Labor Cases (Set 2)

1. G.R. No. 128024. May 9, 2000

BEBIANO M. BAEZ, petitioner, vs. HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC.,
respondents.

DECISION

GONZAGA_REYES, J.:

The orders of respondent judge[1] dated June 20, 1996 and October 16, 1996, taking jurisdiction over an
action for damages filed by an employer against its dismissed employee, are assailed in this petition for
certiorari under Rule 65 of the Rules of Court for having been issued in grave abuse of discretion.

Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In 1993,
private respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal
dismissal with the National Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July 7,
1994, Labor Arbiter Nicodemus G. Palangan found petitioner to have been illegally dismissed and
ordered the payment of separation pay in lieu of reinstatement, and of backwages and attorney's fees.
The decision was appealed to the NLRC, which dismissed the same for having been filed out of time.[2]
Elevated by petition for certiorari before this Court, the case was dismissed on technical grounds[3];
however, the Court also pointed out that even if all the procedural requirements for the filing of the
petition were met, it would still be dismissed for failure to show grave abuse of discretion on the part of
the NLRC. Slxmis

On November 13, 1995, private respondent filed a complaint for damages before the Regional Trial
Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which prayed for the payment of
the following: Slxsc

a. P709,217.97 plus 12% interest as loss of profit and/or unearned income of three years;

b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties, space, etc. for three
years;
c. P5,000.00 as initial expenses of litigation; and

d. P25,000.00 as attorney's fees.[4]

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He interposed in the
court below that the action for damages, having arisen from an employer-employee relationship, was
squarely under the exclusive original jurisdiction of the NLRC under Article 217(a), paragraph 4 of the
Labor Code and is barred by reason of the final judgment in the labor case. He accused private
respondent of splitting causes of action, stating that the latter could very well have included the instant
claim for damages in its counterclaim before the Labor Arbiter. He also pointed out that the civil action
of private respondent is an act of forum-shopping and was merely resorted to after a failure to obtain a
favorable decision with the NLRC. Scslx

Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which
summarized the basis for private respondent's action for damages in this manner: Slx

Paragraph 5 of the complaint alleged that the defendant violated the plaintiffs policy re: His business in
his branch at Iligan City wherein defendant was the Sales Operations Manager, and paragraph 7 of the
same complaint briefly narrated the modus operandi of defendant, quoted herein: Defendant canvassed
customers personally or through salesmen of plaintiff which were hired or recruited by him. If said
customer decided to buy items from plaintiff on installment basis, defendant, without the knowledge of
said customer and plaintiff, would buy the items on cash basis at ex-factory price, a privilege not given
to customers, and thereafter required the customer to sign promissory notes and other documents
using the name and property of plaintiff, purporting that said customer purchased the items from
plaintiff on installment basis. Thereafter, defendant collected the installment payments either personally
or through Venus Lozano, a Group Sales Manager of plaintiff but also utilized by him as secretary in his
own business for collecting and receiving of installments, purportedly for the plaintiff but in reality on
his own account or business. The collection and receipt of payments were made inside the Iligan City
branch using plaintiffs facilities, property and manpower. That accordingly plaintiffs sales decreased and
reduced to a considerable extent the profits which it would have earned.[5]

In declaring itself as having jurisdiction over the subject matter of the instant controversy, respondent
court stated: Mesm

A perusal of the complaint which is for damages does not ask for any relief under the Labor Code of the
Philippines. It seeks to recover damages as redress for defendant's breach of his contractual obligation
to plaintiff who was damaged and prejudiced. The Court believes such cause of action is within the
realm of civil law, and jurisdiction over the controversy belongs to the regular courts.
While seemingly the cause of action arose from employer- employee relations, the employer's claim for
damages is grounded on the nefarious activities of defendant causing damage and prejudice to plaintiff
as alleged in paragraph 7 of the complaint. The Court believes that there was a breach of a contractual
obligation, which is intrinsically a civil dispute. The averments in the complaint removed the controversy
from the coverage of the Labor Code of the Philippines and brought it within the purview of civil law.
(Singapore Airlines, Ltd. Vs. Pao, 122 SCRA 671.) xxx[6]

Petitioner's motion for reconsideration of the above Order was denied for lack of merit on October 16,
1996. Hence, this petition. Calrky

Acting on petitioner's prayer, the Second Division of this Court issued a Temporary Restraining Order
("TRO ") on March 5, 1997, enjoining respondents from further proceeding with Civil Case No. 95-554
until further orders from the Court. Kycalr

By way of assignment of errors, the petition reiterates the grounds raised in the Motion to Dismiss dated
January 30, 1996, namely, lack of jurisdiction over the subject matter of the action, res judicata, splitting
of causes of action, and forum-shopping. The determining issue, however, is the issue of jurisdiction.
Kyle

Article 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the filing of this
case, reads: Exsm

ART. 217. Jurisdiction of Labor Arbiters and the Commission. --- (a) Except as otherwise provided under
this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:

xxx

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

xxx
The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.") No. 6715,
which took effect on March 21, 1989, and which put to rest the earlier confusion as to who between
Labor Arbiters and regular courts had jurisdiction over claims for damages as between employers and
employees. Sppedjo

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including
claims for damages, was originally lodged with the Labor Arbiters and the NLRC by Article 217 of the
Labor Code.[7] On May 1, 1979, however, Presidential Decree ("P.D.") No. 1367 amended said Article
217 to the effect that "Regional Directors shall not indorse and Labor Arbiters shall not entertain claims
for moral or other forms of damages."[8] This limitation in jurisdiction, however, lasted only briefly since
on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code almost
to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the
NLRC in Article 217 is comprehensive enough to include claims for all forms of damages "arising from
the employer-employee relations". Miso

Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to
claims for damages filed by employees,[9] we hold that by the designating clause "arising from the
employer-employee relations" Article 217 should apply with equal force to the claim of an employer for
actual damages against its dismissed employee, where the basis for the claim arises from or is
necessarily connected with the fact of termination, and should be entered as a counterclaim in the
illegal dismissal case. Nexold

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded by the Labor
Code), jurisprudence was settled that where the plaintiff's cause of action for damages arose out of, or
was necessarily intertwined with, an alleged unfair labor practice committed by the union, the
jurisdiction is exclusively with the (now defunct) Court of Industrial Relations, and the assumption of
jurisdiction of regular courts over the same is a nullity.[10] To allow otherwise would be "to sanction
split jurisdiction, which is prejudicial to the orderly administration of justice."[11] Thus, even after the
enactment of the Labor Code, where the damages separately claimed by the employer were allegedly
incurred as a consequence of strike or picketing of the union, such complaint for damages is deeply
rooted from the labor dispute between the parties, and should be dismissed by ordinary courts for lack
of jurisdiction. As held by this Court in National Federation of Labor vs. Eisma, 127 SCRA 419: Manikx

Certainly, the present Labor Code is even more committed to the view that on policy grounds, and
equally so in the interest of greater promptness in the disposition of labor matters, a court is spared the
often onerous task of determining what essentially is a factual matter, namely, the damages that may be
incurred by either labor or management as a result of disputes or controversies arising from employer-
employee relations.
There is no mistaking the fact that in the case before us, private respondent's claim against petitioner
for actual damages arose from a prior employer-employee relationship. In the first place, private
respondent would not have taken issue with petitioner's "doing business of his own" had the latter not
been concurrently its employee. Thus, the damages alleged in the complaint below are: first, those
amounting to lost profits and earnings due to petitioner's abandonment or neglect of his duties as sales
manager, having been otherwise preoccupied by his unauthorized installment sale scheme; and second,
those equivalent to the value of private respondent's property and supplies which petitioner used in
conducting his "business ". Maniks

Second, and more importantly, to allow respondent court to proceed with the instant action for
damages would be to open anew the factual issue of whether petitioner's installment sale scheme
resulted in business losses and the dissipation of private respondent's property. This issue has been duly
raised and ruled upon in the illegal dismissal case, where private respondent brought up as a defense
the same allegations now embodied in his complaint, and presented evidence in support thereof. The
Labor Arbiter, however, found to the contrary ---that no business losses may be attributed to petitioner
as in fact, it was by reason of petitioner's installment plan that the sales of the Iligan branch of private
respondent (where petitioner was employed) reached its highest record level to the extent that
petitioner was awarded the 1989 Field Sales Achievement Award in recognition of his exceptional sales
performance, and that the installment scheme was in fact with the knowledge of the management of
the Iligan branch of private respondent.[12] In other words, the issue of actual damages has been
settled in the labor case, which is now final and executory. Manikan

Still on the prospect of re-opening factual issues already resolved by the labor court, it may help to refer
to that period from 1979 to 1980 when jurisdiction over employment-predicated actions for damages
vacillated from labor tribunals to regular courts, and back to labor tribunals. In Ebon vs. de Guzman, 113
SCRA 52,[13] this Court discussed:

The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award moral and other
forms of damages in labor cases could have assumed that the Labor Arbiters' position-paper procedure
of ascertaining the facts in dispute might not be an adequate tool for arriving at a just and accurate
assessment of damages, as distinguished from backwages and separation pay, and that the trial
procedure in the Court of First Instance would be a more effective means of determining such damages.
xxx

Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and the
NLRC of the jurisdiction to award damages in labor cases because that setup would mean duplicity of
suits, splitting the cause of action and possible conflicting findings and conclusions by two tribunals on
one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217 in its
original form) nullified Presidential Decree No. 1367 and restored to the Labor Arbiter and the NLRC
their jurisdiction to award all kinds of damages in cases arising from employer-employee relations. xxx
(Underscoring supplied)

Clearly, respondent court's taking jurisdiction over the instant case would bring about precisely the
harm that the lawmakers sought to avoid in amending the Labor Code to restore jurisdiction over claims
for damages of this nature to the NLRC. Oldmiso

This is, of course, to distinguish from cases of actions for damages where the employer-employee
relationship is merely incidental and the cause of action proceeds from a different source of obligation.
Thus, the jurisdiction of regular courts was upheld where the damages, claimed for were based on
tort[14], malicious prosecution[15], or breach of contract, as when the claimant seeks to recover a debt
from a former employee[16] or seeks liquidated damages in enforcement of a prior employment
contract. [17]

Neither can we uphold the reasoning of respondent court that because the resolution of the issues
presented by the complaint does not entail application of the Labor Code or other labor laws, the
dispute is intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor
Arbiter original and exclusive jurisdiction over claims for damages arising from employer-employee
relations ---in other words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by
labor laws, but also damages governed by the Civil Code.[18]

Thus, it is obvious that private respondent's remedy is not in the filing of this separate action for
damages, but in properly perfecting an appeal from the Labor Arbiter's decision. Having lost the right to
appeal on grounds of untimeliness, the decision in the labor case stands as a final judgment on the
merits, and the instant action for damages cannot take the place of such lost appeal.

Respondent court clearly having no jurisdiction over private respondent's complaint for damages, we
will no longer pass upon petitioner's other assignments of error. Ncm

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554 before Branch 39 of
the Regional Trial Court of Misamis Oriental is hereby DISMISSED. No pronouncement as to costs.
Ncmmis

SO ORDERED.
2. G.R. No. 184397, September 09, 2015

ROSALINDA G. PAREDES, Petitioner, v. FEED THE CHILDREN PHILIPPINES, INC. AND/OR DR. VIRGINIA
LAO, HERCULES PARADIANG AND BENJAMIN ESCOBIA, Respondents.

DECISION

PERALTA, J.:

For this Court's resolution is a petition for review on certiorari, dated October 23, 2008, of petitioner
Rosalinda G. Paredes, seeking to reverse and set aside the Decision1 dated March 25, 2008 and
Resolution2 dated August 28, 2008 of the Court of Appeals (CA). The assailed Decision annulled and set
aside the rulings of the National Labor Relations Commission (NLRC) Fourth Division, Cebu City and
affirmed the rulings of the Labor Arbiter (LA), which held that petitioner voluntarily resigned and was
not constructively dismissed.

The antecedents are as follows:chanRoblesvirtualLawlibrary

Respondent Feed the Children Philippines, Inc. (FTCP) is a nonstock, non-profit, and non-government
organization duly incorporated under the Philippine laws in 1989. Its objective is to provide food,
clothing, educational supplies and other necessities of indigent children worldwide3 Respondents Dr.
Virginia Lao, Hercules Paradiang and Benjamin Escobia were members of the FTCP Board of Trustees
(Board) and Executive Committee (Execom) of FTCP.4

Petitioner Rosalinda Paredes was FTCP's National Director. Her functions and duties include project
management, fund accessing, income generation, financial management, and administration of the
organization. She also signed all the FTCP checks and approved all requisitions and disbursements of
FTCP funds.5 As per FTCP's By-laws, it was also her duty to execute all resolutions and/or decisions of
the Board.6

Petitioner was first hired by FTCP in 1999 as Country Director. Her contract was renewed several times
until her last contract for the period from October 1, 2004 to September 30, 2007. Her initial salary was
US$1000.00 and then later, she was paid P70,000.00 aside from other benefits and allowances.7
On August 12, 2005, forty-two (42) FTCP employees signed a petition letter addressed to the Board
expressing their complaints against alleged detestable practices of petitioner, to wit: seeking exemption
from policies which she herself had approved; withholding organization funds despite approval of its
release; procuring health insurance for herself without paying her share of the premium; and receiving
additional fees contrary to the terms of her contract.8

The next day, August 13, 2005, the staff of FTCP called Lao to a meeting to submit their petition. They
included Atty. Edgar Chatto, then Chairman of the Board, in the meeting when they realized that it was
only her and Escobia who were present. The group was edgy and demanded for outright solution.
However, the three Board members told them that they should follow a process.9

Petitioner learned from Atty. Chatto that Program Manager Primitivo Fostanes and his co-employees
prepared a petition questioning her leadership and management of FTCP. She filed an administrative
complaint against Fostanes on August 24, 2005, but the same was not acted upon.10

When the Board convened for a meeting on August 28, 2005, petitioner was not allowed to participate.
She was only allowed to join the meeting after three hours. As ex officio member of the Board and as
head of the secretariat, she was always present in every meeting to discuss her reports, programs and
proposals.11

During the meeting, the Board discussed the animosity between the petitioner and the staff of FTCP and
how they would address the issue since they have inadequate grievance mechanism for issues involving
top management.12 According to Lao, petitioner became combative in issuing memos and filing of
administrative charges.13 Atty. Chatto recounted that when petitioner heard about the protesting
senior management and staff, her initial reaction was to resign but then she asked that the complaints
be put in writing.14 After their discussion, they called the representatives of the complaining staff and
petitioner to air their side.

Consequently, the Board decided that: Acting Board Chair Lao will issue a back-to-work memorandum
and status quo to ensure that all the scheduled tasks be accomplished; there will be a Supervisory Team,
composing of Lao and Escobia, that will draw a definite work plan and be compensated; the Supervisory
Team will not replace the functions of the National Director; and FTCP will hire an independent
professional management and financial auditor.15

Petitioner sent letters to the Board inquiring about the scope of audit. When the Board did not respond,
her lawyers demanded Lao to address petitioner's concerns regarding the management and financial
audit and that the manual of operations be strictly followed.16 In another letter, her lawyers informed
individual respondents that petitioner raised the legality and propriety of the conduct of the audit, thus,
they requested that they desist from conducting the audit. The letter also indicated that failure to do so
would implead them as respondents in a preliminary injunction case that they would file.17

While she was at an orientation for local government officials of Surigao del Norte at the Bohol Tropics
Resort on October 24, 2005, petitioner received a phone call from her staff at FTCP that the auditors
from SRD & Co. were already at their office. Lao also called to instruct her that she should meet the
auditors and accommodate them. She refrained from obeying the order and was adamant that she
should receive her requested information first.18

On October 26, 2005, the FTCP management executive committee, headed by petitioner, informed the
Board that they were not afraid of the audit. They wanted due process as provided by the by-laws,
manual of operations, and manual of financial policies and accounting procedures approved by the
Board itself. They also inquired about the meetings and processes of the Execom that they were not
aware of. Lastly, they asked for a dialogue to settle their differences.19

On the same date, petitioner wrote an electronic mail (e-mail) to Dr. Larry Jones, the founder of Feed
the Children International, Inc. and reported that Paradiang and two members of the Board initiated a
surprise and secret audit. She expressed that the management was upset to the manner of conducting
the audit. She also insinuated that Paradiang was always after her despite steering the organization to
development. She intimated that she would legally protect herself should she be illegally dismissed and
that they would seek relief from the harassment by Paradiang.20

The Board resolved to suspend petitioner because of her indifferent attitude and unjustified refusal to
submit to an audit.21 Before it could be implemented, respondent FTCP received her resignation
letter.22 In her resignation letter, she wrote that she can only serve the organization up to December
31, 2005. She found it no longer tenable to work with the Board since she had differences with majority
of the members regarding resolutions, policies and procedures.23

On October 29, 2005, the Board accepted her resignation with the condition that its effectivity be
moved to November 30, 2005. She was not obliged to report for work and FTCP was willing to pay her
salary for the month of November to aid her while she looked for other employment.24

Petitioner wrote to the members of management and foreign funders informing them that she was no
longer connected with FTCP. She moved out all her belongings and even brought FTCP's
documents.25cralawred
On November 2, 2005, petitioner filed a Complaint for illegal dismissal, claiming that she was forced to
resign, thus, was constructively dismissed, and impleaded Lao, Paradiang and Escobia in their personal
capacities.26

Upon failure of the parties to settle amicably, the mandatory conference was terminated.

In her position paper, petitioner alleged that she was not included in the Supervisory Team which
performed her functions and issued memorandum directly to her subordinates. She also alleged that
she was excluded from Execom meetings.27

Respondents, on the other hand, claimed that petitioner was signatory to all the bank checks of
respondent FTCP and approved all requisitions and disbursements. She received an excess of
US$1,000.00 for her salary and did not return the same. They alleged that petitioner voluntarily resigned
from her position and removed all her belongings from the FTCP.28

The LA ruled in favor of the respondents, the dispositive portion of the Decision29
reads:cralawlawlibrary

WHEREFORE, foregoing considered, the case is hereby DISMISSED for lack of merit and judgment is
hereby rendered ordering complainant Rosalinda G. Paredes to pay the following:

1. One Hundred Forty-Three Thousand Six Hundred [F]orty-Six and 73/100 (P143,646.73) representing
her accountabilities to respondent FTCP in Philippine Currency;

2. One Thousand Dollars ($1,000.00) to respondent FTCP representing complainant's accountability in

US Currency;

3. Five Hundred Thousand Pesos (P500,000.00) each to respondents Dr. Virginia Lao, Benjamin Escobia
and Hercules Paradiang for moral damages;

4. One Million Pesos (P1,000,000.00) to respondent FTCP for damages incurred;

5. One Hundred Thousand Pesos (P100,000.00) to respondents collectively for exemplary damages; and

6. Attorney's Fees to 10% of the total award.

SO ORDERED.
Undaunted, petitioner appealed the decision to the NLRC. In its Decision31 dated March 28, 2007, the
NLRC reversed and set aside the decision of the LA and ruled in her favor, the dispositive portion of
which states

WHEREFORE, premises considered, the decision of the Labor Arbiter dated 08 November 2006 is
REVERSED and SET aside and a new one is entered, to wit:chanRoblesvirtualLawlibrary

I. Ordering respondent Feed the Children Philippines, Inc. to pay the complainant of her salaries and
allowances corresponding to the unexpired portion of her contract in the aggregate amount of One
Million Six Hundred Eighty-Five Thousand Nine Hundred and 00/100 (PI,685,900.00), broken down as
follows:cralawlawlibrary

a. Salaries corresponding to the unexpired portion of the contract

- P1,610,000.00

b. Transportation allowances

- 29,900.00

c. Representation allowances

- 46,000.00

Total

P1,685,900.00;

chanrobleslaw

and

2. Ordering respondent Feed the Children Philippines, Inc. to pay complainant of moral damages in the
amount of One Hundred Thousand Pesos (P100,000.00); and exemplary damages in the amount of One
Hundred Thousand Pesos (P100,000.00).

Respondents Dr. Virginia Lao, Hercules Paradiang and Benjamin Escobia are absolved from any liability
for lack of legal basis.
SO ORDERED.32

In a Resolution33 dated June 14, 2007, the NLRC dismissed the motion for reconsideration of the
respondents. Thus, respondents filed before the CA a petition for certiorari. The CA ruled for the
respondents. The fallo of said decision reads:cralawlawlibrary

WHEREFORE, the Decision dated March 28, 2007 and the Resolution dated June 14, 2007, of the
National Labor Relations Commission (NLRC), Fourth Division, Cebu City, in NLRC Case No. V-000074-
2007, are NULLIFIED and a new one rendered as follows:cralawlawlibrary

1. Declaring private respondent to have voluntarily resigned from her employment/consultancy with
FTCP;

2. Directing private respondent to pay FTCP

a. Thirty-four thousand four hundred thirty-eight pesos and 37/100 (P34,438.37) for her unpaid loans;

b. One hundred nine thousand two hundred eight pesos and 36/100 (P109.208.36) respecting her
disbursement and withdrawals from the FTCP Provident Fund.chanrobleslaw

Costs against private respondent.

SO ORDERED

The CA did not find any valid. reason to disturb its decision, hence, it denied petitioner's Motion for
Reconsideration.35

In this recourse, petitioner raises the following issues for this Court's consideration:cralawlawlibrary

I. The CA contravenes the law and jurisprudence when it granted the petition for certiorari that raised
questions factual in nature and when it sweepingly applied the ruling in St. Martin Funeral Homes to
justify its act of delving into the findings of the NLRC which were outside the scope of extraordinary
remedy of certiorari.
II. The CA grossly contradicts the law and jurisprudence on constructive dismissal and ignored,
misunderstood or misinterpreted cogent facts and circumstances which, if considered, would change
the outcome of the case when it ruled that petitioner voluntarily resigned and was not constructively
dismissed.

III. The CA effectively reverses the law and jurisprudence on damages and recognized money claims in
labor cases when it condemned petitioner to pay respondents' claims for damages that were not duly
proven by the latter and that clearly did not arise from an employer-employee relationship.

IV. The CA violates the Constitution, the law and the prevailing jurisprudence when it resolved the
lingering doubts that remain in the present case, as those arising from evidence and from interpretation
of agreements and writings, against labor.chanrobleslaw

The present petition is partly meritorious.

It is elementary that this Court is not a trier of facts, and only errors of law are generally reviewed in
petitions for review on certiorari. Judicial review of labor cases does not go beyond the evaluation of the
sufficiency of the evidence upon which its labor officials' findings rest. As such, the findings of facts and
conclusion of the NLRC are generally accorded not only great weight and respect but even clothed with
finality and deemed binding on this Court as long as they are supported by substantial evidence.36

However, if the factual findings of the LA and the NLRC are conflicting, as in this case, the reviewing
court may delve into the records and examine for itself the questioned findings.37 The exception, rather
than the general rule, applies in the present case since the LA and the CA found facts supporting the
conclusion that petitioner was not constructively dismissed, while the NLRC's factual findings
contradicted the LA's findings. Under this situation, such conflicting factual findings are not binding on
us, and we retain the authority to pass on the evidence presented and draw conclusions therefrom.

After judicious review on the records of the case, this Court deems it proper to disregard the findings of
fact of the NLRC. This Court finds that the NLRC committed grave abuse of discretion when it ruled for
the petitioner without substantial evidence to support its findings of facts and conclusion.

Petitioner, relying in the principle of finality and conclusiveness of the decisions of labor tribunals, faults
the CA for reversing the findings of the NLRC and affirming the factual findings of the LA that she
voluntarily resigned. She averred that the CA erred when it applied the ruling in the case of St. Martin
Funeral Homes v. NLRC38 to justify its inquiring into the findings of the NLRC which was outside the
scope of extraordinary remedy of certiorari. She posited that NLRC's findings cannot be delved into
without first declaring the decision itself to have been issued with grave abuse of discretion.39

Courts generally accord great respect and finality to factual findings of administrative agencies, like labor
tribunals, in the exercise of their quasi-judicial function. However, this doctrine espousing comity to
administrative findings of facts are not infallible and cannot preclude the courts from reviewing and,
when proper, disregarding these findings of facts when shown that the administrative body committed
grave abuse of discretion.40

It is settled that in a special civil action for certiorari under Rule 65, the issues are limited to errors of
jurisdiction or grave abuse of discretion. However, in labor cases elevated to it via petition for certiorari,
the CA is empowered to evaluate the materiality and significance of the evidence alleged to have been
capriciously, whimsically, or arbitrarily disregarded by the NLRC in relation to all other evidence on
record.41

The CA can grant this prerogative writ when the factual findings complained of are not supported by the
evidence on record; when it is necessary to prevent a substantial wrong or to do substantial justice;
when the findings of the NLRC contradict those of the LA; and when necessary to arrive at a just decision
of the case.42 To make this finding, the CA necessarily has to view the evidence if only to determine if
the NLRC ruling had basis in evidence.43

Contrary to petitioner's contention, the CA, by express legal mandate and pursuant to its equity
jurisdiction, may review factual findings and evidence of the parties to determine whether the NLRC
gravely abused its discretion in its findings.44 Since this Court finds that the findings of the LA and NLRC
contradicting and that the findings of NLRC are not supported by the evidence on record, we rule that it
is within the CA's power to review the factual findings of the NLRC. Accordingly, this Court does not find
erroneous the course that the CA took in resolving that petitioner was not constructively dismissed.

This Court, in turn, has the same authority to sift through the factual findings of both the CA and the
NLRC in the event of their conflict.45 This Court, therefore, is not precluded from reviewing the factual
issues when there are conflicting findings by the Labor Arbiter, the NLRC and the Court of Appeals.46

Since petitioner admittedly resigned, it is incumbent upon her to prove that her resignation was
involuntary and that it was actually a case of constructive dismissal with clear, positive and convincing
evidence.47
Petitioner alleged that she was forced to resign by Lao, Paradiang and Escobia. For her, it was the
overbearing and prejudiced attitude towards her by individual respondents that rendered her continued
employment impossible, unreasonable or unlikely. She maintained that the prevailing working
environment compelled her to disassociate with FTCP. She recounted that the individual respondents
deliberately excluded her from important meetings despite being the chief executive officer and a
fixture to all Board meetings.

Petitioner cited the August 28, 2005 Board meeting and a subsequent Execom meeting where she was
apparently banished as proof of respondents' discrimination. She emphasized in all her pleadings that,
aside from it being provided by the by-laws, she believed that her presence at all Board meetings cannot
be dispensed with since it was through her effort that the Board of Trustees became functional. For her,
she was isolated and singled out. She claimed that these circumstances clearly denoted that the actions
of the respondents were motivated by discrimination and made in bad faith.

Case law holds that constructive dismissal occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or
diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee.48 The test is whether a reasonable person in the employee's
position would have felt compelled to give up his position under the circumstances.49

In this case, petitioner cannot be deemed constructively dismissed. She failed to present clear and
positive evidence that respondent FTCP, through its Board of Trustees, committed acts of discrimination,
insensibility, or disdain towards her which rendered her continued employment unbearable or forced
her to terminate her employment from the respondent. As settled, bare allegations of constructive
dismissal, when uncorroborated by the evidence on record, cannot be given credence.50

It is highly unlikely and incredible for someone of petitioner's position and educational attainment to so
easily succumb to individual respondents' alleged harassment without defending herself. In fact, records
reveal that she wrote directly to Jones when her contract was not to be renewed and whenever she felt
threatened. She vehemently opposed the audit and openly disobeyed the Board when she was not
informed of the scope. She, along with other management staff, questioned the meetings of the Execom
that they were not informed.51 It is also noted that her husband is a lawyer and that she employed
lawyers who sent a series of demand letters to the Board to provide her the details of the audit and
even ordered the Board to desist from pursuing the audit.

There was no urgency for petitioner to submit her resignation letter. In fact, the day before it was given,
she and other management staff requested for a dialogue with the Board to address the issue regarding
the management and financial audit.52 It is, therefore, improbable that her continued employment is
rendered impossible or unreasonable.
Records do not show any demotion in rank or a diminution in pay made against her. Petitioner claimed
that the fact that the Supervisory Team performed her functions and issued memorandum directly to
her subordinates, and her being barred from subsequent Execom meetings constituted constructive
dismissal. However, there was no evidence to corroborate her claim of usurpation. She did not present
evidence of the supposed direct memorandum issued by the Supervisory Team to the staff. Aside from
the minutes of the September 29, 2005 meeting of the Execom, there was no other proof of petitioner's
exclusion from other subsequent Execom meetings.

We find that, apart from her self-serving and uncorroborated allegations, petitioner did not present any
substantial evidence of constructive dismissal. She was not able to present a single witness to
corroborate her claims of harassment by Lao, Paradiang and Escobia.

Petitioner supported her claim with the minutes of the August 28, 2005 meeting and another minutes of
the meeting of the Execom that she was excluded. She argued that her sudden exclusion from board
meetings despite established practice constituted grave abuse of managerial rights of the respondent
FTCP.

We are not persuaded that her exclusion to the meeting constituted discrimination or harassment. A
careful perusal of the minutes would reveal that the Board convened to deliberate on the solution to the
apparent conflict between petitioner and the staff since they have insufficient grievance mechanism for
issues involving top management. She could not fault the Board to not include her in that particular
meeting since she was a party involved and to avoid. possible influence that she could have exerted.

Petitioner presented documents like e-mail correspondences with Paradiang about the non-renewal of
her contract earlier in her employment, e-mail correspondences to Jones about harassment towards her
and specifically mentioning Paradiang, demand letters from her and her lawyers, her resignation letter,
and the board resolution accepting her resignation. These do not verify that respondents committed
discrimination or disdain towards her. Hence, her allegations are sell-serving and uncorroborated and
should not be given evidentiary weight.

On the other hand, respondent FTCP presented a letter53 dated August 28, 2005 written by petitioner
addressed to the Board wherein she presented her side about the petition of the employees against her.
She also praised the Board for strengthening the organization, for putting valuable policies in the
organization, and for opening the organization to new partnerships.

In another letter54 dated September 6, 2005, she reported that on the same date as the August 28
Board meeting, she and Fostanes met to discuss concerns and apologized for what happened and other
members of management also apologized and accepted the reconciliation that she extended to them.
She also reported that during the September 5, 2005 General Staff meeting, the issues were discussed,
feelings and sentiments were shared, and concluded with a firm commitment from everyone to rebuild
the good name of FTCP and work together to enhance its system and maintain its integrity.

The letters did not mention nor hinted that petitioner protested about being excluded from the meeting
which she has considered as a hearing against her. It did not even reveal that there was undue prejudice
from individual respondents. Records are bereft of proof that she even attempted to address the Board
about the supposed discrimination or disdain by individual respondents. It is only upon filing of the
illegal dismissal case that she alleged that she felt that she was discriminated against and treated with
disdain by respondents.

Respondents presented an affidavit and a police blotter55 attesting that some employees who signed in
the August 12 letter-petition were intimidated by the secretary of petitioner's lawyer-husband to sign a
recantation. She refuted the same by alleging that they could have not known that it was recantation
when it appeared in the blotter that they only saw the page they were made to sign. Respondents also
presented an affidavit56 attesting that petitioner intimidated an employee by telling her that she would
file suits against those who defamed her when the employee refused to recant her signature in the
petition against her.

For petitioner, the fact that the effectivity of her resignation was moved to November showed the
eagerness of Lao, Paradiang and Escobia to get rid of her.57

We held that the act of the employer moving the effectivity of the resignation is not an act of
harassment. The 30-day notice requirement for an employee's resignation is actually for the benefit of
the employer who has the discretion to waive such period. Its purpose is to afford the employer enough
time to hire another employee if needed and to see to it that there is proper turn-over of the tasks
which the resigning employee may be handling.58

Such rule requiring an employee to stay or complete the 30-day period prior to the effectivity of his
resignation becomes discretionary on the part of management as an employee who intends to resign
may be allowed a shorter period before his resignation becomes effective.59

Thus, the act of respondents moving the effectivity date of petitioner's resignation to a date earlier than
what she had stated cannot be deemed malicious. This cannot be viewed as an act of harassment but
merely the exercise of respondent's management prerogative. We cannot expect employers to maintain
in their employ employees who intend to resign, just so the latter can have continuous work as they look
for a new source of income.
Petitioner alleged that the CA erred when it ruled that she should pay respondents' claims for damages.
She maintained that they were not duly proven and that they clearly didnot arise from an employer-
employee relationship.

This Court held that the "money claims of workers" referred to in Article 21760 of the Labor Code
embraces money claims which arise out of or in connection with the employer-employee relationship,
or some aspect or incident of such relationship.61

Applying the rule of noscitur a sociis in clarifying the scope of Article 217, it is evident that paragraphs 1
to 5 refer to cases or disputes arising out of or in connection with an employer-employee relationship. In
other words, the money claims within the original and exclusive jurisdiction of labor arbiters are those
which have some reasonable causal connection with the employer-employee relationship.62

This claim is distinguished from cases of actions for damages where the employer-employee relationship
is merely incidental and the cause of action proceeds from a different source of obligation. Thus, the
regular courts have jurisdiction where the damages claimed for were based on: tort, malicious
prosecution, or breach of contract, as when the claimant seeks to recover a debt from a former
employee or seeks liquidated damages in the enforcement of a prior employment contract.'"

By the designating clause "arising from the employer-employee relations," Article 217 applies with equal
force to the claim of an employer for actual damages against its dismissed employee, where the basis
for the claim arises from or is necessarily connected with the fact of termination, and should be entered
as a counterclaim in the illegal dismissal case.64

In this case, the CA erred in awarding P34,438.37 for petitioner's unpaid debt to respondents. The claim
for recovery of a debt has no reasonable causal connection with any of the claims provided for in Article
217. The fact that the transaction happened at the time they were employer and employee did not
negate the civil jurisdiction of trial court. Hence, it is erroneous for the LA and the CA to rule on such
claim arising from a different source of obligation and where the employer-employee relationship was
merely incidental.

Likewise, the CA erred in awarding P109,208.36 for the reimbursement of the FTCP provident Fund
allegedly withdrawn by petitioner. Although it was entered by the respondents in its counterclaim, this
claim does not arise from or is necessarily connected with the fact of termination. It also had no
reasonable causal connection with employer-employee relationship.
Lastly, petitioner maintained that the CA erred when it resolved the lingering doubt in the present case
against labor. She alleged that the CA violated the Constitution, the law, and jurisprudence.

We held that the law and jurisprudence guarantee security of tenure to every employee. However, in
protecting the rights of the workers, the law does not authorize the oppression or self-destruction of the
employer. Social justice does not mean that every labor dispute shall automatically be decided in favor
of labor. Thus, the Constitution and the law equally recognize the employer's right and prerogative to
manage its operation according to reasonable standards and norms of fair play.65

It is settled that the law serves to equalize the unequal. The labor force is a special class that is
constitutionally protected because of the inequality between capital and labor. This constitutional
protection presupposes that the labor force is weak. However, the level of protection to labor should
vary from case to case; otherwise, the state might appear to be too paternalistic in affording protection
to labor.66 Petitioner could not expect to have the same level of ardent protection that the laws bestow
upon a lowly laborer be given to her, a high ranking officer of respondent FTCP. As proven, she was
considered on equal footing with her employer and even had the occasion to demand the renewal of
her contract by sending an e-mail to the organization's founder.67

We cannot subscribe to petitioner's allegation that the CA ruled against labor when it resolved the
factual issues of the case. As discussed, it is well within the powers and jurisdiction of the CA to evaluate
the evidence alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, or as
in the present case, for considering petitioner's bare allegations without support of substantial evidence.
This Court finds that the CA did not violate the Constitution, the law and jurisprudence. Hence, the
resolution of the doubt as to whether petitioner voluntarily resigned or was constructively dismissed
based on the evidence on record was proper and was not against labor.

WHEREFORE, the petition for review on certiorari, dated October 23, 2008, of petitioner Rosalinda G.
Paredes is hereby PARTLY GRANTED. Accordingly, the ruling of the Court of Appeals in its Decision dated
March 25, 2008, that petitioner was not constructively dismissed, is hereby AFFIRMED. However, the
awards of F34,438.37 and PI09,208.36 for the unpaid debt of petitioner and reimbursement of the FTCP
provident Fund, respectively, are hereby SET ASIDE.

SO ORDERED.

3. CENTURY PROPERTIES, INC., Petitioner, v. EDWIN J. BABIANO AND EMMA B. CONCEPCION,

Respondents.
DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated April 8, 2015 and the
Resolution3 dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953, which
affirmed, with modification the Decision4 dated June 25, 2013 and the Resolution5 dated October 16,
2013 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 05-001615-12, and ordered
petitioner Century Properties, Inc. (CPI) to pay respondents Edwin J. Babiano (Babiano) and Emma B.
Concepcion (Concepcion; collectively, respondents) unpaid commissions in the amounts of P889,932.42
and P591,953.05, respectively.

The Facts

On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was eventually6 appointed as
Vice President for Sales effective September 1, 2007. As CPFs Vice President for Sales, Babiano was
remunerated with, inter alia, the following benefits: (a) monthly salary of P70,000.00; (b) allowance of
P50,000.00; and (c) 0.5% override commission for completed sales. His employment contract7 also
contained a "Confidentiality of Documents and Non-Compete Clause"8 which, among others, barred him
from disclosing confidential information, and from working in any business enterprise that is in direct
competition with CPI "while [he is] employed and for a period of one year from date of resignation or
termination from [CPI]." Should Babiano breach any of the terms thereof, his "forms of compensation,
including commissions and incentives will be forfeited."9chanrobleslaw

During the same period, Concepcion was initially hired as Sales Agent by CPI and was eventually10
promoted as Project Director on September 1, 2007.11 As such, she signed an employment agreement,
denominated as "Contract of Agency for Project Director"12 which provided, among others, that she
would directly report to Babiano, and receive, a monthly subsidy of P60,000.00, 0.5% commission, and
cash incentives.13 On March 31, 2008, Concepcion executed a similar contract14 anew with CPI in which
she would receive a monthly subsidy of P50,000.00, 0.5% commission, and cash incentives as per
company policy. Notably, it was stipulated in both contracts that no employer-employee relationship
exists between Concepcion and CPI.15chanrobleslaw

After receiving reports that Babiano provided a competitor with information regarding CPFs marketing
strategies, spread false information regarding CPI and its projects, recruited CPI's personnel to join the
competitor, and for being absent without official leave (AWOL) for five (5) days, CPI, through its
Executive Vice President for Marketing and Development, Jose Marco R. Antonio (Antonio), sent
Babiano a Notice to Explain16 on February 23, 2009 directing him to explain why he should not be
charged with disloyalty, conflict of interest, and breach of trust and confidence for his
actuations.17chanrobleslaw

On February 25, 2009, Babiano tendered18 his resignation and revealed that he had been accepted as
Vice President of First Global BYO Development Corporation (First Global), a competitor of CPI.19 On
March 3, 2009, Babiano was served a Notice of Termination20 for: (a) incurring AWOL; (b) violating the
"Confidentiality of Documents and Non-Compete Clause" when he joined a competitor enterprise while
still working for CPI and provided such competitor enterprise information regarding CPFs marketing
strategies; and (c) recruiting CPI personnel to join a competitor.21chanrobleslaw

On the other hand, Concepcion resigned as CPFs Project Director through a letter22 dated February 23,
2009, effective immediately.

On August 8, 2011, respondents filed a complaint23 for non-payment of commissions and damages
against CPI and Antonio before the NLRC, docketed as NLRC Case No. NCR-08-12029-11, claiming that
their repeated demands for the payment and release of their commissions remained
unheeded.24chanrobleslaw

For its part, CPI maintained25cralawred that Babiano is merely its agent tasked with selling its projects.
Nonetheless, he was afforded due process in the termination of his employment which was based on
just causes.26 It also claimed to have validly withheld Babiano's commissions, considering that they
were deemed forfeited for violating the "Confidentiality of Documents and Non-Compete Clause."27 On
Concepcion's money claims, CPI asserted that the NLRC had no jurisdiction to hear the same because
there was no employer-employee relations between them, and thus, she should have litigated the same
in an ordinary civil action.28chanrobleslaw

The LA Ruling

In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor and, accordingly,
dismissed the complaint for lack of merit.30chanrobleslaw

The LA found that: (a) Babiano's acts of providing information on CPI's marketing strategies to the
competitor and spreading false information about CPI and its projects are blatant violations of the
"Confidentiality of Documents and Non-Compete Clause" of his employment contract, thus, resulting in
the forfeiture of his unpaid commissions in accordance with the same clause;31 and (b) it had no
jurisdiction over Concepcion's money claim as she was not an employee but a mere agent of CPI, as
clearly stipulated in her engagement contract with the latter.32chanrobleslaw

Aggrieved, respondents appealed33 to the NLRC.

The NLRC Ruling

In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and entered a new
one ordering CPI to pay Babiano and Concepcion the amounts of P685,211.76 and P470,754.62,
respectively, representing their commissions from August 9, 2008 to August 8, 2011, as well as 10%
attorney's fees of the total monetary awards.35chanrobleslaw

While the NLRC initially concurred with the LA that Babiano's acts constituted just cause which would
warrant the termination of his employment from CPI, it, however, ruled that the forfeiture of all earned
commissions of Babiano under the "Confidentiality of Documents and Non-Compete Clause" is
confiscatory and unreasonable and hence, contrary to law and public policy.36 In this light, the NLRC
held that CPI could not invoke such clause to avoid the payment of Babiano's commissions since he had
already earned those monetary benefits and, thus, should have been released to him. However, the
NLRC limited the grant of the money claims in light of Article 291 (now Article 306)37 of the Labor Code
which provides for a prescriptive period of three (3) years. Consequently, the NLRC awarded unpaid
commissions only from August 9, 2008 to August 8, 2011 — i.e., which was the date when the complaint
was filed.38 Meanwhile, contrary to the LA's finding, the NLRC ruled that Concepcion was CPI's
employee, considering that CPI: (a) repeatedly hired and promoted her since 2002; (b) paid her wages
despite referring to it as "subsidy"; and (c) exercised the power of dismissal and control over her.39
Lastly, the NLRC granted respondents' claim for attorney's fees since they were forced to litigate and
incurred expenses for the protection of their rights and interests.40chanrobleslaw

Respondents did not assail the NLRC findings. In contrast, only CPI moved for reconsideration,41 which
the NLRC denied in a Resolution42 dated October 16, 2013. Aggrieved, CPI filed a petition for
certiorari43 before the CA.

The CA Ruling

In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with modification increasing the
award of unpaid commissions to Babiano and Concepcion in the amounts of P889,932.42 and
P591.953.05, respectively, and imposing interest of six percent (6%) per annum on all monetary awards
from the finality of its decision until fully paid.45chanrobleslaw
The CA held that Babiano properly instituted his claim for unpaid commissions before the labor tribunals
as it is a money claim arising from an employer-employee relationship with CPI. In this relation, the CA
opined that CPI cannot withhold such unpaid commissions on the ground of Babiano's alleged breach of
the "Confidentiality of Documents and Non-Compete Clause" integrated in the latter's employment
contract, considering that such clause referred to acts done after the cessation of the employer-
employee relationship or to the "post-employment" relations of the parties. Thus, any such supposed
breach thereof is a civil law dispute that is best resolved by the regular courts and not by labor
tribunals.46chanrobleslaw

Similarly, the CA echoed the NLRC's finding that there exists an employer-employee relationship
between Concepcion and CPI, because the latter exercised control over the performance of her duties as
Project Director which is indicative of an employer-employee relationship. Necessarily therefore, CPI
also exercised control over Concepcion's duties in recruiting, training, and developing directors of sales
because she was supervised by Babiano in the performance of her functions. The CA likewise observed
the presence of critical factors which were indicative of an employer-employee relationship with CPI,
such as: (a) Concepcion's receipt of a monthly salary from CPI; and (b) that she performed tasks besides
selling CPI properties. To add, the title of her contract which was referred to as "Contract of Agency for
Project Director" was not binding and conclusive, considering that the characterization of the juridical
relationship is essentially a matter of law that is for the courts to determine, and not the parties thereof.
Moreover, the totality of evidence sustains a finding of employer-employee relationship between CPI
and Concepcion.47chanrobleslaw

Further, the CA held that despite the NLRC's proper application of the three (3)-year prescriptive period
under Article 291 of the Labor Code, it nonetheless failed to include all of respondents' earned
commissions during that time - i.e., August 9, 2008 to August 8, 2011 - thus, necessitating the increase in
award of unpaid commissions in respondents' favor.48chanrobleslaw

Undaunted, CPI sought for reconsideration,49 which was, however, denied in a Resolution50 dated
October 12, 2015; hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA erred in denying CPI's petition for
certiorari, thereby holding it liable for the unpaid commissions of respondents.

The Court's Ruling

The petition is partly meritorious.

I.

Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulations shall control."51 In
Norton Resources and Development Corporation v. All Asia Bank Corporation,52 the Court had the
opportunity to thoroughly discuss the said rule as follows:ChanRoblesVirtualawlibrary

The rule is that where the language of a contract is plain and unambiguous, its meaning should be
determined without reference to extrinsic facts or aids. The intention of the parties must be gathered
from that language, and from that language alone. Stated differently, where the language of a written
contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it
purports to mean, unless some good reason can be assigned to show that the words should be
understood in a different sense. Courts cannot make for the parties better or more equitable
agreements than they themselves have been satisfied to make, or rewrite contracts because they
operate harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to
the detriment of the other, or by construction, relieve one of the parties from the terms which he
voluntarily consented to, or impose on him those which he did not.53 (Emphases and underscoring
supplied)

Thus, in the interpretation of contracts, the Court must first determine whether a provision or
stipulation therein is ambiguous. Absent any ambiguity, the provision on its face will be read as it is
written and treated as the binding law of the parties to the contract.54chanrobleslaw

In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-Compete Clause"
found in Babiano's employment contract55 to justify the forfeiture of his commissions,
viz.:ChanRoblesVirtualawlibrary

Confidentiality of Documents and Non-Compete Clause

All records and documents of the company and all information pertaining to its business or affairs or
that of its affiliated companies are confidential and no unauthorized disclosure or reproduction or the
same will be made by you any time during or after your employment.

And in order to ensure strict compliance herewith, you shall not work for whatsoever capacity, either as
an employee, agent or consultant with any person whose business is in direct competition with the
company while you are employed and for a period of one year from date of resignation or termination
from the company.
In the event the undersigned breaches any term of this contract, the undersigned agrees and
acknowledges that damages may not be an adequate remedy and that in addition to any other remedies
available to the Company at law or in equity, the Company is entitled to enforce its rights hereunder by
way of injunction, restraining order or other relief to enjoin any breach or default of this contract.

The undersigned agrees to pay all costs, expenses and attorney's fees incurred by the Company in
connection with the enforcement of the obligations of the undersigned. The undersigned also agrees
to .pay the Company all profits, revenues and income or benefits derived by or accruing to the
undersigned resulting from the undersigned's breach of the obligations hereunder. This Agreement shall
be binding upon the undersigned, all employees, agents, officers, directors, shareholders, partners and
representatives of the undersigned and all heirs, successors and assigns of the foregoing.

Finally, if undersigned breaches any terms of this contract, forms of compensation including
commissions and incentives will be forfeited.56 (Emphases and underscoring supplied)

Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred to "work
for whatsoever capacity x x x with any person whose business is in direct competition with [CPI] while
[he is] employed and for a period of one year from date of [his] resignation or termination from the
company," it also expressly provided in no uncertain terms that should Babiano "[breach] any term of
[the employment contract], forms of compensation including commissions and incentives will be
forfeited." Here, the contracting parties - namely Babiano on one side, and CPI as represented by its
COO-Vertical, John Victor R. Antonio, and Director for Planning and Controls, Jose Carlo R. Antonio, on
the other -indisputably wanted the said clause to be effective even during the existence of the
employer-employee relationship between Babiano and CPI, thereby indicating their intention to be
bound by such clause by affixing their respective signatures to the employment contract. More
significantly, as CPFs Vice President for Sales, Babiano held a highly sensitive and confidential managerial
position as he "was tasked, among others, to guarantee the achievement of agreed sales targets for a
project and to ensure that his team has a qualified and competent manpower resources by conducting
recruitment activities, training sessions, sales rallies, motivational activities, and evaluation
programs."57 Hence, to allow Babiano to freely move to direct competitors during and soon after his
employment with CPI would make the latter's trade secrets vulnerable to exposure, especially in a highly
competitive marketing environment. As such, it is only reasonable that CPI and Babiano agree on such
stipulation in the latter's employment contract in order to afford a fair and reasonable protection to
CPI.58 Indubitably, obligations arising from contracts, including employment contracts, have the force of
law between the contracting parties and should be complied with in good faith.59 Corollary thereto,
parties are bound by the stipulations, clauses, terms, and conditions they have agreed to, provided that
these stipulations, clauses, terms, and conditions are not contrary to law, morals, public order or public
policy,60 as in this case.

Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-Compete Clause" only to
acts done after the cessation of the employer-employee relationship or to the "post-employment"
relations of the parties. As clearly stipulated, the parties wanted to apply said clause during the
pendency of Babiano's employment, and CPI correctly invoked the same before the labor tribunals to
resist the former's claim for unpaid commissions on account of his breach of the said clause while the
employer-employee relationship between them still subsisted. Hence, there is now a need to determine
whether or not Babiano breached said clause while employed by CPI, which would then resolve the
issue of his entitlement to his unpaid commissions.

A judicious review of the records reveals that in his resignation letter61 dated February 25, 2009,
Babiano categorically admitted to CPI Chairman Jose Antonio that on February 12, 2009, he sought
employment from First Global, and five (5) days later, was admitted thereto as vice president. From the
foregoing, it is evidently clear that when he sought and eventually accepted the said position with First
Global, he was still employed by CPI as he has not formally resigned at that time. Irrefragably, this is a
glaring violation of the "Confidentiality of Documents and Non-Compete Clause" in his employment
contract with CPI, thus, justifying the forfeiture of his unpaid commissions.

II.

Anent the nature of Concepcion's engagement, based on case law, the presence of the following
elements evince the existence of an employer-employee relationship: (a) the power to hire, i.e., the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer's power to control the employee's conduct, or the so called "control test." The control
test is commonly regarded as the most important indicator of the presence or absence of an employer-
employee relationship.62 Under this test, an employer-employee relationship exists where the person
for whom the services are performed reserves the right to control not only the end achieved, but also
the manner and means to be used in reaching that end.63chanrobleslaw

Guided by these parameters, the Court finds that Concepcion was an employee of CPI considering that:
(a) CPI continuously hired and promoted Concepcion from October 2002 until her resignation on
February 23, 2009,64 thus, showing that CPI exercised the power of selection and engagement over her
person and that she performed functions that were necessary and desirable to the business of CPI; (b)
the monthly "subsidy" and cash incentives that Concepcion was receiving from CPI are actually
remuneration in the concept of wages as it was regularly given to her on a monthly basis without any
qualification, save for the "complete submission of documents on what is a sale policy";65 (c) CPI had
the power to discipline or even dismiss Concepcion as her engagement contract with CPI expressly
conferred upon the latter "the right to discontinue [her] service anytime during the period of
engagement should [she] fail to meet the performance standards,"66 among others, and that CPI
actually exercised such power to dismiss when it accepted and approved Concepcion's resignation
letter; and most importantly, (d) as aptly pointed out by the CA, CPI possessed the power of control over
Concepcion because in the performance of her duties as Project Director - particularly in the conduct of
recruitment activities, training sessions, and skills development of Sales Directors - she did not exercise
independent discretion thereon, but was still subject to the direct supervision of CPI, acting through
Babiano.67chanrobleslaw
Besides, while the employment agreement of Concepcion was denominated as a "Contract of Agency for
Project Director," it should be stressed that the existence of employer-employee relations could not be
negated by the mere expedient of repudiating it in a contract. In the case of Insular Life Assurance Co.,
Ltd. v. NLRC,68 it was ruled that one's employment status is defined and prescribed by law, and not by
what the parties say it should be, viz.:ChanRoblesVirtualawlibrary

It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly

repudiating it in the management contract and providing therein that the "employee" is an independent
contractor when the terms of the agreement clearly show otherwise. For, the employment status of a
person is defined and prescribed by law and not by what the parties say it should be. In determining the
status of the management contract, the "four-fold test" on employment earlier mentioned has to be
applied.69 (Emphasis and underscoring supplied)

Therefore, the CA correctly ruled that since there exists an employer-employee relationship between
Concepcion and CPI, the labor tribunals correctly assumed jurisdiction over her money claims.

III.

Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her the amount of
P470,754.62 representing unpaid commissions rendered the same final and binding upon her. As such,
the CA erred in increasing her monetary award to P591,953.05.70chanrobleslaw

The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any affirmative relief other than the one
granted in the appealed decision. However, jurisprudence admits an exception to the said rule, such as
when strict adherence thereto shall result in the impairment of the substantive rights of the parties
concerned. In Global Resource for Outsourced Workers, Inc. v. Velasco:71

Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it and can no
longer obtain from the appellate court any affirmative relief other than what was already granted under
said judgment. However, when strict adherence to such technical rule will impair a substantive right,
such as that of an illegally dismissed employee to monetary compensation as provided by law, then
equity dictates that the Court set aside the rule to pave the way for a full and just adjudication of the
case.72 (Emphasis and underscoring supplied)

In the present case, the CA aptly pointed out that the NLRC failed to account for all the unpaid
commissions due to Concepcion for the period of August 9, 2008 to August 8, 2011.73 Indeed,
Concepcion's right to her earned commissions is a substantive right which cannot be impaired by an
erroneous computation of what she really is entitled to. Hence, following the dictates of equity and in
order to arrive at a complete and just resolution of the case, and avoid a piecemeal dispensation of
justice over the same, the CA correctly recomputed Concepcion's unpaid commissions, notwithstanding
her failure to seek a review of the NLRC's computation of the same.

In sum, the Court thus holds that the commissions of Babiano were properly forfeited for violating the
"Confidentiality of Documents and Non-Compete Clause." On.the other hand, CPI remains liable for the
unpaid commissions of Concepcion in the sum of P591,953.05.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the Resolution
dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953 are hereby MODIFIED in
that the commissions of respondent Edwin J. Babiano are deemed FORFEITED. The rest of the CA
Decision stands.

SO ORDERED.

4. G.R. No. 200114, August 24, 2015

SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE UBAÑA, Respondent.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails: 1) the July 29, 2011 Decision2 of the Court of Appeals (CA)
denying the Petition for Certiorari in CA-G.R. SP No. 110006 and affirming the March 6, 2007 Order3 of
the Regional Trial Court (RTC) of Daet, Camarines Norte, Branch 39 in Civil Case No. 7304; and 2) the
CA's January 10, 2012 Resolution4 denying petitioner's Motion for Reconsideration of the herein
assailed Decision.

Factual Antecedents

On December 26, 2002, respondent Debbie Ubana filed a civil case for damages against the DBP Service
Corporation, petitioner Social Security System (SSS), and the SSS Retirees Association5 before the RTC of
Daet, Camarines Norte. The case was docketed as Civil Case No. 7304 and assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995, she applied for employment with the
petitioner. However, after passing the examinations and accomplishing all the requirements for
employment, she was instead referred to DBP Service Corporation for "transitory employment." She
took the pre-employment examination given by DBP Service Corporation and passed the same. On May
20, 1996, she was told to report for training to SSS, Naga City branch, for immediate deployment to SSS
Daet branch. On May 28, 1996, she was made to sign a six-month Service Contract Agreement7 by DBP
Service Corporation, appointing her as clerk for assignment with SSS Daet branch effective May 27,
1996, with a daily wage of only P171.00. She was assigned as "Frontliner" of the SSS Members
Assistance Section until December 15, 1999. From December 16, 1999 to May 15, 2001, she was
assigned to the Membership Section as Data Encoder. On December 16, 2001, she was transferred to
the SSS Retirees Association as Processor at the Membership Section until her resignation on August 26,
2002. As Processor, she was paid only P229.00 daily or P5,038.00 monthly, while a regular SSS Processor
receives a monthly salary of P18,622.00 or P846.45 daily wage. Her May 28, 1996 Service Contract
Agreement with DBP Service Corporation was never renewed, but she was required to work for SSS
continuously under different assignments with a maximum daily salary of only P229.00; at the same
time, she was constantly assured of being absorbed into the SSS plantilla. Respondent claimed she was
qualified for her position as Processor, having completed required training and passed the SSS qualifying
examination for Computer Operations Course given by the National Computer Institute, U.P. Diliman
from May 16 to June 10, 2001, yet she was not given the proper salary. Because of the oppressive and
prejudicial treatment by SSS, she was forced to resign on August 26, 2002 as she could no longer stand
being exploited, the agony of dissatisfaction, anxiety, demoralization, and injustice. She asserted that
she dedicated six years of her precious time faithfully serving SSS, foregoing more satisfying
employment elsewhere, yet she was merely exploited and given empty and false promises; that
defendants conspired to exploit her and violate civil service laws and regulations and Civil Code
provisions on Human Relations, particularly Articles 19, 20, and 21.8 As a result, she suffered actual
losses by way of unrealized income, moral and exemplary damages, attorney's fees and litigation
expenses.

Respondent prayed for an award of P572,682.67 actual damages representing the difference between
the legal and proper salary she should have received and the actual salary she received during her six-
year stint with petitioner; P300,000.00 moral damages; exemplary damages at the discretion of the
court; P20,000.00 attorney's fees and P1,000.00 appearance fees; and other just and equitable relief.

Petitioner and its co-defendants SSS Retirees Association and DBP Service Corporation filed their
respective motions to dismiss, arguing that the subject matter of the case and respondent's claims arose
out of employer-employee relations, which are beyond the RTC's jurisdiction and properly cognizable by
the National Labor Relations Commission (NLRC).

Respondent opposed the motions to dismiss, arguing that pursuant to civil service rules and regulations,
service contracts such as her Service Contract Agreement with DBP Service Corporation should cover
only a) lump sum work or services such as janitorial, security or consultancy services, and b) piece work
or intermittent jobs of short duration not exceeding six months on a daily basis.9 She posited that her
service contract involved the performance of sensitive work, and not merely janitorial, security,
consultancy services, or work of intermittent or short duration. In fact, she was made to work
continuously even after the lapse of her 6-month service contract. Citing Civil Service Commission
Memorandum Circular No. 40, respondent contended that the performance of functions outside of the
nature provided in the appointment and receiving salary way below that received by regular SSS
employees amount to an abuse of rights; and that her cause of action is anchored on the provisions of
the Civil Code on Human Relations.

Ruling of the Regional Trial Court

On October 1, 2003, the RTC issued an Order10 dismissing respondent's complaint for lack of
jurisdiction, stating that her claim for damages "has a reasonable causal connection with her employer-
employee relations with the defendants"11 and "is grounded on the alleged fraudulent and malevolent
manner by which the defendants conspired with each other in exploiting [her], which is a clear case of
unfair labor practice,"12 falling under the jurisdiction of the Labor Arbiter of the NLRC. Thus, it
decreed:cralawlawlibrary

WHEREFORE, premises considered, the aforementioned Motion to Dismiss the complaint of the herein
plaintiff for lack of jurisdiction is hereby GRANTED. The above-entitled complaint is hereby DISMISSED.

