You are on page 1of 218

WMSU LLB 2A 2015

Atty. Plagata
Labor Relations

MIDTERM LABOR RELATIONS CASES

TABLE OF CONTENTS

Atlas Farms vs NLRC 392 SCRA 128 ............................................................................................................... 2


Vivero vs CA 344 SCRA 268 ......................................................................................................................... 12
Davao City Water District vs Civil Service Commission 201 SCRA 593 ....................................................... 24
Boy Scouts of the Phil. vs NLRC 196 SCRA 176 ........................................................................................... 38
Zamoras vs Su 184 SCRA 248 ...................................................................................................................... 48
Fortune Cement vs NLRC ............................................................................................................................ 52
SEAFDEC vs NLRC 206 SCRA 283 ................................................................................................................. 56
Pepsi Cola vs Gal-Lang 201 SCRA 695 ......................................................................................................... 62
Tolosa vs NLRC 401 SCRA 291 ..................................................................................................................... 68
Austria vs NLRC 310 SCRA 293 .................................................................................................................... 79
PAL vs NLRC 287 SCRA 672 ......................................................................................................................... 86
Pioneer Texturizing vs NLRC 280 SCRA 806 ................................................................................................ 95
Garcia vs PAL (EN BANC) 576 SCRA 479 .................................................................................................... 109
Aris (Phil.) Inc. vs NLRC 200 SCRA 246 ...................................................................................................... 132
St. Martin Funeral Homes vs NLRC 295 SCRA 494 .................................................................................... 142
EMCO Plywood vs Abelgas 427 SCRA 496 ................................................................................................ 153
Bantolino vs Coca-Cola Bottlers 403 SCRA 699......................................................................................... 168
PIDI vs NLRC 210 SCRA 339 ....................................................................................................................... 174
NAFTU vs MALDECOU-ULGWP 192 SCRA 598 .......................................................................................... 184
Cooperative Rural Bank of Davao City vs Calleja 165 SCRA 725 ............................................................... 188
CENECO vs Sec. of Labor 201 SCRA 584 .................................................................................................... 195
MERALCO vs Sec. of Labor 197 SCRA 275 ................................................................................................. 201
Colgate-Palmolive vs Ople ........................................................................................................................ 213

1
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

ATLAS FARMS VS NLRC 392 SCRA 128

Republic of the Philippines


SUPREME COURT
Manila

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 decision1 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
resolution2 dated February 24, 2000, denying its motion for reconsideration.

The antecedent facts of the case, as found by the Court of Appeals,3 are as follows:

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, 1993,4 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 ofP5,402.

2
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Co-respondent Marcial I. Abion5 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
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.

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 6 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.

Thus, private respondents brought the case to the NLRC, which reversed the labor arbiters
decision. 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:

3
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

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.7

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.8

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.9

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

4
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

involves factual issues that cannot be properly raised in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court.10

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,11 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.12Moreover, 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. 13

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 that-

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 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,14 "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."

5
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

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 and 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. 15 x
xx

Records show, however, that private respondents sought without success to avail of the
grievance procedure in their CBA.16 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.17 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.18 It erred only in finding
that their cause of action was ripe for arbitration.

In the case of Maneja vs. NLRC,19 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

6
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

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,20 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 21 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.22 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.23

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

7
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

positions. But since reinstatement is no longer feasible because petitioner had already closed
its shop, separation pay in lieu of reinstatement shall be awarded.24 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. 25 As held in Cario vs.
ACCFA:26

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.27 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. 28

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.

Bellosillo, (Chairman), Mendoza, and Callejo, Sr., JJ., concur.


Austria-Martinez, J., on leave.

Footnotes

8
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
1
Rollo, pp. 32-45.
2
Id. at 47.
3
Id. at 33-35.
4
Erroneously stated as March 13, 1995 in NLRC Resolution and CA Decision.
5
Referred also as Marcial L. Abion in NLRC Resolution and CA Decision.
6
ART. 217. Jurisdiction of Labor Arbiters and the Commission.

xxx

(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
be provided in said agreements.
7
Rollo, pp. 44-45.
8
Id. at 47.
9
Id. at 13.
10
Id. at 9-10.
11
CA Rollo, pp. 101-103.
12
See Sanyo Travel Corporation vs. NLRC, 280 SCRA 129, 139 (1997).
13
Bataan Shipyard and Engineering Corporation vs. NLRC, 269 SCRA 199, 209-
210 (1997); Aurora Land Projects Corporation vs. NLRC, 266 SCRA 48, 58-59
(1997).
14
344 SCRA 268, 281 (2000). Stress supplied.
15
Id. at 282.
16
CA Rollo, pp. 61-62.
17
Id. at 14.
18
Id at 23.

9
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
19
290 SCRA 603, 616 (1998).
20
344 SCRA 268 (2000).
21
ART. 260. Grievance Machinery and Voluntary Arbitration.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. See also Maneja vs. NLRC,
supra.

All grievances submitted to the grievance machinery which are not settled within
seven (7) calendar days from the date of its submission shall automatically be
referred to voluntary arbitration prescribed in the Collective Bargaining
Agreement.

For this purpose, parties to a Collective Bargaining Agreement shall name and
designate in advance a Voluntary Arbitrator or panel of Voluntary Arbitrators, or
include in the agreement a procedure for the selection of such Voluntary
Arbitrator or panel of Voluntary Arbitrators, preferably from the listing of
qualified Voluntary Arbitrators duly accredited by the Board. In case the parties
fail to select a Voluntary Arbitrator or panel of Voluntary Arbitrators, the Board
shall designate the Voluntary Arbitrators, as may be necessary, pursuant to the
selection procedure agreed upon in the Collective Bargaining Agreement, which
shall act with the same force and effect as if the Arbitrator or panel of
Arbitrators has been selected by the parties as prescribed.
22
Magcalas vs. NLRC, 269 SCRA 453, 470 (1997); Pepsi-Cola Distributors of the
Philippines, Inc. vs. NLRC, 272 SCRA 267, 274-275 (1997).
23
Maneja vs. NLRC, 290 SCRA 603, 616 (1998), citing Sanyo Philippines Workers Union-
PSSLU vs. Caizares, 211 SCRA 361, 368 (1992).
24
Aurora Land Projects Corp. vs. NLRC, 266 SCRA 48, 66 (1997); De la Cruz vs. NLRC, 268
SCRA 458, 471 (1997); Hinatuan Mining Corporation vs. NLRC, 268 SCRA 622, 626
(1997).
25
See Lopez Sugar Corporation vs. Federation of Free Workers, 189 SCRA 179, 192
(1990), citing AFP Mutual Benefit Association, Inc. vs. AFP-MBAI-EU, 97 SCRA 715 (1980).
26
18 SCRA 183, 190 (1966).

10
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
27
Iriga Telephone Co., Inc. vs. NLRC, 286 SCRA 600, 609 (1998); Kathy-O Enterprises vs.
NLRC, 286 SCRA 729, 740 (1998).
28
Mabeza vs. NLRC, 271 SCRA 670, 687 (1997), citing Bustamante vs. NLRC, 265 SCRA 61
(1996).

11
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

VIVERO VS CA 344 SCRA 268

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 138938 October 24, 2000

CELESTINO VIVIERO, petitioner,


vs.
COURT OF APPEALS, HAMMONIA MARINE SERVICES, and HANSEATIC SHIPPING CO.,
LTD. respondents.

DECISION

BELLOSILLO, J.:

CELESTINO VIVERO, in this petition for review, seeks the reversal of the Decision of the Court of
Appeals of 26 May 1999 setting aside the Decision of the National Labor Relations Commission
of 28 May 1998 as well as its Resolution of 23 July 1998 denying his motion for its
reconsideration, and reinstating the decision of the Labor Arbiter of 21 January 1997.

Petitioner Vivero, a licensed seaman, is a member of the Associated Marine Officers and
Seamen's Union of the Philippines (AMOSUP). The Collective Bargaining Agreement entered
into by AMOSUP and private respondents provides, among others -

ARTICLE XII

GRIEVANCE PROCEDURE

xxxx

Sec. 3. A dispute or grievance arising in connection with the terms and provisions of this
Agreement shall be adjusted in accordance with the following procedure:

1. Any seaman who feels that he has been unjustly treated or even subjected to an unfair
consideration shall endeavor to have said grievance adjusted by the designated representative
of the unlicensed department abroad the vessel in the following manner:

A. Presentation of the complaint to his immediate superior.

12
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

B. Appeal to the head of the department in which the seaman involved shall be
employed.

C. Appeal directly to the Master.

Sec. 4. If the grievance cannnot be resolved under the provision of Section 3, the decision of the
Master shall govern at sea x x x x in foreign ports and until the vessel arrives at a port where the
Master shall refer such dispute to either the COMPANY or the UNION in order to resolve such
dispute. It is understood, however, if the dispute could not be resolved then both parties shall
avail of the grievance procedure.

Sec. 5. In furtherance of the foregoing principle, there is hereby created a GRIEVANCE


COMMITTEE to be composed of two COMPANY REPRESENTATIVES to be designated by the
COMPANY and two LABOR REPRESENTATIVES to be designated by the UNION.

Sec. 6. Any grievance, dispute or misunderstanding concerning any ruling, practice, wages or
working conditions in the COMPANY, or any breach of the Employment Contract, or any dispute
arising from the meaning or the application of the provision of this Agreement or a claim of
violation thereof or any complaint that any such crewmembers may have against the
COMPANY, as well as complaint which the COMPANY may have against such crewmembers
shall be brought to the attention of the GRIEVANCE COMMITTEE before either party takes any
action, legal or otherwise.

Sec. 7. The COMMITTEE shall resolve any dispute within seven (7) days from and after the same
is submitted to it for resolution and if the same cannot be settled by the COMMITTEE or if the
COMMITTEE fails to act on the dispute within the 7-day period herein provided, the same shall
be referred to a VOLUNTARY ARBITRATION COMMITTEE.

An "impartial arbitrator" will be appointed by mutual choice and consent of the UNION
and the COMPANY who shall hear and decide the dispute or issue presented to him and
his decision shall be final and unappealable x x x x1

As found by the Labor Arbiter -

Complainant was hired by respondent as Chief Officer of the vessel "M.V. Sunny Prince"
on 10 June 1994 under the terms and conditions, to wit:

Duration of Contract - - - - 10 months

Basic Monthly Salary - - - - US $1,100.00

Hours of Work - - - - 44 hrs./week

Overtime - - - - 495 lump O.T.

13
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Vacation leave with pay - - - - US $220.00/mo.

On grounds of very poor performance and conduct, refusal to perform his job, refusal to report
to the Captain or the vessels Engineers or cooperate with other ship officers about the
problem in cleaning the cargo holds or of the shipping pump and his dismal relations with the
Captain of the vessel, complainant was repatriated on 15 July 1994.

On 01 August 1994, complainant filed a complaint for illegal dismissal at Associated Marine
Officers and Seamans Union of the Philippines (AMOSUP) of which complainant was a
member. Pursuant to Article XII of the Collective Bargaining Agreement, grievance proceedings
were conducted; however, parties failed to reach and settle the dispute amicably, thus, on 28
November 1994, complainant filed [a] complaint with the Philippine Overseas Employment
Administration (POEA).2

The law in force at the time petitioner filed his Complaint with the POEA was EO No. 247.3

While the case was pending before the POEA, private respondents filed a Motion to Dismiss on
the ground that the POEA had no jurisdiction over the case considering petitioner Vivero's
failure to refer it to a Voluntary Arbitration Committee in accordance with the CBA between the
parties. Upon the enactment of RA 8042, theMigrant Workers and Overseas Filipinos Act of
1995, the case was transferred to the Adjudication Branch of the National Labor Relations
Commission.

On 21 January 1997 Labor Arbiter Jovencio Ll. Mayor Jr., on the basis of the pleadings and
documents available on record, rendered a decision dismissing the Complaint for want of
jurisdiction.4 According to the Labor Arbiter, since the CBA of the parties provided for the
referral to a Voluntary Arbitration Committee should the Grievance Committee fail to settle the
dispute, and considering the mandate of Art. 261 of the Labor Code on the original and
exclusive jurisdiction of Voluntary Arbitrators, the Labor Arbiter clearly had no jurisdiction over
the case.5

Petitioner (complainant before the Labor Arbiter) appealed the dismissal of his petition to the
NLRC. On 28 May 1998 the NLRC set aside the decision of the Labor Arbiter on the ground that
the record was clear that petitioner had exhausted his remedy by submitting his case to the
Grievance Committee of AMOSUP. Considering however that he could not obtain any
settlement he had to ventilate his case before the proper forum, i.e., the Philippine Overseas
Employment Administration.6 The NLRC further held that the contested portion in the CBA
providing for the intercession of a Voluntary Arbitrator was not binding upon petitioner since
both petitioner and private respondents had to agree voluntarily to submit the case before a
Voluntary Arbitrator or Panel of Voluntary Arbitrators. This would entail expenses as the
Voluntary Arbitrator chosen by the parties had to be paid. Inasmuch however as petitioner
chose to file his Complaint originally with POEA, then the Labor Arbiter to whom the case was
transferred would have to take cognizance of the case.7

14
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

The NLRC then remanded the case to the Labor Arbiter for further proceedings. On 3 July 1998
respondents filed a Motion for Reconsideration which was denied by the NLRC on 23 July 1998.

Thus, private respondents raised the case to the Court of Appeals contending that the provision
in the CBA requiring a dispute which remained unresolved by the Grievance Committee to be
referred to a Voluntary Arbitration Committee, was mandatory in character in view of the CBA
between the parties. They stressed that "since it is a policy of the state to promote voluntary
arbitration as a mode of settling labor disputes, it is clear that the public respondent gravely
abused its discretion in taking cognizance of a case which was still within the mantle of the
Voluntary Arbitration Commitees jurisdiction."8

On the other hand, petitioner argued -

(A)s strongly suggested by its very title, referral of cases of this nature to the Voluntary
Arbitration Committee is voluntary in nature. Otherwise, the committee would not have been
called Voluntary Arbitration Committee but rather, a Compulsory Arbitration Committee.
Moreover, if the referral of cases of similar nature to the Voluntary Arbitration Committee
would be deemed mandatory by virtue of the provisions in the CBA, the [NLRC] would then be
effectively deprived of its jurisdiction to try, hear and decide termination disputes, as provided
for under Article 217 of the Labor Code. Lastly, [respondents] ought to be deemed to have
waived their right to question the procedure followed by [petitioner], considering that they
have already filed their Position Paper before belatedly filing a Motion to Dismiss x x x x 9

But the Court of Appeals ruled in favor of private respondents. It held that the CBA "is the law
between the parties and compliance therewith is mandated by the express policy of the
law."10 Hence, petitioner should have followed the provision in the CBA requiring the
submission of the dispute to the Voluntary Arbitration Committee once the Grievance
Committee failed to settle the controversy.11 According to the Court of Appeals, the parties did
not have the choice to "volunteer" to refer the dispute to the Voluntary Arbitrator or a Panel of
Arbitrators when there was already an agreement requiring them to do so. "Voluntary
Arbitration" means that it is binding because of a prior agreement or contract, while
"Compulsory Arbitration" is when the law declares the dispute subject to arbitration, regardless
of the consent or desire of the parties.12

The Court of Appeals further held that the Labor Code itself enumerates the original and
exclusive jurisdiction of the Voluntary Arbitrator or Panel of Voluntary Arbitrators, and prohibits
the NLRC and the Regional Directors of the Department of Labor and Employment (DOLE) from
entertaining cases falling under the same.13 Thus, the fact that private respondents filed their
Position Paper first before filing their Motion to Dismiss was immaterial and did not operate to
confer jurisdiction upon the Labor Arbiter, following the well-settled rule that jurisdiction is
determined by law and not by consent or agreement of the parties or by estoppel. 14

Finally, the appellate court ruled that a case falling under the jurisdiction of the Labor Arbiter as
provided under Art. 217 of the Labor Code may be lodged instead with a Voluntary Arbitrator

15
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

because the law prefers, or gives primacy, to voluntary arbitration instead of compulsory
arbitration.15 Consequently, the contention that the NLRC would be deprived of its jurisdiction
to try, hear and decide termination disputes under Art. 217 of the Labor Code, should the
instant dispute be referred to the Voluntary Arbitration Committee, is clearly bereft of
merit.16 Besides, the Voluntary Arbitrator, whether acting solely or in a panel, enjoys in law the
status of a quasi-judicial agency independent of, and apart from, the NLRC since his decisions
are not appealable to the latter.17

Celestino Vivero, in his petition for review assailing the Decision of the Court of Appeals, alleges
that the appellate court committed grave abuse of discretion in holding that a Voluntary
Arbitrator or Panel of Voluntary Arbitrators, and not the Adjudication Branch of the NLRC, has
jurisdiction over his complaint for illegal dismissal. He claims that his complaint for illegal
dismissal was undeniably a termination dispute and did not, in any way, involve an
"interpretation or implementation of collective bargaining agreement" or "interpretation" or
"enforcement" of company personnel policies. Thus, it should fall within the original and
exclusive jurisdiction of the NLRC and its Labor Arbiter, and not with a Voluntary Arbitrator, in
accordance with Art. 217 of the Labor Code.

Private respondents, on the other hand, allege that the case is clearly one "involving the
proper interpretation andimplementation of the Grievance Procedure found in the Collective
Bargaining Agreement (CBA) between the parties"18 because of petitioners allegation in his
claim/assistance request form submitted to the Union, to wit:

NATURE OF COMPLAINT

3. Illegal Dismissal - Reason: (1) That in this case it was the master of M.V. SUNNY PRINCE Capt.
Andersen who created the trouble with physical injury and stating false allegation; (2) That
there was no proper procedure of grievance; (3) No proper notice of dismissal.

Is there a Notice of dismissal? _x_ Yes or ____ No

What date? 11 July 1994

Is there a Grievance Procedure observed? ____ Yes or _x_ No19

Private respondents further allege that the fact that petitioner sought the assistance of his
Union evidently shows that he himself was convinced that his Complaint was within the ambit
of the jurisdiction of the grievance machinery and subsequently by a Panel of Voluntary
Arbitrators as provided for in their CBA, and as explicitly mandated by Art. 261 of the Labor
Code.20

Thus, the issue is whether the NLRC is deprived of jurisdiction over illegal dismissal cases
whenever a CBA provides for grievance machinery and voluntary arbitration proceedings. Or,
phrased in another way, does the dismissal of an employee constitute a "grievance between

16
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

the parties," as defined under the provisions of the CBA, and consequently, within the exclusive
original jurisdiction of the Voluntary Arbitrators, thereby rendering the NLRC without
jurisdiction to decide the case?

On the original and exclusive jurisdiction of Labor Arbiters, Art. 217 of the Labor Code provides -

Art. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and
decide within thirty (30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural: (1) Unfair labor practice cases;
(2) Termination disputes; (3) If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other terms and conditions of
employment; (4) Claims for actual, moral, exemplary and other forms of damages arising from
the 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.

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

(c) Cases arising from the interpretation 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 be provided in said
agreements (emphasis supplied).

However, any or all of these cases may, by agreement of the parties, be submitted to a
Voluntary Arbitrator or Panel of Voluntary Arbitrators for adjudication. 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.

17
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

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 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 (emphasis supplied).

Private respondents attempt to justify the conferment of jurisdiction over the case on the
Voluntary Arbitrator on the ground that the issue involves the proper interpretation and
implementation of the Grievance Procedure found in the CBA. They point out that when
petitioner sought the assistance of his Union to avail of the grievance machinery, he in effect
submitted himself to the procedure set forth in the CBA regarding submission of unresolved
grievances to a Voluntary Arbitrator.

The argument is untenable. The case is primarily a termination dispute. It is clear from the
claim/assistance request form submitted by petitioner to AMOSUP that he was challenging the
legality of his dismissal for lack of cause and lack of due process. The issue of whether there
was proper interpretation and implementation of the CBA provisions comes into play only
because the grievance procedure provided for in the CBA was not observed after he sought his
Unions assistance in contesting his termination. Thus, the question to be resolved necessarily
springs from the primary issue of whether there was a valid termination; without this, then
there would be no reason to invoke the need to interpret and implement the CBA provisions
properly.

In San Miguel Corp. v. National Labor Relations Commission21 this Court held that the phrase
"all other labor disputes" may include termination disputes provided that the agreement
between the Union and the Company states "in unequivocal language that [the parties]
conform to the submission of termination disputes and unfair labor practices to voluntary
arbitration."22 Ergo, it is not sufficient to merely say that parties to the CBA agree on the
principle that "all disputes" should first be submitted to a Voluntary Arbitrator. There is a need
for an express stipulation in the CBA that illegal termination disputes should be resolved by a
Voluntary Arbitrator or Panel of Voluntary Arbitrators, since the same fall within a special class
of disputes that are generally within the exclusive original jurisdiction of Labor Arbiters by
express provision of law. Absent such express stipulation, the phrase "all disputes" should be
construed as limited to the areas of conflict traditionally within the jurisdiction of Voluntary
Arbitrators, i.e., disputes relating to contract-interpretation, contract-implementation, or
interpretation or enforcement of company personnel policies. Illegal termination disputes - not
falling within any of these categories - should then be considered as a special area of interest
governed by a specific provision of law.

18
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

In this case, however, while the parties did agree to make termination disputes the proper
subject of voluntary arbitration, such submission remains discretionary upon the parties. A
perusal of the CBA provisions shows that Sec. 6, Art. XII (Grievance Procedure) of the CBA is the
general agreement of the parties to refer grievances, disputes or misunderstandings to a
grievance committee, and henceforth, to a voluntary arbitration committee. The requirement
of specificity is fulfilled by Art. XVII (Job Security) where the parties agreed -

Sec. 1. Promotion, demotion, suspension, dismissal or disciplinary action of the seaman shall be
left to the discretion of the Master, upon consultation with the Company and notification to the
Union. This notwithstanding, any and all disciplinary action taken on board the vessel shall be
provided for in Appendix "B" of this Agreement x x x x 23

Sec. 4. x x x x Transfer, lay-off or discipline of seamen for incompetence, inefficiency, neglect of


work, bad behavior, perpetration of crime, drunkenness, insubordination, desertion, violation
of x x x regulations of any port touched by the Companys vessel/s and other just and proper
causes shall be at Masters discretion x x x in the high seas or foreign ports. The Master shall
refer the case/dispute upon reaching port and if not satisfactorily settled, the case/dispute may
be referred to the grievance machinery or procedure hereinafter provided (emphasis
supplied).24

The use of the word "may" shows the intention of the parties to reserve the right to submit the
illegal termination dispute to the jurisdiction of the Labor Arbiter, rather than to a Voluntary
Arbitrator. Petitioner validly exercised his option to submit his case to a Labor Arbiter when he
filed his Complaint before the proper government agency.

Private respondents invoke Navarro III v. Damasco25 wherein the Court held that "it is the policy
of the state to promote voluntary arbitration as a mode of settling disputes." 26 It should be
noted, however, that in Navarro III all the parties voluntarily submitted to the jurisdiction of the
Voluntary Arbitrator when they filed their respective position papers and submitted
documentary evidence before him. Furthermore, they manifested during the initial conference
that they were not questioning the authority of the Voluntary Arbitrator. 27 In the case at bar,
the dispute was never brought to a Voluntary Arbitrator for resolution; in fact, petitioner
precisely requested the Court to recognize the jurisdiction of the Labor Arbiter over the case.
The Court had held in San Miguel Corp. v. NLRC28 that neither officials nor tribunals can assume
jurisdiction in the absence of an express legal conferment. In the same manner, 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 Art. 262 of the Labor
Code to apply in the case at bar. In other words, the Court of Appeals is correct in holding that
Voluntary Arbitration is mandatory in character if there is a specific agreement between the
parties to that effect. It must be stressed however that, in the case at bar, the use of the word
"may" shows the intention of the parties to reserve the right of recourse to Labor Arbiters.

19
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

The CBA clarifies the proper procedure to be followed in situations where the parties expressly
stipulate to submit termination disputes to the jurisdiction of a Voluntary Arbitrator or Panel of
Voluntary Arbitrators. For 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.1wphi1 Non-compliance therewith cannot be excused, as petitioner suggests,
by the fact that he is not well-versed with the "fine prints" of the CBA. It was his responsibility
to find out, through his Union, what the provisions of the CBA were and how they could affect
his rights. As provided in Art. 241, par. (p), of the Labor Code -

(p) It shall be the duty of any labor organization and its officers to inform its members on the
provisions of its constitution and by-laws, collective bargaining agreement, the prevailing labor
relations system and all their rights and obligations under existing labor laws.

In fact, any violation of the rights and conditions of union membership is a "ground for
cancellation of union registration or expulsion of officer from office, whichever is appropriate.
At least thirty percent (30%) of all the members of a union or any member or members
especially concerned may report such violation to the Bureau [of Labor Relations] x x x x" 29

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. In
any case, private respondents never invoked the application of Policy Instruction No. 56 in
their Position Papers, neither did they raise the question in their Motion to Dismiss which they
filed nine (9) months after the filing of their Position Papers. At this late stage of the
proceedings, it would not serve the ends of justice if this case is referred back to a Voluntary
Arbitrator considering that both the AMOSUP and private respondents have submitted to the
jurisdiction of the Labor Arbiter by filing their respective Position Papers and ignoring the
grievance procedure set forth in their CBA.

20
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

After the grievance proceedings have failed to bring about a resolution, AMOSUP, as agent of
petitioner, should have informed him of his option to settle the case through voluntary
arbitration. Private respondents, on their part, should have timely invoked the provision of their
CBA requiring the referral of their unresolved disputes to a Voluntary Arbitrator once it became
apparent that the grievance machinery failed to resolve it prior to the filing of the case before
the proper tribunal. The private respondents should not have waited for nine (9) months from
the filing of their Position Paper with the POEA before it moved to dismiss the case purportedly
for lack of jurisdiction. As it is, private respondents are deemed to have waived their right to
question the procedure followed by petitioner, assuming that they have the right to do so.
Under their CBA, both Union and respondent companies are responsible for selecting an
impartial arbitrator or for convening an arbitration committee; 30 yet, it is apparent that neither
made a move towards this end. Consequently, petitioner should not be deprived of his
legitimate recourse because of the refusal of both Union and respondent companies to follow
the grievance procedure.

WHEREFORE, the Decision of the Court of Appeals is SET ASIDE and the case is remanded to the
Labor Arbiter to dispose of the case with dispatch until terminated considering the undue delay
already incurred.

SO ORDERED.

Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Footnotes
1
Rollo, pp. 34-35.
2
Id., pp. 49-50.
3
Sec. 3, par. (d), of EO No. 247, the "Reorganization Act of the Philippine Overseas
Employment Administration" (24 July 1987) provides -

Sec. 3. Powers and Functions. - x x x x (d) Exercise original and exclusive


jurisdiction to hear and decide all claims arising out of an employee-employer
relationship or by virtue of any law or contract involving Filipino workers for
overseas employment including the disciplinary cases; and all pre-employment
cases which are administrative in character involving or arising out of violation of
requirement laws, rules and regulations including money claims arising
therefrom, or violation of the conditions for issuance of license or authority to
recruit workers x x x x

21
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
4
Id., p. 53.
5
Rollo, p. 66
6
Id., p. 60.
7
Id., p. 61.
8
Rollo, p. 66.
9
Rollo, p. 67.
10
E. Razon, Inc. v. Secretary of Labor and Employment, G.R. No. 85867, 13 May 1993.
222 SCRA 1, 8.
11
Rollo, p. 69.
12
Id., p. 70, citing II Azucena, THE LABOR CODE WITH COMMENTS AND CASES 277
(1993).
13
Id., p. 70.
14
Tolentino v. Court of Appeals, G.R. No. 123445, 6 October 1997, 280 SCRA 226, 234.
15
Labor Code, Art. 211, par. (a) provides that: "It is the policy of the State to promote
and emphasize the primacy of free collective bargaining and negotiations, including
voluntary arbitration, mediation and conciliation, as modes of settling labor or industrial
disputes."
16
Rollo, p. 70.
17
Id., p. 70; see Luzon Development Bank v. Association of Luzon Development Bank
Employees, G.R. No. 120319, 6 October 1995, 249 SCRA 162, 168-69, citing Labor Code,
Art. 262-A, in relation to Labor Code, Art. 217 (b) and (c), as amended by RA 6715, Sec.
9.
18
Id., p. 74.
19
Id., p. 23.
20
Id., p. 74.
21
G.R. No. 108001, 15 March 1996, 255 SCRA 133.
22
Id., p. 137.

22
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
23
The aforesaid Appendix B provides for a Table of Offenses and Maximum Penalties,
where the offense of insubordination, which includes "any acts of disobedience to
lawful orders of a superior officer" is punished with the maximum penalty of
dismissal; Rollo, p. 46.
24
Rollo, pp. 36-37.
25
G.R. No. 101875, 14 July 1995, 246 SCRA 260.
26
Id., p. 264, citing Manguiat, MECHANISMS OF VOLUNTARY ARBITRATION IN LABOR
DISPUTES, pp. 2-6 (1978)
27
See Note 25, p. 264.
28
See Note 20, pp. 143-44.
29
Labor Code, Art. 241 (p).
30
Rollo, p. 35.

23
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

DAVAO CITY WATER DISTRICT VS CIVIL SERVICE COMMISSION 201


SCRA 593

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 95237-38 September 13, 1991

DAVAO CITY WATER DISTRICT, CAGAYAN DE ORO CITY WATER DISTRICT, METRO CEBU
WATER DISTRICT, ZAMBOANGA CITY WATER DISTRICT, LEYTE METRO WATER DISTRICT,
BUTUAN CITY WATER DISTRICT, CAMARINES NORTE WATER DISTRICT, LAGUNA WATER
DISTRICT, DUMAGUETE CITY WATER DISTRICT, LA UNION WATER DISTRICT, BAYBAY WATER
DISTRICT, METRO LINGAYEN WATER DISTRICT, URDANETA WATER DISTRICT, COTABATO CITY
WATER DISTRICT, MARAWI WATER DISTRICT, TAGUM WATER DISTRICT, DIGOS WATER
DISTRICT, BISLIG WATER DISTRICT, and MECAUAYAN WATER DISTRICT, petitioners,
vs.
CIVIL SERVICE COMMISSION, and COMMISSION ON AUDIT, respondents.

Rodolfo S. De Jesus for petitioners.

Evalyn H. Itaas-Fetalino, Rogelio C. Limare and Daisy B. Garcia-Tingzon for CSC.

MEDIALDEA, J.:p

Whether or not the Local Water Districts formed and created pursuant to the provisions of
Presidential Decree No. 198, as amended, are government-owned or controlled corporations
with original charter falling under the Civil Service Law and/or covered by the visitorial power of
the Commission on Audit is the issue which the petitioners entreat this Court, en banc, to shed
light on.

Petitioners are among the more than five hundred (500) water districts existing throughout the
country formed pursuant to the provisions of Presidential Decree No. 198, as amended by
Presidential Decrees Nos. 768 and 1479, otherwise known as the "Provincial Water Utilities Act
of 1973."

Presidential Decree No. 198 was issued by the then President Ferdinand E. Marcos by virtue of
his legislative power under Proclamation No. 1081. It authorized the different local legislative

24
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

bodies to form and create their respective water districts through a resolution they will pass
subject to the guidelines, rules and regulations therein laid down. The decree further created
and formed the "Local Water Utilities Administration" (LWUA), a national agency attached to
the National Economic and Development Authority (NEDA), and granted with regulatory power
necessary to optimize public service from water utilities operations.

The respondents, on the other hand, are the Civil Service Commission (CSC) and the
Commission on Audit (COA), both government agencies and represented in this case by the
Solicitor General.

On April 17, 1989, this Court ruled in the case of Tanjay Water District v. Gabaton, et al. (G.R.
No. 63742, 172 SCRA 253):

Significantly, Article IX (B), Section 2(1) of the 1987 Constitution provides that
the Civil Service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government-owned and controlled
corporations with original charters. Inasmuch as PD No. 198, as amended, is the
original charter of the petitioner, Tanjay Water District, and respondent Tarlac
Water District and all water districts in the country, they come under the
coverage of the Civil Service Law, rules and regulations. (Sec. 35, Art. VIII and
Sec. 37, Art. IX of PD No. 807).

As an offshoot of the immediately cited ruling, the CSC. issued Resolution No. 90-575, the
dispositive portion of which reads:

NOW THEREFORE, in view of all the foregoing, the Commission resolved, as it


hereby resolves to rule that Local Water Districts, being quasi-public
corporations created by law to perform public services and supply public wants,
the matter of hiring and firing of its officers and employees should be governed
by the Civil Service Law, rules and regulations. Henceforth, all appointments of
personnel of the different local water districts in the country shall be submitted
to the Commission for appropriate action. (Rollo. p. 22).

However, on May 16, 1990, in G.R. No. 85760, entitled "Metro Iloilo Water District v. National
Labor Relations Commission, et al.," the Third Division of this Court ruled in a minute resolution:

xxx xxx xxx

Considering that PD 198 is a general legislation empowering and/or authorizing


government agencies and entities to create water districts, said PD 198 cannot
be considered as the charter itself creating the Water District. Public respondent
NLRC did not commit any grave abuse of discretion in holding that the operative
act, that created the Metro Iloilo Water District was the resolution of the
Sangguniang Panglunsod of Iloilo City. Hence, the employees of Water Districts

25
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

are not covered by Civil Service Laws as the latter do (sic) not have original
charters.

In adherence to the just cited ruling, the CSC suspended the implementation of Resolution No.
90-575 by issuing Resolution No. 90-770 which reads:

xxx xxx xxx

NOW, THEREFORE, in view of all the foregoing, the Commission resolved to rule,
as it hereby rules, that the implementation of CSC. Resolution No. 575 dated
June 27, 1990 be deferred in the meantime pending clarification from the
Supreme Court are regards its conflicting decisions in the cases of Tanjay Water
District v. Gabaton and Metro Iloilo Water District v. National Labor Relations
Commission. (p. 26, Rollo)

In the meanwhile, there exists a divergence of opinions between COA on one hand, and the
(LWUA), on the other hand, with respect to the authority of COA to audit the different water
districts.

COA opined that the audit of the water districts is simply an act of discharging the visitorial
power vested in them by law (letter of COA to LWUA dated August 13, 1985, pp. 29-30, Rollo).

On the other hand, LWUA maintained that only those water districts with subsidies from the
government fall within the COA's jurisdiction and only to the extent of the amount of such
subsidies, pursuant to the provision of the Government Auditing Code of the Phils.

It is to be observed that just like the question of whether the employees of the water districts
falls under the coverage of the Civil Service Law, the conflict between the water districts and
the COA is also dependent on the final determination of whether or not water districts are
government-owned or controlled corporations with original charter. The reason behind this is
Sec. 2(1), Article IX-D of the 1987 constitution which reads:

Sec. 2(1) The Commission on Audit shall have the power, authority, and duty to
examine, audit, and settle all accounts pertaining to the revenue and receipts of,
and expenditures or uses of funds and property, owned or held in trust by, or
pertaining to the Government, or any of its subdivisions, agencies or
instrumentalities, including government-owned or controlled corporations with
original charters, and on a post audit basis. (emphasis supplied)

Petitioners' main argument is that they are private corporations without original charter, hence
they are outside the jurisdiction of respondents CSC and COA. Reliance is made on the Metro
Iloilo case which declared petitioners as quasi-public corporations created by virtue of PD 198, a
general legislation which cannot be considered as the charter itself creating the water districts.
Holding on to this ruling, petitioners contend that they are private corporations which are only

26
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

regarded as quasi-public or semi-public because they serve public interest and convenience and
that since PD 198 is a general legislation, the operative act which created a water district is not
the said decree but the resolution of the sanggunian concerned.

After a fair consideration of the parties' arguments coupled with a careful study of the
applicable laws as well as the constitutional provisions involved, We rule against the petitioners
and reiterate Our ruling in Tanjay case declaring water districts government-owned or
controlled corporations with original charter.

As early as Baguio Water District v. Trajano, et al., (G.R. No. 65428, February 20, 1984, 127
SCRA 730), We already ruled that a water district is a corporation created pursuant to a special
law P.D. No. 198, as amended, and as such its officers and employees are covered by the Civil
Service Law.

In another case (Hagonoy Water District v. NLRC, G.R. No. 81490, August 31, 1988, 165 SCRA
272), We ruled once again that local water districts are quasi-public corporations whose
employees belong to the Civil Service. The Court's pronoucement in this case, as extensively
quoted in the Tanjay case, supra, partly reads:

"The only question here is whether or not local water districts are governmkent
owned or controlled corporations whose employees are subject to the provisions
of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged
illegal dismissal of private respondent Villanueva by relying on Section 25 of
Presidential decree No. 198, known as the Provincial Water Utilities Act of 1973"
which went onto effect in 25 May 1973, and which provides as follows:

Exemption from Civil Service. The district and its employees,


being engaged in a proprietary function, are hereby exempt from
the provisions of the Civil Service Law. Collective Bargaining shall
be available only to personnel below supervisory levels:Provided,
however, That the total of all salaries, wages emoluments,
benefits or other compensation paid to all employees in any
month shall not exceed fifty percent (50%) of average net monthy
revenue. Said net revenue representing income from water sales
and sewerage service charges, less pro-rata share of debt service
and expenses for fuel or energy for pumping during the preceding
fiscal year.

The Labor Arbiter failed to take into accout the provisions of Presidential Decree
No. 1479, which went into effect on 11 June 1978, P.D. No. 1479, wiped away
Section 25 of PD 198 quoted above, and Section 26 of PD 198 was renumbered
as Section 25 in the following manner:

27
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Section 26 of the same decree PD 198 is hereby amended to read as Section 25


as follows:

Section 25. Authorization. The district may exercise all the powers which are
expressly granted by this Title or which are necessarily implied from or incidental
to the powers and purposes herein stated. For the purpose of carrying out the
objectives of this Act, a district is hereby granted the power of eminent domain,
the exercise thereof shall, however, be subject to review by the Administration.

Thus, Section 25 of PD 198 exempting the employees of water districts from the
application of the Civil Service Law was removed from the statute books:

xxx xxx xxx

We grant the petition for the following reasons:

1. Section 25 of PD No. 198 was repealed by Section 3 of PD No. 1479; Section 26


of PD No. 198 was amended ro read as Sec. 25 by Sec. 4 of PD No. 1479. The
amendatory decree took effect on June 11, 1978.

xxx xxx xxx

3. The BWD is a corporation created pursuant to a special law PD No. 198, as


amended. As such its officers and employees are part of the Civil Service (Sec. 1,
Art. XII-B, [1973] Constitution; PD No. 868).

Ascertained from a consideration of the whole statute, PD 198 is a special law applicable only to
the different water districts created pursuant thereto. In all its essential terms, it is obvious that
it pertains to a special purpose which is intended to meet a particular set of conditions and
cirmcumstances. The fact that said decree generally applies to all water districts throughout the
country does not change the fact that PD 198 is a special law. Accordingly, this Court's
resolution in Metro Iloilo case declaring PD 198 as a general legislation is hereby abandoned.

By "government-owned or controlled corporation with original charter," We mean government


owned or controlled corporation created by a special law and not under the Corporation Code
of the Philippines. Thus, in the case ofLumanta v. NLRC (G.R. No. 82819, February 8, 1989, 170
SCRA 79, 82), We held:

The Court, in National Service Corporation (NASECO) v. National Labor Relations


Commission, G.R. No 69870, promulgated on 29 November 1988, quoting
extensively from the deliberations of 1986 Constitutional Commission in respect
of the intent and meaning of the new phrase "with original character," in effect
held that government-owned and controlled corporations with original charter
refer to corporations chartered by special law as distinguished from corporations

28
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

organized under our general incorporation statute the Corporations Code. In


NASECO, the company involved had been organized under the general
incorporation statute and was a sbusidiary of the National Investment
Development Corporation (NIDC) which in turn was a subsidiary of the Philippine
National Bank, a bank chartered by a special statute. Thus, government-owned
or controlled corporations like NASECO are effectively, excluded from the scope
of the Civil Service. (emphasis supplied)

From the foregoing pronouncement, it is clear that what has been excluded from the coverage
of the CSC are those corporations created pursuant to the Corporation Code. Significantly,
petitioners are not created under the said code, but on the contrary, they were created
pursuant to a special law and are governed primarily by its provision.

No consideration may thus be given to petitioners' contention that the operative act which
created the water districts are the resolutions of the respective local sanggunians and that
consequently, PD 198, as amended, cannot be considered as their charter.

It is to be noted that PD 198, as amended is the source of authorization and power to form and
maintain a district. Section 6 of said decree provides:

Sec. 6. Formation of District. This Act is the source of authorization and power
to form and maintain a district. Once formed, a district is subject to the
provisions of this Act and not under the jurisdiction of any political subdivision, . .
..

Moreover, it must be observed that PD 198, contains all the essential terms necessary to
constitute a charter creating a juridical person. For example, Section 6(a) provides for the name
that will be used by a water district, thus:

Sec. 6. . . . To form a district, the legislative body of any city, municipality or


province shall enact a resolution containing the following:

a) The name of the local water district, which shall include the name of the city,
municipality, or province, or region thereof, served by said system, followed by
the words "Water District."

It also prescribes for the numbers and qualifications of the members of the Board of Directors:

Sec. 8. Number and Qualification. The Board of Directors of a district shall be


composed of five citizens of the Philippines who are of voting age and residents
within the district. One member shall be a representative of civic-oriented
service clubs, one member of representative of professional associations, one
member a representative of business, commercial or financial organizations, one
member a representative of educational institutions and one member a

29
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

representative of women's organization. No public official shall serve as


director. Provided, however, that if the district has availed of the financial
assistance of the Administration, the Administration may appoint any of its
personnel to sit in the board of directors with all the rights and privileges
appertaining to a regular member for such period as the indebtedness remains
unpaid in which case the board shall be composed of six members; (as amended
by PDs Nos. 768 and 1479).

the manner of their appointment and nominations;

Sec. 9. Appointment. Board members shall be appointed by the appointing


authority. Said appointments shall be made from a list of nominees, if any,
submitted pursuant to Section 10. If no nominations are submitted, the
appointing authority shall appoint any qualified person of the category to the
vacant position;

Sec.10. Nominations. On or before October 1 of each even numbered year,


the secretary of the district shall contact each known organization, association,
or institution being represented by the director whose term will expire on
December 31 and solicit nominations from these organizations to fill the position
for the ensuing term. One nomination may be submitted in writing by each such
organization to the Secretary of the district on or before November 1 of such
year: This list of nominees shall be transmitted by the Secretary of the district to
the office of the appointing authority on or before November 15 of such year
and he shall make his appointment from the list submitted on or before
December 15. In the event the appointing authority fails to make his
appointments on or before December 15, selection shall be made from said list
of nominees by majority vote of the seated directors of the district constituting a
quorum. Initial nominations for all five seats of the board shall be solicited by the
legislative body or bodies at the time of adoption of the resolution forming the
district. Thirty days thereafter, a list of nominees shall be submitted to the
provincial governor in the event the resolution forming the district is by a
provincial board, or the mayor of the city or municipality in the event the
resolution forming the adoption of the district is by the city or municipal board
of councilors, who shall select the initial directors therefrom within 15 days after
receipt of such nominations;

their terms of office:

Sec. 11. Term of Office. Of the five initial directors of each newly formed
district, two shall be appointed for a maximum term of two years, two for a
maximum term of four years, and one for a maximum term of six years. Terms of
office of all directors in a given district shall be such that the term of at least one
director, but not more then two, shall expire on December 31 of each even-

30
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

numbered year. Regular terms of office after the initial terms shall be for six
years commencing on January 1 of odd-numbered years. Directors may be
removed for cause only, subject to review and approval of the Administration;
(as amended by PD 768).

the manner of filling up vacancies:

Sec. 12. Vacancies. In the event of a vacancy in the board of directors


occurring more than six months before expiration of any director's term, the
remaining directors shall within 30 days, serve notice to or request the secretary
of the district for nominations and within 30 days, thereafter a list of nominees
shall be submitted to the appointing authority for his appointment of a
replacement director from the list of nominees. In the absence of such
nominations, the appointing authority shall make such appointment. If within 30
days after submission to him of a list of nominees the appointing authority fails
to make an appointment, the vacancy shall be filled from such list by a majority
vote of the remaining members of the Board of Directors constituting a quorum.
Vacancies occurring within the last six months of an unexpired term shall also be
filled by the Board in the above manner. The director thus appointed shall serve
the unexpired term only; (as amended by PD 768).

and the compensation and personal liability of the members of the Board of Directors:

Sec. 13. Compensation. Each director shall receive a per diem, to be


determined by the board, for each meeting of the board actually attended by
him, but no director shag receive per diems in any given month in excess of the
equivalent of the total per diems of four meetings in any given month. No
director shall receive other compensation for services to the district.

Any per diem in excess of P50.00 shall be subject to approval of the


Administration (as amended by PD 768).

Sec. 14. Personal Liability. No director may be held to be personally liable for
any action of the district.

Noteworthy, the above quoted provisions of PD 198, as amended, are similar to those which
are actually contained in other corporate charters. The conclusion is inescapable that the said
decree is in truth and in fact the charter of the different water districts for it clearly defines the
latter's primary purpose and its basic organizational set-up. In other words, PD 198, as
amended, is the very law which gives a water district juridical personality. While it is true that a
resolution of a local sanggunian is still necessary for the final creation of a district, this Court is
of the opinion that said resolution cannot be considered as its charter, the same being intended
only to implement the provisions of said decree. In passing a resolution forming a water district,
the local sanggunian is entrusted with no authority or discretion to grant a charter for the

31
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

creation of a private corporation. It is merely given the authority for the formation of a water
district, on a local option basis, to be exercised under and in pursuance of PD 198.

More than the aforequoted provisions, what is of important interest in the case at bar is
Section 3, par. (b) of the same decree which reads:

Sec. 3(b). Appointing authority. The person empowered to appoint the


members of the Board of Directors of a local water district, depending upon the
geographic coverage and population make-up of the particular district. In the
event that more than seventy-five percent of the total active water service
connections of a local water districts are within the boundary of any city or
municipality, the appointing authority shall be the mayor of that city or
municipality, as the case may be; otherwise, the appointing authority shall be
the governor of the province within which the district is located:Provided, That if
the existing waterworks system in the city or municipality established as a water
district under this Decree is operated and managed by the province, initial
appointment shall be extended by the governor of the province. Subsequent
appointments shall be as specified herein.

If portions of more than one province are included within the boundary of the
district, and the appointing authority is to be the governors then the power to
appoint shall rotate between the governors involved with the initial
appointments made by the governor in whose province the greatest number of
service connections exists (as amended by PD 768).

The above-quoted section definitely sets to naught petitioners' contention that they are private
corporations. It is clear therefrom that the power to appoint the members who will comprise
the Board of Directors belongs to the local executives of the local subdivision units where such
districts are located. In contrast, the members of the Board of Directors or trustees of a private
corporation are elected from among the members and stockholders thereof. It would not be
amiss to emphasize at this point that a private corporation is created for the private purpose,
benefit, aim and end of its members or stockholders. Necessarily, said members or
stockholders should be given a free hand to choose those who will compose the governing body
of their corporation. But this is not the case here and this clearly indicates that petitioners are
definitely not private corporations.

The foregoing disquisition notwithstanding, We are, however, not unaware of the serious
repercussion this may bring to the thousands of water districts' employees throughout the
country who stand to be affected because they do not have the necessary civil service
eligibilities. As these employees are equally protected by the constitutional guarantee to
security of tenure, We find it necessary to rule for the protection of such right which cannot be
impaired by a subsequent ruling of this Court. Thus, those employees who have already
acquired their permanent employment status at the time of the promulgation of this decision
cannot be removed by the mere reason that they lack the necessary civil service eligibilities.

32
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

ACCORDINGLY, the petition is hereby DISMISSED. Petitioners are declared "government-owned


or controlled corporations with original charter" which fall under the jurisdiction of the public
respondents CSC and COA.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Padilla, Grio-Aquino, Regalado and
Davide, Jr., JJ., concur.

Gutierrez, Jr., Feliciano and Sarmiento, JJ., are on leave.

Separate Opinions

BIDIN, J., dissenting:

I regret I have to register my dissent in this case. I agree with the main ponencia that P.D. 198,
as amended, authorizes the different local legislative bodies (Sanggunian) to form and create
their respective water districts through a Resolution which they will pass subject to the
guidelines, rules and regulations therein laid down. The issue, therefore, to be resolved is
whether the local water districts so created are government-owned or controlled corporations
with original charters embraced by the Civil Service as contemplated by Art. IX-B, Sec. 2[1] of
the 1987 Constitution.

