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SECOND DIVISION During the pre-election conference on January 18, 1990, PICOP questioned

and objected to the inclusion of some section heads and supervisors in the
[G. R. No.101738. April 12, 2000] list of voters whose positions it averred were reclassified as managerial
employees in the light of the reorganization effected by it.[16] Under the
Revised Organizational Structure of the PICOP, the company was divided
PAPER INDUSTRIES CORPORATION OF THE into four (4) main business groups, namely: Paper Products Business,
PHILIPPINES, petitioner, vs. HON. BIENVENIDO E. LAGUESMA, Timber Products Business, Forest Resource Business and Support Services
Undersecretary of Labor and Employment, HON. HENRY PABEL, Business. A vice- president or assistant vice-president heads each of these
Director of the Department of Labor and Employment Regional Office business groups. A division manager heads the divisions comprising each
No. XI and/or the Representation Officer of the Industrial Relations business group. A department manager heads the departments comprising
Division who will act for and in his behalf, PCOP- BISLIG each division. Section heads and supervisors, now called section managers
SUPERVISORY AND TECHNICAL STAFF EMPLOYEES UNION, and unit managers, head the sections and independent units, respectively,
ASSOCIATED LABOR UNION and FEDERATION OF FREE
comprising each department.[17] PICOP advanced the view that considering
WORKERS, respondents.
the alleged present authority of these section managers and unit managers
to hire and fire, they are classified as managerial employees, and hence,
DECISION ineligible to form or join any labor organization.[18] Mani kx

DE LEON, JR., J.: Miso Following the submission by the parties of their respective position
papers[19] and evidence[20] on this issue, Med-Arbiter Phibun D. Pura issued
Before us is a petition for certiorari seeking to annul the Resolution[1] and the an Order[21] dated March 27, 1990, holding that supervisors and section
Order[2] dated April 17, 1991 and August 7, 1991, respectively, of public heads of the petitioner are managerial employees and therefore excluded
respondent Bienvenido E. Laguesma, acting then as Undersecretary, now from the list of voters for purposes of certification election.
the Secretary, of the Department of Labor and Employment (DOLE), which
reversed the Order dated March 27, 1990[3] of Med-Arbiter Phibun D. Pura PBSTSEU appealed[22] the Order of the Med-Arbiter to the Office of the
declaring that supervisors and section heads of petitioner under its new Secretary, DOLE. ALU likewise appealed.[23] PICOP submitted evidence
organizational structure are managerial employees and should be excluded militating against the appeal.[24] Public respondent Bienvenido E. Laguesma,
from the list of voters for the purpose of a certification election among acting as the then Undersecretary of Labor, issued the assailed
supervisory and technical staff employees of petitioner.[4] Order[25] dated April 17, 1991 setting aside the Order dated March 27, 1990
of the Med-Arbiter and declaring that the subject supervisors and section
The facts of the case are the following: heads are supervisory employees eligible to vote in the certification election.

Petitioner Paper Industries Corporation of the Philippines (PICOP) is PICOP sought[26] reconsideration of the Order dated April 7, 1991. However,
engaged in the manufacture of paper and timber products, with principal public respondent in his Order[27] dated August 7, 1991 denied PICOP's
place of operations at Tabon, Bislig, Surigao del Sur. It has over motion for reconsideration.
9,000[5] employees, 944[6] of whom are supervisory and technical staff
employees. More or less 487 of these supervisory and technical staff Hence, this petition.
employees are signatory members of the private respondent PICOP-Bislig
Supervisory and Technical Staff Employees Union (PBSTSEU).[7]
PICOP anchors its petition on two (2) grounds, to wit: Maniks

On August 9, 1989. PBSTSEU instituted a Petition[8] for Certification Election


I.
to determine the sole and exclusive bargaining agent of the supervisory and
technical staff employees of PICOP for collective bargaining agreement
(CBA) purposes. THE PUBLIC RESPONDENT HONORABLE
BIENVENIDO E. LAGUESMA, UNDERSECRETARY
OF LABOR AND EMPLOYMENT, IN A CAPRICIOUS,
In a Notice[9] dated August 10, 1989, the initial hearing of the petition was
ARBITRARY AND WHIMSICAL EXERCISE OF
set on August 18, 1989 but it was reset to August 25, 1989, at the instance of
POWER ERRED AND COMMITTED GRAVE ABUSE
PICOP, as it requested a fifteen (15) day period within which to file its
OF DISCRETION, TANTAMOUNT TO ACTING
comments and/or position paper. But PICOP failed to file any comment or
WITHOUT OR IN EXCESS OF JURISDICTION WHEN
position paper. Meanwhile, private respondents Federation of Free Workers
HE DENIED YOUR PETITIONER'S PLEA TO
(FFW) and Associated Labor Union (ALU) filed their respective petitions for
PRESENT ADDITIONAL EVIDENCE TO PROVE
intervention.
THAT SOME OF ITS MANAGERIAL EMPLOYEES
ARE DISQUALIFIED FROM JOINING OR FORMING
On September 14, 1989, Med-Arbiter Arturo L. Gamolo issued an A UNION REPRESENTED BY CO-RESPONDENT
Order[10] granting the petitions for interventions of the FFW and ALU. PBSTSEU, IN VIEW OF A SUPERVENING EVENT
Another Order[11] issued on the same day set the holding of a certification BROUGHT ABOUT BY THE CHANGES IN THE
election among PICOP's supervisory and technical staff employees in ORGANIZATIONAL STRUCTURE OF YOUR
Tabon, Bislig, Surigao del Sur, with four (4) choices, namely: (1) PBSTSEU; PETITIONER WHICH WAS FULLY IMPLEMENTED
(2) FFW; (3) ALU; and (4) no union. Nex old IN JANUARY 1991 AFTER THE CASE WAS
ELEVATED ON APPEAL AND SUBMITTED FOR
On September 21, 1989, PICOP appealed[12] the Order which set the holding DECISION.
of the certification election contending that the Med-Arbiter committed
grave abuse of discretion in deciding the case without giving PICOP the II.
opportunity to file its comments/answer, and that PBSTSEU had no
personality to file the petition for certification election.
THE PUBLIC RESPONDENT, HONORABLE
BIENVENIDO E. LAGUESMA, ALSO ERRED AND
After PBSTSEU filed its Comments[13] to petitioner's appeal, the Secretary of COMMITTED GRAVE ABUSE OF DISCRETION,
the Labor[14] issued a Resolution[15] dated November 17, 1989 which upheld TANTAMOUNT TO ARBITRARILY ACTING
the Med-Arbiter's Order dated September 17, 1989, with modification WITHOUT OR IN EXCESS OF JURISDICTION WHEN
allowing the supervising and staff employees in Cebu, Davao and Iligan HE TOTALLY DISREGARDED THE DOCUMENTARY
City to participate in the certification election. EVIDENCE SO FAR SUBMITTED BY YOUR
PETITIONER AND RELIED MAINLY ON THE
UNSUBSTANTIATED CLAIM AND MERE Finally, considering all the foregoing, the fact that PICOP voiced out its
ALLEGATIONS OF PRIVATE RESPONDENT, objection to the holding of certification election, despite numerous
PBSTSEU, THAT THE REORGANIZATION OF YOUR opportunities to ventilate the same, only after respondent Undersecretary of
PETITIONER WAS A SHAM AND CALCULATED Labor affirmed the holding thereof, simply bolstered the public
MERELY TO FRUSTRATE THE UNIONIZATION OF respondents' conclusion that PICOP raised the issue merely to prevent and
YOUR PETITIONER'S SUPERVISORY PERSONNEL; thwart the concerned section heads and supervisory employees from
AND SOLELY ON THIS BASIS, DENIED YOUR exercising a right granted them by law. Needless to stress, no obstacle must
PETITIONER'S URGENT MOTION FOR be placed to the holding of certification elections, for it is a statutory policy
RECONSIDERATION.[28] Manikan that should not be circumvented.[40]

PICOP's main thesis is that the positions Section Heads and Supervisors, WHEREFORE, the petition is hereby DISMISSED, and the Resolution and
who have been designated as Section Managers and Unit Managers, as the Order of public respondent Bienvenido E. Laguesma dated April 17, 1991
case may be, were converted to managerial employees under the and August 17, 1991, respectively, finding the subject supervisors and
decentralization and reorganization program it implemented in 1989. Being section heads as supervisory employees eligible to vote in the certification
managerial employees, with alleged authority to hire and fire employees, election are AFFIRMED. Costs against petitioner.
they are ineligible for union membership under Article 245[29] of the Labor
Code. Furthermore, PICOP contends that no malice should be imputed SO ORDERED.
against it for implementing its decentralization program only after the
petition for certification election was filed inasmuch as the same is a valid
exercise of its management prerogative, and that said program has long
been in the drawing boards of the company, which was realized only in
1989 and fully implemented in 1991. PICOP emphatically stresses that it THIRD DIVISION
could not have conceptualized the decentralization program only for the
purpose of "thwarting the right of the concerned employees to self- TUNAY NA PAGKAKAISA NG G.R. No. 162025
organization." MANGGAGAWA
SA ASIABREWERY, Present:
The petition, not being meritorious, must fail and the same should be as it is Petitioner,
hereby dismissed. CARPIO MORALES, J.,
Chairperson,
- versus - BRION,
First. In United Pepsi-Co/a Supervisory Union (UPSU) v. Laguesma,[30] we BERSAMIN,
had occasion to elucidate on the term "managerial employees." Managerial ABAD,* and
employees are ranked as Top Managers, Middle Managers and First Line VILLARAMA, JR., JJ.
Managers. Top and Middle Managers have the authority to devise,
implement and control strategic and operational policies while the task of ASIA BREWERY, INC., Promulgated:
First-Line Managers is simply to ensure that such policies are carried out by Respondent.
the rank-and- file employees of an organization. Under this distinction, August 3, 2010
"managerial employees" therefore fall in two (2) categories, namely, the x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
"managers" per se composed of Top and Middle Managers, and the
"supervisors" composed of First-Line Managers.[31] Thus, the mere fact that DECISION
an employee is designated manager" does not ipso facto make him one.
Designation should be reconciled with the actual job description of the VILLARAMA, JR., J.:
employee,[32] for it is the job description that determines the nature of For resolution is an appeal by certiorari filed by petitioner under Rule 45 of
employment.[33] Oldmis o the 1997 Rules of Civil Procedure, as amended, assailing the
Decision[1] dated November 22, 2002 and Resolution[2] dated January 28,
In the petition before us, a thorough dissection of the job description[34] of 2004 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 55578,
the concerned supervisory employees and section heads indisputably show granting the petition of respondent company and reversing the Voluntary
that they are not actually managerial but only supervisory employees since Arbitrators Decision[3] dated October 14, 1999.
they do not lay down company policies. PICOP's contention that the subject
section heads and unit managers exercise the authority to hire and fire[35] is The facts are:
ambiguous and quite misleading for the reason that any authority they
exercise is not supreme but merely advisory in character. Theirs is not a Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale
final determination of the company policies inasmuch as any action taken and distribution of beer, shandy, bottled water and glass products. ABI
by them on matters relative to hiring, promotion, transfer, suspension and entered into a Collective Bargaining Agreement (CBA),[4] effective for five
termination of employees is still subject to confirmation and approval by (5) years from August 1, 1997to July 31, 2002, with Bisig at Lakas ng mga
their respective superior.[36] Thus, where such power, which is in effect Manggagawa sa Asia-Independent (BLMA-INDEPENDENT), the exclusive
recommendatory in character, is subject to evaluation, review and final bargaining representative of ABIs rank-and-file employees. On October 3,
action by the department heads and other higher executives of the
2000, ABI and BLMA-INDEPENDENT signed a renegotiated CBA effective
company, the same, although present, is not effective and not an exercise of
from August 1, 2000 to 31 July 2003.[5]
independent judgment as required by law.[37]
Article I of the CBA defined the scope of the bargaining unit, as follows:
Second. No denial of due process can be ascribed to public respondent
Undersecretary Laguesma for the latter's denial to allow PICOP to present Section 1. Recognition. The COMPANY recognizes the UNION as the sole
additional evidence on the implementation of its program inasmuch as in and exclusive bargaining representative of all the regular rank-and-file
the appeal before the said public respondent, PICOP even then had already daily paid employees within the scope of the appropriate bargaining unit
submitted voluminous supporting documents.[38] The record of the case is with respect to rates of pay, hours of work and other terms and conditions
replete with position papers and exhibits that dealt with the main thesis it of employment. The UNION shall not represent or accept for membership
relied upon. What the law prohibits is the lack of opportunity to be employees outside the scope of the bargaining unit herein defined.
heard.[39] PICOP has long harped on its contentions and these were dealt
upon and resolved in detail by public respondent Laguesma. We see no Section 2. Bargaining Unit. The bargaining unit shall be comprised of all
reason or justification to deviate from his assailed resolutions for the reason regular rank-and-file daily-paid employees of the COMPANY. However,
that law and jurisprudence aptly support them. the following jobs/positions as herein defined shall be excluded from the
bargaining unit, to wit:
1. Managers SO ORDERED.[10]

2. Assistant Managers BLMA-INDEPENDENT filed a motion for reconsideration. In the


meantime, a certification election was held on August 10, 2002 wherein
3. Section Heads petitioner Tunay na Pagkakaisa ng Manggagawa sa Asia (TPMA) won. As the
incumbent bargaining representative of ABIs rank-and-file employees
4. Supervisors
claiming interest in the outcome of the case, petitioner filed with the CA an
5. Superintendents omnibus motion for reconsideration of the decision and intervention, with
attached petition signed by the union officers.[11]Both motions were denied
6. Confidential and Executive Secretaries by the CA.[12]

7. Personnel, Accounting and Marketing Staff The petition is anchored on the following grounds:

8. Communications Personnel (1)

9. Probationary Employees THE COURT OF APPEALS ERRED IN RULING THAT THE 81


EMPLOYEES ARE EXCLUDED FROM AND ARE NOT ELIGIBLE FOR
10. Security and Fire Brigade Personnel INCLUSION IN THE BARGAINING UNIT AS DEFINED IN SECTION 2,
ARTICLE 1 OF THE CBA[;]
11. Monthly Employees
(2)
12. Purchasing and Quality Control Staff[6] [EMPHASIS SUPPLIED.]
THE COURT OF APPEALS ERRED IN HOLDING THAT THE 81
Subsequently, a dispute arose when ABIs management stopped deducting
EMPLOYEES CANNOT VALIDLY BECOME UNION MEMBERS, THAT
union dues from eighty-one (81) employees, believing that their
THEIR MEMBERSHIP IS VIOLATIVE OF THE CBA AND THAT THEY
membership in BLMA-INDEPENDENT violated the CBA. Eighteen (18) of
SHOULD DISAFFILIATE FROM RESPONDENT;
these affected employees are QA Sampling Inspectors/Inspectresses and
Machine Gauge Technician who formed part of the Quality Control (3)
Staff. Twenty (20) checkers are assigned at the Materials Department of the
Administration Division, Full Goods Department of the Brewery Division THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT
and Packaging Division. The rest are secretaries/clerks directly under their PETITIONER (NOW PRIVATE RESPONDENT) HAS NOT COMMITTED
respective division managers.[7] ANY ACT THAT RESTRAINED OR TENDED TO RESTRAIN ITS
EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO SELF-
BLMA-INDEPENDENT claimed that ABIs actions restrained the employees ORGANIZATION.[13]
right to self-organization and brought the matter to the grievance
machinery. As the parties failed to amicably settle the controversy, BLMA- Although Article 245 of the Labor Code limits the ineligibility to join, form
INDEPENDENT lodged a complaint before the National Conciliation and and assist any labor organization to managerial employees, jurisprudence
Mediation Board (NCMB). The parties eventually agreed to submit the case has extended this prohibition to confidential employees or those who by
for arbitration to resolve the issue of [w]hether or not there is restraint to reason of their positions or nature of work are required to assist or act in a
employees in the exercise of their right to self-organization.[8] fiduciary manner to managerial employees and hence, are likewise privy to
sensitive and highly confidential records.[14] Confidential employees are
In his Decision, Voluntary Arbitrator Bienvenido Devera sustained the thus excluded from the rank-and-file bargaining unit.The rationale for their
BLMA-INDEPENDENT after finding that the records submitted by ABI separate category and disqualification to join any labor organization is
showed that the positions of the subject employees qualify under the rank- similar to the inhibition for managerial employees because if allowed to be
and-file category because their functions are merely routinary and affiliated with a Union, the latter might not be assured of their loyalty in
clerical. He noted that the positions occupied by the checkers and view of evident conflict of interests and the Union can also become
secretaries/clerks in the different divisions are not managerial or company-denominated with the presence of managerial employees in the
supervisory, as evident from the duties and responsibilities assigned to Union membership.[15] Having access to confidential information,
them. With respect to QA Sampling Inspectors/Inspectresses and Machine confidential employees may also become the source of undue
Gauge Technician, he ruled that ABI failed to establish with sufficient advantage. Said employees may act as a spy or spies of either party to a
clarity their basic functions as to consider them Quality Control Staff who collective bargaining agreement.[16]
were excluded from the coverage of the CBA. Accordingly, the subject
employees were declared eligible for inclusion within the bargaining unit In Philips Industrial Development, Inc. v. NLRC,[17] this Court held that
represented by BLMA-INDEPENDENT.[9] petitioners division secretaries, all Staff of General Management, Personnel
and Industrial Relations Department, Secretaries of Audit, EDP and
On appeal, the CA reversed the Voluntary Arbitrator, ruling that: Financial Systems are confidential employees not included within the rank-
and-file bargaining unit.[18] Earlier, in Pier 8 Arrastre & Stevedoring Services,
WHEREFORE, foregoing premises considered, the questioned decision of
Inc. v. Roldan-Confesor,[19] we declared that legal secretaries who are tasked
the Honorable Voluntary Arbitrator Bienvenido De Vera is hereby
with, among others, the typing of legal documents, memoranda and
REVERSED and SET ASIDE, and A NEW ONE ENTERED DECLARING
correspondence, the keeping of records and files, the giving of and
THAT:
receiving notices, and such other duties as required by the legal personnel
a) the 81 employees are excluded from and are not eligible for inclusion in of the corporation, fall under the category of confidential employees and
the bargaining unit as defined in Section 2, Article I of the CBA; hence excluded from the bargaining unit composed of rank-and-file
employees.[20]
b) the 81 employees cannot validly become members of respondent and/or
if already members, that their membership is violative of the CBA and that Also considered having access to vital labor information are the executive
they should disaffiliate from respondent; and secretaries of the General Manager and the executive secretaries of the
Quality Assurance Manager, Product Development Manager, Finance
c) petitioner has not committed any act that restrained or tended to restrain Director, Management System Manager, Human Resources Manager,
its employees in the exercise of their right to self-organization. Marketing Director, Engineering Manager, Materials Manager and
Production Manager.[21]
NO COSTS.
In the present case, the CBA expressly excluded Confidential and Executive 3. Menil, Bottling Mr. Julius Palmares
Secretaries from the rank-and-file bargaining unit, for which reason ABI Emmanuel S. Production
seeks their disaffiliation from petitioner. Petitioner, however, maintains that
except for Daisy Laloon, Evelyn Mabilangan and Lennie Saguan who had 4. Nevalga, Bottling Mr. Julius Palmares
been promoted to monthly paid positions, the following secretaries/clerks Marcelo G. Production
are deemed included among the rank-and-file employees of ABI:[22]

NAME DEPARTMENT IMMEDIATE SUPERIOR


1. Mapola, Ma. Bottling Mr. Ernesto Ang
Esraliza T. Maintenance

C1 ADMIN 2. Velez, Bottling Mr. Ernesto Ang


DIVISION Carmelito A. Maintenance

1. Angeles, Transportation Mr. Melito K. Tan


Cristina C. 1. Bordamonte, Bottled Water Mr. Faustino Tetonche
Rhumela D.
2. Barraquio, Transportation Mr. Melito K. Tan
Carina P. 2. Deauna, Edna Bottled Water Mr. Faustino Tetonche
R.
3. Cabalo, Marivic Transportation Mr. Melito K. Tan
B. 3. Punongbayan, Bottled Water Mr. Faustino Tetonche
Marylou F.
4. Fameronag, Transportation Mr. Melito K. Tan
Leodigario C. 4. Saguan, Lennie Bottled Water Mr. Faustino Tetonche
Y.

1. Abalos, Andrea Materials Mr. Andres G. Co


A. 1. Alcoran, Full Goods Mr. Tsoi Wah Tung
Simeon A.
2. Algire, Juvy L. Materials Mr. Andres G. Co
2. Cervantes, Ma. Full Goods Mr. Tsoi Wah Tung
3. Anouevo, Materials Mr. Andres G. Co Sherley Y.
Shirley P.
3. Diongco, Ma. Full Goods Mr. Tsoi Wah Tung
4. Aviso, Rosita S. Materials Mr. Andres G. Co Teresa M.

5. Barachina, Materials Mr. Andres G. Co 4. Mabilangan, Full Goods Mr. Tsoi Wah Tung
Pauline C. Evelyn M.

6. Briones, Materials Mr. Andres G. Co 5. Rivera, Aurora Full Goods Mr. Tsoi Wah Tung
Catalina P. M.

7. Caralipio, Materials Mr. Andres G. Co 6. Salandanan, Full Goods Mr. Tsoi Wah Tung
Juanita P. Nancy G.

8. Elmido, Ma. Materials Mr. Andres G. Co


Rebecca S.
1. Magbag, Ma. Tank Farm/ Mr. Manuel Yu Liat
9. Giron, Laura P. Materials Mr. Andres G. Co Corazon C.
Cella Services
10. Mane, Edna A. Materials Mr. Andres G. Co

1. Capiroso, Quality Ms. Regina Mirasol


xxxx Francisca A. Assurance

C2 BREWERY 1. Alconaba, Engineering Mr. Clemente Wong


DIVISION Elvira C.

2. Bustillo, Electrical Mr. Jorge Villarosa


Bernardita E.
1. Laloon, Daisy Brewhouse Mr. William Tan
S. 3. Catindig, Ruel Civil Works Mr. Roger Giron
A.

4. Sison, Claudia Utilities Mr. Venancio


1. Arabit, Myrna Bottling Mr. Julius Palmares B. Alconaba
F. Production

2. Burgos, Bottling Mr. Julius Palmares


Adelaida D. Production xxxx
Consequently, we hold that the twenty (20) checkers may not be considered
confidential employees under the category of Quality Control Staff who
C3 PACKAGING were expressly excluded from the CBA of the rank-and-file bargaining unit.
DIVISION
Confidential employees are defined as those who (1) assist or act in a
confidential capacity, (2) to persons who formulate, determine, and effectuate
management policies in the field of labor relations. The two (2) criteria are
1. Alvarez, Ma. GP Ms. Susan Bella
cumulative, and both must be met if an employee is to be considered a
Luningning L. Administration
confidential employee that is, the confidential relationship must exist between
2. Caiza, Alma A. GP Technical Mr. Chen Tsai Tyan the employee and his supervisor, and the supervisor must handle the
prescribed responsibilities relating to labor relations. The exclusion from
3. Cantalejo, Aida GP Engineering Mr. Noel Fernandez bargaining units of employees who, in the normal course of their duties,
S. become aware of management policies relating to labor relations is a principal
objective sought to be accomplished by the confidential employee
4. Castillo, Ma. GP Production Mr. Tsai Chen Chih rule.[26] There is no showing in this case that the secretaries/clerks and
Riza R. checkers assisted or acted in a confidential capacity to managerial employees
and obtained confidential information relating to labor relations policies. And
5. Lamadrid, GP Production Mr. Robert Bautista
even assuming that they had exposure to internal business operations of the
Susana C.
company, respondent claimed, this is not per se ground for their exclusion in
6. Mendoza, GP Technical Mr. Mel Oa the bargaining unit of the daily-paid rank-and-file employees.[27]
Jennifer L.
Not being confidential employees, the secretaries/clerks and checkers are
As can be gleaned from the above listing, it is rather curious that there not disqualified from membership in the Union of respondents rank-and-
would be several secretaries/clerks for just one (1) department/division file employees. Petitioner argues that respondents act of unilaterally
performing tasks which are mostly routine and clerical. Respondent insisted stopping the deduction of union dues from these employees constitutes
they fall under the Confidential and Executive Secretaries expressly unfair labor practice as it restrained the workers exercise of their right to
excluded by the CBA from the rank-and-file bargaining unit. However, self-organization, as provided in Article 248 (a) of the Labor Code.
perusal of the job descriptions of these secretaries/clerks reveals that their
Unfair labor practice refers to acts that violate the workers right to organize.
assigned duties and responsibilities involve routine activities of recording
The prohibited acts are related to the workers right to self organization and
and monitoring, and other paper works for their respective departments
to the observance of a CBA. For a charge of unfair labor practice to prosper,
while secretarial tasks such as receiving telephone calls and filing of office
it must be shown that ABI was motivated by ill will, bad faith, or fraud, or
correspondence appear to have been commonly imposed as additional
was oppressive to labor, or done in a manner contrary to morals, good
duties.[23] Respondent failed to indicate who among these numerous
customs, or public policy, and, of course, that social humiliation, wounded
secretaries/clerks have access to confidential data relating to management
feelings or grave anxiety resulted x x x[28] from ABIs act in discontinuing the
policies that could give rise to potential conflict of interest with their Union
union dues deduction from those employees it believed were excluded by
membership. Clearly, the rationale under our previous rulings for the
the CBA. Considering that the herein dispute arose from a simple
exclusion of executive secretaries or division secretaries would have little or no
disagreement in the interpretation of the CBA provision on excluded
significance considering the lack of or very limited access to confidential
employees from the bargaining unit, respondent cannot be said to have
information of these secretaries/clerks. It is not even farfetched that the job
committed unfair labor practice that restrained its employees in the exercise
category may exist only on paper since they are all daily-paid
of their right to self-organization, nor have thereby demonstrated an anti-
workers. Quite understandably, petitioner had earlier expressed the view
union stance.
that the positions were just being reclassified as these employees actually
discharged routine functions. WHEREFORE, the petition is GRANTED. The Decision dated November
22, 2002 and Resolution dated January 28, 2004 of the Court of Appeals in
We thus hold that the secretaries/clerks, numbering about forty (40), are
CA-G.R. SP No. 55578 are hereby REVERSED and SET ASIDE. The
rank-and-file employees and not confidential employees.
checkers and secretaries/clerks of respondent company are hereby declared
With respect to the Sampling Inspectors/Inspectresses and the Gauge rank-and-file employees who are eligible to join the Union of the rank-and-
Machine Technician, there seems no dispute that they form part of the file employees.
Quality Control Staff who, under the express terms of the CBA, fall under a
No costs.
distinct category. But we disagree with respondents contention that the
twenty (20) checkers are similarly confidential employees being quality SO ORDERED.
control staff entrusted with the handling and custody of company
properties and sensitive information.

Again, the job descriptions of these checkers assigned in the storeroom ECOND DIVISION
section of the Materials Department, finishing section of the Packaging [G.R. No. 110399. August 15, 1997]
Department, and the decorating and glass sections of the Production
SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT
Department plainly showed that they perform routine and mechanical tasks
UNION AND ERNESTO L. PONCE, President, petitioners,
preparatory to the delivery of the finished products.[24] While it may be vs. HONARABLE BIENVENIDO E. LAGUESMA IN HIS
argued that quality control extends to post-production phase -- proper CAPACITY AS UNDERSECRETARY OF LABOR AND
packaging of the finished products -- no evidence was presented by the EMPLOYMENT, HONORABLE DANILO L. REYNANTE IN
respondent to prove that these daily-paid checkers actually form part of the HIS CAPACITY AS MED-ARBITER AND SAN MIGUEL
companys Quality Control Staff who as such were exposed to sensitive, CORPORATION, respondents.
vital and confidential information about [companys] products or have
knowledge of mixtures of the products, their defects, and even their DECISION
formulas which are considered trade secrets. Such allegations of respondent
must be supported by evidence.[25] ROMERO, J.:

This is a Petition for Certiorari with Prayer for the Issuance of


Preliminary Injunction seeking to reverse and set aside the Order of public
respondent, Undersecretary of the Department of Labor and Employment, There is no question that the said employees, supervisors and the
Bienvenido E. Laguesma, dated March 11, 1993, in Case No. OS MA A-2-70- exempt employees, are not vested with the powers and prerogatives to lay
91[1] entitled In Re: Petition for Certification Election Among the Supervisory down and execute management policies and/or to hire, transfer, suspend,
and Exempt Employees of the San Miguel Corporation Magnolia Poultry layoff, recall, discharge or dismiss employees.They are, therefore, not
Plants of Cabuyao, San Fernando and Otis, San Miguel Corporation qualified to be classified as managerial employees who, under Article 245[4] of
Supervisors and Exempt Union, Petitioner. The Order excluded the the Labor Code, are not eligible to join, assist or form any labor
employees under supervisory levels 3 and 4 and the so-called exempt organization. In the very same provision, they are not allowed membership
employees from the proposed bargaining unit and ruled out their in a labor organization of the rank-and-file employees but may join, assist or
participation in the certification election. form separate labor organizations of their own. The only question that need
be addressed is whether these employees are properly classified as
The antecedent facts are undisputed: confidential employees or not.
On October 5, 1990, petitioner union filed before the Department of Confidential employees are those who (1) assist or act in a confidential
Labor and Employment (DOLE) a Petition for District Certification or capacity, (2) to persons who formulate, determine, and effectuate
Certification Election among the supervisors and exempt employees of the management policies in the field of labor relations.[5] The two criteria are
SMC Magnolia Poultry Products Plants of Cabuyao, San Fernando and Otis. cumulative, and both must be met if an employee is to be considered a
confidential employee that is, the confidential relationship must exist
On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an
between the employees and his supervisor, and the supervisor must handle
Order ordering the conduct of certification among the supervisors and
the prescribed responsibilities relating to labor relations.[6]
exempt employees of the SMC Magnolia Poultry Products Plants of Cabuyao,
San Fernando and Otis as one bargaining unit. The exclusion from bargaining units of employees who, in the normal
course of their duties, become aware of management policies relating to labor
On January 18, 1991, respondent San Miguel Corporation filed a Notice
relations is a principal objective sought to be accomplished by the
of Appeal with Memorandum on Appeal, pointing out, among others, the
confidential employee rule. The broad rationale behind this rule is that employees
Med-Arbiters error in grouping together all three (3) separate plants, Otis,
should not be placed in a position involving a potential conflict of
Cabuyao and San Fernando, into one bargaining unit, and in including
interests.[7] Management should not be required to handle labor relations
supervisory levels 3 and above whose positions are confidential in nature.
matters through employees who are represented by the union with the
On July 23, 1991, the public respondent, Undersecretary Laguesma, company is required to deal and who in the normal performance of their
granted respondent companys Appeal and ordered the remand of the case to duties may obtain advance information of the companys position with regard
the Med-Arbiter of origin for determination of the true classification of each to contract negotiations, the disposition of grievances, or other labor relations
of the employees sought to be included in the appropriate bargaining unit. matters.[8]

Upon petitioner-unions motion dated August 7, 1991, Undersecretary There have been ample precedents in this regard, thus in Bulletin
Laguesma granted the reconsideration prayed for on September 3, 1991 and Publishing Company v. Hon. Augusto Sanchez,[9] the Court held that if these
directed the conduct of separate certification elections among the supervisors managerial employees would belong to or be affiliated with a Union, the
ranked as supervisory levels 1 to 4 (S1 to S4) and the exempt employees in latter might not be assured of their loyalty to the Union in view of evident
each of the three plants at Cabuyao, San Fernando and Otis. conflict of interest. The Union can also become company-dominated with the
presence of managerial employees in Union membership. The same rationale
On September 21, 1991, respondent company, San Miguel Corporation was applied to confidential employees in Golden Farms, Inc. v. Ferrer-
filed a Motion for Reconsideration with Motion to suspend proceedings. Calleja[10]and in the more recent case of Philips Industrial Development,
Inc. v. NLRC[11] which held that confidential employees, by the very nature
On March 11, 1993, an Order was issued by the public respondent of their functions, assist and act in a confidential capacity to, or have access
granting the Motion, citing the doctrine enunciated in Philips Industrial to confidential matters of, persons who exercise managerial functions in the
Development, Inc. v. NLRC[2] case. Said Order reads in part: field of labor relations. Therefore, the rationale behind the ineligibility of
managerial employees to form, assist or join a labor union was held equally
x x x Confidential employees, like managerial employees, are not allowed to applicable to them.[12]
form, join or assist a labor union for purposes of collective bargaining.
An important element of the confidential employee rule is the
employees need to use labor relations information. Thus, in determining the
In this case, S3 and S4 and the so-called exempt employees are admittedly confidentiality of certain employees, a key questions frequently considered is
confidential employees and therefore, they are not allowed to form, join or the employees necessary access to confidential labor relations information.[13]
assist a labor union for purposes of collective bargaining following the
above courts ruling. Consequently, they are not allowed to participate in the It is the contention of respondent corporation that Supervisory
certification election. employees 3 and 4 and the exempt employees come within the meaning of
the term confidential employees primarily because they answered in the
affirmative when asked Do you handle confidential data or documents? in
WHEREFORE, the motion is hereby granted and the Decision of this Office
the Position Questionnaires submitted by the Union.[14] In the same
dated 03 September 1991 is hereby modified to the extent that employees
questionnaire, however, it was also stated that the confidential information
under supervisory levels 3 and 4 (S3 and S4) and the so-called exempt
handled by questioned employees relate to product formulation, product
employees are not allowed to join the proposed bargaining unit and are
standards and product specification which by no means relate to labor
therefore excluded from those who could participate in the certification
relations.[15]
election.[3]
Granting arguendo that an employee has access to confidential labor
Hence this petition. relations information but such is merely incidental to his duties and
knowledge thereof is not necessary in the performance of such duties, said
access does not render the employee a confidential employee.[16] If access to
For resolution in this case are the following issues:
confidential labor relations information is to be a factor in the determination
1. Whether Supervisory employees 3 and 4 and the exempt of an employees confidential status, such information must relate to the
employees of the company are considered confidential employers labor relations policies. Thus, an employee of a labor union, or of
employees, hence ineligible from joining a union. a management association, must have access to confidential labor
information with respect to his employer, the union, or the association, to be
2. If they are not confidential employees, do the employees of the regarded a confidential employee, and knowledge of labor relations
three plants constitute an appropriate single bargaining unit. information pertaining to the companies with which the union deals, or
which the association represents, will not clause an employee to be excluded
On the first issue, this Court rules that said employees do not fall from the bargaining unit representing employees of the union or
within the term confidential employees who may be prohibited from joining association.[17] Access to information which is regarded by the employer to be
a union. confidential from the business standpoint, such as financial information[18] or
technical trade secrets, will not render an employee a confidential of the same nature, receive the same wages and compensation, and most
employee.[19] importantly, share a common stake in concerted activities.

