Compilation of

Cases for Labor

Relations
Labor Relations
“…refers to the relations between management and
labor, especially with respect to the maintenance of
agreements, collective bargaining…”

Compiled by:
MARIPHI C. AMBOLARIO

DVOREF
LAW II-B

2/15/2016
 TABLE OF CONTENTS

Title of the Case Page Number

1. Holganza, et al –VERSUS—Hon. Sergio 2

Apostol and SSS, G.R. No. L-32953 March
31, 1977
2. Hagonoy Water District – VERSUS—NLRC, 3
G.R. No. 81490 August 31,1988
3. Zamboanga City Water District – VERSUS—
Presiding Commissioner Musib M. Buat, et 6
al. G.R. No. 104389 May 27,1994
4. San Miguel Corporation –VERSUS—NLRC 10
and Rustico Vega, G.R. No. 80774
5. Ernesto Medina and Jose G. Ong— 14
VERSUS—Hon. Floreliana Castro-
Bartolome, et al. G.R. No. L-59825
September 11,1982
6. Georg Grotjhan GMBH & Co., --VERSUS— 19
Hon. Lucia Violago Isnani, et al., G.R. No.
109272 August 10, 1994
7. Evelyn Tolosa –VERSUS—NLRC, et al. G.R. 23
No. 149578 April 10, 2003
8. Eduardo G. Eviota—VERSUS—CA, et al. 28
G.R. No. 152121 July 29, 2003
9. SANYO Philippines Workers Union— 34
VERSUS—Hon. Potenciano S. Canizares, et
al. July 8, 1992
10. Bebiano M. Bañez—VERSUS—Hon. 40
Downey C. Valdevilla and ORO Marketing ,
Inc., G.R. No. 128024 May 9,2000
11. Philippine Airlines Inc.—VERSUS—NLRC, et 44
al., G.R. No. 120567 March 20, 1998
12. CMP Federal Security Agency Inc. – 49
VERSUS—NLRC, et al., G.R. No. 125298
February 11, 1999
13. Prudencio Bantolino, et al. –VERSUS— 54
COCA-COLA Bottlers Phils. Inc. G.R. No.
153660 June 10, 2003
14. FORD Philippines Salaried Employees 57
Association, et al. –VERSUS—NLRC, G.R.
No. 75347 December 11, 1987
15. Prudencio J. Tanjuan—VERSUS—Philippine 63
Postal Savings Banks, Inc., et al. G.R. No.
155278 September 16, 2003
16. Halagueña—VERSUS—PAL, G.R. No. 69
172013 October 2, 2009

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 SECOND DIVISION

[G.R. No. L-32953. March 31, 1977.]

RIZALINO HOLGANZA, LEOCADIO RAMIREZ, ALEGRIA CELIS, LEVY A. RACELIS, GREGORIO CADIENTE,
JR., PEDRO DIONEDA, RAUL LARRACAS, EMILIO LEONOR, Jr., ARISTIDES PARAS, CONRADO YACABA,
CELSO DE GUZMAN, RAFAEL DE LA PENA, ROMEO CACHOLA, and RICARDO LUMAWIG, Petitioners, v.
HON. SERGIO A. F. APOSTOL, as Judge of the Court of First Instance of Rizal, Quezon City Branch No.
XVI, and THE SOCIAL SECURITY SYSTEM, Respondents.

Gertrudo G. Aquino, for Petitioners.

Filemon Q. Almazan, Mauricio M. Rivera, Perlita J. Tria Tirona & Gelacio L. Bayani for respondent
Social Security System.

DECISION

FERNANDO, J.:

The necessity for this certiorari and prohibition proceeding filed by petitioners precisely on the ground
of lack of jurisdiction could have been obviated, the case against them in the court of first instance
presided by respondent Judge Sergio A. F. Apostol being for the recovery of damages allegedly arising
from picketing carried on during a strike against private respondent, the Social Security System. There
was a motion to dismiss, but it was denied. That was not in accordance with the authoritative doctrine
which would leave such matters to the labor tribunal. That has been the settled law for some time. In
October of last year, in Goodrich Employees Association v. The Honorable Delfin B. Flores, 1 it was again
reiterated. There is thus merit to this suit for prohibition and certiorari.chanrobles.com : virtual law
library

Private respondent Social Security System filed with the lower court a complaint for damages with writ
of preliminary attachment against the defendants named therein, included among whom are the
present petitioners. 2 Thereafter, petitioners filed a motion to dismiss, premised primarily on the ground
of lack of jurisdiction, with the added objection that the action was premature. 3 The motion to dismiss
included as annexes the complaint in Case No. V-41 as well as Case No. 46-IPA, then both pending in the
Court of Industrial Relations, the latter being certified to such tribunal by the President. 4 There was an
opposition to such motion. 5 It was sustained by respondent Judge in these words: "For lack of merit,
the motion to dismiss filed by the defendant-movants is hereby denied. The defendant-movants are
directed to file the necessary answer within the prescribed period provided for in the Rules of Court." 6
There was a motion for reconsideration, but it was denied. Hence this petition.

The jurisdictional issue, as noted, must be decided in favor of petitioners. There is this appraisal of the
nature of the action instituted against them by private respondent, the Social Security System: "Clearly,
the complaint for damages is deeply rooted from the labor dispute certified by the President of the
Philippines and from which resulted a collective bargaining agreement that was adopted as the court
award. This award, in turn, branched out to disputes that led to the strike. On the basis of this strike, the
SSS petitioned the CIR to declare the said strike illegal, to dismiss the striking employees, and to declare
the officers in contempt of court. And the claim for damages is the result of the strike. The SSS alleges
that: ‘19. As a result of the Defendants’ strike and picketing from September 3, 1968 to September 18,
1969, staged as aforesaid, in violation of the CIR award of August 5, 1966, as well as the orders of the CIR
of August 29, 1966 and September 3 and September 5, 1968, plaintiff suffered actual and consequential
damages . . .’ (par. 19, Complaint, Annex ‘A’; Italics supplied). Likewise, in paragraphs 20 and 21 of the
complaint the SSS seeks exemplary and moral damages in view of the defiance of the CIR orders and also
because of the strike and picketing as thus alleged. In fine, the alleged damages, the strike and picketing,
the alluded CIR orders, the petition to declare the said strike illegal, to dismiss the striking employees,
and to declare the officers in contempt of court - are so intertwined and inseparable from each other.
Except for the aspect of damages, all these incidents are embraced in CIR Case No. 46-IPA and which are

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 all still pending." 7 As far back as Associated Labor Union v. Gomez, 8 the exclusive jurisdiction of the
Court of Industrial Relations in disputes of this character was upheld. "To hold otherwise," as succinctly
stated by the ponente, Justice Sanchez, "is to sanction split jurisdiction - which is obnoxious to the
orderly administration of Justice." 9 Then in Progressive Labor Association v. Atlas Consolidated Mining
and Development Corporation, 10 decided three years later, Justice J.B.L. Reyes, speaking for the Court,
stressed that to rule that such demand for damages is to be passed upon by the regular courts of justice,
instead of leaving the matter to the Court of Industrial Relations, "would be to sanction split jurisdiction,
which is prejudicial to the orderly administration of justice." 11 Thereafter, this Court, in the cases of
Leoquenio v. Canada Dry Bottling Co. 12 and Associated Labor Union v. Cruz, 13 with the opinions
coming from the same distinguished jurist, adhered to such a doctrine, the latest case in point, as noted
at the outset, is the Goodrich Employees Association decision. The lack of jurisdiction of respondent
Judge is thus manifest.chanrobles.com.ph : virtual law library

WHEREFORE, the writ of certiorari is granted, respondent Judge being devoid of jurisdiction to entertain
Civil Case No. Q-12541, entitled, Social Security System v. Philippine Association of Free Labor Unions
(PAFLU), pending in this sala. The writ of prohibition prayed for is likewise granted, and the lower court
restrained from taking any further action on the aforesaid case except for the purpose of dismissing the
same.

Barredo, Antonio, Aquino and Concepcion Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 81490 August 31, 1988

HAGONOY WATER DISTRICT represented by its General Manager CELESTINO S. VENGCO, petitioner,
vs.
THE HON. NATIONAL LABOR RELATIONS COMMISSION, EXECUTIVE LABOR ARBITER VLADIMIR P.L.
SAMPANG, DEPUTY SHERIFF JOSE A. CRUZ and DANTE VILLANUEVA, respondents.

Mario S. Jugco for petitioner.

Renato C. Guevara for private respondent Villanueva.

FELICIANO, J.:

The present petition for certiorari seeks to annul and set aside: a) the decision of the Labor Arbiter dated 17
March 1987 in NLRC Case No. RAB-III-8-2354-85, entitled "Dante Villanueva versus LWA-Hagonoy
Waterworks District/Miguel Santos;" and b) the Resolution of the National Labor Relations Commission dated
20 August 1987 affirming the mentioned decision.

Private respondent Dante Villanueva was employed as service foreman by petitioner Hagonoy Water District
("Hagonoy") from 3 January 1977 until 16 May 1985, when he was indefinitely suspended and thereafter
dismissed on 12 July 1985 for abandonment of work and conflict of interest.

On 14 August 1985, private respondent filed a complaint for illegal dismissal, illegal suspension and
underpayment of wages and emergency cost of living allowance against petitioner Hagonoy with the then
Ministry of Labor and Employment, Regional Arbitration Branch III, San Fernando, Pampanga.

Petitioner immediately moved for outright dismissal of the complaint on the ground of lack of jurisdiction.
Being a government entity, petitioner claimed, its personnel are governed by the provisions of the Civil
Service Law, not by the Labor Code, and protests concerning the lawfulness of dismissals from the service fall
within the jurisdiction of the Civil Service Commission, not the Ministry of Labor and Employment. Petitioner
cited Resolution No. 1540 of the Social Security Commission cancelling petitioner's compulsory coverage
from the system effective 16 May 1979 "considering the rulings that local water districts are instrumentalities
owned and controlled by the government and that their officers and employees are government employees."
In opposing the motion, private respondent Villanueva contended that local water districts, like petitioner

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Hagonoy, though quasi-public corporations, are in the nature of private corporations since they perform
proprietary functions for the government.

The Labor Arbiter proceeded to hear and try the case and, on 17 March 1986, rendered a Decision in favor of
the private respondent and against petitioner Hagonoy. The dispositive part of the decision read:

WHEREFORE, premises considered, respondents are hereby ordered to reinstate petitioner immediately to
his former position as Service Foreman, without loss of seniority rights and privileges, with full backwages,
including all benefits provided by law, from the date he was terminated up to his actual date of
reinstatement.

In addition, respondents are hereby ordered to pay the petitioner the amount of P4,927.50 representing the
underpayments of wages from July 1983 to May 16, 1985.

SO ORDERED.

On appeal, the National Labor Relations Commission affirmed the decision of the Labor Arbiter in a
Resolution dated 20 August 1987.

The petitioner moved for reconsideration, insisting that public respondents had no jurisdiction over the case.
Meanwhile, a Writ of Execution was issued by the Labor Arbiter on 16 November 1987. The writ was
enforced by garnishing petitioner Hagonoy's deposits with the Planters Development Bank of Hagonoy.

Petitioner then filed a Motion to Quash the Writ of Execution with Application for Writ of Preliminary
Injunction arguing that the writ was prematurely issued as its motion for reconsideration had not yet been
resolved. By Resolution dated 10 December 1987, public respondent Commission denied the application for a
preliminary injunction. The motion to quash was similarly denied by the Commission which directed
petitioner to reinstate immediately private respondent and to pay him the amount of P63,577.75 out of
petitioner's garnished deposits.

Hence, the instant petition.

