[G.R. No. L-8967. May 31, 1956.
] answer to the claim for compensation filed by the employee
ANASTACIO VIAÑA, Petitioner, vs. ALEJO AL-
LAGADAN and FILOMENA PIGA, Respondents.
DECISION
CONCEPCION, J.:
Petitioner Anastacio Viaña owned the fishing sailboat
“Magkapatid”, which, in the night of September 3, 1948, sunk
in the waters between the province of Bataan and the island of
Corregidor, as a consequence of a collision with the USS
“TINGLES”, a vessel of the U.S. Navy. Inasmuch as
Alejandro Al-Lagadan, a member of the crew of the
“Magkapatid”, disappeared with the craft, his
parents, Respondent Alejo Al-Lagadan and Filomena Piga,
filed the corresponding claim for compensation under Act No.
3428. After appropriate proceedings, a Referee of the
Workmen’s Compensation Commission rendered a decision,
dated February 23, 1953:chanroblesvirtuallawlibrary
“1. Ordering Mr. Anastacio Viaña to pay the above-named
claimants through the Workmen’s Compensation
Commission, Manila, the sum of P1,560 in lump sum with
interest at 6 per cent from September 3, 1948 until fully
paid; chan roblesvirtualawlibraryand.
“To pay the sum of P16 to the Workmen’s Compensation
Commission as costs.”
Said decision was, on petition for review filed by Viaña,
affirmed by the Workmen’s Compensation Commissioner, on
or about October 22, 1954, “with additional fee of P5.00”.
Said Commissioner, having subsequently denied a
reconsideration of this action, Viaña has brought the matter to
us, for review by certiorari, upon the ground that this case
does not fall within the purview of Act No. 3428, because the
gross income of his business for the year 1947 was allegedly
less than P10,000, and because Alejandro Al-Lagadan was, at
the time of his death, his (Petitioner’s) industrial partner, not
his employee.
The first ground is untenable, Petitioner not having invoked it
before the rendition of the Referee’s decision on February 23,
1953. The objection to the application of Act No. 3428, upon
said ground, was made for the first time
when Petitioner sought a review of said decision by the
Workmen’s Compensation Commissioner. The non-
applicability of said Act to employers whose gross income
does not reach P20,000 is, however, a matter of defense,
which cannot be availed of unless pleaded in the employer’s
or his heirs. Petitioner herein having failed to do so, said
defense may not now be entertained (Rolan vs. Perez, 63
Phil., 80, 85-86).
As regards the second ground, Petitioner maintains, contrary
to the finding of the Referee and said Commissioner, that the
deceased was his industrial partner, not employee. In this
connection, it is alleged in paragraph (6) of the
petition:chanroblesvirtuallawlibrary
“That the practice observed then and now in engaging the
services of crewmen of sailboats plying between Mindoro and
Manila is on a partnership basis, to
wit:chanroblesvirtuallawlibrary that the owner of the vessel,
on one hand receives one-half of the earnings of the sailboat
after deducting the expenses for the maintenance of the crew,
the other half is divided pro rata among the members of the
crew, the ‘patron’ or captain receiving four parts, the ‘piloto’
or next in command three parts, the wheelsman or ‘timonel’ 1
1/2 parts and the rest of the members of the crew one part
each, as per Annex ‘B’ hereof.”
It appears that, before rendering his aforementioned decision,
the Referee requested Mr. Manuel O. Morente, an attorney of
the Workmen’s Compensation Commission, “to look into and
inquire and determine the method of and the basis of
engaging the services of crewmen for sailboats (batel) of
twenty (20) tons or more plying between Manila and
Mariveles and moored along Manila North Harbor”, and that,
thereafter, said Atty. Morente
reported:chanroblesvirtuallawlibrary
“The basis of engaging the services of crewmen of a batel is
determined in accordance with the contract executed between
the owner and the patron. The contract commonly followed is
on a share basis after deducting all the expenses incurred on
the voyage. One half goes to the owner of the batel and the
other half goes to the patron and the members of the crew and
divided among themselves on a share basis also in accordance
with their agreement with the patron getting the lion’s share.
The hiring of the crew is done by the patron himself. Usually,
when a patron enters into a contract with the owner of the
batel, he has a crew ready with him.” (Italics supplied.)
In sustaining the Referee’s finding to the effect that the
deceased was an employee of Viaña, the Workmen’s
Compensation Commissioner
said:chanroblesvirtuallawlibrary
“The trial referee found that there was an employer-employee
relation between the Respondentand the deceased, Alejandro
Al-Lagadan, and the share which the deceased received at the
end of each trip was in the nature of ‘wages’ which is defined
under section 39 of the Compensation Act. This is so because
such share could be reckoned in terms of money. In other
words, there existed the relation of employer and employee
between the Respondent and Alejandro Al-Lagadan at the
time of the latter’s death.
“We believe that the trial referee did not err in finding the
deceased an employee of the Respondent. We cite the
following cases which illustrate the point at
issue:chanroblesvirtuallawlibrary
‘The officers and crews of whaling and other fishing vessels
who are to receive certain proportions of produce of the
voyage in lieu of wages; chan roblesvirtualawlibrary(Rice vs.
Austin, 17 Mass. 206; chan roblesvirtualawlibrary2Y & C.
61); chan roblesvirtualawlibraryCaptains of merchant ships
who, instead of wages, receive shares in the profits of the
adventure; chan roblesvirtualawlibrary(4 Maule & C.
240); chan roblesvirtualawlibraryor who take vessels under an
agreement to pay certain charges and receive a share of the
earnings; chan roblesvirtualawlibrary(Tagard vs. Loring, 16
Mass. 336, 8 Am. Dec. 140; chan
roblesvirtualawlibraryWinsor vs. Cutts, 7 Greenl. Me. 261)
have generally been held not to be partners with
the Respondent, and the like. Running a steamboat on shares
does not make the owners partners in respect to the vessel
(The Daniel Koine, 35 Fed. 785); chan
roblesvirtualawlibraryso of an agreement between two parties
to farm on shares; chan roblesvirtualawlibrary(Hooloway vs.
Brinkley, 42 Ga. 226); chan roblesvirtualawlibraryA seaman
who is to receive pay in proportion to the amount of fish
caught is not a partner; chan roblesvirtualawlibrary(Holdren
vs. French, 68 Me. 241); chan roblesvirtualawlibrarysharing
profits in lieu of wages is not a partnership. There is no true
contribution; chan roblesvirtualawlibrary(Crawford vs.
Austin, 34 Md. 49; chan roblesvirtualawlibraryWhitehill vs.
Shickle, 43 Mo. 538; chan roblesvirtualawlibrarySankey vs.
Iron Works, 44 Ga. 228.)’“ (Italics supplied.)
In other words, in the opinion of the Referee, as well as of
said Commissioner, the mere fact that Alejandro’s share in
the understanding “could be reckoned in terms of money”,
sufficed to characterize him as an employee of Viaña. We do
not share this view. Neither can we accept,
however, Petitioner’s theory to the effect that the deceased
was his partner, not an employee, simply because he (the
deceased) shared in the profits, not in the losses. In
determining the existence of employer-employee relationship,
the following elements are generally considered,
namely:chanroblesvirtuallawlibrary (1) the selection and
engagement of the employee; chan roblesvirtualawlibrary(2)
the payment of wages; chan roblesvirtualawlibrary(3) the
power of dismissal; chan roblesvirtualawlibraryand (4) the
power to control the employees’ conduct — although the
latter is the most important element (35 Am. Jur. 445).
Assuming that the share received by the deceased could
partake of the nature of wages — on which we need not, and
do not, express our view — and that the second element,
therefore, exists in the case at bar, the record does not contain
any specific data regarding the third and fourth elements.
With respect to the first element, the facts before us are
insufficient to warrant a reasonable conclusion, one way or
the other. On the one hand, Atty. Morente said, in his
aforementioned report, that “the contract commonly followed
is on a share basis cralaw The hiring of a crew is done by the
patron himself. Usually, when a patron enters into a contract
with the owner of the batel, he has a crew ready with him”.
This statement suggests that the members of the crew are
chosen by the patron, seemingly, upon his sole responsibility
and authority. It is noteworthy, however, that said report
referred to a practice commonly and “usually” observed in a
given place. The record is silent on whether such practice had
been followed in the case under consideration. More
important still, the language used in said report may be
construed as intimating, not only that the “patron” selects and
engages the crew, but, also, that the members thereof are
subject to his control and may be dismissed by him. To put it
differently, the literal import of said report is open to the
conclusion that the crew has a contractual relation, not with
the owner of the vessel, but with the patron, and that the
latter, not the former, is either their employer or their partner.
Upon the other hand, the very allegations of the petition show
otherwise, for Petitioner explicitly averred therein that the
deceased Alejandro Al-Lagadan was his “industrial partner”.
This implies that a contract of partnership existed between
them and that, accordingly, if the crew was selected and
engaged by the “patron”, the latter did so merely as agent or
representative of Petitionerherein. Again, if Petitioner were a
partner of the crew members, then neither the former nor the
patron could control or dismiss the latter.
In the interest of justice and equity, and considering that a
decision on the merits of the issue before us may establish an
important precedent, it would be better to remand the case to
the Workmen’s Compensation Commission for further
evidence and findings on the following
questions:chanroblesvirtuallawlibrary (1) who selected the
crew of the “Magkapatid” and engaged their services; chan
roblesvirtualawlibrary(2) if selected and engaged by the
“patron”, did the latter act in his own name and for his own
account, or on behalf and for the account of Viaña; chan
roblesvirtualawlibrary(3) could Viaña have refused to accept
any of the crew members chosen and engaged by the
“patron”; chan roblesvirtualawlibrary(4) did Petitioner have
authority to determine the time when, the place where and/or
the manner or conditions in or under which the crew would
work; chan roblesvirtualawlibraryand (5) who could dismiss
its members.

Wherefore, let the case be remanded to the Workmen’s

Compensation Commission, for further proceedings in
conformity with this decision, without special pronouncement
as to costs. SO ORDERED.
G.R. No. L-28280-81 November 28, 1969
GERONIMO DE LOS REYES, petitioner,
vs.
GREGORIO ESPINELI, RUPERTO ALCANTARA,
JORGE LOBREN, PEDRO AMANTE, MATEO
GUTIERREZ, ISIDRO RAMOS, SANTOS DANGUE,
MIGUEL RAMOS, CORNELIO GARCIA,
MARGARITO BELARMINO, IRENEO BATRALO,
SIMPLICIO CASTRO, VICENTE ANIVES, MIGUEL
HERNANDEZ, EUGENIO DALISAY, LEON
LACSAMANA, and BELEN ALVAREZ, respondents.
Luis A. L. Javellana and Yolanda Q. Javellana for petitioner.
Manuel A. Cordero for respondents.
CASTRO, J.:
Petition for review of the decision of the Court of Appeals in
C.A.-G.R. No. 37689-R and C.A.-G.R. No. 37690-R
modifying that of the Court of Agrarian Relations in CAR
cases 1185 and 1186.
The petitioner Geronimo de los Reyes is the owner of a 200-
hectare coconut plantation located in Calauan, Laguna. In
1958 his overseer ("katiwala") therein was Gonzalo
Belarmino, who took into the land the 17 respondents under
an agreement that the latter were to receive 1/7 portion of
every coconut harvest. Sometime in October, 1962, the
petitioner dismissed Belarmino, upon the suspicion that the
latter had been deceiving him, in connivance with the
respondents.
On March 2, 1963 Ruperto Alcantara, et al., and Gregorio
Espineli (respondents here) filed separate petitions
(subsequently amended) against De los Reyes in the Court of
Agrarian Relations, seeking the delivery to them of the
difference between the 1/7 share which the petitioner had
been giving them and the 30% share to which they, as share
tenants, were allegedly entitled. Upon the finding that the
respondents were mere agricultural workers of the petitioner,
the CAR ordered the latter to retain them as such and to pay
them the sum of P4,559.07 "which is the total of their unpaid
share of 1/7 of the net coconut harvests for the period from
September 13 to December 23, 1962 and February 25 to May
28, 1963," plus P500 as attorney's fees. Upon respondents'
appeal, the Court of Appeals modified the decision of the
CAR, by declaring the respondents tenants of the petitioner
and ordering the latter to pay them "the difference between
the one-seventh (1/7) share of the crops and the thirty (30%)
per cent provided for in the Tenancy Law from the year 1958
up to the filing of the petitions and so on; the resulting
amount for this purpose to be arrived at in a liquidation to be
submitted, if and when this judgment shall have become final
and the record remanded to the lower court."
Basically, the petitioner contends that (1) there existed no
contractual relationship between him and the respondents; (2)
the respondents were not his tenants; and (3) the decision of
the Court of Appeals deprives him of his property without due
process of law.
The respondents attempted to have the present appeal
dismissed on the ground that it involves questions of fact. If
indeed the issues posed by the petitioner necessarily invite
calibration of the entire evidence,1 then the appeal should be
dismissed since issues only of law may be raised in an appeal
from the Court of Appeals to this Court.2 It seems to us clear,
however, that the petitioner accepts the findings of fact made
by the appellate court, but takes exception to the conclusions
drawn therefrom. Such being the case, the questions here
tendered for resolution are purely of law.3
At the outset, we must resolve the question of existence of a
contract, the petitioner alleging, as he does, that his consent,
express or implied, had never been given. His position,
simply stated, is that at the time the respondents were taken
into his land by Belarmino, the latter was a mere laborer and
therefore without the requisite authority to contract in his
behalf, and it was only later that he was promoted to the
position of overseer. However, in his "Amended Complaint"
of April 22, 1968,4 the petitioner prayed that "judgment be
rendered ... finding the defendants guilty of a breach of their
contractual obligation with the plaintiff," and in the body
thereof he incorporated statements from which it can plainly
be seen that a contractual relationship existed between the
parties.
Verily, there was and still is a contractual relationship
between the petitioner and the respondents. In our view the
pith of the problem is, actually, whether the relationship is
that of agricultural share tenancy (as averred by the
respondents) or that of farm employer and agricultural laborer
(as asserted by the petitioner). On a determination of this
question depends the respective rights of the parties, more
particularly the proper assessment of the share of the
respondents under the law.
Of fundamental relevance in this discussion are definitions of
basic terms.
"Agricultural tenancy" is the physical possession by a person
of land devoted to agriculture belonging to, or legally
possessed by, another for the purpose of production through
the labor of the former and of the members of his immediate
farm household, in consideration of which the former agrees
to share the harvest with the latter, or to pay a price certain or
ascertainable, either in produce or in money, or in
both.5 "Share tenancy" exists whenever two persons agree on
a joint undertaking for agricultural production wherein one
party furnishes the land and the other his labor, with either or
both contributing any one or several of the items of
production, the tenant cultivating the land personally with the
aid of labor available from members of his immediate farm
household, and the produce thereof to be divided between the
landholder and the tenant in proportion to their respective
contributions.6 And a "share tenant" is a person who, himself
and with the aid available from within his immediate farm
household, cultivates the land belonging to or possessed by
another, with the latter's consent, for purposes of production,
sharing the produce with the landholder."7
It is to be readily deduced from the foregoing definitions that
aside from the usual essential requisites of a contract,8the
characteristics of a share tenancy contract are: (1) the parties
are a landholder, who is a natural or juridical person and is
the owner, lessee, usufructuary or legal possessor of
agricultural land,9 and a tenant who, himself and with the aid
available from within his immediate farm household,
cultivates the land which is the subject-matter of the tenancy;
(2) the subject-matter is agricultural land; (3) the purpose of
the contract is agricultural production; and (4) the cause or
consideration is that the landholder and the share tenant
would divide the agricultural produce between themselves in
proportion to their respective contributions.
While the Agricultural Tenancy Act did not define the term
"agricultural laborer" or "agricultural worker," the
Agricultural Land Reform Code does. A "farm worker" is
"any agricultural wage, salary or piece worker but is not
limited to a farm worker of a particular farm employer unless
this Code explicitly states otherwise, and any individual
whose work has ceased as a consequence of, or in connection
with, a current agrarian dispute or an unfair labor practice and
who has not obtained a substantially equivalent and regular
employment." The term includes "farm laborer and/or farm
employees."10 An "agricultural worker" is not a whit different
from a "farm worker."
From the definition of a "farm worker" thus fashioned, it is
quite apparent that there should be an employer-employee
relationship between the "farm employer"11 and the farm
worker. In determining the existence of an employer-
employee relationship, the elements that are generally
considered are the following: (1) the selection and
engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the employer's power to
control the employee's conduct. It is this last element that
constitutes the most important index of the existence of
relationship.12
This is not to say that agricultural workers or farm laborers
are industrial workers. Not by any means, although they may
both appear in the same establishment. The difference lies in
the kind of work they do. Those whose labor is devoted to
purely agricultural work are agricultural laborers. All others
are industrial workers.13 Nonetheless, they belong to the same
class. Both are workers. Both are employees.
We are here primarily interested in the basic differences
between a farm employer-farm worker relationship and an
agricultural sharehold tenancy relationship. Both, of course,
are leases, but there the similarity ends. In the former, the
lease is one of labor, with the agricultural laborer as the lessor
of his services, and the farm employer as the lessee
thereof.14 In the latter, it is the landowner who is the lessor,
and the sharehold tenant is the lessee of agricultural land. As
lessee he has possession of the leased premises.15 But the
relationship is more than a mere lease. It is a special kind of
lease, the law referring to it as a "joint undertaking."16 For this
reason, not only the tenancy laws are applicable, but also, in a
suppletory way, the law on leases, the customs of the place
and the civil code provisions on partnership.17 The share
tenant works for that joint venture. The agricultural laborer
works for the farm employer, and for his labor he receives a
salary or wage, regardless of whether the employer makes a
profit.18 On the other hand, the share tenant participates in the
agricultural produce. His share is necessarily dependent on
the amount of the harvest.
Since the relationship between farm employer and
agricultural laborer is that of employer and employee, the
decisive factor is the control exercised by the former over the
latter. On the other hand, the landholder has the "right to
require the tenant to follow those proven farm practices which
have been found to contribute towards increased agricultural
production and to use fertilizer of the kind or kinds shown by
proven farm practices to be adapted to the requirements of the
land." This is but the right of a partner to protect his interest,
not the control exercised by an employer. If landholder and
tenant disagree as to farm practices, the former may not
dismiss the latter. It is the court that shall settle the conflict
according to the best interests of both parties.19
The record is devoid of evidentiary support for the notion that
the respondents are farm laborers. They do not observe set
hours of work. The petitioner has not laid down regulations
under which they are supposed to do their work. The
argument tendered is that they are guards. However, it does
not appear that they are under obligation to report for duty to
the petitioner or his agent. They do not work in shifts. Nor has
the petitioner prescribed the manner by which the respondents
were and are to perform their duties as guards. We do not find
here that degree of control and supervision evincive of an
employer-employee relationship. Furthermore, if the
respondents are guards, then they are not agricultural laborers,
because the duties and functions of a guard are not
agricultural in nature.20 It is the Industrial Court that has
jurisdiction over any dispute that might arise between
employer and employee. Yet, the petitioner filed his
complaint against the respondents in the Court of Agrarian
Relations.
We now proceed to determine if there are present here the
salient characteristics of an agricultural share tenancy
contract. The subject-matter is coconut land, which is
considered agricultural land under both the Agricultural Land
Tenancy ACT21 and the Agricultural Land Reform
Code.22 The purpose of the contract is the production of
coconuts; the respondents would receive 1/7 of the harvest.
The petitioner is the landholder of the coconut plantation.
The crucial factors are that the tenant must have physical
possession of the land for the purpose of production23and he
must personally cultivate the land. If the tenant does not
cultivate the land personally he cannot be considered a tenant
even if he is so designated in the written agreement of the
parties.24
"Cultivation" is not limited to the plowing and harrowing of
the land. It includes the various phrases of farm labor
described and provided by law, the maintenance, repair and
weeding of dikes, paddies and irrigation canals in the holding.
Moreover, it covers attending to the care of the growing
plants.25 Where the parties agreed that they would "operate a
citrus nursery upon the condition that they would divide the
budded citrus in the proportion of 1/3 share of respondents
and 2/3 as share of petitioner," and that the "petitioner would
furnish all the necessary seedlings and seeds, as well as the
technical know-how in the care, cultivation, budding and
balling of the budded citrus, while respondents would furnish
the land necessary for the nursery, the farm labor that may be
needed to plant and cultivate, and all the chemicals,
fertilizers, and bud tapes that may be necessary for such
cultivation," then "the tenancy agreement entered into
between the parties has relation to the possession of
agricultural land to be devoted to the production of
agricultural products thru the labor of one of the parties, and
as such comes within the purview of the term 'agricultural
tenancy' as defined in section 3 of Republic Act No. 1199 as
amended."26
In one instance,27 the landholder claimed that his caretaker
was not an agricultural tenant because he "does not till or
cultivate the land in order to grow the fruit bearing trees
because they are already full grown," and "he does not even
do the actual gathering of the fruits" but "merely supervises
the gathering, and after deducting the expenses, he gives one-
half of the fruits to plaintiff all in consideration of his stay in
the land." This Court's answer was to the point:
Anyone who has had fruit trees in his yard will disagree with
the above description of the relationship. He knows the
caretaker, must water the trees, even fertilize them for better
production, uproot weeds and turn the soil, sometimes
fumigate to eliminate plant pests, etc. Those chores obviously
mean "working or cultivating" the land. Besides, it seems that
defendant planted other crops, [i.e., cultivated the lot] giving
the landowner his corresponding share.
The Court of Appeals made some essential findings of fact.
The respondents were called "kasama." They have plowing
implements. The respondent Pedro Amante even used to have
a carabao which he subsequently exchanged for a horse.
Almost all of the respondents have banana plantations on the
land. They live in the landholding. They are charge with the
obligation to clean their respective landholdings. Certain
portions of the land are planted to palay.
These factual findings may not be reviewed by the Supreme
Court.28 Furthermore, the said facts are supported by the
testimony of the petitioner himself, who admitted that the
respondents are his "kasama," although he tried to minimize
the effect of this admission by alleging that although called
"kasama," the respondents "do not perform the work of a
"kasama," and that in Quezon the "kasama" plow the land,
they plant rice, but here in Laguna, they do not do anything."
The appellate court was correct in concluding that "kasama"
means "tenant,"29 not worker or laborer, which is translated
into our national language as "manggagawa."30 Respecting
farm implements, the petitioner admitted that "they have the
implements," but again he tried to minimize the significance
of his statement by adding that "they have not used it in the
farm." However, the report of the CAR clerk of court, based
on his ocular inspection, pertinently states that he found
"certain portions planted with palay."
The petitioner cannot deny that the respondents were all
living in the landholding and that "all of them have banana
plantation, small or big, "though he averred," not one single
banana was given to me as my share."
We now come to the all-important question of whether the
respondents have the duty to cultivate the land in order that
the trees would bear more coconuts. The petitioner's answers
on cross-examination are quite revealing. Thus:
Q. Where these petitioners duty bound to do any cleaning or
clearing of the underbrush within the coconut land?
A. These laborers clean the land from where . . . They are
getting their food and subsistence.
COURT: The question is that, are they duty bound to clean the
landholding in question?
A. To make my answer short, I say that the responsibility is to
Gonzalo Belarmino, to him, because he is the one who engaged
them.
xxx xxx xxx
A. One, to guard the property and use their names as threat to
people who might ... have the intention of stealing my coconuts, and
two, to assist in the clearing of the land because that is the
responsibility of Gonzalo Belarmino. . . . 31
Undeniably, the petitioner considers it one of the duties of the
respondents to clear and clean the land. Additionally, in his
complaint the petitioner claimed that "the defendants have
abandoned their posts at the plaintiff's plantation and have
likewise failed and refused to comply with their contractual
obligation with the plaintiff to keep the areas respectively
assigned to them clean and clear of undergrowths and
cogonal grass at all times, with the result that it is now
impossible for the plaintiff to harvest the mature coconuts as
these would only be lost amid the undergrowth and cogonal
which have now grown to unreasonable heights, thereby
causing further damage and prejudice to the plaintiff."
(Emphasis supplied).
The petitioner clearly expected the respondents to perform the
duties of a tenant, especially, to maintain the land clean and
clear "at all times," which not only would facilitate harvesting
but, more importantly, would necessarily result in greater
production. As found by the CAR clerk of court during the
ocular inspection,
the planting of palay has a direct effect on the growing of the
coconuts because in the places he found planted with palay,
the coconut trees displayed white leaves gray in color with
plenty of nuts or fruits, compared to the portion in the
hacienda where we encountered cogon grasses, under brushes
and ipil-ipil tress, there is a need for thorough cleaning,
especially the ipil-ipil trees which are growing high for years
already in-between the rows of coconut trees.32
Therefore, the parties to the contract understood, in sum and
substance, that the respondents were to "cultivate" the land.
Whether the latter had been remiss in the performance of their
contractual obligations, does not affect the nature of the
contract which the appellate court analyzed and found to be
that of share tenancy. It is the principal features and
stipulations which determine the true essence of a
contract.33 Considering then that the respondents are duty
bound to cultivate their respective holdings (of which they
have possession), and that they share in the harvest, the Court
of Appeals' conclusion must be upheld. This, especially in the
light of the facts that the respondents raise secondary crops
and have their homes in their respective holdings.
The petitioner having entered into a share tenancy contract
with the respondents, it certainly cannot be seriously claimed
that the relationship of landlord and tenant is unjustifiably
being imposed on him without due process of law. It was the
petitioner himself who voluntarily entered the relationship,
and, therefore, should shoulder the consequences thereof, one
of which is that the tenants must be given, as they are entitled
to, a 30% share in the produce.34
ACCORDINGLY, the decision appealed from is affirmed, at
petitioner's cost.
G.R. No. 87700 June 13, 1990
SAN MIGUEL CORPORATION EMPLOYEES UNION-
PTGWO, DANIEL S.L. BORBON II, HERMINIA
REYES, MARCELA PURIFICACION, ET
AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS
PRESIDING JUDGE OF BRANCH 166, RTC, PASIG,
and SAN MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for
respondents.
MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig,
Branch 166, is taken to task by petitioners in this special civil
action for certiorari and Prohibition for having issued the
challenged Writ of Preliminary Injunction on 29 March 1989
in Civil Case No. 57055 of his Court entitled "San Miguel
Corporation vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in
excess of jurisdiction and with grave abuse of discretion, a
labor dispute being involved. Private respondent San Miguel
Corporation (SanMig. for short), for its part, defends the Writ
on the ground of absence of any employer-employee
relationship between it and the contractual workers employed
by the companies Lipercon Services, Inc. (Lipercon) and
D'Rite Service Enterprises (D'Rite), besides the fact that the
Union is bereft of personality to represent said workers for
purposes of collective bargaining. The Solicitor General
agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts
for merchandising services with Lipercon and D'Rite
(Annexes K and I, SanMig's Comment, respectively). These
companies are independent contractors duly licensed by the
Department of Labor and Employment (DOLE). SanMig
entered into those contracts to maintain its competitive
position and in keeping with the imperatives of efficiency,
business expansion and diversity of its operation. In said
contracts, it was expressly understood and agreed that the
workers employed by the contractors were to be paid by the
latter and that none of them were to be deemed employees or
agents of SanMig. There was to be no employer-employee
relation between the contractors and/or its workers, on the one
hand, and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-
PTWGO (the Union, for brevity) is the duly authorized
representative of the monthly paid rank-and-file employees of
SanMig with whom the latter executed a Collective
Bargaining Agreement (CBA) effective 1 July 1986 to 30
June 1989 (Annex A, SanMig's Comment). Section 1 of their
CBA specifically provides that "temporary, probationary, or
contract employees and workers are excluded from the
bargaining unit and, therefore, outside the scope of this
Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the
Union advised SanMig that some Lipercon and D'Rite
workers had signed up for union membership and sought the
regularization of their employment with SMC. The Union
alleged that this group of employees, while appearing to be
contractual workers supposedly independent contractors, have
been continuously working for SanMig for a period ranging
from six (6) months to fifteen (15) years and that their work is
neither casual nor seasonal as they are performing work or
activities necessary or desirable in the usual business or trade
of SanMig. Thus, it was contended that there exists a "labor-
only" contracting situation. It was then demanded that the
employment status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive
any favorable response from SanMig, the Union filed a notice
of strike for unfair labor practice, CBA violations, and union
busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of
strike for unfair labor practice (Annex F, Petition).
As in the first notice of strike. Conciliatory meetings were
held on the second notice. Subsequently, the two (2) notices
of strike were consolidated and several conciliation
conferences were held to settle the dispute before the National
Conciliation and Mediation Board (NCMB) of DOLE (Annex
G, Petition).
Beginning 14 February 1989 until 2 March 1989, series of
pickets were staged by Lipercon and D'Rite workers in
various SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for
Injunction and Damages before respondent Court to enjoin
the Union from:
a. representing and/or acting for and in behalf of the
employees of LIPERCON and/or D'RITE for the purposes of
collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to
hire the employees or workers of LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees or
workers of LIPERCON and D'RITE to demonstrate and/or
picket at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
e. using the employees or workers of LIPERCON AND
D'RITE to man the strike area and/or picket lines and/or
barricades which the defendants may set up at the plants and
offices of plaintiff within the bargaining unit referred to in the
CBA ...;
f. intimidating, threatening with bodily harm and/or molesting
the other employees and/or contract workers of plaintiff, as
well as those persons lawfully transacting business with
plaintiff at the work places within the bargaining unit referred
to in the CBA, ..., to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or
impeding the free ingress to, and egress from, the work places
within the bargaining unit referred to in the CBA .., to compel
plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
h. preventing and/or disrupting the peaceful and normal
operation of plaintiff at the work places within the bargaining
unit referred to in the CBA, Annex 'C' hereof, to compel
plaintiff to hire the employees or workers of LIPERCON and
D'RITE. (Annex H, Petition)
Respondent Court found the Complaint sufficient in form and
substance and issued a Temporary Restraining Order for the
purpose of maintaining the status quo, and set the application
for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion
to Dismiss SanMig's Complaint on the ground of lack of
jurisdiction over the case/nature of the action, which motion
was opposed by SanMig. That Motion was denied by
respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive
relief, where the parties presented both testimonial and
documentary evidence on 25 March 1989, respondent Court
issued the questioned Order (Annex A, Petition) granting the
application and enjoining the Union from Committing the acts
complained of, supra. Accordingly, on 29 March 1989,
respondent Court issued the corresponding Writ of
Preliminary Injunction after SanMig had posted the required
bond of P100,000.00 to answer for whatever damages
petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the
existence of labor dispute. Verily, this court has jurisdiction
to take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has
contracts for services with Lipercon and D'Rite. The
application and contract for employment of the defendants'
witnesses are either with Lipercon or D'Rite. What could be
discerned is that there is no employer-employee relationship
between plaintiff and the contractual workers employed by
Lipercon and D'Rite. This, however, does not mean that a
final determination regarding the question of the existence of
employer-employee relationship has already been made. To
finally resolve this dispute, the court must extensively
consider and delve into the manner of selection and
engagement of the putative employee; the mode of payment
of wages; the presence or absence of a power of dismissal;
and the Presence or absence of a power to control the putative
employee's conduct. This necessitates a full-blown trial. If the
acts complained of are not restrained, plaintiff would,
undoubtedly, suffer irreparable damages. Upon the other
hand, a writ of injunction does not necessarily expose
defendants to irreparable damages.
Evidently, plaintiff has established its right to the relief
demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now
before us seeking nullification of the challenged Writ. On 24
April 1989, we issued a Temporary Restraining Order
enjoining the implementation of the Injunction issued by
respondent Court. The Union construed this to mean that "we
can now strike," which it superimposed on the Order and
widely circulated to entice the Union membership to go on
strike. Upon being apprised thereof, in a Resolution of 24
May 1989, we required the parties to "RESTORE the status
quo ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went
on strike. Apparently, some of the contractual workers of
Lipercon and D'Rite had been laid off. The strike adversely
affected thirteen (13) of the latter's plants and offices.
On 3 May 1989, the National Conciliation and Mediation
Board (NCMB) called the parties to conciliation. The Union
stated that it would lift the strike if the thirty (30) Lipercon
and D'Rite employees were recalled, and discussion on their
other demands, such as wage distortion and appointment of
coordinators, were made. Effected eventually was a
Memorandum of Agreement between SanMig and the Union
that "without prejudice to the outcome of G.R. No. 87700
(this case) and Civil Case No. 57055 (the case below), the
laid-off individuals ... shall be recalled effective 8 May 1989
to their former jobs or equivalent positions under the same
terms and conditions prior to "lay-off" (Annex 15, SanMig
Comment). In turn, the Union would immediately lift the
pickets and return to work.
After an exchange of pleadings, this Court, on 12 October
1989, gave due course to the Petition and required the parties
to submit their memoranda simultaneously, the last of which
was filed on 9 January 1990.
The focal issue for determination is whether or not respondent
Court correctly assumed jurisdiction over the present
controversy and properly issued the Writ of Preliminary
Injunction to the resolution of that question, is the matter of
whether, or not the case at bar involves, or is in connection
with, or relates to a labor dispute. An affirmative answer
would bring the case within the original and exclusive
jurisdiction of labor tribunals to the exclusion of the regular
Courts.
Petitioners take the position that 'it is beyond dispute that the
controversy in the court a quo involves or arose out of a labor
dispute and is directly connected or interwoven with the cases
pending with the NCMB-DOLE, and is thus beyond the ambit
of the public respondent's jurisdiction. That the acts
complained of (i.e., the mass concerted action of picketing
and the reliefs prayed for by the private respondent) are
within the competence of labor tribunals, is beyond question"
(pp. 6-7, Petitioners' Memo).
On the other hand, SanMig denies the existence of any
employer-employee relationship and consequently of any
labor dispute between itself and the Union. SanMig submits,
in particular, that "respondent Court is vested with
jurisdiction and judicial competence to enjoin the specific
type of strike staged by petitioner union and its officers herein
complained of," for the reasons that:
A. The exclusive bargaining representative of an employer
unit cannot strike to compel the employer to hire and thereby
create an employment relationship with contractual workers,
especially were the contractual workers were recognized by
the union, under the governing collective bargaining
agreement, as excluded from, and therefore strangers to, the
bargaining unit.
B. A strike is a coercive economic weapon granted the
bargaining representative only in the event of a deadlock in a
labor dispute over 'wages, hours of work and all other and of
the employment' of the employees in the unit. The union
leaders cannot instigate a strike to compel the employer,
especially on the eve of certification elections, to hire
strangers or workers outside the unit, in the hope the latter
will help re-elect them.
C. Civil courts have the jurisdiction to enjoin the above
because this specie of strike does not arise out of a labor
dispute, is an abuse of right, and violates the employer's
constitutional liberty to hire or not to hire. (SanMig's
Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor
Code includes "any controversy or matter concerning terms
and conditions of employment or the association or
representation of persons in negotiating, fixing, maintaining,
changing, or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the
proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee
relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and D'Rite on the other, a
labor dispute can nevertheless exist "regardless of whether the
disputants stand in the proximate relationship of employer
and employee" (Article 212 [1], Labor Code, supra) provided
the controversy concerns, among others, the terms and
conditions of employment or a "change" or "arrangement"
thereof (ibid). Put differently, and as defined by law, the
existence of a labor dispute is not negative by the fact that the
plaintiffs and defendants do not stand in the proximate
relation of employer and employee.
That a labor dispute, as defined by the law, does exist herein
is evident. At bottom, what the Union seeks is to regularize
the status of the employees contracted by Lipercon and D'Rite
in effect, that they be absorbed into the working unit of
SanMig. This matter definitely dwells on the working
relationship between said employees vis-a-vis SanMig.
Terms, tenure and conditions of their employment and the
arrangement of those terms are thus involved bringing the
matter within the purview of a labor dispute. Further, the
Union also seeks to represent those workers, who have signed
up for Union membership, for the purpose of collective
bargaining. SanMig, for its part, resists that Union demand on
the ground that there is no employer-employee relationship
between it and those workers and because the demand
violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating
the conditions of employment are also involved. In fact, the
injunction sought by SanMig was precisely also to prevent
such representation. Again, the matter of representation falls
within the scope of a labor dispute. Neither can it be denied
that the controversy below is directly connected with the
labor dispute already taken cognizance of by the NCMB-
DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-
093-83).
Whether or not the Union demands are valid; whether or not
SanMig's contracts with Lipercon and D'Rite constitute
"labor-only" contracting and, therefore, a regular employer-
employee relationship may, in fact, be said to exist; whether
or not the Union can lawfully represent the workers of
Lipercon and D'Rite in their demands against SanMig in the
light of the existing CBA; whether or not the notice of strike
was valid and the strike itself legal when it was allegedly
instigated to compel the employer to hire strangers outside the
working unit; — those are issues the resolution of which call
for the application of labor laws, and SanMig's cause's of
action in the Court below are inextricably linked with those
issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30
April 1965, 13 SCRA 738) relied upon by SanMig is not
controlling as in that case there was no controversy over
terms, tenure or conditions, of employment or the
representation of employees that called for the application of
labor laws. In that case, what the petitioning union demanded
was not a change in working terms and conditions, or the
representation of the employees, but that its members be hired
as stevedores in the place of the members of a rival union,
which petitioners wanted discharged notwithstanding the
existing contract of the arrastre company with the latter union.
Hence, the ruling therein, on the basis of those facts unique to
that case, that such a demand could hardly be considered a SO ORDERED.
labor dispute.