SO ORDERED.13

Respondent moved for reconsideration. On March 6, 2007, the RTC issued another Order14 granting
respondent's motion for reconsideration. The trial court held:cralawlawlibrary

Section 2(1), Art. K-B, 1987 Constitution, expressly provides that "the civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the government, including government-owned or
controlled corporation[s] with original charters." Corporations with original charters are those which
have been created by special law[s] and not through the general corporation law. In contrast, labor law
claims against government-owned and controlled corporations without original charters fall within the
jurisdiction of the Department of Labor and Employment and not the Civil Service Commission. (Light
Rail Transit Authority vs. Perfecto Venus, March 24, 2006.)

Having been created under an original charter, RA No. 1161 as amended by R.A. 8282, otherwise known
as the Social Security Act of 1997, the SSS is governed by the provision[s] of the Civil Service
Commission. However, since the SSS denied the existence of an employer-employee relationship, and
the case is one for Damages, it is not the Civil Service Commission that has jurisdiction to try the case,
but the regular courts.
A perusal of the Complaint filed by the plaintiff against the defendant SSS clearly shows that the case is
one for Damages.

Paragraph 15 of her complaint states, thus:ChanRoblesvirtualLawlibrary

xxx. Likewise, they are contrary to the Civil Code provisions on human relations which [state], among
others, that Every person, must in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due and observe honesty and good faith (Article 19) and that Every
person who, contrary to law, willfully or negligently [causes] damages to another, shall indemnify the
latter for the same. (Art. 20)

"Article 19 provides a rule of conduct that is consistent with an orderly and harmonious relationship
between and among men and women It codifies the concept of what is justice and fair play so that
abuse of right by a person will be prevented. Art. 20 speaks of general sanction for all other provisions of
law which do not especially provide their own sanction. Thus, anyone, who, whether willfully or
negligently, in the exercise of his legal right or duty, causes damage to another, shall indemnify his or
her victim for injuries suffered thereby." (Persons and Family Relations, Sta. Maria, Melencio, Jr. (2004)
pp. 31-32.)

Wherefore, all premises considered, the Motion for Reconsideration is hereby GRANTED. The case
against defendant Social Security System represented by its President is hereby reinstated in the docket
of active civil cases of this court.

SO ORDERED.15 [Italics in the original]

Petitioner moved for reconsideration, but the RTC stood its ground in its June 24, 2009
Order16cralawrednad

Ruling of the Court of Appeals

In a Petition for Certiorari17 filed with the CA and docketed as CA-G.R. SP No. 110006, petitioner sought
a reversal of the RTC's June 24, 2009 and March 6, 2007 Orders and the reinstatement of its original
October 1, 2003 Order dismissing Civil Case No. 7304, insisting that the trial court did not have
jurisdiction over respondent's claims for "unrealized salary income" and other damages, which
constitute a labor dispute cognizable only by the labor tribunals. Moreover, it claimed that the assailed
Orders of the trial court were issued with grave abuse of discretion. It argued that the trial court gravely
erred in dismissing the case only as against its co-defendants DBP Service Corporation and SSS Retirees
Association and maintaining the charge against it, considering that its grounds for seeking dismissal are
similar to those raised by the two. It maintained that DBP Service Corporation and SSS Retirees
Association are legitimate independent job contractors engaged by it to provide manpower services
since 2001, which thus makes respondent an employee of these two entities and not of SSS; and that
since it is not the respondent's employer, then there is no cause of action against it.

On July 29, 2011, the CA issued the assailed Decision containing the following
pronouncement:cralawlawlibrary

Hence, petitioner seeks recourse before this Court via this Petition for Certiorari challenging the RTC
Orders. For the resolution of this Court is the sole issue of:cralawlawlibrary

WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 7304.

The petition is devoid of merits.

The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency
of the government has jurisdiction over the same, are determined by the material allegations of the
complaint in relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A prayer or demand for relief is not part of
the petition of the cause of action; nor does it enlarge the cause of action stated or change the legal
effect of what is alleged. In determining which body has jurisdiction over a case, the better policy is to
consider not only the status or relationship of the parties but also the nature of the action that is the
subject of their controversy.

A careful perusal of Ubana's Complaint in Civil Case No. 7304 unveils that Ubana's claim is rooted on the
principle of abuse of right laid in the New Civil Code. She was claiming damages based on the alleged
exploitation [perpetrated] by the defendants depriving her of her rightful income. In asserting that she is
entitled to the damages claimed, [she] invoked not the provisions of the Labor Code or any other labor
laws but the provisions on human relations under the New Civil Code. Evidently, the determination of
the respective rights of the parties herein, and the ascertainment whether there were abuses of such
rights, do not call for the application of the labor laws but of the New Civil Code. Apropos thereto, the
resolution of the issues raised in the instant complaint does not require the expertise acquired by labor
officials. It is the courts of general jurisdiction, which is the RTC in this case, which has the authority to
hear and decide Civil Case No. 7304.

Not every dispute between an employer and employee involves matters that only labor arbiters and the
NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Where the claim to the
principal relief sought is to be resolved not by reference to the Labor Code or other labor relations
statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute
belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such situations,
[resolution] of the dispute requires expertise, not in labor management relations nor in wage structures
and other terms and conditions of employment, but rather in the application of the general civil law.
Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiters
and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears.

It is the character of the principal relief sought that appears essential in this connection. Where such
principal relief is to be granted under labor legislation or a collective bargaining agreement, the case
should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages
might be asserted as an incident to such claim.

The pivotal question is whether the Labor Code has any relevance to the principal relief sought in the
complaint. As pointed out earlier, Ubana did not seek refuge from the Labor Code in asking for the
award of damages. It was the transgression of Article[s] 19 and 20 of the New Civil Code that she was
insisting in wagering this case. The primary relief sought herein is for moral and exemplary damages for
the abuse of rights. The claims for actual damages for unrealized income are the natural consequence
for abuse of such rights.

While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by
labor laws, but also damages governed by the Civil Code, these reliefs must still be based on an action
that has a reasonable causal connection with the Labor Code, other labor statutes, or collective
bargaining agreements. Claims for damages under paragraph 4 of Article 217 must have a reasonable
causal connection with any of the claims provided for in the article in order to be cognizable by the labor
arbiter. Only if there is such a connection with the other claims can the claim for damages be considered
as arising from employer-employee relations. In the present case, Ubana's claim for damages is not
related to any other claim under Article 217, other labor statutes, or collective bargaining agreements.

All told, it is ineluctable that it is the regular courts that has [sic] jurisdiction to hear and decide Civil Case
No. 7304. In Tolosa v. NLRC,18 the Supreme Court held that, "[i]t is not the NLRC but the regular courts
that have jurisdiction over action for damages, in which the employer-employee relations is merely
incidental, and in which the cause of action proceeds from a different source of obligation such as tort.
Since petitioner's claim for damages is predicated on a quasi-delict or tort that has no reasonable causal
connection with any of the claims provided for in Article 217, other labor statutes or collective
bargaining agreements, jurisdiction over the action lies with the regular courts not with the NLRC or the
labor arbiters." The same rule applies in this case.

WHEREFORE, premises considered, the instant petition is DENIED and the Order dated March 6, 2007 of
the Regional Trial Court, Branch 39 of Daet, Camarines Norte in Civil Case No. 7304 is hereby AFFIRMED.

SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied the same in its January 10, 2012
Resolution.21 Hence, the present Petition.

Issue

Petitioner simply submits that the assailed CA dispositions are contrary to law and jurisprudence.

Petitioner's Arguments

Praying that the assailed CA dispositions be set aside and that the RTC's October 1, 2003 Order
dismissing Civil Case No. 7304 be reinstated, petitioner essentially maintains in its Petition and Reply22
that respondent's claims arose from and are in fact centered on her previous employment. It maintains
that there is a direct causal connection between respondent's claims and her employment, which brings
the subject matter within the jurisdiction of the NLRC. Petitioner contends that respondent's other
claims are intimately intertwined with her claim of actual damages which are cognizable by the NLRC.
Moreover, petitioner alleges that its existing manpower services agreements with DBP Service
Corporation and SSS Retirees Association are legitimate; and that some of respondent's claims may not
be entertained since these pertain to benefits enjoyed by government employees, not by employees
contracted via legitimate manpower service providers. Finally, petitioner avers that the nature and
character of the reliefs prayed for by the respondent are directly within the jurisdiction not of the
courts, but of the labor tribunals.

Respondent's Arguments

In her Comment,23 respondent maintains that her case is predicated not on labor laws but on Articles
19 and 20 of the Civil Code for petitioner's act of exploiting her and enriching itself at her expense by not
paying her the correct salary commensurate to the position she held within SSS. Also, since there is no
employer-employee relationship between her and petitioner, as the latter itself admits, then her case is
not cognizable by the Civil Service Commission (CSC) either; that since the NLRC and the CSC have no
jurisdiction over her case, then it is only the regular courts which can have jurisdiction over her claims.
She argues that the CA is correct in ruling that her case is rooted in the principle of abuse of rights under
the Civil Code; and that the Petition did not properly raise issues of law.

Our Ruling

The Court denies the Petition.

In Home Development Mutual Fund v. Commission on Audit,24 it was held that while they performed
the work of regular government employees, DBP Service Corporation personnel are not government
personnel, but employees of DBP Service Corporation acting as an independent contractor. Applying the
foregoing pronouncement to the present case, it can be said that during respondent's stint with
petitioner, she never became an SSS employee, as she remained an employee of DBP Service
Corporation and SSS Retirees Association - the two being independent contractors with legitimate
service contracts with SSS.

Indeed, "[i]n legitimate job contracting, no employer-employee relation exists between the principal and
the job contractor's employees. The principal is responsible to the job contractor's employees only for
the proper payment of wages."25cralawredcralawrednad

In her Complaint, respondent acknowledges that she is not petitioner's employee, but that precisely she
was promised that she would be absorbed into the SSS plantilla after all her years of service with SSS;
and that as SSS Processor, she was paid only P229.00 daily or P5,038.00 monthly, while a regular SSS
Processor receives a monthly salary of P18,622.00, or P846.45 daily wage. In its pleadings, petitioner
denied the existence of an employer-employee relationship between it and respondent; in fact, it insists
on the validity of its service agreements with DBP Service Corporation and SSS Retirees Association -
meaning that the latter, and not SSS, are respondent's true employers. Since both parties admit that
there is no employment relation between them, then there is no dispute cognizable by the NLRC. Thus,
respondent's case is premised on the claim that in paying her only P229.00 daily - or P5,038.00 monthly
- as against a monthly salary of P18,622.00, or P846.45 daily wage, paid to a regular SSS Processor at the
time, petitioner exploited her, treated her unfairly, and unjustly enriched itself at her expense.

For Article 217 of the Labor Code to apply, and in order for the Labor Arbiter to acquire jurisdiction over
a dispute, there must be an employer-employee relation between the parties thereto.chanrobleslaw

x x x It is well settled in law and jurisprudence that where no employer-employee relationship exists
between the parties and no issue is involved which may be resolved by reference to the Labor Code,
other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has
jurisdiction, x x x The action is within the realm of civil law hence jurisdiction over the case belongs to
the regular courts. While the resolution of the issue involves the application of labor laws, reference to
the labor code was only for the determination of the solidary liability of the petitioner to the respondent
where no employer-employee relation exists. Article 217 of the Labor Code as amended vests upon the
labor arbiters exclusive original jurisdiction only over the following:ChanRoblesvirtualLawlibrary

1. Unfair labor practices;

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of
strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer- employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.

In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite x x x.26

Since there is no employer-employee relationship between the parties herein, then there is no labor
dispute cognizable by the Labor Arbiters or the NLRC.

There being no employer-employee relation or any other definite or direct contract between
respondent and petitioner, the latter being responsible to the former only for the proper payment of
wages, respondent is thus justified in filing a case against petitioner, based on Articles 19 and 20 of the
Civil Code, to recover the proper salary due her as SSS Processor. At first glance, it is indeed unfair and
unjust that as, Processor who has worked with petitioner for six long years, she was paid only P5,038.00
monthly, or P229.00 daily, while a regular SSS employee with the same designation and who performs
identical functions is paid a monthly salary of P18,622.00, or P846.45 daily wage. Petitioner may not
hide under its service contracts to deprive respondent of what is justly due her. As a vital government
entity charged with ensuring social security, it should lead in setting the example by treating everyone
with justice and fairness. If it cannot guarantee the security of those who work for it, it is doubtful that it
can even discharge its directive to promote the social security of its members in line with the
fundamental mandate to promote social justice and to insure the well-being and economic security of
the Filipino people.

In this jurisdiction, the "long honored legal truism of 'equal pay for equal work'" has been "impregnably
institutionalized;" "[p]ersons who work with substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be paid similar salaries."27 "That public policy abhors
inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against
these evils. The Constitution in the Article on Social Justice and Human Rights exhorts Congress to 'give
highest priority to the enactment of measures that protect and enhance the right of all people to human
dignity, reduce social, economic, and political inequalities.' The very broad Article 19 of the Civil Code
requires every person, 'in the exercise of his rights and in the performance of his duties, [to] act with
justice, give everyone his due, and observe honesty and good faith'."28cralawrednad

WHEREFORE, the Petition is DENIED. The assailed July 29, 2011 Decision and January 10, 2012
Resolution of the Court of Appeals in CA-G.R. SP No. 110006 are AFFIRMED. The case is ordered
remanded with dispatch to the Regional Trial Court of Daet, Camarines Norte, Branch 39, for
continuation of proceedings.

SO ORDERED.

DISSENTING OPINION

JARDELEZA, J.:

The majority has voted to deny the petition on the ground that, there being no employer-employee
relationship between the parties, there is no labor dispute cognizable by the Labor Arbiters or the
National Labor Relations Commission (NLRC). There being no labor dispute, the trial court correctly
assumed jurisdiction over respondent's suit for damages against the Social Security System (SSS), based
on Articles 19 and 20 of the Civil Code.

With all due respect, I dissent from the majority decision.

It is my view that respondent's suit against the SSS involves a labor dispute properly cognizable by the
Civil Service Commission (CSC).

Both parties agree that there is no employer-employee relation between them, respondent being an
employee of independent service contractors1 hired by the SSS. This fact alone, however, does not
preclude the controversy between them from being a labor dispute.2 Article 212(1) of the Labor Code
defines a labor dispute to include "any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in negotiating, fixing, maintaining, changing
or arranging the terms and conditions of employment regardless of whether or not the disputants stand
in the proximate relations of employer and employee."3cralawrednad

Furthermore, respondent's claims relate to the terms and conditions of her working relationship vis-a-vis
the SSS. While captioned as a suit for damages under Articles 19 and 20 of the Civil Code, respondent's
action is really one to recover from the SSS amounts she would have received had she been employed in
petitioner's roster of regular employees. This is a dispute no different from "regularization cases" usually
filed by contractual employees seeking to be absorbed as regular employees of a company.

The SSS is a government-controlled corporation created by Republic Act (RA) No. 1161.4 Pursuant to
Section 2(1), Article IX of the Constitution,5 a labor dispute involving the SSS is cognizable by the CSC.
Thus,

...that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to
keep the case within the jurisdictional boundaries of regular Courts. That claim for damages is
interwoven with a labor dispute existing between the parties and would have to be ventilated before
the administrative machinery established for the expeditious settlement of those disputes. To allow the
action filed below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly
administration of justice.

I note with serious concern the statement of the majority that respondent is "justified" in filing the case
based on Articles 19 and 20 of the Civil Code "to recover the proper salary" and that the SSS "may not
hide under its service contracts to deprive respondent of what is justly due her."7cralawrednad

The only issue for resolution in this case concerns the matter of jurisdiction. While clearly obiter, the
foregoing statement gives the impression that the merits of respondent's claim have already been
proved and settled. This, on the contrary, is an issue still to be resolved on remand.

The foregoing statement would have serious repercussions on a significant question of law, that is,
whether or not a principal can legally be held liable for damages by a person contracted through an
independent contractor under a valid and legitimate service contract.

This Court has recognized that an employer has "the proprietary right to exercise an inherent
management prerogative and its best business judgment to determine whether it should contract out
the performance of some of its work to independent contractors."8 This right, in my view, flows from
the constitutional liberty of an employer to determine whether to perform its work itself or through
independent contractors that meet the requirements of the law.
Accordingly, I vote to GRANT the petition filed by the SSS and order the dismissal, without prejudice, of
respondent's Complaint for Damages filed before the trial court.

5. G.R. No. 171212 August 4, 2014

INDOPHIL TEXTILE MILLS, INC., Petitioner,

vs.

ENGR. SALVADOR ADVIENTO, Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which
seeks to review, reverse and set-aside the Decision1 of the Court of Appeals (CA), dated May 30, 2005,
and its Resolution2 dated January 10, 2006 in the case entitled Jndophil Textile Mills, Inc. v. Hon.
Rolando R. Velasco and Engr. Salvador Adviento, docketed as CA-G.R. SP No. 83099.

The facts are not disputed.

Petitioner Indophil Textile Mills, Inc. is a domestic corporation engaged in the business of manufacturing
thread for weaving.3 On August 21, 1990, petitioner hired respondent Engr. Salvador Adviento as Civil
Engineer to maintain its facilities in Lambakin, Marilao, Bulacan.4 On August 7, 2002, respondent
consulted a physician due to recurring weakness and dizziness.5 Few days later, he was diagnosed with
Chronic Poly Sinusitis, and thereafter, with moderate, severe and persistent Allergic Rhinitis.6
Accordingly, respondent was advised by his doctor to totally avoid house dust mite and textile dust as it
will transmute into health problems.7

Distressed, respondent filed a complaint against petitioner with the National Labor Relations
Commission (NLRC), San Fernando, Pampanga, for alleged illegal dismissal and for the payment of
backwages, separation pay, actual damages and attorney’s fees. The said case, docketed as NLRC Case
No. RAB-III-05-5834-03, is still pending resolution with the NLRC at the time the instant petition was
filed.8
Subsequently, respondent filed another Complaint9 with the Regional Trial Court (RTC) of Aparri,
Cagayan, alleging that he contracted such occupational disease by reason of the gross negligence of
petitioner to provide him with a safe, healthy and workable environment.

In his Complaint, respondent alleged that as part of his job description, he conductsregular maintenance
check on petitioner’s facilities including its dye house area, which is very hot and emits foul chemical
odor with no adequate safety measures introduced by petitioner.10 According to respondent, the air
washer dampers and all roof exhaust vests are blown into open air, carrying dust thereto.11 Concerned,
respondent recommended to management to place roof insulation to minimize, if not, eradicate the
health hazards attendant in the work place.12 However, said recommendation was turned down by
management due to high cost.13 Respondent further suggested to petitioner’s management that the
engineering office be relocated because ofits dent prone location, such that even if the door of the office
is sealed, accumulated dust creeps in outside the office.14 This was further aggravated by the
installation of new filters fronting the office.15 However, no action was taken by management.16
According to respondent, these healthhazards have been the persistent complaints of most, if not all,
workers of petitioner.17 Nevertheless, said complaints fell on deaf ears as petitioner callously ignored
the health problems of its workers and even tended to be apathetic to their plight, including
respondent.18

Respondent averred that, being the only breadwinner in the family, he made several attempts to apply
for a new job, but to his dismay and frustration, employers who knew ofhis present health condition
discriminated against him and turned down his application.19 By reason thereof, respondent suffered
intense moral suffering, mental anguish, serious anxiety and wounded feelings, praying for the recovery
of the following: (1) Five Million Pesos (P5,000,000.00) asmoral damages; (2) Two Million Pesos
(P2,000,000.00) as exemplary damages; and (3) Seven Million Three Thousand and Eight Pesos
(P7,003,008.00) as compensatory damages.20 Claiming to be a pauper litigant, respondent was not
required to pay any filing fee.21

In reply, petitioner filed a Motion to Dismiss22 on the ground that: (1) the RTC has no jurisdiction over
the subject matter of the complaint because the same falls under the original and exclusive jurisdiction
of the Labor Arbiter (LA) under Article 217(a)(4) of the Labor Code; and (2) there is another action
pending with the Regional Arbitration Branch III of the NLRC in San Fernando City, Pampanga, involving
the same parties for the same cause.

On December 29, 2003, the RTC issued a Resolution23 denying the aforesaid Motion and sustaining its
jurisdiction over the instant case. It held that petitioner’s alleged failure to provide its employees with a
safe, healthy and workable environment is an act of negligence, a case of quasi-delict. As such, it is not
within the jurisdiction of the LA under Article 217 of the Labor Code. On the matter of dismissal based
on lis pendencia, the RTC ruled that the complaint before the NLRC has a different cause of action which
is for illegal dismissal and prayer for backwages, actual damages, attorney’s fees and separation pay due
to illegal dismissal while in the present case, the cause of action is for quasi-delict.24 The falloof the
Resolution is quoted below:
WHEREFORE, finding the motion to dismiss to be without merit, the Court deniesthe motion to dismiss.

SO ORDERED.25

On February 9, 2004, petitioner filed a motion for reconsideration thereto, which was likewise denied in
an Order issued on even date.

Expectedly, petitioner then filed a Petition for Certiorariwith the CA on the ground that the RTC
committed grave abuse of discretion amounting to lack or excess of jurisdiction in upholding that it has
jurisdiction over the subject matter of the complaint despite the broad and clear terms of Article 217 of
the Labor Code, as amended.26

After the submission by the parties of their respective Memoranda, the CA rendered a Decision27 dated
May 30, 2005 dismissing petitioner’s Petition for lack of merit, the dispositive portion of which states:

WHEREFORE, premises considered, petition for certiorari is hereby DISMISSEDfor lack of merit. SO
ORDERED.28

From the aforesaid Decision, petitioner filed a Motion for Reconsideration which was nevertheless
denied for lack of merit in the CA’s Resolution29 dated January 10, 2006. Hence, petitioner interposed
the instant petition upon the solitary ground that "THE HONORABLE COURT OF APPEALS HAS DECIDED A
QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF
THE HONORABLE SUPREME COURT."30 Simply, the issue presented before us is whether or not the RTC
has jurisdiction over the subject matter of respondent’s complaint praying for moral damages,exemplary
damages, compensatory damages, anchored on petitioner’s alleged gross negligence in failing to provide
a safe and healthy working environment for respondent.

The delineation between the jurisdiction of regular courts and labor courts over cases involving workers
and their employers has always been a matter of dispute.31 It is up to the Courts to lay the line after
careful scrutiny of the factual milieu of each case. Here, we find that jurisdiction rests on the regular
courts.

In its attempt to overturn the assailed Decision and Resolution of the CA, petitioner argues that
respondent’sclaim for damages is anchored on the alleged gross negligence of petitioner as an employer
to provide its employees, including herein respondent, with a safe, healthy and workable environment;
hence, it arose from an employer-employee relationship.32 The fact of respondent’s employment
withpetitioner as a civil engineer is a necessary element of his cause ofaction because without the same,
respondent cannot claim to have a rightto a safe, healthy and workable environment.33 Thus, exclusive
jurisdiction over the same should be vested in the Labor Arbiter and the NLRC pursuant to Article 217(a)
(4) of the Labor Code of the Philippines (Labor Code), as amended.34

We are not convinced.

The jurisdiction of the LA and the NLRC is outlined in Article 217 of the Labor Code, as amended by
Section 9 of Republic Act (R.A.) No. 6715, to wit:

ART. 217. Jurisdiction of Labor Arbiters and the Commission-- (a) Except as otherwise provided under
this Code the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision without extension, even in
the absence of stenographic notes, the following cases involving all workers, whether agricultural or
nonagricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involvingwages,
rates of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code including questions involving the legality of
strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service,involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.

x x x.35

While we have upheld the present trend to refer worker-employer controversies to labor courts in light
of the aforequoted provision, we have also recognized that not all claims involving employees can be
resolved solely by our labor courts, specifically when the law provides otherwise.36 For this reason, we
have formulated the "reasonable causal connection rule," wherein if there is a reasonable causal
connection between the claim asserted and the employer-employee relations, then the case is within
the jurisdiction of the labor courts; and in the absence thereof, it is the regular courts that have
jurisdiction.37 Such distinction is apt since it cannot be presumed that money claims of workers which
do not arise out of or in connection with their employer-employee relationship, and which would
therefore fall within the general jurisdiction of the regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters
on an exclusive basis.38

In fact, as early as Medina vs. Hon. Castro-Bartolome,39 in negating the jurisdiction of the LA, although
the parties involved were an employer and two employees, the Court succinctly held that:

The pivotal question to Our mind iswhether or not the Labor Code has any relevance to the reliefs
sought by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes
amending it and whether or not they have retroactive effect is unnecessary.

It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a
simple action for damages for tortious acts allegedly committed by the defendants. Such being the case,
the governing statute is the Civil Code and not the Labor Code. It results that the orders under revieware
based on a wrong premise.40

Similarly, we ruled in the recent case of Portillo v. Rudolf Lietz, Inc.41 that not all disputes between an
employer and his employees fall within the jurisdiction of the labor tribunals suchthat when the claim
for damages is grounded on the "wanton failure and refusal" without just cause of an employee to
report for duty despite repeated notices served upon him of the disapproval of his application for leave
ofabsence, the same falls within the purview of Civil Law, to wit:

As early as Singapore Airlines Limited v. Paño, we established that not all disputes between an employer
and his employee(s) fall within the jurisdiction of the labor tribunals. We differentiated between
abandonment per seand the manner and consequent effects of such abandonment and ruled that the
first, is a labor case, while the second, is a civil law case.

Upon the facts and issues involved, jurisdiction over the present controversy must be held to belong to
the civil Courts. While seemingly petitioner's claim for damages arises from employer-employee
relations, and the latest amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg. 130
provides that all other claimsarising from employer-employee relationship are cognizable by Labor
Arbiters [citation omitted], in essence, petitioner's claim for damages is grounded on the "wanton failure
and refusal"without just cause of private respondent Cruz to report for duty despite repeated notices
served upon him of the disapproval of his application for leave of absence without pay. This, coupled
with the further averment that Cruz "maliciously and with bad faith" violated the terms and conditions
of the conversion training course agreement to the damage of petitioner removes the present
controversy from the coverage of the Labor Code and brings it within the purview of Civil Law.

Clearly, the complaint was anchored not on the abandonment per seby private respondent Cruz of his
job—as the latter was not required in the Complaint to report back to work—but on the manner and
consequent effects of such abandonmentof work translated in terms of the damages which petitioner
had to suffer. x x x.42

Indeed, jurisprudence has evolved the rule that claims for damages under Article 217(a)(4) of the Labor
Code, to be cognizable by the LA, must have a reasonable causal connection withany of the claims
provided for in that article.43 Only if there is such a connection with the other claims can a claim for
damages be considered as arising from employer-employee relations.44

In the case at bench, we find that such connection is nil.

True, the maintenance of a safe and healthy workplace is ordinarily a subject of labor cases. More, the
acts complained of appear to constitute matters involving employee-employer relations since
respondent used to be the Civil Engineer of petitioner. However, it should be stressed that respondent’s
claim for damages is specifically grounded on petitioner’s gross negligenceto provide a safe, healthy and
workable environment for its employees −a case of quasi-delict. This is easily ascertained from a plain
and cursory reading of the Complaint,45 which enumerates the acts and/or omissions of petitioner
relative to the conditions in the workplace, to wit:

1. Petitioner’s textile mills have excessive flying textile dust and waste in its operations and no effort was
exerted by petitioner to minimize or totally eradicate it;
2. Petitioner failed to provide adequate and sufficient dust suction facilities;

3. Textile machines are cleaned with air compressors aggravating the dusty work place;

4. Petitioner has no physician specializing in respiratoryrelated illness considering it is a textile company;

5. Petitioner has no device to detectthe presence or density of dust which is airborne;

6. The chemical and color room are not equipped with proper safety chemical nose mask; and

7. The power and boiler plant emit too much smoke with solid particles blown to the air from the smoke
stack of the power plant emitting a brown rust color which engulfs the entire compound.46

In addition, respondent alleged that despite his earnest efforts to suggest to management to place roof
insulation to minimize, if not, eradicate the health hazards attendant in the workplace, the same was
not heeded.47

It is a basic tenet that jurisdiction over the subject matter is determined upon the allegations made in
the complaint, irrespective of whether or not the plaintiff is entitled to recover upon the claim asserted
therein, which is a matter resolved only after and as a result of a trial.48 Neither can jurisdiction of a
court bemade to depend upon the defenses made by a defendant in his answer or motion to dismiss.49
In this case, a perusal of the complaint would reveal that the subject matter is one of claim for damages
arising from quasi-delict, which is within the ambit of the regular court's jurisdiction.

The pertinent provision of Article 2176 of the Civil Code which governs quasi-delictprovides that:
Whoever by act or omissioncauses damageto another, there being fault or negligence, is obliged to pay
for the damagedone. Such fault or negligence, if there is no pre-existing contractual relation between
the parties, is called quasi-delict.50

Thus, to sustain a claim liability under quasi-delict, the following requisites must concur: (a) damages
suffered by the plaintiff; (b) fault or negligence of the defendant, or someother person for whose acts he
must respond; and (c) the connection of causeand effect between the fault or negligence of the
defendant and the damages incurred by the plaintiff.51
In the case at bar, respondent alleges that due to the continued and prolonged exposure to textile dust
seriously inimical to his health, he suffered work-contracted disease which is now irreversible and
incurable, and deprived him of job opportunities.52 Clearly, injury and damages were allegedly suffered
by respondent, an element of quasi-delict. Secondly, the previous contract of employment between
petitioner and respondent cannot be used to counter the element of "no pre-existing contractual
relation" since petitioner’s alleged gross negligence in maintaining a hazardous work environment
cannot be considered a mere breach of such contract of employment, but falls squarely within the
elements of quasi-delictunder Article 2176 of the Civil Code since the negligence is direct, substantive
and independent.53 Hence, we ruled in Yusen Air and Sea Services Phils., Inc. v. Villamor54 that:

When, as here, the cause of action is based on a quasi-delictor tort, which has no reasonable causal
connection with any of the claims provided for in Article 217, jurisdiction over the action is with the
regular courts.55

It also bears stressing that respondent is not praying for any relief under the Labor Code of the
Philippines. He neither claims for reinstatement nor backwages or separation pay resulting from an
illegal termination. The cause of action herein pertains to the consequence of petitioner’s omission
which led to a work-related disease suffered by respondent, causing harm or damage to his person. Such
cause of action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the
regular courts.56

Our ruling in Portillo, is instructive, thus:

There is no causal connection between private respondent’s claim for damages and the respondent
employers’ claim for damages for the alleged "Goodwill Clause" violation. Portillo’s claim for unpaid
salaries did not have anything to do with her alleged violation of the employment contract as, in fact,
her separation from employmentis not "rooted" in the alleged contractual violation. She resigned from
her employment. She was not dismissed. Portillo’s entitlementto the unpaid salaries is not even
contested. Indeed, Lietz Inc.’s argument about legal compensation necessarily admits that it owesthe
money claimed by Portillo.57

Further, it cannot be gainsaid that the claim for damages occurred afterthe employer-employee
relationship of petitioner and respondent has ceased. Given that respondent no longer demands for any
relief under the Labor Code as well as the rules and regulations pertinent thereto, Article 217(a)(4) of
the Labor Code is inapplicable to the instant case, as emphatically held in Portillo, to wit:

It is clear, therefore, that while Portillo’s claim for unpaid salaries is a money claim that arises out ofor in
connection with an employeremployee relationship, Lietz Inc.’s claim against Portillo for violation of the
goodwill clause is a money claim based on an act done after the cessation of the employment
relationship. And, while the jurisdiction over Portillo’s claim is vested in the labor arbiter, the jurisdiction
over Lietz Inc.’s claim rests on the regular courts. Thus:

As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages
based on the parties' contract of employment as redress for respondent's breach thereof. Such cause of
action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular
courts. More so must this be in the present case, what with the reality that the stipulation refers to the
post-employment relations of the parties.58

Where the resolution of the dispute requires expertise, not in labor management relations nor in wage
structures and other terms and conditions of employment, but rather in the application of the general
civil law, such claim falls outside the area of competence of expertise ordinarily ascribed to the LA and
the NLRC.59

Guided by the aforequoted doctrines, we find no reason to reverse the findings of the CA.1âwphi1 The
RTC has jurisdiction over the subject matter of respondent's complaint praying for moral damages,
exemplary damages, compensatory damages, anchored on petitioner's alleged gross negligence in
failing to provide a safe and healthy working environment for respondent. WHEREFORE, the petition is
DENIED. The Decision of the Court of Appeals, dated May 30, 2005, and its Resolution dated January 10,
2006 in CA-G.R. SP No. 83099 are hereby AFFIRMED.

SO ORDERED.

6. G.R. No. 202961, February 04, 2015

EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN,
NORA MENDOZA, ET AL., Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, SOLID MILLS, INC.,
AND/OR PHILIP ANG, Respondents.

DECISION

LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the employee’s return of its
properties.

Petitioners are respondent Solid Mills, Inc.’s (Solid Mills) employees.1 They are represented by the
National Federation of Labor Unions (NAFLU), their collective bargaining
agent.2chanroblesvirtuallawlibrary

As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI Village, a property
owned by Solid Mills.3 According to Solid Mills, this was “[o]ut of liberality and for the convenience of
its employees . . . [and] on the condition that the employees . . . would vacate the premises anytime the
Company deems fit.”4chanroblesvirtuallawlibrary

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease
its operations due to serious business losses.5 NAFLU recognized Solid Mills’ closure due to serious
business losses in the memorandum of agreement dated September 1, 2003.6 The memorandum of
agreement provided for Solid Mills’ grant of separation pay less accountabilities, accrued sick leave
benefits, vacation leave benefits, and 13th month pay to the employees.7 Pertinent portions of the
agreement provide:chanRoblesvirtualLawlibrary

WHEREAS, the COMPANY has incurred substantial financial losses and is currently experiencing further
severe financial losses;chanrobleslaw

WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its operations on
October 10, 2003;chanrobleslaw

WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will be dismissed
from employment effective October 10, 2003;chanrobleslaw

In view thereof, the parties agree as follows:chanRoblesvirtualLawlibrary

That UNION acknowledges that the COMPANY is experiencing severe financial losses and as a
consequence of which, management is constrained to cease the company’s operations.

The UNION acknowledges that under Article 283 of the Labor Code, separation pay is granted to
employees who are dismissed due to closures or cessation of operations NOT DUE to serious business
losses.
The UNION acknowledges that in view of the serious business losses the Company has been
experiencing as seen in their audited financial statements, employees ARE NOT granted separation
benefits under the law.

The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant financial assistance less
accountabilities to members of the Union based on length of service to be computed as follows: (Italics
in this paragraph supplied)

Number of days - 12.625 for every year of service

In view of the above, the members of the UNION will receive such financial assistance on an equal
monthly installments basis based on the following schedule:chanRoblesvirtualLawlibrary

First Check due on January 5, 2004 and every 5th of the month thereafter until December 5, 2004.

The COMPANY commits to pay any accrued benefits the Union members are entitled to, specifically
those arising from sick and vacation leave benefits and 13th month pay, less accountabilities based on
the following schedule:chanRoblesvirtualLawlibrary

One Time Cash Payment to be distributed anywhere from. . . .

....

The foregoing agreement is entered into with full knowledge by the parties of their rights under the law
and they hereby bind themselves not to conduct any concerted action of whatsoever kind, otherwise
the grant of financial assistance as discussed above will be withheld.8 (Emphasis in the original)

Solid Mills filed its Department of Labor and Employment termination report on September 2,
2003.9chanroblesvirtuallawlibrary
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI
Village.10chanroblesvirtuallawlibrary

Petitioners were no longer allowed to report for work by October 10, 2003.11 They were required to
sign a memorandum of agreement with release and quitclaim before their vacation and sick leave
benefits, 13th month pay, and separation pay would be released.12 Employees who signed the
memorandum of agreement were considered to have agreed to vacate SMI Village, and to the
demolition of the constructed houses inside as condition for the release of their termination benefits
and separation pay.13 Petitioners refused to sign the documents and demanded to be paid their
benefits and separation pay.14chanroblesvirtuallawlibrary

Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of separation pay,
accrued sick and vacation leaves, and 13th month pay.15 They argued that their accrued benefits and
separation pay should not be withheld because their payment is based on company policy and
practice.16 Moreover, the 13th month pay is based on law, specifically, Presidential Decree No. 851.17
Their possession of Solid Mills property is not an accountability that is subject to clearance
procedures.18 They had already turned over to Solid Mills their uniforms and equipment when Solid
Mills ceased operations.19chanroblesvirtuallawlibrary

On the other hand, Solid Mills argued that petitioners’ complaint was premature because they had not
vacated its property.20chanroblesvirtuallawlibrary

The Labor Arbiter ruled in favor of petitioners.21 According to the Labor Arbiter, Solid Mills illegally
withheld petitioners’ benefits and separation pay.22 Petitioners’ right to the payment of their benefits
and separation pay was vested by law and contract.23 The memorandum of agreement dated
September 1, 2003 stated no condition to the effect that petitioners must vacate Solid Mills’ property
before their benefits could be given to them.24 Petitioners’ possession should not be construed as
petitioners’ “accountabilities” that must be cleared first before the release of benefits.25 Their
possession “is not by virtue of any employer-employee relationship.”26 It is a civil issue, which is
outside the jurisdiction of the Labor Arbiter.27chanroblesvirtuallawlibrary

The dispositive portion of the Labor Arbiter’s decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID MILLS, INC.
and/or PHILIP ANG (President), in solido to pay the remaining 21
complainants:chanRoblesvirtualLawlibrary
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO DAVID,
BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS, RENATO ESTOLANO, REX
S. DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA, ROBERTO IGCAS, ISMAEL
MATA, CARLITO DAMIAN, TEODORA MAHILOM, MARILOU LINGA, RENATO LINGA their separation pay of
12.625 days’ pay per year of service, pro-rated 13th month pay for 2003 and accrued vacation and sick
leaves, plus 12% interest p.a. from date of filing of the lead case/judicial demand on 12/08/03 until
actual payment and/or finality;chanrobleslaw

2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received on 12/19/03
her accrued 13th month pay for 2003, accrued VL/SL total amount of P15,435.16, likewise, complainant
Jerry L. Sesma as he already received his accrued 13th month pay for 2003, SL/VL in the total amount of
P10,974.97, shall be paid only their separation pay of 12.625 days’ pay per year of service but also with
12% interest p.a. from date of filing of the lead case/judicial demand on 12/08/03 until actual payment
and/or finality, which computation as of date, amount to as shown in the attached computation sheet.

3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie Vergara,
Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and Purificacion
Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement, whereas, that of [RONIE
ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA PASCO], [OLIMPIO A. PASCO] are
DISMISSED WITHOUT PREJUDICE, for lack of interest and/or failure to prosecute.

The Computation and Examination unit is directed to cause the computation of the award in Pars. 2 and
3 above.28 (Emphasis in the original)

Solid Mills appealed to the National Labor Relations Commission.29 It prayed for, among others, the
dismissal of the complaints against it and the reversal of the Labor Arbiter’s
decision.30chanroblesvirtuallawlibrary

The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter’s dispositive
portion, but reversed paragraphs 1 and 2. Thus:chanRoblesvirtualLawlibrary

WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is AFFIRMED in so far
as par. 3 thereof is concerned but modified in that paragraphs 1 and 2 thereof are REVERSED and SET
ASIDE. Accordingly, the following complainants, namely: Emir Milan, Ramon Masangkay, Alfredo Javier,
Ronaldo David, Bonifacio Matundan, Nora Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano,
Rex S. Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias
and Jerry L. Sesma’s monetary claims in the form of separation pay, accrued 13th month pay for 2003,
accrued vacation and sick leave pays are held in abeyance pending compliance of their accountabilities
to respondent company by turning over the subject lots they respectively occupy at SMI Village Sucat
Muntinlupa City, Metro Manila to herein respondent company.31

The National Labor Relations Commission noted that complainants Marilou Linga, Renato Linga, Ismael
Mata, and Carlito Damian were already paid their respective separation pays and benefits.32
Meanwhile, Teodora Mahilom already retired long before Solid Mills’ closure.33 She was already given
her retirement benefits.34chanroblesvirtuallawlibrary

The National Labor Relations Commission ruled that because of petitioners’ failure to vacate Solid Mills’
property, Solid Mills was justified in withholding their benefits and separation pay.35 Solid Mills granted
the petitioners the privilege to occupy its property on account of petitioners’ employment.36 It had the
prerogative to terminate such privilege.37 The termination of Solid Mills and petitioners’ employer-
employee relationship made it incumbent upon petitioners to turn over the property to Solid
Mills.38chanroblesvirtuallawlibrary

Petitioners filed a motion for partial reconsideration on October 18, 2010,39 but this was denied in the
November 30, 2010 resolution.40chanroblesvirtuallawlibrary

Petitioners, thus, filed a petition for certiorari41 before the Court of Appeals to assail the National Labor
Relations Commission decision of August 31, 2010 and resolution of November 30,
2010.42chanroblesvirtuallawlibrary

On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners’ petition,43
thus:chanRoblesvirtualLawlibrary

WHEREFORE, the petition is hereby ordered DISMISSED.44

The Court of Appeals ruled that Solid Mills’ act of allowing its employees to make temporary dwellings in
its property was a liberality on its part. It may be revoked any time at its discretion.45 As a
consequence of Solid Mills’ closure and the resulting termination of petitioners, the employer-employee
relationship between them ceased to exist. There was no more reason for them to stay in Solid Mills’
property.46 Moreover, the memorandum of agreement between Solid Mills and the union representing
petitioners provided that Solid Mills’ payment of employees’ benefits should be “less
accountabilities.”47chanroblesvirtuallawlibrary
On petitioners’ claim that there was no evidence that Teodora Mahilom already received her retirement
pay, the Court of Appeals ruled that her complaint filed before the Labor Arbiter did not include a claim
for retirement pay. The issue was also raised for the first time on appeal, which is not allowed.48 In any
case, she already retired before Solid Mills ceased its operations.49chanroblesvirtuallawlibrary

The Court of Appeals agreed with the National Labor Relations Commission’s deletion of interest since it
found that Solid Mills’ act of withholding payment of benefits and separation pay was proper.
Petitioners’ terminal benefits and pay were withheld because of petitioners’ failure to vacate Solid Mills’
property.50chanroblesvirtuallawlibrary

Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and
benefits.51 Hence, he should no longer be awarded these claims.52chanroblesvirtuallawlibrary

In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners’ motion for
reconsideration.53chanroblesvirtuallawlibrary

Petitioners raise in this petition the following errors:chanRoblesvirtualLawlibrary

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT
RULED THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE HELD IN ABEYANCE
PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT SOLID MILLS BY TURNING OVER
THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI VILLAGE, SUCAT, MUNTINLUPA CITY.

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT
UPHELD THE RULING OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM IMPOSED BY THE
HONORABLE LABOR ARBITER HERNANDEZ ON THE AMOUNT DUE FROM THE DATE OF FILING OF THE
LEAD CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL ACTUAL PAYMENT AND/OR FINALITY.

III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT
UPHELD THE RULING OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM FOR PAYMENT OF
RETIREMENT BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE RECEIVED THE SAME.

IV

WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS MONETARY BENEFITS FROM
RESPONDENT SOLID MILLS.54

Petitioners argue that respondent Solid Mills and NAFLU’s memorandum of agreement has no provision
stating that benefits shall be paid only upon return of the possession of respondent Solid Mills’
property.55 It only provides that the benefits shall be “less accountabilities,” which should not be
interpreted to include such possession.56 The fact that majority of NAFLU’s members were not
occupants of respondent Solid Mills’ property is evidence that possession of the property was not
contemplated in the agreement.57 “Accountabilities” should be interpreted to refer only to
accountabilities that were incurred by petitioners while they were performing their duties as employees
at the worksite.58 Moreover, applicable laws, company practice, or policies do not provide that 13th
month pay, and sick and vacation leave pay benefits, may be withheld pending satisfaction of liabilities
by the employee.59chanroblesvirtuallawlibrary

Petitioners also point out that the National Labor Relations Commission and the Court of Appeals have
no jurisdiction to declare that petitioners’ act of withholding possession of respondent Solid Mills’
property is illegal.60 The regular courts have jurisdiction over this issue.61 It is independent from the
issue of payment of petitioners’ monetary benefits.62chanroblesvirtuallawlibrary

For these reasons, and because, according to petitioners, the amount of monetary award is no longer in
question, petitioners are entitled to 12% interest per annum.63chanroblesvirtuallawlibrary

Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims. They insist
that Teodora Mahilom did not receive her retirement benefits and that Carlito Damian did not receive
his separation benefits.64chanroblesvirtuallawlibrary

Respondents Solid Mills and Philip Ang, in their joint comment, argue that petitioners’ failure to turn
over respondent Solid Mills’ property “constituted an unsatisfied accountability” for which reason
“petitioners’ benefits could rightfully be withheld.”65 The term “accountability” should be given its
natural and ordinary meaning.66 Thus, it should be interpreted as “a state of being liable or
responsible,” or “obligation.”67 Petitioners’ differentiation between accountabilities incurred while
performing jobs at the worksite and accountabilities incurred outside the worksite is baseless because
the agreement with NAFLU merely stated “accountabilities,” without
qualification.68chanroblesvirtuallawlibrary

On the removal of the award of 12% interest per annum, respondents argue that such removal was
proper since respondent Solid Mills was justified in withholding the monetary
claims.69chanroblesvirtuallawlibrary

Respondents argue that Teodora Mahilom had no more cause of action for retirement benefits claim.70
She had already retired more than a decade before Solid Mills’ closure. She also already received her
retirement benefits in 1991.71 Teodora Mahilom’s claim was also not included in the complaint filed
before the Labor Arbiter. It was improper to raise this claim for the first time on appeal. In any case,
Teodora Mahilom’s claim was asserted long after the three-year prescriptive period provided in Article
291 of the Labor Code.72chanroblesvirtuallawlibrary

Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to receive
monetary benefits again, which he, admittedly, already received from Solid
Mills.73chanroblesvirtuallawlibrary

The National Labor Relations

Commission may preliminarily

determine issues related to rights

arising from an employer-employee

relationship

The National Labor Relations Commission has jurisdiction to determine, preliminarily, the parties’ rights
over a property, when it is necessary to determine an issue related to rights or claims arising from an
employer-employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National Labor
Relations Commission, in its appellate jurisdiction, may determine issues involving claims arising from
employer-employee relations. Thus:chanRoblesvirtualLawlibrary

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. – (1) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving workers, whether
agricultural or non-agricultural:chanRoblesvirtualLawlibrary

Unfair labor practice cases;

Termination disputes;

If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates
of pay, hours of work and other terms and conditions of employment;

Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; and

Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00), regardless of whether
accompanied with a claim for reinstatement.

(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(Emphasis supplied)

Petitioners’ claim that they have the right to the immediate release of their benefits as employees
separated from respondent Solid Mills is a question arising from the employer-employee relationship
between the parties.

Claims arising from an employer-employee relationship are not limited to claims by an employee.
Employers may also have claims against the employee, which arise from the same relationship.

In Bañez v. Valdevilla,74 this court ruled that Article 217 of the Labor Code also applies to employers’
claim for damages, which arises from or is connected with the labor issue.
Thus:chanRoblesvirtualLawlibrary
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to
claims for damages filed by employees, we hold that by the designating clause “arising from the
employer-employee relations” Article 217 should apply with equal force to the claim of an employer for
actual damages against its dismissed employee, where the basis for the claim arises from or is
necessarily connected with the fact of termination, and should be entered as a counterclaim in the
illegal dismissal case.75

Bañez was cited in Domondon v. National Labor Relations Commission.76 One of the issues in
Domondon is whether the Labor Arbiter has jurisdiction to decide an issue on the transfer of ownership
of a vehicle assigned to the employee. It was argued that only regular courts have jurisdiction to decide
the issue.77chanroblesvirtuallawlibrary

This court ruled that since the transfer of ownership of the vehicle to the employee was connected to
his separation from the employer and arose from the employer-employee relationship of the parties,
the employer’s claim fell within the Labor Arbiter’s jurisdiction.78chanroblesvirtuallawlibrary

As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue raised and
must arise from an employer-employee relationship for the labor tribunals to have jurisdiction.

In this case, respondent Solid Mills claims that its properties are in petitioners’ possession by virtue of
their status as its employees. Respondent Solid Mills allowed petitioners to use its property as an act of
liberality. Put in other words, it would not have allowed petitioners to use its property had they not
been its employees. The return of its properties in petitioners’ possession by virtue of their status as
employees is an issue that must be resolved to determine whether benefits can be released
immediately. The issue raised by the employer is, therefore, connected to petitioners’ claim for benefits
and is sufficiently intertwined with the parties’ employer-employee relationship. Thus, it is properly
within the labor tribunals’ jurisdiction.

II

Institution of clearance procedures

has legal bases

Requiring clearance before the release of last payments to the employee is a standard procedure among
employers, whether public or private. Clearance procedures are instituted to ensure that the
properties, real or personal, belonging to the employer but are in the possession of the separated
employee, are returned to the employer before the employee’s departure.
As a general rule, employers are prohibited from withholding wages from employees. The Labor Code
provides:chanRoblesvirtualLawlibrary

Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker’s
consent.

The Labor Code also prohibits the elimination or diminution of benefits.

Thus:chanRoblesvirtualLawlibrary

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed
at the time of promulgation of this Code.

However, our law supports the employers’ institution of clearance procedures before the release of
wages. As an exception to the general rule that wages may not be withheld and benefits may not be
diminished, the Labor Code provides:chanRoblesvirtualLawlibrary

Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:chanRoblesvirtualLawlibrary

1. In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;chanrobleslaw

2. For union dues, in cases where the right of the worker or his union to check-off has been recognized
by the employer or authorized in writing by the individual worker concerned; and

3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and
Employment. (Emphasis supplied)

The Civil Code provides that the employer is authorized to withhold wages for debts
due:chanRoblesvirtualLawlibrary
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
employer.cralawred

“Debt” in this case refers to any obligation due from the employee to the employer. It includes any
accountability that the employee may have to the employer. There is no reason to limit its scope to
uniforms and equipment, as petitioners would argue.

More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that
the release of petitioners’ benefits shall be “less accountabilities.”

“Accountability,” in its ordinary sense, means obligation or debt. The ordinary meaning of the term
“accountability” does not limit the definition of accountability to those incurred in the worksite. As long
as the debt or obligation was incurred by virtue of the employer-employee relationship, generally, it
shall be included in the employee’s accountabilities that are subject to clearance procedures.

It may be true that not all employees enjoyed the privilege of staying in respondent Solid Mills’
property. However, this alone does not imply that this privilege when enjoyed was not a result of the
employer-employee relationship. Those who did avail of the privilege were employees of respondent
Solid Mills. Petitioners’ possession should, therefore, be included in the term “accountability.”

Accountabilities of employees are personal. They need not be uniform among all employees in order to
be included in accountabilities incurred by virtue of an employer-employee relationship.

Petitioners do not categorically deny respondent Solid Mills’ ownership of the property, and they do not
claim superior right to it. What can be gathered from the findings of the Labor Arbiter, National Labor
Relations Commission, and the Court of Appeals is that respondent Solid Mills allowed the use of its
property for the benefit of petitioners as its employees. Petitioners were merely allowed to possess and
use it out of respondent Solid Mills’ liberality. The employer may, therefore, demand the property at
will.79chanroblesvirtuallawlibrary

The return of the property’s possession became an obligation or liability on the part of the employees
when the employer-employee relationship ceased. Thus, respondent Solid Mills has the right to
withhold petitioners’ wages and benefits because of this existing debt or liability. In Solas v. Power and
Telephone Supply Phils., Inc., et al., this court recognized this right of the employer when it ruled that
the employee in that case was not constructively dismissed.80 Thus:chanRoblesvirtualLawlibrary
There was valid reason for respondents’ withholding of petitioner’s salary for the month of February
2000. Petitioner does not deny that he is indebted to his employer in the amount of around P95,000.00.
Respondents explained that petitioner’s salary for the period of February 1-15, 2000 was applied as
partial payment for his debt and for withholding taxes on his income; while for the period of February
15-28, 2000, petitioner was already on absence without leave, hence, was not entitled to any pay.81

The law does not sanction a situation where employees who do not even assert any claim over the
employer’s property are allowed to take all the benefits out of their employment while they
simultaneously withhold possession of their employer’s property for no rightful reason.

Withholding of payment by the employer does not mean that the employer may renege on its obligation
to pay employees their wages, termination payments, and due benefits. The employees’ benefits are
also not being reduced. It is only subjected to the condition that the employees return properties
properly belonging to the employer. This is only consistent with the equitable principle that “no one
shall be unjustly enriched or benefited at the expense of another.”82chanroblesvirtuallawlibrary

For these reasons, we cannot hold that petitioners are entitled to interest of their withheld separation
benefits. These benefits were properly withheld by respondent Solid Mills because of their refusal to
return its property.

III

Mahilom and Damian are not

entitled to the benefits claimed

Teodora Mahilom is not entitled to separation benefits.

Both the National Labor Relations Commission and the Court of Appeals found that Teodora Mahilom
already retired long before respondent Solid Mills’ closure. They found that she already received her
retirement benefits. We have no reason to disturb this finding. This court is not a trier of facts. Findings
of the National Labor Relations Commission, especially when affirmed by the Court of Appeals, are
binding upon this court.83chanroblesvirtuallawlibrary
Moreover, Teodora Mahilom’s claim for retirement benefits was not included in her complaint filed
before the Labor Arbiter. Hence, it may not be raised in the appeal.

Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito Damian
already received his terminal benefits. Hence, he may no longer claim terminal benefits.

The fact that respondent Solid Mills has not yet demolished Carlito Damian’s house in SMI Village is not
evidence that he did not receive his benefits. Both the National Labor Relations Commission and the
Court of Appeals found that he executed an affidavit stating that he already received the benefits.

Absent any showing that the National Labor Relations Commission and the Court of Appeals
misconstrued these facts, we will not reverse these findings.

Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical power of
those with capital when they are left to negotiate with their workers without the standards and
protection of law. In cases such as these, the collective bargaining unit of workers are able to get more
benefits and in exchange, the owners are able to continue with the program of cutting their losses or
wind down their operations due to serious business losses. The company in this case did all that was
required by law.

The preferential treatment given by our law to labor, however, is not a license for abuse.84 It is not a
signal to commit acts of unfairness that will unreasonably infringe on the property rights of the
company. Both labor and employer have social utility, and the law is not so biased that it does not find a
middle ground to give each their due.

Clearly, in this case, it is for the workers to return their housing in exchange for the release of their
benefits. This is what they agreed upon. It is what is fair in the premises.

WHEREFORE, the petition is DENIED. The Court of Appeals’ decision is AFFIRMED.

7. G.R. Nos. 174941 February 1, 2012

ANTONIO P. SALENGA and NATIONAL LABOR RELATIONS COMMISSION, Petitioners,

vs.

COURT OF APPEALS and CLARK DEVELOPMENT CORPORATION, Respondents.

DECISION

SERENO, J.:

The present Petition for Certiorari under Rule 65 assails the Decision1 of the Court of Appeals (CA)
promulgated on 13 September 2005, dismissing the Complaint for illegal dismissal filed by petitioner
Antonio F. Salenga against respondent Clark Development Corporation (CDC). The dispositive portion of
the assailed Decision states:

WHEREFORE, premises considered, the original and supplemental petitions are GRANTED. The assailed
resolutions of the National Labor Relations Commission dated September 10, 2003 and January 21, 2004
are ANNULLED and SET ASIDE. The complaint filed by Antonio B. Salenga against Clark Development is
DISMISSED. Consequently, Antonio B. Salenga is ordered to restitute to Clark Development Corporation
the amount of P3,222,400.00, which was received by him as a consequence of the immediate execution
of said resolutions, plus interest thereon at the rate of 6% per annum from date of

such receipt until finality of this judgment, after which the interest shall be at the rate of 12% per annum
until said amount is fully restituted.

SO ORDERED.2

The undisputed facts are as follows:

On 22 September 1998, President/Chief Executive Officer (CEO) Rufo Colayco issued an Order informing
petitioner that, pursuant to the decision of the board of directors of respondent CDC, the position of
head executive assistant – the position held by petitioner – was declared redundant. Petitioner received
a copy of the Order on the same day and immediately went to see Colayco. The latter informed him that
the Order had been issued as part of the reorganization scheme approved by the board of directors.
Thus, petitioner’s employment was to be terminated thirty (30) days from notice of the Order.
On 17 September 1999, petitioner filed a Complaint for illegal dismissal with a claim for reinstatement
and payment of back wages, benefits, and moral and exemplary damages against respondent CDC and
Colayco. The Complaint was filed with the National Labor Relations Commission-Regional Arbitration
Branch (NLRC-RAB) III in San Fernando, Pampanga. In defense, respondents, represented by the Office of
the Government Corporate Counsel (OGCC), alleged that the NLRC had no jurisdiction to entertain the
case on the ground that petitioner was a corporate officer and, thus, his dismissal was an intra-
corporate matter falling properly within the jurisdiction of the Securities and Exchange Commission
(SEC).

On 29 February 2000, labor arbiter (LA) Florentino R. Darlucio issued a Decision3 in favor of petitioner
Salenga. First, the LA held that the NLRC had jurisdiction over the Complaint, considering that petitioner
was not a corporate officer but a managerial employee. He held the position of head executive assistant,
categorized as a Job Level 12 position, not subject to election or appointment by the board of directors.

Second, the LA pointed out that respondent CDC and Colayco failed to establish a valid cause for the
termination of petitioner’s employment. The evidence presented by respondent CDC failed to show that
the position of petitioner was superfluous as to be classified "redundant." The LA further pointed out
that respondent corporation had not disputed the argument of petitioner Salenga that his position was
that of a regular employee. Moreover, the LA found that petitioner had not been accorded the right to
due process. Instead, the latter was dismissed without the benefit of an explanation of the grounds for
his termination, or an opportunity to be heard and to defend himself.

Finally, considering petitioner’s reputation and contribution as a government employee for 40 years, the
LA awarded moral damages amounting to P2,000,000 and exemplary damages of P500,000. The
dispositive portion of the LA’s Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring respondent Clark

Development Corporation and Rufo Colayco guilty of illegal dismissal and for which they are ordered, as
follows:

1. To reinstate complainant to his former or equivalent position without loss of seniority rights and
privileges;

2. To pay complainant his backwages reckoned from the date of his dismissal on September 22, 1998
until actual reinstatement or merely reinstatement in the payroll which as of this date is in the amount
of P722,400.00;
3. To pay complainant moral damages in the amount of P2,000,000.00; and,

4. To pay complainant exemplary damages in the amount of P500,000.00.

SO ORDERED.4

At the time the above Decision was rendered, respondent CDC was already under the leadership of
Sergio T. Naguiat. When he received the Decision on 10 March 2000, he subsequently instructed Atty.
Monina C. Pineda, manager of the Corporate and Legal Services Department and concurrent corporate
board secretary, not to appeal the Decision and to so inform the OGCC.5

Despite these instructions, two separate appeals were filed before LA Darlucio on 20 March 2000. One
appeal6 was from the OGCC on behalf of respondent CDC and Rufo Colayco. The OGCC reiterated its
allegation that petitioner was a corporate officer, and that the termination of his employment was an
intra-corporate matter. The Memorandum of Appeal was verified and certified by Hilana Timbol-Roman,
the executive vice president of respondent CDC. The Memorandum was accompanied by a UCPB
General Insurance Co., Inc. supersedeas bond covering the amount due to petitioner as adjudged by LA
Darlucio. Timbol-Roman and OGCC lawyer Roy Christian Mallari also executed on 17 March 2000 a Joint
Affidavit of Declaration wherein they swore that they were the "respective authorized representative
and counsel" of respondent corporation. However, the Memorandum of Appeal and the Joint Affidavit
of Declaration were not accompanied by a board resolution from respondent’s board of directors
authorizing either Timbol-Roman or Atty. Mallari, or both, to pursue the case or to file the appeal on
behalf of respondent.