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

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

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

Section 26 of the same decree [P.D. 198] is hereby amended to read as Section 25 as follows:

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

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

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This is not the first time that officials of the Department of Labor and Employment have taken the position
that the Labor Arbiter here adopted. In Baguio Water District vs. Cresenciano B. Trajano, etc. et al., 1 the
petitioner Water District sought review of a decision of the Bureau of Labor Relations which affirmed that of
a Med-Arbiter calling for a certification election among the regular rank-and-file employees of the Baguio
Water District (BWD). In granting the petition, the Court said:

The Baguio Water District was formed pursuant to Title II-Local Water District Law of P.D. No. 198, as
amended, The BWD is by Sec. 6 of that decree 'a quasi-public corporation performing public service and
supplying public wants.

A part of the public respondent's decision rendered in September, 1983, reads in part:

We find the appeal [of the BWD] to be devoid of merit. The records show that the operation and
administration of BWD is governed and regulated by special laws, that is, Presidential Decrees Nos. 198 and
1479 which created local water districts throughout the country. Section 25 of Presidential Decree (PD) 198
clearly provides that the district and its employees shall be exempt from the provisions of the Civil Service
Law and that its personnel below supervisory level shall have the right to collectively bargain. Contrary to
appellant's claim, said provision has not been amended much more abrogated expressly or impliedly by PD
1479 which does not make mention of any matter on Civil Service Law or collective bargaining. (Rollo, p.
590.)

We grant the petition for the following reasons:

1. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Sec. 26 of P.D. No. 198 was amended to
read as Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory decree took effect on June 11, 1978.

xxx xxx xxx

3. The BWD is a corporation created pursuant to a special law — P.D. No. 198, as amended. As such its
officers and employees are part of the Civil Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 686.)

The broader question of whether employees of government owned or controlled corporations are governed
by the Civil Service Law and Civil Service Rules and Regulations was addressed by this Court in 1985 in
National Housing Corporation vs. Juco. 2 After a review of constitutional, statutory and case law on the
matter, the Court, through Mr. Justice Gutierrez, held:

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

Section 1. Article XII-B of the [1973] Constitution specifically provides:

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

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

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

The inclusion of "government-owned or controlled corporations" within the embrace of the civil service
shows a deliberate effort of the framers to plug an earlier loophole which allowed government-owned or
controlled corporations to avoid the full consequences of the all encompassing coverage of the, civil service
system. The same explicit intent is shown by the addition of "agency" and "instrumentality" to branches and
subdivisions of the Government. All offices and firms of the government are covered.

The amendments introduced in 1973 are not Idle exercises or meaningless gestures. They carry the strong
message that civil service coverage is broad and all-embracing insofar as employment in the government in
any of its governmental. or corporate arms is concerned.

xxx xxx xxx

Section I of Article XII-B, [1973] Constitution uses the word "every" to modify the phrase "government-owned
or controlled corporation."

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"Every" means each one of a group, without exception. It means all possible and all, taken one by one. Of
course, our decision in this case refers to a corporation created as a government-owned or controlled entity.
It does not cover cases involving private firms taken over by the government in foreclosure or similar
proceedings. We reserve judgment on these latter cases when the appropriate controversy is brought to this
Court. 3

In Juco, the Court spelled out the law on the issue at bar as such law existed under the 1973 Constitution and
the Provisional Constitution of 1984, 4 until just before the effectivity of the 1987 Constitution. Public
respondent Commission, in confirming the Labor Arbiter's assumption of jurisdiction over this case,
apparently relied upon Article IX (B), Section 2 (1) of the 1987 Constitution, which provides that:

[T]he Civil Service embraces ... government owned or controlled corporations with original charters.
(Emphasis supplied)

The NLRC took the position that although petitioner Hagonoy is a government owned or controlled
corporation, it had no original charter having been created simply by resolution of a local legislative council.
The NLRC concluded that therefore petitioner Hagonoy fell outside the scope of the civil service.

At the time the dispute in the case at bar arose, and at the time the Labor Arbiter rendered his decision (i.e.,
17 March 1986), there is no question that the applicable law was that spelled out in National Housing
Corporation vs. Juco (supra) and Baguio Water District vs. Cresenciano B. Trajano (supra) and that under such
applicable law, the Labor Arbiter had no jurisdiction to render the decision that he in fact rendered. By the
time the public respondent Commission rendered its decision of 20 August 1987 which is here assailed, the
1987 Constitution had already come into effect. 5 There is, nonetheless, no necessity for this Court at the
present time and in the present case to pass upon the question of the effect of the provisions of Article DC
(B), Section 2 (1) of the 1987 Constitution upon the pre-existing statutory and case law. For whatever that
effect might be, — and we will deal with that when an appropriate case comes before the Court — we
believe and so hold that the 1987 Constitution did not operate retrospectively so as to confer jurisdiction
upon the Labor Arbiter to render a decision which, under the law applicable at the time of the rendition of
such decision, was clearly outside the scope of competence of the Labor Arbiter. Thus, the respondent
Commission had nothing before it which it could pass upon in the exercise of its appellate jurisdiction. For it
is self-evident that a decision rendered by the Labor Arbiter without jurisdiction over the case is a complete
nullity, vesting no rights and imposing no liabilities.

ACCORDINGLY, the Petition for certiorari is GRANTED. The decision of the Labor Arbiter dated 17 March
1986, and public respondent Commission's Resolution dated 20 August 1987 and all other Resolutions and
Orders issued by the Commission in this case subsequent thereto, are hereby SET ASIDE. This decision is,
however, without prejudice to the right of private respondent Villanueva to refile, if he so wishes, this
complaint in an appropriate forum. No pronouncement as to costs.

SO ORDERED.

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

FIRST DIVISION

[G.R. No. 104389. May 27, 1994.]

ZAMBOANGA CITY WATER DISTRICT, Petitioner, v. PRESIDING COMMISSIONER MUSIB M. BUAT,

COMMISSIONERS LEON G. GONZAGA, JR. AND OSCAR N. ABELLA, and PRIVATE RESPONDENTS LUIS C.
MARIANO, FELIX G. LAQUIO, FRANCISCO C. OLIVEROS, MARITTA S. DELOS REYES, FRANCISBELLO D.
CRUZ, EXEQUIEL M. DAYOT, JR., ERIC A. DELGADO, RICARDO M. FERRER, JOVITO DUHAYLUNGSOD,
ANTONIO F. ALCANTARA, RICARDO M. CORTEZ, TEOBALDO M. FLORES, ZOILO J. CAPUY, BERNARDINO
T. ALDINETE, ANGIEL M. ESPINA, WINIFRIDO P. CASIMIRO, ENRIQUE M. MANUEL, JR., JOSE P.

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 ATILANO, ANTONIO F. DELOS REYES, JR., ELEUTERIO S. TARROZA, ANTONIO B. DESPALO, ROLANDO B.
GARCIA, CESAR P. REYES, GENEROSO L. CODINO, MARIO E. FERNANDO, BERNARDO B. GEROLAGA,
ANTONIO F. VESAGAS, ANTONIO L. TUBIG, SAILILLA A. ABDULLA, NOEL A. FERNANDO, SEVERIANO
CASIMIRO, RODOLFO DESCALZO, ARTEMIO DE LEON, and SANTIAGO FERRER, Respondents.

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; NATIONAL LABOR RELATIONS COMMISSION; JURISDICTION
THEREOF DOES NOT COVER EMPLOYEES OF GOVERNMENT OWNED AND CONTROLLED CORPORATIONS
WITH ORIGINAL CHARTER. — There is no dispute that petitioner, a water district with an original charter,
is a government-owned and controlled corporation. The established rule is that the hiring and firing of
employees of government-owned and controlled corporations are governed by the provisions of the
Civil Service Law and Civil Service Rules and Regulations. Jurisdiction over the strike and the dismissal of
private respondents is therefore lodged not with the NLRC but with the Civil Service Commission.

2. ID.; REINSTATEMENT; WHEN EFFECTIVE; RULE ON EFFECTIVITY THEREOF PENDING APPEAL. — Under
the provision of Art. 223 of the Labor Code as amended by RA 6715, the decision of the Labor Arbiter
reinstating a dismissed or separated employee insofar as the reinstatement aspect is concerned, shall be
immediately executory, even pending appeal. The employer shall reinstate the employee concerned
either by: (a) actually admitting him back to work under the same terms and conditions prevailing prior
to his dismissal or separation; or (b) at the option of the employer, merely reinstating him in the payroll.
Immediate reinstatement is mandated and is not stayed by the fact that the employer has appealed, or
has posted a cash or surety bond pending appeal. The issuance of the temporary restraining order in
G.R. Nos. 95219-20 did not nullify the rights of private respondents to their reinstatement and to collect
their wages during the period of the effectivity of the order but merely suspended the implementation
thereof pending the determination of the validity of the NLRC resolutions subject of the petition.
Naturally, a finding of this Court that private respondents were not entitled to reinstatement would
mean that they had no right to collect any back wages. On the other hand, where the Court affirmed the
decision of the NLRC and recognized the right of private respondents to reinstatement, as in G.R. Nos.
95219-20, private respondents are entitled to the wages accruing during the effectivity of the temporary
restraining order.

3. REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; ONCE INVOKED BY A PARTY CANNOT BE

REPUDIATED BY THE SAME. — Petitioner never raised the issue of lack of jurisdiction before the
Executive Labor Arbiter, the NLRC or even this Court in G.R. Nos. 95219-20. If fact, petitioner itself filed
the complaint before the Executive Labor Arbiter in NLRC Case No. RAB-IX-03-0090-87, sought
affirmative relief therefrom and even participated actively in the proceedings below. It is only now in
this case before us, after the NLRC ordered payment of back wages, that petitioner raises the issue of
lack of jurisdiction. Indeed, it is not fair for a party who has voluntarily invoked the jurisdiction of a
tribunal in a particular matter to secure an affirmative relief therefrom, to afterwards repudiate and
deny that very same jurisdiction to escape a penalty. Petitioner is thus estopped from assailing the
jurisdiction of the NLRC and is bound to respect all the proceedings below.

DECISION

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside the
Resolutions dated October 24, 1991 and February 19, 1992 of the National Labor Relations Commission
(NLRC) in NLRC CA No. M-000352.chanroblesvirtualawlibrary

The Zamboanga City Water District, petitioner herein, is a government-owned and controlled
corporation engaged in the business of supplying water in the City of Zamboanga. Private respondents
are all employees of petitioner.

In March 1987, a strike occurred in the company. It was conducted and participated in by private
respondents, for which reason they were separated from their employment. Petitioner thereafter filed

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 on March 17, 1987 a complaint before the Labor Arbiter to declare the said strike illegal (NLRC Case No.
RAB-IX-03-0090-87). The following day, March 18, the Zamboanga Utilities Labor Union (ZULU), to which
private respondents belonged, filed before the Labor Arbiter, a complaint against petitioner for illegal
dismissal and unpaid wages (NLRC Case No. RAB-IX-03-0092-87).

The two cases were consolidated and heard together, and on April 19, 1988, a consolidated decision was
rendered by the Executive Labor Arbiter declaring both the strike and the dismissal of private
respondents illegal and ordering the reinstatement of private respondents to their former positions,
without loss of seniority rights and privileges, but without back wages.

Petitioner appealed to the NLRC. On July 17, 1990, the NLRC, through respondent Commissioners,
affirmed the decision of the Executive Labor Arbiter, with the sole modification that the strike leader,
respondent Felix Laquio herein, be suspended from work without pay for a period of six months,
effective ten days from receipt of the decision.

