G.R. No. 179652. March 6, 2012.

PEOPLE'S BROADCASTING SERVICE (BOMBO

RADYO PHILS., INC.), petitioner, vs. THE
SECRETARY OF THE DEPARTMENT OF LABOR
AND EMPLOYMENT, THE REGIONAL DIRECTOR,
DOLE REGION VII, and JANDELEON
JUEZAN, respondents.

RESOLUTION

VELASCO, JR., J : p

In a Petition for Certiorari under Rule 65,

petitioner People's Broadcasting Service, Inc. (Bombo Radyo
Phils., Inc.) questioned the Decision and Resolution of the Court
of Appeals (CA) dated October 26, 2006 and June 26, 2007,
respectively, in C.A. G.R. CEB-SP No. 00855. cSaCDT

Private respondent Jandeleon Juezan filed a complaint against

petitioner with the Department of Labor and Employment
(DOLE) Regional Office No. VII, Cebu City, for illegal deduction,
nonpayment of service incentive leave, 13th month pay,
premium pay for holiday and rest day and illegal diminution of
benefits, delayed payment of wages and noncoverage of SSS,
PAG-IBIG and Philhealth. 1 After the conduct of summary
investigations, and after the parties submitted their position
papers, the DOLE Regional Director found that private
respondent was an employee of petitioner, and was entitled to
his money claims. 2 Petitioner sought reconsideration of the
Director's Order, but failed. The Acting DOLE Secretary
dismissed petitioner's appeal on the ground that petitioner
submitted a Deed of Assignment of Bank Deposit instead of
posting a cash or surety bond. When the matter was brought
before the CA, where petitioner claimed that it had been
denied due process, it was held that petitioner was accorded
due process as it had been given the opportunity to be heard,
and that the DOLE Secretary had jurisdiction over the matter,
as the jurisdictional limitation imposed by Article 129 of the
Labor Code on the power of the DOLE Secretary under Art.
128 (b) of the Code had been repealed by Republic Act No. (RA)
7730.3

In the Decision of this Court, the CA Decision was reversed and

set aside, and the complaint against petitioner was dismissed.
The dispositive portion of the Decision reads as follows:

WHEREFORE, the petition is GRANTED. The Decision

dated 26 October 2006 and the Resolution dated 26
June 2007 of the Court of Appeals in C.A. G.R. CEB-SP
No. 00855 are REVERSED and SET ASIDE. The Order
of the then Acting Secretary of the Department of
Labor and Employment dated 27 January 2005
denying petitioner's appeal, and the Orders of the
Director, DOLE Regional Office No. VII, dated 24 May
2004 and 27 February 2004, respectively,
are ANNULLED. The complaint against petitioner
is DISMISSED. 4
The Court found that there was no employer-employee
relationship between petitioner and private respondent. It was
held that while the DOLE may make a determination of the
existence of an employer-employee relationship, this function
could not be co-extensive with the visitorial and enforcement
power provided in Art. 128 (b) of the Labor Code,as amended
by RA 7730. The National Labor Relations Commission (NLRC)
was held to be the primary agency in determining the existence
of an employer-employee relationship. This was the
interpretation of the Court of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b). 5

From this Decision, the Public Attorney's Office (PAO) filed a

Motion for Clarification of Decision (with Leave of Court). The
PAO sought to clarify as to when the visitorial and enforcement
power of the DOLE be not considered as co-extensive with the
power to determine the existence of an employer-employee
relationship. 6 In its Comment, 7 the DOLE sought clarification
as well, as to the extent of its visitorial and enforcement power
under the Labor Code, as amended. SIDTCa

The Court treated the Motion for Clarification as a second

motion for reconsideration, granting said motion and
reinstating the petition. 8 It is apparent that there is a need to
delineate the jurisdiction of the DOLE Secretary vis-à-vis that
of the NLRC.

Under Art. 129 of the Labor Code,the power of the DOLE and
its duly authorized hearing officers to hear and decide any
matter involving the recovery of wages and other monetary
claims and benefits was qualified by the proviso that the
complaint not include a claim for reinstatement, or that the
aggregate money claims not exceed PhP5,000. RA 7730, or
an Act Further Strengthening the Visitorial and Enforcement
Powers of the Secretary of Labor, did away with the PhP5,000
limitation, allowing the DOLE Secretary to exercise its visitorial
and enforcement power for claims beyond PhP5,000. The only
qualification to this expanded power of the DOLE was only that
there still be an existing employer-employee relationship.

It is conceded that if there is no employer-employee

relationship, whether it has been terminated or it has not
existed from the start, the DOLE has no jurisdiction. Under Art.
128 (b) of the Labor Code,as amended by RA 7730, the first
sentence reads, "Notwithstanding the provisions of Articles 129
and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives
shall have the power to issue compliance orders to give effect to
the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the
course of inspection." It is clear and beyond debate that an
employer-employee relationship must exist for the exercise of
the visitorial and enforcement power of the DOLE. The question
now arises, may the DOLE make a determination of whether or
not an employer-employee relationship exists, and if so, to
what extent?
The first portion of the question must be answered in the
affirmative.

The prior decision of this Court in the present case accepts such
answer, but places a limitation upon the power of the DOLE,
that is, the determination of the existence of an
employer-employee relationship cannot be co-extensive with
the visitorial and enforcement power of the DOLE. But even in
conceding the power of the DOLE to determine the existence of
an employer-employee relationship, the Court held that the
determination of the existence of an employer-employee
relationship is still primarily within the power of the NLRC,
that any finding by the DOLE is merely preliminary.

This conclusion must be revisited.

No limitation in the law was placed upon the power of the

DOLE to determine the existence of an employer-employee
relationship. No procedure was laid down where the DOLE
would only make a preliminary finding, that the power was
primarily held by the NLRC. The law did not say that the DOLE
would first seek the NLRC's determination of the existence of an
employer-employee relationship, or that should the existence of
the employer-employee relationship be disputed, the DOLE
would refer the matter to the NLRC. The DOLE must have the
power to determine whether or not an employer-employee
relationship exists, and from there to decide whether or not to
issue compliance orders in accordance with Art. 128 (b) of the
Labor Code,as amended by RA 7730. aCASEH
The DOLE, in determining the existence of an
employer-employee relationship, has a ready set of guidelines
to follow, the same guide the courts themselves use. The
elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal;
(4) the employer's power to control the employee's
conduct. 9 The use of this test is not solely limited to the NLRC.
The DOLE Secretary, or his or her representatives, can utilize
the same test, even in the course of inspection, making use of
the same evidence that would have been presented before the
NLRC.

The determination of the existence of an employer-employee

relationship by the DOLE must be respected. The expanded
visitorial and enforcement power of the DOLE granted by RA
7730 would be rendered nugatory if the alleged employer
could, by the simple expedient of disputing the
employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at
least a prima facie showing of the absence of an
employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with
that evidence, and it is the DOLE that will weigh it, to see if the
same does successfully refute the existence of an
employer-employee relationship.

If the DOLE makes a finding that there is an existing

employer-employee relationship, it takes cognizance of the
matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has
already been terminated, or it appears, upon review, that no
employer-employee relationship existed in the first place.

The Court, in limiting the power of the DOLE, gave the

rationale that such limitation would eliminate the prospect of
competing conclusions between the DOLE and the NLRC. The
prospect of competing conclusions could just as well have been
eliminated by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the more prudent
course of action to take.

This is not to say that the determination by the DOLE is beyond

question or review. Suffice it to say, there are judicial remedies
such as a petition for certiorari under Rule 65 that may be
availed of, should a party wish to dispute the findings of the
DOLE.

It must also be remembered that the power of the DOLE to

determine the existence of an employer-employee relationship
need not necessarily result in an affirmative finding. The DOLE
may well make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction over the
case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.

Under Art. 128 (b) of the Labor Code,as amended by RA

7730, the DOLE is fully empowered to make a determination
as to the existence of an employer-employee relationship in the
exercise of its visitorial and enforcement power, subject to
judicial review, not review by the NLRC.

There is a view that despite Art. 128 (b) of the Labor Code,as
amended by RA 7730, there is still a threshold amount set by
Arts. 129 and 217 of the Labor Code when money claims are
involved, i.e., that if it is for PhP5,000 and below, the
jurisdiction is with the regional director of the DOLE, under
Art. 129, and if the amount involved exceeds PhP5,000, the
jurisdiction is with the labor arbiter, under Art. 217. The view
states that despite the wording of Art. 128 (b), this would only
apply in the course of regular inspections undertaken by the
DOLE, as differentiated from cases under Arts. 129 and 217,
which originate from complaints. There are several cases,
however, where the Court has ruled that Art. 128 (b) has been
amended to expand the powers of the DOLE Secretary and his
duly authorized representatives by RA 7730. In these cases, the
Court resolved that the DOLE had the jurisdiction, despite the
amount of the money claims involved. Furthermore, in these
cases, the inspection held by the DOLE regional director was
prompted specifically by a complaint. Therefore, the initiation
of a case through a complaint does not divest the DOLE
Secretary or his duly authorized representative of jurisdiction
under Art. 128 (b). CAcEaS

To recapitulate, if a complaint is brought before the DOLE to

give effect to the labor standards provisions of the Labor
Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship,
the DOLE exercises jurisdiction to the exclusion of the NLRC. If
the DOLE finds that there is no employer-employee
relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a
claim for reinstatement, the jurisdiction is properly with the
Labor Arbiter, under Art. 217 (3) of the Labor Code,which
provides that the Labor Arbiter has original and exclusive
jurisdiction over those cases involving wages, rates of pay, hours
of work, and other terms and conditions of employment, if
accompanied by a claim for reinstatement. If a complaint is
filed with the NLRC, and there is still an existing
employer-employee relationship, the jurisdiction is properly
with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of
the Rules of Court.

In the present case, the finding of the DOLE Regional Director

that there was an employer-employee relationship has been
subjected to review by this Court, with the finding being that
there was no employer-employee relationship between
petitioner and private respondent, based on the evidence
presented. Private respondent presented self-serving
allegations as well as self-defeating evidence. 10 The findings of
the Regional Director were not based on substantial evidence,
and private respondent failed to prove the existence of an
employer-employee relationship. The DOLE had no jurisdiction
over the case, as there was no employer-employee relationship
present. Thus, the dismissal of the complaint against petitioner
is proper.

WHEREFORE, the Decision of this Court in G.R. No. 179652 is

hereby AFFIRMED, with the MODIFICATION that in the
exercise of the DOLE's visitorial and enforcement power, the
Labor Secretary or the latter's authorized representative shall
have the power to determine the existence of an
employer-employee relationship, to the exclusion of the NLRC.

SO ORDERED.

Corona, C.J., Carpio, Leonardo-de Castro, Peralta, Bersamin,

Abad, Villarama, Jr., Perez, Mendoza, Sereno,
Reyes and Perlas-Bernabe, JJ., concur.

Brion, J., see Concurring Opinion (In the Result).

Del Castillo, J., is on official leave.

Separate Opinions

BRION, J., concurring:

I concur in the result in affirming with modification the Court's

Decision of May 8, 2009. This Decision originally dismissed
respondent Jandeleon Juezan's money claims against the
petitioner People's Broadcasting Service (Bombo Radyo Phils.,
Inc.). The present Resolution still affirms the ruling in favor of
the petitioner, but more importantly to me, it recognizes the
validity of the Department of Labor and
Employment's (DOLE's) plenary power under Article 128 (b) of
the Labor Code,as amended by Republic Act No. 7730,
including its power to determine the existence of
employer-employee relationship in the exercise of its Article
128 (b) powers. ACDIcS

Background

The case arose when the DOLE Regional Office No. VII
conducted an inspection of Bombo Radyo's premises in response
to Juezan's money claims against thebroadcasting company,
resulting in an order for Bombo Radyo to rectify/restitute the
labor standards violations discovered during the inspection.
Bombo Radyo failed to make any rectification or restitution,
prompting the DOLE to conduct a summary investigation.
Bombo Radyo reiterated its position, made during the
inspection, that Juezan was not its employee. Both parties
submitted evidence to support their respective positions.

DOLE Director Rodolfo M. Sabulao found Juezan to be an

employee of Bombo Radyo. Consequently, Director Sabulao
ordered Bombo Radyo to pay Juezan P203,726.30
representing his demanded money claims. Bombo Radyo moved
for reconsideration and submitted additional evidence, but
Director Sabulao denied the motion. Bombo Radyo then
appealed to the DOLE Secretary, insisting that Juezan was not
its employee as he was a drama talent hired on a per drama
basis. The Acting DOLE Secretary dismissed the appeal for
non-perfection due to Bombo Radyo's failure to put a cash or
surety bond, as required by Article 128 (b) of the Labor Code.
Bombo Radyo went to the Court of Appeals (CA) through a
petition for certiorari under Rule 65 of the Rules of Court. The
CA dismissed the petition for lack of merit. Bombo Radyo then
sought relief from this Court, likewise through a Rule 65
petition, contending that the CA committed grave abuse of
discretion in dismissing the petition. It justified its recourse to a
petition for certiorari instead of a Rule 45 appeal by claiming
that there was no appeal or any plain and adequate remedy
available to it in the ordinary course of law.

On May 8, 2009, the Court's Second Division rendered a

Decision reversing the CA rulings and dismissing Juezan's
complaint. It reviewed the evidence and found that there was
no employer-employee relationship between Juezan and
Bombo Radyo. The Court overruled the CA's recognition of the
DOLE's power to determine the existence of
employer-employee relationship in a labor standards case
under Article 128 (b) of the Labor Code. It stressed that the
power to determine the existence of employer-employee
relationship is primarily lodged with the National Labor
Relations Commission (NLRC) based on the clause "in cases
where the relationship of employer-employee still exists" in
Article 128 (b). cSCADE

The Dissent

The May 8, 2009 Court Decision was not unanimous. I wrote a

Dissent and was joined by Justice Conchita Carpio Morales. I
took strong exception to the Court's Decision for:
1. taking cognizance of Bombo Radyo's Rule 65 petition
for certiorari despite the fact that a Rule 45 appeal (petition
for review on certiorari) was available to the company and
would have been the proper recourse since errors of law against
the CA were raised;

2. allowing a Deed of Assignment of Bank Deposits as a

substitute for a cash or surety bond in perfecting an appeal to
the Labor Secretary, in violation of Article 128 (b) of the Labor
Code which requires only a cash or surety bond;

3. re-examining the evidence and finding that there was no

employer-employee relationship between Juezan and Bombo
Radyo, thereby reversing the DOLE Regional Director's findings
which had already lapsed into finality in view of the
non-perfection of the appeal;

4. holding that while the Regional Director and the DOLE

Secretary may preliminarily determine the existence of an
employer-employee relationship in a labor standards case, they
can be divested of jurisdiction over the issue by a mere prima
facie showing of an absence of an employer-employee
relationship.

The Public Attorney's Office (PAO) moved, with leave of court,

to clarify the Decision on the question of when the visitorial and
enforcement power of the DOLE can be considered co-extensive
or not co-extensive with the power to determine the existence
of an employer-employee relationship. The DOLE, in its
Comment, also sought to clarify the extent of its visitorial and
enforcement power under the Labor Code.
The Court, treating the Motion for Clarification as a Second
Motion for Reconsideration, granted the motion and reinstated
the petition. 1

The Court's Ruling

In a reversal of position, the present Resolution now recognizes

that the determination of the existence of an
employer-employee relationship by the DOLE, in the exercise of
its visitorial and enforcement power under Article 128 (b) of
the Labor Code,is entitled to full respect and must be fully
supported. It categorically states: ICDSca

No limitation in the law was placed upon the power of

the DOLE to determine the existence of an
employer-employee relationship. No procedure was laid
down where the DOLE would only make a preliminary
finding, that the power was primarily held by the
NLRC. The law did not say that the DOLE would first
seek the NLRC's determination of the existence of an
employer-employee relationship, or that should the
existence of the employer-employee relationship be
disputed, the DOLE would refer the matter to the
NLRC. The DOLE must have the power to determine
whether or not an employer-employee relationship
exists, and from there to decide whether or not to issue
compliance orders in accordance with Art. 128(b) of
the Labor Code,as amended by RA 7730. 2

The determination of the existence of an

employer-employee relationship by the DOLE must be
respected. The expanded visitorial and enforcement
 power of the DOLE granted by RA 7730 would be
rendered nugatory if the alleged employer could, by the
simple expedient of disputing the employer-employee
relationship, force the referral of the matter to the
NLRC. The Court issued the declaration that at least
a prima facie showing of the absence of an
employer-employee relationship be made to oust the
DOLE of jurisdiction. But it is precisely the DOLE that
will be faced with that evidence, and it is the DOLE
that will weigh it, to see if the same does successfully
refute the existence of an employer-employee
relationship. 3

This is not to say that the determination by the DOLE

is beyond question or review. Suffice it to say, there are
judicial remedies such as a petition for certiorari under
Rule 65 that may be availed of, should a party wish to
dispute the findings of the DOLE. 4 (underscoring ours)

In short, the Court now recognizes that the DOLE has the full
power to determine the existence of an employer-employee
relationship in cases brought to it under Article 128 (b) of the
Labor Code.This power is parallel and not subordinate to that of
the NLRC.

Our present ruling on the authority of the DOLE with respect

to Article 128 (b) of the Labor Code is, to my mind, a very
positive development that cannot but benefit our working
masses, the vast majority of whom "are not organized and,
therefore, outside the protective mantle of collective
bargaining." 5
It should be welcome to the DOLE, too, as it will greatly boost
its visitorial and enforcement power, and serve as an invaluable
tool in its quest to ensure that workers enjoy minimum terms
and conditions of employment. The DOLE's labor inspection
program can now proceed without being sidetracked by
unscrupulous employers who could, as the Resolution
acknowledges, render nugatory the "expanded visitorial and
enforcement power of the DOLE granted by RA 7730 . . . by
the simple expedient of disputing the employer-employee
relationship [and] force the referral of the matter to the
NLRC." 6

But our Resolution does not fully go the DOLE's way. The Court,
at the same time, confirms its previous finding that no
employer-employee relationship exists between Juezan and
Bombo Radyo based on the evidence presented, 7 and that a
Deed of Assignment of Bank Deposits can be a substitute for a
cash or surety bond in perfecting an appeal to the Labor
Secretary.

I continue to entertain strong reservations against the validity

of these rulings, particularly the ruling on the Court's
acceptance of a Deed of Assignment of Bank Deposits to perfect
an appeal to the Labor Secretary; this mode directly
contravenes the express terms of Article 128 (b) of the Labor
Code which requires only a cash or surety bond. I do hope that
the Court will consider this ruling an isolated one applicable
only to the strict facts obtaining in the present case as this is a
step backward in the DOLE's bid for an orderly and efficient
delivery of labor justice. cHCaIE

In light of these reservations, I cannot fully concur with the

present Resolution and must only "concur in the result."

||| (People's Broadcasting Service v. Secretary of the Department

of Labor and Employment, G.R. No. 179652 (Resolution),
[March 6, 2012], 683 PHIL 509-526)

[G.R. No. 152396. November 20, 2007.]

EX-BATAAN VETERANS SECURITY AGENCY,

INC., petitioner, vs. THE SECRETARY OF LABOR
BIENVENIDO E. LAGUESMA, REGIONAL
DIRECTOR BRENDA A. VILLAFUERTE,
ALEXANDER POCDING, FIDEL BALANGAY,
BUAGEN CLYDE, DENNIS EPI, DAVID MENDOZA,
JR., GABRIEL TAMULONG, ANTON PEDRO,
FRANCISCO PINEDA, GASTON DUYAO,
HULLARUB, NOLI DIONEDA, ATONG CENON, JR.,
TOMMY BAUCAS, WILLIAM PAPSONGAY, RICKY
DORIA, GEOFREY MINO, ORLANDO RILLASE,
SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO, and
P. C. DINTAN, respondents.

D E CI S IO N
CARPIO, J : p

The Case

This is a petition for review 1 with prayer for the issuance of a

temporary restraining order or writ of preliminary injunction
of the 29 May 2001 Decision 2 and the 26 February 2002
Resolution 3 of the Court of Appeals in CA-G.R. SP No. 57653.
The 29 May 2001 Decision of the Court of Appeals affirmed
the 4 October 1999 Order of the Secretary of Labor in
OS-LS-04-4-097-280. The 26 February 2002 Resolution
denied the motion for reconsideration.

The Facts

Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the

business of providing security services while private respondents
are EBVSAI's employees assigned to the National Power
Corporation at Ambuklao Hydro Electric Plant, Bokod, Benguet
(Ambuklao Plant).

On 20 February 1996, private respondents led by Alexander

Pocding (Pocding) instituted a complaint 4 for underpayment
of wages against EBVSAI before the Regional Office of the
Department of Labor and Employment (DOLE).

On 7 March 1996, the Regional Office conducted a complaint

inspection at the Ambuklao Plant where the following violations
were noted: (1) non-presentation of records; (2) non-payment
of holiday pay; (3) non-payment of rest day premium; (4)
underpayment of night shift differential pay; (5) non-payment
of service incentive leave; (6) underpayment of 13th month
pay; (7) no registration; (8) no annual medical report; (9) no
annual work accidental report; (10) no safety committee; and
(11) no trained first aider. 5 On the same date, the Regional

Office issued a notice of hearing 6 requiring EBVSAI and private

respondents to attend the hearing on 22 March 1996. Other
hearings were set for 8 May 1996, 27 May 1996 and 10 June
1996.

On 19 August 1996, the Director of the Regional Office

(Regional Director) issued an Order, the dispositive portion of
which reads:

WHEREFORE, premises considered,

respondent EX-BATAAN VETERANS SECURITY
AGENCY is hereby ORDERED to pay the computed
deficiencies owing to the affected employees in the total
amount of SEVEN HUNDRED SIXTY THREE
THOUSAND NINE HUNDRED NINETY SEVEN PESOS
and 85/PESOS within ten (10) calendar days upon
receipt hereof. Otherwise, a Writ of Execution shall be
issued to enforce compliance of this Order. SEACTH

NAME DEFICIENCY

1. ALEXANDER POCDING P36,380.85

2. FIDEL BALANGAY 36,380.85

3. BUAGEN CLYDE 36,380.85

4. DENNIS EPI 36,380.85

5. DAVID MENDOZA, JR. 36,380.85

 6. GABRIEL TAMULONG 36,380.85

7. ANTON PEDRO 36,380.85

8. FRANCISCO PINEDA 36,380.85

9. GASTON DUYAO 36,380.85

10. HULLARUB 36,380.85

11. NOLI D[EO]NIDA 36,380.85

12. ATONG CENON, JR. 36,380.85

13. TOMMY BAUCAS 36,380.85

14. WILIAM PAPSONGAY 36,380.85

15. RICKY DORIA 36,380.85

16. GEOFREY MINO 36,380.85

17. ORLANDO R[IL]LASE 36,380.85

18. SIMPLICO TELLO 36,380.85

19. NOCES, M.G. 36,380.85

20. ALEJO, R.D. 36,380.85

21. D[I]NTAN, P.C. 36,380.85

—————

TOTAL P763,997.85

=========

xxx xxx xxx

SO ORDERED. 7
EBVSAI filed a motion for reconsideration 8 and alleged that
the Regional Director does not have jurisdiction over the subject
matter of the case because the money claim of each private
respondent exceeded P5,000. EBVSAI pointed out that the
Regional Director should have endorsed the case to the Labor
Arbiter.