It is noteworthy that Naguiat, who was president/CEO of respondent CDC from 3 February 2000 to 5 July
2000, executed an Affidavit on 20 March 2002,7 wherein he stated that without his knowledge, consent
or approval, Timbol-Roman and Atty. Mallari filed the above-mentioned appeal. He further alleged that
their statements were false.

The second appeal, meanwhile, was filed by former CDC President/CEO Rufo Colayco. Colayco alleged
that petitioner was dismissed not on 22 September 1998, but twice on 9 March 1999 and 23 March
1999. The dismissal was allegedly approved by respondent’s CDC board of directors pursuant to a new
organizational structure. Colayco likewise stated that he had posted a supersedeas bond – the same
bond taken out by Timbol-Roman – issued by the UCPB General Insurance Co. dated 17 March 2000 in
order to secure the monetary award, exclusive of moral and exemplary damages.
Petitioner thereafter opposed the two appeals on the grounds that both appellants, respondent CDC –
as allegedly represented by Timbol-Roman and Atty. Mallari – and Rufo Colayco had failed to observe
Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure; and that appellants had not been authorized by
respondent’s board of directors to represent the corporation and, thus, they were not the "employer"
whom the Rules referred to. Petitioner also alleged that appellants failed to refute the findings of LA
Darlucio in the previous Decision.

In the meantime, while the appeal was pending, on 19 October 2000, respondent’s board chairperson
and concurrent President/CEO Rogelio L. Singson ordered the reinstatement of petitioner to the latter’s
former position as head executive assistant, effective 24 October 2000.8

On 28 May 2001, respondent CDC’s new President/CEO Emmanuel Y. Angeles issued a Memorandum,
which offered all managers of respondent corporation an early separation/redundancy program. Those
who wished to avail themselves of the program were to be given the equivalent of their 1.25-month
basic salary for every year of service and leave credits computed on the basis of the same 1.25-month
equivalent of their basic salary.9

In August 2001, respondent CDC offered another retirement plan granting higher benefits to the
managerial employees. Thus, on 12 September 2001, petitioner filed an application for the early
retirement program, which Angeles approved on 3 December 2001.

Meanwhile, in the proceedings of the NLRC, petitioner received on 12 September 2001 its 30 July 2001
Decision10 on the appeal filed by Timbol-Roman and Colayco. It is worthy to note that the said Decision
referred to the reports of reviewer arbiters Cristeta D. Tamayo and Thelma M. Concepcion, who in turn
found that petitioner Salenga was a corporate officer of CDC. Nevertheless, the First Division of the NLRC
upheld LA Darlucio’s ruling that petitioner Salenga was indeed a regular employee. It also found that
redundancy, as an authorized cause for dismissal, has not been sufficiently proven, rendering the
dismissal illegal. However, the NLRC held that the award of exemplary and moral damages were
unsubstantiated. Moreover, it also dropped Colayco as a respondent to the case, since LA Darlucio had
failed to provide any ground on which to anchor the former’s solidary liability.

Petitioner Salenga thereafter moved for a partial reconsideration of the above-mentioned Decision. He
sought the reinstatement of the award of exemplary and moral damages. He likewise insisted that the
NLRC should not have entertained the appeal on the following grounds: (1) respondent CDC did not file
an appeal and did not post the required cash or surety bond; (2) both Timbol-Roman and Colayco were
admittedly not real parties-in-interest; (3) they were not the employer or the employer’s authorized
representative and, thus, had no right to appeal; and (4) both appeals had not been perfected for failure
to post the required cash or surety bond. In other words, petitioner’s theory revolved on the fact that
neither Timbol-Roman nor Colayco was authorized to represent the corporation, so the corporation
itself did not appeal LA Darlucio’s Decision. As a result, that Decision should be considered as final and
executory.

For its part, the OGCC also filed a Motion for Reconsideration11 of the NLRC’s 30 July 2001 Decision
insofar as the finding of illegal dismissal was concerned. It no longer questioned the commission’s
finding that petitioner was a regular employee, but instead insisted that he had been dismissed as a
consequence of his redundant position. The motion, however, was not verified by the duly authorized
representative of respondent CDC.

On 5 December 2002, the NLRC denied petitioner Salenga’s Motion for Partial Reconsideration and
dismissed the Complaint. The dispositive portion of the Resolution12 reads as follows:

WHEREFORE, complainant’s partial motion for reconsideration is denied. As recommended by Reviewer

Arbiters Cristeta D. Tamayo in her August 2, 2000 report and Thelma M. Concepcion in her November
25, 2002 report, the decision of Labor Arbiter Florentino R. Darlucio dated 29 February 2000 is set aside.

The complaint below is dismissed for being without merit.

SO ORDERED.13

Meanwhile, pending the Motions for Reconsideration of the NLRC’s 30 July 2001 Decision, another issue
arose with regard to the computation of the retirement benefits of petitioner. Respondent CDC did not
immediately give his requested retirement benefits, pending clarification of the computation of these
benefits. He claimed that the computation of his retirement benefits should also include the forty (40)
years he had been in government service in accordance with Republic Act No. (R.A.) 8291, or the GSIS
Act, and should not be limited to the length of his employment with respondent corporation only, as the
latter insisted.

In a letter dated 14 March 2003, petitioner Salenga’s counsel wrote to the board of directors of
respondent to follow up the payment of the retirement benefits allegedly due to petitioner.14

Pursuant to the NLRC’s dismissal of the Complaint of petitioner Salenga, Angeles subsequently denied
the former’s request for his retirement benefits, to wit:15
Please be informed that we cannot favorably grant your client’s claim for retirement benefits
considering that Clark Development Corporation's dismissal of Mr. Antonio B. Salenga had been upheld
by the National Labor Relations Commission through a Resolution dated December 5, 2002...

xxx xxx xxx

As it is, the said Resolution dismissed the Complaint filed by Mr. Salenga for being without merit.
Consequently, he is not entitled to receive any retirement pay from the corporation.

Meanwhile, petitioner Salenga filed a second Motion for Reconsideration of the 5 December 2002
Resolution of the NLRC, reiterating his claim that it should not have entertained the imperfect appeal,
absent a proper verification and certification against forum-shopping from the duly authorized
representative of respondent CDC. Without that authority, neither could the OGCC act on behalf of the
corporation.

The OGCC, meanwhile, resurrected its old defense that the NLRC had no jurisdiction over the case,
because petitioner Salenga was a corporate officer.

The parties underwent several hearings before the NLRC First Division. During these times, petitioner
Salenga demanded from the OGCC to present a board resolution authorizing it or any other person to
represent the corporation in the proceedings. This, the OGCC failed to do.

After giving due course to the Motion for Reconsideration filed by petitioner Salenga, the NLRC issued a
Resolution16 on 10 September 2003, partially granting the motion. This time, the First Division of the
NLRC held that, absent a board resolution authorizing Timbol-Roman to file the appeal on behalf of
respondent CDC, the appeal was not perfected and was thus a mere scrap of paper. In other words, the
NLRC had no jurisdiction over the appeal filed before it.

The NLRC further held that respondent CDC had failed to show that petitioner Salenga’s dismissal was
pursuant to a valid corporate reorganization or board resolution. It also deemed respondent estopped
from claiming that there was indeed a redundancy, considering that petitioner Salenga had been
reinstated to his position as head executive assistant. While it granted the award of moral damages, it
nevertheless denied exemplary damages. Thus, the dispositive portion of its Decision reads:
WHEREFORE, premises considered, the complainant’s Motion for Reconsideration is GRANTED and We
set aside our Resolution of December 5, 2002. The Decision of the Labor Arbiter dated February 29,
2000 is REINSTATED with the MODIFICATION that:

1.) Being a nominal party, respondent Rufo Colayco is declared to be not jointly and severally liable with
respondent Clark Development Corporation;

2.) Respondent Clark Development Corporation is ordered to pay the complainant his full backwages
and other monetary claims to which he is entitled under the decision of the Labor Arbiter;

3.) Respondent CDC is likewise ordered to pay the complainant moral and exemplary damages as
provided under the Labor Arbiter’s Decision; and

4.) All other money claims are DENIED for lack of merit.

In the meantime, respondent CDC is ordered to pay the complainant his retirement benefits without
further delay.

SO ORDERED.17

On 3 October 2003, the OGCC filed a Motion for Reconsideration18 despite the absence of a verification
and the certification against forum shopping.

On 21 January 2004, the motion was denied by the NLRC for lack of merit.19

On 5 February 2004, the executive clerk of the NLRC First Division entered the judgment on the
foregoing case. Thereafter, on 9 February 2004, the NLRC forwarded the entire records of the case to
the NLRC-RAB III Office in San Fernando, Pampanga for appropriate action.

On 4 March 2004, petitioner Salenga filed a Motion for Issuance of Writ of Execution before the NLRC-
RAB III, Office of LA Henry D. Isorena. The OGCC opposed the motion on the ground that it had filed with
the CA a Petition for Certiorari seeking the reversal of the NLRC Decision dated 30 July 2001 and the
Resolutions dated 10 September 2003 and 21 January 2004, respectively. It is noteworthy that, again,
there was no board resolution attached to the Petition authorizing its filing.

Despite the pending Petition with the CA, LA Isorena issued a Writ of Execution enforcing the 10
September 2003 Resolution of the NLRC. On 1 April 2004, the LA issued an Order20 to the manager of
the Philippine National Bank, Clark Branch, Angeles City, Pampanga, to immediately release in the name
of NLRC-RAB III the amount of P3,222,400 representing partial satisfaction of the judgment award,
including the execution fee of P31,720.

Respondent CDC filed with the CA in February 2004 a Petition for Certiorari with a prayer for the
issuance of a temporary restraining order and/or a writ of preliminary injunction. However, the Petition
still lacked a board resolution from the board of directors of respondent corporation authorizing its then
President Angeles to verify and certify the Petition on behalf of the board. It was only on 16 March 2004
that counsel for respondent filed a Manifestation/Motion21 with an attached Secretary’s Certificate
containing the board’s Resolution No. 86, Series of 2001. The Resolution authorized Angeles to
represent respondent corporation in prosecuting, maintaining, or compromising any lawsuit in
connection with its business.

Meanwhile, in the proceedings before LA Isorena, both respondent CDC’s legal department and the
OGCC on 6 April 2004 filed their respective Motions to Quash Writ of Execution.22 They both cited the
failure to afford to respondent due process in the issuance of the writ. They claimed that the pre-
conference hearing on the execution of the judgment had not pushed through. They also reiterated that
the Petition for Certiorari dated 11 February 2004 was still pending with the CA.

Both motions were denied by LA Isorena for lack of factual and legal bases.

On 6 May 2004, respondent filed with LA Isorena another Motion to Quash Writ of Execution, again
reiterating the pending Petition with the CA.

This active exchange of pleadings and motions and the delay in the payment of his money claims
eventually led petitioner Salenga to file an Omnibus Motion23 before LA Isorena. In his motion, he
recomputed the amount due him representing back wages, other benefits or allowances, legal interests
and attorney’s fees. He also prayed for the computation of his retirement benefits plus interests in
accordance with R.A. 829124 and R.A. 1616.25 He insisted that since respondent CDC was a
government-owned and -controlled corporation (GOCC), his previous government service totalling 40
years must also be credited in the computation of his retirement pay. Thus, he demanded the payment
of the total amount of P23,920,772.30, broken down as follows:
From the illegal dismissal suit: (In Philippine peso)

Recomputed award 3,758,786

Legal interest 5,089,342.58

Attorney’s fees 1,196,052.80

Litigation expenses 250,000

Retirement pay

Retirement gratuity 6,987,944

Unused vacation and sick leave 1,440,328

Legal interest 4,050,544.96

Attorney’s fees 1,147,781.90

On 11 May 2004, the CA issued a Resolution26 ordering petitioner Salenga to comment on the Petition
and holding in abeyance the issuance of a temporary restraining order.

The parties thereafter filed their respective pleadings.

On 19 July 2004, the CA temporarily restrained the NLRC from enforcing the Decision dated 29 February
2000 for a period of 60 days.27 After the lapse of the 60 days, LA Isorena issued a Notice of
Hearing/Conference scheduled for 1 October 2004 on petitioner’s Omnibus Motion dated 7 May 2004.

Meanwhile, on 24 September 2004, the CA issued another Resolution,28 this time denying the
application for the issuance of a writ of preliminary injunction, after finding that the requisites for the
issuance of the writ had not been met.

Respondent CDC subsequently filed a Supplemental Petition29 with the CA, challenging the computation
petitioner Salenga made in his Omnibus Motion filed with the NLRC. Respondent alleged that the
examiner had erred in including the other years of government service in the computation of retirement
benefits. It claimed that, since respondent corporation was created under the Corporation Code,
petitioner Salenga was not covered by civil service laws. Hence, his retirement benefits should only be
limited to the number of years he had been employed by respondent.

Subsequently, respondent CDC filed an Omnibus Motion30 to admit the Supplemental Petition and to
reconsider the CA’s Resolution denying the issuance of a writ of preliminary injunction. In the motion,
respondent alleged that petitioner Salenga had been more than sufficiently paid the amounts allegedly
due him, including the award made by LA Darlucio. On 12 March 2002, respondent CDC had issued a
check amounting to P852,916.29, representing petitioner’s retirement pay and terminal pay.
Meanwhile, on 2 April 2004, P3,254,120 representing the initial award was debited from the account of
respondent CDC.

On 7 February 2005, respondent CDC filed a Motion31 once again asking the CA to issue a writ of
preliminary injunction in the light of a scheduled 14 February 2005 conference called by LA Mariano
Bactin, who had taken over the case from LA Isorena.

At the 14 February 2005 hearing, the parties failed to reach an amicable settlement and were thus
required to submit their relevant pleadings and documents in support of their respective cases.

On 16 February 2005, the CA issued a Resolution32 admitting the Supplemental Petition filed by
respondent, but denying the prayer for the issuance of an injunctive writ.

Thereafter, on 8 March 2005, LA Bactin issued an Order33 resolving the Omnibus Motion filed by
petitioner Salenga for the recomputation of the monetary claims due him. In the Order, LA Bactin
denied petitioner’s Motion for the recomputation of the award of back wages, benefits, allowances and
privileges based on the 29 February 2000 Decision of LA Darlucio. LA Bactin held that since the Decision
had become final and executory, he no longer had jurisdiction to amend or to alter the judgment.

Anent the second issue of the computation of retirement benefits, LA Bactin also denied the claim of
petitioner Salenga, considering that the latter’s retirement benefits had already been paid. The LA,
however, did not rule on whether petitioner was entitled to retirement benefits, either under the
Government Service Insurance System (GSIS) or under the Social Security System (SSS), and held that
this issue was beyond the expertise and jurisdiction of a LA.

Petitioner Salenga thereafter appealed to the NLRC, which granted the appeal in a Resolution34 dated
22 July 2005. First, it was asked to resolve the issue of the propriety of having the Laguesma Law Office
represent respondent CDC in the proceedings before the LA. The said law firm entered its appearance as
counsel for respondent during the pre-execution conference/hearing on 1 October 2004. On this issue,
the NLRC held that respondent corporation’s legal department, which had previously been representing
the corporation, was not validly substituted by the Laguesma Law Office. In addition, the NLRC held that
respondent had failed to comply with Memorandum Circular No. 9, Series of 1998, which strictly
prohibits the hiring of lawyers of private law firms by GOCCs without the prior written conformity and
acquiescence of the Office of Solicitor General, as the case may be, and the prior written concurrence of
the Commission on Audit (COA). Thus, the NLRC held that all actions and submissions undertaken by the
Laguesma Law Office on behalf of respondent were null and void.
The second issue raised before the NLRC was whether LA Bactin acted without jurisdiction in annulling
and setting aside the former’s final and executory judgment contained in its 10 September 2003
Resolution, wherein it held that the appeal had not been perfected, absent the necessary board
resolution allowing or authorizing Timbol-Roman and Atty. Mallari to file the appeal. On this issue, the
NLRC stated:

The final and executory judgment in this case is clearly indicated in the dispositive portion of Our
Resolution promulgated on September 10, 2003 GRANTING complainant’s motion for reconsideration,
SETTING ASIDE Our Resolution of December 5, 2002, and REINSTATING the Decision of the Labor Arbiter
dated February 29, 2000 with the following modification[s]: (1) declaring respondent Rufo Colayco not
jointly and severally liable with respondent Clark Development Corporation; (2) ordering respondent
CDC to pay the complainant his full backwages and other monetary claims to which he is entitled under
the decision of the Labor Arbiter; (3) ordering respondent CDC to pay complainant moral and exemplary
damages as provided under the Labor Arbiter’s Decision; and (4) ordering respondent CDC to pay the
complainant his retirement benefits without further delay. This was entered in the Book of Entry of
Judgment as final and executory effective as of February 2, 2004.

Implementing this final and executory judgment, Arbiter Isorena issued an Order dated May 24, 2004,
DENYING respondent’s Motion to Quash the Writ of Execution dated March 22, 2004, correctly stating
thusly:

"Let it be stressed that once a decision has become final and executory, it becomes the ministerial duty
of this Office to issue the corresponding writ of execution. The rationale behind it is based on the fact
that the winning party has suffered enough and it is the time for him to enjoy the fruits of his labor with
dispatch. The very purpose of the pre-execution conference is to explore the possibility for the parties to
arrive at an amicable settlement to satisfy the judgment award speedily, not to delay or prolong its
implementation."

Thus, when Arbiter Bactin, who took over from Arbiter Isorena upon the latter’s filing for leave of
absence due to poor health in January 2005, issued the appealed Order nullifying, instead of
implementing, the final and executory judgment of this Commission, the labor arbiter a quo acted
WITHOUT JURISDICTION.35

xxx xxx xxx

WHEREFORE, premises considered, the appeal of herein complainant is hereby GRANTED, and We
declare NULL AND VOID the appealed Order of March 8, 2005 and SET ASIDE said Order; We direct the
immediate issuance of the corresponding Alias Writ of Execution to enforce the final and executory
judgment of this Commission as contained in Our September 10, 2003 Resolution.

SO ORDERED.36

Unwilling to accept the above Resolution of the NLRC, the Laguesma Law Office filed a Motion for
Reconsideration dated 29 August 2005 with the NLRC. Again, the motion lacked proper verification and
certification against non-forum shopping.

In the meantime, the OGCC also filed with the CA a Motion for the Issuance of a Writ of Preliminary
Injunction dated 30 August 200537 against the NLRC’s 22 July 2005 Resolution. The OGCC alleged that
the issues in the Resolution addressed monetary claims that were raised by petitioner Salenga only in his
Omnibus Motion dated 7 May 2004 or after the issuance of the 10 September 2003 Decision of LA
Darlucio. Thus, the OGCC insisted that the NLRC had no jurisdiction over the issue, for the matter was
still pending with the CA.

The OGCC likewise filed another Motion for Reconsideration38 dated 31 August 2005 with the NLRC.
The OGCC maintained that it was only acting in a collaborative manner with the legal department of
respondent CDC, for which the former remained the lead counsel. The OGCC reiterated that, as the
statutory counsel of GOCCs, it did not need authorization from them to maintain a case, and thus, LA
Bactin had jurisdiction over that case. Finally, it insisted that petitioner Salenga was not covered by civil
service laws on retirement, the CDC having been created under the Corporation Code.

On 13 September 2005, the CA promulgated the assailed Decision. Relying heavily on the reports of
Reviewer Arbiters Cristeta D. Tamayo and Thelma M. Concepcion, it held that petitioner Salenga was a
corporate officer. Thus, the issue before the NLRC was an intra-corporate dispute, which should have
been lodged with the Securities and Exchange Commission (SEC), which had jurisdiction over the case at
the time the issue arose. The CA likewise held that the NLRC committed grave abuse of discretion when
it allowed and granted petitioner Salenga’s second Motion for Reconsideration, which was a prohibited
pleading.

Petitioner subsequently filed a Motion for Reconsideration on 7 October 2005, alleging that the CA
committed grave abuse of discretion in reconsidering the findings of fact, which had already been found
to be conclusive against respondent; and in taking cognizance of the latter’s Petition which had not been
properly verified.

The CA, finding no merit in petitioner’s allegations, denied the motion in its 17 August 2006 Resolution.
On 4 September 2006, petitioner Salenga filed a Motion for Extension of Time to File a Petition for
Review on Certiorari under Rule 45, praying for an extension of fifteen (15) days within which to file the
Petition. The motion was granted through this Court’s Resolution dated 13 September 2006. The case
was docketed as G.R. No. 174159.

On 25 September 2006, however, petitioner filed a Manifestation39 withdrawing the motion. He

manifested before us that he would instead file a Petition for Certiorari under Rule 65, which was
eventually docketed as G.R. No. 174941. On 7 July 2008, this Court, through a Resolution, considered
the Petition for Review in G.R. No. 174159 closed and terminated.

Petitioner raises the following issues for our resolution:

I.

The Court of Appeals acted without jurisdiction in reviving and re-litigating the factual issues and
matters of petitioner’s illegal dismissal and retirement benefits.

II.

The Court of Appeals had no jurisdiction to entertain the original Petition as a remedy for an appeal that
had actually not been filed, absent a board resolution allowing the appeal.

III.

The Court of Appeals acted with grave abuse of discretion when it did the following:

a. It failed to dismiss the original and supplemental Petitions despite the lack of a board resolution
authorizing the filing thereof.

b. It failed to dismiss the Petitions despite the absence of a proper verification and certification against
non-forum shopping.
c. It failed to dismiss the Petitions despite respondent’s failure to inform it of the pending proceedings
before the NLRC involving the same issues.

d. It failed to dismiss the Petitions on the ground of forum shopping.

e. It did not dismiss the Petition when respondent failed to attach to it certified true copies of the
assailed NLRC 30 July 2001 Decision; 10 September 2003 Resolution; 21 January 2004 Resolution; copies
of material portions of the record as are referred to therein; and copies of pleadings and documents
relevant and pertinent thereto.

f. It did not act on respondent’s failure to serve on the Office of the Solicitor General a copy of the
pleadings, motions and manifestations the latter had filed before the Court of Appeals, as well as copies
of pertinent court resolutions and decisions, despite the NLRC being a party to the present case.

g. It disregarded the findings of fact and conclusions of law arrived at by LA Darlucio, subjecting them to
a second analysis and evaluation and supplanting them with its own findings.

h. It granted the Petition despite respondent’s failure to show that the NLRC committed grave abuse of
discretion in rendering the latter’s 30 July 2001 Decision, 10 September 2003 Resolution and 21 January
2004 Resolution.

i. It dismissed the complaint for illegal dismissal and ordered the restitution of the P3,222,400 already
awarded to petitioner, plus interest thereon.

In its defense, private respondent insists that the present Petition for Certiorari under Rule 65 is an
improper remedy to question the Decision of the CA, and thus, the case should be dismissed outright.
Nevertheless, it reiterates that private petitioner was a corporate officer whose employment was
dependent on board action. As such, private petitioner’s employment was an intra-corporate
controversy cognizable by the SEC, not the NLRC. Private respondent also asserts that it has persistently
sought the reversal of LA Darlucio’s Decision by referring to the letters sent to the OGCC, as well as
Verification and Certificate against forum-shopping. However, these documents were signed only during
Angeles’ time as private respondent’s president/CEO, and not of the former presidents. Moreover,
private respondent contends that private petitioner is not covered by civil service laws, thus, his years in
government service are not creditable for the purpose of determining the total amount of retirement
benefits due him. In relation to this, private respondent enumerates the amounts already paid to private
petitioner.
The Court’s Ruling

The Petition has merit.

This Court deigns it proper to collapse the issues in this Petition to simplify the matters raised in what
appears to be a convoluted case. First, we need to determine whether the NLRC and the CA committed
grave abuse of discretion amounting to lack or excess of jurisdiction, when they entertained
respondent’s so-called appeal of the 29 February 2000 Decision rendered by LA Darlucio.

Second, because of the turn of events, a second issue – the computation of retirement benefits –
cropped up while the first case for illegal dismissal was still pending. Although the second issue may be
considered as separate and distinct from the illegal dismissal case, the issue of the proper computation
of the retirement benefits was nevertheless considered by the relevant administrative bodies, adding
more confusion to what should have been a simple case to begin with.

The NLRC had no jurisdiction

to entertain the appeal filed by

Timbol-Roman and former

CDC CEO Colayco.

To recall, on 29 February 2000, LA Darlucio rendered a Decision in favor of petitioner, stating as follows:

xxxComplainant cannot be considered as a corporate officer because at the time of his termination, he
was holding the position of Head Executive Assistant which is categorized as a Job Level 12 position that
is not subject to the election or appointment by the Board of Directors. The approval of Board
Resolution Nos. 200 and 214 by the Board of Directors in its meeting held on February 11, 1998 and
March 25, 1998 clearly refers to the New CDC Salary Structure where the pay adjustment was based and
not to complainant’s relief as Vice-President, Joint Ventures and Special Projects. While it is true that his
previous positions are classified as Job Level 13 which are subject to board confirmation, the status of
his appointment was permanent in nature. In fact, he had undergone a six-month probationary period
before having acquired the permanency of his appointment. However, due to the refusal of the board
under then Chairman Victorino Basco to confirm his appointment, he was demoted to the position of
Head Executive Assistant. Thus, complainant correctly postulated that he was not elected to his position
and his tenure is not dependent upon the whim of the boardxxx
xxx xxx xxx

Anent the second issue, this Office finds and so holds that respondents have miserably failed to show or
establish the valid cause in terminating the services of complainant.

xxx xxx xxx

In the case at bar, respondents failed to adduce any evidence showing that the position of Head
Executive Assistant is superfluous. In fact, they never disputed the argument advanced by complainant
that the position of Head Executive Assistant was classified as a regular position in the Position
Classification Study which is an essential component of the Organizational Study that had been
approved by the CDC board of directors in 1995 and still remains intact as of the end of 1998. Likewise,
studies made since 1994 by various management consultancy groups have determined the need for the
said position in the Office of the President/CEO in relation to the vision, mission, plans, programs and
overall corporate goals and objectives of respondent CDC. There is no evidence on record to show that
the position of Head Executive Assistant was abolished by the Board of Directors in its meeting held in
the morning of September 22, 1998. The minutes of the meeting of the board on said date, as well as its
other three meetings held in the month of September 1998 (Annexes "B", "C", "D" and "E",
Complainant’s Reply), clearly reveal that no abolition or reorganization plan was discussed by the board.
Hence, the ground of redundancy is merely a device made by respondent Colayco in order to ease out
the complainant from the respondent corporation.

Moreover, the other ground for complainant’s dismissal is unclear and unknown to him as respondent
did not specify nor inform the complainant of the alleged recent developmentsxxx

This Office is also of the view that complainant was not accorded his right to due process prior to his
termination. The law requires that the employer must furnish the worker sought to be dismissed with
two (2) written notices before termination may be validly effected: first, a notice apprising the employee
of the particular acts or omissions for which his dismissal is sought and, second, a subsequent notice
informing the employee of the decision to dismiss him. In the case at bar, complainant was not apprised
of the grounds of his termination. He was not given the opportunity to be heard and defend
himselfxxx40

The OGCC, representing respondent CDC and former CEO Colayco separately appealed from the above
Decision. Both alleged that they had filed the proper bond to cover the award granted by LA Darlucio.
It is clear from the NLRC Rules of Procedure that appeals must be verified and certified against forum-
shopping by the parties-in-interest themselves. In the case at bar, the parties-in-interest are petitioner
Salenga, as the employee, and respondent Clark Development Corporation as the employer.

A corporation can only exercise its powers and transact its business through its board of directors and
through its officers and agents when authorized by a board resolution or its bylaws. The power of a
corporation to sue and be sued is exercised by the board of directors. The physical acts of the
corporation, like the signing of documents, can be performed only by natural persons duly authorized
for the purpose by corporate bylaws or by a specific act of the board. The purpose of verification is to
secure an assurance that the allegations in the pleading are true and correct and have been filed in good
faith.41

Thus, we agree with petitioner that, absent the requisite board resolution, neither Timbol-Roman nor
Atty. Mallari, who signed the Memorandum of Appeal and Joint Affidavit of Declaration allegedly on
behalf of respondent corporation, may be considered as the "appellant" and "employer" referred to by
Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure, which state:

SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. - (a) The Appeal shall be filed within the
reglementary period as provided in Section 1 of this Rule; shall be verified by appellant himself in
accordance with Section 4, Rule 7 of the Rules of Court, with proof of payment of the required appeal
fee and the posting of a cash or surety bond as provided in Section 6 of this Rule; shall be accompanied
by memorandum of appeal in three (3) legibly typewritten copies which shall state the grounds relied
upon and the arguments in support thereof; the relief prayed for; and a statement of the date when the
appellant received the appealed decision, resolution or order and a certificate of non-forum shopping
with proof of service on the other party of such appeal. A mere notice of appeal without complying with
the other requisites aforestated shall not stop the running of the period for perfecting an appeal.

(b) The appellee may file with the Regional Arbitration Branch or Regional Office where the appeal was
filed, his answer or reply to appellant's memorandum of appeal, not later than ten (10) calendar days
from receipt thereof. Failure on the part of the appellee who was properly furnished with a copy of the
appeal to file his answer or reply within the said period may be construed as a waiver on his part to file
the same.

(c) Subject to the provisions of Article 218, once the appeal is perfected in accordance with these Rules,
the Commission shall limit itself to reviewing and deciding specific issues that were elevated on appeal.

SECTION 5. APPEAL FEE. -The appellant shall pay an appeal fee of one hundred fifty pesos (P150.00) to
the Regional Arbitration Branch or Regional Office, and the official receipt of such payment shall be
attached to the records of the case.
SECTION 6. BOND. - In case the decision of the Labor Arbiter or the Regional Director involves a
monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety
bond. The appeal bond shall either be in cash or surety in an amount equivalent to the monetary award,
exclusive of damages and attorney’s fees.

In case of surety bond, the same shall be issued by a reputable bonding company duly accredited by the
Commission or the Supreme Court, and shall be accompanied by:

(a) a joint declaration under oath by the employer, his counsel, and the bonding company, attesting that
the bond posted is genuine, and shall be in effect until final disposition of the case.

(b) a copy of the indemnity agreement between the employer-appellant and bonding company; and

(c) a copy of security deposit or collateral securing the bond.

A certified true copy of the bond shall be furnished by the appellant to the appellee who shall verify the
regularity and genuineness thereof and immediately report to the Commission any irregularity.

Upon verification by the Commission that the bond is irregular or not genuine, the Commission shall
cause the immediate dismissal of the appeal.

No motion to reduce bond shall be entertained except on meritorious grounds and upon the posting of a
bond in a reasonable amount in relation to the monetary award.

The filing of the motion to reduce bond without compliance with the requisites in the preceding
paragraph shall not stop the running of the period to perfect an appeal. (Emphasis supplied)

The OGCC failed to produce any valid authorization from the board of directors despite petitioner
Salenga’s repeated demands. It had been given more than enough opportunity and time to produce the
appropriate board resolution, and yet it failed to do so. In fact, many of its pleadings, representations,
and submissions lacked board authorization.
We cannot agree with the OGCC’s attempt to downplay this procedural flaw by claiming that, as the
statutorily assigned counsel for GOCCs, it does not need such authorization. In Constantino-David v.
Pangandaman-Gania,42 we exhaustively explained why it was necessary for government agencies or
instrumentalities to execute the verification and the certification against forum-shopping through their
duly authorized representatives. We ruled thereon as follows:

But the rule is different where the OSG is acting as counsel of record for a government agency. For in
such a case it becomes necessary to determine whether the petitioning government body has
authorized the filing of the petition and is espousing the same stand propounded by the OSG. Verily, it is
not improbable for government agencies to adopt a stand different from the position of the OSG since
they weigh not just legal considerations but policy repercussions as well. They have their respective
mandates for which they are to be held accountable, and the prerogative to determine whether further
resort to a higher court is desirable and indispensable under the circumstances.

The verification of a pleading, if signed by the proper officials of the client agency itself, would fittingly
serve the purpose of attesting that the allegations in the pleading are true and correct and not the
product of the imagination or a matter of speculation, and that the pleading is filed in good faith. Of
course, the OSG may opt to file its own petition as a "People's Tribune" but the representation would
not be for a client office but for its own perceived best interest of the State.

The case of Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., is not also a precedent that
may be invoked at all times to allow the OSG to sign the certificate of non-forum shopping in place of
the real party-in-interest. The ruling therein mentions merely that the certification of non-forum
shopping executed by the OSG constitutes substantial compliance with the rule since "the OSG is the
only lawyer for the petitioner, which is a government agency mandated under Section 35, Chapter 12,
Title III, Book IV, of the 1987 Administrative Code (Reiterated under Memorandum Circular No. 152
dated May 17, 1992) to be represented only by the Solicitor General."

By its very nature, "substantial compliance" is actually inadequate observance of the requirements of a
rule or regulation which are waived under equitable circumstances to facilitate the administration of
justice there being no damage or injury caused by such flawed compliance. This concept is expressed in
the statement "the rigidity of a previous doctrine was thus subjected to an inroad under the concept of
substantial compliance." In every inquiry on whether to accept "substantial compliance," the focus is
always on the presence of equitable conditions to administer justice effectively and efficiently without
damage or injury to the spirit of the legal obligation.

xxx xxx xxx

The fact that the OSG under the 1987 Administrative Code is the only lawyer for a government agency
wanting to file a petition, or complaint for that matter, does not operate per se to vest the OSG with the
authority to execute in its name the certificate of non-forum shopping for a client office. For, in many
instances, client agencies of the OSG have legal departments which at times inadvertently take legal
matters requiring court representation into their own hands without the intervention of the OSG.
Consequently, the OSG would have no personal knowledge of the history of a particular case so as to
adequately execute the certificate of non-forum shopping; and even if the OSG does have the relevant
information, the courts on the other hand would have no way of ascertaining the accuracy of the OSG's
assertion without precise references in the record of the case. Thus, unless equitable circumstances
which are manifest from the record of a case prevail, it becomes necessary for the concerned
government agency or its authorized representatives to certify for non-forum shopping if only to be sure
that no other similar case or incident is pending before any other court.

We recognize the occasions when the OSG has difficulty in securing the attention and signatures of
officials in charge of government offices for the verification and certificate of non-forum shopping of an
initiatory pleading. This predicament is especially true where the period for filing such pleading is non-
extendible or can no longer be further extended for reasons of public interest such as in applications for
the writ of habeas corpus, in election cases or where sensitive issues are involved. This quandary is more
pronounced where public officials have stations outside Metro Manila.

But this difficult fact of life within the OSG, equitable as it may seem, does not excuse it from wantonly
executing by itself the verification and certificate of non-forum shopping. If the OSG is compelled by
circumstances to verify and certify the pleading in behalf of a client agency, the OSG should at least
endeavor to inform the courts of its reasons for doing so, beyond instinctively citing City Warden of the
Manila City Jail v. Estrella and Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc.

Henceforth, to be able to verify and certify an initiatory pleading for non-forum shopping when acting as
counsel of record for a client agency, the OSG must (a) allege under oath the circumstances that make
signatures of the concerned officials impossible to obtain within the period for filing the initiatory
pleading; (b) append to the petition or complaint such authentic document to prove that the party-
petitioner or complainant authorized the filing of the petition or complaint and understood and adopted
the allegations set forth therein, and an affirmation that no action or claim involving the same issues has
been filed or commenced in any court, tribunal or quasi-judicial agency; and, (c) undertake to inform the
court promptly and reasonably of any change in the stance of the client agency.

Anent the document that may be annexed to a petition or complaint under letter (b) hereof, the letter-
endorsement of the client agency to the OSG, or other correspondence to prove that the subject-matter
of the initiatory pleading had been previously discussed between the OSG and its client, is satisfactory
evidence of the facts under letter (b) above. In this exceptional situation where the OSG signs the
verification and certificate of non-forum shopping, the court reserves the authority to determine the
sufficiency of the OSG's action as measured by the equitable considerations discussed herein. (Emphasis
ours, italics provided)
The ruling cited above may have pertained only to the Office of the Solicitor General’s representation of
government agencies and instrumentalities, but we see no reason why this doctrine cannot be applied
to the case at bar insofar as the OGCC is concerned.

While in previous decisions we have excused transgressions of these rules, it has always been in the
context of upholding justice and fairness under exceptional circumstances. In this case, though,
respondent failed to provide any iota of rhyme or reason to compel us to relax these requirements.
Instead, what is clear to us is that the so-called appeal was done against the instructions of then
President/CEO Naguiat not to file an appeal. Timbol-Roman, who signed the Verification and the
Certification against forum-shopping, was not even an authorized representative of the corporation. The
OGCC was equally remiss in its duty. It ought to have advised respondent corporation, the proper
procedure for pursuing an appeal. Instead, it maintained the appeal and failed to present any valid
authorization from respondent corporation even after petitioner had questioned OGCC’s authority all
throughout the proceedings. Thus, it is evident that the appeal was made in bad faith.

The unauthorized and overzealous acts of officials of respondent CDC and the OGCC have led to a waste
of the government’s time and resources. More alarmingly, they have contributed to the injustice done
to petitioner Salenga. By taking matters into their own hands, these officials let the case drag on for
years, depriving him of the enjoyment of property rightfully his. What should have been a simple case of
illegal dismissal became an endless stream of motions and pleadings.

Time and again, we have said that the perfection of an appeal within the period prescribed by law is
jurisdictional, and the lapse of the appeal period deprives the courts of jurisdiction to alter the final
judgment.43 Thus, there is no other recourse but to respect the findings and ruling of the labor arbiter.
Clearly, therefore, the CA committed grave abuse of discretion in entertaining the Petition filed before it
after the NLRC had dismissed the case based on lack of jurisdiction. The assailed CA Decision did not
even resolve petitioner Salenga’s consistent and persistent claim that the NLRC should not have taken
cognizance of the appeal in the first place, absent a board resolution. Thus, LA Darlucio’s Decision with
respect to the liability of the corporation still stands.

However, we note from that Decision that Rufo Colayco was made solidarily liable with respondent
corporation. Colayco thereafter filed his separate appeal. As to him, the NLRC correctly held in its 30 July
2001 Decision that he may not be held solidarily responsible to petitioner. As a result, it dropped him as
respondent. Notably, in the case at bar, petitioner does not question that ruling.

Based on the foregoing, all other subsequent proceedings regarding the issue of petitioner’s dismissal
are null and void for having been conducted without jurisdiction. Thus, it is no longer incumbent upon
us to rule on the other errors assigned in the matter of petitioner Salenga’s dismissal.
CDC is not under the civil service laws on retirement.

While the case was still persistently being pursued by the OGCC, a new issue arose when petitioner
Salenga reached retirement age: whether his retirement benefits should be computed according to civil
service laws.

To recall, the issue of how to compute the retirement benefits of petitioner was raised in his Omnibus
Motion dated 7 May 2004 filed before the NLRC after it had reinstated LA Darlucio’s original Decision.
The issue was not covered by petitioner’s Complaint for illegal dismissal, but was a different issue
altogether and should have been properly addressed in a separate Complaint. We cannot fault
petitioner, though, for raising the issue while the case was still pending with the NLRC. If it were not for
the "appeal" undertaken by Timbol-Roman and the OGCC through Atty. Mallari, the issue would have
taken its proper course and would have been raised in a more appropriate time and manner. Thus, we
deem it proper to resolve the matter at hand to put it to rest after a decade of litigation.

Petitioner Salenga contends that respondent CDC is covered by the GSIS Law. Thus, he says, the
computation of his retirement benefits should include all the years of actual government service,
starting from the original appointment forty (40) years ago up to his retirement.

Respondent CDC owes its existence to Executive Order No. 80 issued by then President Fidel V. Ramos. It
was meant to be the implementing and operating arm of the Bases Conversion and Development
Authority (BCDA) tasked to manage the Clark Special Economic Zone (CSEZ). Expressly, respondent was
formed in accordance with Philippine corporation laws and existing rules and regulations promulgated
by the SEC pursuant to Section 16 of Republic Act (R.A.) 7227.44 CDC, a government-owned or
-controlled corporation without an original charter, was incorporated under the Corporation Code.
Pursuant to Article IX-B, Sec. 2(1), the civil service embraces only those government-owned or
-controlled corporations with original charter. As such, respondent CDC and its employees are covered
by the Labor Code and not by the Civil Service Law, consistent with our ruling in NASECO v. NLRC,45 in
which we established this distinction. Thus, in Gamogamo v. PNOC Shipping and Transport Corp.,46 we
held:

Retirement results from a voluntary agreement between the employer and the employee whereby the
latter after reaching a certain age agrees to sever his employment with the former.

Since the retirement pay solely comes from Respondent's funds, it is but natural that Respondent shall
disregard petitioner's length of service in another company for the computation of his retirement
benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979. Ordinarily, his creditable
service shall be reckoned from such date. However, since Respondent took over the shipping business of
LUSTEVECO and agreed to assume without interruption all the service credits of petitioner with
LUSTEVECO, petitioner's creditable service must start from 9 November 1977 when he started working
with LUSTEVECO until his day of retirement on 1 April 1995. Thus, petitioner's creditable service is
17.3333 years.

We cannot uphold petitioner's contention that his fourteen years of service with the DOH should be
considered because his last two employers were government-owned and controlled corporations, and
fall under the Civil Service Law. Article IX(B), Section 2 paragraph 1 of the 1987 Constitution states —

Sec. 2. (1)The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters.

It is not at all disputed that while Respondent and LUSTEVECO are government-owned and controlled
corporations, they have no original charters; hence they are not under the Civil Service Law. In
Philippine National Oil Company-Energy Development Corporation v. National Labor Relations
Commission, we ruled:

xxx "Thus under the present state of the law, the test in determining whether a government-owned or
controlled corporation is subject to the Civil Service Law are [sic] the manner of its creation, such that
government corporations created by special charter(s) are subject to its provisions while those
incorporated under the General Corporation Law are not within its coverage." (Emphasis supplied)

Hence, petitioner Salenga is entitled to receive only his retirement benefits based only on the number of
years he was employed with the corporation under the conditions provided under its retirement plan, as
well as other benefits given to him by existing laws.1âwphi1

WHEREFORE, in view of the foregoing, the Petition in G.R. No. 174941 is partially GRANTED. The
Decision of LA Darlucio is REINSTATED insofar as respondent corporation’s liability is concerned.
Considering that petitioner did not maintain the action against Rufo Colayco, the latter is not solidarily
liable with respondent Clark Development Corporation.

The case is REMANDED to the labor arbiter for the computation of petitioner’s retirement benefits in
accordance with the Social Security Act of 1997 otherwise known as Republic Act No. 8282, deducting
therefrom the sums already paid by respondent CDC. If any, the remaining amount shall be subject to
the legal interest of 6% per annum from the filing date of petitioner’s Omnibus Motion on 11 May 2004
up to the time this judgment becomes final and executory. Henceforth, the rate of legal interest shall be
12% until the satisfaction of judgment.

SO ORDERED.

8. G.R. No. 168612               December 10, 2014

PHILIPPINE ELECTRIC CORPORATION (PHILEC), Petitioner, 

vs.
COURT OF APPEALS, NATIONAL CONCILIATION AND MEDIATION BOARD (NCMB),
Department of Labor and Employment, RAMON T. JIMENEZ, in his capacity as
Voluntary Arbitrator, PHILEC WORKERS' UNION (PWU), ELEODORO V. LIPIO, and
EMERLITO C. IGNACIO, Respondents.

DECISION

LEONEN, J.:

An appeal to reverse or modify a Voluntary Arbitrator's award or decision must be filed

before the Court of Appeals within 10 calendar days from receipt of the award or decision.

This is a petition  for review on certiorari of the Court of Appeals’ decision  dated May 25,
1 2

2004, dismissing the Philippine Electric Corporation’s petition for certiorari for lack of merit.
Philippine Electric Corporation (PHILEC) is a domestic corporation "engaged in the
manufacture and repairs of high voltage transformers."  Among its rank-and-file employees
3

were Eleodoro V. Lipio (Lipio) and Emerlito C. Ignacio, Sr. (Ignacio, Sr.), former members of
the PHILEC Workers’ Union (PWU).  PWU is a legitimate labor organization and the
4

exclusive bargaining representative of PHILEC’s rank-and-file employees. 5

From June 1, 1989 to May 31, 1997, PHILEC and its rank-and-file employees were
governed by collective bargaining agreements providing for the following step increases in
an employee’s basic salary in case of promotion: 6

Rank-and-File (PWU)
Pay
Grade June 1, 1989 to June 1, 1992 to June 1, 1994 to
May 31, 1992 May 31, 1994 May 31, 1997
I – II 50 60 65
II – III 60 70 78
III – IV 70 80 95
IV – V 80 110 120
 V- VI 100 140 150
VI – VII 120 170 195
VII – VIII 170 230 255
VIII – IX 220 290 340
IX – X 260 350 455

On August 18, 1997 and with the previous collective bargaining agreements already
expired, PHILEC selected Lipio for promotion from Machinist under Pay Grade VIII  to
7

Foreman I under Pay Grade B.  PHILEC served Lipio a memorandum,  instructing him to
8 9

undergo training for the position of Foreman I beginning on August 25, 1997. PHILEC
undertook to pay Lipio training allowance as provided in the memorandum:

This will confirm your selection and that you will undergo training for the position of
Foreman I (PG B) of the Tank Finishing Section, Distribution Transformer Manufacturing
and Repair effective August 25, 1997.

You will be trained as a Foreman I,and shall receive the following training allowance until
you have completed the training/observation period which shall not exceed four (4) months.

First Month - - - - - 350.00

Second month - - - - - 815.00
Third month - - - - - 815.00
Fourth month - - - - - 815.00

Please be guided accordingly. 10

Ignacio, Sr., then DT-Assembler with Pay Grade VII,  was likewise selected for training for
11

the position of Foreman I.  On August 21, 1997, PHILEC served Ignacio, Sr. a
12

memorandum,  instructing him to undergo training with the following schedule of allowance:
13

This will confirm your selection and that you will undergo training for the position of
Foreman I (PG B) of the Assembly Section, Distribution Transformer Manufacturing and
Repair effective

August 25, 1997.

You will be trained as a Foreman I,and shall receive the following training allowance until
you have completed the training/observation period which shall not exceed four (4) months.

First Month ----- 255.00

Second month - - - - - 605.00
 Third month - - - - - 1,070.00
Fourth month - - - - - 1,070.00

Please be guided accordingly. 14

On September 17, 1997, PHILEC and PWU entered into a new collective bargaining
agreement, effective retroactively on June 1, 1997 and expiring on May 31, 1999.  Under
15

Article X, Section 4 of the June 1, 1997 collective bargaining agreement, a rank-and-file

employee promoted shall be entitled to the following step increases in his or her basic
salary:
16

Section 4. STEP INCREASES. [Philippine Electric Corporation] shall adopt the following
step increases on the basic salary in case of promotion effective June 1, 1997. Such
increases shall be based on the scale below or upon the minimum of the new pay grade to
which the employee is promoted, whichever is higher:

Pay Grade Step Increase

I - II P80.00
II - III P105.00
III - IV P136.00
IV - V P175.00
V - VI P224.00
VI - VII P285.00
VII - VIII P361.00
VIII - IX P456.00
IX - X P575.00
To be promoted, a rank-and-file employee shall undergo training or observation and shall
receive training allowance as provided in Article IX, Section 1(f) of the June 1, 1997
collective bargaining agreement: 17

Section 1. JOB POSTING AND BIDDING:

....

(f) Allowance for employees under Training or Observation shall be on a graduated basis as
follows:

For the first month of training, the allowance should be equivalent to one step increase of
the next higher grade. Every month thereafter the corresponding increase shall be
equivalent to the next higher grade until the allowance for the grade applied for is attained.

As an example, if a Grade I employee qualifies for a Grade III position, he will receive the
training allowance for Grade I to Grade II for the first month. On the second month, he will
receive the training allowance for Grade I to Grade II plus the allowance for Grade II to
Grade III. He will then continue to receive this amount until he finishes his training or
observation period. 18
Claiming that the schedule of training allowance stated in the memoranda served on Lipio
and Ignacio,Sr. did not conform to Article X, Section 4 of the June 1, 1997 collective
bargaining agreement, PWU submitted the grievance to the grievance machinery. 19

PWU and PHILEC failed to amicably settle their grievance. Thus, on December 21, 1998,
the parties filed a submission agreement  with the National Conciliation and Mediation
20

Board, submitting the following issues to voluntary arbitration:

WHETHER OR NOT PHILEC VIOLATED SECTION 4 (Step Increases) ARTICLE X (Wage

and Position Standardization) OF THE EXISTING COLLECTIVE BARGAINING
AGREEMENT (CBA) IN IMPLEMENTING THE STEP INCREASES RELATIVE TO THE
PROMOTION OF INDIVIDUAL COMPLAINANTS.

II

WHETHER OR NOT PHILEC’s MANNER OF IMPLEMENTING THE STEP INCREASES IN

CONNECTION WITH THE PROMOTION OF INDIVIDUAL COMPLAINANTS IN RELATION
TO THE PROVISIONS OF SECTION 4, ARTICLE X OF THE CBA CONSTITUTES
UNFAIR LABOR PRACTICE. 21

In their submission agreement, PWU and PHILEC designated Hon. Ramon T. Jimenez as
Voluntary Arbitrator (Voluntary Arbitrator Jimenez). 22

Voluntary Arbitrator Jimenez, in the order  dated January 4, 1999, directed the parties to file
23

their respective position papers.

In its position paper,  PWU maintained that PHILEC failed to follow the schedule of step
24

increases under Article X, Section 4 of the June 1, 1997 collective bargaining agreement.
Machinist I, Lipio’s position before he underwent training for Foreman I, fell under Pay
Grade VIII, while Foreman I fell under Pay Grade X. Following the schedule under Article X,
Section 4 of the June 1, 1997 collective bargaining agreement and the formula under Article
IX, Section 1(f), Lipio should be paid training allowance equal to the step increase for pay
grade bracket VIII-IX for the first month of training. For the succeeding months, Lipio should
be paid an allowance equal to the step increase for pay grade bracket VIII-IX plus the step
increase for pay grade bracket IX-X, thus: 25

First Month ----- P456.00

Second month - - - - - P1,031.00
Third month ----- P1,031.00
Fourth month - - - - - P1,031.00.

With respect to Ignacio, Sr., he was holding the position of DTAs sembler under Pay Grade
VII when hewas selected to train for the position of Foreman I under Pay Grade X. Thus, for
his first month of training, Ignacio, Sr. should be paid training allowance equal to the step
increase under pay grade bracket VII-VIII. For the second month, he should be paid an
allowance equal to the step increase under pay grade bracket VIIVIII plus the step increase
under pay grade bracket VIII-IX. For the third and fourth months, Ignacio, Sr. should receive
an allowance equal to the amount he received for the second month plus the amount equal
to the step increase under pay grade bracket IX-X, thus: 26

First Month ----- P361.00

Second month - - - - - P817.00
Third month ----- P1,392.00
Fourth month - - - - - P1,392.00.

For PHILEC’s failure to apply the schedule of step increases under Article X of the June 1,
1997 collective bargaining agreement, PWU argued that PHILEC committed an unfair labor
practice under Article 248  of the Labor Code.
27 28

In its position paper,  PHILEC emphasized that it promoted Lipio and Ignacio, Sr. while it
29

was still negotiating a new collective bargaining agreement with PWU. Since PHILEC and
PWU had not yet negotiated a new collective bargaining agreement when PHILEC selected
Lipio and Ignacio, Sr. for training, PHILEC applied the "Modified SGV" pay grade scale in
computing Lipio’s and Ignacio, Sr.’s training allowance. 30

This "Modified SGV" pay grade scale, which PHILEC and PWU allegedly agreed to
implement beginning on May 9, 1997, covered both rank-and-file and supervisory
employees.  According to PHILEC, its past collective bargaining agreements withthe rank-
31

and-file and supervisory unions resulted in an overlap of union membership in Pay Grade IX
of the rank-and-file employees and Pay Grade A of the supervisory employees.  Worse,32

past collective bargaining agreements resulted in rank-and-file employees under Pay

Grades IX and X enjoying higher step increases than supervisory employees under Pay
Grades A and B: 33

Pay Grade
Pay Grade Scale
Scale under the
Step Increase under the Step Increase
Rank-and-File
Supervisory CBA
CBA
VIII-IX P340.00 A P290.00
IX-X P455.00 A-B P350.00

To preserve the hierarchical wage structure within PHILEC’s enterprise, PHILEC and PWU
allegedly agreed to implement the uniform pay grade scale under the "Modified SGV" pay
grade system, thus: 34

Pay Grade
Step Increase
Rank-and-File Supervisory
 I – II P65.00
II-III P78.00
III-IV P95.00
IV-V P120.00
V-VI P150.00
VI-VII P195.00
VII-VIII P255.00
VIII-IX A P350.00
IX-X A-B P465.00
X-XI B-C P570.00
XI-XII C-D P710.00
D-E P870.00
E-F P1,055.00

Pay grade bracket I–IX covered rank-and-file employees, while pay grade bracket A–F
covered supervisory employees. 35

Under the "Modified SGV" pay grade scale, the position of Foreman I fell under Pay Grade
B. PHILEC then computed Lipio’s and Ignacio, Sr.’s training allowance accordingly. 36

PHILEC disputed PWU’s claim of unfair labor practice. According to PHILEC, it did not
violate its collective bargaining agreement with PWU when it implemented the "Modified
SGV" scale. Even assuming that it violated the collective bargaining agreement, PHILEC
argued that its violation was not "gross" or a "flagrant and/or malicious refusal to comply
with the economic provisions of [the collective bargaining agreement]."  PHILEC, therefore,
37

was not guilty of unfair labor practice.

38

Voluntary Arbitrator Jimenez held in the decision  dated August 13, 1999, that PHILEC
39

violated its collective bargaining agreement with PWU.  According to Voluntary Arbitrator
40

Jimenez, the June 1, 1997 collective bargaining agreement governed when PHILEC
selected Lipio and Ignacio, Sr. for promotion on August 18 and 21, 1997.  The provisions of
41

the collective bargaining agreement being the law between the parties, PHILEC should
have computed Lipio’s and Ignacio, Sr.’s training allowance based on Article X, Section 4 of
the June 1, 1997 collective bargaining agreement. 42

As to PHILEC’s claim that applying Article X, Section 4 would result in salary distortion
within PHILEC’s enterprise, Voluntary Arbitrator Jimenez ruled that this was "a concern that
PHILEC could have anticipated and could have taken corrective action"  before signing the
43

collective bargaining agreement.

Voluntary Arbitrator Jimenez dismissed PWU’s claim of unfair labor practice.  According to
44

him, PHILEC’s acts "cannot be considered a gross violation of the [collective bargaining
agreement] nor . . . [a] flagrant and/or malicious refusal to comply withthe economic
provisions of the [agreement]." 45

Thus, Voluntary Arbitrator Jimenez ordered PHILEC to pay Lipio and Ignacio, Sr. training
allowance based on Article X, Section 4 and Article IX, Section 1 of the June 1, 1997
collective bargaining agreement. 46

PHILEC received a copy of Voluntary Arbitrator Jimenez’s decision on August 16,

1999.  On August 26, 1999, PHILEC filed a motion for partial reconsideration  of Voluntary
47 48

Arbitrator Jimenez’s decision.

In the resolution  dated July 7, 2000, Voluntary Arbitrator Jimenez denied PHILEC’s motion
49

for partial reconsideration for lack of merit. PHILEC received a copy of the July 7, 2000
resolution on August 11, 2000. 50

On August 29, 2000, PHILEC filed a petition  for certiorari before the Court of Appeals,
51

alleging that Voluntary Arbitrator Jimenez gravely abused his discretion in rendering his
decision.  PHILEC maintained that it did not violate the June 1, 1997 collective bargaining
52

agreement.  It applied the "Modified SGV" pay grade rates toavoid salary distortion within
53

its enterprise. 54

In addition, PHILEC argued that Article X, Section 4 of the collective bargaining agreement
did not apply to Lipio and Ignacio, Sr. Considering that Lipio and Ignacio, Sr. were promoted
to a supervisory position, their training allowance should be computed based on the
provisions of PHILEC’s collective bargaining agreement with ASSET, the exclusive
bargaining representative of PHILEC’s supervisory employees. 55

The Court of Appeals affirmed Voluntary Arbitrator Jimenez’s decision.  It agreed that
56

PHILEC was bound to apply Article X, Section 4 of its June 1, 1997 collective bargaining
agreement with PWU in computing Lipio’s and Ignacio, Sr.’s training allowance.  In its
57

decision, the Court of Appeals denied due course and dismissed PHILEC’s petition for
certiorari for lack of merit. 58

PHILEC filed a motion for reconsideration, which the Court of Appeals denied in the
resolution  dated June 23, 2005.
59

On August 3, 2005, PHILEC filed its petition for review on certiorari before this
court,  insisting that it did not violate its collective bargaining agreement with
60

PWU.  PHILEC maintains that Lipio and Ignacio, Sr. were promoted to a position covered
61

by the pay grade scale for supervisory employees.  Consequently, the provisions of
62

PHILEC’s collective bargaining agreement with its supervisory employees should apply, not
its collective bargaining agreement with PWU.  To insist on applying the pay grade scale in
63

Article X, Section 4, PHILEC argues, would result in a salary distortion within PHILEC. 64

In the resolution  dated September 21, 2005,this court ordered PWU to comment on
65

PHILEC’s petition for review on certiorari.

In its comment,  PWU argues that Voluntary Arbitrator Jimenez did not gravely abuse his
66

discretion in rendering his decision. He correctly applied the provisions of the PWU
collective bargaining agreement, the law between PHILEC and its rank-and-file employees,
in computing Lipio’s and Ignacio, Sr.’s training allowance.67

On September 27, 2006, PHILEC filed its reply,  reiterating its arguments in its petition for
68

review on certiorari.

The issue for our resolution is whether Voluntary Arbitrator Jimenez gravely abused his
discretion in directing PHILEC to pay Lipio’s and Ignacio, Sr.’s training allowance based on
Article X, Section 4 of the June 1, 1997 rank-and-file collective bargaining agreement.

This petition should be denied.

The Voluntary Arbitrator’s decision

dated August 13, 1999 is already final and
executory

We note that PHILEC filed before the Court of Appeals a petition for certiorari under Rule 65
of the Rules ofCourt against Voluntary Arbitrator Jimenez’s decision. 69

This was not the proper remedy.

Instead, the proper remedy to reverse or modify a Voluntary Arbitrator’s or a panel of

Voluntary Arbitrators’ decision or award is to appeal the award or decision before the Court
of Appeals. Rule 43, Sections 1 and 3 of the Rules of Court provide:

Section 1. Scope.