Petitioner received a copy of the decision of the NLRC on August 27 (Rollo, p. 32). Three days later,
private respondents filed with the Executive Labor Arbiter a motion for execution of the said decision.
On September 24, the Executive Labor Arbiter granted and writ of execution and ordered petitioner to
reinstate all private respondents.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

On September 28, this Court issued a restraining order in G.R. Nos. 95219-20 enjoining, until further
orders, the execution of the NLRC Decision dated July 17, 1990. However, on March 13, 1991, we
dismissed the petition, affirmed the NLRC Decision dated July 17, 1990 and lifted the restraining order
granted earlier.

Petitioner received a copy of the decision of the Supreme Court on April 10 and on April 16, it reinstated
27 of the respondent employees. On the same day, petitioner informed the Executive Labor Arbiter that
respondent Laquio would be reinstated on October 16 after the expiration of Laquio’s six-months
suspension.

On April 17, private respondents filed a motion to compel the immediate reinstatement of respondent
Laquio and the payment of their back wages. According to private respondents, the decision of the NLRC
was executory immediately upon receipt by petitioner of a copy thereof on August 27, 1990.

On May 17, the Executive Labor Arbiter issued an order denying private respondents’ motion. Private
respondents then appealed to the NLRC (NLRC CA No. M-00352.) On October 24, the NLRC set aside the
questioned order of the Executive Labor Arbiter and ordered respondent Laquio’s reinstatement, if not
yet reinstated, and granted full back wages to him from March 6, 1991 up to the day prior to his actual
reinstatement; and to the other private respondents from March 21, 1989 up to April 15, 1991, including
the period of effectivity of the temporary restraining order of this Court in G.R. Nos. 95219-20.

Petitioner moved for a reconsideration, which the NLRC however denied on February 19,
1992.chanrobles virtual lawlibrary

Hence, this petition.

II

Petitioner contends that the NLRC had no jurisdiction to issue the resolutions in question because
jurisdiction over labor disputes is vested in the Civil Service Commission. It also argues that the NLRC
committed grave abuse of discretion amounting to lack or in excess of jurisdiction when it ordered the
payment of the salaries of private respondent during the effectivity of the restraining order of this Court
in G.R. Nos. 95219-20.

There is no dispute that petitioner, a water district with an original charter, is a government-owned and
controlled corporation. The established rule is that the hiring and firing of employees of government-
owned and controlled corporations are governed by the provisions of the Civil Service Law and Civil
Service Rules and Regulations (Tanjay Water District v. Gabaton, 172 SCRA 253 [1989]; Hagonoy Water
District v. National Labor Relations Commission, 165 SCRA 272 [1988]; National Housing Corporation v.
Juco, 134 SCRA 172 [1985]; Baguio Water District v. Trajano, 127 SCRA 730 [1984]). Jurisdiction over the
strike and the dismissal of private respondents is therefore lodged not with the NLRC but with the Civil
Service Commission.cralawnad

Nevertheless, petitioner never raised the issue of lack of jurisdiction before the Executive Labor Arbiter,
the NLRC or even this Court in G.R. Nos. 95219-20. In fact, petitioner itself filed the complaint before the

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 Executive Labor Arbiter in NLRC Case No. RAB-IX-03-0090-87, sought affirmative relief therefrom and
even participated actively in the proceedings below. It is only now in this case before us, after the NLRC
ordered payment of back wages, that petitioner raises the issue of lack of jurisdiction. Indeed it is not
fair for a party who has voluntarily invoked the jurisdiction of a tribunal in a particular matter to secure
an affirmative relief therefrom, to afterwards repudiate and deny that very same jurisdiction to escape a
penalty (Ocheda v. Court of Appeals, 214 SCRA 629 [1992]; Royales v. Intermediate Appellate Court, 127
SCRA 470 [1984]; Tijam v. Sibonghanoy, 23 SCRA 29 [1968]).

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

The second issue involves the determination of when private respondents should be reinstated as
ordered by the decision of the Executive Labor Arbiter dated April 19, 1988. Their salaries start to toll
from said date.

Petitioner claims that private respondents, except respondent Laquio, were entitled to reinstatement
only after April 10, 1991 when it received a copy of the decision of the Supreme Court in G.R. Nos.
95219-20. Petitioner reinstated said private respondents on April 16, 1991. In the case of respondent
Laquio, petitioner reinstated him on October 16, 1991 after the expiration of the six-month suspension.

Petitioner argues that the execution of the NLRC decision dated July 17, 1990 was suspended by the
temporary restraining order issued by this Court in G.R. Nos. 95219-20.

The Executive Labor Arbiter agreed with petitioner’s contention.

The NLRC was of the view that private respondents should have been reinstated on March 21, 1989 and
paid their back wages from that date to April 15, 1991 including the period of effectivity of the
temporary restraining order of this Court in G.R. Nos. 95219-20. Respondent Laquio on the other hand,
should have been reinstated on March 6, 1991 and paid his back wages from said date up to the day
prior to his actual reinstatement.

The reckoning date of March 21, 1989 used by the NLRC was the date of effectivity of R.A. No. 6715,
amending the third paragraph of Article 223 of the Labor Code which provides:chanrob1es virtual 1aw l

x x x

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

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

The issuance of the temporary restraining order in G.R. Nos. 95219-20 did not nullify the rights of private
respondents to their reinstatement and to collect their wages during the period of the effectivity of the
order but merely suspended the implementation thereof pending the determination of the validity of
the NLRC resolutions subject of the petition. Naturally, a finding of this Court that private respondents
were not entitled to reinstatement would mean that they had no right to collect any back wages. On the
other hand, where the Court affirmed the decision of the NLRC and recognized the right of private
respondents to reinstatement, as in G.R. Nos. 95219-20, private respondents are entitled to the wages
accruing during the effectivity of the temporary restraining order.chanrobles lawlibrary : rednad

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Davide, Jr. and Bellosillo, JJ., concur.

9|Page
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 80774 May 31, 1988

SAN MIGUEL CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and RUSTICO VEGA, respondents.

Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner.

The Solicitor General for public respondent.

FELICIANO, J.:

In line with an Innovation Program sponsored by petitioner San Miguel Corporation ("Corporation;" "SMC")
and under which management undertook to grant cash awards to "all SMC employees ... except [ED-HO staff,
Division Managers and higher-ranked personnel" who submit to the Corporation Ideas and suggestions found
to be beneficial to the Corporation, private respondent Rustico Vega submitted on 23 September 1980 an
innovation proposal. Mr. Vega's proposal was entitled "Modified Grande Pasteurization Process," and was
supposed to eliminate certain alleged defects in the quality and taste of the product "San Miguel Beer
Grande:"

Title of Proposal

Modified Grande Pasteurization Process

Present Condition or Procedure

At the early stage of beer grande production, several cases of beer grande full goods were received by MB as
returned beer fulls (RBF). The RBF's were found to have sediments and their contents were hazy. These
effects are usually caused by underpasteurization time and the pasteurzation units for beer grande were
almost similar to those of the steinie.

Proposed lnnovation (Attach necessary information)

In order to minimize if not elienate underpasteurization of beer grande, reduce the speed of the beer grande
pasteurizer thereby, increasing the pasteurization time and the pasteurization acts for grande beer. In this
way, the self-life (sic) of beer grande will also be increased. 1

Mr. Vega at that time had been in the employ of petitioner Corporation for thirteen (1 3) years and was then
holding the position of "mechanic in the Bottling Department of the SMC Plant Brewery situated in Tipolo,
Mandaue City.

Petitioner Corporation, however, did not find the aforequoted proposal acceptable and consequently refused
Mr. Vega's subsequent demands for a cash award under the Innovation Program. On 22 February 1983., a
Complaint 2 (docketed as Case No. RAB-VII-0170-83) was filed against petitioner Corporation with Regional
Arbitration Branch No. VII (Cebu City) of the then.", Ministry of Labor and Employment. Frivate respondent
Vega alleged there that his proposal "[had] been accepted by the methods analyst and implemented by the
Corporation [in] October 1980," and that the same "ultimately and finally solved the problem of the
Corporation in the production of Beer Grande." Private respondent thus claimed entitlement to a cash prize
of P60,000.00 (the maximum award per proposal offered under the Innovation Program) and attorney's fees.

In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation alleged that private respondent
had no cause of action. It denied ever having approved or adopted Mr. Vega's proposal as part of the

10 | P a g e
Corporation's brewing procedure in the production of San Miguel Beer Grande. Among other things,
petitioner stated that Mr. Vega's proposal was tumed down by the company "for lack of originality" and that
the same, "even if implemented [could not] achieve the desired result." Petitioner further alleged that the
Labor Arbiter had no jurisdiction, Mr. Vega having improperly bypassed the grievance machinery procedure
prescribed under a then existing collective bargaining agreement between management and employees, and
available administrative remedies provided under the rules of the Innovation Program. A counterclaim for
moral and exemplary damages, attorney's fees, and litigation expenses closed out petitioner's pleading.

In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money claim of complainant Vega in this
case is "not a necessary incident of his employment" and that said claim is not among those mentioned in
Article 217 of the Labor Code, dismissed the complaint for lack of jurisdiction. However, in a gesture of
"compassion and to show the government's concern for the workingman," the Labor Arbiter also directed
petitioner to pay Mr. Vega the sum of P2,000.00 as "financial assistance."

The Labor Arbiter's order was subsequently appealed by both parties, private respondent Vega assailing the
dismissal of his complaint for lack of jurisdiction and petitioner Corporation questioning the propriety of the
award of "financial assistance" to Mr. Vega. Acting on the appeals, the public respondent National Labor
Relations Commission, on 4 September 1987, rendered a Decision, 5 the dispositive portion of which reads:

WHEREFORE, the appealed Order is hereby set aside and another udgment entered, order the respondent to
pay the complainant the amount of P60,000.00 as explained above.

SO ORDERED.

In the present Petition for certiorari filed on 4 December 1987, petitioner Corporation, invoking Article 217 of
the Labor Code, seeks to annul the Decision of public respondent Commission in Case No. RAB-VII-01 70-83
upon the ground that the Labor Arbiter and the Commission have no jurisdiction over the subject matter of
the case.

The jurisdiction of Labor Arbiters and the National Labor Relations Commission is outlined in Article 217 of
the Labor Code, as last amended by Batas Pambansa Blg. 227 which took effect on 1 June 1982:

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

1. Unfair labor practice cases;

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

3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided by law or appropriate agreement, except claims
for employees' compensation, social security, medicare and maternity benefits;

4. Cases involving household services; and

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

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

While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the
entire universe of money claims that might be asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should
be read not in isolation from but rather within the context formed by paragraph 1 related to unfair labor
practices), paragraph 2 (relating to claims concerning terms and conditions of employment), paragraph 4
(claims relating to household services, a particular species of employer-employee relations), and paragraph 5
(relating to certain activities prohibited to employees or to employers).<äre||anº•1àw> It is evident that
there is a unifying element which runs through paragraphs 1 to 5 and that is, that they all refer to cases or

11 | P a g e
disputes arising out of or in connection with an employer-employee relationship. This is, in other words, a
situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3,
and any other paragraph of Article 217 of the Labor Code, as amended. We reach the above conclusion from
an examination of the terms themselves of Article 217, as last amended by B.P. Blg. 227, and even though
earlier versions of Article 217 of the Labor Code expressly brought within the jurisdiction of the Labor
Arbiters and the NLRC "cases arising from employer employee relations," 6 which clause was not expressly
carried over, in printer's ink, in Article 217 as it exists today. For it cannot be presumed that money claims of
workers which do not arise out of or in connection with their employer-employee relationship, and which
would therefore fall within the general jurisdiction of the regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an
exclusive basis. The Court, therefore, believes and so holds that the money claims of workers" referred to in
paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the employer-
employee relationship, or some aspect or incident of such relationship. Put a little differently, that money
claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those
money claims which have some reasonable causal connection with the employer-employee relationship.

