FIRST DIVISION [G.R. No. 124382. August 16, 1999] PASTOR DIONISIO V. AUSTRIA, petitioner, vs. HON.

NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTIST, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PROFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA, respondents. DECISION KAPUNAN, J.: Subject to the instant petition for certiorari under Rule 65 of the Rules of Court is the Resolution of public respondent National Labor Relations Commission (the NLRC), rendered on 23 January 1996, in NLRC Case No. V-0120-93, entitled Pastor Dionisio V. Austria vs. Central Philippine Union Mission Corporation of Seventh Day Adventists, et. al., which dismissed the case for illegal dismissal filed by the petitioner against private respondents for lack of jurisdiction. Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists (hereinafter referred to as the SDA) is a religious corporation duly organized and existing under Philippine law and is represented in this case by the other private respondents, officers of the SDA. Petitioner, on

the other hand, was a Pastor of the SDA until 31 October 1991, when his services were terminated. The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from 1963 to 1991. He began his work with the SDA on 15 July 1963 as a literature evangelist, selling literature of the SDA over the island of Negros. From then on, petitioner worked his way up the ladder and got promoted several times. In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan Mission of the SDA. In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of Panay, and the provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989, petitioner was promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay, Balintawak and Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31 October 1991. On various occasions from August up to October, 1991, petitioner received several communications from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit accountability and responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10, and to remit the same to the Negros Mission. In his written explanation dated 11 October 1991, petitioner reasoned out that he should not be made accountable for the unremitted collections since it was private respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes and offerings since he was very sick to do the collecting at that time.

Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat, the president of the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to convene the Executive Committee for the purpose of settling the dispute between him and the private respondent, Pastor David Rodrigo. The dispute between Pastor Rodrigo and petitioner arose from an incident in which petitioner assisted his friend, Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for the repair of the latters motor vehicle which he failed to pay to Diamada. Due to the assistance of petitioner in collecting Pastor Rodrigos debt, the latter harbored ill-feelings against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a complaint against him with the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date abovementioned and asked the latter to convene the Executive Committee. Pastor Buhat denied the request of petitioner since some committee members were out of town and there was no quorum. Thereafter, the two exchanged heated arguments. Petitioner then left the office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, Pastor daw inisog na ina iya (Pastor you are talking tough). Irked by such remark, petitioner returned to the office of Pastor Buhat, and tried to overturn the latters table, though unsuccessfully, since it was heavy. Thereafter, petitioner banged the attache case of Pastor Buhat on the table, scattered the books in his office, and threw the phone. Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio Montao were around and they pacified both Pastor Buhat and petitioner. On 17 October 1991, petitioner received a letter inviting him and his wife to attend the Executive Committee meeting at the Negros Mission Conference Room on 21 October 1991, at nine in the morning. To be discussed in the meeting were the nonremittance of church collection and the events that transpired on 16 October 1991. A fact-finding committee was created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding committee conducted an investigation of petitioner.

Sensing that the result of the investigation might be one-sided, petitioner immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding committee, requesting that certain members of the fact-finding committee be excluded in the investigation and resolution of the case. Out of the six (6) members requested to inhibit themselves from the investigation and decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991, petitioner received a letter of dismissal citing misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against the person of employers duly authorized representative, as grounds for the termination of his services. Reacting against the adverse decision of the SDA, petitioner filed a complaint on 14 November 1991, before the Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for reinstatement with backwages and benefits, moral and exemplary damages and other labor law benefits. On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of petitioner, the dispositive portion of which reads thus: WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its officers, respondents herein, are hereby ordered to immediately reinstate complainant Pastor Dionisio Austria to his former position as Pastor of Brgy. Taculing, Progreso and Banago, Bacolod City, without loss of seniority and other rights and backwages in the amount of ONE HUNDRED FIFTEEN THOUSAND EIGHT HUNDRED THIRTY PESOS (P115,830.00) without deductions and qualificatioons.

Respondent CPUMCSDA is further ordered to pay complainant the following: A. B. C. D. 13th month pay Allowance Service Incentive Leave Pay Moral Damages E. F. Exemplary Damages P21,060.00 P 4,770.83 P 3,461.85 P50,000.00 P25,000.00 P22,012.27

WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and the decision of the Labor Arbiter dated February 15, 1993 is REINSTATED. = Panalo sa MR sa NLRC si Austria SO ORDERED. In view of the reversal of the original decision of the NLRC, the SDA filed a motion for reconsideration of the above resolution. Notable in the motion for reconsideration filed by private respondents is their invocation, for the first time on appeal, that the Labor Arbiter has no jurisdiction over the complaint filed by petitioner due to the constitutional provision on the separation of church and state since the case allegedly involved and ecclesiastical affair to which the State cannot interfere. The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the argument posed by private respondents and, accordingly, dismissed the complaint of petitioner. The dispositive portion of the NLRC resolution dated 23 January 1996, subject of the present petition, is as follows: WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby granted. Accordingly, this case is hereby DISMISSED for lack of jurisdiction. SO ORDERED. Hence, the recourse to this Court by petitioner. After the filing of the petition, the Court ordered the Office of the Solicitor General (the OSG) to file its comment on behalf of public respondent NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of comment setting forth its stand that it cannot sustain the resolution of the NLRC. In its manifestation, the OSG submits that the termination of petitioner of his employment

Attorneys Fee

SO ORDERED. The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor Relations Commission, Fourth Division, Cebu City. In a decision, dated 26 August 1994, the NLRC vacated the findings of the Labor Arbiter. The decretal portion of the NLRC decision states: WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED dismissing this case for want of merit. = Winner ang SDA SO ORDERED. Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the NLRC issued a Resolution reversing its original decision. The dispositive portion of the resolution reads:

may be questioned before the NLRC as the same is secular in nature, not ecclesiastical. After the submission of memoranda of all the parties, the case was submitted for decision. The issues to be resolved in this petition are: 1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by petitioner against the SDA; 2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and, as such, involves the separation of church and state; and 3) Whether or not such termination is valid. The first two issues shall be resolved jointly, since they are related. Private respondents contend that by virtue of the doctrine of separation of church and state, the Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since the matter at bar allegedly involves the discipline of a religious minister, it is to be considered a purely ecclesiastical affair to which the State has no right to interfere. The contention of private respondents deserves scant consideration. The principle of separation of church and state finds no application in this case. The rationale of the principle of the separation of church and state is summed up in the familiar saying, Strong fences make good neighbors. The idea advocated by this principle is to delineate the boundaries between the two institutions and thus avoid encroachments by one against the other because of a misunderstanding of the limits of their respective exclusive jurisdictions. The demarcation line calls on the entities to render therefore unto Ceasar the things that are Ceasars and unto God the

things that are Gods. While the State is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters. The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking cognizance of the same. An ecclesiastical affair is one that concerns doctrine, creed, or form or worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of membership. Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of this so-called ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of religious ministers, administration of sacraments and other activities with which attached religious significance. The case at bar does not even remotely concern any of the abovecited examples. While the matter at hand relates to the church and its religious minister it does not ipso facto give the case a religious significance. Simply stated, what is involved here is the relationship of the church as an employer and the minister as an employee. It is purely secular and has no relation whatsoever with the practice of faith, worship or doctrines of the church. In this case, petitioner was not excommunicated or expelled from the membership of the SDA but was terminated from employment. Indeed, the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act of expelling a member from the religious congregation. As pointed out by the OSG in its memorandum, the grounds invoked for petitioners dismissal, namely: misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties and commission of an offense