This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals
and from awards, judgments, final orders or resolutions of orauthorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil
Service Commission, Central Board of Assessment Appeals, Securities and Exchange
Commission, Office of the President, Land Registration Authority, Social Security
Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology
Transfer, National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform under Republic Act No.
6657, Government Service Insurance System, Employees Compensation Commission,
Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy
Commission, Board of Investments, Construction Industry Arbitration Commission, and
voluntary arbitrators authorized by law.

....

Sec. 3. Where to appeal.

An appeal under this Rule may be taken to the Court of Appeals within the period and in the
manner herein provided, whether the appeal involves questions of fact, of law, or mixed
questions of fact and law. (Emphasis supplied)

A Voluntary Arbitrator or a panel of Voluntary Arbitrators has the exclusive original

jurisdiction over grievances arising from the interpretation or implementation of collective
bargaining agreements. Should the parties agree, a Voluntary Arbitrator or a panel of
Voluntary Arbitrators shall also resolve the parties’ other labor disputes, including unfair
labor practices and bargaining deadlocks. Articles 261 and 262 of the Labor Code provide:

ART. 261. JURISDICTION OF VOLUNTARY ARBITRATORS OR PANEL OF VOLUNTARY

ARBITRATORS.

The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining Agreement, except
those which are gross in character, shall no longer be treated as unfair labor practice and
shall be resolved as grievances under the Collective Bargaining Agreement. For purposes
of this article, gross violations of Collective Bargaining Agreement shall mean flagrant
and/or malicious refusal to comply with the economic provisions of such agreement.

The Commission, its Regional Offices and the Regional Directors of the Department of
Labor and Employment shall not entertain disputes, grievances, or matters under the
exclusive and original jurisdiction of the Voluntary Arbitrator orpanel of Voluntary Arbitrators
and shall immediately dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement.

ART. 262. JURISDICTION OVER OTHER LABOR DISPUTES.

The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties,
shall also hear and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.

In Luzon Development Bank v. Association of Luzon Development Bank Employees,  this 70

court ruled that the proper remedy against the award or decision of the Voluntary
Arbitratoris an appeal before the Court of Appeals. This court first characterized the office
ofa Voluntary Arbitrator or a panel of Voluntary Arbitrators as a quasi-judicial agency, citing
Volkschel Labor Union, et al. v. NLRC  and Oceanic Bic Division (FFW) v. Romero:
71 72

In Volkschel Labor Union, et al. v. NLRC, et al.,on the settled premise that the judgments of
courts and awards of quasi-judicial agencies must become final at some definite time, this
Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence,
their decisions have the same legal effect as judgments of a court. In Oceanic Bic Division
(FFW), et al. v. Romero, et al., this Court ruled that "a voluntary arbitrator by the nature of
her functions acts in a quasi-judicial capacity." Under these rulings, it follows that the
voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a
quasijudicial agency but independent of, and apart from, the NLRC since his decisions are
not appealable to the latter.  (Citations omitted)
73

This court then stated that the office of a Voluntary Arbitrator or a panel of Voluntary
Arbitrators, even assuming that the office is not strictly a quasi-judicial agency, may be
considered an instrumentality, thus:

Assuming arguendo that the voluntaryarbitrator or the panel of voluntary arbitrators may not
strictly be considered as a quasi-judicial agency, board or commission, still both he and the
panel are comprehended within the concept of a "quasi-judicial instrumentality." It may even
be stated that it was to meet the very situation presented by the quasi-judicial functions of
the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating
under the Construction Industry Arbitration Commission, that the broader term
"instrumentalities" was purposely included in the above-quoted provision.

An "instrumentality" is anything used as a means or agency. Thus, the terms governmental

"agency" or "instrumentality" are synonymous in the sense that either of them is a means by
which a government acts, or by which a certain government act or function is performed.
The word "instrumentality," with respect to a state, contemplates an authority to which the
state delegates governmental power for the performance of a state function. An individual
person, like an administrator or executor, is a judicial instrumentality in the settling of an
estate, in the same manner that a sub-agent appointed by a bankruptcy court is an
instrumentality of the court, and a trustee in bankruptcy of a defunct corporation is an
instrumentality of the state.

The voluntary arbitrator no less performs a state function pursuant to a governmental power
delegated to him under the provisions therefor in the Labor Code and he falls, therefore,
within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P.
129.  (Citations omitted)
74

Since the office of a Voluntary Arbitrator or a panel of Voluntary Arbitrators is considered a

quasi-judicial agency, this court concluded that a decision or award rendered by a Voluntary
Arbitrator is appealable before the Court of Appeals. Under Section 9 of the Judiciary
Reorganization Act of 1980, the Court of Appeals has the exclusive original jurisdiction over
decisions or awards of quasi-judicial agencies and instrumentalities:

Section 9. Jurisdiction. The Court of Appeals shall exercise:

....

3. Exclusive appellate jurisdiction over all final judgements, resolutions, orders or awardsof
Regional Trial Courts and quasijudicial agencies, instrumentalities, boards or commission,
including the Securities and Exchange Commission, the Social Security Commission, the
Employees Compensation Commission and the Civil Service Commission, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph 4 of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
(Emphasis supplied)

Luzon Development Bankwas decided in 1995 but remains "good law."  In the 2002 case of
75

Alcantara, Jr. v. Court of Appeals,  this court rejected petitioner Santiago Alcantara, Jr.’s
76

argument that the Rules of Court, specifically Rule 43, Section 2, superseded the Luzon
Development Bank ruling:

Petitioner argues, however, that Luzon Development Bank is no longer good law because
of Section 2, Rule 43 of the Rules of Court, a new provision introduced by the 1997 revision.
The provision reads:

SEC. 2. Cases not covered. -This Rule shall not apply to judgments or final orders issued
under the Labor Code of the Philippines.

The provisions may be new to the Rules of Court but it is far from being a new law. Section
2, Rule 42 of the 1997 Rules of Civil Procedure, as presently worded, is nothing more but a
reiteration of the exception to the exclusive appellate jurisdiction of the Court of Appeals, as
provided for in Section 9, Batas Pambansa Blg. 129,  as amended by Republic Act No.
7

7902: 8

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission, the Employees’
Compensation Commission and the Civil Service Commission, except those falling within
the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4)
of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The Court took into account this exception in Luzon Development Bank but, nevertheless,
held that the decisions of voluntary arbitrators issued pursuant to the Labor Codedo not
come within its ambit:

x x x. The fact that [the voluntary arbitrator’s] functions and powers are provided for in the
Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-
judicial instrumentality as contemplated therein. It will be noted that, although the
Employees’ Compensation Commission is also provided for in the Labor Code, Circular No.
1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid
down the procedure for the appealability of its decisions to the Court of Appeals under the
foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending
Sec. 9 of B.P. 129.

A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should
likewise be appealable to the Court of Appeals, in line with the procedure outlined in
Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies,
boards and commissions enumerated therein.  (Emphases in the original)
77
This court has since reiterated the Luzon Development Bankruling in its decisions. 78

Article 262-A of the Labor Code provides that the award or decision of the Voluntary
Arbitrator "shall befinal and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties":

Art. 262-A. PROCEDURES. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall
have the power to hold hearings, receive evidences and take whatever action isnecessary
to resolve the issue or issues subject of the dispute, including efforts to effect a voluntary
settlement between parties.

All parties to the dispute shall beentitled to attend the arbitration proceedings. The
attendance of any third party or the exclusion of any witness from the proceedings shall be
determined by the Voluntary Arbitrator or panel of Voluntary Arbitrators. Hearing may be
adjourned for cause or upon agreement by the parties.

Unless the parties agree otherwise, it shall be mandatory for the Voluntary Arbitrator or
panel of Voluntary Arbitrators to render an award or decision within twenty (20) calendar
days from the date of submission of the dispute to voluntary arbitration.

The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall
contain the facts and the law on which it is based. It shall be final and executory after ten
(10) calendar days from receipt of the copy of the award or decision by the parties.

Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary
Arbitrators or the Labor Arbiter in the region where the movant resides, in case of the
absence or incapacity of the Voluntary Arbitrator or panel of Voluntary Arbitrators, for any
reason, may issue a writ of execution requiring either the sheriff of the Commission or
regular courts or any public official whomthe parties may designate in the submission
agreement to execute the final decision, order or award. (Emphasis supplied)

Thus, in Coca-Cola Bottlers Philippines, Inc. Sales Force UnionPTGWO-BALAIS v. Coca

Cola-Bottlers Philippines, Inc.,  this court declared that the decision of the Voluntary
79

Arbitrator had become final and executory because it was appealed beyond the 10-day
reglementary period under Article 262-A of the Labor Code.

It is true that Rule 43, Section 4 of the Rules of Court provides for a 15-day reglementary
period for filing an appeal:

Section 4. Period of appeal. — The appeal shall be taken within fifteen (15) days from
notice of the award, judgment, final order or resolution, or from the date of its last
publication, if publication is required by law for its effectivity, or of the denial of petitioner's
motion for new trial or reconsideration duly filed in accordance with the governing law of the
court or agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon
proper motion and the payment of the full amount of the docket fee before the expiration of
the reglementary period, the Court of Appeals may grant an additional period of fifteen (15)
days only within which to file the petition for review. No further extension shall be granted
except for the most compelling reason and in no case to exceed fifteen (15) days.
(Emphasis supplied)

The 15-day reglementary period has been upheld by this court in a long line of cases.  In 80

AMA Computer College-Santiago City, Inc. v. Nacino,  Nippon Paint Employees Union-
81

OLALIA v. Court of Appeals,  Manila Midtown Hotel v. Borromeo,  and Sevilla Trading
82 83

Company v. Semana,  this court denied petitioners’ petitions for review on certiorari since
84

petitioners failed to appeal the Voluntary Arbitrator’s decision within the 15-day
reglementary period under Rule43. In these cases, the Court of Appeals had no jurisdiction
to entertain the appeal assailing the Voluntary Arbitrator’s decision.

Despite Rule 43 providing for a 15-day period to appeal, we rule that the Voluntary
Arbitrator’s decision mustbe appealed before the Court of Appeals within 10 calendar days
from receipt of the decision as provided in the Labor Code.

Appeal is a "statutory privilege,"  which may be exercised "only in the manner and in
85

accordance withthe provisions of the law."  "Perfection of an appeal within the reglementary
86

period is not only mandatory but also jurisdictional so that failure to doso rendered the
decision final and executory, and deprives the appellate court of jurisdiction to alter the final
judgment much less to entertain the appeal." 87

We ruled that Article 262-A of the Labor Code allows the appeal of decisions rendered by
Voluntary Arbitrators. Statute provides that the Voluntary Arbitrator’s decision "shall befinal
88

and executory after ten (10) calendar days from receipt of the copy of the award or decision
by the parties." Being provided in the statute,this 10-day period must be complied with;
otherwise, no appellate court willhave jurisdiction over the appeal. This absurd situation
occurs whenthe decision is appealed on the 11th to 15th day from receipt as allowed under
the Rules, but which decision, under the law, has already become final and executory.

Furthermore, under Article VIII, Section 5(5) of the Constitution, this court "shall not
diminish, increase, or modify substantive rights" in promulgating rules of procedure in
courts.  The 10-day period to appeal under the Labor Code being a substantive right, this
89

period cannot be

diminished, increased, or modified through the Rules of Court. 90

In Shioji v. Harvey,  this court held that the "rules of court, promulgated by authority of law,
91

have the force and effect of law, if not in conflict with positive law."  Rules of Court are
92

"subordinate to the statute."  In case of conflict between the law and the Rules of Court,
93

"the statute will prevail." 94

The rule, therefore, is that a Voluntary Arbitrator’s award or decision shall be appealed
before the Court of Appeals within 10 days from receipt of the award or decision. Should the
aggrieved party choose to file a motion for reconsideration with the Voluntary
Arbitrator,  the motion must be filed within the same 10-day period since a motion for
95

reconsideration is filed "within the period for taking an appeal."96

A petition for certiorari is a special civil action "adopted to correct errors of jurisdiction
committed by the lower court or quasi-judicial agency, or when there is grave abuse of
discretion on the part of such court or agency amounting to lack or excess of
jurisdiction."  An extraordinary remedy,  a petition for certiorari may be filed only if appeal is
97 98

not available.  If appeal is available, an appeal must be taken even if the ground relied upon
99

is grave abuse of discretion. 100

As an exception to the rule, this court has allowed petitions for certiorari to be filed in lieu of
an appeal "(a) when the public welfare and the advancement of public policy dictate; (b)
when the broader interests of justice so require; (c) when the writs issued are null; and (d)
when the questioned order amounts to an oppressive exercise of judicial authority." 101

In Unicraft Industries International Corporation, et al. v. The Hon. Court of

Appeals,  petitioners filed a petition for certiorari against the Voluntary Arbitrator’s decision.
102

Finding that the Voluntary Arbitrator rendered an award without giving petitioners an
opportunity to present evidence, this court allowed petitioners’ petition for certiorari despite
being the wrong remedy. The Voluntary Arbitrator’s award, thiscourt said, was null and void
for violation of petitioners’ right to due process. This court decided the case on the merits.

In Leyte IV Electric Cooperative, Inc. v. LEYECO IV Employees Union-ALU,  petitioner

103

likewise filed a petition for certiorari against the Voluntary Arbitrator’s decision, alleging that
the decision lacked basis in fact and in law. Ruling that the petition for certiorari was filed
within the reglementary period for filing an appeal, this court allowed petitioner’s petition for
certiorari in "the broader interests of justice." 104

In Mora v. Avesco Marketing Corporation,  this court held that petitioner Noel E. Mora erred
105

in filing a petition for certiorari against the Voluntary Arbitrator’s decision. Nevertheless, this
court decided the case on the merits "in the interest of substantial justice to arrive at the
proper conclusion that is conformable to the evidentiary facts." 106

None of the circumstances similar to Unicraft, Leyte IV Electric Cooperative, and Moraare
present in this case. PHILEC received Voluntary Arbitrator Jimenez’s resolution denying its
motion for partial reconsideration on August 11, 2000.  PHILEC filed its petition for
107

certiorari before the Court ofAppeals on August 29, 2000,  which was 18 days after its
108

receipt of Voluntary Arbitrator Jimenez’s resolution. The petition for certiorari was filed
beyond the 10-day reglementary period for filing an appeal. We cannot consider PHILEC’s
petition for certiorari as an appeal.

There being no appeal seasonably filed in this case, Voluntary Arbitrator Jimenez’s decision
became final and executory after 10 calendar days from PHILEC’s receipt of the resolution
denying its motion for partial reconsideration.  Voluntary Arbitrator Jimenez’s decision is
109

already "beyond the purview of this Court to act upon." 110

II

PHILEC must pay training allowance

based on the step increases provided in
 the June 1, 1997 collective bargaining
agreement

The insurmountable procedural issue notwithstanding, the case will also fail on its merits.
Voluntary Arbitrator Jimenez correctly awarded both Lipio and Ignacio, Sr. training
allowances based on the amounts and formula provided in the June 1, 1997 collective
bargaining agreement.

A collective bargaining agreement is "a contract executed upon the request of either the
employer or the exclusive bargaining representative of the employees incorporating the
agreement reached after negotiations with respect to wages, hours of work and all other
terms and conditions of employment, including proposals for adjusting any grievances or
questions arising under such agreement."  A collective bargaining agreement being a
111

contract, its provisions "constitute the law between the parties"  and must be complied with
112

in good faith.
113

PHILEC, as employer, and PWU, as the exclusive bargaining representative of PHILEC’s

rank-and-file employees, entered into a collective bargaining agreement, which the parties
agreed to make effective from June 1, 1997 to May 31, 1999. Being the law between the
parties, the June 1, 1997 collective bargaining agreement must govern PHILEC and its
rank-and-file employees within the agreed period.

Lipio and Ignacio, Sr. were rank-and-file employees when PHILEC selected them for
training for the position of Foreman I beginning August 25, 1997. Lipio and Ignacio, Sr. were
selected for training during the effectivity of the June 1, 1997 rank-and-file collective
bargaining agreement. Therefore, Lipio’s and Ignacio, Sr.’s training allowance must be
computed based on Article X, Section 4 and ArticleIX, Section 1(f) of the June 1, 1997
collective bargaining agreement.

Contrary to PHILEC’s claim, Lipio and Ignacio, Sr. were not transferred out of the
bargaining unit when they were selected for training. Lipio and Ignacio, Sr. remained rank-
and-file employees while they trained for the position of Foreman I. Under Article IX, Section
1(e) of the June 1, 1997 collective bargaining agreement,  a trainee who is "unable to
114

demonstrate his ability to perform the work . . . shall be reverted to his previous assignment.
. . ." According to the same provision, the trainee "shall hold that job on a trial or
115

observation basis and . . . subject to prior approval of the authorized management official,
be appointed to the position in a regular capacity."
116

Thus, training is a condition precedent for promotion. Selection for training does not mean
automatic transfer out of the bargaining unit of rankand-file employees.

Moreover, the June 1, 1997 collective bargaining agreement states that the training
allowance of a rank-and-file employee "whose application for a posted job is accepted shall
[be computed] in accordance with Section (f) of [Article IX]."  Since Lipio and Ignacio, Sr.
117

were rank-and-file employees when they applied for training for the position of Foreman I,
Lipio’s and Ignacio, Sr.’s training allowance must be computed based on Article IX, Section
1(f) of the June 1, 1997 rank-and-file collective bargaining agreement.
PHILEC allegedly applied the "Modified SGV" pay grade scale to prevent any salary
distortion within PHILEC’s enterprise. This, however, does not justify PHILEC’s non-
compliance with the June 1, 1997 collective bargaining agreement. This pay grade scale is
not provided in the collective bargaining agreement. In Samahang Manggagawa sa Top
Form Manufacturing United Workers of the Philippines (SMTFM-UWP) v. NLRC,  this court
118

ruled that "only provisions embodied in the [collective bargaining agreement] should be so
interpreted and complied with. Where a proposal raised by a contracting party does not find
print in the [collective bargaining agreement], it is not part thereof and the proponent has no
claim whatsoever to its implementation." 119

Had PHILEC wanted the "Modified SGV" pay grade scale applied within its enterprise, "it
could have requested or demanded that [the ‘Modified SGV’ scale] be incorporated in the
[collective bargaining agreement]."  PHILEC had "the means under the law to compel
120

[PWU] to incorporate this specific economic proposal in the [collective bargaining

agreement]."  It "could have invoked Article 252 of the Labor Code"  to incorporate the
121 122

"Modified SGV" pay grade scale in its collective bargaining agreement with PWU. But it did
not. Since this "Modified SGV" pay grade scale does not appear in PHILEC’s collective
bargaining agreement with PWU, PHILEC cannot insist on the "Modified SGV" pay grade
scale’s application. We reiterate Voluntary Arbitrator Jimenez’s decision dated August 13,
1999 where he said that:

. . . since the signing of the current CBA took place on September 27, 1997, PHILEC, by
oversight, may have overlooked the possibility of a wage distortion occurring among
ASSET-occupied positions. It is surmised that this matter could have been negotiated and
settled with PWU before the actual signing of the CBA on September 27. Instead, PHILEC,
again, allowed the provisions of Art. X, Sec. 4 of the CBA to remain the way it is and is now
suffering the consequences of its laches.  (Emphasis in the original)
123

We note that PHILEC did not dispute PWU’s contention that it selected several rank-and-file
employees for training and paid them training allowance based on the schedule provided in
the collective bargaining agreement effective at the time of the trainees’ selection.  PHILEC
124

cannot choose when and to whom to apply the provisions of its collective bargaining
agreement. The provisions of a collective bargaining agreement must be applied uniformly
and complied with in good faith.

Given the foregoing, Lipio’s and Ignacio, Sr.’s training allowance should be computed based
on Article X, Section 4 in relation to Article IX, Section 1(f) of the June 1, 1997 rank-and-file
collective bargaining agreement. Lipio, who held the position of Machinist before selection
for training as Foreman I, should receive training allowance based on the following
schedule:

First Month ----- P456.00

Second month - - - - - P1,031.00
Third month - - - - - P1,031.00
Fourth month - - - - - P1,031.00
Ignacio, Sr., who held the position of DT-Assembler before selection for training as
Foreman I, should receive training allowance based on the following schedule:

First Month ----- P361.00

Second month - - - - - P817.00
Third month - - - - - P1,392.00
Fourth month - - - - - P1,392.00

Considering that Voluntary Arbitrator Jimenez’s decision awarded sums of money, Lipio and
Ignacio, Sr. are entitled to legal interest on their training allowances. Voluntary Arbitrator
Jimenez’s decision having become final and executory on August 22, 2000, PHILEC is
liable for legal interest equal to 12% per annum from finality of the decision until full
payment as this court ruled in Eastern Shipping Lines, Inc. v. Court of Appeals: 125

When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest. . . shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then as equivalent to a forbearance of credit. 126

The 6% legal interest under CircularNo. 799, Series of 2013, of the Bangko Sentral ng
Pilipinas Monetary Board shall not apply, Voluntary Arbitrator Jimenez’s decision having
become final and executory prior to the effectivity of the circular on July 1, 2013.  In Nacar
1avvphi1

v. Gallery Frames,  we held that:

127

. . . with regard to those judgments that have become final and executory prior to July 1,
2013, said judgments shall not be disturbed and shall continue to be implemented applying
the rate of interest fixed therein.
128

WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals'
decision dated May 25, 2004 is AFFIRMED.

Petitioner Philippine Electric Corporation is ORDERED to PAY respondent Eleodoro V.

Lipio a total of P3,549.00 for a four (4)-month training for the position of Foreman I with
legal interest of 12% per annum from August 22, 2000 until the amount's full satisfaction.

For respondent Emerlito C. Ignacio, Sr., Philippine Electric Corporation is ORDERED to

PAY a total of P3,962.00 for a four (4)-month training for the position of Foreman I with legal
interest of 12% per annum from August 22, 2000 until the amount's full satisfaction.

SO ORDERED.

9. UNIVERSITY OF SANTO TOMAS FACULTY UNION, Petitioner,

vs.
UNIVERSITY OF STO. TOMAS, Respondent.

DECISION

CARPIO, J.:

The Case

G.R. No. 203957 is a petition for review1 assailing the Decision2 promulgated on 13 July
2012 as well as the Resolution3 promulgated on 19 October 2012 by the Court of Appeals
(CA) in CA-G.R. SP No. 120970. The CA set aside the 8 June 2011 Decision4 and 29 July
2011 Resolution5 of the Fourth Division of the National Labor Relations Commission
(NLRC) in NLRC LAC No. 10-003370-08, as well as the 24 September 2010 Decision6 of
the Labor Arbiter (LA) in NLRC-NCR Case No. 09-09745-07.

In its 24 September 2010 decision, the LA ordered the University of Santo Tomas (UST) to
remit P18,000,000.00 to the hospitalization and medical benefits fund (fund) pursuant to the
mandate of the 1996-2001 Collective Bargaining Agreement (CBA).The LA also ordered
UST to pay 10% of the total monetary award as attorney’s fees. The other claims were
dismissed for lack of merit. In its 8 June 2011 decision, the NLRC ordered UST to remit to
the University of Santo Tomas Faculty Union (USTFU) the amounts of P80,000,000.00 for
the fund pursuant to the CBA and P8,000,000.00 as attorney’s fees equivalent to 10% of
the monetary award. The NLRC denied UST’s motion for reconsideration for lack of merit.

In its 13 July 2012 decision, the CA found grave abuse of discretion on the part of NLRC
and granted UST’s petition. The CA set aside the decisions of the NLRC and the LA,
without prejudice to the refiling of USTFU’s complaint in the proper forum. The CA denied
USTFU’s motion for reconsideration for lack of merit.

The Facts

The CA recited the facts as follows:

In a letter dated February 6, 2007, [USTFU] demanded from [UST], through its Rector, Fr.
Ernesto M. Arceo, O.P. ("Fr. Arceo"), remittance of the total amount of P65,000,000.00 plus
legal interest thereon, representing deficiency in its contribution to the medical and
hospitalization fund ("fund") of [UST’s] faculty members. [USTFU] also sent [UST] a letter
dated February 26, 2007, accompanied by a summary of its claims pursuant to their 1996-
2001 CBA.

On March 2, 2007, Fr. Arceo informed [USTFU] that the aforesaid benefits were not meant
to be given annually but rather as a one-time allocation or contribution to the fund.[USTFU]
then sent [UST] another demand letter dated June 24, 2007 reiterating its position that
[UST] is obliged to remit to the fund, its contributions not only for the years 1996-1997 but
also for the subsequent years, but to no avail.

Thus, on September 5, 2007 [USTFU] filed against [UST], a complaint for unfair labor
practice, as well as for moral and exemplary damages plus attorney’s fees before the
arbitration branch of the NLRC.

[UST] sought the dismissal of the complaint on the ground of lack of jurisdiction. It
contended that the case falls within the exclusive jurisdiction of the voluntary arbitratoror
panel of voluntary arbitrators because it involves the interpretation and implementation of
the provisions of the CBA; and the conflict between the herein parties must be resolved as
grievance under the CBA and not as unfair labor practice.

[UST’s] motion to dismiss was denied by the LA in its August 8, 2008 order. [UST] appealed
the Order to the NLRC. The NLRC Seventh Division, however, dismissed the appeal on
May 12, 2009 and remanded the case to the LA for further proceedings.

The NLRC, in its assailed decision, correctly summarized the issues and submissions of the
hereinparties in their respective position papers, as follows:

According to [UST], the parties had, in the past, concluded several Collective Bargaining
Agreements for the mutual benefit of the union members and [UST], and one of these
agreements was the 1996-2001 CBA. It is undisputed that one of the economic benefits
granted by [UST] under the said CBA was the "Hospitalization Fund," provided under
Section 1-A(4) of the Article XIII thereof, the pertinent provisions of which state:

ARTICLE XIII

ECONOMIC BENEFITS

Section 1. ECONOMIC BENEFITUpon ratification and approval and for the term of this
Agreement, the economic benefits to be granted by the UNIVERSITY and the schedule of
such releases are as follows:

A. School Year 1996-97 (June 1, 1996 to May 31, 1997):

xxx

4. Hospitalization Fund: Upon ratification and approval hereof, the UNIVERSITY shall
establish a perpetual hospitalization and medical benefits fund in the sum of TWO MILLION
PESOS (P2,000,000) to be managed conjointly by a hospitalization and medical benefits
committee where both management and union are equally represented.

xxx

B. School Year 1997-98 (June 1, 1997-May 31, 1998);

xxx

2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION
PESOS (P1,000,000) to augment the Hospitalization and Medical Benefits fund. The
saidsum shall be addedto the remaining balance of theaforementioned fund;
xxx

C. School Year 1998-99 (June 1, 1998-May 31, 1999);

xxx

2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION
PESOS (P1,000,000) to augment the Hospitalization and Medical Benefits Fund. The said
sum shall be added to the remaining balance of the aforementioned fund;

D. Miscellaneous Provisions:

xxx

2. All the economic benefits herein given and those elsewhere provided under this
agreement, other than retirement benefits and one-half of the signing bonus, are chargeable
to the tuition fee share, if any, of the faculty members;

xxx xxx xxx

[USTFU] added that the amount offour (4) million pesos was agreed to be paid by the
Universityto the Hospitalization Fund annually for the fourth and fifth year of their CBA,
pursuant to the parties’ Memorandum of Agreement (MOA) which embodied the
renegotiated economic provisions of the said CBAfor the years 1999-2000 and 2000-2001.

According to [USTFU], Section D(2) of the 1996-2001 CBA provides that:

‘All the economic benefitsherein given and those elsewhere provided under thisagreement,
other than retirement benefits and one-half of the signing bonus, are chargeable to the
tuition fee share, if any, of the faculty members.’

[USTFU] explained that the rationale for the above-quoted provision is that the economic
benefits under the said CBA like the Hospitalization and Medical BenefitsFund, are sourced
from the tuition fee increases and pursuant thereto, [UST] is obligated to remit the amount
of P2,000,000.00 not only in the first year of the CBA (1996-1997) but also in the
subsequent years because the said amount became an integral part of the current or
existing tuition fee. Furthermore, [UST] is likewise obligated to slide in the amounts
allocated for the Hospitalization and Medical Benefits Fund for the succeeding years to the
next CBA year and so on and so forth. [USTFU] claimed that the tuition fee increase once
integrated to the old amount of tuition fee becomes and remains an integral part of the
existing tuition fee.

[USTFU] averred that while [UST] remitted the amount of P2,000,000.00 during the first
year of the 1996-2001 CBA, [UST] did not slide-in or remit the said amount in the
succeeding year (1997-1998). [UST] only remitted the amount of P1,000.000,000.00 [sic]
for the CBA year 1998-1999. Moreover, [UST] remitted only the amount of P1,000,000.00
on the third year of the CBA instead of P4,000,000.00 (2 Million + 1 Million + 1 Million). And
though [UST] remitted the amount of P4,000,000 during the fourth year (2) [sic] of the 1996-
2001 CBA, it did not remit any amount at all during the fifth year of the said Agreement.

[USTFU] claimed that during the period of the 1996-2001 CBA, [UST] should have remitted
the total amount of P25,000,000.00 instead of P8,000,000.00 only. Thus, a deficiency of
P17,000,000.00. [USTFU’s] assertion is based on the following illustration:

Year 1

1996-97

Year 2

1997-98 Year 3

1998-99 Year 4

1999-00 Year 5
2000-01 Actual

amount

remitted Total

amount to

[be]

remitted

2M

remitted 2M did not

slide 2M did not

slide 2M did not

slide 2M did not

slide 2M 10M

1M

remitted 1M did not

slide 1M did not

slide 1M did not

slide 1M 4M

1M

remitted 1M did not

slide 1M did not

slide 1M 3M

4M

remitted 4M did not

slide 4M 8M
 Total 8M 25M

[USTFU] added that after the fifth year of the CBA, i.e. 2001 onwards, [UST] ought to remit
the amount of P8,000,000.00 ([2]M+1M+1M+4M) annually to the Hospitalization and
Medical Benefits Fund. Hence, for the school year2001-2002 up to the school year 2005-
2006, an additional amount of P24,000,000.00 (8M x 3) should have been remitted by [UST]
to the aforesaid fund.All in all, the total amount yet to be remitted had ballooned to
P81,000,000.00.

Furthermore, [USTFU] averred that [UST] likewise failed and refused to render a proper
accounting ofthe monies it paid or released to the covered faculty as well as the money it
received as tuition fee increase starting from school year 1997-1998 onwards thereby
violating Section D (1), Article XIII of the 1996-2001 CBA which provides that:

‘At the end of this agreement, and within three (3) months therefrom, the UNIVERSITY shall
render an accounting of the monies it paid or released to the covered faculty in
consequence hereof.’

On the other hand, [UST] claimed that it religiously complied with the economic provisions
of the 1996-2001CBA particularly its obligation to remit to the Hospitalization and Medical
Benefits Fund as the renegotiated economic provisions under the MOA by remitting the total
amount of P8,000,000.00. [UST] claimed that it was never the intention of the parties to the
CBA that the amounts deposited to the Hospitalization fund for each year shall be carried
over to the succeeding years. UST added that the MOA likewise madeno mention that the
amount of P4,000,000.00 corresponding to the school year 1999-2000 should be carried
over to the next school year. Thus, it was safe to conclude that the clear intention of the
parties was that the amounts indicated on the CBA should only be remitted once on the
scheduled school year. Accordingly, [UST] averred that it was not guilty of unfair labor
practice.

[UST] further argued that the claim of [USTFU] had already been barred by prescription
since under Article 290 of the Labor Code all unfair labor practice [cases] should be filed
within one (1) year from the accrual thereof otherwise they shall forever be barred. And
assuming that the instance [sic] case may be considered as a money claim, the same
already prescribed after three (3) years fromthe time the cause of action accrued.
Finally, [UST] maintained that the present dispute should not be treated as unfair labor
practice but should be resolved as a grievance under the CBA and referred to a Voluntary
Arbitrator.

The parties thereafter submitted their respective Replies and Rejoinders amplifying their
arguments while refuting those made by the other.7

The Labor Arbiter’s Ruling

The LA ruled in favor of USTFU.The LA classified USTFU’s complaint as one for "unfair
labor practice, claims for sliding in of funds to hospitalization and medical benefits under the
CBA, damages and attorney’s fee with prayer for slide-in and restoration of medical benefits
under the CBA."8 The LA ruled that UST was not able to comply with Article XIII, Section
1A-(4) of the 1996-2001 CBA. However, despite UST’s alleged non-compliance, the LA
ruled that UST did not commit unfair labor practice.

The LA interpreted the pertinent CBA provisions to mean that UST bound itself to contribute
to the fund P2,000,000.00 every school year, regardless of the appropriated augmentation
amount. The LA computed UST’s liability in this manner:

Considering that the pertinent provision of the [1996-2001] CBA Article XIII, Section 1A(4)
stated that"The University shall establish a perpetual hospitalization and medical benefits
fund in the sum of two million pesos (P2,000,000.00) x x x x" it follows that the amount of
P2M every school year must beslided in regardless of the augmentation amount as may be
appropriated. The wordshall is mandatory and the word perpetual [is] continuous thus,
[UST] is obligated to remit the actual amount to wit:

SY 1996-1997 – P2M = P2M

SY 1997-1998 – P2M + P1M = P3M

SY 1998-1999 – P2M + P1M = P3M

SY 1999-2000 – P4M (Renegotiated) = P4M

SY 2000-2001 – P4M = P4M

TOTAL REMITTANCE = P16M

Thus, [UST] therefore has an unremitted fund of Eight Million (P8,000,000.00) pesos.

Corollarily, the CBA covering the period SY 2001-2006 [UST] is under obligation to remit
two (2) million (P2,000,000.00) [sic] pesos every year or a total of ten million
(P10,000,000.00) pesos in addition to whatever augmented amount stipulated in the CBA.

In fine, the total unremitted amountto the [hospitalization and medical benefits] fund is
eighteen million (P18,000,000.00) pesos. P8M for SY 1996-2001 and P10M for SY 2001-
2006.9

The LA did not find UST’s non-compliance with the 1996-2001 CBA as acts that
constituteunfair labor practice.

The failure of [UST] to slide in yearly the P2M hospitalization fund is not violation of the CBA
but an error in the interpretation of the provision of the CBA. It could not be said eitherthat
[UST] acted with malice and bad faith in view of the compliance with the other economic
provision[s] of the CBA. An error in the interpretation of a provision in the CBA, absent any
malice or bad faith could not be considered as unfair laborpractice as held in the case of
Singapore Airlines Local Employees Association vs. NLRC, et al., 130 SCRA 472.10

The dispositive portion of the LA’s Decision reads:

WHEREFORE, premised on the foregoing considerations, judgment is hereby rendered

ordering [UST] to remit the amount of eighteen million (P18,000,000.00) pesos to [the]
hospitalization and medical benefits fund pursuant tothe mandate of the Collective
Bargaining Agreement on economic benefits.

[UST is] likewise directed to pay attorney’s fee[s] equivalent to ten (10) percent of the total
monetary award in this case.
Other claims dismissed for lack of merit.

SO ORDERED.11

USTFU filed a Memorandum of Partial Appeal12 from the LA’s Decision. USTFU claimed
that the LA erred in holding that UST is liable to USTFU in the amount of P18 million only,
and in not holding that the amounts claimed by USTFU should beremitted by UST to
USTFU. USTFU claimed that, as of 2011, UST’s total liability to the fund is P97 million: P17
million for CBA years 1996 to 2001, P40 million for CBA years 2001 to 2006, and P40
million for CBA years 2006 to 2011. USTFU also claimed that the amount should be
remitted byUST to USTFU for proper turnover to the fund.

UST, on the other hand, filed an Appeal Memorandum.13 UST claimed that the LA
committed grave abuse of discretion in taking cognizance over the case because the issue
is within the jurisdiction of the voluntary arbitrator. UST further claimed that the LA
committed grave abuse of discretion in finding that UST erred in its interpretation of the
CBA and in not finding that USTFU’s claims are already barred by prescription.

The NLRC’s Ruling

The NLRC granted USTFU’s appeal and denied UST’s appeal for lack of merit. The NLRC
ordered UST to pay USTFU P80,000,000.00 and attorney’s fees equivalent to ten percent
of the monetary award.

The NLRC pointed out that UST’s refusal to comply, despite repeated demands, with the
CBA’s economic provisions is tantamount to a gross and flagrant violation. Thus, the
present case properly falls under the LA’s original jurisdiction as well as the NLRC’s
appellate jurisdiction. The issue of prescription also cannot be heldagainst USTFU because
the cause of action accrued only when UST refused to comply with USTFU’s 6 February
2007 demand letter. The demand letter was sent only after the conduct of proceedings in
the Permanent Union-University Committee (PUUC).

The NLRC noted that the subsequent CBAs between UST and USTFU show that the
parties intendedthat the amount appropriated each year to augment the fund shall be
carried over to the succeeding years and is chargeable to the tuition fee increment. The
NLRC ruled that the amounts appropriated for each year during the effectivity of the 1996-
2001 CBA should still be appropriated to the succeeding years. From school year 1997-
1998 and onwards, the basis for suchcarry over is that the amounts were sourced from
tuition increases corresponding to a given school year. Since any increase in tuition is
integrated into the subsequent tuition, the amount allocated to the fund because of the
tuition increaseshould be remitted to the fund. The 2001-2006 and 2006-2011 CBAs have
express provisions on the carry over. The NLRC computed UST’s deficiency14 as follows:

For the 1996-2001 CBA:

Year 1

1996-97 Year 2

1997-98

Year 3

1998-99 Year 4

1999-00 Year 5

2000-01 Total amount

that should

be submitted

2M 2M 2M 2M 2M

1M 1M 1M 1M

1M 1M 1M

4M 4M

2M + 3M + 4M + 8M + 8M = 25M

Since it is undisputed that [UST] remitted the amount of PhP8,000,000.00 only, there is
stilla deficiency of PhP17,000,000.00 corresponding to the 1996-2001 CBA.
xxxx

For the 2001-2006 CBA:

Year 1

2001-02 Year 2

2002-03 Year 3

2003-04 Year 4

2005-06 Total amount

that should be

submitted

2M 2M 2M 2M

3M 3M 3M

3M 3M

2M + 5M + 8M + 8M = 23M

For the 2006-2011 CBA:

Year 1

2006-07 Year 2

2007-08 Year 3

2008-09 Year 4

2009-10 Year 5

2010-11 Total amount

that should
be submitted

8M + 8M + 8M + 8M + 8M = 40M

The NLRC computed UST’s total liability for school years 1996-1997 up to 2010-2011 at
P80,000,000.00. The records show that UST remitted P8,000,000.00 for 1996-2001 CBA,
and there is absence of proof that the additional contributions to the fund were made for the
2001-2006 and 2006-2011 CBAs. The NLRC also ordered UST to pay USTFU attorney’s
fees at 10% of the monetary award.

UST filed a motion for reconsideration of the NLRC decision.1âwphi1 UST again claimed
that the Voluntary Arbitrator, and not LA, had jurisdiction over the interpretation of the CBA;
the P80,000,000.00 award had no basis; and the fund should be remitted to the Hospital
and Medical Benefits Committee, not to USTFU, as stated in the CBA.

In a Resolution promulgated on 29 July 2011, the NLRC denied UST’s motion for
reconsideration for lack of merit.

UST filed a petition for certiorari and prohibition under Rule 65 of the Rules of Court before
the CA. UST still questioned the jurisdiction of the LA, as well as the award of
P80,000,000.00. UST also claimed that USTFU’s money claims are barred byprescription,
and that the proper recipient of the award should bethe Hospital and Medical Benefits
Committee. Finally, UST also questioned the award for attorney’s fees.15

On 8 November 2011, USTFU filed a comment before the CA. USTFU claimed that the
NLRC did not commit grave abuse of discretion in finding that USTFU is entitled to its
claims for payment of the unremitted benefits. USTFU also claimed that certiorari is not a
proper remedy for UST because the NLRC did not commit any grave abuse of discretion.16

The Court of Appeals’ Ruling

The CA, in its decision promulgated on 13 July 2012, disposed of the present case by
agreeing with UST’s argument that the LA and the NLRC did not have jurisdiction to hear
and decide the present case. The CA stated that since USTFU’s ultimateobjective is to
clarify the relevant items in the CBA, then USTFU’s complaint should have been filed with
the voluntary arbitrator or panel of voluntary arbitrators.
The dispositive portion of the CA’s decision reads:

WHEREFORE, finding grave abuse of discretion on the part of public respondent NLRC,
the petition isGRANTED. Without prejudice to the re-filing of private respondent’s complaint
with the proper forum, the assailed NLRC decision dated June 8,2011 and resolution dated
July 29, 2011 in NLRC LAC No. 10-003370-08, as well as the decision dated September
24, 2010 of the Labor Arbiter in NLRC-NCR Case No. 09-09745-07 are hereby SET ASIDE.

SO ORDERED.17

USTFU filed its motion for reconsideration18 before the CA. USTFU maintained that the LA
and the NLRC had jurisdiction over the subject matter of the complaint.

In a resolution19 promulgated on 19 October 2012, the CA denied USTFU’s motion for

reconsideration for lack of merit.

USTFU filed the present petition for review20 before this Court on 7 December 2012.

The Issues

USTFU enumerated the following grounds warranting allowance of its petition:

1. The Honorable Court of Appeals departed from the usual course of judicial proceedings
in holding that the Labor Arbiter and the NLRC have no jurisdiction over the complaint for
unfair labor practice (ULP) filed by USTFU.
2. The Court of Appeals acted in a way not in accord with the applicable decisions of the
Supreme Court in holding that the voluntary arbitrator has jurisdiction over the instant case
despite the fact that Article XIII ("Grievance Machinery") of the CBA is not applicable.

3. The Court of Appeals committed grave abuse of discretion in the appreciation of facts in
not finding that under Art. XXII of the CBA, the Permanent University-Union Committee
(PUUC) is the proper forum to resolve the dispute betweenUST and USTFU. However, Art.
XXII does not provide for a "voluntary arbitration" clause and therefore, USTFU validly filed
the complaint for ULP before the Labor Arbiter.

4. The Honorable Court of Appeals committed grave abuse of discretion in its appreciation
of evidence in not finding that the parties agreed to have the dispute resolved by the labor
tribunals and UST had actively participated in the proceedings before the Labor Arbiter and
the NLRC which is tantamount to a recognitionof the jurisdiction of the said bodies.

5. The Court of Appeals departed from the usual course of proceedings in referring back the
case to voluntary arbitration despite the fact that the parties already fully and exhaustively
litigated the case before the Labor Arbiter and the NLRC which both correctly found in favor
of USTFU. Moreover, referral to voluntary arbitration would result in waste of precious time
in relitigating the case all over again.21

UST, for its part, enumerated the following grounds for opposing USTFU’s petition:

1. The Court of Appeals correctly ruled that it is the Voluntary Arbitrator which has
jurisdiction over the instant case.

2. Assuming arguendo that NLRC has jurisdiction over the instant case, it clearly erred
when it made an award not prayed for in petitioner USTFU’s complaint, in effect mandating
double payment.

3. Assuming arguendo that NLRC has jurisdiction over the instant case, it erred in ruling
that respondent UST is still liable to pay the amount of P17,000,000.00 for the period 1996-
2001 under the 1996-2001 CBA considering that:
a. There is no slide-in provision in the 1996-2001 CBA.

b. The amounts allocated for the Hospitalization Fund during SYs 1996-2001 were not
sourced from the 70% share of the teaching and non-teaching personnel in the tuition fee
increases.

4. The complaint for money claims ofpetitioner USTFU arising from the interpretation of the
1996-2001 CBA isalready barred by prescription.

5. Assuming arguendo that NLRC has jurisdiction over the instant case, it unjustly and
erroneously ordered respondent UST to pay the subject amount to petitioner USTFU and
notto the Hospital and Medical Benefits Committee under the CBA.22

The Court’s Ruling

The petition has no merit. We shall address the issues raised by the parties one by one.

Jurisdiction over the Present Case

On the issue of jurisdiction, we affirm with modification the ruling of the CA. The Labor
Arbiter has no jurisdiction over the present case; however, despite the lack of jurisdiction,
we rule on the issues presented. We recognize that a remand to the voluntary arbitration
stage will give rise to the possibility that this case will still reach this Court through the
parties’ appeals. Furthermore, it does not serve the cause of justice if we allow this case to
go unresolved for aninordinate amount of time.

We quote the pertinent Articles of the Labor Code of the Philippines below:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise
provided underthis Code, the Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the submission of the case by the
parties for decision without extension, x x x:

1. Unfair labor practices cases;

xxxx

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining

agreements and those arising from the interpretation or enforcement of company personnel
policies shall be disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may beprovided in said agreements.

Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. – The

Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining Agreement, except
those which are gross in character, shall no longer be treated as unfair labor practice and
shall be resolved as grievances under the Collective Bargaining Agreement. For purposes
of this article, gross violations of Collective Bargaining Agreement shall mean flagrant
and/ormalicious refusal to comply with the economic provisions of such agreement.

The Commission, its Regional Offices and the Regional Directors of the Department of
Labor and Employment shall not entertain disputes, grievances or matters under the
exclusive and original jurisdiction of the Voluntary Arbitrator or panel ofVoluntary Arbitrators
and shall immediately dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement.
Art. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks.

Art. 262-A. Procedures. – The Voluntary Arbitrator or panel of Voluntary Arbitrators shall
have the power to hold hearings, receive evidences and take whatever action isnecessary
to resolve the issue or issues subject to the dispute, including efforts to effect a voluntary
settlement between the parties.

All parties to the dispute shall be entitled to attend the arbitration proceedings. The
attendance of any third party to the exclusion of any witness from the proceedings shall be
determined by the Voluntary Arbitrator or panel of Voluntary Arbitrators. Hearing may be
adjourned for cause or upon agreement by the parties.

Unless the parties agree otherwise,it shall be mandatory for the Voluntary Arbitrator or
panel of Voluntary Arbitrators to render an award or decision within twenty (20) calendar
days from the date of submission of the dispute to voluntary arbitration.

The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall
contain the facts and the law on which it is based. It shall be final and executory after ten
(10) calendar days from receipt of the copy of the award or decision by the parties.

Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary
Arbitrators or the Labor Arbiter in the region where the movant resides, in case of the
absence or incapacity of the Voluntary Arbitrator or panel of Voluntary Arbitrators for any
reason, may issue a writ of execution requiring either the sheriff of the Commission or
regular courts or any public official whom the parties may designate in the submission
agreement to execute the final decision, order or award.

On the other hand, the pertinent provisions in the 1996-2001 CBA between UST and
USTFU provide:

ARTICLE X
GRIEVANCE MACHINERY

Section 1. Grievance.– Any misunderstanding concerning policies and practices directly

affecting faculty members covered by this [collective bargaining] agreement ortheir working
conditions in the UNIVERSITY or any dispute arising as to the meaning, application or
violation of any provisions of thisAgreement or any complaint that a covered faculty member
may haveagainst the UNIVERSITY shall be considered a grievance.

Section 2. Exclusion. – Termination of employment and preventive suspension shall be

exempted from the provisions of this Article as the same shall be governed by the
procedure in the Labor Code and its Implementing Rules.

Section 3. Procedure. – A grievance shall be settled as expeditiously as possible in

accordance with the following procedure:

STEP I. Upon presentation of a grievance in writing by the aggrieved faculty member, to the
FACULTY UNION Grievance Officer, the said officer shall present the same to the Dean or
school/department head concerned who shall render his decision on the matter within five
(5) school days from the date of the presentation. If the aggrieved party is not satisfied with
the decision, or if the Dean or school/department head fails toact within the five-schoolday
period, appeal may be made to Step II within five (5) school days from receipt of the
decision or, in the absence of a decision, the expiration ofthe period for its rendition. If no
appeal is made within the period of appeal, the grievance shall be deemed settled on the
basis of Step I.

STEP II. All appeals from StepI shall be presented to and considered by an Adjudication
Committee which shall be composed of two (2) representatives chosen by the UNIVERSITY
and two (2) representatives chosen by the FACULTY UNION. The Committee shall meet
within ten (10) school days after the elevation to this step and and try to settle the grievance
to the satisfaction of all concerned. It shall render its decision within twenty (20) school days
following the presentation of the grievance to the Adjudication Committee. A quorum for any
meeting of the Committee shall consist of a majority of its entire membership. The
affirmative vote of at least three (3) members of the Committee shall be necessary to reach
a decision. If the Committee renders a decision, the grievance shall be deemed settled
accordingly. If the Committee fails to make a decision within the period of twenty (20) days
above stated, the FACULTY UNION President may, within ten (10)days thereafter elevate
the grievance to Step III.
STEP III. The grievance appealed to this step shall be handled by the FACULTY UNION
President who shall take it up with the Rector of the UNIVERSITY who, in turn, shall settle
the grievance within ten (10) days. If no settlement is arrived at within the aforementioned
period, the grievance will automatically be referred to voluntary arbitration.

STEP IV. The mechanics of arbitration shall be as follows:

(a) The UNIVERSITY and the FACULTY UNION shall select within three (3) days, by raffle
or process of elimination, an arbitrator mutually agreeable to them preferably from the list
provided by the Bureau of Labor Relations.

(b) The voluntary arbitrator shall render an award within ten (10) days after the issue in
dispute is submitted for decision and his award shall be final and binding upon all parties to
the grievance. (c) Arbitration costs shall be shared equally by the UNIVERSITY and the
FACULTY UNION.23

ARTICLE XXII

PERMANENT UNIVERSITY-UNION COMMITTEE (PUUC)

Permanent UNION-UNIVERSITY Committee (PUUC). – The UNIVERSITY and the

FACULTY UNION realize that notwithstanding this CBA, there will remain problems and
irritants which will require the continuing attention of both parties. Symbolic of the mutual
good faith of the parties, they have agreed to establish a permanent committee, where the
UNIVERSITY and the FACULTY UNION are equally represented, to address these
problems as they arise.

a. Within thirty (30) days from signing of this Agreement, the Committee shall meet. The
members of the Committee are the following:

1) For the ADMINISTRATION:

a) Rector or his representative;

b) Vice Rector for Academic Affairs or his representative;

c) Vice Rector for Finance or his representative; and d) Appointee of the Rector.

2) For the FACULTY UNION:

a) President of the UNION;

b) Executive Vice President of the UNION or his representative;

c) Secretary General orhis representative; and

d) Appointee of the UNION President.

b. The regular meetings of this Committee shall be held at least bimonthly or as the need
arises. c. The decision reached in the PUUCMeetings shall be binding to all UNIVERSITY
functionaries.24

Jurisdiction is determined by the allegations of the complaint. In the present case, USTFU
alleged that UST committed unfair labor practice in its blatant violation of the economic
provisions of the 1996-2001 CBA, and subsequently, the 2001-2006 and 2006-2011 CBAs.
UST, meanwhile, has consistently questioned USTFU’s act of bringing the case before the
LA, and of not submitting the present case to voluntary arbitration. The LA assumed
jurisdiction, but ruled that UST did not commit any unfair labor practice in UST’s
interpretation of the economic provisions of the 1996-2001 CBA. The NLRC, on the other
hand, ruled that there was indeed unfair labor practice. The CA ruled that the LA and the
NLRC did not have jurisdiction as there was no unfair labor practice. Reading the pertinent
portions of the 1996-2001 CBA along with those of the Labor Code, we see that UST and
USTFU’s misunderstanding arose solely from their differing interpretations of the CBA’s
provisions on economic benefits, specifically those concerning the fund. Therefore, it was
clearly error for the LA to assume jurisdiction over the present case. The case should have
been resolved through the voluntary arbitrator or panel of voluntary arbitrators.

Article 217(c) of the Labor Code provides that the Labor Arbiter shall refer to the grievance
machinery and voluntary arbitration as provided in the CBA those cases that involve the
interpretation of said agreements. Article 261 of the Labor Code further provides that all
unresolved grievances arising from the interpretation or implementation of the CBA,
including violations of said agreement, are under the original and exclusive jurisdiction of
the voluntary arbitrator or panel of voluntary arbitrators. Excluded from this original and
exclusive jurisdiction is gross violation of the CBA, which is defined in Article 261 as
"flagrant and/or malicious refusal to comply with the economic provisions" of the CBA. San
Jose v. NLRC25 provides guidelines for understanding Articles 217, 261, and 262:

1. The jurisdiction of the Labor Arbiter and Voluntary Arbitrator or Panel of Voluntary
Arbitrators over the cases enumerated in Articles 217, 261, and 262 can possibly include
money claims in one form or another.

2. The cases where the Labor Arbiters have original and exclusive jurisdiction are
enumerated in Article 217, and that of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators in Article 261.

3. The original and exclusive jurisdiction of Labor Arbiters is qualified by an exception as

indicated in the introductory sentence of Article 217 (a), to wit:

"Art. 217. Jurisdiction of Labor Arbiters ... (a) Except as otherwise provided under this Code
the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide ... the
following cases involving all workers..."

The phrase "Except as otherwise provided under this Code" refers to the following
exceptions:
A. Art. 217. Jurisdiction of Labor Arbiters...

xxx

(c) Cases arising from the interpretation or implementation of collective bargaining

agreement and those arising from the interpretation or enforcement of company
procedure/policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitrator as may be provided in said agreement.

B. Art. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks.

Parenthetically, the original and exclusive jurisdiction of the Labor Arbiter under Article 217
(c), for money claims is limited only to those arising from statutes or contracts other than a
Collective Bargaining Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators
will have original and exclusive jurisdiction over money claims "arising from the
interpretation or implementation of the Collective Bargaining Agreement and, those arising
fromthe interpretation or enforcement of company personnel policies," under Article 261.

4. The jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is provided for in

Arts. 261 and 262 of the Labor Code as indicated above.

1. A close reading of Article 261 indicates that the original and exclusive jurisdiction of
Voluntary Arbitrator or Panel of Voluntary Arbitrators is limited only to:

"... unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company
personnel policies... Accordingly, violations of a collective bargaining agreement, except
those which are gross in character, shall no longer be treated as unfair labor practice and
shall be resolved asgrievances under the Collective Bargaining Agreement. x x x."
2. Voluntary Arbitrators or Panel of Voluntary Arbitrators, however, can exercise jurisdiction
over any and all disputes between an employer and a union and/or individual worker as
provided for in Article 262.

"Art. 262. Jurisdiction over other labor disputes. - The voluntary arbitrator or panel of
voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks."

It must be emphasized that the jurisdiction of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators under Article 262 must be voluntarily conferred upon by bothlabor and
management. The labor disputes referred to in the same Article 262 can include all those
disputes mentioned in Article 217 over which the Labor Arbiter has original and exclusive
jurisdiction.

As shown in the above contextual and wholistic analysis of Articles 217, 261, and 262 of the
Labor Code, the National Labor Relations Commission correctly ruled that the Labor Arbiter
had no jurisdiction to hear and decide petitioner’s money-claim underpayment of retirement
benefits, as the controversy between the parties involved an issue "arising from the
interpretationor implementation" of a provision of the collective bargaining agreement. The
Voluntary Arbitrator or Panel of Voluntary Arbitrators has original and exclusive jurisdiction
over the controversy under Article 261 of the Labor Code, and not the Labor Arbiter.

Despite the allegation that UST refused to comply with the economic provisions of the 1996-
2001 CBA, we cannot characterize UST’s refusal as "flagrant and/or malicious." Indeed,
UST’s literal interpretation of the CBA was, in fact, what led USTFU to fileits complaint. To
our mind, USTFU actually went beyond the text of the 1996-2001 CBA when it claimed that
the integrated tuition fee increase as described in Section 1D(2) is the basis for UST’s
alleged deficiency.

We cannot subscribe to USTFU’s view that the 1996-2001 CBA’s Article X: Grievance
Machinery is not applicable to the present case. When the issue is about the grievance
procedure, USTFU insists on a literal interpretation of the 1996-2001 CBA. Indeed, the
present case falls under Section 1’s definition of grievance:"[a]ny misunderstanding
concerning policies and practices directly affecting faculty members covered by this
[collective bargaining] agreement ortheir working conditions in the UNIVERSITY or any
dispute arising as to the meaning, application or violation of any provisions of this
Agreement or any complaint that a covered faculty member may have against the
UNIVERSITY." Section 2 excludes only termination and preventive suspension from the
grievance procedure.

USTFU’s focus is on the 1996-2001 CBA’s provisions about the grievance process rather
than the provision about the subject matters covered by the grievance process. Despite
UST’s alleged violation of the economic provisions of the CBA by its insufficient remittances
to the fund, a dispute arising as to the meaning, application or violation of the CBA, USTFU
used Step I in Section 3, and ignored Steps III and IV, to rule out any referral to voluntary
arbitration. USTFU concludes that the 1996-2001 CBA’s provisions on grievance machinery
only refer to a grievance of a faculty member against UST, and that said provisions do not
contemplate a situation where USTFU itself has a grievance against UST.

USTFU argues that the PUUC is the proper forum to resolve the issue, and that the filing of
a complaint beforethe LA is proper inthe absence of a voluntary arbitration clause in the
1996-2001 CBA’s Article XXII: Permanent University-Union Committee. However, as
provided in the 1996-2001 CBA, PUUC is established for "continuing problems and irritants
which will require the continuing attention" of UST and USTFU. Clearly, the PUUC
addresses mattersnot covered by the CBA.

USTFU’s adamant refusal to considervoluntary arbitration ignores Articles 261 to 262-A of

the Labor Code, as well as Steps III and IV of Section 3 of the 1996-2001 CBA.

Accrual of Cause of Action and

Prescription of Claims

USTFU’s claims arose from UST’s alleged failure to contribute the correct amounts to the
fund during the 1996-2001 CBA. However, USTFU did not complain of any violation by UST
during the lifetime of the 1996-2001 CBA. Neither did USTFU complain of any violation by
UST during the lifetime of the succeeding 2001-2006 CBA. It was only on 6 February 2007
that USTFU sent a demand letter to UST Rector Fr. Ernesto M. Arceo, O.P., for the claimed
hospitalization and medical benefits under the 1996-2001 CBA. On 2 March 2007, UST,
through its Rector, Fr. Ernesto M. Arceo, O.P., informed USTFU, through its President, Dr.
Gil Gamilla, that "the hospitalization and medical benefits contained in [the 1996-2001 CBA]
were a one-time give, and therefore not meant to slide." USTFU notified UST on 24 June
2007 about its intent to file the necessary complaint. On 6 September 2007, USTFU filed a
complaint against UST before the LA.
The 1996-2001 CBA, as well as the applicable laws, is silent as to when UST’s alleged
violation becomes actionable. Thus, we apply Article 1150 of the Civil Code of the
Philippines: "The time for prescription for all kinds of actions, when there is no special
provision which ordains otherwise, shall be counted from the day they may be brought."26
Prescription of an action is counted from the time the action may be brought.27

It is error to state that USTFU’s cause of action accrued only upon UST’s categorical denial
of its claims on 2 March 2007. USTFU’s cause of action accrued when UST allegedly failed
to comply with the economic provisions of the 1996-2001 CBA. Upon such failure by UST,
USTFU could have brought an action against UST.

Article 290 of the Labor Code provides that unfair labor practices prescribe within one year
"from accrual of such unfair labor practice; otherwise, they shall be forever barred." Article
291 of the same Code provides that money claims arising from employer-employee
relations prescribe "within three (3) years from the time the cause of action accrued;
otherwise they shall be forever barred." USTFU’s claims under the 1996-2001 CBA,
whether characterized as one for unfair labor practice or for money claims from employer-
employee relations, have already prescribed when USTFU filed a complaint before the LA.