As the case is indisputably linked with a labor dispute,

jurisdiction belongs to the labor tribunals. As explicitly
provided for in Article 217 of the Labor Code, prior to its
amendment by R.A. No. 6715 on 21 March 1989, since the
suit below was instituted on 6 March 1989, Labor Arbiters
have original and exclusive jurisdiction to hear and decide the
following cases involving all workers including "1. unfair
labor practice cases; 2. those that workers may file involving
wages, hours of work and other terms and conditions of
employment; ... and 5. cases arising from any violation of
Article 265 of this Code, including questions involving the
legality of striker and lockouts. ..." Article 217 lays down the
plain command of the law.

The claim of SanMig that the action below is for damages

under Articles 19, 20 and 21 of the Civil Code would not
suffice to keep the case within the jurisdictional boundaries of
regular Courts. That claim for damages is interwoven with a
labor dispute existing between the parties and would have to
be ventilated before the administrative machinery established
for the expeditious settlement of those disputes. To allow the
action filed below to prosper would bring about "split
jurisdiction" which is obnoxious to the orderly administration
of justice (Philippine Communications, Electronics and
Electricity Workers Federation vs. Hon. Nolasco, L-24984,
29 July 1968, 24 SCRA 321).

We recognize the proprietary right of SanMig to exercise an

inherent management prerogative and its best business
judgment to determine whether it should contract out the
performance of some of its work to independent contractors.
However, 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 (Section 3, Article XIII, 1987 Constitution) equally
call for recognition and protection. Those contending interests
must be placed in proper perspective and equilibrium.

WHEREFORE, the Writ of certiorari is GRANTED and the

Orders of respondent Judge of 25 March 1989 and 29 March
1989 are SET ASIDE. The Writ of Prohibition is GRANTED
and respondent Judge is enjoined from taking any further
action in Civil Case No. 57055 except for the purpose of
dismissing it. The status quo ante declaration of strike ordered
by the Court on 24 May 1989 shall be observed pending the
proceedings in the National Conciliation Mediation Board-
Department of Labor and Employment, docketed as NCMB-
NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No
costs.
G.R. No. 106231 November 16, 1994
HAWAIIAN-PHILIPPINE COMPANY, petitioner,
vs.
REYNALDO J. GULMATICO, Labor Arbiter, Regional
Arbitration Branch No. VI, AND NATIONAL
FEDERATION OF SUGAR WORKERS-FOOD AND
GENERAL TRADES representing all the sugar farm
workers of the HAWAIIAN PHILIPPINE MILLING
DISTRICT, respondents.
Angara, Abella, Concepcion, Regala & Cruz for petitioner.
Manlapao, Ymballa and Chaves for private respondent.
BIDIN, J.:
This petition for certiorari and prohibition with preliminary
injunction seeks to annul the Order dated June 29, 1992
issued by public respondent Labor Arbiter Reynaldo J.
Gulmatico denying petitioner's motion for "Claims on R.A.
809" in RAB VI Case No. 06-07-10256-89, the dispositive
portion of which reads, in part:
WHEREFORE, premises considered, the motion to dismiss
dated July 31, 1989 and the supplement thereto dated
September 19, 1989 filed by respondent company together
with the motion to dismiss filed by respondent Ramon Jison
dated August 27, 1990 and Francisco Jison dated September
20, 1990, respectively, are hereby DENIED.
xxx xxx xxx
(Rollo, p. 59)
The antecedent facts are as follows:
On July 4, 1989, respondent union, the National Federation of
Sugar Workers-Food and General Trades (NFSW-FGT) filed
RAB VI Case No. 06-07-10256-89 against herein petitioner
Hawaiian-Philippine Company for claims under Republic Act
809 (The Sugar Act of 1952). Respondent union claimed that
the sugar farm workers within petitioner's milling district
have never availed of the benefits due them under the law.
Under Section 9 of R.A 809, otherwise known as the Sugar
Act of 1952, it is provided, to wit:
Sec. 9. In addition to the benefits granted by the Minimum
Wage Law, the proceeds of any increase in participation
granted to planters under this Act and above their present
share shall be divided between the planter and his laborers in
the following proportions;
Sixty per centum of the increase participation for the laborers
and forty per centum for the planters. The distribution of the
share corresponding to the laborers shall be made under the
supervision of the Department of Labor.
xxx xxx xxx
(Emphasis supplied.)
On July 31, 1989, petitioner filed a "Motion to Dismiss,"
followed by a "Supplemental Motion to Dismiss" on
September 19, 1989. Petitioner contended that public
respondent Labor Arbiter has no jurisdiction to entertain and
resolve the case, and that respondent union has no cause of
action against petitioner.
On August 23, 1989, respondent union filed an "Opposition to
Motion to Dismiss."
On October 3,1989, petitioner applied a "Reply to
Opposition" followed by a "Citation of Authorities in Support
of Motion to Dismiss."
On December 20, 1989, respondent union filed an amended
complaint additionally impleading as complainants Efren
Elaco, Bienvenido Gulmatico, Alberto Amacio, Narciso
Vasquez, Mario Casociano and all the other farm workers of
the sugar planters milling with petitioner from 1979 up to the
present, and as respondents, Jose Maria Regalado, Ramon
Jison, Rolly Hernaez, Rodolfo Gamboa, Francisco Jison and
all other sugar planters milling their canes with petitioner
from 1979 up to the present.
On August 27, 1990, Ramon Jison, one of the respondents
impleaded in the amended complaint, filed a "Motion to
Dismiss and/or to Include Necessary Parties," praying for the
inclusion as co-respondents of the Asociacion de Hacenderos
de Silan-Saravia, Inc. and the Associate Planters of Silay-
Saravia, Inc.
On June 29, 1992, public respondent promulgated the assailed
Order denying petitioner's Motion to Dismiss and
Supplemental Motion to Dismiss.
Hence, this petition filed by Hawaiian-Philippine Company.
Petitioner reasserts the two lesson earlier raised in its Motion
to Dismiss which public respondent unfavorably resolved in
the assailed Order.
These two issues are first, whether public respondent Labor
Arbiter has jurisdiction to hear and decide the case against
petitioner; and the second, whether respondent union and/or
the farm workers represented by it have a cause of action
against petitioner.
Petitioner contends that the complaint filed against it cannot
be categorized under any of the cases falling within the
jurisdiction of the Labor Arbiter as enumerated in Article 217
of the Labor Code, as amended, considering that no
employer-employee relationship exists between petitioner
milling company and the farm workers represented by
respondent union. Article 217 of the Labor Code provides:
Art. 217. Jurisdiction of Labor Arbiters and the Commission.
— (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and
lockouts; and
6. Except claims for employees' compensation, social
security, medicare from maternity benefits, all other claims
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount exceeding Five Thousand Pesos (P5,000.00), whether
or not accompanied with a claim for reinstatement. (Emphasis
supplies)
In support of the contention that the Labor Arbiter has no
jurisdiction to hear and decide the case against petitioner, the
latter cites the ruling in San Miguel Corporation
vs. NLRC, 161 SCRA 719 [1988], wherein it was held that a
single unifying element runs through the cases and disputes
falling under the jurisdiction of the Labor Arbiter and that is
that all the enumerated cases and disputes arise out of or are
in connection with an employer-employee relationship, or
some aspect or incident of such relationship. Likewise,
in Federation of Free Farmers vs. Court of Appeals, 107
SCRA 411 [1981], this Court held that:
. . . . From the beginning of the sugar industry, the centrals
have never had any privity with the plantation laborers, since
they had their own laborers to take care of. . . . Nowhere in
Republic Act 809 (the Sugar Act of 1952) can we find
anything that creates any relationship between the laborers of
the planters and the centrals. . . .
. . . Under no principle of law or equity can we impose on the
central . . . any liability to the plantation laborers. . . .
(Emphasis supplied)
On the strength of the aforecited authorities, petitioner
contends that it is not a proper party and has no involvement
in the case filed by respondent union as it is not the employer
of the respondent sugar workers.
Furthermore, to bolster its contention, petitioner cites the
Rules and Regulations Implementing RA 809 issued by the
then Wage Administration Service pursuant to the
Administrative Order of the Labor Secretary dated October 1,
1952. Section 1 thereof states:
Sec. 1. The payment of the proceeds derived from the
sixty per centum of any increase in the participation due the
laborers shall be directly paid to the individual
laborer concerned at the end of each milling season by his
respective planter under the Supervision of the Secretary of
Labor or his duly authorized representative by means of
payrolls prepared by said planter. (Emphasis supplied)
In addition, under Letter of Instruction No. 854 dated May 1,
1979, it is provided:
1. Payment subject to supervision. The workers' share shall be
paid directly by the planter concerned to the workers or
claimants entitled thereto subject to the supervision of the
Minister of Labor or his duly designated representative.
The responsibility for the payment of the sugar workers'
benefits under R.A. 809 was categorically ruled upon in
the Federation of Free Farmers case, supra., to wit:
. . . the matter of paying the plantation laborers of the
respective planters becomes exclusively the concern of the
planters, the laborers and the Department of Labor. Under no
principle of law or equity can we impose on the Central —
here VICTORIAS any liability to the respective plantation
laborers, should any of their respective planters-employers
fail to pay their legal share. After all, since under the law it is
the Department of Labor which is the office directly called
upon to supervise such payment, it is but reasonable to
maintain that if any blame is to be fixed for the unfortunate
situation of the unpaid laborers, the same should principally
be laid on the planters and secondarily on the Department of
Labor, but surely never on the central.
Whatever liability there exists between favor of the plantation
laborers should be pinned on the PLANTERS, their respective
employers. (Emphasis supplied)
On the other hand, public respondent and respondent union
maintain the position that privity exists between petitioner
and the sugar workers. Actually, public respondent, in
resolving petitioner's Motion to Dismiss, skirted the issue of
whether an employer-employee relationship indeed exists
between petitioner milling company and the sugar workers.
He did not categorically rule thereon but instead relied on the
observation that when petitioner delivered to its planters the
quedans representing its share, petitioner did not first
ascertain whether the shares of all workers or claimants were
fully paid/covered pursuant to LOI No. 854, and that
petitioner did not have the necessary certification from the
Department of Labor attesting to such fact of delivery. In
view of these observations, public respondent subscribed to
the possibility that petitioner may still have a liability vis-a-
vis the workers' share. Consequently, in order that the workers
would not have to litigate their claim separately, which would
be tantamount to tolerating the splitting of a cause of action,
public respondent held that petitioner should still be included
in this case as an indispensable party without which a full
determination of this case would not be obtained.
We find for petitioner.
The Solicitor General, in its adverse Comment, correctly
agreed with petitioner's contention that while the jurisdiction
over controversies involving agricultural workers has been
transferred from the Court of Agrarian Relations to the Labor
Arbiters under the Labor Code as amended, the said
transferred jurisdiction is however, not without limitations.
The dispute or controversy must still fall under one of the
cases enumerated under Article 217 of the Labor Code, which
cases, as ruled in San Miguel, supra., arise out of or are in
connection with an employer-employee relationship.
In the case at bar, it is clear that there is no employer-
employee relationship between petitioner milling company
and respondent union and/or its members-workers, a fact
which, the Solicitor General notes, public respondent did not
dispute or was silent about. Absent the jurisdictional requisite
of an employer-employee relationship between petitioner and
private respondent, the inevitable conclusion is that public
respondent is without jurisdiction to hear and decide the case
with respect to petitioner.
Anent the issue of whether respondent union and/or its
members-workers have a cause of action against petitioner,
the same must be resolved in the negative. To have a cause of
action, the claimant must show that he has a legal right and
the respondent a correlative duty in respect thereof, which the
latter violated by some wrongful act or omission (Marquez vs.
Varela, 92 Phil. 373 [1952]). In the instant case, a simple
reading of Section 9 of R.A. 809 and Section 1 of LOI 845 as
aforequoted, would show that the payment of the workers'
share is a liability of the planters-employers, and not of the
milling company/sugar central. We thus reiterate Our ruling
on this matter, as enunciated in Federation of Free Farmers,
supra., to wit:
. . . . Nowhere in Republic Act No. 809 can we find anything
that creates any relationship between the laborers of the
planters and the centrals. Under the terms of said Act, the old
practice of the centrals issuing the quedans to the respective
PLANTERS for their share of the proceeds of milled sugar
per their milling contracts has not been altered or modified. In
other words, the language of the Act does not in any manner
make the central the insurer on behalf of the plantation
laborers that the latter's respective employers-planters would
pay them their share. . . .
. . . . Accordingly, the only obligation of the centrals (under
Section 9 of the Act), like VICTORIAS, is to give to the
respective planters, like PLANTERS herein, the planters'
share in the proportion stipulated in the milling contract
which would necessarily include the portion of 60%
pertaining to the laborers. Once this has been done, the central
is already out of the picture. . . . (Emphasis supplied)
In the case at bar, it is disputed that petitioner milling
company has already distributed to its planters their
respective shares. Consequently, petitioner has fulfilled its
part and has nothing more to do with the subsequent
distribution by the planters of the workers' share.
Public respondent's contention that petitioner is an
indispensable party is not supported by the applicable
provisions of the Rules of Court. Under Section 7, Rule 3
thereof, indispensable parties are "parties in interest" without
whom no final determination of the action can be obtained. In
this case, petitioner cannot be deemed as a party in interest
since there is no privity or legal obligation linking it to
respondent union and/or its members-workers.
In order to further justify petitioner's compulsory joinder as a
party to this case, public respondent relies on petitioners' lack
of certification from the Department of Labor of its delivery
of the planters' shares as evidence of an alleged "conspicuous
display of concerted conspiracy between the respondent sugar
central (petitioner) and its adherent planters to deprive the
workers or claimants of their shares in the increase in
participation of the adherent planters." (Rollo, p. 56)
The assertion is based on factual conclusions which have yet
to be proved. And even assuming for the sake of argument
that public respondent's conclusions are true, respondent
union's and/or its workers' recourse lies with the Secretary of
Labor, upon whom authority is vested under RA 809 to
supervise the payment of the workers' shares. Any act or
omission involving the legal right of the workers to said
shares may be acted upon by the Labor Secretary either motu
proprio or at the instance of the workers. In this case
however, no such action has been brought by the subject
workers, thereby raising the presumption that no actionable
violation has been committed.

Public respondent is concerned that the respondent planters

may easily put up the defense that the workers' share is with
petitioner milling company, giving rise to multiplicity of
suits. The Solicitor General correctly postulates that the
planters cannot legally set up the said defense since the
payment of the workers' share is a direct obligation of the
planters to their workers that cannot be shifted to the
miller/central. Furthermore, the Solicitor General notes that
there is nothing in RA 809 which suggests directly or
indirectly that the obligation of the planter to pay the workers'
share is dependent upon his receipt from the miller of his own
share. If indeed the planter did not receive his just and due
share from the miller, he is not without legal remedies to
enforce his rights. The proper recourse against a reneging
miller or central is for the planter to implead the former not as
an indispensable party but as a third party defendant under
Section 12, Rule 6 of the Rules of Court. In such case, herein
petitioner milling company would be a proper third party
dependent because it is directly liable to the planters (the
original defendants) for all or part of the workers' claim.
However, the planters involved in this controversy have not
filed any complaint of such a nature against petitioner,
thereby lending credence to the conclusion that petitioner has
fulfilled its part vis-a-vis its obligation under RA 809.

WHEREFORE, premises considered, the petition is

GRANTED. Public respondent Reynaldo J. Gulmatico is
hereby ORDERED to DISMISS RAB VI Case No. 06-07-
10256-89 with respect to herein petitioner Hawaiian-
Philippine Company and to PROCEED WITH DISPATCH in
resolving the said case.