Herein listed are the functions of supervisors 3 and higher: In light of these considerations, the Solicitor General has opined that
separate bargaining units in the three different plants of the division will
1. To undertake decisions to discontinue/temporarily stop shift fragmentize the employees of the said division, thus greatly diminishing
operations when situations require. their bargaining leverage. Any concerted activity held against the private
respondent for a labor grievance in one bargaining unit will, in all
2. To effectively oversee the quality control function at the
probability, not create much impact on the operations of the private
processing lines in the storage of chicken and other products.
respondent. The two other plants still in operation can well step up their
3. To administer efficient system of evaluation of products in the production and make up for the slack caused by the bargaining unit engaged
outlets. in the concerted activity. This situation will clearly frustrate the provisions of
the Labor Code and the Mandate of the Constitution.[27]
4. To be directly responsible for the recall, holding and rejection
of direct manufacturing materials. The fact that the three plants are located in three different places,
namely, in Cabuyao, Laguna, in Otis, Pandacan, Metro Manila, and in San
5. To recommend and initiate actions in the maintenance of Fernando, Pampanga is immaterial. Geographical location can be completely
sanitation and hygiene throughout the plant.[20] disregarded if the communal or mutual interests of the employees are not
sacrificed as demonstrated in UP v. Calleja-Ferrer where all non-academic
It is evident that whatever confidential data the questioned employees rank and file employees of the University of the Philippines inDiliman,
may handle will have to relate to their functions. From the foregoing Quezon City, Padre Faura, Manila, Los Baos, Laguna and the Visayas were
functions, it can be gleaned that the confidential information said employees allowed to participate in a certification election. We rule that the distance
have access to concern the employers internal business operations. As held among the three plants is not productive of insurmountable difficulties in the
in Westinghouse Electric Corporation v. National Labor Relations administration of union affairs. Neither are there regional differences that are
Board,[21] an employee may not be excluded from appropriate bargaining unit likely to impede the operations of a single bargaining representative.
merely because he has access to confidential information concerning
employers internal business operations and which is not related to the field WHEREFORE, the assailed Order of March 11, 1993 is hereby SET
of labor relations. ASIDE and the Order of the Med-Arbiter on December 19, 1990 is
REINSTATED under which a certification election among the supervisors
It must be borne in mind that Section 3 of Article XIII of the 1987 (level 1 to 4) and exempt employees of the San Miguel Corporation Magnolia
Constitution mandates the State to guarantee to all workers the right to self- Poultry Products Plants of Cabuyao, San Fernando, and Otis as one
organization. Hence, confidential employees who may be excluded from bargaining unit is ordered conducted.
bargaining unit must be strictly defined so as not to needlessly deprive many
employees of their right bargain collectively through representatives of their SO ORDERED.
choosing.[22]

In the case at bar, supervisors 3 and above may not be considered


confidential employees merely because they handle confidential data as such SECOND DIVISION
must first be strictly classified as pertaining to labor relations for them to fall
under said restrictions. The information they handle are properly classifiable [G.R. No. 116194. February 2, 2000.]
as technical and internal business operations data which, to our mind, has no
relevance to negotiations and settlement of grievances wherein the interests SUGBUANON RURAL BANK, INC., Petitioner, v. HON.
of a union and the management are invariably adversarial. Since the UNDERSECRETARY BIENVENIDO E. LAGUESMA, DEPARTMENT OF
LABOR AND EMPLOYMENT, MED-ARBITER ACHILLES MANIT,
employees are not classifiable under the confidential type, this Court rules
DEPARTMENT OF LABOR AND EMPLOYMENT, REGIONAL OFFICE
that they may appropriately form a bargaining unit for purposes of collective
NO. 7, CEBU CITY, AND SUGBUANON RURAL BANK, INC.-
bargaining. Furthermore, even assuming that they are confidential
ASSOCIATION OF PROFESSIONAL, SUPERVISORY, OFFICE, AND
employees, jurisprudence has established that there is no legal prohibition
TECHNICAL EMPLOYEES UNION-TRADE UNIONS CONGRESS THE
against confidential employees who are not performing managerial functions
PHILIPPINES, Respondents.
to form and join a union.[23]

In this connection, the issue of whether the employees of San Miguel DECISION
Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando,
and Otis constitute a single bargaining unit needs to be threshed out.
QUISUMBING, J.:
It is the contention of the petitioner union that the creation of three (3)
separate bargaining units, one each for Cabuyao Otis and San Fernando as
ruled by the respondent Undersecretary, is contrary to the one-company, In this special civil action for certiorari and prohibition, petitioner seeks the
one-union policy. It adds that Supervisors level 1 to 4 and exempt employees annulment of the April 27, 1994 Resolution of the Department of Labor and
of the three plants have a similarity or a community of interests. Employment, affirming the order of the Med-Arbiter, dated December 9,
1993, which denied petitioner’s motion to dismiss respondent union’s
This Court finds the contention of the petitioner meritorious. petition for certification election.chanroblesvirtual|awlibrary
An appropriate bargaining unit may be defined as a group of
Petitioner Sugbuanon Rural Bank, Inc., (SRBI, for brevity) is a duly-
employees of a given employer, comprised of all or less than all of the entire
registered banking institution with principal office in Cebu City and a
body of employees, which the collective interest of all the employees,
branch in Mandaue City. Private respondent SRBI — Association of
consistent with equity to the employer, indicate to be best suited to serve the
Professional, Supervisory, Office, and Technical Employees Union
reciprocal rights and duties of the parties under the collective bargaining
(APSOTEU) is a legitimate labor organization affiliated with the Trade
provisions of the law.[24]
Unions Congress of the Philippines (TUCP).
A unit to be appropriate must effect a grouping of employees who have
substantial, mutual interests in wages, hours, working conditions and other On October 8, 1993, the DOLE Regional Office in Cebu City granted
subjects of collective bargaining.[25] Certificate of Registration No. R0700-9310-UR-0064 to APSOTEU-TUCP,
hereafter referred to as the union.
It is readily seen that the employees in the instant case have community
or mutuality of interest, which is the standard in determining the proper On October 26, 1993, the union filed a petition for certification election of
constituency of a collective bargaining unit.[26] It is undisputed that they all the supervisory employees of SRBI. It alleged, among others, that: (1)
belong to the Magnolia Poultry Division of San Miguel Corporation. This APSOTEU-TUCP was a labor organization duly-registered with the Labor
means that, although they belong to three different plants, they perform work Department; (2) SRBI employed 5 or more supervisory employees; (3) a
majority of these employees supported the petition; (4) there was no Hence the instant petition grounded on the following assignments of
existing collective bargaining agreement (CBA) between any union and error:chanrob1es virtual 1aw library
SRBI; and (5) no certification election had been held in SRBI during the past
12 months prior to the petition. I

On October 28, 1993, the Med-Arbiter gave due course to the petition. The
pre-certification election conference between SRBI and APSOTEU-TUCP RESPONDENT UNDERSECRETARY LAGUESMA ACTED WITH GRAVE
was set for November 15, 1993. ABUSE OF DISCRETION AND PALPABLY ERRED:chanrob1es virtual 1aw
library
On November 12, 1993, SRBI filed a motion to dismiss the union’s petition.
It sought to prevent the holding of a certification election on two grounds: A. IN HOLDING THAT ART. 257 OF THE LABOR CODE REQUIRES THE
First, that the members of APSOTEU-TUCP were in fact managerial or MED-ARBITER TO CONDUCT A CERTIFICATION ELECTION IN ANY
confidential employees. Thus, following the doctrine in Philips Industrial UNORGANIZED ESTABLISHMENT EVEN WHEN THE PETITIONING
Development Corporation v. National Labor Relations Commission, 1 they UNION DOES NOT POSSESS THE QUALIFICATION FOR AN
were disqualified from forming, joining, or assisting any labor organization. APPROPRIATE BARGAINING AGENT; AND
Petitioner attached the job descriptions of the employees concerned to its
motion. Second, the Association of Labor Unions-Trade Unions Congress of B. IN REFUSING TO ASSUME JURISDICTION OVER THE PETITIONER’S
the Philippines or ALU-TUCP was representing the union. Since ALU- APPEAL AND TO DISMISS THE RESPONDENT UNION’S PETITION
TUCP also sought to represent the rank-and-file employees of SRBI, there FOR CERTIFICATION ELECTION.
was a violation of the principle of separation of unions enunciated in Atlas
Lithographic Services, Inc. v. Laguesma. 2
II.
The union filed its opposition to the motion to dismiss on December 1, 1993.
It argued that its members were not managerial employees but merely
RESPONDENT UNDERSECRETARY LAGUESMA ACTED WITH GRAVE
supervisory employees. The members attached their affidavits describing
ABUSE OF DISCRETION AND PALPABLY ERRED IN DENYING THE
the nature of their respective duties. The union pointed out that Article 245
PETITIONER’S APPEAL DESPITE THE FACT THAT:chanrob1es virtual
of the Labor Code expressly allowed supervisory employees to form, join,
1aw library
or assist their own unions.
A. THE ALLEGED MEMBERS OF RESPONDENT UNION ARE
On December 9, 1993, the Med-Arbiter denied petitioner’s motion to
MANAGERIAL EMPLOYEES WHO ARE LEGALLY DISQUALIFIED
dismiss. He scheduled the inclusion-exclusion proceedings in preparation
FROM JOINING ANY LABOR ORGANIZATION.
for the certification election on December 16, 1993.
B. AT THE VERY LEAST, THE ALLEGED MEMBERS OF RESPONDENT
SRBI appealed the Med-Arbiter’s decision to the Secretary of Labor and
UNION ARE OCCUPYING HIGHLY CONFIDENTIAL POSITIONS IN
Employment. The appeal was denied for lack of merit. The certification
PETITIONER AND, THUS, THE LEGAL DISQUALIFICATION OF
election was ordered.
MANAGERIAL EMPLOYEES EQUALLY APPLY TO THEM.
On June 16, 1994, the Med-Arbiter scheduled the holding of the certification
election for June 29, 1994. His order identified the following SRBI personnel III
as the voting supervisory employees in the election: the Cashier of the Main
Office, the Cashier of the Mandaue Branch, the Accountant of the Mandaue
Branch, and the Acting Chief of the Loans Department. IN ANY EVENT, THE CONCLUSIONS REACHED IN THE SUBJECT
RESOLUTIONS ARE CONTRARY TO LAW AND ARE DIAMETRICALLY
On June 17, 1994, SRBI filed with the Med-Arbiter an urgent motion to OPPOSED TO RESPONDENT UNION’S RECORDED ADMISSIONS AND
suspend proceedings. The Med-Arbiter denied the same on June 21, 1994. REPRESENTATIONS.
SRBI then filed a motion for reconsideration. Two days later, the Med-
Arbiter cancelled the certification election scheduled for June 29, 1994 in Considering petitioner’s assigned errors, we find two core issues for
order to address the motion for reconsideration. immediate resolution:chanrob1es virtual 1aw library

The Med-Arbiter later denied petitioner’s motion for reconsideration. SRBI (1) Whether or not the members of the respondent union are managerial
appealed the order of denial to the DOLE Secretary on December 16, 1993. employees and/or highly-placed confidential employees, hence prohibited
by law from joining labor organizations and engaging in union activities?
On December 22, 1993, petitioner proceeded to file a petition with the DOLE
Regional Office seeking the cancellation of the respondent union’s (2) Whether or not the Med-Arbiter may validly order the holding of a
registration. It averred that the APSOTEU-TUCP members were actually certification election upon the filing of a petition for certification election by
managerial employees who were prohibited by law from joining or a registered union, despite the petitioner’s appeal pending before the DOLE
organizing unions. Secretary against the issuance of the union’s registration?

On April 22, 1994, respondent DOLE Undersecretary denied SRBI’s appeal The other issues based on the assigned errors could be resolved easily after
for lack of merit. He ruled that APSOTEU-TUCP was a legitimate labor the core issues are settled.chanrobles.com : virtuallawlibrary
organization. As such, it was fully entitled to all the rights and privileges
granted by law to a legitimate labor organization, including the right to file Respecting the first issue, Article 212 (m) of the Labor Code defines the
a petition for certification election. He also held that until and unless a final terms "managerial employee" and "supervisory employees" as
order is issued cancelling APSOTEU-TUCP’s registration certificate, it had follows:jgc:chanrobles.com.ph
the legal right to represent its members for collective bargaining purposes.
Furthermore, the question of whether the APSOTEU-TUCP members "ARTICLE 212. Definitions —
should be considered as managerial or confidential employees should not
be addressed in the proceedings involving a petition for certification x x x
election but best threshed out in other appropriate proceedings.chanrobles
virtuallawlibrary:red
(m) ‘Managerial employee’ is one who is vested with powers or
On May 25, 1994, SRBI moved for reconsideration of the Undersecretary’s prerogatives to lay down and execute management policies and/or hire,
decision which was denied on July 7, 1994. The Med-Arbiter scheduled the transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
holding of certification elections on August 12, 1994. Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is note merely routinary or clerical in nature but requires the use account should be collected, whether extrajudicially or judicially, and settles
of independent judgment. All employees not falling within any of the above the problems or complaints of borrowers regarding their accounts;
definitions are considered rank-and-file employees for purposes of this
Book (Emphasis supplied)."cralaw virtua1aw library "(2) the Cashier is one of the approving officers and authorized signatories
of petitioner. He approves the opening of accounts, withdrawals and
Petitioner submitted detailed job descriptions to support its contention that encashment, and acceptance of check deposits. He deals with other banks
the union members are managerial employees and/or confidential and, in the absence of the regular Manager, manages the entire office or
employees proscribed from engaging in labor activities. 3 Petitioner branch and approves disbursements of funds for expenses; and
vehemently argues that the functions and responsibilities of the employees
involved constitute the "very core of the bank’s business, lending of money "(3) the Accountant, who heads the Accounting Department, is also one of
to clients and borrowers, evaluating their capacity to pay, approving the the authorized signatories of petitioner and, in the absence of the Manager
loan and its amount, scheduling the terms of repayment, and endorsing or Cashier, acts as substitute approving officer and assumes the
delinquent accounts to counsel for collection." 4 Hence, they must be management of the entire office. She handles the financial reports and
deemed managerial employees. Petitioner cites Tabacalera Insurance Co. v. reviews the debit/credit tickets submitted by the other departments." 15
National Labor Relations Commission, 5 and Panday v. National Labor
Relations Commission, 6 to sustain its submission. In Tabacalera, we Petitioner’s explanation, however, does not state who among the employees
sustained the classification of a credit and collection supervisor by has access to information specifically relating to its labor relations policies.
management as a managerial/supervisory personnel. But in that case, the Even Cashier Patricia Maluya, who serves as the secretary of the bank’s
credit and collection supervisor "had the power to recommend the hiring Board of Directors may not be so classified. True, the board of directors is
and appointment of his subordinates, as well as the power to recommend responsible for corporate policies, the exercise of corporate powers, and the
any promotion and/or increase." 7 For this reason he was deemed to be a general management of the business and affairs of the corporation. As
managerial employee. In the present case, however, petitioner failed to secretary of the bank’s governing body, Patricia Maluya serves the bank’s
show that the employees in question were vested with similar powers. At management, but could not be deemed to have access to confidential
best they only had recommendatory powers subject to evaluation, review, information specifically relating to SRBI’s labor relations policies, absent a
and final decision by the bank’s management. The job description forms clear showing on this matter. Thus, while petitioner’s explanation confirms
submitted by petitioner clearly show that the union members in question the regular duties of the concerned employees, it shows nothing about any
may not transfer, suspend, lay-off, recall, discharge, assign, or discipline duties specifically connected to labor relations.
employees. Moreover, the forms also do not show that the Cashiers,
Accountants, and Acting Chiefs of the Loans Department formulate and As to the second issue. One of the rights of a legitimate labor organization
execute management policies which are normally expected of management under Article 242(b) of the Labor Code is the right to be certified as the
officers. exclusive representative of all employees in an appropriate bargaining unit
for purposes of collective bargaining. Having complied with the
Petitioner’s reliance on Panday is equally misplaced. There, we held that a requirements of Art. 234, it is our view that respondent union is a legitimate
branch accountant is a managerial employee because the said employee had labor union. Article 257 of the Labor Code mandates that a certification
managerial powers, similar to the supervisor in Tabacalera. Their powers election shall automatically be conducted by the Med-Arbiter upon the
included recommending the hiring and appointment of his subordinates, as filing of a petition by a legitimate labor organization. 16 Nothing is said
well as the power to recommend any promotion and/or increase. 8 therein that prohibits such automatic conduct of the certification election if
the management appeals on the issue of the validity of the union’s
Here, we find that the Cashiers, Accountant, and Acting Chief of the Loans registration. On this score, petitioner’s appeal was correctly
Department of the petitioner did not possess managerial powers and duties. dismissed.chanrobles virtuallawlibrary:red
We are, therefore, constrained to conclude that they are not managerial
employees. Petitioner argues that giving due course to respondent union’s petition for
certification election would violate the separation of unions doctrine. 17
Now may the said bank personnel be deemed confidential employees? Note that the petition was filed by APSOTEU-TUCP, a legitimate labor
Confidential employees are those who (1) assist or act in a confidential organization. It was not filed by ALU. Nor was it filed by TUCP, which is a
capacity, in regard (2) to persons who formulate, determine, and effectuate national labor federation of with which respondent union is affiliated.
management policies [specifically in the field of labor relations]. 9 The two Petitioner says that respondent union is a mere alter ego of ALU. The
criteria are cumulative, and both must be met if an employee is to be records show nothing to this effect. What the records instead reveal is that
considered a confidential employee — that is, the confidential relationship respondent union was initially assisted by ALU during its preliminary
must exist between the employee and his superior officer; and that officer stages of organization. A local union maintains its separate personality
must handle the prescribed responsibilities relating to labor relations. 10 despite affiliation with a larger national federation. 18 Petitioner alleges that
ALU seeks to represent both respondent union and the rank-and-file union.
Article 245 of the Labor Code 11 does not directly prohibit confidential Again, we find nothing in the records to support this bare assertion.
employees from engaging in union activities. However, under the doctrine
of necessary implication, the disqualification of managerial employees The law frowns on a union where the membership is composed of both
equally applies to confidential employees. 12 The confidential-employee supervisors and rank-and-file employees, for fear that conflicts of interest
rule justifies exclusion of confidential employees because in the normal may arise in the areas of discipline, collective bargaining, and strikes. 19
course of their duties, they become aware of management policies relating However, in the present case, none of the members of the respondent union
to labor relations. 13 It must be stressed, however, that when the employee came from the rank-and-file employees of the bank.
does not have access to confidential labor relations information, there is no
legal prohibition against confidential employees from forming, assisting, or Taking into account the circumstances in this case, it is our view that
joining a union. 14 respondent Undersecretary committed no reversible error nor grave abuse
of discretion when he found the order of the Med-Arbiter scheduling a
Petitioner contends that it has only 5 officers running its day-to-day affairs. certification election in order. The list of employees eligible to vote in said
They assist in confidential capacities and have complete access to the bank’s certification election was also found in order, for none was specifically
confidential data. They form the core of the bank’s management team. disqualified from union membership.
Petitioner explains that:jgc:chanrobles.com.ph
WHEREFORE, the instant petition is hereby DISMISSED. No
". . . Specifically: (1) the Head of the Loans Department initially approves pronouncement as to costs.
the loan applications before they are passed on to the Board for
confirmation. As such, no loan application is even considered by the Board SO ORDERED.chanrobles.com : red
and approved by petitioner without his stamp of approval based upon his
interview of the applicant and determination of his (applicant’s) credit
standing and financial capacity. The same holds true with respect to
renewals or restructuring of loan accounts. He himself determines what
G.R. No. L-25246 September 12, 1974 II. That the lower court erred when it sentenced appellant herein to pay
plaintiff the sum of P500 as attorney's fees and the cost thereof.
BENJAMIN VICTORIANO, Plaintiff-Appellee, vs. ELIZALDE ROPE
WORKERS' UNION and ELIZALDE ROPE FACTORY, INC., defendants, In support of the alleged unconstitutionality of Republic Act No. 3350, the
Union contented, firstly, that the Act infringes on the fundamental right to
Appeal to this Court on purely questions of law from the decision of the form lawful associations; that "the very phraseology of said Republic Act
Court of First Instance of Manila in its Civil Case No. 3350, that membership in a labor organization is banned to all those
58894.chanroblesvirtualawlibrarychanrobles virtual law library belonging to such religious sect prohibiting affiliation with any labor
organization" 4, "prohibits all the members of a given religious sect from
joining any labor union if such sect prohibits affiliations of their members
The undisputed facts that spawned the instant case follow:chanrobles thereto" 5; and, consequently, deprives said members of their constitutional
virtual right to form or join lawful associations or organizations guaranteed by the
Bill of Rights, and thus becomes obnoxious to Article III, Section 1 (6) of the
Benjamin Victoriano (hereinafter referred to as Appellee), a member of the 1935 Constitution. 6chanrobles virtual law library
religious sect known as the "Iglesia ni Cristo", had been in the employ of the
Elizalde Rope Factory, Inc. (hereinafter referred to as Company) since 1958. Secondly, the Union contended that Republic Act No. 3350 is
As such employee, he was a member of the Elizalde Rope Workers' Union unconstitutional for impairing the obligation of contracts in that, while the
(hereinafter referred to as Union) which had with the Company a collective Union is obliged to comply with its collective bargaining agreement
bargaining agreement containing a closed shop provision which reads as containing a "closed shop provision," the Act relieves the employer from its
follows: reciprocal obligation of cooperating in the maintenance of union
membership as a condition of employment; and that said Act, furthermore,
Membership in the Union shall be required as a condition of employment impairs the Union's rights as it deprives the union of dues from members
for all permanent employees workers covered by this Agreement. who, under the Act, are relieved from the obligation to continue as such
members. 7chanrobles virtual law library
The collective bargaining agreement expired on March 3, 1964 but was
renewed the following day, March 4, Thirdly, the Union contended that Republic Act No. 3350 discriminatorily
1964.chanroblesvirtualawlibrarychanrobles virtual law library favors those religious sects which ban their members from joining labor
unions, in violation of Article Ill, Section 1 (7) of the 1935 Constitution; and
while said Act unduly protects certain religious sects, it leaves no rights or
Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its
protection to labor organizations. 8chanrobles virtual law library
amendment by Republic Act No. 3350, the employer was not precluded
"from making an agreement with a labor organization to require as a
condition of employment membership therein, if such labor organization is Fourthly, Republic Act No. 3350, asserted the Union, violates the
the representative of the employees." On June 18, 1961, however, Republic constitutional provision that "no religious test shall be required for the
Act No. 3350 was enacted, introducing an amendment to - paragraph (4) exercise of a civil right," in that the laborer's exercise of his civil right to join
subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but such associations for purposes not contrary to law has to be determined under
agreement shall not cover members of any religious sects which prohibit the Act by his affiliation with a religious sect; that conversely, if a worker
affiliation of their members in any such labor has to sever his religious connection with a sect that prohibits membership
organization".chanroblesvirtualawlibrarychanrobles virtual law library in a labor organization in order to be able to join a labor organization, said
Act would violate religious freedom. 9chanrobles virtual law library
Being a member of a religious sect that prohibits the affiliation of its
members with any labor organization, Appellee presented his resignation to Fifthly, the Union contended that Republic Act No. 3350, violates the "equal
appellant Union in 1962, and when no action was taken thereon, he protection of laws" clause of the Constitution, it being a discriminately
reiterated his resignation on September 3, 1974. Thereupon, the Union legislation, inasmuch as by exempting from the operation of closed shop
wrote a formal letter to the Company asking the latter to separate Appellee agreement the members of the "Iglesia ni Cristo", it has granted said
from the service in view of the fact that he was resigning from the Union as members undue advantages over their fellow workers, for while the Act
a member. The management of the Company in turn notified Appellee and exempts them from union obligation and liability, it nevertheless entitles
his counsel that unless the Appellee could achieve a satisfactory them at the same time to the enjoyment of all concessions, benefits and
arrangement with the Union, the Company would be constrained to dismiss other emoluments that the union might secure from the
him from the service. This prompted Appellee to file an action for employer. 10chanrobles virtual law library
injunction, docketed as Civil Case No. 58894 in the Court of First Instance of
Manila to enjoin the Company and the Union from dismissing Appellee. 1In Sixthly, the Union contended that Republic Act No. 3350 violates the
its answer, the Union invoked the "union security clause" of the collective constitutional provision regarding the promotion of social
bargaining agreement; assailed the constitutionality of Republic Act No. justice. 11chanrobles virtual law library
3350; and contended that the Court had no jurisdiction over the case,
pursuant to Republic Act No. 875, Sections 24 and 9 (d) and (e). 2Upon the
facts agreed upon by the parties during the pre-trial conference, the Court a Appellant Union, furthermore, asserted that a "closed shop provision" in a
quo rendered its decision on August 26, 1965, the dispositive portion of collective bargaining agreement cannot be considered violative of religious
which reads: freedom, as to call for the amendment introduced by Republic Act No.
3350; 12and that unless Republic Act No. 3350 is declared unconstitutional,
trade unionism in this country would be wiped out as employers would
IN VIEW OF THE FOREGOING, judgment is rendered enjoining the prefer to hire or employ members of the Iglesia ni Cristo in order to do
defendant Elizalde Rope Factory, Inc. from dismissing the plaintiff from his away with labor organizations. 13chanrobles virtual law library
present employment and sentencing the defendant Elizalde Rope Workers'
Union to pay the plaintiff P500 for attorney's fees and the costs of this
action. 3chanrobles virtual law library Appellee, assailing appellant's arguments, contended that Republic Act No.
3350 does not violate the right to form lawful associations, for the right to
join associations includes the right not to join or to resign from a labor
From this decision, the Union appealed directly to this Court on purely organization, if one's conscience does not allow his membership therein,
questions of law, assigning the following errors: and the Act has given substance to such right by prohibiting the compulsion
of workers to join labor organizations; 14that said Act does not impair the
I. That the lower court erred when it did not rule that Republic Act No. 3350 obligation of contracts for said law formed part of, and was incorporated
is unconstitutional.chanroblesvirtualawlibrarychanrobles virtual law library into, the terms of the closed shop agreement; 15that the Act does not violate
the establishment of religion clause or separation of Church and State, for
Congress, in enacting said law, merely accommodated the religious needs
of those workers whose religion prohibits its members from joining labor union for the duration of the contract in order to keep their jobs. Thus
unions, and balanced the collective rights of organized labor with the Section 4 (a) (4) of the Industrial Peace Act, before its amendment by
constitutional right of an individual to freely exercise his chosen religion; Republic Act No. 3350, provides that although it would be an unfair labor
that the constitutional right to the free exercise of one's religion has primacy practice for an employer "to discriminate in regard to hire or tenure of
and preference over union security measures which are merely employment or any term or condition of employment to encourage or
contractual 16; that said Act does not violate the constitutional provision of discourage membership in any labor organization" the employer is,
equal protection, for the classification of workers under the Act depending however, not precluded "from making an agreement with a labor
on their religious tenets is based on substantial distinction, is germane to the organization to require as a condition of employment membership therein,
purpose of the law, and applies to all the members of a given class; 17that if such labor organization is the representative of the employees". By virtue,
said Act, finally, does not violate the social justice policy of the Constitution, therefore, of a closed shop agreement, before the enactment of Republic Act
for said Act was enacted precisely to equalize employment opportunities No. 3350, if any person, regardless of his religious beliefs, wishes to be
for all citizens in the midst of the diversities of their religious employed or to keep his employment, he must become a member of the
beliefs." 18chanrobles virtual law library collective bargaining union. Hence, the right of said employee not to join
the labor union is curtailed and
withdrawn.chanroblesvirtualawlibrarychanrobles virtual law library
I. Before We proceed to the discussion of the first assigned error, it is
necessary to premise that there are some thoroughly established principles
which must be followed in all cases where questions of constitutionality as To that all-embracing coverage of the closed shop arrangement, Republic
obtains in the instant case are involved. All presumptions are indulged in Act No. 3350 introduced an exception, when it added to Section 4 (a) (4) of
favor of constitutionality; one who attacks a statute, alleging the Industrial Peace Act the following proviso: "but such agreement shall
unconstitutionality must prove its invalidity beyond a reasonable doubt, not cover members of any religious sects which prohibit affiliation of their
that a law may work hardship does not render it unconstitutional; that if members in any such labor organization". Republic Act No. 3350 merely
any reasonable basis may be conceived which supports the statute, it will be excludes ipso jure from the application and coverage of the closed shop
upheld, and the challenger must negate all possible bases; that the courts agreement the employees belonging to any religious sects which prohibit
are not concerned with the wisdom, justice, policy, or expediency of a affiliation of their members with any labor organization. What the exception
statute; and that a liberal interpretation of the constitution in favor of the provides, therefore, is that members of said religious sects cannot be
constitutionality of legislation should be adopted. 19chanrobles virtual law compelled or coerced to join labor unions even when said unions have
library closed shop agreements with the employers; that in spite of any closed shop
agreement, members of said religious sects cannot be refused employment
or dismissed from their jobs on the sole ground that they are not members
1. Appellant Union's contention that Republic Act No. 3350 prohibits and
of the collective bargaining union. It is clear, therefore, that the assailed Act,
bans the members of such religious sects that forbid affiliation of their
far from infringing the constitutional provision on freedom of association,
members with labor unions from joining labor unions appears nowhere in
upholds and reinforces it. It does not prohibit the members of said religious
the wording of Republic Act No. 3350; neither can the same be deduced by
sects from affiliating with labor unions. It still leaves to said members the
necessary implication therefrom. It is not surprising, therefore, that
liberty and the power to affiliate, or not to affiliate, with labor unions. If,
appellant, having thus misread the Act, committed the error of contending
that said Act is obnoxious to the constitutional provision on freedom of notwithstanding their religious beliefs, the members of said religious sects
prefer to sign up with the labor union, they can do so. If in deference and
association.chanroblesvirtualawlibrarychanrobles virtual law library
fealty to their religious faith, they refuse to sign up, they can do so; the law
does not coerce them to join; neither does the law prohibit them from
Both the Constitution and Republic Act No. 875 recognize freedom of joining; and neither may the employer or labor union compel them to join.
association. Section 1 (6) of Article III of the Constitution of 1935, as well as Republic Act No. 3350, therefore, does not violate the constitutional
Section 7 of Article IV of the Constitution of 1973, provide that the right to provision on freedom of association.chanroblesvirtualawlibrarychanrobles
form associations or societies for purposes not contrary to law shall not be virtual law library
abridged. Section 3 of Republic Act No. 875 provides that employees shall
have the right to self-organization and to form, join of assist labor
2. Appellant Union also contends that the Act is unconstitutional for
organizations of their own choosing for the purpose of collective bargaining
impairing the obligation of its contract, specifically, the "union security
and to engage in concerted activities for the purpose of collective bargaining
and other mutual aid or protection. What the Constitution and the clause" embodied in its Collective Bargaining Agreement with the
Industrial Peace Act recognize and guarantee is the "right" to form or join Company, by virtue of which "membership in the union was required as a
condition for employment for all permanent employees workers". This
associations. Notwithstanding the different theories propounded by the
agreement was already in existence at the time Republic Act No. 3350 was
different schools of jurisprudence regarding the nature and contents of a
enacted on June 18, 1961, and it cannot, therefore, be deemed to have been
"right", it can be safely said that whatever theory one subscribes to, a right
incorporated into the agreement. But by reason of this amendment,
comprehends at least two broad notions, namely: first, liberty or freedom,
Appellee, as well as others similarly situated, could no longer be dismissed
i.e., the absence of legal restraint, whereby an employee may act for himself
without being prevented by law; and second, power, whereby an employee from his job even if he should cease to be a member, or disaffiliate from the
Union, and the Company could continue employing him notwithstanding
may, as he pleases, join or refrain from Joining an association. It is,
his disaffiliation from the Union. The Act, therefore, introduced a change
therefore, the employee who should decide for himself whether he should
into the express terms of the union security clause; the Company was partly
join or not an association; and should he choose to join, he himself makes up
absolved by law from the contractual obligation it had with the Union of
his mind as to which association he would join; and even after he has
employing only Union members in permanent positions, It cannot be
joined, he still retains the liberty and the power to leave and cancel his
membership with said organization at any time. 20It is clear, therefore, that denied, therefore, that there was indeed an impairment of said union
the right to join a union includes the right to abstain from joining any security clause.chanroblesvirtualawlibrarychanrobles virtual law library
union. 21Inasmuch as what both the Constitution and the Industrial Peace
Act have recognized, and guaranteed to the employee, is the "right" to join According to Black, any statute which introduces a change into the express
associations of his choice, it would be absurd to say that the law also terms of the contract, or its legal construction, or its validity, or its
imposes, in the same breath, upon the employee the duty to join discharge, or the remedy for its enforcement, impairs the contract. The
associations. The law does not enjoin an employee to sign up with any extent of the change is not material. It is not a question of degree or manner
association.chanroblesvirtualawlibrarychanrobles virtual law library or cause, but of encroaching in any respect on its obligation or dispensing
with any part of its force. There is an impairment of the contract if either
party is absolved by law from its performance. 22Impairment has also been
The right to refrain from joining labor organizations recognized by Section 3
predicated on laws which, without destroying contracts, derogate from
of the Industrial Peace Act is, however, limited. The legal protection granted
substantial contractual rights. 23chanrobles virtual law library
to such right to refrain from joining is withdrawn by operation of law,
where a labor union and an employer have agreed on a closed shop, by
virtue of which the employer may employ only member of the collective It should not be overlooked, however, that the prohibition to impair the
bargaining union, and the employees must continue to be members of the obligation of contracts is not absolute and unqualified. The prohibition is
general, affording a broad outline and requiring construction to fill in the The aforementioned purpose of the amendatory law is clearly seen in the
details. The prohibition is not to be read with literal exactness like a Explanatory Note to House Bill No. 5859, which later became Republic Act
mathematical formula, for it prohibits unreasonable impairment only. 24In No. 3350, as follows:
spite of the constitutional prohibition, the State continues to possess
authority to safeguard the vital interests of its people. Legislation
It would be unthinkable indeed to refuse employing a person who, on
appropriate to safeguarding said interests may modify or abrogate contracts
account of his religious beliefs and convictions, cannot accept membership
already in effect. 25For not only are existing laws read into contracts in order
in a labor organization although he possesses all the qualifications for the
to fix the obligations as between the parties, but the reservation of essential
job. This is tantamount to punishing such person for believing in a doctrine
attributes of sovereign power is also read into contracts as a postulate of the
he has a right under the law to believe in. The law would not allow
legal order. All contracts made with reference to any matter that is subject discrimination to flourish to the detriment of those whose religion discards
to regulation under the police power must be understood as made in
membership in any labor organization. Likewise, the law would not
reference to the possible exercise of that power. 26Otherwise, important and
commend the deprivation of their right to work and pursue a modest means
valuable reforms may be precluded by the simple device of entering into
of livelihood, without in any manner violating their religious faith and/or
contracts for the purpose of doing that which otherwise may be prohibited.
belief. 32chanrobles virtual law library
The policy of protecting contracts against impairment presupposes the
maintenance of a government by virtue of which contractual relations are
worthwhile a government which retains adequate authority to secure the It cannot be denied, furthermore, that the means adopted by the Act to
peace and good order of society. The contract clause of the Constitution achieve that purpose - exempting the members of said religious sects from
must, therefore, be not only in harmony with, but also in subordination to, coverage of union security agreements - is
in appropriate instances, the reserved power of the state to safeguard the reasonable.chanroblesvirtualawlibrarychanrobles virtual law library
vital interests of the people. It follows that not all legislations, which have
the effect of impairing a contract, are obnoxious to the constitutional It may not be amiss to point out here that the free exercise of religious
prohibition as to impairment, and a statute passed in the legitimate exercise profession or belief is superior to contract rights. In case of conflict, the
of police power, although it incidentally destroys existing contract rights, latter must, therefore, yield to the former. The Supreme Court of the United
must be upheld by the courts. This has special application to contracts States has also declared on several occasions that the rights in the First
regulating relations between capital and labor which are not merely Amendment, which include freedom of religion, enjoy a preferred position
contractual, and said labor contracts, for being impressed with public in the constitutional system. 33Religious freedom, although not unlimited, is
interest, must yield to the common good. 27chanrobles virtual law library a fundamental personal right and liberty, 34and has a preferred position in
the hierarchy of values. Contractual rights, therefore, must yield to freedom
In several occasions this Court declared that the prohibition against of religion. It is only where unavoidably necessary to prevent an immediate
impairing the obligations of contracts has no application to statutes relating and grave danger to the security and welfare of the community that
to public subjects within the domain of the general legislative powers of the infringement of religious freedom may be justified, and only to the smallest
state involving public welfare. 28Thus, this Court also held that the Blue extent necessary to avoid the danger.chanroblesvirtualawlibrarychanrobles
Sunday Law was not an infringement of the obligation of a contract that virtual law library
required the employer to furnish work on Sundays to his employees, the
law having been enacted to secure the well-being and happiness of the 3. In further support of its contention that Republic Act No. 3350 is
laboring class, and being, furthermore, a legitimate exercise of the police unconstitutional, appellant Union averred that said Act discriminates in
power. 29chanrobles virtual law library favor of members of said religious sects in violation of Section 1 (7) of
Article Ill of the 1935 Constitution, and which is now Section 8 of Article IV
In order to determine whether legislation unconstitutionally impairs of the 1973 Constitution, which provides:
contract obligations, no unchanging yardstick, applicable at all times and
under all circumstances, by which the validity of each statute may be No law shall be made respecting an establishment of religion, or prohibiting
measured or determined, has been fashioned, but every case must be the free exercise thereof, and the free exercise and enjoyment of religious
determined upon its own circumstances. Legislation impairing the profession and worship, without discrimination and preference, shall
obligation of contracts can be sustained when it is enacted for the forever be allowed. No religious test shall be required for the exercise of
promotion of the general good of the people, and when the means adopted civil or political rights.
to secure that end are reasonable. Both the end sought and the means
adopted must be legitimate, i.e., within the scope of the reserved power of
the state construed in harmony with the constitutional limitation of that The constitutional provision into only prohibits legislation for the support
power. 30chanrobles virtual law library of any religious tenets or the modes of worship of any sect, thus forestalling
compulsion by law of the acceptance of any creed or the practice of any
form of worship, 35but also assures the free exercise of one's chosen form of
What then was the purpose sought to be achieved by Republic Act No. religion within limits of utmost amplitude. It has been said that the religion
3350? Its purpose was to insure freedom of belief and religion, and to clauses of the Constitution are all designed to protect the broadest possible
promote the general welfare by preventing discrimination against those liberty of conscience, to allow each man to believe as his conscience directs,
members of religious sects which prohibit their members from joining labor to profess his beliefs, and to live as he believes he ought to live, consistent
unions, confirming thereby their natural, statutory and constitutional right with the liberty of others and with the common good. 36Any legislation
to work, the fruits of which work are usually the only means whereby they whose effect or purpose is to impede the observance of one or all religions,
can maintain their own life and the life of their dependents. It cannot be or to discriminate invidiously between the religions, is invalid, even though
gainsaid that said purpose is the burden may be characterized as being only indirect. 37But if the stage
legitimate.chanroblesvirtualawlibrarychanrobles virtual law library regulates conduct by enacting, within its power, a general law which has for
its purpose and effect to advance the state's secular goals, the statute is valid
The questioned Act also provides protection to members of said religious despite its indirect burden on religious observance, unless the state can
sects against two aggregates of group strength from which the individual accomplish its purpose without imposing such burden. 38chanrobles virtual
needs protection. The individual employee, at various times in his working law library
life, is confronted by two aggregates of power - collective labor, directed by
a union, and collective capital, directed by management. The union, an In Aglipay v. Ruiz 39, this Court had occasion to state that the government
institution developed to organize labor into a collective force and thus should not be precluded from pursuing valid objectives secular in character
protect the individual employee from the power of collective capital, is, even if the incidental result would be favorable to a religion or sect. It has
paradoxically, both the champion of employee rights, and a new source of likewise been held that the statute, in order to withstand the strictures of
their frustration. Moreover, when the Union interacts with management, it constitutional prohibition, must have a secular legislative purpose and a
produces yet a third aggregate of group strength from which the individual primary effect that neither advances nor inhibits religion. 40Assessed by
also needs protection - the collective bargaining relationship. 31chanrobles these criteria, Republic Act No. 3350 cannot be said to violate the
virtual law library
constitutional inhibition of the "no-establishment" (of religion) clause of the end cannot be promoted by prohibited
Constitution.chanroblesvirtualawlibrarychanrobles virtual law library means.chanroblesvirtualawlibrarychanrobles virtual law library