USTFU filed its complaint under the theory of unfairlabor practice. Thus, USTFU had one
year from UST’s alleged failure to contribute, or "slide in," the correct amount to the fund to
file its complaint. USTFU had one year for every alleged breach by UST: school year (SY)
1997-1998, SY 1998-1999, SY 1999-2000, SY 2000-2001, SY 2001-2002, and SY 2002-
2003. USTFU did not file any complaint within the respective one-year prescriptive periods.
USTFU decided to file its complaint only in 2007, several years after the accrual of its
several possible causes of action. Even if USTFU filed its complaint under the theory of
money claims from employer-employee relations, its cause of action still has prescribed.

Determination of the Benefits Due

We consolidate USTFU’s claims, UST’s remittances, and UST’s alleged balances in the
table below:

USTFU’s claims28 UST’s remittances29 UST’s alleged

Balances

1996 to 2001 CBA

SY 1996-1997 P2,000,000.00 P2,000,000.00 0

SY 1997-1998 P3,000,000.00 P1,000,000.00 P2,000,000.00

SY 1998-199 P4,000,000.00 P1,000,000.00 P3,000,000.00

1999 Memorandum

of Agreement

SY 1999-2000 P8,000,000.00 P4,000,000.00 P4,000,000.00

SY 2000-2001 P8,000,000.00 - P8,000,000.00

2001 to 2006 CBA

SY 2001-2002 P8,000,000.00 P2,000,000.00 P6,000,000.00

SY 2002-2003 P8,000,000.00 P5,000,000.00 P3,000,000.00

SY 2003-2004 P8,000,000.00 P8,000,000.00 0

SY 2004-2005 P8,000,000.00 P8,000,000.00 0

SY 2005-2006 P8,000,000.00 P8,000,000.00 0

2006-2011 CBA

SY 2006-2007 P8,000,000.00 P8,000,000.00 0

SY 2007-2008 P8,000,000.00 P8,000,000.00 0

SY 2008-2009 P8,000,000.00 P8,000,000.00 0

SY 2009-2010 P8,000,000.00 P8,000,000.00 0

SY 2010-2011 P8,000,000.00 P8,000,000.00 0

Total P105,000,000.00 P79,000,000.00 P26,000,000.00

We restate the following provisions inthe pertinent CBAs to establish what USTFU claims as
its bases for additional funds:
1996-2001 CBA

ARTICLE XIII

ECONOMIC BENEFITS

Section 1. ECONOMIC BENEFIT- Upon ratification and approval and for the term of this
Agreement. the economic benefitsto be granted by the UNIVERSITY and the schedule
ofsuch releases are as follows:

A. School Year 1996-97 (June 1, 1996 to May 31, 1997):

xxxx

4. Hospitalization Fund: Upon ratification and approval hereof, the UNIVERSITY shall
establish a perpetual hospitalization and medical benefits fund in the sum of TWO MILLION
PESOS (P2,000,000) to be managed conjointly by a hospitalization and medical benefits
committee where both management and union are equally represented.

The joint committee shall promulgate its internal rules and regulations, and on the second
year of this agreement, i.e., SY 1997-98, may allocate such amount as required, but not to
exceed ten per cent (10%) of the gross income of the fund,for administrative expenses. For
the duration of the first year of operation of the fund, the UNIVERSITY and the FACULTY
UNION shall equally subsidize the operations of the fund.

The hospitalization costs and medical benefits of the members of the faculty as provided in
Article XVIof this agreement shall be taken from this fund.
This fund is independently managed by the aforementioned joint committee, subject to
independent audit. The yearly state of finances of the fund shall be reported, appended to
the FACULTY UNION’s own annual report, to all members of the university faculty.

B. School Year 1997-98 (June 1, 1997-May 31, 1998):

xxxx

2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION
PESOS (P1,000,000) to augment the Hospitalization and Medical Benefits fund.The said
sum shall be added to the remaining balance of the aforementioned fund;

xxxx

C. School Year 1998-99 (June 1, 1998-May 31, 1999):

xxxx

2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION
PESOS (P1,000,000) to augment the Hospitalization and Medical Benefits fund.The said
sum shall be added to the remaining balance of the aforementioned fund;

D. Miscellaneous Provisions:

1. At the end of this agreement, and within three months therefrom, the UNIVERSITY shall
render an accounting of the monies it paid or released to the covered faculty in
consequence thereof;
2. All the economic benefits herein given and those elsewhere provided under this
agreement, other than retirement benefits and one-half of the signing bonus, are chargeable
to the tuition fee share, if any, of the faculty members;

3. In the event that the tuition fee benefits of the faculty for any of the three years covered
by this part of this agreement i.e., the University decides to raise tuition fees in the coming
two school years, exceed those provided herein, the same may be allocated for salaries
and other benefits as determined by the FACULTY UNION and the matter duly
communicated to the UNIVERSITY; and,

4. None of the benefits provided herein, both distributable immediately after ratification and
those to be given during the term hereof, other than the amounts checked-off and the
Hospitalization and Medical Benefits are to be directly distributed to the faculty members by
the University.30 1999 Memorandum of Agreement

1.0 The University hereby agrees to grant increase in salary and fringe benefits as provided
for by the tuition fee increase of school year 1999-2000 according to the following scheme:

xxxx

6.0 If there is any tuition fee increase for school year 2000-2001, there will be an additional
increase in salary/fringe benefitsto be agreed upon by both parties.

7.0An additional amount of four million pesos will be deposited in the hospitalization fund of
the faculty.31

2001-2006 CBA

Article XX

HOSPITALIZATION AND MEDICAL BENEFITS

Section 1. Hospitalization and Medical Benefits Fund. – The UNION and the UNIVERSITY
shall buildup and maintain the perpetual Hospitalization and Medical Benefits Fund. For this
purpose, the UNIVERSITY agrees to appropriate for AY 2001-2002 two million pesos
(PhP2,000,000.00); for AY 2002-2003 three million pesos (PhP3,000,000.00); and for AY
2003-2004 another three million pesos (PhP3,000,000.00). It is understood that the amount
appropriated for each year is carried over to the succeeding years and is chargeable to the
tuition fee increment. x x x32 2006-2011 CBA

Article XX

HOSPITALIZATION AND MEDICAL BENEFITS

Section 5. Miscellaneous Provisions. a. The UNIVERSITY will continue to slide in the

amounts set aside in the 2001-2006 CBA to augment the fund. Fifty percent of the amount
due shall be remitted within a month from the start of the first semester and the other fifty
percent within a month from the start of the second semester of the academic year. These
sums of money shall be remitted without necessity of demand on the part of the union and
may not be garnished or held by the university on account of disputesin hospital billings
between the University and the Union.

x x x x33

USTFU claims that UST’s contributions should have been cumulative, with the amount
appropriated for each year carried over to the succeeding years and is chargeable to the
tuitionfee increment. However, USTFU’s claims are not supported by the economic
provisions of the 1996-2001 CBA and the 1999 Memorandum of Agreement reproduced
above.

We wholly agree with UST’s interpretation of the economic provisions of the 1996-2001
CBA, the 1999 Memorandumof Agreement, and the 2001-2006 and 2006-2011 CBAs, as
well as its remittances to the fund for the covered periods. UST faithfully followed the clear
provisions of these agreements.
The 1996-2001 CBA established the fund, with an initial remittance of P2, 000, 000. 00 for
school year 1996-1997. UST bound itself to augment the fund by contributing
P1,000,000.00 per year for school years 1997-1998 and 1998-1999. The 1999
Memorandum of Agreement merely stated that UST will deposit P4,000,000.00 to the fund.
Express mention of the carryover is found onlv in Section 1, Article XX of the 2001-2006
CBA: "It is understood that the amount appropriated for each year is carried over to the
succeeding years xx x." The 1996-2001 CBA does not have this carry-over provision.
During the lifetime of the 1996-2001 CBA, the 1999 Memorandum of Agreement, and the
2001-2006 CBA, USTFU never questioned the non-compliance by UST with an alleged
carry-over agreement applicable to the 1996-2001 CBA. This Court is well aware of Article
1702 of the Civil Code, which provides that "[i]n case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety and decent living for the laborer."
This Court is also well aware that when the provisions of the CBA are clear and
unambiguous, the literal meaning of the stipulations shall govern.34 In the present case, the
CBA provisions pertaining to the fund are clear and should be interpreted according to their
literal meaning.

WHEREFORE, we DENY the petition. We DECLARE that the claims of the University of
Santo Tomas Faculty Union have prescribed and that there is no carry-over provision for
the Hospitalization and Medical Benefits Fund in the 1996-2001 Collective Bargaining
Agreement and in the 1999 Memorandum of Agreement. The carry-over provision for the
Hospitalization and Medical Benefits Fund is found only in the 2001-2006 and 2006-2011
Collective Bargaining Agreements.

No costs.

SO ORDERED.

10. ACE NAVIGATION CO., INC., VELA INTERNATIONAL MARINE LTD., and/or
RODOLFO PAMINTUAN,Petitioners, 
vs.
TEODORICO FERNANDEZ, assisted by GLENITA FERNANDEZ, Respondent.

DECISION

BRION, J.:

For resolution is the petition for review on certiorari1 which seeks to nullify the
decision2 dated September 22, 2010 and the resolution3 dated May 26,2011 ofthe Court of
Appeals (CA) in CA-G.R. SP No. 112081.
 The Antecedents

On October 9, 2008, seaman Teodorico Fernandez (Fernandez), assisted by his wife,

Glenita Fernandez, filed with the National Labor Relations Commission (NLRC) a complaint
for disability benefits, with prayer for moral and exemplary damages, plus attorney’s fees,
against Ace Navigation Co., Inc., Vela International Marine Ltd., and/or Rodolfo Pamintuan
(petitioners).

The petitioners moved to dismiss the complaint,4 contending that the labor arbiter had no
jurisdiction over the dispute. They argued that exclusive original jurisdiction is with the
voluntary arbitrator or panel of voluntary arbitrators, pursuant to Section 29 of the POEA
Standard Employment Contract (POEA-SEC), since the parties are covered by the
AMOSUP-TCC or AMOSUP-VELA (as later cited by the petitioners) collective bargaining
agreement (CBA). Under Section 14 of the CBA, a dispute between a seafarer and the
company shall be settled through the grievance machinery and mandatory voluntary
arbitration.

Fernandez opposed the motion.5 He argued that inasmuch as his complaint involves a
money claim, original and exclusive jurisdiction over the case is vested with the labor
arbiter.

The Compulsory Arbitration Rulings

On December 9, 2008, Labor Arbiter Romelita N. Rioflorido denied the motion to dismiss,
holding that under Section 10 of Republic Act (R.A.) No. 8042, the Migrant Workers and
Overseas Filipinos Act of 1995, the labor arbiter has original and exclusive jurisdiction over
money claims arising out of an employer-employee relationship or by virtue of any law or
contract, notwithstanding any provision of law to the contrary.6

The petitioners appealed to the NLRC, but the labor agency denied the appeal. It agreed
with the labor arbiter that the case involves a money claim and is within the jurisdiction of
the labor arbiter, in accordance with Section 10 of R.A. No. 8042. Additionally, it declared
that the denial of the motion to dismiss is an interlocutory order which is not appealable.
Accordingly, it remanded the case to the labor arbiter for further proceedings. The
petitioners moved for reconsideration, but the NLRC denied the motion, prompting the
petitioners to elevate the case to the CA through a petition for certiorari under Rule 65 of
the Rules of Court.

The CA Decision

Through its decision of September 22, 2010,7 the CA denied the petition on procedural and
substantive grounds.

Procedurally, it found the petitioners to have availed of the wrong remedy when they
challenged the labor arbiter’s denial of their motion to dismiss by way of an appeal to the
NLRC. It stressed that pursuant to the NLRC rules,8an order denying a motion to dismiss is
interlocutory and is not subject to appeal.
On the merits of the case, the CA believed that the petition cannot also prosper. It rejected
the petitioners’ submission that the grievance and voluntary arbitration procedure of the
parties’ CBA has jurisdiction over the case, to the exclusion of the labor arbiter and the
NLRC. As the labor arbiter and the NLRC did, it opined that under Section 10 of R.A. No.
8042, the labor arbiter has the original and exclusive jurisdiction to hear Fernandez’s money
claims.

Further, the CA clarified that while the law9 allows parties to submit to voluntary arbitration
other labor disputes, including matters falling within the original and exclusive jurisdiction of
the labor arbiters under Article 217 of the Labor Code as this Court recognized in Vivero v.
Court of Appeals,10 the parties’ submission agreement must be expressed in unequivocal
language. It found no such unequivocal language in the AMOSUP/TCC CBA that the parties
agreed to submit money claims or, more specifically, claims for disability benefits to
voluntary arbitration.

The CA also took note of the POEA-SEC11 which provides in its Section 29 that in cases of
claims and disputes arising from a Filipino seafarer’s employment, the parties covered by a
CBA shall submit the claim or dispute to the original and exclusive jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators. The CA explained that the relevant
POEA-SEC provisions should likewise be qualified by the ruling in the Vivero case, the
Labor Code, and other applicable laws and jurisprudence.

In sum, the CA stressed that the jurisdiction of voluntary arbitrators is limited to the
seafarers’ claims which do not fall within the labor arbiter’s original and exclusive jurisdiction
or even in cases where the labor arbiter has jurisdiction, the parties have agreed in
unmistakable terms (through their CBA) to submit the case to voluntary arbitration.

The petitioners moved for reconsideration of the CA decision, but the appellate court denied
the motion, reiterating its earlier pronouncement that on the ground alone of the petitioners’
wrong choice of remedy, the petition must fail.

The Petition

The petitioners are now before this Court praying for a reversal of the CA judgment on the
following grounds:

1. The CA committed a reversible error in disregarding the Omnibus Implementing Rules

and Regulations (IRR) of the Migrant Workers and Overseas Filipinos Act of 1995,12 as
amended by R.A. No. 10022,13 mandating that "For OFWs with collective bargaining
agreements, the caseshall be submitted for voluntary arbitration in accordance with Articles
261 and 262 of the Labor Code."14

The petitioners bewail the CA’s rejection of the above argument for the reason that the
remedy they pursued was inconsistent with the 2005 Revised Rules of Procedure of the
NLRC. Citing Municipality of Sta. Fe v. Municipality of Aritao,15 they argue that the
"dismissal of a case for lack of jurisdiction may be raised at any stage of the proceedings."
In any event, they posit that the IRR of R.A. No. 10022 is in the nature of an adjective or
procedural law which must be given retroactive effect and which should have been applied
by the CA in resolving the present case.

2. The CA committed a reversible error in ruling that the AMOSUP-VELA CBA does not
contain unequivocal wordings for the mandatory referral of Fernandez’s claim to voluntary
arbitration.

The petitioners assail the CA’s failure to explain the basis "for ruling that no explicit or
unequivocal wordings appeared on said CBA for the mandatory referral of the disability
claim to arbitration."16They surmise that the CA construed the phrase "either party may refer
the case to a MANDATORY ARBITRATION COMMITTEE" under Section 14.7(a) of the
CBA as merely permissive and not mandatory because of the use of the word "may." They
contend that notwithstanding the use of the word "may," the parties unequivocally and
unmistakably agreed to refer the present disability claim to mandatory arbitration.

3. The CA committed a reversible error in disregarding the NLRC memorandum prescribing

the appropriate action for complaints and/or proceedings which were initially processed in
the grievance machinery of existing CBAs. In their motion for reconsideration with the CA,
the petitioners manifested that the appellate court’s assailed decision had been modified by
the following directive of the NLRC:

As one of the measures being adopted by our agency in response to the Platform and
Policy Pronouncements on Labor Employment, you are hereby directed to immediately
dismiss the complaint and/or terminate proceedings which were initially processed in the
grievance machinery as provided in the existing Collective Bargaining Agreements (CBAs)
between parties, through the issuance of an Order of Dismissal and referral of the disputes
to the National Conciliation Mediation Board (NCMB) for voluntary arbitration.

FOR STRICT COMPLIANCE.17

4. On July 31, 2012,18 the petitioners manifested before the Court that on June 13, 2012, the
Court’s Second Division issued a ruling in G.R. No. 172642, entitled Estate of Nelson R.
Dulay, represented by his wife Merridy Jane P. Dulay v. Aboitiz Jebsen Maritime,
Inc., and General Charterers, Inc., upholding the jurisdiction of the voluntary arbitrator or
panel of voluntary arbitrators over a seafarer’s money claim. They implore the Court that
since the factual backdrop and the issues involved in the case are similar to the present
dispute, the Dulay ruling should be applied to this case and which should accordingly be
referred to the National Conciliation and Mediation Board for voluntary arbitration.

The Case for Fernandez

In compliance with the Court’s directive,19 Fernandez filed on October 7, 2011 his

Comment20 (on the Petition) with the plea that the petition be dismissed for lack of merit.
Fernandez presents the following arguments:

1. The IRR of the Migrant Workers and Overseas Filipinos Act of 1995 (R.A. No.
8042), as amended by R.A. No. 10022,21 did not divest the labor arbiters of their
 original and exclusive jurisdiction over money claims arising from employment, for
nowhere in said IRR is there such a divestment.

2. The voluntary arbitrators do not have jurisdiction over the present controversy as
can be deduced from Articles 261 and 262 of the Labor Code. Fernandez explains
that his complaint does not involve any "unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement [nor] from
the interpretation or enforcement of company personnel policies[.]"22 As he never
referred his claim to the grievance machinery, there is no "unresolved grievance" to
speak of. His complaint involves a claim for compensation and damages which is
outside the voluntary arbitrator’s jurisdiction under Article 261. Further, only disputes
involving the union and the company shall be referred to the grievance machinery
and to voluntary arbitration, as the Court held in Sanyo Philippines Workers Union-
PSSLU v. Cañizares23 and Silva v. CA.24

3. The CA correctly ruled that no unequivocal wordings appear in the CBA for the
mandatory referral of Fernandez’s disability claim to a voluntary arbitrator.

The Court’s Ruling

We first rule on the procedural question arising from the labor arbiter’s denial of the
petitioners’ motion to dismiss the complaint. On this point, Section 6, Rule V of The 2005
Revised Rules of Procedure of the NLRC provides:

On or before the date set for the mandatory conciliation and mediation conference, the
respondent may file a motion to dismiss. Any motion to dismiss on the ground of lack of
jurisdiction, improper venue, or that the cause of action is barred by prior judgment,
prescription, or forum shopping, shall be immediately resolved by the Labor Arbiter through
a written order. An order denying the motion to dismiss, or suspending its resolution until
the final determination of the case, is not appealable. [underscoring ours]

Corollarily, Section 10, Rule VI of the same Rules states:

Frivolous or Dilatory Appeals. – No appeal from an interlocutory order shall be entertained.

To discourage frivolous or dilatory appeals, including those taken from interlocutory orders,
the Commission may censure or cite in contempt the erring parties and their counsels, or
subject them to reasonable fine or penalty.

In Indiana Aerospace University v. Comm. on Higher Educ.,25 the Court declared that "[a]n
order denying a motion to dismiss is interlocutory"; the proper remedy in this situation is to
appeal after a decision has been rendered. Clearly, the denial of the petitioners’ motion to
dismiss in the present case was an interlocutory order and, therefore, not subject to appeal
as the CA aptly noted.

The petition’s procedural lapse notwithstanding, the CA proceeded to review the merits of
the case and adjudged the petition unmeritorious. We find the CA’s action in order. The
Labor Code itself declares that "it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and all reasonable
means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process."26

We now address the focal question of who has the original and exclusive jurisdiction over
Fernandez’s disability claim — the labor arbiter under Section 10 of R.A. No. 8042, as
amended, or the voluntary arbitration mechanism as prescribed in the parties’ CBA and the
POEA-SEC?

The answer lies in the State’s labor relations policy laid down in the Constitution and fleshed
out in the enabling statute, the Labor Code. Section 3, Article XIII (on Social Justice and
Human Rights) of the Constitution declares:

xxxx

The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.

Article 260 of the Labor Code (Grievance machinery and voluntary arbitration) states:

The parties to a Collective Bargaining Agreement shall include therein provisions that will
ensure the mutual observance of its terms and conditions. They shall establish a machinery
for the adjustment and resolution of grievances arising from the interpretation or
implementation of their Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies.

Article 261 of the Labor Code (Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators), on the other hand, reads in part:

The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies[.]

Article 262 of the Labor Code (Jurisdiction over other labor disputes) declares:

The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties,
shall also hear and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.

Further, the POEA-SEC, which governs the employment of Filipino seafarers, provides in its
Section 29 on Dispute Settlement Procedures:

In cases of claims and disputes arising from this employment, the parties covered by
a collective bargaining agreement shall submit the claim or dispute to the original
and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators.
If the parties are not covered by a collective bargaining agreement, the parties may at their
option submit the claim or dispute to either the original and exclusive jurisdiction of the
National Labor Relations Commission (NLRC), pursuant to Republic Act (RA) 8042
otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995 or to the
original and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators.
If there is no provision as to the voluntary arbitrators to be appointed by the parties, the
same shall be appointed from the accredited voluntary arbitrators of the National
Conciliation and Mediation Board of the Department of Labor and Employment. [emphasis
ours]

We find merit in the petition.

Under the above-quoted constitutional and legal provisions, the voluntary arbitrator or panel
of voluntary arbitrators has original and exclusive jurisdiction over Fernandez’s disability
claim. There is no dispute that the claim arose out of Fernandez’s employment with the
petitioners and that their relationship is covered by a CBA — the AMOSUP/TCC or the
AMOSUP-VELA CBA. The CBA provides for a grievance procedure for the resolution of
grievances or disputes which occur during the employment relationship and, like the
grievance machinery created under Article 261 of the Labor Code, it is a two-tiered
mechanism, with voluntary arbitration as the last step. 1âwphi1

Contrary to the CA’s reading of the CBA’s Article 14, there is unequivocal or unmistakable
language in the agreement which mandatorily requires the parties to submit to the
grievance procedure any dispute or cause of action they may have against each other. The
relevant provisions of the CBA state:

14.6 Any Dispute, grievance, or misunderstanding concerning any ruling, practice,

wages or working conditions in the COMPANY or any breach of the Contract of
Employment, or any dispute arising from the meaning or application of the
provisions of this Agreement or a claim of violation thereof or any complaint or
cause of action that any such Seaman may have against the COMPANY, as well as
complaints which the COMPANY may have against such Seaman shall be brought to
the attention of the GRIEVANCE RESOLUTION COMMITTEE before either party takes
any action, legal or otherwise. Bringing such a dispute to the Grievance Resolution
Committee shall be unwaivable prerequisite or condition precedent for bringing any
action, legal or otherwise, in any forum and the failure to so refer the dispute shall
bar any and all legal or other actions.

14.7a) If by reason of the nature of the Dispute, the parties are unable to amicably
settle the dispute, either party may refer the case to a MANDATORY ARBITRATION
COMMITTEE. The MANDATORY ARBITRATION COMMITTEE shall consist of one
representative to be designated by the UNION, and one representative to be designated by
the COMPANY and a third member who shall act as Chairman and shall be nominated by
mutual choice of the parties. xxx

h) Referral of all unresolved disputes from the Grievance Resolution Committee to

the Mandatory Arbitration Committee shall be unwaivable prerequisite or condition
precedent for bringing any action, claim, or cause of action, legal or otherwise,
before any court, tribunal, or panel in any jurisdiction. The failure by a party or
seaman to so refer and avail oneself to the dispute resolution mechanism contained
in this action shall bar any legal or other action. All parties expressly agree that the
orderly resolution of all claims in the prescribed manner served the interests of
reaching settlements or claims in an orderly and uniform manner, as well as
preserving peaceful and harmonious labor relations between seaman, the Union, and
the Company.27 (emphases ours)

What might have caused the CA to miss the clear intent of the parties in prescribing a
grievance procedure in their CBA is, as the petitioners’ have intimated, the use of the
auxiliary verb "may" in Article 14.7(a) of the CBA which, to reiterate, provides that "if by
reason of the nature of the Dispute, the parties are unable to amicably settle the
dispute, either party may refer the case to a MANDATORY ARBITRATION
COMMITTEE."28

While the CA did not qualify its reading of the subject provision of the CBA, it is reasonable
to conclude that it viewed as optional the referral of a dispute to the mandatory arbitration
committee when the parties are unable to amicably settle the dispute.

We find this a strained interpretation of the CBA provision. The CA read the provision
separately, or in isolation of the other sections of Article 14, especially 14.7(h), which, in
clear, explicit language, states that the "referral of all unresolved disputes from the
Grievance Resolution Committee to the Mandatory Arbitration Committee shall be
unwaivable prerequisite or condition precedent for bringing any action, claim, or
cause of action, legal or otherwise, before any court, tribunal, or panel in any
jurisdiction"29 and that the failure by a party or seaman to so refer the dispute to the
prescribed dispute resolution mechanism shall bar any legal or other action.

Read in its entirety, the CBA’s Article 14 (Grievance Procedure) unmistakably reflects the
parties’ agreement to submit any unresolved dispute at the grievance resolution stage to
mandatory voluntary arbitration under Article 14.7(h) of the CBA. And, it should be added
that, in compliance with Section 29 of the POEA-SEC which requires that in cases of claims
and disputes arising from a seafarer’s employment, the parties covered by a CBA shall
submit the claim or dispute to the original and exclusive jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators.

Since the parties used unequivocal language in their CBA for the submission of their
disputes to voluntary arbitration (a condition laid down in Vivero for the recognition of the
submission to voluntary arbitration of matters within the original and exclusive jurisdiction of
labor arbiters), we find that the CA committed a reversible error in its ruling; it disregarded
the clear mandate of the CBA between the parties and the POEA-SEC for submission of the
present dispute to voluntary arbitration.

Consistent with this finding, Fernandez’s contention — that his complaint for disability
benefits is a money claim that falls within the original and exclusive jurisdiction of the labor
arbiter under Section 10 of R.A. No. 8042 — is untenable. We likewise reject his argument
that he never referred his claim to the grievance machinery (so that no unresolved
grievance exists as required under Article 261 of the Labor Code), and that the parties to
the case are not the union and the employer.30 Needless to state, no such distinction exists
in the parties’ CBA and the POEA-SEC.
It bears stressing at this point that we are upholding the jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators over the present dispute, not only because of the
clear language of the parties’ CBA on the matter; more importantly, we so uphold the
voluntary arbitrator’s jurisdiction, in recognition of the State’s express preference for
voluntary modes of dispute settlement, such as conciliation and voluntary arbitration as
expressed in the Constitution, the law and the rules.

In this light, we see no need to further consider the petitioners’ submission regarding the
IRR of the Migrant Workers and Overseas Filipinos Act of 1995, as amended by R.A. No.
10022, except to note that the IRR lends further support to our ruling.

In closing, we quote with approval a most recent Court pronouncement on the same issue,
thus –

It is settled that when the parties have validly agreed on a procedure for resolving
grievances and to submit a dispute to voluntary arbitration then that procedure
should be strictly observed.31 (emphasis ours)

WHEREFORE, premises considered, the petition is GRANTED. The assailed decision and

resolution of the Court of Appeals are SET ASIDE. Teodorico Fernandez's disability claim
is REFERRED to the Grievance Resolution Committee of the parties' collective bargaining
agreement and/or the Mandatory Arbitration Committee, if warranted.

SO ORDERED.

11. Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 201298 February 5, 2014

RAUL C. COSARE, Petitioner,

vs.

BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.

DECISION

REYES, J.:

Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court,
which assails the Decision2 dated November 24, 2011 and Resolution3 dated March 26,
2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the CA ruled that
the Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the jurisdiction over
petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia,
Inc. (Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom (respondents).

The Antecedents

The case stems from a complaint4 for constructive dismissal, illegal suspension and
monetary claims filed with the National Capital Region Arbitration Branch of the National
Labor Relations Commission (NLRC) by Cosare against the respondents.

Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television networks
and production houses. In December 2000, Arevalo set up the company Broadcom, still to
continue the business of trading communication and broadcast equipment. Cosare was
named an incorporator of Broadcom, having been assigned 100 shares of stock with par
value of P1.00 per share.5 In October 2001, Cosare was promoted to the position of
Assistant Vice President for Sales (AVP for Sales) and Head of the Technical Coordination,
having a monthly basic net salary and average commissions of P18,000.00 and
P37,000.00, respectively.6

Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for
Sales and thus, became Cosare’s immediate superior. On March 23, 2009, Cosare sent a
confidential memo7 to Arevalo to inform him of the following anomalies which were
allegedly being committed by Abiog against the company: (a) he failed to report to work on
time, and would immediately leave the office on the pretext of client visits; (b) he advised
the clients of Broadcom to purchase camera units from its competitors, and received
commissions therefor; (c) he shared in the "under the-table dealings" or "confidential
commissions" which Broadcom extended to its clients’ personnel and engineers; and (d) he
expressed his complaints and disgust over Broadcom’s uncompetitive salaries and wages
and delay in the payment of other benefits, even in the presence of office staff. Cosare
ended his memo by clarifying that he was not interested in Abiog’s position, but only wanted
Arevalo to know of the irregularities for the corporation’s sake.

Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to tender
his resignation in exchange for "financial assistance" in the amount of P300,000.00.8
Cosare refused to comply with the directive, as signified in a letter9 dated March 26, 2009
which he sent to Arevalo.

On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s
Manager for Finance and Administration, a memo10 signed by Arevalo, charging him of
serious misconduct and willful breach of trust, and providing in part:

1. A confidential memo was received from the VP for Sales informing me that you had
directed, or at the very least tried to persuade, a customer to purchase a camera from
another supplier. Clearly, this action is a gross and willful violation of the trust and
confidence this company has given to you being its AVP for Sales and is an attempt to
deprive the company of income from which you, along with the other employees of this
company, derive your salaries and other benefits. x x x.

2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in
another place outside of the office without proper turnover from you to this office which had
assigned said vehicle to you. The vehicle was found to be inoperable and in very bad
condition, which required that the vehicle be towed to a nearby auto repair shop for
extensive repairs.

3. You have repeatedly failed to submit regular sales reports informing the company of your
activities within and outside of company premises despite repeated reminders. However, it
has been observed that you have been both frequently absent and/or tardy without proper
information to this office or your direct supervisor, the VP for Sales Mr. Alex Abiog, of your
whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as evidenced
by the fact that you have not recorded any sales for the past immediate twelve (12) months.
This was inspite of the fact that my office decided to relieve you of your duties as technical
coordinator between Engineering and Sales since June last year so that you could focus
and concentrate [on] your activities in sales.11

Cosare was given forty-eight (48) hours from the date of the memo within which to present
his explanation on the charges. He was also "suspended from having access to any and all
company files/records and use of company assets effective immediately."12 Thus, Cosare
claimed that he was precluded from reporting for work on March 31, 2009, and was instead
instructed to wait at the office’s receiving section. Upon the specific instructions of Arevalo,
he was also prevented by Villareal from retrieving even his personal belongings from the
office.

On April 1, 2009, Cosare was totally barred from entering the company premises, and was
told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the
officials of Barangay San Antonio, Pasig City, and had the incident reported in the barangay
blotter.13

On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he
addressed and denied the accusations cited in Arevalo’s memo dated March 30, 2009. The
respondents refused to receive the memo on the ground of late filing, prompting Cosare to
serve a copy thereof by registered mail. The following day, April 3, 2009, Cosare filed the
subject labor complaint, claiming that he was constructively dismissed from employment by
the respondents. He further argued that he was illegally suspended, as he placed no
serious and imminent threat to the life or property of his employer and co-employees.15

In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed
the following acts inimical to the interests of Broadcom: (a) he failed to sell any broadcast
equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera
which was to be sourced from a competitor; and (c) he made an unauthorized request in
Broadcom’s name for its principal, Panasonic USA, to issue an invitation for Cosare’s friend,
one Alex Paredes, to attend the National Association of Broadcasters’ Conference in Las
Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job17 by
continually failing to report for work beginning April 1, 2009, prompting them to issue on
April 14, 2009 a memorandum18 accusing Cosare of absence without leave beginning April
1, 2009.
The Ruling of the LA

On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19

dismissing the complaint on the ground of Cosare’s failure to establish that he was
dismissed, constructively or otherwise, from his employment. For the LA, what transpired on
March 30, 2009 was merely the respondents’ issuance to Cosare of a show-cause memo,
giving him a chance to present his side on the charges against him. He explained:

It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges
leveled against him in the show-cause memo. What he did was to pre-empt that action by
filing this complaint just a day after he submitted his written explanation. Moreover, by
specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosare’s]
motive for filing this case becomes more evident.20

It was also held that Cosare failed to substantiate by documentary evidence his allegations
of illegal suspension and non-payment of allowances and commissions.

Unyielding, Cosare appealed the LA decision to the NLRC.

The Ruling of the NLRC

On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA
Menese. The dispositive portion of the NLRC Decision reads:

WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents

are found guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA, INC.
and Dante Arevalo are ordered to pay [Cosare’s] backwages, and separation pay, as well
as damages, in the total amount of P1,915,458.33, per attached Computation.
SO ORDERED.22

In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded
to [Cosare’s] contention that he was constructively dismissed by Respondent Arevalo when
he was asked to resign from his employment."23 The fact that Cosare was suspended from
using the assets of Broadcom was also inconsistent with the respondents’ claim that Cosare
opted to abandon his employment.

Exemplary damages in the amount of P100,000.00 was awarded, given the NLRC’s finding
that the termination of Cosare’s employment was effected by the respondents in bad faith
and in a wanton, oppressive and malevolent manner. The claim for unpaid commissions
was denied on the ground of the failure to include it in the prayer of pleadings filed with the
LA and in the appeal.

The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a petition
for certiorari with the CA founded on the following arguments: (1) the respondents did not
have to prove just cause for terminating the employment of Cosare because the latter’s
complaint was based on an alleged constructive dismissal; (2) Cosare resigned and was
thus not dismissed from employment; (3) the respondents should not be declared liable for
the payment of Cosare’s monetary claims; and (4) Arevalo should not be held solidarily
liable for the judgment award.

In a manifestation filed by the respondents during the pendency of the CA appeal, they
raised a new argument, i.e., the case involved an intra-corporate controversy which was
within the jurisdiction of the RTC, instead of the LA.25 They argued that the case involved a
complaint against a corporation filed by a stockholder, who, at the same time, was a
corporate officer.

The Ruling of the CA

On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents’
petition. It agreed with the respondents’ contention that the case involved an intra-corporate
controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the
exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed
as one of its directors. Moreover, he held the position of [AVP] for Sales which is listed as a
corporate office. Generally, the president, vice-president, secretary or treasurer are
commonly regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation. However, it
bears mentioning that under Section 25 of the Corporation Code, the Board of Directors of
[Broadcom] is allowed to appoint such other officers as it may deem necessary. Indeed,
[Broadcom’s] By-Laws provides:

Article IV

Officer

Section 1. Election / Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.

The Board, may, from time to time, appoint such other officers as it may determine to be
necessary or proper. x x x

We hold that [the respondents] were able to present substantial evidence that [Cosare]
indeed held a corporate office, as evidenced by the General Information Sheet which was
submitted to the Securities and Exchange Commission (SEC) on October 22, 2009.27
(Citations omitted and emphasis supplied)

Thus, the CA reversed the NLRC decision and resolution, and then entered a new one
dismissing the labor complaint on the ground of lack of jurisdiction, finding it unnecessary to
resolve the main issues that were raised in the petition. Cosare filed a motion for
reconsideration, but this was denied by the CA via the Resolution28 dated March 26, 2012.
Hence, this petition.

The Present Petition

The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the case
instituted by Cosare was an intra-corporate dispute that was within the original jurisdiction of
the RTC, and not of the LAs; and (2) whether or not Cosare was constructively and illegally
dismissed from employment by the respondents.

The Court’s Ruling

The petition is impressed with merit.

Jurisdiction over the controversy

As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of
the CA, it is the LA, and not the regular courts, which has the original jurisdiction over the
subject controversy. An intra-corporate controversy, which falls within the jurisdiction of
regular courts, has been regarded in its broad sense to pertain to disputes that involve any
of the following relationships: (1) between the corporation, partnership or association and
the public; (2) between the corporation, partnership or association and the state in so far as
its franchise, permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers; and (4)
among the stockholders, partners or associates, themselves.29 Settled jurisprudence,
however, qualifies that when the dispute involves a charge of illegal dismissal, the action
may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination
disputes and claims for damages arising from employer-employee relations as provided in
Article 217 of the Labor Code. Consistent with this jurisprudence, the mere fact that Cosare
was a stockholder and an officer of Broadcom at the time the subject controversy developed
failed to necessarily make the case an intra-corporate dispute.

In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished

between a "regular employee" and a "corporate officer" for purposes of establishing the true
nature of a dispute or complaint for illegal dismissal and determining which body has
jurisdiction over it. Succinctly, it was explained that "[t]he determination of whether the
dismissed officer was a regular employee or corporate officer unravels the conundrum" of
whether a complaint for illegal dismissal is cognizable by the LA or by the RTC. "In case of
the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal
authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for being its
AVP for Sales, was not a "corporate officer" as the term is defined by law. We emphasized
in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the purpose of
identifying an intra-corporate controversy. Citing Garcia v. Eastern Telecommunications
Philippines, Inc.,33 we held:

" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of
the corporation who are given that character by the Corporation Code or by the
corporation’s by-laws. There are three specific officers whom a corporation must have
under Section 25 of the Corporation Code. These are the president, secretary and the
treasurer. The number of officers is not limited to these three. A corporation may have such
other officers as may be provided for by its by-laws like, but not limited to, the vice-
president, cashier, auditor or general manager. The number of corporate officers is thus
limited by law and by the corporation’s by-laws."34 (Emphasis ours)

In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of
corporate offices:

It has been held that an "office" is created by the charter of the corporation and the officer is
elected by the directors and stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by action of the directors or stockholders
but by the managing officer of the corporation who also determines the compensation to be
paid to such employee.36 (Citations omitted)

As may be deduced from the foregoing, there are two circumstances which must concur in
order for an individual to be considered a corporate officer, as against an ordinary employee
or officer, namely: (1) the creation of the position is under the corporation’s charter or by-
laws; and (2) the election of the officer is by the directors or stockholders. It is only when the
officer claiming to have been illegally dismissed is classified as such corporate officer that
the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial
courts.

To support their argument that Cosare was a corporate officer, the respondents referred to
Section 1, Article IV of Broadcom’s by-laws, which reads:
ARTICLE IV

OFFICER

Section 1. Election / Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.

The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper. Any two (2) or more compatible positions may be held concurrently by
the same person, except that no one shall act as President and Treasurer or Secretary at
the same time.37 (Emphasis ours)

This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute
that was within the trial courts’ jurisdiction.

The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices that
are created under Broadcom’s by-laws are the following: the President, Vice-President,
Treasurer and Secretary. Although a blanket authority provides for the Board’s appointment
of such other officers as it may deem necessary and proper, the respondents failed to
sufficiently establish that the position of AVP for Sales was created by virtue of an act of
Broadcom’s board, and that Cosare was specifically elected or appointed to such position
by the directors. No board resolutions to establish such facts form part of the case records.
Further, it was held in Marc II Marketing, Inc. v. Joson38 that an enabling clause in a
corporation’s by-laws empowering its board of directors to create additional officers, even
with the subsequent passage of a board resolution to that effect, cannot make such position
a corporate office. The board of directors has no power to create other corporate offices
without first amending the corporate by-laws so as to include therein the newly created
corporate office.39 "To allow the creation of a corporate officer position by a simple
inclusion in the corporate by-laws of an enabling clause empowering the board of directors
to do so can result in the circumvention of that constitutionally well-protected right [of every
employee to security of tenure]."40

The CA’s heavy reliance on the contents of the General Information Sheets41, which were
submitted by the respondents during the appeal proceedings and which plainly provided
that Cosare was an "officer" of Broadcom, was clearly misplaced. The said documents
could neither govern nor establish the nature of the office held by Cosare and his
appointment thereto. Furthermore, although Cosare could indeed be classified as an officer
as provided in the General Information Sheets, his position could only be deemed a regular
office, and not a corporate office as it is defined under the Corporation Code. Incidentally,
the Court noticed that although the Corporate Secretary of Broadcom, Atty. Efren L.
Cordero, declared under oath the truth of the matters set forth in the General Information
Sheets, the respondents failed to explain why the General Information Sheet officially filed
with the Securities and Exchange Commission in 2011 and submitted to the CA by the
respondents still indicated Cosare as an AVP for Sales, when among their defenses in the
charge of illegal dismissal, they asserted that Cosare had severed his relationship with the
corporation since the year 2009.

Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s
filing did not necessarily make the action an intra- corporate controversy. "Not all conflicts
between the stockholders and the corporation are classified as intra-corporate. There are
other facts to consider in determining whether the dispute involves corporate matters as to
consider them as intra-corporate controversies."42 Time and again, the Court has ruled that
in determining the existence of an intra-corporate dispute, the status or relationship of the
parties and the nature of the question that is the subject of the controversy must be taken
into account.43 Considering that the pending dispute particularly relates to Cosare’s rights
and obligations as a regular officer of Broadcom, instead of as a stockholder of the
corporation, the controversy cannot be deemed intra-corporate. This is consistent with the
"controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142,44 to wit:

Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an intra-corporate relationship,
but must as well pertain to the enforcement of the parties’ correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory rules of the
corporation. If the relationship and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist, then no intra-corporate
controversy exists.45 (Citation omitted)

It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom
when the dispute commenced was unsupported by the case records, as even the General
Information Sheet of 2009 referred to in the CA decision to support such finding failed to
provide such detail.

All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored
Cosare solely on the ground that the dispute was an intra-corporate controversy within the
jurisdiction of the regular courts.
The charge of constructive dismissal

Towards a full resolution of the instant case, the Court finds it appropriate to rule on the
correctness of the NLRC’s ruling finding Cosare to have been illegally dismissed from
employment.

In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing
among other circumstances the charges that were hurled and the suspension that was
imposed against him via Arevalo’s memo dated March 30, 2009. Even prior to such charge,
he claimed to have been subjected to mental torture, having been locked out of his files and
records and disallowed use of his office computer and access to personal belongings.47
While Cosare attempted to furnish the respondents with his reply to the charges, the latter
refused to accept the same on the ground that it was filed beyond the 48-hour period which
they provided in the memo.

Cosare further referred to the circumstances that allegedly transpired subsequent to the
service of the memo, particularly the continued refusal of the respondents to allow Cosare’s
entry into the company’s premises. These incidents were cited in the CA decision as
follows:

On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could
retrieve his personal belongings, but the latter said that x x x Arevalo directed her to deny
his request, so [Cosare] again waited at the receiving section of the office. On April 1, 2009,
[Cosare] was not allowed to enter the office premises. He was asked to just wait outside of
the Tektite (PSE) Towers, where [Broadcom] had its offices, for further instructions on how
and when he could get his personal belongings. [Cosare] waited until 8 p.m. for instructions
but none were given. Thus, [Cosare] sought the assistance of the officials of Barangay San
Antonio, Pasig who advised him to file a labor or replevin case to recover his personal
belongings. x x x.48 (Citation omitted)

It is also worth mentioning that a few days before the issuance of the memo dated March
30, 2009, Cosare was allegedly summoned to Arevalo’s office and was asked to tender his
immediate resignation from the company, in exchange for a financial assistance of
P300,000.00.49 The directive was said to be founded on Arevalo’s choice to retain Abiog’s
employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal
dismissal. "[C]onstructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility, or disdain
by an employer becomes unbearable to the employee leaving the latter with no other option
but to quit."51 In Dimagan v. Dacworks United, Incorporated,52 it was explained:

The test of constructive dismissal is whether a reasonable person in the employee’s

position would have felt compelled to give up his position under the circumstances. It is an
act amounting to dismissal but is made to appear as if it were not. Constructive dismissal is
therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the
employer.53 (Citation omitted)

It is clear from the cited circumstances that the respondents already rejected Cosare’s
continued involvement with the company. Even their refusal to accept the explanation which
Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny Cosare of the
opportunity to be heard prior to any decision on the termination of his employment. The
respondents allegedly refused acceptance of the explanation as it was filed beyond the
mere 48-hour period which they granted to Cosare under the memo dated March 30, 2009.
However, even this limitation was a flaw in the memo or notice to explain which only further
signified the respondents’ discrimination, disdain and insensibility towards Cosare,
apparently resorted to by the respondents in order to deny their employee of the opportunity
to fully explain his defenses and ultimately, retain his employment. The Court emphasized
in King of Kings Transport, Inc. v. Mamac54 the standards to be observed by employers in
complying with the service of notices prior to termination:

[T]he first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice
to give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.55 (Citation omitted, underscoring ours, and emphasis
supplied)

In sum, the respondents were already resolute on a severance of their working relationship
with Cosare, notwithstanding the facts which could have been established by his
explanations and the respondents’ full investigation on the matter. In addition to this, the
fact that no further investigation and final disposition appeared to have been made by the
respondents on Cosare’s case only negated the claim that they actually intended to first
look into the matter before making a final determination as to the guilt or innocence of their
employee. This also manifested from the fact that even before Cosare was required to
present his side on the charges of serious misconduct and willful breach of trust, he was
summoned to Arevalo’s office and was asked to tender his immediate resignation in
exchange for financial assistance.

The clear intent of the respondents to find fault in Cosare was also manifested by their
persistent accusation that Cosare abandoned his post, allegedly signified by his failure to
report to work or file a leave of absence beginning April 1, 2009. This was even the subject
of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to explain his
absence within 48 hours from the date of the memo. As the records clearly indicated,
however, Arevalo placed Cosare under suspension beginning March 30, 2009. The
suspension covered access to any and all company files/records and the use of the assets
of the company, with warning that his failure to comply with the memo would be dealt with
drastic management action. The charge of abandonment was inconsistent with this imposed
suspension. "Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment. To constitute abandonment of work, two elements must concur:
‘(1) the employee must have failed to report for work or must have been absent without
valid or justifiable reason; and (2) there must have been a clear intention on the part of the
employee to sever the employer- employee relationship manifested by some overt act.’"57
Cosare’s failure to report to work beginning April 1, 2009 was neither voluntary nor
indicative of an intention to sever his employment with Broadcom. It was illogical to be
requiring him to report for work, and imputing fault when he failed to do so after he was
specifically denied access to all of the company’s assets. As correctly observed by the
NLRC:

[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on

April 1, 2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid)
suspended [Cosare] from using not only the equipment but the "assets" of Respondent
[Broadcom]. This insults rational thinking because the Respondents tried to mislead us and
make [it appear] that [Cosare] failed to report for work when they had in fact had [sic] placed
him on suspension. x x x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify the
NLRC's monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons Supermarket
Corporation v. Ranchez,59 the Court reiterated that an illegally or constructively dismissed
employee is entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement
is no longer viable; and (2) backwages.60 The award of exemplary damages was also
justified given the NLRC's finding that the respondents acted in bad faith and in a wanton,
oppressive and malevolent manner when they dismissed Cosare. It is also by reason of
such bad faith that Arevalo was correctly declared solidarily liable for the monetary awards.

WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are
SET ASIDE. The Decision dated August 24, 2010 of the National Labor Relations
Commission in favor of petitioner Raul C. Cosare is AFFIRMED.

SO ORDERED.

12. G.R. No. 198587, January 14, 2015

SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA, Petitioners, v. MA. JOPETTE M.

REBESENCIO, MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE S.
SCHNEIDER-CRUZ, Respondents.

DECISION

LEONEN, J.:

All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.

This is a Petition for Review on Certiorari with application for the issuance of a temporary restraining
order and/or writ of preliminary injunction under Rule 45 of the 1997 Rules of Civil Procedure praying
that judgment be rendered reversing and setting aside the June 16, 2011 Decision1 and September
13, 2011 Resolution2 of the Court of Appeals in CA-G.R. SP. No. 113006.

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and existing under the
laws of Jeddah, Kingdom of Saudi Arabia. It has a Philippine office located at 4/F, Metro House
Building, Sen. Gil J. Puyat Avenue, Makati City.3 In its Petition filed with this court, Saudia identified
itself as follows:
chanroblesvirtuallawlibrary

1. Petitioner SAUDIA is a foreign corporation established and existing under the Royal Decree No.
M/24 of 18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its Philippine Office
is located at 4/F Metro House Building, Sen, Gil J. Puyat Avenue, Makati City (Philippine Office). It may
be served with orders of this Honorable Court through undersigned counsel at 4th and 6th Floors,
Citibank Center Bldg., 8741 Paseo de Roxas, Makati City.4 (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and hired by Saudia as
Temporary Flight Attendants with the accreditation and approval of the Philippine Overseas
Employment Administration.5 After undergoing seminars required by the Philippine Overseas
Employment Administration for deployment overseas, as well as training modules offered by Saudia
(e.g., initial flight attendant/training course and transition training), and after working as Temporary
Flight Attendants, respondents became Permanent Flight Attendants. They then entered into Cabin
Attendant contracts with Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on May 16,
1990;6Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth A. Cristobal (Rouen Ruth) on May 22,
1993;7and Loraine Schneider-Cruz (Loraine) on August 27, 1995.8

Respondents continued their employment with Saudia until they were separated from service on
various dates in 2006.9

Respondents contended that the termination of their employment was illegal. They alleged that the
termination was made solely because they were pregnant.10

As respondents alleged, they had informed Saudia of their respective pregnancies and had gone
through the necessary procedures to process their maternity leaves. Initially, Saudia had given its
approval but later on informed respondents that its management in Jeddah, Saudi Arabia had
disapproved their maternity leaves. In addition, it required respondents to file their resignation
letters.11

Respondents were told that if they did not resign, Saudia would terminate them all the same. The
threat of termination entailed the loss of benefits, such as separation pay and ticket discount
entitlements.12

Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base Manager, Abdulmalik
Saddik (Abdulmalik).13 Montassah was informed personally by Abdulmalik and a certain Faisal Hussein
on October 20, 2006 after being required to report to the office one (1) month into her maternity
leave.14 Rouen Ruth was also personally informed by Abdulmalik on October 17, 2006 after being
required to report to the office by her Group Supervisor.15 Loraine received a call on October 12, 2006
from her Group Supervisor, Dakila Salvador.16

Saudia anchored its disapproval of respondents' maternity leaves and demand for their resignation on
its "Unified Employment Contract for Female Cabin Attendants" (Unified Contract).17 Under the Unified
Contract, the employment of a Flight Attendant who becomes pregnant is rendered void. It
provides:chanroblesvirtuallawlibrary

(H) Due to the essential nature of the Air Hostess functions to be physically fit on board to provide
various services required in normal or emergency cases on both domestic/international flights beside
her role in maintaining continuous safety and security of passengers, and since she will not be able to
maintain the required medical fitness while at work in case of pregnancy, accordingly, if the Air
Hostess becomes pregnant at any time during the term of this contract, this shall render
her employment contract as void and she will be terminated due to lack of medical
fitness.18 (Emphasis supplied)
In their Comment on the present Petition,19 respondents emphasized that the Unified Contract took
effect on September 23, 2006 (the first day of Ramadan),20 well after they had filed and had their
maternity leaves approved. Ma. Jopette filed her maternity leave application on September 5,
2006.21Montassah filed her maternity leave application on August 29, 2006, and its approval was
already indicated in Saudia's computer system by August 30, 2006.22 Rouen Ruth filed her maternity
leave application on September 13, 2006,23 and Loraine filed her maternity leave application on
August 22, 2006.24

Rather than comply and tender resignation letters, respondents filed separate appeal letters that were
all rejected.25

Despite these initial rejections, respondents each received calls on the morning of November 6, 2006
from Saudia's office secretary informing them that their maternity leaves had been approved. Saudia,
however, was quick to renege on its approval. On the evening of November 6, 2006, respondents
again received calls informing them that it had received notification from Jeddah, Saudi Arabia that
their maternity leaves had been disapproved.26

Faced with the dilemma of resigning or totally losing their benefits, respondents executed handwritten
resignation letters. In Montassah's and Rouen Ruth's cases, their resignations were executed on
Saudia's blank letterheads that Saudia had provided. These letterheads already had the word
"RESIGNATION" typed on the subject portions of their headings when these were handed to
respondents.27

On November 8, 2007, respondents filed a Complaint against Saudia and its officers for illegal
dismissal and for underpayment of salary, overtime pay, premium pay for holiday, rest day, premium,
service incentive leave pay, 13th month pay, separation pay, night shift differentials, medical expense
reimbursements, retirement benefits, illegal deduction, lay-over expense and allowances, moral and
exemplary damages, and attorney's fees.28 The case was initially assigned to Labor Arbiter Hermino V.
Suelo and docketed as NLRC NCR Case No. 00-11-12342-07.

Saudia assailed the jurisdiction of the Labor Arbiter.29 It claimed that all the determining points of
contact referred to foreign law and insisted that the Complaint ought to be dismissed on the ground
of forum non conveniens.30 It added that respondents had no cause of action as they resigned
voluntarily.31

On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the
Decision32dismissing respondents' Complaint. The dispositive portion of this Decision reads: chanroblesvirtuallawlibrary

WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the instant

complaint for lack of jurisdiction/merit.33 cralawlawlibrary

On respondents' appeal, the National Labor Relations Commission's Sixth Division reversed the ruling
of Executive Labor Arbiter Jambaro-Franco. It explained that "[considering that complainants-
appellants are OFWs, the Labor Arbiters and the NLRC has [sic] jurisdiction to hear and decide their
complaint for illegal termination."34 On the matter of forum non conveniens, it noted that there were
no special circumstances that warranted its abstention from exercising jurisdiction.35 On the issue of
whether respondents were validly dismissed, it held that there was nothing on record to support
Saudia's claim that respondents resigned voluntarily.

The dispositive portion of the November 19, 2009 National Labor Relations Commission
Decision36reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, judgment is hereby rendered finding the appeal impressed with
merit. The respondents-appellees are hereby directed to pay complainants-appellants the aggregate
amount of SR614,001.24 corresponding to their backwages and separation pay plus ten (10%)
percent thereof as attorney's fees. The decision of the Labor Arbiter dated December 12, 2008 is
hereby VACATED and SET ASIDE. Attached is the computation prepared by this Commission and made
an integral part of this Decision.37 cralawlawlibrary

In the Resolution dated February 11, 2010,38 the National Labor Relations Commission denied
petitioners' Motion for Reconsideration.

In the June 16, 2011 Decision,39 the Court of Appeals denied petitioners' Rule 65 Petition and modified
the Decision of the National Labor Relations Commission with respect to the award of separation pay
and backwages.

The dispositive portion of the Court of Appeals Decision reads: chanroblesvirtuallawlibrary

WHEREFORE, the instant petition is hereby DENIED. The Decision dated November 19, 2009 issued
by public respondent, Sixth Division of the National Labor Relations Commission - National Capital
Region is MODIFIED only insofar as the computation of the award of separation pay and backwages.
For greater clarity, petitioners are ordered to pay private respondents separation pay which shall be
computed from private respondents' first day of employment up to the finality of this decision, at the
rate of one month per year of service and backwages which shall be computed from the date the
private respondents were illegally terminated until finality of this decision. Consequently, the ten
percent (10%) attorney's fees shall be based on the total amount of the award. The assailed Decision
is affirmed in all other respects.

The labor arbiter is hereby DIRECTED to make a recomputation based on the foregoing.40 cralawlawlibrary

In the Resolution dated September 13, 2011,41 the Court of Appeals denied petitioners' Motion for
Reconsideration.
Hence, this Appeal was filed.

The issues for resolution are the following:

First, whether the Labor Arbiter and the National Labor Relations Commission may exercise jurisdiction
over Saudi Arabian Airlines and apply Philippine law in adjudicating the present dispute;

Second, whether respondents' voluntarily resigned or were illegally terminated; and

Lastly, whether Brenda J. Betia may be held personally liable along with Saudi Arabian Airlines. chanRoblesvirtualLawlibrary

Summons were validly served on Saudia and jurisdiction over it validly acquired.

There is no doubt that the pleadings and summons were served on Saudia through its
counsel.42Saudia, however, claims that the Labor Arbiter and the National Labor Relations Commission
had no jurisdiction over it because summons were never served on it but on "Saudia
Manila."43 Referring to itself as "Saudia Jeddah," it claims that "Saudia Jeddah" and not "Saudia
Manila" was the employer of respondents because:

First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into by
respondents;

Second, it was "Saudia Jeddah" that provided the funds to pay for respondents' salaries and benefits;
and

Lastly, it was with "Saudia Jeddah" that respondents filed their resignations.44

Saudia posits that respondents' Complaint was brought against the wrong party because "Saudia
Manila," upon which summons was served, was never the employer of respondents.45

Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its bare allegation,
there is no basis for concluding that "Saudia Jeddah" is distinct from "Saudia Manila."

What is clear is Saudia's statement in its own Petition that what it has is a "Philippine Office . . .
located at 4/F Metro House Building, Sen. Gil J. Puyat Avenue, Makati City."46 Even in the position
paper that Saudia submitted to the Labor Arbiter,47 what Saudia now refers to as "Saudia Jeddah" was
then only referred to as "Saudia Head Office at Jeddah, KSA,"48 while what Saudia now refers to as
"Saudia Manila" was then only referred to as "Saudia's office in Manila."49

By its own admission, Saudia, while a foreign corporation, has a Philippine office.

Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments Act of 1991,
provides the following: chanroblesvirtuallawlibrary

The phrase "doing business" shall include . . . opening offices, whether called "liaison"
offices or branches; . . . and any other act or acts that imply a continuity of commercial dealings or
arrangements and contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of commercial gain or of
the purpose and object of the business organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other conclusion than
that Saudia is a foreign corporation doing business in the Philippines. As such, Saudia may be sued in
the Philippines and is subject to the jurisdiction of Philippine tribunals.

Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia Manila" — the latter
being nothing more than Saudia's local office — service of summons to Saudia's office in Manila
sufficed to vest jurisdiction over Saudia's person in Philippine tribunals. chanRoblesvirtualLawlibrary
 II

Saudia asserts that Philippine courts and/or tribunals are not in a position to make an intelligent
decision as to the law and the facts. This is because respondents' Cabin Attendant contracts require
the application of the laws of Saudi Arabia, rather than those of the Philippines.50 It claims that the
difficulty of ascertaining foreign law calls into operation the principle of forum non conveniens, thereby
rendering improper the exercise of jurisdiction by Philippine tribunals.51

A choice of law governing the validity of contracts or the interpretation of its provisions dees not
necessarily imply forum non conveniens. Choice of law and forum non conveniens are entirely different
matters.

Choice of law provisions are an offshoot of the fundamental principle of autonomy of contracts. Article
1306 of the Civil Code firmly ensconces this: chanroblesvirtuallawlibrary

Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against forum shopping. It is designed
to frustrate illicit means for securing advantages and vexing litigants that would otherwise be possible
if the venue of litigation (or dispute resolution) were left entirely to the whim of either party.

Contractual choice of law provisions factor into transnational litigation and dispute resolution in one of
or in a combination of four ways: (1) procedures for settling disputes, e.g., arbitration; (2) forum, i.e.,
venue; (3) governing law; and (4) basis for interpretation. Forum non conveniens relates to, but is not
subsumed by, the second of these.

Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on the laws of a
given jurisdiction as the governing law of a contract does not preclude the exercise of jurisdiction by
tribunals elsewhere. The reverse is equally true: The assumption of jurisdiction by tribunals does
not ipso facto mean that it cannot apply and rule on the basis of the parties' stipulation. In Hasegawa
v. Kitamura:52ChanRoblesVirtualawlibrary

Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is
fair to cause a defendant to travel to this state; choice of law asks the further question whether the
application of a substantive law V'hich will determine the merits of the case is fair to both parties. The
power to exercise jurisdiction does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often, coincide, the "minimum contacts"
for one do not always provide the necessary "significant contacts" for the other. The question of
whether the law of a state can be applied to a transaction is different from the question of whether the
courts of that state have jurisdiction to enter a judgment.53 cralawlawlibrary

As various dealings, commercial or otherwise, are facilitated by the progressive ease of

communication and travel, persons from various jurisdictions find themselves transacting with each
other. Contracts involving foreign elements are, however, nothing new. Conflict of laws situations
precipitated by disputes and litigation anchored on these contracts are not totally novel.

Transnational transactions entail differing laws on the requirements Q for the validity of the formalities
and substantive provisions of contracts and their interpretation. These transactions inevitably lend
themselves to the possibility of various fora for litigation and dispute resolution. As observed by an
eminent expert on transnational law: chanroblesvirtuallawlibrary

The more jurisdictions having an interest in, or merely even a point of contact with, a transaction or
relationship, the greater the number of potential fora for the resolution of disputes arising out of or
related to that transaction or relationship. In a world of increased mobility, where business and
personal transactions transcend national boundaries, the jurisdiction of a number of different fora may
easily be invoked in a single or a set of related disputes.54 cralawlawlibrary

Philippine law is definite as to what governs the formal or extrinsic validity of contracts. The first
paragraph of Article 17 of the Civil Code provides that "[t]he forms and solemnities of contracts . . .
shall be governed by the laws of the country in which they are executed"55 (i.e., lex loci celebrationis).

In contrast, there is no statutorily established mode of settling conflict of laws situations on matters
pertaining to substantive content of contracts. It has been noted that three (3) modes have emerged:
(1) lex loci contractus or the law of the place of the making; (2) lex loci solutionis or the law of the
place of performance; and (3) lex loci intentionis or the law intended by the parties.56

Given Saudia's assertions, of particular relevance to resolving the present dispute is lex loci
intentionis.

An author observed that Spanish jurists and commentators "favor lex loci intentionis."57 These jurists
and commentators proceed from the Civil Code of Spain, which, like our Civil Code, is silent on what
governs the intrinsic validity of contracts, and the same civil law traditions from which we draw ours.

In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P. Eusebio
Construction, Inc.,58 manifested preference for allowing the parties to select the law applicable to their
contract":chanroblesvirtuallawlibrary

No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule
followed by most legal systems, however, is that the intrinsic validity of a contract must be governed
by the lex contractus or "proper law of the contract." This is the law voluntarily agreed upon by the
parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as substantial connection with the
transaction, or the nationality or domicile of the parties. Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the parties to select the law
applicable to their contract, subject to the limitation that it is not against the law, morals, or public
policy of the forum and that the chosen law must bear a substantive relationship to the
transaction.59 (Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the application of the laws
of Saudi Arabia. It insists that the need to comply with these stipulations calls into operation the
doctrine of forum non conveniens and, in turn, makes it necessary for Philippine tribunals to refrain
from exercising jurisdiction.

As mentioned, contractual choice of laws factors into transnational litigation in any or a combination of
four (4) ways. Moreover, forum non conveniens relates to one of these: choosing between multiple
possible fora.

Nevertheless, the possibility of parallel litigation in multiple fora — along with the host of difficulties it
poses — is not unique to transnational litigation. It is a difficulty that similarly arises in disputes well
within the bounds of a singe jurisdiction.

When parallel litigation arises strictly within the context of a single jurisdiction, such rules as those on
forum shopping, litis pendentia, and res judicata come into operation. Thus, in the Philippines, the
1997 Rules on Civil Procedure provide for willful and deliberate forum shopping as a ground not only
for summary dismissal with prejudice but also for citing parties and counsels in direct contempt, as
well as for the imposition of administrative sanctions.60 Likewise, the same rules expressly provide that
a party may seek the dismissal of a Complaint or another pleading asserting a claim on the ground
"[t]hat there is another action pending between the same parties for the same cause," i.e., litis
pendentia, or "[t]hat the cause of action is barred by a prior judgment,"61 i.e., res judicata.

Forum non conveniens, like the rules of forum shopping, litis pendentia, and res judicata, is a means
of addressing the problem of parallel litigation. While the rules of forum shopping, litis pendentia,
and res judicata are designed to address the problem of parallel litigation within a single
jurisdiction, forum non conveniens is a means devised to address parallel litigation arising in multiple
jurisdictions.

Forum non conveniens literally translates to "the forum is inconvenient."62 It is a concept in private

international law and was devised to combat the "less than honorable" reasons and excuses that
litigants use to secure procedural advantages, annoy and harass defendants, avoid overcrowded
dockets, and select a "friendlier" venue.63 Thus, the doctrine of forum non conveniens addresses the
same rationale that the rule against forum shopping does, albeit on a multijurisdictional scale.

Forum non conveniens, like res judicata,64 is a concept originating in common law.65 However, unlike
the rule on res judicata, as well as those on litis pendentia and forum shopping, forum non
conveniens finds no textual anchor, whether in statute or in procedural rules, in our civil law system.
Nevertheless, jurisprudence has applied forum non conveniens as basis for a court to decline its
exercise of jurisdiction.66

Forum non conveniens is soundly applied not only to address parallel litigation and undermine a
litigant's capacity to vex and secure undue advantages by engaging in forum shopping on an
international scale. It is also grounded on principles of comity and judicial efficiency.

Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction on account
of forum non conveniens is a deferential gesture to the tribunals of another sovereign. It is a measure
that prevents the former's having to interfere in affairs which are better and more competently
addressed by the latter. Further, forum non conveniens entails a recognition not only that tribunals
elsewhere are better suited to rule on and resolve a controversy, but also, that these tribunals
are better positioned to enforce judgments and, ultimately, to dispense justice. Forum non
conveniens prevents the embarrassment of an awkward situation where a tribunal is rendered
incompetent in the face of the greater capability — both analytical and practical — of a tribunal in
another jurisdiction.

The wisdom of avoiding conflicting and unenforceable judgments is as much a matter of efficiency and
economy as it is a matter of international courtesy. A court would effectively be neutering itself if it
insists on adjudicating a controversy when it knows full well that it is in no position to enforce its
judgment. Doing so is not only an exercise in futility; it is an act of frivolity. It clogs the dockets of
a.tribunal and leaves it to waste its efforts on affairs, which, given transnational exigencies, will be
reduced to mere academic, if not trivial, exercises.

Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law
cases, may refuse impositions on its jurisdiction where it is not the most 'convenient' or available
forum and the parties are not precluded from seeking remedies elsewhere."67 In Puyat v.
Zabarte,68 this court recognized the following situations as among those that may warrant a court's
desistance from exercising jurisdiction:chanroblesvirtuallawlibrary

1) The belief that the matter can be better tried and decided elsewhere,
either because the main aspects of the case transpired in a foreign
jurisdiction or the material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice
known as forum shopping[,] merely to secure procedural advantages or
to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non residents or
aliens when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right
sought to be maintained; and
5) The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,70 this court
underscored that a Philippine court may properly assume jurisdiction over a case if it chooses to do so
to the extent: "(1) that the Philippine Court is one to which the parties may conveniently resort to; (2)
that the Philippine Court is in a position to make an intelligent decision as to the law and the facts;
and (3) that the Philippine Court has or is likely to have power to enforce its decision."71

The use of the word "may" (i.e., "may refuse impositions on its jurisdiction"72) in the decisions shows
that the matter of jurisdiction rests on the sound discretion of a court. Neither the mere invocation
of forum non conveniens nor the averment of foreign elements operates to automatically divest a
court of jurisdiction. Rather, a court should renounce jurisdiction only "after 'vital facts are
established, to determine whether special circumstances' require the court's desistance."73 As the
propriety of applying forum non conveniens is contingent on a factual determination, it is, therefore, a
matter of defense.74
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure is exclusive in its recital
of the grounds for dismissal that are exempt from the omnibus motion rule: (1) lack of jurisdiction
over the subject matter; (2) litis pendentia; (3) res judicata; and (4) prescription. Moreover, dismissal
on account offorum non conveniens is a fundamentally discretionary matter. It is, therefore, not a
matter for a defendant to foist upon the court at his or her own convenience; rather, it must be
pleaded at the earliest possible opportunity.

On the matter of pleading forum non conveniens, we state the rule, thus: Forum non conveniens must
not only be clearly pleaded as a ground for dismissal; it must be pleaded as such at the earliest
possible opportunity. Otherwise, it shall be deemed waived.

This court notes that in Hasegawa,76 this court stated that forum non conveniens is not a ground for a
motion to dismiss. The factual ambience of this case however does not squarely raise the viability of
this doctrine. Until the opportunity comes to review the use of motions to dismiss for parallel
litigation, Hasegawa remains existing doctrine.

Consistent with forum non conveniens as fundamentally a factual matter, it is imperative that it

proceed from & factually established basis. It would be improper to dismiss an action pursuant
to forum non conveniens based merely on a perceived, likely, or hypothetical multiplicity of fora.
Thus, a defendant must also plead and show that a prior suit has, in fact, been brought in another
jurisdiction.

The existence of a prior suit makes real the vexation engendered by duplicitous litigation, the
embarrassment of intruding into the affairs of another sovereign, and the squandering of judicial
efforts in resolving a dispute already lodged and better resolved elsewhere. As has been noted: chanroblesvirtuallawlibrary

A case will not be stayed o dismissed on [forum] non conveniens grounds unless the plaintiff is shown
to have an available alternative forum elsewhere. On this, the moving party bears the burden of proof.

A number of factors affect the assessment of an alternative forum's adequacy. The statute of
limitations abroad may have run, of the foreign court may lack either subject matter or personal
jurisdiction over the defendant. . . . Occasionally, doubts will be raised as to the integrity or
impartiality of the foreign court (based, for example, on suspicions of corruption or bias in favor of
local nationals), as to the fairness of its judicial procedures, or as to is operational efficiency (due, for
example, to lack of resources, congestion and delay, or interfering circumstances such as a civil
unrest). In one noted case, [it was found] that delays of 'up to a quarter of a century' rendered the
foreign forum... inadequate for these purposes.77 cralawlawlibrary

We deem it more appropriate and in the greater interest of prudence that a defendant not only allege
supposed dangerous tendencies in litigating in this jurisdiction; the defendant must also show that
such danger is real and present in that litigation or dispute resolution has commenced in another
jurisdiction and  that a foreign tribunal has chosen to exercise jurisdiction.

III

Forum non conveniens finds no application and does not operate to divest Philippine tribunals of
jurisdiction and to require the application of foreign law.

Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the Cabin Attendant
contracts that require the application of the laws of Saudi Arabia.

Forum non conveniens relates to forum, not to the choice of governing law. Thai forum non
conveniens may ultimately result in the application of foreign law is merely an incident of its
application. In this strict sense, forum non conveniens is not applicable. It is not the primarily pivotal
consideration in this case.

In any case, even a further consideration of the applicability of forum non conveniens on the incidental
matter of the law governing respondents' relation with Saudia leads to the conclusion that it is
improper for Philippine tribunals to divest themselves of jurisdiction.

Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents must grapple
with two (2) considerations: first, the availability and adequacy of recourse to a foreign tribunal; and
second, the question of where, as between the forum court and a foreign court, the balance of
interests inhering in a dispute weighs more heavily.

The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign tribunal and
can be resolved by juxtaposing the competencies and practical circumstances of the tribunals in
alternative fora. Exigencies, like the statute of limitations, capacity to enforce orders and judgments,
access to records, requirements for the acquisition of jurisdiction, and even questions relating to the
integrity of foreign courts, may render undesirable or even totally unfeasible recourse to a foreign
court. As mentioned, we consider it in the greater interest of prudence that a defendant show, in
pleading forum non conveniens, that litigation has commenced in another jurisdiction and that a
foieign tribunal has, in fact, chosen to exercise jurisdiction.

Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a dispute: first,
the vinculum which the parties and their relation have to a given jurisdiction; and second, the public
interest that must animate a tribunal, in its capacity as an agent of the sovereign, in choosing to
assume or decline jurisdiction. The first is more concerned with the parties, their personal
circumstances, and private interests; the second concerns itself with the state and the greater social
order.

In considering the vinculum, a court must look into the preponderance of linkages which the parties
and their transaction may have to either jurisdiction. In this respect, factors, such as the parties'
respective nationalities and places of negotiation, execution, performance, engagement or
deployment, come into play.

In considering public interest, a court proceeds with a consciousness that it is an organ of the state. It
must, thus, determine if the interests of the sovereign (which acts through it) are outweighed by
those of the alternative jurisdiction. In this respect, the court delves into a consideration of public
policy. Should it find that public interest weighs more heavily in favor of its assumption of jurisdiction,
it should proceed in adjudicating the dispute, any doubt or .contrary view arising from the
preponderance of linkages notwithstanding.

Our law on contracts recognizes the validity of contractual choice of law provisions. Where such
provisions exist, Philippine tribunals, acting as the forum court, generally defer to the parties'
articulated choice.

This is consistent with the fundamental principle of autonomy of contracts. Article 1306 of the Civ:l
Code expressly provides that "[t]he contracting parties may establish 'such stipulations, clauses,
terms and conditions as they may deem convenient."78 Nevertheless, while a Philippine tribunal (acting
as the forum court) is called upon to respect the parties' choice of governing law, such respect must
not be so permissive as to lose sight of considerations of law, morals, good customs, public order, or
public policy that underlie the contract central to the controversy.

Specifically with respect to public policy, in Pakistan International Airlines Corporation v. Ople,79 this
court explained that: chanroblesvirtuallawlibrary

counter-balancing the principle of autonomy of contracting parties is the equally general rule that
provisions of applicable law, especially provisions relating to matters affected with public policy, are
deemed written inta the contract. Put a little differently, the governing principle is that parties may not
contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest.80 (Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure the
fundamental equality before the law of women and men." Contrasted with Article II, Section 1 of the
1987 Constitution's statement that "[n]o person shall ... be denied the equal protection of the laws,"
Article II, Section 14 exhorts the State to "ensure." This does not only mean that the Philippines shall
not countenance nor lend legal recognition and approbation to measures that discriminate on the basis
of one's being male or female. It imposes an obligation to actively engage in securing the fundamental
equality of men and women.

The Convention on the Elimination of all Forms of Discrimination against Women (CEDAW), signed and
ratified by the Philippines on July 15, 1980, and on August 5, 1981, respectively,81 is part of the law of
the land. In view of the widespread signing and ratification of, as well as adherence (in practice) to it
by states, it may even be said that many provisions of the CEDAW may have become customary
international law. The CEDAW gives effect to the Constitution's policy statement in Article II, Section
14. Article I of the CEDAW defines "discrimination against women" as: chanroblesvirtuallawlibrary

any distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of
impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital
status, on a basis of equality of men and women, of human rights and fundamental freedoms in the
political, economic, social, cultural, civil or any other field.82
cralawlawlibrary

The constitutional exhortation to ensure fundamental equality, as illumined by its enabling law, the
CEDAW, must inform and animate all the actions of all personalities acting on behalf of the State. It is,
therefore, the bounden duty of this court, in rendering judgment on the disputes brought before it, to
ensure that no discrimination is heaped upon women on the mere basis of their being women. This is
a point so basic and central that all our discussions and pronouncements — regardless of whatever
averments there may be of foreign law — must proceed from this premise.

So informed and animated, we emphasize the glaringly discriminatory nature of Saudia's policy. As
argued by respondents, Saudia's policy entails the termination of employment of flight attendants who
become pregnant. At the risk of stating the obvious, pregnancy is an occurrence that pertains
specifically to women. Saudia's policy excludes from and restricts employment on the basis of no other
consideration but sex.

We do not lose sight of the reality that pregnancy does present physical limitations that may render
difficult the performance of functions associated with being a flight attendant. Nevertheless, it would
be the height of iniquity to view pregnancy as a disability so permanent and immutable that, it must
entail the termination of one's employment. It is clear to us that any individual, regardless of gender,
may be subject to exigencies that limit the performance of functions. However, we fail to appreciate
how pregnancy could be such an impairing occurrence that it leaves no other recourse but the
complete termination of the means through which a woman earns a living.

Apart from the constitutional policy on the fundamental equality before the law of men and women, it
is settled that contracts relating to labor and employment are impressed with public interest. Article
1700 of the Civil Code provides that "[t]he relation between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts must yield to the common
good."

Consistent with this, this court's pronouncements in Pakistan International Airlines Corporation83 are
clear and unmistakable: chanroblesvirtuallawlibrary

Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies,
firstly, the law of Pakistan as the applicable law of the agreement, and, secondly, lays the venue for
settlement of any dispute arising out of or in connection with the agreement "only [in] courts of
Karachi, Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of
Philippine labor laws and'regulations to the subject matter of this case, i.e., the employer-employee
relationship between petitioner PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the otherwise applicable Philippine laws and
regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their
relationship. . . . Under these circumstances, paragraph 10 of the employment agreement cannot be
given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by
Philippine law.84 (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the illegal termination of
respondents' employment, this case is immutably a matter of public interest and public policy.
Consistent with clear pronouncements in law and jurisprudence, Philippine laws properly find
application in and govern this case. 'Moreover, as this premise for Saudia's insistence on the
application forum non conveniens has been shattered, it follows that Philippine tribunals may properly
assume jurisdiction over the present controversy. Philippine jurisprudence provides ample illustrations
of when a court's renunciation of jurisdiction on account of forum non conveniens is proper or
improper.'

In Philsec Investment Corporation v. Court of Appeals,85 this court noted that the trial court failed to
consider that one of the plaintiffs was a domestic corporation, that one of the defendants was a
Filipino, and that it was the extinguishment of the latter's debt that was the object of the transaction
subject of the litigation. Thus, this court held, among others, that the trial court's refusal to assume
jurisdiction was not justified by forum non conveniens and remanded the case to the trial court.

In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained the trial court's assumption of
jurisdiction considering that the trial court could properly enforce judgment on the petitioner which
was a foreign corporation licensed to do business in the Philippines.

In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no reason to disturb the trial court's
assumption of jurisdiction over a case in which, as noted by the trial court, "it is more convenient to
hear and decide the case in the Philippines because Todaro [the plaintiff] resides in the Philippines and
the contract allegedly breached involve[d] employment in the Philippines."88

In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this court held that the fact that the
complainant in an illegal dismissal case was a Canadian citizen and a repatriate did not warrant the
application of forum non conveniens considering that: (1) the Labor Code does not include forum non
conveniens as a ground for the dismissal of a complaint for illegal dismissal; (2) the propriety of
dismissing a case based on forum non conveniens requires a factual determination; and (3) the
requisites for assumption of jurisdiction as laid out in Bank of America, NT&SA90 were all satisfied.

In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations Commission 91 that
the National Labor Relations Q Commission was a seriously inconvenient forum. In that case, private
respondent Marcelo G. Santos was working in the Sultanate of Oman when he received a letter from
Palace Hotel recruiting him for employment in Beijing, China. Santos accepted the offer.
Subsequently, however, he was released from employment supposedly due to business reverses
arising from political upheavals in China (i.e., the Tiananmen Square incidents of 1989). Santos later
filed a Complaint for illegal dismissal impleading Palace Hotel's General Manager, Mr. Gerhard
Schmidt, the Manila Hotel International Company Ltd. (which was, responsible for training Palace
Hotel's personnel and staff), and the Manila Hotel Corporation (which owned 50% of Manila Hotel
International Company Ltd.'s capital stock).

In ruling against the National Labor Relations Commission's exercise of jurisdiction, this court noted
that the main aspects of the case transpired in two (2) foreign jurisdictions, Oman and China, and that
the case involved purely foreign elements. Specifically, Santos was directly hired by a foreign
employer through correspondence sent to Oman. Also, the proper defendants were neither Philippine
nationals nor engaged in business in the Philippines, while the main witnesses were not residents of
the Philippines. Likewise, this court noted that the National Labor Relations Commission was in no
position to conduct the following: first, determine the law governing the employment contract, as it
was entered into in foreign soil; second, determine the facts, as Santos' employment was terminated
in Beijing; and third, enforce its judgment, since Santos' employer, Palace Hotel, was incorporated
under the laws of China and was not even served with summons.

Contrary to Manila Hotel, the case now before us does not entail a preponderance of linkages that
favor a foreign jurisdiction.

Here, the circumstances of the parties and their relation do not approximate the circumstances
enumerated in Puyat,92 which this court recognized as possibly justifying the desistance of Philippine
tribunals from exercising jurisdiction.

First, there is no basis for concluding that the case can be more conveniently tried elsewhere. As
established earlier, Saudia is doing business in the Philippines. For their part, all four (4) respondents
are Filipino citizens maintaining residence in the Philippines and, apart from their previous
employment with Saudia, have no other connection to the Kingdom of Saudi Arabia. It would even be
to respondents' inconvenience if this case were to be tried elsewhere.

Second, the records are bereft of any indication that respondents filed their Complaint in an effort to
engage in forum shopping or to vex and inconvenience Saudia.
Third, there is no indication of "unwillingness to extend local judicial facilities to non-residents or
aliens."93 That Saudia has managed to bring the present controversy all the way to this court proves
this.

Fourth, it cannot be said that the local judicial machinery is inadequate for effectuating the right
sought to be maintained. Summons was properly served on Saudia and jurisdiction over its person
was validly acquired.

Lastly, there is not even room for considering foreign law. Philippine law properly governs the present
dispute.

As the question of applicable law has been settled, the supposed difficulty of ascertaining foreign law
(which requires the application of forum non conveniens) provides no insurmountable inconvenience
or special circumstance that will justify depriving Philippine tribunals of jurisdiction.

Even if we were to assume, for the sake of discussion, that it is the laws of Saudi Arabia which should
apply, it does not follow that Philippine tribunals should refrain from exercising jurisdiction. To. recall
our pronouncements in Puyat,94 as well as in Bank of America, NT&SA,95 it is not so much the mere
applicability of foreign law which calls into operation forum non conveniens. Rather, what justifies a
court's desistance from exercising jurisdiction is "[t]he difficulty of ascertaining foreign law"96 or the
inability of a "Philippine Court to make an intelligent decision as to the law[.]"97

Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e., "to make an
intelligent decision"98), Philippine tribunals may apply the foreign law selected by the parties. In fact,
(albeit without meaning to make a pronouncement on the accuracy and reliability of respondents'
citation) in this case, respondents themselves have made averments as to the laws of Saudi Arabia. In
their Comment, respondents write: chanroblesvirtuallawlibrary

Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful to terminate the
employment of any woman by virtue of pregnancy. The law in Saudi Arabia is even more harsh and
strict [sic] in that no employer can terminate the employment of a female worker or give her a
warning of the same while on Maternity Leave, the specific provision of Saudi Labor Laws on the
matter is hereto quoted as follows: chanroblesvirtuallawlibrary

"An employer may not terminate the employment of a female worker or give her a warning of the
same while on maternity leave." (Article 155, Labor Law of the Kingdom of Saudi Arabia, Royal Decree
No. M/51.)99cralawlawlibrary

All told, the considerations for assumption of jurisdiction by Philippine tribunals as outlined in Bank of
America, NT&SA100 have been satisfied. First, all the parties are based in the Philippines and all the
material incidents transpired in this jurisdiction. Thus, the parties may conveniently seek relief from
Philippine tribunals. Second, Philippine tribunals are in a position to make an intelligent decision as to
the law and the facts. Third, Philippine tribunals are in a position to enforce their decisions. There is no
compelling basis for ceding jurisdiction to a foreign tribunal. Quite the contrary, the immense public
policy considerations attendant to this case behoove Philippine tribunals to not shy away from their
duty to rule on the case. chanRoblesvirtualLawlibrary

IV

Respondents were illegally terminated.

In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary resignation as "the voluntary act of
an employee who is in a situation where one believes that personal reasons cannot be sacrificed in
favor of the exigency of the service, and one has no other choice but to dissociate oneself from
employment. It is a formal pronouncement or relinquishment of an office, with the intention of
relinquishing the office accompanied by the act of relinquishment."102 Thus, essential to the act of
resignation is voluntariness. It must be the result of an employee's exercise of his or her own will.

In the same case of Bilbao, this court advanced a means for determining whether an employee
resigned voluntarily: chanroblesvirtuallawlibrary
As the intent to relinquish must concur with the overt act of relinquishment, the acts of the employee
before and after the alleged resignation must be considered in determining whether he or she, in fact,
intended, to sever his or her employment.103(Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of work because 'continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank
or a diminution in pay' and other benefits."104

In Penaflor v. Outdoor Clothing Manufacturing Corporation,105 constructive dismissal has been

described as tantamount to "involuntarily [sic] resignation due to the harsh, hostile, and unfavorable
conditions set by the employer."106 In the same case, it was noted that "[t]he gauge for constructive
dismissal is whether a reasonable person in the employee's position would feel compelled to give up
his employment under the prevailing circumstances."107

Applying the cited standards on resignation and constructive dismissal, it is clear that respondents
were constructively dismissed. Hence, their termination was illegal.

The termination of respondents' employment happened when they were pregnant and expecting to
incur costs on account of child delivery and infant rearing. As noted by the Court of Appeals,
pregnancy is a time when they need employment to sustain their families.108 Indeed, it goes against
normal and reasonable human behavior to abandon one's livelihood in a time of great financial need.

It is clear that respondents intended to remain employed with Saudia. All they did was avail of their
maternity leaves. Evidently, the very nature of a maternity leave means that a pregnant employee will
not report for work only temporarily and that she will resume the performance of her duties as soon
as the leave allowance expires.

It is also clear that respondents exerted all efforts to' remain employed with Saudia. Each of them
repeatedly filed appeal letters (as much as five [5] letters in the case of Rebesencio109) asking Saudia
to reconsider the ultimatum that they resign or be terminated along with the forfeiture of their
benefits. Some of them even went to Saudia's office to personally seek reconsideration.110

Respondents also adduced a copy of the "Unified Employment Contract for Female Cabin
Attendants."111 This contract deemed void the employment of a flight attendant who becomes
pregnant and threatened termination due to lack of medical fitness.112 The threat of termination (and
the forfeiture of benefits that it entailed) is enough to compel a reasonable person in respondents'
position to give up his or her employment.

Saudia draws attention to how respondents' resignation letters were supposedly made in their own
handwriting. This minutia fails to surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof of how any supposed resignation
did not arise from respondents' own initiative. As earlier pointed out, respondents' resignations were
executed on Saudia's blank letterheads that Saudia had provided. These letterheads already had the
word "RESIGNATION" typed on the subject portion of their respective headings when these were
handed to respondents.113 ChanRoblesVirtualawlibrary

"In termination cases, the burden of proving just or valid cause for dismissing an employee rests on
the employer."114 In this case, Saudia makes much of how respondents supposedly completed their
exit interviews, executed quitclaims, received their separation pay, and took more than a year to file
their Complaint.115 If at all, however, these circumstances prove only the fact of their occurrence,
nothing more. The voluntariness of respondents' departure from Saudia is non sequitur.

Mere compliance with standard procedures or processes, such as the completion of their exit
interviews, neither negates compulsion nor indicates voluntariness.

As with respondent's resignation letters, their exit interview forms even support their claim of illegal
dismissal and militates against Saudia's arguments. These exit interview forms, as reproduced by
Saudia in its own Petition, confirms the unfavorable conditions as regards respondents' maternity
leaves. Ma. Jopette's and Loraine's exit interview forms are particularly telling:
chanroblesvirtuallawlibrary
a. From Ma. Jopette's exit interview form:

    3. In what respects has the job met or failed to meet your expectations?

THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE.116

b. From Loraine's exit interview form:

    1. What are your main reasons for leaving Saudia? What company are you joining?

        xxx xxx xxx 

        Others

CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY)117

As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v. Paramio,118 this court
noted that "[i]f (a) there is clear proof that the waiver was wangled from an unsuspecting or gullible
person; or (b) the terms of the settlement are unconscionable, and on their face invalid, such
quitclaims must be struck down as invalid or illegal."119 Respondents executed their quitclaims after
having been unfairly given an ultimatum to resign or be terminated (and forfeit their benefits). chanRoblesvirtualLawlibrary

Having been illegally and unjustly dismissed, respondents are entitled to full backwages and benefits
from the time of their termination until the finality of this Decision. They are likewise entitled to
separation pay in the amount of one (1) month's salary for every year of service until the fmality of
this Decision, with a fraction of a year of at least six (6) months being counted as one (1) whole year.

Moreover, "[m]oral damages are awarded in termination cases where the employee's dismissal was
attended by bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it
was done in a manner contrary to morals, good customs or public policy."120 In this case, Saudia
terminated respondents' employment in a manner that is patently discriminatory and running afoul of
the public interest that underlies employer-employee relationships. As such, respondents are entitled
to moral damages.

To provide an "example or correction for the public good"121 as against such discriminatory and callous
schemes, respondents are likewise entitled to exemplary damages.

In a long line of cases, this court awarded exemplary damages to illegally dismissed employees whose
"dismissal[s were] effected in a wanton, oppressive or malevolent manner."122 This court has awarded
exemplary damages to employees who were terminated on such frivolous, arbitrary, and unjust
grounds as membership in or involvement with labor unions,123 injuries sustained in the course of
employment,124 development of a medical condition due to the employer's own violation of the
employment contract,125 and lodging of a Complaint against the employer.126 Exemplary damages were
also awarded to employees who were deemed illegally dismissed by an employer in an attempt to
evade compliance with statutorily established employee benefits.127 Likewise, employees dismissed for
supposedly just causes, but in violation of due process requirements, were awarded exemplary
damages.128

These examples pale in comparison to the present controversy. Stripped of all unnecessary
complexities, respondents were dismissed for no other reason than simply that they were pregnant.
This is as wanton, oppressive, and tainted with bad faith as any reason for termination of employment
can be. This is no ordinary case of illegal dismissal. This is a case of manifest gender discrimination. It
is an affront not only to our statutes and policies on employees' security of tenure, but more so, to the
Constitution's dictum of fundamental equality between men and women.129

The award of exemplary damages is, therefore, warranted, not only to remind employers of the need
to adhere to the requirements of procedural and substantive due process in termination of
employment, but more importantly, to demonstrate that gender discrimination should in no case be
countenanced.

Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal, respondents are
likewise entitled to attorney's fees in the amount of 10% of the total monetary award.130

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of the persons composing it. Thus, as
a rule, corporate directors and officers are not liable for the illegal termination of a corporation's
employees. It is only when they acted in bad faith or with malice that they become solidarity liable
with the corporation.131

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical,132 this

court clarified that "[b]ad faith does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty
through some motive or interest or ill will; it partakes of the nature of fraud."133

Respondents have not produced proof to show that Brenda J. Betia acted in bad faith or with malice as
regards their termination. Thus, she may not be held solidarity liable with Saudia. cralawred

WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not solidarity liable

with petitioner Saudi Arabian Airlines, and second, that petitioner Saudi Arabian Airlines is liable for
moral and exemplary damages. The June 16, 2011 Decision and the September 13, 2011 Resolution
of the Court of Appeals in CA-G.R. SP. No. 113006 are hereby AFFIRMED in all other respects.
Accordingly, petitioner Saudi Arabian Airlines is ordered to pay respondents:

(1) Full backwages and all other benefits computed from the respective
dates in which each of the respondents were illegally terminated until the
finality of this Decision;
(2) Separation pay computed from the respective dates in which each of the
respondents commenced employment until the finality of this Decision at
the rate of one (1) month's salary for every year of service, with a
fraction of a year of at least six (6) months being counted as one (1)
whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;
(4) Exemplary damages in the amount of P200,000.00 per respondent; and
(5) Attorney's fees equivalent to 10% of the total award.
Interest of 6% per annum shall likewise be imposed on the total judgment award from the finality of
this Decision until full satisfaction thereof.

This case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to
respondents which petitioner Saudi Arabian Airlines should pay without delay.

SO ORDERED.

13. G.R. NOS. 178382-83

CONTINENTAL MICRONESIA, INC., Petitioner,

vs.

JOSEPH BASSO, Respondent.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court
assailing the Decision2 dated May 23, 2006 and Resolution3 dated June 19, 2007 of the
Court of Appeals in the consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No.
84281. These assailed Decision and Resolution set aside the Decision4 dated November
28, 2003 of the National Labor Relations Commission (NLRC) declaring Joseph Basso's
(Basso) dismissal illegal, and ordering the payment of separation pay as alternative to
reinstatement and full backwages until the date of the Decision.

The Facts

Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation organized and e:xisting
under the laws of and domiciled in the United States of America (US). It is licensed to do
business in the Philippines.5 Basso, a US citizen, resided in the Philippines prior to his
death.6

During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden), Managing Director-Asia
of Continental Airlines, Inc. (Continental), offered Basso the position of General Manager of
the Philippine Branch of Continental. Basso accepted the offer.7

It was not until much later that Mr. Braden, who had since returned to the US, sent Basso
the employment contract8 dated February 1, 1991, which Mr. Braden had already signed.
Basso then signed the employment contract and returned it to Mr. Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of Continental, with Basso
retaining his position as General Manager.9

On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr. Schulz), who
was then CMI’s Vice President of Marketing and Sales, informing Basso that he has agreed
to work in CMI as a consultant on an "as needed basis" effective February 1, 1996 to July
31, 1996. The letter also informed Basso that: (1) he will not receive any monetary
compensation but will continue being covered by the insurance provided by CMI; (2) he will
enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for the payment of
housing lease for 12 months.10

On January 11, 1996, Basso wrote a counter-proposal11 to Mr. Schulz regarding his
employment status in CMI. On March 14, 1996, Basso wrote another letter addressed to
Ms. Marty Woodward (Ms. Woodward) of CMI’s Human Resources Department inquiring
about the status of his employment.12 On the same day, Ms. Woodward responded that
pursuant to the employment contract dated February 1, 1991, Basso could be terminated at
will upon a thirty-day notice. This notice was allegedly the letter Basso received from Mr.
Schulz on December 20, 1995. Ms. Woodward also reminded Basso of the telephone
conversation between him, Mr. Schulz and Ms. Woodward on December 19, 1995, where
they informed him of the company’s decision to relieve him as General Manager. Basso,
instead, was offered the position of consultant to CMI. Ms. Woodward also informed Basso
that CMI rejected his counter-proposal and, thus, terminated his employment effective
January 31, 1996. CMI offered Basso a severance pay, in consideration of the
Php1,140,000.00 housing advance that CMI promised him13 Basso filed a Complaint for
Illegal Dismissal with Moral and Exemplary Damages against CMI on December 19,
1996.14 Alleging the presence of foreign elements, CMI filed a Motion to Dismiss15 dated
February 10, 1997 on the ground of lack of jurisdiction over the person of CMI and the
subject matter of the controversy. In an Order16 dated August 27, 1997, the Labor Arbiter
granted the Motion to Dismiss. Applying the doctrine of lex loci contractus, the Labor Arbiter
held that the terms and provisions of the employment contract show that the parties did not
intend to apply our Labor Code (Presidential Decree No. 442). The Labor Arbiter also held
that no employer-employee relationship existed between Basso and the branch office of
CMI in the Philippines, but between Basso and the foreign corporation itself.

On appeal, the NLRC remanded the case to the Labor Arbiter for the determination of
certain facts to settle the issue on jurisdiction. NLRC ruled that the issue on whether the
principle of lex loci contractus or lex loci celebrationis should apply has to be further
threshed out.17
Labor Arbiter’s Ruling

Labor Arbiter Madjayran H. Ajan in his Decision18 dated September 24, 1999 dismissed the
case for lack of merit and jurisdiction.

The Labor Arbiter agreed with CMI that the employment contract was executed in the US
"since the letter-offer was under the Texas letterhead and the acceptance of Complainant
was returned there."19 Thus, applying the doctrine of lex loci celebrationis, US laws apply.
Also, applying lex loci contractus, the Labor Arbiter ruled that the parties did not intend to
apply Philippine laws, thus:

Although the contract does not state what law shall apply, it is obvious that Philippine laws
were not written into it. More specifically, the Philippine law on taxes and the Labor Code
were not intended by the parties to apply, otherwise Par. 7 on the payment by Complainant
U.S. Federal and Home State income taxes, and Pars. 22/23 on termination by 30-day prior
notice, will not be there. The contract was prepared in contemplation of Texas or U.S. laws
where Par. 7 is required and Pars. 22/23 is allowed.20

The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the
allegations of CMI that Basso committed a series of acts that constitute breach of trust and
loss of confidence.21

The Labor Arbiter, however, found CMI to have voluntarily submitted to his office’s
jurisdiction. CMI participated in the proceedings, submitted evidence on the merits of the
case, and sought affirmative relief through a motion to dismiss.22

NLRC’s Ruling

On appeal, the NLRC Third Division promulgated its Decision23 dated November 28, 2003,
the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET ASIDE.
Respondent CMI is ordered to pay complainant the amount of US$5,416.00 for failure to
comply with the due notice requirement. The other claims are dismissed.

SO ORDERED.24

The NLRC did not agree with the pronouncement of the Labor Arbiter that his office has no
jurisdiction over the controversy. It ruled that the Labor Arbiter acquired jurisdiction over the
case when CMI voluntarily submitted to his office’s jurisdiction by presenting evidence,
advancing arguments in support of the legality of its acts, and praying for reliefs on the
merits of the case.25

On the merits, the NLRC agreed with the Labor Arbiter that Basso was dismissed for just
and valid causes on the ground of breach of trust and loss of confidence. The NLRC ruled
that under the applicable rules on loss of trust and confidence of a managerial employee,
such as Basso, mere existence of a basis for believing that such employee has breached
the trust of his employer suffices. However, the NLRC found that CMI denied Basso the
required due process notice in his dismissal.26

Both CMI and Basso filed their respective Motions for Reconsideration dated January 15,
200427 and January 8, 2004.28 Both motions were dismissed in separate Resolutions
dated March 15, 200429 and February 27, 2004,30 respectively.

Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals docketed
as CA-G.R. SP No. 83938.31 Basso imputed grave abuse of discretion on the part of the
NLRC in ruling that he was validly dismissed. CMI filed its own Petition for Certiorari dated
May 13, 2004 docketed as CA-G.R. SP No. 84281,32 alleging that the NLRC gravely
abused its discretion when it assumed jurisdiction over the person of CMI and the subject
matter of the case.

In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two cases33
and ordered the parties to file their respective Memoranda.

The Court of Appeal’s Decision

The Court of Appeals promulgated the now assailed Decision34 dated May 23, 2006, the
relevant dispositive portion of which reads:

WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281 is DENIED

DUE COURSE and DISMISSED.

On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN DUE
COURSE and GRANTED, and accordingly, the assailed Decision dated November 28,
2003 and Resolution dated February 27, 2004 of the NLRC are SET ASIDE and VACATED.
Instead judgment is rendered hereby declaring the dismissal of Basso illegal and ordering
Continental to pay him separation pay equivalent to one (1) month pay for every year of
service as an alternative to reinstatement. Further, ordering Continental to pay Basso his
full backwages from the date of his said illegal dismissal until date of this decision. The
claim for moral and exemplary damages as well as attorney’s fees are dismissed.35

The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over the
subject matter of the case and over the parties. The Court of Appeals explained that
jurisdiction over the subject matter of the action is determined by the allegations of the
complaint and the law. Since the case filed by Basso is a termination dispute that is
"undoubtedly cognizable by the labor tribunals", the Labor Arbiter and the NLRC had
jurisdiction to rule on the merits of the case. On the issue of jurisdiction over the person of
the parties, who are foreigners, the Court of Appeals ruled that jurisdiction over the person
of Basso was acquired when he filed the complaint for illegal dismissal, while jurisdiction
over the person of CMI was acquired through coercive process of service of summons to its
agent in the Philippines. The Court of Appeals also agreed that the active participation of
CMI in the case rendered moot the issue on jurisdiction.

On the merits of the case, the Court of Appeals declared that CMI illegally dismissed Basso.
The Court of Appeals found that CMI’s allegations of loss of trust and confidence were not
established. CMI "failed to prove its claim of the incidents which were its alleged bases for
loss of trust or confidence."36 While managerial employees can be dismissed for loss of
trust and confidence, there must be a basis for such loss, beyond mere whim or caprice.

After the parties filed their Motions for Reconsideration,37 the Court of Appeals
promulgated Resolution38 dated June 19, 2007 denying CMI’s motion, while partially
granting Basso’s as to the computation of backwages.
Hence, this petition, which raises the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE FACTUAL

FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY INTO WHETHER OR
NOT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION.

II.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE LABOR
ARBITER AND THE NLRC HAD JURISDICTION TO HEAR AND TRY THE ILLEGAL
DISMISSAL CASE.

III.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT BASSO WAS
NOT VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST OR CONFIDENCE.

We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC in the
illegal dismissal case. The first and third issues will be discussed jointly.

The labor tribunals had jurisdiction

over the parties and the subject

matter of the case.

CMI maintains that there is a conflict-of-laws issue that must be settled to determine proper
jurisdiction over the parties and the subject matter of the case. It also alleges that the
existence of foreign elements calls for the application of US laws and the doctrines of lex
loci celebrationis (the law of the place of the ceremony), lex loci contractus (law of the place
where a contract is executed), and lex loci intentionis (the intention of the parties as to the
law that should govern their agreement). CMI also invokes the application of the rule of
forum non conveniens to determine the propriety of the assumption of jurisdiction by the
labor tribunals.

We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first.
Where the facts establish the existence of foreign elements, the case presents a conflict-of-
laws issue.39 The foreign element in a case may appear in different forms, such as in this
case, where one of the parties is an alien and the other is domiciled in another state.

In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of conflict-of-laws

problems, three consecutive phases are involved: jurisdiction, choice of law, and recognition
and enforcement of judgments. In resolving the conflicts problem, courts should ask the
following questions:

1. "Under the law, do I have jurisdiction over the subject matter and the parties to this case?

2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?

3. "If the answer is yes, what is the conflicts rule for this particular problem?

4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and
proved by the one invoking it?

5. "If so, is the application or enforcement of the foreign law in the forum one of the basic
exceptions to the application of foreign law? In short, is there any strong policy or vital
interest of the forum that is at stake in this case and which should preclude the application
of foreign law?41
Jurisdiction is defined as the power and authority of the courts to hear, try and decide
cases. Jurisdiction over the subject matter is conferred by the Constitution or by law and by
the material allegations in the complaint, regardless of whether or not the plaintiff is entitled
to recover all or some of the claims or reliefs sought therein.42 It cannot be acquired
through a waiver or enlarged by the omission of the parties or conferred by the
acquiescence of the court.43 That the employment contract of Basso was replete with
references to US laws, and that it originated from and was returned to the US, do not
automatically preclude our labor tribunals from exercising jurisdiction to hear and try this
case.

This case stemmed from an illegal dismissal complaint. The Labor Code, under Article 217,
clearly vests original and exclusive jurisdiction to hear and decide cases involving
termination disputes to the Labor Arbiter.

Hence, the Labor Arbiter and the NLRC have jurisdiction over the subject matter of the
case.

As regards jurisdiction over the parties, we agree with the Court of Appeals that the Labor
Arbiter acquired jurisdiction over the person of Basso, notwithstanding his citizenship, when
he filed his complaint against CMI. On the other hand, jurisdiction over the person of CMI
was acquired through the coercive process of service of summons. We note that CMI never
denied that it was served with summons. CMI has, in fact, voluntarily appeared and
participated in the proceedings before the courts. Though a foreign corporation, CMI is
licensed to do business in the Philippines and has a local business address here. The
purpose of the law in requiring that foreign corporations doing business in the country be
licensed to do so, is to subject the foreign corporations to the jurisdiction of our courts.44

Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties and the
subject matter of this case, these tribunals may proceed to try the case even if the rules of
conflict-of-laws or the convenience of the parties point to a foreign forum, this being an
exercise of sovereign prerogative of the country where the case is filed.45

The next question is whether the local forum is the convenient forum in light of the facts of
the case. CMI contends that a Philippine court is an inconvenient forum.

We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws case
may assume jurisdiction if it chooses to do so, provided, that the following requisites are
met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2)
that the Philippine Court is in a position to make an intelligent decision as to the law and the
facts; and (3) that the Philippine Court has or is likely to have power to enforce its
decision.46 All these requisites are present here.

Basso may conveniently resort to our labor tribunals as he and CMI had physical presence
in the Philippines during the duration of the trial. CMI has a Philippine branch, while Basso,
before his death, was residing here.

Thus, it could be reasonably expected that no extraordinary measures were needed for the
parties to make arrangements in advocating their respective cases.

The labor tribunals can make an intelligent decision as to the law and facts. The incident
subject of this case (i.e. dismissal of Basso) happened in the Philippines, the surrounding
circumstances of which can be ascertained without having to leave the Philippines. The acts
that allegedly led to loss of trust and confidence and Basso’s eventual dismissal were
committed in the Philippines. As to the law, we hold that Philippine law is the proper law of
the forum, as we shall discuss shortly. Also, the labor tribunals have the power to enforce
their judgments because they acquired jurisdiction over the persons of both parties.

Our labor tribunals being the convenient fora, the next question is what law should apply in
resolving this case.

The choice-of-law issue in a conflict-of-laws case seeks to answer the following important
questions: (1) What legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what extent should the chosen
legal system regulate the situation.47 These questions are entirely different from the
question of jurisdiction that only seeks to answer whether the courts of a state where the
case is initiated have jurisdiction to enter a judgment.48 As such, the power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum law.49
CMI insists that US law is the applicable choice-of-law under the principles of lex loci
celebrationis and lex loci contractus. It argues that the contract of employment originated
from and was returned to the US after Basso signed it, and hence, was perfected there.
CMI further claims that the references to US law in the employment contract show the
parties’ intention to apply US law and not ours. These references are:

a. Foreign station allowance of forty percent (40%) using the "U.S. State Department Index,
the base being Washington, D.C."

b. Tax equalization that made Basso responsible for "federal and any home state income
taxes."

c. Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S.
Department of State Indexes of living costs abroad."

d. The employment arrangement is "one at will, terminable by either party without any
further liability on thirty days prior written notice."50

CMI asserts that the US law on labor relations particularly, the US Railway Labor Act
sanctions termination-at-will provisions in an employment contract. Thus, CMI concludes
that if such laws were applied, there would have been no illegal dismissal to speak of
because the termination-at-will provision in Basso’s employment contract would have been
perfectly valid.

We disagree.

In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an essential element

of conflict rules is the indication of a "test" or "connecting factor" or "point of contact".
Choice-of-law rules invariably consist of a factual relationship (such as property right,
contract claim) and a connecting fact or point of contact, such as the situs of the res, the
place of celebration, the place of performance, or the place of wrongdoing. Pursuant to
Saudi Arabian Airlines, we hold that the "test factors," "points of contact" or "connecting
factors" in this case are the following:
(1) The nationality, domicile or residence of Basso;

(2) The seat of CMI;

(3) The place where the employment contract has been made, the locus actus;

(4) The place where the act is intended to come into effect, e.g., the place of performance of
contractual duties;

(5) The intention of the contracting parties as to the law that should govern their agreement,
the lex loci intentionis; and

(6) The place where judicial or administrative proceedings are instituted or done.52

Applying the foregoing in this case, we conclude that Philippine law is the applicable law.
Basso, though a US citizen, was a resident here from the time he was hired by CMI until his
death during the pendency of the case. CMI, while a foreign corporation, has a license to do
business in the Philippines and maintains a branch here, where Basso was hired to work.
The contract of employment was negotiated in the Philippines. A purely consensual
contract, it was also perfected in the Philippines when Basso accepted the terms and
conditions of his employment as offered by CMI. The place of performance relative to
Basso’s contractual duties was in the Philippines. The alleged prohibited acts of Basso that
warranted his dismissal were committed in the Philippines.

Clearly, the Philippines is the state with the most significant relationship to the problem.
Thus, we hold that CMI and Basso intended Philippine law to govern, notwithstanding some
references made to US laws and the fact that this intention was not expressly stated in the
contract. We explained in Philippine Export and Foreign Loan Guarantee Corporation v. V.
P. Eusebio Construction, Inc.53 that the law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or domicile of the parties.54
We cautioned, however, that while Philippine courts would do well to adopt the first and
most basic rule in most legal systems, namely, to allow the parties to select the law
applicable to their contract, the selection is subject to the limitation that it is not against the
law, morals, or public policy of the forum.55

Similarly, in Bank of America, NT & SA v. American Realty Corporation,56 we ruled that a

foreign law, judgment or contract contrary to a sound and established public policy of the
forum shall not be applied. Thus:

Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.57

Termination-at-will is anathema to the public policies on labor protection espoused by our

laws and Constitution, which dictates that no worker shall be dismissed except for just and
authorized causes provided by law and after due process having been complied with.58
Hence, the US Railway Labor Act, which sanctions termination-at-will, should not be applied
in this case.

Additionally, the rule is that there is no judicial notice of any foreign law. As any other fact, it
must be alleged and proved.59 If the foreign law is not properly pleaded or proved, the
presumption of identity or similarity of the foreign law to our own laws, otherwise known as
processual presumption, applies. Here, US law may have been properly pleaded but it was
not proved in the labor tribunals.

Having disposed of the issue on jurisdiction, we now rule on the first and third issues.

The Court of Appeals may review the

factual findings of the NLRC in a

Rule 65 petition.

CMI submits that the Court of Appeals overstepped the boundaries of the limited scope of
its certiorari jurisdiction when instead of ruling on the existence of grave abuse of discretion,
it proceeded to pass upon the legality and propriety of Basso’s dismissal. Moreover, CMI
asserts that it was error on the part of the Court of Appeals to re-evaluate the evidence and
circumstances surrounding the dismissal of Basso.

We disagree.

The power of the Court of Appeals to review NLRC decisions via a Petition for Certiorari
under Rule 65 of the Revised Rules of Court was settled in our decision in St. Martin
Funeral Home v. NLRC.60 The general rule is that certiorari does not lie to review errors of
judgment of the trial court, as well as that of a quasi-judicial tribunal. In certiorari
proceedings, judicial review does not go as far as to examine and assess the evidence of
the parties and to weigh their probative value.61 However, this rule admits of exceptions. In
Globe Telecom, Inc. v. Florendo-Flores,62 we stated:

In the review of an NLRC decision through a special civil action for certiorari, resolution is
confined only to issues of jurisdiction and grave abuse of discretion on the part of the labor
tribunal. Hence, the Court refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC.

Occasionally, however, the Court is constrained to delve into factual matters where, as in
the instant case, the findings of the NLRC contradict those of the Labor Arbiter.

In this instance, the Court in the exercise of its equity jurisdiction may look into the records
of the case and reexamine the questioned findings. As a corollary, this Court is clothed with
ample authority to review matters, even if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary to arrive at a just decision of the case. The same
principles are now necessarily adhered to and are applied by the Court of Appeals in its
expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we
see no error on its part when it made anew a factual determination of the matters and on
that basis reversed the ruling of the NLRC.63 (Citations omitted.)

Thus, the Court of Appeals may grant the petition when the factual findings complained of
are not supported by the evidence on record; when it is necessary to prevent a substantial
wrong or to do substantial justice; when the findings of the NLRC contradict those of the
Labor Arbiter; and when necessary to arrive at a just decision of the case.64 To make these
findings, the Court of Appeals necessarily has to look at the evidence and make its own
factual determination.65

Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the Court of
Appeals correctly exercised its power to review the evidence and the records of the illegal
dismissal case.

Basso was illegally dismissed.

It is of no moment that Basso was a managerial employee of CMI. Managerial employees

enjoy security of tenure and the right of the management to dismiss must be balanced
against the managerial employee’s right to security of tenure, which is not one of the
guaranties he gives up.66

In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to validly dismiss
an employee on the ground of loss of trust and confidence under Article 282 (c) of the Labor
Code, the employer must observe the following guidelines: 1) loss of confidence should not
be simulated; 2) it should not be used as subterfuge for causes which are improper, illegal
or unjustified; 3) it may not be arbitrarily asserted in the face of overwhelming evidence to
the contrary; and 4) it must be genuine, not a mere afterthought to justify earlier action
taken in bad faith. More importantly, it must be based on a willful breach of trust and
founded on clearly established facts.

We agree with the Court of Appeals that the dismissal of Basso was not founded on clearly
established facts and evidence sufficient to warrant dismissal from employment. While proof
beyond reasonable doubt is not required to establish loss of trust and confidence,
substantial evidence is required and on the employer rests the burden to establish it.68
There must be some basis for the loss of trust, or that the employer has reasonable ground
to believe that the employee is responsible for misconduct, which renders him unworthy of
the trust and confidence demanded by his position.69

CMI alleges that Basso committed the following:

(1) Basso delegated too much responsibility to the General Sales Agent and relied heavily
on its judgments.70

(2) Basso excessively issued promotional tickets to his friends who had no direct business
with CMI.71

(3) The advertising agency that CMI contracted had to deal directly with Guam because
Basso was hardly available.72 Mr. Schulz discovered that Basso exceeded the advertising
budget by $76,000.00 in 1994 and by $20,000.00 in 1995.73

(4) Basso spent more time and attention to his personal businesses and was reputed to
own nightclubs in the Philippines.74

(5) Basso used free tickets and advertising money to promote his personal business,75
such as a brochure that jointly advertised one of Basso’s nightclubs with CMI.

We find that CMI failed to discharge its burden to prove the above acts. CMI merely
submitted affidavits of its officers, without any other corroborating evidence. Basso, on the
other hand, had adequately explained his side. On the advertising agency and budget
issues raised by CMI, he explained that these were blatant lies as the advertising needs of
CMI were centralized in its Guam office and the Philippine office was not authorized to deal
with CMI’s advertising agency, except on minor issues.76 Basso further stated that under
CMI’s existing policy, ninety percent (90%) of the advertising decisions were delegated to
the advertising firm of McCann- Ericsson in Japan and only ten percent (10%) were left to
the Philippine office.77 Basso also denied the allegations of owning nightclubs and
promoting his personal businesses and explained that it was illegal for foreigners in the
Philippines to engage in retail trade in the first place.

Apart from these accusations, CMI likewise presented the findings of the audit team headed
by Mr. Stephen D. Goepfert, showing that "for the period of 1995 and 1996, personal
passes for Continental and other airline employees were noted (sic) to be issued for which
no service charge was collected."78 The audit cited the trip pass log of a total of 10 months.
The trip log does not show, however, that Basso caused all the ticket issuances.
More, half of the trips in the log occurred from March to July of 1996,79 a period beyond the
tenure of Basso. Basso was terminated effectively on January 31, 1996 as indicated in the
letter of Ms. Woodward.80

CMI also accused Basso of making "questionable overseas phone calls". Basso, however,
adequately explained in his Reply81 that the phone calls to Italy and Portland, USA were
made for the purpose of looking for a technical maintenance personnel with US Federal
Aviation Authority qualifications, which CMI needed at that time. The calls to the US were
also made in connection with his functions as General Manager, such as inquiries on his tax
returns filed in Nevada. Basso also explained that the phone lines82 were open direct lines
that all personnel were free to use to make direct long distance calls.83

Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover the
transfer fee of the Manila Polo Club share from Mr. Kenneth Glover, the previous General
Manager, to him. CMI claimed that "nowhere in the said contract was it likewise indicated
that the Manila Polo Club share was part of the compensation package given by CMI to
Basso."84 CMI’s claims are not credible. Basso explained that the Manila Polo Club share
was offered to him as a bonus to entice him to leave his then employer, United Airlines. A
letter from Mr. Paul J. Casey, former president of Continental, supports Basso.85 In the
letter, Mr. Casey explained:

As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he was
given the Manila Polo Club share and authorized to have the share re-issued in his name.
In addition to giving Mr. Basso the Manila Polo Club share, Continental agreed to pay the
dues for a period of three years and this was embodied in his contract with Continental. This
was all done with my knowledge and approval.86

Clause 14 of the employment contract also states:

Club Memberships: The Company will locally pay annual dues for membership in a club in
Manila that your immediate supervisor and I agree is of at least that value to Continental
through you in your role as our General Manager for the Philippines.87

Taken together, the above pieces of evidence suggest that the Manila Polo Club share was
part of Basso’s compensation package and thus he validly used company funds to pay for
the transfer fees. If doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter.88

Finally, CMI violated procedural due process in terminating Basso. In King of Kings
Transport, Inc. v. Mamac89 we detailed the procedural due process steps in termination of
employment:

To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice
to give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management.

During the hearing or conference, the employees are given the chance to defend
themselves personally, with the assistance of a representative or counsel of their choice.
Moreover, this conference or hearing could be used by the parties as an opportunity to
come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances involving
the charge against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment. (Emphasis in original.)

Here, Mr. Schulz’s and Ms. Woodward’s letters dated December 19, 1995 and March 14,
1996, respectively, are not one of the valid twin notices. Neither identified the alleged acts
that CMI now claims as bases for Basso’s termination. Ms. Woodward’s letter even stressed
that the original plan was to remove Basso as General Manager but with an offer to make
him consultant. It was inconsistent of CMI to declare Basso as unworthy of its trust and
confidence and, in the same breath, offer him the position of consultant. As the Court of
Appeals pointed out:

But mark well that Basso was clearly notified that the sole ground for his dismissal was the
exercise of the termination at will clause in the employment contract. The alleged loss of
trust and confidence claimed by Continental appears to be a mere afterthought belatedly
trotted out to save the day.90

Basso is entitled to separation pay and full backwages.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges, and to
his full backwages, inclusive of allowances and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld up to the time of actual
reinstatement.

Where reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative.1âwphi1 The
payment of separation pay is in addition to payment of backwages.91 In the case of Basso,
reinstatement is no longer possible since he has already passed away. Thus, Basso’s
separation pay with full backwages shall be paid to his heirs.

As to the computation of backwages, we agree with CMI that Basso was entitled to
backwages only up to the time he reached 65 years old, the compulsory retirement age
under the law.92 This is our consistent ruling.93
When Basso was illegally dismissed on January 31, 1996, he was already 58 years old.94
He turned 65 years old on October 2, 2002. Since backwages are granted on grounds of
equity for earnings lost by an employee due to his illegal dismissal,95 Basso was entitled to
backwages only for the period he could have worked had he not been illegally dismissed,
i.e. from January 31, 1996 to October 2, 2002.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated May 23,
2006 and Resolution dated June 19, 2007 in the consolidated cases CA-G.R. SP No. 83938
and CA-G.R. SP No. 84281 are

AFFIRMED, with MODIFICATION as to the award of backwages. Petitioner Continental

Micronesia, Inc. is hereby ordered to pay Respondent Joseph Basso’s heirs: 1) separation
pay equivalent to one (1) month pay for every year of service, and 2) full backwages from
January 31, 1996, the date of his illegal dismissal, to October 2, 2002, the date of his
compulsory retirement age.

SO ORDERED.

14. G.R. No. 205703, March 07, 2016

INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS), SNC LAVALIN

ENGINEERS & CONTRACTORS, INC. AND ANGELITO C. HERNANDEZ, Petitioners, v.
JOSE G. DE VERA AND ALBERTO B. ARRIOLA, Respondents.