SO ORDERED.
G.R. No. L-60716 October 27, 1983
AGUSAN DEL NORTE ELECTRIC COOPERATIVE,
INC., ANTONIO L. SUAREZ, as General Manager and
Ex-Oficio Member of the Board of Directors, et
al., petitioners,
vs.
HON. FORTUNATO A. VAILOCES, in his capacity as
Judge of the Court of First Instance of Agusan del Norte
& Butuan City, 15th Judicial District, and PERLITA S.
JONGKO, respondents.
Balanon & Acain Law Office for petitioners.
Jesus S. Delfin for private respondent.
PLANA, J.:
This is a petition for certiorari with preliminary injunction set
against the following background:
From 1977 to December 1981, Perlita S. Jongko was
employed by the Agusan del Norte Electric Company, Inc.
(ANECO) initially as accountant and later as office manager.
on December 7, 1981, allegedly in the absence of a
substantial basis and without giving Jongko reasonably
sufficient opportunity to put up her defense, the ANECO
general manager, Antonio Suarez, with the concurrence of the
ANECO board of directors, dismissed Jongko as office
manager for alleged dishonesty, conflicting interest, abuse of
authoritv and insubordination.
On December 22, 1981, Jongko filed with the Court of First
Instance of Agusan del Norte and Butuan City a petition for
prohibition and mandamus against ANECO and its officers
based on illegal dismissal, with a praver for reinstatement
with back salary. (Civil Case No. 410.) The defendants filed a
motion to dismiss on the ground, among others, that the CFI
had no jurisdiction over the subject matter of the action. The
court denied the motion and refused to reconsider the same.
Hence, this petition for certiorari filed on June 14, 1982
assailing the denial of the motion to dismiss on the ground
that ordinary courts have no jurisdiction over illegal dismissal
cases which have been assigned by law exclusively to labor
arbiters.
Meanwhile, on the same date that the instant petition was
filed, Jongko also filed with the court a quo an amended
petition seeking not only reinstatement with back salary but
also moral and exemplary damages.
Under Article 217 of Presidential Decree 442 (Labor Code),
as amended by Presidential Decree 1367, labor arbiters had
exclusive jurisdiction over labor cases involving illegal
dismissal and all other cases arising from employer-
employee relations, exclusive of claims for damages. For
under P.D. 1367, "labor-arbiters shall not entertain claims of
moral or other forms of damages."
On May 1, 1980, however, PD 1691 amended the Labor Code
by deleting the ban against labor arbiters taking cognizance of
claims for damages, This amendment had the effect of
restoring the jurisdiction of labor arbiters over said claims
under their broad and exclusive authority to hear and decide-
All money claims of workers, including those based on non-
payment ... of wages ... and other benefits provided by law ...
All other claims arising from employer-employee relations,
unless expressly excluded by this Code. [Article 217 (a). See
Aguda vs. Vallejos, 113 SCRA 69; Cardinal Industries, Inc.
vs. Vallejos, 114 SCRA 472; Getz Corp. (Phil.), Inc. vs.
Court of Appeals, 116 SCRA 86.]
The legal situation remained despite the subsequent
enactment of Batas Pambansa 130 on August 21, 1980.
Thus, when in December, 1981 the services of private
respondent Jongko were terminated by ANECO and Jongko
filed her petition for prohibition and mandamus against
ANECO with the Court of First Instance of Agusan del Norte
and Butuan City praying for reinstatement with back salary
(without asking for damages), the applicable law was Article
217 of the Labor Code, as amended on August 21, 1980 by
Batas Pambansa 130 giving labor arbiters exclusive
jurisdiction over all money claims of workers (including those
based on non-payment of wages and other benefits provided
by law) as well as all other claims arising from employer-
employee relations, including moral and other forms of
damages.
And when Jongko filed on June 14, 1982 her amended
petition praying not only for reinstatement and backwages but
also moral and exemplary damages, the law applicable was
the same Article 217 of the Labor Code, as amended by Batas
Pambansa 227 effective June 1, 1982, under which "all
money claims of workers including those based on non-
payment . . . of wages . . . and other benefits provided by law"
were still under the exclusiue jurisdiction of labor arbiters,
inclusive of illegal dismissal cases with prayer for
reinstatement, backwages and damages, notwithstanding the
fact that Batas Pambansa 227 deleted the basket clause in
Article 217 of the Labor Code which previously gave labor
arbiters jurisdiction over 11 all other claims arising from
employer-employee relations," For as observed by this Court
in Ebon vs. De Guzman, 113 SCRA 52 at 56 -
The provisions ... that the Labor Arbiters and the NLRC have
jurisdiction over "all money claims of workers ..." . . . are
comprehensive enough to include claims for moral and
exemplary damages of a dismiss employee against his
employer. (See also Getz Corp. (Phil.), Inc. 116 SCRA 86.)

Therefore, when the court a quo denied petitioner' motion to

dismiss the illegal dismissal case instituted by private
respondent, it resolved to take cognizance of a case over
which it had no jurisdiction.

WHEREFORE, the petition is granted. Respondent judge or

his successor is directed to dismiss Civil Case 410 without
prejudice to the right of private respondent to re-file her claim
with the proper labor arbiter. No costs.

SO ORDERED.
G.R. No. 75837 December 11, 1987
DOMINADOR BASAYA JR., FLORENCIO ABELLA,
DOMINADOR ORDINEZA, FLORO ROSALEJOS, PABLO
PADILLA, ELVIN ELISORIO PATRICIO GUTIB, JOSE
LEOPOLDO, HONORATO SININA, EFREMIO CATUBAY,
RAUL DE REAL, VIRGINIO ALEGRIA, EDUARDO BULAK,
BALTAZAR DACARA, DIOSDADO REAL, MICHAEL
DUMALAGAN, RAMON FLORES, WILFREDO BACATAN,
PEDRO CANAZARES, LUCIFERO PESQUERA,
FLORENTINO DURAN, CATALINO TIENGCO, EDUARDO
CABRERA, and RENATO ANTONINO, petitioners,
vs.
HON. FRANCIS MILITANTE, President Judge, Regional Trial
Court, 7th Judicial Region, Branch XII, Cebu City, and
PHILIPPINE TUNA VENTURES, INC., respondents.
In this Petition for Review on Certiorari, petitioners challenge
the assumption of jurisdiction by Respondent Judge of the
Regional Trial Court of Cebu City, Branch XI 1, over a
complaint for Replevin filed by private respondent, Philippine
Tuna Ventures, Inc. against petitioners, upon the allegation
that it is intertwined with a labor dispute so that exclusive
jurisdiction belongs to the National Labor Relations
Commission (NLRC).
Respondent Philippine Tuna Ventures, Inc. (TUNA, Inc., for
short), is the charterer of the fishing vessel, the F/B Caribbean
(hereinafter referred to simply as the Vessel). TUNA, Inc. has
been operating this Vessel in its deep-sea fishing business
since 1977 together with eight (8) other fishing boats.
Sometime in 1985, TUNA, Inc. transferred the operation of
the Vessel to a sister corporation, the Eastship Fishing
Corporation (Eastship, for brevity). Petitioners, twenty-four
(24) in all, constitute the crew of the Vessel, with petitioner
Dominador Basaya Jr., as its Captain.
On 9 July 1986, TUNA, Inc. sought the remedy of Replevin
(the Replevin Case) against petitioners before the Regional
Trial Court presided over by Respondent Judge, praying that
petitioners (defendants in that case) be ordered to deliver to it
the possession of its Vessel, which petitioners were allegedly
possessing in violation of its rights.
In their defense below petitioners maintained that they were
in possession of the Vessel as its crew; that their possession is
"an extension of the possession of the plaintiff over the
Vessel" and that to deprive them of its possession by a Writ
of Replevin would amount to an illegal termination of their
employment.
On 10 July 1986, the Writ of Replevin was ordered issued
upon TUNA, Inc.'s filing of a bond in the amount of P2M.
The Sheriff served the Writ on petitioners on 12 July 1986
and they disembarked from the Vessel in the evening of that
day. However, after about an hour, they re-embarked and re-
took possession.
On 29 August 1986 judgment was rendered in the Replevin
Case declaring TUNA, Inc. to have a better right to the
possession of the Vessel and ordering petitioners to
immediately deliver possession thereof.
On 15 September 1986 petitioners resorted to this appeal by
certiorari on a question of law with a prayer for a restraining
order.
On 17 September 1986 we issued a Temporary Restraining
Order enjoining respondents from enforcing the judgment in
the Replevin Case or any Writ of Execution issued therein.
The only issue for resolution is whether or not the Trial Court
had jurisdiction to hear and decide the Replevin Case.
Said Court upheld its jurisdiction and ruled, as heretofore
stated, that the charterer, TUNA, Inc., has a better right to the
possession of the Vessel and ordered petitioners to
immediately deliver possession.
In this Petition, petitioners argue that the Trial Court erred in:
I. ... assuming a split jurisdiction over the civil rights of the
respondent corporation to possess the vessel F/B Caribbean
and oust the petitioners- appellants separately from the labor
rights of the petitioners-appellants to be protected from their
sudden arbitrary ouster from their positions in the said vessel
as crew members and officers thereof.
II. ... holding that the legal responsibility of the respondent,
Philippine Tuna Ventures, Inc. as the employer of the
petitioners-appellants has been transferred to Eastship Fishing
Corporation.
III. ... assuming jurisdiction over this case which involves the
labor violation of unfair labor practice committed by the
respondent Phil. Tuna Ventures, Inc. and which, therefore,
appertains to the exclusive jurisdiction of the National Labor
Relations Commission.
It appears that on 26 June 1986, petitioners had presented to
the management of TUNA, Inc., a set of labor demands; that
on 28 June 1986 they had informed Eastship that they would
not move the Vessel to any destination until their demands
were met; that on 2 July 1986 TUNA, Inc., had applied for a
"shut-down" or closure allegedly due to business losses; that
on 8 July 1986 Eastship filed with the National Labor
Relations Commission, Regional Office No. 7, Cebu City, a
Petition to declare petitioners' strike illegal; and that on 8
August 1986, petitioners instituted a Complaint for Unfair
Labor Practice against TUNA, Inc. and Eastship. Incidentally,
petitioners allege that they are not on strike,
Developments subsequent to the judgment in the Replevin
Case also disclose that on 18 November 1986, in NLRC
Injunction Case No. 1270 entitled Eastship Fishing
Corporation vs. Concerned Seamen of the Philippines, the
NLRC issued an Injunction Writ enjoining petitioners from
blocking the free ingress and egress to the Vessel and seven
(7) other fishing boats and to disembark from and vacate the
Vessel without prejudice to the exercise of their right to
lawful and peaceful picketing; that on 28 November 1986, the
NLRC Sheriffs attempted to enforce the Injunction but
petitioners refused to comply thereby compelling the NLRC
on the same date to seek the assistance of the Philippine
Constabulary and the Philippine Coast Guard; that it was only
on 11 December 1986, after a series of refusals, that
petitioners left the Vessel peacefully only to retake possession
on 16 December 1986.
An ocular inspection on 10 January 1987 by Eastship
disclosed that petitioners were still in possession.
Upon the facts and issue involved, we uphold the jurisdiction
of the Civil Court.
Replevin is a possessory action, the gist of which is the right
of possession in the plaintiff. The primary relief sought
therein is the return of the property in specie wrongfully
detained by another person. It is an ordinary statutory
proceeding to adjudicate rights to the title or possession of
personal property (Francisco, The Revised Rules of Court,
Provisional Remedies, 1985, p. 386, citing 46 Am. Jur. 7).
The question of whether or not a party has the right of
possession over the property involved and if so, whether or
not the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale
of competence of a labor tribunal; it is beyond the field of
specialization of Labor Arbiters.
disembark and vacate. That aspect of the controversy is
properly settled under the Labor Code. So also with
petitioners' right to picket. But the determination of the
question of who has the better right to take possession of the
Vessel and whether petitioners can deprive the Charterer, as
the legal possessor of the Vessel, of that right to possess is
addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction
but defining avenues of jurisdiction as laid down by pertinent
laws.
The Court takes note that petitioners have defied not only the
Writ of Replevin issued by the Civil Court but also the
Injunction ordered by the NLRC. Petitioners must be
reminded that rights are not their exclusive prerogative but
are enjoyed by others as well. They must yield to the rule of
law and not rely on the law of force, specially where
adjudicative bodies and Courts have ruled upon the merits of
their claims although adversely to them.
WHEREFORE, the judgment under review is hereby
AFFIRMED and petitioners are hereby ORDERED to
disembark from the F/B Caribbean and to turn over
possession of said vessel to private respondent Philippine
Tuna Ventures, Inc., without prejudice to the continued
prosecution of their demands for labor benefits before the
labor tribunal, which will surely be protective of their just
deserts. The Temporary Restraining Order issued by this
Court on 17 September 1986 is hereby LIFTED. Treble costs
against petitioners.
This judgment is immediately executory.
SO ORDERED.

The Trial Court, therefore, rightfully assumed jurisdiction

over the Replevin Case and aptly held that, as charterer of the
Vessel, TUNA, Inc. has the better right of possession and that
petitioners' alleged right to possess the Vessel as the crew
thereof is not in any way superior to the right of TUNA, Inc.
as such charterer or lessee.

The labor dispute involved is not intertwined with the issue in

the Replevin Case. The respective issues raised in each forum
can be resolved independently of the other. In fact, on 18
November 1986, the NLRC in the case before it had issued an
Injunctive Writ enjoining petitioners from blocking the free
ingress and egress to the Vessel and ordering petitioners to
G.R. No. 74621 February 7, 1990
BROKENSHIRE MEMORIAL HOSPITAL,
INC., petitioner,
vs.
THE HONORABLE MINISTER OF LABOR &
EMPLOYMENT AND BROKENSHIRE MEMORIAL
HOSPITAL EMPLOYEES AND WORKER'S UNION-
FFW Represented by EDUARDO A. AFUAN, respondents.
Renato B. Pagatpatan for petitioner.
PARAS, J.:
This petition for review by certiorari seeks the annulment or
modification of the Order of public respondent Minister of
Labor dated December 9, 1985 in a case for non-compliance
with Wage Order Nos. 5 and 6 docketed as ROXI-LSED Case
No. 14-85 which 1) denied petitioner's Motion for
Reconsideration dated February 3, 1986 and 2) affirmed the
Order of Regional Director Eugenio I. Sagmit, Jr., Regional
Office No. XI Davao City, dated April 12, 1985, the
dispositive portion of which reads as follows:
WHEREFORE, premises considered, respondent Brokenshire
Memorial Hospital, Incorporated is hereby ordered to pay the
above-named workers, through this Office, within fifteen (15)
days from receipt hereof, the total sum of TWO HUNDRED
EIGHTY- FOUR THOUSAND SIX HUNDRED TWENTY
FIVE (P284,625.00) PESOS representing their living
allowance under Wage Order No. 5 covering the period from
October 16, 1984 to February 28, 1985 and under Wage
Order No. 6 effective November 1, 1984 to February 28,
1985. Respondent is further ordered to pay the employees
who are likewise entitled to the claims here presented, but
whose names were inadvertently omitted in the list and
computation. (Rollo, p. 7)
Petitioner contends that the respondent Minister of Labor and
Employment acted without, or in excess of his jurisdiction or
with grave abuse of discretion in failing to hold:
A) That the Regional Director committed grave abuse of
discretion in asserting exclusive jurisdiction and in not
certifying this case to the Arbitration Branch of the National
Labor Relations Commission for a full-blown hearing on the
merits;
B) That the Regional Director erred in not ruling on the
counterclaim raised by the respondent (in the labor case, and
now petitioner in this case);
C) That the Regional Director erred -in skirting the
constitutional and legal issues raised. (Rollo, p. 4)
This case originated from a complaint filed by private
respondents against petitioner on September 21, 1984 with
the Regional Office of the MOLE, Region XI, Davao City for
non-compliance with the provisions of Wage Order No. 5.
After due healing the Regional Director rendered a decision
dated November 16, 1984 in favor of private respondents.
Judgment having become final and executory, the Regional
Director issued a Writ of Execution whereby some movable
properties of the hospital (petitioner herein) were levied upon
and its operating expenses kept with the bank were garnished.
The levy and garnishment were lifted when petitioner hospital
paid the claim of the private respondents (281 hospital
employees) directly, in the total amount of P163,047.50
covering the period from June 16 to October 15, 1984.
After making said payment, petitioner hospital failed to
continue to comply with Wage Order No. 5 and likewise,
failed to comply with the new Wage Order No. 6 which took
effect on November 1, 1984, prompting private respondents
to file against petitioner another complaint docketed as
ROXI-LSED-14-85, which is now the case at bar.
In its answer, petitioner raised the following affirmative
defenses:
1) That the Regional Office of the Ministry of Labor did not
acquire jurisdiction over it for want of allegation that it has
the capacity to be sued and
2) That Wage Order Nos. 5 and 6 are non-constitutional and
therefore void. Significantly petitioner never averred any
counterclaim in its Answer.
After the complainants had filed their reply, petitioner filed a
Motion for the Certification of the case to the National Labor
Relations Commission for a full-blown hearing on the matter,
including the counterclaim interposed that the complainants
had unpaid obligations with the Hospital which might be
offset with the latter's alleged obligation to the former.
Issues having been joined, the Regional Director rendered a
decision on April 12, 1985 in favor of the complainants
(private respondents herein) declaring that petitioner
(respondent therein) is estopped from questioning the
acquisition of jurisdiction because its appearance in the
hearing is in itself submission to jurisdiction and that this case
is merely a continuance of a previous case where the hospital
already willingly paid its obligations to the workers on orders
of the Regional Office. On the matter of the constitutionality
of the Wage Order Nos. 5 and 6, the Regional Director
declared that only the court can declare a law or order
unconstitutional and until so declared by the court, the Office
of the Regional Director is duly bound to enforce the law or
order.
Aggrieved, petitioner appealed to the Office of the Minister of
Labor, which dismissed the appeal for lack of merit. A motion
for reconsideration was likewise denied by said Office, giving
rise to the instant petition reiterating the issues earlier
mentioned.
The crucial issue We are tasked to resolve is whether or not
the Regional Director has jurisdiction over money claims of
workers concurrent with the Labor Arbiter.
It is worthy of note that the instant case was deliberated upon
by this Court at the same time that Briad Agro Development
Corporation v. de la Cerna, G.R. No. 82805 and L.M. Camus
Engineering Corporation v. Hon. Secretary of Labor, et al.
G.R. No. 83225, promulgated on June 29,1989 and Maternity
Children's Hospital vs. Hon. Secretary of Labor, et al., G.R.
No. 78909, promulgated 30 June 1989, where deliberated
upon; for all three (3) cases raised the same issue of
jurisdiction of the Regional Director of the Department of
Labor to pass upon money claims of employees. Hence, we
will be referring to these cases, most especially the case of
Briad Agro which, as will be seen later, was reconsidered by
the court.
Contrary to the claim of petitioners that the original and
exclusive jurisdiction over said money claims is properly
lodged in the Labor Arbiter (relying on the case of Zambales
Base Metals Inc. v. Minister of Labor, 146 SCRA 50) and the
Regional Director has no jurisdiction over workers' money
claims, the Court in the three (3) cases above-mentioned ruled
that in view of the promulgation of Executive Order No. 111,
the ruling in the earlier case of Zambales Base Metals is
already abandoned. In accordance with the rulings in Briad
Agro, L.M. Camus, and Maternity Children's Hospital, the
Regional Director exercises concurrent jurisdiction with the
Labor Arbiter over money claims. Thus,
. . . . Executive Order No. 111 is in the character of a curative
law, that is to say, it was intended to remedy a defect that, in
the opinion of the legislative (the incumbent Chief Executive
in this case, in the exercise of her lawmaking power under the
Freedom Constitution) had attached to the provision subject
of the amendment. This is clear from the proviso: "The
provisions of Article 217 to the contrary notwithstanding . . ."
Plainly, the amendment was meant to make both the Secretary
of Labor (or the various Regional Directors) and the Labor
Arbiter share jurisdiction. (Briad Agro Dev. Corp. v. Sec. of
Labor, supra).
Under the present rules, a Regional Director
exercises both visitorial and enforcement power over labor
standards cases, and is therefore empowered to adj udicate
money claims, provided there still existsan employer-
employee relationship, and the findings of the regional office
is not contested by the employer concerned. (Maternity
Children's Hospital v. Sec. of Labor, supra).
However, it is very significant to note, at this point, that the
decision in the consolidated cases of Briad Agro
Development Corp. and L.M. Camus Engineering Corp. was
reconsidered and set aside by this Court in a Resolution
promulgated on November 9,1989. In view of the enactment
of Republic Act No. 6715, approved on March 2, 1989, the
Court found that reconsideration was proper.
RA 6715 amended Art. 129 and Art. 217 of the Labor Code,
to read as follows:
ART. 129. Recovery of wages, simple money claims and other
benefits.—Upon complaint of any interested party, the
Regional Director of the Department of Labor and
Employment or any of the duly authorized hearing officers of
the Department is empowered, through summary
proceeding and after due notice, to hear and decide any
matter involving the recovery of wages and other monetary
claims and benefits, including legal interest, owing to an
employee or person employed in domestic or household
service or househelper under this code, arising from
employer-employee relations, Provided, That such complaint
does not include a claim for reinstatement; Provided, further,
That the aggregate money claims of each employee or
househelper do not exceed five thousand pesos (P5,000.00).
The Regional Director or hearing officer shall decide or
resolve the complaint within thirty (30) calendar days from
the date of the filing of the same . . .
Any decision or resolution of the Regional Director or
hearing officer pursuant to this provision may be appealed on
the same grounds provided in Article 223 of this Code, within
five (5) calendar days from 11 receipt of a copy of said
decision or resolution, to the National Labor Relations
Commission which shall resolve the appeal within ten (10)
calendar days from the submission of the last pleading
required or allowed under its rules.
ART. 217. Jurisdiction of Labor Arbiters and the
Commission. —Except as otherwise provided under this code,
the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for
decision without extension, even in the absence of steno
graphic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanied with a claim of reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relation;
(5) Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and
lockouts; and
(6) Except claims for employees compensation, social
security, medicare and maternity benefits, all other claims
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount not exceeding five thousand pesos (P5,000.00),
whether or not accompanied with a claim for reinstatement.
It will be observed that what in fact conferred upon Regional
Directors and other hearing officers of the Department of
Labor (aside from the Labor Arbiters) adjudicative powers,
i.e., the power to try and decide, or hear and determine any
claim brought before them for recovery of wages, simple
money claims, and other benefits, is Republic Act 6715,
provided that the following requisites concur, to wit:
1) The claim is presented by an employee or person employed
in domestic or household service, or househelper under the
code;
2) The claimant, no longer being employed, does not seek
reinstatement; and
3) The aggregate money claim of the employee or
househelper does not exceed five thousand pesos (P5,000.00).
In the absence of any of the three (3) requisites, the Labor
Arbiters have exclusive original jurisdiction over all claims
arising from employer-employee relations, other than claims
for employee's compensation, social security, medicare and
maternity benefits.
We hereby adopt the view taken by Mr. Justice Andres
Narvasa in his Separate Opinion in the case of Briad Agro
Dev. Corp., as reconsidered, a portion of which reads:
In the resolution, therefore, of any question of jurisdiction
over a money claim arising from employer-employee
relations, the first inquiry should be into whether the
employment relation does indeed still exist between the
claimant and the respondent.
If the relation no longer exists, and the claimant does not seek
reinstatement, the case is cognizable by the Labor Arbiter, not
by the Regional Director. On the other hand, if the
employment relation still exists, or reinstatement is sought,
the next inquiry should be into the amount involved.
If the amount involved does not exceed P5,000.00, the
Regional Director undeniably has jurisdiction. But even if the
amount of the claim exceeds P5,000.00, the claim is not on
that account necessary removed from the Regional Director's
competence. In respect thereof, he may still exercise the
visitorial and enforcement powers vested in him by Article
128 of the Labor Code, as amended, supra; that is to say, he
may still direct his labor regulations officers or industrial
safety engineers to inspect the employer's premises and
examine his records; and if the officers should find that there
have been violations of labor standards provisions, the
Regional Director may, after due notice and hearing, order
compliance by the employer therewith and issue a writ of
execution to the appropriate authority for the enforcement
thereof. However, this power may not, to repeat, be exercised
by him where the employer contests the labor regulation
officers' findings and raises issues which cannot be resolved
without considering evidentiary matters not verifiable in the
normal course of inspection. In such an event, the case will
have to be referred to the corresponding Labor Arbiter for
adjudication, since it falls within the latter's exclusive original
jurisdiction.
Anent the other issue involved in the instant case, petitioner's
contention that the constitutionality of Wage Order Nos. 5
and 6 should be passed upon by the National Labor Relations
Commission, lacks merit. The Supreme Court is vested by the
Constitution with the power to ultimately declare a law
unconstitutional. Without such declaration, the assailed
legislation remains operative and can be the source of rights
and duties especially so in the case at bar when petitioner
complied with Wage Order No. 5 by paying the claimants the
total amount of P163,047.50, representing the latter's
minimum wage increases up to October 16, 1984, instead of
questioning immediately at that stage before paying the
amount due, the validity of the order on grounds of
constitutionality. The Regional Director is plainly ,without
the authority to declare an order or law unconstitutional and
his duty is merely to enforce the law which stands valid,
unless otherwise declared by this Tribunal to be
unconstitutional. On our part, We hereby declare the assailed
Wage Orders as constitutional, there being no provision of the
1973 Constitution (or even of both the Freedom Constitution
and the 1987 Constitution) violated by said Wage Orders,
which Orders are without doubt for the benefit of labor.

Based on the foregoing considerations, it is our shared view

that the findings of the labor regulations officers may not be
deemed uncontested as to bring the case at bar within the
competence of the Regional Director, as duly authorized
representative of the Secretary of Labor, pursuant to Article
128 of the Labor Code, as amended. Considering further that
the aggregate claims involve an amount in excess of
P5,000.00, We find it more appropriate that the issue of
petitioner hospital's liability therefor, including the proposal
of petitioner that the obligation of private respondents to the
former in the aggregate amount of P507,237.57 be used to
offset its obligations to them, be ventilated and resolved, not
in a summary proceeding before the Regional Director under
Article 128 of the Labor Code, as amended, but in accordance
With the more formal and extensive proceeding before the
Labor Arbiter. Nevertheless, it should be emphasized that the
amount of the employer's liability is not quite a factor in
determining the jurisdiction of the Regional Director.
However, the power to order compliance with labor standards
provisions may not be exercised where the employer contends
or questions the findings of the labor regulation officers and
raises issues which cannot be determined without taking into
account evidentiary matters not verifiable in the normal
course of inspection, as in the case at bar.

Viewed in the light of RA 6715 and read in consonance with

the case of Briad Agro Development Corp., as reconsidered,
We hold that the instant case falls under the exclusive original
jurisdiction of the Labor Arbiter RA 6715 is in the nature of a
curative statute. Curative statutes have long been considered
valid in our jurisdiction, as long as they do not affect vested
rights. In this case, We do not see any vested right that will be
impaired by the application of RA 6715. Inasmuch as
petitioner had already paid the claims of private respondents
in the amount of P163,047.50 pursuant to the decision
rendered in the first complaint, the only claim that should be
deliberated upon by the Labor Arbiter should be limited to the
second amount given by the Regional Director in the second
complaint together with the proposal to offset the obligations.

WHEREFORE, the assailed decision of the Regional Director

dated April 12, 1985, is SET ASIDE. The case is
REFERRED, if the respondents are so minded, to the Labor
Arbiter for proper proceedings.