against the person of his employers duly authorize representative, are all based on Article 282 of the Labor Code which enumerates the just causes for termination of employment. By this alone, it is palpable that the reason for petitioners dismissal from the service is not religious in nature. Coupled with this is the act of the SDA in furnishing NLRC with a copy of petitioners letter of termination. As aptly stated by the OSG, this again is an eloquent admission by private respondents that NLRC has jurisdiction over the case. Aside from these, SDA admitted in a certification issued by its officer, Mr. Ibesate, that petitioner has been its employee for twenty-eight (28) years. SDA even registered petitioner with the Social Security System (SSS) as its employee. As a matter of fact, the workers records of petitioner have been submitted by private respondents as part of their exhibits. From all of these it is clear that when the SDA terminated the services of petitioner, it was merely exercising its management prerogative to fire an employee which it believes to be unfit for the job. ==== As such, the State, through the Labor Arbiter and the NLRC, has the right to take cognizance of the case and to determine whether the SDA, as employer, rightfully exercised its management prerogative to dismiss an employee. This is in consonance with the mandate of the Constitution to afford full protection to labor. Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-employment states that the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not. Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law, to wit:

Section 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated for profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of the Government and its political subdivisions including governmentowned or controlled corporations. With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its responsibilities as an employer under the Labor Code. Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the issue of lack of jurisdiction for the first time on appeal. It is already too late in the day for private respondents to question the jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully participated in the trials and hearings of the case from start to finish. The Court has already ruled that the active participation of a party against whom the action was brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on impugning the court or bodys jurisdiction. Thus, the active participation of private respondents in the proceedings before the Labor Arbiter and the NLRC mooted the question on jurisdiction. The jurisdictional question now settled, we shall now proceed to determine whether the dismissal of petitioner was valid. At the outset, we note that as a general rule, findings of fact of administrative bodies like the NLRC are binding upon this Court. A review of such findings is justified, however, in instances when the findings of the NLRC differ from those of the labor arbiter, as in this case. When the findings of NLRC do not agree with those of the Labor Arbiter, this Court must of necessity review the records to

determine which findings should be preferred as more comformable to the evidentiary facts. We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of proving that the termination was for a valid or authorized cause rests on the employer. Thus, private respondents must not merely rely on the weaknesses of petitioners evidence but must stand on the merits of their own defense. The issue being the legality of petitioners dismissal, the same must be measured against the requisites for a valid dismissal, namely: (a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard and to defend himself, and; (b) the dismissal must be for a valid cause as provided in Article 282 of the Labor Code. Without the concurrence of this twin requirements, the termination would, in the eyes of the law, be illegal. Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code further require the employer to furnish the employee with two (2) written notices, to wit: (a) a written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; and, (b) a written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular acts or omissions for which his dismissal is sought. The second notice on the other hand seeks to inform the employee of the employers decision to dismiss him. This decision, however, must come only after the employee is given a reasonable period from receipt of the first notice within

which to answer the charge and ample opportunity to be heard and defend himself with the assistance of a representative, if he so desires. This is in consonance with the express provision of the law on the protection to labor and the broader dictates of procedural due process. Non-compliance therewith is fatal because these requirements are conditions sine quo non before dismissal may be validly effected. Private respondent failed to substantially comply with the above requirements. With regard to the first notice, the letter, dated 17 October 1991, which notified petitioner and his wife to attend the meeting on 21 October 1991, cannot be construed as the written charge required by law. A perusal of the said letter reveals that it never categorically stated the particular acts or omissions on which petitioners impending termination was grounded. In fact, the letter never even mentioned that petitioner would be subject to investigation. The letter merely mentioned that petitioner and his wife were invited to a meeting wherein what would be discussed were the alleged unremitted church tithes and the events that transpired on 16 October 1991. Thus, petitioner was surprised to find out that the alleged meeting turned out to be an investigation. From the tenor of the letter, it cannot be presumed that petitioner was actually on the verge of dismissal. The alleged grounds for the dismissal of petitioner from the service were only revealed to him when the actual letter of dismissal was finally issued. For this reason, it cannot be said that petitioner was given enough opportunity to properly prepare for his defense. While admittedly, private respondents complied with the second requirement, the notice of termination, this does not cure the initial defect of lack of the proper written charge required by law. In the letter of termination, dated 29 October 1991, private respondents enumerated the following as grounds for the dismissal of petitioner, namely: 1. misappropriation of denominational funds,

2. willful breach of trust, 3. serious misconduct, 4. gross and habitual neglect of duties, and 5. commission of an offense against the person of employers duly authorized representative. Breach of trust and misappropriation of denominational funds refer to the alleged failure of petitioner to remit to the treasurer of the Negros Mission tithes, collections and offerings amounting to P15,078.10 which were collected by his wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other hand, serious misconduct and commission of an offense against the person of the employers duly authorized representative pertain to the 16 October 1991 incident wherein petitioner allegedly committed an act of violence in the office of Pastor Gideon Buhat. The final ground invoked by private respondents is gross and habitual neglect of duties allegedly committed by petitioner. We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege that they have lost their confidence in petitioner for his failure, despite demands, to remit the tithes and offerings amounting to P15,078.10, which were collected in his district. A careful study of the voluminous records of the case reveals that there is simply no basis for the alleged loss of confidence and breach of trust. Settled is the rule that under Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the employers arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. It should be genuine and not simulated. This ground has never been

intended to afford an occasion for abuse, because of its subjective nature. The records show that there were only six (6) instances when petitioner personally collected and received from the church treasurers the tithes, collections, and donations for the church. The stenographic notes on the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a witness for private respondents, show that Pastor Austria was able to remit all his collections to the treasurer of the Negros Mission. Though private respondents were able to establish that petitioner collected and received tithes and donations several times, they were not able to establish that petitioner failed to remit the same to the Negros Mission, and that he pocketed the amount and used it for his personal purpose. In fact, as admitted by their own witness, Naomi Geniebla, petitioner remitted the amounts which he collected to the Negros Mission for which corresponding receipts were issued to him. Thus, the allegations of private respondents that petitioner breached their trust have no leg to stand on. In a vain attempt to support their claim of breach of trust, private respondents try to pin on petitioner the alleged non-remittance of the tithes collected by his wife. This argument deserves little consideration. First of all, as proven by convincing and substantial evidence consisting of the testimonies of the witnesses for private respondents who are church treasurers, it was Mrs. Thelma Austria who actually collected the tithes and donations from them, and, who failed to remit the same to the treasurer of the Negros Mission. The testimony of these church treasurers were corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the absence of conspiracy and collusion, which private respondents failed to demonstrate, between petitioner and his wife, petitioner cannot be made accountable for the alleged infraction committed by his wife. After all, they still have separate and distinct personalities. For this reason, the Labor Arbiter found it difficult to see the basis for the alleged loss of confidence and breach of trust. The Court does not find any

cogent reason, therefore, to digress from the findings of the Labor Arbiter which is fully supported by the evidence on record. With respect to the grounds of serious misconduct and commission of an offense against the person of the employers duly authorized representative, we find the same unmeritorious and, as such, do not warrant petitioners dismissal from the service. Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. For misconduct to be considered serious it must be of such grave and aggravated character and not merely trivial or unimportant. Based on this standard, we believe that the act of petitioner in banging the attache case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat, although improper, cannot be considered as grave enough to be considered as serious misconduct. After all, as correctly observed by the Labor Arbiter, though petitioner committed damage to property, he did not physically assault Pastor Buhat or any other pastor present during the incident of 16 October 1991. In fact, the alleged offense committed upon the person of the employers representatives was never really established or proven by private respondents. Hence, there is no basis for the allegation that petitioners act constituted serious misconduct or that the same was an offense against the person of the employers duly authorized representative. As such, the cited actuation of petitioner does not justify the ultimate penalty of dismissal from employment. While the Constitution does not condone wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be applied to him in light of the many disadvantages that weigh heavily on him like an albatross on his neck. Where a penalty less punitive would suffice, whatever missteps may have been committed by the worker ought not be