DECISION

MENDOZA, J.:

When can a foreign law govern an overseas employment contract? This is the fervent
question that the Court shall resolve, once and for all.
This petition for review on certiorari seeks to reverse and set aside the January 24, 2013
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 118869, which modified the
November 30, 2010 Decision2 of the National Labor Relations Commission (NLRC) and its
February 2, 2011 Resolution,3 in NLRC LAC Case No. 08-000572-10/NLRC Case No. NCR
09-13563-09, a case for illegal termination of an Overseas Filipino Worker (OFW).

The Facts

Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local placement
agency duly organized and existing under Philippine laws, with petitioner Angelito C.
Hernandez as its president and managing director. Petitioner SNC Lavalin Engineers &
Contractors, Inc. (SNC-Lavalin) is the principal of IPAMS, a Canadian company with
business interests in several countries. On the other hand, respondent Alberto Arriola
(Arriola) is a licensed general surgeon in the Philippines.4

Employee's Position

Arriola was offered by SNC-Lavalin, through its letter,5 dated May 1, 2008, the position of
Safety Officer in its Ambatovy Project site in Madagascar. The position offered had a rate of
CA$32.00 per hour for forty (40) hours a week with overtime pay in excess of forty (40)
hours. It was for a period of nineteen (19) months starting from June 9, 2008 to December
31, 2009.

Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and his
overseas employment contract was processed with the Philippine Overseas Employment
Agency (POEA)6 In a letter of understanding,7 dated June 5, 2008, SNC-Lavalin confirmed
Arriola's assignment in the Ambatovy Project. According to Arriola, he signed the contract of
employment in the Philippines.8 On June 9, 2008, Arriola started working in Madagascar.

After three months, Arriola received a notice of pre-termination of employment,9 dated

September 9, 2009, from SNC-Lavalin. It stated that his employment would be pre-
terminated effective September 11, 2009 due to diminishing workload in the area of his
expertise and the unavailability of alternative assignments. Consequently, on September
15, 2009, Arriola was repatriated. SNC-Lavalin deposited in Arriola's bank account his pay
amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight Centavos
(CA$2,636.80), based on Canadian labor law.

Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-
payment of overtime pay, vacation leave and sick leave pay before the Labor Arbiter (LA).
He claimed that SNC-Lavalin still owed him unpaid salaries equivalent to the three-month
unexpired portion of his contract, amounting to, more or less, One Million Sixty-Two
Thousand Nine Hundred Thirty-Six Pesos (P1,062,936.00). He asserted that SNC-Lavalin
never offered any valid reason for his early termination and that he was not given sufficient
notice regarding the same. Arriola also insisted that the petitioners must prove the
applicability of Canadian law before the same could be applied to his employment contract.

Employer's Position

The petitioners denied the charge of illegal dismissal against them. They claimed that SNC-
Lavalin was greatly affected by the global financial crises during the latter part of 2008. The
economy of Madagascar, where SNC-Lavalin had business sites, also slowed down. As
proof of its looming financial standing, SNC-Lavalin presented a copy of a news item in the
Financial Post,10 dated March 5, 2009, showing the decline of the value of its stocks. Thus,
it had no choice but to minimize its expenditures and operational expenses. It re-organized
its Health and Safety Department at the Ambatovy Project site and Arriola was one of those
affected.11

The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC12 (EDI-

Staffbuilders), pointing out that particular labor laws of a foreign country incorporated in a
contract freely entered into between an OFW and a foreign employer through the latter's
agent was valid. In the present case, as all of Arriola's employment documents were
processed in Canada, not to mention that SNC-Lavalin's office was in Ontario, the principle
of lex loci celebrationis was applicable. Thus, the petitioners insisted that Canadian laws
governed the contract.

The petitioners continued that the pre-termination of Arriola's contract was valid for being
consistent with the provisions of both the Expatriate Policy and laws of Canada. The said
foreign law did not require any ground for early termination of employment, and the only
requirement was the written notice of termination. Even assuming that Philippine laws
should apply, Arriola would still be validly dismissed because domestic law recognized
retrenchment and redundancy as legal grounds for termination.
In their Rejoinder,13 the petitioners presented a copy of the Employment Standards Act
(ESA) of Ontario, which was duly authenticated by the Canadian authorities and certified by
the Philippine Embassy.

The LA Ruling

In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for lack of merit.
The LA ruled that the rights and obligations among and between the OFW, the local
recruiter/agent, and the foreign employer/principal were governed by the employment
contract pursuant to the EDI-Staffbuilders case. Thus, the provisions on termination of
employment found in the ESA, a foreign law which governed Arriola's employment contract,
were applied. Given that SNC-Lavalin was able to produce the duly authenticated ESA, the
LA opined that there was no other conclusion but to uphold the validity of Arriola's dismissal
based on Canadian law. The fallo of the LA decision reads:

chanRoblesvirtualLawlibrary

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
dismissing the complaint for lack of merit.

SO ORDERED.15ChanRoblesVirtualawlibrary

Aggrieved, Arriola elevated the LA decision before the NLRC.

The NLRC Ruling

In its decision, dated November 30, 2010, the NLRC reversed the LA decision and ruled
that Arriola was illegally dismissed by the petitioners. Citing PNB v. Cabansag,16 the NLRC
stated that whether employed locally or overseas, all Filipino workers enjoyed the protective
mantle of Philippine labor and social legislation, contract stipulations to the contrary
notwithstanding. Thus, the Labor Code of the Philippines and Republic Act (R.A.) No. 8042,
or the Migrant Workers Act, as amended, should be applied. Moreover, the NLRC added
that the overseas employment contract of Arriola was processed in the POEA.
Applying the Philippine laws, the NLRC found that there was no substantial evidence
presented by the petitioners to show any just or authorized cause to terminate Arriola. The
ground of financial losses by SNC-Lavalin was not supported by sufficient and credible
evidence. The NLRC concluded that, for being illegally dismissed, Arriola should be
awarded CA$81,920.00 representing sixteen (16) months of Arriola's purported unpaid
salary, pursuant to the Serrano v. Gallant17 doctrine. The decretal portion of the NLRC
decision states:

chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is hereby rendered finding complainant-

appellant to have been illegally dismissed. Respondents-appellees are hereby ordered to
pay complainant-appellant the amount of CA$81,920.00, or its Philippine Peso equivalent
prevailing at the time of payment. Accordingly, the decision of the Labor Arbiter dated May
31, 2010 is hereby VACATED and SET ASIDE.

SO ORDERED.18ChanRoblesVirtualawlibrary

The petitioners moved for reconsideration, but their motion was denied by the NLRC in its
resolution, dated February 2, 2011.

Undaunted, the petitioners filed a petition for certiorari before the CA arguing that it should
be the ESA, or the Ontario labor law, that should be applied in Arriola's employment
contract. No temporary restraining order, however, was issued by the CA.

The Execution Proceedings

In the meantime, execution proceedings were commenced before the LA by Arriola. The LA
granted the motion for execution in the Order,19 dated August 8, 2011.

The petitioners appealed the execution order to the NLRC. In its Decision,20 dated May 31,
2012, the NLRC corrected the decretal portion of its November 30, 2010 decision. It
decreased the award of backpay in the amount of CA$26,880.00 or equivalent only to three
(3) months and three (3) weeks pay based on 70-hours per week workload. The NLRC
found that when Arriola was dismissed on September 9, 2009, he only had three (3) months
and three (3) weeks or until December 31, 2009 remaining under his employment contract.
Still not satisfied with the decreased award, IPAMS filed a separate petition for certiorari
before the CA. In its decision, dated July 25, 2013, the CA affirmed the decrease in Arriola's
backpay because the unpaid period in his contract was just three (3) months and three (3)
weeks.

Unperturbed, IPAMS appealed before the Court and the case was docketed as G.R. No.
212031. The appeal, however, was dismissed outright by the Court in its resolution, dated
August 8, 2014, because it was belatedly filed and it did not comply with Sections 4 and 5 of
Rule 7 of the Rules of Court. Hence, it was settled in the execution proceedings that the
award of backpay to Arriola should only amount to three (3) months and three (3) weeks of
his pay.

The CA Ruling

Returning to the principal case of illegal dismissal, in its assailed January 24, 2013 decision,
the CA affirmed that Arriola was illegally dismissed by the petitioners. The CA explained
that even though an authenticated copy of the ESA was submitted, it did not mean that the
said foreign law automatically applied in this case. Although parties were free to establish
stipulations in their contracts, the same must remain consistent with law, morals, good
custom, public order or public policy. The appellate court wrote that the ESA allowed an
employer to disregard the required notice of termination by simply giving the employee a
severance pay. The ESA could not be made to apply in this case for being contrary to our
Constitution, specifically on the right of due process. Thus, the CA opined that our labor
laws should find application.

As the petitioners neither complied with the twin notice-rule nor offered any just or
authorized cause for his termination under the Labor Code, the CA held that Arriola's
dismissal was illegal. Accordingly, it pronounced that Arriola was entitled to his salary for
the unexpired portion of his contract which is three (3) months and three (3) weeks salary.
It, however, decreased the award of backpay to Arriola because the NLRC made a wrong
calculation. Based on his employment contract, the backpay of Arriola should only be
computed on a 40-hour per week workload, or in the amount of CA$19,200.00. The CA
disposed the case in this wise:

chanRoblesvirtualLawlibrary

WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY GRANTED.

The assailed Order of the National Labor Relations Commission in NLRC LAC No. 08-
000572-10/NLRC Case No. NCR 09-13563-09 is MODIFIED in that private respondent is
only entitled to a monetary judgment equivalent to his unpaid salaries in the amount of
CA$19,200.00 or its Philippine Peso equivalent.

SO ORDERED.21ChanRoblesVirtualawlibrary

Hence, this petition, anchored on the following

ISSUES

WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED PURSUANT

TO THE EMPLOYMENT CONTRACT.

II

GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT BAR, WHETHER
OR NOT THE SIX-WEEK ON, TWO-WEEK OFF SCHEDULE SHOULD BE USED IN THE
COMPUTATION OF ANY MONETARY AWARD.

III

GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT THE

AMOUNT BEING CLAIMED BY RESPONDENTS HAD ALREADY BEEN SATISFIED, OR
AT THE VERY LEAST, WHETHER OR NOT THE AMOUNT OF CA$2,636.80 SHOULD BE
DEDUCTED FROM THE MONETARY AWARD.22ChanRoblesVirtualawlibrary

The petitioners argue that the rights and obligations of the OFW, the local recruiter, and the
foreign employer are governed by the employment contract, citing EDI-Staffbuilders; that
the terms and conditions of Arriola's employment are embodied in the Expatriate Policy,
Ambatovy Project - Site, Long Term, hence, the laws of Canada must be applied; that the
ESA, or the Ontario labor law, does not require any ground for the early termination of
employment and it permits the termination without any notice provided that a severance pay
is given; that the ESA was duly authenticated by the Canadian authorities and certified by
the Philippine Embassy; that the NLRC Sixth Division exhibited bias and bad faith when it
made a wrong computation on the award of backpay; and that, assuming there was illegal
dismissal, the CA$2,636.80, earlier paid to Arriola, and his home leaves should be deducted
from the award of backpay.

In his Comment,23 Arriola countered that foreign laws could not apply to employment
contracts if they were contrary to law, morals, good customs, public order or public policy,
invoking Pakistan International Airlines Corporation v. Ople (Pakistan International);24 that
the ESA was not applicable because it was contrary to his constitutional right to due
process; that the petitioners failed to substantiate an authorized cause to justify his
dismissal under Philippine labor law; and that the petitioners could not anymore claim a
deduction of CA$2,636.80 from the award of backpay because it was raised for the first time
on appeal.

In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the applicability of
foreign laws on labor contracts; that the Pakistan International case was superseded by
EDI-Staffbuilders and other subsequent cases; and that SNC-Lavalin suffering financial
losses was an authorized cause to terminate Arriola's employment.

In his Memorandum,26 Arriola asserted that his employment contract was executed in the
Philippines and that the alleged authorized cause of financial losses by the petitioners was
not substantiated by evidence.

In their Consolidated Memorandum,27 the petitioners reiterated that the ESA was
applicable in the present case and that recent jurisprudence recognized that the parties
could agree on the applicability of foreign laws in their labor contracts.

The Court's Ruling

The petition lacks merit.

Application of foreign laws with labor contracts

At present, Filipino laborers, whether skilled or professional, are enticed to depart from the
motherland in search of greener pastures. There is a distressing reality that the offers of
employment abroad are more lucrative than those found in our own soils. To reap the
promises of the foreign dream, our unsung heroes must endure homesickness, solitude,
discrimination, mental and emotional struggle, at times, physical turmoil, and, worse, death.
On the other side of the table is the growing number of foreign employers attracted in hiring
Filipino workers because of their reasonable compensations and globally-competitive skills
and qualifications. Between the dominant foreign employers and the vulnerable and
desperate OFWs, however, there is an inescapable truth that the latter are in need of
greater safeguard and protection.

In order to afford the full protection of labor to our OFWs, the State has vigorously enacted
laws, adopted regulations and policies, and established agencies to ensure that their needs
are satisfied and that they continue to work in a humane living environment outside of the
country. Despite these efforts, there are still issues left unsolved in the realm of overseas
employment. One existing question is posed before the Court -when should an overseas
labor contract be governed by a foreign law? To answer this burning query, a review of the
relevant laws and jurisprudence is warranted.

R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the policies on
overseas employment and to establish a higher standard of protection and promotion of the
welfare of migrant workers.28 It emphasized that while recognizing the significant
contribution of Filipino migrant workers to the national economy through their foreign
exchange remittances, the State does not promote overseas employment as a means to
sustain economic growth and achieve national development.29 Although it acknowledged
claims arising out of law or contract involving Filipino workers,30 it does not categorically
provide that foreign laws are absolutely and automatically applicable in overseas
employment contracts.

The issue of applying foreign laws to labor contracts was initially raised before the Court in
Pakistan International. It was stated in the labor contract therein (1) that it would be
governed by the laws of Pakistan, (2) that the employer have the right to terminate the
employee at any time, and (3) that the one-month advance notice in terminating the
employment could be dispensed with by paying the employee an equivalent one-month
salary. Therein, the Court elaborated on the parties' right to stipulate in labor contracts, to
wit:

chanRoblesvirtualLawlibrary
A contract freely entered into should, of course, be respected, as PIA argues, since a
contract is the law between the parties. The principle of party autonomy in contracts is not,
however, an absolute principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they may deem convenient, "provided
they are not contrary to law, morals, good customs, public order or public policy." Thus,
counterbalancing the principle of autonomy of contracting parties is the equally general rule
that provisions of applicable law, especially provisions relating to matters affected with
public policy, are deemed written into the contract. Put a little differently, the governing
principle is that parties may not contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily impressed with public interest. The law
relating to labor and employment is clearly such an area and parties are not at liberty to
insulate themselves and their relationships from the impact of labor laws and regulations by
simply contracting with each other. x x x31

[Emphases Supplied]

In that case, the Court held that the labor relationship between OFW and the foreign
employer is "much affected with public interest and that the otherwise applicable Philippine
laws and regulations cannot be rendered illusory by the parties agreeing upon some other
law to govern their relationship."32 Thus, the Court applied the Philippine laws, instead of
the Pakistan laws. It was also held that the provision in the employment contract, where the
employer could terminate the employee at any time for any ground and it could even
disregard the notice of termination, violates the employee's right to security of tenure under
Articles 280 and 281 of the Labor Code.

In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was reiterated that, "[i]n
formulating the contract, the parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy."33 In that case, the overseas contract
specifically stated that Saudi Labor Laws would govern matters not provided for in the
contract. The employer, however, failed to prove the said foreign law, hence, the doctrine of
processual presumption came into play and the Philippine labor laws were applied.
Consequently, the Court did not discuss any longer whether the Saudi labor laws were
contrary to Philippine labor laws.

The case of Becmen Service Exporter and Promotion, Inc. v. Spouses Cuaresma,34 though
not an illegal termination case, elucidated on the effect of foreign laws on employment. It
involved a complaint for insurance benefits and damages arising from the death of a Filipina
nurse from Saudi Arabia. It was initially found therein that there was no law in Saudi Arabia
that provided for insurance arising from labor accidents. Nevertheless, the Court concluded
that the employer and the recruiter in that case abandoned their legal, moral and social
obligation to assist the victim's family in obtaining justice for her death, and so her family
was awarded P5,000,000.00 for moral and exemplary damages.

In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private recruitment agency
invoked the defense that the foreign employer was immune from suit and that it did not sign
any document agreeing to be held jointly and solidarily liable. Such defense, however, was
rejected because R.A. No. 8042 precisely afforded the OFWs with a recourse against the
local agency and the foreign employer to assure them of an immediate and sufficient
payment of what was due. Similar to EDI-Staffbuilders, the local agency therein failed to
prove the Kuwaiti law specified in the labor contract, pursuant to Sections 24 and 25 of Rule
132 of the Revised Rules of Court.

Also, in the recent case of Sameer Overseas Placement Agency, Inc. v. Cabiles36 (Sameer
Overseas), it was declared that the security of tenure for labor was guaranteed by our
Constitution and employees were not stripped of the same when they moved to work in
other jurisdictions. Citing PCL Shipping Phils., Inc. v. NLRC37 (PCL Shipping), the Court
held that the principle of lex loci contractus (the law of the place where the contract is made)
governed in this jurisdiction. As it was established therein that the overseas labor contract
was executed in the Philippines, the Labor Code and the fundamental procedural rights
were observed. It must be noted that no foreign law was specified in the employment
contracts in both cases.

Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer therein asserted
the doctrine of forum non conveniens because the overseas employment contracts required
the application of the laws of Saudi Arabia, and so, the Philippine courts were not in a
position to hear the case. In striking down such argument, the Court held that while a
Philippine tribunal was called upon to respect the parties' choice of governing law, such
respect must not be so permissive as to lose sight of considerations of law, morals, good
customs, public order, or public policy that underlie the contract central to the controversy.
As the dispute in that case related to the illegal termination of the employees due to their
pregnancy, then it involved a matter of public interest and public policy. Thus, it was ruled
that Philippine laws properly found application and that Philippine tribunals could assume
jurisdiction.

Based on the foregoing, the general rule is that Philippine laws apply even to overseas
employment contracts. This rule is rooted in the constitutional provision of Section 3, Article
XIII that the State shall afford full protection to labor, whether local or overseas. Hence,
even if the OFW has his employment abroad, it does not strip him of his rights to security of
tenure, humane conditions of work and a living wage under our Constitution.39
As an exception, the parties may agree that a foreign law shall govern the employment
contract. A synthesis of the existing laws and jurisprudence reveals that this exception is
subject to the following requisites:

chanRoblesvirtualLawlibrary

That it is expressly stipulated in the overseas employment contract that a specific foreign
law shall govern;

That the foreign law invoked must be proven before the courts pursuant to the Philippine
rules on evidence;

That the foreign law stipulated in the overseas employment contract must not be contrary to
law, morals, good customs, public order, or public policy of the Philippines; and

That the overseas employment contract must be processed through the POEA.

The Court is of the view that these four (4) requisites must be complied with before the
employer could invoke the applicability of a foreign law to an overseas employment
contract. With these requisites, the State would be able to abide by its constitutional
obligation to ensure that the rights and well-being of our OFWs are fully protected. These
conditions would also invigorate the policy under R.A. No. 8042 that the State shall, at all
times, uphold the dignity of its citizens whether in country or overseas, in general, and the
Filipino migrant workers, in particular.40 Further, these strict terms are pursuant to the
jurisprudential doctrine that "parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed with public
interest,"41 such as laws relating to labor. At the same time, foreign employers are not at all
helpless to apply their own laws to overseas employment contracts provided that they
faithfully comply with these requisites.

If the first requisite is absent, or that no foreign law was expressly stipulated in the
employment contract which was executed in the Philippines, then the domestic labor laws
shall apply in accordance with the principle of lex loci contractus. This is based on the cases
of Sameer Overseas and PCL Shipping.
If the second requisite is lacking, or that the foreign law was not proven pursuant to
Sections 24 and 25 of Rule 132 of the Revised Rules of Court, then the international law
doctrine of processual presumption operates. The said doctrine declares that "[w]here a
foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign
law is the same as ours."42 This was observed in the cases of EDI-Staffbuilders and ATCI
Overseas.

If the third requisite is not met, or that the foreign law stipulated is contrary to law, morals,
good customs, public order or public policy, then Philippine laws govern. This finds legal
bases in the Civil Code, specifically: (1) Article 17, which provides that laws which have, for
their object, public order, public policy and good customs shall not be rendered ineffective
by laws of a foreign country; and (2) Article 1306, which states that the stipulations, clauses,
terms and conditions in a contract must not be contrary to law, morals, good customs,
public order, or public policy. The said doctrine was applied in the case of Pakistan
International.

Finally, if the fourth requisite is missing, or that the overseas employment contract was not
processed through the POEA, then Article 18 of the Labor Code is violated. Article 18
provides that no employer may hire a Filipino worker for overseas employment except
through the boards and entities authorized by the Secretary of Labor. In relation thereto,
Section 4 of R.A. No. 8042, as amended, declares that the State shall only allow the
deployment of overseas Filipino workers in countries where the rights of Filipino migrant
workers are protected. Thus, the POEA, through the assistance of the Department of
Foreign Affairs, reviews and checks whether the countries have existing labor and social
laws protecting the rights of workers, including migrant workers.43 Unless processed
through the POEA, the State has no effective means of assessing the suitability of the
foreign laws to our migrant workers. Thus, an overseas employment contract that was not
scrutinized by the POEA definitely cannot be invoked as it is an unexamined foreign law.

In other words, lacking any one of the four requisites would invalidate the application of the
foreign law, and the Philippine law shall govern the overseas employment contract.

As the requisites of the applicability of foreign laws in overseas labor contract have been
settled, the Court can now discuss the merits of the case at bench.

A judicious scrutiny of the records of the case demonstrates that the petitioners were able to
observe the second requisite, or that the foreign law must be proven before the court
pursuant to the Philippine rules on evidence. The petitioners were able to present the ESA,
duly authenticated by the Canadian authorities and certified by the Philippine Embassy,
before the LA. The fourth requisite was also followed because Arriola's employment
contract was processed through the POEA.44

Unfortunately for the petitioners, those were the only requisites that they complied with. As
correctly held by the CA, even though an authenticated copy of the ESA was submitted, it
did not mean that said foreign law could be automatically applied to this case. The
petitioners miserably failed to adhere to the two other requisites, which shall be discussed in
seratim.

The foreign law was not expressly specified in the employment contract

The petitioners failed to comply with the first requisite because no foreign law was expressly
stipulated in the overseas employment contract with Arriola. In its pleadings, the petitioners
did not directly cite any specific provision or stipulation in the said labor contract which
indicated the applicability of the Canadian labor laws or the ESA. They failed to show on the
face of the contract that a foreign law was agreed upon by the parties. Rather, they simply
asserted that the terms and conditions of Arriola's employment were embodied in the
Expatriate Policy, Ambatovy Project - Site, Long Term.45 Then, they emphasized provision
8.20 therein, regarding interpretation of the contract, which provides that said policy would
be governed and construed with the laws of the country where the applicable SNC-Lavalin,
Inc. office was located.46 Because of this provision, the petitioners insisted that the laws of
Canada, not of Madagascar or the Philippines, should apply. Then, they finally referred to
the ESA.

It is apparent that the petitioners were simply attempting to stretch the overseas
employment contract of Arriola, by implication, in order that the alleged foreign law would
apply. To sustain such argument would allow any foreign employer to improperly invoke a
foreign law even if it is not anymore reasonably contemplated by the parties to control the
overseas employment. The OFW, who is susceptible by his desire and desperation to work
abroad, would blindly sign the labor contract even though it is not clearly established on its
face which state law shall apply. Thus, a better rule would be to obligate the foreign
employer to expressly declare at the onset of the labor contract that a foreign law shall
govern it. In that manner, the OFW would be informed of the applicable law before signing
the contract.

Further, it was shown that the overseas labor contract was executed by Arriola at his
residence in Batangas and it was processed at the POEA on May 26, 2008.47 Considering
that no foreign law was specified in the contract and the same was executed in the
Philippines, the doctrine of lex loci celebrationis applies and the Philippine laws shall govern
the overseas employment of Arriola.

The foreign law invoked is contrary to the Constitution and the Labor Code

Granting arguendo that the labor contract expressly stipulated the applicability of Canadian
law, still, Arriola's employment cannot be governed by such foreign law because the third
requisite is not satisfied. A perusal of the ESA will show that some of its provisions are
contrary to the Constitution and the labor laws of the Philippines.

First, the ESA does not require any ground for the early termination of employment.48
Article 54 thereof only provides that no employer should terminate the employment of an
employee unless a written notice had been given in advance.49 Necessarily, the employer
can dismiss any employee for any ground it so desired. At its own pleasure, the foreign
employer is endowed with the absolute power to end the employment of an employee even
on the most whimsical grounds.

Second, the ESA allows the employer to dispense with the prior notice of termination to an
employee. Article 65(4) thereof indicated that the employer could terminate the employment
without notice by simply paying the employee a severance pay computed on the basis of
the period within which the notice should have been given.50 The employee under the ESA
could be immediately dismissed without giving him the opportunity to explain and defend
himself.

The provisions of the ESA are patently inconsistent with the right to security of tenure. Both
the Constitution51 and the Labor Code52 provide that this right is available to any
employee. In a host of cases, the Court has upheld the employee's right to security of
tenure in the face of oppressive management behavior and management prerogative.
Security of tenure is a right which cannot be denied on mere speculation of any unclear and
nebulous basis.53

Not only do these provisions collide with the right to security of tenure, but they also deprive
the employee of his constitutional right to due process by denying him of any notice of
termination and the opportunity to be heard.54 Glaringly, these disadvantageous provisions
under the ESA produce the same evils which the Court vigorously sought to prevent in the
cases of Pakistan International and Sameer Overseas. Thus, the Court concurs with the CA
that the ESA is not applicable in this case as it is against our fundamental and statutory
laws.

In fine, as the petitioners failed to meet all the four (4) requisites on the applicability of a
foreign law, then the Philippine labor laws must govern the overseas employment contract
of Arriola.

No authorized cause for dismissal was proven

Article 279 of our Labor Code has construed security of tenure to mean that the employer
shall not terminate the services of an employee except for a just cause or when authorized
by law.55 Concomitant to the employer's right to freely select and engage an employee is
the employer's right to discharge the employee for just and/or authorized causes. To validly
effect terminations of employment, the discharge must be for a valid cause in the manner
required by law. The purpose of these two-pronged qualifications is to protect the working
class from the employer's arbitrary and unreasonable exercise of its right to dismiss.56

Some of the authorized causes to terminate employment under the Labor Code would be
installation of labor-saving devices, redundancy, retrenchment to prevent losses and the
closing or cessation of operation of the establishment or undertaking.57 Each authorized
cause has specific requisites that must be proven by the employer with substantial evidence
before a dismissal may be considered valid.

Here, the petitioners assert that the economy of Madagascar weakened due to the global
financial crisis. Consequently, SNC-Lavalin's business also slowed down. To prove its
sagging financial standing, SNC-Lavalin presented a copy of a news item in the Financial
Post, dated March 5, 2009. They insist that SNC-Lavalin had no choice but to minimize its
expenditures and operational expenses.58 In addition, the petitioners argued that the
government of Madagascar prioritized the employment of its citizens, and not foreigners.
Thus, Arriola was terminated because there was no more job available for him.59

The Court finds that Arriola was not validly dismissed. The petitioners simply argued that
they were suffering from financial losses and Arriola had to be dismissed. It was not even
clear what specific authorized cause, whether retrenchment or redundancy, was used to
justify Arriola's dismissal. Worse, the petitioners did not even present a single credible
evidence to support their claim of financial loss. They simply offered an unreliable news
article which deserves scant consideration as it is undoubtedly hearsay. Time and again the
Court has ruled that in illegal dismissal cases like the present one, the onus of proving that
the employee was dismissed and that the dismissal was not illegal rests on the employer,
and failure to discharge the same would mean that the dismissal is not justified and,
therefore, illegal.60

As to the amount of backpay awarded, the Court finds that the computation of the CA was
valid and proper based on the employment contract of Arriola. Also, the issue of whether
the petitioners had made partial payments on the backpay is a matter best addressed
during the execution process.chanrobleslaw

WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the Court of
Appeals in CA-G.R. SP No. 118869 is AFFIRMED in toto.

SO ORDERED.

15. G.R. No. 217575, June 15, 2016

SOUTH COTABATO COMMUNICATIONS CORPORATION AND GAUVAIN J.

BENZONAN, Petitioners, v. HON. PATRICIA STO. TOMAS, SECRETARY OF LABOR AND
EMPLOYMENT, ROLANDO FABRIGAR, MERLYN VELARDE, VINCE LAMBOC, FELIPE
GALINDO, LEONARDO MIGUEL, JULIUS RUBIN, EDEL RODEROS, MERLYN COLIAO,
AND EDGAR JOPSON, Respondents.

DECISION

VELASCO JR., J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to
reverse and set aside the Decision1 dated November 28, 2014 and Resolution dated March
5, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 00179-MIN, affirming the Orders
dated November 8, 2004 and February 24, 2005 issued by the Secretary of Labor and
Employment.

Factual Antecedents

On January 19, 2004, the Department of Labor and Employment Region-XII (DOLE)
conducted a Complaint Inspection2 at the premises of DXCP Radio Station, which is owned
by petitioner South Cotabato Communications Corporation. The inspection yielded a finding
of violation of labor standards provisions of the Labor Code involving the nine (9) private
respondents, such as:chanRoblesvirtualLawlibrary

Underpayment of Wages

Underpayment of 13th Month Pay

Non-payment of the five (5) days Service Incentive Leave Pay

Non-payment of Rest Day Premium Pay

Non-payment of the Holiday Premium Pay

Non-remittance of SSS Contributions

Some employees are paid on commission basis aside from their allowance[s]3

Consequently, the DOLE issued a Notice of Inspection Result directing petitioner

corporation and/or its president, petitioner Gauvain J. Benzonan (Benzonan), to effect
restitution and/or correction of the alleged violations within five (5) days from notice. Due to
petitioners' failure to comply with its directive, the DOLE scheduled on March 3, 2004 a
Summary Investigation at its Regional Office No. XII, Provincial Extension Office, in General
Santos City. However, petitioners failed to appear despite due notice. Another hearing was
scheduled on April 1, 2004 wherein petitioners' counsel, Atty. Thomas Jacobo (Atty.
Jacobo), failed to attend due to an alleged conflict in schedule. Instead, his secretary, Nona
Gido, appeared on his behalf to request a resetting, which the DOLE Hearing Officer
denied.4 Thus, in an Order dated May 20, 2004, the DOLE Region-XII OIC Regional
Director (DOLE Regional Director) directed petitioners to pay private respondents the total
amount of P759,752, representing private respondents' claim for wage differentials, 13th
month pay differentials, service incentive leave pay, holiday premium pay, and rest day
premium Pay-Therefrom, petitioners appealed to the Secretary of Labor, raising two
grounds: (1) denial of due process; and (2) lack of factual and legal basis of the assailed
Order.
The denial of due process was predicated on the refusal of the Hearing Officer to reset the
hearing set on April 1, 2004, which thus allegedly deprived petitioners the opportunity to
present their evidence. Likewise, petitioners asserted that the Order of the Regional
Director does not state that an employer-employee relationship exists between petitioners
and private respondents, which is necessary to confer jurisdiction to the DOLE over the
alleged violations.

In an Order5 dated November 8, 2004, the Secretary of Labor affirmed the findings of the
DOLE Regional Director on the postulate that petitioners failed to question, despite notice of
hearing, the noted violations or to submit any proof of compliance therewith. And in view of
petitioners' failure to present their evidence before the Regional Director, the Secretary of
Labor adopted the findings of the Labor Inspector and considered the interviews conducted
as substantial evidence. The Secretary of Labor likewise sustained what is considered as
the straight computation method adopted by the Regional Office as regards the monetary
claims of private respondents,6 thus:chanRoblesvirtualLawlibrary

WHEREFORE, presmises considered, the appeal by DXCP Radio Station and Engr.
Gauvain Benzonan is hereby DISMISSED for lack of merit. The Order dated May [20], 2004
of the Regional Director, directing appellants to pay the nine (9) appellees the aggregate
amount of Seven Hundred Fifty Nine Thousand Seven Hundred Fifty Two Pesos
(Php759,752.00), representing their claims for wage differentials, 13th month pay
differentials, service incentive leave pay, holiday pay premium and rest day premium, is
AFFIRMED.

SO ORDERED.cralawred

Petitioners moved for, but was denied, reconsideration of the Secretary of Labor's Order.

Petitioners elevated the case to the Court of Appeals (CA) via a Petition for Certiorari under
Rule 65 of the Rules of Court. By a Resolution7 dated July 20, 2005, the CA dismissed the
petition owing to procedural infirmities because petitioners failed to attach a Secretary's
Certificate evidencing the authority of petitioner Benzonan, as President, to sign the petition.
On appeal,8 this Court remanded the case back to the CA for determination on the
merits.9ChanRoblesVirtualawlibrary

Ruling of the Court of Appeals

In its Decision dated November 28, 2014 in CA-G.R. SP No. 00179-MIN, the CA upheld the
Secretary of Labor, holding that petitioners cannot claim denial of due process, their failure
to present evidence being attributed to their negligence.

Petitioners moved for the reconsideration of the Decision, grounded on similar arguments
raised before the Secretary of Labor, citing in addition, the pronouncement of the National
Labor Relations Commission (NLRC) in the related case of NLRC No. MAC-01-010053-
2008 entitled Rolando Fabrigar, et. al. v. DXCP Radio Station, et. al. There, the NLRC held
that no employer-employee relationship exists between petitioners and private respondents
Rolando Fabrigar (Fabrigar), Edgar Jopson (Jopson), and Merlyn Velarde (Velarde). For
clarity, two separate actions were instituted by private respondents Fabrigar, Jopson, and
Velarde against petitioners: the first, for violation of labor standards provisions with the
DOLE; and the second, for illegal dismissal filed with the NLRC. The latter case arose from
the three respondents' claim of constructive dismissal effected by petitioners following the
inspection by the DOLE. In ruling for petitioners, the NLRC, in its Resolution10 dated April
30, 2008, declared that there is no employer-employee relationship between the parties,
thus negating the notion of constructive dismissal.

The CA denied petitioners' motion for reconsideration in its Resolution dated March 5, 2014.
Hence, this petition.

Petitioners presently seek the reversal of the CA's Decision and Resolution and ascribe the
following errors to the court a quo:chanRoblesvirtualLawlibrary

The [CA] did not completely and properly dispose of the case pending before it as it never
resolved all justiciable issues raised x x x, particularly, that the determination of presence or
absence of employer-employee relationship is indispensable in the resolution of this case
as jurisdiction is dependent upon it.

There is [no] single basis, either factual or legal, for the issuance of the May 20, 2004 Order
of the Regional Director x x x against the petitioners as it was issued relying merely on pure
allegations and without any substantial proof on the part of the claimants, contrary to law
and jurisprudence.

The [CA] gravely erred in ruling that the Secretary of Labor x x x did not act in a whimsical
and capricious manner or with grave abuse of discretion tantamount to lack or excess of
jurisdiction in affirming the Order of the [Regional Director] despite the glaring fact that no
evidence were submitted by private respondents as to the basis of [their] claim and nature
of their employment.

The [CA] erred in ruling that the Secretary of Labor x x x did not deny [petitioners their] right
to due process in affirming the x x x Order of [the] Regional Director x x x notwithstanding
[the evidence] submitted before her [that there] exist no employer- employee relation [ship]
among the parties and that the [DOLE] has no jurisdiction over the case.11

In the matter of denial of due process, petitioners maintain that they were prevented from
presenting evidence to prove that private respondents are not their employees when the
Regional Director submitted the case for resolution without affording them an opportunity to
ventilate their case or rebut the findings of the inspection. In addition, petitioners assail the
Order of the Regional Director for want of factual and legal basis, particularly the lack of
categorical finding on the existence of an employer-employee relationship between the
parties—an element which petitioners insist is a prerequisite for the exercise of the DOLE'S
jurisdiction,12 following People's Broadcasting (Bombo Radyo, Phils., Inc.) v. The Secretary
of Labor and Employment, et al.13 Petitioners likewise note that the November 8, 2004
Order of the DOLE Secretary denying petitioner's appeal, as well as the Decision of the CA,
is silent on the employer-employee relationship issue, which further suggests that no real
and proper determination of the existence of such relationship was ever made by these
tribunals.

In its Comment, the DOLE counters that the results of the interviews conducted in the
premises of DXCP in the course of its inspection constitute substantial evidence that served
as basis for the monetary awards to private respondents.14ChanRoblesVirtualawlibrary

From the foregoing, the issue for the resolution can be reduced into the question of whether
the CA erred in upholding the November 8, 2004 Order of the Secretary of Labor, which in
turn affirmed the May 20, 2004 Order of the Regional Director. Inextricably linked to the
resolution of the said issue is a determination of whether an employer-employee
relationship had sufficiently been established between the parties as to warrant the
assumption of jurisdiction by the DOLE and issuance of the said May 20, 2004 and
November 8, 2004 Orders.

The Court's Ruling

Petitioners were not denied due process

Petitioners' claim of denial of due process deserves scant consideration. The essence of
due process, jurisprudence teaches, is simply an opportunity to be heard, or, as applied to
administrative proceedings, an opportunity to explain one's side or an opportunity to seek a
reconsideration of the action or ruling complained of.15 As long as the parties are, in fine,
given the opportunity to be heard before judgment is rendered, the demands of due process
are sufficiently met.16ChanRoblesVirtualawlibrary

That petitioners were given ample opportunity to present their evidence before the Regional
Director is indisputable. They were notified of the summary investigations conducted on
March 3, 2004 and April 1, 2004, both of which they failed to attend. To justify their non-
appearance, petitioners claim they requested a resetting of the April 1, 2004 hearing due to
the unavailability of their counsel.17 However, no such explanation was proffered as to why
they failed to attend the first hearing. At any rate, it behooved the petitioners to ensure that
they, as well as their counsel, would be available on the dates set for the summary
investigation as this would enable them to prove their claim of non-existence of an
employer-employee relationship. Clearly, their own negligence did them in. Their lament
that they have been deprived of due process is specious.

This thus brings to the fore the issues of whether the Orders of the Regional Director and
Secretary of Labor are supported by factual and legal basis, and, concomitantly, whether an
employer-employee relationship was sufficiently established between petitioners and private
respondents as to warrant the exercise by the DOLE of jurisdiction.

At the outset, the determination as to whether such employer-employee relationship was,

indeed, established requires an examination of facts. It is a well-settled rule that findings of
fact of quasi-judicial agencies are accorded great respect, even finality, by this Court. This
proceeds from the general rule that this Court is not a trier of facts, as questions of fact are
contextually for the labor tribunals to resolve, and only errors of law are generally reviewed
in petitions for review on certiorari criticizing the decisions of the
CA.18ChanRoblesVirtualawlibrary

The findings of fact should, however, be supported by substantial evidence from which the
said tribunals can make their own independent evaluation of the facts. In labor cases, as in
other administrative and quasi-judicial proceedings, the quantum of proof necessary is
substantial evidence, or such amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion.19 Although no particular form of evidence is
required to prove the existence of an employer-employee relationship, and any competent
and relevant evidence to prove the relationship may be admitted,20 a finding that the
relationship exists must nonetheless rest on substantial
evidence.21ChanRoblesVirtualawlibrary

In addition, the findings of fact tainted with grave abuse of discretion will not be upheld. This
Court will not hesitate to set aside the labor tribunal's findings of fact when it is clearly
shown that they were arrived at arbitrarily or in disregard of the evidence on record or when
there is showing of fraud or error of law.22ChanRoblesVirtualawlibrary

This case clearly falls under the exception. After a careful review of this case, the Court
finds that the DOLE failed to establish its jurisdiction over the case.

The assailed May 20, 2004 Order of the Regional Director and November 8, 2004 Order of
the Secretary of Labor were issued pursuant to Article 128 of the Labor Code, to
wit:chanRoblesvirtualLawlibrary

ART. 128. Visitorial and enforcement power. - (a) The Secretary of Labor and Employment
or his duly authorized representatives, including labor regulation officers, shall have access
to employer's records and premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to determine violations or
which may aid in the enforcement of this Code and of any labor law, wage order or rules
and regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and
in cases where the relationship of employer-employee still exists, the Secretary of Labor
and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other
labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly
authorized representatives shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the
labor employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection. (As amended by Republic Act
No. 7730, June 2, 1994). x x xcralawred

Under the aforequoted provision, the Secretary of Labor, or any of his or her authorized
representatives, is granted visitorial and enforcement powers for the purpose of determining
violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and
regulations issued pursuant thereto. Indispensable to the DOLE'S exercise of such power is
the existence of an actual employer-employee relationship between the parties.
The power of the DOLE to determine the existence of an employer-employee relationship
between petitioners and private respondents in order to carry out its mandate under Article
128 has been established beyond cavil in Bombo Radyo,23
thus:chanRoblesvirtualLawlibrary

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power
somehow has to make a determination of the existence of an employer-employee
relationship. Such prerogatival determination, however, cannot be coextensive with the
visitorial and enforcement power itself. Indeed, such determination is merely preliminary,
incidental and collateral to the DOLE'S primary function of enforcing labor standards
provisions. The determination of the existence of employer-employee relationship is still
primarily lodged with the NLRC. This is the meaning of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b).

Thus, before the DOLE may exercise its powers under Article 128, two important questions
must be resolved: (1) Does the employer-employee relationship still exist, or alternatively,
was there ever an employer-employee relationship to speak of; and (2) Are there violations
of the Labor Code or of any labor law?

The existence of an employer-employee relationship is a statutory prerequisite to and a

limitation on the power of the Secretary of Labor, one which the legislative branch is entitled
to impose. The rationale underlying this limitation is to eliminate the prospect of competing
conclusions of the Secretary of Labor and the NLR.C, on a matter fraught with questions of
fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather
than an administrative official of the executive branch of the government. If the Secretary of
Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite,
as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise
acquire. (emphasis ours)cralawred

The foregoing ruling was further reiterated and clarified in the resolution of the
reconsideration of the same case, wherein the jurisdiction of the DOLE was delineated vis-
a-vis the NLRC where the employer-employee relationship between the parties is at
issue:chanRoblesvirtualLawlibrary

No limitation in the law was placed upon the power of the DOLE to determine the existence
of an employer-employee relationship. No procedure was laid down where the DOLE would
only make a preliminary finding, that the power was primarily held by the NLRC. The law did
not say that the DOLE would first seek the NLRC's determination of the existence of an
employer-employee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must
have the power to determine whether or not an employer-employee relationship exists, and
from there to decide whether or not to issue compliance orders in accordance with Art.
128(b) of the Labor Code, as amended by RA 7730.

The DOLE, in determining the existence of an employer-employee relationship, has a ready

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

Like the NLRC, the DOLE has the authority to rule on the existence of an employer-
employee relationship between the parties, considering that the existence of an employer-
employee relationship is a condition sine qua non for the exercise of its visitorial power.
Nevertheless, it must be emphasized that without an employer-employee relationship, or if
one has already been terminated, the Secretary of Labor is without jurisdiction to determine
if violations of labor standards provision had in fact been committed,24 and to direct
employers to comply with their alleged violations of labor standards.

The Orders of the Regional Director and the Secretary of Labor do not contain clear and
distinct factual basis necessary to establish the jurisdiction of the DOLE and to justify the
monetary awards to private respondents

For expediency, the May 20, 2004 Order of the Regional Director is pertinently reproduced
hereunder:chanRoblesvirtualLawlibrary

ORDER

This refers to the Complaint Inspection conducted at DXCP Radio Station and/or Engr.
Gauvain Benzonan, President, located at NH Lagao Road, General Santos City on January
19, 2004 pursuant to Inspection Authority No. R1201-0401-CI-052 which resulted to the
discovery of the Labor Standards violations, namely:chanRoblesvirtualLawlibrary

1. Underpayment of Wages

2. Underpayment of 13th Month Pay

3. Non-payment of the five (5) days Service Incentive Leave Pay

4. Non-payment of Rest Day Premium Pay

5. Non-payment of the Holiday Premium Pay

6. Non-remittance of SSS Contributions

7. Some employees are paid on commission basis aside from their allowance[s]cralawred

Proceeding from the conduct of such inspection was the issuance of the Notice of
Inspection Result requiring the respondent DXCP Radio Station and/or Engr. Gauvain
Benzonan, President, to effect restitution and/or correction of the noted violations at the
plant/company level within five (5) calendar days from notice thereof. But, Engr. Gauvain
Benzonan failed to do so.

On March 3, 2004, a summary investigation was conducted at the [DOLE], Regional Office
No. XII, Provincial Extension Office, General Santos City. In that scheduled Summary
Investigation, only complainants appeared, assisted by Mr. Fred Huervana, National
President of the Philippine Organization of Labor Unions, x x x while respondent failed to
appear despite due notice.

On April 1, 2004, another Summary Investigation was conducted x x x [There] complainants

appeared, x x x while respondent was represented by Ms. Nona Gido, Secretary of Atty.
Thomas Jacobo, counsel for the respondent. During the deliberation, Ms. Nona Gido
manifested that her presence in that scheduled summary investigation was to request for
the re-scheduling of such hearing, however, such request was denied. Mr. Fred Huervana
declared that as he gleaned from the Notice of Inspection Result issued by the labor
inspector, the Non-payment of the Provisional Emergency Relief Allowance (PERA) was not
included from among the discovered violations, hence he requested that it should be
included in the computation. Such request was denied x x x. Further, Mr. Fred Huervana,
declared that this case be submitted for decision based on the merit of the case.

Failure of the parties to reach a final settlement prompted this Office to compute the
entitlements of the seven (7) affected workers for their salary differential, underpayment of
13th month pay, non-payment of the five (5) days service incentive leave pay, non-payment
of holiday premium pay and non-payment of rest day premium pay in the total amount of
SEVEN HUNDRED FIFTY NINE THOUSAND SEVEN HUNDRED FIFTY TWO PESOS
(P759,752.00) x x x.25cralawred

In determining the existence of an employer-employee relationship, Bombo Radyo specifies

the guidelines or indicators used by courts, i.e. (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer's
power to control the employee's conduct. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in the course of inspection, making use of
the same evidence that would have been presented before the
NLRC.26ChanRoblesVirtualawlibrary

As can be gleaned from the above-quoted Order, the Regional Director merely noted the
discovery of violations of labor standards provisions in the course of inspection of the DXCP
premises. No such categorical determination was made on the existence of an employer-
employee relationship utilizing any of the guidelines set forth. In a word, the Regional
Director had presumed, not demonstrated, the existence of the relationship. Of particular
note is the DOLE'S failure to show that petitioners, thus, exercised control over private
respondents' conduct in the workplace. The power of the employee to control the work of
the employee, or the control test, is considered the most significant determinant of the
existence of an employer-employee relationship.27ChanRoblesVirtualawlibrary

Neither did the Orders of the Regional Director and Secretary of Labor state nor make
reference to any concrete evidence to support a finding of an employer-employee
relationship and justify the monetary awards to private respondents. Substantial evidence,
such as proofs of employment, clear exercise of control, and the power to dismiss that
prove such relationship and that petitioners committed the labor laws violations they were
adjudged to have committed, are grossly absent in this case. Furthermore, the Orders dated
May 20, 2004 and November 8, 2004 do not even allude to the substance of the interviews
during the inspection that became the basis of the finding of an employer-employee
relationship.

The Secretary of Labor adverts to private respondents' allegation in their Reply28 to justify
their status as employees of petitioners. The proffered justification falls below the quantum
of proof necessary to establish such fact as allegations can easily be concocted and
manufactured. Private respondents' allegations are inadequate to support a conclusion
absent other concrete proof that would support or corroborate the same. Mere allegation,
without more, is not evidence and is not equivalent to proof.29 Hence, private respondents'
allegations, essentially self-serving statements as they are and devoid under the premises
of any evidentiary weight, can hardly be taken as the substantial evidence contemplated for
the DOLE'S conclusion that they are employees of petitioners.

In a similar vein, the use of the straight computation method in awarding the sum of
P759,752 to private respondents, without reference to any other evidence other than the
interviews conducted during the inspection, is highly telling that the DOLE failed to consider
evidence in arriving at its award and leads this Court to conclude that such amount was
arrived at arbitrarily.
It is quite implausible for the nine (9) private respondents to be entitled to uniform amounts
of Service Incentive Leave (SIL) pay, holiday pay premium, and rest day premium pay for
three (3) years, without any disparity in the amounts due them since entitlement to said
benefits would largely depend on the actual rest days and holidays worked and amount of
remaining leave credits in a year. Whoever claims entitlement to the benefits provided by
law should establish his or her right thereto.30 The burden of proving entitlement to
overtime pay and premium pay for holidays and rest days lies with the employee because
these are not incurred in the normal course of business.31 In the case at bar, evidence
pointing not only to the existence of an employer-employee relationship between the
petitioners and private respondents but also to the latter's entitlement to these benefits are
miserably lacking.

It may be that petitioners have failed to refute the allegation that private respondents were
employees of DXCP. Nevertheless, it was incumbent upon private respondents to prove
their allegation that they were, indeed, under petitioners' employ and that the latter violated
their labor rights. A person who alleges a fact has the onus of proving it and the proof
should be clear, positive and convincing.32 Regrettably, private respondents failed to
discharge this burden. The pronouncement in Bombyo Radyo that the determination by the
DOLE of the existence of an employer-employee relationship must be respected should not
be construed so as to dispense with the evidentiary requirement when called for.

It cannot be stressed enough that the existence of an employer-employee relationship

between the parties is essential to confer jurisdiction of the case to the DOLE. Without such
express finding, the DOLE cannot assume to have jurisdiction to resolve the complaints of
private respondents as jurisdiction in that instance lies with the
NLRC.33ChanRoblesVirtualawlibrary

The Orders of the Regional Director and Secretary of Labor do not comply with Article VIII,
Section 16 of the Constitution

As a necessary corollary to the foregoing considerations, another well-grounded reason

exists to set aside the May 20, 2004 Order of the Regional Director and November 8, 2004
Order of the Secretary of Labor. The said Orders contravene Article VIII, Section 14 of the
Constitution, which requires courts to express clearly and distinctly the facts and law on
which decisions are based, to wit:chanRoblesvirtualLawlibrary

Section 14. No decision shall be rendered by any court without expressing therein clearly
and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall be
refused due course or denied without stating the legal basis therefor.cralawred

As stressed by this Court in San Jose v. NLRC,34 faithful compliance by the courts and
quasi-judicial bodies, such as the DOLE, with Art. VIII, Sec. 14 is a vital element of due
process as it enables the parties to know how decisions are arrived at as well as the legal
reasoning behind them. Thus:chanRoblesvirtualLawlibrary

This Court has previously held that judges and arbiters should draw up their decisions and
resolutions with due care, and make certain that they truly and accurately reflect their
conclusions and their final dispositions. A decision should faithfully comply with Section 14,
Article VIII of the Constitution which provides that no decision shall be rendered by any
court without expressing therein clearly and distinctly the facts of the case and the law on
which it is based. If such decision had to be completely overturned or set aside, upon the
modified decision, such resolution or decision should likewise state the factual and legal
foundation relied upon. The reason for this is obvious: aside from being required by the
Constitution, the court should be able to justify such a sudden change of course; it must be
able to convincingly explain the taking back of its solemn conclusions and pronouncements
in the earl indecision. The same thing goes for the findings of fact made by the NLRC, as it
is a settled rule that such findings are entitled to great respect and even finality when
supported by substantial evidence; otherwise, they shall be struck down for being whimsical
and capricious and arrived at with grave abuse of discretion. It is a requirement of due
process and fair play that the parties to a litigation be informed of how it was decided, with
an explanation of the factual and legal reasons that led to the conclusions of the court. A
decision that does not clearly and distinctly state the facts and the law on which it is based
leaves the parties in the dark as to how it was reached and is especially prejudicial to the
losing party, who is unable to pinpoint the possible errors of the court for review by a higher
tribunal. x x xcralawred

To this end, University of the Philippines v. Hon. Dizon35 instructs that the Constitution and
the Rules of Court require not only that a decision should state the ultimate facts but also
that it should specify the supporting evidentiary facts, for they are what are called the
findings of fact. A decision that does not clearly and distinctly state the facts and the law on
which it is based leaves the parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible errors of the court (or
quasi-judicial body) for review by a higher tribunal.36ChanRoblesVirtualawlibrary

Accordingly, this Court will not hesitate to strike down decisions rendered not hewing to the
Constitutional directive, as it did to a Decision rendered by the NLRC in Anino, et al. v.
Hinatuan Mining Corporation37 for non-observance of the said
requirement:chanRoblesvirtualLawlibrary

In the present case, the NLRC was definitely wanting in the observance of the aforesaid
constitutional requirement. Its assailed five-page Decision consisted of about three pages of
quotation from the labor arbiter's decision, including the dispositive portion, and barely a
page (two short paragraphs of two sentences each) of its own discussion of its reasons for
reversing the arbiter's findings. It merely raised a doubt on the motive of the complaining
employees and took "judicial notice that in one area of Mindanao, the mining industry
suffered economic difficulties." In affirming peremptorily the validity of private respondents'
retrenchment program, it surmised that "[i]f small mining cooperatives experienced the
same fate, what more with those highly mechanized establishments."cralawred

The Court is not unmindful of the State's policy to zealously safeguard the rights of our
workers, as no less than the Constitution itself mandates the State to afford full protection to
labor. Nevertheless, it is equally true that the law, in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction of the employer.38 The constitutional
policy to provide full protection to labor is not meant to be a sword to oppress employers.39
Certainly, an employer cannot be made to answer for claims that have neither been
sufficiently proved nor substantiated.

WHEREFORE, the petition is GRANTED. The Decision dated November 28, 2014 and
Resolution dated March 5, 2015 of the Court of Appeals in CA-G.R. SP No. 00179-MIN are
accordingly REVERSED and SET ASIDE. The Order of the then Secretary of Labor and
Employment dated November 8, 2004 denying petitioners' appeal and the Order of the
Regional Director, DOLE Regional Office No. XII, dated May 20, 2004, are ANNULLED,
without prejudice to whatever right or cause of action private respondents may have against
petitioners.

SO ORDERED.

16. G.R. No. 208986, January 13, 2016

HIJO RESOURCES CORPORATION, Petitioner, v. EPIFANIO P. MEJARES, REMEGIO C.

BALURAN, JR., DANTE SAYCON, AND CECILIO CUCHARO, REPRESENTED BY
NAMABDJERA-HRC, Respondents.

DECISION

CARPIO, J.:
The Case

This petition for review1 assails the 29 August 2012 Decision2 and the 13 August 2013
Resolution3 of the Court of Appeals in CA-G.R. SP No. 04058-MIN. The Court of Appeals
reversed and set aside the Resolutions dated 29 June 2009 and 16 December 2009 of the
National Labor Relations Commission (NLRC) in NLRC No. MIC-03-000229-08 (RAB XI-09-
00774-2007), and remanded the case to the Regional Arbitration Branch, Region XI, Davao
City for further proceedings.

The Facts

Respondents Epifanio P. Mejares, Remegio C. Baluran, Jr., Dante Saycon, and Cecilio
Cucharo (respondents) were among the complainants, represented by their labor union
named "Nagkahiusang Mamumuo ng Bit, Djevon, at Raquilla Farms sa Hijo Resources
Corporation" (NAMABDJERA-HRC), who filed with the NLRC an illegal dismissal case
against petitioner Hijo Resources Corporation (HRC).

Complainants (which include the respondents herein) alleged that petitioner HRC, formerly
known as Hijo Plantation Incorporated (HPI), is the owner of agricultural lands in Madum,
Tagum, Davao del Norte, which were planted primarily with Cavendish bananas. In 2000,
HPI was renamed as HRC. In December 2003, HRC's application for the conversion of its
agricultural lands into agri-industrial use was approved. The machineries and equipment
formerly used by HPI continued to be utilized by HRC.

Complainants claimed that they were employed by HPI as farm workers in HPI's plantations
occupying various positions as area harvesters, packing house workers, loaders, or
labelers. In 2001, complainants were absorbed by HRC, but they were working under the
contractor-growers: Buenaventura Tano (Bit Farm); Djerame Pausa (Djevon Farm); and
Ramon Q. Laurente (Raquilla Farm). Complainants asserted that these contractor-growers
received compensation from HRC and were under the control of HRC. They further alleged
that the contractor-growers did not have their own capitalization, farm machineries, and
equipment.
On 1 July 2007, complainants formed their union NAMABDJERA-HRC, which was later
registered with the Department of Labor and Employment (DOLE). On 24 August 2007,
NAMABDJERA-HRC filed a petition for certification election before the DOLE.

When HRC learned that complainants formed a union, the three contractor-growers filed
with the DOLE a notice of cessation of business operations. In September 2007,
complainants were terminated from their employment on the ground of cessation of
business operations by the contractor-growers of HRC. On 19 September 2007,
complainants, represented by NAMABDJERA-HRC, filed a case for unfair labor practices,
illegal dismissal, and illegal deductions with prayer for moral and exemplary damages and
attorney's fees before the NLRC.

On 19 November 2007, DOLE Med-Arbiter Lito A. Jasa issued an Order,4 dismissing

NAMABDJERA-HRC's petition for certification election on the ground that there was no
employer-employee relationship between complainants (members of NAMABDJERA-HRC)
and HRC. Complainants did not appeal the Order of Med-Arbiter Jasa but pursued the
illegal dismissal case they filed.

On 4 January 2008, HRC filed a motion to inhibit Labor Arbiter Maria Christina S. Sagmit
and moved to dismiss the complaint for illegal dismissal. The motion to dismiss was
anchored on the following arguments: (1) Lack of jurisdiction under the principle of res
judicata; and (2) The Order of the Med-Arbiter finding that complainants were not
employees of HRC, which complainants did not appeal, had become final and executory.

The Labor Arbiter's Ruling

On 5 February 2008, Labor Arbiter Sagmit denied the motion to inhibit. Labor Arbiter Sagmit
likewise denied the motion to dismiss in an Order dated 12 February 2008. Labor Arbiter
Sagmit held that res judicata does not apply. Citing the cases of Manila Golf & Country
Club, Inc. v. IAC5 and Sandoval Shipyards, Inc. v. Pepito,6 the Labor Arbiter ruled that the
decision of the Med-Arbiter in a certification election case, by the nature of that
proceedings, does not foreclose further dispute between the parties as to the existence or
non-existence of employer-employee relationship between them. Thus, the finding of Med-
Arbiter Jasa that no employment relationship exists between HRC and complainants does
not bar the Labor Arbiter from making his own independent finding on the same issue. The
non-litigious nature of the proceedings before the Med-Arbiter does not prevent the Labor
Arbiter from hearing and deciding the case. Thus, Labor Arbiter Sagmit denied the motion to
dismiss and ordered the parties to file their position papers.
HRC filed with the NLRC a petition for certiorari with a prayer for temporary restraining
order, seeking to nullify the 5 February 2008 and 12 February 2008 Orders of Labor Arbiter
Sagmit.