SO ORDERED.
G.R. No. L-68544 October 27, 1986
LORENZO C. DY, ZOSIMO DY, SR., WILLIAM IBERO, RICARDO
GARCIA AND RURAL BANK OF AYUNGON, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND
EXECUTIVE LABOR ARBITER ALBERTO L. DALMACION, AND
CARLITO H. VAILOCES, respondents.
NARVASA, J.:
Petitioners assail in this Court the resolution of the National
Labor Relations Commission (NLRC) dismissing their appeal
from the decision of the Executive Labor Arbiter 1 in Cebu
City which found private respondent to have been illegally
dismissed by them.
Said private respondent, Carlito H. Vailoces, was the manager
of the Rural Bank of Ayungon (Negros Oriental), a banking
institution duly organized under Philippine laws. He was also
a director and stockholder of the bank.
On June 4, 1983, a special stockholders' meeting was called
for the purpose of electing the members of the bank's Board
of Directors. Immediately after the election the new Board
proceeded to elect the bank's executive officers.
Pursuant to Article IV of the bank's by-laws, 2 providing for
the election by the entire membership of the Board of the
executive officers of the bank, i.e., the president, vice-
president, secretary, cashier and bank manager, in that board
meeting of June 4, 1983, petitioners Lorenzo Dy, William
Ibero and Ricardo Garcia were elected president, vice-
president and corporate secretary, respectively. Vailoces was
not re-elected as bank manager, 3 Because of this
development, the Board, on July 2, 1983, passed Resolution
No. 5, series of 1983, relieving him as bank manager.
On August 3, 1983, Vailoces filed a complaint for illegal
dismissal and damages with the Ministry of Labor and
Employment against Lorenzo Dy and Zosimo Dy, Sr. The
complaint was amended on September 22, 1983 to include
additional respondents-William Ibero, Ricardo Garcia and the
Rural Bank of Ayungon, and additional causes of action for
underpayment of salary and non-payment of living allowance.
In his complaint and position paper, Vailoces asserted that
Lorenzo Dy, after obtaining control of the majority stock of
the bank by buying the shares of Marcelino Maximo, called
an illegal stockholders' meeting and elected a Board of
Directors controlled by him; that after its illegal constitution,
said Board convened on July 2, 1983 and passed a resolution
dismissing him as manager, without giving him the
opportunity to be heard first; that his dismissal was motivated
by Lorenzo Dy's desire to take over the management and
control of the bank, not to mention the fact that he (Dy)
harbored ill feelings against Vailoces on account of the latter's
filing of a complaint for violation of the corporation code
against him and another complaint for compulsory
recognition of natural child with damages against Zosimo Dy,
Sr. 4
In their answer, Lorenzo Dy, et al. denied the charge of illegal
dismissal. They pointed out that Vailoces' position was an
elective one, and he was not re-elected as bank manager
because of the Board's loss of confidence in him brought
about by his absenteeism and negligence in the performance
of his duties; and that the Board's action was taken to protect
the interest of the bank and was "designed as an internal
control measure to secure the check and balance of authority
within the organization." 5
The Executive Labor Arbiter found that Vailoces was:
(a) Illegally dismissed, first not because of absenteeism and
negligence, but of the resentment of petitioners against
Vailoces which arose from the latter's filing of the cases for
recognition as natural child against Zosimo Dy, Sr. and for
violation of the corporation code against Lorenzo Dy; and
second, because he was not afforded the due process of law
when he was dismissed during the Board meeting of July 2,
1983 the validity of which is seriously doubted;
(b) Not paid his cost of living allowance; and
(c) Underpaid with only P500 monthly salary,
and consequently ordered the individual petitioners —
Lorenzo Dy and Zosimo Dy-but not the Bank itself, to:
(a) Pay Vailoces jointly and severally, the sum of
P111,480.60 representing his salary differentials, cost of
living allowances, back wages from date of dismissal up to
the date of the decision (November 29, 1983), moral and
exemplary damages, and attorney's fees; and
(b) Reinstate Vailoces to his position as bank manager, with
additional backwages from December 1, 1983 on the adjusted
salary rate of P620.00 r month until he is actually reinstated,
plus cost-of-living allowance. 6
Lorenzo Dy, et al. appealed to the NLRC, assigning error to
the decision of the Labor Arbiter on various grounds, among
them: that Vailoces was not entitled to notice of the Board
meeting of July 2, 1983 which decreed his relief because he
was no longer a member of the Board on said date; that he
nonetheless had the opportunity to refute the charges against
him and seek a formal investigation because he received a
copy of the minutes of said meeting while he was still the
bank manager (his removal was to take effect only on August
15, 1983), instead of which he simply abandoned the work he
was supposed to perform up to the effective date of his relief;
and that the matter of his relief was within the adjudicatory
powers of the Securities and Exchange Commission.7
The NLRC, however bypassed the issues raised and simply
dismissed the appeal for having been filed late. It ruled that:
The record shows that a copy of the decision sent by
registered mail to respondents' counsel, Atty. Edmund Tubio,
was received on January 11, 1984 by a certain Atty. Ramon
Elesteria, a law office partner of Atty. Tubio. ... This fact is
corroborated by the certification issued by the Postmaster of
Dumaguete City... Moreover, the same is admitted by no less
than Atty. Ramon Elesteria himself in his affidavit. It further
appears in the record that on January 30, 1984 a certain Atty.
Francisco Zerna, a new lawyer engaged by the respondents
for the appeal, received a copy of the decision in this case as
certified by Julia Pepito in an affidavit subscribed before the
Senior Labor Arbitration Specialist. The appeal was filed only
on February 17, 1984.
Considering that it was a law partner of the respondents'
counsel who received on January 11, 1984 the registered
letter, his actual receipt thereof completes the service. ... And
even assuming that such was not a valid service, since the
respondents received another copy of the decision on January
30, 1984, through their newly engaged counsel, it is therefore
our opinion that the appeal herein was filed out of time,
whether the time is reckoned from the receipt by Atty.
Elesteria or Atty. Zerna, and, for this reason, we can not give
due course to his appeal. 8
In this Court, petitioners assail said ruling as an arbitrary
deprivation of their right to appeal through unreasonable
adherence to procedural technicality. They argue that they
should not be bound by the service of the Labor Arbiter's
decision by Atty. Elesteria on January 11, 1984 or by Atty.
Zerna on January 30, 1984, because neither lawyer was
authorized to accept service for their counsel Atty. Tubio, and
that their 10 day period of appeal should be counted from
February 10, 1984 when they actually received the copy of
the decision from Atty. Zerna. On the merits, they assert that
the Arbiter's finding of illegal dismissal was without
evidentiary basis, that it was error to impose the obligation to
pay damages upon the individual petitioners, instead of the
Rural Bank of Ayungon, which was Vailoces' real employer,
and that the damages awarded are exorbitant and oppressive.
While the comment of Vailoces traverses the averments of the
petition, that of the Solicitor General on behalf of public
respondents perceives the matter as an intracorporate
controversy of the class described in Section 5, par. (c), of
Presidential Decree No. 902-A, namely:
(c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations,
partnerships or associations.
explicitly declared to be within the original and exclusive
jurisdiction of the Securities and Exchange Commission, and
recommends that the questioned resolution of the NLRC as
well as the decision of the Labor Arbiter be set aside as null
and void.9
In truth, the issue of jurisdiction is decisive and renders
unnecessary consideration of the other questions raised.
There is no dispute that the position from which private
respondent Vailoces claims to have been illegally dismissed is
an elective corporate office. He himself acquired that position
through election by the bank's Board of Directors at the
organizational meeting of November 17, 1979. 10 He lost that
position because the Board that was elected in the special
stockholders' meeting of June 4, 1983 did not re-elect him.
And when Vailoces, in his position paper submitted to the
Labor Arbiter, impugned said stockholders' meeting as
illegally convoked and the Board of Directors thereby elected
as illegally constituted, 11 he made it clear that at the heart of
the matter was the validity of the directors' meeting of June 4,
1983 which, by not re-electing him to the position of
manager, in effect caused termination of his services.
The case thus falls squarely within the purview of Section 5,
par. (c), No. 902-A just cited. In PSBA vs. Leaño, 12 this
Court, confronted with a similar controversy, ruled that the
Securities and Exchange Commission, not the NLRC, has
jurisdiction:
It was at a Board regular monthly meeting held on August 1,
1981, that three directors were elected to fill vacancies. And,
it was at the regular Board meeting of September 5, 1981 that
all corporate positions were declared vacant in order to effect
a reorganization, and at the ensuing election of officers, Tan
was not re-elected as Executive Vice-President.
Basically, therefore, the question is whether the election of
directors on August 1, 1981 and the election of officers on
September 5, 1981, which resulted in Tan's failure to be re-
elected, were validly held. This is the crux of the question that
Tan has raised before the SEC. Even in his position paper
before the NLRC, Tan alleged that the election on August 1,
1981 of the three directors was in contravention of the PSBA
By-Laws providing that any vacancy in the Board shall be
filled by a majority vote of the stockholders at a meeting
specially called for the purpose. Thus, he concludes, the
Board meeting on September 5, 1981 was tainted with
irregularity on account of the presence of illegally elected
directors without whom the results could have been different.
Tan invoked the same allegations in his complaint filed with
the SEC. So much so, that on December 17, 1981, the SEC
(Case No. 2145) rendered a Partial Decision annulling the
election of the three directors and ordered the convening of a
stockholders' meeting for the purpose of electing new
members of the Board. The correctness of d conclusion is not
for us to pass upon in this case. Tan was present at said
meeting and again sought the issuance of injunctive relief
from the SEC.
The foregoing indubitably show that, fundamentally, the
controversy is intra-corporate in nature. It revolves around the
election of directors, officers or managers of the PSBA, the
relation between and among its stockholders, and between
them and the corporation. Private respondent also contends
that his "ouster" was a scheme to intimidate him into selling
his shares and to deprive him of his just and fair return on his
investment as a stockholder received through his salary and
allowances as Executive Vice-President. Vis-a-vis the NLRC,
these matters fall within the jurisdiction of the SEC.
Presidential Decree No. 902-A vests in the Securities and
Exchange Commission:
... Original and exclusive jurisdiction to hear and decide cases
involving:
a) Devices or schemes employed by or any acts, of the board
of directors, business associates, its officers or partners,
amounting to fraud and misrepresentation) which may be
detrimental to the interest of the public and/or of the
stockholders, partners, members of associations or
organizations registered with the Commission.
b) Controversies arising out of intracorporate or partnership
relations, between and among stockholders, members or
associates; between any of all of them and the corporation,
partnership or association of which they are stockholders,
members or associates, respectively; and between such
corporation, partnership or association and the state insofar as
it concerns their individual franchise or right to exist as such
entity;
c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations,
partnership or associations.
This is not a case of dismissal. The situation is that of
a corporate office having been declared vacant, and of Tan's
not having been elected thereafter. The matter of whom to
elect is a prerogative that belongs to the Board, and involves
the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship
of a person to corporation, whether as officer or as agent or
employee, is not determined by the nature of the services
performed, but by the incidents of the relationship as they
actually exist.
Respondent Vailoces' invocation of estoppel as against
petitioners with respect to the issue of jurisdiction is
unavailing. In the first place, it is not quite correct to state that
petitioners did not raise the point in the lower tribunal.
Although rather off handedly, in their appeal to the NLRC
they called attention to the Labor Arbiter's lack of jurisdiction
to rule on the validity of the meeting of July 2, 1983, but the
dismissal of the appeal for alleged tardiness effectively
precluded consideration of that or any other question raised in
the appeal. More importantly, estoppel cannot be invoked to
prevent this Court from taking up the question of jurisdiction,
which has been apparent on the face of the pleadings since the
start of litigation before the Labor Arbiter. It is well settled
that the decision of a tribunal not vested with appropriate
jurisdiction is null and void. Thus, in Calimlim vs.
Ramirez, 13 this Court held:
A rule that had been settled by unquestioned acceptance and
upheld in decisions so numerous to cite is that the jurisdiction
of a court over the subject matter of the action is a matter of
law and may not be conferred by consent or agreement of the
parties. The lack of jurisdiction of a court may be raised at
any stage of the proceedings, even on appeal. This doctrine
has been qualified by recent pronouncements which stemmed
principally from the ruling in the cited case
of Sibonghanoy. It is to be regretted, however, that the
holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional
circumstances involved in Sibonghanoy which justified the
departure from the accepted concept of non-waivability of
objection to jurisdiction has been ignored and, instead a
blanket doctrine had been repeatedly upheld that rendered the
supposed ruling in Sibonghanoy not as the exception, but
rather the general rule, virtually overthrowing altogether the
time-honored principle that the issue of jurisdiction is not lost
by waiver or by estoppel.
xxx xxx xxx
It is neither fair nor legal to bind a party by the result of a suit
or proceeding which was taken cognizance of in a court
which lacks jurisdiction over the same irrespective of the
attendant circumstances. The equitable defense of estoppel
requires knowledge or consciousness of the facts upon which
it is based . The same thing is true with estoppel by conduct
which may be asserted only when it is shown, among others,
that the representation must have been made with knowledge
of the facts and that the party to whom it was made is
ignorant of the truth of the matter (De Castro vs. Gineta, 27
SCRA 623). The filing of an action or suit in a court that does
not possess jurisdiction to entertain the same may not be
presumed to be deliberate and intended to secure a ruling
which could later be annulled if not favorable to the party
who filed such suit or proceeding in a court that lacks
jurisdiction to take cognizance of the same, such act may not
at once be deemed sufficient basis of estoppel. It could have
been the result of an honest mistake or of divergent
interpretation of doubtful legal provisions. If any fault is to be
imputed to a party taking such course of action, part of the
blame should be placed on the court which shall entertain the
suit, thereby lulling the parties into believing that they
pursued their remedies in the correct forum. Under the rules,
it is the duty of the court to dismiss an action 'whenever it
appears that court has no jurisdiction over the subject matter.'
(Section 2, Rule 9, Rules of Court) Should the Court render a
judgment without jurisdiction, such judgment may be
impeached or annulled for lack of jurisdiction (Sec. 30, Rule
132, Ibid), within ten (10) years from the finality of the same
(Art. 1144, par. 3, Civil Code).
To be sure, petitioners failed to raise the issue of jurisdiction
in their petition before this Court. But this, too, is no
hindrance to the Court's considering said issue.
The failure of the appellees to invoke anew the
aforementioned solid ground of want of jurisdiction of the
lower court in this appeal should not prevent this Tribunal to
take up that issue as the lack of jurisdiction of the lower court
is apparent upon the face of the record and it is fundamental
that a court of justice could only validly act upon a cause of
action or subject matter of a case over which it has
jurisdiction and said jurisdiction is one conferred only by law;
and cannot be acquired through, or waived by, any act or
omission of the parties (Lagman vs. CA, 44 SCRA 234
[1972]); hence may be considered by this court motu proprio
(Gov't. vs. American Surety Co., 11 Phil. 203 [1908])... 14
These considerations make inevitable the conclusion that the
judgment of the Labor Arbiter and the resolution of the
NLRC are void for lack of cause of jurisdiction, and this
Court must set matters aright in the exercise of its judicial
power. It is of no moment that Vailoces, in his amended
complaint, seeks other relief which would seemingly fan
under the jurisdiction of the Labor Arbiter, because a closer
look at these-underpayment of salary and non-payment of
living allowance-shows that they are actually part of the
perquisites of his elective position, hence, intimately linked
with his relations with the corporation. The question of
remuneration, involving as it does, a person who is not a mere
employee but a stockholder and officer, an integral part, it
might be said, of the corporation, is not a simple labor
problem but a matter that comes within the area of corporate
affairs and management, and is in fact a corporate controversy
in contemplation of the Corporation Code.
WHEREFORE, the questioned decision of the Labor Arbiter
and the Resolution of the NLRC dismissing petitioners'
appeal from said decision are hereby set aside because
rendered without jurisdiction. The amended complaint for
illegal dismissal, etc., basis of said decision and Resolution, is
ordered dismissed, without prejudice to private respondent's
seeking recourse in the appropriate forum.SO ORDERED.
G.R. No. 79762 January 24, 1991
FORTUNE CEMENT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION
(First Division) and ANTONIO M.
LAGDAMEO, respondents.
GRIÑO-AQUINO, J.:
This is a petition for certiorari with prayer to annul the
resolution dated May 29, 1987 of respondent National Labor
Relations Commission (NLRC) reversing the order dated
December 3, 1985 of the Labor Arbiter which dismissed
private respondent Antonio M. Lagdameo's (Lagdameo for
brevity) complaint for Illegal Dismissal (NLRC NCR Case
No. 1-228-85) against petitioner Fortune Cement Corporation
(FCC for brevity) for lack of jurisdiction.
Lagdameo is a registered stockholder of FCC.
On October 14, 1975, at the FCC Board of Directors' regular
monthly meeting, he was elected Executive Vice-President of
FCC effective November 1, 1975 (p. 3, Rollo).
Some eight (8) years later, or on February 10, 1983, during a
regular meeting, the FCC Board resolved that all of its
incumbent corporate officers, including Lagdameo, would be
"deemed" retained in their respective positions without
necessity of yearly reappointments, unless they resigned or
were terminated by the Board (p. 4, Rollo).
At subsequent regular meetings held on June 14 and 21, 1983,
the FCC Board approved and adopted a resolution dismissing
Lagdameo as Executive Vice-President of the company,
effective immediately, for loss of trust and confidence (p.
4, Rollo).
On June 21, 1983, Lagdameo filed with the National Labor
Relations Commission (NLRC), National Capital Region, a
complaint for illegal dismissal against FCC (NLRC-NCR
Case No. 1-228-85) alleging that his dismissal was done
without a formal hearing and investigation and, therefore,
without due process (p. 63, Rollo).
On August 5, 1985, FCC moved to dismiss Lagdameo's
complaint on the ground that his dismiss as a corporate officer
is a purely intra-corporate controversy over which the
Securities and Exchange Commission (SEC) has original and
exclusive jurisdiction.
The Labor Arbiter granted the motion to dismiss (p.
22, Rollo). On appeal, however, the NLRC set aside the Labor
Arbiter's order and remanded the case to the Arbitration
Branch "for appropriate proceedings" (NLRC Resolution
dated April 30, 1987). The NLRC denied FCC's motion for
reconsideration (p. 5, Rollo). Dissatisfied, FCC filed this
petition for certiorari.
We find merit in the petition.
The sole issue to be resolved is whether or not the NLRC has
jurisdiction over a complaint filed by a corporate executive
vice-president for illegal dismissal, resulting from a board
resolution dismissing him as such officer.
Section 5 of Presidential Decree No. 902-A vests in the SEC
original and exclusive jurisdiction over this controversy:
Sec. 5. In addition to the regulatory and adjudicative
functions of the Securities and Exchange Commissionover
corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:
a) Devices and schemes employed by or any acts, of the
board of directors, business associates, its officers or
partners, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or
stockholders, partners, members of associations or
organization registered with the Commission;
b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members, or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members or associates, respectively; and between such
corporation, partnership or association and the state insofar as
it concerns their individual franchise or right to exist as such
entity;
c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations,
partnership or associations." (Section 5, P.D. 902-A;
Emphasis supplied.)
In reversing the decision of Labor Arbiter Porfirio E.
Villanueva, respondent NLRC held:
. . . . It is not disputed that complainant Lagdameo was an
employee of respondent Fortune Cement Corporation, being
then the Executive Vice-President. For having been dismissed
for alleged loss of trust and confidence, complainant
questioned his dismissal on such ground and the manner in
which he was dismissed, claiming that no investigation was
conducted, hence, there was and is denial of due process.
Predicated on the above facts, it is clear to Us that a labor
dispute had arisen between the appellant and the respondent
corporation, a dispute which falls within the original and
exclusive jurisdiction of the NLRC. A labor dispute as
defined in the Labor Code includes any controversy or matter
concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing,
maintaining, changing or arranging the terms and conditions
of employment regardless of whether or not the disputants
stand in the proximate relations of employers and
employees." (pp. 16-17, Rollo).
The Solicitor General, declining to defend public respondent
in its pleading entitled "Manifestation in Lieu of Comment,"
aptly observed:
The position of "Executive Vice-President," from which
private respondent Lagdameo claims to have been illegally
dismissed, is an elective corporate office. He himself acquired
that position through election by the corporation's Board of
Directors, although he also lost the same as a consequence of
the latter's resolution.
Indeed the election, appointment and/or removal of an
executive vice-president is a prerogative vested upon a
corporate board.
And it must be, not only because it is a practice observed in
petitioner Fortune Cement Corporation, but more so, because
of an express mandate of law. (p. 65, Rollo.)
The Solicitor General pointed out that "a corporate officer's
dismissal is always a corporate act and/or intra-corporate
controversy and that nature is not altered by the reason or
wisdom which the Board of Directors may have in taking
such action." The dispute between petitioner and Lagdameo is
of the class described in Section 5, par. (c) of Presidential
Decree No. 902-A, hence, within the original and exclusive
jurisdiction of the SEC. The Solicitor General recommended
that the petition be granted and NLRC-NCR Case No. 1-228-
85 be dismissed by respondent NLRC for lack of jurisdiction rendered without jurisdiction, is hereby reversed and set
(p. 95, Rollo). aside. The decision of the Labor Arbiter dated December 3,
1985 dismissing NLRC-NCR Case No. 1-228-85 is affirmed,
In PSBA vs. Leaño (127 SCRA 778), this Court, confronted without prejudice to private respondent Antonio M.
with a similar controversy, ruled that the SEC, not the NLRC, Lagdameo's seeking recourse in the appropriate forum. No
has jurisdiction: costs.
This is not a case of dismissal. The situation is that of a SO ORDERED.
corporate office having been declared vacant, and of Tan's not
having been elected thereafter. The matter of whom to elect is
a prerogative that belongs to the Board, and involves the
exercise of deliberate choice and the faculty of discriminative
selection. Generally speaking, the relationship of a person to a
corporation, whether as officer or as agent or employee is not
determined by the nature of the services performed, but by the
incidents of the relationship as they actually exist.

Lagdameo claims that his dismissal was wrongful, illegal, and

arbitrary, because the "irregularities" charged against him
were not investigated (p. 85, Rollo); that the case of PSBA vs.
Leaño (supra) cited by the Labor Arbiter finds no application
to his case because it is not a matter of corporate office
having been declared vacant but one where a corporate officer
was dismissed without legal and factual basis and without due
process; that the power of dismissal should not be confused
with the manner of exercising the same; that even a corporate
officer enjoys security of tenure regardless of his rank (p.
97, Rollo); and that the SEC is without power to grant the
reliefs prayed for in his complaint (p. 106, Rollo).

The issue of the SEC's power or jurisdiction is decisive and

renders unnecessary a consideration of the other questions
raised by Lagdameo. Thus did this Court rule in the case
of Dy vs. National Labor Relations Commission(145 SCRA
211) which involved a similar situation:

It is of no moment that Vailoces, in his amended complaint,

seeks other reliefs which would seemingly fall under the
jurisdiction of the Labor Arbiter, because a closer look at
these — underpayment of salary and non-payment of living
allowance — shows that they are actually part of the
perquisites of his elective position, hence, intimately linked
with his relations with the corporation.1âwphi1 The question
of remuneration, involving as it does, a person who is not a
mere employee but a stockholder and officer, an integral part,
it might be said, of the corporation, is not a simple labor
problem but a matter that comes within the area of corporate
affairs and management, and is in fact a corporate
controversy in contemplation of the Corporation Code.
(Emphasis ours.)

