations composed primarily of small
producers and of consumers who voluntarily join together to
form business enterprises which they themselves own,
control, and patronize." Its creation and growth were declared
as a policy of the State as a means of increasing the income
and purchasing power of the low-income sector of the
population in order to attain a more equitable distribution of
13
income and wealth . The principles governing it are:
a) Open membership"Should be voluntary
and available without artificial restriction, or
any social, political, racial or religious
discrimination, to all persons who can make
Page 171 of 179
 use of its services and are willing to accept
responsibilities of membership;"
b) Democratic control."Irrespective of the
number of shares owned, each member can
only cast one vote in deciding upon the
affairs of the cooperative;"
c) Limited interests to capital. "Share
capital shall earn only limited interest, the
maximum rate of interest to be established
by the Department of Local Government and
Community Development from time to
time;" and
d) Patronage refund "Net income after
the interest on capital has been paid shall be
redistributed among the members in
proposition to their patronage."
14
While cooperatives may exercise the same rights and
privileges given to persons, partnership and corporations
provided under existing laws, operate business enterprises of
all kinds, establish rural banks, enjoy all the privileges and
incentives granted by the NACIDA Act and other government
agencies to business organizations under existing laws, to
expropriate idle urban or rural lands for its purposes, to own
and dispose of properties, enter into contracts, to sue and be
sued and perform other acts necessary to pursue its
15
objectives, such cooperatives enjoy such privileges as:
a) Exemption from income tax and sales taxes;
b) Preferential right to supply rice, corn and other grains, and
other commodities produced by them to State agencies
administering price stabilization program; and
c) In appropriate cases, exemption from application of
minimum wage law upon recommendation of the Bureau of
Cooperative Development subject to the approval of the
16
Secretary of Labor.
A cooperative development loan fund has been created for
17
the development of the cooperative movement.
It may be, further stated that the Department of Local
Govemment and Community Development through the
Bureau of Cooperative Development is vested with full
authority to promulgate rules and regulations to cover the
promotion, organization, registration, regulation and
18
supervision of all types of cooperatives. Electric
cooperatives, however, are under the regulation and
supervision of the National Electrification Ad.
19
Administration, while it is the Monetary Board of the Central
Bank that has exclusive responsibility and authority over the
20
banking functions and operations of cooperative banks .
LABREL FULL TEXT CASES
A cooperative, therefore, is by its nature different from an
ordinary business concern, being run either by persons,
partnerships, or corporations. Its owners and/or members are
the ones who run and operate the business while the others
are its employees. As above stated, irrespective of the number
of shares owned by each member they are entitled to cast one
vote each in deciding upon the affairs of the cooperative. Their
share capital earn limited interests. They enjoy special
privileges as exemption from income tax and sales taxes,
preferential right to supply their products to State agencies
and even exemption from the minimum wages laws.
An employee therefore of such a cooperative who is a
member and co-owner thereof cannot invoke the right to
collective bargaining for certainly an owner cannot bargain
with himself or his co-owners. In the opinion of August 14,
1981 of the Solicitor General he correctly opined that
employees of cooperatives who are themselves members of
the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being
21
themselves co-owners of the cooperative.
However, in so far as it involves cooperatives with employees
who are not members or co-owners thereof, certainly such
employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as
are enshrined in the Constitution and existing laws of the
22
country.
The questioned ruling therefore of public respondent Pura
Ferrer-Calleja must be upheld insofar as it refers to the
employees of petitioner who are not members or co-owners
of petitioner. It cannot extend to the other employees who are
at the same time its members or co-owners.
The Court upholds the findings of said public respondent that
no persuasive evidence has been presented to show that two
of the signatories in the petition for certification election are
managerial employees who under the law are disqualified
from pursuing union activities.
WHEREFORE, the herein petition is hereby GRANTED and the
resolution of public respondent Pura Ferrer-Calleja, Director,
Bureau of Labor Relations, of February 11, 1987 is hereby
MODIFIED to the effect that only the rank and file employees
of petitioner who are not its members or co-owners are
entitled to self-organization, collective bargaining, and
negotiations, while the other employees who are members or
co-owners thereof can not enjoy such right.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.