In a supplemental motion for reconsideration, 9 EBVSAI

questioned the Regional Director's basis for the computation of the
deficiencies due to each private respondent.

In an Order 10 dated 16 January 1997, the Regional Director

denied EBVSAI's motion for reconsideration and supplemental
motion for reconsideration. The Regional Director stated that,
pursuant to Republic Act No. 7730 (RA 7730), 11 the
limitations under Articles 129 12 and 217 (6) 13 of the Labor
Code no longer apply to the Secretary of Labor's visitorial and
enforcement powers under Article 128 (b). 14 The Secretary of
Labor or his duly authorized representatives are now
empowered to hear and decide, in a summary proceeding, any
matter involving the recovery of any amount of wages and
other monetary claims arising out of employer-employee
relations at the time of the inspection.

EBVSAI appealed to the Secretary of Labor.

The Ruling of the Secretary of Labor

In an Order 15 dated 4 October 1999, the Secretary of Labor

affirmed with modification the Regional Director's 19 August
1996 Order. The Secretary of Labor ordered that the P1,000
received by private respondents Romeo Alejo, Atong Cenon, Jr.,
Geofrey Mino, Dennis Epi, and Ricky Doria be deducted from
their respective claims. The Secretary of Labor ruled that,
pursuant to RA 7730, the Court's decision in
the Servando 16 case is no longer controlling insofar as the
restrictive effect of Article 129 on the visitorial and
enforcement power of the Secretary of Labor is concerned.

The Secretary of Labor also stated that there was no denial of

due process because EBVSAI was accorded several opportunities
to present its side but EBVSAI failed to present any evidence to
controvert the findings of the Regional Director. Moreover, the
Secretary of Labor doubted the veracity and authenticity of
EBVSAI's documentary evidence. The Secretary of Labor noted
that these documents were not presented at the initial stage of
the hearing and that the payroll documents did not indicate
the periods covered by EBVSAI's alleged payments. THCSAE

EVBSAI filed a motion for reconsideration which was denied by

the Secretary of Labor in his 3 January 2000 Order. 17

EBVSAI filed a petition for certiorari before the Court of

Appeals.

The Ruling of the Court of Appeals

In its 29 May 2001 Decision, the Court of Appeals dismissed

the petition and affirmed the Secretary of Labor's decision. The
Court of Appeals adopted the Secretary of Labor's ruling
that RA 7730 repealed the jurisdictional limitation imposed by
Article 129 on Article 128 of the Labor Code.The Court of
Appeals also agreed with the Secretary of Labor's finding that
EBVSAI was accorded due process.

The Court of Appeals also denied EBVSAI's motion for

reconsideration in its 26 February 2002 Resolution.

Hence, this petition.

The Issues

This case raises the following issues:

1.Whether the Secretary of Labor or his duly

authorized representatives acquired jurisdiction
over EBVSAI; and

2.Whether the Secretary of Labor or his duly

authorized representatives have jurisdiction over
the money claims of private respondents which
exceed P5,000. TSAHIa

The Ruling of the Court

The petition has no merit.

On the Regional Director's Jurisdiction over EBVSAI

EBVSAI claims that the Regional Director did not acquire

jurisdiction over EBVSAI because he failed to comply with
Section 11, Rule 14 of the 1997 Rules of Civil
Procedure. 18 EBVSAI points out that the notice of hearing was
served at the Ambuklao Plant, not at EBVSAI's main office in
Makati, and that it was addressed to Leonardo Castro, Jr.,
EBVSAI's Vice-President.
The Rules on the Disposition of Labor Standards Cases in the
Regional Offices 19 (rules) specifically state that notices and
copies of orders shall be served on the parties or their duly
authorized representatives at their last known address or, if
they are represented by counsel, through the latter. 20 The
rules shall be liberally construed 21and only in the absence of
any applicable provision will the Rules of Court apply in a
suppletory character. 22

In this case, EBVSAI does not deny having received the notices
of hearing. In fact, on 29 March and 13 June 1996, Danilo
Burgos and Edwina Manao, detachment commander and
bookkeeper of EBVSAI, respectively, appeared before the
Regional Director. They claimed that the 22 March 1996
notice of hearing was received late and manifested that the
notices should be sent to the Manila office. Thereafter, the
notices of hearing were sent to the Manila office. They were also
informed of EBVSAI's violations and were asked to present the
employment records of the private respondents for verification.
They were, moreover, asked to submit, within 10 days, proof of
compliance or their position paper. The Regional Director
validly acquired jurisdiction over EBVSAI. EBVSAI can no longer
question the jurisdiction of the Regional Director after receiving
the notices of hearing and after appearing before the Regional
Director.

On the Regional Director's Jurisdiction over the Money

Claims
EBVSAI maintains that under Articles 129 and 217 (6) of the
Labor Code,the Labor Arbiter, not the Regional Director, has
exclusive and original jurisdiction over the case because the
individual monetary claim of private respondents exceeds
P5,000. EBVSAI also argues that the case falls under the
exception clause in Article 128 (b) of theLabor Code.EBVSAI
asserts that the Regional Director should have certified the case
to the Arbitration Branch of the National Labor Relations
Commission (NLRC) for a full-blown hearing on the merits.

In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled

that:

While it is true that under Articles 129 and 217 of the

Labor Code,the Labor Arbiter has jurisdiction to hear
and decide cases where the aggregate money claims of
each employee exceeds P5,000.00, said provisions of
law do not contemplate nor cover the visitorial and
enforcement powers of the Secretary of Labor or his
duly authorized representatives.

Rather, said powers are defined and set forth in Article

128 of the Labor Code (as amended by R.A. No. 7730)
thus:

Art. 128 Visitorial and enforcement power.

—. . .

(b)Notwithstanding the provisions of Article[s]

129 and 217 of this Code to the contrary, and
in cases where the relationship of
 employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized
representatives shall have the power to issue
compliance orders to give effect to [the labor
standards provisions of this Code and other]
labor legislation based on the findings of labor
employment and enforcement officers or
industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to
the appropriate authority for the enforcement of
their orders, except in cases where the employer
contests the findings of the labor employment
and enforcement officer and raises issues
supported by documentary proofs which were
not considered in the course of inspection. caHIAS

xxx xxx xxx

The aforequoted provision explicitly excludes from its

coverage Articles 129 and 217 of the Labor Code by
the phrase "(N)otwithstanding the provisions of Articles
129 and 217 of this Code to the contrary . . ." thereby
retaining and further strengthening the power of the
Secretary of Labor or his duly authorized
representatives to issue compliance orders to give effect
to the labor standards provisions of said Code and
other labor legislation based on the findings of labor
employment and enforcement officer or industrial
safety engineer made in the course of
inspection. 23 (Italics in the original)
This was further affirmed in our ruling in Cirineo Bowling Plaza,
Inc. v. Sensing, 24 where we sustained the jurisdiction of the
DOLE Regional Director and held that "the visitorial and
enforcement powers of the DOLE Regional Director to order
and enforce compliance with labor standard laws can be
exercised even where the individual claim exceeds P5,000."

However, if the labor standards case is covered by the exception

clause in Article 128 (b) of the Labor Code,then the Regional
Director will have to endorse the case to the appropriate
Arbitration Branch of the NLRC. In order to divest the Regional
Director or his representatives of jurisdiction, the following
elements must be present: (a) that the employer contests the
findings of the labor regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to
examine evidentiary matters; and (c) that such matters are not
verifiable in the normal course of inspection. 25 The rules also
provide that the employer shall raise such objections during the
hearing of the case or at any time after receipt of the notice of
inspection results. 26

In this case, the Regional Director validly assumed jurisdiction

over the money claims of private respondents even if the claims
exceeded P5,000 because such jurisdiction was exercised in
accordance with Article 128 (b) of the Labor Code and the case
does not fall under the exception clause.

The Court notes that EBVSAI did not contest the findings of the
labor regulations officer during the hearing or after receipt of
the notice of inspection results. It was only in its supplemental
motion for reconsideration before the Regional Director that
EBVSAI questioned the findings of the labor regulations officer
and presented documentary evidence to controvert the claims
of private respondents. But even if this was the case, the
Regional Director and the Secretary of Labor still looked into
and considered EBVSAI's documentary evidence and found that
such did not warrant the reversal of the Regional Director's
order. The Secretary of Labor also doubted the veracity and
authenticity of EBVSAI's documentary evidence. Moreover, the
pieces of evidence presented by EBVSAI were verifiable in the
normal course of inspection because all employment records of
the employees should be kept and maintained in or about the
premises of the workplace, which in this case is in Ambuklao
Plant, the establishment where private respondents were
regularly assigned. 27

WHEREFORE, we DENY the petition. We AFFIRM the 29 May

2001 Decision and the 26 February 2002 Resolution of the
Court of Appeals in CA-G.R. SP No. 57653.

SO ORDERED.

||| (Ex-Bataan Veterans Security Agency, Inc. v. Laguesma, G.R.

No. 152396, [November 20, 2007], 563 PHIL 228-239)

G.R. No. 185567. October 20, 2010.]

 ARSENIO
Z. LOCSIN, petitioner, vs. NISSAN LEASE PHILS.
INC. and LUIS BANSON, respondents.

DECISION

BRION, *** J :
p

Through a petition for review

on certiorari, 1 petitioner Arsenio Z. Locsin (Locsin) seeks
the reversal of the Decision 2 of the Court of Appeals (CA)
dated August 28, 2008, 3 in "Arsenio
Z. Locsin v. Nissan Car Lease Phils., Inc. and Luis
Banson," docketed as CA-G.R. SP No. 103720 and the
Resolution dated December 9, 2008, 4denying Locsin's
Motion for Reconsideration. The assailed ruling of the CA
reversed and set aside the Decision 5 of the Hon. Labor
Arbiter Thelma Concepcion (Labor Arbiter
Concepcion) which denied Nissan Lease Phils.
Inc.'s (NCLPI) and Luis T. Banson's (Banson) Motion to
Dismiss.

THE FACTUAL ANTECEDENTS

On January 1, 1992, Locsin was elected Executive

Vice President and Treasurer (EVP/Treasurer) of NCLPI. As
EVP/Treasurer, his duties and responsibilities included: (1)
the management of the finances of the company; (2)
carrying out the directions of the President and/or the
Board of Directors regarding financial management; and (3)
the preparation of financial reports to advise the officers and
directors of the financial condition of NCLPI. 6 Locsin held
this position for 13 years, having been re-elected every year
since 1992, until January 21, 2005, when he was
nominated and elected Chairman of NCLPI's Board of
Directors. 7

On August 5, 2005, a little over seven (7) months

after his election as Chairman of the Board, the NCLPI
Board held a special meeting at the Manila Polo Club. One of
the items of the agenda was the election of a new set of
officers. Unfortunately, Locsin was neither re-elected
Chairman nor reinstated to his previous position as
EVP/Treasurer. 8

Aggrieved, on June 19, 2007, Locsin filed a complaint

for illegal dismissal with prayer for reinstatement, payment
of backwages, damages and attorney's fees before the Labor
Arbiter against NCLPI and Banson, who was then President
of NCLPI. 9 SACEca

The Compulsory Arbitration Proceedings before the Labor

Arbiter.

On July 11, 2007, instead of filing their position paper,

NCLPI and Banson filed a Motion to Dismiss, 10 on the
ground that the Labor Arbiter did not have jurisdiction over
the case since the issue of Locsin's removal as EVP/Treasurer
involves an intra-corporate dispute.
 On August 16, 2007, Locsin submitted his opposition
to the motion to dismiss, maintaining his position that he is
an employee of NCLPI.

On March 10, 2008, Labor Arbiter Concepcion issued

an Order denying the Motion to Dismiss, holding that her
office acquired "jurisdiction to arbitrate and/or decide the
instant complaint finding extant in the case an
employer-employee relationship." 11

NCLPI, on June 3, 2008, elevated the case to the CA

through a Petition for Certiorari under Rule 65 of the Rules
of Court. 12 NCLPI raised the issue on whether the Labor
Arbiter committed grave abuse of discretion by denying the
Motion to Dismiss and holding that her office had
jurisdiction over the dispute.

The CA Decision - Locsin was a corporate officer; the issue of

his removal as EVP/Treasurer is an intra-corporate dispute
under the RTC's jurisdiction.

On August 28, 2008, 13 the CA reversed and set aside

the Labor Arbiter's Order denying the Motion to Dismiss and
ruled that Locsin was a corporate officer.

Citing PD 902-A, the CA defined "corporate officers as

those officers of a corporation who are given that character
either by the Corporation Code or by the corporations'
by-laws." In this regard, the CA held:

Scrutinizing the records, We hold that petitioners

successfully discharged their onus of establishing that
private respondent was a corporate officer who held
 the position of Executive Vice-President/Treasurer as
provided in the by-laws of petitioner corporation and
that he held such position by virtue of election by the
Board of Directors.

That private respondent is a corporate officer cannot

be disputed. The position of Executive
Vice-President/Treasurer is specifically included in the
roster of officers provided for by the (Amended)
By-Laws of petitioner corporation, his duties and
responsibilities, as well as compensation as such officer
are likewise set forth therein.14

Article 280 of the Labor Code, the receipt of salaries

by Locsin, SSS deductions on that salary, and the element of
control in the performance of work duties — indicia used by
the Labor Arbiter to conclude that Locsin was a regular
employee — were held inapplicable by the CA. 15 The CA
noted the Labor Arbiter's failure to address the fact that the
position of EVP/Treasurer is specifically enumerated as an
"office" in the corporation's by-laws. 16 SAHEIc

Further, the CA pointed out Locsin's failure to "state

any circumstance by which NCLPI engaged his services as a
corporate officer that would make him an employee." The
CA found, in this regard, that Locsin's assumption and
retention as EVP/Treasurer was based on his election and
subsequent re-elections from 1992 until 2005. Further, he
performed only those functions that were "specifically set
forth in the By-Laws or required of him by the Board of
Directors." 17
 With respect to the suit Locsin filed with the Labor
Arbiter, the CA held that:

Private respondent, in belatedly filing this suit before

the Labor Arbiter, questioned the legality of his
"dismissal" but in essence, he raises the issue of whether
or not the Board of Directors had the authority to
remove him from the corporate office to which he was
elected pursuant to the By-Laws of the petitioner
corporation. Indeed, had private respondent been an
ordinary employee, an election conducted by the Board
of Directors would not have been necessary to remove
him as Executive Vice-President/Treasurer. However,
in an obvious attempt to preclude the application of
settled jurisprudence that corporate officers whose
position is provided in the by-laws, their election,
removal or dismissal is subject to Section 5 of P.D. No.
902-A (now R.A. No. 8799), private respondent
would even claim in his Position Paper, that since his
responsibilities were akin to that of the company's
Executive Vice-President/Treasurer, he was "hired
under the pretext that he was being 'elected' into said
post. 18 [Emphasis supplied.]

As a consequence, the CA concluded that Locsin does

not have any recourse with the Labor Arbiter or the NLRC
since the removal of a corporate officer, whether elected or
appointed, is an intra-corporate controversy over which the
NLRC has no jurisdiction. 19 Instead, according to the
CA, Locsin's complaint for "illegal dismissal" should have been
filed in the Regional Trial Court (RTC), pursuant to Rule 6 of
the Interim Rules of Procedure Governing Intra-Corporate
Controversies. 20

Finally, the CA addressed Locsin's invocation of Article

4 of the Labor Code.Dismissing the application of the
provision, the CA cited Dean Cesar Villanueva of the Ateneo
School of Law, as follows:

. . . the non-coverage of corporate officers from the

security of tenure clause under the Constitution is now
well-established principle by numerous decisions
upholding such doctrine under the aegis of the 1987
Constitution in the face of contemporary decisions of
the same Supreme Court likewise confirming that
security of tenure covers all employees or workers
including managerial employees. 21

THE PETITIONER'S ARGUMENTS

Failing to obtain a reconsideration of the CA's

decision, Locsin filed the present petition on January 28,
2009, raising the following procedural and substantive
issues: IATSHE

(1) Whether the CA has original jurisdiction to review

decision of the Labor Arbiter under Rule 65?

(2) Whether he is a regular employee of NCLPI under

the definition of Article 280 of the Labor Code? and

(3) Whether Locsin's position as Executive

Vice-President/Treasurer makes him a corporate officer
thereby excluding him from the coverage of the Labor
Code?
 Procedurally, Locsin essentially submits that NCLPI
wrongfully filed a petition for certiorari before the CA, as
the latter's remedy is to proceed with the arbitration, and to
appeal to the NLRC after the Labor Arbiter shall have ruled
on the merits of the case. Locsin cites, in this regard, Rule V,
Section 6 of the Revised Rules of the National Labor
Relations Commission (NLRC Rules), which provides that a
denial of a motion to dismiss by the Labor Arbiter is not
subject to an appeal.Locsin also argues that even if the Labor
Arbiter committed grave abuse of discretion in denying the
NCLPI motion, a special civil action for certiorari, filed with
the CA was not the appropriate remedy, since this was a
breach of the doctrine of exhaustion of administrative
remedies.

Substantively, Locsin submits that he is a regular

employee of NCLPI since - as he argued before the Labor
Arbiter and the CA - his relationship with the company
meets the "four-fold test."

First, Locsin contends that NCLPI had the power to

engage his services as EVP/Treasurer. Second, he received
regular wages from NCLPI, from which his SSS and
Philhealth contributions, as well as his withholding taxes
were deducted. Third, NCLPI had the power to terminate
his employment. 22 Lastly, Nissan had control over the
manner of the performance of his functions as
EVP/Treasurer, as shown by the 13 years of faithful
execution of his job, which he carried out in accordance with
the standards and expectations set by
NCLPI. 23 Further, Locsin maintains that even after his
election as Chairman, he essentially performed the functions
of EVP/Treasurer — handling the financial and
administrative operations of the Corporation — thus making
him a regular employee. 24

Under these claimed facts, Locsin concludes that the

Labor Arbiter and the NLRC — not the RTC (as NCLPI posits)
— has jurisdiction to decide the controversy.
Parenthetically, Locsin clarifies that he does not dispute the
validity of his election as Chairman of the Board on January
1, 2005. Instead, he theorizes that he never lost his position
as EVP/Treasurer having continuously performed the
functions appurtenant thereto. 25 Thus, he questions his
"unceremonious removal" as EVP/Treasurer during the
August 5, 2005 special Board meeting. EDcICT

THE RESPONDENT'S ARGUMENTS

It its April 17, 2009 Comment, 26 Nissan prays for

the denial of the petition for lack of merit. Nissan submits
that the CA correctly ruled that the Labor Arbiter does not
have jurisdiction over Locsin's complaint for illegal dismissal.
In support, Nissan maintains that Locsin is a corporate
officer and not an employee. In addressing the procedural
defect Locsin raised, Nissan brushes the issue aside, stating
that (1) this issue was belatedly raised in the Motion for
Reconsideration, and that (2) in any case, Rule VI, Section 2
(1) of the NLRC does not apply since
only appealable decisions, resolutions and orders are covered
under the rule.

THE COURT'S RULING

We resolve to deny the petition for lack of merit.

At the outset, we stress that there are two (2)

important considerations in the final determination of this
case. On the one hand, Locsin raises a procedural issue that,
if proven correct, will require the Court to dismiss the
instant petition for using an improper remedy. On the other
hand, there is the substantive issue that will be disregarded if
a strict implementation of the rules of procedure is upheld.

Prefatorily, we agree with Locsin's submission that the

NCLPI incorrectly elevated the Labor Arbiter's denial of the
Motion to Dismiss to the CA. Locsin is correct in positing
that the denial of a motion to dismiss is unappealable. As a
general rule, an aggrieved party's proper recourse to the
denial is to file his position paper, interpose the grounds
relied upon in the motion to dismiss before the labor arbiter,
and actively participate in the proceedings. Thereafter, the
labor arbiter's decision can be appealed to the NLRC, not to
the CA.

As a rule, we strictly adhere to the rules of procedure

and do everything we can, to the point of penalizing
violators, to encourage respect for these rules. We take
exception to this general rule, however, when a strict
implementation of these rules would cause substantial
injustice to the parties.
 We see it appropriate to apply the exception to this
case for the reasons discussed below; hence, we are
compelled to go beyond procedure and rule on the merits of
the case. In the context of this case, we see sufficient
justification to rule on the employer-employee relationship
issue raised by NCLPI, even though the Labor Arbiter's
interlocutory order was incorrectly brought to the CA under
Rule 65. cCEAHT

The NLRC Rules are clear: the denial by the labor arbiter of
the motion to dismiss is not appealable because the denial is
merely an interlocutory order.

In Metro Drug v. Metro Drug Employees, 27 we

definitively stated that the denial of a motion to dismiss by a
labor arbiter is not immediately appealable. 28

We similarly ruled in Texon Manufacturing v.

Millena, 29 in Sime Darby Employees Association v. National
Labor Relations Commission 30 and in Westmont
Pharmaceuticals v. Samaniego. 31 In Texon, we specifically
said:

The Order of the Labor Arbiter denying petitioners'

motion to dismiss is interlocutory. It is well-settled that
a denial of a motion to dismiss a complaint is an
interlocutory order and hence, cannot be appealed,
until a final judgment on the merits of the case is
rendered. [Emphasis supplied.] 32

and indicated the appropriate recourse in Metro Drug, as

follows: 33
 . . . The NLRC rule proscribing appeal from a denial of a
motion to dismiss is similar to the general rule observed
in civil procedure that an order denying a motion to
dismiss is interlocutory and, hence, not appealable until
final judgment or order is rendered [1 Feria and Noche,
Civil Procedure Annotated 453 (2001 ed.)]. The
remedy of the aggrieved party in case of denial of the
motion to dismiss is to file an answer and interpose, as
a defense or defenses, the ground or grounds relied
upon in the motion to dismiss, proceed to trial and, in
case of adverse judgment, to elevate the entire case by
appeal in due course [Mendoza v. Court of Appeals, G.R.
No. 81909, September 5, 1991, 201 SCRA 343]. In
order to avail of the extraordinary writ of certiorari, it
is incumbent upon petitioner to establish that the
denial of the motion to dismiss was tainted with grave
abuse of discretion. [Macawiwili Gold Mining and
Development Co., Inc. v. Court of Appeals, G.R. No.
115104, October 12, 1998, 297 SCRA 602]

In so citing Feria and Noche, the Court was referring

to Sec. 1 (b), Rule 41 of the Rules of Court, which specifically
enumerates interlocutory orders as one of the court actions
that cannot be appealed. In the same rule, as amended
by A.M. No. 07-7-12-SC, the aggrieved party is allowed to
file an appropriate special civil action under Rule 65. The
latter rule, however, also contains limitations for its
application, clearly outlined in its Section 1 which provides:

Section 1. Petition for certiorari. —

 When any tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in
excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction,
and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in
the proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or
officer, and granting such incidental reliefs as law and
justice may require.