Applying the foregoing reading to the present case, we note that petitioner's Innovation Program is an
employee incentive scheme offered and open only to employees of petitioner Corporation, more specifically
to employees below the rank of manager. Without the existing employer-employee relationship between the
parties here, there would have been no occasion to consider the petitioner's Innovation Program or the
submission by Mr. Vega of his proposal concerning beer grande; without that relationship, private
respondent Vega's suit against petitioner Corporation would never have arisen. The money claim of private
respondent Vega in this case, therefore, arose out of or in connection with his employment relationship with
petitioner.

The next issue that must logically be confronted is whether the fact that the money claim of private
respondent Vega arose out of or in connection with his employment relation" with petitioner Corporation, is
enough to bring such money claim within the original and exclusive jurisdiction of Labor Arbiters.

In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation engaged in the sale and repair of
motor vehicles, while private respondent was the sales Manager of petitioner. Petitioner had sued private
respondent for non-payment of accounts which had arisen from private respondent's own purchases of
vehicles and parts, repair jobs on cars personally owned by him, and cash advances from the corporation. At
the pre-trial in the lower court, private respondent raised the question of lack of jurisdiction of the court,
stating that because petitioner's complaint arose out of the employer-employee relationship, it fell outside
the jurisdiction of the court and consequently should be dismissed. Respondent Judge did dismiss the case,
holding that the sum of money and damages sued for by the employer arose from the employer-employee
relationship and, hence, fell within the jurisdiction of the Labor Arbiter and the NLRC. In reversing the order
of dismissal and requiring respondent Judge to take cognizance of the case below, this Court, speaking
through Mme. Justice Melencio-Herrera, said:

Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the
Labor Code had jurisdiction over" all other cases arising from employer-employee relation, unless, expressly
excluded by this Code." Even then, the principle followed by this Court was that, although a controversy is
between an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not
involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, 604, in negating jurisdiction of the Labor Arbiter,
although the parties were an employer and two employees, Mr. Justice Abad Santos stated:

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

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

And in Singapore Airlines Limited v. Paño, 122 SCRA 671, 677, the following was said:

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

In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his
personal cars, and for the purchase price of vehicles and parts sold to him. Those accounts have no relevance
to the Labor Code. The cause of action was one under the civil laws, and it does not breach any provision of
the Labor Code or the contract of employment of DEFENDANT. Hence the civil courts, not the Labor Arbiters
and the NLRC should have jurisdiction. 8

It seems worth noting that Medina v. Castro-Bartolome, referred to in the above excerpt, involved a claim for
damages by two (2) employees against the employer company and the General Manager thereof, arising
from the use of slanderous language on the occasion when the General Manager fired the two (2) employees
(the Plant General Manager and the Plant Comptroller). The Court treated the claim for damages as "a simple
action for damages for tortious acts" allegedly committed by private respondents, clearly if impliedly
suggesting that the claim for damages did not necessarily arise out of or in connection with the employer-
employee relationship. Singapore Airlines Limited v. Paño, also cited in Molave, involved a claim for
liquidated damages not by a worker but by the employer company, unlike Medina. The important principle
that runs through these three (3) cases is that where the claim to the principal relief sought 9 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.

Applying the foregoing to the instant case, the Court notes that the SMC Innovation Program was essentially
an invitation from petitioner Corporation to its employees to submit innovation proposals, and that
petitioner Corporation undertook to grant cash awards to employees who accept such invitation and whose
innovation suggestions, in the judgment of the Corporation's officials, satisfied the standards and
requirements of the Innovation Program 10 and which, therefore, could be translated into some substantial
benefit to the Corporation. Such undertaking, though unilateral in origin, could nonetheless ripen into an
enforceable contractual (facio ut des) 11 obligation on the part of petitioner Corporation under certain
circumstances. Thus, whether or not an enforceable contract, albeit implied arid innominate, had arisen
between petitioner Corporation and private respondent Vega in the circumstances of this case, and if so,
whether or not it had been breached, are preeminently legal questions, questions not to be resolved by
referring to labor legislation and having nothing to do with wages or other terms and conditions of
employment, but rather having recourse to our law on contracts.

WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4 September 1987 of public
respondent National Labor Relations Commission is SET ASIDE and the complaint in Case No. RAB-VII-0170-83
is hereby DISMISSED, without prejudice to the right of private respondent Vega to file a suit before the
proper court, if he so desires. No pronouncement as to costs.

SO ORDERED.

Fernan, Gutierrez, Jr., Bidin and Cortes, JJ., concur.

13 | P a g e
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-59825 September 11, 1982

ERNESTO MEDINA and JOSE G. ONG, petitioners,

vs.
HON. FLORELIANA CASTRO-BARTOLOME in her capacity as Presiding Judge of the Court of First Instance Cf
Rizal, Branch XV, Makati, Metro Manila, COSME DE ABOITIZ and PEPSI-COLA BOTTLING COMPANY OF THE
PHILIPPINES, INC., respondents.

ABAD SANTOS, J.:

Civil Case No. 33150 of the Court of First Instance of Rizal Branch XV, was filed in May, 1979, by Ernesto
Medina and Jose G. Ong against Cosme de Aboitiz and Pepsi-Cola Bottling Co. of the Philippines, Inc. Medina
was the former Plant General Manager and Ong was the former Plant Comptroller of the company. Among
the averments in the complaint are the following:

3. That on or about 1:00 o'clock in the afternoon of December 20, 1977, defendant Cosme de Aboitiz, acting
in his capacity as President and Chief Executive Officer of the defendant Pepsi-Cola Bottling Company of the
Philippines, Inc., went to the Pepsi-Cola Plant in Muntinlupa, Metro Manila, and without any provocation,
shouted and maliciously humiliated the plaintiffs with the use of the following slanderous language and other
words of similar import uttered in the presence of the plaintiffs' subordinate employees, thus-

GOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU ARE BOTH SHIT TO ME! YOU ARE FIRED
(referring to Ernesto Medina). YOU TOO ARE FIRED! '(referring to Jose Ong )

4. That on January 9, 1978, the herein plaintiffs filed a joint criminal complaint for oral defamation against
the defendant Cosme de Aboitiz duly supported with respective affidavits and corroborated by the affidavits
of two (2) witnesses: Isagani Hernandez and Jose Ganseco II, but after conducting a preliminary investigation,
Hon. Jose B. Castillo, dismissed the complaint allegedly because the expression "Fuck you and "You are both
shit to me" were uttered not to slander but to express anger and displeasure;

5. That on February 8, 1978, plaintiffs filed a Petition for Review with the office of the Secretary of Justice
(now Ministry of Justice) and on June 13, 1978, the Deputy Minister of Justice, Catalino Macaraig, Jr., issued a
resolution sustaining the plaintiff's complaint, reversing the resolution of the Provincial Fiscal and directing
him to file against defendant Cosme de Aboitiz an information for Grave Slander. ... ;

6. That the employment records of plaintiffs show their track performance and impeccable qualifications, not
to mention their long years of service to the Company which undoubtedly caused their promotion to the two
highest positions in Muntinlupa Plant having about 700 employees under them with Ernesto Medina as the
Plant General Manager receiving a monthly salary of P6,600.00 excluding other perquisites accorded only to
top executives and having under his direct supervision other professionals like himself, including the plaintiff
Jose G. Ong, who was the Plant Comptroller with a basic monthly salary of P4,855.00;

7. That far from taking these matters into consideration, the defendant corporation, acting through its
President, Cosme de Aboitiz, dismissed and slandered the plaintiffs in the presence of their subordinate
employees although this could have been done in private;

8. That the defendants have evidently enjoyed the act of dismissing the plaintiffs and such dismissal was
planned to make it as humiliating as possible because instead of allowing a lesser official like the Regional
Vice President to take whatever action was necessary under the circumstances, Cosme de Aboitiz himself
went to the Muntinlupa Plant in order to publicly upbraid and dismiss the plaintiffs;

9. That the defendants dismissed the plaintiffs because of an alleged delay in the use of promotional crowns
when such delay was true with respect to the other Plants, which is therefore demonstrative of the fact that

14 | P a g e
Cosme de Aboitiz did not really have a strong reason for publicly humiliating the plaintiffs by dismissing them
on the spot;

10. That the defendants were moved by evil motives and an anti-social attitude in dismissing the plaintiffs
because the dismissal was effected on the very day that plaintiffs were awarded rings of loyalty to the
Company, five days before Christmas and on the day when the employees' Christmas party was held in the
Muntinlupa Plant, so that when plaintiffs went home that day and found their wives and children already
dressed up for the party, they didn't know what to do and so they cried unashamedly;

xxx xxx xxx

20. That because of the anti-social manner by which the plaintiffs were dismissed from their employment and
the embarrassment and degradation they experience in the hands of the defendants, the plaintiffs have
suffered and will continue to suffer wounded feelings, sleepless nights, mental torture, besmirched
reputation and other similar injuries, for which the sum of P150,000.00 for each plaintiff, or the total
amount. of P300,000.00 should be awarded as moral damages;

21. That the defendants have demonstrated their lack of concern for the rights and dignity of the Filipino
worker and their callous disregard of Philippine labor and social legislation, and to prevent other persons
from following the footsteps of defendants, the amount of P50,000.00 for each plaintiff, or the total sum of
P100,000.00, should be awarded as exemplary damages;

22. That plaintiffs likewise expect to spend no less than P5,000.00 as litigation expenses and were
constrained to secure the services of counsel for the protection and enforcement of their rights for which
they agreed to pay the sum of P10,000.00 and P200.00 per appearance as and for attorney's fees.

The complaint contains the following:

PRAYER

WHEREFORE, in view of all the foregoing. it is most respectfully that after proper notice and hearing,
judgment be rendered for the plaintiffs and against the defendants ordering them, jointly and solidarily, to
pay the plaintiffs the sums of:

1. Unrealized income in such sum as will be established during the trial;

2. P300,000.00 as moral damages;

3. P100,000.00 by way of exemplary damages:

4. P5,000.00 as litigation expenses;

5. P10,000.00 and P200.00 per appearance as and for attorney's fees; and

6. Costs of this suit.

Plaintiffs also pray for such further reliefs and remedies as may be in keeping with justice and equity.

On June 4, 1979, a motion to dismiss the complaint on the ground of lack of jurisdiction was filed by the
defendants. The trial court denied the motion on September 6, 1979, in an order which reads as follows:

Up for resolution by the Court is the defendants' Motion to Dismiss dated June 4, 1979, which is basically
anchored on whether or not this Court has jurisdiction over the instant petition.

The complaint alleges that the plaintiffs' dismissal was without any provocation and that defendant Aboitiz
shouted and maliciously humiliated plaintiffs and used the words quoted in paragraph 3 thereof. The
plaintiffs further allege that they were receiving salaries of P6,600.00 and P4,855.00 a month. So the
complaint for civil damages is clearly not based on an employer-employee relationship but on the manner of
plaintiffs' dismissal and the effects flowing therefrom. (Jovito N. Quisaba vs, Sta. Ines-Melale Veneer &
Plywood Co., Inc., et al., No. L-38088, Aug. 30,1974.)

15 | P a g e
This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took effect on May 1, 1978
and which provides that Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for
moral or other forms of damages, now expressly confers jurisdiction on the courts in these cases, specifically
under the plaintiff's causes of action.