Page 172 of 179
SECOND DIVISION the reason that the basis of withdrawal is not among the
grounds covered by Board Resolution No. 5023, dated
G.R. No. 94045 September 13, 1991 November 22, 1989 and that said request is contrary to Board
4
Resolution No. 5033 dated December 13, 1989, ..."
CENTRAL NEGROS ELECTRIC COOPERATIVE, INC.
(CENECO), petitioner, By reason of CENECO's refusal to renegotiate a new CBA, CURE
vs. filed a petition for direct recognition or for certification
HONORABLE SECRETARY, DEPARTMENT OF LABOR AND election, supported by 282 or 72% of the 388 rank-and-file
EMPLOYMENT, and CENECO UNION OF RATIONAL employees in the bargaining unit of CENECO.
EMPLOYEES (CURE), respondents.
CENECO filed a motion to dismiss on the ground that there are
Enrique S. Tabino for petitioner. legal constraints to the filing of the certification election, citing
the ruling laid down by this Court in Batangas I Electric
5
Edmundo G. Manlapao for private respondent. Cooperative Labor Union vs. Romeo A. Young, (BATANGAS
case) to the effect that "employees who at the same time are
members of an electric cooperative are not entitled to form or
join unions for purposes of collective bargaining agreement,
for certainly an owner cannot bargain with himself or his co-
REGALADO, J.:p
owners."

In this special civil action for certiorari, petitioner Central 6

Med-Arbiter Felizardo T. Serapio issued an order, granting
Negros Electric Cooperative, Inc. (CENECO) seeks to annul the
1 the petition for certification election which, in effect, was a
order issued by then Acting Secretary of Labor Bienvenido E.
denial of CENECO's motion to dismiss, and directing the
Laguesma on June 6, 1990, declaring the projected
holding of a certification election between CURE and No
certification election unnecessary and directing petitioner
Union.
CENECO to continue recognizing private respondent CENECO
Union of Rational Employees (CURE) as the sole and exclusive
CENECO appealed to the Department of Labor and
bargaining representative of all the rank-and-file employees of
Employment which issued the questioned order modifying the
petitioner's electric cooperative for purposes of collective
aforestated order of the med-arbiter by directly certifying
bargaining.
CURE as the exclusive bargaining representative of the rank-
and-file employees of CURE.
It appears from the records that on August 15, 1987, CENECO
entered into a collective bargaining agreement with CURE, a
Hence, this petition.
labor union representing its rank-and-file employees,
providing for a term of three years retroactive to April 1, 1987
and extending up to March 31, 1990. On December 28, 1989, Petitioner CENECO argues that respondent Secretary
CURE wrote CENECO proposing that negotiations be committed a grave abuse of discretion in not applying to the
conducted for a new collective bargaining agreement (CBA). present case the doctrine enunciated in the BATANGAS case
that employees of an electric cooperative who at the same
time are members of the electric cooperative are prohibited
On January 18, 1990, CENECO denied CURE's request on the
from forming or joining labor unions for purposes of a
ground that, under applicable decisions of the Supreme Court,
collective bargaining agreement. While CENECO recognizes the
employees who at the same time are members of an electric
2 employees' right to self-organization, it avers that this is not
cooperative are not entitled to form or join a union.
absolute. Thus, it opines that employees of an electric
cooperative who at the same time are members thereof are
Prior to the submission of the proposal for CBA renegotiation,
not allowed to form or join labor unions for purposes of
CURE members, in a general assembly held on December 9,
collective bargaining. However, petitioner does not hesitate to
1989, approved Resolution No. 35 whereby it was agreed that
admit that the prohibition does not extend to employees of an
'tall union members shall withdraw, retract, or recall the union
electric cooperative who are not members of the cooperative.
members' membership from Central Negros Electric
Cooperative, Inc. in order to avail (of) the full benefits under
The issue, therefore, actually involves a determination of
the existing Collective Bargaining Agreement entered into by
whether or not the employees of CENECO who withdrew their
and between CENECO and CURE, and the supposed benefits
3 membership from the cooperative are entitled to form or join
that our union may avail (of) under the renewed CBA. This
CURE for purposes of the negotiations for a collective
was ratified by 259 of the 362 union members. CENECO and
bargaining agreement proposed by the latter.
the Department of Labor and Employment, Bacolod District,
were furnished copies of this resolution.