In the labor law setting, a plain, speedy and adequate

remedy is still open to the aggrieved party when a labor
arbiter denies a motion to dismiss. This is Article 223
of Presidential Decree No. 442, as amended (Labor
Code), 34 which states: cSICHD

ART. 223. APPEAL

Decisions, 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:

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

discretion on the part of the Labor Arbiter; . . .
[Emphasis supplied.]
 Pursuant to this Article, we held in Metro
Drug (citing Air Services Cooperative, et al. v. Court of
Appeals) 35 that the NLRC is clothed with sufficient
authority to correct any claimed "erroneous assumption of
jurisdiction" by labor arbiters:

In Air Services Cooperative, et al. v. The Court of

Appeals, et al., a case where the jurisdiction of the
labor arbiter was put in issue and was assailed through
a petition forcertiorari, prohibition and annulment of
judgment before a regional trial court, this Court had
the opportunity to expound on the nature of appeal as
embodied in Article 223 of the Labor Code,thus:

. . . Also, while the title of the Article 223 seems

to provide only for the remedy of appeal as that
term is understood in procedural law and as
distinguished from the office of certiorari,
nonetheless, a closer reading thereof reveals that
it is not as limited as understood by the
petitioners . . . .

Abuse of discretion is admittedly within the

ambit of certiorari and its grant of review thereof
to the NLRC indicates the lawmakers' intention
to broaden the meaning of appeal as that term is
used in the Code. For this reason, petitioners
cannot argue now that the NLRC is devoid of any
corrective power to rectify a supposed erroneous
assumption of jurisdiction by the Labor
Arbiter . . . . [Air Services Cooperative, et al. v.
 The Court of Appeals, et al. G.R. No. 118693, 23
July 1998, 293 SCRA 101]

Since the legislature had clothed the NLRC with the

appellate authority to correct a claimed "erroneous
assumption of jurisdiction" on the part of the labor
arbiter — a case of grave abuse of discretion -
the remedy availed of by petitioner in this case is
patently erroneous as recourse in this case is lodged,
under the law, with the NLRC. DSacAE

In Metro Drug, as in the present case, the defect

imputed through the NLCPI Motion to Dismiss is the labor
arbiter's lack of jurisdiction since Locsin is alleged to be a
corporate officer, not an employee. Parallelisms between the
two cases is undeniable, as they are similar on the following
points: (1) in Metro Drug, as in this case, the Labor Arbiter
issued an Order denying the Motion to Dismiss by one of the
parties; (2) the basis of the Motion to Dismiss is also the
alleged lack of jurisdiction by the Labor Arbiter to settle the
dispute; and (3) dissatisfied with the Order of the Labor
Arbiter, the aggrieved party likewise elevated the case to the
CAvia Rule 65.

The similarities end there, however. Unlike in the

present case, the CA denied the petition forcertiorari and
the subsequent Motion for Reconsideration inMetro Drug; the
CA correctly found that the proper appellate mechanism
was an appeal to the NLRC and not a petition
for certiorari under Rule 65. In the present case, the CA
took a different position despite our clear ruling in Metro
Drug, and allowed, not only the use of Rule 65, but also
ruled on the merits.

From this perspective, the CA clearly erred in the

application of the procedural rules by disregarding the
relevant provisions of the NLRC Rules, as well as the
requirements for a petition for certiorari under the Rules of
Court. To reiterate, the proper action of an aggrieved party
faced with the labor arbiter's denial of his motion to dismiss
is to submit his position paper and raise therein the supposed
lack of jurisdiction. The aggrieved party cannot immediately
appeal the denial since it is an interlocutory order; the
appropriate remedial recourse is the procedure outlined in
Article 223 of the Labor Code,not a petition
for certiorari under Rule 65.

A strict implementation of the NLRC Rules and the Rules of

Court would cause injustice to the parties because the Labor
Arbiter clearly has no jurisdiction over the present
intra-corporate dispute.

Our ruling in Mejillano v. Lucillo 36 stands for the

proposition that we should strictly apply the rules of
procedure. We said:

Time and again, we have ruled that procedural rules

do not exist for the convenience of the litigants. Rules of
Procedure exist for a purpose, and to disregard such
rules in the guise of liberal construction would be to
defeat such purpose. Procedural rules were established
 primarily to provide order to and enhance the
efficiency of our judicial system. [Emphasis supplied.]

An exception to this rule is our ruling in Lazaro v.

Court of Appeals 37 where we held that the strict
enforcement of the rules of procedure may be relaxed
inexceptionally meritorious cases:

. . . Procedural rules are not to be belittled or dismissed

simply because their non-observance may have resulted
in prejudice to a party's substantive rights. Like all
rules, they are required to be followed except only for
the most persuasive of reasons when they may be
relaxed to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in
not complying with the procedure prescribed. The
Court reiterates that rules of procedure, especially
those prescribing the time within which certain acts
must be done, "have oft been held as absolutely
indispensable to the prevention of needless delays and
to the orderly and speedy discharge of business. . . . The
reason for rules of this nature is because the dispatch of
business by courts would be impossible, and intolerable
delays would result, without rules governing
practice . . . . Such rules are a necessary incident to the
proper, efficient and orderly discharge of judicial
functions." Indeed, in no uncertain terms, the Court
held that the said rules may be relaxed only in
exceptionally meritorious cases. [Emphasis supplied.] ESTDIA
 Whether a case involves an exceptionally
meritorious circumstance can be tested under the guidelines
we established in Sanchez v. Court of Appeals, 38 as follows:

Aside from matters of life, liberty, honor or

property which would warrant the suspension of the
Rules of the most mandatory character and an
examination and review by the appellate court of the
lower court's findings of fact, the other elements that
should be considered are the following: (a) the existence
of special or compelling circumstances, (b) the merits of
the case, (c) a cause not entirely attributable to the
fault or negligence of the party favored by the
suspension of the rules, (d) a lack of any showing that
the review sought is merely frivolous and dilatory, and
(e) the other party will not be unjustly prejudiced
thereby. [Emphasis supplied.]

Under these standards, we hold that exceptional

circumstances exist in the present case to merit the
relaxation of the applicable rules of procedure.

Due to existing exceptional circumstances, the ruling on the

merits that Locsin is an officer and not an employee
of Nissan must take precedence over procedural
considerations.

We arrived at the conclusion that we should go beyond

the procedural rules and immediately take a look at the
intrinsic merits of the case based on several considerations.
 First, the parties have sufficiently ventilated their
positions on the disputed employer-employee relationship
and have, in fact, submitted the matter for the CA's
consideration.

Second, the CA correctly ruled that no

employer-employee relationship exists
between Locsin and Nissan.

Locsin was undeniably Chairman and President, and

was elected to these positions by the Nissan board pursuant
to its By-laws. 39 As such, he was a corporate officer, not an
employee. The CA reached this conclusion by relying on the
submitted facts and on Presidential Decree 902-A, which
defines corporate officers as "those officers of a corporation
who are given that character either by the Corporation Code
or by the corporation's by-laws." Likewise, Section 25
of Batas Pambansa Blg. 69, or the Corporation Code of the
Philippines (Corporation Code) provides that corporate
officers are the president, secretary, treasurer and
suchother officers as may be provided for in the by-laws. THEDCA

Third. Even as Executive

Vice-President/Treasurer, Locsin already acted as a
corporate officer because the position of Executive
Vice-President/Treasurer is provided for in Nissan's
By-Laws. Article IV, Section 4 of these By-Laws specifically
provides for this position, as follows:

ARTICLE IV

Officers
Section 1. Election and Appointment. — The Board of
Directors at their first meeting, annually thereafter,
shall elect as officers of the Corporation a Chairman of
the Board, a President, an Executive
Vice-President/Treasurer, a Vice-President/General
Manager and a Corporate Secretary. The other Senior
Operating Officers of the Corporation shall be
appointed by the Board upon the recommendation of
the President.

xxx xxx xxx

Section 4. Executive Vice-President/Treasurer. — The

Executive Vice-President/Treasurer shall have such
powers and perform such duties as are prescribed by
these By-Laws, and as may be required of him by the
Board of Directors. As the concurrent Treasurer of the
Corporation, he shall have the charge of the funds,
securities, receipts, and disbursements of the
Corporation. He shall deposit, or cause to be deposited,
the credit of the Corporation in such banks or trust
companies, or with such banks of other depositories, as
the Board of Directors may from time to time
designate. He shall tender to the President or to the
Board of Directors whenever required an account of the
financial condition of the corporation and of all his
transactions as Treasurer. As soon as practicable after
the close of each fiscal year, he shall make and submit
to the Board of Directors a like report of such fiscal
year. He shall keep correct books of account of all the
business and transactions of the Corporation.
 In Okol v. Slimmers World
International, 40 citing Tabang v. National Labor Relations
Commission, 41 we held that —

x x x an "office" is created by the charter of the

corporation and the officer is elected by the directors or
stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by
action of the directors or stockholders but by the
managing officer of the corporation who also
determines the compensation to be paid to such
employee. [Emphasis supplied.]

In this case, Locsin was elected by the NCLPI Board, in

accordance with the Amended By-Laws of the corporation.
The following factual determination by the CA is elucidating:

More important, private respondent failed to state any

such "circumstance" by which the petitioner
corporation "engaged his services" as corporate officer
that would make him an employee. In the first place,
the Vice-President/Treasurer was elected on an annual
basis as provided in the By-Laws, and no duties and
responsibilities were stated by private respondent
which he discharged while occupying said
position other than those specifically set forth in the
By-Laws or required of him by the Board of Directors.
The unrebutted fact remains that private respondent
held the position of Executive Vice-President/Treasurer
of petitioner corporation, a position provided for in the
latter's by-laws, by virtue of election by the Board of
Directors, and has functioned as such Executive
 Vice-President/Treasurer pursuant to the provisions of
the said By-Laws. Private respondent knew very well
that he was simply not re-elected to the said position
during the August 5, 2005 board meeting, but he had
objected to the election of a new set of officers held at
the time upon the advice of his lawyer that he cannot
be "terminated" or replaced as Executive
Vice-President/Treasurer as he had attained tenurial
security. 42 ACTESI

We fully agree with this factual determination which

we find to be sufficiently supported by evidence. We likewise
rule, based on law and established jurisprudence, that Locsin,
at the time of his severance from NCLPI, was the
latter's corporate officer.

a. The Question of Jurisdiction

Given Locsin's status as a corporate officer, the RTC,

not the Labor Arbiter or the NLRC, has jurisdiction to hear
the legality of the termination of his relationship with Nissan.
As we also held in Okol, a corporate officer's dismissal from
service is an intra-corporate dispute:

In a number of cases [Estrada v. National Labor

Relations Commission, G.R. No. 106722, 4 October
1996, 262 SCRA 709; Lozon v. National Labor
Relations Commission, 310 Phil. 1 (1995); Espino v.
National Labor Relations Commission, 310 Phil. 61
(1995); Fortune Cement Corporation v. National Labor
Relations Commission, G.R. No. 79762, 24 January
1991, 193 SCRA 258], we have held that a corporate
 officer's dismissal is always a corporate act, or
an intra-corporate controversy which arises between a
stockholder and a corporation. 43 [Emphasis supplied.]

so that the RTC should exercise jurisdiction based on the

following legal reasoning:

Prior to its amendment, Section 5(c) of Presidential

Decree No. 902-A (PD 902-A) provided that
intra-corporate disputes fall within the jurisdiction of
the Securities and Exchange Commission (SEC):

Sec. 5. In addition to the regulatory and

adjudicative functions of the Securities and
Exchange Commission over corporations,
partnerships and other forms of associations
registered with it as expressly granted under
existing laws and decrees, it shall have original
and exclusive jurisdiction to hear and decide cases
involving:

xxx xxx xxx

c) Controversies in the election or appointments

of directors, trustees, officers or managers of
such corporations, partnerships or associations.

Subsection 5.2, Section 5 of Republic Act No. 8799,

which took effect on 8 August 2000, transferred to
regional trial courts the SEC's jurisdiction over all cases
listed in Section 5 of PD 902-A: SCaEcD

5.2. The Commission's jurisdiction over all cases

enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the
 Courts of general jurisdiction or the
appropriate Regional Trial Court. [Emphasis
supplied.]

b. Precedence of Substantive Merits;

Primacy of Element of Jurisdiction

Based on the above jurisdictional considerations, we

would be forced to remand the case to the Labor Arbiter for
further proceedings if we were to dismiss the petition
outright due to the wrongful use of Rule 65. 44 We cannot
close our eyes, however, to the factual and legal reality,
established by evidence already on record, that Locsin is a
corporate officer whose termination of relationship is outside
a labor arbiter's jurisdiction to rule upon.

Under these circumstances, we have to give precedence

to the merits of the case, and primacy to the element of
jurisdiction. Jurisdiction is the power to hear and rule on a
case and is the threshold element that must exist before any
quasi-judicial officer can act. In the context of the present
case, the Labor Arbiter does not have jurisdiction over the
termination dispute Locsin brought, and should not be
allowed to continue to act on the case after the absence of
jurisdiction has become obvious, based on the records and the
law. In more practical terms, a contrary ruling will only
cause substantial delay and inconvenience as well as
unnecessary expenses, to the point of injustice, to the parties.
This conclusion, of course, does not go into the merits of
termination of relationship and is without prejudice to the
 filing of an intra-corporate dispute on this point before the
appropriate RTC.

WHEREFORE, we DISMISS the petitioner's petition for

review on certiorari, and AFFIRM the Decision of the Court
of Appeals, in CA-G.R. SP No. 103720, promulgated on
August 28, 2008, as well as its Resolution of December 9,
2008, which reversed and set aside the March 10, 2008
Order of Labor Arbiter Concepcion in NLRC NCR Case No.
00-06-06165-07. This Decision is without prejudice to
petitioner Locsin's available recourse for relief through the
appropriate remedy in the proper forum.

No pronouncement as to costs.

SO ORDERED.

||| (Locsin v. Nissan Lease Phils., Inc., G.R. No. 185567, [October
20, 2010], 648 PHIL 596-616)

G.R. No. 165744. August 11, 2008.]

OSCAR C. REYES, petitioner, vs.

HON. REGIONAL TRIAL COURT OF MAKATI,
Branch 142, ZENITH INSURANCE CORPORATION,
and RODRIGO C. REYES,respondents.

D E CI S IO N

BRION, J : p
This Petition for Review on Certiorari under Rule 45 of the
Rules of Court seeks to set aside the Decision of the Court of
Appeals (CA) 1 promulgated on May 26, 2004 in CA-G.R. SP
No. 74970. The CA Decision affirmed the Order of
the Regional Trial Court (RTC), Branch 142, Makati City
dated November 29, 2002 2 in Civil Case No. 00-1553
(entitled "Accounting of All Corporate Funds and Assets, and
Damages") which denied petitioner Oscar
C. Reyes' (Oscar) Motion to Declare Complaint as Nuisance or
Harassment Suit. ATcaEH

BACKGROUND FACTS

Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are

two of the four children of the spouses Pedro and
Anastacia Reyes. Pedro, Anastacia, Oscar, and Rodrigo each
owned shares of stock of Zenith Insurance
Corporation (Zenith), a domestic corporation established by
their family. Pedro died in 1964, while Anastacia died in 1993.
Although Pedro's estate was judicially partitioned among his
heirs sometime in the 1970s, no similar settlement and
partition appear to have been made with Anastacia's estate,
which included her shareholdings in Zenith. As of June 30,
1990, Anastacia owned 136,598 shares of Zenith; Oscar and
Rodrigo owned 8,715,637 and 4,250 shares, respectively. 3

On May 9, 2000, Zenith and Rodrigo filed a complaint 4 with

the Securities and Exchange Commission (SEC) against Oscar,
docketed as SEC Case No. 05-00-6615. The complaint stated
that it is "a derivative suit initiated and filed by the
complainant Rodrigo C. Reyes to obtain an accounting of the
funds and assets of ZENITHINSURANCE CORPORATION which
are now or formerly in the control, custody, and/or possession
of respondent [herein petitioner Oscar] and to determine the
shares of stock of deceased spouses Pedro and
Anastacia Reyes that were arbitrarily and fraudulently
appropriated [by Oscar] for himself [and] which were not
collated and taken into account in the partition, distribution,
and/or settlement of the estate of the deceased spouses, for
which he should be ordered to account for all the income from
the time he took these shares of stock, and should now deliver
to his brothers and sisters their just and respective
shares." 5 [Emphasis supplied.]

In his Answer with Counterclaim, 6 Oscar denied the charge

that he illegally acquired the shares of Anastacia Reyes. He
asserted, as a defense, that he purchased the subject shares
with his own funds from the unissued stocks of Zenith, and that
the suit is not a bona fide derivative suit because the requisites
therefor have not been complied with. He thus questioned the
SEC's jurisdiction to entertain the complaint because it pertains
to the settlement of the estate of Anastacia Reyes.

When Republic Act (R.A.) No. 8799 7 took effect, the SEC's
exclusive and original jurisdiction over cases enumerated in
Section 5 of Presidential Decree (P.D.) No. 902-A was
transferred to the RTC designated as a special
commercial court. 8 The records of Rodrigo's SEC case were
thus turned over to the RTC, Branch 142, Makati, and
docketed as Civil Case No. 00-1553.

On October 22, 2002, Oscar filed a Motion to Declare

Complaint as Nuisance or Harassment Suit. 9 He claimed that
the complaint is a mere nuisance or harassment suit and should,
according to the Interim Rules of Procedure for
Intra-Corporate Controversies, be dismissed; and that it is not
a bona fide derivative suit as it partakes of the nature of a
petition for the settlement of estate of the deceased Anastacia
that is outside the jurisdiction of a special commercial court.
The RTC, in its Order dated November 29,
2002 (RTC Order), denied the motion in part and declared: cHDaEI

A close reading of the Complaint disclosed the presence

of two (2) causes of action, namely: a) a derivative suit
for accounting of the funds and assets of the
corporation which are in the control, custody, and/or
possession of the respondent [herein petitioner Oscar]
with prayer to appoint a management committee; and
b) an action for determination of the shares of stock of
deceased spouses Pedro and Anastacia Reyes allegedly
taken by respondent, its accounting and the
corresponding delivery of these shares to the parties'
brothers and sisters. The latter is not a derivative suit
and should properly be threshed out in a petition for
settlement of estate.

Accordingly, the motion is denied. However, only the

derivative suit consisting of the first cause of action will
be taken cognizance of by this Court. 10
Oscar thereupon went to the CA on a petition
for certiorari, prohibition, and mandamus 11 and prayed that
the RTC Order be annulled and set aside and that
the trialcourt be prohibited from continuing with the
proceedings. The appellate court affirmed the RTC Order and
denied the petition in its Decision dated May 26, 2004. It
likewise denied Oscar's motion for reconsideration in a
Resolution dated October 21, 2004.

Petitioner now comes before us on appeal through a petition for

review on certiorari under Rule 45 of the Rules of Court.

ASSIGNMENT OF ERRORS

Petitioner Oscar presents the following points as conclusions the

CA should have made:

1. that the complaint is a mere nuisance or

harassment suit that should be dismissed
under the Interim Rules of Procedure of
Intra-Corporate Controversies; and

2. that the complaint is not a bona fide derivative

suit but is in fact in the nature of a petition
for settlement of estate; hence, it is outside
the jurisdiction of the RTC acting as a special
commercial court.

Accordingly, he prays for the setting aside and annulment of

the CA decision and resolution, and the dismissal of Rodrigo's
complaint before the RTC. SECAHa

THE COURT'S RULING

We find the petition meritorious.

The core question for our determination is whether

the trial court, sitting as a special commercial court, has
jurisdiction over the subject matter of Rodrigo's complaint. To
resolve it, we rely on the judicial principle that "jurisdiction
over the subject matter of a case is conferred by law and is
determined by the allegations of the complaint, irrespective of
whether the plaintiff is entitled to all or some of the claims
asserted therein." 12

JURISDICTION OF SPECIAL COMMERCIAL COURTS

P.D. No. 902-A enumerates the cases over which the SEC (now
the RTC acting as a special commercial court) exercises
exclusive jurisdiction:

SEC. 5. In addition to the regulatory and adjudicative

functions of the Securities and Exchange Commission
over corporations, partnership, 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 or schemes employed by or any acts of

the board of directors, business associates, its
officers or partners, amounting to fraud and
misrepresentation which may be detrimental to
the interest of the public and/or of the
stockholders, partners, members of associations
or organizations registered with the Commission.
 b) Controversies arising out of 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; and

c) Controversies in the election or appointment of

directors, trustees, officers, or managers of such
corporations, partnerships, or associations.

The allegations set forth in Rodrigo's complaint principally

invoke Section 5, paragraphs (a) and (b) above as basis for the
exercise of the RTC's special court jurisdiction. Our focus in
examining the allegations of the complaint shall therefore be on
these two provisions. CaATDE

Fraudulent Devices and Schemes

The rule is that a complaint must contain a plain, concise, and

direct statement of the ultimate facts constituting the
plaintiff's cause of action and must specify the relief
sought. 13 Section 5, Rule 8 of the Revised Rules
of Court provides that in all averments of fraud or mistake, the
circumstances constituting fraud or mistake must be stated
with particularity. 14 These rules find specific application to
Section 5 (a) of P.D. No. 902-A which speaks of corporate
devices or schemes that amount to fraud or misrepresentation
detrimental to the public and/or to the stockholders.

In an attempt to hold Oscar responsible for corporate fraud,

Rodrigo alleged in the complaint the following:

3. This is a complaint . . . to determine the shares of

stock of the deceased spouses Pedro and
Anastacia Reyes that were arbitrarily and fraudulently
appropriated for himself [herein petitioner
Oscar] which were not collated and taken into account
in the partition, distribution, and/or settlement of the
estate of the deceased Spouses Pedro and
Anastacia Reyes, for which he should be ordered to
account for all the income from the time he took these
shares of stock, and should now deliver to his brothers
and sisters their just and respective shares with the
corresponding equivalent amount of P7,099,934.82
plus interest thereon from 1978 representing his
obligations to the Associated Citizens' Bank that was
paid for his account by his late mother, Anastacia
C. Reyes. This amount was not collated or taken into
account in the partition or distribution of the estate of
their late mother, Anastacia C. Reyes.