P.D. 198 is a general legislation which authorizes the formation of water districts. However, the
operative act which creates a water district is not said decree but the resolution of the
Sanggunian concerned forming and maintaining a local water district. Thus, Section 2 of P.D.
198, among others, provides:

Sec. 2. Declaration of Policy . . . To encourage the formulation of such local


water districts and the transfer thereto of existing water supply and waste water
disposal facilities, this Decree provides by general act the authority for the
formation thereof, on a local option basis. . . . (Emphasis supplied)

Implementing the above policy, Title II of P.D. 198 provides:

33
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

TITLE II. LOCAL WATER DISTRICT LAW


CHAPTER I. Title

Sec. 4. Title. The provisions of this Title shall be known and referred to as the
"Local Water District Law."

CHAPTER II. Purpose and Formation

Sec. 5. Purpose. Local water districts may be formed pursuant to this Title for
the purposes of (a) acquiring, installing, improving, maintaining and operating
water supply and distribution systems for domestic, industrial, municipal and
agricultural uses for residents and lands within the boundaries of such districts,
(b) providing, maintaining and operating wastewater collection, treatment and
disposal facilities, and (c) conducting such other functions and operations
incidental to water resource development, utilization and disposal within such
districts, as are necessary or incidental to said purpose.

Sec. 6. Formation of District. This Act is the source of authorization and power
to form and maintain a district. For purposes of this Act, a district shall be
considered as a quasi-public corporation performing public service and supplying
public wants. As such, a district shall exercise the powers, rights and privileges
given to private corporations under existing laws, in addition to the powers
granted in, and subject to such restrictions imposed, under this Act.

xxx xxx xxx

Sec. 7. Filing of Resolution. A certifted copy of the resolution or resolutions


forming a district shall be forwarded to the office of the Secretary of the
Administration. If found by the Administration to conform to the requirements
of Section 6 and the policy objectives in Section 2, the resolution shall be duly
filed. The district shall be deemed duly formed and existing upon the date of such
filing. A certified copy of said resolution showing the filing stamp of the
Administration shall be maintained in the office of the district. Upon such filing,
the local government or governments concerned shall lose ownership,
supervision and control or any right whatsoever over the district except as
provided herein. (Emphasis supplied)

It is apparent that insofar as the formation of local water districts are concerned, P.D.
198 is not an original charter but a general act authorizing the formation of water
districts on local option basis (Sec. 2, P.D. 198) similar to the Corporation Code. What is
chartered, formed and created under P.D. 198 as a government corporation is the "Local
Water Utilities Administration" attached to the Office of the President as follows:

34
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Sec. 49. Charter. There is hereby chartered, created and formed a government
corporation to be known as the "Local Water Utilities Administration which is
hereby attached to the Office of the President. The provisions of this title shall
be and constitute the charter of the Administration.

On the other hand, local water districts are formed by resolutions of the respective Provincial,
City and Municipal councils (Sec. 7, P.D. 198) filed with the Local Water Utilities Administration,
a government corporation chartered under Section 49, P.D. 198 and attached to the Office of
the President. Consequently, without the requisite resolution of the Sanggunian concerned
forming the water district having been filed with the Local Water Utility Administration, no
water district is formed. What gives the water districts juridical personality is the resolution of
the respective Sanggunian forming the district and filed with the Local Water Utilities
Administration. Once formed, a water district is subject to the provisions of P.D. 198 and no
longer under the jurisdiction of any political administration which shall thereafter lose
ownership, supervision and control over the district (Sec. 7, PD 198).

In view of the foregoing, I vote to Grant the petition and to declare petitioners as quasi-public
corporations performing public service without original charters and therefore not embraced
by the Civil Service.

Separate Opinions

BIDIN, J., dissenting:

I regret I have to register my dissent in this case. I agree with the main ponencia that P.D. 198,
as amended, authorizes the different local legislative bodies (Sanggunian) to form and create
their respective water districts through a Resolution which they will pass subject to the
guidelines, rules and regulations therein laid down. The issue, therefore, to be resolved is
whether the local water districts so created are government-owned or controlled corporations
with original charters embraced by the Civil Service as contemplated by Art. IX-B, Sec. 2[1] of
the 1987 Constitution.

P.D. 198 is a general legislation which authorizes the formation of water districts. However, the
operative act which creates a water district is not said decree but the resolution of the
Sanggunian concerned forming and maintaining a local water district. Thus, Section 2 of P.D.
198, among others, provides:

Sec. 2. Declaration of Policy . . . To encourage the formulation of such local


water districts and the transfer thereto of existing water supply and waste water
disposal facilities, this Decree provides by general act the authority for the
formation thereof, on a local option basis. . . . (Emphasis supplied)

35
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Implementing the above policy, Title II of P.D. 198 provides:

TITLE II. LOCAL WATER DISTRICT LAW


CHAPTER I. Title

Sec. 4. Title. The provisions of this Title shall be known and referred to as the
"Local Water District Law."

CHAPTER II. Purpose and Formation

Sec. 5. Purpose. Local water districts may be formed pursuant to this Title for
the purposes of (a) acquiring, installing, improving, maintaining and operating
water supply and distribution systems for domestic, industrial, municipal and
agricultural uses for residents and lands within the boundaries of such districts,
(b) providing, maintaining and operating wastewater collection, treatment and
disposal facilities, and (c) conducting such other functions and operations
incidental to water resource development, utilization and disposal within such
districts, as are necessary or incidental to said purpose.

Sec. 6. Formation of District. This Act is the source of authorization and power
to form and maintain a district. For purposes of this Act, a district shall be
considered as a quasi-public corporation performing public service and supplying
public wants. As such, a district shall exercise the powers, rights and privileges
given to private corporations under existing laws, in addition to the powers
granted in, and subject to such restrictions imposed, under this Act.

xxx xxx xxx

Sec. 7. Filing of Resolution. A certifted copy of the resolution or resolutions


forming a district shall be forwarded to the office of the Secretary of the
Administration. If found by the Administration to conform to the requirements
of Section 6 and the policy objectives in Section 2, the resolution shall be duly
filed. The district shall be deemed duly formed and existing upon the date of such
filing. A certified copy of said resolution showing the filing stamp of the
Administration shall be maintained in the office of the district. Upon such filing,
the local government or governments concerned shall lose ownership,
supervision and control or any right whatsoever over the district except as
provided herein. (Emphasis supplied)

It is apparent that insofar as the formation of local water districts are concerned, P.D.
198 is not an original charter but a general act authorizing the formation of water
districts on local option basis (Sec. 2, P.D. 198) similar to the Corporation Code. What is
chartered, formed and created under P.D. 198 as a government corporation is the "Local
Water Utilities Administration" attached to the Office of the President as follows:

36
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Sec. 49. Charter. There is hereby chartered, created and formed a government
corporation to be known as the "Local Water Utilities Administration which is
hereby attached to the Office of the President. The provisions of this title shall
be and constitute the charter of the Administration.

On the other hand, local water districts are formed by resolutions of the respective Provincial,
City and Municipal councils (Sec. 7, P.D. 198) filed with the Local Water Utilities Administration,
a government corporation chartered under Section 49, P.D. 198 and attached to the Office of
the President. Consequently, without the requisite resolution of the Sanggunian concerned
forming the water district having been filed with the Local Water Utility Administration, no
water district is formed. What gives the water districts juridical personality is the resolution of
the respective Sanggunian forming the district and filed with the Local Water Utilities
Administration. Once formed, a water district is subject to the provisions of P.D. 198 and no
longer under the jurisdiction of any political administration which shall thereafter lose
ownership, supervision and control over the district (Sec. 7, PD 198).

In view of the foregoing, I vote to Grant the petition and to declare petitioners as quasi-public
corporations performing public service without original charters and therefore not embraced
by the Civil Service.

37
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

BOY SCOUTS OF THE PHIL. VS NLRC 196 SCRA 176

Republic of the Philippines


SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 80767 April 22, 1991

BOY SCOUTS OF THE PHILIPPINES, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, FORTUNATO ESGUERRA, ROBERTO
MALABORBOR, ESTANISLAO MISA, VICENTE EVANGELISTA, and MARCELINO
GARCIA, respondents.

Julio O. Lopez for petitioner.

FELICIANO, J.:

This Petition for Certiorari is directed at (1) the Decision,1 dated 27 February 1987, and (2) the
Resolution2 dated 16 October 1987, both issued by the National Labor Relations Commission
("NLRC") in Case No. 1637-84.

Private respondents Fortunato C. Esquerra, Roberto O. Malaborbor, Estanislao M. Misa, Vicente


N. Evangelista and Marcelino P. Garcia, had all been rank-and-file employees of petitioner Boy
Scouts of the Philippines ("BSP"). At the time of termination of their services in February 1985,
private respondents were stationed at the BSP Camp in Makiling, Los Baos, Laguna.

The events which led to such termination of services are as follows:

On 19 October 1984, the Secretary-General of petitioner BSP issued Special Orders Nos. 80, 81,
83, 84 and 85 addressed separately to the five (5) private respondents, informing them that on
20 November 1984, they were to be transferred from the BSP Camp in Makiling to the BSP Land
Grant in Asuncion, Davao del Norte. These Orders were opposed by private respondents who,
on 4 November 1984, appealed the matter to the BSP National President.

On 6 November 1984, petitioner BSP conducted a pre-transfer briefing at its National


Headquarters in Manila. Private respondents were in attendance during the briefing and they
were there assured that their transfer to Davao del Norte would not involve any diminution in
salary, and that each of them would receive a relocation allowance equivalent to one (1)

38
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

month's basic pay. This assurance, however, failed to persuade private respondents to abandon
their opposition to the transfer orders issued by the BSP Secretary-General.

On 13 November 1984, a complaint3

(docketed as NLRC Case No. 16-84J) for illegal transfer was filed with the then Ministry of Labor
and Employment, Sub-Regional Arbitration Branch IV, San Pablo City, Laguna. Private
respondents there sought to enjoin implementation of Special Orders Nos. 80, 81, 83, 84 and
85, alleging, among other things, that said orders were "indubitable and irrefutable action[s]
prejudicial not only to [them] but to [their] families and [would] seriously affect [their]
economic stability and solvency considering the present cost of living."

On 21 November 1984 (or the day immediately following the date of scheduled transfer), the
BSP Camp Manager in Makiling issued a Memorandum requiring the five (5) private
respondents to explain why they should not be charged administratively for insubordination.
The Memorandum was a direct result of the refusal by private respondents, two (2) days
earlier, to accept from petitioner BSP their respective boat tickets to Davao del Norte and their
relocation allowances.

Meanwhile, in a letter of the same date, the BSP National President informed private
respondents that their refusal to comply with the Special Orders was not sufficiently justified
and constituted rank disobedience. Memoranda subsequently issued by the BSP Secretary-
General stressed that such refusal as well as the explanations proffered therefor, were
unacceptable and could altogether result in termination of employment with petitioner BSP.
These warnings notwithstanding, private respondents continued pertinaciously to disobey the
disputed transfer orders.

Petitioner BSP consequently imposed a five-day suspension on the five (5) private respondents,
in the latter part of January 1985. Subsequently, by Special Order dated 12 February 1985
issued by the BSP Secretary-General, private respondents' services were ordered terminated
effective 15 February 1985.

On 22 February 1985, private respondents amended their original complaint to include charges
of illegal dismissal and unfair labor practice against petitioner BSP.4

The Labor Arbiter thereafter proceeded to hear the complaint.

In a decision5 dated 31 July 1985, the Labor Arbiter ordered the dismissal of private
respondents' complaint for lack of merit.

On 27 February 1987, however, the ruling of the Labor Arbiter was reversed by public
respondent, NLRC, which held that private respondents had been illegally dismissed by
petitioner BSP. The dispositive portion of the NLRC decision read:

39
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

WHEREFORE, premises considered the Decision appealed from is hereby SET ASIDE and
a new one entered ordering the respondent-appellee [petitioner BSP] to reinstate the
complainants-appellants [private respondents] to their former positions without loss of
seniority rights and other benefits appurtenant thereto and with full backwages from
the time they were illegally dismissed from the service up to the date of their actual
reinstatement.

SO ORDERED.

The Court notes at the outset that in the Position Paper 6 filed by petitioner BSP with the Labor
Arbiter, it was alleged in the second paragraph thereof, that petitioner is a "civic service, non-
stock and non-profit organization, relying mostly [on] government and public support, existing
under and by virtue of Commonwealth Act No. 111, as amended, by Presidential Decree No.
460 . . . " A similar allegation was contained in the Brief for Appellee7 and in the Petition8 and
Memorandum9 filed by petitioner BSP with public respondent NLRC and this Court,
respectively. The same allegation, moreover, appeared in the Comment10 (also treated as the
Memorandum) submitted to this Court by the Solicitor General on behalf of public respondent
NLRC; for their part, private respondents stated in their Appeal Memorandum 11 with the NLRC
that petitioner BSP is "by mandate of law a Public Corporation," a statement reiterated by them
in their Memorandum12 before this Court.

In a Resolution dated 9 August 1989, this Court required the parties and the Office of the
Government Corporate Counsel to file a comment on the question of whether or not petitioner
BSP is in fact a government-owned or controlled corporation.

Petitioner, private respondents, the Office of the Solicitor General and the Office of the
Government Corporate Counsel filed their respective comments.

The central issue is whether or not the BSP is embraced within the Civil Service as that term is
defined in Article IX (B) (2) (1) of the 1987 Constitution which reads as follows:

The Civil Service embraces all branches, subdivisions, instrumentality mentalities and
agencies of the Government, including government-owned or controlled corporations
with original charters.

xxx xxx xxx

The answer to the central issue will determine whether or not private respondent NLRC had
jurisdiction to render the Decision and Resolution which are here sought to be nullified.

The responses of the parties, on the one hand, and of the Office of the Solicitor General and the
Office of the Government Corporate Counsel, upon the other hand, in compliance with the
Resolution of this Court of 9 August 1989, present a noteworthy uniformity. Petitioner BSP and
private respondents submit substantially the same view "that the BSP is a purely private

40
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

organization". In contrast, the Solicitor General and the Government Corporate Counsel take
much the same position, that is, that the BSP is a "public corporation' or a "quasi-public
corporation" and, as well, a "government controlled corporation." Petitioner BSP's compliance
with our Resolution invokes the following provisions of its Constitution and By-laws:

The Boy Scouts of the Philippines declares that it is an independent, voluntary, non-
political, non-sectarian and non-governmental organization, with obligations towards
nation building and with international orientation.

The BSP, petitioner stresses, does not receive any monetary or financial subsidy from the
Government whether on the national or local level.13 Petitioner declares that it is a "purely
private organization" directed and controlled by its National Executive Board the members of
which are, it is said, all "voluntary scouters," including seven (7) Cabinet Secretaries.14

Private respondents submitted a supplementary memorandum arguing that while petitioner


BSP was created as a public corporation, it had lost that status when Section 2 of
Commonwealth Act No. 111 as amended by P.D. No. 460 conferred upon it the powers which
ordinary private corporations organized under the Corporation Code have:

Sec. 2. The said corporation shall have perpetual succession with power to sue and be
sued; to hold such real and personal estate as shall be necessary for corporate purposes,
and to receive real and personal property by gift, devise, or bequest; to adopt a seal,
and to alter or destroy the same at pleasure; to have offices and conduct its business
and affairs in the City of Manila and in the several provinces; to make and adopt by-
laws, rules and regulations not inconsistent with the laws of the Philippines, and
generally to do all such acts and things (including the establishment of regulations for
the election of associates and successors: as may be necessary to carry into effect the
provisions of the Act and promote the purposes of said corporation.

Private respondents also point out that the BSP is registered as a private employer with the
Social Security System and that all its staff members and employees are covered by the Social
Security Act, indicating that the BSP had lost its personality or standing as a public corporation.
It is further alleged that the BSP's assets and liabilities, official transactions and financial
statements have never been subjected to audit by the government auditing office, i.e., the
Commission on Audit, being audited rather by the private auditing firm of Sycip Gorres Velayo
and Co. Private respondents finally state that the appointments of BSP officers and staff were
not approved or confirmed by the Civil Service Commission.

The views of the Office of the Solicitor General and the Office of the Government Corporate
Counsel on the above issue appeared to be generally similar. The Solicitor General's Office,
although it had appeared for the NLRC and filed a Comment on the latter's behalf on the merits
of the Petition for Certiorari, submitted that the BSP is a government-owned or controlled
corporation, having been created by virtue of Commonwealth Act No. 111 entitled "An Act to
Create a Public Corporation to be known as the Boy Scouts of the Philippines and to Define its

41
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Powers and Purposes." The Solicitor General stressed that the BSP was created in order to
"promote, through organization, and cooperation with other agencies the ability of boys to do
things for themselves and others, to train them in scoutcraft, and to teach them patriotism,
courage, self-reliance, and kindred virtues, using the methods which are now in common use by
boy scouts."5 He further noted that the BSP's objectives and purposes are "solely of a
benevolent character and not for pecuniary profit by its members.16 The Solicitor General also
underscored the extent of government participation in the BSP under its charter as reflected in
the composition of its governing body:

The governing body of the said corporation shall consist of a National Executive Board
composed of (a) thePresident of the Philippines or his representative; (b) the charter and
life members of the Boy Scouts of the Philippines; (c) the Chairman of the Board of
Trustees of the Philippine Scouting Foundation; (d) the Regional Chairman of the Scout
Regions of the Philippines; (e) the Secretary of Education and Culture, the Secretary of
Social Welfare, the Secretary of National Defense, the Secretary of Labor, the Secretary
of Finance, the Secretary of Youth and Sports, and the Secretary of local Government and
Community Development; (f) an equal number of individuals from the private sector; (g)
the National President of the Girl Scouts of the Philippines; (h) one Scout of Senior age
from each Scout Region to represent the boy membership; and (i) three representatives
of the cultural minorities. Except for the Regional Chairman who shall be elected by the
Regional Scout Councils during their annual meetings, and the Scouts of their respective
regions, all members of the National Executive Board shall be either by appointment or
cooption, subject to ratification and confirmation by the Chief Scout, who shall be the
Head of State. . . .17 (Emphasis supplied)

The Government Corporate Counsel, like the Solicitor General, describes the BSP as a "public
corporation" but, unlike the Solicitor General, suggests that the BSP is more of a "quasi
corporation" than a "public corporation." The BSP, unlike most public corporations which are
created for a political purpose, is not vested with political or governmental powers to be
exercised for the public good or public welfare in connection with the administration of civil
government. The Government Corporate Counsel submits, more specifically, that the BSP falls
within the ambit of the term "government-owned or controlled corporation" as defined in
Section 2 of P.D. No. 2029 (approved on 4 February 1986) which reads as follows:

A government-owned or controlled corporation is a stock or a non-stock corporation,


whether performing governmental or proprietary functions, which is directly chartered
by special law or if organized under the general corporation law is owned or controlled
by the government directly, or indirectly through a parent corporation or subsidiary
corporation, to the extent of at least a majority of its outstanding capital stock or its
outstanding voting capital stock.

xxx xxx xxx

(Emphasis supplied)

42
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Examining the relevant statutory provisions and the arguments outlined above, the Court
considers that the following need to be considered in arriving at the appropriate legal
characterization of the BSP for purposes of determining whether its officials and staff members
are embraced in the Civil Service. Firstly, BSP's functions as set out in its statutory charter do
have a public aspect. BSP's functions do relate to the fostering of the public virtues of
citizenship and patriotism and the general improvement of the moral spirit and fiber of our
youth. The social value of activities like those to which the BSP dedicates itself by statutory
mandate have in fact, been accorded constitutional recognition. Article II of the 1987
Constitution includes in the "Declaration of Principles and State Policies," the following:

Sec. 13. The State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual, and social well-being. It
shall inculcate in the youth patriotism and nationalism, and encourage their
involvement in public and civic affairs.

At the same time, BSP's sanctions do not relate to the governance of any part of territory of the
Philippines; BSP is not a public corporation in the same sense that municipal corporations or
local governments are public corporations. BSP's functions can not also be described as
proprietary functions in the same sense that the functions or activities of government-owned
or controlled corporations like the National Development Company or the National Steel
Corporation can be described as proprietary or "business-like" in character. Nevertheless, the
public character of BSP's functions and activities must be conceded, for they pertain to the
educational, civic and social development of the youth which constitutes a very substantial and
important part of the nation.

The second aspect that the Court must take into account relates to the governance of the BSP.
The composition of the National Executive Board of the BSP includes, as noted from Section 5
of its charter quoted earlier, includes seven (7) Secretaries of Executive Departments. The
seven (7) Secretaries (now six [6] in view of the abolition of the Department of Youth and
Sports and merger thereof into the Department of Education, Culture and Sports) by
themselves do not constitute a majority of the members of the National Executive Board. We
must note at the same time that the appointments of members of the National Executive
Board, except only the appointments of the Regional Chairman and Scouts of Senior age from
the various Scout Regions, are subject to ratification and confirmation by the Chief Scout, who
is the President of the Philippines. Vacancies to the Board are filled by a majority vote of the
remaining members thereof, but again subject to ratification and confirmation by the Chief
Scout.18 We must assume that such confirmation or ratification involves the exercise of choice
or discretion on the part of ratifying or confirming power. It does appears therefore that there
is substantial governmental (i.e., Presidential) participation or intervention in the choice of the
majority of the members of the National Executive Board of the BSP.

The third aspect relates to the character of the assets and funds of the BSP. The original assets
of the BSP were acquired by purchase or gift or other equitable arrangement with the Boy
Scouts of America, of which the BSP was part before the establishment of the Commonwealth

43
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

of the Philippines. The BSP charter, however, does not indicate that such assets were public or
statal in character or had originated from the Government or the State. According to petitioner
BSP, its operating funds used for carrying out its purposes and programs, are derived principally
from membership dues paid by the Boy Scouts themselves and from property rentals. In this
respect, the BSP appears similar to private non-stock, non-profit corporations, although its
charter expressly envisages donations and contributions to it from the Government and any of
its agencies and instrumentalities.19 We note only that BSP funds have not apparently
heretofore been regarded as public funds by the Commission on Audit, considering that such
funds have not been audited by the Commission.

While the BSP may be seen to be a mixed type of entity, combining aspects of both public and
private entities, we believe that considering the character of its purposes and its functions, the
statutory designation of the BSP as "a public corporation" and the substantial participation of
the Government in the selection of members of the National Executive Board of the BSP, the
BSP, as presently constituted under its charter, is a government-controlled corporation within
the meaning of Article IX. (B) (2) (1) of the Constitution.

We are fortified in this conclusion when we note that the Administrative Code of 1987
designates the BSP as one of the attached agencies of the Department of Education, Culture
and Sports ("DECS").20 An "agency of the Government" is defined as referring to any of the
various units of the Government including a department, bureau, office, instrumentality,
government-owned or-controlled corporation, or local government or distinct unit
therein.21 "Government instrumentality" is in turn defined in the 1987 Administrative Code in
the following manner:

Instrumentality refers to any agency of the National Government, not integrated


within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds,
and enjoying operational autonomy usually through a charter. This term
includes regulatory agencies, chartered institutions and government-owned or controlled
corporations.22 (Emphasis supplied)

The same Code describes a "chartered institution" in the following terms:

Chartered institution refers to any agency organized or operating under a special


charter, and vested by law with functions relating to specific constitutional policies or
objectives. This term includes the state universities and colleges, and the monetary
authority of the State.23 (Emphasis supplied)

We believe that the BSP is appropriately regarded as "a government instrumentality" under the
1987 Administrative Code.

It thus appears that the BSP may be regarded as both a "government controlled corporation
with an original charter" and as an "instrumentality" of the Government within the meaning of

44
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Article IX (B) (2) (1) of the Constitution. It follows that the employees of petitioner BSP are
embraced within the Civil Service and are accordingly governed by the Civil Service Law and
Regulations.

It remains only to note that even before the effectivity of the 1987 Constitution employees of
the BSP already fell within the scope of the Civil Service. In National Housing Corporation v.
Juco,24 decided in 1985, the Court, speaking through Mr. Justice Gutierrez, held:

There should no longer be any question at this time that employees of government-
owned or controlled corporations are governed by the civil service law and civil service
rules and regulations.

Section 1, Article XII-B of the [19731 Constitution specifically provides:

The Civil Service embraces every branch, agency, subdivision and instrumentality of the
Government, including every government-owned or controlled corporation. . . .

The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:

A Civil Service embracing all branches and subdivisions of the Government shall be
provided by law.1wphi1

The inclusion of "government-owned or controlled corporations" within the embrace of


the civil service shows a deliberate effort of the framers to plug an earlier loophole
which allowed government-owned or controlled corporations to avoid the full
consequences of the all encompassing coverage of the civil service system. The same
explicit intent is shown by the addition of "agency" and "instrumentality" to branches
and subdivisions of the Government. All offices and firms of the government are
covered. The amendments introduced in 1973 are not idle exercises or meaningless
gestures. They carry the strong message that civil service coverage is broad and all-
embracing insofar as employment in the government in any of its governmental or
corporate arms is concerned.25

The complaint in NLRC Case No. 1637-84 having been filed on 13 November 1984, when the
1973 Constitution was still in force, our ruling in Juco applies in the case at bar.26

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

45
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

proprio take cognizance of the issue of existence or absence of jurisdiction and pass upon the
same.27

ACCORDINGLY, the Decision of the Labor Arbiter dated 31 July 1985, and the Decision dated 27
February 1987 and Resolution dated 16 October 1987, issued by public respondent NLRC, in
NLRC Case No. 1637-84, are hereby SET ASIDE. All other orders and resolutions rendered in this
case by the Labor Arbiter and the NLRC are likewise SET ASIDE. No pronouncement as to costs.

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

Footnotes
1
Rollo, pp. 49-53.
2
Id., pp. 83-86.
3
Annex "A" of Petition, Rollo, pp. 21-22.
4
Annex "C" of Petition, Rollo, p. 29.
5
Annex "D" of Petition, Rollo, pp. 31-37.
6
Annex "B" of Petition, Rollo, pp. 23-28.
7
Annex "F" of Petition, Rollo, pp. 43-48 at 43.
8
Id., pp. 5-20 at 5.
9
Id., pp. 132-145 at 132.
10
Id., pp. 107-117 at 107.
11
Annex "E" of Petition, Rollo, pp. 38-41 at 39.
12
Rollo, pp. 147-152.
13
Compliance, p. 1; Temporary Rollo.
14
Id.
15
Section 3, Commonwealth Act No. 111, as amended by P.D. No. 460.

46
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
16
Section 4, Id.
17
Section 5, Id.
18
Section 5, Id.
19
Section 8, Id.
20
Book IV, Title VI, Chapter 8, Section 20, Administrative Code of 1987.
21
Introductory Provisions, Section 2 (4), Id.
22
Section 2 (5), Id.
23
Section 2 (12), Id.
24
134 SCRA 172 (1985); Emphasis supplied.
25
134 SCRA at 176-177.
26
See Hagonoy Water District v. Hon. National Labor Relations Commission, G.R. No.
81490, 31 August 1988.
27
Dy v. National Labor Relations Commission, 145 SCRA 211 (1986).

47
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

ZAMORAS VS SU 184 SCRA 248

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 85611 April 6, 1990

VICTORIANO ZAMORAS, petitioner,


vs.
ROQUE SU, JR., ANITA SU HORTELLANO and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

Paulo V. Briones for petitioner.


Pacifico C. Cimafranca for private respondents.

GRIO-AQUINO, J.:

The issue in this petition is whether, upon the established facts, the petitioner was an employee
or tenant of the private respondents.

The petitioner, Victoriano Zamoras, was hired by the respondent, Roque Su, Jr., in 1957
as overseer of his coconut land in Asenario, Dapitan City. Zamoras was charged with the task of
having the land titled in Su's name, and of assigning portions to be worked by tenants,
supervising the cleaning, planting, care and cultivation of the land, the harvesting of coconuts
and selling of the copra. As compensation, Su paid Zamoras a salary of P2,400 per month plus
one-third (1/3) of the proceeds of the sales of copra which normally occurred every two
months. Another one-third of the proceeds went to the tenants and the other third to Su. This
system of sharing was regularly observed up to September, 1981. As the coconut plantation
yielded an average harvest of 21,000 nuts worth P18,900, based on the current market price of
P3 per kilo, Zamoras' share amounted to P6,300 every two months.

In May, 1981, Su informed Zamoras in writing that he obtained a loan from the other
respondent, Anita Su Hortellano, and that he authorized her to harvest the coconuts from his
property "while the loan was outstanding" (p. 8, Rollo). Su sent Zamoras a letter dated May 29,
1981 informing him that he was being laid-off temporarily until Su could obtain a loan from the
Development Bank of the Philippines with which to pay Anita. However, Zamoras was not
allowed anymore to work as overseer of the plantation. Without his knowledge and consent,
Hortellano harvested the coconuts without giving him his one-third share of the copra sales.

48
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On August 8, 1983, Zamoras filed in the Regional Arbitration Branch of the Ministry of Labor
and Employment in Zamboanga City a complaint against Roque Su, Jr. and Anita Su Hortellano
for illegal termination and breach of contract with damages of not less than P75,600 as his
uncollected share of the copra sales from September 15, 1981 to August 1983.

The officer-in-charge of the NLRC Sub-Regional Office in Dipolog City who investigated the case
submitted the following findings which were adopted by the Labor Arbiter

The record would show that the respondent, Atty. Roque Su, Jr., is a resident of 976-A Gerardo
Avenue Extension, Lahug, Cebu City and at the same time an employee in the government up to
the present, while the land wherein the complainant herein was employed by the respondent
as overseer of the land since 1957 up to and until his termination from the service sometime in
September 1981 without just cause or causes duly authorized by law and after due process.
That to prove that complainant was the overseer of the land owned by the respondent are the
sworn declaration of the three witnesses, namely: Vicente Amor, Narcisa Arocha, and Wilfredo
Bernaldes who are presently working as tenants of the respondent. That the three witnesses
testified that they knew the complainant personally who has been working as overseer of the
land because it was through him, the complainant, that they were allowed to work and/or
occupy the land as tenants ever since up to the present. In fact, they further declared that they
do not know personally the owner of the land and besides, they have not seen personally the
said owner as their dealing were directly done thru the complainant. That they always received
their share of the produce from the complainant for every two months up to 1981.

xxx xxx xxx

It is very clear in the evidence of record that complainant was an employee of the respondent.
This fact is even admitted by the respondent in his answer by way of controverting the claim of
the complainant. (pp. 44-45, Rollo.)

On July 30, 1986, the Labor Arbiter rendered a decision holding that Zamoras, as overseer of
the respondent's plantation, was a regular employee whose services were necessary and
desirable to the usual trade or business of his employer. The Labor Arbiter held that the
dismissal of Zamoras was without just cause, hence, illegal. The private respondents were
ordered to reinstate him to his former position as overseer of the plantation and to pay him
backwages equivalent to P31,975.83 in the event that he opted not to be reinstated or that his
reinstatement was not feasible.

The private respondents appealed to the National Labor Relations Commission, alleging that
the Labor Arbiter erred:

1. in disregarding respondents' evidence (a financial report showing the yearly copra


sales from 1973 to 1977), proving that complainant's one-third share of the copra sales
amounted to P5,985.16 only and not P6,300 per harvest;

49
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

2. in not holding that the complainant can no longer be reinstated for he is already
dead; and

3. in not finding that no employer-employee relationship existed between the parties.

On September 16, 1988, the NLRC rendered a decision reversing the Labor Arbiter. It held that
"the right to control test used in determining the existence of an employer-employee
relationship is unavailing in the instant case and that what exists between the parties is a
landlord-tenant relationship" (p. 32, Rollo), because such functions as introducing permanent
improvements on the land, assigning portions to tenants, supervising the cleaning, planting,
care and cultivation of the plants, and deciding where and to whom to sell the copra are
attributes of a landlord-tenant relationship, hence, jurisdiction over the case rests with the
Court of Agrarian Relations.

Zamoras filed this petition, assailing the NLRC's decision.

There is merit in the petition.

The NLRC's conclusion that a landlord-tenant relationship existed between Su and Zamoras is
not supported by the evidence which shows that Zamoras was hired by Su not as a tenant but
as overseer of his coconut plantation. As overseer, Zamoras hired the tenants and assigned
their respective portions which they cultivated under Zamoras' supervision. The tenants dealt
directly with Zamoras and received their one-third share of the copra produce from him. The
evidence also shows that Zamoras, aside from doing administrative work for Su, regularly
managed the sale of copra processed by the tenants. There is no evidence that Zamoras
cultivated any portion of Su's land personally or with the aid of his immediate farm household.
In fact the respondents never raised the issue of tenancy in their answer.

Under Section 5 (a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid
available from within his immediate household, cultivates the land belonging to or possessed
by another, with the latter's consent for purposes of production, sharing the produce with the
landholder or for a price certain or ascertainable in produce or in money or both, under the
leasehold tenancy system" (Matienzo vs. Servidad, 107 SCRA 276). Agricultural tenancy is
defined as "the physical possession by a person of land devoted to agriculture, belonging to or
legally possessed by another for the purpose of production through the labor of the former and
of the members of his immediate farm household in consideration of which the former agrees
to share the harvest with the latter or to pay a price certain or ascertainable, whether in
produce or in money, or both" (Sec. 3, R.A. No. 1199; 50 O.G. 4655-56; Miguel Carag vs. CA, et
al., 151 SCRA 44).

The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the
tenant; (2) the subject is the agricultural holding; (3) there is consent between the parties; (4)
the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6)
there is a sharing of harvests between landlord and tenant (Antonio Castro vs. CA and De la

50
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Cruz, G.R. L-34613, January 26, 1989; Tiongson vs. CA, 130 SCRA 482; Guerrero vs. CA, 142 SCRA
138).

The element of personal cultivation of the land, or with the aid of his farm household, essential
in establishing a landlord-tenant or a lessor-lessee relationship, is absent in the relationship
between Su and Zamoras (Co vs. IAC, 162 SCRA 390; Graza vs. CA, 163 SCRA 39), for Zamoras
did not cultivate any part of Su's plantation either by himself or with the help of his household.

On the other hand, the following circumstances are indicative of an employer-employee


relationship between them:

1. Zamoras was selected and hired by Su as overseer of the coconut plantation.

2. His duties were specified by Su.

3. Su controlled and supervised the performance of his duties. He determined to whom


Zamoras should sell the copra produced from the plantation.

4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every
two months as compensation for managing the plantation.

Since Zamoras was an employee, not a tenant of Su, it is the NLRC, not the Court of Agrarian
Relations, that has jurisdiction to try and decide Zamora's complaint for illegal dismissal (Art.
217, Labor Code; Manila Mandarin Employees Union vs. NLRC, 154 SCRA 368; Jacqueline
Industries Dunhill Bags Industries, et al. vs. NLRC, et al., 69 SCRA 242).

WHEREFORE, the assailed decision is reversed and a new one is entered, declaring Zamoras to
be an employee of respondent Roque Su, Jr. and that his dismissal was illegal and without
lawful cause. He is entitled to reinstatement with backwages, but because he is dead and may
no longer be reinstated, the private respondents are ordered to pay to his heirs the backwages
due him, as well as his share of the copra sales from the plantation for a period of three (3)
years from his illegal dismissal in September, 1981, plus separation pay in lieu of reinstatement.
Costs against the private respondents.

SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

51
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

FORTUNE CEMENT VS NLRC

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 79762 January 24, 1991

FORTUNE CEMENT CORPORATION, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division) and ANTONIO M.
LAGDAMEO, respondents.

De Leon, Diokno & Associates Law Offices for petitioner.


Romarie G. Villonco and George C. Nograles for private respondent.

GRIO-AQUINO, J.:

This is a petition for certiorari with prayer to annul the resolution dated May 29, 1987 of
respondent National Labor Relations Commission (NLRC) reversing the order dated December
3, 1985 of the Labor Arbiter which dismissed private respondent Antonio M. Lagdameo's
(Lagdameo for brevity) complaint for Illegal Dismissal (NLRC NCR Case No. 1-228-85) against
petitioner Fortune Cement Corporation (FCC for brevity) for lack of jurisdiction.

Lagdameo is a registered stockholder of FCC.

On October 14, 1975, at the FCC Board of Directors' regular monthly meeting, he was elected
Executive Vice-President of FCC effective November 1, 1975 (p. 3, Rollo).

Some eight (8) years later, or on February 10, 1983, during a regular meeting, the FCC Board
resolved that all of its incumbent corporate officers, including Lagdameo, would be "deemed"
retained in their respective positions without necessity of yearly reappointments, unless they
resigned or were terminated by the Board (p. 4, Rollo).

At subsequent regular meetings held on June 14 and 21, 1983, the FCC Board approved and
adopted a resolution dismissing Lagdameo as Executive Vice-President of the company,
effective immediately, for loss of trust and confidence (p. 4, Rollo).

52
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On June 21, 1983, Lagdameo filed with the National Labor Relations Commission (NLRC),
National Capital Region, a complaint for illegal dismissal against FCC (NLRC-NCR Case No. 1-228-
85) alleging that his dismissal was done without a formal hearing and investigation and,
therefore, without due process (p. 63, Rollo).

On August 5, 1985, FCC moved to dismiss Lagdameo's complaint on the ground that his dismiss
as a corporate officer is a purely intra-corporate controversy over which the Securities and
Exchange Commission (SEC) has original and exclusive jurisdiction.

The Labor Arbiter granted the motion to dismiss (p. 22, Rollo). On appeal, however, the NLRC
set aside the Labor Arbiter's order and remanded the case to the Arbitration Branch "for
appropriate proceedings" (NLRC Resolution dated April 30, 1987). The NLRC denied FCC's
motion for reconsideration (p. 5, Rollo). Dissatisfied, FCC filed this petition for certiorari.

We find merit in the petition.

The sole issue to be resolved is whether or not the NLRC has jurisdiction over a complaint filed
by a corporate executive vice-president for illegal dismissal, resulting from a board resolution
dismissing him as such officer.

Section 5 of Presidential Decree No. 902-A vests in the SEC original and exclusive jurisdiction
over this controversy:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and
Exchange Commissionover corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide cases involving:

a) Devices and schemes employed by or any acts, of the board of directors, business
associates, its officers or partners, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or stockholders, partners,
members of associations or organization registered with the Commission;

b) Controversies arising out of intra-corporate or partnership relations, between and


among stockholders, members, or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members or
associates, respectively; and between such corporation, partnership or association and
the state insofar as it concerns their individual franchise or right to exist as such entity;

c) Controversies in the election or appointments of directors, trustees, officers or


managers of such corporations, partnership or associations." (Section 5, P.D. 902-A;
Emphasis supplied.)

In reversing the decision of Labor Arbiter Porfirio E. Villanueva, respondent NLRC held:

53
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

. . . . It is not disputed that complainant Lagdameo was an employee of respondent


Fortune Cement Corporation, being then the Executive Vice-President. For having been
dismissed for alleged loss of trust and confidence, complainant questioned his dismissal
on such ground and the manner in which he was dismissed, claiming that no
investigation was conducted, hence, there was and is denial of due process. Predicated
on the above facts, it is clear to Us that a labor dispute had arisen between the
appellant and the respondent corporation, a dispute which falls within the original and
exclusive jurisdiction of the NLRC. A labor dispute as defined in the Labor Code includes
any controversy or matter concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing, maintaining, changing or
arranging the terms and conditions of employment regardless of whether or not the
disputants stand in the proximate relations of employers and employees." (pp. 16-
17, Rollo).

The Solicitor General, declining to defend public respondent in its pleading entitled
"Manifestation in Lieu of Comment," aptly observed:

The position of "Executive Vice-President," from which private respondent Lagdameo


claims to have been illegally dismissed, is an elective corporate office. He himself
acquired that position through election by the corporation's Board of Directors,
although he also lost the same as a consequence of the latter's resolution.

Indeed the election, appointment and/or removal of an executive vice-president is a


prerogative vested upon a corporate board.

And it must be, not only because it is a practice observed in petitioner Fortune Cement
Corporation, but more so, because of an express mandate of law. (p. 65, Rollo.)

The Solicitor General pointed out that "a corporate officer's dismissal is always a corporate act
and/or intra-corporate controversy and that nature is not altered by the reason or wisdom
which the Board of Directors may have in taking such action." The dispute between petitioner
and Lagdameo is of the class described in Section 5, par. (c) of Presidential Decree No. 902-A,
hence, within the original and exclusive jurisdiction of the SEC. The Solicitor General
recommended that the petition be granted and NLRC-NCR Case No. 1-228-85 be dismissed by
respondent NLRC for lack of jurisdiction (p. 95, Rollo).

In PSBA vs. Leao (127 SCRA 778), this Court, confronted with a similar controversy, ruled that
the SEC, not the NLRC, has jurisdiction:

This is not a case of dismissal. The situation is that of a corporate office having been
declared vacant, and of Tan's not having been elected thereafter. The matter of whom
to elect is a prerogative that belongs to the Board, and involves the exercise of
deliberate choice and the faculty of discriminative selection. Generally speaking, the
relationship of a person to a corporation, whether as officer or as agent or employee is

54
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

not determined by the nature of the services performed, but by the incidents of the
relationship as they actually exist.

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

The issue of the SEC's power or jurisdiction is decisive and renders unnecessary a consideration
of the other questions raised by Lagdameo. Thus did this Court rule in the case of Dy vs.
National Labor Relations Commission (145 SCRA 211) which involved a similar situation:

It is of no moment that Vailoces, in his amended complaint, seeks other reliefs which
would seemingly fall under the jurisdiction of the Labor Arbiter, because a closer look at
these underpayment of salary and non-payment of living allowance shows that
they are actually part of the perquisites of his elective position, hence, intimately linked
with his relations with the corporation.1wphi1 The question of remuneration, involving
as it does, a person who is not a mere employee but a stockholder and officer, an
integral part, it might be said, of the corporation, is not a simple labor problem but a
matter that comes within the area of corporate affairs and management, and is in fact a
corporate controversy in contemplation of the Corporation Code. (Emphasis ours.)

WHEREFORE, the questioned Resolution of the NLRC reversing the decision of the Labor
Arbiter, having been rendered without jurisdiction, is hereby reversed and set aside. The
decision of the Labor Arbiter dated December 3, 1985 dismissing NLRC-NCR Case No. 1-228-85
is affirmed, without prejudice to private respondent Antonio M. Lagdameo's seeking recourse
in the appropriate forum. No costs.

SO ORDERED.

Narvasa, Gancayco and Medialdea, JJ., concur.


Cruz, J., took no part.

55
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

SEAFDEC VS NLRC 206 SCRA 283

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 86773 February 14, 1992

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT


(SEAFDEC-AQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.),
BEN DELOS REYES (FINANCE OFFICER), petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents.

Ramon Encarnacion for petitioners.

Caesar T. Corpus for private respondent.

NOCON, J.:

This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National
Labor Relations Commission sustaining the labor arbiter, in holding herein petitioners
Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD), Dr.
Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to pay private respondent Juvenal
Lazaga the amount of P126,458.89 plus interest thereon computed from May 16, 1986 until full
payment thereof is made, as separation pay and other post-employment benefits, and the
resolution denying the petitioners' motion for reconsideration of said decision dated January 9,
1989.

The antecedent facts of the case are as follows:

SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries


Development Center, organized through an agreement entered into in Bangkok, Thailand on
December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia
and the Philippines with Japan as the sponsoring country (Article 1, Agreement Establishing the
SEAFDEC).

56
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an
a probationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on
January 5, 1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00.
Thereafter, he was appointed to the position of Professional III and designated as Head of
External Affairs Office with the same pay and benefits.

On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of
termination to private respondent informing him that due to the financial constraints being
experienced by the department, his services shall be terminated at the close of office hours on
May 15, 1986 and that he is entitled to separation benefits equivalent to one (1) month of his
basic salary for every year of service plus other benefits (Rollo, p. 153).

Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter
filed on March 18, 1987 a complaint against petitioners for non-payment of separation benefits
plus moral damages and attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of
Petition for Certiorari).

Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the
case inasmuch as the SEAFDEC-AQD is an international organization and that private
respondent must first secure clearances from the proper departments for property or money
accountability before any claim for separation pay will be paid, and which clearances had not
yet been obtained by the private respondent.

A formal hearing was conducted whereby private respondent alleged that the non-issuance of
the clearances by the petitioners was politically motivated and in bad faith. On the other hand,
petitioners alleged that private respondent has property accountability and an outstanding
obligation to SEAFDEC-AQD in the amount of P27,532.11. Furthermore, private respondent is
not entitled to accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of
the same during his employment with the SEAFDEC-AQD (Annex "D",Id.).

On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which
reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering


respondents:

1. To pay complainant P126,458.89, plus legal interest thereon computed from


May 16, 1986 until full payment thereof is made, as separation pay and other
post-employment benefits;

2. To pay complainant actual damages in the amount of P50,000, plus 10%


attorney's fees.

All other claims are hereby dismissed.

57
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

SO ORDERED. (Rollo, p. 51, Annex "E")

On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the
award of P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p.
28, id.)

On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which
was denied on January 9, 1989. Thereafter, petitioners instituted this petition
for certiorari alleging that the NLRC has no jurisdiction to hear and decide respondent Lazaga's
complaint since SEAFDEC-AQD is immune from suit owing to its international character and the
complaint is in effect a suit against the State which cannot be maintained without its consent.

The petition is impressed with merit.

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-


AQD) is an international agency beyond the jurisdiction of public respondent NLRC.

It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia,


Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom
of Thailand and Republic of Vietnam (Annex "H", Petition).

The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on
January 16,1968. Its purpose is as follows:

The purpose of the Center is to contribute to the promotion of the fisheries


development in Southeast Asia by mutual co-operation among the member
governments of the Center, hereinafter called the "Members", and through
collaboration with international organizations and governments external to the
Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H" Petition)
(p.310, Rollo)

SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in
Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be
established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the
Agreement establishing SEAFDEC mandates:

1. The Council shall be the supreme organ of the Center and all powers of the
Center shall be vested in the Council.

Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys


functional independence and freedom from control of the state in whose territory its office is
located.

58
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public
International Law (p. 83, 1956 ed.):

Permanent international commissions and administrative bodies have been


created by the agreement of a considerable number of States for a variety of
international purposes, economic or social and mainly non-political. Among the
notable instances are the International Labor Organization, the International
Institute of Agriculture, the International Danube Commission. In so far as they
are autonomous and beyond the control of any one State, they have a distinct
juridical personality independent of the municipal law of the State where they
are situated. As such, according to one leading authority "they must be deemed
to possess a species of international personality of their own." (Salonga and Yap,
Public International Law, 83 [1956 ed.])

Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be
represented by one Director in the governing SEAFDEC Council (Agreement Establishing
SEAFDEC, Art. 5, Par. 1, Annex "H",ibid.) and that its national laws and regulations shall apply
only insofar as its contribution to SEAFDEC of "an agreed amount of money, movable and
immovable property and services necessary for the establishment and operation of the Center"
are concerned (Art. 11, ibid.). It expressly waived the application of the Philippine laws on the
disbursement of funds of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).

The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over
SEAFDEC-AQD in Opinion No. 139, Series of 1984

4. One of the basic immunities of an international organization is immunity from


local jurisdiction, i.e.,that it is immune from the legal writs and processes issued
by the tribunals of the country where it is found. (See Jenks, Id., pp. 37-44) The
obvious reason for this is that the subjection of such an organization to the
authority of the local courts would afford a convenient medium thru which the
host government may interfere in there operations or even influence or control
its policies and decisions of the organization; besides, such subjection to local
jurisdiction would impair the capacity of such body to discharge its
responsibilities impartially on behalf of its member-states. In the case at bar, for
instance, the entertainment by the National Labor Relations Commission of Mr.
Madamba's reinstatement cases would amount to interference by the Philippine
Government in the management decisions of the SEARCA governing board; even
worse, it could compromise the desired impartiality of the organization since it
will have to suit its actuations to the requirements of Philippine law, which may
not necessarily coincide with the interests of the other member-states. It is
precisely to forestall these possibilities that in cases where the extent of the
immunity is specified in the enabling instruments of international organizations,
jurisdictional immunity from the host country is invariably among the first

59
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

accorded. (See Jenks, Id.; See also Bowett, The Law of International Institutions,
pp. 284-1285).

Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing
because estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause
of action. Jurisdiction is conferred by law. Where there is none, no agreement of the parties can
provide one. Settled is the rule that the decision of a tribunal not vested with appropriate
jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held:

A rule, that had been settled by unquestioned acceptance and upheld in


decisions so numerous to cite is that the jurisdiction of a court over the subject
matter of the action is a matter of law and may not be conferred by consent or
agreement of the parties. The lack of jurisdiction of a court may be raised at any
stage of the proceedings, even on appeal. This doctrine has been qualified by
recent pronouncements which it stemmed principally from the ruling in the cited
case of Sibonghanoy. It is to be regretted, however, that the holding in said case
had been applied to situations which were obviously not contemplated therein.
The exceptional circumstances involved in Sibonghanoy which justified the
departure from the accepted concept of non-waivability of objection to
jurisdiction has been ignored and, instead a blanket doctrine had been
repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the
exception, but rather the general rule, virtually overthrowing altogether the
time-honored principle that the issue of jurisdiction is not lost by waiver or by
estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982])

Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286
[1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the
Court in said case explained why it took cognizance of the case. Said the Court:

We would note, finally, that the present petition relates to a controversy


between two claimants to the same position; this is not a controversy between
the SEAFDEC on the one hand, and an officer or employee, or a person claiming
to be an officer or employee, of the SEAFDEC, on the other hand. There is before
us no question involving immunity from the jurisdiction of the Court, there being
no plea for such immunity whether by or on behalf of SEAFDEC, or by an official
of SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied).

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the


courts or local agency of the Philippine government, the questioned decision and resolution of
the NLRC dated July 26, 1988 and January 9, 1989, respectively, are hereby REVERSED and SET
ASIDE for having been rendered without jurisdiction. No costs.

SO ORDERED.

60
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

61
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

PEPSI COLA VS GAL-LANG 201 SCRA 695

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 89621 September 24, 1991

PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General
Manager ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE
HERAYA, petitioners,
vs.
HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS &
FULGENCIO LEGO, respondents.

Aurelio D. Menzon for petitioners.

Mario P. Nicolasora co-counsel for petitioners.

Papiano L. Santo for private respondents.

CRUZ, J.:p

The question now before us has been categorically resolved in earlier decisions of the Court
that a little more diligent research would have disclosed to the petitioners. On the basis of
those cases and the facts now before us, the petition must be denied.

The private respondents were employees of the petitioner who were suspected of complicity in
the irregular disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a
criminal complaint for theft against them but this was later withdrawn and substituted with a
criminal complaint for falsification of private documents. On November 26, 1987, after a
preliminary investigation conducted by the Municipal Trial Court of Tanauan, Leyte, the
complaint was dismissed. The dismissal was affirmed on April 8, 1988, by the Office of the
Provincial Prosecutor.

Meantime, allegedly after an administrative investigation, the private respondents were


dismissed by the petitioner company on November 23, 1987. As a result, they lodged a
complaint for illegal dismissal with the Regional Arbitration Branch of the NLRC in Tacloban City
on December 1, 1987, and decisions manded reinstatement with damages. In addition, they
instituted in the Regional Trial Court of Leyte, on April 4, 1988, a separate civil complaint

62
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

against the petitioners for damages arising from what they claimed to be their malicious
prosecution.

The petitioners moved to dismiss the civil complaint on the ground that the trial court had no
jurisdiction over the case because it involved employee-employer relations that were
exclusively cognizable by the labor arbiter. The motion was granted on February 6, 1989. On
July 6, 1989, however, the respondent judge, acting on the motion for reconsideration,
reinstated the complaint, saying it was "distinct from the labor case for damages now pending
before the labor courts." The petitioners then came to this Court for relief.

The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to
support their position that the private respondents civil complaint for damages falls under the
jurisdiction of the labor arbiter. They particularly cite the case of Getz Corporation v. Court of
Appeals, 1 where it was held that a court of first instance had no jurisdiction over the complaint
filed by a dismissed employee "for unpaid salary and other employment benefits, termination
pay and moral and exemplary damages."

We hold at the outset that the case is not in point because what was involved there was a claim
arising from the alleged illegal dismissal of an employee, who chose to complain to the regular
court and not to the labor arbiter. Obviously, the claim arose from employee-employer
relations and so came under Article 217 of the Labor Code which then provided as follows:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor
Arbiters shall have the original and exclusive jurisdiction to hear and decide
within thirty (30) working days after submission of the case by the parties for
decision, the following cases involving all workers, whether agricultural or non-
agricultural:

1. Unfair labor practice cases;

2. Those that workers may file involving wages, hours of work and other terms
and conditions of employment;

3. All money claims of workers, including those based on non-payment or


underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and maternity benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this Code, including questions
involving the legality of strikes and lockouts.

63
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by labor Arbiters. 2

It must be stressed that not every controversy involving workers and their employers can be
resolved only by the labor arbiters. This will be so only if there is a "reasonable causal
connection" between the claim asserted and employee-employer relations to put the case
under the provisions of Article 217. Absent such a link, the complaint will be cognizable by the
regular courts of justice in the exercise of their civil and criminal jurisdiction.

In Medina v. Castro-Bartolome, 3 two employees filed in the Court of First Instance of Rizal a
civil complaint for damages against their employer for slanderous remarks made against them
by the company president. On the order dismissing the case because it came under the
jurisdiction of the labor arbiters, Justice Vicente Abad Santos said for the Court:

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

In Singapore Airlines Ltd. v. Pao, 4 where the plaintiff was suing for damages for alleged
violation by the defendant of an "Agreement for a Course of Conversion Training at the Expense
of Singapore Airlines Limited," the jurisdiction of the Court of First Instance of Rizal over the
case was questioned. The Court, citing the earlier case of Quisaba v. Sta. Ines Melale Veneer
and Plywood, Inc., 5 declared through Justice Herrera:

Stated differently, petitioner seeks protection under the civil laws and claims no
benefits under the Labor Code. The primary relief sought is for liquidated
damages for breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation pay.
The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.

In Molave Sales, Inc. v. Laron, 6 the same Justice held for the Court that the claim of the plaintiff
against its sales manager for payment of certain accounts pertaining to his purchase of vehicles
and automotive parts, repairs of such vehicles, and cash advances from the corporation was
properly cognizable by the Regional Trial Court of Dagupan City and not the labor arbiter,
because "although a controversy is between an employer and an employee, the Labor Arbiters
have nojurisdiction if the Labor Code is not involved."

The latest ruling on this issue is found in San Miguel Corporation v. NLRC, 7 where the above
cases are cited and the changes in Article 217 are recounted. That case involved a claim of an
employee for a P60,000.00 prize for a proposal made by him which he alleged had been

64
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

accepted and implemented by the defendant corporation in the processing of one of its beer
products. The claim was filed with the labor arbiter, who dismissed it for lack of jurisdiction but
was reversed by the NLRC on appeal. In setting aside the appealed decision and dismissing the
complaint, the Court observed through Justice Feliciano:

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.

xxx xxx xxx

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.

xxx xxx xxx

While paragraph 3 above refers to "all money claims of workers," it is not


necessary to suppose that the entire universe of money claims that might be
asserted by workers against their employers has been absorbed into the original
and exclusive jurisdiction of Labor Arbiters.

xxx xxx xxx

For it cannot be presumed that money claims of workers which do not arise out
of or in connection with their employer-employee relationship, and which would
therefore fall within the general jurisdiction of the regular courts of justice, were
intended by the legislative authority to be taken away from the jurisdiction of
the courts and lodged with Labor Arbiters on an exclusive basis. The Court,
therefore, believes and so holds that the 'money claims of workers" referred to
in paragraph 3 of Article 217 embraces money claims which arise out of or in
connection with the employer- employee relationship, or some aspect or
incident of such relationship. Put a little differently, that money claims of
workers which now fall within the original and exclusive jurisdiction of Labor

65
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Arbiters are those money claims which have some reasonable causal connection
with the employer-employee relationship (Ibid.).

The case now before the Court involves a complaint for damages for malicious prosecution
which was filed with the Regional Trial Court of Leyte by the employees of the defendant
company. It does not appear that there is a "reasonable causal connection" between the
complaint and the relations of the parties as employer and employees. The complaint did not
arise from such relations and in fact could have arisen independently of an employment
relationship between the parties. No such relationship or any unfair labor practice is asserted.
What the employees are alleging is that the petitioners acted with bad faith when they filed the
criminal complaint which the Municipal Trial Court said was intended "to harass the poor
employees" and the dismissal of which was affirmed by the Provincial Prosecutor "for lack of
evidence to establish even a slightest probability that all the respondents herein have
committed the crime imputed against them." This is a matter which the labor arbiter has no
competence to resolve as the applicable law is not the Labor Code but the Revised Penal Code.

"Talents differ, all is well and wisely put," so observed the philosopher-poet. 8 So it must be in
the case we here decide.

WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs
against the petitioner.

SO ORDERED.

Narvasa (Chairman), Grio-Aquino and Medialdea, JJ., concur.

Footnotes

1 116 SCRA 86.

2 This has since been amended by Sec. 9, R.A. 6715, effective March 21, 1989, to
read as follows:

ART. 217. Jurisdiction of Labor Arbiters and the Commission.-4a) Except as


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

1. Unfair labor practice cases;

66
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

2. Termination disputes;

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

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

5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strike 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.

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

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


bargaining agreement 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
be provided in said agreements.

3 116 SCRA 597.

4 122 SCRA 671.

5 58 SCRA 771.

6 129 SCRA 719.

7 161 SCRA 719.

8 "The Mountain and the Squirrel," by Ralph Waldo Emerson.

67
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

TOLOSA VS NLRC 401 SCRA 291

Republic of the Philippines


SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 149578 April 10, 2003

EVELYN TOLOSA, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, QWANA KAIUN (through its resident-agent,
FUMIO NAKAGAWA), ASIA BULK TRANSPORT PHILS. INC., PEDRO GARATE and MARIO
ASIS, respondents.

PANGANIBAN, J.:

As a rule, labor arbiters and the National Labor Relations Commission have no power or
authority to grant reliefs from claims that do not arise from employer-employee relations. They
have no jurisdiction over torts that have no reasonable causal connection to any of the claims
provided for in the Labor Code, other labor statutes, or collective bargaining agreements.

The Case

The Petition for Review before us assails the April 18, 2001 Decision 1 of the Court of Appeals
(CA) in CA-GR SP No. 57660, as well as the April 17, 2001 CA Resolution2 denying petitioner's
Motion for Reconsideration. The dispositive portion of the challenged Decision reads as follows:

"WHEREFORE, premises considered, the instant petition for certiorari is hereby DENIED
and accordingly DISMISSED, without prejudice to the right of herein petitioner to file a
suit before the proper court, if she so desires. No pronouncement as to costs." 3

The Facts

The appellate court narrated the facts of the case in this manner:

"Evelyn Tolosa (hereafter EVELYN), was the widow of Captain Virgilio Tolosa (hereafter
CAPT. TOLOSA) who was hired by Qwana-Kaiun, through its manning agent, Asia Bulk
Transport Phils. Inc., (ASIA BULK for brevity), to be the master of the Vessel named M/V
Lady Dona. CAPT. TOLOSA had a monthly compensation of US$1700, plus US$400.00
monthly overtime allowance. His contract officially began on November 1, 1992, as
supported by his contract of employment when he assumed command of the vessel in
Yokohama, Japan. The vessel departed for Long Beach California, passing by Hawaii in

68
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

the middle of the voyage. At the time of embarkation, CAPT. TOLOSA was allegedly
shown to be in good health.

"During 'channeling activities' upon the vessel's departure from Yokohama sometime on
November 6, 1992, CAPT. TOLOSA was drenched with rainwater. The following day,
November 7, 1992, he had a slight fever and in the succeeding twelve (12) days, his
health rapidly deteriorated resulting in his death on November 18, 1992.

"According to Pedro Garate, Chief Mate of the Vessel, in his statement submitted to the
U.S. Coast Guard on November 23, 1992 upon arrival in Long Beach, California CAPT.
TOLOSA experienced high fever between November 11-15, 1992 and suffered from
loose bowel movement (LBM) beginning November 9, 1992. By November 11, 1992, his
temperature was 39.5 although his LBM had 'slightly' stopped. The next day, his
temperature rose to 39.8 and had lost his appetite. In the evening of that day,
November 13, 1992, he slipped in the toilet and suffered scratches at the back of his
waist. First aid was applied and CAPT. TOLOSA was henceforth confined to his quarters
with an able seaman to watch him 24 hours a day until November 15, 1992, when his
conditioned worsened.

"On the same day, November 15, 1992, the Chief Engineer initiated the move and
contacted ASIA BULK which left CAPT. TOLOSA's fate in the hands of Pedro Garate and
Mario Asis, Second Mate of the same vessel who was in-charge of the primary medical
care of its officers and crew. Contact with the U.S. Coast Guard in Honolulu, Hawaii
(USCGHH) was likewise initiated to seek medical advice.

"On November 17, 1992, CAPT. TOLOSA was 'losing resistance' and his 'condition was
getting serious.' At 2215 GMT, a telex was sent to ASIA BULK requesting for the
immediate evacuation of CAPT. TOLOSA and thereafter an airlift was set on November
19, 1992. However, on November 18, 1992, at 0753 GMT, CAPT. TOLOSA was officially
recorded as having breathed his last.

"Because of the death of CAPT. TOLOSA, his wife, EVELYN, as petitioner, filed a
Complaint/Position Paper before the POEA (POEA Case No. 93-06-1080) against Qwana-
Kaiun, thru its resident-agent, Mr. Fumio Nakagawa, ASIA BULK, Pedro Garate and Mario
Asis, as respondents.

"After initial hearings and submissions of pleadings, the case was however transferred
to the Department of Labor and Employment, National Labor Relations Commission
(NLRC), when the amendatory legislation expanding its jurisdiction, and removing
overseas employment related claims from the ambit of POEA jurisdiction. The case was
then raffled to Labor Arbiter, Vladimir Sampang.

xxx xxx xxx

69
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

"After considering the pleadings and evidences, on July 8, 1997, the Labor Arbiter
Vladimir P. L. Sampang, in conformity with petitioner's plea to hold respondents
solidarily liable, granted all the damages, (plus legal interest), as prayed for by the
petitioner. The dispositive portion of his Decision reads:

'WHEREFORE, premises considered, the respondents are hereby ordered to


jointly and solidarily pay complainants the following:

1. US$176,400.00 (US$2,100.00 x 12 months x 7 years) or P4,586,400.00 (at


P26.00 per US$1.00) by way of lost income;

2. interest at the legal rate of six percent (6%) per annum or P1,238,328.00 (from
November 1992 to May 1997 or 4 years);

3. moral damages of P200,000.00;

4. exemplary damages of P100,000.00; and

5. 10% of the total award, or P612,472.80, as attorney's fees.'

xxx xxx xxx

"On appeal, private respondents raised before the National Labor Relations Commission
(NLRC) the following grounds:

(a) the action before the Arbiter, as he himself concedes, is a complaint based on
torts due to negligence. It is the regular courts of law which have jurisdiction
over the action;

(b) Labor Arbiters have jurisdiction over claims for damages arising from
employer-employee relationship (Art. 217, Section (a) (3));

(c) In this case, gross negligence is imputed to respondents Garate and Asis, who
have no employer-employee relationship with the late Capt. Virgilio Tolosa;

(d) The labor arbiter has no jurisdiction over the controversy;

xxx xxx xxx

"Despite other peripheral issues raised by the parties in their respective pleadings, the
NLRC on September 10, 1998, vacated the appealed decision dated July 8, 1997 of the
Labor Arbiter and dismissed petitioner's case for lack of jurisdiction over the subject
matter of the action pursuant to the provisions of the Labor Code, as
amended."4 (Citations omitted)

70
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Ruling of the Court of Appeals

Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction over the
subject matter of the action filed by petitioner. Her cause did not arise from an employer-
employee relation, but from a quasi delict or tort. Further, there is no reasonable causal
connection between her suit for damages and her claim under Article 217 (a)(4) of the Labor
Code, which allows an award of damages incident to an employer-employee relation.

Hence, this Petition.5

Issues

Petitioner raises the following issues for our consideration:

"I

"Whether or not the NLRC has jurisdiction over the case.

"II

"Whether or not Evelyn is entitled to the monetary awards granted by the labor
arbiter."6

After reviewing petitioner's Memorandum, we find that we are specifically being asked to
determine 1) whether the labor arbiter and the NLRC had jurisdiction over petitioner's action,
and 2) whether the monetary award granted by the labor arbiter has already reached finality.

The Court's Ruling

The Petition has no merit.

First Issue:
Jurisdiction over the Action

Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the
failure of private respondents -- as employers of her husband (Captain Tolosa) -- to provide him
with timely, adequate and competent medical services under Article 161 of the Labor Code:

"ART 161. Assistance of employer. -- It shall be the duty of any employer to provide all
the necessary assistance to ensure the adequate and immediate medical and dental
attendance and treatment to an injured or sick employee in case of emergency."

71
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Likewise, she contends that Article 217 (a) (4)7 of the Labor Code vests labor arbiters and the
NLRC with jurisdiction to award all kinds of damages in cases arising from employer-employee
relations.

Petitioner also alleges that the "reasonable causal connection" rule should be applied in her
favor. Citing San Miguel Corporation v. Etcuban,8 she insists that a reasonable causal connection
between the claim asserted and the employer-employee relation confers jurisdiction upon
labor tribunals. She adds that she has satisfied the required conditions: 1) the dispute arose
from an employer-employee relation, considering that the claim was for damages based on the
failure of private respondents to comply with their obligation under Article 161 of the Labor
Code; and 2) the dispute can be resolved by reference to the Labor Code, because the material
issue is whether private respondents complied with their legal obligation to provide timely,
adequate and competent medical services to guarantee Captain Tolosa's occupational safety.9

We disagree. We affirm the CA's ruling that the NLRC and the labor arbiter had no jurisdiction
over petitioner's claim for damages, because that ruling was based on a quasi delict or tort per
Article 2176 of the Civil Code.10

Time and time again, we have held that the allegations in the complaint determine the nature
of the action and, consequently, the jurisdiction of the courts. 11 After carefully examining the
complaint/position paper of petitioner, we are convinced that the allegations therein are in the
nature of an action based on a quasi delict or tort. It is evident that she sued Pedro Garate and
Mario Asis for gross negligence.

Petitioner's complaint/position paper refers to and extensively discusses the negligent acts of
shipmates Garate and Asis, who had no employer-employee relation with Captain Tolosa.
Specifically, the paper alleges the following tortious acts:

"x x x [R]espondent Asis was the medical officer of the Vessel, who failed to regularly
monitor Capt. Tolosa's condition, and who needed the USCG to prod him to take the
latter's vital signs. In fact, he failed to keep a medical record, like a patient's card or
folder, of Capt. Tolosa's illness."12

"Respondents, however, failed Capt. Tolosa because Garate never initiated actions to
save him. x x x In fact, Garate rarely checked personally on Capt. Tolosa's condition, to
wit:"13

"x x x Noticeably, the History (Annex "D") fails to mention any instance when Garate
consulted the other officers, much less Capt. Tolosa, regarding the possibility of
deviation. To save Capt. Tolosa's life was surely a just cause for the change in course,
which the other officers would have concurred in had they been consulted by
respondent Garate which he grossly neglected to do.

72
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

"Garate's poor judgement, since he was the officer effectively in command of the vessel,
prevented him from undertaking these emergency measures, the neglect of which
resulted in Capt. Tolosa's untimely demise."14

The labor arbiter himself classified petitioner's case as "a complaint for damages, blacklisting
and watchlisting (pending inquiry) for gross negligence resulting in the death of complainant's
husband, Capt. Virgilio Tolosa."15

We stress that the case does not involve the adjudication of a labor dispute, but the recovery of
damages based on a quasi delict. The jurisdiction of labor tribunals is limited to disputes arising
from employer-employee relations, as we ruled in Georg Grotjahn GMBH & Co. v. Isnani:16

"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. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor
Code is limited to disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes, or their collective
bargaining agreement."17

The pivotal question is whether the Labor Code has any relevance to the relief sought by
petitioner. From her paper, it is evident that the primary reliefs she seeks are as follows: (a) loss
of earning capacity denominated therein as "actual damages" or "lost income" and (b)
blacklisting. The loss she claims does not refer to the actual earnings of the deceased, but to his
earning capacity based on a life expectancy of 65 years. This amount is recoverable if the action
is based on a quasi delict as provided for in Article 2206 of the Civil Code,18 but not in the Labor
Code.

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,19 these reliefs must still
he based on an action that has a reasonable causal connection with the Labor Code, other labor
statutes, or collective bargaining agreements.20

The central issue is determined essentially from the relief sought in the complaint. In San
Miguel Corporation v. NLRC,21 this Court held:

"It is the character of the principal relief sought that appears essential in this
connection. Where suchprincipal 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."22

The labor arbiter found private respondents to be grossly negligent. He ruled that Captain
Tolosa, who died at age 58, could expect to live up to 65 years and to have an earning capacity
of US$176,400.

73
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

It must be noted that a worker's loss of earning capacity and blacklisting are not to be equated
with wages, overtime compensation or separation pay, and other labor benefits that are
generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting
from a quasi delict or a similar cause within the realm of civil law.

"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."23In the present case, petitioner's
claim for damages is not related to any other claim under Article 217, other labor statutes, or
collective bargaining agreements.

Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does
not grant or specify a claim or relief. This provision is only a safety and health standard under
Book IV of the same Code. The enforcement of this labor standard rests with the labor
secretary.24 Thus, claims for an employer's violation thereof are beyond the jurisdiction of the
labor arbiter. In other words, petitioner cannot enforce the labor standard provided for in
Article 161 by suing for damages before the labor arbiter.

It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in
which the employer-employee relation is merely incidental, and in which the cause of action
proceeds from a different source of obligation such as a tort.25 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 courts26 -- not with the NLRC or
the labor arbiters.

Second Issue:
Finality of the Monetary Award

Petitioner contends that the labor arbiter's monetary award has already reached finality, since
private respondents were not able to file a timely appeal before the NLRC.

This argument cannot be passed upon in this appeal, because it was not raised in the tribunals a
quo. Well-settled is the rule that issues not raised below cannot be raised for the first time on
appeal. Thus, points of law, theories, and arguments not brought to the attention of the Court
of Appeals need not -- and ordinarily will not -- be considered by this Court.27 Petitioner's
allegation cannot be accepted by this Court on its face; to do so would be tantamount to a
denial of respondents' right to due process.28

Furthermore, whether respondents were able to appeal on time is a question of fact that
cannot be entertained in a petition for review under Rule 45 of the Rules of Court. In general,
the jurisdiction of this Court in cases brought before it from the Court of Appeals is limited to a
review of errors of law allegedly committed by the court a quo.29

74
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution
AFFIRMED. Costs against petitioner.

SO ORDERED.

Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

Footnotes
1
Penned by Justice Mercedes Gozo-Dadole, with the concurrence of Justices Fermin A.
Martin Jr. (Division chairman) and Portia Alio-Hormachuelos (member); rollo, pp. 8-20.
2
Id., p. 22.
3
Id., p. 19.
4
CA Decision, pp. 1-3; id., pp. 8-13.
5
This case was deemed submitted for resolution on September 12, 2002, upon receipt
by this Court of the Memorandum for private respondents, signed by Atty. Dante H.
Cortez. Filed earlier on August 9, 2002 was the Memorandum for petitioner, signed by
Attys. Rodelle B. Bolante and Gener C. Sansaet of Sycip Salazar Hernandez & Gatmaitan.
6
Petitioner's Memorandum dated August 9, 2002, p. 5; rollo, p. 197; original in upper
case.
7
Article 217 of the Labor Code as amended reads:

"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:

Unfair labor practice cases;

Termination disputes;

75
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

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 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.

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

c) Cases arising from the interpretation 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 be provided in said
agreements."
8
319 SCRA 704, December 3, 1999.
9
See Petitioner's Memorandum, pp. 8-9; rollo, pp. 200-201.
10
Article 2176 of the Civil Code reads:

"Art. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called quasi-delict and is governed by the provisions of this Chapter."
11
Manila Hotel Corp v. National Labor Relations Commission, 343 SCRA 1, October 13,
2000; Citibank, N.A. v. Court of Appeals, 359 Phil. 719, November 27, 1998; San Miguel
Corp. v. National Labor Relations Commission, GR No. 108001, 325 Phil. 401, March 15,
1996.
12
Complaint/Position Paper dated August 23, 1993, p. 7; CA rollo, p. 47.
13
Id., pp. 7 & 47.

76
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
14
Id., pp. 9 & 50.
15
Decision dated July 8, 1997, p. 1; CA rollo, p. 13.
16
235 SCRA 216, August 10, 1994.
17
Id., p. 221, per Puno, J.
18
Article 2202 of the Civil Code reads:

"Art. 2202. In crimes and quasi-delicts, the defendants shall be liable for all
damages which are the natural and probable consequences of the act or
omission complained of. It is not necessary that such damages have been
foreseen or could have reasonably been foreseen by the defendant.
19
Baez v. Valdevilla, 331 SCRA 584, May 9, 2000.
20
Georg Grotjahn GMBH & Co. v. Isnani, supra; San Miguel Corporation v.
Etcuban, supra.
21
161 SCRA 719, May 31, 1988.
22
Id., p. 730, per Feliciano, J.
23
Dai-Chi Electronics Manufacturing Corp. v. Villarama Jr., 238 SCRA 267, November 21,
1994, per Quiason, J.
24
Article 162 of the Labor Code as amended provides:

"ART. 162. SAFETY AND HEALTH STANDARDS

"The Secretary of Labor shall, by appropriate orders, set and enforce mandatory
occupational safety and health standards to eliminate or reduce occupational
safety and health hazards in all workplaces and institute new, and update
existing, programs to ensure safe and healthful working conditions in all places
of employment."
25
Baez v. Valdevilla, supra.
26
Georg Grotjahn GMBH & Co. v. Isnani, supra; San Miguel Corporation v.
Etcuban, supra.
27
Hufana v. Genato, GR No. 141209, 365 SCRA 384, September 17, 2001; Mendoza v.
Court of Appeals, GR No. 116216, 274 SCRA 527, June 20, 1997.

77
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
28
Mendoza v. Court of Appeals, supra.
29
Ibid.

78
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

AUSTRIA VS NLRC 310 SCRA 293

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 123646 July 14, 1999

NAZARIO C. AUSTRIA, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, ABETO A. UY and PHILIPPINE STEEL COATING
CORPORATION, respondents.

BELLOSILLO, J.:

PHILIPPINE STEEL COATING CORPORATION (PHILSTEEL), private respondent, is engaged in the


manufacture of prefabricated steel, galvanized iron and other metal products. On 19 December
1985 it hired petitioner Nazario C. Austria as its Credit and Collection Manager. 1 On 11 August
1987 petitioner and private respondent PHILSTEEL entered into a "Confidentiality Agreement"
whereby he agreed not to disclose to anyone outside the company any technical, operational
and other such information acquired in the course of his employment, unless otherwise duly
authorized by private respondent, on pain of immediate dismissal. 2

A smooth and satisfactory employee-employer relationship ensued between the two (2) parties
until 17 August 1989 when petitioner was unceremoniously terminated by private respondent
company on the ground that he allegedly disclosed confidential information to prospective
competitors and had undertaken activities far beyond his official duties and responsibilities. 3

On 30 August 1989 Austria filed a case for illegal dismissal against PHILSTEEL. He alleged that on
5 August 1989 the President of PHlLSTEEL, Abeto Uy, demanded his resignation purportedly
due to loss of confidence but refused to shed light on the reasons therefor. 4 Austria further
alleged that on 17 August 1989, without any prior written notice, he was summoned to a
meeting with the Vice-President for Finance, Prime Valerio, and Vice-President for Legal and
Personnel, Gregorio Vega. Therein he was questioned about a certain 13 July 1989 telefax
message sent by one Felix Lukban to PHILSTEEL's Australian supplier of equipment and
machinery, Bliss Fox Manufacturing Corporation (BLISS FOX). The telefax showed that, on
behalf of an unnamed client, Lukban was asking for the purchase price of a complete line of

79
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

machinery and equipment for a steel galvanizing plant. Austria denied any knowledge of the
telex.1wphi1.nt

Petitioner was also asked about his close relationship with Lukban, which the former admitted,
Lukban being the godfather of his child. 5 Immediately after the meeting Austria was given his
notice of termination and required to surrender the keys to his company car and to his room
which were in his possession. When he returned to his room it was already padlocked; when he
passed by his car it was barricaded. 6

Austria submitted in support of his complaint the affidavit of Felix Lukban executed on 13
December 1989 disclaiming any participation of petitioner in the sending of the telefax
message. 7 In addition, Lukban testified to the same effect and denied hearing any answer from
BLISS FOX on his telefax. 8

PHILSTEEL, on the other hand, contended that any information as to the sources of its supply
was highly confidential as the steel industry was very competitive, and the information was
disclosed by Austria to Lukban. The basis for this contention was the incident of 5 August 1989
when a representative of BLISS FOX named Charles Villa informed Abeto Uy, in the presence of
Primo Valerio and Gregorio Vega, of the fax message sent by Lukban to BLISS FOX. Charles Villa
was said to have stated that Lukban represented himself to be acting for PHILSTEEL so he
verified the representation from Uy who however denied it. Forthwith, Villa dialed a certain
number from the telefax message. 9 After a brief exchange with the person on the other end of
the phone, during which time Villa scribbled a name at the back of the telex, he informed Uy
that he just talked with Lukban who informed him that his contact with PHILSTEEL was Rudy
Austria whose name he had just written. 10

After Villa left, Austria was immediately investigated on the matter. Petitioner admitted having
a close relationship with Lukban. Austria also volunteered to disclose secret meetings at Manila
Garden Hotel with Lukban and the latter's son-in-law regarding plans to put up a rival
galvanizing business either here in the Philippines or in Singapore, as well as meetings at
company premises with a group of Australians on the same subject. A second investigation held
on 17 August 1989 yielded the same result. 11 Testimonies of Vega and Valerio, as well as the
latter's 29 November 1989 affidavit, the confidentiality agreement and the termination letter
were presented to buttress private respondents' evidence.

The Labor Arbiter found the evidence of private respondents credible on the ground that no
other inference other than Austria's guilt could be drawn from these established circumstances:
the Australian representative of BLISS FOX did not know Austria nor the latter's nickname
(Rudy) when he called Lukban and inquired who Lukban's contact person was at PHILSTEEL;
Lukban was not only known to Austria, he was close to him; and, Austria signified his intention
to join the rival company which Lukban planned to form. 12

The Labor Arbiter pointed out that petitioner failed to establish any motive on the part of
private respondents and of Valerio and Vega in terminating his employment or in testifying

80
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

against him since his services were still highly satisfactory as of July 1989. Thus, the Labor
Arbiter declared the dismissal to be legal but ordered private respondents to pay petitioner
P24,000.00 separation pay considering that the company suffered no loss and that there was
no proof of a rival petitioner. 13

On appeal the NLRC agreed with the thesis of the Labor Arbiter that petitioner failed to prove
any other motive by private respondents for his termination considering his excellent job
performance. The Commission however modified the Labor Arbiter's decision by directing
PHILSTEEL to pay petitioner an indemnity of P1,000.00 for non-observance of due process in
failing to provide petitioner with a prior written notice of the investigation and for not giving
him time to answer charges and to seek assistance of counsel. 14 Hence, this petition which is
anchored on the following perceived errors: 15

1. Respondent NLRC committed grave abuse of discretion in upholding the


validity of petitioner's dismissal

a. The alleged "loss of trust" in petitioner was not based on


convincing and substantial evidence of any actual misconduct on
his part, but merely on private respondents' suspicions,
speculations and conjectures built around Lukban's telefax of 13
July 1989.

b. The alleged mention of petitioner as a "contact person" of


Lukban in respondent PHILSTEEL is not in itself proof of any
breach of duty on petitioner's part, nor was such "identification"
even established as a fact by competent and reliable evidence;

c. The inconsistent and incredible testimonies of private


respondents' witnesses on material and relevant facts clearly
show that the charge of "loss of trust" is baseless, simulated and a
mere capricious concoction of private respondents;

2. The denial of reliefs to petitioner for his illegal dismissal was an arbitrary,
whimsical and capricious exercise of judgment by respondent NLRC.

Petitioner, in effect, assigns grave abuse of discretion on the part of public respondent NLRC for
its misappreciation of the evidence and giving it undue weight. Basic is the rule that judicial
review of labor cases does not go so far as to evaluate the sufficiency of evidence on which the
labor officials' findings rest; 16 more so when both the Labor Arbiter and the NLRC share the
same findings. This, notwithstanding, we cannot affirm the decision of the NLRC especially
when its findings of fact on which the conclusion was based are not supported by substantial
evidence. By substantial evidence, we mean the amount of relevant evidence which a
reasonable mind might accept as adequate to justify the conclusion. 17

81
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

The NLRC grounded its findings on the following postulates: (a) the witnesses of PHILSTEEL are
credible for petitioner failed to show any ground for them to falsely testify, especially in the
light of his excellent job performance; and, (b) respondents' witnesses are more credible than
petitioner's Lukban who, insofar as the source of the information is concerned, impressed
the NLRC as evasive. 18 The NLRC however entertained a patent misapprehension of the burden
of proof rule in labor termination cases. Unlike in other cases where the complainant has the
burden of proof to discharge, in labor cases concerning illegal dismissals, the burden of proving
that the employee was dismissed with just cause rests upon the employer. 19 Such is the
mandate of Art. 278 of the Labor Code. 20

In brief, the evidence of PHILSTEEL rests upon the following bases: (a) the allegation of Charles
Villa, representative of BLISS FOX, that Lukban named petitioner Austria as his contact in
PHILSTEEL; (b) the close relationship of Lukban and Austria; and, (c) the admissions of Austria
during the investigation relative to both the close relationship with Lukban and their plans to
set up a rival business.

Like a house of cards, the evidence of private respondents collapses when we take into account
the fact that its foundation is made of hearsay evidence or mere speculations. It must be noted
that the testimonies of Valerio and Vega relied mainly on the veracity of the assertions of Villa.
They did not say that they actually heard or observed Lukban admit to Villa that the former's
client was PHILSTEEL and that his contact with PHILSTEEL was Austria. What they seemingly saw
was Villa scribbling a name on the telefax purportedly dictated by Lukban. In short, what they
appear to have observed was what Villa wanted them to observe, no matter whether it was the
truth or not. Thus, their testimony was clearly hearsay and must not be given weight.
Moreover, the veracity of Villa's assertions, even as to his being a representative of BLISS FOX,
is suspect. For not only were the circumstances attending the assertions incredible, considering
that Lukban's message was by telex sent to Australia and would thus be more convenient for
BLISS FOX to reply by the same mode and not by spending so much by sending a representative
over merely to inquire upon a prospective customer, but also, the assertions were not
subjected to the sifting process of cross examination. Neither Villa nor Uy was presented as a
witness, hence, could not be cross examined by petitioner.

The reliance both by the Labor Arbiter and the NLRC on the hearsay testimonies in assessing
the evidence of private respondents reflects a dangerous propensity for baseless conclusions
amounting to grave abuse of discretion. 21 Such propensity is further shown when public
respondent gave imprimatur to PHILSTEEL's conclusion that Austria was the one who divulged
the so-called confidential information due mainly to his close affinity with Lukban. As we held
in Globe Mackay Cable and Radio Corporation v. NLRC 22

In the instant case, petitioner has predicated its, dismissal of Salazar on loss of
confidence. As we have held countless times, while loss of confidence or breach
of trust is a valid ground for termination, it must rest on some basis which must
be convincingly established. An employee may not be dismissed on mere
presumptions and supposition. Petitioner's allegation that since Salazar and

82
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Saldivar lived together in the same apartment, it "presumes reasonably that


complainant's sympathy would be with Saldivar" and its averment that Saldivar's
investigation although unverified, was probably true, do not pass this Court's
test. While we should not condone the acts of disloyalty of an employee, neither
should we dismiss him on the basis of suspicion derived from speculative
inferences.

Of significance here is the fact that nowhere in all the allegations of PHILSTEEL was there proof
of any concrete action by Austria of divulging confidential information and of setting up a rival
business. Everything was according to what Villa said or what Lukban supposedly said. Thus,
PHILSTEEL's resort to Austria's "admissions."

The admission of close relationship is certainly true as it was affirmed by both Austria and
Lukban. The "admission" however, of their setting up a rival business strikes this Court as
somewhat forced like squeezing a stone for water. The reality of such admission is negated by
subsequent events. At no time did such an envisioned "rival" company come to being. Indeed,
after his dismissal, petitioner had to languish for several months in uncertainty while looking for
employment, instead of just joining the alleged company. Until he died on 15 March
1997, 23 petitioner never went into partnership with Lukban nor joined any other company.

Accusation cannot take the place of proof. A suspicion or belief no matter how sincerely felt
cannot be a substitute for factual findings carefully established through an orderly
procedure. 24 Such orderly procedure was denied petitioner by PHILSTEEL, as correctly found by
the NLRC, thus 25

In the instant case, there was at least a partial denial of the complainant's right
to due process because there was no showing: (1) that he was given the required
first written notice; (2) that he was given sufficient time to answer the charges
against him; and, (3) that he had the chance to obtain the assistance of counsel.

As there is a finding of illegal dismissal, an award of backwages, instead of indemnity, computed


from the time of dismissal up to the time of his death, with legal interest plus attorney's fees,
might properly assuage the hurt and damages caused by such illegal dismissal.

WHEREFORE, the petition is GRANTED. Private respondent PHILIPPINE STEEL COATING


CORPORATION (PHILSTEEL) is ORDERED to pay the heirs of NAZARIO C. AUSTRIA his back wages
inclusive of allowances and other benefits, including death benefits, from 17 August 1989 up to
15 March 1997, with legal interest plus attorney's fees. The Labor Arbiter is DIRECTED to
compute immediately the monetary benefits due petitioner as aforestated in accordance with
law.

SO ORDERED.1wphi1.nt

Puno, Mendoza, Quisumbing and Buena, JJ., concur.

83
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Footnotes

1 Rollo, p. 6.

2 Records, pp. 42-44.

3 Id., p. 20.

4 TSN, 12 February 1990, pp. 73-88.

5 TSN, 27 February 1990, pp. 40-47.

6 Rollo, p. 36.

7 Records, pp. 59-60.

8 TSN, 19 March 1990, pp. 292-294.

9 TSN, 20 April 1990, pp. 15-16.

10 Records, p. 45.

11 TSN, 2 October 1990, pp. 19-23, 28-30.

12 14 October 1992 Decision of Labor Arbiter Nieves V. De Castro; Records, p. 700.

13 Id., pp. 701-702.

14 10 February 1994 NLRC (First Division) Decision, penned by Presiding Commissioner


Bartolome S. Carale, concurred in by Commissioners Vicente S. E. Veloso and Alberto R.
Quimpo; Rollo, pp. 33-48.

15 Rollo, p. 15.

16 Fernandez v. NLRC, G.R. No. 108444, 6 November 1997, 281 SCRA 423.

17 Panlilio v. NLRC, G.R. No. 117459, 17 October 1997, 281 SCRA 53.

18 Rollo, pp. 46-47.

19 Southern Cotobato Development and Construction, Inc. v. NLRC, G.R. No. 121582, 16
October 1997, 280 SCRA 853; Reno Foods, Inc. v. NLRC G.R. No. 116462, 18 October
1995, 249 SCRA 379;

84
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

20 Pan Pacific Industrial Sales Co., Inc. vs. NLRC, G.R. No. 96191, 4 March 1991, 194
SCRA 633.

21 Icasiano v. Office of the President, G.R. No. 49855, 15 May 1992, 209 SCRA 25.

22 G.R. No. 82511, 3 March 1992, 206 SCRA 701, 713.

23 Rollo, p. 175.

24 Philippine Associated Smelting and Refining Corp. (PASAR) v. NLRC, G.R. Nos. 82866-
67, 29 June 1989, 174 SCRA 550.

25 See Note 14, p. 42.

85
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

PAL VS NLRC 287 SCRA 672

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 120567 March 20, 1998

PHILIPPINE AIRLINES, INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, FERDINAND PINEDA and GOGFREDO
CABLING,respondents.

MARTINEZ, J.:

Can the National Labor Relations Commission (NLRC), even without a complaint for illegal dismissal tiled
before the labor arbiter, entertain an action for injunction and issue such writ enjoining petitioner
Philippine Airlines, inc. from enforcing its Orders of dismissal against private respondents, and ordering
petitioner to reinstate the private respondents to their previous positions?

This is the pivotal issue presented before us in this petition for certiorari under Rule 65 of the Revised
Rules of Court which seeks the nullification of the injunctive writ dated April 3, 1995 issued by the NLRC
and the Order denying petitioner's motion for reconsideration on the ground that the said Orders were
issued in excess of jurisdiction.

Private respondents are flight stewards of the petitioner. Both were dismissed from the service for their
alleged involvement in the April 3, 1993 currency smuggling in Hong Kong.

Aggrieved by said dismissal, private respondents filed with the NLRC a petition1 for injunction praying
that:

I. Upon filing of this Petition, a temporary restraining order be issued, prohibiting


respondents (petitioner herein) from effecting or enforcing the Decision dated Feb. 22,
1995, or to reinstate petitioners temporarily while a hearing on the propriety of the
issuance of a writ of preliminary injunction is being undertaken;

II. After hearing, a writ of preliminary mandatory injunction be issued ordering


respondent to reinstate petitioners to their former positions pending the hearing of this
case, or, prohibiting respondent from enforcing its Decision dated February 22, 1995
while this case is pending adjudication;

86
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

III. After hearing, that the writ of preliminary injunction as to the reliefs sought for be
made permanent, that petitioners be awarded full backwages, moral damages of PHP
500,000.00 each and exemplary damages of PHP 500,000.00 each, attorney's fees
equivalent to ten percent of whatever amount is awarded, and the costs of suit.

On April 3, 1995, the NLRC issued a temporary mandatory injunction 2 enjoining petitioner to cease and
desist from enforcing its February 22, 1995 Memorandum of dismissal. In granting the writ, the NLRC
considered the following facts, to wit:

. . . that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were instructed
to attend an investigation by respondent's "Security and Fraud Prevention Sub-
Department" regarding an April 3, 1993 incident in Hongkong at which Joseph Abaca,
respondent's Avionics Mechanic in Hongkong "was intercepted by the Hongkong Airport
Police at Gate 05 . . . the ramp area of the Kai Tak International Airport while . . . about
to exit said gate carrying a . . . bag said to contain some 2.5 million pesos in Philippine
Currencies. That at the Police Station. Mr. Abaca claimed that he just found said plastic
bag at the Skybed Section of the arrival flight PR300/03 April 93," where petitioners
served as flight stewards of said flight PR300; . . the petitioners sought "a more detailed
account of what this HKG incident is all about"; but instead, the petitioners were
administratively charged, "a hearing" on which "did
not push through" until almost two (2) years after, i.e, "on January 20, 1995 . . . where a
confrontation between Mr. Abaca and petitioners herein was compulsorily arranged by
the respondent's disciplinary board" at which hearing, Abaca was made to identify
petitioners as co-conspirators; that despite the fact that the procedure of identification
adopted by respondent's Disciplinary Board was anomalous "as there was no one else in
the line-up (which could not be called one) but petitioners . . . Joseph Abaca still had
difficulty in identifying petitioner Pineda as his co-conspirator, and as to petitioner
Cabling, he was implicated and pointed by Abaca only after respondent's Atty.
Cabatuando pressed the former to identify petitioner Cabling as co-conspirator"; that
with the hearing reset to January 25, 1995, "Mr. Joseph Abaca finally gave exculpating
statements to the board in that he cleared petitioners from any participation or from
being the owners of the currencies, and at which hearing Mr. Joseph Abaca volunteered
the information that the real owner of said money was one who frequented his
headquarters in Hongkong to which information, the Disciplinary Board Chairman, Mr.
Ismael Khan," opined "for the need for another hearing to go to the bottom of the
incident"; that from said statement, it appeared "that Mr. Joseph Abaca was the courier,
and had another mechanic in Manila who hid the currency at the plane's skybed for
Abaca to retrieve in Hongkong, which findings of how the money was found was
previously confirmed by Mr. Joseph Abaca himself when he was first investigated by the
Hongkong authorities"; that just as petitioners "thought that they were already fully
cleared of the charges, as they no longer received any summons/notices on the
intended "additional hearings" mandated by the Disciplinary Board," they were
surprised to receive "on February 23, 1995. . . a Memorandum dated February 22, 1995"
terminating their services for alleged violation of respondent's Code of Discipline
"effective immediately"; that sometime . . . first week of March, 1995, petitioner Pineda
received another Memorandum from respondent Mr. Juan Paraiso, advising him of his
termination effective February 3, 1995, likewise for violation of respondent's Code of
Discipline; . . .

87
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

In support of the issuance of the writ of temporary injunction, the NLRC adapted the view that: (1)
private respondents cannot be validly dismissed on the strength of petitioner's Code of Discipline which
was declared illegal by this Court in the ease at PAL, Inc. vs. NLRC, (G.R. No. 85985), promulgated August
13, 1993, for the reason that it was formulated by the petitioner without the participation of its
employees as required in R.A. 6715, amending Article 211 of the Labor Code; (2) the whimsical, baseless
and premature dismissals of private respondents which "caused them grave and irreparable injury" is
enjoinable as private respondents are left "with no speedy and adequate remedy at law" except the
issuance of a temporary mandatory injunction; (3) the NLRC is empowered under Article 218 (e) of the
Labor Code not only to restrain any actual or threatened commission of any or all prohibited or unlawful
acts but also to require the performance of a particular act in any labor dispute, which, if not restrained
or performed forthwith, may cause grave or irreparable damage to any party; and (4) the temporary
power of the NLRC was recognized by this Court in the case of Chemo-Technische Mfg., Inc.Employees
Union, DFA, et. al. vs. Chemo-Technische Mfg., Inc. [G.R. No. 107031, January 25, 1993].

On May 4, 1995, petitioner moved for reconsideration3 arguing that the NLRC erred:

1. . . . in granting a temporary injunction order when it has no


jurisdiction to issue an injunction or restraining order since this may be
issued only under Article 218 of the Labor Code if the case involves or
arises from labor disputes;

2. . . . in granting a temporary injunction order when the termination of


private respondents have long been carried out;

3. . . . in ordering the reinstatement of private respondents on the basis


of their mere allegations, in violation of PAL's right to due process:

4. . . . in arrogating unto itself management prerogative to discipline its


employees and divesting the labor arbiter of its original and exclusive
jurisdiction over illegal dismissal cases;

5. . . . in suspending the effects of termination when such action is


exclusively within the jurisdiction of the Secretary of Labor;

6. . . . in issuing the temporary injunction in the absence of any


irreparable or substantial injury to both private respondents.

On May 31, 1995, the NLRC denied petitioner's motion for reconsideration, ruling:

"The respondent (now petitioner), for one, cannot validly claim that we cannot exercise
our injunctive power under Article 218 (e) of the Labor Code on the pretext that what
we have here is not a labor dispute as long as it concedes that as defined by law, a" (l)
"Labor Dispute" includes any controversy or matter concerning terms or conditions of
employment." If security of tenure, which has been breached by respondent and which,
precisely, is sought to be protected by our temporary mandatory injunction (the core of
controversy in this case) is not a "term or condition of employment", what then is?

88
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

xxx xxx xxx

Anent respondent's second argument . . . . Article 218 (e) of the Labor Code . . .
empowered the Commission not only to issue a prohibitory injunction, but a mandatory
("to require the performance") one as well. Besides, as earlier discussed, we already
exercised (on August 23, 1991) this temporary mandatory injunctive power in the case
of "Chemo-Technische Mfg., Inc. Employees Union-DFA et. al. vs. Chemo-Technische
Mfg., Inc., et. al." (supra) and effectively enjoined one (1) month old dismissals by
Chemo-Technische and that our aforesaid mandatory exercise of injunctive power,
when questioned through a petition for certiorari, was sustained by the Third Division of
the Supreme court per its Resolution dated January 25, 1993.

xxx xxx xxx

Respondent's fourth argument that petitioner's remedy for their dismissals is "to file an
illegal dismissal case against PAL which cases are within the original and exclusive
jurisdiction of the Labor Arbiter' is ignorant. In requiring as a condition for the issuance
of a "temporary or permanent injunction" "(4) That complainant has no adequate
remedy at law;" Article 218 (e) of the Labor Code clearly envisioned adequacy, and not
plain availability of a remedy at law as an alternative bar to the issuance of an
injunction. An illegal dismissal suit (which takes, on its expeditious side, three (3) years
before it can be disposed of) while available as a remedy under Article 217 (a) of the
Labor Code, is certainly not an "adequate; remedy at law, Ergo, it cannot as an
alternative remedy, bar our exercise of that injunctive power given us by Article 218 (e)
of the Code.

xxx xxx xxx

Thus, Article 218 (e), as earlier discussed [which empowers this Commission "to require
the performance of a particular act" (such as our requiring respondent "to cease and
desist from enforcing" its whimsical memoranda of dismissals and "instead to reinstate
petitioners to their respective position held prior to their subject dismissals") in "any
labor dispute which, if not . . . performed forthwith, may cause grave and irreparable
damage to any party"] stands as the sole "adequate remedy at law" for petitioners here.