As culled from the records, it is the submission of CENECO that
the withdrawal from membership in the cooperative and, as a
However, the withdrawal from membership was denied by
CENECO on February 27, 1990 under Resolution No. 90 "for
LABREL FULL TEXT CASES Page 173 of 179
consequence, the employees' acquisition of membership in
the union cannot be allowed for the following reasons:
1. It was made as a subterfuge or to subvert
the ruling in the BATANGAS case:
2. To allow the withdrawal of the members
of CENECO from the cooperative without
justifiable reason would greatly affect the
objectives and goals of petitioner as an
electric cooperative;
3. The Secretary of Labor, as well as the
Med-Arbiter, has no jurisdiction over the
issue of the withdrawal from membership
which is vested in the National Electrification
Administration (NEA) which has direct
control and supervision over the operations
of electric cooperatives; and
4. Assuming that the Secretary has
jurisdiction, CURE failed to exhaust
administrative remedies by not referring the
matter of membership withdrawal to the
NEA.
The petition is destitute of merit; certiorari will not lie.
We first rule on the alleged procedural infirmities affecting the
instant case. CENECO avers that the med-arbiter has no
jurisdiction to rule on the issue of withdrawal from
membership of its employees in the cooperative which, it
claims, is properly vested in the NEA which has control and
supervision over all electric cooperatives.
From a perusal of petitioner's motion to dismiss filed with the
med-arbiter, it becomes readily apparent that the sole basis
for petitioner's motion is the illegality of the employees'
membership in respondent union despite the fact that they
allegedly are still members of the cooperative. Petitioner itself
adopted the aforesaid argument in seeking the dismissal of
the petition for certification election filed with the med-
arbiter, and the finding made by the latter was merely in
answer to the arguments advanced by petitioner. Hence,
petitioner is deemed to have submitted the issue of
membership withdrawal from the cooperative to the
jurisdiction of the med-arbiter and it is now estopped from
questioning that same jurisdiction which it invoked in its
motion to dismiss after obtaining an adverse ruling thereon.
Under Article 256 of the Labor Code, to have a valid
certification election at least a majority of all eligible voters in
the unit must have cast their votes. It is apparent that
incidental to the power of the med-arbiter to hear and decide
representation cases is the power to determine who the
eligible voters are. In so doing, it is axiomatic that the med-
arbiter should determine the legality of the employees'
membership in the union. In the case at bar, it obviously
LABREL FULL TEXT CASES
becomes necessary to consider first the propriety of the
employees' membership withdrawal from the cooperative
before a certification election can be had.
Lastly, it is petitioner herein who is actually questioning the
propriety of the withdrawal of its members from the
cooperative. Petitioner could have brought the matter before
the NEA if it wanted to and. if such remedy had really been
available, and there is nothing to prevent it from doing so. It
would be absurd to fault the employees for the neglect or
laxity of petitioner in protecting its own interests.
The argument of CENECO that the withdrawal was merely to
subvert the ruling of this Court in the BATANGAS case is
without merit. The case referred to merely declared that
employees who are at the same time members of the
cooperative cannot join labor unions for purposes of collective
bargaining. However, nowhere in said case is it stated that
member-employees are prohibited from withdrawing their
membership in the cooperative in order to join a labor union.
As discussed by the Solicitor General, Article I, Section 9 of the
Articles of Incorporation and By- Laws of CENECO provides
that "any member may withdraw from membership upon
compliance with such uniform terms and conditions as the
Board may prescribe." The same section provides that upon
withdrawal, the member is merely required to surrender his
membership certificate and he is to be refunded his
membership fee less any obligation that he has with the
cooperative. There appears to be no other condition or
requirement imposed upon a withdrawing member. Hence,
there is no just cause for petitioner's denial of the withdrawal
from membership of its employees who are also members of
7
the union.
The alleged board resolutions relied upon by petitioner in
denying the withdrawal of the members concerned were
never presented nor their contents disclosed either before the
med-arbiter or the Secretary of Labor if only to prove the
ratiocination for said denial. Furthermore, CENECO never
averred non-compliance with the terms and conditions for
withdrawal, if any. It appears that the Articles of Incorporation
of CENECO do not provide any ground for withdrawal from
membership which accordingly gives rise to the presumption
that the same may be done at any time and for whatever
reason. In addition, membership in the cooperative is on a
voluntary basis. Hence, withdrawal therefrom cannot be
restricted unnecessarily. The right to join an organization
necessarily includes the equivalent right not to join the same.