3.1. Respondent Oscar C. Reyes, through other schemes

of fraud including misrepresentation, unilaterally, and
for his own benefit, capriciously transferred and took
possession and control of the management of
Zenith Insurance Corporation which is considered as a
family corporation, and other properties and businesses
belonging to Spouses Pedro and Anastacia Reyes. TDcEaH
 xxx xxx xxx

4.1. During the increase of capitalization of Zenith

Insurance Corporation, sometime in 1968, the
property covered by TCT No. 225324 was illegally and
fraudulently used by respondent as a collateral.

xxx xxx xxx

5. The complainant Rodrigo C. Reyes discovered

that by some manipulative scheme, the shareholdings of
their deceased mother, Doña Anastacia C. Reyes, shares
of stocks and [sic] valued in the corporate books at
P7,699,934.28, more or less, excluding interest
and/or dividends, had been transferred solely in the
name of respondent. By such fraudulent manipulations
and misrepresentation, the shareholdings of said
respondent Oscar C. Reyes abruptly increased to
P8,715,637.00 [sic] and becomes [sic] the majority
stockholder of Zenith Insurance Corporation, which
portion of said shares must be distributed equally
amongst the brothers and sisters of the respondent
Oscar C. Reyes including the complainant herein.

xxx xxx xxx

9.1 The shareholdings of deceased Spouses

Pedro Reyes and Anastacia C. Reyes valued at
P7,099,934.28 were illegally and fraudulently
transferred solely to the respondent's [herein petitioner
Oscar] name and installed himself as a majority
stockholder of Zenith Insurance Corporation [and]
thereby deprived his brothers and sisters of their
 respective equal shares thereof including complainant
hereto.

xxx xxx xxx

10.1 By refusal of the respondent to account of his [sic]

shareholdings in the company, he illegally and
fraudulently transferred solely in his name
wherein [sic] the shares of stock of the deceased
Anastacia C. Reyes [which] must be properly collated
and/or distributed equally amongst the children,
including the complainant Rodrigo C. Reyes herein, to
their damage and prejudice.

xxx xxx xxx

11.1 By continuous refusal of the respondent to

account of his [sic] shareholding with Zenith Insurance
Corporation[,] particularly the number of shares of
stocks illegally and fraudulently transferred to him
from their deceased parents Sps. Pedro and
Anastacia Reyes[,] which are all subject for collation
and/or partition in equal shares among their children.
[Emphasis supplied.] HTcDEa

Allegations of deceit, machination, false pretenses,

misrepresentation, and threats are largely conclusions of law
that, without supporting statements of the facts to which the
allegations of fraud refer, do not sufficiently state an effective
cause of action. 15 The late Justice Jose Feria, a noted authority
in Remedial Law, declared that fraud and mistake are required
to be averred with particularity in order to enable the opposing
party to controvert the particular facts allegedly constituting
such fraud or mistake. 16

Tested against these standards, we find that the charges of

fraud against Oscar were not properly supported by the
required factual allegations. While the complaint contained
allegations of fraud purportedly committed by him, these
allegations are not particular enough to bring the controversy
within the special commercial court's jurisdiction; they are not
statements of ultimate facts, but are mere conclusions of law:
how and why the alleged appropriation of shares can be
characterized as "illegal and fraudulent" were not explained nor
elaborated on.

Not every allegation of fraud done in a corporate setting or

perpetrated by corporate officers will bring the case within the
special commercial court's jurisdiction. To fall within this
jurisdiction, there must be sufficient nexus showing that the
corporation's nature, structure, or powers were used to
facilitate the fraudulent device or scheme. Contrary to this
concept, the complaint presented a reverse situation. No
corporate power or office was alleged to have facilitated the
transfer of the shares; rather, Oscar, as an individual and
without reference to his corporate personality, was alleged to
have transferred the shares of Anastacia to his name, allowing
him to become the majority and controlling stockholder of
Zenith, and eventually, the corporation's President. This is the
essence of the complaint read as a whole and is particularly
demonstrated under the following allegations:
 5. The complainant Rodrigo C. Reyes discovered that
by some manipulative scheme, the shareholdings of
their deceased mother, Doña Anastacia C. Reyes, shares
of stocks and [sic] valued in the corporate books at
P7,699,934.28, more or less, excluding interest
and/or dividends, had been transferred solely in the
name of respondent. By such fraudulent manipulations
and misrepresentation, the shareholdings of said
respondent Oscar C. Reyes abruptly increased to
P8,715,637.00 [sic] and becomes [sic] the majority
stockholder of Zenith Insurance Corporation, which
portion of said shares must be distributed equally
amongst the brothers and sisters of the respondent
Oscar C. Reyes including the complainant herein. CHDAEc

xxx xxx xxx

9.1 The shareholdings of deceased Spouses

Pedro Reyes and Anastacia C. Reyes valued at
P7,099,934.28 were illegally and fraudulently
transferred solely to the respondent's [herein petitioner
Oscar] name and installed himself as a majority
stockholder of Zenith Insurance Corporation [and]
thereby deprived his brothers and sisters of their
respective equal shares thereof including complainant
hereto. [Emphasis supplied.]

In ordinary cases, the failure to specifically allege the fraudulent

acts does not constitute a ground for dismissal since such defect
can be cured by a bill of particulars. In cases governed by the
Interim Rules of Procedure on Intra-Corporate Controversies,
however, a bill of particulars is a prohibited pleading. 17 It is
essential, therefore, for the complaint to show on its face what
are claimed to be the fraudulent corporate acts if the
complainant wishes to invoke the court's special commercial
jurisdiction.

We note that twice in the course of this case, Rodrigo had been
given the opportunity to study the propriety of amending or
withdrawing the complaint, but he consistently refused.
The court's function in resolving issues of jurisdiction is limited
to the review of the allegations of the complaint and, on the
basis of these allegations, to the determination of whether they
are of such nature and subject that they fall within the terms of
the law defining the court's jurisdiction. Regretfully, we cannot
read into the complaint any specifically alleged corporate fraud
that will call for the exercise of the court's special commercial
jurisdiction. Thus, we cannot affirm the RTC's assumption of
jurisdiction over Rodrigo's complaint on the basis of Section 5
(a) of P.D. No. 902-A. 18

Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in

the Court's approach in classifying what constitutes an
intra-corporate controversy. Initially, the main consideration
in determining whether a dispute constitutes an
intra-corporate controversy was limited to a consideration of
the intra-corporate relationship existing between or among the
parties. 19 The types of relationships embraced under Section 5
(b), as declared in the case of Union Glass & Container Corp. v.
SEC, 20 were as follows: SAEHaC
 a) between the corporation, partnership, or association
and the public;

b) between the corporation, partnership, or association

and its stockholders, partners, members, or
officers;

c) between the corporation, partnership, or association

and the State as far as its franchise, permit or
license to operate is concerned; and

d) among the stockholders, partners, or associates

themselves. [Emphasis supplied.]

The existence of any of the above intra-corporate relations was

sufficient to confer jurisdiction to the SEC, regardless of the
subject matter of the dispute. This came to be known as
the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol

Mountain Reserve, Inc., 21 the Court introduced the nature of
the controversy test. We declared in this case that it is not the
mere existence of an intra-corporate relationship that gives rise
to an intra-corporate controversy; to rely on the relationship
test alone will divest the regular courts of their jurisdiction for
the sole reason that the dispute involves a corporation, its
directors, officers, or stockholders. We saw that there is no legal
sense in disregarding or minimizing the value of the nature of
the transactions which gives rise to the dispute.

Under the nature of the controversy test, the incidents of that

relationship must also be considered for the purpose of
ascertaining whether the controversy itself is
intra-corporate. 22 The controversy must not only be rooted in
the existence of an intra-corporate relationship, but must as
well pertain to the enforcement of the parties' correlative
rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the
corporation. If the relationship and its incidents are merely
incidental to the controversy or if there will still be conflict even
if the relationship does not exist, then no intra-corporate
controversy exists. HICSaD

The Court then combined the two tests and declared that
jurisdiction should be determined by considering not only the
status or relationship of the parties, but also the nature of the
question under controversy. 23 This two-tier test was adopted
in the recent case of Speed Distribution, Inc. v. Court of
Appeals: 24

To determine whether a case involves an

intra-corporate controversy, and is to be heard and
decided by the branches of the RTC specifically
designated by the Court to try and decide such cases,
two elements must concur: (a) the status or
relationship of the parties; and (2) the nature of the
question that is the subject of their controversy.

The first element requires that the controversy must

arise out of intra-corporate or partnership relations
between any or all of the parties and the corporation,
partnership, or association of which they are
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 franchises. The second
element requires that the dispute among the parties be
intrinsically connected with the regulation of the
corporation. If the nature of the controversy involves
matters that are purely civil in character, necessarily,
the case does not involve an intra-corporate
controversy. HEDaTA

Given these standards, we now tackle the question posed for

our determination under the specific circumstances of this case:

Application of the Relationship Test

Is there an intra-corporate relationship between the parties

that would characterize the case as an intra-corporate dispute?

We point out at the outset that while Rodrigo holds shares of

stock in Zenith, he holds them in two capacities: in his own
right with respect to the 4,250 shares registered in his name,
and as one of the heirs of Anastacia Reyes with respect to the
136,598 shares registered in her name. What is material in
resolving the issues of this case under the allegations of the
complaint is Rodrigo's interest as an heir since the subject
matter of the present controversy centers on the shares of
stocks belonging to Anastacia, not on Rodrigo's
personally-owned shares nor on his personality as shareholder
owning these shares. In this light, all reference to shares of
stocks in this case shall pertain to the shareholdings of the
deceased Anastacia and the parties' interest therein as her
heirs.

Article 777 of the Civil Code declares that the successional

rights are transmitted from the moment of death of the
decedent. Accordingly, upon Anastacia's death, her children
acquired legal title to her estate (which title includes her
shareholdings in Zenith), and they are, prior to the estate's
partition, deemed co-owners thereof. 25This status as
co-owners, however, does not immediately and necessarily
make them stockholders of the corporation. Unless and until
there is compliance with Section 63 of the Corporation Code on
the manner of transferring shares, the heirs do not become
registered stockholders of the corporation. Section 63 provides:

Section 63. Certificate of stock and transfer of shares.

— The capital stock of stock corporations shall be
divided into shares for which certificates signed by the
president or vice-president, countersigned by the
secretary or assistant secretary, and sealed with the
seal of the corporation shall be issued in accordance
with the by-laws. Shares of stock so issued are personal
property and may be transferred by delivery of the
certificate or certificates indorsed by the owner or his
attorney-in-fact or other person legally authorized to
make the transfer. No transfer, however, shall be valid,
except as between the parties, until the transfer is
recorded in the books of the corporation so as to show
the names of the parties to the transaction, the date of
 the transfer, the number of the certificate or
certificates, and the number of shares transferred.
[Emphasis supplied.] ASCTac

No shares of stock against which the corporation holds

any unpaid claim shall be transferable in the books of
the corporation.

Simply stated, the transfer of title by means of succession,

though effective and valid between the parties involved (i.e.,
between the decedent's estate and her heirs), does not bind the
corporation and third parties. The transfer must be registered
in the books of the corporation to make the transferee-heir a
stockholder entitled to recognition as such both by the
corporation and by third parties. 26

We note, in relation with the above statement, that in Abejo v.

Dela Cruz 27 and TCL Sales Corporation v. Court of
Appeals 28 we did not require the registration of the transfer
before considering the transferee a stockholder of the
corporation (in effect upholding the existence of an
intra-corporate relation between the parties and bringing the
case within the jurisdiction of the SEC as an intra-corporate
controversy). A marked difference, however, exists between
these cases and the present one.

In Abejo and TCL Sales, the transferees held definite and

uncontested titles to a specific number of shares of the
corporation; after the transferee had establishedprima
facie ownership over the shares of stocks in question,
registration became a mere formality in confirming their status
as stockholders. In the present case, each of Anastacia's heirs
holds only an undivided interest in the shares. This interest, at
this point, is still inchoate and subject to the outcome of a
settlement proceeding; the right of the heirs to specific,
distributive shares of inheritance will not be determined until
all the debts of the estate of the decedent are paid. In short, the
heirs are only entitled to what remains after payment of the
decedent's debts; 29 whether there will be residue remains to be
seen. Justice Jurado aptly puts it as follows:

No succession shall be declared unless and until a

liquidation of the assets and debts left by the decedent
shall have been made and all his creditors are fully paid.
Until a final liquidation is made and all the debts are
paid, the right of the heirs to inherit remains inchoate.
This is so because under our rules of
procedure, liquidation is necessary in order to
determine whether or not the decedent has left any
liquid assets which may be transmitted to his

heirs. 30 [Emphasis supplied.]

Rodrigo must, therefore, hurdle two obstacles before he can be

considered a stockholder of Zenith with respect to the
shareholdings originally belonging to Anastacia.First, he must
prove that there are shareholdings that will be left to him and
his co-heirs, and this can be determined only in a settlement of
the decedent's estate. No such proceeding has been commenced
to date. Second, he must register the transfer of the shares
allotted to him to make it binding against the corporation. He
cannot demand that this be done unless and until he has
established his specific allotment (and prima facie ownership) of
the shares. Without the settlement of Anastacia's estate, there
can be no definite partition and distribution of the estate to the
heirs. Without the partition and distribution, there can be no
registration of the transfer. And without the registration, we
cannot consider the transferee-heir a stockholder who may
invoke the existence of an intra-corporate relationship as
premise for an intra-corporate controversy within the
jurisdiction of a special commercial court.

In sum, we find that — insofar as the subject shares of stock

(i.e., Anastacia's shares) are concerned — Rodrigo cannot be
considered a stockholder of Zenith. Consequently, we cannot
declare that an intra-corporate relationship exists that would
serve as basis to bring this case within the special
commercial court's jurisdiction under Section 5 (b) of P.D.
902-A, as amended. Rodrigo's complaint, therefore, fails the
relationship test. aESTAI

Application of the Nature of Controversy Test

The body rather than the title of the complaint determines the
nature of an action. 31 Our examination of the complaint yields
the conclusion that, more than anything else, the complaint is
about the protection and enforcement of successional rights.
The controversy it presents is purely civil rather than corporate,
although it is denominated as a "complaint for accounting of all
corporate funds and assets".

Contrary to the findings of both the trial and appellate courts,

we read only one cause of action alleged in the complaint. The
"derivative suit for accounting of the funds and assets of the
corporation which are in the control, custody, and/or
possession of the respondent [herein petitioner Oscar]" does not
constitute a separate cause of action but is, as correctly claimed
by Oscar, only an incident to the "action for determination of
the shares of stock of deceased spouses Pedro and
Anastacia Reyesallegedly taken by respondent, its accounting
and the corresponding delivery of these shares to the parties'
brothers and sisters". There can be no mistake of the
relationship between the "accounting" mentioned in the
complaint and the objective of partition and distribution when
Rodrigo claimed in paragraph 10.1 of the complaint that: DTcASE

10.1 By refusal of the respondent to account

of [sic] his shareholdings in the company, he illegally
and fraudulently transferred solely in his name
wherein [sic] the shares of stock of the deceased
Anastacia C. Reyes [which] must be properly collated
and/or distributed equally amongst the children
including the complainant Rodrigo C. Reyes herein to
their damage and prejudice.

We particularly note that the complaint contained no

sufficient allegation that justified the need for an
accounting other than to determine the extent of
Anastacia's shareholdings for purposes of distribution.

Another significant indicator that points us to the real nature

of the complaint are Rodrigo's repeated claims of illegal and
fraudulent transfers of Anastacia's shares by Oscar to the
prejudice of the other heirs of the decedent; he cited these
allegedly fraudulent acts as basis for his demand for the
collation and distribution of Anastacia's shares to the heirs.
These claims tell us unequivocally that the present controversy
arose from the parties' relationship as heirs of Anastacia
and not as shareholders of Zenith. Rodrigo, in filing the
complaint, is enforcing his rights as a co-heir and not as a
stockholder of Zenith. The injury he seeks to remedy is one
suffered by an heir (for the impairment of his successional
rights) and not by the corporation nor by Rodrigo as a
shareholder on record.

More than the matters of injury and redress, what Rodrigo

clearly aims to accomplish through his allegations of illegal
acquisition by Oscar is the distribution of Anastacia's
shareholdings without a prior settlement of her estate — an
objective that, by law and established jurisprudence, cannot be
done. The RTC of Makati, acting as a special commercial court,
has no jurisdiction to settle, partition, and distribute the estate
of a deceased. A relevant provision — Section 2 of Rule 90 of
the Revised Rules of Court — that contemplates properties of
the decedent held by one of the heirs declares:

Questions as to advancement made or alleged to have

been made by the deceased to any heir may be heard
and determined by the court having jurisdiction of the
estate proceedings; and the final order of
the court thereon shall be binding on the person raising
the questions and on the heir. [Emphasis supplied.]
 Worth noting are this Court's statements in the case
of Natcher v. Court of Appeals: 32

Matters which involve settlement and distribution of

the estate of the decedent fall within the exclusive
province of the probate court in the exercise of its
limited jurisdiction. CaSHAc

xxx xxx xxx

It is clear that trial courts trying an ordinary action

cannot resolve to perform acts pertaining to a special
proceeding because it is subject to specific prescribed
rules. [Emphasis supplied.]

That an accounting of the funds and assets of Zenith to

determine the extent and value of Anastacia's shareholdings
will be undertaken by a probate court and not by a special
commercial court is completely consistent with the
probate court's limited jurisdiction. It has the power to enforce
an accounting as a necessary means to its authority to
determine the properties included in the inventory of the estate
to be administered, divided up, and distributed. Beyond this,
the determination of title or ownership over the subject shares
(whether belonging to Anastacia or Oscar) may be conclusively
settled by the probate court as a question of collation or
advancement. We had occasion to recognize the court's
authority to act on questions of title or ownership in a collation
or advancement situation in Coca v. Pangilinan33 where we
ruled:
 It should be clarified that whether a particular matter
should be resolved by the Court of First Instance in the
exercise of its general jurisdiction or of its limited
probate jurisdiction is in reality not a jurisdictional
question. In essence, it is a procedural question involving
a mode of practice "which may be waived".

As a general rule, the question as to title to property

should not be passed upon in the testate or intestate
proceeding. That question should be ventilated in a
separate action. That general rule has qualifications or
exceptions justified by expediency and convenience.

Thus, the probate court may provisionally pass upon in

an intestate or testate proceeding the question of
inclusion in, or exclusion from, the inventory of a piece
of property without prejudice to its final determination
in a separate action.

Although generally, a probate court may not decide a

question of title or ownership, yet if the interested
parties are all heirs, or the question is one of collation
or advancement, or the parties consent to the
assumption of jurisdiction by the probate court and the
rights of third parties are not impaired, the
probate court is competent to decide the question of
ownership. [Citations omitted. Emphasis supplied.] AEIcSa

In sum, we hold that the nature of the present controversy is

not one which may be classified as an intra-corporate dispute
and is beyond the jurisdiction of the special
commercial court to resolve. In short, Rodrigo's complaint also
fails the nature of the controversy test.

DERIVATIVE SUIT

Rodrigo's bare claim that the complaint is a derivative suit will

not suffice to confer jurisdiction on the RTC (as a special
commercial court) if he cannot comply with the requisites for
the existence of a derivative suit. These requisites are:

a. the party bringing suit should be a shareholder

during the time of the act or transaction
complained of, the number of shares not being
material;

b. the party has tried to exhaust intra-corporate

remedies, i.e., has made a demand on the board
of directors for the appropriate relief, but the
latter has failed or refused to heed his plea; and

c. the cause of action actually devolves on the

corporation; the wrongdoing or harm having
been or being caused to the corporation and not
to the particular stockholder bringing the suit. 34

Based on these standards, we hold that the allegations of the

present complaint do not amount to a derivative suit.

First, as already discussed above, Rodrigo is not a shareholder

with respect to the shareholdings originally belonging to
Anastacia; he only stands as a transferee-heir whose rights to
the share are inchoate and unrecorded. With respect to his own
individually-held shareholdings, Rodrigo has not alleged any
individual cause or basis as a shareholder on record to proceed
against Oscar.

Second, in order that a stockholder may show a right to sue on

behalf of the corporation, he must allege with some
particularity in his complaint that he has exhausted his
remedies within the corporation by making a sufficient
demand upon the directors or other officers for appropriate
relief with the expressed intent to sue if relief is
denied. 35 Paragraph 8 of the complaint hardly satisfies this
requirement since what the rule contemplates is the exhaustion
of remedies within the corporate setting: AaCTID

8. As members of the same family, complainant

Rodrigo C. Reyes has resorted [to] and exhausted all
legal means of resolving the dispute with the end view
of amicably settling the case, but the dispute between
them ensued.

Lastly, we find no injury, actual or threatened, alleged to have

been done to the corporation due to Oscar's acts. If indeed he
illegally and fraudulently transferred Anastacia's shares in his
own name, then the damage is not to the corporation but to his
co-heirs; the wrongful transfer did not affect the capital stock
or the assets of Zenith. As already mentioned, neither has
Rodrigo alleged any particular cause or wrongdoing against the
corporation that he can champion in his capacity as a
shareholder on record. 36

In summary, whether as an individual or as a derivative suit,

the RTC — sitting as special commercial court — has no
jurisdiction to hear Rodrigo's complaint since what is involved is
the determination and distribution of successional rights to the
shareholdings of Anastacia Reyes. Rodrigo's proper remedy,
under the circumstances, is to institute a special proceeding for
the settlement of the estate of the deceased Anastacia Reyes, a
move that is not foreclosed by the dismissal of his present
complaint.

WHEREFORE, we hereby GRANT the petition and REVERSE

the decision of the Court of Appeals dated May 26, 2004 in
CA-G.R. SP No. 74970. The complaint before
theRegional Trial Court, Branch 142, Makati, docketed as Civil
Case No. 00-1553, is ordered DISMISSED for lack of
jurisdiction.

SO ORDERED.

||| (Reyes v. Regional Trial Court of Makati, Branch 142, G.R. No.
165744, [August 11, 2008], 583 PHIL 591-617)

G.R. No. 160146. December 11, 2009.]

LESLIE OKOL, petitioner, vs. SLIMMERS WORLD I

NTERNATIONAL, BEHAVIOR MODIFICATIONS,
INC., and RONALD JOSEPH MOY, respondents.

DECISION

CARPIO, J : p
 The Case

Before the Court is a petition for review

on certiorari 1 assailing the Decision 2 dated 18 October
2002 and Resolution dated 22 September 2003 of the
Court of Appeals in CA-G.R. SP No. 69893, which set aside
the Resolutions dated 29 May 2001 and 21 December
2001 of the National Labor Relations Commission (NLRC).

The Facts

Respondent Slimmers World International operating

under the name Behavior Modifications, Inc.
(Slimmers World) employed petitioner Leslie Okol (Okol) as
a management trainee on 15 June 1992. She rose up the
ranks to become Head Office Manager and then Director and
Vice President from 1996 until her dismissal on 22
September 1999.