WHEREFORE, the questioned Resolution of the NLRC

reversing the decision of the Labor Arbiter, having been
G.R. No. L-30211 October 5, 1976
GOODRICH EMPLOYEES ASSOCIATION, petitioner,
vs.
THE HONORABLE DELFIN B. FLORES, JUDGE OF
THE COURT OF FIRST INSTANCE OF RIZAL, PASIG
BRANCH XI and B. F. GOODRICH PHILIPPINES,
INC., respondents.
J.C. Espinas B.C. Pineda & Associates for petitioner.
Manuel O. Chan for private respondent.
FERNANDO, J.:
The crucial question raised by petitioner B. F. Goodrich
Employees Association in this certiorari and prohibition
proceeding is whether respondent Judge Delfin B. Flores,
since deceased, could entertain a suit for damages filed by
private respondent . B. F. Goodrich Philippines, Inc., the
employer, because of a strike by such union characterized by
management as an unfair labor practice. Previously there was
instituted by it the very same unfair labor practice charge with
now defunct Court of Industrial Relations. The answer
supplied in categorical language both by Associated Labor
Union v. Gomez 1 and Progressive Labor Association v. Atlas
Consolidated Mining and Development Corporation, 2 is that
a court of first instance is devoid of jurisdiction, the matter
being appropriately for the Court of Industrial Relations. It is
true that the Gomez decision was not promulgated until
February 9, 1967, while the suit for damages by private
respondent based on an unfair labor practice was filed with
respondent Judge as early as October 12, 1965, as noted
during the pendency of an unfair labor practice complaint
based on the same strike in the Court of Industrial
Relations. 3 It could be said that respondent Judge, when he
assumed jurisdiction in 1965, could not have known any
better. No such excuse could be relied upon, however, as of
June 5, 1967 when the motion to dismiss precisely on the
ground of lack of jurisdiction was presented to him. For the
Gomez ruling had in the meanwhile, on February 9, 1967, to
be exact, made its appearance. That circumstance ought to
have prompted him to grant such motion and thus terminate
the civil suit for damages allegedly arising from the unfair
labor practice, Instead, he denied it. 4
That was to act not in accordance with but contrary to our
controlling decisions. It ought not to have been the case.
Since jurisdiction was lacking, a case for certiorari and
prohibition has been made out.
1. This is the doctrine announced by this Court through
Justice Sanchez with such clarity in Gomez: "Nor will
Sugecos averment below that it suffers damages by reason of
the strike, work to defeat the CIR's jurisdiction to hear the
unfair labor practice charge, Reason for this is that the right to
damages "would still to depend on the evidence in the unfair
labor practice case"—in the CIR. To hold otherwise is to
sanction split jurisdiction—which is obnoxious to the orderly
administration of justice. 5 Justice J.B.L. Reyes in Progressive
Labor Association decision was equally explicit: "In its effort
to sustain the jurisdiction of the lower court over the present
case, appellants also advance the argument that their demand
for damages anyway cannot be entertained by the Industrial
Court. This does not improve the situation at all. As already
held b this Court, mere allegation that the plaintiff suffered
damages because of the complained acts does not work to
divest the Court of Industrial Relations of jurisdiction to hear
the unfair labor practice charge. For it must be realized that
the right to damages would still have to depend on the
evidence to be presented in the unfair labor case. To hold that
the demand for damages is to be passed upon by the regular
courts independently or separately from the unfair labor
practice accusation would be to sanction split jurisdiction,
which is prejudicial to the orderly administration of
justice. 6 Thereafter the same jurist had occasion to reiterate
the doctrine in the two subsequent decisions of Leoquenio v.
Dry Bottling Co. 7 and Associated Labor Union v. Cruz. 8
2. Associated Labor Union v. Gomez 9 is also notable for this
categorical pronouncement concerning the exclusive
jurisdiction of the Court of Industrial Relations over unfair
labor practice controversies. To quote from Justice Sanchez
anew: "A rule buttressed upon statute and reason that
is frequently reiterated in jurisprudence is that labor
cases involving unfair labor practice are within the exclusive
jurisdiction of the CIR. By now, this rule has ripened into
dogma. It thus commands adherence, not breach. 10 This
excerpt was referred to with approval by Justice Teehankee,
speaking for this Court in Veteran Security Free Workers
Union v. Cloribel, 11 thus: "It has long been accepted as
dogma that cases involving unfair labor practice fall within
the exclusive jurisdiction of the Court of Industrial Relations,
by virtue of the explicit provision of Section 5(a) of the
Industrial Peace Act ... . 12 As was further clarified by
the ponencia of Justice Dizon in Meralco Workers Union v.
Gaerlan, 13 where the subject matter is within the competence
of the CIR, it "must be deemed to have jurisdiction of all
incidental matters connected with the main issue ... ." 14 So it
was repeated in Lakas ng Manggagawang Makabayan v.
Abiera. 15 There has been since then no deviation from such a
controlling doctrine in accordance with the express terms of
the Industrial Peace Act. 16
3. Rightfully, the able counsel for petitioner, Attorney J. C.
Espinas, concentrated on the crucial and decisive aspect of
lack of jurisdiction. Understandably, the knowledgeable
Attorney Manuel Chan for private respondent sought refuge
in the minute resolution of this Court of October 28, 1968
dismissing a case of similar nature by the same parties
"without prejudice to asking suspension of proceedings in the
Court of First Instance. 17 That is hardly relevant to the
disposition of this present petition. There is no res judicata.
The principle underlying Social Security System v. Court of
Appeals 18 cautions against such an approach. The very
resolution, in the traditional language of the law, can
rightfully be interpreted as evincing respect for the well-
settled doctrine of ripeness for appellate review. With
respondent Judge apparently unable to perceive the clear and
manifest import of authoritative decisions, this Court, in its
resolution of March 4, 1969, left no doubt that the question
raised in this petition was of such moment, indicative as it
was of the failure of the lower court to abide by the
controlling doctrines, that it forthwith required respondents
"to file an answer to the petition for certiorari and
prohibition. 19 This it did notwithstanding the investment in
the petition that there was a previous proceeding filed b the
same union against the same judge, and the same employer
which resulted in the aforesaid resolution of October 25,
1968. 20 It cannot be doubted, therefore, that this Court took
into consideration that particular defense raised and found it
lacking in merit.
4. The conclusion reached by this Court to nullify on
jurisdictional ground the challenged order gains added
reinforcement from their draconian Character. On August 31,
1968, the dispositive portion of the decision reached by
respondent Judge was amended to read as follows:
"[Wherefore], judgment is hereby rendered in favor of the
plaintiff B. F. Goodrich Philippines, Incorporated, and against
the defendants Goodrich Employees Association (PLUM)
Celedonio Francisco, Melencio Bautista, Luis V. Mendez,
Loreto R. Sotto, Gabino Magdamit, Jose Porcuna, Igm . Idio
Tayag, Teofilo Malicdem Leonardo Pilande, Leonardo
Calimotan, Eleuterio Alvarez, August Lopez, and L. de los
Reyes, directing the said defendants to pay the plaintiff the
amount of Six Hundred Eighty-Six
Thousand Seven Hundred (P686,700.00) Pesos plus interest
at the rate of 1% per month from January 1, 1966 until the
said amount is fully paid; P25,000.00 as moral damages;
P25,000.00 as exemplary damages; P50,000.00 as attorney's
fees and to pay the costs of this suit." 21 Then came on
January 20, 1969 an order that could deal a death-blow to
petitioner union: "Let a writ of execution issue in favor of the
plaintiff B. F. Goodrich Philippines, Inc., and against the
defendants Goodrich Employees Association (PLUM),
Celedonio Francisco, Melencio Bautista, Luis V. Mendez,
Loreto R. Sotto, Gabino Magdamit, Jose Porcuna, Igmidio
Tayag, Teofilo Malicdem Leonardo Pilande, Leonardo
Calimotan, Eleuterio Alvarez, August Lopez. and L. de los
Reyes for the full satisfaction of its claims." 22Thus there is
the sad spectacle of a court acting without jurisdiction, guided
solely by its own unaided appraisal of a matter clearly beyond
its competence, inflicting what in the apt phrase of Justice
Laurel could very well be a "mortal wound" to the labor
movement. There is no better illustration of the wisdom of the
view of Justice J.B.L. Reyes that labor controversies should
be left for disposition not to an ordinary court but to an
agency better equipped by training, experience and
background to handle them. This observation was made by
him as far back as 1957. 23 The regular courts, as he pointed
out, "have not intervened in labor cases [since 1936] and are
therefore illprepared to apply labor laws and policies. And the
frequency with which this Court has had to upset their labor
injunctions attest to the fact. 24 What is more, that is not
protect labor as required by the 1935 Constitution that was in
force when this litigation arose. 25 That is to make a mockery
of the fundamental principle of social justice, again as therein
enshrined. 26 If there is one case then where the vivid rhetoric
of Justice Street in Banco Espanol-Filipino v.
Palanca 27 finds application, this is it: "Where a judgment or
judicial order is void in this sense it may be said to be a
lawless thing, which can be treated as an outlaw and slain at
sight or ignored wherever and whenever it exhibits its
head. 28Only thus may there be fidelity to the even greater
concern shown by the present Constitution for the workers as
evidenced by the expanded and more generous scope to both
concepts of protection to labor 29 and social justice. 30Thereby
the goal of what in the inspired language of the First Lady is,
"a compassionate society" 31 may be truly achieved.
WHEREFORE, the writ of prohibition is granted and the
successor of respondent Judge Delfin B. Flores in Branch XI
of the Court of First Instance of Rizal is hereby perpetually
restrained from taking any further action in Civil Case No.
8962 entitled B. F. Goodrich Philippines, Inc. v. Philippine
Labor Unity Movement, Goodrich Employees Association, et
al., except for the purpose of dismissing the same. The writ
of certiorari is likewise granted setting aside, nullifying and
declaring without any force or effect respondent Judge's
decision of August 31, 1968 and his order of January 20,
1969, for having been issued without jurisdiction. No costs.
Barredo, Antonio, Aquino, and Concepcion Jr. JJ., concur.
G.R. No. 85750 September 28, 1990
INTERNATIONAL CATHOLIC IMMIGRATION
COMMISSION, petitioner
vs
HON. PURA CALLEJA IN HER CAPACITY AS
DIRECTOR OF THE BUREAU OF LABOR
RELATIONS AND TRADE UNIONS OF THE
PHILIPPINES AND ALLIED SERVICES (TUPAS)
WFTU respondents.
G.R. No. 89331 September 28, 1990
KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-
ORGANIZED LABOR ASSOCIATION IN LINE
INDUSTRIES AND AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND
INTERNATIONAL RICE RESEARCH INSTITUTE,
INC., respondents.
Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in
85750.
Dominguez, Armamento, Cabana & Associates for petitioner
in G.R. No. 89331.
Jimenez & Associates for IRRI.
Alfredo L. Bentulan for private respondent in 85750.
MELENCIO-HERRERA, J.:
Consolidated on 11 December 1989, these two cases involve
the validity of the claim of immunity by the International
Catholic Migration Commission (ICMC) and the International
Rice Research Institute, Inc. (IRRI) from the application of
Philippine labor laws.
I privileges and immunities, as evidenced by a Memorandum
Facts and Issues
A. G.R. No. 85750 — the International Catholic Migration
Commission (ICMC) Case.
As an aftermath of the Vietnam War, the plight of
Vietnamese refugees fleeing from South Vietnam's
communist rule confronted the international community.
In response to this crisis, on 23 February 1981, an Agreement
was forged between the Philippine Government and the
United Nations High Commissioner for Refugees whereby an
operating center for processing Indo-Chinese refugees for
eventual resettlement to other countries was to be established
in Bataan (Annex "A", Rollo, pp. 22-32).
ICMC was one of those accredited by the Philippine
Government to operate the refugee processing center in
Morong, Bataan. It was incorporated in New York, USA, at
the request of the Holy See, as a non-profit agency involved
in international humanitarian and voluntary work. It is duly
registered with the United Nations Economic and Social
Council (ECOSOC) and enjoys Consultative Status, Category
II. As an international organization rendering voluntary and
humanitarian services in the Philippines, its activities are
parallel to those of the International Committee for Migration
(ICM) and the International Committee of the Red Cross
(ICRC) [DOLE Records of BLR Case No. A-2-62-87, ICMC
v. Calleja, Vol. 1].
On 14 July 1986, Trade Unions of the Philippines and Allied
Services (TUPAS) filed with the then Ministry of Labor and
Employment a Petition for Certification Election among the
rank and file members employed by ICMC The latter opposed
the petition on the ground that it is an international
organization registered with the United Nations and, hence,
enjoys diplomatic immunity.
On 5 February 1987, Med-Arbiter Anastacio L. Bactin
sustained ICMC and dismissed the petition for lack of
jurisdiction.
On appeal by TUPAS, Director Pura Calleja of the Bureau of
Labor Relations (BLR), reversed the Med-Arbiter's Decision
and ordered the immediate conduct of a certification election.
At that time, ICMC's request for recognition as a specialized
agency was still pending with the Department of Foreign
Affairs (DEFORAF).
Subsequently, however, on 15 July 1988, the Philippine
Government, through the DEFORAF, granted ICMC the
status of a specialized agency with corresponding diplomatic
of Agreement between the Government and ICMC (Annex
"E", Petition, Rollo, pp. 41-43), infra.
ICMC then sought the immediate dismissal of the TUPAS
Petition for Certification Election invoking the immunity
expressly granted but the same was denied by respondent
BLR Director who, again, ordered the immediate conduct of a
pre-election conference. ICMC's two Motions for
Reconsideration were denied despite an opinion rendered by
DEFORAF on 17 October 1988 that said BLR Order violated
ICMC's diplomatic immunity.
Thus, on 24 November 1988, ICMC filed the present Petition
for Certiorari with Preliminary Injunction assailing the BLR
Order.
On 28 November 1988, the Court issued a Temporary
Restraining Order enjoining the holding of the certification
election.
On 10 January 1989, the DEFORAF, through its Legal
Adviser, retired Justice Jorge C. Coquia of the Court of
Appeals, filed a Motion for Intervention alleging that, as the
highest executive department with the competence and
authority to act on matters involving diplomatic immunity and
privileges, and tasked with the conduct of Philippine
diplomatic and consular relations with foreign governments
and UN organizations, it has a legal interest in the outcome of
this case.
Over the opposition of the Solicitor General, the Court
allowed DEFORAF intervention.
On 12 July 1989, the Second Division gave due course to the
ICMC Petition and required the submittal of memoranda by
the parties, which has been complied with.
As initially stated, the issue is whether or not the grant of
diplomatic privileges and immunites to ICMC extends to
immunity from the application of Philippine labor laws.
ICMC sustains the affirmative of the proposition citing (1) its
Memorandum of Agreement with the Philippine Government
giving it the status of a specialized agency, (infra); (2) the
Convention on the Privileges and Immunities of Specialized
Agencies, adopted by the UN General Assembly on 21
November 1947 and concurred in by the Philippine Senate
through Resolution No. 91 on 17 May 1949 (the Philippine
Instrument of Ratification was signed by the President on 30
August 1949 and deposited with the UN on 20 March
1950) infra; and (3) Article II, Section 2 of the 1987
Constitution, which declares that the Philippines adopts the
generally accepted principles of international law as part of
the law of the land.
Intervenor DEFORAF upholds ICMC'S claim of diplomatic
immunity and seeks an affirmance of the DEFORAF
determination that the BLR Order for a certification election
among the ICMC employees is violative of the diplomatic
immunity of said organization.
Respondent BLR Director, on the other hand, with whom the
Solicitor General agrees, cites State policy and Philippine
labor laws to justify its assailed Order, particularly, Article II,
Section 18 and Article III, Section 8 of the 1987
Constitution, infra; and Articles 243 and 246 of the Labor
Code, as amended, ibid. In addition, she contends that a
certification election is not a litigation but a mere
investigation of a non-adversary, fact-finding character. It is
not a suit against ICMC its property, funds or assets, but is the
sole concern of the workers themselves.
B. G.R. No. 89331 — (The International Rice Research
Institute [IRRI] Case).
Before a Decision could be rendered in the ICMC Case, the
Third Division, on 11 December 1989, resolved to
consolidate G.R. No. 89331 pending before it with G.R. No.
85750, the lower-numbered case pending with the Second
Division, upon manifestation by the Solicitor General that
both cases involve similar issues.
The facts disclose that on 9 December 1959, the Philippine
Government and the Ford and Rockefeller Foundations
signed a Memorandum of Understanding establishing the
International Rice Research Institute (IRRI) at Los Baños,
Laguna. It was intended to be an autonomous, philanthropic,
tax-free, non-profit, non-stock organization designed to carry
out the principal objective of conducting "basic research on
the rice plant, on all phases of rice production, management,
distribution and utilization with a view to attaining nutritive
and economic advantage or benefit for the people of Asia and
other major rice-growing areas through improvement in
quality and quantity of rice."
Initially, IRRI was organized and registered with the
Securities and Exchange Commission as a private corporation
subject to all laws and regulations. However, by virtue of
Pres. Decree No. 1620, promulgated on 19 April 1979, IRRI
was granted the status, prerogatives, privileges and
immunities of an international organization.
The Organized Labor Association in Line Industries and
Agriculture (OLALIA), is a legitimate labor organization with
an existing local union, the Kapisanan ng Manggagawa at
TAC sa IRRI (Kapisanan, for short) in respondent IRRI.
On 20 April 1987, the Kapisanan filed a Petition for Direct
Certification Election with Region IV, Regional Office of the
Department of Labor and Employment (DOLE).
IRRI opposed the petition invoking Pres. Decree No. 1620
conferring upon it the status of an international organization
and granting it immunity from all civil, criminal and
administrative proceedings under Philippine laws.
On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the
opposition on the basis of Pres. Decree No. 1620 and
dismissed the Petition for Direct Certification.
On appeal, the BLR Director, who is the public respondent in
the ICMC Case, set aside the Med-Arbiter's Order and
authorized the calling of a certification election among the
rank-and-file employees of IRRI. Said Director relied on
Article 243 of the Labor Code, as amended, infra and Article
XIII, Section 3 of the 1987 Constitution, 1 and held that "the
immunities and privileges granted to IRRI do not include
exemption from coverage of our Labor Laws."
Reconsideration sought by IRRI was denied.
On appeal, the Secretary of Labor, in a Resolution of 5 July
1989, set aside the BLR Director's Order, dismissed the
Petition for Certification Election, and held that the grant of
specialized agency status by the Philippine Government to the
IRRI bars DOLE from assuming and exercising jurisdiction
over IRRI Said Resolution reads in part as follows:
Presidential Decree No. 1620 which grants to the IRRI the
status, prerogatives, privileges and immunities of an
international organization is clear and explicit. It provides in
categorical terms that:
Art. 3 — The Institute shall enjoy immunity from any penal,
civil and administrative proceedings, except insofar as
immunity has been expressly waived by the Director-General
of the Institution or his authorized representative.
Verily, unless and until the Institute expressly waives its
immunity, no summons, subpoena, orders, decisions or
proceedings ordered by any court or administrative or quasi-
judicial agency are enforceable as against the Institute. In the
case at bar there was no such waiver made by the Director-
General of the Institute. Indeed, the Institute, at the very first
opportunity already vehemently questioned the jurisdiction of
this Department by filing an ex-parte motion to dismiss the
case.
Hence, the present Petition for Certiorari filed by Kapisanan
alleging grave abuse of discretion by respondent Secretary of
Labor in upholding IRRI's diplomatic immunity.
The Third Division, to which the case was originally
assigned, required the respondents to comment on the
petition. In a Manifestation filed on 4 August 1990, the
Secretary of Labor declared that it was "not adopting as his
own" the decision of the BLR Director in the ICMC Case as
well as the Comment of the Solicitor General sustaining said
Director. The last pleading was filed by IRRI on 14 August
1990.
Instead of a Comment, the Solicitor General filed a
Manifestation and Motion praying that he be excused from
filing a comment "it appearing that in the earlier case
of International Catholic Migration Commission v. Hon.
Pura Calleja, G.R. No. 85750. the Office of the Solicitor
General had sustained the stand of Director Calleja on the
very same issue now before it, which position has been
superseded by respondent Secretary of Labor in G.R. No.
89331," the present case. The Court acceded to the Solicitor
General's prayer.
The Court is now asked to rule upon whether or not the
Secretary of Labor committed grave abuse of discretion in
dismissing the Petition for Certification Election filed by
Kapisanan.
Kapisanan contends that Article 3 of Pres. Decree No. 1620
granting IRRI the status, privileges, prerogatives and
immunities of an international organization, invoked by the
Secretary of Labor, is unconstitutional in so far as it deprives
the Filipino workers of their fundamental and constitutional
right to form trade unions for the purpose of collective
bargaining as enshrined in the 1987 Constitution.
A procedural issue is also raised. Kapisanan faults respondent
Secretary of Labor for entertaining IRRI'S appeal from the
Order of the Director of the Bureau of Labor Relations
directing the holding of a certification election. Kapisanan
contends that pursuant to Sections 7, 8, 9 and 10 of Rule
V 2 of the Omnibus Rules Implementing the Labor Code, the
Order of the BLR Director had become final and unappeable
and that, therefore, the Secretary of Labor had no more
jurisdiction over the said appeal.
On the other hand, in entertaining the appeal, the Secretary of
Labor relied on Section 25 of Rep. Act. No. 6715, which took
effect on 21 March 1989, providing for the direct filing of
appeal from the Med-Arbiter to the Office of the Secretary of
Labor and Employment instead of to the Director of the
Bureau of Labor Relations in cases involving certification
election orders.
III
Findings in Both Cases.
There can be no question that diplomatic immunity has, in
fact, been granted ICMC and IRRI.
Article II of the Memorandum of Agreement between the
Philippine Government and ICMC provides that ICMC shall
have a status "similar to that of a specialized agency." Article
III, Sections 4 and 5 of the Convention on the Privileges and
Immunities of Specialized Agencies, adopted by the UN
General Assembly on 21 November 1947 and concurred in by
the Philippine Senate through Resolution No. 19 on 17 May
1949, explicitly provides:
Art. III, Section 4. The specialized agencies, their property
and assets, wherever located and by whomsoever held,
shall enjoy immunity from every form of legal process except
insofar as in any particular case they have expressly waived
their immunity. It is, however, understood that no waiver of
immunity shall extend to any measure of execution.
Sec. 5. — The premises of the specialized agencies shall be
inviolable. The property and assets of the specialized
agencies, wherever located and by whomsoever held shall be
immune from search, requisition, confiscation, expropriation
and any other form of interference, whether by executive,
administrative, judicial or legislative action. (Emphasis
supplied).
IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is
explicit in its grant of immunity, thus:
Art. 3. Immunity from Legal Process. — The Institute shall
enjoy immunity from any penal, civil and administrative
proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or
his authorized representatives.
Thus it is that the DEFORAF, through its Legal Adviser,
sustained ICMC'S invocation of immunity when in a
Memorandum, dated 17 October 1988, it expressed the view
that "the Order of the Director of the Bureau of Labor
Relations dated 21 September 1988 for the conduct of
Certification Election within ICMC violates the diplomatic
immunity of the organization." Similarly, in respect of IRRI,
the DEFORAF speaking through The Acting Secretary of
Foreign Affairs, Jose D. Ingles, in a letter, dated 17 June
1987, to the Secretary of Labor, maintained that "IRRI enjoys
immunity from the jurisdiction of DOLE in this particular
instance."
The foregoing opinions constitute a categorical recognition by
the Executive Branch of the Government that ICMC and IRRI
enjoy immunities accorded to international organizations,
which determination has been held to be a political question
conclusive upon the Courts in order not to embarrass a
political department of Government.
It is a recognized principle of international law and under our
system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to
look beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government . . .
or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so
exercise their jurisdiction . . . as to embarrass the executive
arm of the government in conducting foreign relations, it is
accepted doctrine that in such cases the judicial department of
(this) government follows the action of the political branch
and will not embarrass the latter by assuming an antagonistic
jurisdiction. 3
A brief look into the nature of international organizations and
specialized agencies is in order. The term "international
organization" is generally used to describe an organization set
up by agreement between two or more states. 4 Under
contemporary international law, such organizations are
endowed with some degree of international legal
personality 5 such that they are capable of exercising specific
rights, duties and powers. 6 They are organized mainly as a
means for conducting general international business in which
the member states have an interest. 7 The United Nations, for
instance, is an international organization dedicated to the
propagation of world peace.
"Specialized agencies" are international organizations having
functions in particular fields. The term appears in Articles
57 8 and 63 9 of the Charter of the United Nations:
The Charter, while it invests the United Nations with the
general task of promoting progress and international
cooperation in economic, social, health, cultural, educational
and related matters, contemplates that these tasks will be
mainly fulfilled not by organs of the United Nations itself but
by autonomous international organizations established by
inter-governmental agreements outside the United Nations.
There are now many such international agencies having
functions in many different fields, e.g. in posts,
telecommunications, railways, canals, rivers, sea transport,
civil aviation, meteorology, atomic energy, finance, trade,
education and culture, health and refugees. Some are virtually
world-wide in their membership, some are regional or
otherwise limited in their membership. The Charter provides
that those agencies which have "wide international
responsibilities" are to be brought into relationship with the
United Nations by agreements entered into between them and
the Economic and Social Council, are then to be known as
"specialized agencies." 10
The rapid growth of international organizations under
contemporary international law has paved the way for the
development of the concept of international immunities.
It is now usual for the constitutions of international
organizations to contain provisions conferring certain
immunities on the organizations themselves, representatives
of their member states and persons acting on behalf of the
organizations. A series of conventions, agreements and
protocols defining the immunities of various international
organizations in relation to their members generally are now
widely in force; . . . 11
There are basically three propositions underlying the grant of
international immunities to international organizations. These
principles, contained in the ILO Memorandum are stated thus:
1) international institutions should have a status which
protects them against control or interference by any one
government in the performance of functions for the effective
discharge of which they are responsible to democratically
constituted international bodies in which all the nations
concerned are represented; 2) no country should derive any
national financial advantage by levying fiscal charges on
common international funds; and 3) the international
organization should, as a collectivity of States members, be
accorded the facilities for the conduct of its official business
customarily extended to each other by its individual member
States. 12 The theory behind all three propositions is said to be
essentially institutional in character. "It is not concerned with
the status, dignity or privileges of individuals, but with the
elements of functional independence necessary to free
international institutions from national control and to enable
them to discharge their responsibilities impartially on behalf
of all their members. 13 The raison d'etre for these immunities
is the assurance of unimpeded performance of their functions
by the agencies concerned.
The grant of immunity from local jurisdiction to ICMC and
IRRI is clearly necessitated by their international character
and respective purposes. The objective is to avoid the danger
of partiality and interference by the host country in their
internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very
purpose of immunity, which is to shield the affairs of
international organizations, in accordance with international
practice, from political pressure or control by the host country
to the prejudice of member States of the organization, and to
ensure the unhampered performance of their functions.
ICMC's and IRRI's immunity from local jurisdiction by no
means deprives labor of its basic rights, which are guaranteed
by Article II, Section 18, 14 Article III, Section 8, 15 and
Article XIII, Section 3 (supra), of the 1987 Constitution; and
implemented by Articles 243 and 246 of the Labor
Code, 16 relied on by the BLR Director and by Kapisanan.
For, ICMC employees are not without recourse whenever
there are disputes to be settled. Section 31 of the Convention
on the Privileges and Immunities of the Specialized Agencies
of the United Nations 17 provides that "each specialized
agency shall make provision for appropriate modes of
settlement of: (a) disputes arising out of contracts or other
disputes of private character to which the specialized agency
is a party." Moreover, pursuant to Article IV of the
Memorandum of Agreement between ICMC the the
Philippine Government, whenever there is any abuse of
privilege by ICMC, the Government is free to withdraw the
privileges and immunities accorded. Thus:
Art. IV. Cooperation with Government Authorities. — 1. The
Commission shall cooperate at all times with the appropriate
authorities of the Government to ensure the observance of
Philippine laws, rules and regulations, facilitate the proper
administration of justice and prevent the occurrences of any
abuse of the privileges and immunities granted its officials
and alien employees in Article III of this Agreement to the
Commission.
2. In the event that the Government determines that there has
been an abuse of the privileges and immunities granted under
this Agreement, consultations shall be held between the
Government and the Commission to determine whether any
such abuse has occurred and, if so, the Government shall
withdraw the privileges and immunities granted the
Commission and its officials.
Neither are the employees of IRRI without remedy in case of
dispute with management as, in fact, there had been organized
a forum for better management-employee relationship as
evidenced by the formation of the Council of IRRI
Employees and Management (CIEM) wherein "both
management and employees were and still are represented for
purposes of maintaining mutual and beneficial cooperation
between IRRI and its employees." The existence of this
Union factually and tellingly belies the argument that Pres.
Decree No. 1620, which grants to IRRI the status, privileges
and immunities of an international organization, deprives its
employees of the right to self-organization.
The immunity granted being "from every form of legal
process except in so far as in any particular case they have
expressly waived their immunity," it is inaccurate to state that
a certification election is beyond the scope of that immunity
for the reason that it is not a suit against ICMC. A
certification election cannot be viewed as an independent or
isolated process. It could tugger off a series of events in the
collective bargaining process together with related incidents
and/or concerted activities, which could inevitably involve
ICMC in the "legal process," which includes "any penal, civil
and administrative proceedings." The eventuality of Court
litigation is neither remote and from which international
organizations are precisely shielded to safeguard them from
the disruption of their functions. Clauses on jurisdictional
immunity are said to be standard provisions in the
constitutions of international Organizations. "The immunity
covers the organization concerned, its property and its assets.
It is equally applicable to proceedings in personam and
proceedings in rem." 18
WHEREFORE, in G.R. No. 85750 (the ICMC Case), the
Petition is GRANTED, the Order of the Bureau of Labor
Relations for certification election is SET ASIDE, and the
Temporary Restraining Order earlier issued is made
PERMANENT.

We take note of a Manifestation, dated 28 September 1989, in
the ICMC Case (p. 161, Rollo), wherein TUPAS calls
attention to the case entitled "International Catholic
Migration Commission v. NLRC, et als., (G.R. No. 72222, 30
January 1989, 169 SCRA 606), and claims that, having taken
cognizance of that dispute (on the issue of payment of salary
for the unexpired portion of a six-month probationary
employment), the Court is now estopped from passing upon
the question of DOLE jurisdiction petition over ICMC.
In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed,
no grave abuse of discretion having been committed by the
Secretary of Labor and Employment in dismissing the
Petition for Certification Election.
No pronouncement as to costs.
SO ORDERED.

We find no merit to said submission. Not only did the facts of

said controversy occur between 1983-1985, or before the
grant to ICMC on 15 July 1988 of the status of a specialized
agency with corresponding immunities, but also because
ICMC in that case did not invoke its immunity and, therefore,
may be deemed to have waived it, assuming that during that
period (1983-1985) it was tacitly recognized as enjoying such
immunity.

Anent the procedural issue raised in the IRRI Case, suffice it

to state that the Decision of the BLR Director, dated 15
February 1989, had not become final because of a Motion for
Reconsideration filed by IRRI Said Motion was acted upon
only on 30 March 1989 when Rep. Act No. 6715, which
provides for direct appeals from the Orders of the Med-
Arbiter to the Secretary of Labor in certification election
cases either from the order or the results of the election itself,
was already in effect, specifically since 21 March 1989.
Hence, no grave abuse of discretion may be imputed to
respondent Secretary of Labor in his assumption of appellate
jurisdiction, contrary to Kapisanan's allegations. The pertinent
portion of that law provides:

Art. 259. — Any party to an election may appeal the order or

results of the election as determined by the Med-
Arbiter directly to the Secretary of Labor and Employment on
the ground that the rules and regulations or parts thereof
established by the Secretary of Labor and Employment for the
conduct of the election have been violated. Such appeal shall
be decided within 15 calendar days (Emphasis supplied).