The right of the employees to self-organization is a compelling
reason why their withdrawal from the cooperative must be
allowed. As pointed out by CURE, the resignation of the
member- employees is an expression of their preference for
union membership over that of membership in the
cooperative. The avowed policy of the State to afford fall
protection to labor and to promote the primacy of free
collective bargaining mandates that the employees' right to
Page 174 of 179
form and join unions for purposes of collective bargaining be effective way of determining which labor organization can
10
accorded the highest consideration. truly represent the working force is by certification election.

Membership in an electric cooperative which merely vests in WHEREFORE, the questioned order for the direct certification
the member a right to vote during the annual meeting of respondent CURE as the bargaining representative of the
becomes too trivial and insubstantial vis-a-vis the primordial employees of petitioner CENECO is hereby ANNULLED and SET
and more important constitutional right of an employee to ASIDE. The med-arbiter is hereby ordered to conduct a
join a union of his choice. Besides, the 390 employees of certification election among the rank-and- file employees of
CENECO, some of whom have never been members of the CENECO with CURE and No Union as the choices therein.
cooperative, represent a very small percentage of the
cooperative's total membership of 44,000. It is inconceivable SO ORDERED.
how the withdrawal of a negligible number of members could
adversely affect the business concerns and operations of Melencio-Herrera (Chairperson), Paras and Padilla, JJ., concur.
CENECO.
Sarmiento, J., is on leave.
We rule, however, that the direct certification ordered by
respondent Secretary is not proper. By virtue of Executive
Order No. 111, which became effective on March 4, 1987, the
direct certification originally allowed under Article 257 of the
Labor Code has apparently been discontinued as a method of
selecting the exclusive bargaining agent of the workers. This
amendment affirms the superiority of the certification election
over the direct certification which is no longer available now
8
under the change in said provision.

We have said that where a union has filed a petition for

certification election, the mere fact that no opposition is made
9
does not warrant a direct certification. In said case which has
similar features to that at bar, wherein the respondent
Minister directly certified the union, we held that:

... As pointed out by petitioner in its petition,

what the respondent Minister achieved in
rendering the assailed orders was to make a
mockery of the procedure provided under
the law for representation cases because: ...
(c) By directly certifying a Union without
sufficient proof of majority representation,
he has in effect arrogated unto himself the
right, vested naturally in the employee's to
choose their collective bargaining
representative. (d) He has in effect imposed
upon the petitioner the obligation to
negotiate with a union whose majority
representation is under serious question.
This is highly irregular because while the
Union enjoys the blessing of the Minister, it
does not enjoy the blessing of the
employees. Petitioner is therefore under
threat of being held liable for refusing to
negotiate with a union whose right to
bargaining status has not been legally
established.

While there may be some factual variances, the rationale

therein is applicable to the present case in the sense that it is
not alone sufficient that a union has the support of the
majority. What is equally important is that everyone be given a
democratic space in the bargaining unit concerned. The most
LABREL FULL TEXT CASES Page 175 of 179
THIRD DIVISION
G.R. No. 143616 May 9, 2001
NEGROS ORIENTAL ELECTRIC COOPERATIVE 1 (NORECO1),
represented by ATTY. SUNNY R.A. MADAMBA, as General
Manager, petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE), and PACIWU-NACUSIP, NORECO 1
Chapter of Bindoy, Negros Oriental, respondents.
GONZAGA-REYES, J.:
1 The appellate court ruled that the Secretary of Labor properly
Petitioner assails the Decision of the Court of Appeals dated
August 20, 1999 dismissing its petition for certiorari in C.A.-
G.R. SP No. 50295 and the order denying its Motion for
Reconsideration therefrom.
The antecedents are recited by the Court of Appeals as
follows:
"It appears that on December 4, 1997, some
employees of the petitioner organized themselves
into a local chapter of the Philippine Agricultural
Commercial and Industrial Workers' Union - Trade
Union Congress of the Philippines (PACIWU-TUCP).