On 28 July 1999, prior to Okol's

dismissal, Slimmers World preventively suspended Okol. The
suspension arose from the seizure by the Bureau of Customs
of seven Precor elliptical machines and seven Precor
treadmills belonging to or consigned to Slimmers World. The
shipment of the equipment was placed under the names
of Okol and two customs brokers for a value less than
US$500. For being undervalued, the equipment were seized.

On 2 September 1999, Okol received a memorandum

that her suspension had been extended from 2 September
until 1 October 1999 pending the outcome of the
investigation on the Precor equipment importation.
 On 17 September 1999, Okol received another
memorandum from Slimmers World requiring her to
explain why no disciplinary action should be taken against
her in connection with the equipment seized by the Bureau
of Customs.

On 19 September 1999, Okol filed her written

explanation. However, Slimmers World found Okol's
explanation to be unsatisfactory. Through a letter dated 22
September 1999 signed by its president Ronald Joseph Moy
(Moy), Slimmers World terminated Okol's employment. DECSIT

Okol filed a complaint 3 with the Arbitration branch of

the NLRC against Slimmers World, Behavior Modifications,
Inc. and Moy (collectively called respondents) for illegal
suspension, illegal dismissal, unpaid commissions, damages
and attorney's fees, with prayer for reinstatement and
payment of backwages.

On 22 February 2000, respondents filed a Motion to

Dismiss 4 the case with a reservation of their right to file a
Position Paper at the proper time. Respondents asserted
that the NLRC had no jurisdiction over the subject matter of
the complaint.

In an Order, 5 dated 20 March 2000, the labor

arbiter granted the motion to dismiss. The labor arbiter
ruled that Okol was the vice-president of Slimmers Worldat
the time of her dismissal. Since it involved a corporate officer,
the dispute was an intra-corporate controversy falling
outside the jurisdiction of the Arbitration branch.
 Okol filed an appeal with the NLRC. In a
Resolution 6 dated 29 May 2001, the NLRC reversed and
set aside the labor arbiter's order. The dispositive portion of
the resolution states:

WHEREFORE, the Order appealed from is SET ASIDE

and REVERSED. A new one is hereby ENTERED
ordering respondent Behavior Modification,
Inc./Slimmers WorldInternational to reinstate
complainant Leslie F. Okol to her former position with
full back wages which to date stood in the amount of
P10,000,000.00 computed from July 28, 1999 to
November 28, 2000 until fully reinstated; and the
further sum of P1,250,000.00 as indemnity pay plus
attorney's fee equivalent to ten (10%) of the total
monetary award. However, should reinstatement be
not feasible separation pay equivalent to one month
pay per year of service is awarded, a fraction of at least
six months considered one whole year.

All other claims are dismissed for lack of factual or legal

basis.

SO ORDERED. 7

Respondents filed a Motion for Reconsideration with

the NLRC. Respondents contended that the relief prayed for
was confined only to the question of jurisdiction. However,
the NLRC not only decided the case on the merits but did so
in the absence of position papers from both parties. In a
Resolution 8 dated 21 December 2001, the NLRC denied
the motion for lack of merit.
 Respondents then filed an appeal with the Court of
Appeals, docketed as CA-G.R. SP No. 69893.

The Ruling of the Court of Appeals

In a Decision 9 dated 18 October 2002, the appellate

court set aside the NLRC's Resolution dated 29 May 2001
and affirmed the labor arbiter's Order dated 20 March
2000. The Court of Appeals ruled that the case, being an
intra-corporate dispute, falls within the jurisdiction of the
regular courts pursuant to Republic Act No. 8799. 10 The
appellate court added that the NLRC had acted without
jurisdiction in giving due course to the complaint and
deprived respondents of their right to due process in
deciding the case on the merits.

Okol filed a Motion for Reconsideration which was

denied in a Resolution 11 dated 22 September 2003. STECAc

Hence, the instant petition.

The Issue

The issue is whether or not the NLRC has jurisdiction

over the illegal dismissal case filed by petitioner.

The Court's Ruling

The petition lacks merit.

Petitioner insists that the Court of Appeals erred in

ruling that she was a corporate officer and that the case is
an intra-corporate dispute falling within the jurisdiction of
the regular courts. Petitioner asserts that even as
vice-president, the work that she performed conforms to
that of an employee rather than a corporate officer. Mere
title or designation in a corporation will not, by itself,
determine the existence of an employer-employee
relationship. It is the "four-fold" test, namely (1) the power
to hire, (2) the payment of wages, (3) the power to dismiss,
and (4) the power to control, which must be applied.

Petitioner enumerated the instances that she was under the

power and control of Moy, Slimmers World's president: (1)
petitioner received salary evidenced by pay slips, (2) Moy
deducted Medicare and SSS benefits from petitioner's salary,
and (3) petitioner was dismissed from employment not
through a board resolution but by virtue of a letter from Moy.
Thus, having shown that an employer-employee relationship
exists, the jurisdiction to hear and decide the case is vested
with the labor arbiter and the NLRC.

Respondents, on the other hand, maintain that petitioner

was a corporate officer at the time of her dismissal
from Slimmers World as supported by the General
Information Sheet and Director's Affidavit attesting that
petitioner was an officer. Also, the factors cited by petitioner
that she was a mere employee do not prove that she was not
an officer of Slimmers World. Even the alleged absence of
any resolution of the Board of Directors approving
petitioner's termination does not constitute proof that
petitioner was not an officer. Respondents assert that
petitioner was not only an officer but also a stockholder and
director; which facts provide further basis that petitioner's
separation from Slimmers World does not come under the
NLRC's jurisdiction.

The issue revolves mainly on whether petitioner was an

employee or a corporate officer of Slimmers World. Section
25 of the Corporation Code enumerates corporate officers as
the president, secretary, treasurer and such other officers as
may be provided for in the by-laws. In Tabang v.
NLRC, 12 we held that an "office" is created by the charter of
the corporation and the officer is elected by the directors or
stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by action of
the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be
paid to such employee.

In the present case, the respondents, in their motion to

dismiss filed before the labor arbiter, questioned the
jurisdiction of the NLRC in taking cognizance of petitioner's
complaint. In the motion, respondents attached the General
Information Sheet 13 (GIS) dated 14 April 1998,
Minutes 14 of the meeting of the Board of Directors dated
14 April 1997 and Secretary's Certificate, 15 and the
Amended By-Laws 16 dated 1 August 1994
of Slimmers World as submitted to the SEC to show that
petitioner was a corporate officer whose rights do not fall
within the NLRC's jurisdiction. The GIS and minutes of the
meeting of the board of directors indicated that petitioner
was a member of the board of directors, holding one
subscribed share of the capital stock, and an elected
corporate officer. cDCIHT

The relevant portions of the Amended By-Laws

of Slimmers World which enumerate the power of the board
of directors as well as the officers of the corporation state:

Article II
The Board of Directors

1. Qualifications and Election — The general

management of the corporation shall be vested in a
board of five directors who shall be stockholders and
who shall be elected annually by the stockholders and
who shall serve until the election and qualification of
their successors.

xxx xxx xxx

Article III
Officers

xxx xxx xxx

4. Vice-President — Like the Chairman of the Board

and the President, the Vice-President shall be elected
by the Board of Directors from [its] own members.

The Vice-President shall be vested with all the powers

and authority and is required to perform all the duties
of the President during the absence of the latter for
any cause.

The Vice-President will perform such duties as the

Board of Directors may impose upon him from time to
time.
 xxx xxx xxx

Clearly, from the documents submitted by respondents,

petitioner was a director and officer of Slimmers World. The
charges of illegal suspension, illegal dismissal, unpaid
commissions, reinstatement and back wages imputed by
petitioner against respondents fall squarely within the ambit
of intra-corporate disputes. In a number of cases, 17 we have
held that a corporate officer's dismissal is always a corporate
act, or an intra-corporate controversy which arises between
a stockholder and a corporation. The question of
remuneration involving a stockholder and officer, not a mere
employee, is not a simple labor problem but a matter that
comes within the area of corporate affairs and management
and is a corporate controversy in contemplation of the
Corporation Code. 18

Prior to its amendment, Section 5 (c) of Presidential Decree

No. 902-A 19 (PD 902-A) provided that intra-corporate
disputes fall within the jurisdiction of the Securities and
Exchange Commission (SEC):

Sec. 5. In addition to the regulatory and adjudicative

functions of the Securities and Exchange Commission
over corporations, partnerships and other forms of
associations registered with it as expressly granted
under existing laws and decrees, it shall have original
and exclusive jurisdiction to hear and decide cases
involving: DCSETa
 xxx xxx xxx

c) Controversies in the election or appointments of

directors, trustees, officers or managers of such
corporations, partnerships or associations.

Subsection 5.2, Section 5 of Republic Act No. 8799, which

took effect on 8 August 2000, transferred to regional trial
courts the SEC's jurisdiction over all cases listed in Section 5
of PD 902-A:

5.2. The Commission's jurisdiction over all cases

enumerated under Section 5 of Presidential Decree No.
902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court.

xxx xxx xxx

It is a settled rule that jurisdiction over the subject

matter is conferred by law. 20 The determination of the
rights of a director and corporate officer dismissed from his
employment as well as the corresponding liability of a
corporation, if any, is an intra-corporate dispute subject to
the jurisdiction of the regular courts. Thus, the appellate
court correctly ruled that it is not the NLRC but the regular
courts which have jurisdiction over the present case.

WHEREFORE, we DENY the petition. We AFFIRM the

18 October 2002 Decision and 22 September 2003
Resolution of the Court of Appeals in CA-G.R. SP No. 69893.
This Decision is without prejudice to petitioner Leslie Okol's
taking recourse to and seeking relief through the appropriate
remedy in the proper forum.
 SO ORDERED.

||| (Okol v. Slimmers World International, G.R. No. 160146,

[December 11, 2009], 623 PHIL 13-22)

[G.R. No. 164888. December 6, 2006.]

RURAL BANK OF CORON (PALAWAN), INC.,

EMPIRE COLD STORAGE AND DEVELOPMENT
CORPORATION, CITIZENS DEVELOPMENT
INCORPORATED, CARIDAD B. GARCIA, SANDRA
G. ESCAT, LORNA GARCIA, and OLGA G.
ESCAT, petitioners, vs.
ANNALISA CORTES, respondent.

D E CI S IO N

CARPIO MORALES, J : p

In 1987, Virgilio Garcia, "founder" of petitioner corporations

(the corporations), hired the then still single
Annalisa Cortes (respondent) as
clerk of the Rural Bank ofCoron (Manila Office).

After Virgilio died, his son Victor took over the

management of the corporations.
Anita Cortes (Anita), the wife of Victor Garcia, was also
involved in the management of the corporations. Respondent
later married Anita's brother Eduardo Cortes.

Anita soon assumed the position of Vice President of petitioner

Citizens Development Incorporated (CDI) and practically
controlled the financial operations of almost allof the other
corporations in the course of which she allowed some of her
relatives and in-laws, including respondent, to hold several key
sensitive positions thereat.

Respondent later became the Financial Assistant, Personnel

Officer and Corporate Secretary of The Rural Bank of Coron,
Personnel Officer of CDI, and also Personnel Officer and
Disbursing Officer of The Empire Cold Storage Development
Corporation (ECSDC). She simultaneously received salaries from
these corporations.

On examination of the financial books of the corporations by

petitioner Sandra Garcia Escat, a daughter of Virgilio Garcia
who was previously residing in Spain, she found out that
respondent was involved in several anomalies, 1 drawing
petitioners to terminate respondent's services on November 23,
1998 in petitioner corporations. 2

By letter of November 25, 1998 3 addressed to individual

petitioners Caridad B. Garcia (widow of Virgilio Garcia),
Sandra G. Escat, and Olga G. Escat (another daughter ofVirgilio
Garcia), respondent's counsel conveyed respondent's willingness
to abide by the decision to terminate her but reminded them
that she was entitled to separation pay equivalent to 11
months salary as well as to the other benefits provided by law
in her favor. EcHIAC

Respondent's counsel thus demanded the

payment of respondent's unpaid salary for the
months of October and November 1998, separation pay
equivalent to 12 months salary, 4 13th month pay and other
benefits.

As the demand remained unheeded, respondent filed a

complaint 5 for illegal dismissal and non-payment of salaries
and other benefits, docketed as NLRC-NCR Case No.
00-05-05738-99.

Petitioners moved for the dismissal of the complaint on the

ground of lack of jurisdiction, contending that the case was an
intra-corporate controversy involving the removal of a
corporate officer, respondent being the Corporate
Secretary of the Rural Bank of Coron, Inc., hence, cognizable
by the Securities and Exchange Commission (SEC) pursuant to
Section 5 of PD 902-A. 6

In resolving the issue of jurisdiction, the Labor Arbiter noted as

follows:

It is to be noted that complainant, aside from her being

Corporate
Secretary of Rural Bank of Coron, complainant was
likewise appointed as Financial Assistant & Personnel
Officer of all respondents herein, whose services w[ere]
terminated on 23 November 1998, hence, the instant
complaint.
 Verily, a Financial Assistant & Personnel Officer is not a
Corporate Officer of the [petitioners'] corporation, thus,
pursuant to Article 217 of the Labor Code, as
amended, the instant case falls within the
ambit of original and exclusive jurisdiction of this

Office. 7 (Emphasis and underscoring supplied).

Eventually, the Labor Arbiter found for respondent, computing

the monetary award due her as follows:

Backwages P658,000.00

13th Month Pay for 1998, 1999 & 2000 63,000.00

P721,000.00

Separation Pay 315,000.00

Unpaid Salary 25,900.00

Attorney's fees 106,190.00

P1,168,090.00

Thus, the Labor Arbiter, by Decision of July 18, 2001,

disposed:

WHEREFORE, in view of all the foregoing, respondents

are hereby ordered to jointly and severally pay
complainant the total amount of ONE MILLION ONE
HUNDRED SIXTY-EIGHT THOUSAND NINETY
(P1,168,090.00) PESOS as discussed above. 8

On August 13, 2001, the tenth or last day of the

period of appeal, 9 petitioners filed a Notice of Appeal and
Motion for Reduction of Bond 10 to which they attached
aMemorandum on Appeal. 11 In their Motion for
Reduction of Bond, petitioners alleged that the corporations
were under financial distress and the Rural Bank of Coronwas
under receivership. They thus prayed that the amount of bond
be substantially reduced, preferably to one half thereof or even
lower. 12

By Resolution of October 16, 2001 13 , the National Labor

Relations Commission (NLRC), while noting that petitioners
timely filed the appeal, held that the same was not
accompanied by an appeal bond, a mandatory requirement
under Article 223 14 of the Labor Code and Section 6, Rule
VI of the NLRC New Rules of Procedure. It also noted that
the Motion for Reduction of Bond was "premised on
self-serving allegations." It accordingly dismissed the appeal.

Petitioners' Motion for Reconsideration 15 was denied by the

NLRC by November 26, 2001 Resolution, 16 hence, they filed a
Petition for Certiorari 17 before the Court ofAppeals. aSIATD

By Decision dated May 26, 2004 18 , the appellate court

dismissed the petition for lack of merit. Petitioners' motion for
reconsideration was also denied by Resolution ofAugust 13,
2004. 19

Hence, this petition, 20 petitioners faulting the appellate court

for:

. . . FAIL[URE] TO RULE THAT THE NLRC'S

RULE OF PROCEDURE WHICH PROVIDES FOR THE
POSTING OF A BOND AS A CONDITION PRECEDENT
FOR PERFECTING AN APPEAL AS A CONDITION
PRECEDENT FOR PERFECTING AN APPEAL IS
CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE.

II

. . . DISMISS[ING] PETITIONERS['] PETITION FOR

[CERTIORARI] BASED ON TECHNICALITY AND
FAIL[URE] TO DECIDE THE SAME BASED ON ITS
MERIT.

III

. . . DISMISSING PETITIONERS' PETITION FOR

CERTIORARI FROM THE DECISION OF THE NLRC FOR
NON-PERFECTION THEREOF.

IV

. . . DISMISSING PETITIONERS' PETITION FOR

[CERTIORARI] FROM THE DECISION OF THE NLRC
WITHOUT RESOLVING THE CASE BASED ON ITS
MERITS.

. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL

PETITIONERS ARE NOT SOLIDARY LIABLE TO PAY
THE RESPONDENT FOR HER MONETARY CLAIM IN
VIEW OF THE ABSENCEOF ANY EVIDENCE SHOWING
THAT THEY WERE MOTIVATED BY ILL-WILL OR
MALICE IN SEVERING HER EMPLOYMENT.

VI

. . . FAIL[URE] TO RESOLVE THE

ISSUE OF JURISDICTION. 21
While, indeed, respondent was the Corporate
Secretary of the Rural Bank of Coron, she was also its Financial
Assistant and the Personnel Officer of the two other petitioner
corporations. 22

Mainland Construction Co., Inc. v. Movilla 23 instructs that a

corporation can engage its corporate officers to perform
services under a circumstance which would make them
employees. 24

The Labor Arbiter has thus jurisdiction over respondent's

complaint.

On the first three assigned errors which bear on whether

petitioners' appeal before the NLRC was perfected:

As before the Court of Appeals, petitioners cite Cosico, Jr. v.

NLRC 25 and Taberrah v. NLRC 26 in support of their
contention that their appeal before the NLRC was perfected. As
correctly ruled by the Court of Appeals, however, the cited
cases are not in point.

. . . The appellant in Taberrah filed a motion

to fix appeal bond instead of posting an appeal bond;
and the Supreme Court relaxed the requirement
considering that thelabor arbiter's decision did not
contain a computation of the monetary award.
In Cosico, the appeal bond posted was of insufficient
amount but the Supreme Court ruled that
provisions of the Labor Code on requiring a bond on
appeal involving monetary awards must be given liberal
interpretation in line with the desired
 objectiveof resolving controversies on their merits.
Herein, no appeal bond, whether sufficient or not, was

ever filed by the petitioners. 27 (Italics in the original;

emphasis and underscoring supplied) CEHcSI

Petitioners additionally cite Star Angel Handicraft v.

NLRC 28 to support their position that there is a distinction
between the filing of an appeal within the reglementary period
and its perfection. In the parallel case of Computer Innovations
Center v. National Labor Relations Commission, 29 this Court
hesitated to reiterate the doctrine inStar Angel in this wise:

Petitioners invoke the aforementioned holding in Star

Angel that there is a distinction between the
filing of an appeal within the reglementary period and
its perfection, and that the appeal may be perfected
after the said reglementary period. Indeed, Star
Angel held that the filing of a motion for
reduction of appeal bond necessarily stays the
reglementary period for appeal. However, in this case,
the motion for reduction of appeal bond, which was
incorporated in the appeal memorandum, wasfiled
only on the tenth or final day of the reglementary
period. Under such circumstance, the motion for
reduction of appeal bond can no longer be deemed to
have stayed the appeal, and the petitioner faces the risk,
as had happened in this case, of summary
dismissal of the appeal for non-perfection.

Moreover, the reference in Star Angel to the

distinction between the period to file the appeal and to
perfect the appeal has been pointedly made only once
 by this Court in Gensoli v. NLRC thus, it has not
acquired the sheen of venerability reserved for
repeatedly-cited cases. The distinction, if any, is not
particularly evident or material in the Labor Code;
hence, the reluctance of the Court to adopt such
doctrine. Moreover, the present provision in the NLRC
Rules of Procedure, that "the filing of a motion to
reduce bond shall not stop the running of the period to
perfect appeal" flatly contradicts the notion expressed
in Star Angel that there is a distinction between the
filing an appeal and perfecting an appeal.

Ultimately, the disposition of Star Angel was premised

on the ruling that a motion for reduction of the appeal
bond necessarily stays the period for perfecting the
appeal, and that the employer cannot be expected to
perfect the appeal by posting the proper bond until
such time the said motion for reduction is resolved. The
unduly stretched-out distinction between the period to
file an appeal and to perfect an appeal was not
material to the resolution of Star Angel, and this could

be properly considered as obiter dictum. 30 (Italics in

the original; emphasis and underscoring supplied)

The appellate court did not thus err in dismissing the petition
before it. And contrary to petitioners' assertion, the appellate
court dismissed its petition not "on a mere technicality." For the
non-posting of an appeal bond within the reglementary period
divests the NLRC of its jurisdiction to entertain the appeal.
Thus, in the same case ofComputer Innovations Center, this
Court held:

Petitioners also characterize the appeal bond

requirement as a technical rule, and that the
dismissal of an appeal on purely technical grounds is
frowned upon. However, Article 223, which prescribes
the appeal bond requirement, is
a rule of jurisdiction and not of procedure. There is a
little leeway for condoning a liberal interpretation
thereof, and certainly none premised on the ground
that its requirements are mere technicalities. It must be
emphasized that there is no inherent right to an appeal
in a labor case, as it arises solely from grant of statute,
namely the Labor Code. IDTSEH

We have indeed held that the requirement for posting

the surety bond is not merely procedural
but jurisdictional and cannot be trifled with.
Non-compliance with such legal requirements is fatal
and has the effect of rendering the judgment final and
executory. The petitioners cannot be allowed to seek
refuge in a liberal application of rules for their

act of negligence. 31 (Emphasis and underscoring

supplied)

It bears emphasis that all that is required to perfect the appeal

is the posting of a bond to ensure that the award is eventually
paid should the appeal be dismissed. Petitioners should thus
have posted a bond, even if it were only partial, but they did
not. No relaxation of the Rule may thus be considered. 32
 In the case at bar, petitioner did not post
a full or partial appeal bond within the prescribed
period, thus, no appeal was perfected from the
decision of the Labor Arbiter. For this reason, the
decision sought to be appealed to the NLRC had become
final and executory and therefore immutable. Clearly
then, the NLRC has no authority to entertain the
appeal, much less to reverse the decision of the Labor
Arbiter. Any amendment or alteration made which
substantially affects the final and executory judgment
is null and void for lack of jurisdiction, including the

entire proceeding held for that purpose. 33 (Emphasis

and underscoring supplied)

As the decision of the Labor Arbiter had become final and

executory, a discussion of the fourth and fifth assigned errors is
no longer necessary.

WHEREFORE, the petition is DENIED.

SO ORDERED.

||| (Rural Bank of Coron (Palawan), Inc. v. Cortes, G.R. No.

164888, [December 6, 2006], 539 PHIL 498-509)

[G.R. No. 172013. October 2, 2009.]

PATRICIA HALAGUEÑA, MA. ANGELITA L.

PULIDO, MA. TERESITA P. SANTIAGO,
MARIANNE V. KATINDIG, BERNADETTE A.
CABALQUINTO, LORNA B. TUGAS, MARY
 CHRISTINE A. VILLARETE, CYNTHIA A.
STEHMEIER, ROSE ANNA G. VICTA, NOEMI R.
CRESENCIO, and other flight attendants of
PHILIPPINE AIRLINES, petitioners, vs. PHILIPPINE
AIRLINES INCORPORATED, respondent.