Because of the letter dated January 4, 1978 and the statement of plaintiff Medina that his receipt of the
amount from defendant company was done "under strong protest," it cannot be said that the demands set
forth in the complaint have been paid, waived or other extinguished. In fact, in defendants' Motion to
Dismiss, it is stated that 'in the absence of a showing that there was fraud, duress or violence attending said
transactions, such Release and Quitclaim Deeds are valid and binding contracts between them, which in
effect admits that plaintiffs can prove fraud, violence, duress or violence. Hence a cause of action for
plaintiffs exist.

It is noticed that the defamatory remarks standing alone per se had been made the sole cause under the first
cause of action, but it is alleged in connection with the manner in which the plaintiffs had been dismissed,
and whether the statute of limitations would apply or not would be a matter of evidence.

IT has been alreadly settled by jurisprudence that mere asking for reinstatement does not remove from the
CFI jurisdiction over the damages. The case must involve unfair labor practices to bring it within the
jurisdiction of the CIR (now NLRC).

WHEREFORE, the defendants' Motion to Dismiss dated June 4, 1979 is hereby denied.

The defendants are hereby directed to interpose their answer within ten (10) days from receipt hereof.

While the trial was underway, the defendants filed a second motion to dismiss the complaint dated January
23, 1981, because of amendments to the Labor Code immediately prior thereto. Acting on the motion, the
trial court issued on May 23, 1981, the following order:

Up for resolution by the Court is the defendants' Motion to Dismiss dated January 23, 1981, on grounds not
existing when the first Motion to Dismiss dated June 4, 1979 was interposed. The ground relied upon is the
promulgation of P.D. No. 1691 amending Art. 217 of the Labor Code of the Philippines and Batasan Pambansa
Bldg. 70 which took effect on May 1, 1980, amending Art. 248 of the Labor Code.

The Court agrees with defendants that the complaint alleges unfair labor practices which under Art. 217 of
the Labor Code, as amended by P.D. 1691, has vested original and exclusive jurisdiction to Labor Arbiters, and
Art. 248, thereof ... "which may include claims for damages and other affirmative reliefs." Under the
amendment, therefore, jurisdiction over employee-employer relations and claims of workers have been
removed from the Courts of First Instance. If it is argued that this case did not arise from employer-employee
relation, but it cannot be denied that this case would not have arisen if the plaintiffs had not been employees
of defendant Pepsi-Cola. Even the alleged defamatory remarks made by defendant Cosme de Aboitiz were
said to plaintiffs in the course of their employment, and the latter were dismissed from such employment.
Hence, the case arose from such employer-employee relationship which under the new Presidential Decree
1691 are under the exclusive, original jurisdiction of the labor arbiters. The ruling of this Court with respect to
the defendants' first motion to dismiss, therefore, no longer holds as the positive law has been subsequently
issued and being a curative law, can be applied retroactively (Garcia v. Martinez, et al., L-47629, May 28,
1979; 90 SCRA 331-333).

It will also logically follow that plaintiffs can reinterpose the same complaint with the Ministry of Labor.

WHEREFORE, let this case be, as it is hereby ordered, dismissed, without pronouncement as to costs.

A motion to reconsider the above order was filed on July 7, 1981, but it was only on February 8, 1982, or
after a lapse of around seven (7) months when the motion was denied.

Plaintiffs have filed the instant petition pursuant to R. A. No. 5440 alleging that the respondent court
committed the following errors:

16 | P a g e
IN DIVESTING ITSELF OF ITS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 33150 DESPITE THE FACT
THAT JURISDICTION HAD ALREADY ATTACHED WHICH WAS NOT OUSTED BY THE SUBSEQUENT ENACTMENT
OF PRESIDENTIAL DECREE 1691;

IN HOLDING THAT PRESIDENTIAL DECREE 1691 SHOULD BE GIVEN A RETROSPECTIVE EFFECT WHEN
PRESIDENTIAL DECREE 1367 WHICH WAS IN FORCE WHEN CIVIL CASE NO. 33150 WAS FILED AND TRIAL
THEREOF HAD COMMENCED, WAS NEVER EXPRESSLY REPEALED BY PRESIDENTIAL DECREE 1691, AND IF EVER
THERE WAS AN IMPLIED REPEAL, THE SAME IS NOT FAVORED UNDER PREVAILED JURISPRUDENCE;

IN HOLDING THAT WITH THE REMOVAL BY PRESIDENTIAL DECREE 1691 OF THE PROVISO INSERTED IN
ARTICLE 217 OF THE LABOR CODE BY PRESIDENTIAL DECREE 1367, THE LABOR ARBITERS HAVE ACQUIRED
JURISDICTION OVER CLAIMS FOR DAMAGES ARISING FROM EMPLOYER-EMPLOYEE RELATIONS TO THE
EXCLUSION OF THE REGULAR COURTS, WHEN A READING OF ARTICLE 217 WITHOUT THE PROVISO IN
QUESTION READILY REVEALS THAT JURISDICTION OVER DAMAGE CLAIMS IS STILL VESTED WITH THE
REGULAR COURTS;

IN DISMISSING FOR LACK OF JURISDICTION CIVIL CASE NO. 33150 THEREBY VIOLATING THE CONSTITUTIONAL
RIGHTS OF THE PETITIONERS NOTABLY THEIR RIGHT TO DUE PROCESS.

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

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

WHEREFORE, the petition is granted; the respondent judge is hereby ordered to reinstate Civil Case No.
33150 and render a decision on the merits. Costs against the private respondents.

SO ORDERED.

Barredo (Chairman), Concepcion, Jr. Guerrero, De Castro and Escolin, JJ., concur.

Separate Opinions

AQUINO, J.,dissenting:

I dissent with due deference to the opinion penned by Mr. Justice Abad Santos.

This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising
from the alleged disgraceful termination of petitioners' employment.

Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines with
a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly salary of
P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive officer, on
December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31, Rollo),

The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386
as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent by
registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and that
they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo).

More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of
Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the
alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC Case
No. R4-STF-1-492-78, pp. 40, 288-299, Rollo).

The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation and
quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister Amado C.

17 | P a g e
Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the motion for
reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo).

Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of First
Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by reason of the
humiliating manner in which they were dismissed. They prayed for the payment of unrealized income and
P415,000 as moral and exemplary damages, attorney's fees and litigation expenses (pp. 34-5, 246, Rollo).

Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a labor
case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the motion.

Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the
ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor
Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be
ventilated in court (p. 247, Rollo).

After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based on
Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential Decree No.
1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims of workers,
including moral damages, and other claims arising from employer- employee relationship.

Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of
dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440.

In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong
were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217
of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their
cause of action against Aboitiz and Pepsi-Cola. (See Aguda vs. Judge Vallejos, G. R. No. 58133, March 26,1982;
Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal Industries, Inc. vs. Vallejos, G. R. No.
57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R. No. 58877, March 15,1982.)

The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of
Medina and Ong.

Separate Opinions

AQUINO, J.,dissenting:

I dissent with due deference to the opinion penned by Mr. Justice Abad Santos.

This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising
from the alleged disgraceful termination of petitioners' employment.

Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines with
a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly salary of
P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive officer, on
December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31, Rollo),

The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386
as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent by
registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and that
they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo).

More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of
Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the
alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC Case
No. R4-STF-1-492-78, pp. 40, 288-299, Rollo).

The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation and
quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister Amado C.

18 | P a g e
Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the motion for
reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo).

Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of First
Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by reason of the
humiliating manner in which they were dismissed. They prayed for the payment of unrealized income and
P415,000 as moral and exemplary damages, attorney's fees and litigation expenses (pp. 34-5, 246, Rollo).

Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a labor
case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the motion.

Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the
ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor
Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be
ventilated in court (p. 247, Rollo).

After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based on
Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential Decree No.
1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims of workers,
including moral damages, and other claims arising from employer- employee relationship.

Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of
dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440.

In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong
were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217
of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their
cause of action against Aboitiz and Pepsi-Cola. (See Aguda vs. Judge Vallejos, G. R. No. 58133, March 26,1982;
Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal Industries, Inc. vs. Vallejos, G. R. No.
57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R. No. 58877, March 15,1982.)

The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of
Medina and Ong.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 109272 August 10, 1994

GEORG GROTJAHN GMBH & CO., petitioner,

vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br. 59; ROMANA R.
LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents.

A.M. Sison, Jr. & Associates for petitioner.

Pedro L. Laso for private respondents.

PUNO, J.:

Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent judge for lack of
jurisdiction and lack of capacity to sue.

The records show that petitioner is a multinational company organized and existing under the laws of the
Federal Republic of Germany. On July 6, 1983, petitioner filed an application, dated July 2, 1983, 1 with the
Securities and Exchange Commission (SEC) for the establishment of a regional or area headquarters in the
Philippines, pursuant to Presidential Decree No. 218. The application was approved by the Board of

19 | P a g e
Investments (BOI) on September 6, 1983. Consequently, on September 20, 1983, the SEC issued a Certificate
of Registration and License to petitioner. 2

Private respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983 to mid-1992.
On March 12, 1992, she secured a loan of twenty-five thousand pesos (P25,000.00) from petitioner. On
March 26 and June 10, 1992, she made additional cash advances in the sum of ten thousand pesos
(P10,000.00). Of the total amount, twelve thousand one hundred seventy pesos and thirty-seven centavos
(P12,170.37) remained unpaid. Despite demand, private respondent Romana failed to settle her obligation
with petitioner.

On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch of the National
Labor Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal and non-payment
of commissions against petitioner. On August 18, 1992, petitioner in turn filed against private respondent a
Complaint for damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the NLRC
Arbitration Branch (Manila). 3 The two cases were consolidated.

On September 2, 1992, petitioner filed another Complaint for collection of sum of money against private
respondents spouses Romana and Teofilo Lanchinebre which was docketed as Civil Case No. 92-2486 and
raffled to the sala of respondent judge. Instead of filing their Answer, private respondents moved to dismiss
the Complaint. This was opposed by petitioner.

On December 21, 1992, respondent judge issued the first impugned Order, granting the motion to dismiss.
She held, viz:

Jurisdiction over the subject matter or nature of the action is conferred by law and not subject to the whims
and caprices of the parties.

Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties
for decision, the following cases involving all workers, whether agricultural or non-agricultural:

(4) claims for actual, moral, exemplary and other forms of damages arising from an employer-employee
relations.

xxx xxx xxx

(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other
claims arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether or not
accompanied with a claim for reinstatement.

In its complaint, the plaintiff (petitioner herein) seeks to recover alleged cash advances made by defendant
(private respondent herein) Romana Lanchinebre while the latter was in the employ of the former. Obviously
the said cash advances were made pursuant to the employer-employee relationship between the (petitioner)
and the said (private respondent) and as such, within the original and exclusive jurisdiction of the National
Labor Relations Commission.

Again, it is not disputed that the Certificate of Registration and License issued to the (petitioner) by the
Securities and Exchange Commission was merely "for the establishment of a regional or area headquarters in
the Philippines, pursuant to Presidential Decree No. 218 and its implementing rules and regulations." It does
not include a license to do business in the Philippines. There is no allegation in the complaint moreover that
(petitioner) is suing under an isolated transaction. It must be considered that under Section 4, Rule 8 of the
Revised Rules of Court, facts showing the capacity of a party to sue or be sued or the authority of a party to
sue or be sued in a representative capacity or the legal existence of an organized association of persons that
is made a party must be averred. There is no averment in the complaint regarding (petitioner's) capacity to
sue or be sued.

Finally, (petitioner's) claim being clearly incidental to the occupation or exercise of (respondent) Romana
Lanchinebre's profession, (respondent) husband should not be joined as party defendant. 4

20 | P a g e
On March 8, 1993, the respondent judge issued a minute Order denying petitioner's Motion for
Reconsideration.