The private respondent-union submitted its charter
certificate and supporting documents on the same
date.1wphi1.nt
On December 10, 1997, PACIWU-TUCP filed a petition
for certification election on behalf of the NORECO 1
chapter, seeking to represent the seventy-seven (77)
rank-and-file employees of NORECO 1. PACIWU-TUCP
alleged in its petition that it had created a local
chapter in NORECO 1 which had been duly reported
to the DOLE Regional Office (Region VII) on December
4, 1997. It was further averred therein that NORECO 1
is an unorganized establishment, and that there is no
other labor organization presently existing at the said
employer establishment.
The Med-Arbiter dismissed the petition in an order
dated December 23, 1997, which stated that:
'It appears in the records of this Office that
the petitioner has just applied for
registration. The corresponding certificate
has not yet been issued. Accordingly, it has
not yet acquired the status of a legitimate
labor organization.
The instant petition, not having been filed by
legitimate labor organization, the same is
hereby DENIED.
LABREL FULL TEXT CASES
WHEREFORE, this case is
DISMISSED.1wphi1.nt
SO ORDERED.'
PACIWU-TUCP filed a Motion for Reconsideration of
the said order, which was treated as an appeal by the
public respondent. On July 31, 1998, the public
respondent rendered the assailed judgment as
2
previously quoted. The petitioner filed a Motion for
Reconsideration on August 24, 1998, but the same
was denied in a Resolution dated September 21,
3
1998."
treated PACIWU-TUCP's Motion for Reconsideration as an
appeal, and held that the said chapter is deemed to have
acquired legal personality as of December 4, 1997 upon
submission of the documents required under the Omnibus
Rules for the creation of a local chapter. The said court also
dismissed petitioner's contention assailing the composition of
the private respondent union.
Motion for Reconsideration of the above decision was denied.
Hence this petition for review on certiorari which submits the
following arguments in support thereof:
"I. THE COURT OF APPEALS HAS DEPARTED
FROM THE ACCEPTED PRINCIPLE THAT THE
PERIOD TO APPEAL CANNOT BE EXTENDED
AND THUS THE RESPONDENT SECRETARY OF
LABOR HAS NO JURISDICTION TO REVERSE
THE DECISION OF THE MED-ARBITER,
BECAUSE THE APPEAL HAS NOT BEEN
PERFECTED ON TIME;
II. THE COURT OF APPEALS DECIDED THIS
CASE CONTRARY TO THE DECISION OF THE
SUPREME COURT IN THE CASE OF TOYOTA
MOTOR PHILIPPINES VS. TOYOTA MOTOER
PHILIPPINES CORPORATION UNION AND THE
SECRETARY OF LABOR AND EMPLOYMENT,
G.R. NO. 121084, FEBRUARY 19, 1997, BY
COMPLETELY IGNORING THE TOYOTA CASE
WHICH IS ON FOUR SQUARE WITH THIS
CASE, WHEN THE COURT OF APPEALS
SUSTAINED THE ORDER FOR CERTIFICATION
ELECTIONS IN SPITE OF THE EXISTENCE OF
SUPERVISORY EMPLOYEES IN THE RANK AND
FILE UNION OF THE RESPONDENT PACIWU-
NACUSIP NORECO 1 CHAPTER;
III. THE COURT OF APPEALS ERRED IN
ALLOWING CERTIFICATION ELECTIONS
WHEN ALL THE MEMBERS OF THE UNION
4
ARE MEMBERS OF THE COOPERATIVE."
Page 176 of 179
The first contention was correctly resolved by the Court of
Appeals. Petitioner reiterates that the Motion for
Reconsideration from the Decision of the Med-Arbiter was
filed by PACIWU-NACUSIP out of time, i.e. beyond the ten (10)
days allowed for filing such motion for reconsideration. The
allegation of late filing is bare, it does not even specify the
material dates, nor furnish substantiation of the said
allegation. The Court of Appeals noted that the original record
does not disclose the actual date of receipt by the private
respondent of the order of the Med-Arbiter dismissing the
petition for certification election, and hence it "cannot
conclude that the Med-Arbiter's Decision had already become
final and executory pursuant to Section 14, Rule XI Book V of
the Omnibus Implementing Rules". Neither the present
Petition or the Reply to Comment of Solicitor General for
public respondent attempts to supply the omission and we are
accordingly constrained to dismiss this assigned error
concerning the timeliness of respondent's appeal to the
Secretary of Labor.