The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not 4. Appellants' fourth contention, that Republic Act No. 3350 violates the
spiritual or religious or holy and eternal. It was intended to serve the constitutional prohibition against requiring a religious test for the exercise
secular purpose of advancing the constitutional right to the free exercise of of a civil right or a political right, is not well taken. The Act does not require
religion, by averting that certain persons be refused work, or be dismissed as a qualification, or condition, for joining any lawful association
from work, or be dispossessed of their right to work and of being impeded membership in any particular religion or in any religious sect; neither does
to pursue a modest means of livelihood, by reason of union security the Act require affiliation with a religious sect that prohibits its members
agreements. To help its citizens to find gainful employment whereby they from joining a labor union as a condition or qualification for withdrawing
can make a living to support themselves and their families is a valid from a labor union. Joining or withdrawing from a labor union requires a
objective of the state. In fact, the state is enjoined, in the 1935 Constitution, positive act. Republic Act No. 3350 only exempts members with such
to afford protection to labor, and regulate the relations between labor and religious affiliation from the coverage of closed shop agreements. So, under
capital and industry. 41More so now in the 1973 Constitution where it is this Act, a religious objector is not required to do a positive act - to exercise
mandated that "the State shall afford protection to labor, promote full the right to join or to resign from the union. He is exempted ipso
employment and equality in employment, ensure equal work opportunities jure without need of any positive act on his part. A conscientious religious
regardless of sex, race or creed and regulate the relation between workers objector need not perform a positive act or exercise the right of resigning
and employers. 42chanrobles virtual law library from the labor union - he is exempted from the coverage of any closed shop
agreement that a labor union may have entered into. How then can there be
a religious test required for the exercise of a right when no right need be
The primary effects of the exemption from closed shop agreements in favor
exercised?chanrobles virtual law library
of members of religious sects that prohibit their members from affiliating
with a labor organization, is the protection of said employees against the
aggregate force of the collective bargaining agreement, and relieving certain We have said that it was within the police power of the State to enact
citizens of a burden on their religious beliefs; and by eliminating to a certain Republic Act No. 3350, and that its purpose was legal and in consonance
extent economic insecurity due to unemployment, which is a serious with the Constitution. It is never an illegal evasion of a constitutional
menace to the health, morals, and welfare of the people of the State, the Act provision or prohibition to accomplish a desired result, which is lawful in
also promotes the well-being of society. It is our view that the exemption itself, by discovering or following a legal way to do it. 49chanrobles virtual
from the effects of closed shop agreement does not directly advance, or law library
diminish, the interests of any particular religion. Although the exemption
may benefit those who are members of religious sects that prohibit their
5. Appellant avers as its fifth ground that Republic Act No. 3350 is a
members from joining labor unions, the benefit upon the religious sects is
discriminatory legislation, inasmuch as it grants to the members of certain
merely incidental and indirect. The "establishment clause" (of religion) does
religious sects undue advantages over other workers, thus violating Section
not ban regulation on conduct whose reason or effect merely happens to
1 of Article III of the 1935 Constitution which forbids the denial to any
coincide or harmonize with the tenets of some or all religions. 43The free person of the equal protection of the laws. 50chanrobles virtual law library
exercise clause of the Constitution has been interpreted to require that
religious exercise be preferentially aided. 44chanrobles virtual law library
The guaranty of equal protection of the laws is not a guaranty of equality in
the application of the laws upon all citizens of the state. It is not, therefore, a
We believe that in enacting Republic Act No. 3350, Congress acted
requirement, in order to avoid the constitutional prohibition against
consistently with the spirit of the constitutional provision. It acted merely to inequality, that every man, woman and child should be affected alike by a
relieve the exercise of religion, by certain persons, of a burden that is
statute. Equality of operation of statutes does not mean indiscriminate
imposed by union security agreements. It was Congress itself that imposed
operation on persons merely as such, but on persons according to the
that burden when it enacted the Industrial Peace Act (Republic Act 875),
circumstances surrounding them. It guarantees equality, not identity of
and, certainly, Congress, if it so deems advisable, could take away the same
rights. The Constitution does not require that things which are different in
burden. It is certain that not every conscience can be accommodated by all
fact be treated in law as though they were the same. The equal protection
the laws of the land; but when general laws conflict with scrupples of clause does not forbid discrimination as to things that are different. 51It does
conscience, exemptions ought to be granted unless some "compelling state
not prohibit legislation which is limited either in the object to which it is
interest" intervenes. 45In the instant case, We see no such compelling state
directed or by the territory within which it is to
interest to withhold exemption.chanroblesvirtualawlibrarychanrobles
operate.chanroblesvirtualawlibrarychanrobles virtual law library
virtual law library

The equal protection of the laws clause of the Constitution allows


Appellant bewails that while Republic Act No. 3350 protects members of classification. Classification in law, as in the other departments of
certain religious sects, it leaves no right to, and is silent as to the protection
knowledge or practice, is the grouping of things in speculation or practice
of, labor organizations. The purpose of Republic Act No. 3350 was not to
because they agree with one another in certain particulars. A law is not
grant rights to labor unions. The rights of labor unions are amply provided
invalid because of simple inequality. 52The very idea of classification is that
for in Republic Act No. 875 and the new Labor Code. As to the lamented
of inequality, so that it goes without saying that the mere fact of inequality
silence of the Act regarding the rights and protection of labor unions, suffice
in no manner determines the matter of constitutionality. 53All that is
it to say, first, that the validity of a statute is determined by its provisions, required of a valid classification is that it be reasonable, which means that
not by its silence 46; and, second, the fact that the law may work hardship
the classification should be based on substantial distinctions which make for
does not render it unconstitutional. 47chanrobles virtual law library
real differences; that it must be germane to the purpose of the law; that it
must not be limited to existing conditions only; and that it must apply
It would not be amiss to state, regarding this matter, that to compel persons equally to each member of the class. 54This Court has held that the standard
to join and remain members of a union to keep their jobs in violation of is satisfied if the classification or distinction is based on a reasonable
their religious scrupples, would hurt, rather than help, labor unions, foundation or rational basis and is not palpably arbitrary. 55chanrobles
Congress has seen it fit to exempt religious objectors lest their resistance virtual law library
spread to other workers, for religious objections have contagious
potentialities more than political and philosophic
In the exercise of its power to make classifications for the purpose of
objections.chanroblesvirtualawlibrarychanrobles virtual law library
enacting laws over matters within its jurisdiction, the state is recognized as
enjoying a wide range of discretion. 56It is not necessary that the
Furthermore, let it be noted that coerced unity and loyalty even to the classification be based on scientific or marked differences of things or in
country, and a fortiori to a labor - union assuming that such unity and their relation. 57Neither is it necessary that the classification be made with
loyalty can be attained through coercion - is not a goal that is mathematical nicety. 58Hence legislative classification may in many cases
constitutionally obtainable at the expense of religious liberty. 48A desirable properly rest on narrow distinctions, 59for the equal protection guaranty
does not preclude the legislature from recognizing degrees of evil or harm, The mere fact that the legislative classification may result in actual
and legislation is addressed to evils as they may inequality is not violative of the right to equal protection, for every
appear.chanroblesvirtualawlibrarychanrobles virtual law library classification of persons or things for regulation by law produces inequality
in some degree, but the law is not thereby rendered invalid. A classification
otherwise reasonable does not offend the constitution simply because in
We believe that Republic Act No. 3350 satisfies the aforementioned
practice it results in some inequality. 61Anent this matter, it has been said
requirements. The Act classifies employees and workers, as to the effect and
that whenever it is apparent from the scope of the law that its object is for
coverage of union shop security agreements, into those who by reason of
the benefit of the public and the means by which the benefit is to be
their religious beliefs and convictions cannot sign up with a labor union,
obtained are of public character, the law will be upheld even though
and those whose religion does not prohibit membership in labor unions.
Tile classification rests on real or substantial, not merely imaginary or incidental advantage may occur to individuals beyond those enjoyed by the
general public. 62chanrobles virtual law library
whimsical, distinctions. There is such real distinction in the beliefs, feelings
and sentiments of employees. Employees do not believe in the same
religious faith and different religions differ in their dogmas and cannons. 6. Appellant's further contention that Republic Act No. 3350 violates the
Religious beliefs, manifestations and practices, though they are found in all constitutional provision on social justice is also baseless. Social justice is
places, and in all times, take so many varied forms as to be almost beyond intended to promote the welfare of all the people. 63Republic Act No. 3350
imagination. There are many views that comprise the broad spectrum of promotes that welfare insofar as it looks after the welfare of those who,
religious beliefs among the people. There are diverse manners in which because of their religious belief, cannot join labor unions; the Act prevents
beliefs, equally paramount in the lives of their possessors, may be their being deprived of work and of the means of livelihood. In determining
articulated. Today the country is far more heterogenous in religion than whether any particular measure is for public advantage, it is not necessary
before, differences in religion do exist, and these differences are important that the entire state be directly benefited - it is sufficient that a portion of the
and should not be ignored.chanroblesvirtualawlibrarychanrobles virtual state be benefited thereby.chanroblesvirtualawlibrarychanrobles virtual law
law library library

Even from the phychological point of view, the classification is based on Social justice also means the adoption by the Government of measures
real and important differences. Religious beliefs are not mere beliefs, mere calculated to insure economic stability of all component elements of society,
ideas existing only in the mind, for they carry with them practical through the maintenance of a proper economic and social equilibrium in the
consequences and are the motives of certain rules. of human conduct and inter-relations of the members of the community. 64Republic Act No. 3350
the justification of certain acts. 60Religious sentiment makes a man view insures economic stability to the members of a religious sect, like the Iglesia
things and events in their relation to his God. It gives to human life its ni Cristo, who are also component elements of society, for it insures security
distinctive character, its tone, its happiness or unhappiness its enjoyment or in their employment, notwithstanding their failure to join a labor union
irksomeness. Usually, a strong and passionate desire is involved in a having a closed shop agreement with the employer. The Act also advances
religious belief. To certain persons, no single factor of their experience is the proper economic and social equilibrium between labor unions and
more important to them than their religion, or their not having any religion. employees who cannot join labor unions, for it exempts the latter from the
Because of differences in religious belief and sentiments, a very poor person compelling necessity of joining labor unions that have closed shop
may consider himself better than the rich, and the man who even lacks the agreements and equalizes, in so far as opportunity to work is concerned,
necessities of life may be more cheerful than the one who has all possible those whose religion prohibits membership in labor unions with those
luxuries. Due to their religious beliefs people, like the martyrs, became whose religion does not prohibit said membership. Social justice does not
resigned to the inevitable and accepted cheerfully even the most painful imply social equality, because social inequality will always exist as long as
and excruciating pains. Because of differences in religious beliefs, the world social relations depend on personal or subjective proclivities. Social justice
has witnessed turmoil, civil strife, persecution, hatred, bloodshed and war, does not require legal equality because legal equality, being a relative term,
generated to a large extent by members of sects who were intolerant of is necessarily premised on differentiations based on personal or natural
other religious beliefs. The classification, introduced by Republic Act No. conditions. 65Social justice guarantees equality of opportunity 66, and this is
3350, therefore, rests on substantial precisely what Republic Act No. 3350 proposes to accomplish - it gives
distinctions.chanroblesvirtualawlibrarychanrobles virtual law library laborers, irrespective of their religious scrupples, equal opportunity for
work.chanroblesvirtualawlibrarychanrobles virtual law library
The classification introduced by said Act is also germane to its purpose. The
purpose of the law is precisely to avoid those who cannot, because of their 7. As its last ground, appellant contends that the amendment introduced by
religious belief, join labor unions, from being deprived of their right to work Republic Act No. 3350 is not called for - in other words, the Act is not
and from being dismissed from their work because of union shop security proper, necessary or desirable. Anent this matter, it has been held that a
agreements.chanroblesvirtualawlibrarychanrobles virtual law library statute which is not necessary is not, for that reason, unconstitutional; that
in determining the constitutional validity of legislation, the courts are
Republic Act No. 3350, furthermore, is not limited in its application to unconcerned with issues as to the necessity for the enactment of the
legislation in question. 67Courts do inquire into the wisdom of
conditions existing at the time of its enactment. The law does not provide
laws. 68Moreover, legislatures, being chosen by the people, are presumed to
that it is to be effective for a certain period of time only. It is intended to
understand and correctly appreciate the needs of the people, and it may
apply for all times as long as the conditions to which the law is applicable
change the laws accordingly. 69The fear is entertained by appellant that
exist. As long as there are closed shop agreements between an employer
unless the Act is declared unconstitutional, employers will prefer
and a labor union, and there are employees who are prohibited by their
religion from affiliating with labor unions, their exemption from the employing members of religious sects that prohibit their members from
joining labor unions, and thus be a fatal blow to unionism. We do not agree.
coverage of said agreements
The threat to unionism will depend on the number of employees who are
continues.chanroblesvirtualawlibrarychanrobles virtual law library
members of the religious sects that control the demands of the labor market.
But there is really no occasion now to go further and anticipate problems
Finally, the Act applies equally to all members of said religious sects; this is We cannot judge with the material now before Us. At any rate, the validity
evident from its provision. The fact that the law grants a privilege to of a statute is to be determined from its general purpose and its efficacy to
members of said religious sects cannot by itself render the Act accomplish the end desired, not from its effects on a particular case. 70The
unconstitutional, for as We have adverted to, the Act only restores to them essential basis for the exercise of power, and not a mere incidental result
their freedom of association which closed shop agreements have taken arising from its exertion, is the criterion by which the validity of a statute is
away, and puts them in the same plane as the other workers who are not to be measured. 71chanrobles virtual law library
prohibited by their religion from joining labor unions. The circumstance,
that the other employees, because they are differently situated, are not
granted the same privilege, does not render the law unconstitutional, for II. We now pass on the second assignment of error, in support of which the
Union argued that the decision of the trial court ordering the Union to pay
every classification allowed by the Constitution by its nature involves
P500 for attorney's fees directly contravenes Section 24 of Republic Act No.
inequality.chanroblesvirtualawlibrarychanrobles virtual law library
875, for the instant action involves an industrial dispute wherein the Union
was a party, and said Union merely acted in the exercise of its rights under two high-ranking PAL officials. Among these officials was petitioner; he
the union shop provision of its existing collective bargaining contract with had been administratively charged by Romeo David, Senior Vice-President
the Company; that said order also contravenes Article 2208 of the Civil for Corporate Services and Logistics Group, for his (Lozon) purported
Code; that, furthermore, Appellee was never actually dismissed by the involvement in four cases, labeled "Goldair," "Autographics," "Big Bang of
defendant Company and did not therefore suffer any damage at all 1983" and "Middle East."[2] Pending the investigation of these cases by a
. 72chanrobles virtual law library panel[3]constituted by then President Corazon C. Aquino, petitioner was
placed under preventive suspension.
In refuting appellant Union's arguments, Appellee claimed that in the
instant case there was really no industrial dispute involved in the attempt to In the organizational meeting of the PAL board of directors on 19 October
compel Appellee to maintain its membership in the union under pain of 1990, during which occasion Feliciano R. Belmonte, Jr., was elected
dismissal, and that the Union, by its act, inflicted intentional harm on chairman of the board while Dante G. Santos was designated president and
Appellee; that since Appellee was compelled to institute an action to protect chief executive officer,[4] the board deferred action on the election or
his right to work, appellant could legally be ordered to pay attorney's fees appointment of some senior officers of the company who, like petitioner,
under Articles 1704 and 2208 of the Civil Code. 73chanrobles virtual law had been charged with various offenses.
library
On 18 January 1991, the PAL board of directors issued two resolutions
The second paragraph of Section 24 of Republic Act No. 875 which is relied relative to the investigation conducted by the presidential investigating
upon by appellant provides that: panel in the "Autographics" and "Goldair" cases. In "Autographics,"
petitioner was charged, along with three other officials,[5] with "gross
No suit, action or other proceedings shall be maintainable in any court inefficiency, negligence, imprudence, mismanagement, dereliction of duty,
against a labor organization or any officer or member thereof for any act failure to observe and/or implement administrative and executive policies"
done by or on behalf of such organization in furtherance of an industrial and with the "concealment, or cover-up and prevention of the seasonal
dispute to which it is a party, on the ground only that such act induces some discovery of the anomalous transactions" had with Autographics, Inc.,
other person to break a contract of employment or that it is in restraint of resulting in, among other things, an overpayment by PAL to Autographics
trade or interferes with the trade, business or employment of some other in the amount of around P12 million. Petitioner was forthwith considered
person or with the right of some other person to dispose of his capital or "resigned from the service x x x for loss of confidence and for acts inimical
labor. (Emphasis supplied) 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
That there was a labor dispute in the instant case cannot be disputed for where he, together with six other PAL officials,[7] were charged with like
appellant sought the discharge of respondent by virtue of the closed shop "offenses" that had caused PAL's defraudation by Goldair, PAL's general
agreement and under Section 2 (j) of Republic Act No. 875 a question sales agent in Australia, of 14.6 million Australian dollars.[8]
involving tenure of employment is included in the term "labor
dispute". 74The discharge or the act of seeking it is the labor dispute itself. It Aggrieved by the action taken by the PAL board of directors, petitioner, on
being the labor dispute itself, that very same act of the Union in asking the 26 June 1991, filed with the National Labor Relations Commission ("NLRC")
employer to dismiss Appellee cannot be "an act done ... in furtherance of an in Manila a complaint (docketed NLRC-NCR Case No. 00-06-03684-91) for
industrial dispute". The mere fact that appellant is a labor union does not illegal dismissal and for reinstatement, with backwages and "fringe benefits
necessarily mean that all its acts are in furtherance of an industrial such as Vacation leave, Sick leave, 13th month pay, Christmas Bonus,
dispute. 75Appellant Union, therefore, cannot invoke in its favor Section 24
Medical Expenses, car expenses, trip pass entitlement, etc., plus moral
of Republic Act No. 875. This case is not intertwined with any unfair labor
damages of P40 Million, exemplary damages of P10 Million and reasonable
practice case existing at the time when Appellee filed his complaint before
the lower court.chanroblesvirtualawlibrarychanrobles virtual law library attorney's fees."[9]