The Ruling of the NLRC

The NLRC granted the petition, holding that Labor Arbiter Sagmit gravely abused her
discretion in denying HRC's motion to dismiss. The NLRC held that the Med-Arbiter Order
dated 19 November 2007 dismissing the certification election case on the ground of lack of
employer-employee relationship between HRC and complainants (members of
NAMABDJERA-HRC) constitutes res judicata under the concept of conclusiveness of
judgment, and thus, warrants the dismissal of the case. The NLRC ruled that the Med-
Arbiter exercises quasi-judicial power and the Med-Arbiter's decisions and orders have,
upon their finality, the force and effect of a final judgment within the purview of the doctrine
of res judicata.

On the issue of inhibition, the NLRC found it moot and academic in view of Labor Arbiter
Sagmit's voluntary inhibition from the case as per Order dated 11 March 2009.

The Ruling of the Court of Appeals

The Court of Appeals found the ruling in the Sandoval case more applicable in this case.
The Court of Appeals noted that the Sandoval case, which also involved a petition for
certification election and an illegal dismissal case filed by the union members against the
alleged employer, is on all fours with this case. The issue in Sandoval on the effect of the
Med-Arbiter's findings as to the existence of employer-employee relationship is the very
same issue raised in this case. On the other hand, the case of Chris Garments Corp. v.
Hon. Sto. Tomas7 cited by the NLRC, which involved three petitions for certification election
filed by the same union, is of a different factual milieu.

The Court of Appeals held that the certification proceedings before the Med-Arbiter are non-
adversarial and merely investigative. On the other hand, under Article 217 of the Labor
Code, the Labor Arbiter has original and exclusive jurisdiction over illegal dismissal cases.
Although the proceedings before the Labor Arbiter are also described as non-litigious, the
Court of Appeals noted that the Labor Arbiter is given wide latitude in ascertaining the
existence of employment relationship. Thus, unlike the Med-Artbiter, the Labor Arbiter may
conduct clarificatory hearings and even avail of ocular inspection to ascertain facts speedily.

Hence, the Court of Appeals concluded that the decision in a certification election case
does not foreclose further dispute as to the existence or non-existence of an employer-
employee relationship between HRC and the complainants.

On 29 August 2012, the Court of Appeals promulgated its Decision, the dispositive portion
of which reads:chanRoblesvirtualLawlibrary

WHEREFORE, the petition is hereby GRANTED and the assailed Resolutions dated June
29, 2009 and December 16, 2009 of the National Labor Relations Commission are hereby
REVERSED AND SET ASIDE. Let NLRC CASE No. RAB-XI-09-00774-0707 be remanded
to the Regional Arbitration Branch, Region XI, Davao City for further proceedings.

SO ORDERED.8ChanRoblesVirtualawlibrary

cralawlawlibrary

The Issue

Whether the Court of Appeals erred in setting aside the NLRC ruling and remanding the
case to the Labor Arbiter for further proceedings.

The Ruling of the Court

We find the petition without merit.

There is no question that the Med-Arbiter has the authority to determine the existence of an
employer-employee relationship between the parties in a petition for certification election.
As held in M. Y. San Biscuits, Inc. v. Acting Sec. Laguesma:9chanroblesvirtuallawlibrary

Under Article 226 of the Labor Code, as amended, the Bureau of Labor Relations (BLR), of
which the med-arbiter is an officer, has the following jurisdiction -

"ART. 226. Bureau of Labor Relations. - The Bureau of Labor Relations and the Labor
Relations Divisionfs] in the regional offices of the Department of Labor shall have original
and exclusive authority to act, at their own initiative or upon request of either or both parties,
on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising
from or affecting labor-management relations in all workplaces whether agricultural or non-
agricultural, except those arising from the implementation or interpretation of collective
bargaining agreements which shall be the subject of grievance procedure and/or voluntary
arbitration.

The Bureau shall have fifteen (15) working days to act on labor cases before it, subject to
extension by agreement of the parties." (Italics supplied)

From the foregoing, the BLR has the original and exclusive jurisdiction to inter alia, decide
all disputes, grievances or problems arising from or affecting labor-management relations in
all workplaces whether agricultural or non-agricultural. Necessarily, in the exercise of this
jurisdiction over labor-management relations, the med-arbiter has the authority, original and
exclusive, to determine the existence of an employer-employee relationship between the
parties.

Apropos to the present case, once there is a determination as to the existence of such a
relationship, the med-arbiter can then decide the certification election case. As the authority
to determine the employer-employee relationship is necessary and indispensable in the
exercise of jurisdiction by the med-arbiter, his finding thereon may only be reviewed and
reversed by the Secretary of Labor who exercises appellate jurisdiction under Article 259 of
the Labor Code, as amended, which provides -

"ART. 259. Appeal from certification election orders. - Any party to an election may appeal
the order or results of the election as determined by the Med-Arbiter directly to the
Secretary of Labor and Employment on the ground that the rules and regulations or parts
thereof established by the Secretary of Labor and Employment for the conduct of the
election have been violated. Such appeal shall be decided within fifteen (15) calendar
days."10

cralawlawlibrary
In this case, the Med-Arbiter issued an Order dated 19 November 2007, dismissing the
certification election case because of lack of employer-employee relationship between HRC
and the members of the respondent union. The order dismissing the petition was issued
after the members of the respondent union were terminated from their employment in
September 2007, which led to the filing of the illegal dismissal case before the NLRC on 19
September 2007. Considering their termination from work, it would have been futile for the
members of the respondent union to appeal the Med-Arbiter' s order in the certification
election case to the DOLE Secretary. Instead, they pursued the illegal dismissal case filed
before the NLRC.

The Court is tasked to resolve the issue of whether the Labor Arbiter, in the illegal dismissal
case, is bound by the ruling of the Med-Arbiter regarding the existence or non-existence of
employer-employee relationship between the parties in the certification election case.

The Court rules in the negative. As found by the Court of Appeals, the facts in this case are
very similar to those in the Sandoval case, which also involved the issue of whether the
ruling in a certification election case on the existence or non-existence of an employer-
employee relationship operates as res judicata in the illegal dismissal case filed before the
NLRC. In Sandoval, the DOLE Undersecretary reversed the finding of the Med-Arbiter in a
certification election case and ruled that there was no employer-employee relationship
between the members of the petitioner union and Sandoval Shipyards, Inc. (SSI), since the
former were employees of the subcontractors. Subsequently, several illegal dismissal cases
were filed by some members of the petitioner union against SSI. Both the Labor Arbiter and
the NLRC ruled that there was no employer-employee relationship between the parties,
citing the resolution of the DOLE Undersecretary in the certification election case. The Court
of Appeals reversed the NLRC ruling and held that the members of the petitioner union
were employees of SSI. On appeal, this Court affirmed the appellate court's decision and
ruled that the Labor Arbiter and the NLRC erred in relying on the pronouncement of the
DOLE Undersecretary that there was no employer-employee relationship between the
parties. The Court cited the ruling in the Manila Golf11 case that the decision in a
certification election case, by the very nature of that proceeding, does not foreclose all
further dispute between the parties as to the existence or non-existence of an employer-
employee relationship between them.

This case is different from the Chris Garments case cited by the NLRC where the Court
held that the matter of employer-employee relationship has been resolved with finality by
the DOLE Secretary, whose factual findings were not appealed by the losing party. As
mentioned earlier, the Med-Arbiter's order in this case dismissing the petition for certification
election on the basis of non-existence of employer-employee relationship was issued after
the members of the respondent union were dismissed from their employment. The purpose
of a petition for certification election is to determine which organization will represent the
employees in their collective bargaining with the employer.12The respondent union, without
its member-employees, was thus stripped of its personality to challenge the Med-Arbiter's
decision in the certification election case. Thus, the members of the respondent union were
left with no option but to pursue their illegal dismissal case filed before the Labor Arbiter. To
dismiss the illegal dismissal case filed before the Labor Arbiter on the basis of the
pronouncement of the Med-Arbiter in the certification election case that there was no
employer-employee relationship between the parties, which the respondent union could not
even appeal to the DOLE Secretary because of the dismissal of its members, would be
tantamount to denying due process to the complainants in the illegal dismissal case. This,
we cannot allow.

WHEREFORE, we DENY the petition. We AFFIRM the 29 August 2012 Decision and the
13 August 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 04058-MIN.

SO ORDERED

17. G.R. No. 201595

ALLAN M. MENDOZA, Petitioner,

vs.

OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU), namely, EDUARDO B.

BORELA, BUENAVENTURA QUEBRAL, ELIZABETH COMETA, ALEJANDRO TORRES,
AMORSOLO TIERRA, SOLEDAD YEBAN, LUIS RENDON, VIRGINIA APILADO,
TERESITA BOLO, ROGELIO BARBERO, JOSE CASAÑAS, ALFREDO MAGA, EMILIO
FERNANDEZ, ROSITA BUENA VENTURA, ALMENIO CANCINO, ADELA IMANA, MARIO
MANCENIDO, WILFREDO MANDILAG, ROLANDO MANLAP AZ, EFREN MONTEMAYOR,
NELSON PAGULAYAN, CARLOS VILLA, RIC BRIONES, and CHITO BERNARDO,
Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the April 24, 2012 Decision2 of the Court of
Appeals (CA) which dismissed the Petition for Certiorari3 in CA-G.R. SP No. 115639.

Factual Antecedents

Petitioner was a member of the Manila Water Employees Union (MWEU), a Department of
Labor and Employment (DOLE)-registered labor organization consisting of rank-and-file
employees within Manila Water Company (MWC). The respondents herein named –
Eduardo B. Borela (Borela), Buenaventura Quebral (Quebral), Elizabeth Cometa (Cometa),
Alejandro Torres (Torres), Amorsolo Tierra (Tierra), Soledad Yeban (Yeban), Luis Rendon
(Rendon), Virginia Apilado (Apilado), Teresita Bolo (Bolo), Rogelio Barbero (Barbero), Jose
Casañas (Casañas), Alfredo Maga (Maga), Emilio Fernandez (Fernandez), Rosita
Buenaventura (Buenaventura), Almenio Cancino (Cancino), Adela Imana, Mario Mancenido
(Mancenido), Wilfredo Mandilag (Mandilag), Rolando Manlapaz (Manlapaz), Efren
Montemayor (Montemayor), Nelson Pagulayan, Carlos Villa, Ric Briones, and Chito
Bernardo – were MWEU officers during the period material to this Petition, with Borela as
President and Chairman of the MWEU Executive Board, Quebral as First Vice-President
and Treasurer, and Cometa as Secretary.4

In an April 11, 2007 letter,5 MWEU through Cometa informed petitioner that the union was
unable to fully deduct the increased P200.00 union dues from his salary due to lack of the
required December 2006 check-off authorization from him. Petitioner was warned that his
failure to pay the union dues would result in sanctions upon him. Quebral informed Borela,
through a May 2, 2007 letter,6 that for such failure to pay the union dues, petitioner and
several others violated Section 1(g), Article IX of the MWEU’s Constitution and By-Laws.7
In turn, Borela referred the charge to the MWEU grievance committee for investigation.

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled
hearing. On June 6, 2007, the MWEU grievance committee recommended that petitioner be
suspended for 30 days.

In a June 20, 2007 letter,8 Borela informed petitioner and his corespondents of the MWEU
Executive Board’s "unanimous approval"9 of the grievance committee’s recommendation
and imposition upon them of a penalty of 30 days suspension, effective June 25, 2007.
In a June 26, 2007 letter10 to Borela, petitioner and his co-respondents took exception to
the imposition and indicated their intention to appeal the same to the General Membership
Assembly in accordance with Section 2(g), Article V of the union’s Constitution and By-
Laws,11 which grants them the right to appeal any arbitrary resolution, policy and rule
promulgated by the Executive Board to the General Membership Assembly. In a June 28,
2007 reply,12 Borela denied petitioner’s appeal, stating that the prescribed period for
appeal had expired.

Petitioner and his co-respondents sent another letter13 on July 4, 2007, reiterating their
arguments and demanding that the General Membership Assembly be convened in order
that their appeal could be taken up. The letter was not acted upon.

Petitioner was once more charged with non-payment of union dues, and was required to
attend an August 3, 2007 hearing.14 Thereafter, petitioner was again penalized with a 30-
day suspension through an August 21, 2007 letter15 by Borela informing petitioner of the
Executive Board’s "unanimous approval"16 of the grievance committee recommendation to
suspend him effective August 24, 2007, to which he submitted a written reply,17 invoking
his right to appeal through the convening of the General Membership Assembly. However,
the respondents did not act on petitioner’s plea.

Meanwhile, MWEU scheduled an election of officers on September 14, 2007. Petitioner filed
his certificate of candidacy for Vice-President, but he was disqualified for not being a
member in good standing on account of his suspension.

On October 2, 2007, petitioner was charged with non-payment of union dues for the third
time. He did not attend the scheduled hearing. This time, he was meted the penalty of
expulsion from the union, per "unanimous approval"18 of the members of the Executive
Board. His pleas for an appeal to the General Membership Assembly were once more
unheeded.19

In 2008, during the freedom period and negotiations for a new collective bargaining
agreement (CBA) with MWC, petitioner joined another union, the Workers Association for
Transparency, Empowerment and Reform, All-Filipino Workers Confederation (WATER-
AFWC). He was elected union President. Other MWEU members were inclined to join
WATER-AFWC, but MWEU director Torres threatened that they would not get benefits from
the new CBA.20
The MWEU leadership submitted a proposed CBA which contained provisions to the effect
that in the event of retrenchment, non-MWEU members shall be removed first, and that
upon the signing of the CBA, only MWEU members shall receive a signing bonus.21

Ruling of the Labor Arbiter

On October 13, 2008, petitioner filed a Complaint22 against respondents for unfair labor
practices, damages, and attorney’s fees before the National Labor Relations Commission
(NLRC), Quezon City, docketed as NLRC Case No. NCR-10-14255-08. In his Position
Paper and other written submissions,23 petitioner accused the respondents of illegal
termination from MWEU in connection with the events relative to his non-payment of union
dues; unlawful interference, coercion, and violation of the rights of MWC employees to self-
organization – in connection with the proposed CBA submitted by MWEU leadership, which
petitioner claims contained provisions that discriminated against non-MWEU members.
Petitioner prayed in his Supplemental Position Paper that respondents be held guilty of
unfair labor practices and ordered to indemnify him moral damages in the amount of
P100,000.00, exemplary damages amounting to P50,000.00, and 10% attorney’s fees.

In their joint Position Paper and other pleadings,24 respondents claimed that the Labor
Arbiter had no jurisdiction over the dispute, which is intra-union in nature; that the Bureau of
Labor Relations (BLR) was the proper venue, in accordance with Article 226 of the Labor
Code25 and Section 1, Rule XI of Department Order 40-03, series of 2003, of the DOLE;26
and that they were not guilty of unfair labor practices, discrimination, coercion or restraint.

On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision27 which
decreed as follows:

Indeed the filing of the instant case is still premature. Section 5, Article X-Investigation
Procedures and Appeal Process of the Union Constitution and By-Laws provides that:

Section 5. Any dismissed and/or expelled member shall have the rights to appeal to the
Executive Board within seven (7) days from the date of notice of the said dismissal and/or
expulsion, which in [turn] shall be referred to the General Membership Assembly. In case of
an appeal, a simple majority of the decision of the Executive Board is imperative. The same
shall be approved/disapproved by a majority vote of the general membership assembly in a
meeting duly called for the purpose.
On the basis of the foregoing, the parties shall exhaust first all the administrative remedies
before resorting to compulsory arbitration. Thus, instant case is referred back to the Union
for the General Assembly to act or deliberate complainant’s appeal on the decision of the
Executive Board.

WHEREFORE PREMISES CONSIDERED, instant case is referred back to the Union level
for the General Assembly to act on complainant’s appeal.

SO ORDERED.28

Ruling of the National Labor Relations Commission

Petitioner appealed before the NLRC, where the case was docketed as NLRC LAC No. 07-
001913-09. On March 15, 2010, the NLRC issued its Decision,29 declaring as follows:

Complainant30 imputes serious error to the Labor Arbiter when she decided as follows:

a. Referring back the subject case to the Union level for the General Assembly to act on his
appeal.

b. Not ruling that respondents are guilty of ULP as charged.

c. Not granting to complainant moral and exemplary damages and attorney’s fees.

Complainant, in support of his charges, claims that respondents restrained or coerced him
in the exercise of his right as a union member in violation of paragraph "a", Article 249 of
the Labor Code,31 particularly, in denying him the explanation as to whether there was
observance of the proper procedure in the increase of the membership dues from P100.00
to P200.00 per month. Further, complainant avers that he was denied the right to appeal his
suspension and expulsion in accordance with the provisions of the Union’s Constitution and
By-Laws. In addition, complainant claims that respondents attempted to cause the
management to discriminate against the members of WATER-AFWC thru the proposed
CBA.

Pertinent to the issue then on hand, the Labor Arbiter ordered that the case be referred
back to the Union level for the General Assembly to act on complainant’s appeal. Hence,
these appeals.

After a careful look at all the documents submitted and a meticulous review of the facts, We
find that this Commission lacks the jurisdictional competence to act on this case.

Article 217 of the Labor Code,32 as amended, specifically enumerates the cases over
which the Labor Arbiters and the Commission have original and exclusive jurisdiction. A
perusal of the record reveals that the causes of action invoked by complainant do not fall
under any of the enumerations therein. Clearly, We have no jurisdiction over the same.

Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department Order No. 40-03
in particular, Item A, paragraphs (h) and (j) and Item B, paragraph (a)(3), respectively,
provide:

"A. Inter-Intra-Union disputes shall include:

"(h) violation of or disagreements over any provision of the Constitution and By-Laws of a
Union or workers’ association.

"(j) violation of the rights and conditions of membership in a Union or workers’ association.

"B. Other Labor Relations disputes, not otherwise covered by Article 217 of the Labor Code,
shall include –
"3. a labor union and an individual who is not a member of said union."

Clearly, the above-mentioned disputes and conflict fall under the jurisdiction of the Bureau
of Labor Relations, as these are inter/intra-union disputes.

WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is hereby
declared NULL and VOID for being rendered without jurisdiction and the instant complaint is
DISMISSED.

SO ORDERED.33

Petitioner moved for reconsideration,34 but in a June 16, 2010 Resolution,35 the motion
was denied and the NLRC sustained its Decision.

Ruling of the Court of Appeals

In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP No. 115639,
petitioner sought to reverse the NLRC Decision and be awarded his claim for damages and
attorney’s fees on account of respondents’ unfair labor practices, arguing among others that
his charge of unfair labor practices is cognizable by the Labor Arbiter; that the fact that the
dispute is inter- or intra-union in nature cannot erase the fact that respondents were guilty of
unfair labor practices in interfering and restraining him in the exercise of his right to self-
organization as member of both MWEU and WATER-AFWC, and in discriminating against
him and other members through the provisions of the proposed 2008 CBA which they
drafted; that his failure to pay the increased union dues was proper since the approval of
said increase was arrived at without observing the prescribed voting procedure laid down in
the Labor Code; that he is entitled to an award of damages and attorney’s fees as a result
of respondents’ illegal acts in discriminating against him; and that in ruling the way it did, the
NLRC committed grave abuse of discretion.

On April 24, 2012, the CA issued the assailed Decision containing the following
pronouncement:
The petition lacks merit.

Petitioner’s causes of action against MWEU are inter/intra-union disputes cognizable by the
BLR whose functions and jurisdiction are largely confined to union matters, collective
bargaining registry, and labor education. Section 1, Rule XI of Department Order (D.O.) No.
40-03, Series of 2003, of the Department of Labor and Employment enumerates instances
of inter/intra-union disputes, viz:

Section 1. Coverage. – Inter/intra-union disputes shall include:

xxxx

(b) conduct of election of union and workers’ association officers/nullification of election of

union and workers’ association officers;

(c) audit/accounts examination of union or workers’ association funds;

xxxx

(g) validity/invalidity of impeachment/ expulsion of union and workers’ association officers

and members;

xxxx

(j) violations of or disagreements over any provision in a union or workers’ association

constitution and by-laws;
xxxx

(l) violations of the rights and conditions of union or workers’ association membership;

xxxx

(n) such other disputes or conflicts involving the rights to self-organization, union
membership and collective bargaining –

(1) between and among legitimate labor organizations;

(2) between and among members of a union or workers’ association.

In brief, "Inter-Union Dispute" refers to any conflict between and among legitimate labor
unions involving representation questions for purposes of collective bargaining or to any
other conflict or dispute between legitimate labor unions. "Intra-Union Dispute" refers to any
conflict between and among union members, including grievances arising from any violation
of the rights and conditions of membership, violation of or disagreement over any provision
of the union’s constitution and by-laws, or disputes arising from chartering or affiliation of
union. On the other hand, the circumstances of unfair labor practices (ULP) of a labor
organization are stated in Article 249 of the Labor Code, to wit:

Article 249. Unfair labor practices of labor organizations. It shall be unlawful for labor
organization, its officers, agents, or representatives to commit any of the following unfair
labor practices:

(a) To restrain or coerce employees in the exercise of their right to self-organization;

Provided, That the labor organization shall have the right to prescribe its own rules with
respect to the acquisition or retention of membership;
(b) To cause or attempt to cause an employer to discriminate against an employee,
including discrimination against an employee with respect to whom membership in such
organization has been denied or terminated on any ground other than the usual terms and
conditions under which membership or continuation of membership is made available to
other members;

xxxx

Applying the aforementioned rules, We find that the issues arising from petitioner’s right to
information on the increased membership dues, right to appeal his suspension and
expulsion according to CBL provisions, and right to vote and be voted on are essentially
intra-union disputes; these involve violations of rights and conditions of union membership.
But his claim that a director of MWEU warned that non-MWEU members would not receive
CBA benefits is an inter-union dispute. It is more of an "interference" by a rival union to
ensure the loyalty of its members and to persuade non-members to join their union. This is
not an actionable wrong because interfering in the exercise of the right to organize is itself a
function of self-organizing.37 As long as it does not amount to restraint or coercion, a labor
organization may interfere in the employees’ right to self-organization.38 Consequently, a
determination of validity or illegality of the alleged acts necessarily touches on union
matters, not ULPs, and are outside the scope of the labor arbiter’s jurisdiction.

As regards petitioner’s other accusations, i.e., discrimination in terms of meting out the
penalty of expulsion against him alone, and attempt to cause the employer, MWC, to
discriminate against non-MWEU members in terms of retrenchment or reduction of
personnel, and signing bonus, while We may consider them as falling within the concept of
ULP under Article 249(a) and (b), still, petitioner’s complaint cannot prosper for lack of
substantial evidence. Other than his bare allegation, petitioner offered no proof that MWEU
did not penalize some union members who failed to pay the increased dues. On the
proposed discriminatory CBA provisions, petitioner merely attached the pages containing
the questioned provisions without bothering to reveal the MWEU representatives
responsible for the said proposal. Article 249 mandates that "x x x only the officers,
members of the governing boards, representatives or agents or members of labor
associations or organizations who have actually participated in, authorized or ratified unfair
labor practices shall be held criminally liable." Plain accusations against all MWEU officers,
without specifying their actual participation, do not suffice. Thus, the ULP charges must
necessarily fail.
In administrative and quasi-judicial proceedings, only substantial evidence is necessary to
establish the case for or against a party. Substantial evidence is that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion.
Petitioner failed to discharge the burden of proving, by substantial evidence, the allegations
of ULP in his complaint. The NLRC, therefore, properly dismissed the case.

FOR THESE REASONS, the petition is DISMISSED.

SO ORDERED.39

Thus, the instant Petition.

Issue

In an August 28, 2013 Resolution,40 this Court resolved to give due course to the Petition,
which claims that the CA erred:

A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION CONFLICTS

NEGATES THE COMPLAINT FOR UNFAIR LABOR PRACTICES AGAINST A LABOR
ORGANIZATION AND ITS OFFICERS, AND IN AFFIRMING THAT THE NLRC
PROPERLY DISMISSED THE CASE FOR ALLEGED LACK OF JURISDICTION.

B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR LABOR

PRACTICES UNDER ARTICLE 249(a) AND (b) OF THE LABOR CODE.

C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER AGAINST

MEMBERS OF A RIVAL UNION IS (sic) MERELY AN "INTERFERENCE" AND DO NOT
AMOUNT TO "RESTRAINT" OR "COERCION".
D. IN DECLARING THAT PETITIONER FAILED TO PRESENT SUBSTANTIAL EVIDENCE
IN PROVING RESPONDENTS’ SPECIFIC ACTS OF UNFAIR LABOR PRACTICES.

E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO PETITIONER

FOR MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY’S FEES.41

Petitioner’s Arguments

Praying that the assailed CA dispositions be set aside and that respondents be declared
guilty of unfair labor practices under Article 249(a) and (b) and adjudged liable for damages
and attorney’s fees as prayed for in his complaint, petitioner maintains in his Petition and
Reply42 that respondents are guilty of unfair labor practices which he clearly enumerated
and laid out in his pleadings below; that these unfair labor practices committed by
respondents fall within the jurisdiction of the Labor Arbiter; that the Labor Arbiter, the NLRC,
and the CA failed to rule on his accusation of unfair labor practices and simply dismissed
his complaint on the ground that his causes of action are intra- or inter-union in nature; that
admittedly, some of his causes of action involved intra- or inter-union disputes, but other
acts of respondents constitute unfair labor practices; that he presented substantial evidence
to prove that respondents are guilty of unfair labor practices by failing to observe the proper
procedure in the imposition of the increased monthly union dues, and in unduly imposing
the penalties of suspension and expulsion against him; that under the union’s constitution
and by-laws, he is given the right to appeal his suspension and expulsion to the general
membership assembly; that in denying him his rights as a union member and expelling him,
respondents are guilty of malice and evident bad faith; that respondents are equally guilty
for violating and curtailing his rights to vote and be voted to a position within the union, and
for discriminating against non-MWEU members; and that the totality of respondents’
conduct shows that they are guilty of unfair labor practices.

Respondent’s Arguments

In their joint Comment,43 respondents maintain that petitioner raises issues of fact which
are beyond the purview of a petition for review on certiorari; that the findings of fact of the
CA are final and conclusive; that the Labor Arbiter, NLRC, and CA are one in declaring that
there is no unfair labor practices committed against petitioner; that petitioner’s other
allegations fall within the jurisdiction of the BLR, as they refer to intra- or inter-union
disputes between the parties; that the issues arising from petitioner’s right to information on
the increased dues, right to appeal his suspension and expulsion, and right to vote and be
voted upon are essentially intra-union in nature; that his allegations regarding supposed
coercion and restraint relative to benefits in the proposed CBA do not constitute an
actionable wrong; that all of the acts questioned by petitioner are covered by Section 1,
Rule XI of Department Order 40-03, series of 2003 as intra-/inter-union disputes which do
not fall within the jurisdiction of the Labor Arbiter; that in not paying his union dues,
petitioner is guilty of insubordination and deserved the penalty of expulsion; that petitioner
failed to petition to convene the general assembly through the required signature of 30% of
the union membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s
Constitution and By-Laws or by a petition of the majority of the general membership in good
standing under Article VI, Section 3; and that for his failure to resort to said remedies,
petitioner can no longer question his suspension or expulsion and avail of his right to
appeal.

Our Ruling

The Court partly grants the Petition.

In labor cases, issues of fact are for the labor tribunals and the CA to resolve, as this Court
is not a trier of facts. However, when the conclusion arrived at by them is erroneous in
certain respects, and would result in injustice as to the parties, this Court must intervene to
correct the error. While the Labor Arbiter, NLRC, and CA are one in their conclusion in this
case, they erred in failing to resolve petitioner’s charge of unfair labor practices against
respondents.

It is true that some of petitioner’s causes of action constitute intra-union cases cognizable
by the BLR under Article 226 of the Labor Code.

An intra-union dispute refers to any conflict between and among union members, including
grievances arising from any violation of the rights and conditions of membership, violation of
or disagreement over any provision of the union’s constitution and by-laws, or disputes
arising from chartering or disaffiliation of the union. Sections 1 and 2, Rule XI of Department
Order No. 40-03, Series of 2003 of the DOLE enumerate the following circumstances as
inter/intra-union disputes x x x.44

However, petitioner’s charge of unfair labor practices falls within the original and exclusive
jurisdiction of the Labor Arbiters, pursuant to Article 217 of the Labor Code. In addition,
Article 247 of the same Code provides that "the civil aspects of all cases involving unfair
labor practices, which may include claims for actual, moral, exemplary and other forms of
damages, attorney’s fees and other affirmative relief, shall be under the jurisdiction of the
Labor Arbiters."

Unfair labor practices may be committed both by the employer under Article 248 and by
labor organizations under Article 249 of the Labor Code,45 which provides as follows:

ART. 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice for
a labor organization, its officers, agents or representatives:

(a) To restrain or coerce employees in the exercise of their right to self-organization.

However, a labor organization shall have the right to prescribe its own rules with respect to
the acquisition or retention of membership;

(b) To cause or attempt to cause an employer to discriminate against an employee,

including discrimination against an employee with respect to whom membership in such
organization has been denied or to terminate an employee on any ground other than the
usual terms and conditions under which membership or continuation of membership is
made available to other members;

(c) To violate the duty, or refuse to bargain collectively with the employer, provided it is the
representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver
any money or other things of value, in the nature of an exaction, for services which are not
performed or not to be performed, including the demand for fee for union negotiations;

(e) To ask for or accept negotiation or attorney’s fees from employers as part of the
settlement of any issue in collective bargaining or any other dispute; or

(f) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers, members of
governing boards, representatives or agents or members of labor associations or
organizations who have actually participated in, authorized or ratified unfair labor practices
shall be held criminally liable. (As amended by Batas Pambansa Bilang 130, August 21,
1981).

Petitioner contends that respondents committed acts constituting unfair labor practices –
which charge was particularly laid out in his pleadings, but that the Labor Arbiter, the NLRC,
and the CA ignored it and simply dismissed his complaint on the ground that his causes of
action were intra- or inter-union in nature. Specifically, petitioner claims that he was
suspended and expelled from MWEU illegally as a result of the denial of his right to appeal
his case to the general membership assembly in accordance with the union’s constitution
and by-laws. On the other hand, respondents counter that such charge is intra-union in
nature, and that petitioner lost his right to appeal when he failed to petition to convene the
general assembly through the required signature of 30% of the union membership in good
standing pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-Laws or by a
petition of the majority of the general membership in good standing under Article VI, Section
3.

Under Article VI, Section 2(a) of MWEU’s Constitution and By-Laws, the general
membership assembly has the power to "review revise modify affirm or repeal [sic]
resolution and decision of the Executive Board and/or committees upon petition of thirty
percent (30%) of the Union in good standing,"46 and under Section 2(d), to "revise, modify,
affirm or reverse all expulsion cases."47 Under Section 3 of the same Article, "[t]he decision
of the Executive Board may be appealed to the General Membership which by a simple
majority vote reverse the decision of said body. If the general Assembly is not in session the
decision of the Executive Board may be reversed by a petition of the majority of the general
membership in good standing."48 And, in Article X, Section 5, "[a]ny dismissed and/or
expelled member shall have the right to appeal to the Executive Board within seven days
from notice of said dismissal and/or expulsion which, in [turn] shall be referred to the
General membership assembly. In case of an appeal, a simple majority of the decision of
the Executive Board is imperative. The same shall be approved/disapproved by a majority
vote of the general membership assembly in a meeting duly called for the purpose."49

In regard to suspension of a union member, MWEU’s Constitution and By-Laws provides

under Article X, Section 4 thereof that "[a]ny suspended member shall have the right to
appeal within three (3) working days from the date of notice of said suspension. In case of
an appeal a simple majority of vote of the Executive Board shall be necessary to nullify the
suspension."
Thus, when an MWEU member is suspended, he is given the right to appeal such
suspension within three working days from the date of notice of said suspension, which
appeal the MWEU Executive Board is obligated to act upon by a simple majority vote. When
the penalty imposed is expulsion, the expelled member is given seven days from notice of
said dismissal and/or expulsion to appeal to the Executive Board, which is required to act by
a simple majority vote of its members. The Board’s decision shall then be approved/
disapproved by a majority vote of the general membership assembly in a meeting duly
called for the purpose.1avvphi1

The documentary evidence is clear that when petitioner received Borela’s August 21, 2007
letter informing him of the Executive Board’s unanimous approval of the grievance
committee recommendation to suspend him for the second time effective August 24, 2007,
he immediately and timely filed a written appeal. However, the Executive Board – then
consisting of respondents Borela, Tierra, Bolo, Casañas, Fernandez, Rendon, Montemayor,
Torres, Quebral, Pagulayan, Cancino, Maga, Cometa, Mancenido, and two others who are
not respondents herein – did not act thereon. Then again, when petitioner was charged for
the third time and meted the penalty of expulsion from MWEU by the unanimous vote of the
Executive Board, his timely appeal was again not acted upon by said board – this time
consisting of respondents Borela, Quebral, Tierra, Imana, Rendon, Yeban, Cancino, Torres,
Montemayor, Mancenido, Mandilag, Fernandez, Buenaventura, Apilado, Maga, Barbero,
Cometa, Bolo, and Manlapaz.

Thus, contrary to respondents’ argument that petitioner lost his right to appeal when he
failed to petition to convene the general assembly through the required signature of 30% of
the union membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s
Constitution and By-Laws or by a petition of the majority of the general membership in good
standing under Article VI, Section 3, this Court finds that petitioner was illegally suspended
for the second time and thereafter unlawfully expelled from MWEU due to respondents’
failure to act on his written appeals. The required petition to convene the general assembly
through the required signature of 30% (under Article VI, Section 2[a]) or majority (under
Article VI, Section 3) of the union membership does not apply in petitioner’s case; the
Executive Board must first act on his two appeals before the matter could properly be
referred to the general membership. Because respondents did not act on his two appeals,
petitioner was unceremoniously suspended, disqualified and deprived of his right to run for
the position of MWEU Vice-President in the September 14, 2007 election of officers,
expelled from MWEU, and forced to join another union, WATER-AFWC. For these,
respondents are guilty of unfair labor practices under Article 249 (a) and (b) – that is,
violation of petitioner’s right to self-organization, unlawful discrimination, and illegal
termination of his union membership – which case falls within the original and exclusive
jurisdiction of the Labor Arbiters, in accordance with Article 217 of the Labor Code.
The primary concept of unfair labor practices is stated in Article 247 of the Labor Code,
which states:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. ––
Unfair labor practices violate the constitutional right of workers and employees to self-
organization, are inimical to the legitimate interests of both labor and management,
including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the
promotion of healthy and stable labor-management relations.

"In essence, [unfair labor practice] relates to the commission of acts that transgress the
workers’ right to organize."50 "[A]ll the prohibited acts constituting unfair labor practice in
essence relate to the workers’ right to self-organization."51 "[T]he term unfair labor practice
refers to that gamut of offenses defined in the Labor Code which, at their core, violates the
constitutional right of workers and employees to self-organization."52

Guaranteed to all employees or workers is the ‘right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective bargaining.’ This
is made plain by no less than three provisions of the Labor Code of the Philippines. Article
243 of the Code provides as follows:

ART. 243. Coverage and employees’ right to self-organization. — All persons employed in
commercial, industrial and agricultural enterprises and in religious, charitable, medical, or
educational institutions whether operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing for
purposes or collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.

Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to
‘interfere with, restrain or coerce employees in the exercise of their right to self-
organization.’ Similarly, Article 249 (a) makes it an unfair labor practice for a labor
organization to ‘restrain or coerce employees in the exercise of their rights to self-
organization . . .’

xxxx
The right of self-organization includes the right to organize or affiliate with a labor union or
determine which of two or more unions in an establishment to join, and to engage in
concerted activities with co-workers for purposes of collective bargaining through
representatives of their own choosing, or for their mutual aid and protection, i.e., the
protection, promotion, or enhancement of their rights and interests.53

As members of the governing board of MWEU, respondents are presumed to know,

observe, and apply the union’s constitution and by-laws. Thus, their repeated violations
thereof and their disregard of petitioner’s rights as a union member – their inaction on his
two appeals which resulted in his suspension, disqualification from running as MWEU
officer, and subsequent expulsion without being accorded the full benefits of due process –
connote willfulness and bad faith, a gross disregard of his rights thus causing untold
suffering, oppression and, ultimately, ostracism from MWEU. "Bad faith implies breach of
faith and willful failure to respond to plain and well understood obligation."54 This warrants
an award of moral damages in the amount of P100,000.00. Moreover, the Civil Code
provides:

Art. 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs any of the following rights
and liberties of another person shall be liable to the latter for damages:

xxxx

(12) The right to become a member of associations or societies for purposes not contrary to
law;

In Vital-Gozon v. Court of Appeals,55 this Court declared, as follows:

Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.
They may be recovered if they are the proximate result of the defendant’s wrongful act or
omission. The instances when moral damages may be recovered are, inter alia, ‘acts and
actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code,’ which,
in turn, are found in the Chapter on Human Relations of the Preliminary Title of the Civil
Code. x x x

Under the circumstances, an award of exemplary damages in the amount of P50,000.00, as

prayed for, is likewise proper. "Exemplary damages are designed to permit the courts to
mould behavior that has socially deleterious consequences, and their imposition is required
by public policy to suppress the wanton acts of the offender."56 This should prevent
respondents from repeating their mistakes, which proved costly for petitioner.1âwphi1

Under Article 2229 of the Civil Code, ‘[e]xemplary or corrective damages are imposed, by
way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.’ As this court has stated in the past: ‘Exemplary
damages are designed by our civil law to permit the courts to reshape behaviour that is
socially deleterious in its consequence by creating negative incentives or deterrents against
such behaviour.’57

Finally, petitioner is also entitled to attorney’s fees equivalent to 10 per cent (10%) of the
total award. The unjustified acts of respondents clearly compelled him to institute an action
primarily to vindicate his rights and protect his interest. Indeed, when an employee is forced
to litigate and incur expenses to protect his rights and interest, he is entitled to an award of
attorney’s fees.58

WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April 24, 2012 Decision
of the Court of Appeals in CA-G.R. SP No. 115639 is hereby MODIFIED, in that all of the
respondents - except for Carlos Villa, Ric Briones, and Chito Bernardo - are declared guilty
of unfair labor practices and ORDERED TO INDEMNIFY petitioner Allan M. Mendoza the
amounts of Pl00,000.00 as and by way of moral damages, PS0,000.00 as exemplary
damages, and attorney's fees equivalent to 10 per cent (10%) of the total award.

SO ORDERED.

G.R. No. 176085 February 8, 2012

FEDERICO S. ROBOSA, ROLANDO E. PANDY, NOEL D. ROXAS, ALEXANDER
ANGELES, VERONICA GUTIERREZ, FERNANDO EMBAT, and NANETTE H. PINTO,
Petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION (First Division), CHEMO-TECHNISCHE

MANUFACTURING, INC. and its responsible officials led by FRANKLIN R. DE
LUZURIAGA, and PROCTER & GAMBLE PHILIPPINES, INC., Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 seeking the reversal of the resolutions of
the Court of Appeals (CA) rendered on February 24, 20062 and December 14, 20063 in
CA-G.R. SP No. 80436.

Factual Background

Federico S. Robosa, Rolando E. Pandy, Noel D. Roxas, Alexander Angeles, Veronica

Gutierrez, Fernando Embat and Nanette H. Pinto (petitioners) were rank-and-file employees
of respondent Chemo-Technische Manufacturing, Inc. (CTMI), the manufacturer and
distributor of "Wella" products. They were officers and members of the CTMI Employees
Union-DFA (union). Respondent Procter and Gamble Philippines, Inc. (P & GPI) acquired
all the interests, franchises and goodwill of CTMI during the pendency of the dispute.

Sometime in the first semester of 1991, the union filed a petition for certification election at
CTMI. On June 10, 1991, Med-Arbiter Rasidali Abdullah of the Office of the Department of
Labor and Employment in the National Capital Region (DOLE-NCR) granted the petition.
The DOLE-NCR conducted a consent election on July 5, 1991, but the union failed to
garner the votes required to be certified as the exclusive bargaining agent of the company.
On July 15, 1991, CTMI, through its President and General Manager Franklin R. de
Luzuriaga, issued a memorandum4 announcing that effective that day: (1) all sales
territories were demobilized; (2) all vehicles assigned to sales representatives should be
returned to the company and would be sold; (3) sales representatives would continue to
service their customers through public transportation and would be given transportation
allowance; (4) deliveries of customers’ orders would be undertaken by the warehouses; and
(5) revolving funds for ex-truck selling held by sales representatives should be surrendered
to the cashier (for Metro Manila) or to the supervisor (for Visayas and Mindanao), and truck
stocks should immediately be surrendered to the warehouse.

On the same day, CTMI issued another memorandum5 informing the company’s sales
representatives and sales drivers of the new system in the Salon Business Group’s selling
operations.

The union asked for the withdrawal and deferment of CTMI’s directives, branding them as
union busting acts constituting unfair labor practice. CTMI ignored the request. Instead, it
issued on July 23, 1991 a notice of termination of employment to the sales drivers, due to
the abolition of the sales driver positions.6

On August 1, 1991, the union and its affected members filed a complaint for illegal dismissal
and unfair labor practice, with a claim for damages, against CTMI, De Luzuriaga and other
CTMI officers. The union also moved for the issuance of a writ of preliminary injunction
and/or temporary restraining order (TRO).

The Compulsory Arbitration Proceedings

The labor arbiter handling the case denied the union’s motion for a stay order on the ground
that the issues raised by the petitioners can best be ventilated during the trial on the merits
of the case. This prompted the union to file on August 16, 1991 with the National Labor
Relations Commission (NLRC), a petition for the issuance of a preliminary mandatory
injunction and/or TRO.7

On August 23, 1991, the NLRC issued a TRO.8 It directed CTMI, De Luzuriaga and other
company executives to (1) cease and desist from dismissing any member of the union and
from implementing the July 23, 1991 memorandum terminating the services of the sales
drivers, and to immediately reinstate them if the dismissals have been effected; (2) cease
and desist from implementing the July 15, 1991 memorandum grounding the sales
personnel; and (3) restore the status quo ante prior to the formation of the union and the
conduct of the consent election.

Allegedly, the respondents did not comply with the NLRC’s August 23, 1991 resolution.
They instead moved to dissolve the TRO and opposed the union’s petition for preliminary
injunction.

On September 12, 1991, the NLRC upgraded the TRO to a writ of preliminary injunction.9
The respondents moved for reconsideration. The union opposed the motion and urgently
moved to cite the responsible CTMI officers in contempt of court.

On August 25, 1993, the NLRC denied the respondents’ motion for reconsideration and
directed Labor Arbiter Cristeta Tamayo to hear the motion for contempt. In reaction, the
respondents questioned the NLRC orders before this Court through a petition for certiorari
and prohibition with preliminary injunction. The Court dismissed the petition for being
premature. It also denied the respondents’ motion for reconsideration, as well as a second
motion for reconsideration, with finality. This notwithstanding, the respondents allegedly
refused to obey the NLRC directives. The respondents’ defiance, according to the
petitioners, resulted in the loss of their employment.

Meanwhile, the NLRC heard the contempt charge. On October 31, 2000, it issued a
resolution10 dismissing the charge. It ordered the labor arbiter to proceed hearing the main
case on the merits.

The petitioners moved for, but failed to secure, a reconsideration from the NLRC on the
dismissal of the contempt charge. They then sought relief from the CA by way of a petition
for certiorari under Rule 65.

The CA Decision

The CA saw no need to dwell on the issues raised by the petitioners as the question it
deemed appropriate for resolution is whether the NLRC’s dismissal of the contempt charge
against the respondents may be the proper subject of an appeal. It opined that the dismissal
is not subject to review by an appellate court. Accordingly, the CA Special Sixth Division
dismissed the petition in its resolution of February 24, 2006.11

The CA considered the prayer of P & GPI to be dropped as party-respondent moot and
academic.

The petitioners sought a reconsideration, but the CA denied the motion in its resolution of
December 14, 2006.12 Hence, the present Rule 45 petition.

The Petition

The petitioners charge the CA with grave abuse of discretion in upholding the NLRC
resolutions, despite the reversible errors the labor tribunal committed in dismissing the
contempt charge against the respondents. They contend that the respondents were guilty of
contempt for their failure (1) to observe strictly the NLRC status quo order; and (2) to
reinstate the dismissed petitioners and to pay them their lost wages, sales commissions,
per diems, allowances and other employee benefits. They also claim that the NLRC, in
effect, overturned this Court’s affirmation of the TRO and of the preliminary injunction.

The petitioners assail the CA’s reliance on the Court’s ruling that a contempt charge
partakes of a criminal proceeding where an acquittal is not subject to appeal. They argue
that the facts obtaining in the present case are different from the facts of the cases where
the Court’s ruling was made. They further argue that by the nature of this case, the Labor
Code and its implementing rules and regulations should apply, but in any event, the
appellate court is not prevented from reviewing the factual basis of the acquittal of the
respondents from the contempt charges.

The petitioners lament that the NLRC, in issuing the challenged resolutions, had
unconstitutionally applied the law. They maintain that not only did the NLRC unconscionably
delay the disposition of the case for more than twelve (12) years; it also rendered an unjust,
unkind and dubious judgment. They bewail that "[f]or some strange reason, the respondent
NLRC made a queer [somersault] from its earlier rulings which favor the petitioners."13

The Case for the Respondents

Franklin K. De Luzuriaga

De Luzuriaga filed a Comment14 on May 17, 2007 and a Memorandum on December 4,

2008,15 praying for a dismissal of the petition.

De Luzuriaga argues that the CA committed no error when it dismissed the petition for
certiorari since the dismissal of the contempt charge against the respondents amounted to
an acquittal where review by an appellate court will not lie. In any event, he submits, the
respondents were charged with indirect contempt which may be initiated only in the
appropriate regional trial court, pursuant to Section 12, Rule 71 of the Rules of Court. He
posits that the NLRC has no jurisdiction over an indirect contempt charge. He thus argues
that the petitioners improperly brought the contempt charge before the NLRC.

Additionally, De Luzuriaga points out that the petition raises only questions of facts which,
procedurally, is not allowed in a petition for review on certiorari. Be this as it may, he
submits that pursuant to Philippine Long Distance Telephone Company, Inc. v. Tiamson,16
factual findings of labor officials, who are deemed to have acquired expertise in matters
within their respective jurisdictions, are generally accorded not only respect but even finality.
He stresses that the CA committed no reversible error in not reviewing the NLRC’s factual
findings.

Further, De Luzuriaga contends that the petitioners’ verification and certification against
forum shopping is defective because it was only Robosa and Pandy who executed the
document. There was no indication that they were authorized by Roxas, Angeles, Gutierrez,
Embat and Pinto to execute the required verification and certification.

Lastly, De Luzuriaga maintains that the petitioners are guilty of forum shopping as the
reliefs prayed for in the petition before the CA, as well as in the present petition, are the
same reliefs that the petitioners may be entitled to in the complaint before the labor
arbiter.17

P & GPI
As it did with the CA when it was asked to comment on the petitioners’ motion for
reconsideration,18 P & GPI prays in its Comment19 and Memorandum20 that it be dropped
as a party-respondent, and that it be excused from further participating in the proceedings.
It argues that inasmuch as the NLRC resolved the contempt charge on the merits, an
appeal from its dismissal through a petition for certiorari is barred. Especially in its case, the
dismissal of the petition for certiorari is correct because it was never made a party to the
contempt proceedings and, thus, it was never afforded the opportunity to be heard. It adds
that it is an entity separate from CTMI. It submits that it cannot be made to assume any or
all of CTMI’s liabilities, absent an agreement to that effect but even if it may be liable, the
present proceedings are not the proper venue to determine its liability, if any.

On December 16, 2008, the petitioners filed a Memorandum21 raising essentially the same
issues and arguments laid down in the petition.

The Court’s Ruling

Issues

The parties’ submissions raise the following issues:

(1) whether the NLRC has contempt powers;

(2) whether the dismissal of a contempt charge is appealable; and

(3) whether the NLRC committed grave abuse of discretion in dismissing the contempt
charge against the respondents.

On the first issue, we stress that under Article 21822 of the Labor Code, the NLRC (and the
labor arbiters) may hold any offending party in contempt, directly or indirectly, and impose
appropriate penalties in accordance with law. The penalty for direct contempt consists of
either imprisonment or fine, the degree or amount depends on whether the contempt is
against the Commission or the labor arbiter. The Labor Code, however, requires the labor
arbiter or the Commission to deal with indirect contempt in the manner prescribed under
Rule 71 of the Rules of Court.23

Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to initiate
indirect contempt proceedings before the trial court. This mode is to be observed only when
there is no law granting them contempt powers.24 As is clear under Article 218(d) of the
Labor Code, the labor arbiter or the Commission is empowered or has jurisdiction to hold
the offending party or parties in direct or indirect contempt. The petitioners, therefore, have
not improperly brought the indirect contempt charges against the respondents before the
NLRC.

The second issue pertains to the nature of contempt proceedings, especially with respect to
the remedy available to the party adjudged to have committed indirect contempt or has
been absolved of indirect contempt charges. In this regard, Section 11, Rule 71 of the Rules
of Court states that the judgment or final order of a court in a case of indirect contempt may
be appealed to the proper court as in a criminal case. This is not the point at issue,
however, in this petition. It is rather the question of whether the dismissal of a contempt
charge, as in the present case, is appealable. The CA held that the NLRC’s dismissal of the
contempt charges against the respondents amounts to an acquittal in a criminal case and is
not subject to appeal.

The CA ruling is grounded on prevailing jurisprudence.

In Yasay, Jr. v. Recto,25 the Court declared:

A distinction is made between a civil and [a] criminal contempt. Civil contempt is the failure
to do something ordered by a court to be done for the benefit of a party. A criminal contempt
is any conduct directed against the authority or dignity of the court.26

The Court further explained in Remman Enterprises, Inc. v. Court of Appeals27 and People
v. Godoy28 the character of contempt proceedings, thus –

The real character of the proceedings in contempt cases is to be determined by the relief
sought or by the dominant purpose. The proceedings are to be regarded as criminal when
the purpose is primarily punishment and civil when the purpose is primarily compensatory or
remedial.

Still further, the Court held in Santiago v. Anunciacion, Jr.29 that:

But whether the first or the second, contempt is still a criminal proceeding in which acquittal,
for instance, is a bar to a second prosecution. The distinction is for the purpose only of
determining the character of punishment to be administered.

In the earlier case of The Insurance Commissioner v. Globe Assurance Co., Inc.,30 the
Court dismissed the appeal from the ruling of the lower court denying a petition to punish
the respondent therein from contempt for lack of evidence. The Court said in that case:

It is not the sole reason for dismissing this appeal. In the leading case of In re Mison, Jr. v.
Subido, it was stressed by Justice J.B.L. Reyes as ponente, that the contempt proceeding
far from being a civil action is "of a criminal nature and of summary character in which the
court exercises but limited jurisdiction." It was then explicitly held: "Hence, as in criminal
proceedings, an appeal would not lie from the order of dismissal of, or an exoneration from,
a charge of contempt of court." [footnote omitted]

Is the NLRC’s dismissal of the contempt charges against the respondents beyond review by
this Court? On this important question, we note that the petitioners, in assailing the CA main
decision, claim that the appellate court committed grave abuse of discretion in not ruling on
the dismissal by the NLRC of the contempt charges.31 They also charge the NLRC of
having gravely abused its discretion and having committed reversible errors in:

(1) setting aside its earlier resolutions and orders, including the writ of preliminary injunction
it issued, with its dismissal of the petition to cite the respondents in contempt of court;

(2) overturning this Court’s resolutions upholding the TRO and the writ of preliminary
injunction;
(3) failing to impose administrative fines upon the respondents for violation of the TRO and
the writ of preliminary injunction; and

(4) failing to order the reinstatement of the dismissed petitioners and the payment of their
accrued wages and other benefits.

In view of the grave abuse of discretion allegation in this case, we deem it necessary to look
into the NLRC’s dismissal of the contempt charges against the respondents. As the charges
were rooted into the respondents’ alleged non-compliance with the NLRC directives
contained in the TRO32 and the writ of preliminary injunction,33 we first inquire into what
really happened to these directives.

The assailed NLRC resolution of October 31, 200034 gave us the following account on the
matter -

On the first directive, x x x We find that there was no violation of the said order. A perusal of
the records would show that in compliance with the temporary restraining order (TRO),
respondents reinstated back to work the sales drivers who complained of illegal dismissal
(Memorandum of Respondents, page 4).

Petitioners’ allegation that there was only payroll reinstatement does not make the
respondents guilty of contempt of court. Even if the drivers were just in the garage doing
nothing, the same does not make respondents guilty of contempt nor does it make them
violators of the injunction order. What is important is that they were reinstated and receiving
their salaries.

As for petitioners Danilo Real, Roberto Sedano and Rolando Manalo, they have resigned
from their jobs and were paid their separation pay xxx (Exhibits "6," "6-A," "7," "7-A," "8," "8-
A," Respondents’ Memorandum dated August 12, 1996). The issue of whether they were
illegally dismissed should be threshed out before the Labor Arbiter in whose sala the case
of unfair labor practice and illegal dismissal were (sic) filed. Records also show that
petitioner Antonio Desquitado during the pendency of the case executed an affidavit of
desistance asking that he be dropped as party complainant in as much as he has already
accepted separation benefits totaling to P63,087.33.
With respect to the second directive ordering respondents to cease and desist from
implementing the memoranda dated July 15, 1991 designed to ground sales personnel who
are members of the union, respondents alleged that they can no longer be restrained or
enjoined and that the status quo can no longer be restored, for implementation of the
memorandum was already consummated or was a fait accompli. x x x

All sales vehicles were ordered to be turned over to management and the same were
already sold[.] xxx [I]t would be hard to undo the sales transactions, the same being valid
and binding. The memorandum of July 15, 1991 authorized still all sales representatives to
continue servicing their customers using public transportation and a transportation
allowance would be issued.

xxxx

The third directive of the Commission is to preserve the "status quo ante" between the
parties.

Records reveal that WELLA AG of Germany terminated its Licensing Agreement with
respondent company effective December 31, 1991 (Exhibit "11," Respondents’
Memorandum).

On January 31, 1992, individual petitioners together with the other employees were
terminated xxx. In fact, this event resulted to the closure of the respondent company. The
manufacturing and marketing operations ceased. This is evidenced by the testimony of
Rosalito del Rosario and her affidavit (Exh. "9," memorandum of Respondents) as well as
Employer’s Monthly Report on Employees Termination/dismissals/suspension xxx (Exhibits
"12-A" to "12-F," ibid) as well as the report that there is a permanent shutdown/total closure
of all units of operations in the establishment (Ibid). A letter was likewise sent to the
Department of Labor and Employment (Exh. "12," Ibid) in compliance with Article 283 of the
Labor Code, serving notice that it will cease business operations effective January 31,
1992.

The petitioners strongly dispute the above account. They maintain that the NLRC failed to
consider the following:
1. CTMI violated the status quo ante order when it did not restore to their former work
assignments the dismissed sales drivers. They lament that their being "garaged" deprived
them of benefits, and they were subjected to ridicule and psychological abuse. They assail
the NLRC for considering the payroll reinstatement of the drivers as compliance with its stay
order.

They also bewail the NLRC’s recognition of the resignation of Danilo Real, Roberto Sedano,
Rolando Manalo and Antonio Desquitado as they were just compelled by economic
necessity to resign from their employment. The quitclaims they executed were contrary to
public policy and should not bar them from claiming the full measure of their rights, including
their counsel who was unduly deprived of his right to collect attorney’s fees.

2. It was error for the NLRC to rule that the memorandum, grounding the sales drivers,
could no longer be restrained or enjoined because all sales vehicles were already sold. No
substantial evidence was presented by the respondents to prove their allegation, but even if
there was a valid sale of the vehicles, it did not relieve the respondents of responsibility
under the stay order.

3. The alleged termination of the licensing agreement between CTMI and WELLA AG of
Germany, which allegedly resulted in the closure of CTMI’s manufacturing and marketing
operations, occurred after the NLRC’s issuance of the injunctive reliefs. CTMI failed to
present substantial evidence to support its contention that it folded up its operations when
the licensing agreement was terminated. Even assuming that there was a valid closure of
CTMI’s business operations, they should have been paid their lost wages, allowances,
incentives, sales commissions, per diems and other employee benefits from August 23,
1991 up to the date of the alleged termination of CTMI’s marketing operations.

Did the NLRC commit grave abuse of discretion in dismissing the contempt charges against
the respondents? An act of a court or tribunal may only be considered as committed in
grave abuse of discretion when it was performed in a capricious or whimsical exercise of
judgment which is equivalent to lack of jurisdiction. The abuse of discretion must be so
patent and gross as to amount to an evasion of a positive duty enjoined by law, or to act at
all in contemplation of law, as where the power is exercised in an arbitrary and despotic
manner by reason of passion or personal hostility.35

The petitioners insist that the respondents violated the NLRC directives, especially the
status quo ante order, for their failure to reinstate the dismissed petitioners and to pay them
their benefits. In light of the facts of the case as drawn above, we cannot see how the status
quo ante or the employer-employee situation before the formation of the union and the
conduct of the consent election can be maintained. As the NLRC explained, CTMI closed its
manufacturing and marketing operations after the termination of its licensing agreement
with WELLA AG of Germany. In fact, the closure resulted in the termination of CTMI’s
remaining employees on January 31, 1992, aside from the sales drivers who were earlier
dismissed but reinstated in the payroll, in compliance with the NLRC injunction. The
petitioners’ termination of employment, as well as all of their money claims, was the subject
of the illegal dismissal and unfair labor practice complaint before the labor arbiter. The latter
was ordered by the NLRC on October 31, 2000 to proceed hearing the case.36 The NLRC
thus subsumed all other issues into the main illegal dismissal and unfair labor practice case
pending with the labor arbiter. On this point, the NLRC declared:

Note that when the injunction order was issued, WELLA AG of Germany was still under
licensing agreement with respondent company. However, the situation has changed when
WELLA AG of Germany terminated its licensing agreement with the respondent, causing
the latter to close its business.

Respondents could no longer be ordered to restore the status quo as far as the individual
petitioners are concerned as these matters regarding the termination of the employees are
now pending litigation with the Arbitration Branch of the Commission. To resolve the
incident now regarding the closure of the respondent company and the matters alleged by
petitioners such as the creations of three (3) new corporations xxx as successor-
corporations are matters best left to the Labor Arbiter hearing the merits of the unfair labor
practice and illegal dismissal cases.37

We find no grave abuse of discretion in the assailed NLRC ruling. It rightly avoided delving
into issues which would clearly be in excess of its jurisdiction for they are issues involving
the merits of the case which are by law within the original and exclusive jurisdiction of the
labor arbiter.38 To be sure, whether payroll reinstatement of some of the petitioners is
proper; whether the resignation of some of them was compelled by dire economic
necessity; whether the petitioners are entitled to their money claims; and whether quitclaims
are contrary to law or public policy are issues that should be heard by the labor arbiter in the
first instance. The NLRC can inquire into them only on appeal after the merits of the case
shall have been adjudicated by the labor arbiter.

The NLRC correctly dismissed the contempt charges against the respondents.1âwphi1 The
CA likewise committed no grave abuse of discretion in not disturbing the NLRC resolution.
In light of the above discussion, we find no need to dwell into the other issues the parties
raised.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit and
AFFIRM the assailed resolutions of the Court of Appeals.

SO ORDERED.