DECISION

PERALTA, J. : p

Before this Court is a petition for review on certiorari under

Rule 45 of the Rules of Court seeking to annul and set aside the
Decision 1 and the Resolution 2 of the Court of Appeals (CA) in
CA-G.R. SP. No. 86813.

Petitioners were employed as female flight attendants of

respondent Philippine Airlines (PAL) on different dates prior to
November 22, 1996. They are members of the Flight
Attendants and Stewards Association of the Philippines
(FASAP), a labor organization certified as the sole and exclusive
certified as the sole and exclusive bargaining representative of
the flight attendants, flight stewards and pursers of
respondent.

On July 11, 2001, respondent and FASAP entered into a

Collective Bargaining Agreement 3 incorporating the terms and
conditions of their agreement for the years 2000 to 2005,
hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

 A.For the Cabin Attendants hired before 22 November
1996:

xxx xxx xxx

3.Compulsory Retirement

Subject to the grooming standards provisions of this

Agreement, compulsory retirement shall be fifty-five
(55) for females and sixty (60) for males. . . . . cDHAaT

In a letter dated July 22, 2003, 4 petitioners and several

female cabin crews manifested that the aforementioned CBA
provision on compulsory retirement is discriminatory, and
demanded for an equal treatment with their male
counterparts. This demand was reiterated in a letter 5 by
petitioners' counsel addressed to respondent demanding the
removal of gender discrimination provisions in the coming
re-negotiations of the PAL-FASAP CBA.

On July 12, 2004, Robert D. Anduiza, President of FASAP

submitted their 2004-2005 CBA proposals 6 and manifested
their willingness to commence the collective bargaining
negotiations between the management and the association, at
the soonest possible time.

On July 29, 2004, petitioners filed a Special Civil Action for

Declaratory Relief with Prayer for the Issuance of Temporary
Restraining Order and Writ of Preliminary Injunction 7 with
the Regional Trial Court (RTC) of Makati City, Branch 147,
docketed as Civil Case No. 04-886, against respondent for the
invalidity of Section 144, Part A of the PAL-FASAP CBA. The
RTC set a hearing on petitioners' application for a TRO and,
thereafter, required the parties to submit their respective
memoranda.

On August 9, 2004, the RTC issued an Order 8 upholding its

jurisdiction over the present case. The RTC reasoned that:

In the instant case, the thrust of the Petition is Sec.

144 of the subject CBA which is allegedly
discriminatory as it discriminates against female flight
attendants, in violation of the Constitution, the Labor
Code, and the CEDAW. The allegations in the Petition
do not make out a labor dispute arising from
employer-employee relationship as none is shown to
exist. This case is not directed specifically against
respondent arising from any act of the latter, nor does
it involve a claim against the respondent. Rather, this
case seeks a declaration of the nullity of the questioned
provision of the CBA, which is within the Court's
competence, with the allegations in the Petition
constituting the bases for such relief sought.

The RTC issued a TRO on August 10, 2004, 9 enjoining the

respondent for implementing Section 144, Part A of the
PAL-FASAP CBA.

The respondent filed an omnibus motion 10 seeking

reconsideration of the order overruling its objection to the
jurisdiction of the RTC the lifting of the TRO. It further prayed
that the (1) petitioners' application for the issuance of a writ of
preliminary injunction be denied; and (2) the petition be
dismissed or the proceedings in this case be suspended.
On September 27, 2004, the RTC issued an Order 11 directing
the issuance of a writ of preliminary injunction enjoining the
respondent or any of its agents and representatives from
further implementing Sec. 144, Part A of the PAL-FASAP
CBA pending the resolution of the case. HSDCTA

Aggrieved, respondent, on October 8, 2004, filed a Petition for

Certiorari and Prohibition with Prayer for a Temporary
Restraining Order and Writ of Preliminary Injunction 12 with
the Court of Appeals (CA) praying that the order of the RTC,
which denied its objection to its jurisdiction, be annuled and set
aside for having been issued without and/or with grave abuse of
discretion amounting to lack of jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting

the respondent's petition, and ruled that:

WHEREFORE, the respondent court is by us declared to

have NO JURISDICTION OVER THE CASE BELOW and,
consequently, all the proceedings, orders and processes
it has so far issued therein are ANNULED and SET
ASIDE. Respondent court is ordered to DISMISS its Civil
Case No. 04-886.

SO ORDERED.

Petitioner filed a motion for reconsideration, 13 which was

denied by the CA in its Resolution dated March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE

SUBJECT MATTER IS A LABOR DISPUTE OR
 GRIEVANCE IS CONTRARY TO LAW AND
JURISPRUDENCE.

The main issue in this case is whether the RTC has jurisdiction
over the petitioners' action challenging the legality or
constitutionality of the provisions on the compulsory
retirement age contained in the CBA between respondent PAL
and FASAP.

Petitioners submit that the RTC has jurisdiction in all civil

actions in which the subject of the litigation is incapable of
pecuniary estimation and in all cases not within the exclusive
jurisdiction of any court, tribunal, person or body exercising
judicial or quasi-judicial functions. The RTC has the power to
adjudicate all controversies except those expressly
witheld * from the plenary powers of the court. Accordingly, it
has the power to decide issues of constitutionality or legality of
the provisions of Section 144, Part A of the PAL-FASAP CBA.
As the issue involved is constitutional in character, the labor
arbiter or the National Labor Relations Commission (NLRC) has
no jurisdiction over the case and, thus, the petitioners pray
that judgment be rendered on the merits declaring Section
144, Part A of the PAL-FASAP CBA null and void.

Respondent, on the other hand, alleges that the labor tribunals

have jurisdiction over the present case, as the controversy
partakes of a labor dispute. The dispute concerns the terms and
conditions of petitioners' employment in PAL, specifically their
retirement age. The RTC has no jurisdiction over the subject
matter of petitioners' petition for declaratory relief because the
Voluntary Arbitrator or panel of Voluntary Arbitrators have
original and exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation or
implementation of the CBA. Regular courts have no power to
set and fix the terms and conditions of employment. Finally,
respondent alleged that petitioners' prayer before this Court to
resolve their petition for declaratory relief on the merits is
procedurally improper and baseless.

The petition is meritorious.

Jurisdiction of the court is determined on the basis of the

material allegations of the complaint and the character of the
relief prayed for irrespective of whether plaintiff is entitled to
such relief. 14

In the case at bar, the allegations in the petition for declaratory

relief plainly show that petitioners' cause of action is the
annulment of Section 144, Part A of the PAL-FASAP CBA.
The pertinent portion of the petition recites:

CAUSE OF ACTION

24.Petitioners have the constitutional right to

fundamental equality with men under Section 14,
Article II, 1987 of the Constitution and, within the
specific context of this case, with the male cabin
attendants of Philippine Airlines.

26.Petitioners have the statutory right to equal work

and employment opportunities with men under Article
3, Presidential Decree No. 442, The Labor Code and,
within the specific context of this case, with the male
cabin attendants of Philippine Airlines.

27.It is unlawful, even criminal, for an employer to

discriminate against women employees with respect to
terms and conditions of employment solely on account
of their sex under Article 135 of the Labor Code as
amended by Republic Act No. 6725 or the Act
Strengthening Prohibition on Discrimination Against
Women. EScAID

28.This discrimination against Petitioners is likewise

against the Convention on the Elimination of All Forms
of Discrimination Against Women (hereafter,
"CEDAW"), a multilateral convention that the
Philippines ratified in 1981. The Government and its
agents, including our courts, not only must condemn
all forms of discrimination against women, but must
also implement measures towards its elimination.

29.This case is a matter of public interest not only

because of Philippine Airlines' violation of the
Constitution and existing laws, but also because it
highlights the fact that twenty-three years after the
Philippine Senate ratified the CEDAW, discrimination
against women continues.

31.Section 114, Part A of the PAL-FASAP

2000-20005 CBA on compulsory retirement from
service is invidiously discriminatory against and
manifestly prejudicial to Petitioners because, they are
compelled to retire at a lower age (fifty-five (55)
relative to their male counterparts (sixty (60)).
 33.There is no reasonable, much less lawful, basis for
Philippine Airlines to distinguish, differentiate or
classify cabin attendants on the basis of sex and thereby
arbitrarily set a lower compulsory retirement age of 55
for Petitioners for the sole reason that they are women.

37.For being patently unconstitutional and unlawful,

Section 114, Part A of the PAL-FASAP 2000-2005
CBA must be declared invalid and stricken down to the
extent that it discriminates against petitioner.

38.Accordingly, consistent with the constitutional and

statutory guarantee of equality between men and
women, Petitioners should be adjudged and declared
entitled, like their male counterparts, to work until
they are sixty (60) years old.

PRAYER

WHEREFORE, it is most respectfully prayed that the

Honorable Court:

c.after trial on the merits:

(I)declare Section 114, Part A of the PAL-FASAP

2000-2005 CBA INVALID, NULL and VOID to the
extent that it discriminates against Petitioners; . . . .

From the petitioners' allegations and relief prayed for in its

petition, it is clear that the issue raised is whether Section 144,
Part A of the PAL-FASAP CBA is unlawful and
unconstitutional. Here, the petitioners' primary relief in Civil
Case No. 04-886 is the annulment of Section 144, Part A of
the PAL-FASAP CBA, which allegedly discriminates against
them for being female flight attendants. The subject of
litigation is incapable of pecuniary estimation, exclusively
cognizable by the RTC, pursuant to Section 19 (1) of Batas
Pambansa Blg. 129, as amended. 15 Being an ordinary civil
action, the same is beyond the jurisdiction of labor tribunals. TIEHDC

The said issue cannot be resolved solely by applying the Labor

Code. Rather, it requires the application of the Constitution,
labor statutes, law on contracts and the Convention on the
Elimination of All Forms of Discrimination Against
Women, 16 and the power to apply and interpret the
constitution and CEDAW is within the jurisdiction of trial
courts, a court of general jurisdiction. In Georg Grotjahn GMBH
& Co. v. Isnani, 17 this Court held that 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.

Not every controversy or money claim by an employee against

the employer or vice-versa is within the exclusive jurisdiction of
the labor arbiter. Actions between employees and employer
where the employer-employee relationship is merely incidental
and the cause of action precedes from a different source of
obligation is within the exclusive jurisdiction of the regular
court. 18 Here, the employer-employee relationship between
the parties is merely incidental and the cause of action
ultimately arose from different sources of obligation, i.e., the
Constitution and CEDAW.

Thus, where 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. 19

If We divest the regular courts of jurisdiction over the case, then

which tribunal or forum shall determine the constitutionality or
legality of the assailed CBA provision?

This Court holds that the grievance machinery and voluntary

arbitrators do not have the power to determine and settle the
issues at hand. They have no jurisdiction and competence to
decide constitutional issues relative to the questioned
compulsory retirement age. Their exercise of jurisdiction is
futile, as it is like vesting power to someone who cannot wield
it.
In Gonzales v. Climax Mining Ltd., 20 this Court affirmed the
jurisdiction of courts over questions on constitutionality of
contracts, as the same involves the exercise of judicial power.
The Court said:

Whether the case involves void or voidable contracts is

still a judicial question. It may, in some instances,
involve questions of fact especially with regard to the
determination of the circumstances of the execution of
the contracts. But the resolution of the validity or
voidness of the contracts remains a legal or judicial
question as it requires the exercise of judicial function. It
requires the ascertainment of what laws are applicable
to the dispute, the interpretation and application of
those laws, and the rendering of a judgment based
thereon. Clearly, the dispute is not a mining conflict. It
is essentially judicial. The complaint was not merely for
the determination of rights under the mining contracts
since the very validity of those contracts is put in
issue. DTIaCS

In Saura v. Saura, Jr., 21 this Court emphasized the primacy of

the regular court's judicial power enshrined in the Constitution
that is true that the trend is towards vesting administrative
bodies like the SEC with the power to adjudicate matters
coming under their particular specialization, to insure a more
knowledgeable solution of the problems submitted to them. This
would also relieve the regular courts of a substantial number of
cases that would otherwise swell their already clogged
dockets.But as expedient as this policy may be, it should not
deprive the courts of justice of their power to decide ordinary
cases in accordance with the general laws that do not require
any particular expertise or training to interpret and apply.
Otherwise, the creeping take-over by the administrative
agencies of the judicial power vested in the courts would render
the judiciary virtually impotent in the discharge of the duties
assigned to it by the Constitution.

To be sure, in Rivera v. Espiritu, 22 after Philippine Airlines

(PAL) and PAL Employees Association (PALEA) entered into an
agreement, which includes the provision to suspend the
PAL-PALEA CBA for 10 years, several employees questioned
its validity via a petition for certiorari directly to the Supreme
Court. They said that the suspension was unconstitutional and
contrary to public policy. Petitioners submit that the suspension
was inordinately long, way beyond the maximum statutory life
of 5 years for a CBA provided for in Article 253-A of the
Labor Code.By agreeing to a 10-year suspension, PALEA, in
effect, abdicated the workers' constitutional right to bargain
for another CBA at the mandated time.

In that case, this Court denied the petition for certiorari, ruling
that there is available to petitioners a plain, speedy, and
adequate remedy in the ordinary course of law. The Court said
that while the petition was denominated as one for certiorari
and prohibition, its object was actually the nullification of the
PAL-PALEA agreement. As such, petitioners' proper remedy is
an ordinary civil action for annulment of contract, an action
which properly falls under the jurisdiction of the regional trial
courts.

The change in the terms and conditions of employment, should

Section 144 of the CBA be held invalid, is but a necessary and
unavoidable consequence of the principal relief sought, i.e.,
nullification of the alleged discriminatory provision in the CBA.
Thus, it does not necessarily follow that a resolution of
controversy that would bring about a change in the terms and
conditions of employment is a labor dispute, cognizable by labor
tribunals. It is unfair to preclude petitioners from invoking the
trial court's jurisdiction merely because it may eventually result
into a change of the terms and conditions of employment.
Along that line, the trial court is not asked to set and fix the
terms and conditions of employment, but is called upon to
determine whether CBA is consistent with the laws.

Although the CBA provides for a procedure for the adjustment

of grievances, such referral to the grievance machinery and
thereafter to voluntary arbitration would be inappropriate to
the petitioners, because the union and the management have
unanimously agreed to the terms of the CBA and their interest
is unified. HaIATC

In Pantranco North Express, Inc., v. NLRC, 23 this Court held

that:

. . . Hence, only disputes involving the union and the

company shall be referred to the grievance machinery
or voluntary arbitrators.
 In the instant case, both the union and the company
are united or have come to an agreement regarding
the dismissal of private respondents. No grievance
between them exists which could be brought to a
grievance machinery. The problem or dispute in the
present case is between the union and the company on
the one hand and some union and non-union members
who were dismissed, on the other hand. The dispute has
to be settled before an impartial body. The grievance
machinery with members designated by the union and
the company cannot be expected to be impartial
against the dismissed employees. Due process demands
that the dismissed workers' grievances be ventilated
before an impartial body. . . . .

Applying the same rationale to the case at bar, it

cannot be said that the "dispute" is between the union
and petitioner company because both have previously
agreed upon the provision on "compulsory retirement"
as embodied in the CBA. Also, it was only private
respondent on his own who questioned the compulsory
retirement. . . . .

In the same vein, the dispute in the case at bar is not between
FASAP and respondent PAL, who have both previously agreed
upon the provision on the compulsory retirement of female
flight attendants as embodied in the CBA. The dispute is
between respondent PAL and several female flight attendants
who questioned the provision on compulsory retirement of
female flight attendants. Thus, applying the principle in the
aforementioned case cited, referral to the grievance machinery
and voluntary arbitration would not serve the interest of the
petitioners.

Besides, a referral of the case to the grievance machinery and

to the voluntary arbitrator under the CBA would be futile
because respondent already implemented Section 114, Part A
of PAL-FASAP CBA when several of its female flight attendants
reached the compulsory retirement age of 55.

Further, FASAP, in a letter dated July 12, 2004, addressed to

PAL, submitted its association's bargaining proposal for the
remaining period of 2004-2005 of the PAL-FASAP CBA,
which includes the renegotiation of the subject Section 144.
However, FASAP's attempt to change the questioned provision
was shallow and superficial, to say the least, because it exerted
no further efforts to pursue its proposal. When petitioners in
their individual capacities questioned the legality of the
compulsory retirement in the CBA before the trial court, there
was no showing that FASAP, as their representative,
endeavored to adjust, settle or negotiate with PAL for the
removal of the difference in compulsory age retirement
between its female and male flight attendants, particularly
those employed before November 22, 1996. Without FASAP's
active participation on behalf of its female flight attendants,
the utilization of the grievance machinery or voluntary
arbitration would be pointless.

The trial court in this case is not asked to interpret Section 144,
Part A of the PAL-FASAP CBA. Interpretation, as defined in
Black's Law Dictionary, is the art of or process of discovering
and ascertaining the meaning of a statute, will, contract, or
other written document. 24 The provision regarding the
compulsory retirement of flight attendants is not ambiguous
and does not require interpretation. Neither is there any
question regarding the implementation of the subject CBA
provision, because the manner of implementing the same is
clear in itself. The only controversy lies in its intrinsic
validity. AaDSTH

Although it is a rule that a contract freely entered between the

parties should be respected, since a contract is the law between
the parties, said rule is not absolute.

In Pakistan International Airlines Corporation v. Ople, 25 this

Court held that:

The principle of party autonomy in contracts is not,

however, an absolute principle. The rule in Article
1306, of our Civil Code is that the contracting parties
may establish such stipulations as they may deem
convenient, "provided they are not contrary to law,
morals, good customs, public order or public policy".
Thus, counter-balancing the principle of autonomy of
contracting parties is the equally general rule that
provisions of applicable law, especially provisions
relating to matters affected with public policy, are
deemed written into the contract. Put a little
differently, the governing principle is that parties may
not contract away applicable provisions of law
especially peremptory provisions dealing with matters
 heavily impressed with public interest. The law relating
to labor and employment is clearly such an area and
parties are not at liberty to insulate themselves and
their relationships from the impact of labor laws and
regulations by simply contracting with each other.

Moreover, the relations between capital and labor are not

merely contractual. They are so impressed with public interest
that labor contracts must yield to the common good. . . . 26 The
supremacy of the law over contracts is explained by the fact
that labor contracts are not ordinary contracts; these are
imbued with public interest and therefore are subject to the
police power of the state. 27 It should not be taken to mean
that retirement provisions agreed upon in the CBA are
absolutely beyond the ambit of judicial review and nullification.
A CBA, as a labor contract, is not merely contractual in nature
but impressed with public interest. If the retirement provisions
in the CBA run contrary to law, public morals, or public policy,
such provisions may very well be voided. 28

Finally, the issue in the petition for certiorari brought before

the CA by the respondent was the alleged exercise of grave
abuse of discretion of the RTC in taking cognizance of the case
for declaratory relief. When the CA annuled and set aside the
RTC's order, petitioners sought relief before this Court through
the instant petition for review under Rule 45. A perusal of the
petition before Us, petitioners pray for the declaration of the
alleged discriminatory provision in the CBA against its female
flight attendants.
This Court is not persuaded. The rule is settled that pure
questions of fact may not be the proper subject of an appeal by
certiorari under Rule 45 of the Revised Rules of Court. This
mode of appeal is generally limited only to questions of law
which must be distinctly set forth in the petition. The Supreme
Court is not a trier of facts. 29

The question as to whether said Section 114, Part A of the

PAL-FASAP CBA is discriminatory or not is a question of fact.
This would require the presentation and reception of evidence
by the parties in order for the trial court to ascertain the facts
of the case and whether said provision violates the Constitution,
statutes and treaties. A full-blown trial is necessary, which
jurisdiction to hear the same is properly lodged with the
the * RTC. Therefore, a remand of this case to the RTC for the
proper determination of the merits of the petition for
declaratory relief is just and proper.

WHEREFORE, the petition is PARTLY GRANTED. The Decision

and Resolution of the Court of Appeals, dated August 31, 2005
and March 7, 2006, respectively, in CA-G.R. SP. No. 86813
are REVERSED and SET ASIDE. The Regional Trial Court of
Makati City, Branch 147 is DIRECTED to continue the
proceedings in Civil Case No. 04-886 with deliberate
dispatch. DCScaT

SO ORDERED.

||| (Halagueña v. Philippine Airlines, Inc., G.R. No. 172013,

[October 2, 2009], 617 PHIL 502-521)
 G.R. No. 162419. July 10, 2007.]

PAUL V. SANTIAGO, petitioner, vs.

CF SHARP CREW MANAGEMENT,
INC., respondent.

D E CI S IO N

TINGA, J : p

At the heart of this case involving a contract between a seafarer,

on one hand, and the manning agent and the foreign principal,
on the other, is this erstwhile unsettled legal quandary: whether
the seafarer, who was prevented from leaving the port of
Manila and refused deployment without valid reason but whose
POEA-approved employment contract provides that the
employer-employee relationship shall commence only upon the
seafarer's actual departure from the port in the point of hire, is
entitled to relief?

This treats of the petition for review filed by Paul

V. Santiago (petitioner) assailing the Decision and Resolution of
the Court of Appeals dated 16 October 2003 and 19 February
2004, respectively, in CA-G.R. SP No. 68404. 1

Petitioner had been working as a seafarer for Smith Bell

Management, Inc. (respondent) for about five (5) years. 2 On 3
February 1998, petitioner signed a new contract of
employment with respondent, with the duration of nine (9)
months. He was assured of a monthly salary of US$515.00,
overtime pay and other benefits. The following day or on 4
February 1998, the contract was approved by the Philippine
Overseas Employment Administration (POEA). Petitioner was
to be deployed on board the "MSV Seaspread" which was
scheduled to leave the port of Manila for Canada on 13
February 1998.

A week before the scheduled date of departure, Capt. Pacifico

Fernandez, respondent's Vice President, sent a facsimile
message to the captain of "MSV Seaspread," which reads:

I received a phone call today from the wife of

Paul Santiago in Masbate asking me not to send her
husband to MSV Seaspread anymore. Other callers who
did not reveal their identity gave me some feedbacks
that Paul Santiago this time if allowed to depart will
jump ship in Canada like his brother
Christopher Santiago, O/S who jumped ship from the
C.S. Nexus in Kita-kyushu, Japan last December,
1997. CScTED

We do not want this to happen again and have the

vessel penalized like the C.S. Nexus in Japan.

Forewarned is forearmed like his brother when his

brother when he was applying he behaved like a Saint
but in his heart he was a serpent. If you agree with me
then we will send his replacement.