On 09 August 1991,[10] the PAL board of directors also held petitioner as


Neither does Article 2208 of the Civil Code, invoked by the Union, serve as "resigned from the company" for loss of confidence and for acts inimical to
its shield. The article provides that attorney's fees and expenses of litigation the interests of the company in the "Big Bang of 1983" case for his alleged
may be awarded "when the defendant's act or omission has compelled the role in the irregularities that had precipitated the write-down (write-off) of
plaintiff ... to incur expenses to protect his interest"; and "in any other case
assets amounting to P553 million from the books and financial statements of
where the court deems it just and equitable that attorney's fees and
PAL.[11] In the "Middle East" case, the PAL board of directors, on the same
expenses of litigation should be recovered". In the instant case, it cannot be
date, suspended petitioner for six (6) months for his supposed involvement
gainsaid that appellant Union's act in demanding Appellee's dismissal
caused Appellee to incur expenses to prevent his being dismissed from his in the anomalous administration of commercial marketing arrangements in
job. Costs according to Section 1, Rule 142, of the Rules of Court, shall be which PAL had lost an estimated P120 million.[12]
allowed as a matter of course to the prevailing
party.chanroblesvirtualawlibrarychanrobles virtual law library PAL defended the validity of petitioner's dismissal before the Labor Arbiter.
WHEREFORE, the instant appeal is dismissed, and the decision, dated It questioned at the same time the jurisdiction of the NLRC, positing the
August 26, 1965, of the Court of First Instance of Manila, in its Civil Case theory that since the investigating panel was constituted by then President
No. 58894, appealed from is affirmed, with costs against appellant Union. It Aquino, said panel, along with the PAL board of directors, became "a
is so ordered. parallel arbitration unit" which, in legal contemplation, should be deemed
to have substituted for the NLRC. Thus, PAL averred, petitioner's recourse
[ GR No. 107660, Jan 02, 1995 ] should have been to appeal his case to the Office of the President.[13] On
RAMON C. LOZON v. NLRC + the other hand, petitioner questioned the authority of the panel to conduct
the investigation, asseverating that the charges leveled against him were
Petitioner Ramon C. Lozon, a certified public accountant, was a Senior Vice- purely administrative in nature that could have well been ventilated under
President-Finance of private respondent Philippine Airlines, Inc. ("PAL"), the grievance procedure outlined in PAL's Code of Discipline.
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 On 17 March 1992, Labor Arbiter Jose G. de Vera rendered a decision ruling
the national carrier on 23 August 1967 and, for twenty-three years, steadily for petitioner.[14] The decretal portion of the decision read:
climbed the corporate ladder until he became one of its vice-presidents.[1]
"WHEREFORE, all the foregoing premises being considered, judgment is
His termination from the service was spawned by a letter sent some time in hereby rendered ordering the respondent Philippine Airlines, Inc., to
June 1990 by a member of PAL's board of directors, then Solicitor General reinstate the complainant to his former position with all the rights,
Francisco Chavez, to PAL President Dante Santos. Chavez demanded an privileges, and benefits appertaining thereto plus backwages, which as of
investigation of twenty-three irregularities allegedly committed by twenty- March 15, 1992 already amounted to P2,632,500.00, exclusive of fringes.
Further, the respondent company is ordered to pay complainant as follows: until his successor shall have been elected and qualified.[23] Petitioner, for
P5,000,000.00 as moral damages; P1,000,000.00 as exemplary damages, and reasons already mentioned, did not get to be re-elected thereafter.[24]
attorney's fees equivalent to ten percent (10%) of all the foregoing awards.
In Fortune Cement Corporation v. NLRC,[25] the Court has quoted with
"SO ORDERED."[15] approval the Solicitor General's contention that "a corporate officer's
dismissal is always a corporate act and/or intra-corporate controversy and
A day after promulgating the decision, the labor arbiter issued a writ of that nature is not altered by the reason or wisdom which the Board of
execution. PAL filed a motion to quash the writ which petitioner promptly Directors may have in taking such action." Not the least insignificant in the
opposed. After the labor arbiter had denied the motion to quash, PAL filed case at bench is that petitioner's dismissal is intertwined with still another
a petition for injunction with the NLRC (docketed NLRC IC Case No. intra-corporate affair, earlier so ascribed as the "two-billion-peso PALscam,"
00261-92). No decision was rendered by NLRC on this petition.[16] 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
Meanwhile, PAL appealed the decision of the labor arbiter by filing a
general provisions of Article 217 of the Labor Code.[26]
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 Petitioner contends that the jurisdiction of the SEC excludes its cognizance
or dismissal of petitioner, a corporate officer, was within the exclusive and over claims for vacation and sick leaves, 13th month pay, Christmas bonus,
original jurisdiction of the Securities and Exchange Commission ("SEC"). medical expenses, car expenses, and other benefits, as well as for moral and
Petitioner interposed a partial appeal praying for an increase in the amount exemplary damages and attorney's fees.[27]Dy v. NLRC[28] categorically
of moral and exemplary damages awarded by the labor arbiter.[18] 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
On 24 July 1992, the NLRC rendered a decision (in NLRC NCR Case No. 00-
the area of corporate affairs and management, and is in fact, a corporate
06-03684-91)[19] dismissing the case on the strength of PAL's new argument
controversy in contemplation of the Corporation Code." With regard to the
on the issue of jurisdiction.[20] Petitioner's motion for reconsideration was
matter of damages, in Andaya v. Abadia[29] where, in a complaint filed
denied by the NLRC.
before the Regional Trial Court, the president and general manager of the
The instant petition for certiorari filed with this Court raises these issues: (a) Armed Forces and Police Savings and Loan Association ("AFPSLAI")
Whether or not the NLRC has jurisdiction over the illegal dismissal case, questioned his ouster from the stewardship of the association, this Court, in
and (b) on the assumption that the SEC has that jurisdiction, whether or not dismissing the petition assailing the order of the trial court which ruled that
private respondent is estopped from raising NLRC's lack of jurisdiction SEC, not the regular courts, had jurisdiction over the case, has said:
over the controversy.
"The allegations against herein respondents in the amended complaint
We sustain NLRC's dismissal of the case. unquestionably reveal intra-corporate controversies cleverly concealed,
Presidential Decree No. 902-A confers on the SEC original and exclusive although unsuccessfully, by use of civil law terms and phrases. The
jurisdiction to hear and decide controversies and cases involving - amended complaint impleads herein respondents who, in their capacity as
directors of AFPSLAI, allegedly convened an illegal meeting and voted for
a. Intra-corporate and partnership relations between or among the the reorganization of management resulting in petitioner's ouster as
corporation, officers and stockholders and partners, including their corporate officer. While it may be said that the same corporate acts also give
elections or appointments; 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
b. State and corporate affairs in relation to the legal existence of which can be considered consequential in the exercise of its adjudicative
corporations, partnerships and associations or to their franchises; and powers. Besides, incidental issues that properly fall within the authority of a
tribunal may also be considered by it to avoid multiplicity, of actions.
c. Investors and corporate affairs, particularly in respect of devices and
Consequently, in intra-corporate matters such as those affecting the
schemes, such as fraudulent practices, employed by directors, officers,
corporation, its directors, trustees, officers, shareholders, the issue of
business associates, and/or other stockholders, partners, or members of
consequential damages may just as well be resolved and adjudicated by the
registered firms; as well as
SEC." (Underscoring supplied.)
d. Petitions for suspension of payments filed by corporations, partnerships
We here reiterate the above holdings for, indeed, controversies within the
or associations possessing sufficient property to cover all their debts but
purview of Section 5 of P.D. No. 902-A must not be so constricted as to deny
which foresee the impossibility of meeting them when they respectively fall
to the SEC the sound exercise of its expertise and competence in resolving
due, or possessing insufficient assets to cover their liabilities and said
all closely related aspects of such corporate disputes.
entities are upon petition or motu proprio, placed under the management of
a Rehabilitation Receiver or Management Committee. Petitioner maintains that PAL is estopped, nevertheless, from questioning
the jurisdiction of the NLRC considering that PAL did not hold the dispute
Specifically, in intra-corporate matters concerning the election or
to be intracorporate until after the case had already been brought on appeal
appointment of officers of a corporation, the decree provides:
to the NLRC.
"SEC. 5. In addition to the regulatory and adjudicative functions of the
In the first place, there would not be much basis to indicate that PAL was
Securities and Exchange Commission over corporations, partnerships and
"effectively barred by estoppel."[30] As early as the initial stages of the
other forms of associations registered with it as expressly granted under
controversy PAL had already raised the issue of jurisdiction albeit
existing laws and decrees, it shall have original and exclusive jurisdiction to
mistakenly at first on the ground that petitioner's recourse was an appeal to
hear and decide cases involving:
the Office of the President. The error could not alter the fact that PAL did
"(c) Controversies in the election or appointments of directors, trustees, question even then the jurisdiction of both the labor arbiter and the NLRC.
officers or managers of such corporations, partnerships or associations."
It has long been the established rule, moreover, that jurisdiction over a
Petitioner himself admits that "vice presidents are senior members of subject matter is conferred by law,[31] and the question of lack of
management,"[21] whose designations are no longer than just by means of jurisdiction may be raised at anytime even on appeal.[32] In the recent case
ordinary promotions. In his own case, petitioner has been elected to the of La Naval Drug Corporation vs. Court of Appeals, G.R. No. 103200, 31
position of Senior Vice-President - Finance Group by PAL's board of August 1994, this Court said:
directors at its organizational meeting held on 20 October 1989 pursuant to
"Lack of jurisdiction over the subject matter of the suit is yet another
the By-laws,[22] under which, he would serve for a term of one year and
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 On August 21, 1998, the Labor Arbiter rendered a Decision stating that
Court). This defense may be interposed at any time, during appeal (Roxas petitioner had been illegally dismissed. The dispositive portion thereof reads:
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 WHEREFORE, in view of all the foregoing, judgment is hereby rendered in
jurisdiction is conferred by law and not within the courts, let alone the favor of the complainant and against all the respondents, jointly and
parties, to themselves determine or conveniently set aside. In People vs. severally, ordering the latter:
Casiano (111 Phil. 73, 93-94), this Court, on the issue of estoppel, held:
1. To reinstate complainant to his former position without diminution
"'The operation of the principle of estoppel on the question of jurisdiction
of salary or loss of seniority rights, and with full backwages
seemingly depends upon whether the lower court actually had jurisdiction computed from the time of his illegal dismissal on May 16, 1997 up
or not. If it had no jurisdiction, but the case was tried and decided upon the to the time of his actual reinstatement which is tentatively
theory that it had jurisdiction, the parties are not barred, on appeal, from computed as of the date of this decision on August 21, 1998 in the
assailing such jurisdiction, for the same 'must exist as a matter of law, and amount of P1,231,750.00 (i.e., P75,000.00 a month x 15.16 months =
may not be conferred by consent of the parties or by estoppel' (5 C.J.S., 861- P1,137,000.00 plus 13th month pay equivalent to 1/12 of P
863). However, if the lower court had jurisdiction, and the case was heard 1,137,000.00 = P94,750.00 or the total amount of P 1,231,750.00).
and decided upon a given theory, such, for instance, as that the court had Should complainant be not reinstated within ten (10) days from
no jurisdiction, the party who induced it to adopt such theory will not be receipt of this decision, he shall be entitled to additional backwages
permitted, on appeal, to assume an inconsistent position--that the lower until actually reinstated.
court had jurisdiction. Here, the principle of estoppel applies. The rule that 2. Likewise, to pay complainant the following:
jurisdiction is conferred by law, and does not depend upon the will of the
parties, has no bearing thereon.'"
a) P 2 Million as and for moral damages;
Petitioner points to "PAL's scandalous duplicity" in questioning the
jurisdiction of the NLRC in this particular controversy while upholding it b) P500,000.00 as and for exemplary damages; plus and (sic)
(NLRC's jurisdiction) in "Robin Dui v. Philippine Airlines" (Case No. 00-4-
20267) pending before that Commission. We need not delve into whether or c) Ten (10%) percent thereof as and for attorneys fees.
not PAL's conduct does indeed smack of opportunism; suffice it to say that
Robin Dui is entirely an independent and separate case and, more than that,
SO ORDERED.[3]
it is not before us in this instance.

WHEREFORE, the herein petition for certiorari is DISMISSED, and the IBC appealed to the NLRC, but the same was dismissed in a Resolution
decision appealed from is AFFIRMED, without prejudice to petitioner's dated March 2, 1999, for its failure to file the required appeal bond in
seeking, if circumstances permit, a recourse in the proper forum. No costs. accordance with Article 223 of the Labor Code.[4] IBC then filed a motion for
reconsideration that was likewise denied in a Resolution dated April 26,
SO ORDERED. 1999.[5]

DILY DANY NACPIL, petitioner, vs. INTERNATIONAL IBC then filed with the Court of Appeals a petition for certiorari under
BROADCASTING CORPORATION, respondent. Rule 65, which petition was granted by the appellate court in its Decision
dated November 23, 1999. The dispositive portion of said decision states:
This is a petition for review on certiorari under Rule 45, assailing the
Decision of the Court of Appeals dated November 23, 1999 in CA-G.R. SP No.
WHEREFORE, premises considered, the petition for Certiorari is
52755[1] and the Resolution dated August 31, 2000 denying petitioner Dily
GRANTED. The assailed decisions of the Labor Arbiter and the NLRC are
Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the
REVERSED and SET ASIDE and the complaint is DISMISSED without
decisions promulgated by the Labor Arbiter and the National Labor Relations
prejudice.
Commission (NLRC), which consistently ruled in favor of petitioner.

Petitioner states that he was Assistant General Manager for SO ORDERED.[6]


Finance/Administration and Comptroller of private respondent
Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997.
According to petitioner, when Emiliano Templo was appointed to replace Petitioner then filed a motion for reconsideration, which was denied by
IBC President Tomas Gomez III sometime in March 1997, the former told the the appellate court in a Resolution dated August 31, 2000.
Board of Directors that as soon as he assumes the IBC presidency, he would Hence, this petition.Petitioner Nacpil submits that:
terminate the services of petitioner. Apparently, Templo blamed petitioner,
along with a certain Mr. Basilio and Mr. Gomez, for the prior I.
mismanagement of IBC. Upon his assumption of the IBC presidency, Templo THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER
allegedly harassed, insulted, humiliated and pressured petitioner into WAS APPOINTED BY RESPONDENTS BOARD OF DIRECTORS AS
resigning until the latter was forced to retire. However, Templo refused to COMPTROLLER. THIS FINDING IS CONTRARY TO THE COMMON,
pay him his retirement benefits, allegedly because he had not yet secured the CONSISTENT POSITION AND ADMISSION OF BOTH PARTIES.
clearances from the Presidential Commission on Good Government and the FURTHER, RESPONDENTS BY-LAWS DOES NOT INCLUDE
Commission on Audit. Furthermore, Templo allegedly refused to recognize COMPTROLLER AS ONE OF ITS CORPORATE OFFICERS.
petitioners employment, claiming that petitioner was not the Assistant
General Manager/Comptroller of IBC but merely usurped the powers of the II.
Comptroller. Hence, in 1997, petitioner filed with the Labor Arbiter a THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE
complaint for illegal dismissal and non-payment of benefits. WHEN IT SUBSTITUTED THE NATIONAL LABOR RELATIONS
COMMISSIONS DECISION TO APPLY THE APPEAL BOND
Instead of filing its position paper, IBC filed a motion to dismiss REQUIREMENT STRICTLY IN THE INSTANT CASE. THE ONLY ISSUE
alleging that the Labor Arbiter had no jurisdiction over the case. IBC FOR ITS DETERMINATION IS WHETHER NLRC COMMITTED GRAVE
contended that petitioner was a corporate officer who was duly elected by ABUSE OF DISCRETION IN DOING THE SAME.[7]
the Board of Directors of IBC; hence, the case qualifies as an intra-corporate
dispute falling within the jurisdiction of the Securities and Exchange The issue to be resolved is whether the Labor Arbiter had jurisdiction
Commission (SEC). However, the motion was denied by the Labor Arbiter in over the case for illegal dismissal and non-payment of benefits filed by
an Order dated April 22, 1998.[2] petitioner. The Court finds that the Labor Arbiter had no jurisdiction over the
same.
Under Presidential Decree No. 902-A (the Revised Securities Act), the corporation who also determines the compensation to be paid to such
law in force when the complaint for illegal dismissal was instituted by employee.[16]
petitioner in 1997, the following cases fall under the exclusive of the SEC:
As petitioners appointment as comptroller required the approval and
formal action of the IBCs Board of Directors to become valid,[17] it is clear
a) Devices or schemes employed by or any acts of the board of directors, therefore holds that petitioner is a corporate officer whose dismissal may be
business associates, its officers or partners, amounting to fraud and the subject of a controversy cognizable by the SEC under Section 5(c) of P.D.
misrepresentation which may be detrimental to the interest of the public 902-A which includes controversies involving both election
and/or of the stockholders, partners, members of associations or and appointment of corporate directors, trustees, officers, and
organizations registered with the Commission; managers.[18] Had petitioner been an ordinary employee, such board action
would not have been required.
b) Controversies arising out of intra-corporate or partnership relations,
between and among stockholders, members or associates; between any or Thus, the Court of Appeals correctly held that:
all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such Since complainants appointment was approved unanimously by the Board
corporation, partnership or association and the State insofar as it concerns of Directors of the corporation, he is therefore considered a corporate officer
their individual franchise or right to exist as such entity; and his claim of illegal dismissal is a controversy that falls under the
jurisdiction of the SEC as contemplated by Section 5 of P.D. 902-A. The rule
is that dismissal or non-appointment of a corporate officer is clearly an intra-
c) Controversies in the election or appointment of directors, trustees, corporate matter and jurisdiction over the case properly belongs to the SEC,
officers, or managers of such corporations, partnerships or associations; not to the NLRC.[19]

d) Petitions of corporations, partnerships, or associations to be declared in As to petitioners argument that the nature of his functions is
the state of suspension of payments in cases where the corporation, recommendatory thereby making him a mere managerial officer, the Court
partnership or association possesses property to cover all of its debts but has previously held that the relationship of a person to a corporation,
foresees the impossibility of meeting them when they respectively fall due whether as officer or agent or employee is not determined by the nature of
the services performed, but instead by the incidents of the relationship as
or in cases where the corporation, partnership or association has no
sufficient assets to cover its liabilities, but is under the Management they actually exist.[20]
Committee created pursuant to this decree. (Emphasis supplied.) It is likewise of no consequence that petitioner's complaint for illegal
dismissal includes money claims, for such claims are actually part of the
The Court has consistently held that there are two elements to be perquisites of his position in, and therefore linked with his relations with, the
considered in determining whether the SEC has jurisdiction over the corporation. The inclusion of such money claims does not convert the issue
controversy, to wit: (1) the status or relationship of the parties; and (2) the into a simple labor problem. Clearly, the issues raised by petitioner against
nature of the question that is the subject of their controversy.[8] the IBC are matters that come within the area of corporate affairs and
management, and constitute a corporate controversy in contemplation of the
Petitioner argues that he is not a corporate officer of the IBC but an Corporation Code.[21]
employee thereof since he had not been elected nor appointed as Comptroller
and Assistant Manager by the IBCs Board of Directors. He points out that he Petitioner further argues that the IBC failed to perfect its appeal from
had actually been appointed as such on January 11, 1995 by the IBCs General the Labor Arbiters Decision for its non-payment of the appeal bond as
Manager, Ceferino Basilio. In support of his argument, petitioner required under Article 223 of the Labor Code, since compliance with the
underscores the fact that the IBCs By-Laws does not even include the position requirement of posting of a cash or surety bond in an amount equivalent to
of comptroller in its roster of corporate officers.[9] He therefore contends that the monetary award in the judgment appealed from has been held to be both
his dismissal is a controversy falling within the jurisdiction of the labor mandatory and jurisdictional.[22] Hence, the Decision of the Labor Arbiter
courts.[10] had long become final and executory and thus, the Court of Appeals acted
with grave abuse of discretion amounting to lack or excess of jurisdiction in
Petitioners argument is untenable. Even assuming that he was in fact giving due course to the IBCs petition for certiorari, and in deciding the case
appointed by the General Manager, such appointment was subsequently on the merits.
approved by the Board of Directors of the IBC.[11] That the position of
Comptroller is not expressly mentioned among the officers of the IBC in the The IBCs failure to post an appeal bond within the period mandated
By-Laws is of no moment, because the IBCs Board of Directors is empowered under Article 223 of the Labor Code has been rendered immaterial by the fact
under Section 25 of the Corporation Code[12] and under the corporations By- that the Labor Arbiter did not have jurisdiction over the case since as stated
Laws to appoint such other officers as it may deem necessary. The By-Laws earlier, the same is in the nature of an intra-corporate controversy. The Court
of the IBC categorically provides: has consistently held that where there is a finding that any decision was
rendered without jurisdiction, the action shall be dismissed. Such defense can
be interposed at any time, during appeal or even after final judgment.[23] It is
XII. OFFICERS
a well-settled rule that jurisdiction is conferred only by the Constitution or
by law. It cannot be fixed by the will of the parties; it cannot be acquired
The officers of the corporation shall consist of a President, a Vice-President, through, enlarged or diminished by, any act or omission of the parties. [24]
a Secretary-Treasurer, a General Manager, and such other officers as the
Board of Directors may from time to time does fit to provide for. Said Considering the foregoing, the Court holds that no error was
officers shall be elected by majority vote of the Board of Directors and committed by the Court of Appeals in dismissing the case filed before the
shall have such powers and duties as shall hereinafter provide (Emphasis Labor Arbiter, without prejudice to the filing of an appropriate action in the
supplied).[13] proper court.

It must be noted that under Section 5.2 of the Securities Regulation


The Court has held that in most cases the by-laws may and usually do Code (Republic Act No. 8799) which was signed into law by then President
provide for such other officers,[14] and that where a corporate office is not Joseph Ejercito Estrada on July 19, 2000, the SECs jurisdiction over all cases
specifically indicated in the roster of corporate offices in the by-laws of a enumerated in Section 5 of P.D. 902-Ahas been transferred to the Regional
corporation, the board of directors may also be empowered under the by- Trial Courts.[25]
laws to create additional officers as may be necessary.[15]
WHEREFORE, the petition is hereby DISMISSED and the Decision of
An office has been defined as a creation of the charter of a corporation, the Court of Appeals in CA-G.R. SP No. 52755 is AFFIRMED.
while an officer as a person elected by the directors or stockholders. On the
other hand, an employee occupies no office and is generally employed not by SO ORDERED.
action of the directors and stockholders but by the managing officer of the
PURIFICACION G. TABANG, petitioner, vs. NATIONAL LABOR hospital administrator, which are corporate offices, is an intra-corporate
RELATIONS COMMISSION and PAMANA GOLDEN CARE controversy subject to the jurisdiction of the SEC.
MEDICAL CENTER FOUNDATION, INC., respondents.
Contrary to the contention of petitioner, a medical director and a
This is a petition for certiorari which seeks to annul the resolution of the hospital administrator are considered as corporate officers under the by-laws
National Labor Relations Commission (NLRC), dated June 26, 1995, of respondent corporation. Section 2(i), Article I thereof states that one of the
affirming in toto the order of the labor arbiter, dated April 26, 1994, which powers of the Board of Trustees is (t)o appoint a Medical Director,
dismissed petitioners complaint for illegal dismissal with money claims for Comptroller/Administrator, Chiefs of Services and such other officers as it
lack of jurisdiction. may deem necessary and prescribe their powers and duties. [4]

The records show that petitioner Purificacion Tabang was a founding The president, vice-president, secretary and treasurer are commonly
member, a member of the Board of Trustees, and the corporate secretary of regarded as the principal or executive officers of a corporation, and modern
private respondent Pamana Golden Care Medical Center Foundation, Inc., a corporation statutes usually designate them as the officers of the
non-stock corporation engaged in extending medical and surgical services. corporation.[5] However, other offices are sometimes created by the charter or
by-laws of a corporation, or the board of directors may be empowered under
On October 30, 1990, the Board of Trustees issued a memorandum the by-laws of a corporation to create additional offices as may be necessary. [6]
appointing petitioner as Medical Director and Hospital Administrator of
private respondents Pamana Golden Care Medical Center in Calamba, It has been held that an office is created by the charter of the
Laguna. corporation and the officer is elected by the directors or stockholders. [7] On
the other hand, an employee usually occupies no office and generally is
Although the memorandum was silent as to the amount of employed not by action of the directors or stockholders but by the managing
remuneration for the position, petitioner claims that she received a monthly officer of the corporation who also determines the compensation to be paid
retainer fee of five thousand pesos (P5,000.00) from private respondent, but to such employee.[8]
the payment thereof was allegedly stopped in November, 1991.
In the case at bar, considering that herein petitioner, unlike an ordinary
As medical director and hospital administrator, petitioner was tasked employee, was appointed by respondent corporations Board of Trustees in
to run the affairs of the aforesaid medical center and perform all acts of its memorandum of October 30, 1990,[9] she is deemed an officer of the
administration relative to its daily operations. corporation. Perforce, Section 5(c) of Presidential Decree No. 902-A, which
On May 1, 1993, petitioner was allegedly informed personally by Dr. provides that the SEC exercises exclusive jurisdiction over controversies in
Ernesto Naval that in a special meeting held on April 30, 1993, the Board of the election or appointment of directors, trustees, officers or managers of
Trustees passed a resolution relieving her of her position as Medical Director corporations, partnerships or associations, applies in the present
and Hospital Administrator, and appointing the latter and Dr. Benjamin dispute.Accordingly, jurisdiction over the same is vested in the SEC, and not
Donasco as acting Medical Director and acting Hospital Administrator, in the Labor Arbiter or the NLRC.
respectively. Petitioner averred that she thereafter received a copy of said Moreover, the allegation of petitioner that her being a member of the
board resolution. Board of Trustees was not one of the considerations for her appointment is
On June 6, 1993, petitioner filed a complaint for illegal dismissal and belied by the tenor of the memorandum itself. It states: We hope that you will
non-payment of wages, allowances and 13th month pay before the labor uphold and promote the mission of our foundation,[10] and this cannot be
arbiter. construed other than in reference to her position or capacity as a corporate
trustee.
Respondent corporation moved for the dismissal of the complaint on
the ground of lack of jurisdiction over the subject matter. It argued that A corporate officers dismissal is always a corporate act, or an intra-
petitioners position as Medical Director and Hospital Administrator was corporate controversy, and the nature is not altered by the reason or wisdom
interlinked with her position as member of the Board of Trustees, hence, her with which the Board of Directors may have in taking such action.[11] Also, an
dismissal is an intra-corporate controversy which falls within the exclusive intra-corporate controversy is one which arises between a stockholder and
jurisdiction of the Securities and Exchange Commission (SEC). the corporation. There is no distinction, qualification, nor any exemption
whatsoever. The provision is broad and covers all kinds of controversies
Petitioner opposed the motion to dismiss, contending that her position between stockholders and corporations. [12]
as Medical Director and Hospital Administrator was separate and distinct
from her position as member of the Board of Trustees. She claimed that there With regard to the amount of P5,000.00 formerly received by herein
is no intra-corporate controversy involved since she filed the complaint in her petitioner every month, the same cannot be considered as compensation for
capacity as Medical Director and Hospital Administrator, or as an employee her services rendered as Medical Director and Hospital Administrator. The
of private respondent. vouchers[13] submitted by petitioner show that the said amount was paid to
her by PAMANA, Inc., a stock corporation which is separate and distinct
On April 26, 1994, the labor arbiter issued an order dismissing the from herein private respondent. Although the payments were considered
complaint for lack of jurisdiction. He ruled that the case falls within the advances to Pamana Golden Care, Calamba branch, there is no evidence to
jurisdiction of the SEC, pursuant to Section 5 of Presidential Decree No. 902- show that the Pamana Golden Care stated in the vouchers refers to herein
A. [1] respondent Pamana Golden Care Medical Center Foundation, Inc.

Petitioners motion for reconsideration was treated as an appeal by the Pamana Golden Care is a division of Pamana, Inc., while respondent
labor arbiter who consequently ordered the elevation of the entire records of Pamana Golden Care Medical Center Foundation, Inc. is a non-stock, non-
the case to public respondent NLRC for appellate review. [2] profit corporation. It is stated in the memorandum of petitioner that Pamana,
Inc. is a stock and profit corporation selling pre-need plan for education,
On appeal, respondent NLRC affirmed the dismissal of the case on the pension and health care. The health care plan is called Pamana Golden Care
additional ground that the position of a Medical Director and Hospital Plan and the holders are called Pamana Golden Care Card Holders or,
Administrator is akin to that of an executive position in a corporate ladder simply, Pamana Members. [14]
structure, hence, petitioners removal from the said position was an intra-
corporate controversy within the original and exclusive jurisdiction of the It is an admitted fact that herein petitioner is a retained physician of
SEC. [3] Pamana, Inc., whose patients are holders of the Pamana Golden Care Card. In
fact, in her complaint[15] filed before the Regional Trial Court of Calamba,
Aggrieved by the decision, petitioner filed the instant petition which herein petitioner is asking, among others, for professional fees and/or
we find, however, to be without merit. retainer fees earned for her treatment of Pamana Golden Care card
holders.[16] Thus, at most, said vouchers can only be considered as proof of
We agree with the findings of the NLRC that it is the SEC which has
payment of retainer fees made by Pamana, Inc. to herein petitioner as a
jurisdiction over the case at bar. The charges against herein private
retained physician of Pamana Golden Care.
respondent partake of the nature of an intra-corporate controversy. Similarly,
the determination of the rights of petitioner and the concomitant liability of Moreover, even assuming that the monthly payment of P5,000.00 was
private respondent arising from her ouster as a medical director and/or a valid claim against respondent corporation, this would not operate to
effectively remove this case from the jurisdiction of the SEC. In the case of The auditors of the Bank discovered that two checks, No. 011728-7232-146,
Cagayan de Oro Coliseum, Inc. vs. Office of the Minister of Labor and in the amount of US$109,650.00, and No. 011730-7232-146, in the amount of
Employment, etc., et al.,[17] we ruled that (a)lthough the reliefs sought by US$115,000.00, received by the Bank on April 6, 1989, drawn by the Sanford
Chavez appear to fall under the jurisdiction of the labor arbiter as they are Trading against Hongkong and Shanghai Banking Corporation, Jurong
claims for unpaid salaries and other remunerations for services rendered, a Branch, Singapore, in favor of Filipinas Tyrom, were not sent out for
close scrutiny thereof shows that said claims are actually part of the collection to Hongkong Shanghai Banking Corporation on the alleged order
perquisites of his position in, and therefore interlinked with, his relations of the complainant until the said checks became stale.
with the corporation. In Dy, et al., vs. NLRC, et al., the Court said: (t)he
question of remuneration involving as it does, a person who is not a mere
The Bank created a committee to investigate the findings of the auditors
employee but a stockholder and officer, an integral part, it might be said, of involving the two checks which were not collected and became stale.
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. On March 8, 1991, the president of the Bank issued a memorandum to the
complainant informing her of the findings of the auditors and asked her to
WHEREFORE, the questioned resolution of the NLRC is hereby give her side. In reply, complainant requested for an extension of one week
AFFIRMED, without prejudice to petitioners taking recourse to and seeking to submit her explanation. In a subsequent letter, dated March 14, 1991, to
relief through the appropriate remedy in the proper forum. the president, complainant stated that in view of the refusal of the Bank that
she be furnished copies of the pertinent documents she is requesting and
SO ORDERED. the refusal to grant her a reasonable period to prepare her answer, she was
constrained to make a general denial of any misfeasance or malfeasance on
her part and asked that a formal investigation be made.
PRUDENTIAL BANK and TRUST COMPANY, petitioner, vs. CLARITA
T. REYES, respondent. As the complainant failed to attend and participate in the formal
investigation conducted by the Committee on May 24, 1991, despite due
Before the Court is a petition for review on certiorari of the
notice, the Committee proceeded with its hearings and heard the
Decision,[1] dated October 15, 1999 of the Court of Appeals in C.A.-G.R. SP
testimonies of several witnesses.
No. 30607 and of its Resolution, dated December 6, 1999 denying petitioners
motion for reconsideration of said decision. The Court of Appeals reversed
and set aside the resolution[2] of the National Labor Relations Commission The Committees findings were:
(NLRC) in NLRC NCR CA No. 009364-95, reversing and setting aside the
labor arbiters decision and dismissing for lack of merit private respondents a) The two (2) HSBC checks were received by the Foreign Department on 6
complaint.[3] April 1989. On the same day, complainant authorized the crediting of the
account of Filipinas Tyrom in the amount of P4,780,102.70 corresponding to
The case stems from NLRC NCR Case No. 00-06-03462-92, which is a
complaint for illegal suspension and illegal dismissal with prayer for moral the face value of the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the
and exemplary damages, gratuity, fringe benefits and attorneys fees filed by following day, a transmittal letter was prepared by Ms. Cecilia Joven, a
Clarita Tan Reyes against Prudential Bank and Trust Company (the Bank) remittance clerk then assigned in the Foreign Department, for the purpose
before the labor arbiter. Prior to her dismissal, private respondent Reyes held of sending out the two (2) HSBC checks for collection. She then requested
the position of Assistant Vice President in the foreign department of the Bank, complainant to sign the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11
tasked with the duties, among others, to collect checks drawn against March 1993, pp. 42-52), as it is complainant who gives her instructions
overseas banks payable in foreign currency and to ensure the collection of directly concerning the transmittal of foreign bills purchased. All other
foreign bills or checks purchased, including the signing of transmittal letters transmittal letters are in fact signed by complainant.
covering the same.
b) After Ms. Joven delivered the transmittal letters and the checks to the
After proceedings duly undertaken by the parties, judgment was Accounting Section of the Foreign Department, complainant instructed her
rendered by Labor Arbiter Cornelio L. Linsangan, the dispositive portion of to withdraw the same for the purpose of changing the addressee thereon
which reads: from American Express Bank to Bank of Hawaii (ibid.) under a special
collection scheme (Exhibits 4 and 5 to 5-B).
WHEREFORE, finding the dismissal of complainant to be without factual
and legal basis, judgment is hereby rendered ordering the respondent bank c) After complying with complainants instruction, Ms. Joven then returned
to pay her back wages for three (3) years in the amount of P540,000.00 to complainant for the latter to sign the new transmittal letters. However,
(P15,000.00 x 36 mos.). In lieu of reinstatement, the respondent is also complainant told Ms. Joven to just hold on to the letters and checks and
ordered to pay complainant separation pay equivalent to one month salary await further instructions (ibid.). Thus, the new transmittal letters remained
for every year of service, in the amount of P420,000.00 (P15,000 x 28 unsigned. (See Exhibits 5 to 5-B).
mos.). In addition, the respondent should also pay complainant profit
sharing and unpaid fringe benefits. Attorneys fees equivalent to ten (10%)
percent of the total award should likewise be paid by respondent. d) In June 1989, Ms. Joven was transferred to another department. Hence,
her duties, responsibilities and functions, including the responsibility over
the two (2) HSBC checks, were turned over to another remittance clerk, Ms.
SO ORDERED.[4] Analisa Castillo (Exhibit 14; TSN, 4 June 1993, pp. 27-29).