Petitioner now raises the following assignments of errors:

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE REGULAR COURTS HAVE NO JURISDICTION OVER
DISPUTES BETWEEN AN EMPLOYER AND AN EMPLOYEE INVOLVING THE APPLICATION PURELY OF THE
GENERAL CIVIL LAW.

II

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT PETITIONER HAS NO CAPACITY TO SUE AND BE SUED IN
THE PHILIPPINES DESPITE THE FACT THAT PETITIONER IS DULY LICENSED BY THE SECURITIES AND EXCHANGE
COMMISSION TO SET UP AND OPERATE A REGIONAL OR AREA HEADQUARTERS IN THE COUNTRY AND THAT
IT HAS CONTINUOUSLY OPERATED AS SUCH FOR THE LAST NINE (9) YEARS.

III

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE ERRONEOUS INCLUSION OF THE HUSBAND IN A
COMPLAINT IS A FATAL DEFECT THAT SHALL RESULT IN THE OUTRIGHT DISMISSAL OF THE COMPLAINT.

IV

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE HUSBAND IS NOT REQUIRED BY THE RULES TO BE
JOINED AS A DEFENDANT IN A COMPLAINT AGAINST THE WIFE.

There is merit to the petition.

Firstly, the trial court should not have held itself without jurisdiction over Civil Case No. 92-2486. It is true
that the loan and cash advances sought to be recovered by petitioner were contracted by private respondent
Romana Lanchinebre while she was still in the employ of petitioner. Nonetheless, it does not follow that
Article 217 of the Labor Code covers their relationship.

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. In this regard, we held in the earlier case of Molave Motor Sales, Inc.
vs. Laron, 129 SCRA 485 (1984), viz:

Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the
Labor Code had jurisdiction over "all other cases arising from employer-employee relation, unless expressly
excluded by this Code." Even then, the principal followed by this Court was that, although a controversy is
between an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not
involved. In Medina vs. Castro-Bartolome, 116 SCRA 597, 604 in negating jurisdiction of the Labor Arbiter,
although the parties were an employer and two employees, Mr. Justice Abad Santos stated:

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

xxx xxx xxx

And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677, the following was said:

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

21 | P a g e
xxx xxx xxx

In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the doctrines set forth in the
Medina, Singapore Airlines, and Molave Motors cases, thus:

. . . The important principle that runs through these three (3) cases is that where the claim to the principal
relief sought is to be resolved not by reference to the Labor Code or other labor relations statute or a
collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the
regular courts of justice and not to the Labor Arbiter and the NLRC. In such situations, resolutions 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.

Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as creditor, against
private respondent Romana Lanchinebre, as debtor. The fact that they were employer and employee at the
time of the transaction does not negate the civil jurisdiction of the trial court. The case does not involve
adjudication of a labor dispute but recovery of a sum of money based on our civil laws on obligation and
contract.

Secondly, the trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is
clear that petitioner is a foreign corporation doing business in the Philippines. Petitioner is covered by the
Omnibus Investment Code of 1987. Said law defines "doing business," as follows:

. . . shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in
any calendar year stay in the Philippines for a period or periods totalling one hundred eighty (180) days or
more; participating in the management, supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or
arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization. 5

There is no general rule or governing principle as to what constitutes "doing" or "engaging in" or
"transacting" business in the Philippines. Each case must be judged in the light of its peculiar circumstances. 6
In the case at bench, petitioner does not engage in commercial dealings or activities in the country because it
is precluded from doing so by P.D. No. 218, under which it was established. 7 Nonetheless, it has been
continuously, since 1983, acting as a supervision, communications and coordination center for its home
office's affiliates in Singapore, and in the process has named its local agent and has employed Philippine
nationals like private respondent Romana Lanchinebre. From this uninterrupted performance by petitioner of
acts pursuant to its primary purposes and functions as a regional/area headquarters for its home office, it is
clear that petitioner is doing business in the country. Moreover, private respondents are estopped from
assailing the personality of petitioner. So we held in Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA
824, 837 (1992):

The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged
the same by entering into a contract with it. And the "doctrine of estoppel to deny corporate existence
applies to foreign as well as to domestic corporations;" "one who has dealth with a corporation of foreign
origin as a corporate entity is estopped to deny its corporate existence and capacity." The principle "will be
applied to prevent a person contracting with a foreign corporation from later taking advantage of its
noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract,
. . . (Citations omitted.)

Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be the misjoinder of
private respondent Teofilo Lanchinebre as party defendant. It is a basic rule that "(m)isjoinder or parties is
not ground for dismissal of an action." 8 Moreover, the Order of the trial court is based on Section 4(h), Rule 3
of the Revised Rules of Court, which provides:

22 | P a g e
A married woman may not . . . be sued alone without joining her husband, except . . . if the litigation is
incidental to the profession, occupation or business in which she is engaged,

Whether or not the subject loan was incurred by private respondent as an incident to her profession,
occupation or business is a question of fact. In the absence of relevant evidence, the issue cannot be resolved
in a motion to dismiss.

IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992 and March 8,
1993, in Civil Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby ordered to
hear the reinstated case on its merits. No costs.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Mendoza, JJ., concur.

THIRD DIVISION

[G.R. No. 149578. April 10, 2003.]

EVELYN TOLOSA, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, QWANA KAIUN (through
its resident-agent, FUMIO NAKAGAWA), ASIA BULK TRANSPORT PHILS. INC., PEDRO GARATE and
MARIO ASIS, Respondents.

DECISION
PANGANIBAN, J.:

As a rule, labor arbiters and the National Labor Relations Commission have no power or authority to
grant reliefs from claims that do not arise from employer-employee relations. They have no jurisdiction
over torts that have no reasonable causal connection to any of the claims provided for in the Labor
Code, other labor statutes, or collective bargaining agreements.chanrob1es virtua1 1aw 1ibrary

The Case

The Petition for Review before us assails the April 18, 2001 Decision 1 of the Court of Appeals (CA) in CA-
GR SP No. 57660, as well as the April 17, 2001 CA Resolution 2 denying petitioner’s Motion for
Reconsideration. The dispositive portion of the challenged Decision reads as
follows:jgc:chanrobles.com.ph

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

The Facts

The appellate court narrated the facts of the case in this manner:jgc:chanrobles.com.ph

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

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

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

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

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

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

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

x x x

"After considering the pleadings and evidences, on July 8, 1997, the Labor Arbiter Vladimir P. L.
Sampang, in conformity with petitioner’s plea to hold respondents solidarily liable, granted all the
damages, (plus legal interest), as prayed for by the petitioner. The dispositive portion of his Decision
reads:chanrob1es virtual 1aw library

‘WHEREFORE, premises considered, the respondents are hereby ordered to jointly and solidarily pay
complainants the following:chanrob1es virtual 1aw library

1. US$176,400.00 (US$2,100.00 x 12 months x 7 years) or P4,586,400.00 (at P26.00 per US$1.00) by way
of lost income;

2. interest at the legal rate of six percent (6%) per annum or P1,238,328.00 (from November 1992 to
May 1997 or 4½ years);

3. moral damages of P200,000.00;

4. exemplary damages of P100,000.00; and

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

x x x

"On appeal, private respondents raised before the National Labor Relations Commission (NLRC) the
following grounds:chanrob1es virtual 1aw library

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

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

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

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

x x x

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

Ruling of the Court of Appeals

Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction over the subject matter
of the action filed by petitioner. Her cause did not arise from an employer-employee relation, but from a
quasi delict or tort. Further, there is no reasonable causal connection between her suit for damages and
her claim under Article 217 (a)(4) of the Labor Code, which allows an award of damages incident to an
employer-employee relation.chanrob1es virtua1 1aw 1ibrary

Hence, this Petition. 5

Issues

Petitioner raises the following issues for our consideration:chanrob1es virtual 1aw library

"I

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

"II

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

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

The Court’s Ruling

The Petition has no merit.

First Issue:chanrob1es virtual 1aw library

Jurisdiction over the Action

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

"ART 161. Assistance of employer. — It shall be the duty of any employer to provide all the necessary
assistance to ensure the adequate and immediate medical and dental attendance and treatment to an
injured or sick employee in case of emergency."cralaw virtua1aw library

Likewise, she contends that Article 217 (a) (4) 7 of the Labor Code vests labor arbiters and the NLRC with

25 | P a g e
 jurisdiction to award all kinds of damages in cases arising from employer-employee relations.

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

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

Time and time again, we have held that the allegations in the complaint determine the nature of the
action and, consequently, the jurisdiction of the courts. 11 After carefully examining the
complaint/position paper of petitioner, we are convinced that the allegations therein are in the nature
of an action based on a quasi delict or tort. It is evident that she sued Pedro Garate and Mario Asis for
gross negligence.chanrob1es virtua1 1aw 1ibrary

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

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

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

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

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

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

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

"Not every dispute between an employer and employee involves matters that only labor arbiters and
the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of
labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can only be resolved by reference to the Labor Code, other labor
statutes, or their collective bargaining agreement." 17

The pivotal question is whether the Labor Code has any relevance to the relief sought by petitioner.
From her paper, it is evident that the primary reliefs she seeks are as follows: (a) loss of earning capacity
denominated therein as "actual damages" or "lost income" and (b) blacklisting. The loss she claims does
not refer to the actual earnings of the deceased, but to his earning capacity based on a life expectancy of
65 years. This amount is recoverable if the action is based on a quasi delict as provided for in Article
2206 of the Civil Code, 18 but not in the Labor Code.chanrob1es virtua1 1aw 1ibrary

While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by
labor laws, but also damages governed by the Civil Code, 19 these reliefs must still be based on an action

26 | P a g e
 that has a reasonable causal connection with the Labor Code, other labor statutes, or collective
bargaining agreements. 20

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

"It is the character of the principal relief sought that appears essential in this connection. Where such
principal relief is to be granted under labor legislation or a collective bargaining agreement, the case
should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages
might be asserted as an incident to such claim." 22

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

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

"Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection with
any of the claims provided for in the article in order to be cognizable by the labor arbiter. Only if there is
such a connection with the other claims can the claim for damages be considered as arising from
employer-employee relations." 23 In the present case, petitioner’s claim for damages is not related to
any other claim under Article 217, other labor statutes, or collective bargaining agreements.

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

It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the
employer-employee relation is merely incidental, and in which the cause of action proceeds from a
different source of obligation such as a tort. 25 Since petitioner’s claim for damages is predicated on a
quasi delict or tort that has no reasonable causal connection with any of the claims provided for in
Article 217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies
with the regular courts 26 — not with the NLRC or the labor arbiters.

Second Issue:chanrob1es virtual 1aw library

Finality of the Monetary Award

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

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

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

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

SO ORDERED.

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

27 | P a g e
 SECOND DIVISION

[G.R. No. 152121. July 29, 2003]

EDUARDO G. EVIOTA, petitioner, vs. THE HON. COURT OF APPEALS, THE HON. JOSE BAUTISTA, Presiding
Judge of Branch 136, Regional Trial Court of Makati, and STANDARD CHARTERED BANK, respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, of the Decision1[1]
of the Court of Appeals in CA-G.R. SP No. 60141 denying the petition for certiorari filed by the petitioner
praying the nullification of the Order of the Regional Trial Court of Makati, Branch 136.2[2]

Sometime on January 26, 1998, the respondent Standard Chartered Bank and petitioner Eduardo G. Eviota
executed a contract of employment under which the petitioner was employed by the respondent bank as
Compensation and Benefits Manager, VP (M21). However, the petitioner abruptly resigned from the
respondent bank barely a month after his employment and rejoined his former employer.

On June 19, 1998, the respondent bank filed a complaint against the petitioner with the RTC of Makati City.
The respondent bank alleged inter alia in its complaint that:

1. It is a foreign banking institution authorized to do business in the Philippines, with principal offices
th
at the 5 Floor, Bankmer Bldg., 6756 Ayala Avenue, Makati City.