Finally, the respondent, in its sixth argument claims that even if its acts of dismissing
petitioners "may be great, still the same is capable of compensation", and that
consequently, "injunction need not be issued where adequate compensation at law
could be obtained". Actually,
what respondent PAL argues here is that we need not interfere in its whimsical
dismissals of petitioners as, after all, it can pay the latter its backwages. . . .

But just the same, we have to stress that Article 279 does not speak alone of backwages
as an obtainable relief for illegal dismissal; that reinstatement as well is the concern of
said law, enforceable when necessary, through Article 218 (e) of the Labor Code
(without need of an illegal dismissal suit under Article 217 (a) of the Code) if such

89
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

whimsical and capricious act of illegal dismissal will "cause grave or irreparable injury to
a party". . . . .4

Hence, the present recourse.

Generally, injunction is a preservative remedy for the protection of one's substantive rights or interest.
It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. It is
resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be
remedied under any standard of compensation. The application of the injunctive writ rests upon the
existence of an emergency or of a special reason before the main case be regularly heard. The essential
conditions for granting such temporary injunctive relief are that the complaint alleges facts which
appear to be sufficient to constitute a proper basis for injunction and that on the entire showing from
the contending parties, the injunction is reasonably necessary to protect the legal rights of the plaintiff
pending the litigation.5 Injunction is also a special equitable relief granted only in cases where there is no
plain, adequate and complete remedy at law.6

In labor cases, Article 218 of the Labor Code empowers the NLRC

(e) To enjoin or restrain any actual or threatened commission of any or all prohibited or
unlawful acts or to require the performance of a particular act in any labor
dispute which, if not restrained or performed forthwith, may cause grave or irreparable
damage to any party or render ineffectual any decision in favor of such party; . . ."
(Emphasis Ours)

Complementing the above-quoted provision, Sec. 1, Rule XI of the New Rules of Procedure of the NLRC,
pertinently provides as follows:

Sec. 1. Injunction in Ordinary Labor Dispute. A preliminary injunction or a restraining


order may be granted by the Commission through its divisions pursuant to the
provisions of paragraph (e) of Article 218 of the Labor Code, as amended, when it is
established on the bases of the sworn allegations in the petition that the acts
complained of, involving or arising from any labor dispute before the Commission,
which, if not restrained or performed forthwith, may cause grave or irreparable damage
to any party or render ineffectual any decision in favor of such party.

xxx xxx xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only as an incident
to the cases pending before them in order to preserve the rights of the parties during
the pendency of the case, but excluding labor disputes involving strikes or
lockout. 7 (Emphasis Ours)

From the foregoing provisions of law, the power of the NLRC to issue an injunctive writ originates from
"any labor dispute" upon application by a party thereof, which application if not granted "may cause
grave or irreparable damage to any party or render ineffectual any decision in favor of such party."

90
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

The term "labor dispute" is defined as "any controversy or matter concerning terms and conditions of
employment or the association or representation of persons in negotiating, fixing. maintaining,
changing, or arranging the terms and conditions of employment regardless of whether or not the
disputants stand in the proximate relation of employers and employees." 8

The term "controversy" is likewise defined as "a litigated question; adversary proceeding in a court of
law; a civil action or suit, either at law or in equity; a justiciable dispute."9

A "justiciable controversy" is "one involving an active antagonistic assertion of a legal right on one side
and a denial thereof on the other concerning a real, and not a mere theoretical question or issue." 10

Taking into account the foregoing definitions, it is an essential requirement that there must first be a
labor dispute between the contending parties before the labor arbiter. In the present case, there is no
labor dispute between the petitioner and private respondents as there has yet been no complaint for
illegal dismissal filed with the labor arbiter by the private respondents against the petitioner.

The petition for injunction directly filed before the NLRC is in reality an action for illegal dismissal. This is
clear from the allegations in the petition which prays for; reinstatement of private respondents; award
of full backwages, moral and exemplary damages; and attorney's fees. As such, the petition should have
been filed with the labor arbiter who has the original and exclusive jurisdiction to hear and decide the
following cases involving all workers, whether agricultural or non-agricultural:

(1) Unfair labor practice;

(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 the 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), whether or not accompanied with a claim for
reinstatement. 11

The jurisdiction conferred by the foregoing legal provision to the labor arbiter is
both original and exclusive, meaning, no other officer or tribunal can take cognizance of, hear and
decide any of the cases therein enumerated. The only exceptions are where the Secretary of Labor and
Employment or the NLRC exercises the power of compulsory arbitration, or the parties agree to submit

91
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

the matter to voluntary arbitration pursuant to Article 263 (g) of the Labor Code, the pertinent portions
of which reads:

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify the same
to the Commission for compulsory arbitration. Such assumption or certification shall
have the effect of automatically enjoining the intended or impending strike or lockout as
specified in the assumption or certification order. If one has already taken place at the
time of assumption or certification, all striking or locked out employees shall
immediately resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The Secretary of Labor and
Employment or the Commission may seek the assistance of law enforcement agencies
to ensure compliance with this provision as well as with such orders as he may issue to
enforce the same.

On the other hand, the NLRC shall have exclusive appellate jurisdiction over all cases decided by labor
arbiters as provided in Article 217(b) of the Labor Code. In short, the jurisdiction of the NLRC in illegal
dismissal cases is appellate in nature and, therefore, it cannot entertain the private respondents'
petition for injunction which challenges the dismissal orders of petitioner. Article 218(e) of the Labor
Code does not provide blanket authority to the NLRC or any of its divisions to issue writs of injunction,
considering that Section 1 of Rule XI of the New Rules of Procedure of the NLRC makes injunction only
an ancillary remedy in ordinary labor disputes." 12

Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order granting private respondents'
petition for injunction and ordering the petitioner to reinstate private respondents.

The argument of the NLRC in its assailed Order that to file an illegal dismissal suit with the labor arbiter
is not an "adequate" remedy since it takes three (3) years before it can be disposed of, is patently
erroneous. An "adequate" remedy at law has been defined as one "that affords relief with reference to
the matter in controversy, and which is appropriate to the particular circumstances of the case." 13 It is a
remedy which is equally, beneficial, speedy and sufficient which will promptly relieve the petitioner
from the injurious effects of the acts complained of.14

Under the Labor Code, the ordinary and proper recourse of an illegally dismissed employee is to file a
complaint for illegal dismissal with the labor arbiter. 15 In the case at bar, private respondents
disregarded this rule and directly went to the NLRC through a petition for injunction praying that
petitioner be enjoined from enforcing its dismissal orders. In Lamb vs. Phipps, 16 we ruled that if the
remedy is specifically provided by law, it is presumed to be adequate. Moreover, the preliminary
mandatory injunction prayed for by the private respondents in their petition before the NLRC can also
be entertained by the labor arbiter who, as shown earlier, has the ancillary power to issue preliminary
injunctions or restraining orders as an incident in the cases pending before him in order to preserve the
rights of the parties during the pendency of the case. 17

Furthermore, an examination of private respondents' petition for injunction reveals that it has no basis
since there is no showing of any urgency or irreparable injury which the private respondents might
suffer. An injury is considered irreparable if it is of such constant and frequent recurrence that no fair
and reasonable redress can be had therefor in a court of law, 18 or where there is no standard by which

92
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

their amount can be measured with reasonable accuracy, that is, it is not susceptible of mathematical
computation. It is considered irreparable injury when it cannot be adequately compensated in damages
due to the nature of the injury itself or the nature of the right or property injured or when there exists
no certain pecuniary standard for the measurement of damages. 19

In the case at bar, the alleged injury which private respondents stand to suffer by reason of their alleged
illegal dismissal can be adequately compensated and therefore, there exists no "irreparable injury," as
defined above which would necessitate the issuance of the injunction sought for. Article 279 of the
Labor Code provides that an employee who is unjustly dismissed from employment shall be entitled to
reinstatement, without loss of seniority rights and other privileges, and to the payment of full
backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his actual reinstatement.

The ruling of the NLRC that the Supreme Court upheld its power to issue temporary mandatory
injunction orders in the case of Chemo-Technische Mfg., Inc. Employees Union-DFA, et. al. vs. Chemo-
Technische Mfg., Inc. et.al., docketed as G.R. No. 107031, is misleading. As correctly argued by the
petitioner, no such pronouncement was made by this Court in said case. On January 25, 1993, we issued
a Minute Resolution in the subject case stating as follows:

Considering the allegations contained, the issues raised and the arguments adduced in
the petition for certiorari, as well as the comments of both public and private
respondents thereon, and the reply of the petitioners to private respondent's motion to
dismiss the petition, the Court Resolved to DENY the same for being premature.

It is clear from the above resolution that we did not in anyway sustain the action of the NLRC in issuing
such temporary mandatory injunction but rather we dismissed the petition as the NLRC had yet to rule
upon the motion for reconsideration filed by petitioner. Thus, the minute resolution denying the
petition for being prematurely filed.

Finally, an injunction, as an extraordinary remedy, is not favored in labor law considering that it
generally has not proved to be an effective means of settling labor disputes. 20 It has been the policy of
the State to encourage the parties to use the non-judicial process of negotiation and compromise,
mediation and arbitration. 21 Thus, injunctions may be issued only in cases of extreme necessity based
on legal grounds clearly established, after due consultations or hearing and when all efforts at
conciliation are exhausted which factors, however, are clearly absent in the present case.

WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated April 3, 1995 and May 31,
1995, issued by the National Labor Relations Commission (First Division), in NLRC NCR IC No. 000563-95,
are hereby REVERSED and SET ASIDE.

SO ORDERED.

Regalado, Melo, Puno and Mendoza, JJ., concur.

Footnotes

1 Annex "3", pp. 134-147, Rollo.

93
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

2 Annex "A", pp. 19-23, Rollo.

3 Annex "I", pp. 124-133, Rollo.

4 Annex "B", pp. 24-46, Rollo.

5 Del Rosario vs. Court of Appeals, 255 SCRA 152 [1996]

6 Devesa vs. Arbes, 13 Phil. 273 [1909]; Gilchrist vs. Cuddy, et. al., 29 Phil. 542 [1915]

7 See also Pondoc vs. National Labor Relations Commission, 262 SCRA 632, 638 [1996].

8 Article 212(1), Labor Code of the Philippines.

9 Federico B. Moreno, Philippine Law Dictionary, 1982 edition, p. 136.

10 Delumen vs. Republic, 94 Phil. 288, cited in Moreno, supra, p. 336.

11 Article 217 (a), Labor Code of the Philippines.

12 Pondoc vs. NLRC, supra.

13 Mt. Vermon vs. Borman, 100 Ohio St., 2, 75, 125 NE 116 [1919].

14 See Silvestre vs. Torres, 57 Phil. 885.

15 Article 217 (a) Labor Code of the Philippines.

16 22 Phil., 465.

17 Section 1, Rule XI of the New Rules of Procedure of the NLRC. See also Pondoc vs.
NLRC, supra.

18 Allundorff vs. Abrahanson, 38 Phil. 58 cited in Phil. Virginia Tobacco Administration


vs. De los Angeles, 164 SCRA 555 [1988].

19 Phil. Law Dictionary, supra., p. 321.

20 48 Am. Jur. 2d, 2071, p. 437, cited in Azucena. The Labor Code, vol. 2, 1996 ed., p.
430.

21 Ibid., p. 35.

94
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

PIONEER TEXTURIZING VS NLRC 280 SCRA 806

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 118651 October 16, 1997

PIONEER TEXTURIZING CORP. and/or JULIANO LIM, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, PIONEER TEXTURIZING WORKERS UNION and
LOURDES A. DE JESUS, respondents.

FRANCISCO, J.:

The facts are as follows:

Private respondent Lourdes A. de Jesus is petitioners' reviser/trimmer since 1980. As


reviser/trimmer, de Jesus based her assigned work on a paper note posted by petitioners. The
posted paper which contains the corresponding price for the work to be accomplished by a
worker is identified by its P.O. Number. On August 15, 1992, de Jesus worked on P.O. No. 3853
by trimming the cloths' ribs. She thereafter submitted tickets corresponding to the work done
to her supervisor. Three days later, de Jesus received from petitioners' personnel manager a
memorandum requiring her to explain why no disciplinary action should be taken against her
for dishonesty and tampering of official records and documents with the intention of cheating
as P.O. No. 3853 allegedly required no trimming. The memorandum also placed her under
preventive suspension for thirty days starting from August 19, 1992. In her handwritten
explanation, de Jesus maintained that she merely committed a mistake in trimming P.O. No.
3853 as it has the same style and design as P.O. No. 3824 which has an attached price list for
trimming the ribs and admitted that she may have been negligent in presuming that the same
work was to be done with P.O. No. 3853, but not for dishonesty or tampering. Petitioners'
personnel department, nonetheless, terminated her from employment and sent her a notice of
termination dated September 18, 1992.

On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. The
Labor Arbiter who heard the case noted that de Jesus was amply accorded procedural due
process in her termination from service. Nevertheless, after observing that de Jesus made some
further trimming on P.O. No. 3853 and that her dismissal was not justified, the Labor Arbiter

95
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

held petitioners guilty of illegal dismissal. Petitioners were accordingly ordered to reinstate de
Jesus to her previous position without loss of seniority rights and with full backwages from the
time of her suspension on August 19, 1992. Dissatisfied with the Labor Arbiter's decision,
petitioners appealed to public respondent National Labor Relations Commission (NLRC). In its
July 21, 1994 decision, the NLRC 1 ruled that de Jesus was negligent in presuming that the ribs
of P.O. No. 3853 should likewise be trimmed for having the same style and design as P.O. No.
3824, thus petitioners cannot be entirely faulted for dismissing de Jesus. The NLRC declared
that the status quo between them should be maintained and affirmed the Labor Arbiter's order
of reinstatement, but without backwages. The NLRC further "directed petitioner to pay de Jesus
her back salaries from the date she filed her motion for execution on September 21, 1993 up to
the date of the promulgation of [the] decision." 2 Petitioners filed their partial motion for
reconsideration which the NLRC denied, hence this petition anchored substantially on the
alleged NLRC's error in holding that de Jesus is entitled to reinstatement and back salaries. On
March 6, 1996, petitioners filed its supplement to the petition amplifying further their
arguments. In a resolution dated February 20, 1995, the Court required respondents to
comment thereon. Private respondent de Jesus and the Office of the Solicitor General, in behalf
of public respondent NLRC, subsequently filed their comments. Thereafter, petitioners filed two
rejoinders [should be replies] to respondents' respective comments. Respondents in due time
filed their rejoinders.

There are two interrelated and crucial issues, namely: (1) whether or not de Jesus was illegally
dismissed, and (2) whether or not an order for reinstatement needs a writ of execution.

Petitioners insist that the NLRC gravely abused its discretion in holding that de Jesus is entitled
to reinstatement to her previous position for she was not illegally dismissed in the first place. In
support thereof, petitioners quote portions of the NLRC decision which stated that
"respondents [petitioners herein] cannot be entirely faulted for dismissing the
complainant" 3 and that there was "no illegal dismissal to speak of in the case at
bar". 4 Petitioners further add that de Jesus breached the trust reposed in her, hence her
dismissal from service is proper on the basis of loss of confidence, citing as authority the cases
of Ocean Terminal Services, Inc. v. NLRC, 197 SCRA 491; Coca-Cola Bottlers Phil., Inc. v. NLRC,
172 SCRA 751, and Piedad v. Lanao del Norte Electric Cooperative, 5 154 SCRA 500.

The arguments lack merit.

The entire paragraph which comprises the gist of the NLRC's decision from where petitioners
derived and isolated the aforequoted portions of the NLRC's observation reads in full as follows:

We cannot fully subscribe to the complainant's claim that she trimmed the ribs of
PO3853 in the light of the sworn statement of her supervisor Rebecca Madarcos (Rollo,
p. 64) that no trimming was necessary because the ribs were already of the proper
length. The complainant herself admitted in her sinumpaang salaysay (Rollo, p. 45) that
"Aking napansin na hindi pantay-pantay ang lapad ng mga ribs PO3853 mas maigsi
ang nagupit ko sa mga ribs ng PO3853 kaysa sa mga ribs ng mga nakaraang PO's. The

96
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

complainant being an experienced reviser/trimmer for almost twelve (12) years should
have called the attention of her supervisor regarding her observation of PO3853. It
should be noted that complainant was trying to claim as production output 447 pieces
of trimmed ribs of PO3853 which respondents insists that complainant did not do any.
She was therefore negligent in presuming that the ribs of PO3853 should likewise be
trimmed for having the same style and design as PO3824. Complainant cannot pass on
the blame to her supervisor whom she claimed checked the said tickets prior to the
submission to the Accounting Department. As explained by respondent, what the
supervisor does is merely not the submission of tickets and do some checking before
forwarding the same to the Accounting Department. It was never disputed that it is the
Accounting Department who does the detailed checking and computation of the tickets
as has been the company policy and practice. Based on the foregoing and considering
that respondent cannot be entirely faulted for dismissing complainant as the
complainant herself was also negligent in the performance of her job, We hereby rule
that status quo between them should be maintained as a matter of course. We thus
affirm the decision of Labor Arbiter reinstating the complainant but without backwages.
The award of backwages in general are granted on grounds of equity for earnings which
a worker or employee has lost due to his illegal dismissal. (Indophil Acrylic Mfg.
Corporation vs. NLRC, G.R. No. 96488 September 27, 1993) There being no illegal
dismissal to speak in the case at bar, the award for backwages should necessarily be
deleted. 6

We note that the NLRC's decision is quite categorical in finding that de Jesus was merely
negligent in the performance of her duty. Such negligence, the Labor Arbiter delineated, was
brought about by the petitioners' plain improvidence. Thus:

After careful assessment of the allegations and documents available on record, we are
convinced that the penalty of dismissal was not justified.

At the outset, it is remarkable that respondents did not deny nor dispute that P.O. 3853
has the same style and design as P.O. 3824; that P.O. 3824 was made as guide for the
work done on P.O. 3853; and, most importantly, that the notation correction on P.O.
3824 was made only after the error was discovered by respondents' Accounting
Department.

Be that as it may, the factual issue in this case is whether or not complainant trimmed
the ribs of P.O. 3853?

Respondents maintained that she did not because the record in Accounting Department
allegedly indicates that no trimming is to be done on P.O. 3853. Basically, this allegation
is unsubstantiated.

It must be emphasized that in termination cases the burden of proof rests upon the
employer.

97
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

In the instant case, respondents' mere allegation that P.O. 3853 need not be trimmed
does not satisfy the proof required to warrant complainant's dismissal.

Now, granting that the Accounting record is correct, we still believe that complainant
did some further trimming on P.O. 3853 based on the following grounds:

Firstly, Supervisor Rebecca Madarcos who ought to know the work to be performed
because she was in-charged of assigning jobs, reported no anomally when the tickets
were submitted to her.

Incidentally, supervisor Madarcos testimony is suspect because if she could recall what
she ordered the complainant to do seven (7) months ago (to revise the collars and
plackets of shirts) there was no reason for her not to detect the alleged tampering at
the time complainant submitted her tickets, after all, that was part of her job, if not her
main job.

Secondly, she did not exceed her quota, otherwise she could have simply asked for
more.

That her output was remarkably big granting it is true, is well explained in that the parts
she had trimmed were lesser compared to those which she had cut before.

In this connection, respondents misinterpreted the handwritten explanation of the


complainant dated 20 August 1992, because the letter never admits that she never
trimmed P.O. 3853, on the contrary the following sentence,

Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang inalis


na pala ang presyo ng Sec. 9 P.O. 3853 na ito.

is crystal clear that she did trim the ribs on P.O. 3853. 7

Gleaned either from the Labor Arbiter's observations or from the NLRC's assessment, it
distinctly appears that petitioners' accusation of dishonesty and tampering of official records
and documents with intention of cheating against de Jesus was not substantiated by clear and
convincing evidence. Petitioners simply failed, both before the Labor Arbiter and the NLRC, to
discharge the burden of proof and to validly justify de Jesus' dismissal from service. The law, in
this light, directs the employers, such as herein petitioners, not to terminate the services of an
employee except for a just or authorized cause under the Label Code. 8 Lack of a just cause in
the dismissal from service of an employee, as in this case, renders the dismissal illegal, despite
the employer's observance of procedural due process. 9 And while the NLRC stated that "there
was no illegal dismissal to speak of in the case at bar" and that petitioners cannot be entirely
faulted therefor, said statements are inordinate pronouncements which did not remove the
assailed dismissal from the realm of illegality. Neither can these pronouncements preclude us
from holding otherwise.

98
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

We also find the imposition of the extreme penalty of dismissal against de Jesus as certainly
harsh and grossly disproportionate to the negligence committed, especially where said
employee holds a faithful and an untarnished twelve-year service record. While an employer
has the inherent right to discipline its employees, we have always held that this right must
always be exercised humanely, and the penalty it must impose should be commensurate to the
offense involved and to the degree of its infraction. 10 The employer should bear in mind that, in
the exercise of such right, what is at stake is not only the employee's position but her livelihood
as well.

Equally unmeritorious is petitioners' assertion that the dismissal is justified on the basis of loss
of confidence. While loss of confidence, as correctly argued by petitioners, is one of the valid
grounds for termination of employment, the same, however, cannot be used as a pretext to
vindicate each and every instance of unwarranted dismissal. To be a valid ground, it must be
shown that the employee concerned is responsible for the misconduct or infraction and that
the nature of his participation therein rendered him absolutely unworthy of the trust and
confidence demanded by his position. 11 In this case, petitioners were unsuccessful in
establishing their accusations of dishonesty and tampering of records with intention of
cheating. Indeed, even if petitioners' allegations against de Jesus were true, they just the same
failed to prove that her position needs the continued and unceasing trust of her employers. The
breach of trust must be related to the performance of the employee's
functions. 12 Surely, de Jesus who occupies the position of a reviser/trimmer does not require
the petitioners' perpetual and full confidence. In this regard, petitioners' reliance on the cases
of Ocean Terminal Services, Inc. v. NLRC; Coca-Cola Bottlers Phil., Inc. v. NLRC; and Piedad
v. Lanao del Norte Electric Cooperative, which when perused involve positions that require the
employers' full trust and confidence, is wholly misplaced. In Ocean Terminal Services, for
instance, the dismissed employee was designated as expediter and canvasser whose
responsibility is mainly to make emergency procurements of tools and equipments and was
entrusted with the necessary cash for buying them. The case of Coca-Cola Bottlers, on the other
hand, involves a sales agent whose job exposes him to the everyday financial transactions
involving the employer's goods and funds, while that of Piedad concerns a bill collector who
essentially handles the employer's cash collections. Undoubtedly, the position of a
reviser/trimmer could not be equated with that of a canvasser, sales agent, or a bill collector.
Besides, the involved employees in the three aforementioned cases were clearly proven guilty
of infractions unlike private respondent in the case at bar. Thus, petitioners dependence on
these cited cases is inaccurate, to say the least. More, whether or not de Jesus meets the day's
quota of work she, just the same, is paid the daily minimum wage. 13

Corollary to our determination that de Jesus was illegally dismissed is her imperative
entitlement to reinstatement and backwages as mandated by
law. 14 Whence, we move to the second issue, i.e., whether or not an order for reinstatement
needs a writ of execution.

Petitioners' theory is that an order for reinstatement is not self-executory. They stress that
there must be a writ of execution which may be issued by the NLRC or by the Labor

99
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Arbiter motu proprio or on motion of an interested party. They further maintain that even if a
writ of execution was issued, a timely appeal coupled by the posting of appropriate
supersedeas bond, which they did in this case, effectively forestalled and stayed execution of
the reinstatement order of the Labor Arbiter. As supporting authority, petitioners emphatically
cite and bank on the case of Maranaw Hotel Resort Corporation (Century Park Sheraton Manila)
v. NLRC, 238 SCRA 190.

Private respondent de Jesus, for her part, maintains that petitioners should have reinstated her
immediately after the decision of the Labor Arbiter ordering her reinstatement was
promulgated since the law mandates that an order for reinstatement is immediately executory.
An appeal, she says, could not stay the execution of a reinstatement order for she could either
be admitted back to work or merely reinstated in the payroll without need of a writ of
execution. De Jesus argues that a writ of execution is necessary only for the enforcement of
decisions, orders, or awards which have acquired finality. In effect, de Jesus is urging the Court
to re-examine the ruling laid down in Maranaw.

Article 223 of the Labor Code, as amended by R.A. No. 6715 which took effect on March 21,
1989, pertinently provides:

Art. 223. Appeal. Decision, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds:

xxx xxx xxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation or,
at the option of the employer, merely reinstated in the payroll. The posting of a bond by
the employer shall not stay the execution for reinstatement provided herein.

xxx xxx xxx

We initially interpreted the aforequoted provision in Inciong v. NLRC. 15 The Court 16 made this
brief comment:

The decision of the Labor Arbiter in this case was rendered on December 18, 1988, or
three (3) months before Article 223 of the Labor Code was amended by Republic Act
6715 (which became law on March 21, 1989), providing that a decision of the Labor
Arbiter ordering the reinstatement of a dismissed or separated employee shall be
immediately executory insofar as the reinstatement aspect is concerned, and the
posting of an appeal bond by the employer shall not stay such execution. Since this new

100
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

law contains no provision giving it retroactive effect (Art. 4, Civil Code), the amendment
may not be applied to this case.

which the Court adopted and applied in Callanta v. NLRC. 17 In Zamboanga City Water District
v. Buat, 18 the Court construed Article 223 to mean exactly what it says. We said:

Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed
or separated employee insofar as the reinstatement aspect is concerned, shall be
immediately executory, even pending appeal. The employer shall reinstate the
employee concerned either by: (a) actually admitting him back to work under the same
terms and conditions prevailing prior to his dismissal or separation; or (b) at the option
of the employer, merely reinstating him in the payroll. Immediate reinstatement is
mandated and is not stayed by the fact that the employer has appealed, or has posted a
cash or surety bond pending appeal. 19

We expressed a similar view a year earlier in Medina v. Consolidated Broadcasting System (CBS)
DZWX 20and laid down the rule that an employer who fails to comply with an order of
reinstatement makes him liable for the employee's salaries. Thus:

Petitioners construe the above paragraph to mean that the refusal of the employer to
reinstate an employee as directed in an executory order of reinstatement would make it
liable to pay the latter's salaries. This interpretation is correct. Under Article 223 of the
Labor Code, as amended, an employer has two options in order for him to comply with
an order of reinstatement, which is immediately executory, even pending appeal. Firstly,
he can admit the dismissed employee back to work under the same terms and
conditions prevailing prior to his dismissal or separation or to a substantially equivalent
position if the former position is already filled up as we have ruled in Union of
Supervisors (RB) NATU vs. Sec. of Labor, 128 SCRA 442 [1984]; and Pedroso vs. Castro,
141 SCRA 252 [1986]. Secondly, he can reinstate the employee merely in the payroll.
Failing to exercise any of the above options, the employer can be compelled under pain
of contempt, to pay instead the salary of the employee. This interpretation is more in
consonance with the constitutional protection to labor (Section 3, Art. XIII,
1987 Constitution). The right of a person to his labor is deemed to be property within
the meaning of the constitutional guaranty that no one shall be deprived of life, liberty,
and property without due process of law. Therefore, he should be protected against any
arbitrary and unjust deprivation of his job (Bondoc vs. People's Bank and Trust Co., Inc.,
103 SCRA 599 [1981]). The employee should not be left without any remedy in case the
employer unreasonably delays reinstatement. Therefore, we hold that the unjustified
refusal of the employer to reinstate an illegally dismissed employee entitles the
employee to payment of his salaries . . . . 21

The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting
the import of Article 223 in Maranaw, the Court 22 declared that the reinstatement aspect of

101
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

the Labor Arbiter's decision needs a writ of execution as it is not self-executory, a declaration
the Court recently reiterated and adopted in Archilles Manufacturing Corp.v. NLRC. 23

We note that prior to the enactment of R.A. No. 6715, Article 223 24 of the Labor Code contains
no provision dealing with the reinstatement of an illegally dismissed employee. The
amendment introduced by R.A. No. 6715 is an innovation and a far departure from the old law
indicating thereby the legislature's unequivocal intent to insert a new rule that will govern the
reinstatement aspect of a decision or resolution in any given labor dispute. In fact, the law as
now worded employs the phrase "shall immediately be executory" without qualification
emphasizing the need for prompt compliance. As a rule, "shall" in a statute commonly denotes
an imperative obligation and is inconsistent with the idea of discretion 25 and that the
presumption is that the word "shall", when used in a statute, is mandatory. 26 An appeal or
posting of bond, by plain mandate of the law, could not even forestall nor stay the executory
nature of an order of reinstatement. The law, moreover, is unambiguous and clear. Thus, it
must be applied according to its plain and obvious meaning, according to its express terms.
In Globe-Mackay Cable and Radio Corporation v. NLRC, 27 we held that:

Under the principles of statutory construction, if a statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without attempted
interpretation. This plain-meaning rule or verba legisderived from the maxim index
animi sermo est (speech is the index of intention) rests on the valid presumption that
the words employed by the legislature in a statute correctly express its intent or will and
preclude the court from construing it differently. The legislature is presumed to know
the meaning of the words, to have used words advisedly, and to have expressed its
intent by the use of such words as are found in the statute. Verba legis non est
recedendum, or from the words of a statute there should be no departure. 28

And in conformity with the executory nature of the reinstatement order, Rule V, Section 16 (3)
of the New Rules of Procedure of the NLRC strictly requires the Labor Arbiter to direct the
employer to immediately reinstate the dismissed employee. Thus:

In case the decision includes an order of reinstatement, the Labor Arbiter shall direct
the employer to immediately reinstate the dismissed or separated employee even
pending appeal. The order of reinstatement shall indicate that the employee shall either
be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated in the
payroll.

In declaring that reinstatement order is not self-executory and needs a writ of execution, the
Court, in Maranaw, adverted to the rule provided under Article 224. We said:

It must be stressed, however, that although the reinstatement aspect of the decision
is immediately executory, it does not follow that it is self-executory. There must be a writ

102
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

of execution which may be issuedmotu proprio or on motion of an interested party.


Article 224 of the Labor Code provides:

Art. 224. Execution of decision, orders or awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter, or med-
arbitter or voluntary arbitrator may, motu proprio or on motion of any interested party,
issue a writ of execution on a judgment within five (5) years from the date it becomes
final and executory . . . (emphasis supplied)

The second paragraph of Section 1, Rule VIII of the New Rules of Procedure of the NLRC
also provides:

The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized
hearing officer of origin shall, motu proprio or on motion of any interested party, issue a
writ of execution on a judgment only within five (5) years from the date it becomes final
and executory . . . . No motion for execution shall be entertained nor a writ he issued
unless the Labor Arbiter is in possession of the records of the case which shall include an
entry of judgment. (emphasis supplied)

xxx xxx xxx

In the absence then of an order for the issuance of a writ of execution on the
reinstatement aspect of the decision of the Labor Arbiter, the petitioner was under no
legal obligation to admit back to work the private respondent under the terms and
conditions prevailing prior to her dismissal or, at the petitioner's option, to merely
reinstate her in the payroll. An option is a right of election to exercise a privilege, and
the option in Article 223 of the Labor Code is exclusively granted to the employer. The
event that gives rise for its exercise is not the reinstatement decree of a Labor Arbiter,
but the writ for its execution commanding the employer to reinstate the employee,
while the final act which compels the employer to exercise the option is the service
upon it of the writ of execution when, instead of admitting the employee back to his
work, the employer chooses to reinstate the employee in the payroll only. If the
employer does not exercise this option, it must forthwith admit the employee back to
work, otherwise it may be punished for contempt. 29

A closer examination, however, shows that the necessity for a writ of execution under Article
224 applies only to final and executory decisions which are not within the coverage of Article
223. For comparison, we quote the material portions of the subject articles:

Art. 223. Appeal. . . .

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to work

103
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

under the same terms and conditions prevailing prior to his dismissal or separation or,
at the option of the employer, merely reinstated in the payroll. The posting of a bond by
the employer shall not stay the execution for reinstatement provided herein.

xxx xxx xxx

Art. 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter, or med-
arbiter or voluntary arbitrator may, motu propio or on motion of any interested
party, issue a writ of execution on a judgment within five (5) years from the date it
becomes final and executory, requiring a sheriff or a duly deputized officer to execute or
enforce final decisions, orders or awards of the Secretary of Labor and Employment or
regional director, the Commission, the Labor Arbiter or med-arbiter, or voluntary
arbitrators. In any case, it shall be the duty of the responsible officer to separately
furnish immediately the counsels of record and the parties with copies of said decisions,
orders or awards. Failure to comply with the duty prescribed herein shall subject such
responsible officer to appropriate administrative sanctions.

Article 224 states that the need for a writ of execution applies only within five (5) years from
the date a decision, an order or award becomes final and executory. It can not relate to an
award or order of reinstatement still to be appealed or pending appeal which Article 223
contemplates. The provision of Article 223 is clear that an award for reinstatement shall be
immediately executory even pending appeal and the posting of a bond by the employer shall not
stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an
award of reinstatement immediately enforceable, even pending appeal. To require the
application for and issuance of a writ of execution as prerequisites for the execution of a
reinstatement award would certainly betray and run counter to the very object and intent of
Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An
application for a writ of execution and its issuance could be delayed for numerous reasons. A
mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the
part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting
at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the
requirements of Article 224 were to govern, as we so declared in Maranaw, then the executory
nature of a reinstatement order or award contemplated by Article 223 will be unduly
circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have
ordained a valid and sensible law, one which operates no further than may be necessary to
achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose
to be achieved and the evil sought to be remedied. 30 And where the statute is fairly susceptible
of two or more constructions, that construction should be adopted which will most tend to give
effect to the manifest intent of the lawmaker and promote the object for which the statute was
enacted, and a construction should be rejected which would tend to render abortive other
provisions of the statute and to defeat the object which the legislator sought to attain by its
enactment. 31 In introducing a new rule on the reinstatement aspect of a labor decision under
R.A. No. 6715, Congress should not be considered to be indulging in mere semantic exercise. On

104
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

appeal, however, the appellate tribunal concerned may enjoin or suspend the reinstatement
order in the exercise of its sound discretion.

Furthermore, the rule is that all doubts in the interpretation and implementation of labor laws
should be resolved in favor of labor. 32 In ruling that an order or award for reinstatement does
not require a writ of execution the Court is simply adhering and giving meaning to this rule.
Henceforth, we rule that an award or order for reinstatement is self-executory. After receipt of
the decision or resolution ordering the employee's reinstatement, the employer has the right to
choose whether to re-admit the employee to work under the same terms and conditions
prevailing prior to his dismissal or to reinstate the employee in the payroll. In either instance,
the employer has to inform the employee of his choice. The notification is based on practical
considerations for without notice, the employee has no way of knowing if he has to report for
work or not.

WHEREFORE, the petition is DENIED and the decision of the Labor Arbiter is hereby
REINSTATED.

Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Hermosisima, Jr., Panganiban and Torres, Jr., JJ., concur.

Footnotes

1 Second Division: Perez, Pres. Comm.; Calaycay, Rayala, Comms.

2 NLRC Decision, p. 7; Rollo, p. 35.

3 Petition, p. 12, Rollo, p. 13

4 Id; Rejoinder [should he Reply] to the Comment of the Office of the Solicitor
General, pp. 2-3.

5 Piedad's correct citation is 153 SCRA 500, and not 154 SCRA 500 as
inadvertently stated by the petitioners.

6 NLRC Decision, pp. 5-7; Rollo, pp. 33-35.

7 Decision of the Labor Arbiter, pp. 4-6; Rollo, pp. 41-43.

8 Art. 279, Labor Code, as amended.

105
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

9 Oania v. NLRC, 244 SCRA 668, Citytrust Finance Corp. v. NLRC, 157 SCRA 87;
Manila Midtown Commercial Corp. v. Nuwhrain, 159 SCRA 212; Stellar Services,
Inc. v. NLRC, G.R. No. 117418, January 24, 1996.

10 Solmac Marketing, Inc., and Armando Macam v. NLRC, G.R. No. 116574,
February 12, 1996.

11 Nevans v. CIR, 23 SCRA 1321; Galsim v. Philippine National Bank, 29 SCRA 293;
Reyes v. Zamora, 90 SCRA 92; Tabacalera Insurance Co. v. NLRC, 152 SCRA 667.

12 Quezon Electric Cooperative v. NLRC, 172 SCRA 88; Valladolid v. Inciong, 121
SCRA 2053.

13 Rollo, p. 39.

14 Article 279, Labor Code, as amended; Pantranco North Express, Inc. v. NLRC,
G.R. No. 114333, January 24, 1996; Oania v. NLRC, 244 SCRA 668; Valiant
Machinery and Metal Corporation and Jimmy Lua Sing v. NLRC, G.R. No. 105877,
January 25, 1996.

15 185 SCRA 651, 655.

16 First Division: Grio-Aquino, J., ponente; Narvasa [now C.J.], Cruz, and
Medialdea, JJ., concurring.

17 225 SCRA 526; Third Division: Bidin, J., ponente; Feliciano, Romero, Melo and
Vitug, JJ., concurring.

18 232 SCRA 587; First Division; Quiason, J., ponente; Davide, Jr., and
Bellosillo, JJ., concurring: Cruz and Kapunan, JJ., on leave.

19 232 SCRA at p. 593.

20 222 SCRA 707; Third Division; Melo, J., ponente; Feliciano, Bidin, Davide, Jr.,
and Romero, JJ.,concurring.

21 222 SCRA at pp. 710-711.

22 First Division: Davide, Jr., J., ponente; Padilla, Bellosillo, Quiason and
Kapunan, JJ., concurring.

23 244 SCRA 750; First Division: Bellosillo, J., ponente; Padilla, Davide, Jr., and
Kapunan, JJ.,concurring; Quiason, J., on leave.

106
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

24 Art. 223. Appeal. Decisions, awards, or orders of the Labor Arbiter or


compulsory arbitrators are final and executory unless appealed to the
Commission by any or both of the parties within ten (10) days from receipt of
such awards, orders, or decisions. Such appeal may be entertained only on any
of the following grounds:

(a) If there is prima facie evidence of abuse of discretion on the part of the Labor
Arbiter or Compulsory Arbitrator;

(b) If the decision, order or award was secured through fraud or coercion,
including graft and corruption;

(c) If made purely on questions of law; and

(d) If serious errors in the findings of facts are raised which would cause grave
abuse or irreparable damage or injury to the appellant.

To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter


shall impose reasonable penalty, including fines or censures, upon the erring
parties.

In all cases, the appellant shall furnish a copy of the memorandum of appeal to
the other party who shall file an answer not later than ten (10) days from receipt
thereof.

The Commission shall decide all cases within twenty (20) working days from
receipt of the answer of the appellee.

The decision of the Commission is appealable to the Secretary of Labor on any of


the following grounds:

(a) If there is a prima facie evidence of abuse of discretion;

(b) If made purely on questions of law; and

(c) If there is a showing that the national security or social and economic stability
is threatened.

The decision of the Commission shall be immediately executory, even pending


appeal, unless stayed by an order of the Secretary of Labor for special reasons.
The decision of the Secretary of Labor shall be immediately executory; Provided,
That the President of the Philippines may assume jurisdiction over any cases
which he considers national interest cases. (Note: PD 1367 promulgated May 1,
1978 eliminated appeals of the Office of the President and made the Office of

107
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

the Secretary the terminal appeal level. But PD 1391 promulgated May 29, 1978
further delimited appeals to the NLRC. See texts of PD 1367 and PD 1391.)

The Philippine Constabulary and other law-enforcement agencies may be


deputized by the Secretary of Labor in the enforcement of orders, decisions, or
awards.

25 Elmer v. Commissioner of Insurance, 23 N.E. 2d 95, 304 Mass. 194.

26 Swift v. Smith, 201 P. 2d 609, 119 Colo. 126; City of Gary v. Yaksich, 90 N.E. 2d
509, 120 Ind. App. 121, Baranda v. Gustilo, 165 SCRA 757.

27 206 SCRA 701.

28 Id., at p. 711.

29 238 SCRA at pp. 198-199.

30 See ALVN Pictures, Inc. v. Philippine Musicians Guild and CIR, 110 Phil. 725.

31 US v. Toribio, 15 Phil. 85, 90.

32

108
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

GARCIA VS PAL (EN BANC) 576 SCRA 479

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 164856 January 20, 2009

JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners,


vs.
PHILIPPINE AIRLINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and
April 16, 2004 Resolution of the Court of Appeals1 in CA-G.R. SP No. 69540 which granted the
petition for certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners
Motion for Reconsideration, respectively. The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby
GIVEN DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28,
2002 Resolution of public respondent National Labor Relations Commission [NLRC] is hereby
ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to
lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of
Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE.

SO ORDERED.2

The case stemmed from the administrative charge filed by PAL against its employees-herein
petitioners3 after they were allegedly caught in the act of sniffing shabu when a team of
company security personnel and law enforcers raided the PAL Technical Centers Toolroom
Section on July 24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code
of Discipline,4prompting them to file a complaint for illegal dismissal and damages which was,
by Decision of January 11, 1999,5 resolved by the Labor Arbiter in their favor, thus ordering PAL
to, inter alia, immediately comply with the reinstatement aspect of the decision.

Prior to the promulgation of the Labor Arbiters decision, the Securities and Exchange
Commission (SEC) placed PAL (hereafter referred to as respondent), which was suffering from

109
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

severe financial losses, under an Interim Rehabilitation Receiver, who was subsequently
replaced by a Permanent Rehabilitation Receiver on June 7, 1999.

From the Labor Arbiters decision, respondent appealed to the NLRC which, by Resolution of
January 31, 2000, reversed said decision and dismissed petitioners complaint for lack of merit.6

Petitioners Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of
Judgment was issued on July 13, 2000.7

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ)
respecting thereinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000,
he issued a Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ
and to lift the Notice while petitioners moved to release the garnished amount.

In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by
Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and
the Notice issued by the Labor Arbiter but suspended and referred the action to the
Rehabilitation Receiver for appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged
Decision and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing
that: (1) a subsequent finding of a valid dismissal removes the basis for implementing the
reinstatement aspect of a labor arbiters decision (the first ground), and (2) the impossibility to
comply with the reinstatement order due to corporate rehabilitation provides a reasonable
justification for the failure to exercise the options under Article 223 of the Labor Code (the
second ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and
effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings, viz:

Since petitioners claim against PAL is a money claim for their wages during the pendency of
PALs appeal to the NLRC, the same should have been suspended pending the rehabilitation
proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have
abstained from resolving petitioners case for illegal dismissal and should instead have directed
them to lodge their claim before PALs receiver.

However, to still require petitioners at this time to re-file their labor claim against PAL under
peculiar circumstances of the case that their dismissal was eventually held valid with only the
matter of reinstatement pending appeal being the issue this Court deems it legally expedient
to suspend the proceedings in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein
are SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines,

110
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Inc. is hereby DIRECTED to quarterly update the Court as to the status of its ongoing
rehabilitation. No costs.

SO ORDERED.8 (Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the
SEC, by Order of September 28, 2007, granted its request to exit from rehabilitation
proceedings.9

In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve
the remaining issuefor consideration, which is whether petitioners may collect their wages
during the period between the Labor Arbiters order of reinstatement pending appeal and the
NLRC decision overturning that of the Labor Arbiter, now that respondent has exited from
rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid
dismissal removes the basis for implementing the reinstatement aspect of a labor arbiters
decision.

On this score, the Courts attention is drawn to seemingly divergent decisions concerning
reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one
hand is the jurisprudential trend as expounded in a line of cases including Air Philippines Corp.
v. Zamora,10 while on the other is the recent case ofGenuino v. National Labor Relations
Commission.11 At the core of the seeming divergence is the application of paragraph 3 of Article
223 of the Labor Code which reads:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, pending
appeal. The employee shall either be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation or, at the option of the employer,
merely reinstated in the payroll. The posting of a bond by the employer shall not stay the
execution for reinstatement provided herein. (Emphasis and underscoring supplied)

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is


obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court. On the other hand, if
the employee has been reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever salary he received
for he is entitled to such, more so if he actually rendered services during the
period.12 (Emphasis in the original; italics and underscoring supplied)

111
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is
entitled to receive wages pending appeal upon reinstatement, which is immediately executory.
Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the
order of reinstatement and it is mandatory on the employer to comply therewith. 13

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground
for dismissal is valid, then the employer has the right to require the dismissed employee on
payroll reinstatement to refund the salaries s/he received while the case was pending appeal,
or it can be deducted from the accrued benefits that the dismissed employee was entitled to
receive from his/her employer under existing laws, collective bargaining agreement provisions,
and company practices. However, if the employee was reinstated to work during the pendency
of the appeal, then the employee is entitled to the compensation received for actual services
rendered without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and
her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in
item no. 3 of the fallo of the September 3, 1994 NLRC Decision.14 (Emphasis, italics and
underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where
the employee was required to refund the salaries received on payroll reinstatement. In fact, in
a catena of cases,15 the Court did not order the refund of salaries garnished or received by
payroll-reinstated employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise
render inutile the rationale of reinstatement pending appeal.

x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and
enhances the provisions of the 1987 Constitution on labor and the working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for
the workingman as to forcefully and meaningfully underscore labor as a primary social and
economic force, which the Constitution also expressly affirms with equal intensity. Labor is an
indispensable partner for the nation's progress and stability.

xxxx

112
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

x x x In short, with respect to decisions reinstating employees, the law itself has determined a
sufficiently overwhelming reason for its execution pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an
immediate implementation, pending appeal, of a decision reinstating a dismissed or separated
employee since that saving act is designed to stop, although temporarily since the appeal may
be decided in favor of the appellant, a continuing threat or danger to the survival or even the
life of the dismissed or separated employee and his family.16

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine
of unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The
constitutional and statutory precepts portray the otherwise "unjust" situation as a condition
affording full protection to labor.

Even outside the theoretical trappings of the discussion and into the mundane realities of
human experience, the "refund doctrine" easily demonstrates how a favorable decision by the
Labor Arbiter could harm, more than help, a dismissed employee. The employee, to make both
ends meet, would necessarily have to use up the salaries received during the pendency of the
appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is
mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the
employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any
is available. Notably, the option of payroll reinstatement belongs to the employer, even if the
employee is able and raring to return to work. Prior toGenuino, it is unthinkable for one to
refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned
employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but
also institutes a scheme unduly favorable to management. Under such scheme, the salaries
dispensed pendente lite merely serve as a bond posted in installment by the employer. For in
the event of a reversal of the Labor Arbiters decision ordering reinstatement, the employer
gets back the same amount without having to spend ordinarily for bond premiums. This
circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a
cash bond] by the employer shall not stay the execution for reinstatement."17

In playing down the stray posture in Genuino requiring the dismissed employee on payroll
reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal,
the Court realigns the proper course of the prevailing doctrine on reinstatement pending
appeal vis--vis the effect of a reversal on appeal.

113
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Respondent insists that with the reversal of the Labor Arbiters Decision, there is no more basis
to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice
Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air
Philippines and allied cases inapplicable because, unlike the present case, the writ of execution
therein was secured prior to the reversal of the Labor Arbiters decision.

The proposition is tenuous. First, the matter is treated as a mere race against time. The
discussion stopped there without considering the cause of the delay. Second, it requires the
issuance of a writ of execution despite the immediately executory nature of the reinstatement
aspect of the decision. In Pioneer Texturing Corp. v. NLRC,18which was cited in Panuncillo v. CAP
Philippines, Inc.,19 the Court observed:

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for
reinstatement shall be immediately executory even pending appeal and the posting of a bond
by the employer shall not stay the execution for reinstatement. The legislative intent is quite
obvious, i.e., to make an award of reinstatement immediately enforceable, even pending
appeal. To require the application for and issuance of a writ of execution as prerequisites for
the execution of a reinstatement award would certainly betray and run counter to the very
object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The
reason is simple. An application for a writ of execution and its issuance could be delayed for
numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance,
or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the
writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223.
In other words, if the requirements of Article 224 [including the issuance of a writ of
execution] were to govern, as we so declared in Maranaw, then the executory nature of a
reinstatement order or award contemplated by Article 223 will be unduly circumscribed and
rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid
and sensible law, one which operates no further than may be necessary to achieve its specific
purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and
the evil sought to be remedied. x x x In introducing a new rule on the reinstatement aspect of a
labor decision under Republic Act No. 6715, Congress should not be considered to be indulging
in mere semantic exercise. x x x20 (Italics in the original; emphasis and underscoring supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay
the wages of the dismissed employee during the period of appeal until reversal by the higher
court.21 It settles the view that the Labor Arbiter's order of reinstatement
is immediately executory and the employer has to either re-admit them to work under the
same terms and conditions prevailing prior to their dismissal, or to reinstate them in the
payroll, and that failing to exercise the options in the alternative, employer must pay the
employees salaries.22

Amplification of the Second Ground

114
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

The remaining issue, nonetheless, is resolved in the negative on the strength of the second
ground relied upon by the appellate court in the assailed issuances. The Court sustains the
appellate courts finding that the peculiar predicament of a corporate rehabilitation rendered it
impossible for respondent to exercise its option under the circumstances.