visited with a consequence so severe such as dismissal from employment. For the foregoing reasons, we believe that the minor infraction committed by petitioner does not merit the ultimate penalty of dismissal. The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties, does not requires an exhaustive discussion. Suffice it to say that all private respondents had were allegations but not proof. Aside from merely citing the said ground, private respondents failed to prove culpability on the part of petitioner. In fact, the evidence on record shows otherwise. Petitioners rise from the ranks disclose that he was actually a hard-worker. Private respondents evidence, which consisted of petitioners Workers Reports, revealed how petitioner travelled to different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in return, he was rewarded with a dismissal from the service for a non-existent cause. In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service without just or lawful cause. Having been illegally dismissed, petitioner is entitled to reinstatement to his former position without loss of seniority right and the payment of full backwages without any deduction corresponding to the period from his illegal dismissal up to actual reinstatement. WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public respondent National Labor Relations Commission, rendered on 23 January 1996, is NULLIFIED and SET ASIDE. The Decision of the Labor Arbiter, dated 15 February 1993, is reinstated and hereby AFFIRMED. SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

THIRD DIVISION [G.R. No. 126773. April 14, 1999] RUBBERWORLD (PHILS.), INC., or JULIE YAP ONG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MARILYN F. ARELLANO, EMILY S. LEGASPI, MYRNA S. GALGANA, MERCEDITA R. SONGCO, WILFREDO V. SANTOS, JOSEPHINE S. RAMOS, REDENTOR G. HONA, LUZ B. HONA, ROLANDO B. CRUZ, GUILLERMA R. MUZONES, CARMELITA V. HALILI, SUSAN A. REYES, EMILY A. ROBILLOS, PLACIDO REYES, MANOLITO DELA CRUZ, VICTORINO C. FRANCISCO, ROGER B. MARIAS, VIOLETA ALEJO, RICARDO T. TORRES, EMMA DELA TORRE, PERLA N. MANZANERO, FRANCISCO D. SERDONCILLO, LUISITO P. HERNANDEZ, RAYMOND PEREA, EDITHA A. SERDONCILLO, FRANCISCO GENER, MARIO B. REYES, VALERIANO A. HERRERA, JORGE S. SEERES, ELENA S. IGNACIO, EMERITA S. CACHERO, NERIZA G. ENRIQUEZ, LOLITA M. FABULAR, NORMITA M. HERNANDEZ, DOMINADOR P. ENRIQUEZ, respondents. DECISION PANGANIBAN, J.:

Presidential Decree 902-A, as amended, provides that "upon the appointment of a management committee, rehabilitation receiver board or body pursuant to this Decree, all actions for claims against corporations, partnerships, or associations under management or receivership pending, before any court, tribunal, board or body shall be suspended accordingly." Such suspension is intended to give enough breathing space for the management committee or rehabilitation receiver to make the business viable again, without having to divert attention and resources to litigations in various fora. Among, the actions suspended are those for money claims before labor tribunals, like the National Labor Relation Commission (NLRC) and the Labor arbiters.
Statement of the Case

The foregoing Summarizes this Court's grant of the Petition for Certiorari under Rule 65 of the Rules of Court, assailing the April 26, 1996 Resolution promulgate by the NLRC which upheld the labor arbiter's refusal to suspend proceedings involving, monetary claims of the petitioner's employees. Petitioner likewise assails the June 20, 1996 NLRC Resolution which denied its Motion for Reconsideration. On November 20, 1996, this Court issued a temporary restraining order signed by then Chief Justice Andres R. Narvasa, "restraining the public respondents from further conducting proceedings in the aforesaid cases effective immediately xxx."
The Facts

The facts are undisputed. They are narrated by the Office of the Solicitor General as follows:

"Petitioner xxx is a domestic corporation which used to be in the business of manufacturing footwear, bags and garments. It filed with the Securities and Exchange Commission on November 24, 1994 a petition for suspension of payments praying that it be declared in a state of suspension of payments and that the SEC accordingly issue an order restraining its creditors from enforcing their claims against petitioner corporation. It further prayed for the creation of a management committee as well as for the approval of the proposed rehabilitation plan and memorandum of agreement between petitioner corporation and its creditors. SEC RULING: "In an order dated December 28, 1994, the SEC favorably ruled on the petition for suspension of payments thusly: 'Accordingly, with the creation of the Management Committee, all actions for claims against Rubberworld Philippines, Inc. pending before any court, tribunal, office, board, body Commission of Sheriff are hereby deemed SUSPENDED. 'Consequently, all pending incidents for preliminary injunctions, writ of attachments (sic), foreclosures' and the like are hereby rendered moot and academic.' "Private respondents, who claim to be employees of petitioner corporation, filed against petitioners [from] April to July 1995 their respective complaints for 1. illegal dismissal, 2. unfair labor practice, 3. damages and payment of separation pay, retirement benefits, 13th month pay and service incentive pay. "Petitioners moved to suspend the proceedings in the above labor cases on the strength of the SEC Order dated December

28, 1994. Likewise, petitioners cited the rulings of BF Homes vs. Court of Appeals (190 SCRA 262), Alemar's Sibal & Sons, Inc. vs. Elbinias (186 SCRA 94) and Bank of Philippine Islands vs. Court of Appeals (229 SCRA 223) to support their motion to suspend the proceedings in the labor cases. LABOR ARBITER: "In an Order dated September 25, 1995, the Labor Arbiter denied the aforesaid motion holding that the injunction contained in the SEC Order applied only to the enforcement of established rights and did not include the suspension of proceedings involving claims against petitioner which have yet to be ascertained. The Labor Arbiter further held that the order of the SEC suspending all actions for claims against petitioners does not cover the claims of private respondents in the labor cases because said claims and the concomitant liability of petitioners still had to be determined, thus carrying no dissipation of the assets of petitioners. NLRC: "Petitioners appealed the adverse order of the Labor Arbiter to public respondent which, in a Resolution dated April 26, 1996, dismissed the appeal for lack of merit and, instead, sustained the rulings of the Labor Arbiter. "The motion for reconsideration of petitioners fared no better and was denied by public respondent in a Resolution dated June 20, 1996." Hence, this petition.
The Issue

Petitioner raises only one issue: "Whether or not the Respondent NLRC acted without or in excess of Jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in affirming the order of

Labor Arbiter Voltaire A. Balitaan denying petitioners' motion to suspend proceedings despite the Order of the Securities and Exchange Commission under Sec. 6 (c) of P.D. 902-A directing the suspension of all actions against a company under the first stages of insolvency proceedings."
This Court's Ruling

suspension of all actions for claim against Rubberworld. Clearly, the applicable law is PD 902-A, as amended, the relevant provision of which read: "SECTION 5. In addition to the regulatory adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: xxx xxx xxx

The petition is meritorious.