2. Defendant Eduardo Eviota (Eviota) is a former employee of the Bank, and may be served with
summons and other court processes at 8 Maple Street, Cottonwoods, Antipolo, Metro Manila.

3. On December 22, 1997, Eviota began negotiating with the Bank on his possible employment with
the latter. Taken up during these negotiations were not only his compensation and benefit package, but also
the nature and demands of his prospective position. The Bank made sure that Eviota was fully aware of all
the terms and conditions of his possible job with the Bank.

4. On January 26, 1998, Eviota indicated his conformity with the Banks Offer of Employment by signing
a written copy of such offer dated January 22, 1998 (the Employment Contract). A copy of the Employment
Contract between Eviota and the Bank is hereto attached as Annex A.

5. Acting on the Employment Contract and on Eviotas uninhibited display of interest in assuming his
position, the Bank promptly proceeded to carry out the terms of the Employment Contract as well as to
facilitate his integration into the workforce. Among others, the Bank: (a) renovated and refurbished the room
which was to serve as Eviotas office; (b) purchased a 1998 Honda CR-V (Motor No. PEWED7P101101; Chassis
No. PADRD 1830WV00108) for Eviotas use; (c) purchased a desktop IBM computer for Eviotas use; (d)
arranged the takeout of Eviotas loans with Eviotas former employer; (e) released Eviotas signing bonus in the
net amount of P300,000.00; (f) booked Eviotas participation in a Singapore conference on Y2K project
scheduled on March 10 and 11, 1998; and (g) introduced Eviota to the local and regional staff and officers of
the Bank via personal introductions and electronic mail.

6. The various expenses incurred by the Bank in carrying out the above acts are itemized below, as
follows:

a. Signing Bonus P 300,000.00

28 | P a g e
b. 1 Honda CR-V 800,000.00

c. IBM Desktop Computer 89,995.00

d. Office Reconfiguration 29,815.00

e. 2-Drawer Lateral File

Cabinet 13,200.00

f. 1 Officers Chair 31,539.00

g. 1 Guest Chair 2,200.00

h. 1 Hanging Shelf 2,012.00

i. Staff Loan Processing

Title Verification 375.00

Cost of Appraisal

Housing Loan 3,500.00

TOTAL P1,272,636.00

An itemized schedule of the above expenses incurred by the Bank is hereto attached as Annex B.

7. On February 25, 1998, Eviota assumed his position as Compensation and Benefits Manager with the
Bank and began to discharge his duties. At one Human Resources (HR) Committee meeting held on March 3,
1998, Eviota energetically presented to senior management his projects for the year, thus raising the latters
expectations. The same day, Eviota instructed the Banks HR Administrator to book him a flight for Singapore,
where he was scheduled to participate in a Y2K project on March 10 and 11, 1998. Confident of Eviotas
professed commitment to the Bank, the latter made the aforementioned airline booking for him. In addition,
the Bank allowed Eviota access to certain sensitive and confidential information and documents concerning
the Banks operations.

8. After leading the Bank to believe that he had come to stay, Eviota suddenly resigned his
employment with immediate effect to re-join his previous employer. His resignation, which did not comply
with the 30-day prior notice rule under the law and under the Employment Contract, was so unexpected that
it disrupted plans already in the pipeline (e.g., the development of a salary/matrix grid and salary structure,
and the processing of merit promotion recommendations), aborted meetings previously scheduled among
Bank officers, and forced the Bank to hire the services of a third party to perform the job he was hired to do.
For the services of this third party, the Bank had to pay a total of P208,807.50. A copy of a receipt for the
above expenses is hereto attached as Annex C (See also, Annex B).

9. Aside from causing no small degree of chaos within the Bank by reason of his sudden resignation,
Eviota made off with a computer diskette and other papers and documents containing confidential
information on employee compensation and other Bank matters, such as the salary schedule of all Corporate
and Institutional Banking officers and photocopies of schedules of benefits provided expatriates being
employed by the Bank.

10. With the benefit of hindsight, the Bank realizes that it was simply used by Eviota as a mere leverage
for his selfish efforts at negotiating better terms of employment with his previous employer. Worse, there is
evidence to show that in his attempts to justify his hasty departure from the Bank and conceal the real
reason for his move, Eviota has resorted to falsehoods derogatory to the reputation of the Bank. In
particular, he has been maliciously purveying the canard that he had hurriedly left the Bank because it had
failed to provide him support. His untruthful remarks have falsely depicted the Bank as a contract violator
and an undesirable employer, thus damaging the Banks reputation and business standing in the highly
competitive banking community, and undermining its ability to recruit and retain the best personnel in the
labor market.

29 | P a g e
11. On March 16, 1998, the Bank made a written demand on Eviota to return the aforementioned
computer diskette and other confidential documents and papers, reimburse the Bank for the various
expenses incurred on his account as a result of his resignation (with legal interest), and pay damages in the
amount of at least P500,000.00 for the inconvenience and work/program disruptions suffered by the Bank.

A copy of the Banks demand letter dated March 16, 1998 is hereto attached as Annex D.

12. In partial compliance with said demand, Eviota made arrangements with his previous employer to
reimburse the Bank for the expenses incurred in connection with the Banks purchase of the Honda CR-V for
his use. The Bank informed Eviota that in addition to the Honda CR-Vs purchase price of P848,000.00 (of
which Eviota initially shouldered P48,000.00), incidental costs in the form of Processing Fees (P1,000.00),
FPD/MCAR/98-155684 (P1,232.53) and Fund Transfer Price (P18,646.84) were incurred, bringing the total
cost of the Honda CR-V to P868,881.38. On April 29, 1998, the Bank received two managers checks in the
aggregate amount of P868,881.38, representing costs incurred in connection with the purchase of the Honda
CR-V, inclusive of processing fees and other incidental costs. Previously, Eviota had returned his P300,000.00
signing bonus, less the P48,000.00 he had advanced for the Honda CR-Vs purchase price.

13. Eviota never complied with the Banks demand that he reimburse the latter for the other expenses
incurred on his account, amounting to P360,562.12 (see, Annex B).3[3]

The respondent bank alleged, by way of its causes of action against the petitioner, the following:

First Cause of Action

14. Eviotas actions constitute a clear violation of Articles 19, 20 and 21 of Republic Act No. 386, as
amended (the Civil Code). Assuming arguendo that Eviota had the right to terminate his employment with
the Bank for no reason, the manner in and circumstances under which he exercised the same are clearly
abusive and contrary to the rules governing human relations.

14.1. By his actions and representations, Eviota had induced the Bank to believe that he was committed
to fulfilling his obligations under the Employment Contract. As a result, the Bank incurred expenses in
carrying out its part of the contract (see Annexes B and C). Less reimbursements received from Eviota, the
Bank is entitled to actual damages of P360,562.12. (See, Annex C).

Second Cause of Action

15. Under Article 285 (a) of Presidential Decree No. 442, as amended (the Labor Code), an employee
may terminate without just cause the employer-employee relationship by serving written notice on the
employer at least one (1) month in advance. In addition, Section 13 of the Employment Contract specifically
provides that: Your [i.e., Eviotas] employment may be terminated by either party giving notice of at least one
month. (Annex A, p. 5.)

15.1. Eviotas failure to comply with the above requirement threw a monkey wrench into the Banks
operations Eviotas sudden resignation aborted meetings previously scheduled among Bank officers and
disrupted plans for a salary/merit review program and development of a salary structure and merit grid
already in the pipeline.

Hence, Eviota is liable to the Bank for damages in the amount of at least P100,000.00.

Third Cause of Action

16. Eviotas false and derogatory statements that the Bank had failed to deliver what it had purportedly
promised have besmirched the Banks reputation and depicted it as a contract violator and one which does
not treat its employees properly. These derogatory statements have injured the Banks business standing in
the banking community, and have undermined the Banks ability to recruit and retain the best personnel.
Hence, plaintiff is entitled to moral damages of at least P2,000,000.00.

30 | P a g e
17. By way of example or correction for the public good, and to deter other parties from committing
similar acts in the future, defendant should be held liable for exemplary damages of at least P1,000,000.00

18. Eviotas actions have compelled plaintiff to obtain the services of undersigned counsel for a fee, in
order to protect its interests. Hence, plaintiff is entitled to attorneys fees of at least P200,000.00.4[4]

The respondent bank prayed, that after due proceedings, judgment be rendered in its favor as follows:

WHEREFORE, it is respectfully prayed that judgment be rendered ordering the defendant to pay the plaintiff:

1. As actual damages, the amount of P360,562.12, representing expenses referred to in items c to i of

par. 6 and the cost of the third-party services mentioned in par. 8;

2. For violating the 30-day notice requirement under the Labor Code and order (sic) the Employment
Contract, damages in the amount of at least P100,000.00;

3. As moral damages, the amount of P2,000,000.00;

4. As exemplary damages, the amount of P1,000,000.00;

5. As attorneys fees, the amount of P200,000.00; and

6. Costs of the suit.

Other just and equitable reliefs are likewise prayed for.5[5]

The respondent bank appended to its complaint a copy of the petitioners employment contract.

The petitioner filed a motion to dismiss the complaint on the ground that the action for damages of the
respondent bank was within the exclusive jurisdiction of the Labor Arbiter under paragraph 4, Article 217 of
the Labor Code of the Philippines, as amended. The petitioner averred that the respondent banks claim for
damages arose out of or were in connection with his employer-employee relationship with the respondent
bank or some aspect or incident of such relationship. The respondent bank opposed the motion, claiming
that its action for damages was within the exclusive jurisdiction of the trial court. Although its claims for
damages incidentally involved an employer-employee relationship, the said claims are actually predicated on
the petitioners acts and omissions which are separately, specifically and distinctly governed by the New Civil
Code.

On November 29, 1999, the trial court issued an order denying the petitioners motion to dismiss,
ratiocinating that the primary relief prayed for by the respondent bank was grounded on the tortious manner
by which the petitioner terminated his employment with the latter, and as such is governed by the New Civil
Code:

The Court holds that here, since the primary relief prayed for by the plaintiff is for damages, grounded on the
tortious manner by which the defendant terminated his employment with the company, the same are
recoverable under the applicable provision of the Civil Code, the present controversy is removed from the
jurisdiction of the Labor Arbiter and brings in within the purview of the regular courts.6[6]

31 | P a g e
The petitioner filed a motion for reconsideration of the said order, but the court issued an order denying the
same. The petitioner filed a petition for certiorari with the Court of Appeals for the nullification of the orders
of the trial court, alleging that the court a quo committed grave abuse of its discretion amounting to excess
or lack of jurisdiction in issuing the said orders. The petitioner further asserted that contrary to the ruling of
the court, the respondent bank claimed damages in its complaint against the petitioner based on his
employment contract, and not on tortious acts.

On November 15, 2001, the CA promulgated a decision dismissing the petition, holding that the trial court
and not the Labor Arbiter had exclusive jurisdiction over the action of the respondent bank. It held that the
latters claims for damages were grounded on the petitioners sudden and unceremonious severance of his
employment with the respondent bank barely a month after assuming office.

With his motion for reconsideration of the decision having been denied by the CA, the petitioner filed his
petition with this Court contending that:

Suffice to state immediately that on the basis of the allegations in the complaint, it is the Labor Arbiter, not
the Regional Trial Court, which has jurisdiction of the subject matter of the complaint in Civil Case No. 98-
1397, the principal cause of action being the alleged omission of petitioner in giving notice to the respondent
Bank employer of termination of their relationship; whereas the claims for other actual/moral/exemplary
damages are well within the competence of the Labor Arbiter.