The spirit of the rule on reinstatement pending appeal animates the proceedings once the
Labor Arbiter issues the decision containing an order of reinstatement. The immediacy of its
execution needs no further elaboration.Reinstatement pending appeal necessitates its
immediate execution during the pendency of the appeal, if the law is to serve its noble purpose.
At the same time, any attempt on the part of the employer to evade or delay its execution, as
observed in Panuncillo and as what actually transpired in Kimberly,23 Composite,24 Air
Philippines,25 and Roquero,26 should not be countenanced.

After the labor arbiters decision is reversed by a higher tribunal, the employee may be
barred from collecting the accrued wages, if it is shown that the delay in enforcing the
reinstatement pending appeal was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement
pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the
employers unjustified act or omission. If the delay is due to the employers unjustified refusal,
the employer may still be required to pay the salaries notwithstanding the reversal of the Labor
Arbiters decision.

In Genuino, there was no showing that the employer refused to reinstate the employee, who
was the Treasury Sales Division Head, during the short span of four months or from the
promulgation on May 2, 1994 of the Labor Arbiters Decision up to the promulgation on
September 3, 1994 of the NLRC Decision. Notably, the former NLRC Rules of Procedure did not
lay down a mechanism to promptly effectuate the self-executory order of reinstatement,
making it difficult to establish that the employer actually refused to comply.

In a situation like that in International Container Terminal Services, Inc. v. NLRC27 where it was
alleged that the employer was willing to comply with the order and that the employee opted
not to pursue the execution of the order, the Court upheld the self-executory nature of the
reinstatement order and ruled that the salary automatically accrued from notice of the Labor
Arbiter's order of reinstatement until its ultimate reversal by the NLRC. It was later discovered
that the employee indeed moved for the issuance of a writ but was not acted upon by the
Labor Arbiter. In that scenario where the delay was caused by the Labor Arbiter, it was ruled
that the inaction of the Labor Arbiter who failed to act upon the employees motion for the
issuance of a writ of execution may no longer adversely affect the cause of the dismissed
employee in view of the self-executory nature of the order of reinstatement.28

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the
employer to submit areport of compliance within 10 calendar days from receipt of the Labor
Arbiters decision,29 disobedience to which clearly denotes a refusal to reinstate. The employee

115
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

need not file a motion for the issuance of the writ of execution since the Labor
Arbiter shall thereafter motu proprio issue the writ. With the new rules in place, there is hardly
any difficulty in determining the employers intransigence in immediately complying with the
order.

In the case at bar, petitioners exerted efforts30 to execute the Labor Arbiters order of
reinstatement until they were able to secure a writ of execution, albeit issued on October 5,
2000 after the reversal by the NLRC of the Labor Arbiters decision. Technically, there was still
actual delay which brings to the question of whether the delay was due to
respondents unjustified act or omission.

It is apparent that there was inaction on the part of respondent to reinstate them, but whether
such omission was justified depends on the onset of the exigency of corporate rehabilitation.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims
before any court, tribunal or board against the corporation shall ipso jure be suspended.31 As
stated early on, during the pendency of petitioners complaint before the Labor Arbiter, the SEC
placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered
his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent
Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of
reinstatement is ministerial and mandatory.32 This injunction or suspension of claims by
legislative fiat33 partakes of the nature of a restraining order that constitutes a legal justification
for respondents non-compliance with the reinstatement order. Respondents failure to
exercise the alternative options of actual reinstatement and payroll reinstatement was thus
justified. Such being the case, respondents obligation to pay the salaries pending appeal, as the
normal effect of the non-exercise of the options, did not attach.

While reinstatement pending appeal aims to avert the continuing threat or danger to the
survival or even the life of the dismissed employee and his family, it does not contemplate the
period when the employer-corporation itself is similarly in a judicially monitored state of being
resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for the
non-exercise of its options, on the one hand, and a claim of actual and imminent substantial
losses as ground for retrenchment, on the other hand, stops at the red line on the financial
statements. Beyond the analogous condition of financial gloom, as discussed by Justice
Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground
of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation
was judicially pre-determined by a competent court and not formulated for the first time in this
case by respondent.

116
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

More importantly, there are legal effects arising from a judicial order placing a corporation
under rehabilitation. Respondent was, during the period material to the case, effectively
deprived of the alternative choices under Article 223 of the Labor Code, not only by virtue of
the statutory injunction but also in view of the interim relinquishment of management control
to give way to the full exercise of the powers of the rehabilitation receiver. Had there been no
need to rehabilitate, respondent may have opted for actual physical reinstatement pending
appeal to optimize the utilization of resources. Then again, though the management may think
this wise, the rehabilitation receiver may decide otherwise, not to mention the subsistence of
the injunction on claims.

In sum, the obligation to pay the employees salaries upon the employers failure to exercise
the alternative options under Article 223 of the Labor Code is not a hard and fast rule,
considering the inherent constraints of corporate rehabilitation.

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of
December 5, 2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming
the validity of the Writ of Execution and the Notice of Garnishment are concerned, the Court
finds no reversible error.

SO ORDERED.

CONCHITA CARPIO MORALES


Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING ANTONIO T. CARPIO


Associate Justice Associate Justice

CONSUELO YNARES- SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ


Associate Justice Associate Justice

RENATO C. CORONA ADOLFO S. AZCUNA


Associate Justice Associate Justice

DANTE O. TINGA PRESBITERO J. VELASCO, JR.


Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA

117
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION


Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I hereby certify that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Court.

REYNATO S. PUNO
Chief Justice

Footnotes
1
Justices Marina L. Buzon, Sergio L. Pestao (ponente) and Jose C. Mendoza comprised
the [Former] Fourteenth Division of the appellate court.
2
Rollo, pp. 47-48.
3
Juanito A. Garcia and Alberto J. Dumago were employed as aircraft inspector and
aircraft furnisher master, respectively.
4
Particularly, Chapter II, Section 6, Articles 46 (Violation of Law/Government
Regulations) and 48 (Prohibited Drugs).
5
Records, Vol. 1, p. 167. The dispositive portion of the Decision penned by Labor Arbiter
Ramon Valentin Reyes reads:

WHEREFORE, conformably with the foregoing, judgment is hereby rendered


finding the respondents guilty of illegal suspension and illegal dismissal
and ordering them to reinstate complainants to their former position without
loss of seniority rights and other privileges. Respondents are hereby further
ordered to pay jointly and severally unto the complainants the following:

Alberto J. Dumago - P409,500.00 backwages as of 1/10/99

34,125.00 for 13th month pay

118
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Juanito A. Garcia - P1,290,744.00 backwages as of 1/10/99

107,562.00 for 13th month pay

[t]he amounts of P100,000.00 and P50,000.00 to each complainant as and by


way of moral and exemplary damages; and

[t]he sum equivalent to ten percent (10%) of the total award as and for
attorneys fees.

Respondents are directed to immediately comply with the reinstatement aspect


of this Decision. However, in the event that reinstatement is no longer feasible,
respondent is hereby ordered, in lieu thereof, to pay unto the complainants their
separation pay computed at one month for [e]very year of service.

SO ORDERED. (Emphasis and underscoring supplied)


6
Records, Vol. 1. pp. 174-186.
7
Id, at 209. A second look at the antecedents of the main case reveals that petitioners
went on certiorari to the Court of Appeals to challenge the finding of the validity of their
dismissal. By Resolutions of August 10, 2000 and November 5, 2003, the appellate court
dismissed the petition docketed as CA-G.R. SP No. 59826 and denied reconsideration
thereof on technical grounds. By Decision of June 8, 2005, the Court reversed the two
resolutions and remanded the case to the appellate court for further
proceedings. vide rollo, pp. 218-219; Garcia v. Philippine Airlines, Inc., G.R. No. 160798,
June 8, 2005, 459 SCRA 768. The appellate court, by Decision of March 28, 2008 and
Resolution of July 11, 2008, dismissed the petition.
8
Garcia v. Philippine Airlines, Inc., G.R. No. 164856, August 29, 2007, 531 SCRA 574, 582-
583. Penned by Justice Leonardo A. Quisumbing.
9
Rollo, pp. 250-257.
10
G.R. No. 148247, August 7, 2006, 498 SCRA 59.
11
G.R. Nos. 142732-33, December 4, 2007, 539 SCRA 342.
12
Supra note 10 at 72-73.
13
Roquero v. Philippine Airlines, 449 Phil. 437, 446 (2003).

119
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
14
Supra note 11 at 363-364. The Court therein sustained the NLRCs reversal of the
Labor Arbiters decision but cancelled the NLRCs award of salaries accruing from the
Labor Arbiters order of reinstatement pending appeal.
15
Composite Enterprises, Inc. v. Caparoso, G.R. No. 159919, August 8, 2007, 529 SCRA
470; Kimberly Clark (Phils), Inc. v. Facundo, G.R. No. 144885, July 26, 2006 (Unsigned
Resolution); Sanchez v. NLRC, G.R. No. 124348, February 7, 2001 Unsigned
Resolution; International Container Terminal Services, Inc. v. NLRC, 360 Phil. 527 (1998).
16
Roquero v. Philippine Airlines, supra at 445 citing Aris (Phil.) Inc. v. NLRC, 200 SCRA 246
(1991).
17
Labor Code, Article 223, par. 3.
18
345 Phil. 1057 (1997) which established the doctrine that an order or award for
reinstatement is self-executory, meaning that it does not require a writ of execution,
much less a motion for its issuance.
19
G.R. No. 161305, February 9, 2007, 515 SCRA 323.
20
Supra note 18 at 1075-1076.
21
Supra note 12.
22
Kimberly Clark (Phils), Inc. v. Facundo, supra.
23
Supra, where the 3 months salary was delayed because the employer filed another
baseless motion to quash writ of execution.
24
Supra, where the employer did not release the salaries despite agreeing on payroll
reinstatement, awaiting the resolution of its unmeritorious Motion to be Allowed to pay
Separation Pay in lieu of Reinstatement.
25
Supra, where the employer did not at all comply with the standing writ of execution.
26
Supra, where the employer refused to comply with the writ of execution, arguing that
it filed a petition for review before the Court.
27
Supra.
28
International Container Terminal Services, Inc. v. NLRC, supra.
29
Revised Rules of Procedure of the NLRC (2005), Rule V, Sec. 14 and Rule XI, Sec. 6.

120
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
30
Petitioners state that respondent ignored their letter of June 14, 1999, prompting
them to file a "Motion for Issuance of Writ of Execution [of the Labor Arbiters January
11, 1999] and to Cite the Respondents in Contempt" of November 11, 1999, rollo, pp.
78-85, 169.
31
Garcia v. Philippine Airlines, Inc., supra note 8.
32
Roquero v. Philippine Airlines, supra note 13.
33
Pres. Decree No. 902-A, Sec. 6 (c), as amended.

SEPARATE OPINION

QUISUMBING, J.:

From this Courts Decision1 dated August 29, 2007, which ordered the suspension of the
proceedings in this case, respondent Philippine Airlines, Inc. (PAL) filed a Manifestation and
Compliance2 on November 13, 2007 containing an Order3 dated September 28, 2007, from the
Securities and Exchange Commission (SEC) granting its request to exit from the rehabilitation
proceedings.

In a letter dated September 14, 2007, the members of the Permanent Rehabilitation Receiver
(PRR) recommended PALs exit from rehabilitation "because the same is feasible based on the
corporations improved financial condition, capability to service debts or obligations, rosy
projected cash flows, sustainable profitability and adherence to its Amended and Restated
Rehabilitation Plan."4 This assessment was bolstered by the Office of the General Accountant of
the SEC in its Memorandum dated September 26, 2007, which concluded that PALs projected
income and projected cash flow for the next three years, cost of debt and equity capital, and
latest interim (unaudited) financial statements, satisfactorily addressed concerns on its financial
condition and sustainability of profit.5

Based on these recommendations, the SEC found the termination of the rehabilitation
proceedings, on the ground of successful rehabilitation, in order, thus:

WHEREFORE, in the light of the foregoing, and considering PALs firm commitment to settle its
outstanding obligations as well as the fact that its operations and its financial condition have
been normalized and stabilized in conformity with the Amended and Restated Rehabilitation
Plan, exemplifying a successful corporate rehabilitation, the PALs request to exit from
rehabilitation is hereby GRANTED.

121
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

The PRR is likewise directed to furnish all creditors and parties concerned with copies of this
Order at the expense of the Petitioner and submit proof of service thereof to the Commission,
within fifteen (15) days from date of receipt of this Order.

SO ORDERED.6

In view of the foregoing development, the instant case may now be resolved. But first, a brief
summation of the antecedent proceedings.

Petitioners Alberto J. Dumago and Juanito A. Garcia were Aircraft Furnishers Master "C" and
Aircraft Inspector, respectively, assigned in the PAL Technical Center. On October 9, 1995, they
were dismissed for violation of Chapter II, Section 6, Article 46 (Violation of Law/Government
Regulations) and Chapter II, Section 6, Article 48 (Prohibited Drugs) of the PAL Code of
Discipline.7 Both simultaneously filed a case for illegal dismissal and damages.

On January 11, 1999, the Labor Arbiter rendered a Decision8 in petitioners favor:

WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding the
respondents guilty of illegal suspension and illegal dismissal and ordering them to reinstate
complainants to their former position without loss of seniority rights and other privileges.
Respondents are hereby further ordered to pay jointly and severally unto the complainants the
following:

Alberto J. Dumago P409,500.00 backwages as of 1/10/99

34,125.00 for 13th month pay

Juanito A. Garcia P1,290,744.00 backwages as of 1/10/99 107,562.00 for 13th month pay

The amounts of P100,000.00 and P50,000.00 to each complainant as and by way of moral and
exemplary damages; and

The sum equivalent to ten percent (10%) of the total award as and for attorneys fees.

Respondents are directed to immediately comply with the reinstatement aspect of this
Decision. However, in the event that reinstatement is no longer feasible, respondent[s] are
hereby ordered, in lieu thereof, to pay unto the complainants their separation pay computed at
one month for [e]very year of service.

SO ORDERED.9

On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiters
decision and dismissed the case for lack of merit.10 Reconsideration having been denied, an
Entry of Judgment11 was issued on July 13, 2000.

122
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On October 5, 2000, the Labor Arbiter issued a Writ of Execution 12 commanding the sheriff to
proceed:

xxxx

1. To the Office of respondent PAL Building I, Legaspi St., Legaspi Village, Makati City or
to any of its Offices in the Philippines and cause reinstatement of complainants to their
former position and to cause the collection of the amount of [P]549,309.60 from
respondent PAL representing the backwages of said complainants on the reinstatement
aspect;

2. In case you cannot collect from respondent PAL for any reason, you shall levy on the
office equipment and other movables and garnish its deposits with any bank in the
Philippines, subject to the limitation that equivalent amount of such levied movables
and/or the amount garnished in your own judgment, shall be equivalent to
[P]549,309.60. If still insufficient, levy against immovable properties of PAL not
otherwise exempt from execution.

x x x x13

Although PAL filed an Urgent Motion to Quash Writ of Execution, the Labor Arbiter issued a
Notice of Garnishment14 addressed to the President/Manager of the Allied Bank Head Office in
Makati City for the amount of P549,309.60.

PAL moved to lift the Notice of Garnishment while petitioners moved for the release of the
garnished amount. PAL opposed petitioners motion. It also filed an Urgent Petition for
Injunction which the NLRC resolved as follows:

WHEREFORE, premises considered, the Petition is partially GRANTED. Accordingly, the Writ of
Execution dated October 5, 2000 and related [N]otice of Garnishment [dated October 25, 2000]
are DECLARED valid. However, the instant action is SUSPENDED and REFERRED to the Receiver
of Petitioner PAL for appropriate action.

SO ORDERED.15

PAL appealed to the Court of Appeals on the grounds that: (1) by declaring the writ of execution
and the notice of garnishment valid, the NLRC gave petitioners undue advantage and
preference over PALs other creditors and hampered the task of the PRR; and (2) there was no
longer any legal or factual basis to reinstate petitioners as a result of the reversal by the NLRC
of the Labor Arbiters decision.

On December 5, 2003,16 the appellate court ruled that the Labor Arbiter issued the writ of
execution and the notice of garnishment without jurisdiction. Hence, the NLRC erred in
upholding its validity. Since PAL was under receivership, it could not have possibly reinstated

123
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

petitioners due to retrenchment and cash-flow constraints. The appellate court declared that a
stay of execution may be warranted by the fact that PAL was under rehabilitation receivership.
The dispositive portion of the decision dated December 5, 2003, reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is
hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution, as well as the January
28, 2002 Resolution of public respondent National Labor Relations Commission is
hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice
of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE.

SO ORDERED.17

Petitioners moved for reconsideration which the appellate court denied on April 16,
2004,18 thus:

Considering the Motion for Reconsideration filed by private respondents dated [January] 6,
2004 of this Courts Decision promulgated on December 5, 2003, as well as the Comment filed
by petitioner dated February 20, 2003, the Court, finding no sufficient and compelling reason
which will merit a reconsideration of the Decision rendered in this case as the issues raised
therein had already been carefully considered and passed upon in the Decision sought to be
reconsidered, hereby resolves to DENY the instant motion for reconsideration for lack of merit.

SO ORDERED.19

Hence, the instant petition raising a single issue as follows:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PETITIONERS
ARE ENTITLED TO THEIR ACCRUED WAGES DURING THE PENDENCY OF PALS APPEAL.20

Simply put, the issue is: Are petitioners entitled to their wages during the pendency of PALs
appeal to the NLRC?

Petitioners argue that pursuant to this Courts ruling in International Container Terminal
Services, Inc. v. NLRC,21the reinstatement aspect of the Labor Arbiters decision, albeit under
appeal, is immediately enforceable as a consequence of which, the employer is duty-bound to
choose forthwith whether to re-admit the employee or to reinstate him in the payroll. Failing to
exercise the options in the alternative, the employer must pay the salary of the employee
which automatically accrued from notice of the Labor Arbiters order of reinstatement until its
ultimate reversal by the NLRC.22 Petitioners add that PAL should not be excused from complying
with the order of reinstatement on the ground that it was under receivership. At the time PAL
received a copy of the Labor Arbiters decision, PAL was not yet under receivership.

124
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Respondent counters that PAL was already under an Interim Rehabilitation Receiver at the time
it received a copy of the Labor Arbiters decision. It also contends that it cannot be compelled
to reinstate petitioners pending appeal to the NLRC since retrenchment and cash flow
constraints rendered it impossible to exercise its option under Article 223 of the Labor Code.

At the crux of the controversy is the application of Article 223 of the Labor Code which provides
that:

ART. 223. Appeal.

xxxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending
appeal. The employee shall either be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation, or at the option of the employer,
merely reinstated in the payroll. The posting of a bond by the employer shall not stay the
execution for reinstatement provided herein.

xxxx

To be sure, the Court has divergent views on the immediately executory nature of
reinstatement pending appeal particularly where the reinstatement order is reversed on
appeal. On one hand, the Court has ruled that even if the Labor Arbiters reinstatement order is
reversed on appeal, it is the employers obligation to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the NLRC. However, if the
employee has been reinstated during the period of appeal and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever salary he received
for he is entitled to such, more so if he actually rendered services during the period.23

On the other hand, the Court has held that if the decision of the Labor Arbiter is later reversed
on appeal upon the finding that the ground for dismissal is valid, then the employer has the
right to require the dismissed employee on payroll reinstatement to refund the salaries s/he
received while the case was pending appeal, or it can be deducted from the accrued benefits
that the dismissed employee was entitled to receive from his/her employer under existing laws,
collective bargaining agreement provisions, and company practices. However, if the employee
was reinstated to work during the pendency of the appeal, then the employee is entitled to the
compensation received for actual services rendered without need of refund.24

In his dissenting opinion, Justice Presbitero J. Velasco, Jr. adopts the second interpretation and
explains that since no actual or payroll reinstatement pending appeal transpired, petitioners
are no longer entitled to their salaries for the period in question with the reversal of the Labor
Arbiters reinstatement order. There is no more legal basis for the payment of their salaries

125
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

since their right to reinstatement pending appeal has been lost and extinguished. To release
their salaries for the period in question would constitute unjust enrichment.

The rationale for execution pending appeal has been explained by this Court in Aris (Phil.) Inc. v.
NLRC,25 thus:

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor
Arbiter reinstating a dismissed or separated employee, the law itself has laid down a
compassionate policy which, once more, vivifies and enhances the provisions of the 1987
Constitution on labor and the working-man.26

xxxx

If in ordinary civil actions execution of judgment pending appeal is authorized for reasons the
determination of which is merely left to the discretion of the judge, We find no plausible reason
to withhold it in cases of decisions reinstating dismissed or separated employees. In such cases,
the poor employees had been deprived of their only source of livelihood, their only means of
support for their family their very lifeblood. To Us, this special circumstance is far better than
any other which a judge, in his sound discretion, may determine. In short, with respect to
decisions reinstating employees, the law itself has determined a sufficiently overwhelming
reason for its execution pending appeal.27

Clearly, the principle of unjust enrichment does not apply. First, the provision on reinstatement
pending appeal is in accord with the social justice philosophy of our Constitution. It is meant to
afford full protection to labor as it aims to stop (albeit temporarily, since the appeal may be
decided in favor of the employer) a continuing threat or danger to the survival or even the life
of the dismissed employee and his family.28 Second, the provision on reinstatement pending
appeal partakes of a special law that must govern the instant case. The provision of the Civil
Code on unjust enrichment, being of general application, must give way.

In any case, Justice Velasco points out that the writ of execution in the instant case was issued
after the promulgation of the NLRC resolution. As petitioners failed to act on their rights and
seek enforcement of the reinstatement pending appeal, PAL is not liable to pay their accrued
salaries for the period in question.

In Pioneer Texturizing Corp. v. NLRC,29 this Court clarified that an award or order for
reinstatement is self-executory, to wit:

A closer examination, however, shows that the necessity for a writ of execution under Article
224 applies only to final and executory decisions which are not within the coverage of Article
223. ...

xxxx

126
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

It can not relate to an award or order of reinstatement still to be appealed or pending appeal
which Article 223 contemplates. The provision of Article 223 is clear that an award for
reinstatement shall be immediately executory even pending appeal and the posting of a bond
by the employer shall not stay the execution for reinstatement. The legislative intent is quite
obvious, i.e., to make an award of reinstatement immediately enforceable, even pending
appeal. To require the application for and issuance of a writ of execution as prerequisites for
the execution of a reinstatement award would certainly betray and run counter to the very
object and intent of Article 223, i.e., the immediate execution of a reinstatement order.
30 (Italics in the original.)

Since the reinstatement order is self-executory, it is inaccurate to say that its non-
implementation was due to petitioners fault who failed to enforce their rights at the proper
and opportune time. To reiterate, the reinstatement order does not require a writ of execution,
much less a motion for its issuance. To require petitioners to move for the enforcement of the
reinstatement order and blame them for its belated enforcement, as Justice Velasco does,
would render nugatory the self-executory nature of the award.

Justice Velasco also posits that Article 223 of the Labor Code does not automatically make the
employer liable for accrued salaries during the reinstatement pending appeal where no
reinstatement took place. He stresses that the only relief given under the NLRC Rules of
Procedure is the remedy of compulsion via a citation for contempt, thus:

RULE V. SEC. 14. Contents of Decisions. ---

In case the decision of the Labor Arbiter includes an order of reinstatement, it shall likewise
contain: a) a statement that the reinstatement aspect is immediately executory; and b) a
directive for the employer to submit a report of compliance within ten (10) calendar days from
receipt of the said decision.

RULE IX. SEC. 6. EXECUTION OF REINSTATEMENT PENDING APPEAL. --- In case the decision
includes an order of reinstatement, and the employer disobeys the directive under the second
paragraph of Section 14 of Rule V or refuses to reinstate the dismissed employee, the Labor
Arbiter shall immediately issue a writ of execution, even pending appeal, directing the
employer to immediately reinstate the dismissed employee either physically or in the payroll,
and to pay the accrued salaries as a consequence of such reinstatement at the rate specified in
the decision.

The Sheriff shall serve the writ of execution upon the employer or any other person required by
law to obey the same. If he disobeys the writ, such employer or person may be cited for
contempt in accordance with Rule IX. (Emphasis and underscoring supplied.)

Contrary to the position of Justice Velasco, there are actually two reliefs given in the foregoing
provisions: (1) the payment of accrued salaries, and (2) a citation for contempt.

127
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

If the Labor Arbiters decision includes a reinstatement order, the decision should state that the
reinstatement aspect is immediately executory and direct the employer to submit a compliance
report within ten calendar days from receipt of the said decision. Should the employer disobey
the directive of the Labor Arbiter or refuse to reinstate the dismissed employee, the Labor
Arbiter shall immediately issue a writ of execution, even pending appeal, directing the
employer to immediately reinstate the dismissed employee either physically or in the payroll,
and to pay the accrued salaries as a consequence of such reinstatement. If the employer still
disobeys the writ of execution, then he may be cited for contempt.

Finally, the majority put forth the view that after the Labor Arbiters reinstatement order is
reversed by the NLRC, the employee may be barred from collecting his accrued salaries if it is
shown that the non-implementation of the reinstatement order was not due to the fault of the
employer. In the instant case, the corporate rehabilitation of PAL had the effect of suspending
all actions or claims against it. It partakes of the nature of a restraining order that constitutes a
legal justification for PALs non-compliance with the reinstatement order. The writer adds that
reinstatement pending appeal does not contemplate the period when the employer is similarly
in a state of being resuscitated in order to survive.

In Rubberworld (Phils.), Inc. v. NLRC,31 we recognized that the automatic stay of all pending
actions for claims is intended 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 distressed corporation. 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.

Indeed, rehabilitation merely provides for the automatic stay of all pending actions or the
suspension of payments of the distressed corporation to prevent the dissipation of its assets; it
does not relieve the corporation of its obligations. Upon its successful rehabilitation, it must
settle in full all claims previously suspended.

Applying the foregoing rule, we cannot adhere to the posture taken by the majority. Just
because PAL was under rehabilitation did not necessarily mean that immediately executory
orders such as reinstatement pending appeal will be put to naught. That would in effect nullify
the relief given to the employee when all the law seeks to do is suspend it.

Furthermore, we do not agree that reinstatement pending appeal is inapplicable in the instant
case since, as the majority puts it, PAL is similarly in a state of being resuscitated in order to
survive. PAL even argues that retrenchment and cash flow constraints rendered it impossible to
comply with the reinstatement order. In Flight Attendants and Stewards Association of the
Philippines (FASAP) v. Philippine Airlines, Inc., et al.,32 we noted that PAL failed to substantiate
its claim of actual and imminent substantial losses which would justify the retrenchment of
more than 1,400 of its cabin crew personnel. Although the Philippine economy was gravely
affected by the Asian financial crisis, however, it cannot be assumed that it has likewise brought

128
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

PAL to the brink of bankruptcy.33In effect, we held that the mere fact that PAL underwent
corporate rehabilitation does not automatically mean that it suffered specific and substantial
losses that would necessitate retrenchment. In fact, PAL was on the road to recovery as early as
February 1999 and was declaring profits in millions in the succeeding years.34

Given the circumstances in this case, delay on the employees part was not an issue. But we
cannot agree that the petitioners could be barred from collecting accrued wages, merely on the
ground of their delay in enforcing reinstatement pending appeal. For it was the statutory duty
of the respondent as employer to comply with a self-executory order in favor of the employees,
herein petitioners.

Thus, while its rehabilitation may have prevented PAL from exercising its option either to re-
admit petitioners to work or to reinstate them in the payroll, it did not defeat petitioners right
to reinstatement pending appeal which vested upon rendition of the Labor Arbiters decision;
more so when no actual and imminent substantial losses were proven by PAL.

To reiterate, there is no longer any legal impediment to hold PAL liable for petitioners salaries
which automatically accrued from notice of the Labor Arbiters order of reinstatement until its
ultimate reversal by the NLRC.35

WHEREFORE, I would vote to GRANT the petition.

LEONARDO A. QUISUMBING
Associate Justice

Footnotes
1
Garcia v. Philippine Airlines, Inc., G.R. No. 164856, August 29, 2007, 531 SCRA 574.
2
Rollo, pp. 250-251.
3
Id. at 252-257.
4
Id. at 254.
5
Id. at 254-256.
6
Id. at 257.
7
Records, Vol. I, pp. 32-33.

129
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
8
Id. at 160-167.
9
Id. at 167.
10
Id. at 174-186.
11
Id. at 209-210.
12
CA rollo, pp. 57-61.
13
Id. at 60-61.
14
Id. at 71.
15
Id. at 21.
16
Rollo, pp. 38-48. Penned by Associate Justice Sergio L. Pestao, with Associate Justices
Marina L. Buzon and Jose C. Mendoza concurring.
17
Id. at 47-48.
18
Id. at 49.
19
Id.
20
Id. at 219.
21
G.R. No. 115452, December 21, 1998, 300 SCRA 335.
22
Id. at 343.
23
Kimberly Clark (Phils.), Inc. v. Ernesto Facundo, et al., G.R. No. 144885, July 12, 2006,
p. 8 (Unsigned Resolution); Roquero v. Philippine Airlines, Inc., G.R. No. 152329, April
22, 2003, 401 SCRA 424, 430-431; See International Container Terminal Services, Inc. v.
NLRC, G.R. No. 115452, December 21, 1998, 300 SCRA 335, 343.
24
Genuino v. National Labor Relations Commission, G.R. Nos. 142732-33 & 142753-54,
December 4, 2007, 539 SCRA 342, 363-364.
25
G.R. No. 90501, August 5, 1991, 200 SCRA 246; See Composite Enterprises, Inc. v.
Caparoso, G.R. No. 159919, August 8, 2007, 529 SCRA 470, 482; Air Philippines
Corporation v. Zamora, G.R. No. 148247, August 7, 2006, 498 SCRA 59, 73; Roquero v.
Philippine Airlines, Inc., supra note 23 at 429-430.
26
Aris (Phil.) Inc. v. NLRC, id. at 253.

130
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
27
Id. at 255.
28
Id.
29
G.R. No. 118651, October 16, 1997, 280 SCRA 806; See International Container
Terminal Services, Inc. v. NLRC, supra note 21 at 341.
30
Pioneer Texturizing Corp. v. NLRC, id. at 824-825.
31
G.R. No. 128003, July 26, 2000, 336 SCRA 433, 437.
32
G.R. No. 178083, July 22, 2008.
33
Id. at 17.
34
Id. at 21.
35
Kimberly Clark (Phils.), Inc. v. Ernesto Facundo, et al., supra note 23 at 9; International
Container Terminal Services, Inc. v. NLRC, supra note 21 at 343; See Composite
Enterprises, Inc. v. Caparoso, supra note 25 at 483.

131
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

ARIS (PHIL.) INC. VS NLRC 200 SCRA 246

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 90501 August 5, 1991

ARIS (PHIL.) INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER FELIPE GARDUQUE III,
LEODEGARIO DE GUZMAN, LILIA PEREZ, ROBERTO BESTAMONTE, AIDA OPENA, REYNALDO
TORIADO, APOLINARIO GAGAHINA, RUFINO DE CASTRO, FLORDELIZA RAYOS DEL SOL, STEVE
SANCHO, ESTER CAIRO, MARIETA MAGALAD, and MARY B. NADALA, respondents.

Cesar C. Cruz & Partners for petitioner.

Zosimo Morillo for respondent Rayos del Sol.

Banzuela, Flores, Miralles, Raneses, Sy & Associates for private respondents.

DAVIDE, JR., J.:p

Petitioner assails the constitutionality of the amendment introduced by Section 12 of Republic


Act No. 6715 to Article 223 of the Labor Code of the Philippines (PD No. 442, as amended)
allowing execution pending appeal of the reinstatement aspect of a decision of a labor arbiter
reinstating a dismissed or separated employee and of Section 2 of the NLRC Interim Rules on
Appeals under R.A. No. 6715 implementing the same. It also questions the validity of the
Transitory Provision (Section 17) of the said Interim Rules.

The challenged portion of Section 12 of Republic Act No. 6715, which took effect on 21 March
1989, reads as follows:

SEC 12. Article 223 of the same code is amended to read as follows:

ART. 223. Appeal.

xxx xxx xxx

132
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

In any event, the decision of the Labor Arbiter reinstating a dismissed or


separated employee, in so far as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, merely reinstated in
the payroll. The posting of a bond by the employer shall not stay the execution
for reinstatement provided therein.

This is a new paragraph ingrafted into the Article.

Sections 2 and 17 of the "NLRC Interim Rules On Appeals Under R.A. No. 6715, Amending the
Labor Code", which the National Labor Relations Commission (NLRC) promulgated on 8 August
1989, provide as follows:

Section 2. Order of Reinstatement and Effect of Bond. In so far as the


reinstatement aspect is concerned, the decision of the Labor Arbiter reinstating
a dismissed or separated employee shall immediately be executory even pending
appeal. The employee shall either be admitted back to work under the same
terms and conditions prevailing prior to his dismissal or separation, or, at the
option of the employer, merely be reinstated in the payroll.

The posting of a bond by the employer shall not stay the execution for
reinstatement.

xxx xxx xxx

Section 17. Transitory provision. Appeals filed on or after March 21, 1989, but
prior to the effectivity of these Interim Rules must conform to the requirements
as herein set forth or as may be directed by the Commission.

The antecedent facts and proceedings which gave rise to this petition are not disputed:

On 11 April 1988, private respondents, who were employees of petitioner, aggrieved by


management's failure to attend to their complaints concerning their working surroundings
which had become detrimental and hazardous, requested for a grievance conference. As none
was arranged, and believing that their appeal would be fruitless, they grouped together after
the end of their work that day with other employees and marched directly to the
management's office to protest its long silence and inaction on their complaints.

On 12 April 1988, the management issued a memorandum to each of the private respondents,
who were identified by the petitioner's supervisors as the most active participants in the rally
requiring them to explain why they should not be terminated from the service for their
conduct. Despite their explanation, private respondents were dismissed for violation of

133
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

company rules and regulations, more specifically of the provisions on security and public order
and on inciting or participating in illegal strikes or concerted actions.

Private respondents lost no time in filing a complaint for illegal dismissal against petitioner and
Mr. Gavino Bayan with the regional office of the NLRC at the National Capital Region, Manila,
which was docketed therein as NLRC-NCR-00-0401630-88.

After due trial, Labor Arbiter Felipe Garduque III handed down on 22 June 1989 a decision' the
dispositive portion of which reads:

ACCORDINGLY, respondent Aris (Phils.), Inc. is hereby ordered to reinstate within


ten (10) days from receipt hereof, herein complainants Leodegario de Guzman,
Rufino de Castro, Lilia M. Perez, Marieta Magalad, Flordeliza Rayos del Sol,
Reynaldo Toriado, Roberto Besmonte, Apolinario Gagahina, Aidam (sic) Opena,
Steve C. Sancho Ester Cairo, and Mary B. Nadala to their former respective
positions or any substantial equivalent positions if already filled up, without loss
of seniority right and privileges but with limited backwages of six (6) months
except complainant Leodegario de Guzman.

All other claims and prayers are hereby denied for lack of merit.

SO ORDERED.

On 19 July 1989, complainants (herein private respondents) filed a Motion For Issuance of a
Writ of Execution 2pursuant to the above-quoted Section 12 of R.A. No. 6715.

On 21 July 1989, petitioner filed its Appeal. 3

On 26 July 1989, the complainants, except Flor Rayos del Sol, filed a Partial Appeal. 4

On 10 August 1989, complainant Flor Rayos del Sol filed a Partial Appeal. 5

On 29 August 1989, petitioner filed an Opposition 6 to the motion for execution alleging that
Section 12 of R.A. No. 6715 on execution pending appeal cannot be applied retroactively to
cases pending at the time of its effectivity because it does not expressly provide that it shall be
given retroactive effect 7 and to give retroactive effect to Section 12 thereof to pending cases
would not only result in the imposition of an additional obligation on petitioner but would also
dilute its right to appeal since it would be burdened with the consequences of reinstatement
without the benefit of a final judgment. In their Reply 8 filed on 1 September 1989,
complainants argued that R.A. No. 6715 is not sought to be given retroactive effect in this case
since the decision to be executed pursuant to it was rendered after the effectivity of the Act.
The said law took effect on 21 March 1989, while the decision was rendered on 22 June 1989.

Petitioner submitted a Rejoinder to the Reply on 5 September 1989. 9

134
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On 5 October 1989, the Labor Arbiter issued an Order granting the motion for execution and
the issuance of a partial writ of execution 10 as far as reinstatement of herein complainants is
concerned in consonance with the provision of Section 2 of the rules particularly the last
sentence thereof.

In this Order, the Labor Arbiter also made reference to Section 17 of the NLRC Interim Rules in
this wise:

Since Section 17 of the said rules made mention of appeals filed on or after
March 21, 1989, but prior to the effectivity of these interim rules which must
conform with the requirements as therein set forth (Section 9) or as may be
directed by the Commission, it obviously treats of decisions of Labor Arbiters
before March 21,1989. With more reason these interim rules be made to apply
to the instant case since the decision hereof (sic) was rendered thereafter. 11

Unable to accept the above Order, petitioner filed the instant petition on 26 October
1989 12 raising the issues adverted to in the introductory portion of this decision under the
following assignment of errors:

A. THE LABOR ARBITER A QUO AND THE NLRC, IN ORDERING THE


REINSTATEMENT OF THE PRIVATE RESPONDENTS PENDING APPEAL AND IN
PROVIDING FOR SECTION 2 OF THE INTERIM RULES, RESPECTIVELY, ACTED
WITHOUT AND IN EXCESS OF JURISDICTION SINCE THE BASIS FOR SAID ORDER
AND INTERIM RULE, i.e., SECTION 12 OF R.A. 6715 IS VIOLATIVE OF THE
CONSTITUTIONAL GUARANTY OF DUE PROCESS IT BEING OPPRESSIVE AND
UNREASONABLE.

B. GRANTING ARGUENDO THAT THE PROVISION IN(SIC) REINSTATEMENT


PENDING APPEAL IS VALID, NONETHELESS, THE LABOR ARBITER A QUO AND THE
NLRC STILL ACTED IN EXCESS AND WITHOUT JURISDICTION IN RETROACTIVELY
APPLYING SAID PROVISION TO PENDING LABOR CASES.

In Our resolution of 7 March 1989, We required the respondents to comment on the petition.

Respondent NLRC, through the Office of the Solicitor General, filed its Comment on 20
November 1989. 13Meeting squarely the issues raised by petitioner, it submits that the
provision concerning the mandatory and automatic reinstatement of an employee whose
dismissal is found unjustified by the labor arbiter is a valid exercise of the police power of the
state and the contested provision "is then a police legislation."

As regards the retroactive application thereof, it maintains that being merely procedural in
nature, it can apply to cases pending at the time of its effectivity on the theory that no one can
claim a vested right in a rule of procedure. Moreover, such a law is compatible with the
constitutional provision on protection to labor.

135
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On 11 December 1989, private respondents filed a Manifestation 14 informing the Court that
they are adopting the Comment filed by the Solicitor General and stressing that petitioner
failed to comply with the requisites for a valid petition for certiorari under Rule 65 of the Rules
of Court.

On 20 December 1989, petitioner filed a Rejoinder 15 to the Comment of the Solicitor General.

In the resolution of 11 January 1990, 16 We considered the Comments as respondents' Answers,


gave due course to the petition, and directed that the case be calendared for deliberation.

In urging Us to declare as unconstitutional that portion of Section 223 of the Labor Code
introduced by Section 12 of R.A. No. 6715, as well as the implementing provision covered by
Section 2 of the NLRC Interim Rules, allowing immediate execution, even pending appeal, of the
reinstatement aspect of a decision of a labor arbiter reinstating a dismissed or separated
employee, petitioner submits that said portion violates the due process clause of the
Constitution in that it is oppressive and unreasonable. It argues that a reinstatement pending
appeal negates the right of the employer to self-protection for it has been ruled that an
employer cannot be compelled to continue in employment an employee guilty of acts inimical
to the interest of the employer; the right of an employer to dismiss is consistent with the legal
truism that the law, in protecting the rights of the laborer, authorizes neither the oppression
nor the destruction of the employer. For, social justice should be implemented not through
mistaken sympathy for or misplaced antipathy against any group, but even-handedly and
fairly. 17

To clinch its case, petitioner tries to demonstrate the oppressiveness of reinstatement pending
appeal by portraying the following consequences: (a) the employer would be compelled to hire
additional employees or adjust the duties of other employees simply to have someone watch
over the reinstated employee to prevent the commission of further acts prejudicial to the
employer, (b) reinstatement of an undeserving, if not undesirable, employee may demoralize
the rank and file, and (c) it may encourage and embolden not only the reinstated employees
but also other employees to commit similar, if not graver infractions.

These rationalizations and portrayals are misplaced and are purely conjectural which,
unfortunately, proceed from a misunderstanding of the nature and scope of the relief of
execution pending appeal.

Execution pending appeal is interlinked with the right to appeal. One cannot be divorced from
the other. The latter may be availed of by the losing party or a party who is not satisfied with a
judgment, while the former may be applied for by the prevailing party during the pendency of
the appeal. The right to appeal, however, is not a constitutional, natural or inherent right. It is a
statutory privilege of statutory origin 18 and, therefore, available only if granted or provided by
statute. The law may then validly provide limitations or qualifications thereto or relief to the
prevailing party in the event an appeal is interposed by the losing party. Execution pending
appeal is one such relief long recognized in this jurisdiction. The Revised Rules of Court allows

136
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

execution pending appeal and the grant thereof is left to the discretion of the court upon good
reasons to be stated in a special order. 19

Before its amendment by Section 12 of R.A. No. 6715, Article 223 of the Labor Code already
allowed execution of decisions of the NLRC pending their appeal to the Secretary of Labor and
Employment.

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor
Arbiter reinstating a dismissed or separated employee, the law itself has laid down a
compassionate policy which, once more, vivifies and enhances the provisions of the 1987
Constitution on labor and the working-man.

These provisions are the quintessence of the aspirations of the workingman for recognition of
his role in the social and economic life of the nation, for the protection of his rights, and the
promotion of his welfare. Thus, in the Article on Social Justice and Human Rights of the
Constitution, 20 which principally directs 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, and remove cultural inequities by equitably diffusing
wealth and political power for the common good, the State is mandated to afford full
protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all; to guarantee the rights of all
workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law, security of tenure, human
conditions of work, and a living wage, to participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law; and to promote the principle of
shared responsibility between workers and employers and the preferential use of voluntary
modes in settling disputes. Incidentally, a study of the Constitutions of various nations readily
reveals that it is only our Constitution which devotes a separate article on Social Justice and
Human Rights. Thus, by no less than its fundamental law, the Philippines has laid down the
strong foundations of a truly just and humane society. This Article addresses itself to specified
areas of concern labor, agrarian and natural resources reform, urban land reform and housing,
health, working women, and people's organizations and reaches out to the underprivileged
sector of society, for which reason the President of the Constitutional Commission of 1986,
former Associate Justice of this Court Cecilia Muoz-Palma, aptly describes this Article as the
"heart of the new Charter." 21

These duties and responsibilities of the State are imposed not so much to express sympathy for
the workingman as to forcefully and meaningfully underscore labor as a primary social and
economic force, which the Constitution also expressly affirms With equal intensity. 22 Labor is
an indispensable partner for the nation's progress and stability.

If in ordinary civil actions execution of judgment pending appeal is authorized for reasons the
determination of which is merely left to the discretion of the judge, We find no plausible reason
to withhold it in cases of decisions reinstating dismissed or separated employees. In such cases,

137
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

the poor employees had been deprived of their only source of livelihood, their only means of
support for their family their very lifeblood. To Us, this special circumstance is far better than
any other which a judge, in his sound discretion, may determine. In short, with respect to
decisions reinstating employees, the law itself has determined a sufficiently overwhelming
reason for its execution pending appeal.

The validity of the questioned law is not only supported and sustained by the foregoing
considerations. As contended by the Solicitor General, it is a valid exercise of the police power
of the State. Certainly, if the right of an employer to freely discharge his employees is subject to
regulation by the State, basically in the exercise of its permanent police power on the theory
that the preservation of the lives of the citizens is a basic duty of the State, that is more vital
than the preservation of corporate profits. 23 Then, by and pursuant to the same power, the
State may authorize an immediate implementation, pending appeal, of a decision reinstating a
dismissed or separated employee since that saving act is designed to stop, although temporarily
since the appeal may be decided in favor of the appellant, a continuing threat or danger to the
survival or even the life of the dismissed or separated employee and its family.

The charge then that the challenged law as well as the implementing rule are unconstitutional
is absolutely baseless. Laws are presumed constitutional. 24 To justify nullification of a law,
there must be a clear and unequivocal breach of the Constitution, not a doubtful and
argumentative implication; a law shall not be declared invalid unless the conflict with the
constitution is clear beyond reasonable doubt. 25 In Parades, et al. vs. Executive Secretary 26 We
stated:

2. For one thing, it is in accordance with the settled doctrine that between two
possible constructions, one avoiding a finding of unconstitutionality and the
other yielding such a result, the former is to be preferred. That which will save,
not that which will destroy, commends itself for acceptance. After all, the basic
presumption all these years is one of validity. The onerous task of proving
otherwise is on the party seeking to nullify a statute. It must be proved by clear
and convincing evidence that there is an infringement of a constitutional
provision, save in those cases where the challenged act is void on its face. Absent
such a showing, there can be no finding of unconstitutionality. A doubt, even if
well-founded, does not suffice. Justice Malcolm's aphorism is apropos: To doubt
is to sustain. 27

The reason for this:

... can be traced to the doctrine of separation of powers which enjoins on each
department a proper respect for the acts of the other departments. ... The
theory is that, as the joint act of the legislative and executive authorities, a law is
supposed to have been carefully studied and determined to be constitution
before it was finally enacted. Hence, as long as there is some other basis that can
be used by the courts for its decision, the constitutionality of the challenged law

138
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

will not be touched upon and the case will be decided on other available
grounds. 28

The issue concerning Section 17 of the NLRC Interim Rules does not deserve a measure of
attention. The reference to it in the Order of the Labor Arbiter of 5 October 1989 was
unnecessary since the procedure of the appeal proper is not involved in this case. Moreover,
the questioned interim rules of the NLRC, promulgated on 8 August 1989, can validly be given
retroactive effect. They are procedural or remedial in character, promulgated pursuant to the
authority vested upon it under Article 218(a) of the Labor Code of the Philippines, as amended.
Settled is the rule that procedural laws may be given retroactive effect. 29 There are no vested
rights in rules of procedure. 30 A remedial statute may be made applicable to cases pending at
the time of its enactment. 31

WHEREFORE, the petition is hereby DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Footnotes

1 Annex "C" of Petition; Rollo, 35-43.

2 Annex "G" of Petition; Id., 69.

3 Annex "D" of Petition Id., 44-57.

4 Annex "E" of Petition; Id., 58-61.

5 Annex "F" of Petition; Id., 62-68.

6 Annex "H" of Petition; Rollo, 71-75.

7 Article 4. Civil Code.

8 Annex "I" of Petition; Id., 76-77.

9 Annex "J" of Petition; Id., 78-80.

10 Annex "A" of Petition; Id, 28-30.

139
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

11 Rollo, 30.

12 Id., 2-27.

13 Rollo 87-93.

14 Id., 103-104.

15 Rollo, 105-108.

16 Id., 110.

17 Citing Reyes vs. Minister of Labor, G.R. No. 48705, 9 Feb. 1989; Colgate
Palmolive Phil. Inc. vs. Ople, 163 SCRA 323; Cabatan vs. Court of Appeals, 95
SCRA 323; Sosito vs. Aguinaldo Development Corp., 156 SCRA 392.