Kindly advise. 3
To this message the captain of "MSV Seaspread" replied:

Many thanks for your advice concerning P. Santiago,

A/B. Please cancel plans for him to return to
Seaspread. 4

On 9 February 1998, petitioner was thus told that he would

not be leaving for Canada anymore, but he was reassured that
he might be considered for deployment at some future date.

Petitioner filed a complaint for illegal dismissal, damages, and

attorney's fees against respondent and its foreign principal,
Cable and Wireless (Marine) Ltd. 5 The case was raffled to
Labor Arbiter Teresita Castillon-Lora, who ruled that the
employment contract remained valid but had not commenced
since petitioner was not deployed. According to her, respondent
violated the rules and regulations governing overseas
employment when it did not deploy petitioner, causing
petitioner to suffer actual damages representing lost salary
income for nine (9) months and fixed overtime fee, all
amounting to US$7,209.00.

The labor arbiter held respondent liable. The dispositive portion

of her Decision dated 29 January 1999 reads:

WHEREFORE, premises considered, respondent is

hereby Ordered to pay complainant actual damages in
the amount of US$7,209.00 plus 10% attorney's fees,
payable in Philippine peso at the rate of exchange
prevailing at the time of payment. TacSAE

All the other claims are hereby DISMISSED for lack of

merit.
 SO ORDERED. 6

On appeal by respondent, the National Labor Relations

Commission (NLRC) ruled that there is no employer-employee
relationship between petitioner and respondent because under
the Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean Going Vessels
(POEA Standard Contract), the employment contract shall
commence upon actual departure of the seafarer from the
airport or seaport at the point of hire and with a
POEA-approved contract. In the absence of an
employer-employee relationship between the parties, the
claims for illegal dismissal, actual damages, and attorney's fees
should be dismissed. 7 On the other hand, the NLRC found
respondent's decision not to deploy petitioner to be a valid
exercise of its management prerogative. 8 The NLRC disposed of
the appeal in this wise:

WHEREFORE, in the light of the foregoing, the assailed

Decision dated January 29, 1999 is hereby AFFIRMED
in so far as other claims are concerned and with
MODIFICATION by VACATING the award of actual
damages and attorney's fees as well as excluding
Pacifico Fernandez as party respondent.

SO ORDERED. 9

Petitioner moved for the reconsideration of the NLRC's Decision

but his motion was denied for lack of merit. 10 He elevated the
case to the Court of Appeals through a petition for certiorari.
In its Decision 11 dated 16 October 2003, the Court of Appeals
noted that there is an ambiguity in the NLRC's Decision when it
affirmed with modification the labor arbiter's Decision, because
by the very modification introduced by the Commission
(vacating the award of actual damages and attorney's fees),
there is nothing more left in the labor arbiter's Decision to
affirm. 12

According to the appellate court, petitioner is not entitled to

actual damages because damages are not recoverable by a
worker who was not deployed by his agency within the period
prescribed in the POEA Rules. 13 It agreed with the NLRC's
finding that petitioner's non-deployment was a valid exercise of
respondent's management prerogative. 14 It added that since
petitioner had not departed from the Port of Manila, no
employer-employee relationship between the parties arose and
any claim for damages against the so-called employer could
have no leg to stand on. 15 HaECDI

Petitioner's subsequent motion for reconsideration was denied

on 19 February 2004. 16

The present petition is anchored on two grounds, to wit:

A. The Honorable Court of Appeals committed a serious

error of law when it ignored [S]ection 10 of Republic
Act [R.A.] No. 8042 otherwise known as the Migrant
Worker's Act of 1995 as well as Section 29 of the
Standard Terms and Conditions Governing the
Employment of Filipino Seafarers On-Board
Ocean-Going Vessels (which is deemed incorporated
 under the petitioner's POEA approved Employment
Contract) that the claims or disputes of the Overseas
Filipino Worker by virtue of a contract fall within the
jurisdiction of the Labor Arbiter of the NLRC.

B. The Honorable Court of Appeals committed a serious

error when it disregarded the required quantum of
proof in labor cases, which is substantial evidence, thus
a total departure from established jurisprudence on the
matter. 17

Petitioner maintains that respondent violated the Migrant

Workers Act and the POEA Rules when it failed to deploy him
within thirty (30) calendar days without a valid reason. In
doing so, it had unilaterally and arbitrarily prevented the
consummation of the POEA-approved contract. Since it
prevented his deployment without valid basis, said deployment
being a condition to the consummation of the POEA contract,
the contract is deemed consummated, and therefore he should
be awarded actual damages, consisting of the stipulated salary
and fixed overtime pay. 18 Petitioner adds that since the
contract is deemed consummated, he should be considered an
employee for all intents and purposes, and thus the labor
arbiter and/or the NLRC has jurisdiction to take cognizance of
his claims. 19

Petitioner additionally claims that he should be considered a

regular employee, having worked for five (5) years on board the
same vessel owned by the same principal and manned by the
same local agent. He argues that respondent's act of not
deploying him was a scheme designed to prevent him from
attaining the status of a regular employee. 20

Petitioner submits that respondent had no valid and sufficient

cause to abandon the employment contract, as it merely relied
upon alleged phone calls from his wife and other unnamed
callers in arriving at the conclusion that he would jump ship like
his brother. He points out that his wife had executed an
affidavit 21 strongly denying having called respondent, and
that the other alleged callers did not even disclose their
identities to respondent. 22 Thus, it was error for the Court of
Appeals to adopt the unfounded conclusion of the NLRC, as the
same was not based on substantial evidence. 23 aHATDI

On the other hand, respondent argues that the Labor Arbiter

has no jurisdiction to award petitioner's monetary claims. His
employment with respondent did not commence because his
deployment was withheld for a valid reason. Consequently, the
labor arbiter and/or the NLRC cannot entertain adjudication of
petitioner's case much less award damages to him. The
controversy involves a breach of contractual obligations and as
such is cognizable by civil courts. 24 On another matter,
respondent claims that the second issue posed by petitioner
involves a recalibration of facts which is outside the jurisdiction
of this Court. 25

There is some merit in the petition.

There is no question that the parties entered into an

employment contract on 3 February 1998, whereby petitioner
was contracted by respondent to render services on board
"MSV Seaspread" for the consideration of US$515.00 per
month for nine (9) months, plus overtime pay. However,
respondent failed to deploy petitioner from the port of Manila
to Canada. Considering that petitioner was not able to depart
from the airport or seaport in the point of hire, the
employment contract did not commence, and no
employer-employee relationship was created between the
parties. 26

However, a distinction must be made between the perfection of

the employment contract and the commencement of the
employer-employee relationship. The perfection of the contract,
which in this case coincided with the date of execution thereof,
occurred when petitioner and respondent agreed on the object
and the cause, as well as the rest of the terms and conditions
therein. The commencement of the employer-employee
relationship, as earlier discussed, would have taken place had
petitioner been actually deployed from the point of hire. Thus,
even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment
contract was the birth of certain rights and obligations, the
breach of which may give rise to a cause of action against the
erring party. Thus, if the reverse had happened, that is the
seafarer failed or refused to be deployed as agreed upon, he
would be liable for damages.

Moreover, while the POEA Standard Contract must be

recognized and respected, neither the manning agent nor the
employer can simply prevent a seafarer from being deployed
without a valid reason.

Respondent's act of preventing petitioner from departing the

port of Manila and boarding "MSV Seaspread" constitutes a
breach of contract, giving rise to petitioner's cause of action.
Respondent unilaterally and unreasonably reneged on its
obligation to deploy petitioner and must therefore answer for
the actual damages he suffered.

We take exception to the Court of Appeals' conclusion that

damages are not recoverable by a worker who was not
deployed by his agency. The fact that the POEA Rules27 are
silent as to the payment of damages to the affected seafarer
does not mean that the seafarer is precluded from claiming the
same. The sanctions provided for non-deployment do not end
with the suspension or cancellation of license or fine and the
return of all documents at no cost to the worker. They do not
forfend a seafarer from instituting an action for damages
against the employer or agency which has failed to deploy
him. HaIESC

The POEA Rules only provide sanctions which the POEA can
impose on erring agencies. It does not provide for damages and
money claims recoverable by aggrieved employees because it is
not the POEA, but the NLRC, which has jurisdiction over such
matters.

Despite the absence of an employer-employee relationship

between petitioner and respondent, the Court rules that the
NLRC has jurisdiction over petitioner's complaint. The
jurisdiction of labor arbiters is not limited to claims arising
from employer-employee relationships. Section 10 of R.A. No.
8042 (Migrant Workers Act), provides that:

Sec. 10. Money Claims. — Notwithstanding any

provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall
have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing
of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any
law or contract involving Filipino workers for overseas
deployment including claims for actual, moral,
exemplary and other forms of damages. . . . [Emphasis
supplied]

Since the present petition involves the employment contract

entered into by petitioner for overseas employment, his claims
are cognizable by the labor arbiters of the NLRC.

Article 2199 of the Civil Code provides that one is entitled to

an adequate compensation only for such pecuniary loss suffered
by him as he has duly proved. Respondent is thus liable to pay
petitioner actual damages in the form of the loss of nine (9)
months' worth of salary as provided in the contract. He is not,
however, entitled to overtime pay. While the contract indicated
a fixed overtime pay, it is not a guarantee that he would receive
said amount regardless of whether or not he rendered overtime
work. Even though petitioner was "prevented without valid
reason from rendering regular much less overtime
service," 28 the fact remains that there is no certainty that
petitioner will perform overtime work had he been allowed to
board the vessel. The amount of US$286.00 stipulated in the
contract will be paid only if and when the employee rendered
overtime work. This has been the tenor of our rulings in the
case of Stolt-Nielsen Marine Services (Phils.), Inc. v. National
Labor Relations Commission 29 where we discussed the matter
in this light: AaCTcI

The contract provision means that the fixed overtime

pay of 30% would be the basis for computing the
overtime pay if and when overtime work would be
rendered. Simply stated, the rendition of overtime
work and the submission of sufficient proof that said
work was actually performed are conditions to be
satisfied before a seaman could be entitled to overtime
pay which should be computed on the basis of 30% of
the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the
entitlement to such benefit must first be established.
Realistically speaking, a seaman, by the very nature of
his job, stays on board a ship or vessel beyond the
regular eight-hour work schedule. For the employer to
give him overtime pay for the extra hours when he
might be sleeping or attending to his personal chores or
even just lulling away his time would be extremely
unfair and unreasonable. 30

The Court also holds that petitioner is entitled to attorney's fees

in the concept of damages and expenses of litigation. Attorney's
fees are recoverable when the defendant's act or omission has
compelled the plaintiff to incur expenses to protect his
interest. 31 We note that respondent's basis for not deploying
petitioner is the belief that he will jump ship just like his
brother, a mere suspicion that is based on alleged phone calls of
several persons whose identities were not even confirmed. Time
and again, this Court has upheld management prerogatives so
long as they are exercised in good faith for the advancement of
the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or
under valid agreements. 32 Respondent's failure to deploy
petitioner is unfounded and unreasonable, forcing petitioner to
institute the suit below. The award of attorney's fees is thus
warranted.

However, moral damages cannot be awarded in this case. While

respondent's failure to deploy petitioner seems baseless and
unreasonable, we cannot qualify such action as being tainted
with bad faith, or done deliberately to defeat petitioner's rights,
as to justify the award of moral damages. At most, respondent
was being overzealous in protecting its interest when it became
too hasty in making its conclusion that petitioner will jump ship
like his brother.

We likewise do not see respondent's failure to deploy petitioner

as an act designed to prevent the latter from attaining the
status of a regular employee. Even if petitioner was able to
depart the port of Manila, he still cannot be considered a
regular employee, regardless of his previous contracts of
employment with respondent. In Millares v. National Labor
Relations Commission, 33 the Court ruled that seafarers are
considered contractual employees and cannot be considered as
regular employees under the Labor Code. Their employment is
governed by the contracts they sign every time they are rehired
and their employment is terminated when the contract expires.
The exigencies of their work necessitates that they be employed
on a contractual basis. 34 CDTHSI

WHEREFORE, petition is GRANTED IN PART. The Decision

dated 16 October 2003 and the Resolution dated 19 February
2004 of the Court of Appeals are REVERSED and SET ASIDE.
The Decision of Labor Arbiter Teresita D. Castillon-Lora dated
29 January 1999 is REINSTATED with the MODIFICATION
that respondent CF Sharp Crew Management, Inc. is ordered
to pay actual or compensatory damages in the amount of
US$4,635.00 representing salary for nine (9) months as stated
in the contract, and attorney's fees at the reasonable rate of
10% of the recoverable amount.

SO ORDERED.

||| (Santiago v. CF Sharp Crew Management, Inc., G.R. No.

162419, [July 10, 2007], 554 PHIL 63-77)

G.R. No. 142244. November 18, 2002.]

ATLAS FARMS,
INC., petitioner, vs. NATIONAL LABOR RELATION
S COMMISSION, JAIME O. DELA PEÑA and
MARCIAL I. ABION, respondents.
Eufemio Law Offices for petitioner.

Joshua P. Lapuz for private respondents.

SYNOPSIS

Private respondent Jaime O. dela Peña was employed as a

veterinary aide by petitioner Atlas Farms, Inc., in December
1975. On March 3, 1993, Peña 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. Peña refused, however, to receive the
formal notice. 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.
Co-respondent Martial I. Abion was a carpenter/mason and a
maintenance man whose employment by petitioner
commenced on October 8, 1990. He allegedly 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 pond's
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. The company
terminated his services on October 27, 1992. He acknowledged
receipt of a written notice of dismissal, with his separation pay.
Thereafter, Peña and Abion filed separate complaints for illegal
dismissal that were later consolidated. Both claimed that their
termination from the service was due to petitioner's suspicion
that they were the leaders in a plan to form a union to
compete and replace the existing management-dominated
union. 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 petitioner's 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.
According to petitioner, jurisdiction over the case belonged to
the grievance machinery and thereafter the voluntary
arbitrator, as provided in the CBA. 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. Private respondents
appealed to the National Labor Relations Commission (NLRC),
which reversed the laborarbiter's decision. Dissatisfied with
the NLRC ruling, petitioner went to the Court of Appeals by
way of a petition for certiorari under Rule 65, seeking
reinstatement of the labor arbiter's decision. The appellate
court denied the petition and affirmed the NLRC resolution.
Hence, the present petition. The Supreme Court affirmed the
decision of the Court of Appeals. The Court pointed out that
private respondents went to the NLRC only after
the labor arbiter dismissed their original complaint for illegal
dismissal. Given the circumstances, private respondents acted
within their legal rights in finding another avenue for the
redress of their grievances. The Court also upheld the NLRC in
concluding that private respondents had already exhausted the
remedies under the grievance procedure and in ruling 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 complaint for illegal dismissal and directed the
parties to avail of the grievance procedure under Article VII of
the existing CBA. Private respondents could not 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. Petitioner also did not comply with the
requirements of a valid dismissal. Considering the illegality of
the dismissal, the cases were then effectively removed from the
jurisdiction of the voluntary arbitrator, thus placing them
within the jurisdiction of the labor arbiter. The Court
emphasized that 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 employee's rights, it is
already cognizable by the labor arbiter. TcaAID
 SYLLABUS

1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF

AGENCIES EXERCISING QUASI-JUDICIAL FUNCTIONS ARE
ACCORDED NOT ONLY RESPECT BUT EVEN FINALITY. — The
first issue primarily involves questions of fact, which can serve
as basis for the conclusion that private respondents were legally
and validly dismissed. The burden of proving that the dismissal
of private respondents was legal and valid falls upon petitioner.
The NLRC found that petitioner failed to substantiate its claim
that both private respondents committed certain acts that
violated company rules and regulations, hence we find no
factual basis to say that private respondents' dismissal was in
order. We see no compelling reason to deviate from
the NLRC ruling that their dismissal was illegal, absent a
showing that it reached its conclusion arbitrarily. Moreover,
factual findings of agencies exercising quasi-judicial functions
are accorded not only respect but even finality, aside from the
consideration here that this Court is not a trier of facts.

2. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS;

GRIEVANCE MACHINERY AND VOLUNTARY ARBITRATION;
NON-EXHAUSTION THEREOF JUSTIFIED IN CASE AT BAR;
PETITIONER FAILED TO TAKE STEPS TO CONVENE THE
GRIEVANCE MACHINERY AFTER THE LABOR ARBITER
DISMISSED THE COMPLAINTS FOR ILLEGAL DISMISSAL AND
DIRECTED THE PARTIES TO AVAIL OF THE GRIEVANCE
PROCEDURE UNDER ARTICLE VII OF THEIR EXISTING
COLLECTIVE BARGAINING AGREEMENT. — Records show,
however, that private respondents sought without success to
avail of the grievance procedure in their CBA. On this point,
petitioner maintains that by so doing, private respondents
recognized that their cases still fell under the grievance
machinery. According to petitioner, without having exhausted
said machinery, the private respondents filed their action
before the NLRC, in a clear act of forum-shopping. However, it
is worth pointing out that private respondents went to
the NLRConly after the labor arbiter dismissed their original
complaint for illegal dismissal. Under these circumstances
private respondents had to find another avenue for redress. We
agree with the NLRC that it was petitioner who failed to show
proof that it took steps to convene the grievance machinery
after the labor arbiter first dismissed the complaints for illegal
dismissal and directed the parties to avail of the grievance
procedure under Article VII of the existing CBA. They could not
now be faulted for attempting to find an impartial forum, after
petitioner failed to listen to them and after the intercession of
the labor arbiter proved futile. The NLRC had aptly concluded
in part that private respondents had already exhausted the
remedies under the grievance procedure. It erred only in
finding that their cause of action was ripe for arbitration.

3. ID.; ID.; ID.; ARBITRATION WITHOUT THE UNION'S ACTIVE

PARTICIPATION ON BEHALF OF THE DISMISSED EMPLOYEES
WOULD BE POINTLESS, OR EVEN PREJUDICIAL TO THEIR
CAUSE. — One significant fact in the present petition also
needs stressing. Pursuant to Article 260 of the Labor Code, the
parties to a CBA shall name or designate their respective
representatives to the grievance machinery and if the grievance
is unsettled in that level, it shall automatically be referred to
the voluntary arbitrators designated in advance by the parties
to a CBA. Consequently only disputes involving the union and
the company shall be referred to the grievance machinery or
voluntary arbitrators. In these termination cases of private
respondents, the union had no participation, it having failed to
object to the dismissal of the employees concerned by the
petitioner. It is obvious that arbitration without the union's
active participation on behalf of the dismissed employees would
be pointless, or even prejudicial to their cause.

4. ID.; TERMINATION OF EMPLOYMENT; REQUIREMENTS OF

A VALID DISMISSAL; NOT COMPLIED WITH IN CASE AT BAR.
— The NLRC found that petitioner did not comply with the
requirements of a valid dismissal. For a dismissal to be valid, the
employer must show that: (1) the employee was accorded due
process, and (2) the dismissal must be for any of the valid
causes provided for by law. No evidence was shown that private
respondents refused, as alleged, to receive the notices requiring
them to show cause why no disciplinary action should be taken
against them. Without proof of notice, private respondents who
were subsequently dismissed without hearing were also
deprived of a chance to air their side at the level of the
grievance machinery. Given the fact of dismissal, it can be said
that the cases were effectively removed from the jurisdiction of
the voluntary arbitrator, thus placing them within the
jurisdiction of the labor arbiter. Where the dispute is just in the
interpretation, implementation or enforcement stage, it may
be referred to the grievance machinery set up in the CBA, or
brought to voluntary arbitration. But, where there was already
actual termination, with alleged violation of the employee's
rights, it is already cognizable by the labor arbiter.

5. ID.; ID.; RIGHTS OF ILLEGALLY DISMISSED EMPLOYEES. —

We find that a modification of the monetary awards is in order.
As a consequence of their illegal dismissal, private respondents
are entitled to reinstatement to their former positions. But
since reinstatement is no longer feasible because petitioner had
already closed its shop, separation pay in lieu of reinstatement
shall be awarded. A terminated employee's receipt of his
separation pay and other monetary benefits does not preclude
reinstatement or full benefits under the law, should
reinstatement be no longer possible. As held in Cariño vs.
ACCFA: Acceptance of those benefits would not amount to
estoppel. The reason is plain. Employer and employee, obviously,
do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of the
money. Because out of job, he had to face the harsh necessities
of life. He thus found himself in no position to resist money
proffered. His, then, is a case of adherence, not of choice. One
thing sure, however, is that petitioners did not relent their
claim. They pressed it. They are deemed not to have waived
their rights. Renuntiato non praesumitur. Conformably, private
respondents are entitled to separation pay equivalent to one
month's salary for every year of service, in lieu of reinstatement.
As regards the award of damages, in order not to further delay
the disposition of this case, we find it necessary to expressly set
forth the extent of the backwages as awarded by the appellate
court. Pursuant to R.A. 6715, as amended, private
respondents shall be entitled to full backwages computed from
the time of their illegal dismissal up to the date of promulgation
of this decision without qualification, considering that
reinstatement is no longer practicable under the
circumstances. CDAHIT

D E CI S IO N

QUISUMBING, J : p

Petitioner seeks the reversal of the decision 1 dated January 10,

2000 of the Court of Appeals in CA-G.R. SP No. 52780,
dismissing its petition for certiorari against theNLRC, as well as
the resolution 2 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 Peña 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 Peña 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. Peña 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, Peña had worked for seven
days a week, including holidays, without overtime, holiday, rest
day pay and service incentive leave. At the time of his dismissal
from employment, he was receiving P180 pesos daily wage, or
an average monthly salary of P5,402.

Co-respondent Marcial I. Abion 5 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 pond's
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 Peña, 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.

Peña and Abion filed separate complaints for illegal dismissal

that were later consolidated. Both claimed that their
termination from service was due to petitioner's 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 petitioner's 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 petitioner's
financial assistance.

Thus, private respondents brought the case to the NLRC, which

reversed the labor arbiter's 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 arbiter's decision. The
appellate court denied the petition and affirmed
the NLRC resolution with some modifications, thus:

WHEREFORE, the petition is DENIED. The resolution

in NLRC CA No. 010520-96 is AFFIRMED with the
following modifications:

1) The private respondents can not be reinstated, due

to their acceptance of the separation pay offered by the
petitioner;

2) The private respondents are entitled to their full

back wages; and,
 3) The amount of the separation pay received by
private respondents from petitioner shall not be
deducted from their full back wages.

Costs against petitioner.

SO ORDERED. 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
company's rules and regulations. It also alleges lack of
jurisdiction on the part of the labor arbiter, claiming that the
cases should have been resolved through the grievance
machinery, and eventually referred to voluntary arbitration, as
prescribed in the CBA.

For their part, private respondents contend that they were

illegally dismissed from employment because management
discovered that they intended to form another union, and
because they were vocal in asserting, their rights. In any case,
according to private respondents, the petition involves factual
issues that cannot be properly raised in a petition for review
on certiorari under Rule 45 of the Revised Rules of Court. 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
unfairlabor practices, termination disputes, and claims for
damages, in the absence of an express agreement between the
parties in order for Article 262 of the Labor Code [Jurisdiction
over other labor disputes] to apply in the case at bar."