In its Petition for Certiorari filed in the Court of Appeals dated
November 7, 1998, the allegation that the Motion for
Reconsideration filed by respondent PACIWU-NACUSIP was
"filed out of time" was similarly unsubstantiated. Moreover,
the issue was raised below for the first time in the Motion for
Reconsideration filed by NORECO I (Motion dated August 22,
1998), and the Secretary of labor rejected the petitioner's
contention for not having been seasonably filed; the DOLE
Resolution stated categorically that:
"there being no question as to the timeliness of the
filing of appellant's Motion for Reconsideration which
was elevated to us by the Regional Office, the same
5
can be treated as an appeal xxx".
We find no cogent justification to reverse the finding on the
basis of the records before us.
The second argument posited by petitioner is also without
merit. Petitioner invokes Article 245 of the Labor Code and the
ruling in Toyota Motor Philippines Corp. vs. Toyota Motor
6
Philippines Corporation Labor Union which declare the
ineligibility of managerial or supervisory employees to join any
labor organization consisting of rank and file employees for
the reason that the concerns which involve either group "are
normally disparate and contradictory". Petitioner claims that it
challenged the composition of the union at the earliest
possible time after the decision of the Med-Arbiter was set
aside by the DOLE; and that the list of the names of
supervisory or confidential employees was submitted with the
petition for certiorari filed in the Court of Appeals, which did
not consider the same. Petitioner further argues that the
failure of the Secretary of Labor and the Court of Appeals to
resolve this question constituted a denial of its right to due
process.
The contentions are unmeritorious.
LABREL FULL TEXT CASES
The issue was raised for the first time in petitioner's Motion
for Reconsideration of the Decision of the Secretary of Labor
dated July 13, 1998 which set aside the Order of the Med-
Arbiter dated December 23, 1997 dismissing the PACIWU-
7
TUCP's petition for certification election. In its Resolution
dated September 21, 1998, denying the Motion for
Reconsideration, the Secretary of Labor categorically stated:
"On the fourth ground, in the cited case of Toyota
Motor Philippines Corporation v. Toyota Motor
Philippines Corporation Labor Union, 268 SCRA 573,
the employer, since the beginning opposed the
petition indicating the specific names of the
supervisory employees and their respective job
descriptions. In the instant case, movant not only
belatedly raised the issue but miserably failed to
support the same. Hence, between the belated and
bare allegation of movant that "there are supervisory
and confidential employees in the union" vis--vis the
open and repeated declaration under oath of the
union members in the minutes of their organizational
meeting and the ratification of their Constitution and
By-Laws that they are rank and file employees, we are
inclined to give more credence to the latter. Again,
in Cooperative Rural Bank of Davao City, Inc. vs.
Ferrer-Calleja, supra, the Supreme Court held:
'the Court upholds the findings of said public
respondent that no persuasive evidence has
been presented to show that two of the
signatories in the petition for certification
election are managerial employees who
under the law are disqualified from pursuing
union activities.'
In the instant case, there is no persuasive evidence to
show that there are indeed supervisory and
confidential employees in appellant union who under
8
the law are disqualified to join the same."
The above finding was correctly upheld by the Court of
Appeals, and we find no cogent basis to reverse the same.
Factual issues are not a proper subject for certiorari which is
limited to the issue of jurisdiction and grave abuse of
discretion.1wphi1.nt
Indeed, the Court of Appeals cannot be expected to go over
the list of alleged supervisory employees attached to the
petition before it and to pass judgment in the first instance on
the nature of the functions of each employee on the basis of
the job description pertaining to him. As appropriately
observed by the said court, the determination of such factual
issues is vested in the appropriate Regional Office of the
Department of Labor and Employment and pursuant to the
doctrine of primary jurisdiction, the Court should refrain from
resolving such controversies. The doctrine of primary
jurisdiction does not warrant a court to arrogate unto itself the
authority to resolve a controversy the jurisdiction over which
Page 177 of 179
is initially lodged with an administrative body of special
9
competence.