18 Aragon vs. Araullo, et al., 11 Phil. 7; U.S. vs. Gomez Jesus, 31 Phil. 218; Layda
vs. Legaspi, 39 Phil. 93; Aguilar vs. Navarro, 55 Phil. 898; Santiago vs. Valenzuela,
78 Phil. 397; Abesamis vs. Garcia, 98 Phil. 769; Gonzalez vs. CA, 3 SCRA 465; Bello
vs. Fernando, 4 SCRA 138; United CMC Textile Workers Union vs. Clave, 137
SCRA 346; Tropical Homes Inc, vs. NHA 152 SCRA 540; Municipal Gov't. of Coron
vs. Carino, 154 SCRA 216; and Ozaeta vs. CA, 179 SCRA 800.

19 Section 2, Rule 39.

20 Article XIII, Section 3.

21 Record of the Constitutional Commission, vol. V, pp. 945, 1010.

22 Article II Section 18.

23 Manila Electric Co. vs. NLRC, supra, citing Euro-Linea Phil. Inc. vs. NLRC, 156
SCRA 78. See also PAL, Inc. vs. PALEA, 57 SCRA 498; Phil. Apparel Workers Union
vs. NLRC, 106 SCRA 444.

24 La Union Electric Cooperative, Inc. vs. Yaranon, 179 SCRA 828; People vs.
Permskul 173 SCRA 324.

25 Peralta vs. Commission on Elections, 82 SCRA 30.

26 128 SCRA 6, 11.

27 In Yu Cong Eng vs. Trinidad, 47 Phil. 385.

140
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

28 La Union Electric Cooperative, Inc. vs. Yaranon, supra, citing Isagani A. Cruz,
Philippine Political Law, 1989 ed., p. 232.

29 People vs. Sumilang, 77 Phil. 764; Alday vs. Camilon, 120 SCRA 521; Palomo
Building Tenants Association, Inc. vs. IAC, 133 SCRA 168; Sun Insurance Office,
Ltd., et al. vs. Asuncion, et al., 170 SCRA 274.

30 Paras, E.L. Civil Code of the Philippines, Annotated, Vol. I, 1984 ed., p. 22,
citing Aguillon vs. Director of Lands, 17 Phil. 507; People vs. Sumilang, 77 Phil.
764; Guevara vs. Laico 64 Phil. 144; Laurel vs. Misa, 76 Phil. 372.

31 Enrile vs. Court of First Instance, 36 Phil. 574; Hosana vs. Diomano, 56 Phil.
741.

141
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

ST. MARTIN FUNERAL HOMES VS NLRC 295 SCRA 494

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 130866 September 16, 1998

ST. MARTIN FUNERAL HOME, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION and BIENVENIDO ARICAYOS, respondents.

REGALADO, J.:

The present petition for certiorari stemmed from a complaint for illegal dismissal filed by herein
private respondent before the National Labor Relations Commission (NLRC), Regional
Arbitration Branch No. III, in San Fernando, Pampanga. Private respondent alleges that he
started working as Operations Manager of petitioner St. Martin Funeral Home on February 6,
1995. However, there was no contract of employment executed between him and petitioner
nor was his name included in the semi-monthly payroll. On January 22, 1996, he was dismissed
from his employment for allegedly misappropriating P38,000.00 which was intended for
payment by petitioner of its value added tax (VAT) to the Bureau of Internal Revenue (BIR). 1

Petitioner on the other hand claims that private respondent was not its employee but only the
uncle of Amelita Malabed, the owner of petitioner St. Martin's Funeral Home. Sometime in
1995, private respondent, who was formerly working as an overseas contract worker, asked for
financial assistance from the mother of Amelita. Since then, as an indication of gratitude,
private respondent voluntarily helped the mother of Amelita in overseeing the business.

In January 1996, the mother of Amelita passed away, so the latter then took over the
management of the business. She then discovered that there were arrears in the payment of
taxes and other government fees, although the records purported to show that the same were
already paid. Amelita then made some changes in the business operation and private
respondent and his wife were no longer allowed to participate in the management thereof. As a
consequence, the latter filed a complaint charging that petitioner had illegally terminated his
employment. 2

142
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Based on the position papers of the parties, the labor arbiter rendered a decision in favor of
petitioner on October 25, 1996 declaring that no employer-employee relationship existed
between the parties and, therefore, his office had no jurisdiction over the case. 3

Not satisfied with the said decision, private respondent appealed to the NLRC contending that
the labor arbiter erred (1) in not giving credence to the evidence submitted by him; (2) in
holding that he worked as a "volunteer" and not as an employee of St. Martin Funeral Home
from February 6, 1995 to January 23, 1996, or a period of about one year; and (3) in ruling that
there was no employer-employee relationship between him and petitioner. 4

On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision and
remanding the case to the labor arbiter for immediate appropriate proceedings. 5 Petitioner
then filed a motion for reconsideration which was denied by the NLRC in its resolution dated
August 18, 1997 for lack of merit, 6 hence the present petition alleging that the NLRC committed
grave abuse of discretion. 7

Before proceeding further into the merits of the case at bar, the Court feels that it is now
exigent and opportune to reexamine the functional validity and systemic practicability of the
mode of judicial review it has long adopted and still follows with respect to decisions of the
NLRC. The increasing number of labor disputes that find their way to this Court and the
legislative changes introduced over the years into the provisions of Presidential Decree (P.D.)
No. 442 (The Labor Code of the Philippines and Batas Pambansa Blg. (B.P. No.) 129 (The
Judiciary Reorganization Act of 1980) now stridently call for and warrant a reassessment of that
procedural aspect.

We prefatorily delve into the legal history of the NLRC. It was first established in the
Department of Labor by P.D. No. 21 on October 14, 1972, and its decisions were expressly
declared to be appealable to the Secretary of Labor and, ultimately, to the President of the
Philippines.

On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the same to take
effect six months after its promulgation. 8 Created and regulated therein is the present NLRC
which was attached to the Department of Labor and Employment for program and policy
coordination only. 9 Initially, Article 302 (now, Article 223) thereof also granted an aggrieved
party the remedy of appeal from the decision of the NLRC to the Secretary of Labor, but P.D.
No. 1391 subsequently amended said provision and abolished such appeals. No appellate
review has since then been provided for.

Thus, to repeat, under the present state of the law, there is no provision for appeals from the
decision of the NLRC. 10 The present Section 223, as last amended by Section 12 of R.A. No.
6715, instead merely provides that the Commission shall decide all cases within twenty days
from receipt of the answer of the appellee, and that such decision shall be final and executory
after ten calendar days from receipt thereof by the parties.

143
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

When the issue was raised in an early case on the argument that this Court has no jurisdiction
to review the decisions of the NLRC, and formerly of the Secretary of Labor, since there is no
legal provision for appellate review thereof, the Court nevertheless rejected that thesis. It held
that there is an underlying power of the courts to scrutinize the acts of such agencies on
questions of law and jurisdiction even though no right of review is given by statute; that the
purpose of judicial review is to keep the administrative agency within its jurisdiction and
protect the substantial rights of the parties; and that it is that part of the checks and balances
which restricts the separation of powers and forestalls arbitrary and unjust adjudications. 11

Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the remedy of
the aggrieved party is to timely file a motion for reconsideration as a precondition for any
further or subsequent remedy, 12 and then seasonably avail of the special civil action
of certiorari under Rule 65, 13 for which said Rule has now fixed the reglementary period of sixty
days from notice of the decision. Curiously, although the 10-day period for finality of the
decision of the NLRC may already have lapsed as contemplated in Section 223 of the Labor
Code, it has been held that this Court may still take cognizance of the petition for certiorari on
jurisdictional and due process considerations if filed within the reglementary period under Rule
65. 14

Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129 originally provided
as follows:

Sec. 9. Jurisdiction. The Intermediate Appellate Court shall exercise:

(1) Original jurisdiction to issue writs of mandamus,


prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or
processes, whether or not in aid of its appellate jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of judgments of


Regional Trial Courts; and

(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, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution,
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 Intermediate Appellate Court shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary to resolve
factual issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further proceedings.

144
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

These provisions shall not apply to decisions and interlocutory orders issued
under the Labor Code of the Philippines and by the Central Board of Assessment
Appeals. 15

Subsequently, and as it presently reads, this provision was amended by R.A. No. 7902 effective
March 18, 1995, to wit:

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

(1) Original jurisdiction to issue writs of mandamus,


prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or
processes, whether or not in aid of its appellate jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of judgments of


Regional Trial Courts; and

(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 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.

The Court of Appeals shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual issues
raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings. Trials or hearings
in the Court of Appeals must be continuous and must be completed within, three
(3) months, unless extended by the Chief Justice.

It will readily be observed that, aside from the change in the name of the lower appellate
court, 16 the following amendments of the original provisions of Section 9 of B.P. No. 129 were
effected by R.A. No. 7902, viz.:

1. The last paragraph which excluded its application to the Labor Code of the Philippines and the
Central Board of Assessment Appeals was deleted and replaced by a new paragraph granting
the Court of Appeals limited powers to conduct trials and hearings in cases within its
jurisdiction.

145
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

2. The reference to the Labor Code in that last paragraph was transposed to paragraph (3) of
the section, such that the original exclusionary clause therein now provides "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).

3. Contrarily, however, specifically added to and included among the quasi-judicial agencies
over which the Court of Appeals shall have exclusive appellate jurisdiction are the Securities
and Exchange Commission, the Social Security Commission, the Employees Compensation
Commission and the Civil Service Commission.

This, then, brings us to a somewhat perplexing impass, both in point of purpose and
terminology. As earlier explained, our mode of judicial review over decisions of the NLRC has
for some time now been understood to be by a petition for certiorari under Rule 65 of the Rules
of Court. This is, of course, a special original action limited to the resolution of jurisdictional
issues, that is, lack or excess of jurisdiction and, in almost all cases that have been brought to
us, grave abuse of discretion amounting to lack of jurisdiction.

It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now grants
exclusive appellate jurisdiction to the Court of Appeals over all final adjudications of the
Regional Trial Courts and the quasi-judicial agencies generally or specifically referred to therein
except, among others, "those falling within the appellate jurisdiction of the Supreme Court in
accordance with . . . the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, . . . ." This would necessarily contradict what has been ruled and said all along that
appeal does not lie from decisions of the NLRC. 17 Yet, under such excepting clause literally
construed, the appeal from the NLRC cannot be brought to the Court of Appeals, but to this
Court by necessary implication.

The same exceptive clause further confuses the situation by declaring that the Court of Appeals
has no appellate jurisdiction over decisions falling within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the provisions of B.P. No. 129, and those
specified cases in Section 17 of the Judiciary Act of 1948. These cases can, of course, be
properly excluded from the exclusive appellate jurisdiction of the Court of Appeals. However,
because of the aforementioned amendment by transposition, also supposedly excluded are
cases falling within the appellate jurisdiction of the Supreme Court in accordance with the Labor
Code. This is illogical and impracticable, and Congress could not have intended that procedural
gaffe, since there are no cases in the Labor Code the decisions, resolutions, orders or awards
wherein are within the appellate jurisdiction of the Supreme Court or of any other court for
that matter.

A review of the legislative records on the antecedents of R.A. No. 7902 persuades us that there
may have been an oversight in the course of the deliberations on the said Act or an imprecision
in the terminology used therein. In fine, Congress did intend to provide for judicial review of the

146
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

adjudications of the NLRC in labor cases by the Supreme Court, but there was an inaccuracy in
the term used for the intended mode of review. This conclusion which we have reluctantly but
prudently arrived at has been drawn from the considerations extant in the records of Congress,
more particularly on Senate Bill No. 1495 and the Reference Committee Report on S. No.
1495/H. No. 10452. 18

In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his sponsorship
speech 19 from which we reproduce the following excerpts:

The Judiciary Reorganization Act, Mr. President, Batas Pambansa Blg. 129,
reorganized the Court of Appeals and at the same time expanded its jurisdiction
and powers. Among others, its appellate jurisdiction was expanded to cover not
only final judgment of Regional Trial Courts, but also all final judgment(s),
decisions, resolutions, orders or awards of quasi-judicial agencies,
instrumentalities, boards and commissions, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution,
the provisions of BP Blg. 129 and of subparagraph 1 of the third paragraph and
subparagraph 4 of Section 17 of the Judiciary Act of 1948.

Mr. President, the purpose of the law is to ease the workload of the Supreme
Court by the transfer of some of its burden of review of factual issues to the Court
of Appeals. However, whatever benefits that can be derived from the expansion
of the appellate jurisdiction of the Court of Appeals was cut short by the last
paragraph of Section 9 of Batas Pambansa Blg. 129 which excludes from its
coverage the "decisions and interlocutory orders issued under the Labor Code of
the Philippines and by the Central Board of Assessment Appeals.

Among the highest number of cases that are brought up to the Supreme Court
are labor cases. Hence, Senate Bill No. 1495 seeks to eliminate the exceptions
enumerated in Section 9 and, additionally, extends the coverage of appellate
review of the Court of Appeals in the decision(s) of the Securities and Exchange
Commission, the Social Security Commission, and the Employees Compensation
Commission to reduce the number of cases elevated to the Supreme Court.
(Emphases and corrections ours)

xxx xxx xxx

Senate Bill No. 1495 authored by our distinguished Colleague from Laguna
provides the ideal situation of drastically reducing the workload of the Supreme
Court without depriving the litigants of the privilege of review by an appellate
tribunal.

In closing, allow me to quote the observations of former Chief Justice Teehankee


in 1986 in the Annual Report of the Supreme Court:

147
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

. . . Amendatory legislation is suggested so as to relieve the


Supreme Court of the burden of reviewing these cases which
present no important issues involved beyond the particular fact
and the parties involved, so that the Supreme Court may wholly
devote its time to cases of public interest in the discharge of its
mandated task as the guardian of the Constitution and the
guarantor of the people's basic rights and additional task
expressly vested on it now "to determine whether or not there
has been a grave abuse of discretion amounting to lack of
jurisdiction on the part of any branch or instrumentality of the
Government.

We used to have 500,000 cases pending all over the land, Mr. President. It has
been cut down to 300,000 cases some five years ago. I understand we are now
back to 400,000 cases. Unless we distribute the work of the appellate courts, we
shall continue to mount and add to the number of cases pending.

In view of the foregoing, Mr. President, and by virtue of all the reasons we have
submitted, the Committee on Justice and Human Rights requests the support
and collegial approval of our Chamber.

xxx xxx xxx

Surprisingly, however, in a subsequent session, the following Committee Amendment was


introduced by the said sponsor and the following proceedings transpired: 20

Senator Roco. On page 2, line 5, after the line "Supreme Court in accordance
with the Constitution," add the phrase "THE LABOR CODE OF THE PHILIPPINES
UNDER P.D. 442, AS AMENDED." So that it becomes clear, Mr. President, that
issues arising from the Labor Code will still be appealable to the Supreme Court.

The President. Is there any objection? (Silence) Hearing none, the amendment is
approved.

Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This
was also discussed with our Colleagues in the House of Representatives and as
we understand it, as approved in the House, this was also deleted, Mr. President.

The President. Is there any objection? (Silence) Hearing none, the amendment is
approved.

Senator Roco. There are no further Committee amendments, Mr. President.

148
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Senator Romulo. Mr. President, I move that we close the period of Committee
amendments.

The President. Is there any objection? (Silence) Hearing none, the amendment is
approved. (Emphasis supplied).

xxx xxx xxx

Thereafter, since there were no individual amendments, Senate Bill No. 1495 was passed on
second reading and being a certified bill, its unanimous approval on third reading
followed. 21 The Conference Committee Report on Senate Bill No. 1495 and House Bill No.
10452, having theretofore been approved by the House of Representatives, the same was
likewise approved by the Senate on February 20, 1995, 22 inclusive of the dubious formulation
on appeals to the Supreme Court earlier discussed.

The Court is, therefore, of the considered opinion that ever since appeals from the NLRC to the
Supreme Court were eliminated, the legislative intendment was that the special civil action
of certiorari was and still is the proper vehicle for judicial review of decisions of the NLRC. The
use of the word "appeal" in relation thereto and in the instances we have noted could have
been a lapsus plumae because appeals by certiorari and the original action for certiorari are
both modes of judicial review addressed to the appellate courts. The important distinction
between them, however, and with which the Court is particularly concerned here is that the
special civil action ofcertiorari is within the concurrent original jurisdiction of this Court and the
Court of Appeals; 23 whereas to indulge in the assumption that appeals by certiorari to the
Supreme Court are allowed would not subserve, but would subvert, the intention of Congress
as expressed in the sponsorship speech on Senate Bill No. 1495.

Incidentally, it was noted by the sponsor therein that some quarters were of the opinion that
recourse from the NLRC to the Court of Appeals as an initial step in the process of judicial
review would be circuitous and would prolong the proceedings. On the contrary, as he
commendably and realistically emphasized, that procedure would be advantageous to the
aggrieved party on this reasoning:

On the other hand, Mr. President, to allow these cases to be appealed to the
Court of Appeals would give litigants the advantage to have all the evidence on
record be reexamined and reweighed after which the findings of facts and
conclusions of said bodies are correspondingly affirmed, modified or reversed.

Under such guarantee, the Supreme Court can then apply strictly the axiom that
factual findings of the Court of Appeals are final and may not be reversed on
appeal to the Supreme Court. A perusal of the records will reveal appeals which
are factual in nature and may, therefore, be dismissed outright by minute
resolutions. 24

149
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

While we do not wish to intrude into the Congressional sphere on the matter of the wisdom of
a law, on this score we add the further observations that there is a growing number of labor
cases being elevated to this Court which, not being a trier of fact, has at times been constrained
to remand the case to the NLRC for resolution of unclear or ambiguous factual findings; that the
Court of Appeals is procedurally equipped for that purpose, aside from the increased number of
its component divisions; and that there is undeniably an imperative need for expeditious action
on labor cases as a major aspect of constitutional protection to labor.

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from
the NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to
petitions for certiorari under Rule 65. Consequently, all such petitions should hence forth be
initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of
courts as the appropriate forum for the relief desired.

Apropos to this directive that resort to the higher courts should be made in accordance with
their hierarchical order, this pronouncement in Santiago vs. Vasquez, et al. 25 should be taken
into account:

One final observation. We discern in the proceedings in this case a propensity on


the part of petitioner, and, for that matter, the same may be said of a number of
litigants who initiate recourses before us, to disregard the hierarchy of courts in
our judicial system by seeking relief directly from this Court despite the fact that
the same is available in the lower courts in the exercise of their original or
concurrent jurisdiction, or is even mandated by law to be sought therein. This
practice must be stopped, not only because of the imposition upon the precious
time of this Court but also because of the inevitable and resultant delay,
intended or otherwise, in the adjudication of the case which often has to be
remanded or referred to the lower court as the proper forum under the rules of
procedure, or as better equipped to resolve the issues since this Court is not a
trier of facts. We, therefore, reiterate the judicial policy that this Court will not
entertain direct resort to it unless the redress desired cannot be obtained in the
appropriate courts or where exceptional and compelling circumstances justify
availment of a remedy within and calling for the exercise of our primary
jurisdiction.

WHEREFORE, under the foregoing premises, the instant petition for certiorari is hereby
REMANDED, and all pertinent records thereof ordered to be FORWARDED, to the Court of
Appeals for appropriate action and disposition consistent with the views and ruling herein set
forth, without pronouncement as to costs.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban
Martinez, Quisumbing and Purisima, JJ., concur.

150
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Footnotes

1 Rollo, 17.

2 Ibid., 18-19.

3 Ibid., 19.

4 Ibid., 16.

5 Ibid., 21.

6 Ibid., 23-24.

7 Ibid., 6.

8 Art. 2.

9 Art. 213.

10 While Art. 223 bears the epigraph of "Appeal," it actually refers only to
decisions, awards, or orders of the labor arbiter which shall be final and
executory unless appealed to the NLRC by any or both parties within ten
calendar days from receipt thereof.

11 San Miguel Corporation vs. Secretary of Labor, et al., G.R. No. L-39195, May
15, 1975, 64 SCRA 56; Scott vs. Inciong, et al. G.R. No. L-38868, December 29,
1975, 68 SCRA 473; Bordeos, et al., vs. NLRC, et al., G.R. Nos. 115314-23,
September 26, 1996, 262 SCRA 424.

12 Zapata vs. NLRC, et al., G.R. No. 77827, July 5, 1989, 175 SCRA 56.

13 See, for instance , Pure Foods Corporation vs. NLRC, et al., G.R. No. 78591,
March 21, 1989, 171 SCRA 415.

14 Mantrade, etc. vs. Bacungan, et al., G.R. No. L-48437, September 30, 1986,
144 SCRA 511.

15 75 O.G. 4781, August 29, 1983.

16 Executive Order No. 33 restored the name of the Court of Appeals, in lieu of
the Intermediate Appellate Court, effective July 28, 1986.

151
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

17 The different modes of appeal, that is, by writ of error (Rule 41), petition for
review (Rules 42 and 43), and petition for review on certiorari (Rule 45)
obviously cannot be availed of because there is no provision appellate review of
NLRC decisions in P.D. No. 442, as amended.

18 All Act Expanding the Jurisdiction of the Court of Appeals, Amending for the
Purpose Section 9 of Batas Pambansa Blg. 129, known as the Judiciary
Reorganization Act of 1980.

19 Transcript of Session Proceedings (TSP). S. No. 1495, February 8, 1995, 31-36.

20 TSP, id., February 15, 1995, 18-19.

21 TSP, id., id., 19-21; Record of the Senate, Vol. V, No. 63, pp. 180-181.

22 TSP, id., February 20, 1995, pp. 42-43.

23 The Regional Trial Court also shares that concurrent jurisdiction but that
cannot be considered with regard to the NLRC since they are of the same rank.

24 TSP, S. No. 1495, February 8, 1995, pp. 32-33.

25 G.R. Nos. 99289-90, January 27, 1993, 217 SCRA 633. See also Tano, et al. vs.
Socrates. et al., G.R. No. 110249, August 21, 1997, 278 SCRA 155.

152
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

EMCO PLYWOOD VS ABELGAS 427 SCRA 496

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 148532 April 14, 2004

EMCO PLYWOOD CORPORATION and JIMMY LIM, petitioners,


vs.
PERFERIO ABELGAS, ARTURO ABELLANA, FLORENCIO ABEQUIBEL, FELIZARDO AGUELO,
NECERATO ALCALA, PEDRO ALIVIO JR., RODOLFO ALDAYA, ABELARDO AMANTE, NELSON
ANGAC, ALEJO ANTOLIJAO, JOHN ALEX ARABEJO, REYNALDO ARBOLONIO, RODRIGO
ARSILUM, RONALDO BABAYLAN, LEOPOLDO BAGA, AGRIPINO BARON, FELIPE BAHIAN, JOEL
BADILLA, NARCISO BANTILLAN, FELIPE BANDIBAS, ERNESTO BEDRA, ROGELIO BONGATO,
ADOLFO BUCAL, DOMINADOR BUSTILLO, PLUTARCO CABREROS, FELIPE CAMBARIHAN, PABLO
CASANIA, PERFECTO CASTANES, FERDINAND CASTILLO, ISIDRO CERRO, MARCEDINO CELOCIA,
LEODEGARIO CLARO, ALFREDO CLAVANO, EDILBRETO CUABO, EDILBERTO CURILAN, ANGELA
DATIG, EDDIE DE LA CRUZ, DOMINO DELA CRUZ, SEGUNDO DELIGERO, RAYMUNDO
DESAMPARADO, GAUDISIO DEVEYRA, HENRY ENERIO, ANTONIO ENCISO, ANSELMO FELIAS
JR., JULIAN GANZAN, ALLAN HONCULADA, BIENVENIDO IBALANG, FREDERICK JANOPOL,
SAMUEL JUMAMOY, ISABELO LOREN, PROCORIO LOLOR, RESTITUTO LOMOCSO, PEDRO
LOZADA, PEDRO LOZAGA, PASTOR MAGARO, ALLAN MANAGA, SIMPLICIO MANDAS,
SATURNINO MANISAN, DIOSDADO MATA, EMMANUEL MATUTOD, MAXIMO MEDALLE,
MARCELINO MINOZA, NORBERTO MORDEN, ARNOLD MORDEN, WILLIAM MORADA,
RAYMUNDO MORAGAS, RODRIGO MOSQUIDA, BENITO NEMENO JR., RICO OGCANG,
EMELIANO ONDAP, FRANCISCO PANDAWATAN, ALFREDO PAIGAN, VENANCIO PAJO, ELY
QUINONES, ALEJANDRO QUIPET, BENIGNO REPOLIDO, PABLO SUMIDO, JOSE SUMALINOG,
SAMUEL TABLA, OSCAR TABANAO, MARIO TELIN, MANOLITO TIMTIM, FELIX TINDUGAN,
DANILO VELUESTO, ALEJANDRO VILVESTRE, TEOFILO ZAPANTA, RODULFO ALCALA, PERCY
ALIPIN, ANGELO AMADA, PAQUITO ANCAJAS, EDGARD ARBISO, PERFECTO ARABACA, JUDITH
BALMORIA, JOHANNES BONGATO, NARCISO BULLECER JR., BERNADITA BURDEOS,
WENCESLAO BUSA, RODRIGO CABAL, DONALD CADILINA, JOSE CAINGHOG, RODOLFO
CATUBIG, GADIOSO CASTRODES, VIRGINIA CERRO, FORTUNATO CELETONA, JUAN CELLO,
MARCIANO CORTEZ, ROLANDO CUMBA, ALMAR DAPAR, MARISA DELA CRUZ, SIMEON
DELIGERO, DIOSDADO DOMINISE, FLORENTINO DUNCANO, CLAUDIO DUMO, MARIDEL
EFREN, ROMUALDOESTRETO, JAIME FLORES, ESMERALDO GALOPE, PROCESSO HERNANDO,
ALFREDO JAVIER,CRISPINO JUGARAP, DANIEL LABRICA, ERNESTO LABADAN, AURELIO
LINOGAO, BENALDO LOPEZ, AMADOR LUMONGSOD, FRESCO LUNOY, FLORENCIO
MAGLASANG, EUTIQUEO MAJAIT, ALBINO MANLA, FELIPE MANTILLA, CASIANO MELICOR,
ANECITA MENDOZA, NEMERIANO NACA, ZACARIAS NALAM, SIXTO NAPAL JR., ALMAQUIO

153
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

OBEDENCIO, GODOFREDO OLAIZ, VIRGILIA OSORIO, ELEUTRIO PAGADOR, ARDEN PASILANG,


DIONESIO PASILANG, ADELAIDO PAQUIPOT, FERNANDO PATINDOL, VIRGILIO PENDICA,
FRANKLIN PILOTON, GIL PILOTON, CHARLITA PLAZA, EUFRACIA PLAZA, TORIBEO PUSA,
FRANCISCO RAMIRA, BELEN ROJAS, ALFONSO SABANDAL, CARMEN SABELLANO, ROGELIO
SIMPRON, CENIA SUMILE, ESPEREDION TABIQUE, ARECIO TAGHOY, SILVANA TAPALES,
JEMCIE TIMTIM, ELENO TORILLO, THOMAS TERRECAMPO, FE VALENZUELA, FLORENCIO
ABEQUIBEL, EFREN LUMINARIO, JULITO ONDAP, respondents.

DECISION

PANGANIBAN, J.:

Not every loss incurred or expected to be incurred by employers can justify retrenchment.
They must prove,among others, that the losses are substantial and that the retrenchment is
reasonably necessary to avert those losses.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the
December 21, 2000 Decision2 and the June 20, 2001 Resolution3 of the Court of Appeals4 (CA) in
CA-GR SP No. 51967. The assailed Decision disposed as follows:

"WHEREFORE, the petition for certiorari is GRANTED and the challenged Orders of the
National Labor Relations Commission are hereby declared NULL and VOID.

"Considering that, as borne out of the records, EMCOs attempted retrenchment of the
[respondents] was legally ineffective, EMCO is ordered to REINSTATE [respondents]
with full backwages, inclusive of allowances and other benefits or their monetary
equivalent, computed from the time their compensation was withheld from them up to
the time of their actual reinstatement. Where reinstatement is no longer possible
because the position they had previously filled are no longer in existence, EMCO shall
paybackwages, inclusive of allowances and other benefits, computed from the time
their employment was terminated up to the time the decision herein becomes
final, and, in lieu of reinstatement, separation payequivalent to one-months pay for
every year of service including the putative period for which backwages are payable. In
all these cases, the payments received by [respondents] and for which they executed
quitclaims shall be deducted from the backwages and separation pay due to them. Costs
against the [petitioners]."5

The assailed Resolution denied petitioners Motion for Partial Reconsideration.

The Facts

The factual antecedents of the case are summarized by the CA as follows:

154
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

"[Respondents], the retrenched employees of [petitioner] seek the review and reversal
of the resolutions of the National Labor Relations Commission (NLRC), dated February
11, 1997 and March 25, 1997, respectively.

"The first resolution dismissed [respondents] appeal for lack of merit and affirmed the
decision of the Labor Arbiter, dated July 24, 1996, which, in turn, dismissed
[respondents] complaint against EMCO and the latters general manager,
[petitioner] Jimmy N. Lim (Lim), for illegal dismissal, damages and attorneys fees. The
second resolution assailed by the [respondents] consists of the NLRCs denial of their
motion for reconsideration of the earlier mentioned February 11, 1997 resolution.

"EMCO is a domestic corporation engaged in the business of wood processing, operating


through its sawmill and plymill sections where [respondents] used to be assigned as
regular workers.

"On January 20, 1993 and of March 2, 1993, EMCO, represented by Lim, informed
the Department of Labor and Employment (DOLE) of its intention to retrench some of
its workers. The intended retrenchment was grounded on purported financial difficulties
occasioned by alleged lack of raw materials, frequent machinery breakdown, low
market demand and expiration of permit to operate its sawmill department. A
memorandum was thereafter issued by EMCO, addressed to all its foremen, section
heads, supervisors and department heads, with the following instructions:

1) Retrench some of your workers based on the following guidelines:

a) Old Age (58 years and above except positions that are really skilled);

b) Performance (Attitude, Attendance, Quality/ Quantity of Work[)];

2) Schedule the unspent VL/SL of your men without necessary replacements. x x


x

"Per EMCOs notice to the DOLE, one hundred four (104) workers were proposed for
inclusion in its retrenchment program. As it turned out, though, EMCO terminated two
hundred fifty (250) workers. Among them were herein [respondents].

"[Respondents] received their separation pay in the amount of four thousand eight
hundred fifteen pesos (P4,815.00) each. Deductions were, nevertheless, made by EMCO
purportedly for the attorneys fees payable to [respondents] lawyer, for the latters
effort in purportedly renegotiating, sometime in 1993, the three peso (P3.00) increase
in the wages of [respondents], as now contained in the Collective Bargaining
Agreement.

155
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

"Upon receipt of their separation pay, [respondents] were made to sign quitclaims,
which read:

TO WHOM IT MAY CONCERN:

I, ________________of legal age and a resident of


_______________________, for and in consideration of the amount of
(P___________), the receipt of which, in full, is hereby acknowledged,
forever discharge and release x x x EMCO PLYWOOD CORPORATION and
all its officers men agents and corporate assigns from any and all forms of
actions/suits, debts, sums of money, unpaid wages, overtime pay
allowances, overtime pay or an other liability of any nature by reason of
my employment which has ceased by this date.

Done this _________________, at Magallanes, Agusan del Norte.

"About two (2) years later, [respondents], through their labor union, lodged a compliant
against EMCO for illegal dismissal, damages and attorneys fees.

"In the main, [respondents] questioned the validity of their retrenchment and the
sufficiency of the separation pay received by them.

"EMCO countered by interposing the defense of lack of cause of action, contending that
[respondents], by signing the quitclaims in favor of EMCO, had, in fact, waived whatever
claims they may have against the latter.

"Finding for EMCO, the Labor Arbiter dismissed [respondents] complaint.

"[Respondents] subsequent appeal to the NLRC was dismissed for lack of merit and the
decision of the Labor Arbiter was affirmed. Notably, the NLRC glossed over the issue of
whether [respondents] were validly retrenched, and anchored its dismissal of the appeal
on the effect of [respondents] waivers or quitclaims, to quote:

The pivotal issue brought to fore is whether or not the quitclaims/waivers


executed by [respondents] are valid and binding. The other issues raised by
[respondents] are either related to mere technicality, or are merely ancillary or
dependent on the main issue.lawph!1.t

x x x xxx xxx

There is no doubt that the [respondents] voluntarily executed their


quitclaims/waivers as manifested by the fact that they did not promptly question
their validity within a reasonable time. It took them two (2) years to challenge
and dispute the validity of the waivers by claiming belatedly that they were

156
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

either forced or misled into signing the same. Clearly, this case was instituted by
[respondents] to unduly exact more payment of separation benefits from
[petitioner] at the expense of fairness and justice.

"In passing, the NLRC likewise affirmed EMCOs deductions of attorneys fees from the
separation pay received by the [respondents].

"A motion for reconsideration of the afore-quoted resolution was filed by [respondents]
on March 10, 1997, but was denied by the NLRC, purportedly, for lack of merit and for
having been filed out of time."6 (Citations omitted)

Ruling of the Court of Appeals

The CA held that the evidence was insufficient to justify a ruling in favor of EMCO, which had
not complied with the one-month prior notice requirement under the Labor Code. The
appellate court added that the corporation had not served on the employees the required
notice of termination. It opined that the Memorandum, having merely provided the guidelines
on the conduct of the intended lay-off, did not constitute such notice. Furthermore, the
Memorandum was not addressed to the workers, but to the foremen, the department
supervisors and the section heads. Moreover, there was no proper notice to DOLE. The
corporation terminated the services of 250 employees but included only 104 of them in the list
it filed with DOLE. EMCOs argument that the 146 unlisted employees had voluntarily resigned
was brushed aside by the appellate court.

The CA also held that before EMCO resorted to retrenchment, the latter had failed to adduce
evidence of its losses and to prove that it had undertaken measures to prevent the occurrence
of its alleged actual or impending losses.

Moreover, the CA ruled that the corporation had not paid the legally prescribed separation pay,
which was equal to one-month pay or at least one-half month pay for every year of service,
whichever was higher. Deducting attorneys fees from the supposed separation pay of the
employees was held to be in clear violation of the law. Such fees should have been charged
against the funds of their union.

The appellate court further held that the cause of action of the employees had not yet
prescribed when the case was filed, because an action for illegal dismissal constituted an injury
to their rights. The CA added that the provision applicable to the case was Article 1146 of the
New Civil Code, according to which the prescriptive period for such causes of action was four
(4) years. The Complaint, having been filed by the employees only two years after their
dismissal, had not prescribed.

All in all, the appellate court concluded that the retrenchment was illegal, because of EMCOs
failure to comply with the legal requirements.

157
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Hence, this Petition.7

The Issues

In their Memorandum, petitioners raise these issues for our consideration:

"I.

Whether or not respondent Court of Appeals seriously erred in reversing the factual
findings of both the Labor Arbiter and the NLRC that petitioners had substantially
complied with the requisites for a valid retrenchment?

"II.

Whether or not respondent Court manifestly erred in reversing the factual findings of
both the Labor Arbiter and the NLRC that private respondents had voluntarily executed
their respective Quitclaims?

"III.

Whether or not respondent Court may, in a petition for certiorari under Rule 65 of the
Rules of Court, correct the evaluation of evidence made by both the Labor Arbiter and
the NLRC, and thereafter substitute its own findings for those of the Labor Arbiter and
the NLRC?"8

Simply put, petitioners are insisting on the validity of the retrenchment and the enforceability
of the Quitclaims. They are also questioning whether or not the appellate court may disturb the
findings of the labor arbiter and the NLRC.

This Courts Ruling

The Petition has no merit.

Main Issues:

Retrenchment

Retrenchment is one of the authorized causes for the dismissal of employees. Resorted to by
employers to avoid or minimize business losses,9 it is recognized under Article 283 of the Labor
Code.10

The "loss" referred to in this provision cannot be of just any kind or amount; otherwise, a
company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted

158
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

employees. The Court has laid down the following standards that a company must meet to
justify retrenchment and to guard against abuse:

"x x x Firstly, the losses expected should be substantial and not merely de minimis in
extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown
to be insubstantial and inconsequential in character, the bonafide nature of the
retrenchment would appear to be seriously in question. Secondly, the substantial loss
apprehended must be reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or otherwise laid-off. Because
of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary
and likely to effectively prevent the expected losses. The employer should have taken
other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs
other than labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites or so-called
golden parachutes, can scarcely claim to be retrenching in good faith to avoid losses.
To impart operational meaning to the constitutional policy of providing full protection
to labor, the employers prerogative to bring down labor costs by retrenching must be
exercised essentially as a measure of last resort, after less drastic means e.g.,
reduction of both management and rank-and-file bonuses and salaries, going on
reduced time, improving manufacturing efficiencies, trimming of marketing and
advertising costs, etc. have been tried and found wanting.

"Lastly, but certainly not the least important, alleged losses if already realized, and the
expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring this quantum of proof is readily apparent:
any less exacting standard of proof would render too easy the abuse of this ground for
termination of services of employees. x x x."11

Retrenchment is only "a measure of last resort when other less drastic means have been tried
and found to be inadequate."12

To prove that the retrenchment was necessary to prevent substantial losses, petitioners
present their audited financial statements for the years 1991 and 1992.13 These statements
show that EMCOs net income ofP1,052,817.00 for 1991 decreased to P880,407.85 in 1992.
They allege that this decrease was due to low market demand, lack of raw materials, frequent
breakdown of old equipment and high cost of operations. The financial statements also
demonstrate that EMCOs liability then increased from P106,507,214.14 to P123,901,838.30.
Petitioners cite several cases in which this Court has held that audited financial statements
constitute the normal method of proof of the profit-and-loss performance of a company. These
statements allegedly partake the nature of public documents, because they have been audited
and duly filed with the Bureau of Internal Revenue. As such, they enjoy the presumption of
regularity and validity.

159
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Petitioners further argue that EMCO undertook preventive measures to prevent the occurrence
of imminent losses.14 To accommodate and save all its employees, it allegedly implemented a
scheme in which they would work on a rotation basis -- on at least a three-day-work per
employee per week schedule.15 This arrangement was, however, short-lived to prevent a strike
that the union and its members then threatened to stage.16

Petitioners also contend that the 146 employees not included in the list submitted to DOLE
voluntarily resigned, not solely on the ground that the companys permit to operate its sawmill
department had expired, but also because of a period of uncertainty brought about by the
aforementioned factors that allegedly justified the retrenchment program.17

The Court is not persuaded. "Not every loss incurred or expected to be incurred by a company
will justify retrenchment. The losses must be substantial and the retrenchment must be
reasonably necessary to avert such losses."18 The employer bears the burden of proving the
existence or the imminence of substantial losses with clear and satisfactory evidence that there
are legitimate business reasons justifying a retrenchment.19 Should the employer fail to do so,
the dismissal shall be deemed unjustified.20

In the present case, petitioners have presented only EMCOs audited financial statements for
the years 1991 and 1992. As already stated, these show that their net income of P1,052,817.00
for 1991 decreased to P880,407.85 in 1992. Somerville Stainless Steel Corporation v.
NLRC21 held that the presentation of the companys financial statements for a particular year
was inadequate to overcome the stringent requirement of the law. According to the Court,
"[t]he failure of petitioner to show its income or loss for the immediately preceding years or to
prove that it expected no abatement of such losses in the coming years bespeaks the weakness
of its cause. The financial statement for 1992, by itself, x x x does not show whether its losses
increased or decreased. Although [the employer] posted a loss for 1992, it is also possible that
such loss was considerably less than those previously incurred, thereby indicating the
companys improving condition."22

The Court further held therein that "[i]n the analysis of financial statements, (o)ne particular
percentage of relationship may not be too significant in itself ; that is, it may not suffice to
point out those unfavorable characteristics of the company that would require immediate or
even drastic action."23 Petitioners have failed to prove that their alleged losses were
substantial, continuing and without any immediate prospect of abating; hence, the nature of
the retrenchment is seriously disputable.

Retrenchment is a management prerogative consistently recognized and affirmed by this Court.


It is, however, subject to faithful compliance with the substantive and the procedural
requirements laid down by law and jurisprudence.24 It must be exercised essentially as a
measure of last resort, after less drastic means have been tried and found wanting.

The only less drastic measure that EMCO undertook was the rotation work scheme: the three-
day-work per employee per week schedule. It did not try other measures, such as cost

160
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

reduction, lesser investment on raw materials, adjustment of the work routine to avoid the
scheduled power failure, reduction of the bonuses and salaries of both management and rank-
and-file, improvement of manufacturing efficiency, trimming of marketing and advertising
costs, and so on. The fact that petitioners did not resort to other such measures seriously belies
their claim that retrenchment was done in good faith to avoid losses.

Defective Notice

For a valid termination due to retrenchment, the law requires that written notices of the
intended retrenchment be served by the employer on the worker and on the Department of
Labor and Employment at least one (1) month before the actual date of the
retrenchment.25 The purpose of this requirement is to give employees some time to prepare for
the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of
the alleged cause of termination.26

There is no showing that such notice was served on the employees in the present case.
Petitioners argue that on January 20, 1993, Petitioner Jimmy Lim gave the DOLE a formal notice
of the intended retrenchment and furnished the EMCO Labor Association and its general
membership copies of the notice by posting it on the bulletin boards of their respective
departments. On March 2, 1993, EMCO sent DOLE another written notice. The next day, Lim
sent a Memorandum to the foremen, the section heads, the supervisors and the department
heads instructing them to retrench some of the workers based on certain guidelines.
Petitioners aver that the Memorandum also served as a written notice to all the employees
concerned. Clearly, it is not the notice contemplated by law. The written notice should have
been served on the employees themselves, not on their supervisors.

The Notice sent to DOLE was defective, because it stated that EMCO would terminate the
services of 104 of its workers. The corporation, however, actually dismissed 250. Petitioners
aver that the 146 employees not listed in the Notice sent to DOLE voluntarily resigned; hence,
the latter were not retrenched. This assertion does not deserve any consideration. Petitioners
reiterate that those workers voluntarily resigned because of the atmosphere of uncertainty,
which occurred after the Sawmill Department had been temporarily shut off in February 1993.
The renewal of the permit on March 31, 1993, however, removed the alleged shroud of
uncertainty.

Moreover, resignation is the voluntary act of employees who are compelled by personal
reasons to dissociate themselves from their employment. It must be done with the intention of
relinquishing an office, accompanied by the act of abandonment.27 Therefore, it would have
been illogical for respondents to resign and then file a Complaint for illegal dismissal.
Resignation is inconsistent with the filing of the Complaint.28

Propriety of Separation Benefits

Article 283 of the Labor Code provides for the proper separation benefits in this wise:

161
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

"Article 283. x x x In case of retrenchment to prevent losses x x x, the separation pay


shall be equivalent to one (1) month pay or at least one half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year."

The appellate court aptly ruled that petitioners had not complied with this statutory
requirement. They deducted the amount of attorneys fees that had allegedly accrued as a
result of the renegotiations for a new collective bargaining agreement.29 Without denying that
they deducted those fees, petitioners argue that the deduction was made with the prior
approval of respondents.30

This contention is untenable. The Labor Code prohibits such arrangement in this wise:

"Article 222. APPEARANCES AND FEES. x x x

xxx xxx xxx

(b) No attorneys fees, negotiation fees or similar charges of any kind arising from any
collective bargaining negotiations or conclusion of the collective bargaining agreement
shall be imposed on any individual member of the contracting union: Provided,
however, That attorneys fees may be charged against union funds in an amount to be
agreed upon by the parties. Any contract, agreement or arrangement of any sort to the
contrary shall be null and void."

The obligation to pay attorneys fees belongs to the union and cannot be shunted to the
individual workers as their direct responsibility. The law has made clear that any agreement to
the contrary shall be null and void ab initio.31 Thus, petitioners deduction of attorneys fees
from respondents separation pay has no basis in law.

Second Issue:

Validity of the Quitclaims

Petitioners argue that the Quitclaims signed by respondents enjoy the presumption of
regularity, and that the latter had the burden of proving that their consent had been
vitiated.32 They further maintain that aside from Eddie de la Cruz, the other respondents did
not submit their respective supporting affidavits detailing how their individual consents had
been obtained. Allegedly, such documents do not constitute the clear and convincing evidence
required under the law to overturn the validity of quitclaims.33

We hold that the labor arbiter and the NLRC erred in concluding that respondents had
voluntarily signed the Waivers and Quitclaim Deeds. Contrary to this assumption, the mere fact
that respondents were not physically coerced or intimidated does not necessarily imply that

162
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

they freely or voluntarily consented to the terms thereof.34Moreover, petitioners, not


respondents, have the burden of proving that the Quitclaims were voluntarily entered into. 35

Furthermore, in Trendline Employees Association-Southern Philippines Federation of Labor (TEA-


SPFL) v. NLRC36 and Philippine Carpet Employees Association v. Philippine Carpet Manufacturing
Corporation,37 similar retrenchments were found to be illegal, as the employers had failed to
prove that they were actually suffering from poor financial conditions. In these cases, the
Quitclaims were deemed illegal, as the employees consents had been vitiated by mistake or
fraud.

These rulings are applicable to the case at bar. Because the retrenchment was illegal and of no
effect, the Quitclaims were therefore not voluntarily entered into by respondents. Their
consent was similarly vitiated by mistake or fraud. The law looks with disfavor upon quitclaims
and releases by employees pressured into signing by unscrupulous employers minded to evade
legal responsibilities.38

As a rule, deeds of release or quitclaim cannot bar employees from demanding benefits to
which they are legally entitled or from contesting the legality of their dismissal. The acceptance
of those benefits would not amount to estoppel.39 The amounts already received by the
present respondents as consideration for signing the Quitclaims should, however, be deducted
from their respective monetary awards.

Third Issue:

The Office of Certiorari

Petitioners aver that in a special civil action for certiorari, the appellate court is limited to
reviewing only questions related to jurisdiction or grave abuse of discretion. As in the present
case, however, the lower tribunals factual findings will not be upheld where there is a showing
that such findings were totally devoid of support, or that the judgment was based on a
misapprehension of facts.40

WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs
against petitioners.

SO ORDERED.

Davide, Jr., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Footnotes

163
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
1
Rollo, pp. 9-47.
2
Id., pp. 49-60.
3
Id., p. 62.
4
Eighth Division. Penned by Justice Eriberto U. Rosario Jr., with the concurrence of
Justices Ramon Mabutas Jr. (Division chairman) and Roberto A. Barrios (member).
5
Assailed Decision, p. 15; rollo, p. 60.
6
Assailed Decision, pp. 4-8; id., pp. 52-56.
7
The case was deemed submitted for decision on October 9, 2002, upon this Courts
receipt of respondents Memorandum, which was signed by Atty. Danilo P. Rubio.
Petitioners Memorandum, signed by Attys. Gregorio M. Batiller Jr. and Gavino F. Reyes,
was received by the Court on September 12, 2002.
8
Petitioners Memorandum, pp. 12-13; rollo, pp. 173-174.
9
AG & P United Rank and File Association v. NLRC, 332 Phil. 937, 944, November 29,
1996; citingPrecision Electronics Corporation v. NLRC, 178 SCRA 667, October 23, 1989.
10
ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. The
employer may also terminate the employment of any employee due to the installation
of labor saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the
worker and the Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closure or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered as one (1) whole year.
11
Saballa v. NLRC, 329 Phil. 511, 526-527, August 22, 1996, per Panganiban, J.;
citing Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA 179, 186-187,
August 30, 1990, per Feliciano, J.
12
Edge Apparel, Inc. v. NLRC, 349 Phil. 972, 983, February 12, 1998, per Vitug, J.;
citing Guerrero v. NLRC, 329 Phil. 1069, 1076, August 30, 1996, per Puno, J.

164
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
13
Audited financial statements for 1991-1992 (See petitioners Memorandum, p. 15;
rollo, p. 176):

EMCO PLYWOOD CORPORATION


STATEMENT OF INCOME FOR THE YEARS
ENDED DECEMBER 31, 1992 AND 1991
1992 1991
SALES P 127,587,597.21 P 178,049,527.00
COST OF SALES 99,233,805.52 140,459,417.00
GROSS PROFIT 28,353,791.69 37,590,110.00
OPERATING EXPENSES 26,999,379.61 36,004,512.00

INCOME FROM OPERATIONS 1,354,412.08 1,585,598.00


PROVISION FOR INCOME TAX 474,004.23 532,781.00

NET INCOME P 880,407.85 P 1,052,817.00

14
Petitioners Memorandum, p. 20; rollo, p. 181.
15
Id., pp. 21 & 182.
16
Ibid.
17
Id., pp. 21-22 & 182-183.
18
Guerrero v. NLRC, supra, p. 1075.
19
Somerville Stainless Steel Corporation v. NLRC, 350 Phil. 859, 872, March 11, 1998;
citing San Miguel Jeepney Service v. NLRC, 332 Phil. 804, 851, November 28, 1996.
20
Id., citing Sebuguero v. NLRC, 248 SCRA 532, 544, September 27, 1995.
21
Supra at note 19.
22
Id., p. 873, per Panganiban, J.; citing Philippine School of Business Administration
(PSBA Manila) v. NLRC, 223 SRCA 305, June 8, 1993, per Romero, J.