En passant, the Court is gratified to note that the heretofore

antagonistic positions assumed by two departments of the
executive branch of government have been rectified and the
resultant embarrassment to the Philippine Government in the
eyes of the international community now, hopefully, effaced.
G.R. No. 108813 December 15, 1994
JUSMAG PHILIPPINES, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION
(Second Division) and FLORENCIO SACRAMENTO,
Union President, JPFCEA, respondents.
Juan, Luces, Luna and Associates for petitioner.
Galutera & Aguilar Law Offices for private respondent.
PUNO, J.:
The immunity from suit of the Joint United States Military
Assistance Group to the Republic of the Philippines
(JUSMAG-Philippines) is the pivotal issue in the case at
bench.
JUSMAG assails the January 29, 1993 Resolution of the
NATIONAL LABOR RELATIONS COMMISSION (public
respondent), in NLRC NCR CASE NO. 00-03-02092-92,
reversing the July 30, 1991 Order of the Labor Arbiter, and
ordering the latter to assume jurisdiction over the complaint
for illegal dismissal filed by FLORENCIO SACRAMENTO
(private respondent) against petitioner.
First, the undisputed facts.
Private respondent was one of the seventy-four (74) security
assistance support personnel (SASP) working at JUSMAG-
Philippines. 1 He had been with JUSMAG from December 18,
1969, until his dismissal on April 27, 1992. When dismissed,
he held the position of Illustrator 2 and was the incumbent
President of JUSMAG PHILIPPINES-FILIPINO CIVILIAN
EMPLOYEES ASSOCIATION (JPFCEA), a labor
organization duly registered with the Department of Labor
and Employment. His services were terminated allegedly due
to the abolition of his position.2He was also advised that he
was under administrative leave until April 27, 1992, although
the same was not charged against his leave.
On March 31, 1992, private respondent filed a complaint with
the Department of Labor and Employment on the ground that
he was illegally suspended and dismissed from service by
JUSMAG. 3 He asked for his reinstatement.
JUSMAG then filed a Motion to Dismiss invoking
its immunity from suit as an agency of the United States. It
further alleged lack of employer-employee relationship and
that it has no juridical personality to sue and be sued.4
In an Order dated July 30, 1991, Labor Arbiter Daniel C.
Cueto dismissed the subject complaint " for want of
jurisdiction."5 Private respondent appealed6 to the National
Labor Relations Commission (public respondent), assailing
the ruling that petitioner is immune from suit for alleged
violation of our labor laws. JUSMAG filed its
Opposition, 7 reiterating its immunity from suit for its non-
contractual, governmental and/or public acts.
In a Resolution, dated January 29, 1993, the NLRC8 reversed
the ruling of the Labor Arbiter as it held that petitioner had
lost its right not to be sued. The resolution was predicated on
two grounds: (1) the principle of estoppel — that JUSMAG
failed to refute the existence of employer-employee
relationship under the "control test"; and (2) JUSMAG has
waived its right to immunity from suit when it hired the
services of private respondent on December 18, 1969.
The NLRC relied on the case of Harry Lyons vs. United
States of America,9 where the "United States Government
(was considered to have) waived its immunity from suit by
entering into (a) contract of stevedoring services, and thus, it
submitted itself to the jurisdiction of the local courts."
Accordingly, the case was remanded to the labor arbiter for
reception of evidence as to the issue on illegal dismissal.
Hence, this petition, JUSMAG contends:
I
THE PUBLIC RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK
AND/OR EXCESS OF JURISDICTION —
A. IN REVERSING THE DECISION OF THE LABOR
ARBITER AND IN NOT AFFIRMING THE DISMISSAL
OF THE COMPLAINT IT BEING A SUIT AGAINST THE
UNITED STATES OF AMERICA WHICH HAD NOT
GIVEN ITS CONSENT TO BE SUED; AND
B. IN FINDING WAIVER BY JUSMAG OF IMMUNITY
FROM SUIT;
II
THE PUBLIC RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK
AND/OR EXCESS OF JURISDICTION —
A. WHEN IT FOUND AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN JUSMAG AND PRIVATE
RESPONDENT; AND
B. WHEN IT CONSIDERED JUSMAG ESTOPPED FROM
DENYING THAT PRIVATE RESPONDENT IS ITS
EMPLOYEE FOR FAILURE TO PRESENT PROOF TO
THE CONTRARY.
We find the petition impressed with merit.
It is meet to discuss the historical background of the
JUSMAG to determine its immunity from suit.
JUSMAG was created pursuant to the Military Assistance
Agreement 10 dated March 21, 1947, between the Government
of the Republic of the Philippines and the Government of the
United States of America. As agreed upon, JUSMAG shall
consist of Air, Naval and Army group, and its primary task
was to advise and assist the Philippines, on air force, army
and naval matters. 11
Article 14 of the 1947 Agreement provides, inter alia, that
"the cost of all services required by the Group, including
compensation of locally employed interpreters, clerks,
laborers, and other personnel, except personal servants, shall
be borne by the Republic of the Philippines."
This set-up was to change in 1991. In Note No 22, addressed
to the Department of Foreign Affairs (DFA) of the
Philippines, dated January 23, 1991, the United States
Government, thru its Embassy, manifested its preparedness
"to provide funds to cover the salaries of security assistance
support personnel" and security guards, the rent of JUSMAG
occupied buildings and housing, and the cost of
utilities. 12 This offer was accepted by our Government, thru
the DFA, in Note No. 911725, dated April 18, 1991.13
14
Consequently, a Memorandum of Agreement was forged
between the Armed Forces of the Philippines and JUSMAG-
Philippines, thru General Lisandro C. Abadia and U.S.
Brigadier General Robert G. Sausser. The Agreement
delineated the terms of the assistance-in-kind of JUSMAG for
1991, the relevant parts of which read:
a. The term salaries as used in this agreement include those
for the security guards currently contracted between
JUSMAG and A' Prime Security Services Inc., and
the Security Assistance Support Personnel (SASP). . . . .
b. The term Security Assistance Support Personnel (SASP)
does not include active duty uniformed members of the
Armed Forces of the Philippines performing duty at
JUSMAG.
c. It is understood that SASP are employees of the Armed
Forces of the Philippines (AFP). Therefore, the AFP agrees
to appoint, for service with JUSMAG, no more than 74
personnel to designated positions with JUSMAG.
d. SASP are under the total operational control of the Chief,
JUSMAG-Philippines. The term "Operational Control"
includes, but is not limited to, all personnel administrative
actions, such as: hiring recommendations; firing
recommendations; position classification; discipline;
nomination and approval of incentive awards; and payroll
computation. Personnel administration will be guided by
Annex E of JUSMAG-Philippines Memo 10-2. For the
period of time that there is an exceptional funding agreement
between the government of the Philippines and the United
States Government (USG), JUSMAG will pay the total payroll
costs for the SASP employees. Payroll costs include only
regular salary; approved overtime, costs of living allowance;
medical insurance; regular contributions to the Philippine
Social Security System, PAG-IBIG Fund and Personnel
Economic Relief Allowance (PERA); and the thirteenth-
month bonus. Payroll costs do not include gifts or other bonus
payments in addition to those previously defined above.
Entitlements not considered payroll costs under this
agreement will be funded and paid by the AFP.
e. All SASP employed as of July 1, 1990 will continue their
service with JUSMAG at their current rate of pay and benefits
up to 30 June 1991, with an annual renewal of employment
thereafter subject to renewal of their appointment with the
AFP (employees and rates of pay are indicated at Enclosure
3). No promotion or transfer internal to JUSMAG of the listed
personnel will result in the reduction of their pay and benefits.
f. All SASP will, after proper classification, be paid salaries
and benefits at established AFP civilian rates. Rules for
computation of pay and allowances will be made available to
the Comptroller, JUSMAG, by the Comptroller, GHQ, AFP.
Additionally, any legally mandated changes in salary levels or
methods of computation shall be transmitted within 48 hours
of receipt by Comptroller, GHQ to Comptroller, JUSMAG.
g. The AFP agrees not to terminate SASP without 60 days
prior written notice to Chief, JUSMAG-Philippines. Any
termination of these personnel thought to be necessary
because of budgetary restrictions or manpower ceiling will be
subject to consultations between AFP and JUSMAG to ensure
that JUSMAG's mission of dedicated support to the AFP will
not be degraded or harmed in any way.
h. The AFP agrees to assume the severance pay/retirement
pay liability for all appointed SASP. (Enclosure 3 lists the
severance pay liability date for current SASP). Any
termination of services, other than voluntary resignations or
termination for cause, will result in immediate payments of
AFP of all termination pay to the entitled employee. Vouchers
for severance/retirement pay and accrued bonuses and annual
leave will be presented to the Comptroller, GHQ, AFP, not
later than 14 calendar days prior to required date of payment.
i. All SASP listed in Enclosure 3 will continue to participate
in the Philippine Social Security System.
A year later, or in 1992, the United States Embassy sent
another note of similar import to the Department of Foreign
Affairs (No. 227, dated April 8, 1992), extending the funding
agreement for the salaries of SASP and security guards until
December 31, 1992.
From the foregoing, it is apparent that when JUSMAG took
the services of private respondent, it was performing a
governmental function on behalf of the United States pursuant
to the Military Assistance Agreement dated March 21, 1947.
Hence, we agree with petitioner that the suit is, in effect, one
against the United States Government, albeit it was not
impleaded in the complaint. Considering that the United
States has not waived or consented to the suit, the complaint
against JUSMAG cannot not prosper.
In this jurisdiction, we recognize and adopt the generally
accepted principles of international law as part of the law of
the land. 15 Immunity of State from suit is one of these
universally recognized principles. In international law,
"immunity" is commonly understood as an exemption of the
state and its organs from the judicial jurisdiction of another
state. 16 This is anchored on the principle of the sovereign
equality of states under which one state cannot assert
jurisdiction over another in violation of the maxim par in
parem non habet imperium (an equal has no power over an
equal).17
Under the traditional rule of State immunity, a state cannot be
sued in the courts of another State, without its consent or
waiver. However, in Santos, et al., vs. Santos, et al., 18 we
recognized an exception to the doctrine of immunity from suit
by a state, thus:
. . . . Nevertheless, if, where and when the state or its
government enters into a contract, through its officers or
agents, in furtherance of a legitimate aim and purpose and
pursuant to constitutional legislative authority, whereby
mutual or reciprocal benefits accrue and rights and
obligations arise therefrom, and if the law granting the
authority to enter into such contract does not provide for or
name the officer against whom action may be brought in the
event of a breach thereof, the state itself may be sued, even
without its consent, because by entering into a contract, the
sovereign state has descended to the level of the citizen and
its consent to be sued is implied from the very act of entering
into such contract. . . . . (emphasis ours)
It was in this light that the state immunity issue in Harry
Lyons, Inc., vs. United States of America 19 was decided.
In the case of Harry Lyons, Inc., the petitioner entered into a
contract with the United States Government for stevedoring
services at the U.S. Naval Base, Subic Bay, Philippines. It
then sought to collect from the US government sums of
money arising from the contract. One of the issues posed in
the case was whether or not the defunct Court of First
Instance had jurisdiction over the defendant United States, a
sovereign state which cannot be sued without its consent. This
Court upheld the contention of Harry Lyons, Inc., that "when
a sovereign state enters into a contract with a private person,
the state can be sued upon the theory that it has descended to
the level of an individual from which it can be implied that it
has given its consent to be sued under the contract."
The doctrine of state immunity from suit has undergone
further metamorphosis. The view evolved that the existence
of a contract does not, per se, mean that sovereign states may,
at all times, be sued in local courts. The complexity of
relationships between sovereign states, brought about by their
increasing commercial activities, mothered a
more restrictive application of the doctrine. 20 Thus, in United
States of America vs. Ruiz, 21 we clarified that our
pronouncement in Harry Lyons, supra, with respect to the
waiver of State immunity, was obiter and "has no value as an
imperative authority."
As it stands now, the application of the doctrine of immunity
from suit has been restricted to sovereign or governmental
activities ( jure imperii). 22 The mantle of state
immunity cannot be extended to commercial, private and
proprietary acts ( jure gestionis). As aptly stated by this
Court (En banc) in US vs. Ruiz, supra:
The restrictive application of State immunity is proper when
the proceedings arise out of commercial transactions of the
foreign sovereign, its commercial activities or economic
affairs. Stated differently, a State may be said to have
descended to the level of an individual and thus can be
deemed to have tacitly given its consent to be used only when
it enters into business contracts. It does not apply where the
contract relates to the exercise of its sovereign functions.
(emphasis ours)
We held further, that the application of the doctrine of state
immunity depends on the legal nature of the act. Ergo, since
a governmental function was involved — the transaction dealt
with the improvement of the wharves in the naval installation
at Subic Bay — it was held that the United States was not
deemed to have waived its immunity from suit.
Then came the case of United States vs. Hon. Rodrigo, et
al. 23 In said case, Genove was employed as a cook in the
Main Club located at U.S. Air Force Recreation Center, John
Hay Air Station. He was dismissed from service after he was
found to have polluted the stock of soup with urine. Genove
countered with a complaint for damages. Apparently, the
restaurant services offered at the John Hay Air Station partake
of the nature of a business enterprise undertaken by the
United States government in its proprietary capacity. The
Court then noted that the restaurant is well known and
available to the general public, thus, the services are operated
for profit, as a commercial and not a governmental activity.
Speaking through Associate Justice Isagani Cruz, the Court
(En Banc) said:
Considering his length of service with JUSMAG, he deserves
a more compassionate treatment. Unfortunately, JUSMAG is
beyond the jurisdiction of this Court. Nonetheless, the
Executive branch, through the Department of Foreign Affairs
and the Armed Forces of the Philippines, can take the cudgel
for private respondent and the other SASP working for
JUSMAG, pursuant to the aforestated Military Assistance
Agreement.
IN VIEW OF THE FOREGOING, the petition
for certiorari is GRANTED. Accordingly, the impugned
Resolution dated January 29, 1993 of the National Labor
Relations Commission is REVERSED and SET ASIDE. No
costs.
SO ORDERED.

The consequence of this finding is that the petitioners cannot

invoke the doctrine of state immunity to justify the dismissal
of the damage suit against them by Genove. Such defense will
not prosper even if it be established that they were acting as
agents of the United States when they investigated and later
dismissed Genove. For the matter, not even the United States
government itself can claim such immunity. The reason is that
by entering into the employment contract with Genove in the
discharge of its proprietary functions, it impliedly divested
itself of its sovereign immunity from suit. (emphasis ours)

Conversely, if the contract was entered into in the discharge

of its governmental functions, the sovereign state cannot be
deemed to have waived its immunity from suit. 24 Such is the
case at bench. Prescinding from this premise, we need not
determine whether JUSMAG controls the employment
conditions of the private respondent.

We also hold that there appears to be no basis for public

respondent to rule that JUSMAG is stopped from denying the
existence of employer-employee relationship with private
respondent. On the contrary, in its Opposition before the
public respondent, JUSMAG consistently contended that the
(74) SASP, including private respondent, working in
JUSMAG, are employees of the Armed Forces of the
Philippines. This can be gleaned from: (1) the Military
Assistance Agreement, supra, (2) the exchange of notes
between our Government, thru Department of Foreign
Affairs, and the United States, thru the US Embassy to the
Philippines, and (3) the Agreement on May 21,
1991, supra between the Armed Forces of the Philippines and
JUSMAG.

We symphatize with the plight of private respondent who had

served JUSMAG for more than twenty (20) years.
G.R. No. 107660 January 2, 1995
RAMON C. LOZON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION
(Second Division) and PHILIPPINE AIRLINES,
INC., respondents.
VITUG, J.:
Petitioner Ramon C. Lozon, a certified public accountant, was
a Senior
Vice-President-Finance of Private respondent Philippine
Airlines, Inc. ("PAL"), when his services were terminated on
19 December 1990 in the aftermath of the much-publicized
"two-billion-peso PALscam." Lozon started to work for the
national carrier on 23 August 1967 and, for twenty-three
years, steadily climbed the corporate ladder until he became
one of its vice-presidents.1
His termination from the service was spawned by a letter sent
some time in June 1990 by a member of PAL's board of
directors, then Solicitor General Francisco Chavez, to PAL
President Dante Santos. Chavez demanded an investigation of
twenty-three irregularities allegedly committed by twenty-two
high-ranking PAL officials. Among these officials was
petitioner; he had been administratively charged by Romeo
David, Senior Vice-President for Corporate Services and
Logistics Group, for his (Lozon) purported involvement in
four cases, labeled "Goldair," "Autographics," "Big Bang of
1983" and "Middle
East."2 Pending the investigation of these cases by a
panel3 constituted by then President Corazon C. Aquino,
petitioner was placed under preventive suspension.
In the organizational meeting of the PAL board of directors
on 19 October 1990 which occasion Feliciano R. Belmonte,
Jr., was elected chairman of the board while Dante G. Santos
was designated president and chief executive officer,4 the
board deferred action on the election or appointment of some
senior officers of the company who, like petitioner, had been
charged with various offenses.
On 18 January 1991, the PAL board of directors issued two
resolutions relative to the investigation conducted by the
presidential investigating panel in the "Autographics" and
"Goldair" cases. In "Autographics," petitioner was charged,
along with three other officials,5 with "gross inefficiency,
negligence, imprudence, mismanagement, dereliction of duty,
failure to observe and/or implement administrative and
executive policies" and with the "concealment, or cover-up
and prevention of the seasonal discovery of the anomalous
transactions" had with Autographics, Inc., resulting in, among
other things, an overpayment by PAL to Autographics in the
amount of around P12 million. Petitioner was forthwith
considered "resigned from the service . . . for loss of
confidence and for acts inimical to the interests of the
company."6 A similar conclusion was arrived at by the PAL
board of directors with regard to petitioner in the "Goldair"
case where he, together with six other PAL officials,7 were
charged with like "offenses" that had caused PAL's
defraudation by Goldair, PAL's general sales agent in
Australia, of 14.6 million Australian dollars.8
Aggrieved by the action taken by the PAL board of directors,
petitioner, on 26 June 1991 filed with the National Labor
Relations Commission ("NLRC") in Manila a complaint
(docketed NLRC-NCR Case No. 00-06-03684-91) for illegal
dismissal and for reinstatement, with backwages and "fringe
benefits such as Vacation leave, Sick leave, 13th month pay,
Christmas Bonus, Medical Expenses, car expenses, trip pass
entitlement, etc., plus moral damages of P40 Million,
exemplary damages of P10 Million and reasonable attorney's
fees."9
On 09 August 1991, 10 the PAL board of directors also held
petitioner as "resigned from the company" for loss of
confidence and for acts inimical to the interests of the
company in the "Big Bang of 1983" case for his alleged role
in the irregularities that had precipitated the write-down
(write-off) of assets amounting to P553 million from the
books and financial statements of PAL. 11 In the "Middle
East" case, the PAL board of directors, on the anomalous
administration of commercial marketing arrangements in
which PAL had lost an estimated P120 million. 12
PAL defended the validity of petitioner's dismissal before the
Labor Arbiter. It questioned at the same time the jurisdiction
of the NLRC, positing the theory that since the investigating
panel was constituted by then President Aquino, said panel,
along with the PAL board of directors, became "a parallel
arbitration unit" which, in legal contemplation, should be
deemed to have substituted for the NLRC. Thus, PAL
averred, petitioner's recourse should have been to appeal his
case to the Office of the President. 13 On the other hand,
petitioner questioned the authority of the panel to conduct the
investigation, asseverating that the charges leveled against
him were purely administrative in nature that could have well
been ventilated under the grievance procedure outline in
PAL's Code of Discipline.
On 17 March 1992, Labor Arbiter Jose G. de Vera rendered a
decision ruling for petitioner.14 The decretal portion of the
decision read:
WHEREFORE, all the foregoing premises being considered,
judgment is hereby rendered ordering the respondent
Philippine Airlines, Inc., to reinstate the complainant to his
former position with all the rights, privileges, and benefits
appertaining thereto plus backwages, which as of March 15,
1992 already amounted to P2,632,500.00, exclusive of
fringes. Further, the respondent company is ordered to pay
complainant as follows: P5,000.00 as moral damages;
P1,000,000.00 as exemplary damages, and attorney's fees
equivalent to ten percent (10%) of all of the foregoing
awards.
SO ORDERED. 15
A day after promulgating the decision, the labor arbiter issued
a writ of execution. PAL filed a motion to quash the writ
petitioner promptly opposed. After the labor arbiter had
denied the motion to quash, PAL filed a petition for
injunction with the NLRC (docketed NLRC IC Case No.
00261-92). No decision was rendered by NLRC on this
petition. 16
Meanwhile, PAL appealed the decision of the labor arbiter by
filing a memorandum on appeal, 17 assailing, once again, the
jurisdiction of the NLRC but this time on the ground that the
issue pertaining to the removal or dismissal of petitioner, a
corporate officer, was within the exclusive and original
jurisdiction of the Securities and Exchange Commission
("SEC"). Petitioner interposed a partial appeal praying for an
increase in the amount of moral and exemplary damages
awarded by the labor arbiter. 18
On 24 July 1992, the NLRC rendered a decision (in NLRC
NCR Case No. 00-06-03684-91) 19 dismissing the case on the
strength of PAL's new argument on the issue of
jurisdiction. 20 Petitioner's motion for reconsideration was
denied by the NLRC.
The instant petition for certiorari filed with this Court raises
these issues: (a) Whether or not the NLRC has jurisdiction
over the illegal dismissal case, and (b) on the assumption that
the SEC has that jurisdiction, whether or not private
respondent is estopped from raising NLRC's lack of
jurisdiction over the controversy.
We sustain NLRC's dismissal of the case.
Presidential Decree No. 902-A confers on the SEC original
and exclusive jurisdiction to hear and decide controversies
and cases involving —
a. Intra-corporate and partnership relations between or among
the corporation, officers and stockholders and partners,
including their elections or appointments;
b. State and corporate affairs in relation to the legal existence
of corporations, partnerships and associations or to their
franchises; and
c. Investors and corporate affairs, particularly in respect of
devices and schemes, such as fraudulent practices, employed
by directors, officers, business associates, and/or other
stockholders, partners, or members of registered firms; as
well as
d. Petitions for suspension of payments filed by corporations,
partnerships or associations possessing sufficient property to
cover all their debts but which foresee the impossibility of
meeting them when they respectively fall due, or possessing
insufficient assets to cover their liabilities and said entities are
upon petition or motu propio, placed under the management
of a Rehabilitation Receiver or Management Committee.
Specifically, in intra-corporate matters concerning the
election or appointment of officers of a corporation, the
decree provides:
Sec. 5. In addition to the regulatory and adjudicative
functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of association
registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:
xxx xxx xxx
(c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations,
partnerships or association.
Petitioner himself admits that vice presidents are senior
members of
management, 21 whose designations are no longer than just by
means of ordinary promotions. In his own case, petitioner has
been elected to the position of Senior Vice-President —
Finance Group by PAL's board of directors at its
organizational meeting held on 20 October 1989 pursuant to
the By-laws, 22 under which, he would serve for a term of one
year and until his successor shall have been elected and
qualified. 23 Petitioner, for reasons already mentioned, did not
get to be re-elected thereafter. 24
In Fortune Cement Corporation v. NLRC, 25 the Court has
quoted with approval the Solicitor General's contention that
"a corporate officer's dismissal is always a corporate act
and/or intra-corporate controversy and that nature is not
altered by the reason or wisdom which the Board of Directors
may have in taking such action." Not the least insignificant in
the case at bench is that petitioner's dismissal is intertwined
with still another intra-corporate affair, earlier so ascribed as
the "two-billion-peso PALscam," that inevitably places the
case under the specialized competence of the SEC and well
beyond the ambit of a labor arbiter's normal jurisdiction under
the general provisions of Article 217 of the Labor Code. 26
Petitioner contends that the jurisdiction of the SEC excludes
its cognizance over claims for vacation and sick leaves, 13th
month pay, Christmas bonus, medical expenses, car expenses,
and other benefits, as well as for moral damages and
attorney's fees. 27 Dy v. NLRC28 categorically states that the
question of remuneration being asserted by an officer of a
corporation is "not a simple labor problem but a matter that
comes within the area of corporate affairs and management,
and is in fact, a corporate controversy in contemplation of the
Corporation Code." With regard to the matter of damages,
in Andaya v.
Abadia 29 where, in a complaint filed before the Regional
Trial Court, the president and general manager of the Armed
Forces and Police Savings and Loan Association
("AFPSLAI") questioned his ouster from the stewardship of
the association, this Court, in dismissing the petition assailing
the order of the trial court which ruled that SEC, not the
regular courts, had jurisdiction over the case, has said:
The allegations against herein respondents in the amended
complaint unquestionably reveal intra-corporate controversies
cleverly conceals, although unsuccessfully, by use of civil law
terms and phrases. The amended complaint impleads herein
respondents who, in their capacity as directors of AFPSLAI,
allegedly convened an illegal meeting and voted for the
reorganization of management resulting in petitioner's ouster
as corporate officer. While it may be said that the same
corporate acts also give rise to civil liability for damages, it
does not follow that the case is necessarily taken out of the
jurisdiction of the SEC as it may award damages which can
be considered consequential in the exercise of its adjudicative
powers. Besides, incidental issues that properly fall within the
authority of a tribunal may also be considered by it to avoid
multiplicity of actions. Consequently, in intra-corporate
matters such as those affecting the corporation, its directors,
trustees, officers, shareholders, the issue of consequential
damages may just as well be resolved and adjudicated by the
SEC. (Emphasis supplied.)
We here reiterate the above holdings for, indeed,
controversies within the purview of Section 5 of P.D. No.
902-A must not be so constricted as to deny to the SEC the
sound exercise of its expertise and competence in resolving
all closely related aspects of such corporate disputes.
Petitioner maintains that PAL is estopped, nevertheless, from
questioning the jurisdiction of the NLRC considering that
PAL did not hold the dispute to be intra-corporate until after
the case had already been brought on appeal to the NLRC.
In the first place, there would not be much basis to indicate
that PAL was "effectively barred by estoppel." 30 As early as
the initial stages of the controversy PAL had already raised
the issue of jurisdiction albeit mistakenly at first on the
ground that petitioner's recourse was an appeal to the Office
of the President. The error could not alter the fact that PAL
did question even then the jurisdiction of both the labor
arbiter and the NLRC.
It has long been the established rule, moreover, that
jurisdiction over a subject matter is conferred by law, 31 and
the question of lack of jurisdiction may be raised at anytime
even on appeal. 32 In the recent case of La Naval Drug
Corporation vs. Court of Appeals, G.R. No. 103200, 31
August 1994, this Court said:
Lack of jurisdiction over the subject matter of the suit is yet
another matter. Whenever it appears that the court has no
jurisdiction over the subject matter, the action shall be
dismissed (Section 2, Rule 9, Rules of Court). This defense
may be interpose at any time, during appeal (Roxas vs.
Rafferty, 37 Phil. 957) or even after final judgment (Cruzcosa
vs. Judge Concepcion, et al., 101 Phil. 146). Such is
understandable, as this kind of jurisdiction is conferred by law
and not within the courts, let alone the parties, to themselves
determine or conveniently set aside. In People
vs. Casiano (111 Phil. 73, 93-94), this Court, on the issue of
estoppel, held:
"The operation of the principle of estoppel on the question of
jurisdiction seemingly depends upon whether the lower court
actually had jurisdiction or not. If it had no jurisdiction, but
the case was tried and decided upon the theory that it had
jurisdiction, the parties are not barred, on appeal, from
assailing such jurisdiction, for the same "must exist as a
matter of law, and may not be conferred by consent of the
parties or by estoppel" (5 C.J.S., 861-863). However, if the
lower court had jurisdiction, and the case was heard and
decided upon a given theory, such, for instance, as that the
court had no jurisdiction, the party who induced it to adopt
such theory will not be permitted, on appeal, to assume a
inconsistent position — that the lower court had jurisdiction.
Here, the principle of estoppel applies. The rule that
jurisdiction is conferred by law, and does not depend upon the
will of the parties, has no bearing thereon."
Petitioner points to "PAL's scandalous duplicity" in
questioning the jurisdiction of the NLRC in this particular
controversy while upholding it (NLRC's jurisdiction) in
"Robin Dui v. Philippine Airlines" (Case No. 00-4-20267)
pending before the Commission. We need not delve into
whether or not PAL's conduct does indeed smack of
opportunities; suffice it to say that Robin Dui is entirely an
independent and separate case and, more than that, it is not
before us in this instance.