Sole Issue: Suspension Proceedings

Jurisprudence teaches us: "xxx where the petition filed is one for declaration of a state of suspension of payments due to a recognition of the inability to pay one's debts and liabilities, and where the petitioning corporation either: (a) has sufficient property to cover all its debts but foresees the impossibility of meeting them when they fall due (solvent but illiquid) or (b) has no sufficient property (insolvent) but is under the management of a rehabilitation receiver or a management committee, the applicable law is P.D. 902-A pursuant to Sec. 5 par. (d) thereof. However, if the petitioning corporation has no sufficient assets to cover its liabilities and is not under a rehabilitation receiver or a management committee created under P.D. 902-A and does not seek merely to have the payments of its debts suspended, but seeks a declaration of insolvency xxx the applicable law is Act 1956 [The Insolvency Law] on voluntary insolvency, xxx." In the case at bar, Petitioner Rubberworld filed before the SEC a Petition for Declaration of Suspension of Payments, as well as a propose rehabilitation plan. On December 28, 1994, the SEC ordered the creation of a management committee and the

d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a rehabilitation receiver or management committee created pursuant to this Decree. SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx

c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing public and creditors: x x x Provided finally, That upon appointment of a management committee, the rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships, or associations under management or

receivership pending before any court, tribunal, board or body shall be suspended accordingly." It is plain from the foregoing provisions of law that "upon the appointment [by, the SEC] of a management committee or a rehabilitation receiver," all actions for claims against the corporation pending before any court, tribunal or board shall ipso jure be suspended. The justification for the automatic stay of all pending actions for claims "is to enable the management committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the 'rescue' of the debtor company. To allow such other actions to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation." Parenthetically, the rehabilitation of a financially distressed corporation benefits its employees, creditors, stockholders and, in a larger sense, the general public. And in considering whether to rehabilitate or not, the SEC gives preference to the interest of creditors, including employees. The reason that shareholders can recover their investments only upon liquidation of' the corporation, and only if there are assets remaining after all corporate creditors ire paid.
Labor Claims Included in Suspension Order

respondents will still present their claims before the management committee. We disagree. The law is clear: upon the creation of a management committee or the appointment of rehabilitation receiver, all claims for actions "shall be suspended accordingly." No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. Allowing labor cases to proceed clearly defeats the purpose of the automatic stay and severely encumbers the management committee's time and resources. The said committee would need to defend against these suits, to the detriment of its primary and urgent duty to work towards rehabilitating the corporation and making it viable again. To rule otherwise would open the floodgates to other similarly situated claimants and forestall if not defeat the rescue efforts. Besides, even if the NLRC awards the claims of private respondents, as it did, its ruling could not be enforced as long as the petitioner is under the management committee. In Chua v. National Labor Relation Commission, we ruled that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, since these claims "would spawn needless controversy, delays, and confusion." With more reason, allowing labor claims to continue in spite of a SEC suspension order in rehabilitation case would merely lead to such results. The solicitor general insists that since Article 217 of the Labor Code vested public respondent with jurisdiction to hear and decide these labor cases, the NLRC did not exceed its jurisdiction when it refused to suspend the proceedings therein. The Court is not persuaded. Article 217 of the Labor Code should be construed not in isolation but in harmony with PD 902-A, according to the basic rule in statutory construction that implied repeals are not favored. Indeed, it

The solicitor general, representing Public Respondent NLRC, argues that the rationale for an automatic stay will not be frustrated even if the NLRC proceeds with the disposition of these labor cases, because any favorable judgment obtained by the private respondents would only establish their rights as creditors. The solicitor general also contends that the assailed Resolutions of the NLRC will not result in an undue preference for the assets of Rubberworld, as the private

is axiomatic that each and every statute must be construed in a way that would avoid conflict with existing laws. True, the NLRC has the power to hear and decide labor disputes, but such authority is deemed suspended when PD 902-A is put into effect by the Securities and Exchange Commission.
Preference in Favor of Workers in Case of Bankruptcy or Liquidation

expired after three months, in the absence of an agreement between the company and the corporate creditors. Private respondents also accuse the SEC of abusing its power by "allowing said suspension order to remain pending for many years without resolving and approving any rehabilitation plan." They contend that "[t]his is fatal to the instant petition for it had been a party to the abuse by the SEC of its suspension order." This Court notes that PD 902-A itself does not provide for the duration of the automatic stay. Neither does the Order of the SEC. Hence, the suspensive effect has no time limit and remains in force as long as reasonably necessary to accomplish the purpose of the Order. On the other hand, the attack against the SEC's alleged "abuse of power" is misplaced. Under review in this Petition for Certiorari are Resolutions of the NLRC, not of the SEC. The scope of this review is thus limited to whether the NLRC gravely abused or exceeded its jurisdiction in refusing to heed the SEC Order of Suspension and in issuing its challenged Resolutions. In any event, the bare allegation of inaction is insufficient to condemn the Securities and Exchange Commission and the management committee where, it should be noted, all affected parties, including, the labor union in the company, are represented. WHEREFORE, the petition is hereby GRANTED. The assailed Resolutions of the NLRC dated April 26, 1996, and June 20, 1996, are REVERSED and SET ASIDE. No costs. SO ORDERED. Romero, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

The private respondents contend that automatic stay under PD 902-A is not applicable to the instant case; otherwise, the preference granted to workers by Article 110 of the Labor Code would be rendered ineffective. This contention is misleading. The preferential right of workers and employees under Article 110 of the Labor Code may be invoked only upon the institution of insolvency or judicial liquidation proceeding. Indeed, it is wellsettled that "a declaration of bankruptcy or a judicial liquidation must be present before preferences over various money claims may be enforced." But debtors resort to preference of credit -- giving preferred creditors the right to have their claims paid ahead of those of other claimants -- only when their assets are insufficient to pay their debts fully. The purpose of rehabilitation proceedings is precisely to enable the company to gain a new lease on life and thereby allow creditors to be paid their claims from its earnings. In insolvency proceedings, on the other hand, the company stops operating, and the claims of creditors are satisfied from the assets of the insolvent corporation. The present case involves the rehabilitation, not the liquidation, of petitioner-corporation. Hence, the preference of credit granted to workers or employees under Article 110 of the Labor Code is not applicable.
Duration of Automatic Stay Under PD 902-A

Finally, private respondents posit that under Section 6 of the Insolvency Law, the December 28, 1994 Order of the SEC suspending all actions for claims against Rubberworld should have

FIRST DIVISION [G.R. No. 146698. September 24, 2002] PHILIPPINE AIRLINES, petitioner, vs. SPOUSES SADIC AND AISHA KURANGKING and SPOUSES ABDUL SAMAD T. DIANALAN AND MORSHIDA L. DIANALAN, respondents. DECISION VITUG, J.: In April 1997, respondents, all Muslim Filipinos, returned to Manila from their pilgrimage to the Holy City of Mecca, Saudi Arabia, on board a Philippines Airlines (PAL) flight. Respondents claimed that they were unable to retrieve their checked-in luggages. On 05 January 1998, respondents filed a complaint with the Regional Trial Court (RTC) of Marawi City against PAL for breach of contract resulting in damages due to negligence in the custody of the missing luggages. On 02 March 1998, PAL filed its answer invoking, among its defenses, the limitations under the Warsaw Convention. On 19 June 1998, before the case could be heard on pre-trial, PAL, claiming to have suffered serious business losses due to the Asian economic crisis, followed by a massive strike by its employees, filed a petition for the approval of a rehabilitation plan and the appointment of a rehabilitation receiver before the Securities and Exchange Commission (SEC). On 23 June 1998, the SEC issued an order granting the prayer for an appointment of a rehabilitation receiver, and it constituted a three-man panel to oversee PALs rehabilitation. On 25 September 1998, the SEC created a management committee conformably with Section 6(d) of Presidential Decree (P.D.) 902, as amended, declaring the suspension of all actions for money claims against PAL pending before any court, tribunal, board or body. Thereupon, PAL