Moreover, per Justice Bellosillo:

It may be observed that under Policy Instruction

No. 56 of the Secretary of Labor, dated 6 April
1993, "Clarifying the Jurisdiction Between Voluntary
Arbitrators andLabor 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. 15 . . .

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 NLRConly 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 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
employee's 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
union's 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 union's
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 employee's 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
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 employee's
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 Cariño
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 month's 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 month's 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.

||| (Atlas Farms, Inc. v. National Labor Relations Commission,

G.R. No. 142244, [November 18, 2002], 440 PHIL 620-636)

[G.R. No. 121948. October 8, 2001.]

PERPETUAL HELP CREDIT COOPERATIVE,

INC., petitioner, vs. BENEDICTO FABURADA,
SISINITA VILLAR, IMELDA TAMAYO, HAROLD
 CATIPAY, and the NATIONAL LABOR RELATIONS
COMMISSION, Fourth Division, Cebu
City, respondents.

Sedillo Icao Hernando and Associates for petitioner.

The Solicitor General for public respondent.

Sonia B. Eleccion for private respondents.

SYNOPSIS

Private respondents filed a complaint against

petitioner with the Arbitration Branch, Department of
Labor and Employment, Dumaguete City, for illegal
dismissal, premium pay on holidays and rest days,
separation pay, wage differential, moral damages, and
attorney's fees. Petitioner moved to dismiss the complaint on
ground of absence of employer-employee relationship
between them and private respondents. Petitioner
contended that private respondents were mere volunteer
workers, not regular employees. Thus, they cannot sue them.
Petitioner also questioned the jurisdiction of the Labor
Arbiter. The Labor Arbiter dismissed the petitioner's motion
to dismiss and subsequently ruled in favor of private
respondents. On appeal, the National Labor Relations
Commission affirmed the findings of the labor arbiter that
private respondents were illegally dismissed and were
entitled to reinstatement and full backwages.
 Hence, this petition.

In determining the existence of an employer-employee

relationship, the following elements are considered: (1) the
selection and engagement of the worker or the power to hire;
(2) the power to dismiss; (3) the payment of wages by
whatever means; and (4) the power to control the worker's
conduct, with the latter assuming primacy in the overall
consideration. The Supreme Court found that the said
elements are present in this case. Petitioner hired private
respondents to work for it. They work regularly on regular
working hours, were assigned specific duties, were paid
regular wages and made to accomplish daily time records.
They worked under the supervision of the cooperative
manager. Moreover, private respondents were rendering
services necessary to the day-to-day operations of petitioner,
which qualified them as regular employees. Hence, as regular
employees, private respondents are entitled to security of
tenure and can be terminated only for a valid cause, with
observance of due process. The Court, however, found that
private respondents' dismissal was not for a valid cause. They
were dismissed because petitioner considered them to be
mere voluntary workers, being its members, and as such,
work at its pleasure. Moreover, the Court found that
petitioner failed to comply with the twin requisites of a valid
notice.

With respect to the issue on jurisdiction, the Court held

that disputes about payment of wages, overtime pay,
 restday and termination of employment are within the
original and exclusive jurisdiction of the labor arbiter. Hence,
the decision of the NLRC was affirmed by the Court with
modification as to the computation of back wages.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION;

EMPLOYER-EMPLOYEE RELATIONSHIP; ELEMENTS;
PRESENT IN CASE AT BAR. — In determining the existence of
an employer-employee relationship, the following elements are
considered: (1) the selection and engagement of the worker or
the power to hire; (2) the power to dismiss; (3) the payment of
wages by whatever means; and (4) the power to control the
worker's conduct, with the latter assuming primacy in the
overall consideration. No particular form of proof is required to
prove the existence of an employer-employee relationship. Any
competent and relevant evidence may show the relationship.
The above elements are present here. Petitioner PHCCI,
through Mr. Edilberto Lantaca, Jr., its Manager, hired private
respondents to work for it. They worked regularly on regular
working hours, were assigned specific duties, were paid regular
wages and made to accomplish daily time records just like any
other regular employee. They worked under the supervision of
the cooperative manager. But unfortunately, they were
dismissed.

2. ID.; ID.; EMPLOYEES; KINDS. — Article 280 of the Labor

Code provides for three kinds of employees: (1) regular
employees or those who have been engaged to perform
activities which are usually necessary or desirable in the usual
business or trade of the employer; (2) project employees or
those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season; and (3)
casual employees or those who are neither regular nor project
employees. The employees who are deemed regular are: (a)
those who have been engaged to perform activities which are
usually necessary or desirable in the usual trade or business of
the employer; and (b) those casual employees who have
rendered at least one (1) year of service, whether such service is
continuous or broken, with respect to the activity in which they
are employed.

3. ID.; ID.; ID.; REGULAR EMPLOYEES; REGULARITY OF

EMPLOYMENT DETERMINED BY THE NATURE AND BY THE
LENGTH OF TIME AN EMPLOYEE HAS BEEN IN A
PARTICULAR JOB; CASE AT BAR. — Undeniably, private
respondents were rendering services necessary to the
day-to-day operations of petitioner PHCCI. This fact alone
qualified them as regular employees. All of them, except Harold
D. Catipay, worked with petitioner for more than one (1) year:
Benedicto Faburada, for one and a half (1 1/2) years; Sisinita
Vilar, for two (2) years; and Imelda C. Tamayo, for two (2)
years and two (2) months. That Benedicto Faburada worked
only on a part-time basis, does not mean that he is not a
regular employee. One's regularity of employment is not
determined by the number of hours one works but by the
nature and by the length of time one has been in that
particular job. Petitioner's contention that private respondents
are mere volunteer workers, not regular employees, must
necessarily fail. Its invocation of San Jose City Electric
Cooperative vs. Ministry of Labor and Employment (173 SCRA
697, 703 [1989]) is misplaced. The issue in this case is
whether or not the employees-members of a cooperative can
organize themselves for purposes of collective bargaining, not
whether or not the members can be employees. Petitioner
missed the point.

4. ID.; ID.; ID.; ID.; ENTITLED TO SECURITY OF TENURE AND

CAN BE TERMINATED ONLY FOR A VALID CAUSE. — As
regular employees or workers, private respondents are entitled
to security of tenure. Thus, their services may be terminated
only for a valid cause, with observance of due process.

5. ID.; LABOR RELATIONS; TERMINATION OF EMPLOYMENT;

VALID CAUSES; KINDS. — The valid causes are categorized into
two groups: the just causes under Articles 282 of the Labor
Code and the authorized causes under Articles 283 and 284 of
the same Code. The just causes are: (1) serious misconduct or
willful disobedience of lawful orders in connection with the
employee's work; (2) gross or habitual neglect of duties; (3)
fraud or willful breach of trust; (4) commission of a crime or an
offense against the person of the employer or his immediate
family member or representative; and, analogous cases. The
authorized causes are: (1) the installation of labor-saving
devices; (2) redundancy; (3) retrenchment to prevent losses;
and (4) closing or cessation of operations of the establishment
or undertaking, unless the closing is for the purpose of
circumventing the provisions of law. Article 284 provides that
an employer would be authorized to terminate the services of
an employee found to be suffering from any disease if the
employee's continued employment is prohibited by law or is
prejudicial to his health or to the health of his fellow employees.

6. ID.; ID.; ID.; PROCEDURAL DUE PROCESS; EMPLOYER

MUST COMPLY WITH THE TWIN REQUISITES OF A VALID
NOTICE; CASE AT BAR. — Procedural due process requires
that the employer serve the employees to be dismissed two (2)
written notices before the termination of their employment is
effected: (a) the first, to apprise them of the particular acts or
omissions for which their dismissal is sought and (b) the second,
to inform them of the decision of the employer that they are
being dismissed. In this case, only one notice was served upon
private respondents by petitioner. It was in the form of a
Memorandum signed by the Manager of the Cooperative dated
January 2, 1990 terminating their services effective December
29, 1989. Clearly, petitioner failed to comply with the twin
requisites of a valid notice.

7. ID.; ID.; ID.; ILLEGALLY DISMISSED EMPLOYEES ARE

ENTITLED TO REINSTATEMENT AND FULL BACKWAGES. —
As illegally dismissed employees, private respondents are
therefore entitled to reinstatement without loss of seniority
rights and other privileges and to full backwages, inclusive of
allowances, plus other benefits or their monetary equivalent
computed from the time their compensation was withheld
from them up to the time of their actual reinstatement. Since
they were dismissed after March 21, 1989, the effectivity date
of R.A. 6715 they are granted full backwages, meaning,
without deducting from their backwages the earnings derived
by them elsewhere during the period of their illegal dismissal. If
reinstatement is no longer feasible, as when the relationship
between petitioner and private respondents has become
strained, payment of their separation pay in lieu of
reinstatement is in order. HSTaEC

8. ID.; LABOR ARBITER; HAS ORIGINAL AND EXCLUSIVE

JURISDICTION OVER DISPUTES ON PAYMENT OF WAGES,
OVERTIME PAY, REST DAY AND TERMINATION OF
EMPLOYMENT. — Article 121 of Republic Act No. 6938
(Cooperative Code of the Philippines) provides the procedure
how cooperative disputes are to be resolved, thus: . . . .
Complementing this Article is Section 8 of R.A. No. 6939
(Cooperative Development Authority Law) which reads: . . . .
The above provisions apply to members, officers and directors
of the cooperative involved in disputes within a cooperative or
between cooperatives. There is no evidence that private
respondents are members of petitioner PHCCI and even if they
are, the dispute is about payment of wages, overtime pay, rest
day and termination of employment. Under Art. 217 of the
Labor Code,these disputes are within the original and exclusive
jurisdiction of the Labor Arbiter.

D E CI S IO N

SANDOVAL-GUTIERREZ, J : p

On January 3, 1990, Benedicto Faburada, Sisinita Vilar,

Imelda Tamayo and Harold Catipay, private respondents, filed
a complaint against the Perpetual Help CreditCooperative, Inc.
(PHCCI), petitioner, with the Arbitration Branch, Department
of Labor and Employment (DOLE), Dumaguete City, for illegal
dismissal, premium pay on holidays and rest days, separation
pay, wage differential, moral damages, and attorney's fees.

Forthwith, petitioner PHCCI filed a motion to dismiss the

complaint on the ground that there is no employer-employee
relationship between them as private respondents are all
members and co-owners of the cooperative. Furthermore,
private respondents have not exhausted the remedies provided
in the cooperative by-laws.

On September 3, 1990, petitioner filed a supplemental motion

to dismiss alleging that Article 121 of R.A. No. 6939,
otherwise known as the Cooperative Development Authority
Law which took effect on March 26, 1990, requires
conciliation or mediation within the cooperative before a resort
to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion
to dismiss, holding that the case is impressed with
employer-employee relationship and that the law on
cooperatives is subservient to the Labor Code.

On November 23, 1993, the Labor Arbiter rendered a decision,

the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby

rendered declaring complainants illegally dismissed,
thus respondent is directed to pay Complainants
backwages computed from the time they were illegally
dismissed up to the actual reinstatement but subject to
the three year backwages rule, separation pay for one
month for every year of service since reinstatement is
evidently not feasible anymore, to pay complainants
13th month pay, wage differentials and Ten Percent
(10%) attorney's fees from the aggregate monetary
award. However, complainant Benedicto Faburada
shall only be awarded what are due him in proportion
to the nine and a half months that he had served the
respondent, he being a part-time employee.

All other claims are hereby dismissed for lack of merit.

The computation of the foregoing awards is hereto

attached and forms an integral part of this decision."

On appeal, 1 the NLRC affirmed the Labor Arbiter's decision.

Hence, this petition by the PHCCI.

The issue for our resolution is whether or not respondent judge

committed grave abuse of discretion in ruling that there is an
employer-employee relationship between the parties and that
private respondents were illegally dismissed.

Petitioner PHCCI contends that private respondents are its

members and are working for it as volunteers. Not being
regular employees, they cannot sue petitioner. TICaEc

In determining the existence of an employer-employee

relationship, the following elements are considered: (1) the
selection and engagement of the worker or the power to hire;
(2) the power to dismiss; (3) the payment of wages by
whatever means; and (4) the power to control the worker's
conduct, with the latter assuming primacy in the overall
consideration. No particular form of proof is required to prove
the existence of an employer-employee relationship. Any
competent and relevant evidence may show the relationship. 2

The above elements are present here. Petitioner PHCCI,

through Mr. Edilberto Lantaca, Jr., its Manager, hired private
respondents to work for it. They worked regularly on regular
working hours, were assigned specific duties, were paid regular
wages and made to accomplish daily time records just like any
other regular employee. They worked under the supervision of
the cooperative manager. But unfortunately, they were
dismissed.

That an employer-employee exists between the parties is shown

by the averments of private respondents in their respective
affidavits, carefully considered by respondent NLRC in
affirming the Labor Arbiter's decision, thus:
Benedicto Faburada —Regular part-time Computer
programmer/operator. Worked with the Cooperative
since June 1, 1988 up to December 29, 1989. Work
schedule: Tuesdays and Thursdays, from 1:00 p.m. to
5:30 p.m. and every Saturday from 8:00 to 11:30
a.m. and 1:00 to 4:00 p.m. and for at least three (3)
hours during Sundays.Monthly salary: P1,000.00 —
from June to December 1988; P1,350.00 — from
January to June 1989; and P1,500.00 from July to
December 1989. Duties: Among others, — Enter data
into the computer; compute interests on savings
deposits, effect mortuary deductions and dividends on
fixed deposits; maintain the masterlist of the
cooperative members; perform various forms for
mimeographing; and perform such other duties as may
be assigned from time to time.

Sisinita Vilar — Clerk. Worked with the Cooperative

since December 1, 1987 up to December 29,
1989. Work schedule: Regular working hours. Monthly
salary: P500.00 — from December 1, 1987 to
December 31, 1988; P1,000.00 — from January 1,
1989 to June 30, 1989; and P1,150.00 — from July
1, 1989 to December 31, 1989. Duties: Among others,
Prepare summary of salary advances, journal vouchers,
daily summary of disbursements to respective
classifications; schedule loans; prepare checks and cash
vouchers for regular and emergency loans; reconcile
bank statements to the daily summary of
disbursements; post the monthly balance of fixed and
savings deposits in preparation for the computation of
interests, dividends, mortuary and patronage funds;
disburse checks during regular and emergency loans;
and perform such other bookkeeping and accounting
duties as may be assigned to her from time to time.

Imelda C. Tamayo — Clerk. Worked with the

Cooperative since October 19, 1987 up to December
29, 1989. Work schedule: Monday to Friday - 8:00 to
11:30 a.m and 2:00 to 5:30 p.m.; every Saturday —
8:00 to 11:30 a.m and 1:00 to 4:00 p.m; and for one
Sunday each month — for at least three (3)
hours. Monthly salary: P60.00 — from October to
November 1987; P250.00 for December 1987;
P500.00 — from January to December 1988; P950
— from January to June 1989; and P1,000.00 from
July to December 1989. Duties: Among others, pick up
balances for the computation of interests on savings
deposit, mortuary, dividends and patronage funds;
prepare cash vouchers; check petty cash vouchers; take
charge of the preparation of new passbooks and ledgers
for new applicants; fill up members logbook of regular
depositors, junior depositors and special accounts; take
charge of loan releases every Monday morning; assist in
the posting and preparation of deposit slips; receive
deposits from members; and perform such other
bookkeeping and accounting duties as may be assigned
her from time to time.

Harold D. Catipay — Clerk. Worked with the

Cooperative since March 3 to December 29,
1989. Work schedule: — Monday to Friday — 8:00 to
 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday — 8:00
to 11:30 a.m. and 1:00 to 4:00 p.m.; and one Sunday
each month — for at least three (3) hours. Monthly
salary: P900.00 — from March to June 1989;
P1,050.00 — from July to December 1989. Duties:
Among others, Bookkeeping, accounting and collecting
duties, such as, post daily collections from the two (2)
collectors in the market; reconcile passbooks and
ledgers of members in the market; and assist the other
clerks in their duties.

All of them were given a memorandum of termination

on January 2, 1990, effective December 29, 1989.

We are not prepared to disregard the findings of both the

Labor Arbiter and respondent NLRC, the same being supported
by substantial evidence, that quantum of evidence required in
quasi-judicial proceedings, like this one.

Necessarily, this leads us to the issue of whether or not private

respondents are regular employees. Article 280 of the Labor
Code provides for three kinds of employees: (1) regular
employees or those who have been engaged to perform
activities which are usually necessary or desirable in the usual
business or trade of the employer; (2) project employees or
those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season; and (3)
casual employees or those who are neither regular nor project
employees. 3 The employees who are deemed regular are: (a)
those who have been engaged to perform activities which are
usually necessary or desirable in the usual trade or business of
the employer; and (b) those casual employees who have
rendered at least one (1) year of service, whether such service is
continuous or broken, with respect to the activity in which they
are employed. 4 Undeniably, private respondents were
rendering services necessary to the day-to-day operations of
petitioner PHCCI. This fact alone qualified them as regular
employees.

All of them, except Harold D. Catipay, worked with petitioner

for more than one (1) year: Benedicto Faburada, for one and a
half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda
C. Tamayo, for two (2) years and two (2) months. That
Benedicto Faburada worked only on a part-time basis, does not
mean that he is not a regular employee. One's regularity of
employment is not determined by the number of hours one
works but by the nature and by the length of time one has been
in that particular job. 5 Petitioner's contention that private
respondents are mere volunteer workers, not regular employees,
must necessarily fail. Its invocation of San Jose City Electric
Cooperative vs. Ministry of Labor and Employment (173 SCRA
697, 703 (1989) is misplaced. The issue in this case is whether
or not the employees-members of a cooperative can organize
themselves for purposes of collective bargaining, not whether or
not the members can be employees. Petitioner missed the point
As regular employees or workers, private respondents are
entitled to security of tenure. Thus, their services may be
terminated only for a valid cause, with observance of due
process.

The valid causes are categorized into two groups: the just causes
under Articles 282 of the Labor Code and the authorized
causes under Articles 283 and 284 of the same Code. The just
causes are: (1) serious misconduct or willful disobedience of
lawful orders in connection with the employee's work; (2) gross
or habitual neglect of duties; (3) fraud or willful breach of trust;
(4) commission of a crime or an offense against the person of
the employer or his immediate family member or
representative; and, analogous cases. The authorized causes are:
(1) the installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of
operations of the establishment or undertaking, unless the
closing is for the purpose of circumventing the provisions of
law. Article 284 provides that an employer would be
authorized to terminate the services of an employee found to be
suffering from any disease if the employee's continued
employment is prohibited by law or is prejudicial to his health
or to the health of his fellow employees. 6

Private respondents were dismissed not for any of the above

causes. They were dismissed because petitioner considered them
to be mere voluntary workers, being its members, and as such
work at its pleasure. Petitioner thus vehemently insists that
their dismissal is not against the law.

Procedural due process requires that the employer serve the

employees to be dismissed two (2) written notices before the
termination of their employment is effected: (a) the first, to
apprise them of the particular acts or omissions for which their
dismissal is sought and (b) the second, to inform them of the
decision of the employer that they are being dismissed. 7 In this
case, only one notice was served upon private respondents by
petitioner. It was in the form of a Memorandum signed by the
Manager of the Cooperative dated January 2, 1990
terminating their services effective December 29, 1989.
Clearly, petitioner failed to comply with the twin requisites of a
valid notice.

We hold that private respondents have been illegally dismissed.

Petitioner contends that the labor arbiter has no jurisdiction to

take cognizance of the complaint of private respondents
considering that they failed to submit their dispute to the
grievance machinery as required by P.D. 175 (strengthening
the Cooperative Movement) 8 and its implementing rules and
regulations under LOI 23. Likewise, the Cooperative
Development Authority did not issue a Certificate of
Non-Resolution pursuant to Section 8 of R.A. 6939 or the
Cooperative Development Authority Law.

As aptly stated by the Solicitor General in his comment, P.D.

175 does not provide for a grievance machinery where a
dispute or claim may first be submitted. LOI 23refers to
instructions to the Secretary of Public Works and
Communications to implement immediately the
recommendation of the Postmaster General for the dismissal of
some employees of the Bureau of Post. Obviously, this LOI has
no relevance to the instant case.

Article 121 of Republic Act No. 6938 (Cooperative Code of the

Philippines) provides the procedure how cooperative disputes
are to be resolved, thus:

"ART. 121. Settlement of Disputes. — Disputes among

members, officers, directors, and committee members,
and intra-cooperative disputes shall, as far as
practicable, be settled amicably in accordance with the
conciliation or mediation mechanisms embodied in the
bylaws of the cooperative, and in applicable laws.

Should such a conciliation/mediation proceeding fail,

the matter shall be settled in a court of competent
jurisdiction."

Complementing this Article is Section 8 of R.A. No. 6939

(Cooperative Development Authority Law) which reads:

SEC. 8 Mediation and Conciliation. — Upon request of

either or both parties, the Authority shall mediate and
conciliate disputes within a cooperative or between
cooperatives: Provided, That if no mediation or
conciliation succeeds within three (3) months from
request thereof, a certificate of non-resolution shall be
issued by the Commission prior to the filing of
appropriate action before the proper courts.
The above provisions apply to members, officers and directors
of the cooperative involved in disputes within a cooperative or
between cooperatives.

There is no evidence that private respondents are members of

petitioner PHCCI and even if they are, the dispute is about
payment of wages, overtime pay, rest day and termination of
employment. Under Art. 217 of the Labor Code,these disputes
are within the original and exclusive jurisdiction of the Labor
Arbiter.

As illegally dismissed employees, private respondents are

therefore entitled to reinstatement without loss of seniority
rights and other privileges and to full backwages, inclusive of
allowances, plus other benefits or their monetary equivalent
computed from the time their compensation was withheld
from them up to the time of their actual reinstatement. 9 Since
they were dismissed after March 21, 1989, the effectivity date
of R.A. 6715 10 they are granted full backwages, meaning,
without deducting from their backwages the earnings derived
by them elsewhere during the period of their illegal
dismissal. 11 If reinstatement is no longer feasible, as when the
relationship between petitioner and private respondents has
become strained, payment of their separation pay in lieu of
reinstatement is in order. 12 AIaSTE

WHEREFORE, the petition is hereby DENIED. The decision of

respondent NLRC is AFFIRMED, with modification in the sense
that the backwages due private respondents shall be paid in full,
computed from the time they were illegally dismissed up to the
time of the finality of this Decision. 13

SO ORDERED.

||| (Perpetual Help Credit Cooperative, Inc. v. Faburada, G.R. No.

121948, [October 8, 2001], 419 PHIL 147-159)