The petitioner questions the remedy suggested by the Court of
Appeals i.e., to file a petition for cancellation of registration
before the appropriate Regional Office arguing that the
membership of supervisory employees in the rank-and-file is
not one of the grounds for cancellation of registration under
the Omnibus Rules. Whether the inclusion of the prohibited
mix of rank-and-file and supervisory employees in the roster of
officers and members of the union can be cured by
cancellation of registration under Article 238 et seq. of the
Labor Code vis--vis Rule VIII of the Omnibus Rules, or by
simple inclusion-exclusion proceedings in the pre-election
10
conference, the fact remains that the determination of
whether there are indeed supervisory employees in the roster
of members of the rank-and-file union has never been raised
nor resolved by the appropriate fact finding body, and the
petition for certiorari filed in the Court of Appeals cannot cure
the procedural lapse. It bears notice that unlike in Toyota
Motor Philippines Corp. vs. Toyota Motor Philippines Corp.
11
Labor Union where the objection that "the union was
composed of both rank-and-file and supervisory employees in
violation of law" was promptly raised in the position paper to
oppose the petition for certification election, and this
objection was resolved by the Med-Arbiter, this issue was
belatedly raised in the case at bar and was sought to be
ventilated only before the Court of Appeals in the petition for
certiorari. Time and again, this Court has ruled that factual
12
matters are not proper subjects for certiorari.
The above observations are in point with respect to the last
assigned error challenging the inclusion of members of the
cooperative in the union. The argument that NORECO I is a
cooperative and most if not all of the members of the
petitioning union are members of the cooperative was raised
only in the Motion for Reconsideration from the Decision of
the Secretary of Labor dated July 31, 1998. The Secretary of
Labor ruled that the argument should be rejected as it was not
seasonably filed. Nevertheless the DOLE resolved the question
in this wise:
"On the third ground, while movant correctly
cited Cooperative Bank of Davao City, Inc. vs. Ferrer-
Calleja, 165 SCRA 725, that "an employee of a
cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining" it
failed to mention the proviso provided by the
Supreme Court in the same decision:
'However, in so far as it involves
cooperatives with employees who are not
members or co-owners thereof, certainly
such employees are entitled to exercise the
rights of all workers to organization,
collective bargaining, negotiations and
others as are enshrined in the constitution
and existing laws of the country.
LABREL FULL TEXT CASES
The questioned ruling therefore of public
respondent Pura Ferrer-Calleja must be
upheld in so far as it refers to the employees
of petitioner who are not members or co-
owners of petitioner.'
Not only did movant fail to show any proof that
anyone of the union members are members or co-
owners of the cooperative. It also declared that not
all members of the petitioning union are members of
13
the cooperative".
The ruling was upheld by the appellate court thus:
"The petitioner is indeed correct in stating that
employees of a cooperative who are members-
consumers or members-owners, are not qualified to
form, join or assist labor organizations for purposes of
collective bargaining, because of the principle that an
owner cannot bargain with himself. However, the
petitioner failed to mention that the Supreme Court
has also declared that in so far as it involves
cooperatives with employees who are not members
or co-owners thereof, certainly such employees are
entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and
others as are enshrined in the Constitution and
existing laws of the country.
The public respondent found that petitioner failed to
show any proof that any member of the private
respondent was also a member or co-owner of the
petitioner-cooperative. Hence the members of the
private respondent could validly form a labor
organization."
14
In the instant petition, NORECO 1 fails to controvert the
statement of the Court of Appeals that the petitioner "failed to
show any proof that any member of the private respondent
was also a member or co-owner of the petitioner
cooperative." More important, the factual issue is not for the
Court of Appeals to resolve in a petition for certiorari. Finally,
the instant petition ambiguously states that "NORECO1 is an
electric cooperative and all the employees of the subject union
are members of the cooperative", but submitted "a certified
list of employees who are members-co-owners of the
petitioner electric cooperative." Impliedly, there are rank-and-
file employees of the petitioner who are not themselves
members-co-owners, or who are the ones qualified to form or
join a labor organization. Again, the core issue raises a
question of fact that the appellate court correctly declined to
resolve in the first instance.1wphi1.nt
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.
Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.
Page 178 of 179
LABREL FULL TEXT CASES Page 179 of 179