WHEREFORE, the herein petition for certiorari is

DISMISSED, and the decision appealed from is AFFIRMED,
without prejudice to petitioner's seeking, if circumstances
permit, a recourse in the proper forum. No costs.

SO ORDERED.
G.R. No. L-61236 January 31, 1984
NATIONAL FEDERATION OF LABOR and ZAMBOWOOD
MONTHLY EMPLOYEES UNION, ITS OFFICERS AND
MEMBERS, petitioners,
vs.
THE HONORABLE CARLITO A. EISMA, LT. COL. JACOB
CARUNCHO, COMMANDING OFFICER, ZAMBOANGA
DISTRICT COMMAND, PC, AFP, and ZAMBOANGA
WOOD PRODUCTS, respondents.
FERNANDO, C.J.:
This Court is confronted once again with the question of
whether or not it is a court or a labor arbiter that can pass on a
suit for damages filed by the employer, here private
respondent Zamboanga Wood Products. Respondent Judge
Carlito A. Eisma 1 then of the Court of First Instance, now of
the Regional Trial Court of Zamboanga City, was of the view
that it is a court and denied a motion to dismiss filed by
petitioners National Federation of labor and Zambowood
Monthly Employees Union, its officers and members. It was
such an order dated July 20, 1982 that led to the filing of this
certiorari and prohibition proceeding. In the order assailed, it
was required that the officers and members of petitioner
union appear before the court to show cause why a writ of
preliminary injunction should not be issued against them and
in the meanwhile such persons as well as any other persons
acting under their command and on their behalf were
"temporarily restrained and ordered to desist and refrain from
further obstructing, impeding and impairing plaintiff's use of
its property and free ingress to or egress from plaintiff's
Manufacturing Division facilities at Lumbayao, Zamboanga
City and on its road right of way leading to and from said
plaintiff's facilities, pending the determination of the
litigation, and unless a contrary order is issued by this
Court." 2
The record discloses that petitioner National Federation of
Labor, on March 5, 1982, filed with the Ministry of Labor and
Employment, Labor Relations Division, Zamboanga City, a
petition for direct certification as the sole exclusive collective
bargaining representative of the monthly paid employees of
the respondent Zamboanga Wood Products, Inc. at its
manufacturing plant in Lumbayao, Zamboanga City. 3 Such
employees, on April 17, 1982 charged respondent firm before
the same office of the Ministry of Labor for underpayment of
monthly living allowances. 4Then came, on May 3, 1982,
from petitioner union, a notice of strike against private
respondent, alleging illegal termination of Dionisio Estioca,
president of the said local union; unfair labor practice, non-
payment of living allowances; and "employment of
oppressive alien management personnel without proper
permit. 5 It was followed by the union submitting the minutes
of the declaration of strike, "including the ninety (90) ballots,
of which 79 voted for yes and three voted for no." 6 The strike
began on May 23, 1982. 7 On July 9, 1982, private respondent
Zambowood filed a complaint with respondent Judge against
the officers and members of petitioners union, for "damages
for obstruction of private property with prayer for preliminary
injunction and/or restraining order." 8 It was alleged that
defendants, now petitioners, blockaded the road leading to its
manufacturing division, thus preventing customers and
suppliers free ingress to or egress from such premises. 9 Six
days later, there was a motion for the dismissal and for the
dissolution of the restraining order and opposition to the
issuance of the writ of preliminary injunction filed by
petitioners. It was contended that the acts complained of were
incidents of picketing by defendants then on strike against
private respondent, and that therefore the exclusive
jurisdiction belongs to the Labor Arbiter pursuant to Batas
Pambansa Blg. 227, not to a court of first instance.10 There
was, as noted earlier, a motion to dismiss, which was denied.
Hence this petition for certiorari.
Four days after such petition was filed, on August 3, 1982,
this Court required respondents to answer and set the plea for
a preliminary injunction to be heard on Thursday, August 5,
1982. 11 After such hearing, a temporary restraining order
was issued, "directing respondent Judge and the commanding
officer in Zamboanga and his agents from enforcing the ex-
parte order of injunction dated July 20, 1982; and to restrain
the respondent Judge from proceeding with the hearing of the
until otherwise case effective as of [that] date and continuing
ordered by [the] Court. In the exercise of the right to peaceful
picketing, petitioner unions must abide strictly with Batas
Pambansa Blg. 227, specifically Section 6 thereof, amending
Article 265 of the Labor Code, which now reads: '(e) No
person engaged in picketing shall commit any act of violence,
coercion or intimidation or obstruct the free ingress to or
egress from the employer's premises for lawful purposes, or
obstruct public thoroughfares.' " 12
On August 13, 1982, the answer of private respondent was
filed sustaining the original jurisdiction of respondent Judge
and maintaining that the order complained of was not in
excess of such jurisdiction, or issued with grave abuse of
discretion. Solicitor General Estelito P. Mendoza, 13 on the
other hand, instead of filing an answer, submitted a
Manifestation in lieu thereof. He met squarely the issue of
whether or not respondent Judge had jurisdiction, and
answered in the negative. He (i)ncluded that "the instant
petition has merit and should be given due course."
He traced the changes undergone by the Labor Code, citing at
the same time the decisions issued by this Court after each of
such changes. As pointed out, the original wording of Article
217 vested the labor arbiters with jurisdictional. 14 So it was
applied by this Court in Garcia v. Martinez 15 and
in Bengzon v. Inciong. 16 On May 1, 1978, however,
Presidential Decree No. 1367 was issued, amending Article
217, and provided "that the Regional Directors shall not
indorse and Labor Arbiters shall not entertain claims for
moral and other forms of damages." 17 The ordinary courts
were thus vested with jurisdiction to award actual and moral
damages in the case of illegal dismissal of
employees. 18 That is not, as pointed out by the Solicitor
General, the end of the story, for on May 1, 1980, Presidential
Decree No. 1691 was issued, further amending Article 217,
returning the original jurisdiction to the labor arbiters, thus
enabling them to decide "3. All money claims of workers,
including those based on non-payment or underpayment of
wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except
claims for employees compensation, social security, medicare
and maternity benefits; [and] (5) All other claims arising from
employer-employee relations unless expressly excluded by
tills Code." 19 An equally conclusive manifestation of the
lack of jurisdiction of a court of first instance then, a regional
trial court now, is Batas Pambansa Blg. 130, amending
Article 217 of the Labor Code. It took effect on August 21,
1981. Subparagraph 2, paragraph (a) is now worded thus: "(2)
those that involve wages, hours of work and other terms and
conditions of employment." 20 This is to be compared with the
former phraseology "(2) unresolved issue in collective
bargaining, including those that involve wages, hours of work
and other terms and conditions of employment." 21 It is to be
noted that Batas Pambansa Blg. 130 made no change with
respect to the original and exclusive jurisdiction of Labor
Arbiters with respect to money claims of workers or claims
for damages arising from employer-employee relations.
Nothing becomes clearer, therefore, than the meritorious
character of this petition. certiorari and prohibition lie,
respondent Judge being devoid of jurisdiction to act on the
matter.
1. Article 217 is to be applied the way it is worded. The
exclusive original jurisdiction of a labor arbiter is therein
provided for explicitly. It means, it can only mean, that a
court of first instance judge then, a regional trial court judge
now, certainly acts beyond the scope of the authority
conferred on him by law when he entertained the suit for
damages, arising from picketing that accompanied a strike.
That was squarely within the express terms of the law. Any
deviation cannot therefore be tolerated. So it has been the
constant ruling of this Court even prior to Lizarraga
Hermanos v. Yap Tico, 22 a 1913 decision. The ringing words
of the ponencia of Justice Moreland still call for obedience.
Thus, "The first and fundamental duty of courts, in our
judgment, is to apply the law. Construction and interpretation
come only after it has been demonstrated that application is
impossible or inadequate without them." 23 It is so even after
the lapse of sixty years. 24
2. On the precise question at issue under the law as it now
stands, this Court has spoken in three decisions. They all
reflect the utmost fidelity to the plain command of the law
that it is a labor arbiter, not a court, that ossesses original and
exclusive jurisdiction to decide a claim for damages arising
from picketing or a strike. In Pepsi-Cola Bottling Co. v.
Martinez, 25 the issue was set forth in the opening paragraph,
in the ponencia of Justice Escolin: "This petition for
certiorari, prohibition and mandamus raises anew the legal
question often brought to this Court: Which tribunal has
exclusive jurisdiction over an action filed by an employee
against his employer for recovery of unpaid salaries,
separation benefits and damages — the court of general
jurisdiction or the Labor Arbiter of the National Labor
Relations Commission [NLRC]?" 26 It was categorically held:
"We rule that the Labor Arbiter has exclusive jurisdiction
over the case." 27 Then came this portion of the opinion:
"Jurisdiction over the subject matter in a judicial proceeding
is conferred by the sovereign authority which organizes the
court; and it is given only by law. Jurisdiction is never
presumed; it must be conferred by law in words that do not
admit of doubt. Since the jurisdiction of courts and judicial
tribunals is derived exclusively from the statutes of the forum,
the issue before us should be resolved on the basis of the law
or statute now in force. We find that law in presidential
Decree 1691 which took effect on May 1, 1980, Section 3 of
which reads as follows: ... Article 217. Jurisdiction of Labor
Arbiters and the Commission. — (a) The Labor Arbiters shall
have the original and exclusive jurisdiction to hear and decide
the following cases involving all workers, whether
agricultural or non-agricultural: ... 3. All money claims of
workers, including those based on nonpayment or
underpayment of wages, overtime compensation, separation
pay and other benefits provided by law or appropriate
agreement, except claims for employees' compensation, social
security, medicare and maternity benefits; 4. Cases involving
household services; and 5. All other claims arising from
employer-employee relations, unless expressly excluded by
this Code." 28 That same month, two other cases were
similarly decided, Ebon v. De Guzman 29 and Aguda v.
Vallejos. 30
3. It is regrettable that the ruling in the above three decisions,
decided in March of 1982, was not followed by private
respondent when it filed the complaint for damages on July 9,
1982, more than four months later. 31 On this point, reference
may be made to our decision in National Federation of
Labor, et al. v. The Honorable Minister of Labor and
Employment, 32 promulgated on September 15, 1983. In that
case, the question involved was the failure of the same private
respondent, Zamboanga Wood Products, Inc., to admit the
striking petitioners, eighty-one in number, back to work after
an order of Minister Blas F. Ople certifying to the National
Labor Relations Commission the labor dispute for
compulsory arbitration pursuant to Article 264 (g) of the
Labor Code of the Philippines. It was noted in the first
paragraph of our opinion in that case: "On the face of it, it
seems difficult to explain why private respondent would not
comply with such order considering that the request for
compulsory arbitration came from it. It ignored this
notification by the presidents of the labor unions involved to
its resident manager that the striking employees would lift
their picket line and start returning to work on August 20,
1982. Then, too, Minister Ople denied a partial motion for
reconsideration insofar as the return-to-work aspect is
concerned which reads: 'We find no merit in the said Motion
for Reconsideration. The Labor code, as amended,
specifically Article 264 (g), mandates that whenever a labor
dispute is certified by the Minister of Labor and Employment
to the National Labor Relations Commission for compulsory
arbitration and a strike has already taken place at the time of
certification, "all striking employees shall immediately return
to work and the employees shall immediately resume
operations and readmit all workers under the same terms and
conditions prevailing before the strike." ' " 33 No valid
distinction can be made between the exercise of compulsory
arbitration vested in the Ministry of Labor and the jurisdiction
of a labor arbiter to pass over claims for damages in the light
of the express provision of the Labor Code as set forth in
Article 217. In both cases, it is the Ministry, not a court of
justice, that is vested by law with competence to act on the
matter.
and a court, the unmistakable trend has been to refer it to the
former. Thus: "Increasingly, this Court has been committed to
the view that unless the law speaks clearly and unequivocally,
the choice should fall on [an administrative
agency]." 36 Certainly, the present Labor Code is even more
committed to the view that on policy grounds, and equally so
in the interest of greater promptness in the disposition of labor
matters, a court is spared the often onerous task of
determining what essentially is a factual matter, namely, the
damages that may be incurred by either labor or management
as a result of disputes or controversies arising from employer-
employee relations.
WHEREFORE, the writ of certiorari is granted and the order
of July 20, 1982, issued by respondent Judge, is nullified and
set aside. The writ of prohibition is likewise granted and
respondent Judge, or whoever acts in his behalf in the
Regional Trial Court to which this case is assigned, is enjoin
from taking any further action on Civil Case No. 716 (2751),
except for the purpose of dismissing it. The temporary
restraining order of August 5, 1982 is hereby made
permanent.
Teehankee, Makasiar, Aquino, Guerrero, Melencio-Herrera,
Plana, Escolin Relova and Gutierrez, Jr., JJ., concur.
Separate Opinions
ABAD SANTOS, J., concurring:
I concur and express the hope that Art. 217 should not
undergo repeated amendments.

4. The issuance of Presidential Decree No. 1691 and the

enactment of Batas Pambansa Blg. 130, made clear that the
exclusive and original jurisdiction for damages would once
again be vested in labor arbiters. It can be affirmed that even
if they were not that explicit, history has vindicated the view
that in the appraisal of what was referred to by Philippine
American Management & Financing Co., Inc. v. Management
& Supervisors Association of the Philippine-American
Management & Financing Co., Inc. 34 as "the rather thorny
question as to where in labor matters the dividing line is to be
drawn"35 between the power lodged in an administrative body
G.R. No. 80774 May 31, 1988
SAN MIGUEL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
RUSTICO VEGA, respondents.
Siguion Reyna, Montecillo & Ongsiako Law Offices for
petitioner.
The Solicitor General for public respondent.
FELICIANO, J.:
In line with an Innovation Program sponsored by petitioner
San Miguel Corporation ("Corporation;" "SMC") and under
which management undertook to grant cash awards to "all
SMC employees ... except [ED-HO staff, Division Managers
and higher-ranked personnel" who submit to the Corporation
Ideas and suggestions found to be beneficial to the
Corporation, private respondent Rustico Vega submitted on
23 September 1980 an innovation proposal. Mr. Vega's
proposal was entitled "Modified Grande Pasteurization
Process," and was supposed to eliminate certain alleged
defects in the quality and taste of the product "San Miguel
Beer Grande:"
Title of Proposal
Modified Grande Pasteurization Process
Present Condition or Procedure
At the early stage of beer grande production, several cases of
beer grande full goods were received by MB as returned beer
fulls (RBF). The RBF's were found to have sediments and
their contents were hazy. These effects are usually caused by
underpasteurization time and the pasteurzation units for beer
grande were almost similar to those of the steinie.
Proposed lnnovation (Attach necessary information)
In order to minimize if not elienate underpasteurization of
beer grande, reduce the speed of the beer grande pasteurizer
thereby, increasing the pasteurization time and the
pasteurization acts for grande beer. In this way, the self-life
(sic) of beer grande will also be increased. 1
Mr. Vega at that time had been in the employ of petitioner
Corporation for thirteen (1 3) years and was then holding the
position of "mechanic in the Bottling Department of the SMC
Plant Brewery situated in Tipolo, Mandaue City.
Petitioner Corporation, however, did not find the aforequoted
proposal acceptable and consequently refused Mr. Vega's
subsequent demands for a cash award under the Innovation
Program. On 22 February 1983., a Complaint 2(docketed as
Case No. RAB-VII-0170-83) was filed against petitioner
Corporation with Regional Arbitration Branch No. VII (Cebu
City) of the then.", Ministry of Labor and Employment.
Frivate respondent Vega alleged there that his proposal "[had]
been accepted by the methods analyst and implemented by
the Corporation [in] October 1980," and that the same
"ultimately and finally solved the problem of the Corporation
in the production of Beer Grande." Private respondent thus
claimed entitlement to a cash prize of P60,000.00 (the
maximum award per proposal offered under the Innovation
Program) and attorney's fees.
In an Answer With Counterclaim and Position
Paper, 3 petitioner Corporation alleged that private respondent
had no cause of action. It denied ever having approved or
adopted Mr. Vega's proposal as part of the Corporation's
brewing procedure in the production of San Miguel Beer
Grande. Among other things, petitioner stated that Mr. Vega's
proposal was tumed down by the company "for lack of
originality" and that the same, "even if implemented [could
not] achieve the desired result." Petitioner further alleged that
the Labor Arbiter had no jurisdiction, Mr. Vega having
improperly bypassed the grievance machinery procedure
prescribed under a then existing collective bargaining
agreement between management and employees, and
available administrative remedies provided under the rules of
the Innovation Program. A counterclaim for moral and
exemplary damages, attorney's fees, and litigation expenses
closed out petitioner's pleading.
In an Order 4 dated 30 April 1986, the Labor Arbiter, noting
that the money claim of complainant Vega in this case is "not
a necessary incident of his employment" and that said claim is
not among those mentioned in Article 217 of the Labor Code,
dismissed the complaint for lack of jurisdiction. However, in
a gesture of "compassion and to show the government's
concern for the workingman," the Labor Arbiter also directed
petitioner to pay Mr. Vega the sum of P2,000.00 as "financial
assistance."
The Labor Arbiter's order was subsequently appealed by both
parties, private respondent Vega assailing the dismissal of his
complaint for lack of jurisdiction and petitioner Corporation
questioning the propriety of the award of "financial
assistance" to Mr. Vega. Acting on the appeals, the public
respondent National Labor Relations Commission, on 4
September 1987, rendered a Decision, 5 the dispositive
portion of which reads:
WHEREFORE, the appealed Order is hereby set aside and
another udgment entered, order the respondent to pay the
complainant the amount of P60,000.00 as explained above.
SO ORDERED.
In the present Petition for certiorari filed on 4 December
1987, petitioner Corporation, invoking Article 217 of the
Labor Code, seeks to annul the Decision of public respondent
Commission in Case No. RAB-VII-01 70-83 upon the ground
that the Labor Arbiter and the Commission have no
jurisdiction over the subject matter of the case.
The jurisdiction of Labor Arbiters and the National Labor
Relations Commission is outlined in Article 217 of the Labor
Code, as last amended by Batas Pambansa Blg. 227 which
took effect on 1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the
commission. (a) The Labor Arbiters shall have the original
and exclusive jurisdiction to hear and decide within thirty
(30) working days after submission of the case by the parties
for decision, the following cases involving are workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of
work and other terms and conditions of employment;
3. All money claims of workers, including those based on non-
payment or underpayment of wages, overtime compensation,
separation pay and other benefits provided by law or
appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity
benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this;
Code, including questions involving the legality of strikes and
lockouts.
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.
(Emphasis supplied)
While paragraph 3 above refers to "all money claims of
workers," it is not necessary to suppose that the entire
universe of money claims that might be asserted by workers
against their employers has been absorbed into the original
and exclusive jurisdiction of Labor Arbiters. In the first place,
paragraph 3 should be read not in isolation from but rather
within the context formed by paragraph 1 related to unfair
labor practices), paragraph 2 (relating to claims concerning
terms and conditions of employment), paragraph 4 (claims
relating to household services, a particular species of
employer-employee relations), and paragraph 5 (relating to
certain activities prohibited to employees or to
employers).<äre||anº•1àw> It is evident that there is a
unifying element which runs through paragraphs 1 to 5 and
that is, that they all refer to cases or disputes arising out of or
in connection with an employer-employee relationship. This
is, in other words, a situation where the rule of noscitur a
sociis may be usefully invoked in clarifying the scope of
paragraph 3, and any other paragraph of Article 217 of the
Labor Code, as amended. We reach the above conclusion
from an examination of the terms themselves of Article 217,
as last amended by B.P. Blg. 227, and even though earlier
versions of Article 217 of the Labor Code expressly brought
within the jurisdiction of the Labor Arbiters and the NLRC
"cases arising from employer employee relations," 6 which
clause was not expressly carried over, in printer's ink, in
Article 217 as it exists today. For it cannot be presumed that
money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and
which would therefore fall within the general jurisdiction of
the regular courts of justice, were intended by the legislative
authority to be taken away from the jurisdiction of the courts
and lodged with Labor Arbiters on an exclusive basis. The
Court, therefore, believes and so holds that the money claims
of workers" referred to in paragraph 3 of Article 217
embraces money claims which arise out of or in connection
with the employer-employee relationship, or some aspect or
incident of such relationship. Put a little differently, that
money claims of workers which now fall within the original
and exclusive jurisdiction of Labor Arbiters are those money
claims which have some reasonable causal connection with
the employer-employee relationship.
Applying the foregoing reading to the present case, we note
that petitioner's Innovation Program is an employee incentive
scheme offered and open only to employees of petitioner
Corporation, more specifically to employees below the rank
of manager. Without the existing employer-employee
relationship between the parties here, there would have been
no occasion to consider the petitioner's Innovation Program or
the submission by Mr. Vega of his proposal concerning beer
grande; without that relationship, private respondent Vega's
suit against petitioner Corporation would never have arisen.
The money claim of private respondent Vega in this case,
therefore, arose out of or in connection with his employment
relationship with petitioner.
The next issue that must logically be confronted is whether
the fact that the money claim of private respondent Vega
arose out of or in connection with his employment relation"
with petitioner Corporation, is enough to bring such money
claim within the original and exclusive jurisdiction of Labor
Arbiters.
In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a
corporation engaged in the sale and repair of motor vehicles,
while private respondent was the sales Manager of petitioner.
Petitioner had sued private respondent for non-payment of
accounts which had arisen from private respondent's own
purchases of vehicles and parts, repair jobs on cars personally
owned by him, and cash advances from the corporation. At
the pre-trial in the lower court, private respondent raised the
question of lack of jurisdiction of the court, stating that
because petitioner's complaint arose out of the employer-
employee relationship, it fell outside the jurisdiction of the
court and consequently should be dismissed. Respondent
Judge did dismiss the case, holding that the sum of money
and damages sued for by the employer arose from the
employer-employee relationship and, hence, fell within the
jurisdiction of the Labor Arbiter and the NLRC. In reversing
the order of dismissal and requiring respondent Judge to take
cognizance of the case below, this Court, speaking through
Mme. Justice Melencio-Herrera, said:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor
Arbiters, under paragraph 5 of Article 217 of the Labor Code
had jurisdiction over" all other cases arising from employer-
employee relation, unless, expressly excluded by this
Code." Even then, the principle followed by this Court was
that, although a controversy is between an employer and an
employee, the Labor Arbiters have no jurisdiction if the Labor
Code is not involved. In Medina vs. Castro-Bartolome, 11
SCRA 597, 604, in negating jurisdiction of the Labor Arbiter,
although the parties were an employer and two employees,
Mr. Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor
Code has any relevance to the reliefs sought by the plaintiffs.
For if the Labor Code has no relevance, any discussion
concerning the statutes amending it and whether or not they
have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not
alleged any unfair labor practice. Theirs is a simple action for
damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is the
Civil Code and not the Labor Code. It results that the orders
under review are based on a wrong premise.
And in Singapore Airlines Limited v. Paño, 122 SCRA 671,
677, the following was said:
Stated differently, petitioner seeks protection under the civil
laws and claims no benefits under the Labor Code. The
primary relief sought is for liquidated damages for breach of
a contractual obligation. The other items demanded are not
labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed
are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
In the case below, PLAINTIFF had sued for monies loaned to
DEFENDANT, the cost of repair jobs made on his personal
cars, and for the purchase price of vehicles and parts sold to
him. Those accounts have no relevance to the Labor Code.
The cause of action was one under the civil laws, and it does
not breach any provision of the Labor Code or the contract of
employment of DEFENDANT. Hence the civil courts, not the
Labor Arbiters and the NLRC should have jurisdiction. 8
It seems worth noting that Medina v. Castro-Bartolome,
referred to in the above excerpt, involved a claim for damages
by two (2) employees against the employer company and the
General Manager thereof, arising from the use of slanderous
language on the occasion when the General Manager fired the
two (2) employees (the Plant General Manager and the Plant
Comptroller). The Court treated the claim for damages as "a
simple action for damages for tortious acts" allegedly
committed by private respondents, clearly if impliedly
suggesting that the claim for damages did not necessarily
arise out of or in connection with the employer-employee
relationship. Singapore Airlines Limited v. Paño, also cited
in Molave, involved a claim for liquidated damages not by a
worker but by the employer company, unlike Medina. The
important principle that runs through these three (3) cases is
that where the claim to the principal relief sought 9 is to be
resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by
the general civil law, the jurisdiction over the dispute belongs
to the regular courts of justice and not to the Labor Arbiter
and the NLRC. In such situations, resolution of the dispute
requires expertise, not in labor management relations nor in
wage structures and other terms and conditions of
employment, but rather in the application of the general civil
law. Clearly, such claims fall outside the area of competence
or expertise ordinarily ascribed to Labor Arbiters and the
NLRC and the rationale for granting jurisdiction over such
claims to these agencies disappears.
Applying the foregoing to the instant case, the Court notes
that the SMC Innovation Program was essentially an
invitation from petitioner Corporation to its employees to
submit innovation proposals, and that petitioner Corporation
undertook to grant cash awards to employees who accept such
invitation and whose innovation suggestions, in the judgment
of the Corporation's officials, satisfied the standards and
requirements of the Innovation Program 10 and which,
therefore, could be translated into some substantial benefit to
the Corporation. Such undertaking, though unilateral in
origin, could nonetheless ripen into an enforceable contractual
(facio ut des) 11 obligation on the part of petitioner
Corporation under certain circumstances. Thus, whether or
not an enforceable contract, albeit implied arid innominate,
had arisen between petitioner Corporation and private
respondent Vega in the circumstances of this case, and if so,
whether or not it had been breached, are preeminently legal
questions, questions not to be resolved by referring to labor
legislation and having nothing to do with wages or other
terms and conditions of employment, but rather having
recourse to our law on contracts.

WEREFORE, the Petition for certiorari is GRANTED. The

decision dated 4 September 1987 of public respondent
National Labor Relations Commission is SET ASIDE and the
complaint in Case No. RAB-VII-0170-83 is hereby
DISMISSED, without prejudice to the right of private
respondent Vega to file a suit before the proper court, if he so
desires. No pronouncement as to costs.