165
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
23
Somerville Stainless Steel Corporation v. NLRC, supra, p. 874, per Panganiban, J.; citing
Moore, Carl L. and Jaedicke, Robert K., Managerial Accounting (1967), p. 169.
24
Lopez Sugar Corporation v. Federation of Free Workers, supra; Anino v. NLRC, 352 Phil.
1098, May 21, 1998; Edge Apparel, Inc. v. NLRC, supra; Philippine Tuberculosis Society,
Inc. v. NLU & NLRC, 356 Phil. 63, August 25, 1998.
25
Article 283 of the Labor Code of the Philippines; Fuentes v. NLRC, 334 Phil. 22, January
2, 1997.
26
Serrano v. NLRC, 380 Phil. 416, 445, January 27, 2000 .
27
Dosch v. NLRC, 123 SCRA 296, July 5, 1983; Magtoto v. NLRC, 140 SCRA 58, November
18, 1985;Molave Tours Corporation v. NLRC, 250 SCRA 325, November 24, 1995,
citing Intertrod Maritime, Inc. v. NLRC, 198 SCRA 318, June 19, 1991.
28
Valdez v. NLRC, 349 Phil. 760, 767, February 9, 1998; Santos v. NLRC, 166 SCRA 759,
October 28, 1988; Hua Bee Shirt Factory, v. NLRC, 186 SCRA 586, June 18,
1990; Dagupan Bus Company, Inc. v. NLRC, 191 SCRA 328, November 9, 1990.
29
Petitioners Memorandum, p. 28; rollo, p. 189.
30
Ibid.
31
Bank of the Philippine Islands Employees Union-ALU v. NLRC, 171 SCRA 556, March 31,
1989.
32
Petitioners Memorandum, p. 30; rollo, p. 191.
33
Ibid.
34
Philippine Carpet Employees Association v. Philippine Carpet Manufacturing
Corporation, 340 SCRA 383, 394, September 14, 2000.
35
Salonga v. NLRC, 324 Phil. 330, February 23, 1996.
36
338 Phil. 681, May 5, 1997.
37
Supra at note 34.
38
Ibid., citing Talla v. NLRC, 175 SCRA 479, 480-481, July 19, 1989.
39
Villar v. NLRC, 387 Phil. 706, 717, May 11, 2000; Olacao v. NLRC, 177 SCRA 38, August
29, 1989;Lopez Sugar Corporation v. Federation of Free Workers, supra.

166
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
40
Sarao v. CA, 343 Phil. 774, 780, August 21, 1997; Reyes v. CA, 328 Phil. 171, 180-181,
July 11, 1996;Lagon v. Hooven Comalco Industries, Inc., 349 SCRA 451, 371, January 17,
2001; Imperial v CA, 328 Phil. 366, 373, July 17, 1996; Atlantic Gulf and Pacific Company
of Manila, Inc. v CA, 317 Phil. 707, 714, August 23, 1995; Cormero v. CA, 317 Phil. 348,
August 14, 1995.

167
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

BANTOLINO VS COCA-COLA BOTTLERS 403 SCRA 699

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 153660 June 10, 2003

PRUDENCIO BANTOLINO, NESTOR ROMERO, NILO ESPINA, EDDIE LADICA, ARMAN QUELING,
ROLANDO NIETO, RICARDO BARTOLOME, ELUVER GARCIA, EDUARDO GARCIA and NELSON
MANALASTAS,petitioners,
vs.
COCA-COLA BOTTLERS PHILS., INC., respondent.

BELLOSILLO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision of the Court of Appeals1 dated 21 December 2001 which affirmed with modification
the decision of the National Labor Relations Commission promulgated 30 March 2001.2

On 15 February 1995 sixty-two (62) employees of respondent Coca-Cola Bottlers, Inc., and its
officers, Lipercon Services, Inc., People's Specialist Services, Inc., and Interim Services, Inc., filed
a complaint against respondents for unfair labor practice through illegal dismissal, violation of
their security of tenure and the perpetuation of the "Cabo System." They thus prayed for
reinstatement with full back wages, and the declaration of their regular employment status.

For failure to prosecute as they failed to either attend the scheduled mandatory conferences or
submit their respective affidavits, the claims of fifty-two (52) complainant-employees were
dismissed. Thereafter, Labor Arbiter Jose De Vera conducted clarificatory hearings to elicit
information from the ten (10) remaining complainants (petitioners herein) relative to their
alleged employment with respondent firm.

In substance, the complainants averred that in the performance of their duties as route helpers,
bottle segregators, and others, they were employees of respondent Coca-Cola Bottlers, Inc.
They further maintained that when respondent company replaced them and prevented them
from entering the company premises, they were deemed to have been illegally dismissed.

In lieu of a position paper, respondent company filed a motion to dismiss complaint for lack of
jurisdiction and cause of action, there being no employer-employee relationship between
complainants and Coca-Cola Bottlers, Inc., and that respondents Lipercon Services, People's
Specialist Services and Interim Services being bona fideindependent contractors, were the real
employers of the complainants.3 As regards the corporate officers, respondent insisted that

168
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

they could not be faulted and be held liable for damages as they only acted in their official
capacities while performing their respective duties.

On 29 May 1998 Labor Arbiter Jose De Vera rendered a decision ordering respondent company
to reinstate complainants to their former positions with all the rights, privileges and benefits
due regular employees, and to pay their full back wages which, with the exception of Prudencio
Bantolino whose back wages must be computed upon proof of his dismissal as of 31 May 1998,
already amounted to an aggregate of P1,810,244.00.4

In finding for the complainants, the Labor Arbiter ruled that in contrast with the negative
declarations of respondent company's witnesses who, as district sales supervisors of
respondent company denied knowing the complainants personally, the testimonies of the
complainants were more credible as they sufficiently supplied every detail of their
employment, specifically identifying who their salesmen/drivers were, their places of
assignment, aside from their dates of engagement and dismissal.

On appeal, the NLRC sustained the finding of the Labor Arbiter that there was indeed an
employer-employee relationship between the complainants and respondent company when it
affirmed in toto the latter's decision.

In a resolution dated 17 July 2001 the NLRC subsequently denied for lack of merit respondent's
motion for consideration.

Respondent Coca-Cola Bottlers appealed to the Court of Appeals which, although affirming the
finding of the NLRC that an employer-employee relationship existed between the contending
parties, nonetheless agreed with respondent that the affidavits of some of the complainants,
namely, Prudencio Bantolino, Nestor Romero, Nilo Espina, Ricardo Bartolome, Eluver Garcia,
Eduardo Garcia and Nelson Manalastas, should not have been given probative value for their
failure to affirm the contents thereof and to undergo cross-examination. As a consequence, the
appellate court dismissed their complaints for lack of sufficient evidence. In the same Decision
however, complainants Eddie Ladica, Arman Queling and Rolando Nieto were declared regular
employees since they were the only ones subjected to cross-examination.5 Thus -

x x x (T)he labor arbiter conducted clarificatory hearings to ferret out the truth between
the opposing claims of the parties thereto. He did not submit the case based on position
papers and their accompanying documentary evidence as a full-blown trial was
imperative to establish the parties' claims. As their allegations were poles apart, it was
necessary to give them ample opportunity to rebut each other's statements through
cross-examination. In fact, private respondents Ladica, Quelling and Nieto were
subjected to rigid cross-examination by petitioner's counsel. However, the testimonies
of private respondents Romero, Espina, and Bantolino were not subjected to cross-
examination, as should have been the case, and no explanation was offered by them or
by the labor arbiter as to why this was dispensed with. Since they were represented by

169
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

counsel, the latter should have taken steps so as not to squander their testimonies. But
nothing was done by their counsel to that effect.6

Petitioners now pray for relief from the adverse Decision of the Court of Appeals; that, instead,
the favorable judgment of the NLRC be reinstated.

In essence, petitioners argue that the Court of Appeals should not have given weight to
respondent's claim of failure to cross-examine them. They insist that, unlike regular courts,
labor cases are decided based merely on the parties' position papers and affidavits in support of
their allegations and subsequent pleadings that may be filed thereto. As such, according to
petitioners, the Rules of Court should not be strictly applied in this case specifically by putting
them on the witness stand to be cross-examined because the NLRC has its own rules of
procedure which were applied by the Labor Arbiter in coming up with a decision in their favor.

In its disavowal of liability, respondent commented that since the other alleged affiants were
not presented in court to affirm their statements, much less to be cross-examined, their
affidavits should, as the Court of Appeals rightly held, be stricken off the records for being self-
serving, hearsay and inadmissible in evidence. With respect to Nestor Romero, respondent
points out that he should not have been impleaded in the instant petition since he already
voluntarily executed a Compromise Agreement, Waiver and Quitclaim in consideration of
P450,000.00. Finally, respondent argues that the instant petition should be dismissed in view of
the failure of petitioners7 to sign the petition as well as the verification and certification of non-
forum shopping, in clear violation of the principle laid down in Loquias v. Office of the
Ombudsman.8

The crux of the controversy revolves around the propriety of giving evidentiary value to the
affidavits despite the failure of the affiants to affirm their contents and undergo the test of
cross-examination.

The petition is impressed with merit. The issue confronting the Court is not without precedent
in jurisprudence. The oft-cited case of Rabago v. NLRC9 squarely grapples a similar challenge
involving the propriety of the use of affidavits without the presentation of affiants for cross-
examination. In that case, we held that "the argument that the affidavit is hearsay because the
affiants were not presented for cross-examination is not persuasive because the rules of
evidence are not strictly observed in proceedings before administrative bodies like the NLRC
where decisions may be reached on the basis of position papers only."

In Rase v. NLRC,10 this Court likewise sidelined a similar challenge when it ruled that it was not
necessary for the affiants to appear and testify and be cross-examined by counsel for the
adverse party. To require otherwise would be to negate the rationale and purpose of the
summary nature of the proceedings mandated by the Rules and to make mandatory the
application of the technical rules of evidence.

170
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Southern Cotabato Dev. and Construction Co. v. NLRC11 succinctly states that under Art. 221 of
the Labor Code, the rules of evidence prevailing in courts of law do not control proceedings
before the Labor Arbiter and the NLRC. Further, it notes that the Labor Arbiter and the NLRC
are authorized to adopt reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law and procedure, all in the interest of due
process. We find no compelling reason to deviate therefrom.

To reiterate, administrative bodies like the NLRC are not bound by the technical niceties of law
and procedure and the rules obtaining in courts of law. Indeed, the Revised Rules of Court and
prevailing jurisprudence may be given only stringent application, i.e., by analogy or in a
suppletory character and effect. The submission by respondent, citing People v. Sorrel,12 that an
affidavit not testified to in a trial, is mere hearsay evidence and has no real evidentiary value,
cannot find relevance in the present case considering that a criminal prosecution requires a
quantum of evidence different from that of an administrative proceeding. Under the Rules of
the Commission, the Labor Arbiter is given the discretion to determine the necessity of a formal
trial or hearing. Hence, trial-type hearings are not even required as the cases may be decided
based on verified position papers, with supporting documents and their affidavits.

As to whether petitioner Nestor Romero should be properly impleaded in the instant case, we
only need to follow the doctrinal guidance set by Periquet v. NLRC13 which outlines the
parameters for valid compromise agreements, waivers and quitclaims -

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a change of mind. It is only
where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its face, that the law will step
in to annul the questionable transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the transaction must be
recognized as a valid and binding undertaking.

In closely examining the subject agreements, we find that on their face the Compromise
Agreement14 andRelease, Waiver and Quitclaim15 are devoid of any palpable inequity as the
terms of settlement therein are fair and just. Neither can we glean from the records any
attempt by the parties to renege on their contractual agreements, or to disavow or disown
their due execution. Consequently, the same must be recognized as valid and binding
transactions and, accordingly, the instant case should be dismissed and finally terminated
insofar as concerns petitioner Nestor Romero.

We cannot likewise accommodate respondent's contention that the failure of all the petitioners
to sign the petition as well as the Verification and Certification of Non-Forum Shopping in
contravention of Sec. 5, Rule 7, of the Rules of Court will cause the dismissal of the present
appeal. While the Loquias case requires the strict observance of the Rules, it however provides

171
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

an escape hatch for the transgressor to avoid the harsh consequences of non-observance. Thus
-

x x x x We find that substantial compliance will not suffice in a matter involving strict
observance of the rules. The attestation contained in the certification on non-forum
shopping requires personal knowledge by the party who executed the same. Petitioners
must show reasonable cause for failure to personally sign the certification. Utter
disregard of the rules cannot justly be rationalized by harking on the policy of liberal
construction (underscoring supplied).

In their Ex Parte Motion to Litigate as Pauper Litigants, petitioners made a request for a
fifteen (15)-day extension, i.e., from 24 April 2002 to 8 May 2002, within which to file
their petition for review in view of the absence of a counsel to represent them. 16 The
records also reveal that it was only on 10 July 2002 that Atty. Arnold Cacho, through the
UST Legal Aid Clinic, made his formal entry of appearance as counsel for herein
petitioners. Clearly, at the time the instant petition was filed on 7 May 2002 petitioners
were not yet represented by counsel. Surely, petitioners who are non-lawyers could not
be faulted for the procedural lapse since they could not be expected to be conversant
with the nuances of the law, much less knowledgeable with the esoteric technicalities of
procedure. For this reason alone, the procedural infirmity in the filing of the present
petition may be overlooked and should not be taken against petitioners.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals


is REVERSED and SET ASIDEand the decision of the NLRC dated 30 March 2001 which affirmed
in toto the decision of the Labor Arbiter dated 29 May 1998 ordering respondent Coca-Cola
Bottlers Phils., Inc., to reinstate Prudencio Bantolino, Nilo Espina, Eddie Ladica, Arman Queling,
Rolando Nieto, Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and Nelson Manalastas to
their former positions as regular employees, and to pay them their full back wages, with the
exception of Prudencio Bantolino whose back wages are yet to be computed upon proof of his
dismissal, isREINSTATED, with the MODIFICATION that herein petition is DENIED insofar as it
concerns Nestor Romero who entered into a valid and binding Compromise Agreement and
Release, Waiver and Quitclaim with respondent company.

SO ORDERED.

Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.

Footnotes
1
Penned by Associate Justice Martin S. Villarama, Jr., concurred in by Associate Justices
Conchita Carpio Morales and Sergio L. Pestano,former Ninth Division, Court of Appeals.

172
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations
2
Penned by Commissioner Victoriano Calaycay, Second Division, NLRC, concurred in by
Presiding Commissioner Raul T. Aquino and Commissioner Angelita A. Gacutan.
3
Original Records, p. 41.
4
Id. at 545.
5
Rollo, p. 26.
6
Id. at 32.
7
Of the seven (7) petitioners only Ricardo Bartolome signed the verification and
certification of non-forum shopping
8
G.R. No. 139396, 15 August 2000, 338 SCRA 62.
9
G.R. No. 82868, 5 August 1991, 200 SCRA 158.
10
G.R. No. 110637, 7 October 1994, 237 SCRA 523.
11
G.R. No. 121582, 16 October 1997, 280 SCRA 853.
12
G.R. No. 119332, 29 August 1997, 278 SCRA 368.
13
G.R. No. 91298, 22 June 1990, 186 SCRA 724.
14
Rollo, p. 82, Annex "A."
15
Id. at 84, Annex "B."
16
Petitioners' counsel of record, Atty. Armando Ampil, had signified his intention to
withd raw from the case in view of his commitment in other equally important cases.

173
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

PIDI VS NLRC 210 SCRA 339

Republic of the Philippines


SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 88957 June 25, 1992

PHILIPS INDUSTRIAL DEVELOPMENT, INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPS EMPLOYEES ORGANIZATION
(FFW),respondents.

DAVIDE, JR., J.:

In this petition for certiorari and prohibition under Rule 65 of the Rules of Court with a prayer
for a temporary restraining order and/or a writ of preliminary injunction, petitioner Philips
Industrial Development, Inc. (PIDI) seeks to set aside the Decision and Resolution, dated 16
January 1989 and 17 March 1989, respectively, of the National Labor Relations Commission
(NLRC) in Case No. NLRC-NCR-00-11-03936-87 on the ground that it committed grave abuse of
discretion amounting to lack of jurisdiction in holding that service engineers, sales
representatives and confidential employees of PIDI are qualified to be included in the existing
bargaining unit.

PIDI is a domestic corporation engaged in the manufacturing and marketing of electronic


products Since 1971, it had a total of six (6) collective bargaining agreements (CBAs) with
private respondent Philips Employees Organization-FFW (PEO-FFW), a registered labor union
and the certified bargaining agent of all the rank and file employees of PIDI. In the first CBA
(1971-1974), the supervisors referred to in R.A. No. 875, confidential employees, security
guards, temporary employees and sales representatives were excluded from the bargaining
unit. In the second to the fifth CBAs (1975-1977; 1978-1980; 1981-1983; and 1984-1986), the
sales force, confidential employees and heads of small units, together with the managerial
employees, temporary employees and security personnel, were specifically excluded from the
bargaining unit. 1 The confidential employees are the division secretaries of light/telecom/data
and consumer electronics, marketing managers, secretaries of the corporate planning and
business manager, fiscal and financial system manager and audit and EDP manager, and the
staff of both the General Management and the Personnel Department. 2

174
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

In the sixth CBA covering the years 1987 to 1989, it was agreed upon, among others, that the
subject of inclusion or exclusion of service engineers, sales personnel and confidential
employees in the coverage of the bargaining unit would be submitted for arbitration. Pursuant
thereto, on June 1987, PEO-FFW filed a petition before the Bureau of Labor Relations (BLR)
praying for an order "directing the parties to select a voluntary arbitrator in accordance with its
rules and regulations."

As the parties failed to agree on a voluntary arbitrator, the BLR endorsed the petition to the
Executive Labor Arbiter of the National Capital Region for compulsory arbitration pursuant to
Article 228 of the Labor Code. Docketed as Case No. NLRC-NCR-00-11-03936-87, the case was
assigned to Executive Labor Arbiter Arthur Amansec.

On 17 March 1988, Labor Arbiter Amansec rendered a decision, the dispositive portion of which
states:

In view of the foregoing, a decision is hereby rendered, ordering the respondent


to conduct a referendum to determine the will of the service engineers, sales
representatives as to their inclusion or exclusion in the bargaining unit.

It is hereby declared that the Division Secretaries and all Staff of general
management, personnel and industrial relations department, secretaries of
audit, EDP, financial system are confidential employees and as such are hereby
deemed excluded in the bargaining unit.

SO ORDERED.

PEO-FFW appealed from the decision to the NLRC.

On 16 January 1989, the NLRC rendered the questioned decision, the dispositive portion of
which reads:

WHEREFORE, the foregoing premises considered, the appealed decision of the


Executive Labor Arbiter is hereby SET ASIDE and a new one entered declaring
respondent company's Service Engineers, Sales Force, division secretaries, all
Staff of General Management, Personnel and Industrial Relations Department,
Secretaries of Audit, EDP and Financial Systems are included within the rank and
file bargaining unit.

SO ORDERED.

The reversal is anchored on the respondent NLRC's conclusion that based on Section 1, 3 Rule II,
Book V of the Omnibus Rules Implementing the Labor Code, as amended by Section 3,
Implementing Rules of E.O. No. 111; paragraph (c) Section 2, Rule V of the same Code, as

175
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

amended by Section 6 4 of the Implementing Rules of E.O. No. 111; and Article 245 5 of the
Labor Code, as amended:

. . . all workers, except managerial employees and security personnel, are


qualified to join or be a part of the bargaining unit. . . .

It further ruled that:

The Executive Labor Arbiters directive that the service engineers and sales
representatives to (sic) conduct a referendum among themselves is erroneous
inasmuch as it arrogates unto said employees the right to define what the law
means. It would not be amiss to state at this point that there would be no one
more interested in excluding the subject employees from the bargaining unit
than management and that it would not be improbable for the latter to lobby
and/or exert pressure on the employees concerned, thus agitating unrest among
the rank-and-file. Likewise, the Executive Labor Arbiter's declaration that the
Division Secretaries and all Staff of general management, personnel and
industrial relations department, secretaries of audit, EDP and financial system
"are confidential employees and as such are hereby deemed excluded in (sic) the
bargaining unit" is contrary to law for the simple reason that the law, as earlier
quoted, does not mention them as among those to be excluded from
the bargaining unit only (sic) managerial employees and security guards. As a
matter of fact, supervisory unions have already been dissolved and their
members who do not fall within the definition of managerial employees have
become eligible to join or assist the rank-and-file organization. 6

Its motion for the reconsideration of this decision having been denied by the NLRC in its
Resolution of 16 March 1989, a copy of which it received on 8 June 1989, petitioner PIDI filed
the instant petition on 20 July 1989, alleging that:

THE NLRC COMMITTED ABUSE OF DISCRETION AMOUNTING TO LACK OF


JURISDICTION IN HOLDING THAT SERVICE ENGINEERS, SALES REPRESENTATIVES
AND CONFIDENTIAL EMPLOYEES OF PETITIONER ARE QUALIFIED TO BE PART OF
THE EXISTING BARGAINING UNIT.

II

THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF


JURISDICTION IN NOT APPLYING THE TIME HONORED "GLOBE DOCTRINE." 7

176
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On 31 July 1989, this Court; required the respondents to comment on the petition, which PEO-
FFW complied with on 28 August 1989. Public respondent NLRC, thru its counsel, the Solicitor
General, moved for, and was granted a 30-day extension to file its Comment.

On 18 September 1989, this Court required the parties to show cause why the petition should
not be dismissed in view of the finality of the NLRC decision as provided for by the penultimate
sentence of Article 223 of the Labor Code, as amended by R.A. No. 6715 R..A. No. 6715, which
amended Article 223 of the Labor Code, was enacted on 2 March 1989 and took effect on 21
March 1989. The parties subsequently complied with the Resolution.

On 16 May 1990, this Court required the parties to submit Memoranda explaining the effect in
this case of Article 223 of the Labor Code, as amended by Section 12 of R.A. No-6715 with
respect to the finality of decisions of the NLRC. The parties complied separately with the same.

On 10 September 1990, this Court gave due course to the petition and required the parties to
submit their respective Memoranda. The petitioner and the Office of the Solicitor General filed
their separate Memoranda. On the other hand, PEO-FFW moved that its Motion and
manifestation dated 23 August 1989 be considered as its Memorandum; this Court granted the
same.

As stated earlier, the principal issue in this case is whether the NLRC committed grave abuse of
discretion in holding that service engineers, sales representatives and confidential employees
(division secretaries, staff of general management, personnel and industrial relations
department, secretaries of audit, EDP and financial system) are qualified to be included in the
existing bargaining unit. Petitioner maintains that it did, and in support of its stand that said
employees should not be absorbed by the existing bargaining unit, it urges this Court to
consider these points:

1) The inclusion of the group in the existing bargaining unit would run counter to the history of
this parties CBA. The parties' five (5) previous CBAs consistently excluded this group of
employees from the scope of the bargaining unit. The rationale for such exclusion is that these
employees hold positions which are highly sensitive, confidential and of a highly fiduciary
nature; to include them in the bargaining unit may subject the company to breaches in security
and the possible revelation of highly sensitive and confidential matters. It would cripple the
company's bargaining position and would give undue advantage to the union.

2) The absence of mutuality of interests between this group of employees and the regular rank
and file militates against such inclusion. A table prepared by the petitioner shows the disparity
of interests between the said groups:

SERVICE ENGINEERS SERVICE


SALES REPRESENTATIVES TECHNICIANS

177
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

(Non-Bargaining (Bargaining
AREAS OF INTEREST Unit Employees) Unit Employees)

Qualifications Professional Employees High School/


Vocational
Grads.
Work Schedule With Night Shift None
Schedule
Night Shift 10% of Basic Rate None
Differential Pay
Stand-By Call & On Stand-By Call with: None
Allowance First Line:15% of
basic rate
Second Line: 10% of
basic rate
Uniforms None 2 sets of polo
& pants every
6 months
Retirement Benefits 15 yrs. ser.70% 15 yrs. serv. 50%
16 75% 16 85%
17 80% 17 90%
18 85% 18 100%
19 90% 19 115%
20 100% 20 135%
Year End Performance Merit Increase system None
Evaluation
Sales Commission Yes None
Car Loan Yes None
Precalculated Yes None
Kilometer allowance

The Office of the Solicitor General supports the decision of the Executive Labor Arbiter and
refuses to uphold the position of the NLRC. It holds the view that the division Secretaries; the
staff members of General Management, Personnel and the Industrial Relations Department;
and the secretaries of Audit, EDP and Financial Systems, are disqualified from joining the PEO-
FFW as they are confidential employees. They cannot even form a union of their own for, as
held in Golden Farms, Inc. vs. Ferrer-Calleja, 8 the rationale for the disqualification of
managerial employees from joining unions holds true also for confidential employees. As
regards the sales representatives and service engineers, however, there is no doubt that they
are entitled to join or form a union, as they are not disqualified by law from doing so.
Considering that they have interests dissimilar to those of the rank and file employees
comprising the existing bargaining unit, and following the Globe Doctrine enunciated in In Re:

178
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Globe Machine and Stamping Company 9 to the effect that in determining the proper
bargaining unit the express will or desire of the employees shall be considered, they should be
allowed to determine for themselves what union to join or form. The best way to determine
their preference is through a referendum. As shown by the records, such a. referendum was
decreed by the Executive Labor Arbiter.

The petition is impressed with merit.

At the outset, We express Our agreement with the petitioner's view that respondent NLRC did
not quite accurately comprehend the issue raised before it. Indeed, the issue is not whether the
subject employees may join or form a union, but rather, whether or not they may be part of the
existing bargaining unit for the rank and file employees of PIDI.

Even if the issue was, indeed, as perceived by the NLRC, still, a palpable error was committed by
it in ruling that under the law, all workers, except managerial employees and security
personnel, are qualified to join a union, or form part of a bargaining unit. At the time Case No.
NLRC-NCR-00-11-03936-87 was filed in 1987, security personnel were no longer disqualified
from joining or forming a union.

Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the original provisions of
Article 245 of the Labor Code, reading as follows:

Art. 245. Ineligibility of security personnel to join any labor organization.


Security guards and other personnel employed for the protection and security of
the person, properties and premises of the employer shall not be eligible for
membership, in any labor organization.

and substituted it with the following provision:

Art. 245. Right of employees in the public service. 10

xxx xxx xxx

By virtue of such repeal and substitution, security guards became eligible for
membership in any labor organization. 11

On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave
abuse of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing
that PIDI's "Service Engineers, Sales Force, division secretaries, all Staff of General
Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP and
Financial Systems are included within the rank and file bargaining unit."

In the first place, all these employees, with the exception of the service engineers and the sales
force personnel, are confidential employees. Their classification as such is not seriously

179
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

disputed by PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly
considered them as confidential employees. By the very nature of their functions, they assist
and act in a confidential capacity to, or have access to confidential matters of, persons who
exercise managerial functions in the field of labor relations. 12 As such, the rationale behind the
ineligibility of managerial employees to form, assist or join a labor union equally applies to
them.

In Bulletin Publishing Co., Inc. vs. Hon Augusto Sanchez, 13 this Court elaborated on this
rationale, thus:

. . . The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the latter
might not be assured of their loyalty, to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the presence of
managerial employees in Union membership.

In Golden Farms, Inc. vs. Ferrer-Calleja, 14 this Court explicitly made this rationale applicable to
confidential employees:

This rationale holds true also for confidential employees such as accounting
personnel, radio and telegraph operators, who having access to confidential
information, may become the source of undue advantage. Said employee(s) may
act as a spy or, spies of either party to a collective bargaining agreement. This is
specially true in the present case where the petitioning Union is already the
bargaining agent of the rank-and-file employees in the establishment. To allow
the confidential employees to join the existing Union of the rank-and-file would
be in violation of the terms of the Collective Bargaining Agreement wherein this
kind of employees by the nature of their functions/ positions are expressly
excluded.

As regards the service engineers and the sales representatives, two (2) points which respondent
NLRC likewise arbitrarily and erroneously ruled upon agreed to be discussed. Firstly, in holding
that they are included in the bargaining unit for the rank and file employees of PIDI, the NLRC
practically forced them to become members of PEO-FFW or to be subject to its sphere of
influence, it being the certified bargaining agent for the subject bargaining unit. This violates,
obstructs, impairs and impedes the service engineers' and the sales representatives'
constitutional right to form unions or associations 15 and to self-organization. 16 In Victoriano vs.
Elizalde Rope Workers Union, 17 this Court already ruled:

. . . Notwithstanding the different theories propounded by the different schools


of jurisprudence regarding the nature and contents of a "right", it can be safely
said that whatever theory one subscribes to, a right comprehends at least two
broad notions, namely: first, liberty or freedom, i.e., the absence of legal
restraint, whereby an employee may act for himself without being prevented by

180
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

law; and second, power, whereby an employee may, as he pleases, join or


refrain from joining an association. It is, therefore, the employee who should
decide for himself whether he should join or not an association; and should he
choose to join, he himself makes up his mind as to which association he would
join; and even after he has joined, he still retains the liberty and the power to
leave and cancel his membership with said organization at any time. 18 It is clear,
therefore, that the right to join a union includes the right to abstain from joining
any
union. 19 Inasmuch as what both the Constitution and the Industrial Peace Act
have recognized, and guaranteed to the employee, is the "right" to join
associations of his choice, it would be absurd to say that the law also imposes, in
the same breath, upon the employee the duty to join associations. The law does
not enjoin an employee to sign up with any association.

The decision then of the Executive Labor Arbiter in merely directing the holding of a
referendum "to determine the will of the service engineers, sales representatives as to their
inclusion or exclusion in (sic) the bargaining unit" is the most appropriate procedure that
conforms with their right to form, assist or join in labor union or organization. However, since
this decision was rendered before the effectivity of R.A. No. 6715, it must now be stressed that
its future application to the private parties in this case should, insofar as service engineers and
sales representatives holding supervisory positions or functions are concerned, take into
account the present Article 245 20 of the Labor Code which, as amended by R.A. No. 6715, now
reads:

ARTICLE 245. Ineligibility of managerial employees to join any labor organization;


right of supervisory employees. Managerial employees are not eligible to join,
assist or form any labor organization.Supervisory employees shall not be eligible
for membership in a labor organization of the rank-and-file employees but may
join, assist or form separate labor organizations of their own. (emphasis
supplied)

The foregoing disquisitions render unnecessary a discussion on the second ground on the
alleged grave abuse of discretion on the part of the NLRC in not applying the "Globe Doctrine".
Suffice it to state here that since the only issue is the subject employees' inclusion in or
exclusion from the bargaining unit in question, and PIDI never questioned the decision of the
Executive Labor Arbiter, the Globe Doctrine finds no application. Besides, this doctrine applies
only in instances of evenly balanced claims by competitive groups for the right to be established
as the bargaining unit, 21 which do not obtain in this case.

WHEREFORE, the petition is hereby GRANTED. The Decision of public respondent National
Labor Relations Commission in Case No. NLRC-NCR-00-11-03936-87, promulgated on 16
January 1989, is hereby SET ASIDE while the Decision of the Executive Labor Arbiter in said case
dated 17 March 1988 is hereby REINSTATED, subject to the modifications above indicated.
Costs against private respondent.

181
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

SO ORDERED.

Gutierrez, Feliciano, Bidin and Romero, JJ., concur.

Footnotes

1 Rollo, 4.

2 Id.

3 On who may join labor unions.

4 On exclusion of security guards from the bargaining unit of the rank and file
employees.

5 On ineligibility of managerial employees to join any labor organization.

6 Rollo, 111.

7 Id., 2.

8 175 SCRA 471 [1989].

9 3 NLRC 294 [1937].

10 In view of the repeal of Article 238 of the Labor Code by Section 5 of E.O. 111,
this Article was deemed renumbered as Article 244.

11 Manila Electric Co. vs. Secretary of Labor and Employment, 197 SCRA 275
[1991].

12 PASCUAL, C., Labor Relations Law, 1986 ed., 159.

13 144 SCRA 628, 635 [1986].

14 Supra.

15 Section 8, Article III (Bill of Rights) and Section 3, Article XIII of the present
Constitution.

16 Article 246, Labor Code of the Philippines, as amended.

182
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

17 59 SCRA 54, 66-67 [1974]. See also Anucension vs. National Labor Union, 80
SCRA 350 [1977]; Vassar Industries Employees Union vs. Estrelia, 82 SCRA 280
[1978].

18 Citing Pagkakaisa Samahang Manggagawa ng San Miguel Brewery at mga


Kasangay (PAFLU) vs. Enriquez, 108 Phil. 1010 [1960].

19 Citing Abo vs. PHILAME (KG) Employees & Workers Union, 13 SCRA 120
[1965].

20 Originally Article 246.

21 Rothenberg on Labor Relations, 1949 ed., 483.

183
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

NAFTU VS MALDECOU-ULGWP 192 SCRA 598

SECOND DIVISION
[G.R. No. 79526 : December 21, 1990.]
192 SCRA 598
NATIONAL ASSOCIATION OF FREE TRADE UNIONS (NAFTU), Petitioner, vs.MAINIT LUMBER
DEVELOPMENT COMPANY WORKERS UNION-UNITED LUMBER AND GENERAL WORKERS OF
THE PHILIPPINES. (MALDECOWU-ULGWP), Respondents.

DECISION

PARAS, J.:

This is a petition for Certiorari to annul and set aside the resolution ** of the public respondent
Bureau of Labor Relation dated January 29,1987 in BLR Case No. A-5-99-85 entitled: IN RE:
Petition for Direct Certification or Certification Election, Mainit Lumber Development Company
Workers Union-United Lumber and General Workers of the Philippines (MALDECOWU-ULGWP),
petitioner-appellee vs. Mainit Lumber and Development Company, Inc. (MALDECO),
respondent; National Association of Free Trade Unions (NAFTU), compulsory intervenor-
appellant, affirming the Order of the Med-Arbiter date September 24, 1986 and denying
petitioner's motion for reconsideration.
The facts are as follows:
On January 28, 1985, private respondent Mainit Lumber Development Company Workers
Union-United Lumber and General Workers of the Philippines, MALDECOWU-ULGWP (ULGWP,
for short), a legitimate labor organization duly registered with the Ministry of Labor and
Employment under Registry No. 2944-IP, filed with Regional Office No. 10, Ministry of Labor
and Employment at Cagayan de Oro City, a petition for certification election to determine the
sole and exclusive collective bargaining representative among the rank and file
workers/employees of Mainit Lumber Development Company Inc. (MALDECO), a duly
organized, registered and existing corporation engaged in the business of logging and saw-mill
operations employing approximately 136 rank and file employees/workers (Rollo, p. 11;
Petition; Annex "A"). The case was scheduled for hearing two (2) times. During the first
scheduled hearing on February 20, 1985, the counsel for compulsory intervenor (now
petitioner), National Association of Free Trade Union (NAFTU) requested for postponement on
the ground that he was leaving for abroad. During the scheduled hearing of March 13, 1985,
they, however, agreed to submit simultaneously their respective position papers within twenty
(20) days (Rollo, p. 17; Petition; Annex "D").

184
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Petitioner ULGWP, private respondent herein, in its petition and position paper alleged, among
others: (1) that there was no certification election conducted within 12 months prior to the
filing of the petition; (2) that the petition was filed within the 60 day freedom period, i.e. CBA
expired on February 28, 1985; (3) that the petition is supported by the signatures of 101 rank
and file employees out of a total of 201 employees of the employer or more than thirty percent
(30%) than that required by law (Rollo, p. 13; Petition; Annex "B").:-cralaw
On April 11, 1985, the Med-Arbiter granted the petition for certification election. On April 26,
1985, NAFTU appealed the decision of the Med-Arbiter on the ground that MALDECO was
composed of two (2) bargaining units, the Sawmill Division and the Logging Division, but both
the petition and decision treated these separate and distinct units only as one (Rollo, p. 20;
Petition; Annex "E").
On April 28, 1986, the Bureau of Labor Relations affirmed the decision (Rollo, p. 26; Petition;
Annex "J"). Thus, a certification election was held on separate dates at the employer's sawmill
division and logging area respectively. In said election MALDECOWU-ULGWP garnered a total
vote of 146 while NAFTU garnered a total of 2 votes (Rollo, p. 42; Petition; Annex "O").
On July 26, 1986, NAFTU filed an election protest alleging massive vote buying accompanied
with grave and serious threat force and intimidation on the lives of 25 applicants as stated in a
Joint Affidavit attached thereto (Rollo, p. 28; Petition; Annexes "K", "K-3").
MALDECO filed its Manifestation on August 3, 1986, which corroborated petitioner's stand.
Attached to the said Manifestation was a joint affidavit executed by thirty five (35) of its
employees/workers (Rollo, p. 33; Petition; Annexes "L", "L-1").
On September 3, 1986, private respondent filed its position paper (Rollo, p. 36; Petition; Annex
"I"). On September 8, 1986 petitioner filed its opposition to private respondent's position paper
(Rollo, p. 39; Petition; Annex "N"). On September 24, 1986, the Med-Arbiter dismissed the
election protest (Rollo, p. 42; Petition; Annex "O").
On October 10, 1986, petitioner NAFTU appealed the order of the Med-Arbiter to the Bureau of
Labor Relations in Manila (Rollo, p. 46) which denied the appeal (Rollo, p. 48) and the two
motions for reconsideration (Rollo, pp. 51, 55).
Hence, this petition.
The issues raised in this petition are:
I
WHETHER OR NOT IT WAS RIGHT FOR THE MED-ARBITER TO CHANGE THE EMPLOYER FROM
TWO SEPARATE BARGAINING UNITS TO ONLY ONE.
II
WHETHER OR NOT THERE WAS MASSIVE VOTE BUYING AND SERIOUS THREAT TO LIFE TO
JUSTIFY INVALIDATING THE RESULT OF THE ELECTION.
III

185
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

WHETHER OR NOT AN ELECTION PROTEST IN A CERTIFICATION ELECTION CAN BE GIVEN DUE


COURSE EVEN IF NOT ENTERED IN THE MINUTES OF THE ELECTION.
In the case at bar, petitioner alleges that the employer MALDECO was composed of two
bargaining units, the Sawmill Division in Butuan City and the Logging Division, in Zapanta Valley,
Kitcharao, Agusan Norte, about 80 kilometers distant from each other and in fact, had then two
separate CBA's, one for the Sawmill Division and another for the Logging Division, both the
petition and decision referred only to one bargaining unit; that from 1979 to 1985, the Ministry
of Labor and Employment recognized the existence of two (2) separate bargaining units at
MALDECO, one for its Logging Division and another for its Sawmill Division.
Significantly, out of two hundred and one (201) employees of MALDECO, one hundred seventy
five (175) consented and supported the petition for certification election, thereby confirming
their desire for one bargaining representative (Rollo, p. 104).:- nad
Moreover, while the existence of a bargaining history is a factor that may be reckoned with in
determining the appropriate bargaining unit, the same is not decisive or conclusive. Other
factors must be considered. The test of grouping is community or mutuality of interests. This is
so because "the basic test of an asserted bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all employees the exercise of their
collective bargaining rights." (Democratic Labor Association v. Cebu Stevedoring Company, Inc.,
et al., 103 Phil. 1103 [1958]).
Certainly, there is a mutuality of interest among the employees of the Sawmill Division and the
Logging Division. Their functions mesh with one another. One group needs the other in the
same way that the company needs them both. There may be difference as to the nature of
their individual assignments but the distinctions are not enough to warrant the formation of a
separate bargaining unit.
Secondly, the issue had been raised earlier by petitioner. The respondent Bureau of Labor
Relations had already ruled on the same in its decision dated April 28, 1986 affirming the Med-
Arbiter's Order dated April 11, 1985 which granted the petition for Certification Election.
NAFTU did not elevate the April 28, 1986 decision to this Court. On the contrary, it participated
in the questioned election and later it did not raise the issue in its election protest (Rollo, p.
210). Hence, the principle of res judicata applies. It was settled as early as 1956 that "the rule
which forbids the reopening of a matter once judicially determined by competent authority
applies as well to the judicial and quasi-judicial acts of public, executive or administrative
officers and boards acting within their jurisdiction as to the judgments of courts having general
judicial powers . . ." (B.F. Goodrich Philippines, Inc. v. Workmen's Compensation Commission
and Leandro M. Castro, 159 SCRA 355 [1988]).
With regard to the second and third issues raised by petitioner, the public respondent Bureau
of Labor Relations in its order dated September 24, 1986 found the following, to wit:
"After a careful perusal of the records of this case and after considering, adducing and weighing
all the pleadings, arguments, etc. and the circumstances attendant to the instant case, this
Office is of the opinion that the grounds relied upon by the protestant NAFTU in its protest are
bereft of any merit, hence, this Office finds no cogent reason to order the invalidation or

186
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

annulment of the certification election under protest or the holding of a run-off election
thereat between no union and the protestee, MALDECOWU-ULGWP. Indeed, the minutes of
said certification elections conducted both at the sawmill and logging departments on August
15 and 21, 1986 respectively, of the respondent/employer showed that there was no protest on
massive vote buying accompanied with grave and serious threats, force and intimidation raised
by any of the parties who were ably represented in said elections. Paragraph 2, Section 9, Rule
6 of the Rules and Regulations implementing the Labor Code of the Philippines (now Section 3,
Rule VI, Book 5 of the Omnibus Rules Implementing the Labor Code) provides that protests not
so raised and contained in the minutes of the proceedings are deemed waived. Allegations of
vote buying, grave and serious threats, force and intimidation are questions of fact which
should be contained in the minutes of said proceedings. There is no clear and convincing proof
presented by the protestant in support of its contention, hence, we have no other alternative
than to uphold the election results."
In the case of Philippine Airlines Employees' Association (PALEA) v. Hon. Pura Ferrer-Calleja, et
al., 162 SCRA 425 [1988]), this Court held that factual findings of the Bureau of Labor Relations
which are supported by substantial evidence are binding on this Court and must be respected.:
nad
PREMISES CONSIDERED, the resolution of public respondent Bureau of Labor Relations dated
January 29, 1987 is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

187
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

COOPERATIVE RURAL BANK OF DAVAO CITY VS CALLEJA 165 SCRA 725

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 77951 September 26, 1988

COOPERATIVE RURAL BANK OF DAVAO CITY, INC., petitioner,


vs.
PURA FERRER-CALLEJA, DIRECTOR, BUREAU OF LABOR RELATIONS, MOLE, MANILA;
FELIZARDO T. SERAPIO, MED-ARBITER DESIGNATE, REGIONAL OFFICE NO. XI, MOLE, DAVAO
CITY; and FEDERATION OF FREE WORKERS, respondents.

Herbert P. Artes for petitioner.

The Solicitor General for Public respondent.

GANCAYCO, J.:

This is a Petition for certiorari under Rule 65 of the Rules of Court where the issue is whether or
not the employees of a cooperative can organize themselves for purposes of collective
bargaining.

The record of the case discloses that the herein petitioner Cooperative Rural Bank of Davao
City, Inc. is a cooperative banking corporation operating in Davao City. It is owned in part by the
Government and its employees are members and co-owners of the same. The petitioner has
around 16 rank-and-file employees. As of August, 1986, there was no existing collective
bargaining agreement between the said employees and the establishment. On the other hand,
the herein private respondent Federation of Free Workers is a labor organization registered
with the Department of Labor and Employment. It is interested in representing the said
employees for purposes of collective bargaining.

On August 27, 1986, the private respondent filed with the Davao City Regional Office of the
then Ministry of Labor and Employment a verified Petition for certification election among the
rank-and-file employees of the petitioner. 1The same was docketed as Case No. R-325 ROXI
MED-UR-73-86. On September 18, 1986, the herein public respondent issued an Order granting
the Petition for certification election.

188
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

On October 3, 1986, the petitioner filed an Appeal Memorandum and sought a reversal of the
Order of the Med-Arbiter. 2 The petitioner argues therein that, among others, a cooperative is
not covered by the Rules governing certification elections inasmuch as it is not an institution
operating for profit. The petitioner also adds that two of the alleged rank-and-file employees
seeking the certification election are managerial employees disqualified from joining concerted
labor activities. In sum, the petitioner insists that its employees are disqualified from forming
labor organizations for purposes of collective bargaining.

On October 8, 1986, the private respondent filed a "Motion to Dismiss the Appeal." On October
15, 1986, the petitioner filed its opposition to the said Motion.

On February 11, 1987, the herein public respondent Bureau of Labor Relations Director Pura
Ferrer-Calleja issued a Resolution affirming the Order of the Med-Arbiter and dismissing the
Appeal. 3 The pertinent portions of the said Resolution are as follows

It is beyond doubt that respondent-appellant, Cooperative Rural Bank of Davao


City falls within the purview of Article 212, paragraph C of the Labor Code, acting
as such in the interest of an employer. To argue otherwise would amount to
closing one's eyes to the realities of today's cooperative banking institutions. ....

Moreover, basic is the right of every worker in any establishment whether


operated for profit or not to organize and engage in concerted activity, mutually
beneficial to their interest. Such right is sacredly enshrined and protected in our
fundamental law, granting every worker the right to organize into a collective
group and engage in concerted activities for purposes of promoting their well
being, subject only to such limitations as may be provided for by law.

xxx xxx xxx

As this Office has consistently ruled and applied in various cases, being a
member of a cooperative organization does not preclude one from forming or
joining a labor union provided that such person or persons are not among those
disqualified by law. Nowhere in the records can we find any piece of evidence
showing that the signatories in the petition are among those disqualified to form
or join a union.

Finally, we cannot give credence to (the) employer's allegation that two of the
signatories thereof, are managerial employees, since no evidence showing such
fact can be found from the records.

xxx xxx xxx

In a Motion dated March 2, 1987, the petitioner asked for a reconsideration of the said
Resolution. 4 The petitioner reiterated therein its view that its employees are disqualified from

189
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

forming the labor organization so contemplated. The petitioner also called attention to an
Opinion rendered by then Solicitor General and Minister of Justice Estelito P. Mendoza dated
August 14, 1981. 5 The Opinion states that employees of an electric cooperative who are
themselves members/co-owners of the same cannot form or join labor organizations for
purposes of collective bargaining. The Opinion also states that the duty to bargain exists only
between an employer and his/its employees, and that an employer has no duty to bargain with
his co-owners of a corporation who are also its employees. The petitioner submits that the said
Opinion calls for application in the present controversy.

On March 26, 1987, director Calleja issued a Resolution denying the reconsideration sought by
the petitioner. 6Thus, the certification election was scheduled in the morning of April 23, 1987.

Finding the action taken by the Bureau unsatisfactory, the petitioner brought the case directly
to this Court on April 9, 1987 by way of the instant Petition for certiorari. The petitioner
maintains that the public respondents both acted without jurisdiction or in excess thereof, or
with grave abuse of discretion amounting to lack of jurisdiction, in allowing the certification
election sought by the private respondent despite the arguments of the petitioner in opposition
thereto. The petitioner reiterates its argument that employees of cooperatives who are
members and co-owners of the same cannot form and join labor organizations for purposes of
collective bargaining.

On April 15, 1987, this Court issued a temporary restraining order enjoining the Bureau of Labor
Relations from proceeding with the certification election scheduled on April 23, 1987. 7 The
certification election nonetheless pushed through as scheduled for the alleged reason that the
temporary restraining order was not seasonably transmitted to Davao City. 8

This court also required the respondents to file their Comment on the Petition. The
respondents complied as instructed. The Office of the Solicitor General represented the public
respondents.

The Solicitor General intimated to this Court that the instant Petition has been rendered moot
and academic inasmuch as the certification election sought to be enjoined had already been
conducted. The Solicitor General added that the public respondents did not commit any
jurisdictional error. 10

In due time, the parties submitted other pleadings. On January 6, 1988, the case was deemed
submitted for decision.

After a careful examination of the entire record of the case, We find the instant Petition
meritorious.

Contrary to the view espoused by the Solicitor General, this case cannot be considered moot
and academic simply because the certification election sought to be enjoined went on as
scheduled. The instant Petition is one for certiorari as a special civil action. Errors of jurisdiction

190
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

on the part of the public respondents are alleged in the Petition itself. If the public respondents
had indeed committed jurisdictional errors, the action taken by both the Med-Arbiter and the
Bureau Director will be deemed null and void ab initio. 11 And if this were so, the certification
election would, necessarily, have no legal justification. The arguments raised in the instant
Petition strike at the very heart of the validity of the certification election itself.

We come now to the main aspect of the case.