moved for the suspension of the proceedings before the Marawi City RTC. RTC: On 11 January 1999, the trial court issued an order denying the motion for suspension of the proceedings on the ground that the claim of respondents was only yet to be established. PALs motion for reconsideration was denied by the trial court. PAL went to the Court of Appeals via a petition for certiorari. On 16 April 1999, the appellate court dismissed the petition for the failure of PAL to serve a copy of the petition on respondents. PAL moved for a reconsideration. In its resolution, dated 08 October 1999, the appellate court denied the motion but added that a second motion for reconsideration before the trial court could still be feasible inasmuch as the assailed orders of the trial court were merely interlocutory in nature. Consonantly, PAL filed before the trial court a motion for leave to file a second motion for reconsideration. The trial court, however, denied leave of court to admit the second motion for reconsideration. Again, PAL filed a motion for reconsideration which sought reconsideration of the denial of the prayed leave to file a second motion for reconsideration. In an order, dated 28 December 2000, the trial court denied the motion. On the thesis that there was no other plain, speedy and adequate remedy available to it, PAL went to this Court via a petition for review on certiorari under Rule 45 of the Rules of Court, raising the question of "Whether or not the proceedings before the trial court should have been suspended after the court was informed that a rehabilitation receiver was appointed over the petitioner by the Securities and Exchange Commission under Section 6(c) of Presidential Decree No. 902-A.

In their comment to the petition, private respondents posited (a) that the instant petition under Rule 45 would not lie, the assailed orders of the court a quo being merely interlocutory; (b) that PAL was already operational and thus claims and actions against it should no longer be suspended; (c) that the SEC, not the RTC, should have the prerogative to determine the necessity of suspending the proceedings; and (d) that the only claims or actions that could be suspended under P.D. 902-A were those pending with the SEC. While a petition for review on certiorari under Rule 45 would ordinarily be inappropriate to assail an interlocutory order, in the interest, however, of arresting the perpetuation of an apparent error committed below that could only serve to unnecessarily burden the parties, the Court has resolved to ignore the technical flaw and, also, to treat the petition, there being no other plain, speedy and adequate remedy, as a special civil action for certiorari. Not much, after all, can be gained if the Court were to refrain from now making a pronouncement on an issue so basic as that submitted by the parties. On 15 December 2000, the Supreme Court, in A.M. No. 00-8-10-SC, adopted the Interim Rules of Procedure on Corporate Rehabilitation and directed to be transferred from the SEC to Regional Trial Courts, all petitions for rehabilitation filed by corporations, partnerships, and associations under P.D. 902-A in accordance with the amendatory provisions of Republic Act No. 8799. The rules require trial courts to issue, among other things, a stay order in the enforcement of all claims, whether for money or otherwise, and whether such enforcement is by court action or otherwise, against the corporation under rehabilitation, its guarantors and sureties not solidarily liable with it. Specifically, Section 6, Rule 4, of the Interim Rules of Procedure On Corporate Rehabilitation, provides: SEC. 6. Stay Order. - If the court finds the petition to be sufficient in form and substance, it shall, not later than five (5) days from the filing of the petition, issue an Order

(a) appointing a Rehabilitation Receiver and fixing his bond; (b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise, against the debtor, its guarantors and sureties not solidarily liable with the debtor; (c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (d) prohibiting the debtor from making any payment of its liabilities outstanding as at the date of filing of the petition; (e) prohibiting the debtors suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order; (f) directing the payment in full of all administrative expenses incurred after the issuance of the stay order; (g) fixing the initial hearing on the petition not earlier than forty-five (45) days but not later than sixty (60) days from the filing thereof; (h) directing the petitioner to publish the Order in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; (I) directing all creditors and all interested parties (including the Securities and Exchange Commission) to file and serve on the debtor a verified comment on or opposition to the petition, with supporting affidavits and documents, not later than ten (10) days before the date of the initial hearing and putting them on notice that their failure to do so will bar them from participating in the proceedings; and (j) directing the creditors and interested parties to secure from the court copies of the petition and its annexes within such time as to enable

themselves to file their comment on or opposition to the petition and to prepare for the initial hearing of the petition. The stay order is effective from the date of its issuance until the dismissal of the petition or the termination of the rehabilitation proceedings. The interim rules must likewise be read and applied along with Section 6(c) of P.D. 902-A, as so amended, directing that upon the appointment of a management committee, rehabilitation receiver, board or body pursuant to the decree, all actions for claims against the distressed corporation pending before any court, tribunal, board or body shall be suspended accordingly. Paragraph (c) of Section 6 of the law reads: Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx.

Corporation this Court has defined the word claim, contemplated in Section 6(c) of P.D. 902-A, as referring to debts or demands of a pecuniary nature and the assertion of a right to have money paid as well. Verily, the claim of private respondents against petitioner PAL is a money claim for the missing luggages, a financial demand, that the law requires to be suspended pending the rehabilitation proceedings. In B.F. Homes, Inc. vs. Court of Appeals, the Court has ratiocinated: x x x (T)he reason for suspending actions for claims against the corporation should not be difficult to discover. it is not really to enable the management committee or the rehabilitation receiver to substitute the defendant in any pending action against it before any court, tribunal, board or body. Obviously, the real justification is to enable the management committee or rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the rescue of the debtor company. To allow such other action to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation. WHEREFORE, the petition is GRANTED. The assailed orders of the Regional Trial Court, Branch 9, of Marawi City, are SET ASIDE. No costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, and Carpio, JJ., concur.

c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing public and creditors: x x x Provided, finally, That upon appointment of a management committee, the rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships, or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. A claim is said to be a right to payment, whether or not It is reduced to judgment, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, legal or equitable, and secured or unsecured. In Finasia Investments and Finance

FIRST DIVISION [G.R. No. 144767. March 21, 2002] DILY DANY NACPIL, petitioner, vs. INTERNATIONAL BROADCASTING CORPORATION, respondent. DECISION KAPUNAN, J.: This is a petition for review on certiorari under Rule 45, assailing the Decision of the Court of Appeals dated November 23, 1999 in CA-G.R. SP No. 52755 and the Resolution dated August 31, 2000 denying petitioner Dily Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the decisions promulgated by the Labor Arbiter and the National Labor Relations Commission (NLRC), which consistently ruled in favor of petitioner. Petitioner states that he was Assistant General Manager for Finance/Administration and Comptroller of private respondent Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997. According to petitioner, when Emiliano Templo was appointed to replace IBC President Tomas Gomez III sometime in March 1997, the former told the Board of Directors that as soon as he assumes the IBC presidency, he would terminate the services of petitioner. Apparently, Templo blamed petitioner, along with a certain Mr. Basilio and Mr. Gomez, for the prior mismanagement of IBC. Upon his assumption of the IBC presidency, Templo allegedly harassed, insulted, humiliated and pressured petitioner into resigning until the latter was forced to retire. However, Templo refused to pay him his retirement benefits, allegedly because he had not yet secured the clearances from the Presidential Commission on Good Government and the Commission on Audit. Furthermore,