SO ORDERED.
G.R. No. L-58877 March 15, 1982
PEPSI-COLA BOTTLING COMPANY, COSME
DE ABOITIZ, and ALBERTO M.
DACUYCUY, petitioners,
vs.
HON. JUDGE ANTONIO M. MARTINEZ, in his
official capacity, and ABRAHAM TUMALA,
JR., respondents.
This petition for certiorari, prohibition and mandamus
raises anew the legal question often brought to this
Court: Which tribunal has exclusive jurisdiction over an
action filed by an employee against his employer for
recovery of unpaid salaries, separation benefits and
damages — the court of general jurisdiction or the Labor
Arbiter of the National Labor Relations Commission
[NLRC]?
The facts that gave rise to this petition are as follows:
On September 19, 1980, respondent Abraham Tumala,
Jr. filed a complaint in the Court of First Instance of
Davao, docketed as Civil Case No. 13494, against
petitioners Pepsi-Cola Bottling Co., Inc., its president
Cosme de Aboitiz and other company officers. Under
the first cause of action, the complaint averred inter
alia that Tumala was a salesman of the company in
Davao City from 1977 up to August 21, 1980; that in the
annual "Sumakwel" contest conducted by the company
in 1979, Tumala was declared winner of the "Lapu-Lapu
Award" for his performance as top salesman of the year,
an award which entitled him to a prize of a house and
lot; and that petitioners, despite demands, have unjustly
refused to deliver said prize Under the second cause of
action, it was alleged that on August 21, 1980,
petitioners, "in a manner oppressive to labor" and
"without prior clearance from the Ministry of Labor",
"arbitrarily and ilegally" terminated his employment. He
prayed that petitioners be ordered, jointly and severally,
to deliver his prize of house and lot or its cash
equivalent, and to pay his back salaries and separation
benefits, plus moral and exemplary damages, attorney's
fees and litigation expenses. He did not ask for
reinstatement.
Petitioners moved to dismiss the complaint on grounds
of lack of jurisdiction and cause of action. Petitioners
further alleged that Tumala was not entitled to the
"Sumakwel" prize for having misled the company into
declaring him top salesman for 1979 through various
deceitful and fraudulent manipulations and machinations
in the performance of his duties as salesman and depot
in-charge of the bottling company in Davao City, which
manipulations consisted of "unremitted cash collections,
fictitious collections of trade accounts, fictitious loaned
empties, fictitious product deals, uncollected loaned
empties, advance sales confirmed as fictitious, and route
shortages which resulted to the damage and prejudice of
the bottling company in the amount of P381,851.76."
The alleged commission of these fraudulent acts was
also advanced by petitioners to justify Tumala's
dismissal.
The court below, sustaining its jurisdiction over the case,
denied the motion for reconsideration. Hence the present
recourse.
We rule that the Labor Arbiter has exclusive jurisdiction
over the case.
Jurisdiction over the subject matter in a judicial
proceeding is conferred by the sovereign authority which
organizes the court; and it is given only by
law. 1 Jurisdiction is never presumed; it must be
conferred by law in words that do not admit of doubt. 2
Since the jurisdiction of courts and judicial tribunals is
derived exclusively from the statutes of the forum, the
issue efore Us should be resolved on the basis of the law
or statute now in force. We find that law in Presidential
Decree 1691 which took effect on May 1, 1980, Section
3 of which reads as follows:
SEC. 3. Article 217, 222 and 262 of Book V of the
Labor Code are hereby amended to read as follows:
Article 217. Jurisdiction of Labor Arbiters and the
Commission. — The Labor Arbiters shall have the
original and exclusive jurisdiction to hear and decide the
following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Unresolved issues in collective bargaining, including
those that involve waged hours of work and other terms
and conditions of employment;
3. All money claims of workers, including those based
on non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits
provided by law or appropriate agreement, except claims
for employees' compensation, social security, medicare
and maternity benefits;
4. Cases involving household services; and
5. All other claims arising from employer-employee
relations, unless expressly excluded by this Code.
Under paragraphs 3 and 5 of the above Presidential
Decree, the case is exclusively cognizable by the Labor
Arbiters of the National Labor Relations Commission.
It is to be noted that P.D. 1691 is an exact reproduction
of Article 217 of the Labor Code (P.D. 442), which took
effect on May 1, 1974. In Garcia vs. Martinez 3, an
action filed on August 2, 1976 in the Court of First
Instance of Davao by a dismissed employee against his
employer for actual, moral and exemplary damages, We
held that under Article 217 of the Labor Code, the law
then in force, the case was within the exclusive
jurisdiction of the Labor Arbiters and the National Labor
Relations Commission [NLRC]. This Court, per Justice
Aquino, rational this holding thus:
The provisions of paragraph 3 and 5 of Article 217 are
broad and comprehensive enough to cover Velasco's
[employee's] claim for damages allegedly arising from
his unjustified dismissal by Garcia [employer]. His
claim was a consequence of the termination of their
employer-employee relations [Compare with Ruby
Industrial Corporation vs. Court of First Instance of
Manila, L- 38893, August 31, 1977, 78 SCRA 499].
Article 217 of the Labor Code words amended by P.D.
1367, which was promulgated on May 1, 1978, the full
text of which is quoted as follows:
SECTION 1. Paragraph [a] of Art, 217 of the Labor
Code as amended is hereby further amended to read as
follows:
[a] The Labor Arbiters shall have exclusive jurisdiction
hear and decide the following cases involving all
workers, whether agricultural or non-agricultural:
1] Unfair labor practice cases;
2] Unresolved issues in collective bargaining, including
those which involve wages, hours of work, and other
terms conditions of employment; and
3] All other cases arising from employer-employee
relations duly indorsed by the Regional Directors in
accordance with the provisions of this Code.
Provided, that the Regional Directors shall not indorse
and Labor Arbiters shall not entertain claims for moral
or other forms of damages.
It will be noted that paragraphs 3 and 5 of Article 217
were deleted from the text of the above decree and a new
provision incorporated therein, to wit: "Provided that the
Regional Directors shall not indorse and Labor Arbiters
shall not en certain claims for moral or other forms of
damages." This amendatory act thus divested the Labor
Arbiters of their competence to pass upon claims for
damages by employees against their employers.
However, on May 1, 1980, Article 217, as amended by
P.D. 1367, was amended anew by P.D. 1691. This last
decree, which is a verbatim reproduction of the original
test of Article 217 of the Labor Code, restored to the
Labor Arbiters of the NLRC exclusive jurisdiction over
claims, money or otherwise, arising from employer-
employee relations, except those expressly excluded
therefrom.
In sustaining its jurisdiction over the case at bar, the
respondent court relied on Calderon vs. Court of
Appeals 4 , where We ruled that an employee's action for
unpaid salaries, alowances and other reimbursable
expenses and damages was beyond the periphery of the
jurisdictional competence of the Labor Arbiters. Our
ruling in Calderon, however, no longer applaies to this
case because P.D. 1367, upon which said decision was
based, had already been superceded by P.D. 1691. As
heretofore stated, P.D. 1691 restored to the Labor
Arbiters their exlcusive jurisdiction over said classes of
claims.
Respondent Tumala maintains that his action for
delivery of the house and lot, his prize as top salesman
of the company for 1979, is a civil controversy triable
exclusively by the court of the general jurisdiction. We
do not share this view. The claim for said prize
unquestionably arose from an employer-employee
relation and, therefore, falls within the coverage of par. 5
of P.D. 1691, which speaks of "all claims arising from
employer-employee relations, unless expressly excluded
by this Code." Indeed, Tumala would not have qualitfied
for the content, much less won the prize, if he was not an
employee of the company at the time of the holding of
the contest. Besides, the cause advanced by petitioners
to justify their refusal to deliver the prize—the alleged
fraudulent manipulations committed by Tumala in
connection with his duties as salesman of the
company—involves an inquiry into his actuations as an
employee.

Besides, to hold that Tumala's claim for the prize should

be passed upon by the regular court of justice,
independently and separately from his claim for back
salaries, retirement benefits and damages, would be to
sanction split juridiction and multiplicity of suits which
are prejudicial to the orderly administration of justice.

One last point. Petitioners content that Tumala has no

cause of action to as for back salaries and damages
because his dimissal was authorized by the Regional
Director of the MInistry of Labor. This question calls for
the presentaiton of evidence and the same may well be
entilated before the labor Arbiter who has jurisdiction
over the case. Besides, the issue raised is not for Us to
determine in this certiorari proceeding. The
extraordinary remedy of certiorari proceeding. The
extraordinary remedy of certiorari offers only a limited
form of review and its principal function is to keep an
inferior tribunal within its jurisdiction. 5

WHEREFORE, the petition is granted, and respondent

judge is hereby directed to dismiss Civil Case No.
13494, without prejudice to the right of respondent
Tumala to refile the same with the Labor Arbiter. No
costs.

SO ORDERED.
G.R. No. L-39084 February 23, 1988
PHILIPPINE ASSOCIATION OF FREE LABOR
UNIONS (PAFLU), petitioner,
vs.
EMILIO V. SALAS, Judge of the Court of First Instance
of Rizal, Seventh Judicial District, Branch I, Pasig, Rizal
and WONG KING YUEN, respondents.
GANCAYCO, J.:
This is a petition for certiorari under Rule 65 of the Rules of
Court.
The record of the case discloses that the herein petitioner
Philippine Association of Free Labor Unions (PAFLU) is a
labor organization registered with the Department of Labor
and Employment. Sometime in 1963, the petitioner filed a
Complaint for unfair labor practice with the then Court of
Industrial Relations (CIR) against the Northwest
manufacturing Corporation and a certain Gan Hun. The suit
was docketed as Case No. 3901-ULP.
On September 25, 1972, the CIR rendered a Decision in favor
of the petitioner labor organization. Pursuant to a writ of
execution issued by the CIR, the provincial sheriff of Rizal
commenced levying the personal properties of the said Gan
Hun, particularly the properties found in his residential
apartment unit in San Juan, then a town of Rizal province.
The herein private respondent Wong King Yuen however,
claims that Gan Hun is his boarder in the apartment unit
mentioned earlier and that the properties inside the apartment
unit levied by the provincial sheriff belong to him and not to
Gan Hun.
Thus, on October 18, 1973, the private respondent filed a
Complaint for damages with the then Court of First Instance
(CFI) of Rizal against the provincial sheriff. The suit was
docketed as Civil Case No. 18460. The amount of money
involved in the said case is about P24,680.00.
As sought by the private respondent, the CFI, with the herein
respondent Judge Emilio V. Salas presiding therein, issued an
injunctive writ restraining the provincial sheriff from
proceeding with the sale of the properties in question.
After having been allowed by the CFI to intervene in Civil
Case No. 18460, the petitioner labor organization sought to
dismiss the Complaint on the ground that the said court had
no jurisdiction over the case filed by the private
respondent.1 The petitioner argued that Civil Case No. 18460
relates to an existing labor dispute and as such the proper
forum for the same is the industrial court.
In an Order dated July 9, 1974, the CFI denied the Motion to
Dismiss filed by the petitioner. 2 The petitioner sought a
reconsideration of the said case but did not succeed in doing
so. 3
On August 8, 1974, the petitioner elevated the case to this
Court by way of the instant Petition.4 The petitioner maintains
its stand that the CFI has no jurisdiction over Civil Case No.
18460.
In an Answer filed with this Court on August 29, 1974, the
private respondent contends that Civil Case No. 18460 is not
a labor dispute recognizable by the industrial court. The
private respondent points out that Civil Case No. 18460 is an
ordinary civil action for damages against the provincial
sheriff and directed against the sheriffs bond required under
Section 17, Rule 39 of the Rules of Court. The private
respondent adds that it is an entirely separate proceeding
distinct from the labor case filed with the CIR and that,
accordingly, it is the Court of First Instance which has
jurisdiction over the same.5
After a careful examination of the entire record of the case,
We find that instant Petition to be devoid of merit.
The sole issue in this case is whether or not the CFI has the
jurisdiction to issue the injunctive relief questioned by the
petitioner. We rule in the affirmative.
It is clear that Civil Case No. 18460 is an ordinary civil action
for damages, not a labor dispute. The case is directed against
the provincial sheriff and the recovery of damages is sought
against the bond provided for Section 17, Rule 39 of the
Rules of Court governing execution and satisfaction of
judgments.
Even if the act complained of by the private respondent arose
from a labor dispute between the petitioner and another party,
the inevitable conclusion remains the same — there is no
labor dispute between the petitioner and the private
respondent. Civil Case No. 18460 has no direct bearing with
the case flied with the industrial court. The civil case remains
distinct from the labor dispute pending with the CIR.
Under Commonwealth Act No. 103, the law creating the
Court of Industrial Relations, the jurisdiction of the industrial
court is limited to labor disputes. i.e., problems and
controversies pertaining to the relationship between employer
and employee. Section I thereof provides as follows —
Sec. 1. Jurisdiction. — There is created a Court of Industrial
Relations hereinafter called the court, which shall have
jurisdiction over the entire Philippines to consider,
investigate, decide and settle all questions, matters,
controversies, or disputes arising between, and/or affecting
employers and employees or laborers, and regulate the
relations between them, . . . . (Emphasis supplied.)

From the foregoing, it is clear that the jurisdiction of the CIR

can be invoked only when there is a dispute arising between
or affecting employers and employees, or when an employer-
employee relationship exists between the parties.

There being no labor dispute between the petitioner and the

private respondent, the Court of First Instance 6 has the
jurisdiction to issue the injunctive relief sought by the private
respondent in Civil Case No. 18460.7 The latter case can
proceed independently of the case pending in the Court of
Industrial Relations. 8

Accordingly, the writ of certiorari sought by the petitioner

cannot issue.

WHEREFORE, in view of the foregoing, the instant Petition

for certiorari is hereby DISMISSED for lack of merit. We
make no pronouncement as to costs:

SO ORDERED.
G.R. No. 72644 December 14, 1987
ALFREDO F. PRIMERO, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DM
TRANSIT, respondents.
NARVASA, J.:
The question on which the petitioner's success in the instant
appeal depends, and to which he would have us give an
affirmative answer, is whether or not, having recovered
separation pay by judgment of the Labor Arbiter — which
held that he had been fired by respondent DM Transit
Corporation without just cause — he may subsequently
recover moral damages by action in a regular court, upon the
theory that the manner of his dismissal from employment was
tortious and therefore his cause of action was intrinsically
civil in nature.
Petitioner Primero was discharged from his employment as
bus driver of DM Transit Corporation (hereafter, simply DM)
in August, 1974 after having been employed therein for over
6 years. The circumstances attendant upon that dismissal are
recounted by the Court of Appeals 1 as follows:
Undisputably, since August 1, 1974, appellee's bus dispatcher
did not assign any bus to be driven by appellant Primero. No
reason or cause was given by the dispatcher to appellant for
not assigning a bus to the latter for 23 days (pp. 6-14, 21-22,
tsn, May 15, 1979).
Also, for 23 days, appellant was given a run-around from one
management official to another, pleading that he be allowed
to work as his family was in dire need of money and at the
same time inquiring (why) he was not allowed to work or
drive a bus of the company. Poor appellant did not only get
negative results but was given cold treatment, oftentimes
evaded and given confusing information, or ridiculed,
humiliated, or sometimes made to wait in the offices of some
management personnel of the appellee (pp. 2-29, tsn, May 15,
1979).
(The) General Manager and (the) Vice-President and
Treasurer ... wilfully and maliciously made said appellant ...
seesaw or ... go back and forth between them for not less than
ten (10) times within a period of 23 days ... but (he) got
negative results from both corporate officials. Worse, on the
23rd day of his ordeal appellant was suddenly told by
General Manager Briones to seek employment with other bus
companies because he was already dismissed from his job
with appellee (without having been) told of the cause of his
hasty and capricious dismissal ... (pp. 8, 11-13, 25, tsn, May
15, 1979).
Impelled to face the harsh necessities of life as a jobless
person and worried by his immediate need for money,
appellant pleaded with Corporate President Demetrio Munoz,
Jr. for his reinstatement and also asked P300.00 as financial
assistance, but the latter told the former that he (Munoz, Jr.)
will not give him even one centavo and that should appellant
sue him in court, then that will be the time President Munoz,
Jr. will pay him, if Munoz, Jr. loses the case x x (pp. 21-22,
tsn, May 15, 1979).
Appellant also advised (the) President of the oppressive, anti-
social and inhumane acts of subordinate officers ... (but)
Munoz, Jr. did nothing to resolve appellant's predicament and
... just told the latter to go back ... to ... Briones, who insisted
that appellant seek employment with other bus firms in Metro
Manila ... (but) admitted that the appellant has not violated
any company rule or regulation ... (pp. 23-26, tsn, May 15,
1979).
... In pursuance (of) defendant's determination to oppress
plaintiff and cause further loss, irreparable injury, prejudice
and damage, (D.M. Transit) in bad faith and with malice
persuaded other firms (California Transit, Pascual Lines, De
Dios Transit, Negrita Corporation, and MD Transit) not to
employ (appellant) in any capacity after he was already
unjustly dismissed by said defendant ... (paragraph 8 of
plaintiff's complaint).
These companies with whom appellant applied for a job
called up the D.M. Transit Office (which) ... told them ... that
they should not accept (appellant) because (he) was dismissed
from that Office.
Primero instituted proceedings against DM with the Labor
Arbiters of the Department of Labor, for illegal dismissal, and
for recovery of back wages and reinstatement. It is not clear
from the record whether these proceedings consisted of one or
two actions separately filed. What is certain is that he
withdrew his claims for back wages and reinstatement, "with
the end in view of filing a damage suit" "in a civil court which
has exclusive jurisdiction over his complaint for damages on
causes of action founded on tortious acts, breach of
employment contract ... and consequent effects (thereof ). 2
In any case, after due investigation, the Labor Arbiter
rendered judgment dated January 24, 1977 ordering DM to
pay complainant Primero P2,000.00 as separation pay in
accordance with the Termination Pay Law. 3 The judgment
was affirmed by the National Labor Relations Commission
and later by the Secretary of Labor, the case having been
concluded at this level on March 3, 1978. 4
Under the provisions of the Labor Code in force at that time,
Labor Arbiters had jurisdiction inter alia over —
1) claims involving non-payment or underpayment of wages,
overtime compensation, social security and medicare benefits,
and
2) all other cases or matters arising from employer-employee
relations, unless otherwise expressly excluded. 5
And we have since held that under these "broad and
comprehensive" terms of the law, Labor Arbiters possessed
original jurisdiction over claims for moral and other forms of
damages in labor disputes. 6
The jurisdiction of Labor Arbiters over such claims was
however removed by PD 1367, effective May 1, 1978, which
explicitly provided that "Regional Directors shall not indorse
and Labor Arbiters shall not entertain claims for moral or
other forms of damages." 7
Some three months afterwards, Primero brought suit against
DM in the Court of First Instance of Rizal seeking recovery
of damages caused not only by the breach of his employment
contract, but also by the oppressive and inhuman, and
consequently tortious, acts of his employer and its officers
antecedent and subsequent to his dismissal from employment
without just cause. 8
While this action was pending in the CFI, the law governing
the Labor Arbiters' jurisdiction was once again revised. The
amending act was PD 1691, effective May 1, 1980. It
eliminated the restrictive clause placed by PD 1367, that
Regional Directors shall not indorse and Labor Arbiters
entertain claims for moral or other forms of damages. And, as
we have had occasion to declare in several cases, it restored
the principle that "exclusive and original jurisdiction for
damages would once again be vested in labor arbiters;"
eliminated "the rather thorny question as to where in labor
matters the dividing line is to be drawn between the power
lodged in an administrative body and a court;' " and, "in the
interest of greater promptness in the disposition of labor
matters, ... spared (courts of) the often onerous task of
determining what essentially is a factual matter, namely, the
damages that may be incurred by either labor or management
as a result of disputes or controversies arising from employer-
employee relations." 9 Parenthetically, there was still another
amendment of the provision in question which, however, has
no application to the case at bar. The amendment was
embodied in B.P. Blg. 227, effective June 1, 1982. 10
On August 11, 1980 the Trial Court rendered judgment
dismissing the complaint on the ground of lack of jurisdiction,
for the reason that at the time that the complaint was filed. on
August 17, 1978, the law — the Labor Code as amended by
PD 1367, eff. May 1, 1978 — conferred exclusive, original
jurisdiction over claims for moral or other damages, not on
ordinary courts, but on Labor Arbiters.
This judgment was affirmed by the Intermediate Appellate
Court, by Decision rendered on June 29, 1984. This is the
judgment now subject of the present petition for review
on certiorari. The decision was reached by a vote of 3 to 2.
The dissenters, placing reliance on certain of our
pronouncements, opined that Primero's causes of action were
cognizable by the courts, that existence of employment
relations was not alone decisive of the issue of jurisdiction,
and that such relations may indeed give rise to "civil" as
distinguished from purely labor disputes, as where an
employer's right to dismiss his employee is exercised
tortiously, in a manner oppressive to labor, contrary to
morals, good customs or public policy. 11
Primero has appealed to us from this judgment of the IAC
praying that we overturn the majority view and sustain the
dissent.
Going by the literal terms of the law, it would seem clear that
at the time that Primero filed his complaints for illegal
dismissal and recovery of backwages, etc. with the Labor
Arbiter, the latter possessed original and exclusive
jurisdiction also over claims for moral and other forms of
damages; this, in virtue of Article 265 12 of PD 442,
otherwise known as the Labor Code, effective from May 1,
1974. In other words, in the proceedings before the Labor
Arbiter, Primero plainly had the right to plead and prosecute
a claim not only for the reliefs specified by the Labor
Code itself for unlawful termination of employment, but also
for moral or other damages under the Civil Code arising from
or connected with that termination of employment. And this
was the state of the law when he moved for the dismissal of
his claims before the Labor Arbiter, for reinstatement and
recovery of back wages, so that he might later file a damage
suit "in a civil court which has exclusive jurisdiction over his
complaint ... founded on tortious acts, breach of employment
contract ... and consequent effects (thereof)." 13
The legislative intent appears clear to allow recovery in
proceedings before Labor Arbiters of moral and other forms
of damages, in all cases or matters arising from employer-
employee relations. This would no doubt include, particularly,
instances where an employee has been unlawfully dismissed.
In such a case the Labor Arbiter has jurisdiction to award to
the dismissed employee not only the reliefs specifically
provided by labor laws, but also moral and other forms of
damages governed by the Civil Code. Moral damages would
be recoverable, for example, where the dismissal of the
employee was not only effected without authorized cause
and/or due process for which relief is granted by the Labor
Code — but was attended by bad faith or fraud, or constituted
an act oppressive to labor, or was done in a manner contrary
to morals, good customs or public policy 14 — for which the
obtainable relief is determined by the Civil Code 15 (not the
Labor Code). Stated otherwise, if the evidence adduced by the
employee before the Labor Arbiter should establish that the
employer did indeed terminate the employee's services
without just cause or without according him due process, the
Labor Arbiter's judgment shall be for the employer to
reinstate the employee and pay him his back wages or,
exceptionally, for the employee simply to receive separation
pay. These are reliefs explicitly prescribed by the Labor
Code. 16 But any award of moral damages by the Labor
Arbiter obviously cannot be based on the Labor Code but
should be grounded on the Civil Code. Such an award cannot
be justified solely upon the premise (otherwise sufficient for
redress under the Labor Code) that the employer fired his
employee without just cause or due process. Additional facts
must be pleaded and proven to warrant the grant of moral
damages under the Civil Code, these being, to repeat, that the
act of dismissal was attended by 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, grave anxiety, etc., resulted
therefrom. 17
It is clear that the question of the legality of the act of
dismissal is intimately related to the issue of the legality
of the manner by which that act of dismissal was
performed. But while the Labor Code treats of the nature of,
and the remedy available as regards the first — the
employee's separation from employment — it does not at all
deal with the second — the manner of that separation —
which is governed exclusively by the Civil Code. In
addressing the first issue, the Labor Arbiter applies the Labor
Code; in addressing the second, the Civil Code. And this
appears to be the plain and patent intendment of the law. For
apart from the reliefs expressly set out in the Labor Code
flowing from illegal dismissal from employment, no
other damages may be awarded to an illegally dismissed
employee other than those specified by the Civil Code.
Hence, the fact that the issue-of whether or not moral or other
damages were suffered by an employee and in the affirmative,
the amount that should properly be awarded to him in the
circumstances-is determined under the provisions of the Civil
Code and not the Labor Code, obviously was not meant to
create a cause of action independent of that for illegal
dismissal and thus place the matter beyond the Labor
Arbiter's jurisdiction.
Thus, an employee who has been illegally dismissed (i.e.,
discharged without just cause or being accorded due process),
in such a manner as to cause him to suffer moral damages (as
determined by the Civil Code), has a cause of action for
reinstatement and recovery of back wages and damages.
When he institutes proceedings before the Labor Arbiter, he
should make a claim for all said reliefs. He cannot, to be sure,
be permitted to prosecute his claims piecemeal. He cannot
institute proceedings separately and contemporaneously in a
court of justice upon the same cause of action or a part
thereof. He cannot and should not be allowed to sue in two
forums: one, before the Labor Arbiter for reinstatement and
recovery of back wages, or for separation pay, upon the
theory that his dismissal was illegal; and two, before a court
of justice for recovery of moral and other damages, upon the
theory that the manner of his dismissal was unduly injurious,
or tortious. This is what in procedural law is known as
splitting causes of action, engendering multiplicity of actions.
It is against such mischiefs that the Labor Code amendments
just discussed are evidently directed, and it is such duplicity
which the Rules of Court regard as ground for abatement or
dismissal of actions, constituting either litis pendentia (auter
action pendant) or res adjudicata, as the case may be. 18 But
this was precisely what Primero's counsel did. He split
Primero's cause of action; and he made one of the split parts
the subject of a cause of action before a court of justice.
Consequently, the judgment of the Labor Arbiter granting
Primero separation pay operated as a bar to his subsequent
action for the recovery of damages before the Court of First
Instance under the doctrine of res judicata, The rule is that the
prior "judgment or order is, with respect to the matter directly
adjudged or as to any other matter that could have been
raised in relation thereto, conclusive between the parties and
their successors in interest by title subsequent to the
commencement of the action or special proceeding, litigating
for the same thing and under the same title and in the same
capacity. 19
We are not unmindful of our previous rulings on the matter
cited in the dissent to the decision of the Court of Appeals
subject of the instant petition, 20 notably, Quisaba v. Sta Ines-
Melale Veneer & Plywood Inc., where a distinction was
drawn between the right of the employer to dismiss an
employee, which was declared to be within the competence of
labor agencies to pass upon, and the "manner in which the
right was exercised and the effects flowing therefrom,"
declared to be a matter cognizable only by the regular courts
because "intrinsically civil." 21 We opine that it is this very
distinction which the law has sought to eradicate as being so
tenuous and so difficult to observe, 22 and, of course, as herein
pointed out, as giving rise to split jurisdiction, or to
multiplicity of actions, "a situation obnoxious to the orderly
administration of justice. 23 Actually we merely reiterate in
this decision the doctrine already laid down in other cases
(Garcia v. Martinez, 84 SCRA 577; Ebon v. de Guzman, 13
SCRA 52; Bengzon v. Inciong, 91 SCRA 248; Pepsi-Cola
Bottling Co. v. Martinez, 112 SCRA 578; Aguda v. Vallejos,
113 SCRA 69; Getz v. C.A., 116 SCRA 86; Cardinal
Industries v. Vallejos, 114 SCRA 471; Sagmit v. Sibulo, 133
SCRA 359) to the effect that the grant of jurisdiction to the
Labor Arbiter by Article 217 of the Labor Code is sufficiently
comprehensive to include claims for moral and exemplary
damages sought to be recovered from an employer by an
employee upon the theory of his illegal dismissal. Rulings to
the contrary are deemed abandoned or modified accordingly.

WHEREFORE, the petition is DISMISSED, without

pronouncement as to costs.