Not satisfied, the Bank appealed to the NLRC which, as mentioned at e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms. Joven
the outset, reversed the Labor Arbiters decision in its Resolution dated 24 relayed to the latter complainants instruction (Exhibit 14; TSN, 4 June 1993,
March 1997. Private respondent sought reconsideration which, however, was p. 42).
denied by the NLRC in its Resolution of 28 July 1998. Aggrieved, private
respondent commenced on October 28, 1998, a petition for certiorari before
the Supreme Court.[5] The subject petition was referred to the Court of f) About fifteen (15) months after the HSBC checks were received by the
Appeals for appropriate action and disposition per resolution of this Court Bank, the said checks were discovered in the course of an audit conducted
dated November 25, 1998, in accordance with the ruling in St. Martin by the Banks auditors. Atty. Pablo Magno, the Banks legal counsel, advised
Funeral Homes vs. NLRC.[6] complainant to send the checks for collection despite the lapse of fifteen (15)
months.
In its assailed decision, the Court of Appeals adopted the following
antecedent facts leading to Reyess dismissal as summarized by the NLRC: g) Complainant, however, deliberately withheld Atty. Magnos advice from
her superior, the Senior Vice-President, Mr. Renato Santos and falsely
informed the latter that Atty. Magno advised that a demand letter be sent Appeals reinstated the judgment of the labor arbiter with modification as
instead, thereby further delaying the collection of the HSBC checks. follows:

h) On 10 July 1990, the HSBC checks were finally sent for collection, but WHEREFORE, in the light of the foregoing, the decision appealed from is
were returned on 16 July 1990 for the reason account closed (Exhibits 2-A hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby
and 3-A). rendered ordering respondent Bank as follows:

After a review of the Committees findings, the Board of Directors of the 1. To pay petitioner full backwages and other benefits from July
Bank resolved not to re-elect complainant any longer to the position of 19, 1991 up to the finality of this judgment;
assistant president pursuant to the Banks By-laws.
2. To pay petitioner separation pay equivalent to one (1) month
salary for every year of service in lieu of reinstatement; and
On July 19, 1991, complainant was informed of her termination of
employment from the Bank by Senior Vice President Benedicto L. Santos, in 3. To pay attorneys fee equivalent to ten (10%) percent of the total
a letter the text of which is quoted in full: award.

Dear Mrs. Reyes: SO ORDERED.[8]

After a thorough investigation and appreciation of the charges against you Hence, the Banks recourse to this Court contending in its
as contained in the Memorandum of the President dated March 8, 1991, the memorandum that:
Fact Finding Committee which was created to investigate the commission
and/or omission of the acts alluded therein, has found the following:
IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997 AND THE
RESOLUTION DATED 28 JULY 1998 OF THE NLRC AND
1. You have deliberately held the clearing of Checks Nos. 11728 and 11730 REINSTATING WITH MODIFICATION THE DECISION DATED 20 JULY
of Hongkong and Shanghai Banking Corporation in the total amount of 1995 OF LABOR ARBITER CORNELIO L. LINSANGAN, THE
US$224,650.00 by giving instructions to the collection clerk not to send the HONORABLE COURT OF APPEALS SERIOUSLY ERRED, IN VIEW OF
checks for collection. In view thereof, when the said checks were finally sent THE FOLLOWING:
to clearing after the lapse of 15 months from receipt of said checks, they
were returned for the reason Account closed. To date, the value of said
I.
checks have not been paid by Filipinas Tyrom, which as payee of the
checks, had been credited with their peso equivalent;
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT THE
NLRC WHICH HAS ORIGINAL AND EXCLUSIVE JURISDICTION OVER
2. You tried to influence the decision of Atty. Pablo P. Magno, Bank legal
CASES INVOLVING THE REMOVAL FROM OFFICE OF CORPORATE
counsel, by asking him to do something allegedly upon instructions of a
OFFICERS.
Senior Vice President of the Bank or else lose his job when in truth and in
fact no such instructions was given; and
II.
3. You deliberately withheld from Mr. Santos, Senior Vice President, the
advice given by the legal counsel of the Bank which Mr. Santos had asked EVEN ASSUMING ARGUENDO THAT THE NLRC HAS JURISDICTION,
you to seek. As a matter of fact, you even relayed a false advice which THERE WAS SUBSTANTIAL EVIDENCE OF RESPONDENTS
delayed further the sending of the two checks for collection. Likewise, you MISCONDUCT JUSTIFYING THE BANKS LOSS OF TRUST AND
refused to heed the advice of the Banks legal counsel to send the checks for CONFIDENCE ON (sic) HER.
collection.
III.
These findings have given rise to the Banks loss of trust and confidence in
you, the same being acts of serious misconduct in the performance of your EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED
duties resulting in monetary loss to the Bank. In view thereof, the Board has TO BACKWAGES, THE HONORABLE COURT OF APPEALS ERRED IN
resolved not to re-elect you to the position of Assistant Vice President of the AWARDING UNLIMITED AND UNQUALIFIED BACKWAGES
Bank. Accordingly, your services are terminated effective immediately. In THEREBY GOING FAR BEYOND THE LABOR ARBITERS DECISION
relation thereto, your monetary and retirement benefits are forfeited except LIMITING THE SAME TO THREE YEARS, WHICH DECISION
those that have vested in you. RESPONDENT HERSELF SOUGHT TO EXECUTE.[9]

In her position paper, complainant alleged that the real reason for her In sum, the resolution of this petition hinges on (1) whether the NLRC
dismissal was her filing of the criminal cases against the bank president, the has jurisdiction over the complaint for illegal dismissal; (2) whether
vice president and the auditors of the Bank, such filing not being a valid complainant Reyes was illegally dismissed; and (3) whether the amount of
ground for her dismissal. Furthermore, she alleged that it would be self- back wages awarded was proper.
serving for the respondent to state that she was found guilty of gross
misconduct in deliberately withholding the clearing of the two dollar On the first issue, petitioner seeks refuge behind the argument that the
checks. She further alleged that she was not afforded due process as she was dispute is an intra-corporate controversy concerning as it does the non-
not given the chance to refute the charges mentioned in the letter of election of private respondent to the position of Assistant Vice-President of
dismissal.Hence, she was illegally dismissed. the Bank which falls under the exclusive and original jurisdiction of the
Securities and Exchange Commission (now the Regional Trial Court) under
Section 5 of Presidential Decree No. 902-A. More specifically, petitioner
On the other hand, respondent argues that there were substantial bases for
contends that complainant is a corporate officer, an elective position under
the Bank to lose its trust and confidence on the complainant and,
the corporate by-laws and her non-election is an intra-corporate controversy
accordingly, had just cause for terminating her services. Moreover, for filing
cognizable by the SEC invoking lengthily a number of this Courts
the clearly unfounded suit against the respondents officers, complainant is
decisions.[10]
liable to pay moral and exemplary damages and attorneys fees.[7]
Petitioner Bank can no longer raise the issue of jurisdiction under the
The Court of Appeals found that the NLRC committed grave abuse of principle of estoppel. The Bank participated in the proceedings from start to
discretion in ruling that the dismissal of Reyes is valid. In effect, the Court of finish. It filed its position paper with the Labor Arbiter. When the decision of
the Labor Arbiter was adverse to it, the Bank appealed to the NLRC. When
the NLRC decided in its favor, the bank said nothing about jurisdiction. Even checks per petitioners instruction, respondent Bank failed to adduce
before the Court of Appeals, it never questioned the proceedings on the convincing evidence to prove bad faith and malice. It bears emphasizing
ground of lack of jurisdiction. It was only when the Court of Appeals ruled that respondent Banks witnesses merely corroborate Jovens testimony.
in favor of private respondent did it raise the issue of jurisdiction. The Bank
actively participated in the proceedings before the Labor Arbiter, the NLRC
Upon this point, the rule that proof beyond reasonable doubt is not required
and the Court of Appeals. While it is true that jurisdiction over the subject
to terminate an employee on the charge of loss of confidence and that it is
matter of a case may be raised at any time of the proceedings, this rule
sufficient that there is some basis for such loss of confidence, is not
presupposes that laches or estoppel has not supervened. In this regard, Baaga
absolute. The right of an employer to dismiss employees on the ground that
vs. Commission on the Settlement of Land Problems,[11] is most enlightening. The
it has lost its trust and confidence in him must not be exercised arbitrarily
Court therein stated: and without just cause. For loss of trust and confidence to be valid ground
for an employees dismissal, it must be substantial and not arbitrary, and
This Court has time and again frowned upon the undesirable practice of a must be founded on clearly established facts sufficient to warrant the
party submitting his case for decision and then accepting the judgment, employees separation from work (Labor vs. NLRC, 248 SCRA 183).
only if favorable, and attacking it for lack of jurisdiction when
adverse. Here, the principle of estoppel lies. Hence, a party may be SECOND. Respondent Banks charge of deliberate withholding of the two
estopped or barred from raising the question of jurisdiction for the first time
dollar checks finds no support in the testimony of Atty. Jocson, Chairman of
in a petition before the Supreme Court when it failed to do so in the early
the Investigating Committee. On cross examination, Atty. Jocson testified
stages of the proceedings.
that the documents themselves do not show any direct withholding (pp.
186-187, Rollo). There being conflict in the statement of witnesses, the court
Undeterred, the Bank also contends that estoppel cannot lie must adopt the testimony which it believes to be true (U.S. vs. Losada, 18
considering that from the beginning, petitioner Bank has consistently Phil. 90).
asserted in all its pleadings at all stages of the proceedings that respondent
held the position of Assistant Vice President, an elective position which she
THIRD. Settled is the rule that when the conclusions of the Labor Arbiter
held by virtue of her having been elected as such by the Board of Directors.
are sufficiently substantiated by the evidence on record, the same should be
As far as the records before this Court reveal however, such an assertion was
respected by appellate tribunals since he is in a better position to assess and
made only in the appeal to the NLRC and raised again before the Court of
evaluate the credibility of the contending parties (Ala Mode Garments, Inc.
Appeals, not for purposes of questioning jurisdiction but to establish that vs. NLRC, 268 SCRA 497). In this regard, the Court quotes with approval
private respondents tenure was subject to the discretion of the Board of
the following disquisition of Labor Arbiter Linsangan, thus:
Directors and that her non-reelection was a mere expiration of her term. The
Bank insists that private respondent was elected Assistant Vice President
sometime in 1990 to serve as such for only one year. This argument will not This Office has repeatedly gone over the records of the case and
do either and must be rejected. painstakingly examined the testimonies of respondent banks witnesses. One
thing was clearly established: that the legality of complainants dismissal
It appears that private respondent was appointed Accounting Clerk by based on the first ground stated in respondents letter of termination (exh.
the Bank on July 14, 1963. From that position she rose to become 25-J, supra) will rise or fall on the credibility of Miss Joven who
supervisor. Then in 1982, she was appointed Assistant Vice-President which undisputedly is the star witness for the bank. It will be observed that the
she occupied until her illegal dismissal on July 19, 1991. The banks contention testimonies of the banks other witnesses, Analiza Castillo, Dante Castor and
that she merely holds an elective position and that in effect she is not a regular Antonio Ragasa pertaining to the non-release of the dollar checks and their
employee is belied by the nature of her work and her length of service with corresponding transmittal letters were all anchored on what was told them
the Bank. As earlier stated, she rose from the ranks and has been employed by Ms. Joven, that is: she was instructed by complainant to hold the release
with the Bank since 1963 until the termination of her employment in 1991. As of subject checks. In a nutshell, therefore, the issue boils down to who
Assistant Vice President of the foreign department of the Bank, she is tasked, between complainant and Ms. Joven is more credible.
among others, to collect checks drawn against overseas banks payable in
foreign currency and to ensure the collection of foreign bills or checks
After painstakingly examining the testimonies of Ms. Joven and
purchased, including the signing of transmittal letters covering the same. It
respondents other witnesses this Office finds the evidence still wanting in
has been stated that the primary standard of determining regular
proof of complainants guilt. This Office had closely observed the demeanor
employment is the reasonable connection between the particular activity
of Ms. Joven while testifying on the witness stand and was not impressed
performed by the employee in relation to the usual trade or business of the
by her assertions. The allegation of Ms. Joven in that her non-release of the
employer.[12] Additionally, an employee is regular because of the nature of
dollar checks was upon the instruction of complainant Reyes is extremely
work and the length of service, not because of the mode or even the reason
doubtful. In the first place, the said instruction constitutes a gross violation
for hiring them.[13] As Assistant Vice-President of the Foreign Department of
of the banks standard operating procedure. Moreover, Ms. Joven was fully
the Bank she performs tasks integral to the operations of the bank and her
aware that the instruction, if carried out, will greatly prejudice her employer
length of service with the bank totaling 28 years speaks volumes of her status
bank. It was incumbent upon Ms. Joven not only to disobey the instruction
as a regular employee of the bank. In fine, as a regular employee, she is
but even to report the matter to management, if same was really given to
entitled to security of tenure; that is, her services may be terminated only for
her by complainant.
a just or authorized cause.[14] This being in truth a case of illegal dismissal, it
is no wonder then that the Bank endeavored to the very end to establish loss
of trust and confidence and serious misconduct on the part of private Our doubt on the veracity of Ms. Jovens allegation even deepens as we
respondent but, as will be discussed later, to no avail. consider the fact that when the non-release of the checks was discovered by
Ms. Castillo the former contented herself by continuously not taking any
This brings us to the second issue wherein the Bank insists that it has action on the two dollar checks. Worse, Ms. Joven even impliedly told by
presented substantial evidence to prove the breach of trust on the part of Ms. Castillo (sic) to ignore the two checks and just withhold their release. In
private respondent warranting her dismissal. On this point, the Court of her affidavit Ms. Castillo said:
Appeals disagreed and set aside the findings of the NLRC that Reyes
deliberately withheld the release of the two dollar checks; that she is guilty
4. When I asked Cecille Joven what I was supposed to do with those checks,
of conflict of interest that she waived her right to due process for not
she said the same should be held as per instruction of Mrs. Reyes. (Exh. 14,
attending the hearing; and that she was dismissed based on loss of trust and
supra).
confidence. We quote pertinent portions of the decision, to wit:

The evidence shows that it was only on 16 May 1990 that Ms. Joven broke
FIRST: Respondent Bank heavily relied on the testimony and affidavit of
her silence on the matter despite the fact that on 15 November 1989, at
Remittance Clerk Joven in trying to establish loss of confidence. However,
about 8:00 p.m. the complainant, accompanied by driver Celestino Banito,
Jovens allegation that petitioner instructed her to hold the subject two dollar
went to her residence and confronted her regarding the non-release of the
checks amounting to $224,650.00 falls short of the requisite proof to warrant
petitioners dismissal. Except for Jovens bare assertion to withhold the dollar dollar checks. It took Ms. Joven eighteen (18) months before she explained
her side on the controversy. As to what prompted her to make her letter of On the third issue, the Bank questions the award of full backwages and
explanation was not even mentioned. other benefits from July 19, 1991 up to the finality of this judgment; separation
pay equivalent to one (1) month salary for every year of service in lieu of
On the other hand, the actions taken by the complainant were reinstatement; and attorneys fees equivalent to ten (10%) percent of the total
award. The Bank argues, in the main, that private respondent is not entitled
spontaneous. When complainant was informed by Mr. Castor and Ms.
to full backwages in view of the fact that she did not bother to appeal that
Castillo regarding the non-release of the checks sometime in November,
portion of the labor arbiters judgment awarding back wages limited to three
1989 she immediately reported the matter to Vice President Santos, Head of
years. It must be stressed that private respondent filed a special civil action
the Foreign Department. And as earlier mentioned, complainant went to the
for certiorari to review the decision of the NLRC [17] and not an ordinary
residence of Ms. Joven to confront her. In this regard, Celestino Bonito,
complainants driver, stated in his affidavit, thus: appeal. An ordinary appeal is distinguished from the remedy of certiorari
under Rule 65 of the Revised Rules of Court in that in ordinary appeals it is
settled that a party who did not appeal cannot seek affirmative relief other
1. Sometime on November 15, 1989 at about 7:00 oclock in the evening, Mrs. than the ones granted in the decision of the court below.[18] On the other hand,
Clarita Tan Reyes and I were in the residence of one Ms. Cecille Joven, then resort to a judicial review of the decisions of the National Labor Relations
a Processing Clerk in the Foreign Department of Prudential Bank; Commission in a petition for certiorari under Rule 65 of Rules of Court is
confined to issues of want or excess of jurisdiction and grave abuse of
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes were discretion.[19] In the instant case, the Court of Appeals found that the NLRC
seated in the sala when the latter asked the former, Ms. Cecille Joven, how it gravely abused its discretion in finding that the private respondents
came about that the two dollar checks which she was then holding with the dismissal was valid and so reversed the same. Corollary to the foregoing, the
transmittal letters, were found in a plastic envelope kept day-to-day by the appellate court awarded backwages in accordance with current
former; jurisprudence.

Indeed, jurisprudence is clear on the amount of backwages recoverable


3. Hesitatingly, Cecille Joven said: Eh, Mother (Mrs. Tan Reyes had been in cases of illegal dismissal. Employees illegally dismissed prior to the
intimately called Mother in the Bank) akala ko bouncing checks yon mga effectivity of Republic Act No. 6715 on March 21, 1989 are entitled to
yon. backwages up to three (3) years without deduction or qualification, while
those illegally dismissed after are granted full backwages inclusive of
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised and she allowances and other benefits or their monetary equivalent from the time
said: Ano, papaano mong alam na bouncing na hindi mo pa pinadadala; their actual compensation was withheld from them up to the time of their
actual reinstatement.[20] Considering that private respondent was terminated
on July 19, 1991, she is entitled to full backwages from the time her actual
5. Mrs. Cecille Joven turned pale and was not able to answer. compensation was withheld from her (which, as a rule, is from the time of
her illegal dismissal) up to the finality of this judgment (instead of
There are other factors that constrain this Office to doubt even more the reinstatement) considering that reinstatement is no longer feasible as
legality of complainants dismissal based on the first ground stated in the correctly pointed out by the Court of Appeals on account of the strained
letter of dismissal. The non-release of the dollar checks was reported to top relations brought about by the litigation in this case. Since reinstatement is
management sometime on 15 November 1989 when complainant, no longer viable, she is also entitled to separation pay equivalent to one (1)
accompanied by Supervisor Dante Castor and Analiza Castillo, reported the month salary for every year of service.[21] Lastly, since private respondent
matter to Vice President Santos. And yet, it was only on 08 March 1991, was compelled to file an action for illegal dismissal with the labor arbiter, she
after a lapse of sixteen (16) months from the time the non-release of the is likewise entitled to attorneys fees[22] at the rate above-mentioned. There is
checks was reported to the Vice President, that complainant was issued a no room to argue, as the Bank does here, that its liability should be mitigated
memorandum directing her to submit an explanation. And it took the bank on account of its good faith and that private respondent is not entirely
another four (4) months before it dismissed complainant. blameless. There is no showing that private respondent is partly at fault or
that the Bank acted in good faith in terminating an employee of twenty-eight
years. In any event, Article 279 of Republic Act No. 6715[23] clearly and plainly
The delayed action taken by respondent against complainant lends credence
provides for full backwages to illegally dismissed employees.
to the assertion of the latter that her dismissal was a mere retaliation to the
criminal complaints she filed against the banks top officials. WHEREFORE, the instant petition for review on certiorari is DENIED,
and the assailed Decision of the Court of Appeals, dated October 15, 1999, is
It clearly appears from the foregoing that the complainant herein has no AFFIRMED.
knowledge of, much less participation in, the non-release of the dollar
SO ORDERED.
checks under discussion. Ms. Joven is solely responsible for the
same. Incidentally, she was not even reprimanded by the bank.

FOURTH. Respondent Bank having failed to furnish petitioner necessary RURAL BANK OF CORON (PALAWAN), INC., EMPIRE COLD
documents imputing loss of confidence, petitioner was not amply afforded STORAGE AND DEVELOPMENT CORPORATION, CITIZENS
opportunity to prepare an intelligent answer. The Court finds nothing DEVELOPMENT
confidential in the auditors report and the affidavit of Transmittal Clerk
Joven. Due process dictates that management accord the employees every INCOPRORATED, CARIDAD B. GARCIA, SANDRA G. ESCAT,
kind of assistance to enable him to prepare adequately for his defense, LORNA GARCIA, and OLGA G. ESCAT,
including legal representation.
- versus -

The issue of conflict of interest not having been covered by the ANNALISA CORTES,
investigation, the Court finds it irrelevant to the charge.[15]
In 1987, Virgilio Garcia, founder of petitioner corporations (the
corporations), hired the then still single Annalisa Cortes (respondent) as
We uphold the findings of the Court of Appeals that the dismissal of
clerk of the Rural Bank of Coron (Manila Office).
private respondent on the ground of loss of trust and confidence was without
basis. The charge was predicated on the testimony of Ms. Joven and we defer
After Virgilio died, his son Victor took over the management of the
to the findings of the Labor Arbiter as confirmed and adopted by the Court
corporations.
of Appeals on the credibility of said witness. This Court is not a trier of facts
and will not weigh anew the evidence already passed upon by the Court of Anita Cortes (Anita), the wife of Victor Garcia, was also involved in the
Appeals.[16]
management of the corporations. Respondent later married Anitas brother
Eduardo Cortes.
Anita soon assumed the position of Vice President of petitioner Citizens ONE HUNDRED SIXTY-EIGHT THOUSAND NINETY (P1,168,090.00)
Development Incorporated (CDI) and practically controlled the financial PESOS as discussed above.[8]
operations of almost all of the other corporations in the course of which she
allowed some of her relatives and in-laws, including respondent, to hold On August 13, 2001, the tenth or last day of the period of
several key sensitive positions thereat. appeal,[9] petitioners filed a Notice of Appeal and Motion for Reduction of
Bond[10] to which they attached a Memorandum on Appeal.[11] In their Motion
Respondent later became the Financial Assistant, Personnel Officer and for Reduction of Bond, petitioners alleged that the corporations were under
Corporate Secretary of The Rural Bank of Coron, Personnel Officer of CDI, financial distress and the Rural Bank of Coron was under receivership. They
and also Personnel Officer and Disbursing Officer of The Empire Cold thus prayed that the amount of bond be substantially reduced, preferably to
Storage Development Corporation (ECSDC). She simultaneously received one half thereof or even lower.[12]
salaries from these corporations.
By Resolution of October 16, 2001[13], the National Labor Relations
On examination of the financial books of the corporations by petitioner Commission (NLRC), while noting that petitioners timely filed the appeal,
Sandra Garcia Escat, a daughter of Virgilio Garcia who was previously held that the same was not accompanied by an appeal bond, a mandatory
residing in Spain, she found out that respondent was involved in several requirement under Article 223[14] of the Labor Code and Section 6, Rule VI
anomalies,[1] drawing of the NLRC New Rules of Procedure. It also noted that the Motion for
petitioners to terminate respondents services on November 23, 1998 in Reduction of Bond was premised on self-serving allegations. It accordingly
petitioner corporations.[2] dismissed the appeal.

By letter of November 25, 1998[3] addressed to individual petitioners Petitioners Motion for Reconsideration[15] was denied by the NLRC
Caridad B. Garcia (widow of Virgilio Garcia), Sandra G. Escat, and Olga G. by November 26, 2001 Resolution,[16] hence, they filed a Petition for
Escat (another daughter of Virgilio Garcia), respondents counsel conveyed Certiorari[17] before the Court of Appeals.
respondents willingness to abide by the decision to terminate her but
reminded them that she was entitled to separation pay equivalent to 11 By Decision dated May 26, 2004[18], the appellate court dismissed the
months salary as well as to the other benefits provided by law in her favor. petition for lack of merit. Petitioners motion for reconsideration was also
denied by Resolution of August 13, 2004.[19]
Respondents counsel thus demanded the payment of respondents unpaid
salary for the months of October and November 1998, separation pay Hence, this petition,[20] petitioners faulting the appellate court for:
equivalent to 12 months salary,[4] 13th month pay and other benefits.
I. . . FAIL[URE] TO RULE THAT THE NLRCS RULE OF PROCEDURE
As the demand remained unheeded, respondent filed a complaint[5]
for WHICH PROVIDES FOR THE POSTING OF A BOND AS A CONDITION
illegal dismissal and non-payment of salaries and other benefits, docketed PRECEDENT FOR PERFECTING AN APPEAL AS A CONDITION
as NLRC-NCR Case No. 00-05-05738-99. PRECEDENT FOR PERFECTING AN APPEAL IS CONTRARY TO LAW
AND ESTABLISHED JURISPRUDENCE
Petitioners moved for the dismissal of the complaint on the ground of lack
of jurisdiction, contending that the case was an intra-corporate controversy II. . . DISMISS[ING] PETITIONERS[] PETITION FOR [CERTIORARI]
involving the removal of a corporate officer, respondent being the BASED ON TECHNICALITY AND FAIL[URE] TO DECIDE THE SAME
Corporate Secretary of the Rural Bank of Coron, Inc., hence, cognizable by BASED ON ITS MERIT.
the Securities and Exchange Commission (SEC) pursuant to Section 5 of PD
III. . . DISMISSING PETITIONERS PETITION FOR CERTIORARI FROM
902-A.[6]
THE DECISION OF THE NLRC FOR NON-PERFECTION THEREOF.
In resolving the issue of jurisdiction, the Labor Arbiter noted as follows:
IV. . . DISMISSING PETITIONERS PETITION FOR [CERTIORARI] FROM
It is to be noted that complainant, aside from her being Corporate THE DECISION OF THE NLRC WITHOUT RESOLVING THE CASE
Secretary of Rural Bank of Coron, complainant was likewise appointed as BASED ON ITS MERITS.
Financial Assistant & Personnel Officer of all respondents herein, whose
V. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL PETITIONERS ARE
services w[ere] terminated on 23 November 1998, hence, the instant
NOT SOLIDARY LIABLE TO PAY THE RESPONDENT FOR HER
complaint.
MONETARY CLAIM IN VIEW OF THE ABSENCE OF ANY EVIDENCE
Verily, a Financial Assistant & Personnel Officer is not a Corporate Officer SHOWING THAT THEY WERE MOTIVATED BY ILL-WILL OR MALICE
of the [petitioners] corporation, thus, pursuant to Article 217 of the Labor IN SEVERING HER EMPLOYMENT.
Code, as amended, the instant case falls within the ambit of original and
VI. . . FAIL[URE] TO RESOLVE THE ISSUE OF JURISDICTION.[21]
exclusive jurisdiction of this Office.[7] (Emphasis and underscoring
supplied). While, indeed, respondent was the Corporate Secretary of the Rural Bank of
Coron, she was also its Financial Assistant and the Personnel Officer of the
Eventually, the Labor Arbiter found for respondent, computing the
two other petitioner corporations.[22]
monetary award due her as follows:
Mainland Construction Co., Inc. v. Movilla[23] instructs that a corporation can
Backwages P658,000.00
engage its corporate officers to perform services under a circumstance
13th Month Pay for 1998, 1999 & 2000 63,000.00 which would make them employees.[24]

P721,000.00 The Labor Arbiter has thus jurisdiction over respondents complaint.