Templo allegedly refused to recognize petitioners employment, claiming that petitioner was not the Assistant General Manager/Comptroller of IBC but merely usurped the powers of the Comptroller. Hence, in 1997, petitioner filed with the Labor Arbiter a complaint for illegal dismissal and non-payment of benefits. LABOR ARBITER: Instead of filing its position paper, IBC filed a motion to dismiss alleging that the Labor Arbiter had no jurisdiction over the case. IBC contended that petitioner was a corporate officer who was duly elected by the Board of Directors of IBC; hence, the case qualifies as an intra-corporate dispute falling within the jurisdiction of the Securities and Exchange Commission (SEC). However, the motion was denied by the Labor Arbiter in an Order dated April 22, 1998. On August 21, 1998, the Labor Arbiter rendered a Decision stating that petitioner had been illegally dismissed. The dispositive portion thereof reads: WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the complainant and against all the respondents, jointly and severally, ordering the latter: 1. To reinstate complainant to his former position without diminution of salary or loss of seniority rights, and with full backwages computed from the time of his illegal dismissal on May 16, 1997 up to the time of his actual reinstatement which is tentatively computed as of the date of this decision on August 21, 1998 in the amount of P1,231,750.00 (i.e., P75,000.00 a month x 15.16 months = P1,137,000.00 plus 13th month pay equivalent to 1/12 of P 1,137,000.00 = P94,750.00 or the total amount of P 1,231,750.00). Should complainant be not reinstated within ten (10) days from receipt of this decision, he shall be entitled to additional backwages until actually reinstated. 2. Likewise, to pay complainant the following:

a) b) c)

P 2 Million as and for moral damages; P500,000.00 as and for exemplary damages; plus and (sic) Ten (10%) percent thereof as and for attorneys fees.

I. THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS APPOINTED BY RESPONDENTS BOARD OF DIRECTORS AS COMPTROLLER. THIS FINDING IS CONTRARY TO THE COMMON, CONSISTENT POSITION AND ADMISSION OF BOTH PARTIES. FURTHER, RESPONDENTS BY-LAWS DOES NOT INCLUDE COMPTROLLER AS ONE OF ITS CORPORATE OFFICERS. II. THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN IT SUBSTITUTED THE NATIONAL LABOR RELATIONS COMMISSIONS DECISION TO APPLY THE APPEAL BOND REQUIREMENT STRICTLY IN THE INSTANT CASE. THE ONLY ISSUE FOR ITS DETERMINATION IS WHETHER NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN DOING THE SAME. The issue to be resolved is whether the Labor Arbiter had jurisdiction over the case for illegal dismissal and non-payment of benefits filed by petitioner. The Court finds that the Labor Arbiter had no jurisdiction over the same. Under Presidential Decree No. 902-A (the Revised Securities Act), the law in force when the complaint for illegal dismissal was instituted by petitioner in 1997, the following cases fall under the exclusive of the SEC: a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest

SO ORDERED. NLRC: IBC appealed to the NLRC, but the same was dismissed in a Resolution dated March 2, 1999, for its failure to file the required appeal bond in accordance with Article 223 of the Labor Code. NLRC-MR: IBC then filed a motion for reconsideration that was likewise denied in a Resolution dated April 26, 1999. CA: IBC then filed with the Court of Appeals a petition for certiorari under Rule 65, which petition was granted by the appellate court in its Decision dated November 23, 1999. The dispositive portion of said decision states: WHEREFORE, premises considered, the petition for Certiorari is GRANTED. The assailed decisions of the Labor Arbiter and the NLRC are REVERSED and SET ASIDE and the complaint is DISMISSED without prejudice. SO ORDERED. Petitioner then filed a motion for reconsideration, which was denied by the appellate court in a Resolution dated August 31, 2000. Hence, this petition. Petitioner Nacpil submits that:

of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission; b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity; c) Controversies in the election or appointment of directors, trustees, officers, or managers of such corporations, partnerships or associations; d) Petitions of corporations, partnerships, or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses property to cover all of its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the Management Committee created pursuant to this decree. (Emphasis supplied.) The Court has consistently held that there are two elements to be considered in determining whether the SEC has jurisdiction over the controversy, to wit: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy. Petitioner argues that he is not a corporate officer of the IBC but an employee thereof since he had not been elected nor appointed as Comptroller and Assistant Manager by the IBCs Board of Directors. He points out that he had actually been appointed as such on January 11, 1995 by the IBCs General Manager, Ceferino Basilio. In support of his argument, petitioner underscores the fact

that the IBCs By-Laws does not even include the position of comptroller in its roster of corporate officers. He therefore contends that his dismissal is a controversy falling within the jurisdiction of the labor courts. Petitioners argument is untenable. Even assuming that he was in fact appointed by the General Manager, such appointment was subsequently approved by the Board of Directors of the IBC. That the position of Comptroller is not expressly mentioned among the officers of the IBC in the By-Laws is of no moment, because the IBCs Board of Directors is empowered under Section 25 of the Corporation Code and under the corporations By-Laws to appoint such other officers as it may deem necessary. The By-Laws of the IBC categorically provides: XII. OFFICERS The officers of the corporation shall consist of a President, a VicePresident, a Secretary-Treasurer, a General Manager, and such other officers as the Board of Directors may from time to time does fit to provide for. Said officers shall be elected by majority vote of the Board of Directors and shall have such powers and duties as shall hereinafter provide (Emphasis supplied). The Court has held that in most cases the by-laws may and usually do provide for such other officers, and that where a corporate office is not specifically indicated in the roster of corporate offices in the by-laws of a corporation, the board of directors may also be empowered under the by-laws to create additional officers as may be necessary. An office has been defined as a creation of the charter of a corporation, while an officer as a person elected by the directors or stockholders. On the other hand, an employee occupies no office and is generally employed not by action of the directors and stockholders but by the managing officer of the

corporation who also determines the compensation to be paid to such employee. As petitioners appointment as comptroller required the approval and formal action of the IBCs Board of Directors to become valid, it is clear therefore holds that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable by the SEC under Section 5(c) of P.D. 902-A which includes controversies involving both election and appointment of corporate directors, trustees, officers, and managers. Had petitioner been an ordinary employee, such board action would not have been required. Thus, the Court of Appeals correctly held that: Since complainants appointment was approved unanimously by the Board of Directors of the corporation, he is therefore considered a corporate officer and his claim of illegal dismissal is a controversy that falls under the jurisdiction of the SEC as contemplated by Section 5 of P.D. 902-A. The rule is that dismissal or non-appointment of a corporate officer is clearly an intra-corporate matter and jurisdiction over the case properly belongs to the SEC, not to the NLRC. As to petitioners argument that the nature of his functions is recommendatory thereby making him a mere managerial officer, the Court has previously held that the relationship of a person to a corporation, whether as officer or agent or employee is not determined by the nature of the services performed, but instead by the incidents of the relationship as they actually exist. It is likewise of no consequence that petitioner's complaint for illegal dismissal includes money claims, for such claims are actually part of the perquisites of his position in, and therefore linked with his relations with, the corporation. The inclusion of such money claims does not convert the issue into a simple labor problem. Clearly, the

issues raised by petitioner against the IBC are matters that come within the area of corporate affairs and management, and constitute a corporate controversy in contemplation of the Corporation Code. Petitioner further argues that the IBC failed to perfect its appeal from the Labor Arbiters Decision for its non-payment of the appeal bond as required under Article 223 of the Labor Code, since compliance with the requirement of posting of a cash or surety bond in an amount equivalent to the monetary award in the judgment appealed from has been held to be both mandatory and jurisdictional. Hence, the Decision of the Labor Arbiter had long become final and executory and thus, the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction in giving due course to the IBCs petition for certiorari, and in deciding the case on the merits. The IBCs failure to post an appeal bond within the period mandated under Article 223 of the Labor Code has been rendered immaterial by the fact that the Labor Arbiter did not have jurisdiction over the case since as stated earlier, the same is in the nature of an intra-corporate controversy. The Court has consistently held that where there is a finding that any decision was rendered without jurisdiction, the action shall be dismissed. Such defense can be interposed at any time, during appeal or even after final judgment. It is a well-settled rule that jurisdiction is conferred only by the Constitution or by law. It cannot be fixed by the will of the parties; it cannot be acquired through, enlarged or diminished by, any act or omission of the parties. Considering the foregoing, the Court holds that no error was committed by the Court of Appeals in dismissing the case filed before the Labor Arbiter, without prejudice to the filing of an appropriate action in the proper court. It must be noted that under Section 5.2 of the Securities Regulation Code (Republic Act No. 8799) which was signed into law by then