Article 243 of the Labor Code 12 enumerates who are eligible to form, join, or assist labor
organizations for purposes of collective bargaining, to wit

ART. 243. Coverage and employees' right to self-organization. All persons


employed in commercial, industrial and agricultural enterprises and in religious,
charitable, medical or educational institutions whether operating for profit or
not, shall have the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective bargaining. ....

The recognized exception to this enumeration is found in Article 245 of the same code, which
provides for the ineligibility of managerial employees to join any labor reorganization, viz-

ART. 245. Ineligibility of managerial employees to join any labor organization.


Managerial employees are not eligible to join, assist or form any labor
organization.

From the foregoing provisions of law it would appear at first blush that all the rank and file
employees of a cooperative who are not managerial employees are eligible to form, join or
assist any labor organization of their own choosing for the purpose of collective bargaining.

However, under Section 2 of P.D. No. 175, a cooperative is defined to mean "organizations
composed primarily of small producers and of consumers who voluntarily join together to form
business enterprises which they themselves own, control, and patronize." Its creation and
growth were declared as a policy of the State as a means of increasing the income and
purchasing power of the low-income sector of the population in order to attain a more
equitable distribution of income and wealth . 13 The principles governing it are:

a) Open membership"Should be voluntary and available without artificial


restriction, or any social, political, racial or religious discrimination, to all persons
who can make use of its services and are willing to accept responsibilities of
membership;"

b) Democratic control."Irrespective of the number of shares owned, each


member can only cast one vote in deciding upon the affairs of the cooperative;"

191
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

c) Limited interests to capital. "Share capital shall earn only limited interest,
the maximum rate of interest to be established by the Department of Local
Government and Community Development from time to time;" and

d) Patronage refund "Net income after the interest on capital has been paid
shall be redistributed among the members in proposition to their patronage." 14

While cooperatives may exercise the same rights and privileges given to persons, partnership
and corporations provided under existing laws, operate business enterprises of all kinds,
establish rural banks, enjoy all the privileges and incentives granted by the NACIDA Act and
other government agencies to business organizations under existing laws, to expropriate idle
urban or rural lands for its purposes, to own and dispose of properties, enter into contracts, to
sue and be sued and perform other acts necessary to pursue its objectives, 15 such cooperatives
enjoy such privileges as:

a) Exemption from income tax and sales taxes;

b) Preferential right to supply rice, corn and other grains, and other commodities produced by
them to State agencies administering price stabilization program; and

c) In appropriate cases, exemption from application of minimum wage law upon


recommendation of the Bureau of Cooperative Development subject to the approval of the
Secretary of Labor. 16

A cooperative development loan fund has been created for the development of the cooperative
movement. 17

It may be, further stated that the Department of Local Govemment and Community
Development through the Bureau of Cooperative Development is vested with full authority to
promulgate rules and regulations to cover the promotion, organization, registration, regulation
and supervision of all types of cooperatives. 18 Electric cooperatives, however, are under the
regulation and supervision of the National Electrification Ad. Administration, 19 while it is the
Monetary Board of the Central Bank that has exclusive responsibility and authority over the
banking functions and operations of cooperative banks . 20

A cooperative, therefore, is by its nature different from an ordinary business concern, being run
either by persons, partnerships, or corporations. Its owners and/or members are the ones who
run and operate the business while the others are its employees. As above stated, irrespective
of the number of shares owned by each member they are entitled to cast one vote each in
deciding upon the affairs of the cooperative. Their share capital earn limited interests. They
enjoy special privileges as exemption from income tax and sales taxes, preferential right to
supply their products to State agencies and even exemption from the minimum wages laws.

192
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

An employee therefore of such a cooperative who is a member and co-owner thereof cannot
invoke the right to collective bargaining for certainly an owner cannot bargain with himself or
his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined
that employees of cooperatives who are themselves members of the cooperative have no right
to form or join labor organizations for purposes of collective bargaining for being themselves
co-owners of the cooperative. 21

However, in so far as it involves cooperatives with employees who are not members or co-
owners thereof, certainly such employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as are enshrined in the Constitution
and existing laws of the country. 22

The questioned ruling therefore of public respondent Pura Ferrer-Calleja must be upheld
insofar as it refers to the employees of petitioner who are not members or co-owners of
petitioner. It cannot extend to the other employees who are at the same time its members or
co-owners.

The Court upholds the findings of said public respondent that no persuasive evidence has been
presented to show that two of the signatories in the petition for certification election are
managerial employees who under the law are disqualified from pursuing union activities.

WHEREFORE, the herein petition is hereby GRANTED and the resolution of public respondent
Pura Ferrer-Calleja, Director, Bureau of Labor Relations, of February 11, 1987 is hereby
MODIFIED to the effect that only the rank and file employees of petitioner who are not its
members or co-owners are entitled to self-organization, collective bargaining, and negotiations,
while the other employees who are members or co-owners thereof can not enjoy such right.

SO ORDERED.

Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

Footnotes

1 Pages 93 and 94, Rollo.

2 Pages 16 to 20, Rollo.

3 Pages 13 to 15, Rollo.

4 Pages 21 to 25, Rollo.

5 Pages 26 to 27, Rollo.

193
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

6 Pages 30 to 21, Rollo.

7 Pages 37 and 38, Rollo.

8 Pages 45 to 47, Rollo.

9 Page 37, Rollo.

10 Pages 37 and 38, Rollo.

11 Ang Lam v. Rosillosa, 86 Phil. 447 (1950).

12 Presidential Decree No. 442, as amended. The codal provisions cited herein
have been renumbered pursuant to Executive Order No. III issued by President
Aquino on December 24,1986.

13 Section 1, P.D. No. 175.

14 Section 3, supra.

15 Section 4, supra.

16 Section 5, supra.

17 Section 6, supra.

18 Section 8, supra.

19 P.D. No. 501. Section 1, amending Section 8 of P.D. No. 175.

20 P.D. No. 1283, amending P.D. No. 175.

21 Annex D to Petition, pages 26-27.

22 Section 8, Art. II, Section 3, Art. XIII, 1984 Constitution; Labor Code of the
Philippines and other related laws.

194
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

CENECO VS SEC. OF LABOR 201 SCRA 584

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 94045 September 13, 1991

CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), petitioner,


vs.
HONORABLE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, and CENECO UNION
OF RATIONAL EMPLOYEES (CURE), respondents.

Enrique S. Tabino for petitioner.

Edmundo G. Manlapao for private respondent.

REGALADO, J.:p

In this special civil action for certiorari, petitioner Central Negros Electric Cooperative, Inc.
(CENECO) seeks to annul the order 1 issued by then Acting Secretary of Labor Bienvenido E.
Laguesma on June 6, 1990, declaring the projected certification election unnecessary and
directing petitioner CENECO to continue recognizing private respondent CENECO Union of
Rational Employees (CURE) as the sole and exclusive bargaining representative of all the rank-
and-file employees of petitioner's electric cooperative for purposes of collective bargaining.

It appears from the records that on August 15, 1987, CENECO entered into a collective
bargaining agreement with CURE, a labor union representing its rank-and-file employees,
providing for a term of three years retroactive to April 1, 1987 and extending up to March 31,
1990. On December 28, 1989, CURE wrote CENECO proposing that negotiations be conducted
for a new collective bargaining agreement (CBA).

On January 18, 1990, CENECO denied CURE's request on the ground that, under applicable
decisions of the Supreme Court, employees who at the same time are members of an electric
cooperative are not entitled to form or join a union. 2

Prior to the submission of the proposal for CBA renegotiation, CURE members, in a general
assembly held on December 9, 1989, approved Resolution No. 35 whereby it was agreed that
'tall union members shall withdraw, retract, or recall the union members' membership from
Central Negros Electric Cooperative, Inc. in order to avail (of) the full benefits under the existing

195
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Collective Bargaining Agreement entered into by and between CENECO and CURE, and the
supposed benefits that our union may avail (of) under the renewed CBA. 3 This was ratified by
259 of the 362 union members. CENECO and the Department of Labor and Employment,
Bacolod District, were furnished copies of this resolution.

However, the withdrawal from membership was denied by CENECO on February 27, 1990
under Resolution No. 90 "for the reason that the basis of withdrawal is not among the grounds
covered by Board Resolution No. 5023, dated November 22, 1989 and that said request is
contrary to Board Resolution No. 5033 dated December 13, 1989, ..." 4

By reason of CENECO's refusal to renegotiate a new CBA, CURE filed a petition for direct
recognition or for certification election, supported by 282 or 72% of the 388 rank-and-file
employees in the bargaining unit of CENECO.

CENECO filed a motion to dismiss on the ground that there are legal constraints to the filing of
the certification election, citing the ruling laid down by this Court in Batangas I Electric
Cooperative Labor Union vs. Romeo A. Young, 5 (BATANGAS case) to the effect that "employees
who at the same time are members of an electric cooperative are not entitled to form or join
unions for purposes of collective bargaining agreement, for certainly an owner cannot bargain
with himself or his co-owners."

Med-Arbiter Felizardo T. Serapio issued an order, 6 granting the petition for certification
election which, in effect, was a denial of CENECO's motion to dismiss, and directing the holding
of a certification election between CURE and No Union.

CENECO appealed to the Department of Labor and Employment which issued the questioned
order modifying the aforestated order of the med-arbiter by directly certifying CURE as the
exclusive bargaining representative of the rank-and-file employees of CURE.

Hence, this petition.

Petitioner CENECO argues that respondent Secretary committed a grave abuse of discretion in
not applying to the present case the doctrine enunciated in the BATANGAS case that employees
of an electric cooperative who at the same time are members of the electric cooperative are
prohibited from forming or joining labor unions for purposes of a collective bargaining
agreement. While CENECO recognizes the employees' right to self-organization, it avers that
this is not absolute. Thus, it opines that employees of an electric cooperative who at the same
time are members thereof are not allowed to form or join labor unions for purposes of
collective bargaining. However, petitioner does not hesitate to admit that the prohibition does
not extend to employees of an electric cooperative who are not members of the cooperative.

The issue, therefore, actually involves a determination of whether or not the employees of
CENECO who withdrew their membership from the cooperative are entitled to form or join

196
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

CURE for purposes of the negotiations for a collective bargaining agreement proposed by the
latter.

As culled from the records, it is the submission of CENECO that the withdrawal from
membership in the cooperative and, as a consequence, the employees' acquisition of
membership in the union cannot be allowed for the following reasons:

1. It was made as a subterfuge or to subvert the ruling in the BATANGAS case:

2. To allow the withdrawal of the members of CENECO from the cooperative


without justifiable reason would greatly affect the objectives and goals of
petitioner as an electric cooperative;

3. The Secretary of Labor, as well as the Med-Arbiter, has no jurisdiction over the
issue of the withdrawal from membership which is vested in the National
Electrification Administration (NEA) which has direct control and supervision
over the operations of electric cooperatives; and

4. Assuming that the Secretary has jurisdiction, CURE failed to exhaust


administrative remedies by not referring the matter of membership withdrawal
to the NEA.

The petition is destitute of merit; certiorari will not lie.

We first rule on the alleged procedural infirmities affecting the instant case. CENECO avers that
the med-arbiter has no jurisdiction to rule on the issue of withdrawal from membership of its
employees in the cooperative which, it claims, is properly vested in the NEA which has control
and supervision over all electric cooperatives.

From a perusal of petitioner's motion to dismiss filed with the med-arbiter, it becomes readily
apparent that the sole basis for petitioner's motion is the illegality of the employees'
membership in respondent union despite the fact that they allegedly are still members of the
cooperative. Petitioner itself adopted the aforesaid argument in seeking the dismissal of the
petition for certification election filed with the med-arbiter, and the finding made by the latter
was merely in answer to the arguments advanced by petitioner. Hence, petitioner is deemed to
have submitted the issue of membership withdrawal from the cooperative to the jurisdiction of
the med-arbiter and it is now estopped from questioning that same jurisdiction which it
invoked in its motion to dismiss after obtaining an adverse ruling thereon.

Under Article 256 of the Labor Code, to have a valid certification election at least a majority of
all eligible voters in the unit must have cast their votes. It is apparent that incidental to the
power of the med-arbiter to hear and decide representation cases is the power to determine
who the eligible voters are. In so doing, it is axiomatic that the med-arbiter should determine
the legality of the employees' membership in the union. In the case at bar, it obviously becomes

197
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

necessary to consider first the propriety of the employees' membership withdrawal from the
cooperative before a certification election can be had.

Lastly, it is petitioner herein who is actually questioning the propriety of the withdrawal of its
members from the cooperative. Petitioner could have brought the matter before the NEA if it
wanted to and. if such remedy had really been available, and there is nothing to prevent it from
doing so. It would be absurd to fault the employees for the neglect or laxity of petitioner in
protecting its own interests.

The argument of CENECO that the withdrawal was merely to subvert the ruling of this Court in
the BATANGAS case is without merit. The case referred to merely declared that employees who
are at the same time members of the cooperative cannot join labor unions for purposes of
collective bargaining. However, nowhere in said case is it stated that member-employees are
prohibited from withdrawing their membership in the cooperative in order to join a labor
union.

As discussed by the Solicitor General, Article I, Section 9 of the Articles of Incorporation and By-
Laws of CENECO provides that "any member may withdraw from membership upon compliance
with such uniform terms and conditions as the Board may prescribe." The same section
provides that upon withdrawal, the member is merely required to surrender his membership
certificate and he is to be refunded his membership fee less any obligation that he has with the
cooperative. There appears to be no other condition or requirement imposed upon a
withdrawing member. Hence, there is no just cause for petitioner's denial of the withdrawal
from membership of its employees who are also members of the union. 7

The alleged board resolutions relied upon by petitioner in denying the withdrawal of the
members concerned were never presented nor their contents disclosed either before the med-
arbiter or the Secretary of Labor if only to prove the ratiocination for said denial. Furthermore,
CENECO never averred non-compliance with the terms and conditions for withdrawal, if any. It
appears that the Articles of Incorporation of CENECO do not provide any ground for withdrawal
from membership which accordingly gives rise to the presumption that the same may be done
at any time and for whatever reason. In addition, membership in the cooperative is on a
voluntary basis. Hence, withdrawal therefrom cannot be restricted unnecessarily. The right to
join an organization necessarily includes the equivalent right not to join the same.

The right of the employees to self-organization is a compelling reason why their withdrawal
from the cooperative must be allowed. As pointed out by CURE, the resignation of the member-
employees is an expression of their preference for union membership over that of membership
in the cooperative. The avowed policy of the State to afford fall protection to labor and to
promote the primacy of free collective bargaining mandates that the employees' right to form
and join unions for purposes of collective bargaining be accorded the highest consideration.

Membership in an electric cooperative which merely vests in the member a right to vote during
the annual meeting becomes too trivial and insubstantial vis-a-vis the primordial and more

198
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

important constitutional right of an employee to join a union of his choice. Besides, the 390
employees of CENECO, some of whom have never been members of the cooperative, represent
a very small percentage of the cooperative's total membership of 44,000. It is inconceivable
how the withdrawal of a negligible number of members could adversely affect the business
concerns and operations of CENECO.

We rule, however, that the direct certification ordered by respondent Secretary is not proper.
By virtue of Executive Order No. 111, which became effective on March 4, 1987, the direct
certification originally allowed under Article 257 of the Labor Code has apparently been
discontinued as a method of selecting the exclusive bargaining agent of the workers. This
amendment affirms the superiority of the certification election over the direct certification
which is no longer available now under the change in said provision. 8

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

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

While there may be some factual variances, the rationale therein is applicable to the present
case in the sense that it is not alone sufficient that a union has the support of the majority.
What is equally important is that everyone be given a democratic space in the bargaining unit
concerned. The most effective way of determining which labor organization can truly represent
the working force is by certification election. 10

WHEREFORE, the questioned order for the direct certification of respondent CURE as the
bargaining representative of the employees of petitioner CENECO is hereby ANNULLED and SET
ASIDE. The med-arbiter is hereby ordered to conduct a certification election among the rank-
and- file employees of CENECO with CURE and No Union as the choices therein.

SO ORDERED.

199
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Melencio-Herrera (Chairperson), Paras and Padilla, JJ., concur.

Sarmiento, J., is on leave.

Footnotes

1 Annex A, Petition; Rollo, 20.

2 Annex J., Id., Ibid., 108.

3 Annex 4, Comment of CURE; Ibid., 139.

4 Annex I, Petition; Ibid., 107.

5 167 SCRA 136 (1988).

6 Annex F, Id.; Ibid., 80.

7 Rollo, 167-170.

8 National Association of Free Trade Unions (NAFTU-TUCP) vs. Bureau of Labor


Relations (BLR) et al., 164 SCRA 12 (1988).

9 Colgate Palmolive Philippines, Inc. vs. Ople, et al., 163 SCRA 323 (1988).

10 Associated Labor Unions (ALU) vs. Ferrer-Calleja, etc., et al., 179 SCRA (1989).

200
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

MERALCO VS SEC. OF LABOR 197 SCRA 275

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. 91902 May 20, 1991

MANILA ELECTRIC COMPANY, petitioner,


vs.
THE HON. SECRETARY OF LABOR AND EMPLOYMENT, STAFF AND TECHNICAL EMPLOYEES
ASSOCIATION OF MERALCO, and FIRST LINE ASSOCIATION OF MERALCO SUPERVISORY
EMPLOYEES,respondents.

Rolando R. Arbues, Atilano S. Guevarra, Jr. and Gil S. San Diego for petitioner.
The Solicitor General for public respondent.
Felipe Gojar for STEAM-PCWF.
Wakay & Wakay Legal Services for First Line Association of Meralco Supervisory Employees.

MEDIALDEA, J.:

This petition seeks to review the Resolution of respondent Secretary of Labor and Employment
Franklin M. Drilon dated November 3, 1989 which affirmed an Order of Med-Arbiter Renato P.
Parungo (Case No. NCR-O-D-M-1-70), directing the holding of a certification election among
certain employees of petitioner Manila Electric Company (hereafter "MERALCO") as well as the
Order dated January 16, 1990 which denied the Motion for Reconsideration of MERALCO.

The facts are as follows:

On November 22, 1988, the Staff and Technical Employees Association of MERALCO (hereafter
"STEAM-PCWF") a labor organization of staff and technical employees of MERALCO, filed a
petition for certification election, seeking to represent regular employees of MERALCO who are:
(a) non-managerial employees with Pay Grades VII and above; (b) non-managerial employees in
the Patrol Division, Treasury Security Services Section, Secretaries who are automatically
removed from the bargaining unit; and (c) employees within the rank and file unit who are
automatically disqualified from becoming union members of any organization within the same
bargaining unit.

201
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Among others, the petition alleged that "while there exists a duly-organized union for rank and
file employees in Pay Grade I-VI, which is the MERALCO Employees and Worker's Association
(MEWA) which holds a valid CBA for the rank and file employees, 1 there is no other labor
organization except STEAM-PCWF claiming to represent the MERALCO employees.

The petition was premised on the exclusion/disqualification of certain MERALCO employees


pursuant to Art. I, Secs. 2 and 3 of the existing MEWA CBA as follows:

ARTICLE I

SCOPE

xxx xxx xxx

Sec. 2. Excluded from the appropriate bargaining unit and therefore outside the scope
of this Agreement are:

(a) Employees in Patrol Division;

(b) Employees in Treasury Security Services Section;

(c) Managerial Employees; and

(d) Secretaries.

Any member of the Union who may now or hereafter be assigned or transferred to
Patrol Division or Treasury Security Services Section, or becomes Managerial Employee
or a Secretary, shall be considered automatically removed from the bargaining unit and
excluded from the coverage of this agreement. He shall thereby likewise be deemed
automatically to have ceased to be member of the union, and shall desist from further
engaging in union activity of any kind.

Sec. 3. Regular rank-and-file employees in the organization elements herein below listed
shall be covered within the bargaining unit, but shall be automatically disqualified from
becoming union members:

1. Office of the Corporate Secretary

2. Corporate Staff Services Department

3. Managerial Payroll Office

4. Legal Service Department

202
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

5. Labor Relations Division

6. Personnel Administration Division

7. Manpower Planning & Research Division

8. Computer Services Department

9. Financial Planning & Control Department

10. Treasury Department, except Cash Section

11. General Accounting Section

xxx xxx xxx

(p. 19, Rollo)

MERALCO moved for the dismissal of the petition on the following grounds:

The employees sought to be represented by petitioner are either 1) managerial who are
prohibited by law from forming or joining supervisory union; 2) security services
personnel who are prohibited from joining or assisting the rank-and-file union; 3)
secretaries who do not consent to the petitioner's representation and whom petitioner
can not represent; and 4) rank-and-file employees represented by the certified or duly
recognized bargaining representative of the only rank-and-file bargaining unit in the
company, the Meralco Employees Workers Association (MEWA), in accordance with the
existing Collective Bargaining Agreement with the latter.

II

The petition for certification election will disturb the administration of the existing
Collective Bargaining Agreement in violation of Art. 232 of the Labor Code.

III

The petition itself shows that it is not supported by the written consent of at least
twenty percent (20%) of the alleged 2,500 employees sought to be represented.
(Resolution, Sec. of Labor, pp. 223-224, Rollo)

Before Med-Arbiter R. Parungo, MERALCO contended that employees from Pay Grades VII and
above are classified as managerial employees who, under the law, are prohibited from forming,

203
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

joining or assisting a labor organization of the rank and file. As regards those in the Patrol
Division and Treasury Security Service Section, MERALCO maintains that since these employees
are tasked with providing security to the company, they are not eligible to join the rank and file
bargaining unit, pursuant to Sec. 2(c), Rule V, Book V of the then Implementing Rules and
Regulations of the Labor Code (1988) which reads as follows:

Sec. 2. Who may file petition. The employer or any legitimate labor organization may
file the petition.

The petition, when filed by a legitimate labor organization, shall contain, among others:

xxx xxx xxx

(c) description of the bargaining unit which shall be the employer unit unless
circumstances otherwise require, and provided, further: that the appropriate bargaining
unit of the rank and file employees shall not include security guards (As amended by
Sec. 6, Implementing Rules of EO 111)

xxx xxx xxx

(p. 111, Labor Code, 1988 Ed.)

As regards those rank and file employees enumerated in Sec. 3, Art. I, MERALCO contends that
since they are already beneficiaries of the MEWA-CBA, they may not be treated as a separate
and distinct appropriate bargaining unit.

MERALCO raised the same argument with respect to employees sought to be represented by
STEAM-PCWF, claiming that these were already covered by the MEWA-CBA.

On March 15, 1989, the Med-Arbiter ruled that having been excluded from the existing
Collective Bargaining Agreement for rank and file employees, these employees have the right to
form a union of their own, except those employees performing managerial functions. With
respect to those employees who had resented their alleged involuntary membership in the
existing CBA, the Med-Arbiter stated that the holding of a certification election would allow
them to fully translate their sentiment on the matter, and thus directed the holding of a
certification election. The dispositive portion of the Resolution provides as follows:

WHEREFORE, premises considered, a certification election is hereby ordered conducted


among the regular rank-and-file employees of MERALCO to wit:

1. Non-managerial employees with Pay Grades VII and above;

2. Non-managerial employees of Patrol Division, Treasury Security Services Section and


Secretaries; and

204
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

3. Employees prohibited from actively participating as members of the union.

within 20 days from receipt hereof, subject to the usual pre-election conference with
the following choices:

1. Staff and Technical, Employees Association of MERALCO (STEAM-PCWF);

2. No Union.

SO ORDERED. (p. 222, Rollo)

On April 4, 1989, MERALCO appealed, contending that "until such time that a judicial finding is
made to the effect that they are not managerial employee, STEAM-PCWF cannot represent
employees from Pay Grades VII and above, additionally reiterating the same reasons they had
advanced for disqualifying respondent STEAM-PCWF.

On April 7, 1989, MEWA filed an appeal-in-intervention, submitting as follows:

A. The Order of the Med-Arbiter is null and void for being in violation of Article 245 of
the Labor Code;

B. The Order of the Med-Arbiter violates Article 232 of the Labor Code; and

C. The Order is invalid because the bargaining unit it delineated is not an appropriated
(sic) bargaining unit.

On May 4, 1989, STEAM-PCWF opposed the appeal-in-intervention.

With the enactment of RA 6715 and the rules and regulations implementing the same, STEAM-
PCWF renounced its representation of the employees in Patrol Division, Treasury Security
Services Section and rank-and-file employees in Pay Grades I-VI.

On September 13, 1989, the First Line Association of Meralco

Supervisory Employees. (hereafter FLAMES) filed a similar petition (NCR-OD-M-9-731-89)


seeking to represent those employees with Pay Grades VII to XIV, since "there is no other
supervisory union at MERALCO." (p. 266,Rollo). The petition was consolidated with that of
STEAM-PCWF.

On November 3, 1989, the Secretary of Labor affirmed with modification, the assailed order of
the Med-Arbiter, disposing as follows:

WHEREFORE, premises considered, the Order appealed from is hereby affirmed but
modified as far as the employees covered by Section 3, Article I of the exist CBA in the

205
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Company are concerned. Said employees shall remain in the unit of the rank-and-file
already existing and may exercise their right to self organization as above enunciated.

Further, the First Line Association of Meralco Supervisory Employees (FLAMES) is


included as among the choices in the certification election.

Let, therefore, the pertinent records of the case be immediately forwarded to the Office
of origin for the conduct of the certification election.

SO ORDERED. (p. 7, Rollo)

MERALCO's motion for reconsideration was denied on January 16, 1990.

On February 9, 1990, MERALCO filed this petition, premised on the following ground:

RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF DISCRETION AND/OR IN


EXCESS OF JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN RULING THAT:

I. ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE ESTABLISHED INDEPENDENT,


DISTINCT AND SEPARATE FROM THE EXISTING RANK-AND-FILE BARGAINING UNIT.

II. THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE RANK-AND-FILE EMPLOYEES.

III. THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED TOGETHER WITH THE
RANK-AND-FILE UNION AND/OR THE SUPERVISORY UNION. (p. 8, Rollo)

On February 26, 1990, We issued a temporary restraining order (TRO) against the
implementation of the disputed resolution.

In its petition, MERALCO has relented and recognized respondents STEAM-PCWF and FLAMES'
desired representation of supervisory employees from Grades VII up. However, it believes that
all that the Secretary of Labor has to do is to establish a demarcation line between supervisory
and managerial rank, and not to classify outright the group of employees represented by
STEAM-PCWF and FLAMES as rank and file employees.

In questioning the Secretary of Labor's directive allowing security guards (Treasury/Patrol


Services Section) to be represented by respondents, MERALCO contends that this contravenes
the provisions of the recently passed RA 6715 and its implementing rules (specifically par. 2,
Sec. 1, Rule II, Book V) which disqualifies supervisory employees and security guards from
membership in a labor organization of the rank and file (p. 11, Rollo).

The Secretary of Labor's Resolution was obviously premised on the provisions of Art. 212, then
par. (k), of the 1988 Labor Code defining "managerial" and "rank and file" employees, the law
then in force when the complaint was filed. At the time, only two groups of employees were

206
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

recognized, the managerial and rank and file. This explains the absence of evidence on job
descriptions on who would be classified managerial employees. It is perhaps also for this reason
why the Secretary of Labor limited his classification of the Meralco employees belonging to Pay
Grades VII and up, to only two groups, the managerial and rank and file.

However, pursuant to the Department of Labor's goal of strenghthening the constitutional right
of workers to self-organization, RA 6715 was subsequently passed which reorganized the
employee-ranks by including a third group, or the supervisory employees, and laying down the
distinction between supervisory employees and those of managerial ranks in Art. 212,
renumbered par. [m], depending on whether the employee concerned has the power to lay
down and execute management policies, in the case of managerial employees, or merely to
recommend them, in case of supervisory employees.

In this petition, MERALCO has admitted that the employees belonging to Pay Grades VII and up
are supervisory (p. 10, Rollo). The records also show that STEAM-PCWF had "renounced its
representation of the employees in Patrol Division, Treasury Security Service Section and rank
and file employees in Pay Grades I-VI" (p. 6, Rollo); while FLAMES, on the other hand,
had limited its representation to employees belonging to Pay Grades VII-XIV,generally accepted
as supervisory employees, as follows:

It must be emphasized that private respondent First Line Association of Meralco


Supervisory Employees seeks to represent only the Supervisory Employees with Pay
Grades VII to XIV.

Supervisory Employees with Pay Grades VII to XIV are not managerial employees. In fact
the petition itself of petitioner Manila Electric Company on page 9, paragraph 3 of the
petition stated as follows, to wit:

There was no need for petitioner to prove that these employees are not rank-
and-file. As adverted to above, the private respondents admit that these are not
the rank-and-file but the supervisory employees, whom they seek to represent.
What needs to be established is the rank where supervisory ends and managerial
begins.

and First Line Association of Meralco Supervisory Employees herein states that Pay
Grades VII to XIV are not managerial employees. In fact, although employees with Pay
Grade XV carry the Rank of Department Managers, these employees only enjoys (sic)
the Rank Manager but their recommendatory powers are subject to evaluation, review
and final action by the department heads and other higher executives of the company.
(FLAMES' Memorandum, p. 305, Rollo)

Based on the foregoing, it is clear that the employees from Pay Grades VII and up have been
recognized and accepted as supervisory. On the other hand, those employees who have been
automatically disqualified have been directed by the Secretary of Labor to remain in the

207
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

existing labor organization for the rank and file, (the condition in the CBA deemed as not having
been written into the contract, as unduly restrictive of an employee's exercise of the right to
self-organization). We shall discuss the rights of the excluded employees (or those covered by
Sec. 2, Art. I, MEWA-CBA later.

Anent the instant petition therefore, STEAM-PCWF, and FLAMES would therefore represent
supervisory employees only. In this regard, the authority given by the Secretary of Labor for the
establishment of two labor organizations for the rank and file will have to be disregarded since
We hereby uphold certification elections only for supervisory employees from Pay Grade VII
and up, with STEAM-PCWF and FLAMES as choices.

As to the alleged failure of the Secretary of Labor to establish a demarcation line for purposes
of segregating the supervisory from the managerial employees, the required parameter is really
not necessary since the law itself, Art. 212-m, (as amended by Sec. 4 of RA 6715) has already
laid down the corresponding guidelines:

Art. 212. Definitions. . . .

(m) "Managerial employee" is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. Supervisory employees are those who, in the
interest of the employer, effectively recommend such managerial actions if the exercise
of such authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of to Book.

In his resolution, the Secretary of Labor further elaborated:

. . . Thus, the determinative factor in classifying an employee as managerial, supervisory


or rank-and-file is the nature of the work of the employee concerned.

In National Waterworks and Sewerage Authority vs. National Waterworks and Sewerage
Authority Consolidated Unions (11 SCRA 766) the Supreme Court had the occasion to
come out with an enlightening dissertation of the nature of the work of a managerial
employees as follows:

. . . that the employee's primary duty consists of the management of the


establishment or of a customarily recognized department or subdivision thereof,
that he customarily and regularly directs the work of other employees therein,
that he has the authority to hire or discharge other employees or that his
suggestions and recommendations as to the hiring and discharging and or to the
advancement and promotion or any other change of status of other employees
are given particular weight, that he customarily and regularly exercises
discretionary powers . . . (56 CJS, pp. 666-668. (p. 226, Rollo)

208
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

We shall now discuss the rights of the security guards to self-organize. MERALCO has
questioned the legality of allowing them to join either the rank and file or the
supervisory union, claiming that this is a violation of par. 2, Sec. 1, Rule II, Book V of the
Implementing Rules of RA 6715, which states as follows:

Sec 1. Who may join unions. . . .

xxx xxx xxx

Supervisory employees and security guards shall not be eligible for membership
in a labor organization of the rank-and-file employees but may join, assist or
form separate labor organizations of their own; . . .

xxx xxx xxx

(emphasis ours)

Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c), Rule V, also of Book V of the
implementing rules of RA 6715:

Rule V.
REPRESENTATION CASES AND
INTERNAL-UNION CONFLICTS

Sec. 1. . . .

Sec. 2. Who may file.Any legitimate labor organization or the employer, when
requested to bargain collectively, may file the petition.

The petition, when filed by a legitimate labor-organization shall contain, among


others:

(a) . . .

(b) . . .

(c) description of the bargaining unit which shall be the employer unit unless
circumstances otherwise require; and provided further, that the appropriate
bargaining unit of the rank-and-file employees shall not include supervisory
employees and/or security guards;

xxx xxx xxx

(emphasis ours)

209
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Both rules, barring security guards from joining a rank and file organization, appear to have
been carried over from the old rules which implemented then Art. 245 of the Labor Code, and
which provided thus:

Art. 245. Ineligibility of security personnel to join any labor organization.Security


guards and other personnel employed for the protection and security of the person,
properties and premises of the employer shall not be eligible for membership in any
labor organization.

On December 24, 1986, Pres. Corazon C. Aquino issued E.O. No. 111 which eliminated the
above-cited provision on the disqualification of security guards. What was retained was the
disqualification of managerial employees, renumbered as Art. 245 (previously Art. 246), as
follows:

Art. 245. Ineligibility of managerial employees to joint any labor organization.


Managerial employees are not eligible to join, assist or form any labor organization.

With the elimination, security guards were thus free to join a rank and file organization.

On March 2, 1989, the present Congress passed RA 6715. 2 Section 18 thereof amended Art.
245, to read as follows:

Art. 245. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees.Managerial employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be eligible for membership in a
labor organization of the rank-and-file employees but may join, assist, or form separate
labor organizations of their own. (emphasis ours)

As will be noted, the second sentence of Art. 245 embodies an amendment


disqualifying supervisory employeesfrom membership in a labor organization of the rank-and-
file employees. It does not include security guards in the disqualification.

The implementing rules of RA 6715, therefore, insofar as they disqualify security guards from
joining a rank and file organization are null and void, for being not germane to the object and
purposes of EO 111 and RA 6715 upon which such rules purportedly derive statutory moorings.
In Shell Philippines, Inc. vs. Central Bank, G.R. No. 51353, June 27, 1988, 162 SCRA 628, We
stated:

The rule-making power must be confined to details for regulating the mode or
proceeding to carry into effect the law as it has been enacted. The power cannot be
extended to amending or expanding the statutory requirements or to embrace matters
not covered by the statute. Rules that subvert the statute cannot be sanctioned.
(citing University of Sto. Tomas vs. Board of Tax Appeals, 93 Phil. 376).

210
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

While therefore under the old rules, security guards were barred from joining a labor
organization of the rank and file, under RA 6715, they may now freely join a labor organization
of the rank and file or that of the supervisory union, depending on their rank. By
accommodating supervisory employees, the Secretary of Labor must likewise apply the
provisions of RA 6715 to security guards by favorably allowing them free access to a labor
organization, whether rank and file or supervisory, in recognition of their constitutional right to
self-organization.

We are aware however of possible consequences in the implementation of the law in allowing
security personnel to join labor unions within the company they serve. The law is apt to
produce divided loyalties in the faithful performance of their duties. Economic reasons would
present the employees concerned with the temptation to subordinate their duties to the
allegiance they owe the union of which they are members, aware as they are that it is usually
union action that obtains for them increased pecuniary benefits.

Thus, in the event of a strike declared by their union, security personnel may neglect or
outrightly abandon their duties, such as protection of property of their employer and the
persons of its officials and employees, the control of access to the employer's premises, and the
maintenance of order in the event of emergencies and untoward incidents.

It is hoped that the corresponding amendatory and/or suppletory laws be passed by Congress
to avoid possible conflict of interest in security personnel.1wphi1

ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM with modification the Resolution
of the Secretary of Labor dated November 3, 1989 upholding an employee's right to self-
organization. A certification election is hereby ordered conducted among supervisory
employees of MERALCO, belonging to Pay Grades VII and above, using as guideliness an
employee's power to either recommend or execute management policies, pursuant to Art. 212
(m), of the Labor Code, as amended by Sec. 4 of RA 6715, with respondents STEAM-PCWF and
FLAMES as choices.

Employees of the Patrol Division, Treasury Security Services Section and Secretaries may freely
join either the labor organization of the rank and file or that of the supervisory union depending
on their employee rank. Disqualified employees covered by Sec. 3, Art. I of the MEWA-CBA,
shall remain with the existing labor organization of the rank and file, pursuant to the Secretary
of Labor's directive:

By the parties' own agreement, they find the bargaining unit, which includes the
positions enumerated in Section 3, Article I of their CBA, appropriate for purposes of
collective bargaining. The composition of the bargaining unit should be left to the
agreement of the parties, and unless there are legal infirmities in such agreement, this
Office will not substitute its judgment for that of the parties. Consistent with the story
of collective bargaining in the company, the membership of said group of employees in
the existing rank-and-file unit should continue, for it will enhance stability in that unit

211
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

already well establish. However, we cannot approve of the condition set in Section 3,
Article I of the CBA that the employees covered are automatically disqualified from
becoming union members. The condition unduly restricts the exercise of the right to self
organization by the employees in question. It is contrary to law and public policy and,
therefore, should be considered to have not been written into the contract. Accordingly,
the option to join or not to join the union should be left entirely to the employees
themselves. (p. 229, Rollo)

The Temporary Restraining Order (TRO) issued on February 26, 1990 is hereby LIFTED. Costs
against petitioner.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento, Grio-Aquino, Regalado and Davide, Jr., JJ., concur.

Footnotes
1
This CBA expired on November 30, 1989. There is an on-going CBA negotiation with
National Capitol Region, Dole, per Comment of FLAMES, dated March 6, 1990, p.
248, Rollo.
2
Published in two newspapers, the law took effect on March 21, 1989.

212
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

COLGATE-PALMOLIVE VS OPLE

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 73681 June 30, 1988

COLGATE PALMOLIVE PHILIPPINES, Inc., petitioners,


vs.
HON. BLAS F. OPLE, COLGATE PALMOLIVE SALES UNION, respondents.

PARAS, J.:

Before Us is a Petition for certiorari seeking to set aside and annul the Order of respondent
Minister of Labor and Employment (MOLE) directly certifying private respondent as the
recognized and duly-authorized collective bargaining agent for petitioner's sales force and
ordering the reinstatement of three employees of petitioner.

Acting on the petition for certiorari with prayer for temporary restraining order, this Court
issued a Temporary Restraining Order enjoining respondents from enforcing and/or carrying
out the assailed order.

The antecedent facts are as follows:

On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of Labor
Relations (BLR) on ground of unfair labor practice consisting of alleged refusal to bargain,
dismissal of union officers/members; and coercing employees to retract their membership with
the union and restraining non-union members from joining the union.

After efforts at amicable settlement proved unavailing, the Office of the MOLE, upon petition of
petitioner assumed jurisdiction over the dispute pursuant to Article 264 (g) of the Labor Code,
Thereafter the case was captioned AJML-3-142-85, BLR-3-86-85 "In Re: Assumption of
Jurisdiction over the Labor Dispute at Colgate Palmolive Philippines, Inc." In its position paper,
petitioner pointed out that

(a) There is no legal basis for the charge that the company refused to bargain
collectively with the union considering that the alleged union is not the certified
agent of the company salesmen;

213
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

(b) The union's status as a legitimate labor organization is still under question
because on 6 March 1985, a certain Monchito Rosales informed the BLR that an
overwhelming majority of the salesmen are not in favor of the Notice of Strike
allegedly filed by the Union (Annex "C");

(c) Upon verification of the records of the Ministry of Labor and Employment, it
appeared that a petition for cancellation of the registration of the alleged union
was filed by Monchito Rosales on behalf of certain salesmen of the company
who are obviously against the formation of the Colgate Palmolive Sales Labor
Union which is supposed to represent them;

(d) The preventive suspensions of salesmen Peregrino Sayson, Salvador


Reynante and Cornelio Mejia, and their eventual dismissal from the employ of
the company were carried out pursuant to the inherent right and prerogative of
management to discipline erring employees; that based on the preliminary
investigation conducted by the company, there appeared substantial grounds to
believe that Sayson, Reynante and Mejia violated company rules and regulations
necessitating their suspension pending further investigation of their respective
cases;

(e) It was also ascertained that the company sustained damages resulting from
the infractions committed by the three salesmen, and that the final results of the
investigation fully convinced the company of the existence of just causes for the
dismissal of the three salesmen;

(f) The formation of the union and the membership therein of Sayson, Reynante
and Mejia were not in any manner connected with the company's decision to
dismiss the three; that the fact that their dismissal came at a time when the
alleged union was being formed was purely coincidental;

(g) The union's charge therefore, that the membership in the union and refusal
to retract precipitated their dismissal was totally false and amounted to a
malicious imputation of union busting;

(h) The company never coerced or attempted to coerce employees, much less
interferred in the exercise of their right to self-organization; the company never
thwarted nor tried to defeat or frustrate the employees' right to form their union
in pursuit of their collective interest, as long as that right is exercised within the
limits prescribed by law; in fact, there are at present two unions representing the
rank and file employees of the company-the factory workers who are covered by
a CBA which expired on 31 October 1985 (which was renewed on May 31, 1985)
and are represented by Colgate Palmolive Employees Union (PAFLU); whereas,
the salaried employees are covered by a CBA which will expire on 31 May 1986

214
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

represented by Philippine Association of Free Labor Union (PAFLU)-CPPI Office


Chapter. (pp. 4-6, Rollo)

The respondent Union, on the other hand, in its position paper, reiterated the issue in its Notice
to Strike, alleging that it was duly registered with the Bureau of Labor Relations under Registry
No. 10312-LC with a total membership of 87 regular salesmen (nationwide) out of 117 regular
salesmen presently employed by the company as of November 30, 1985 and that since the
registration of the Union up to the present, more than 2/3 of the total salesmen employed are
already members of the Union, leaving no doubt that the true sentiment of the salesmen was
to form and organize the Colgate-Palmolive Salesmen Union. The Union further alleged that the
company is unreasonably delaying the recognition of the union because when it was informed
of the organization of the union, and when presented with a set of proposals for a collective
bargaining agreement, the company took an adversarial stance by secretly distributing a
"survey sheet on union membership" to newly hired salesmen from the Visayas, Mindanao and
Metro Manila areas, purposely avoiding regular salesmen who are now members of the union;
that in the accomplishment of the form, District Sales Managers, and Sales Supervisors coerced
salesmen from the Visayas and Mindanao by requiring them to fill up and/or accomplish said
form by checking answers which were adverse to the union; that with a handful of the survey
sheets secured by management through coercion, it now would like to claim that all salesmen
are not in favor of the organization of the union, which acts are clear manifestations of unfair
labor practices.

On August 9,1985, respondent Minister rendered a decision which:

(a) found no merit in the Union's Complaint for unfair labor practice allegedly
committed by petitioner as regards the alleged refusal of petitioner to negotiate
with the Union, and the secret distribution of survey sheets allegedly intended to
discourage unionism,

(b) found the three salesmen, Peregrino Sayson, Salvador Reynante & Cornelio
Mejia "not without fault" and that "the company 1 has grounds to dismiss above
named salesmen"

and at the same time respondent Minister directly certified the respondent Union as the
collective bargaining agent for the sales force in petitioner company and ordered the
reinstatement of the three salesmen to the company on the ground that the employees were
first offenders.

Petitioner filed a Motion for Reconsideration which was denied by respondent Minister in his
assailed Order, dated December 27, 1985. Petitioner now comes to Us with the following:

Assignment of Errors

215
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

Respondent Minister committed a grave abuse of discretion when he directly


certified the Union solely on the basis of the latter's self-serving assertion that it
enjoys the support of the majority of the sales force in petitioner's company.

II

Respondent Minister committed a grave abuse of discretion when,


notwithstanding his very own finding that there was just cause for the dismissal
of the three (3) salesmen, he nevertheless ordered their reinstatement. (pp. 7-8,
Rollo)

Petitioner concedes that respondent Minister has the power to decide a labor dispute in a case
assumed by him under Art. 264 (g) of the Labor Code but this power was exceeded when he
certified respondent Union as the exclusive bargaining agent of the company's salesmen since
this is not a representation proceeding as described under the Labor Code. Moreover the Union
did not pray for certification but merely for a finding of unfair labor practice imputed to
petitioner-company.

The petition merits our consideration. The procedure for a representation case is outlined in
Arts. 257-260 of the Labor Code, in relation to the provisions on cancellation of a Union
registration under Arts. 239-240 thereof, the main purpose of which is to aid in ascertaining
majority representation. The requirements under the law, specifically Secs. 2, 5, and 6 of Rule
V, Book V, of the Rules Implementing the Labor Code are all calculated to ensure that the
certified bargaining representative is the true choice of the employees against all contenders.
The Constitutional mandate that the State shall "assure the rights of the workers to self-
organization, collective bargaining, security of tenure and just and humane conditions of work,"
should be achieved under a system of law such as the aforementioned provisions of the
pertinent statutes. When an overzealous official by-passes the law on the pretext of retaining a
laudable objective, the intendment or purpose of the law will lose its meaning as the law itself
is disregarded. When respondent Minister directly certified the Union, he in fact disregarded
this procedure and its legal requirements. There was therefore failure to determine with legal
certainty whether the Union indeed enjoyed majority representation. Contrary to the
respondent Minister's observation, the holding of a certification election at the proper time is
not necessarily a mere formality as there was a compelling legal reason not to directly and
unilaterally certify a union whose legitimacy is precisely the object of litigation in a pending
cancellation case filed by certain "concerned salesmen," who also claim majority status. Even in
a case where a union has filed a petition for certification elections, the mere fact that no
opposition is made does not warrant a direct certification. More so as in the case at bar, when
the records of the suit show that the required proof was not presented in an appropriate
proceeding and that the basis of the direct certification was the Union's mere allegation in its
position paper that it has 87 out of 117 regular salesmen. In other words, respondent Minister
merely relied on the self-serving assertion of the respondent Union that it enjoyed the support
of the majority of the salesmen, without subjecting such assertion to the test of competing
claims. As pointed out by petitioner in its petition, what the respondent Minister achieved in

216
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

rendering the assailed orders was to make a mockery of the procedure provided under the law
for representation cases because:

(a) He has created havoc by impliedly establishing a procedural short-cut to


obtaining a direct certification-by merely filing a notice of strike.

(b) By creating such a short-cut, he has officially encouraged disrespect for the
law.

(c) By directly certifying a Union without sufficient proof of majority


representation, he has in effect arrogated unto himself the right, vested
naturally in the employees, to choose their collective bargaining representative.

(d) He has in effect imposed upon the petitioner the obligation to negotiate with
a union whose majority representation is under serious question. This is highly
irregular because while the Union enjoys the blessing of the Minister, it does not
enjoy the blessing of the employees. Petitioner is therefore under threat of
being held liable for refusing to negotiate with a union whose right to bargaining
status has not been legally established. (pp. 9-10, Rollo)

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt
on their part is not in conformity with law. Reinstatement is simply incompatible with a finding
of guilt. Where the totality of the evidence was sufficient to warrant the dismissal of the
employees the law warrants their dismissal without making any distinction between a first
offender and a habitual delinquent. Under the law, respondent Minister is duly mandated to
equally protect and respect not only the labor or workers' side but also the management
and/or employers' side. The law, in protecting the rights of the laborer, authorizes neither
oppression nor self-destruction of the employer. To order the reinstatement of the erring
employees namely, Mejia, Sayson and Reynante would in effect encourage unequal protection
of the laws as a managerial employee of petitioner company involved in the same incident was
already dismissed and was not ordered to be reinstated. As stated by Us in the case of San
Miguel Brewery vs. National Labor Union, 2 "an employer cannot legally be compelled to
continue with the employment of a person who admittedly was guilty of misfeasance or
malfeasance towards his employer, and whose continuance in the service of the latter is
patently inimical to his interest."

In the subject order, respondent Minister cited a cases 3 implying that "the proximity of the
dismissal of the employees to the assumption order created a doubt as to whether their
dismissal was really for just cause or due to their activities." 4

This is of no moment for the following reasons:

(a) Respondent Minister has still maintained in his assailed order that a just cause existed to
justify the dismissal of the employees.

217
MAS
WMSU LLB 2A 2015
Atty. Plagata
Labor Relations

(b) Respondent Minister has not made any finding substantiated by evidence that the
employees were dismissed because of their union activities.

WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the Order of the
respondent Minister, dated December 27, 1985 for grave abuse of discretion. However, in view
of the fact that the dismissed employees are first offenders, petitioner is hereby ordered to give
them separation pay. The temporary restraining order is hereby made permanent.

SO ORDERED.

Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

Footnotes

1 Petitioner company.

2 97 Phil. 378.

3 Oceanic Commercial Employees and Labor Assn. v. Oceanic Commercial, Inc.,


case No. 5787 UCP-CIR, Acting Secretary of Labor, December 9,1978.

4 P. 13, Rollo.

218
MAS