Separation Pay 315,000.00 On the first three assigned errors which bear on whether petitioners appeal
before the NLRC was perfected:As before the Court of Appeals, petitioners
Unpaid Salary 25,900.00 cite Cosico, Jr. v. NLRC[25] and Taberrah v. NLRC[26] in support of their
contention that their appeal before the NLRC was perfected. As correctly
Attorneys fees 106,190.00 P1,168,090.00 ruled by the Court of Appeals, however, the cited cases are not in point.
Thus, the Labor Arbiter, by Decision of July 18, 2001, disposed: The appellant in Taberrah filed a motion to fix appeal bond instead of
posting an appeal bond; and the Supreme Court relaxed the requirement
WHEREFORE, in view of all the foregoing, respondents are hereby ordered
considering that the labor arbiters decision did not contain a computation of
to jointly and severally pay complainant the total amount of ONE MILLION
the monetary award. In Cosico, the appeal bond posted was of insufficient dismissed. Petitioners should thus have posted a bond, even if it were only
amount but the Supreme Court ruled that provisions of the Labor Code on partial, but they did not. No relaxation of the Rule may thus be
requiring a bond on appeal involving monetary awards must be given considered.[32]
liberal interpretation in line with the desired objective of resolving
controversies on their merits. Herein, no appeal bond, whether sufficient or In the case at bar, petitioner did not post a full or partial appeal bond within
not, was ever filed by the petitioners.[27] (Italics in the original; emphasis and the prescribed period, thus, no appeal was perfected from the decision of
underscoring supplied) the Labor Arbiter. For this reason, the decision sought to be appealed to the
NLRC had become final and executory and therefore immutable. Clearly
Petitioners additionally cite Star Angel Handicraft v. NLRC[28] to support their then, the NLRC has no authority to entertain the appeal, much less to
position that there is a distinction between the filing of an appeal within the reverse the decision of the Labor Arbiter. Any amendment or alteration
reglementary period and its perfection. In the parallel case of Computer made which substantially affects the final and executory judgment is null
Innovations Center v. National Labor Relations Commission,[29] this Court and void for lack of jurisdiction, including the entire proceeding held for
hesitated to reiterate the doctrine in Star Angel in this wise: that purpose.[33] (Emphasis and underscoring supplied)

Petitioners invoke the aforementioned holding in Star Angel that there is a As the decision of the Labor Arbiter had become final and executory, a
distinction between the filing of an appeal within the reglementary period discussion of the fourth and fifth assigned errors is no longer necessary.
and its perfection, and that the appeal may be perfected after the said
reglementary period. Indeed, Star Angel held that the filing of a motion for WHEREFORE, the petition is DENIED. SO ORDERED.
reduction of appeal bond necessarily stays the reglementary period for
x MATLING INDUSTRIAL
appeal. However, in this case, the motion for reduction of appeal bond,
AND COMMERCIAL CORPORATION,
which was incorporated in the appeal memorandum, was filed only on the RICHARD K. SPENCER,
tenth or final day of the reglementary period. Under such circumstance, the CATHERINE SPENCER,
motion for reduction of appeal bond can no longer be deemed to have AND ALEX MANCILLA,
stayed the appeal, and the petitioner faces the risk, as had happened in this
case, of summary dismissal of the appeal for non-perfection. -versus -

Moreover, the reference in Star Angel to the distinction between the period RICARDO R. COROS,
to file the appeal and to perfect the appeal has been pointedly made only
once by this Court in Gensoli v. NLRC thus, it has not acquired the sheen of Respondent.This case reprises the jurisdictional conundrum of whether a
venerability reserved for repeatedly-cited cases. The distinction, if any, is complaint for illegal dismissal is cognizable by the Labor Arbiter (LA) or by
not particularly evident or material in the Labor Code; hence, the reluctance the Regional Trial Court (RTC). The determination of whether the dismissed
officer was a regular employee or a corporate officer unravels the
of the Court to adopt such doctrine. Moreover, the present provision in the
conundrum. In the case of the regular employee, the LA has jurisdiction;
NLRC Rules of Procedure, that the filing of a motion to reduce bond shall
otherwise, the RTC exercises the legal authority to adjudicate.
not stop the running of the period to perfect appeal flatly contradicts the
notion expressed in Star Angel that there is a distinction between the filing In this appeal via petition for review on certiorari, the petitioners challenge
an appeal and perfecting an appeal. the decision dated September 13, 2002[1] and the resolution dated April 2,
2003,[2] both promulgated in C.A.-G.R. SP No. 65714 entitled Matling
Ultimately, the disposition of Star Angel was premised on the ruling that a Industrial and Commercial Corporation, et al. v. Ricardo R. Coros and National
motion for reduction of the appeal bond necessarily stays the period for Labor Relations Commission, whereby by the Court of Appeals (CA) sustained
perfecting the appeal, and that the employer cannot be expected to perfect the ruling of the National Labor Relations Commission (NLRC) to the effect
the appeal by posting the proper bond until such time the said motion for that the LA had jurisdiction because the respondent was not a corporate
reduction is resolved. The unduly stretched-out distinction between the officer of petitioner Matling Industrial and Commercial Corporation
period to file an appeal and to perfect an appeal was not material to the (Matling).
resolution of Star Angel, and this could be properly considered as obiter
dictum.[30] (Italics in the original; emphasis and underscoring supplied) Antecedents

The appellate court did not thus err in dismissing the petition before it. And
contrary to petitioners assertion, the appellate court dismissed its petition After his dismissal by Matling as its Vice President for Finance and
not on a mere technicality. For the non-posting of an appeal bond within the Administration, the respondent filed on August 10, 2000 a complaint for
reglementary period divests the NLRC of its jurisdiction to entertain the illegal suspension and illegal dismissal against Matling and some of its
corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration
appeal. Thus, in the same case of Computer Innovations Center, this Court
Branch XII, Iligan City.[3]
held:
The petitioners moved to dismiss the complaint,[4] raising the ground, among
Petitioners also characterize the appeal bond requirement as a technical
others, that the complaint pertained to the jurisdiction of the Securities and
rule, and that the dismissal of an appeal on purely technical grounds is
Exchange Commission (SEC) due to the controversy being intra-corporate
frowned upon. However, Article 223, which prescribes the appeal bond
inasmuch as the respondent was a member of Matlings Board of Directors
requirement, is a rule of jurisdiction and not of procedure. There is a little aside from being its Vice-President for Finance and Administration prior to
leeway for condoning a liberal interpretation thereof, and certainly none his termination.
premised on the ground that its requirements are mere technicalities. It The respondent opposed the petitioners motion to dismiss,[5] insisting that his
must be emphasized that there is no inherent right to an appeal in a labor status as a member of Matlings Board of Directors was doubtful,
case, as it arises solely from grant of statute, namely the Labor Code. considering that he had not been formally elected as such; that he did not
own a single share of stock in Matling, considering that he had been made
We have indeed held that the requirement for posting the surety bond is not to sign in blank an undated indorsement of the certificate of stock he had
merely procedural but jurisdictional and cannot be trifled with. Non- been given in 1992; that Matling had taken back and retained the certificate
compliance with such legal requirements is fatal and has the effect of of stock in its custody; and that even assuming that he had been a Director
rendering the judgment final and executory. The petitioners cannot be of Matling, he had been removed as the Vice President for Finance and
allowed to seek refuge in a liberal application of rules for their act of Administration, not as a Director, a fact that the notice of his termination
negligence.[31] (Emphasis and underscoring supplied) dated April 10, 2000 showed.

It bears emphasis that all that is required to perfect the appeal is the posting On October 16, 2000, the LA granted the petitioners motion to
of a bond to ensure that the award is eventually paid should the appeal be dismiss,[6] ruling that the respondent was a corporate officer because he was
occupying the position of Vice President for Finance and Administration
and at the same time was a Member of the Board of Directors of Matling; corporation. However, other offices are sometimes created by the charter or
and that, consequently, his removal was a corporate act of Matling and the by-laws of a corporation, or the board of directors may be empowered
controversy resulting from such removal was under the jurisdiction of the under the by-laws of a corporation to create additional offices as may be
SEC, pursuant to Section 5, paragraph (c) of Presidential Decree No. 902. necessary.
It has been held that an 'office' is created by the charter of the corporation
Ruling of the NLRC and the officer is elected by the directors or stockholders. On the other
hand, an 'employee' usually occupies no office and generally is employed
The respondent appealed to the NLRC,[7] urging that: not by action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to such
I employee.
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF This ruling was reiterated in the subsequent cases of Ongkingco v. National
DISCRETION GRANTING APPELLEES MOTION TO DISMISS WITHOUT Labor Relations Commission and De Rossi v. National Labor Relations
GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS Commission.
OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE The position of vice-president for administration and finance, which Coros
OF DUE PROCESS. used to hold in the corporation, was not created by the corporations board
of directors but only by its president or executive vice-president pursuant to
II the by-laws of the corporation. Moreover, Coros appointment to said
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN position was not made through any act of the board of directors
DISMISSING THE CASE FOR LACK OF JURISDICTION. or stockholders of the corporation. Consequently, the position to which
Coros was appointed and later on removed from, is not a corporate office
On March 13, 2001, the NLRC set aside the dismissal, concluding that the despite its nomenclature, but an ordinary office in the corporation.
respondents complaint for illegal dismissal was properly cognizable by the Coros alleged illegal dismissal therefrom is, therefore, within the
LA, not by the SEC, because he was not a corporate officer by virtue of his jurisdiction of the labor arbiter.
position in Matling, albeit high ranking and managerial, not being among WHEREFORE, the petition for certiorari is hereby DISMISSED.
the positions listed in Matlings Constitution and By-Laws.[8] The NLRC SO ORDERED.
disposed thuswise: The CA denied the petitioners motion for reconsideration on April 2, 2003.[13]

WHEREFORE, the Order appealed from is SET ASIDE. A new one is Issue
entered declaring and holding that the case at bench does not involve any
intracorporate matter. Hence, jurisdiction to hear and act on said case is Thus, the petitioners are now before the Court for a review on certiorari,
vested with the Labor Arbiter, not the SEC, considering that the position of positing that the respondent was a stockholder/member of the Matlings
Vice-President for Finance and Administration being held by complainant- Board of Directors as well as its Vice President for Finance and
appellant is not listed as among respondent's corporate officers. Administration; and that the CA consequently erred in holding that the LA
had jurisdiction.
Accordingly, let the records of this case be REMANDED to the Arbitration
Branch of origin in order that the Labor Arbiter below could act on the case The decisive issue is whether the respondent was a corporate officer of
at bench, hear both parties, receive their respective evidence and position Matling or not. The resolution of the issue determines whether the LA or
papers fully observing the requirements of due process, and resolve the the RTC had jurisdiction over his complaint for illegal dismissal.
same with reasonable dispatch.
SO ORDERED. Ruling

The petitioners sought reconsideration,[9] reiterating that the respondent, The appeal fails.
being a member of the Board of Directors, was a corporate officer whose
removal was not within the LAs jurisdiction. I
The Law on Jurisdiction in Dismissal Cases
The petitioners later submitted to the NLRC in support of the motion for
reconsideration the certified machine copies of Matlings Amended Articles of As a rule, the illegal dismissal of an officer or other employee of a private
Incorporation and By Laws to prove that the President of Matling was employer is properly cognizable by the LA. This is pursuant to Article 217
thereby granted full power to create new offices and appoint the officers (a) 2 of the Labor Code, as amended, which provides as follows:
thereto, and the minutes of special meeting held on June 7, 1999 by Matlings
Board of Directors to prove that the respondent was, indeed, a Member of Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as
the Board of Directors.[10] otherwise provided under this Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar
Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for days after the submission of the case by the parties for decision without
reconsideration.[11] extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
Ruling of the CA
1. Unfair labor practice cases;
The petitioners elevated the issue to the CA by petition for certiorari,
docketed as C.A.-G.R. No. SP 65714, contending that the NLRC committed 2. Termination disputes;
grave abuse of discretion amounting to lack of jurisdiction in reversing the
correct decision of the LA. 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
In its assailed decision promulgated on September 13, 2002,[12] the CA conditions of employment;
dismissed the petition for certiorari, explaining:
4. Claims for actual, moral, exemplary and other forms of damages arising
For a position to be considered as a corporate office, or, for that matter, for from the employer-employee relations;
one to be considered as a corporate officer, the position must, if not listed in
the by-laws, have been created by the corporation's board of directors, and 5. Cases arising from any violation of Article 264 of this Code, including
the occupant thereof appointed or elected by the same board of directors or questions involving the legality of strikes and lockouts; and
stockholders. This is the implication of the ruling in Tabang v. National Labor
Relations Commission, which reads: 6. Except claims for Employees Compensation, Social Security, Medicare
The president, vice president, secretary and treasurer are commonly and maternity benefits, all other claims arising from employer-employee
regarded as the principal or executive officers of a corporation, and modern relations, including those of persons in domestic or household service,
corporation statutes usually designate them as the officers of the
involving an amount exceeding five thousand pesos (P5,000.00) regardless incident to his office or are properly required of him by the Board of
of whether accompanied with a claim for reinstatement. Directors. In case of the absence or disability of the President, the Executive
Vice President shall have the power to exercise his functions.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
The petitioners argue that the power to create corporate offices and to
(c) Cases arising from the interpretation or implementation of collective appoint the individuals to assume the offices was delegated by Matlings
bargaining agreements and those arising from the interpretation or Board of Directors to its President through By-Law No. V, as amended; and
enforcement of company personnel policies shall be disposed of by the that any office the President created, like the position of the respondent,
Labor Arbiter by referring the same to the grievance machinery and was as valid and effective a creation as that made by the Board of Directors,
voluntary arbitration as may be provided in said agreements. (As amended making the office a corporate office. In justification, they cite Tabang v.
by Section 9, Republic Act No. 6715, March 21, 1989). National Labor Relations Commission,[17] which held that other offices are
sometimes created by the charter or by-laws of a corporation, or the board
of directors may be empowered under the by-laws of a corporation to create
Where the complaint for illegal dismissal concerns a corporate officer, additional officers as may be necessary.
however, the controversy falls under the jurisdiction of the Securities and The respondent counters that Matlings By-Laws did not list his position as
Exchange Commission (SEC), because the controversy arises out of intra- Vice President for Finance and Administration as one of the corporate
corporate or partnership relations between and among stockholders, offices; that Matlings By-Law No. III listed only four corporate officers,
members, or associates, or between any or all of them and the corporation, namely: President, Executive Vice President, Secretary, and
partnership, or association of which they are stockholders, members, or Treasurer; [18] that the corporate offices contemplated in the phrase and such
associates, respectively; and between such corporation, partnership, or other officers as may be provided for in the by-laws found in Section 25 of
association and the State insofar as the controversy concerns their the Corporation Code should be clearly and expressly stated in the By-Laws;
individual franchise or right to exist as such entity; or because the that the fact that Matlings By-Law No. III dealt with Directors &
controversy involves the election or appointment of a director, trustee, Officers while its By-Law No. V dealt with Officers proved that there was a
officer, or manager of suchcorporation, partnership, or association. [14] Such differentiation between the officers mentioned in the two provisions, with
controversy, among others, is known as an intra-corporate dispute. those classified under By-Law No. V being ordinary or non-corporate officers;
and that the officer, to be considered as a corporate officer, must be elected
Effective on August 8, 2000, upon the passage of Republic Act No. by the Board of Directors or the stockholders, for the President could only
8799,[15] otherwise known as The Securities Regulation Code, the SECs appoint an employee to a position pursuant to By-Law No. V.
jurisdiction over all intra-corporate disputes was transferred to the RTC,
pursuant to Section 5.2 of RA No. 8799, to wit: We agree with respondent.

5.2. The Commissions jurisdiction over all cases enumerated under Section Section 25 of the Corporation Code provides:
5 of Presidential Decree No. 902-A is hereby transferred to the Courts of
general jurisdiction or the appropriate Regional Trial Court: Provided, that Section 25. Corporate officers, quorum.--Immediately after their election, the
the Supreme Court in the exercise of its authority may designate the directors of a corporation must formally organize by the election of a
Regional Trial Court branches that shall exercise jurisdiction over these president, who shall be a director, a treasurer who may or may not be a
cases. The Commission shall retain jurisdiction over pending cases director, a secretary who shall be a resident and citizen of
involving intra-corporate disputes submitted for final resolution which the Philippines, and such other officers as may be provided for in the by-
should be resolved within one (1) year from the enactment of this Code. The laws. Any two (2) or more positions may be held concurrently by the same
Commission shall retain jurisdiction over pending suspension of person, except that no one shall act as president and secretary or as
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties
enjoined on them by law and the by-laws of the corporation. Unless the
Considering that the respondents complaint for illegal dismissal was articles of incorporation or the by-laws provide for a greater majority, a
commenced on August 10, 2000, it might come under the coverage of majority of the number of directors or trustees as fixed in the articles of
Section 5.2 of RA No. 8799, supra, should it turn out that the respondent was incorporation shall constitute a quorum for the transaction of corporate
a corporate, not a regular, officer of Matling. business, and every decision of at least a majority of the directors or trustees
present at a meeting at which there is a quorum shall be valid as a corporate
II act, except for the election of officers which shall require the vote of a
Was the Respondents Position of Vice President majority of all the members of the board.
for Administration and Finance a Corporate Office?
Directors or trustees cannot attend or vote by proxy at board meetings.
We must first resolve whether or not the respondents position as Vice
President for Finance and Administration was a corporate office. If it was,
his dismissal by the Board of Directors rendered the matter an intra- Conformably with Section 25, a position must be expressly mentioned in the
corporate dispute cognizable by the RTC pursuant to RA No. 8799. By-Laws in order to be considered as a corporate office. Thus, the creation
of an office pursuant to or under a By-Law enabling provision is not enough
The petitioners contend that the position of Vice President for Finance and to make a position a corporate office. Guerrea v. Lezama,[19] the first ruling on
Administration was a corporate office, having been created by Matlings the matter, held that the only officers of a corporation were those given that
President pursuant to By-Law No. V, as amended,[16] to wit: character either by the Corporation Code or by the By-Laws; the rest of the
corporate officers could be considered only as employees or subordinate
BY LAW NO. V officials. Thus, it was held in Easycall Communications Phils., Inc. v. King:[20]

Officers An office is created by the charter of the corporation and the officer is
elected by the directors or stockholders. On the other hand, an employee
The President shall be the executive head of the corporation; shall preside occupies no office and generally is employed not by the action of the
over the meetings of the stockholders and directors; shall countersign all directors or stockholders but by the managing officer of the corporation
certificates, contracts and other instruments of the corporation as authorized who also determines the compensation to be paid to such employee.
by the Board of Directors; shall have full power to hire and discharge any or
all employees of the corporation; shall have full power to create new offices In this case, respondent was appointed vice president for nationwide
and to appoint the officers thereto as he may deem proper and necessary in expansion by Malonzo, petitioner's general manager, not by the board of
the operations of the corporation and as the progress of the business and directors of petitioner. It was also Malonzo who determined the
welfare of the corporation may demand; shall make reports to the directors compensation package of respondent. Thus, respondent was an employee, not
and stockholders and perform all such other duties and functions as are
a corporate officer. The CA was therefore correct in ruling that jurisdiction Commission,[25] the NLRC had no jurisdiction over his complaint, considering
over the case was properly with the NLRC, not the SEC (now the RTC). that any case for illegal dismissal brought by a stockholder/officer against
the corporation was an intra-corporate matter that must fall under the
This interpretation is the correct application of Section 25 of the Corporation jurisdiction of the SEC conformably with the context of PD No. 902-A.
Code, which plainly states that the corporate officers are the President,
Secretary, Treasurer and such other officers as may be provided for in the The petitioners insistence is bereft of basis.
By-Laws. Accordingly, the corporate officers in the context of PD No. 902-A
are exclusively those who are given that character either by the Corporation To begin with, the reliance on Paguio and Ongkingko is misplaced. In both
Code or by the corporations By-Laws. rulings, the complainants were undeniably corporate officers due to their
positions being expressly mentioned in the By-Laws, aside from the fact
A different interpretation can easily leave the way open for the Board of that both of them had been duly elected by the respective Boards of
Directors to circumvent the constitutionally guaranteed security of tenure of Directors. But the herein respondents position of Vice President for Finance
the employee by the expedient inclusion in the By-Laws of an enabling and Administration was not expressly mentioned in the By-Laws; neither
clause on the creation of just any corporate officer position. was the position of Vice President for Finance and Administration created
by Matlings Board of Directors. Lastly, the President, not the Board of
It is relevant to state in this connection that the SEC, the primary agency Directors, appointed him.
administering the Corporation Code, adopted a similar interpretation of
Section 25 of the Corporation Code in its Opinion dated November 25,
1993,[21] to wit: True it is that the Court pronounced in Tabang as follows:

Thus, pursuant to the above provision (Section 25 of the Corporation Also, an intra-corporate controversy is one which arises between a
Code), whoever are the corporate officers enumerated in the by-laws are the stockholder and the corporation. There is no distinction, qualification or any
exclusive Officers of the corporation and the Board has no power to create exemption whatsoever. The provision is broad and covers all kinds of
other Offices without amending first the corporate By-laws. However, the controversies between stockholders and corporations.[26]
Board may create appointive positions other than the positions of corporate
Officers, but the persons occupying such positions are not considered as However, the Tabang pronouncement is not controlling because it is too
corporate officers within the meaning of Section 25 of the Corporation sweeping and does not accord with reason, justice, and fair play. In order to
Code and are not empowered to exercise the functions of the corporate determine whether a dispute constitutes an intra-corporate controversy or
Officers, except those functions lawfully delegated to them. Their functions not, the Court considers two elements instead, namely: (a) the status or
and duties are to be determined by the Board of Directors/Trustees. relationship of the parties; and (b) the nature of the question that is the
subject of their controversy. This was our thrust in Viray v. Court of
Moreover, the Board of Directors of Matling could not validly delegate the Appeals:[27]
power to create a corporate office to the President, in light of Section 25 of
the Corporation Code requiring the Board of Directors itself to elect the The establishment of any of the relationships mentioned above will not
corporate officers. Verily, the power to elect the corporate officers was a necessarily always confer jurisdiction over the dispute on the SEC to the
discretionary power that the law exclusively vested in the Board of exclusion of regular courts. The statement made in one case that the rule
Directors, and could not be delegated to subordinate officers or admits of no exceptions or distinctions is not that absolute. The better policy
agents.[22] The office of Vice President for Finance and Administration in determining which body has jurisdiction over a case would be to
created by Matlings President pursuant to By Law No. V was an ordinary, consider not only the status or relationship of the parties but also the nature
not a corporate, office. of the question that is the subject of their controversy.

To emphasize, the power to create new offices and the power to appoint the Not every conflict between a corporation and its stockholders involves
officers to occupy them vested by By-Law No. V merely allowed Matlings corporate matters that only the SEC can resolve in the exercise of its
President to create non-corporate offices to be occupied by ordinary adjudicatory or quasi-judicial powers. If, for example, a person leases an
employees of Matling. Such powers were incidental to the Presidents duties apartment owned by a corporation of which he is a stockholder, there
as the executive head of Matling to assist him in the daily operations of the should be no question that a complaint for his ejectment for non-payment of
business. rentals would still come under the jurisdiction of the regular courts and not
of the SEC. By the same token, if one person injures another in a vehicular
The petitioners reliance on Tabang, supra, is misplaced. The statement accident, the complaint for damages filed by the victim will not come under
in Tabang, to the effect that offices not expressly mentioned in the By-Laws the jurisdiction of the SEC simply because of the happenstance that both
but were created pursuant to a By-Law enabling provision were also parties are stockholders of the same corporation. A contrary interpretation
considered corporate offices, was plainly obiter dictum due to the position would dissipate the powers of the regular courts and distort the meaning
subject of the controversy being mentioned in the By-Laws. Thus, the Court and intent of PD No. 902-A.
held therein that the position was a corporate office, and that the
determination of the rights and liabilities arising from the ouster from the
position was an intra-corporate controversy within the SECs jurisdiction. In another case, Mainland Construction Co., Inc. v. Movilla,[28] the Court
reiterated these determinants thuswise:
In Nacpil v. Intercontinental Broadcasting Corporation,[23] which may be the In order that the SEC (now the regular courts) can take cognizance of a case,
more appropriate ruling, the position subject of the controversy was not the controversy must pertain to any of the following relationships:
expressly mentioned in the By-Laws, but was created pursuant to a By-Law
enabling provision authorizing the Board of Directors to create other offices a) between the corporation, partnership or association and the public;
that the Board of Directors might see fit to create. The Court held there that
the position was a corporate office, relying on the obiter dictum in Tabang. b) between the corporation, partnership or association and its stockholders,
Considering that the observations earlier made herein show that the partners, members or officers;
soundness of their dicta is not unassailable, Tabang and Nacpil should no c) between the corporation, partnership or association and the State as far as
longer be controlling. its franchise, permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves.
III The fact that the parties involved in the controversy are all stockholders or
Did Respondents Status as Director and that the parties involved are the stockholders and the corporation does not
Stockholder Automatically Convert his Dismissal necessarily place the dispute within the ambit of the jurisdiction of SEC. The
into an Intra-Corporate Dispute? better policy to be followed in determining jurisdiction over a case should
be to consider concurrent factors such as the status or relationship of the
Yet, the petitioners insist that because the respondent was a parties or the nature of the question that is the subject of their controversy.
Director/stockholder of Matling, and relying on Paguio v. National Labor In the absence of any one of these factors, the SEC will not have jurisdiction.
Relations Commission[24] and Ongkingko v. National Labor Relations Furthermore, it does not necessarily follow that every conflict between the
corporation and its stockholders would involve such corporate matters as serious misconduct on the part of private respondent but, as will be
only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial discussed later, to no avail.
powers.[29]
WHEREFORE, we deny the petition for review on certiorari, and affirm the
decision of the Court of Appeals.
The criteria for distinguishing between corporate officers who may be
ousted from office at will, on one hand, and ordinary corporate employees Costs of suit to be paid by the petitioners.
who may only be terminated for just cause, on the other hand, do not
depend on the nature of the services performed, but on the manner of SO ORDERED.
creation of the office. In the respondents case, he was supposedly at once an
employee, a stockholder, and a Director of Matling. The circumstances
surrounding his appointment to office must be fully considered to
determine whether the dismissal constituted an intra-corporate controversy DEPARTMENT OF FOREIGN AFFAIRS, petitioner, vs. NATIONAL
or a labor termination dispute. We must also consider whether his status as LABOR RELATIONS COMMISSION, HON. LABOR ARBITER NIEVES
Director and stockholder had any relation at all to his appointment and V. DE CASTRO and JOSE C. MAGNAYI, respondents.
subsequent dismissal as Vice President for Finance and Administration.
DECISION
Obviously enough, the respondent was not appointed as Vice President for
Finance and Administration because of his being a stockholder or Director VITUG, J.:
of Matling. He had started working for Matling on September 8, 1966, and
The questions raised in the petition for certiorari are a few coincidental
had been employed continuously for 33 years until his termination on April
17, 2000, first as a bookkeeper, and his climb in 1987 to his last position as matters relative to the diplomatic immunity extended to the Asian
Vice President for Finance and Administration had been gradual but steady, Development Bank ("ADB").
as the following sequence indicates:
On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-
1966 Bookkeeper 01-0690-93 for his alleged illegal dismissal by ADB and the latter's violation
1968 Senior Accountant of the "labor-only" contracting law. Two summonses were served, one sent
1969 Chief Accountant directly to the ADB and the other through the Department of Foreign
1972 Office Supervisor Affairs ("DFA"), both with a copy of the complaint. Forthwith, the ADB and
1973 Assistant Treasurer the DFA notified respondent Labor Arbiter that the ADB, as well as its
1978 Special Assistant for Finance President and Officers, were covered by an immunity from legal process
1980 Assistant Comptroller except for borrowings, guaranties or the sale of securities pursuant to
1983 Finance and Administrative Manager Article 50(1) and Article 55 of the Agreement Establishing the Asian
1985 Asst. Vice President for Finance and Administration Development Bank (the "Charter") in relation to Section 5 and Section 44 of
1987 to April 17, 2000 Vice President for Finance and Administration the Agreement Between The Bank And The Government Of The Philippines
Regarding The Bank's Headquarters (the "Headquarters Agreement").
Even though he might have become a stockholder of Matling in 1992, his
promotion to the position of Vice President for Finance and Administration The Labor Arbiter took cognizance of the complaint on the impression that
in 1987 was by virtue of the length of quality service he had rendered as an
the ADB had waived its diplomatic immunity from suit. In time, the Labor
employee of Matling. His subsequent acquisition of the status of
Arbiter rendered his decision, dated 31 August 1993, that concluded:
Director/stockholder had no relation to his promotion. Besides, his status of
Director/stockholder was unaffected by his dismissal from employment as "WHEREFORE, above premises considered, judgment is hereby rendered
Vice President for Finance and Administration.
declaring the complainant as a regular employee of respondent ADB, and
In Prudential Bank and Trust Company v. Reyes,[30] a case involving a lady
the termination of his services as illegal. Accordingly, respondent Bank is
bank manager who had risen from the ranks but was dismissed, the Court
held that her complaint for illegal dismissal was correctly brought to the hereby ordered:
NLRC, because she was deemed a regular employee of the bank. The Court
"1. To immediately reinstate the complainant to his former position effective
observed thus:
September 16, 1993;
It appears that private respondent was appointed Accounting Clerk by the
"2. To pay complainant full backwages from December 1, 1992 to September
Bank on July 14, 1963. From that position she rose to become
15, 1993 in the amount of P42,750.00 (P4,500.00 x 9 months);
supervisor. Then in 1982, she was appointed Assistant Vice-President
which she occupied until her illegal dismissal on July 19, 1991. The banks
"3. And to pay complainants other benefits and without loss of seniority
contention that she merely holds an elective position and that in effect she is
rights and other privileges and benefits due a regular employee of Asian
not a regular employee is belied by the nature of her work and her length of
service with the Bank. As earlier stated, she rose from the ranks and has Development Bank from the time he was terminated on December 31, 1992;
been employed with the Bank since 1963 until the termination of her
"4. To pay 10% attorney's fees of the total entitlements."[1]
employment in 1991. As Assistant Vice President of the Foreign
Department of the Bank, she is tasked, among others, to collect checks The ADB did not appeal the decision. Instead, on 03 November 1993, the
drawn against overseas banks payable in foreign currency and to ensure the
DFA referred the matter to the National Labor Relations Commission
collection of foreign bills or checks purchased, including the signing of
("NLRC"); in its referral, the DFA sought a "formal vacation of the void
transmittal letters covering the same. It has been stated that the primary
standard of determining regular employment is the reasonable connection judgment." Replying to the letter, the NLRC Chairman, wrote:
between the particular activity performed by the employee in relation to the
"The undersigned submits that the request for the 'investigation' of Labor
usual trade or business of the employer. Additionally, an employee is
Arbiter Nieves de Castro, by the National Labor Relations Commission, has
regular because of the nature of work and the length of service, not because
of the mode or even the reason for hiring them. As Assistant Vice-President been erroneously premised on Art. 218(c) of the Labor Code, as cited in the
of the Foreign Department of the Bank she performs tasks integral to the letter of Secretary Padilla, considering that the provision deals with 'a
operations of the bank and her length of service with the bank totaling 28 question, matter or controversy within its (the Commission) jurisdiction'
years speaks volumes of her status as a regular employee of the bank. In obviously referring to a labor dispute within the ambit of Art. 217 (on
fine, as a regular employee, she is entitled to security of tenure; that is, her jurisdiction of Labor Arbiters and the Commission over labor cases).
services may be terminated only for a just or authorized cause. This being in
truth a case of illegal dismissal, it is no wonder then that the Bank "The procedure, in the adjudication of labor cases, including raising of
endeavored to the very end to establish loss of trust and confidence and defenses, is prescribed by law. The defense of immunity could have been
raised before the Labor Arbiter by a special appearance which, naturally,
may not be considered as a waiver of the very defense being raised. Any Government and the Bank shall enjoy, during their stay in the Republic of
decision thereafter is subject to legal remedies, including appeals to the the Philippines in connection with their official duties with the Bank:
appropriate division of the Commission and/or a petition for certiorari with
the Supreme Court, under Rule 65 of the Rules of Court. Except where an xxxxxxxxx
appeal is seasonably and properly made, neither the Commission nor the
(b) Immunity from legal process of every kind in respect of words spoken or
undersigned may review, or even question, the propriety of any decision by
written and all acts done by them in their official capacity.[6]
a Labor Arbiter. Incidentally, the Commission sits en banc (all fifteen
Commissioners) only to promulgate rules of procedure or to formulate The above stipulations of both the Charter and Headquarters Agreement
policies (Art. 213, Labor Code). should be able, nay well enough, to establish that, except in the specified
cases of borrowing and guarantee operations, as well as the purchase, sale
"On the other hand, while the undersigned exercises 'administrative
and underwriting of securities, the ADB enjoys immunity from legal
supervision over the Commission and its regional branches and all its
process of every form. The Banks officers, on their part, enjoy immunity in
personnel, including the Executive Labor Arbiters and Labor Arbiters'
respect of all acts performed by them in their official capacity. The Charter
(penultimate paragraph, Art. 213, Labor Code), he does not have the
and the Headquarters Agreement granting these immunities and privileges
competence to investigate or review any decision of a Labor Arbiter.
are treaty covenants and commitments voluntarily assumed by the
However, on the purely administrative aspect of the decision-making
Philippine government which must be respected.
process, he may cause that an investigation be made of any misconduct,
malfeasance or misfeasance, upon complaint properly made. In World Health Organization vs. Aquino,[7] we have declared:

"If the Department of Foreign Affairs feels that the action of Labor Arbiter It is a recognized principle of international law and under our system of
Nieves de Castro constitutes misconduct, malfeasance or misfeasance, it is separation of powers that diplomatic immunity is essentially a political
suggested that an appropriate complaint be lodged with the Office of the question and courts should refuse to look beyond a determination by the
Ombudsman. executive branch of the government, and where the plea of diplomatic
immunity is recognized and affirmed by the executive branch of the
"Thank you for your kind attention."[2]
government x x x it is then the duty of the courts to accept the claim of
Dissatisfied, the DFA lodged the instant petition for certiorari. In this immunity upon appropriate suggestion by the principal law officer of the
Court's resolution of 31 January 1994, respondents were required to government, x x x or other officer acting under his direction. Hence, in
comment. Petitioner was later constrained to make an application for a adherence to the settled principle that courts may not so exercise their
restraining order and/or writ of preliminary injunction following the jurisdiction x x x as to embarrass the executive arm of the government in
issuance, on 16 March 1994, by the Labor Arbiter of a writ of execution. In a conducting foreign relations, it is accepted doctrine that `in such cases the
resolution, dated 07 April 1994, the Court issued the temporary restraining judicial department of government follows the action of the political branch
order prayed for. and will not embarrass the latter by assuming an antagonistic
jurisdiction.'"[8]
The Office of the Solicitor General (OSG), in its comment of 26 May 1994,
initially assailed the claim of immunity by the ADB. Subsequently, To the same effect is the decision in International Catholic Migration
however, it submitted a Manifestation (dated 20 June 1994) stating, among Commission vs. Calleja,[9] which has similarly deemed the Memoranda of
other things, that "after a thorough review of the case and the records," it the Legal Adviser of the Department of Foreign Affairs to be "a categorical
became convinced that ADB, indeed, was correct in invoking its immunity recognition by the Executive Branch of Government that ICMC x x x
from suit under the Charter and the Headquarters Agreement. enjoy(s) immunities accorded to international organizations" and which
determination must be held "conclusive upon the Courts in order not to
The Court is of the same view. embarrass a political department of Government. In the instant case, the
filing of the petition by the DFA, in behalf of ADB, is itself an affirmance of
Article 50(1) of the Charter provides: the government's own recognition of ADB's immunity.
The Bank shall enjoy immunity from every form of legal process, except in Being an international organization that has been extended a diplomatic
cases arising out of or in connection with the exercise of its powers to status, the ADB is independent of the municipal law.[10] In Southeast Asian
borrow money, to guarantee obligations, or to buy and sell or underwrite Fisheries Development Center vs. Acosta,[11] the Court has cited with
the sale of securities.[3] approval the opinion[12] of the then Minister of Justice; thus -
Under Article 55 thereof - "One of the basic immunities of an international organization is immunity
from local jurisdiction, i.e., that it is immune from the legal writs and
All Governors, Directors, alternates, officers and employees of the Bank,
processes issued by the tribunals of the country where it is found. (See
including experts performing missions for the Bank:
Jenks, Id., pp. 37-44). The obvious reason for this is that the subjection of
(1) shall be immune from legal process with respect of acts performed by such an organization to the authority of the local courts would afford a
them in their official capacity, except when the Bank waives the convenient medium thru which the host government may interfere in their
immunity.[4] operations or even influence or control its policies and decisions of the
organization; besides, such subjection to local jurisdiction would impair the
Like provisions are found in the Headquarters Agreement. Thus, its Section capacity of such body to discharge its responsibilities impartially on behalf
5 reads: of its member-states."[13]

"The Bank shall enjoy immunity from every form of legal process, except in Contrary to private respondent's assertion, the claim of immunity is not
cases arising out of, or in connection with, the exercise of its powers to here being raised for the first time; it has been invoked before the forum of
borrow money, to guarantee obligations, or to buy and sell or underwrite origin through communications sent by petitioner and the ADB to the Labor
the sale of securities.[5] Arbiter, as well as before the NLRC following the rendition of the
questioned judgment by the Labor Arbiter, but evidently to no avail.
And, with respect to certain officials of the bank, Section 44 of the
agreement states: In its communication of 27 May 1993, the DFA, through the Office of Legal
Affairs, has advised the NLRC:
Governors, other representatives of Members, Directors, the President, Vice-
President and executive officers as may be agreed upon between the "Respectfully returned to the Honorable Domingo B. Mabazza, Labor
Arbitration Associate, National Labor Relations Commission, National
Capital Judicial Region, Arbitration Branch, Associated bank Bldg., T.M. acts jure imperii of a state, but not with regard to private act or acts jure
Kalaw St., Ermita, Manila, the attached Notice of Hearing addressed to the gestionis.
Asian Development Bank, in connection with the aforestated case, for the
reason stated in the Department's 1st Indorsement dated 23 March 1993, xxxxxxxxx
copy attached, which is self-explanatory.
Certainly, the mere entering into a contract by a foreign state with a private
"In view of the fact that the Asian Development Bank (ADB) invokes its party cannot be the ultimate test. Such an act can only be the start of the
immunity which is sustained by the Department of Foreign Affairs, a inquiry. The logical question is whether the foreign state is engaged in the
continuous hearing of this case erodes the credibility of the Philippine activity in the regular course of business. If the foreign state is not engaged
government before the international community, let alone the negative regularly in a business or trade, the particular act or transaction must then
implication of such a suit on the official relationship of the Philippine be tested by its nature. If the act is in pursuit of a sovereign activity, or an
government with the ADB. incident thereof, then it is an act jure imperii, especially when it is not
undertaken for gain or profit.[17]
"For the Secretary of Foreign Affairs
The service contracts referred to by private respondent have not been
(Sgd.) intended by the ADB for profit or gain but are official acts over which a
waiver of immunity would not attach.
"SIME D. HIDALGO
With regard to the issue of whether or not the DFA has the legal standing to
Assistant Secretary"[14] file the present petition, and whether or not petitioner has regarded the
basic rule that certiorari can be availed of only when there is no appeal nor
The Office of the President, likewise, has issued on 18 May 1993 a letter to
plain, speedy and adequate remedy in the ordinary course of law, we hold
the Secretary of Labor, viz:
both in the affirmative.
"Dear Secretary Confesor,
The DFA's function includes, among its other mandates, the determination
"I am writing to draw your attention to a case filed by a certain Jose C. of persons and institutions covered by diplomatic immunities, a
Magnayi against the Asian Development Bank and its President, Kimimasa determination which, when challenged, entitles it to seek relief from the
Tarumizu, before the National Labor Relations Commission, National court so as not to seriously impair the conduct of the country's foreign
Capital Region Arbitration Board (NLRC NCR Case No. 00-01690-93). relations. The DFA must be allowed to plead its case whenever necessary or
advisable to enable it to help keep the credibility of the Philippine
"Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de government before the international community. When international
Castro, addressed a Notice of Resolution/Order to the Bank which brought agreements are concluded, the parties thereto are deemed to have likewise
it to the attention of the Department of Foreign Affairs on the ground that accepted the responsibility of seeing to it that their agreements are duly
the service of such notice was in violation of the RP-ADB Headquarters regarded. In our country, this task falls principally on the DFA as being the
Agreement which provided, inter-alia, for the immunity of the Bank, its highest executive department with the competence and authority to so act
President and officers from every form of legal process, except only, in cases in this aspect of the international arena.[18] In Holy See vs. Hon. Rosario,
of borrowings, guarantees or the sale of securities. Jr.,[19] this Court has explained the matter in good detail; viz:

"The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves "In Public International Law, when a state or international agency wishes to
V. de Castro of this fact by letter dated March 22, copied to you. plead sovereign or diplomatic immunity in a foreign court, it requests the
Foreign Office of the state where it is sued to convey to the court that said
"Despite this, the labor arbiter in question persisted to send summons, the defendant is entitled to immunity.
latest dated May 4, herewith attached, regarding the Magnayi case.
"In the United States, the procedure followed is the process of 'suggestion,'
"The Supreme Court has long settled the matter of diplomatic immunities. where the foreign state or the international organization sued in an
In WHO vs. Aquino, SCRA 48, it ruled that courts should respect American court requests the Secretary of State to make a determination as
diplomatic immunities of foreign officials recognized by the Philippine to whether it is entitled to immunity. If the Secretary of State finds that the
government. Such decision by the Supreme Court forms part of the law of defendant is immune from suit, he, in turn, asks the Attorney General to
the land. submit to the court a 'suggestion' that the defendant is entitled to immunity.
In England, a similar procedure is followed, only the Foreign Office issues a
"Perhaps you should point out to Labor Arbiter Nieves V. de Castro that
certification to that effect instead of submitting a 'suggestion' (O'Connell, I
ignorance of the law is a ground for dismissal.
International Law 130 [1965]; Note: Immunity from Suit of Foreign
"Very truly yours, Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088
[1941]).
(Sgd.)
"In the Philippines, the practice is for the foreign government or the
JOSE B. ALEJANDRINO international organization to first secure an executive endorsement of its
claim of sovereign or diplomatic immunity. But how the Philippine Foreign
Chairman, PCC-ADB"[15] Office conveys its endorsement to the courts varies. In International
Catholic Migration Commission vs. Calleja, 190 SCRA 130 (1990), the
Private respondent argues that, by entering into service contracts with
Secretary of Foreign Affairs just sent a letter directly to the Secretary of
different private companies, ADB has descended to the level of an ordinary
Labor and Employment, informing the latter that the respondent-employer
party to a commercial transaction giving rise to a waiver of its immunity
could not be sued because it enjoyed diplomatic immunity. In World Health
from suit. In the case of Holy See vs. Hon. Rosario, Jr.,[16] the Court has
Organization vs. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign
held:
Affairs sent the trial court a telegram to that effect. In Baer vs. Tizon, 57
There are two conflicting concepts of sovereign immunity, each widely held SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to
and firmly established. According to the classical or absolute theory, a request the Solicitor General to make, in behalf of the Commander of the
sovereign cannot, without its consent, be made a respondent in the Courts United States Naval Base at Olongapo City, Zambales, a 'suggestion' to
of another sovereign. According to the newer or restrictive theory, the respondent Judge. The Solicitor General embodied the 'suggestion' in a
immunity of the sovereign is recognized only with regard to public acts or manifestation and memorandum as amicus curiae.
"In the case at bench, the Department of Foreign Affairs, through the Office These cases have been consolidated because they all involve the doctrine
of Legal Affairs moved with this Court to be allowed to intervene on the of state immunity. The United States of America was not impleaded in
side of petitioner. The Court allowed the said Department to file its the complaints below but has moved to dismiss on the ground that they
memorandum in support of petitioner's claim of sovereign immunity. are in effect suits against it to which it has not consented. It is now
contesting the denial of its motions by the respondent
"In some cases, the defense of sovereign immunity was submitted directly judges.chanroblesvirtualawlibrary chanrobles virtual law library
to the local courts by the respondents through their private counsels
(Raquiza vs. Bradford, 75 Phil. 50 [1945]; Miquiabas vs. Philippine-Ryukyus In G.R. No. 76607, the private respondents are suing several officers of the
Command, 80 Phil. 262 [1948]; United States of America vs. Guinto, 182 U.S. Air Force stationed in Clark Air Base in connection with the bidding
SCRA 644 [1990] and companion cases). In cases where the foreign states conducted by them for contracts for barber services in the said
bypass the Foreign Office, the courts can inquire into the facts and make base.chanroblesvirtualawlibrary chanrobles virtual law library
their own determination as to the nature of the acts and transactions
involved."[20] On February 24, 1986, the Western Pacific Contracting Office, Okinawa
Area Exchange, U.S. Air Force, solicited bids for such contracts through its
Relative to the propriety of the extraordinary remedy of certiorari, the Court contracting officer, James F. Shaw. Among those who submitted their
has, under special circumstances, so allowed and entertained such a petition bids were private respondents Roberto T. Valencia, Emerenciana C.
when (a) the questioned order or decision is issued in excess of or without Tanglao, and Pablo C. del Pilar. Valencia had been a concessionaire
inside Clark for 34 years; del Pilar for 12 years; and Tanglao for 50
jurisdiction,[21] or (b) where the order or decision is a patent nullity,[22]
years.chanroblesvirtualawlibrary chanrobles virtual law library
which, verily, are the circumstances that can be said to obtain in the present
case. When an adjudicator is devoid of jurisdiction on a matter before him,
his action that assumes otherwise would be a clear nullity. The bidding was won by Ramon Dizon, over the objection of the private
respondents, who claimed that he had made a bid for four facilities,
WHEREFORE, the petition for certiorari is GRANTED, and the decision of including the Civil Engineering Area, which was not included in the
the Labor Arbiter, dated 31 August 1993 is VACATED for being NULL invitation to bid.chanroblesvirtualawlibrary chanrobles virtual law
library
AND VOID. The temporary restraining order issued by this Court on 07
April 1994 is hereby made permanent. No costs.
The private respondents complained to the Philippine Area Exchange
SO ORDERED. (PHAX). The latter, through its representatives, petitioners Yvonne
Reeves and Frederic M. Smouse explained that the Civil Engineering
concession had not been awarded to Dizon as a result of the February 24,
1986 solicitation. Dizon was already operating this concession, then
known as the NCO club concession, and the expiration of the contract had
G.R. No. 76607 February 26, 1990 been extended from June 30, 1986 to August 31, 1986. They further
explained that the solicitation of the CE barbershop would be available
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND only by the end of June and the private respondents would be
YVONNE REEVES, Petitioners, vs.HON. ELIODORO B. GUINTO, notified.chanroblesvirtualawlibrary chanrobles virtual law library
Presiding Judge, Branch LVII, Regional Trial Court, Angeles City,
ROBERTO T. VALENCIA, EMERENCIANA C. TANGLAO, AND On June 30, 1986, the private respondents filed a complaint in the court
PABLO C. DEL PILAR, Respondents. below to compel PHAX and the individual petitioners to cancel the award
to defendant Dizon, to conduct a rebidding for the barbershop
G.R. No. 79470 February 26, 1990 concessions and to allow the private respondents by a writ of preliminary
injunction to continue operating the concessions pending
litigation. 1chanrobles virtual law library
UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT.
USAF, WILFREDO BELSA, PETER ORASCION AND ROSE
CARTALLA, Petitioners, vs. HON. RODOLFO D. RODRIGO, as Presiding Upon the filing of the complaint, the respondent court issued an ex
Judge of Branch 7, Regional Trial Court (BAGUIO CITY), La Trinidad, parte order directing the individual petitioners to maintain the status
Benguet and FABIAN GENOVE, Respondents. quo.chanroblesvirtualawlibrary chanrobles virtual law library

G.R. No. 80018 February 26, 1990 On July 22, 1986, the petitioners filed a motion to dismiss and opposition
to the petition for preliminary injunction on the ground that the action
was in effect a suit against the United States of America, which had not
UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and
waived its non-suability. The individual defendants, as official
STEVEN F. BOSTICK, Petitioners, vs. HON. JOSEFINA D. CEBALLOS, employees of the U.S. Air Force, were also immune from
As Presiding Judge, Regional Trial Court, Branch 66, Capas, Tarlac, and suit.chanroblesvirtualawlibrary chanrobles virtual law library
LUIS BAUTISTA, Respondents.

On the same date, July 22, 1986, the trial court denied the application for a
G.R. No. 80258 February 26, 1990 writ of preliminary injunction.chanroblesvirtualawlibrary chanrobles
virtual law library
UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C.
CARNS, AIC ERNEST E. RIVENBURGH, AIC ROBIN BLEVINS, SGT. On October 10, 1988, the trial court denied the petitioners' motion to
NOEL A. GONZALES, SGT. THOMAS MITCHELL, SGT. WAYNE L. dismiss, holding in part as follows:
BENJAMIN, ET AL., Petitioners, vs. HON. CONCEPCION S. ALARCON
VERGARA, as Presiding Judge, Branch 62 REGIONAL TRIAL COURT,
Angeles City, and RICKY SANCHEZ, FREDDIE SANCHEZ AKA From the pleadings thus far presented to this Court by the parties, the
FREDDIE RIVERA, EDWIN MARIANO, AKA JESSIE DOLORES Court's attention is called by the relationship between the plaintiffs as
SANGALANG, ET AL., Respondents. well as the defendants, including the US Government, in that prior to the
bidding or solicitation in question, there was a binding contract between
the plaintiffs as well as the defendants, including the US Government. By
Luna, Sison & Manas Law Office for petitioners. virtue of said contract of concession it is the Court's understanding that
neither the US Government nor the herein principal defendants would
CRUZ, J.: become the employer/s of the plaintiffs but that the latter are the
employers themselves of the barbers, etc. with the employer, the
plaintiffs herein, remitting the stipulated percentage of commissions to
the Philippine Area Exchange. The same circumstance would become in
effect when the Philippine Area Exchange opened for bidding or During the period for filing of the answer, Mariano Y. Navarro a special
solicitation the questioned barber shop concessions. To this extent, counsel assigned to the International Law Division, Office of the Staff Judge
therefore, indeed a commercial transaction has been entered, and for Advocate of Clark Air Base, entered a special appearance for the defendants
purposes of the said solicitation, would necessarily be entered between and moved for an extension within which to file an "answer and/or other
the plaintiffs as well as the pleadings." His reason was that the Attorney General of the United States
defendants.chanroblesvirtualawlibrary chanrobles virtual law library had not yet designated counsel to represent the defendants, who were being
sued for their official acts. Within the extended period, the defendants,
The Court, further, is of the view that Article XVIII of the RP-US Bases without the assistance of counsel or authority from the U.S. Department of
Agreement does not cover such kind of services falling under the Justice, filed their answer. They alleged therein as affirmative defenses that
concessionaireship, such as a barber shop concession. 2chanrobles virtual they had only done their duty in the enforcement of the laws of the
law library Philippines inside the American bases pursuant to the RP-US Military Bases
Agreement.chanroblesvirtualawlibrary chanrobles virtual law library
On December 11, 1986, following the filing of the herein petition
for certiorari and prohibition with preliminary injunction, we issued a On May 7, 1987, the law firm of Luna, Sison and Manas, having been
temporary restraining order against further proceedings in the court retained to represent the defendants, filed with leave of court a motion to
below. 3 chanrobles virtual law library withdraw the answer and dismiss the complaint. The ground invoked was
that the defendants were acting in their official capacity when they did the
In G.R. No. 79470, Fabian Genove filed a complaint for damages against acts complained of and that the complaint against them was in effect a suit
petitioners Anthony Lamachia, Wilfredo Belsa, Rose Cartalla and Peter against the United States without its
Orascion for his dismissal as cook in the U.S. Air Force Recreation Center consent.chanroblesvirtualawlibrary chanrobles virtual law library
at the John Hay Air Station in Baguio City. It had been ascertained after
investigation, from the testimony of Belsa Cartalla and Orascion, that The motion was denied by the respondent judge in his order dated
Genove had poured urine into the soup stock used in cooking the September 11, 1987, which held that the claimed immunity under the
vegetables served to the club customers. Lamachia, as club manager, Military Bases Agreement covered only criminal and not civil cases.
suspended him and thereafter referred the case to a board of arbitrators Moreover, the defendants had come under the jurisdiction of the court
conformably to the collective bargaining agreement between the Center when they submitted their answer. 7 chanrobles virtual law library
and its employees. The board unanimously found him guilty and
recommended his dismissal. This was effected on March 5, 1986, by Col.
David C. Kimball, Commander of the 3rd Combat Support Group, Following the filing of the herein petition for certiorari and prohibition with
PACAF Clark Air Force Base. Genove's reaction was to file Ms complaint preliminary injunction, we issued on October 14, 1987, a temporary
in the Regional Trial Court of Baguio City against the individual restraining order. 8chanrobles virtual law library
petitioners. 4 chanrobles virtual law library
In G.R. No. 80258, a complaint for damages was filed by the private
On March 13, 1987, the defendants, joined by the United States of respondents against the herein petitioners (except the United States of
America, moved to dismiss the complaint, alleging that Lamachia, as an America), for injuries allegedly sustained by the plaintiffs as a result of the
officer of the U.S. Air Force stationed at John Hay Air Station, was acts of the defendants. 9 There is a conflict of factual allegations here.
immune from suit for the acts done by him in his official capacity. They According to the plaintiffs, the defendants beat them up, handcuffed them
argued that the suit was in effect against the United States, which had not and unleashed dogs on them which bit them in several parts of their bodies
given its consent to be sued.chanroblesvirtualawlibrary chanrobles and caused extensive injuries to them. The defendants deny this and claim
virtual law library the plaintiffs were arrested for theft and were bitten by the dogs because
they were struggling and resisting arrest, The defendants stress that the
This motion was denied by the respondent judge on June 4, 1987, in an dogs were called off and the plaintiffs were immediately taken to the
order which read in part: medical center for treatment of their
wounds.chanroblesvirtualawlibrary chanrobles virtual law library