President Joseph Ejercito Estrada on July 19, 2000, the SECs jurisdiction over all cases enumerated in Section 5 of P.D. 902-A has been transferred to the Regional Trial Courts. WHEREFORE, the petition is hereby DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 52755 is AFFIRMED. SO ORDERED.

Private respondent Jaime O. dela Pea was employed as a veterinary aide by petitioner in December 1975. He was among several employees terminated in July 1989. On July 8, 1989, he was re-hired by petitioner and given the additional job of feedmill operator. He was instructed to train selected workers to operate the feedmill. On March 13, 1993, Pea was allegedly caught urinating and defecating on company premises not intended for the purpose. The farm manager of petitioner issued a formal notice directing him to explain within 24 hours why disciplinary action should not be taken against him for violating company rules and regulations. Pea refused, however, to receive the formal notice. He never bothered to explain, either verbally or in writing, according to petitioner. Thus, on March 20, 1993, a notice of termination with payment of his monetary benefits was sent to him. He duly acknowledged receipt of his separation pay of P13,918.67. From the start of his employment on July 8, 1989, until his termination on March 20, 1993, Pea had worked for seven days a week, including holidays, without overtime, holiday, rest day pay and service incentive leave. At the time of his dismissal from employment, he was receiving P180 pesos daily wage, or an average monthly salary of P5,402. Co-respondent Marcial I. Abion was a carpenter/mason and a maintenance man whose employment by petitioner commenced on October 8, 1990. Allegedly, he caused the clogging of the fishpond drainage resulting in damages worth several hundred thousand pesos when he improperly disposed of the cut grass and other waste materials into the ponds drainage system. Petitioner sent a written notice to Abion, requiring him to explain what happened, otherwise, disciplinary action would be taken against him. He refused to receive the notice and give an explanation, according to petitioner. Consequently, the company terminated his

SECOND DIVISION [G.R. No. 142244. November 18, 2002] ATLAS FARMS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, JAIME O. DELA PEA and MARCIAL I. ABION, respondents. DECISION QUISUMBING, J.: Petitioner seeks the reversal of the decision dated January 10, 2000 of the Court of Appeals in CA-G.R. SP No. 52780, dismissing its petition for certiorari against the NLRC, as well as the resolution dated February 24, 2000, denying its motion for reconsideration. The antecedent facts of the case, as found by the Court of Appeals, are as follows:

services on October 27, 1992. He acknowledged receipt of a written notice of dismissal, with his separation pay. Like Pea, Abion worked seven days a week, including holidays, without holiday pay, rest day pay, service incentive leave pay and night shift differential pay. When terminated on October 27, 1992, Abion was receiving a monthly salary of P4,500. Pea and Abion filed separate complaints for illegal dismissal that were later consolidated. Both claimed that their termination from service was due to petitioners suspicion that they were the leaders in a plan to form a union to compete and replace the existing management-dominated union. On November 9, 1993, the labor arbiter dismissed their complaints on the ground that the grievance machinery in the collective bargaining agreement (CBA) had not yet been exhausted. Private respondents availed of the grievance process, but later on refiled the case before the NLRC in Region IV. They alleged lack of sympathy on petitioners part to engage in conciliation proceedings. LABOR ARBITER Their cases were consolidated in the NLRC. At the initial mandatory conference, petitioner filed a motion to dismiss, on the ground of lack of jurisdiction, alleging private respondents themselves admitted that they were members of the employees union with which petitioner had an existing CBA. This being the case, according to petitioner, jurisdiction over the case belonged to the grievance machinery and thereafter the voluntary arbitrator, as provided in the CBA. In a decision dated January 30, 1996, the labor arbiter dismissed the complaint for lack of merit, finding that the case was one of illegal dismissal and did not involve the interpretation or implementation of any CBA provision. He stated that Article 217 (c) of the Labor Code was inapplicable to the case. Further,

the labor arbiter found that although both complainants did not substantiate their claims of illegal dismissal, there was proof that private respondents voluntarily accepted their separation pay and petitioners financial assistance. NLRC: Thus, private respondents brought the case to the NLRC, which reversed the labor arbiters decision. CA: Dissatisfied with the NLRC ruling, petitioner went to the Court of Appeals by way of a petition for review on certiorari under Rule 65, seeking reinstatement of the labor arbiters decision. The appellate court denied the petition and affirmed the NLRC resolution with some modifications, thus: WHEREFORE, the petition is DENIED. The resolution in NLRC CA No. 010520-96 is AFFIRMED with the following modifications: 1) The private respondents can not be reinstated, due to their acceptance of the separation pay offered by the petitioner; 2) The private respondents are entitled to their full back wages; and, 3) The amount of the separation pay received by private respondents from petitioner shall not be deducted from their full back wages. Costs against petitioner. SO ORDERED. Petitioner forthwith filed its motion for reconsideration, which was denied in a resolution dated February 24, 2000, which reads: Acting on the Motion for Reconsideration filed by petitioner[s] which drew an opposition from private respondents, the Court resolved to DENY the aforesaid motion for reconsideration, as the

issues raised therein have been passed upon by the Court in its questioned decision and no substantial arguments were presented to warrant its reversal, let alone modification. SO ORDERED. In this petition now before us, petitioner alleges that the appellate court erred in: I. DENYING THE PETITION FOR CERTIORARI AND IN EFFECT AFFIRMING THE RULINGS OF THE PUBLIC RESPONDENT NLRC THAT THE PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED; II. RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY AND FULL BACKWAGES; III. RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT. Petitioner contends that the dismissal of private respondents was for a just and valid cause, pursuant to the provisions of the companys rules and regulations. It also alleges lack of jurisdiction on the part of the labor arbiter, claiming that the cases should have been resolved through the grievance machinery, and eventually referred to voluntary arbitration, as prescribed in the CBA. For their part, private respondents contend that they were illegally dismissed from employment because management discovered that they intended to form another union, and because they were vocal in asserting their rights. In any case, according to private respondents, the petition involves factual issues that cannot be properly raised in a petition for review on certiorari under Rule 45 of the Revised Rules of Court.

In fine, there are three issues to be resolved: 1) whether private respondents were legally and validly dismissed; 2) whether the labor arbiter and the NLRC had jurisdiction to decide complaints for illegal dismissal; and 3) whether petitioner is liable for costs of the suit. The first issue primarily involves questions of fact, which can serve as basis for the conclusion that private respondents were legally and validly dismissed. The burden of proving that the dismissal of private respondents was legal and valid falls upon petitioner. The NLRC found that petitioner failed to substantiate its claim that both private respondents committed certain acts that violated company rules and regulations, hence we find no factual basis to say that private respondents dismissal was in order. We see no compelling reason to deviate from the NLRC ruling that their dismissal was illegal, absent a showing that it reached its conclusion arbitrarily. Moreover, factual findings of agencies exercising quasi-judicial functions are accorded not only respect but even finality, aside from the consideration here that this Court is not a trier of facts. Anent the second issue, Article 217 of the Labor Code provides that labor arbiters have original and exclusive jurisdiction over termination disputes. A possible exception is provided in Article 261 of the Labor Code, which provides thatThe 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 or panel of Voluntary Arbitrators and shall immediately dispose and refer the same to the grievance Machinery or Arbitration provided in the Collective Bargaining Agreement. But as held in Vivero vs. CA, petitioner cannot arrogate into the powers of Voluntary Arbitrators the original and exclusive jurisdiction of Labor Arbiters over unfair labor practices, termination disputes, and claims for damages, in the absence of an express agreement between the parties in order for Article 262 of the Labor Code [Jurisdiction over other labor disputes] to apply in the case at bar. Moreover, per Justice Bellosillo: It may be observed that under Policy Instruction No. 56 of the Secretary of Labor, dated 6 April 1993, Clarifying the Jurisdiction Between Voluntary Arbitrators and Labor Arbiters Over Termination Cases and Providing Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the NCMB, termination cases arising in or resulting from the interpretation and implementation of collective bargaining agreements and interpretation and enforcement of company personnel policies which were initially processed at the various steps of the plant-level Grievance Procedures under the parties collective bargaining agreements fall within the original and

exclusive jurisdiction of the voluntary arbitrator pursuant to Art. 217 (c) and Art. 261 of the Labor Code; and, if filed before the Labor Arbiter, these cases shall be dismissed by the Labor Arbiter for lack of jurisdiction and referred to the concerned NCMB Regional Branch for appropriate action towards an expeditious selection by the parties of a Voluntary Arbitrator or Panel of Arbitrators based on the procedures agreed upon in the CBA. As earlier stated, the instant case is a termination dispute falling under the original and exclusive jurisdiction of the Labor Arbiter, and does not specifically involve the application, implementation or enforcement of company personnel policies contemplated in Policy Instruction No. 56. Consequently, Policy Instruction No. 56 does not apply in the case at bar. x x x Records show, however, that private respondents sought without success to avail of the grievance procedure in their CBA. On this point, petitioner maintains that by so doing, private respondents recognized that their cases still fell under the grievance machinery. According to petitioner, without having exhausted said machinery, the private respondents filed their action before the NLRC, in a clear act of forum-shopping. However, it is worth pointing out that private respondents went to the NLRC only after the labor arbiter dismissed their original complaint for illegal dismissal. Under these circumstances private respondents had to find another avenue for redress. We agree with the NLRC that it was petitioner who failed to show proof that it took steps to convene the grievance machinery after the labor arbiter first dismissed the complaints for illegal dismissal and directed the parties to avail of the grievance procedure under Article VII of the existing CBA. They could not now be faulted for attempting to find an impartial forum, after petitioner failed to listen to them and after the intercession of the labor arbiter proved futile. The NLRC had aptly concluded in part that private respondents had already exhausted the remedies under the grievance procedure. It erred only in finding that their cause of action was ripe for arbitration.

In the case of Maneja vs. NLRC, we held that the dismissal case does not fall within the phrase grievances arising from the interpretation or implementation of the collective bargaining agreement and those arising from the interpretation or enforcement of company personnel policies. In Maneja, the hotel employee was dismissed without hearing. We ruled that her dismissal was unjustified, and her right to due process was violated, absent the twin requirements of notice and hearing. We also held that the labor arbiter had original and exclusive jurisdiction over the termination case, and that it was error to give the voluntary arbitrator jurisdiction over the illegal dismissal case. In Vivero vs. CA, private respondents attempted to justify the jurisdiction of the voluntary arbitrator over a termination dispute alleging that the issue involved the interpretation and implementation of the grievance procedure in the CBA. There, we held that since what was challenged was the legality of the employees dismissal for lack of cause and lack of due process, the case was primarily a termination dispute. The issue of whether there was proper interpretation and implementation of the CBA provisions came into play only because the grievance procedure in the CBA was not observed, after he sought his unions assistance. Since the real issue then was whether there was a valid termination, there was no reason to invoke the need to interpret nor question an implementation of any CBA provision. One significant fact in the present petition also needs stressing. Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name or designate their respective representatives to the grievance machinery and if the grievance is unsettled in that level, it shall automatically be referred to the voluntary arbitrators designated in advance by the parties to a CBA. Consequently only disputes involving the union and the company shall be referred to the grievance machinery or voluntary arbitrators. In these termination cases of private respondents, the union had no participation, it having failed to object to the dismissal of the employees concerned by the

petitioner. It is obvious that arbitration without the unions active participation on behalf of the dismissed employees would be pointless, or even prejudicial to their cause. Coming to the merits of the petition, the NLRC found that petitioner did not comply with the requirements of a valid dismissal. For a dismissal to be valid, the employer must show that: (1) the employee was accorded due process, and (2) the dismissal must be for any of the valid causes provided for by law. No evidence was shown that private respondents refused, as alleged, to receive the notices requiring them to show cause why no disciplinary action should be taken against them. Without proof of notice, private respondents who were subsequently dismissed without hearing were also deprived of a chance to air their side at the level of the grievance machinery. Given the fact of dismissal, it can be said that the cases were effectively removed from the jurisdiction of the voluntary arbitrator, thus placing them within the jurisdiction of the labor arbiter. Where the dispute is just in the interpretation, implementation or enforcement stage, it may be referred to the grievance machinery set up in the CBA, or brought to voluntary arbitration. But, where there was already actual termination, with alleged violation of the employees rights, it is already cognizable by the labor arbiter. In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction over the cases involving private respondents dismissal, and no error was committed by the appellate court in upholding their assumption of jurisdiction. However, we find that a modification of the monetary awards is in order. As a consequence of their illegal dismissal, private respondents are entitled to reinstatement to their former positions. But since reinstatement is no longer feasible because petitioner had already closed its shop, separation pay in lieu of reinstatement shall be awarded. A terminated employees receipt

of his separation pay and other monetary benefits does not preclude reinstatement or full benefits under the law, should reinstatement be no longer possible. As held in Cario vs. ACCFA: Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of the money. Because out of job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed it. They are deemed not to have waived their rights. Renuntiato non praesumitur. Conformably, private respondents are entitled to separation pay equivalent to one months salary for every year of service, in lieu of reinstatement. As regards the award of damages, in order not to further delay the disposition of this case, we find it necessary to expressly set forth the extent of the backwages as awarded by the appellate court. Pursuant to R.A. 6715, as amended, private respondents shall be entitled to full backwages computed from the time of their illegal dismissal up to the date of promulgation of this decision without qualification, considering that reinstatement is no longer practicable under the circumstances. Having found private respondents dismissal to be illegal, and the labor arbiter and the NLRC duly vested with jurisdiction to hear and decide their cases, we agree with the appellate court that petitioner should pay the costs of suit. WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R. SP No. 52780 is AFFIRMED with the MODIFICATION that petitioner is ordered to pay private respondents (a) separation pay, in lieu of their reinstatement, equivalent to one months salary for every year of service, (b) full backwages from the date of their dismissal up to the

date of the promulgation of this decision, together with (c) the costs of suit. SO ORDERED.