It is the understanding of the Court, based on the allegations of the


complaint - which have been hypothetically admitted by defendants In a motion to dismiss the complaint, the United States of America and the
upon the filing of their motion to dismiss - that although defendants individually named defendants argued that the suit was in effect a suit
acted initially in their official capacities, their going beyond what their against the United States, which had not given its consent to be sued. The
functions called for brought them out of the protective mantle of defendants were also immune from suit under the RP-US Bases Treaty for
whatever immunities they may have had in the beginning. Thus, the acts done by them in the performance of their official
allegation that the acts complained of were illegal, done. with extreme functions.chanroblesvirtualawlibrary chanrobles virtual law library
bad faith and with pre-conceived sinister plan to harass and finally
dismiss the plaintiff, gains significance. 5chanrobles virtual law library The motion to dismiss was denied by the trial court in its order dated
August 10, 1987, reading in part as follows:
The petitioners then came to this Court seeking certiorari and prohibition
with preliminary injunction.chanroblesvirtualawlibrary chanrobles virtual The defendants certainly cannot correctly argue that they are immune from
law library suit. The allegations, of the complaint which is sought to be dismissed, had
to be hypothetically admitted and whatever ground the defendants may
In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in have, had to be ventilated during the trial of the case on the merits. The
Camp O' Donnell, an extension of Clark Air Base, was arrested following a complaint alleged criminal acts against the individually-named defendants
buy-bust operation conducted by the individual petitioners herein, namely, and from the nature of said acts it could not be said that they are Acts of
Tomi J. King, Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air State, for which immunity should be invoked. If the Filipinos themselves
Force and special agents of the Air Force Office of Special Investigators are duty bound to respect, obey and submit themselves to the laws of the
(AFOSI). On the basis of the sworn statements made by them, an country, with more reason, the members of the United States Armed Forces
information for violation of R.A. 6425, otherwise known as the Dangerous who are being treated as guests of this country should respect, obey and
Drugs Act, was filed against Bautista in the Regional Trial Court of Tarlac. submit themselves to its laws. 10
The above-named officers testified against him at his trial. As a result of the
filing of the charge, Bautista was dismissed from his employment. He then and so was the motion for reconsideration. The defendants submitted their
filed a complaint for damages against the individual petitioners herein answer as required but subsequently filed their petition for certiorari and
claiming that it was because of their acts that he was removed. 6 chanrobles prohibition with preliminary injunction with this Court. We issued a
virtual law library temporary restraining order on October 27, 1987. 11chanrobles virtual law
library
IIchanrobles virtual law library government will operate as a waiver of its non-suability; distinction must be
made between its sovereign and proprietary acts. 19 As for the filing of a
complaint by the government, suability will result only where the
The rule that a state may not be sued without its consent, now expressed in
Article XVI, Section 3, of the 1987 Constitution, is one of the generally government is claiming affirmative relief from the defendant. 20 chanrobles
virtual law library
accepted principles of international law that we have adopted as part of the
law of our land under Article II, Section 2. This latter provision merely
reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and In the case of the United States of America, the customary rule of
also intended to manifest our resolve to abide by the rules of the international law on state immunity is expressed with more specificity in
international community.chanroblesvirtualawlibrary chanrobles virtual law the RP-US Bases Treaty. Article III thereof provides as follows:
library
It is mutually agreed that the United States shall have the rights, power and
Even without such affirmation, we would still be bound by the generally authority within the bases which are necessary for the establishment, use,
accepted principles of international law under the doctrine of incorporation. operation and defense thereof or appropriate for the control thereof and all
Under this doctrine, as accepted by the majority of states, such principles the rights, power and authority within the limits of the territorial waters
are deemed incorporated in the law of every civilized state as a condition and air space adjacent to, or in the vicinity of, the bases which are necessary
and consequence of its membership in the society of nations. Upon its to provide access to them or appropriate for their control.
admission to such society, the state is automatically obligated to comply
with these principles in its relations with other
The petitioners also rely heavily on Baer v. Tizon, 21 along with several other
states.chanroblesvirtualawlibrary chanrobles virtual law library
decisions, to support their position that they are not suable in the cases
below, the United States not having waived its sovereign immunity from
As applied to the local state, the doctrine of state immunity is based on the suit. It is emphasized that in Baer, the Court held:
justification given by Justice Holmes that "there can be no legal right against
the authority which makes the law on which the right depends." 12 There are
The invocation of the doctrine of immunity from suit of a foreign state
other practical reasons for the enforcement of the doctrine. In the case of the
without its consent is appropriate. More specifically, insofar as alien armed
foreign state sought to be impleaded in the local jurisdiction, the added
forces is concerned, the starting point isRaquiza v. Bradford, a 1945 decision.
inhibition is expressed in the maxim par in parem, non habet imperium. All In dismissing a habeas corpus petition for the release of petitioners confined
states are sovereign equals and cannot assert jurisdiction over one another.
by American army authorities, Justice Hilado speaking for the Court,
A contrary disposition would, in the language of a celebrated case, "unduly
cited Coleman v. Tennessee, where it was explicitly declared: 'It is well settled
vex the peace of nations." 13chanrobles virtual law library
that a foreign army, permitted to march through a friendly country or to be
stationed in it, by permission of its government or sovereign, is exempt
While the doctrine appears to prohibit only suits against the state without from the civil and criminal jurisdiction of the place.' Two years later, in
its consent, it is also applicable to complaints filed against officials of the Tubb and Tedrow v. Griess, this Court relied on the ruling in Raquiza v.
state for acts allegedly performed by them in the discharge of their duties. Bradford and cited in support thereof excerpts from the works of the
The rule is that if the judgment against such officials will require the state following authoritative writers: Vattel, Wheaton, Hall, Lawrence,
itself to perform an affirmative act to satisfy the same, such as the Oppenheim, Westlake, Hyde, and McNair and Lauterpacht. Accuracy
appropriation of the amount needed to pay the damages awarded against demands the clarification that after the conclusion of the Philippine-
them, the suit must be regarded as against the state itself although it has not American Military Bases Agreement, the treaty provisions should control
been formally impleaded. 14 In such a situation, the state may move to on such matter, the assumption being that there was a manifestation of the
dismiss the complaint on the ground that it has been filed without its submission to jurisdiction on the part of the foreign power whenever
consent.chanroblesvirtualawlibrary chanrobles virtual law library appropriate. More to the point is Syquia v. Almeda Lopez, where plaintiffs as
lessors sued the Commanding General of the United States Army in the
Philippines, seeking the restoration to them of the apartment buildings they
The doctrine is sometimes derisively called "the royal prerogative of
owned leased to the United States armed forces stationed in the Manila
dishonesty" because of the privilege it grants the state to defeat any
legitimate claim against it by simply invoking its non-suability. That is area. A motion to dismiss on the ground of non-suability was filed and
upheld by respondent Judge. The matter was taken to this Court in a
hardly fair, at least in democratic societies, for the state is not an unfeeling
mandamus proceeding. It failed. It was the ruling that respondent Judge
tyrant unmoved by the valid claims of its citizens. In fact, the doctrine is not
acted correctly considering that the 4 action must be considered as one
absolute and does not say the state may not be sued under any
against the U.S. Government. The opinion of Justice Montemayor
circumstance. On the contrary, the rule says that the state may not be sued
continued: 'It is clear that the courts of the Philippines including the
without its consent, which clearly imports that it may be sued if it
Municipal Court of Manila have no jurisdiction over the present case for
consents.chanroblesvirtualawlibrary chanrobles virtual law library
unlawful detainer. The question of lack of jurisdiction was raised and
interposed at the very beginning of the action. The U.S. Government has not
The consent of the state to be sued may be manifested expressly or given its consent to the filing of this suit which is essentially against her,
impliedly. Express consent may be embodied in a general law or a special though not in name. Moreover, this is not only a case of a citizen filing a suit
law. Consent is implied when the state enters into a contract or it itself against his own Government without the latter's consent but it is of a citizen
commences litigation.chanroblesvirtualawlibrary chanrobles virtual law firing an action against a foreign government without said government's
library consent, which renders more obvious the lack of jurisdiction of the courts of
his country. The principles of law behind this rule are so elementary and of
The general law waiving the immunity of the state from suit is found in Act such general acceptance that we deem it unnecessary to cite authorities in
No. 3083, under which the Philippine government "consents and submits to support thereof then came Marvel Building Corporation v. Philippine War
be sued upon any moneyed claim involving liability arising from contract, Damage Commission, where respondent, a United States Agency established
express or implied, which could serve as a basis of civil action between to compensate damages suffered by the Philippines during World War II
private parties." In Merritt v. Government of the Philippine Islands, 15 a special was held as falling within the above doctrine as the suit against it would
law was passed to enable a person to sue the government for an alleged eventually be a charge against or financial liability of the United States
tort. When the government enters into a contract, it is deemed to have Government because ... , the Commission has no funds of its own for the
descended to the level of the other contracting party and divested of its purpose of paying money judgments.' The Syquia ruling was again
sovereign immunity from suit with its implied consent. 16 Waiver is also explicitly relied upon in Marquez Lim v. Nelson, involving a complaint for
implied when the government files a complaint, thus opening itself to a the recovery of a motor launch, plus damages, the special defense
counterclaim. 17 chanrobles virtual law library interposed being 'that the vessel belonged to the United States Government,
that the defendants merely acted as agents of said Government, and that the
United States Government is therefore the real party in interest.' So it was
The above rules are subject to qualification. Express consent is effected only in Philippine Alien Property Administration v. Castelo, where it was held that a
by the will of the legislature through the medium of a duly enacted suit against Alien Property Custodian and the Attorney General of the
statute. 18 We have held that not all contracts entered into by the
United States involving vested property under the Trading with the Enemy moved to dismiss the complaint on the ground that the suit was in effect
Act is in substance a suit against the United States. To the same effect against the Philippine government, which had not given its consent to be
is Parreno v. McGranery, as the following excerpt from the opinion of justice sued. This Court sustained the denial of the motion and held that the
Tuazon clearly shows: 'It is a widely accepted principle of international law, doctrine of state immunity was not applicable. The director was being sued
which is made a part of the law of the land (Article II, Section 3 of the in his private capacity for a personal
Constitution), that a foreign state may not be brought to suit before the tort.chanroblesvirtualawlibrary chanrobles virtual law library
courts of another state or its own courts without its consent.' Finally, there
isJohnson v. Turner, an appeal by the defendant, then Commanding General,
With these considerations in mind, we now proceed to resolve the cases at
Philippine Command (Air Force, with office at Clark Field) from a decision
hand.chanroblesvirtualawlibrary chanrobles virtual law library
ordering the return to plaintiff of the confiscated military payment
certificates known as scrip money. In reversing the lower court decision,
this Tribunal, through Justice Montemayor, relied on Syquia v. Almeda Lopez, III chanrobles virtual law library
explaining why it could not be sustained.
It is clear from a study of the records of G.R. No. 80018 that the
It bears stressing at this point that the above observations do not confer on individually-named petitioners therein were acting in the exercise of their
the United States of America a blanket immunity for all acts done by it or its official functions when they conducted the buy-bust operation against the
agents in the Philippines. Neither may the other petitioners claim that they complainant and thereafter testified against him at his trial. The said
are also insulated from suit in this country merely because they have acted petitioners were in fact connected with the Air Force Office of Special
as agents of the United States in the discharge of their official Investigators and were charged precisely with the function of preventing
functions.chanroblesvirtualawlibrary chanrobles virtual law library the distribution, possession and use of prohibited drugs and prosecuting
those guilty of such acts. It cannot for a moment be imagined that they were
acting in their private or unofficial capacity when they apprehended and
There is no question that the United States of America, like any other state,
later testified against the complainant. It follows that for discharging their
will be deemed to have impliedly waived its non-suability if it has entered
duties as agents of the United States, they cannot be directly impleaded for
into a contract in its proprietary or private capacity. It is only when the
acts imputable to their principal, which has not given its consent to be sued.
contract involves its sovereign or governmental capacity that no such
As we observed in Sanders v. Veridiano: 24
waiver may be implied. This was our ruling in United States of America v.
Ruiz, 22 where the transaction in question dealt with the improvement of the
wharves in the naval installation at Subic Bay. As this was a clearly Given the official character of the above-described letters, we have to
governmental function, we held that the contract did not operate to divest conclude that the petitioners were, legally speaking, being sued as officers
the United States of its sovereign immunity from suit. In the words of of the United States government. As they have acted on behalf of that
Justice Vicente Abad Santos: government, and within the scope of their authority, it is that government,
and not the petitioners personally, that is responsible for their acts.
The traditional rule of immunity exempts a State from being sued in the
courts of another State without its consent or waiver. This rule is a The private respondent invokes Article 2180 of the Civil Code which holds
necessary consequence of the principles of independence and equality of the government liable if it acts through a special agent. The argument, it
States. However, the rules of International Law are not petrified; they are would seem, is premised on the ground that since the officers are
constantly developing and evolving. And because the activities of states designated "special agents," the United States government should be liable
have multiplied, it has been necessary to distinguish them - between for their torts.chanroblesvirtualawlibrary chanrobles virtual law library
sovereign and governmental acts (jure imperii) and private, commercial and
proprietary acts (jure gestionis). The result is that State immunity now There seems to be a failure to distinguish between suability and liability and
extends only to acts jure imperii The restrictive application of State a misconception that the two terms are synonymous. Suability depends on
immunity is now the rule in the United States, the United kingdom and the consent of the state to be sued, liability on the applicable law and the
other states in Western Europe.chanroblesvirtualawlibrarychanrobles established facts. The circumstance that a state is suable does not necessarily
virtual law library mean that it is liable; on the other hand, it can never be held liable if it does
not first consent to be sued. Liability is not conceded by the mere fact that
xxx xxx xxxchanrobles virtual law library the state has allowed itself to be sued. When the state does waive its
sovereign immunity, it is only giving the plaintiff the chance to prove, if it
can, that the defendant is liable.chanroblesvirtualawlibrary chanrobles
The restrictive application of State immunity is proper only when the
virtual law library
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 can thus be The said article establishes a rule of liability, not suability. The government
deemed to have tacitly given its consent to be sued only when it enters into may be held liable under this rule only if it first allows itself to be sued
business contracts. It does not apply where the contract relates to the through any of the accepted forms of
exercise of its sovereign functions. In this case the projects are an integral consent.chanroblesvirtualawlibrary chanrobles virtual law library
part of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the government of the Moreover, the agent performing his regular functions is not a special agent
highest order; they are not utilized for nor dedicated to commercial or even if he is so denominated, as in the case at bar. No less important, the
business purposes. said provision appears to regulate only the relations of the local state with
its inhabitants and, hence, applies only to the Philippine government and
The other petitioners in the cases before us all aver they have acted in the not to foreign governments impleaded in our
discharge of their official functions as officers or agents of the United States. courts.chanroblesvirtualawlibrary chanrobles virtual law library
However, this is a matter of evidence. The charges against them may not be
summarily dismissed on their mere assertion that their acts are imputable to We reject the conclusion of the trial court that the answer filed by the special
the United States of America, which has not given its consent to be sued. In counsel of the Office of the Sheriff Judge Advocate of Clark Air Base was a
fact, the defendants are sought to be held answerable for personal torts in submission by the United States government to its jurisdiction. As we noted
which the United States itself is not involved. If found liable, they and they in Republic v. Purisima, 25 express waiver of immunity cannot be made by a
alone must satisfy the judgment.chanroblesvirtualawlibrary chanrobles mere counsel of the government but must be effected through a duly-
virtual law library enacted statute. Neither does such answer come under the implied forms of
consent as earlier discussed.chanroblesvirtualawlibrary chanrobles virtual
In Festejo v. Fernando, 23 a bureau director, acting without any authority law library
whatsoever, appropriated private land and converted it into public
irrigation ditches. Sued for the value of the lots invalidly taken by him, he
But even as we are certain that the individual petitioners in G.R. No. 80018 Concerning G.R. No. 76607, we also find that the barbershops subject of the
were acting in the discharge of their official functions, we hesitate to make concessions granted by the United States government are commercial
the same conclusion in G.R. No. 80258. The contradictory factual allegations enterprises operated by private person's. They are not agencies of the
in this case deserve in our view a closer study of what actually happened to United States Armed Forces nor are their facilities demandable as a matter
the plaintiffs. The record is too meager to indicate if the defendants were of right by the American servicemen. These establishments provide for the
really discharging their official duties or had actually exceeded their grooming needs of their customers and offer not only the basic haircut and
authority when the incident in question occurred. Lacking this information, shave (as required in most military organizations) but such other amenities
this Court cannot directly decide this case. The needed inquiry must first be as shampoo, massage, manicure and other similar indulgences. And all for a
made by the lower court so it may assess and resolve the conflicting claims fee. Interestingly, one of the concessionaires, private respondent Valencia,
of the parties on the basis of the evidence that has yet to be presented at the was even sent abroad to improve his tonsorial business, presumably for the
trial. Only after it shall have determined in what capacity the petitioners benefit of his customers. No less significantly, if not more so, all the
were acting at the time of the incident in question will this Court determine, barbershop concessionaires are under the terms of their contracts, required
if still necessary, if the doctrine of state immunity is to remit to the United States government fixed commissions in
applicable.chanroblesvirtualawlibrary chanrobles virtual law library consideration of the exclusive concessions granted to them in their
respective areas.chanroblesvirtualawlibrary chanrobles virtual law library
In G.R. No. 79470, private respondent Genove was employed as a cook in
the Main Club located at the U.S. Air Force Recreation Center, also known This being the case, the petitioners cannot plead any immunity from the
as the Open Mess Complex, at John Hay Air Station. As manager of this complaint filed by the private respondents in the court below. The contracts
complex, petitioner Lamachia is responsible for eleven diversified activities in question being decidedly commercial, the conclusion reached in
generating an annual income of $2 million. Under his executive the United States of America v. Ruiz case cannot be applied
management are three service restaurants, a cafeteria, a bakery, a Class VI here.chanroblesvirtualawlibrary chanrobles virtual law library
store, a coffee and pantry shop, a main cashier cage, an administrative
office, and a decentralized warehouse which maintains a stock level of
The Court would have directly resolved the claims against the defendants
$200,000.00 per month in resale items. He supervises 167 employees, one of
as we have done in G.R. No. 79470, except for the paucity of the record in
whom was Genove, with whom the United States government has
the case at hand. The evidence of the alleged irregularity in the grant of the
concluded a collective bargaining
barbershop concessions is not before us. This means that, as in G.R. No.
agreement.chanroblesvirtualawlibrary chanrobles virtual law library
80258, the respondent court will have to receive that evidence first, so it can
later determine on the basis thereof if the plaintiffs are entitled to the relief
From these circumstances, the Court can assume that the restaurant services they seek. Accordingly, this case must also be remanded to the court below
offered at the John Hay Air Station partake of the nature of a business for further proceedings.chanroblesvirtualawlibrary chanrobles virtual law
enterprise undertaken by the United States government in its proprietary library
capacity. Such services are not extended to the American servicemen for
free as a perquisite of membership in the Armed Forces of the United States.
IVchanrobles virtual law library
Neither does it appear that they are exclusively offered to these servicemen;
on the contrary, it is well known that they are available to the general public
as well, including the tourists in Baguio City, many of whom make it a There are a number of other cases now pending before us which also
point to visit John Hay for this reason. All persons availing themselves of involve the question of the immunity of the United States from the
this facility pay for the privilege like all other customers as in ordinary jurisdiction of the Philippines. This is cause for regret, indeed, as they mar
restaurants. Although the prices are concededly reasonable and relatively the traditional friendship between two countries long allied in the cause of
low, such services are undoubtedly operated for profit, as a commercial and democracy. It is hoped that the so-called "irritants" in their relations will be
not a governmental activity.chanroblesvirtualawlibrary chanrobles virtual resolved in a spirit of mutual accommodation and respect, without the
law library inconvenience and asperity of litigation and always with justice to both
parties.chanroblesvirtualawlibrary chanrobles virtual law library
The consequence of this finding is that the petitioners cannot invoke the
doctrine of state immunity to justify the dismissal of the damage suit WHEREFORE, after considering all the above premises, the Court hereby
against them by Genove. Such defense will not prosper even if it be renders judgment as follows:
established that they were acting as agents of the United States when they
investigated and later dismissed Genove. For that matter, not even the 1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is
United States government itself can claim such immunity. The reason is that directed to proceed with the hearing and decision of Civil Case No. 4772.
by entering into the employment contract with Genove in the discharge of The temporary restraining order dated December 11, 1986, is
its proprietary functions, it impliedly divested itself of its sovereign LIFTED.chanroblesvirtualawlibrary chanrobles virtual law library
immunity from suit.chanroblesvirtualawlibrary chanrobles virtual law
library
2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-
R(298) is DISMISSED.chanroblesvirtualawlibrarychanrobles virtual law
But these considerations notwithstanding, we hold that the complaint library
against the petitioners in the court below must still be dismissed. While
suable, the petitioners are nevertheless not liable. It is obvious that the claim
for damages cannot be allowed on the strength of the evidence before us, 3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87
which we have carefully examined.chanroblesvirtualawlibrary chanrobles is DISMISSED. The temporary restraining order dated October 14, 1987, is
virtual law library made permanent.chanroblesvirtualawlibrarychanrobles virtual law library

The dismissal of the private respondent was decided upon only after a 4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is
thorough investigation where it was established beyond doubt that he had directed to proceed with the hearing and decision of Civil Case No. 4996.
polluted the soup stock with urine. The investigation, in fact, did not stop The temporary restraining order dated October 27, 1987, is LIFTED.
there. Despite the definitive finding of Genove's guilt, the case was still
referred to the board of arbitrators provided for in the collective bargaining All without any pronouncement as to
agreement. This board unanimously affirmed the findings of the costs.chanroblesvirtualawlibrary chanrobles virtual law library
investigators and recommended Genove's dismissal. There was nothing
arbitrary about the proceedings. The petitioners acted quite properly in
SO ORDERED.
terminating the private respondent's employment for his unbelievably
nauseating act. It is surprising that he should still have the temerity to file
his complaint for damages after committing his utterly disgusting
offense.chanroblesvirtualawlibrary chanrobles virtual law library
Hence, the instant petition.

The only question here is whether or not local water districts are
[ GR No. 81490, Aug 31, 1988 ]
government owned or controlled corporations whose employees are subject
to the provisions of the Civil Service Law. The Labor Arbiter asserted
HAGONOY WATER DISTRICT v. NLRC + jurisdiction over the alleged illegal dismissal of private respondent
Villanueva by relying on Section 25 of Presidential Decree No. 198, known
as the "Provincial Water Utilities Act of 1973" which went into effect on 25
The present petition for certiorari seeks to annul and set aside: a) the
May 1973, and which provides as follows:
decision of the Labor Arbiter dated 17 March 1987 in NLRC Case No. RAB-
III-8-2354-85, entitled "Dante Villanueva versus LWA-Hagonoy Waterworks
"Exemption from Civil Service. - The district and its employees, being engaged
District/Miguel Santos"; and b) the Resolution of the National Labor
in a proprietary function, are hereby exempt from the provisions of the Civil
Relations Commission dated 20 August 1987 affirming the mentioned
Service Law. Collective Bargaining shall be available only to personnel
decision.
below supervisory levels: Provided, however, That the total of all salaries,
wages, emoluments, benefits or other compensation paid to all employees
Private respondent Dante Villanueva was employed as service foreman by
in any month shall not exceed fifty percent (50%) of average net monthly
petitioner Hagonoy Water District ("Hagonoy") from 3 January 1977 until 16
revenue, said net revenue representing income from water sales and
May 1985, when he was indefinitely suspended and thereafter dismissed on
sewerage service charges, less-pro-rata share of debt service and expenses
12 July 1985 for abandonment of work and conflict of interest.
for fuel or energy for pumping during the preceding fiscal year."
On 14 August 1985, private respondent filed a complaint for illegal The Labor Arbiter however failed to take into account the provisions of
dismissal, illegal suspension and underpayment of wages and emergency Presidential Decree No. 1479, which went into effect on 11 June 1978. P.D.
cost of living allowance against petitioner Hagonoy with the then Ministry No. 1479 wiped away Section 25 of P.D. 198 quoted above, and Section 26 of
of Labor and Employment, Regional Arbitration Branch III, San Fernando, P.D. 198 was renumbered as Section 25 in the following manner:
Pampanga.
"Section 26 of the same decree [P.D. 198] is hereby amended to read as
Petitioner immediately moved for outright dismissal of the complaint on Section 25 as follows:
the ground of lack of jurisdiction. Being a government entity, petitioner
claimed, its personnel are governed by the provisions of the Civil Service 'Section 25. Authorization. - The district may exercise all the powers which
Law, not by the Labor Code, and protests concerning the lawfulness of are expressly granted by this Title or which are necessarily implied from or
dismissals from the service fall within the jurisdiction of the Civil Service incidental to the powers and purposes herein stated. For the purpose of
Commission, not the Ministry of Labor and Employment. Petitioner cited carrying out the objectives of this Act, a district is hereby granted the power
Resolution No. 1540 of the Social Security Commission cancelling of eminent domain, the exercise thereof shall, however, be subject to review
petitioner's compulsory coverage from the system effective 16 May 1979 by the Administration.'
"considering the rulings that local water districts are instrumentalities
owned and controlled by the government and that their officers and Thus, Section 25 of P.D. 198 exempting the employees of water districts
employees are government employees". In opposing the motion, private from the application of the Civil Service Law was removed from the statute
respondent Villanueva contended that local water districts, like petitioner books.
Hagonoy, though quasi-public corporations, are in the nature of private
corporations since they perform proprietary functions for the government. This is not the first time that officials of the Department of Labor and
Employment have taken the position that the Labor Arbiter here adopted.
The Labor Arbiter proceeded to hear and try the case and, on 17 March In Baguio Water District vs. Cresenciano B. Trajano, etc et al.,[1] the petitioner
1986, rendered a Decision in favor of the private respondent and against Water District sought review of a decision of the Bureau of Labor Relations
petitioner Hagonoy. The dispositive part of the decision read: which affirmed that of a Med-Arbiter calling for a certification election
among the regular rank-and-file employees of the Baguio Water District
"WHEREFORE, premises considered, respondents are hereby ordered to (BWD). In granting the petition, the Court said:
reinstate petitioner immediately to his former position as Service Foreman,
without loss of seniority rights and privileges, with full backwages, "The Baguio Water District was formed pursuant to Title II-Local Water
including all benefits provided by law, from the date he was terminated up District Law-of P.D. No. 198, as amended. The BWD is by Sec. 6 of that
to his actual date of reinstatement. decree 'a quasi-public corporation performing public service and supplying
public wants.'
In addition, respondents are hereby ordered to pay the petitioner the
amount of P4,927.50 representing the underpayments of wages from July A part of the public respondent's decision rendered in September, 1983,
1983 to May 16, 1985." reads in part:

SO ORDERED." 'We find the appeal [of the BWD] to be devoid of merit. The records show
that the operation and administration of BWD is governed and regulated by
On appeal, the National Labor Relations Commission affirmed the decision special laws, that is, Presidential Decrees Nos. 198 and 1479 which created
of the Labor Arbiter in a Resolution dated 20 August 1987. local water districts throughout the country. Section 25 of Presidential
Decree (PD) 198 clearly provides that the district and its employees shall be
The petitioner moved for reconsideration, insisting that public respondents exempt from the provisions of the Civil Service Law and that its personnel
had no jurisdiction over the case. Meanwhile, a Writ of Execution was below supervisory level shall have the right to collectively bargain.
issued by the Labor Arbiter on 16 November 1987. The writ was enforced Contrary to appellant's claim, said provision has not been amended much
by garnishing petitioner Hagonoy's deposits with the Planters Development more abrogated expressly or impliedly by PD 1479 which does not make
Bank of Hagonoy. mention of any matter on Civil Service Law or collective bargaining.' (Rollo,
p. 590.)
Petitioner then filed a Motion to Quash the Writ of Execution with
Application for Writ of Preliminary Injunction arguing that the writ was We grant the petition for the following reasons:
prematurely issued as its motion for reconsideration had not yet been
resolved. By Resolution dated 10 December 1987, public respondent
Commission denied the application for a preliminary injunction. The
1. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479;
motion to quash was similarly denied by the Commission which directed
Sec. 26 of P.D. No. 198 was amended to read as Sec. 25 by Sec. 4 of
petitioner to reinstate immediately private respondent and to pay him the
P.D. No. 1479. The amendatory decree took effect on June 11,
amount of P63,577.75 out of petitioner's garnished deposits.
1978.
xxxxxxxxx that under such applicable law, the Labor Arbiter had no jurisdiction to
render the decision that he in fact rendered. By the time the public
respondent Commission rendered its decision of 20 August 1987 which is
3. The BWC is a corporation created pursuant to a special law - P.D.
No. 198, as amended. As such its officers and employees are part here assailed, the 1987 Constitution had already come into effect.[5] There is,
nonetheless, no necessity for this Court at the present time and in the
of the Civil Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No.
present case to pass upon the question of the effect of the provisions of
868.)"
Article IX (B), Section 2 (1) of the 1987 Constitution upon the pre-existing
statutory and case law. For whatever that effect might be, -- and we will
The broader question of whether employees of government owned or deal with that when an appropriate case comes before the Court -- we
controlled corporations are governed by the Civil Service Law and Civil believe and so hold that the 1987 Constitution did not operate
Service Rules and Regulations was addressed by this Court in 1985 in retrospectively so as to confer jurisdiction upon the Labor Arbiter to render
National Housing Corporation vs. Juco.[2] After a review of constitutional, a decision which, under the law applicable at the time of the rendition of
statutory and case law on the matter, the Court, through Mr. Justice such decision, was clearly outside the scope of competence of the Labor
Gutierrez, held: Arbiter. Thus, the respondent Commission had nothing before it which it
could pass upon in the exercise of its appellate jurisdiction. For it is self-
"There should no longer be any question at this time that employees of evident that a decision rendered by the Labor Arbiter without jurisdiction
government-owned or controlled corporations are governed by the civil over the case is a complete nullity, vesting no rights and imposing no
service law and civil service rules and regulations. liabilities.

Section 1, Article XII-B of the [1973] Constitution specifically provides: ACCORDINGLY, the Petition for Certiorari is GRANTED. The decision of
the Labor Arbiter dated 17 March 1986, and public respondent
'The Civil Service embraces every branch, agency, subdivision, and Commission's Resolution dated 20 August 1987 and all other Resolutions
instrumentality of the Government, including every government-owned or and Orders issued by the Commission in this case subsequent thereto, are
controlled corporation. x x x" hereby SET ASIDE. This decision is, however, without prejudice to the right
of private respondent Villanueva to refile, if he so wishes, this complaint in
The 1935 Constitution had a similar provision in its Section 1, Article XII
an appropriate forum. No pronouncement as to costs.
which stated:
SO ORDERED.
'A Civil Service embracing all branches and subdivisions of the Government
shall be provided by law.'

The inclusion of 'government-owned or controlled corporations' within the ZAMBOANGA CITY WATER DISTRICT v. PRESIDING
embrace of the civil service shows a deliberate effort of the framers to plug COMMISSIONER MUSIB M. BUAT +
an earlier loophole which allowed government-owned or controlled
corporations to avoid the full consequences of the all encompassing
coverage of the civil service system. The same explicit intent is shown by the This is a petition for certiorari under Rule 65 of the Revised Rules of Court to
addition of 'agency' and 'instrumentality' to branches and subdivisions of reverse and set aside the Resolutions dated October 24, 1991 and February
the Government. All offices and firms of the government are covered. 19, 1992 of the National Labor Relations Commission (NLRC) in NLRC CA
No. M-000352.
The amendments introduced in 1973 are not idle exercises or meaningless
I
gestures. They carry the strong message that civil service coverage is broad
and all-embracing insofar as employment in the government in any of its The Zamboanga City Water District, petitioner herein, is a government-
governmental or corporate arms is concerned." owned and controlled corporation engaged in the business of supplying
water in the City of Zamboanga. Private respondents are all employees of
xxxxxxxxx
petitioner.
Section I of Article XII-B, [1973] Constitution uses the word 'every' to modify In March 1987, a strike occurred in the company. It was conducted and
the phrase 'government-owned or controlled corporation.' participated in by private respondents, for which reason they were
separated from their employment. Petitioner thereafter filed on March 17,
'Every' means each one of a group, without exception. It means all possible 1987 a complaint before the Labor Arbiter to declare the said strike illegal
and all, taken one by one. Of course, our decision in this case refers to a (NLRC Case No. RAB-IX-03-0090-87). The following day, March 18, the
corporation created as a government-owned or controlled entity. It does not Zamboanga Utilities Labor Union (ZULU), to which private respondents
cover cases involving private firms taken over by the government in belonged, filed before the Labor Arbiter, a complaint against petitioner for
foreclosure or similar proceedings. We reserve judgment on these latter illegal dismissal and unpaid wages (NLRC Case No. RAB-IX-03-0092-87).
cases when the appropriate controversy is brought to this Court."[3]
The two cases were consolidated and heard together, and on April 19, 1988,
In Juco, the Court spelled out the law on the issue at bar as such law existed a consolidated decision was rendered by the Executive Labor Arbiter
under the 1973 Constitution and the Provisional Constitution of 1986,[4] until declaring both the strike and the dismissal of private respondents illegal
just before the effectivity of the 1987 Constitution. Public respondent and ordering the reinstatement of private respondents to their former
Commission, in confirming the Labor Arbiter's assumption of jurisdiction positions, without loss of seniority rights and privileges, but without back
over this case, apparently relied upon Article IX (B), Section 2 (1) of the 1987 wages.
Constitution, which provides that:
Petitioner appealed to the NLRC. On July 17, 1990, the NLRC, through
"[T]he Civil Service embraces x x x government owned or controlled respondent Commissioners, affirmed the decision of the Executive Labor
corporations with original charters." (Italics supplied) Arbiter, with the sole modification that the strike leader, respondent Felix
Laquio herein, be suspended from work without pay for a period of six
The NLRC took the position that although petitioner Hagonoy is a months, effective ten days from receipt of the decision.
government owned or controlled corporation, it had no original charter
having been created simply by resolution of a local legislative council. The Petitioner received a copy of the decision of the NLRC on August 27 (Rollo,
NLRC concluded that therefore petitioner Hagonoy fell outside the scope of p. 32). Three days later, private respondents filed with the Executive Labor
the civil service. Arbiter a motion for execution of the said decision. On September 24, the
Executive Labor Arbiter granted the writ of execution and ordered
At the time the dispute in the case at bar arose, and at the time the Labor petitioner to reinstate all private respondents.
Arbiter rendered his decision (i.e., 17 March 1986), there is no question that
the applicable law was that spelled out in National Housing Corporation vs. On September 28, this Court issued a restraining order in G.R. Nos. 95219-
Juco (supra) and Baguio Water District vs. Cresenciano B. Trajano (supra) and 20 enjoining, until further orders, the execution of the NLRC Decision dated
July 17, 1990. However, on March 13, 1991, we dismissed the petition, respondent Laquio, petitioner reinstated him on October 16, 1991 after the
affirmed the NLRC Decision dated July 17, 1990 and lifted the restraining expiration of the six-month suspension.
order granted earlier.
Petitioner argues that the execution of the NLRC decision dated July 17,
Petitioner received a copy of the decision of the Supreme Court on April 10 1990 was suspended by the temporary restraining order issued by this
and on April 16, it reinstated 27 of the respondent employees. On the same Court in G.R. Nos. 95219-20.
day, petitioner informed the Executive Labor Arbiter that respondent
Laquio would be reinstated on October 16 after the expiration of Laquio's The Executive Labor Arbiter agreed with petitioner's contention.
six-month suspension.
The NLRC was of the view that private respondents should have been
On April 17, private respondents filed a motion to compel the immediate reinstated on March 21, 1989 and paid their back wages from that date to
reinstatement of respondent Laquio and the payment of their back wages. April 15, 1991 including the period of effectivity of the temporary
According to private respondents, the decision of the NLRC was executory restraining order of this Court in G.R. Nos. 95219-20. Respondent Laquio on
immediately upon receipt by petitioner of a copy thereof on August 27, the other hand, should have been reinstated on March 6, 1991 and paid his
1990. back wages from said date up to the day prior to his actual reinstatement.

On May 17, the Executive Labor Arbiter issued an order denying private The reckoning date of March 21, 1989 used by the NLRC was the date of
respondents' motion. Private respondents then appealed to the NLRC effectivity of R.A. No. 6715, amending the third paragraph of Article 223 of
(NLRC CA No. M-00352). On October 24, the NLRC set aside the the Labor Code which provides:
questioned order of the Executive Labor Arbiter and ordered respondent
xxx xxx xxx
Laquio's reinstatement, if not yet reinstated, and granted full back wages to
him from March 6, 1991 up to the day prior to his actual reinstatement; and "In any event, the decision of the Labor Arbiter reinstating a dismissed or
to the other private respondents from March 21, 1989 up to April 15, 1991, separated employee, insofar as the reinstatement aspect is concerned, shall
including the period of effectivity of the temporary restraining order of this immediately be executory, even pending appeal. The employee shall either
Court in G.R. Nos. 95219-20. be admitted back to work under the same terms and conditions prevailing
Petitioner moved for a reconsideration, which the NLRC however denied prior to his dismissal or separation or, at the option of the employer, merely
on February 19, 1992. reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatement provided herein (Underscoring
Hence, this petition. supplied).

II xxx xxx xxx

Petitioner contends that the NLRC had no jurisdiction to issue the Under the said provision of law, the decision of the Labor Arbiter
resolutions in question because jurisdiction over labor disputes is vested in reinstating a dismissed or separated employee insofar as the reinstatement
the Civil Service Commission. It also argues that the NLRC committed aspect is concerned, shall be immediately executory, even pending appeal.
grave abuse of discretion amounting to lack or in excess of jurisdiction The employer shall reinstate the employee concerned either by: (a) actually
when it ordered the payment of the salaries of private respondent during admitting him back to work under the same terms and conditions
the effectivity of the restraining order of this Court in G.R. Nos. 95219-20. prevailing prior to his dismissal or separation; or (b) at the option of the
employer, merely reinstating him in the payroll. Immediate reinstatement is
There is no dispute that petitioner, a water district with an original charter, mandated and is not stayed by the fact that the employer has appealed, or
is a government-owned and controlled corporation. The established rule is has posted a cash or surety bond pending appeal.
that the hiring and firing of employees of government-owned and
controlled corporations are governed by the provisions of the Civil Service The issuance of the temporary restraining order in G.R. Nos. 95219-20 did
Law and Civil Service Rules and Regulations (Tanjay Water District v. not nullify the rights of private respondents to their reinstatement and to
Gabaton, 172 SCRA 253 [1989]; Hagonoy Water District v. National Labor collect their wages during the period of the effectivity of the order but
Relations Commission, 165 SCRA 272 [1988]; National Housing Corporation merely suspended the implementation thereof pending the determination of
v. Juco, 134 SCRA 172 [1985]; Baguio Water District v. Trajano, 127 SCRA the validity of the NLRC resolutions subject of the petition. Naturally, a
730 [1984]). Jurisdiction over the strike and the dismissal of private finding of this Court that private respondents were not entitled to
respondents is therefore lodged not with the NLRC but with the Civil reinstatement would mean that they had no right to collect any back wages.
Service Commission. On the other hand, where the Court affirmed the decision of the NLRC and
recognized the right of private respondents to reinstatement, as in G.R. Nos.
Nevertheless, petitioner never raised the issue of lack of jurisdiction before 95219-20, private respondents are entitled to the wages accruing during the
the Executive Labor Arbiter, the NLRC or even this Court in G.R. Nos. effectivity of the temporary restraining order.
95219-20. In fact, petitioner itself filed the complaint before the Executive
Labor Arbiter in NLRC Case No. RAB-IX-03-0090-87, sought affirmative WHEREFORE, the petition is DISMISSED.
relief therefrom and even participated actively in the proceedings below. It
is only now in this case before us, after the NLRC ordered payment of back
wages, that petitioner raises the issue of lack of jurisdiction. Indeed, it is not
fair for a party who has voluntarily invoked the jurisdiction of a tribunal in
a particular matter to secure an affirmative relief therefrom, to afterwards
repudiate and deny that very same jurisdiction to escape a penalty (Ocheda
v. Court of Appeals, 214 SCRA 629 [1992]; Royales v. Intermediate
Appellate Court, 127 SCRA 470 [1984]; Tijam v. Sibonghanoy, 23 SCRA 29
[1968]).

Petitioner is thus estopped from assailing the jurisdiction of the NLRC and
is bound to respect all the proceedings below.

The second issue involves the determination of when private respondents


should be reinstated as ordered by the decision of the Executive Labor
Arbiter dated April 19, 1988. Their salaries start to toll from said date.

Petitioner claims that private respondents, except respondent Laquio, were


entitled to reinstatement only after April 10, 1991 when it received a copy of
the decision of the Supreme Court in G.R. Nos. 95219-20. Petitioner
reinstated said private respondents on April 16, 1991. In the case of

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