The petition is barren of merit.

Article 217 of the Labor Code of the Philippines, as amended by Rep. Act No. 6715 which took effect on
March 21, 1989 reads:

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

1. Unfair labor practice cases;

2. Termination disputes;

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

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

Case law has it that the nature of an action and the subject matter thereof, as well as which court has
jurisdiction over the same, are determined by the material allegations of the complaint and the reliefs prayed
for in relation to the law involved.

Not every controversy or money claim by an employee against the employer or vice-versa is within the
exclusive jurisdiction of the labor arbiter. A money claim by a worker against the employer or vice-versa is
within the exclusive jurisdiction of the labor arbiter only if there is a reasonable causal connection between
the claim asserted and employee-employer relation. Absent such a link, the complaint will be cognizable by
the regular courts of justice.

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. In Georg Grotjahn GMBH & Co. v. Isnani, we held that the jurisdiction of the Labor Arbiter
under Article 217 of the Labor Code, as amended, is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code of the Philippines, other labor laws or
their collective bargaining agreements. In Singapore Airlines Limited v. Pao, the complaint of the employer
against the employee for damages for wanton justice and refusal without just cause to report for duty, and
for having maliciously and with bad faith violated the terms and conditions of their agreement for a course of

32 | P a g e
conversion training at the expense of the employer, we ruled that jurisdiction over the action belongs to the
civil court:

On appeal to this court, we held that jurisdiction over the controversy belongs to the civil courts. We stated
that the action was for breach of a contractual obligation, which is intrinsically a civil dispute. We further
stated that while seemingly the cause of action arose from employer-employee relations, the employers
claim for damages is grounded on wanton failure and refusal without just cause to report to duty coupled
with the averment that the employee maliciously and with bad faith violated the terms and conditions of the
contract to the damage of the employer. Such averments removed the controversy from the coverage of the
Labor Code of the Philippines and brought it within the purview of the Civil Law.

Jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be
cognizable by the Labor Arbiter, must have a reasonable causal connection with any of the claims provided
for in that article. Only if there is such a connection with the other claims can the claim for damages be
considered as arising from employer-employee relations.

The claims were the natural consequences flowing from a breach of an obligation, intrinsically civil in nature.

In Medina v. Castro-Bartolome, we held that a complaint of an employee for damages against the employer
for slanderous remarks made against him was within the exclusive jurisdiction of the regular courts of justice
because the cause of action of the plaintiff was for damages for tortious acts allegedly committed by the
employer. The fact that there was between the parties an employer-employee relationship does not negate
the jurisdiction of the trial court.

In Singapore Airlines Ltd. v. Pao, we held that:

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

In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr., the petitioner sued its employee Adonis
Limjuco for breach of contract which reads:

That for a period of two (2) years after termination of service from EMPLOYER, EMPLOYEE shall not in any
manner be connected, and/or employed, be a consultant and/or be an informative body directly or
indirectly, with any business firm, entity or undertaking engaged in a business similar to or in competition
with that of the EMPLOYER.

The petitioner alleged in its complaint with the trial court that:

Petitioner claimed that private respondent became an employee of Angel Sound Philippines Corporation, a
corporation engaged in the same line of business as that of petitioner, within two years from January 30,
1992, the date of private respondents resignation from petitioners employ. Petitioner further alleged that
private respondent is holding the position of Head of the Material Management Control Department, the
same position he held while in the employ of petitioner.

The trial court dismissed the case for lack of jurisdiction over the subject matter because the cause of action
for damages arose out of the parties employer-employee relationship. We reversed the order of the trial
court and held, thus:

Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages
agreed upon in the contract as redress for private respondents breach of his contractual obligation to its
damage and prejudice (Rollo, p. 57). Such cause of action is within the realm of Civil Law, and jurisdiction
over the controversy belongs to the regular courts. More so when we consider that the stipulation refers to
the post-employment relations of the parties.

In this case, the private respondents first cause of action for damages is anchored on the petitioners
employment of deceit and of making the private respondent believe that he would fulfill his obligation under

33 | P a g e
the employment contract with assiduousness and earnestness. The petitioner volte face when, without the
requisite thirty-day notice under the contract and the Labor Code of the Philippines, as amended, he
abandoned his office and rejoined his former employer; thus, forcing the private respondent to hire a
replacement. The private respondent was left in a lurch, and its corporate plans and program in jeopardy and
disarray. Moreover, the petitioner took off with the private respondents computer diskette, papers and
documents containing confidential information on employee compensation and other bank matters. On its
second cause of action, the petitioner simply walked away from his employment with the private respondent
sans any written notice, to the prejudice of the private respondent, its banking operations and the conduct of
its business. Anent its third cause of action, the petitioner made false and derogatory statements that the
private respondent reneged on its obligations under their contract of employment; thus, depicting the
private respondent as unworthy of trust.

It is evident that the causes of action of the private respondent against the petitioner do not involve the
provisions of the Labor Code of the Philippines and other labor laws but the New Civil Code. Thus, the said
causes of action are intrinsically civil. There is no causal relationship between the causes of action of the
private respondents causes of action against the petitioner and their employer-employee relationship. The
fact that the private respondent was the erstwhile employer of the petitioner under an existing employment
contract before the latter abandoned his employment is merely incidental. In fact, the petitioner had already
been replaced by the private respondent before the action was filed against the petitioner.

IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED. The Decision of the Court of Appeals dismissing the
petition of the petitioner is AFFIRMED.

SO ORDERED.

Bellosillo, (Chairman), Austria-Martinez, and Tinga, JJ., concur.

Quisumbing, J., on official leave.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 101619 July 8, 1992

SANYO PHILIPPINES WORKERS UNION-PSSLU LOCAL CHAPTER NO. 109 AND/OR ANTONIO DIAZ, PSSLU
NATIONAL PRESIDENT, petitioners,
vs.
HON. POTENCIANO S. CANIZARES, in his capacity as Labor Arbiter, BERNARDO YAP, RENATO BAYBON,
SALVADOR SOLIBEL, ALLAN MISTERIO, EDGARDO TANGKAY, LEONARDO DIONISIO, ARNEL SALVO,
REYNALDO RICOHERMOSO, BENITO VALENCIA, GERARDO LASALA AND ALEXANDER ATANASIO,
respondents.

MEDIALDEA, J.:

This petition seeks to nullify: 1) the order of respondent Labor Arbiter Potenciano Cañizares dated August 6,
1991 deferring the resolution of the motion to dismiss the complaint of private respondents filed by
petitioner Sanyo Philippines Workers Union-PSSLU Local Chapter No. 109 (PSSLU, for brevity) on the ground
that the labor arbiter had no jurisdiction over said complaint and 2) the order of the same respondent
clarifying its previous order and ruling that it had jurisdiction over the case.

The facts of the case are as follows:

PSSLU had an existing CBA with Sanyo Philippines Inc. (Sanyo, for short) effective July 1, 1989 to June 30,
1994. The same CBA contained a union security clause which provided:

34 | P a g e
Sec. 2. All members of the union covered by this agreement must retain their membership in good standing
in the union as condition of his/her continued employment with the company. The union shall have the right
to demand from the company the dismissal of the members of the union by reason of their voluntary
resignation from membership or willful refusal to pay the Union Dues or by reasons of their having formed,
organized, joined, affiliated, supported and/or aided directly or indirectly another labor organization, and the
union thus hereby guarantees and holds the company free and harmless from any liability whatsoever that
may arise consequent to the implementation of the provision of this article. (pp. 5-6, Rollo)

In a letter dated February 7, 1990, PSSLU, through its national president, informed the management of Sanyo
that the following employees were notified that their membership with PSSLU were cancelled for anti-union,
activities, economic sabotage, threats, coercion and intimidation, disloyalty and for joining another union:
Benito Valencia, Bernardo Yap, Arnel Salvo, Renato Baybon, Eduardo Porlaje, Salvador Solibel, Conrado Sarol,
Angelito Manzano, Allan Misterio, Reynaldo Ricohermoso, Mario Ensay and Froilan Plamenco. The same
letter informed Sanyo that the same employees refused to submit themselves to the union's grievance
investigation committee (p. 53, Rollo). It appears that many of these employees were not members of PSSLU
but of another union, KAMAO.

On February 14, 1990, some officers of KAMAO, which included Yap, Salvo, Baybon, Solibel, Valencia,
Misterio and Ricohermoso, executed a pledged of cooperation with PSSLU promising cooperation with the
latter union and among others, respecting, accepting and honoring the CBA between Sanyo and specifically:

1. That we shall remain officers and members of KAMAO until we finally decide to rejoin Sanyo Phil. Workers
Union-PSSLU;

2. That henceforth, we support and cooperate with the duly elected union officers of Sanyo Phil. Workers
Union-PSSLU in any and all its activities and programs to insure industrial peace and harmony;

3. That we collectively accept, honor, and respect the Collective Bargaining Agreement entered into between
Sanyo Phil. Inc. and Sanyo Phil. Workers Union-PSSLU dated February 7, 1990;

4 That we collectively promise not to engage in any activities inside company premises contrary to law, the
CBA and existing policies;

5 That we are willing to pay our individual agency fee in accordance with the provision of the Labor Code, as
amended;

6 That we collectively promise not to violate this pledge of cooperation. (p. 55, Rollo)

On March 4, 1991, PSSLU through its national and local presidents, wrote another letter to Sanyo
recommending the dismissal of the following non-union workers: Bernardo Yap, Arnel Salvo, Renato Baybon,
Reynaldo Ricohermoso, Salvador Solibel, Benito Valencia, and Allan Misterio, allegedly because: 1) they were
engaged and were still engaging in anti-union activities; 2) they willfully violated the pledge of cooperation
with PSSLU which they signed and executed on February 14, 1990; and 3) they threatened and were still
threatening with bodily harm and even death the officers of the union (pp. 37-38, Rollo).

Also recommended for dismissal were the following union members who allegedly joined, supported and
sympathized with a minority union, KAMAO: Gerardo Lasala, Legardo Tangkay, Alexander Atanacio, and
Leonardo Dionisio.

The last part of the said letter provided:

The dismissal of the above-named union members is without prejudice to receive (sic) their termination pay
if management decide (sic) to grant them benefits in accordance with law. The union hereby holds the
company free and harmless from any liability that may arise consequent to the implementation by the
company of our recommendations for the dismissal of the above-mentioned workers.

It is however suggested that the Grievance Machinery be convened pursuant to Section 3, Article XV of the
Collective Bargaining Agreement (CBA) before their actual dismissal from the company. (p. 38, Rollo)

Pursuant to the above letter of the union, the company sent a memorandum to the same workers advising
them that:

35 | P a g e
As per the attached letter from the local union President SPWU and the federation President, PSSLU,
requesting management to put the herein mentioned employees on preventive suspension, effective
immediately, preliminary to their subsequent dismissal, please be informed that the following employees are
under preventive suspension effective March 13, 1991 to wit:

1. Bernardo Yap

2. Renato Baybon

3. Salvador Solibel

4. Allan Misterio

5. Edgardo Tangkay

6. Leonardo Dionisio

7. Arnel Salvo

8. Reynaldo Ricohermoso

9. Benito Valencia

10. Gerardo Lasala

11. Alexander Atanacio

The above listed employees shall not be allowed within company premises without the permission of
management.

As per request of the union's letter to management, should the listed employees fail to appeal the decision of
the union for dismissal, then effective March 23, 1991, said listed employees shall be considered dismissed
from the company. (p 39, Rollo)

The company received no information on whether or not said employees appealed to PSSLU. Hence, it
considered them dismissed as of March 23, 1991 (p. 40, Rollo).

On May 20, 1991, the dismissed employees filed a complaint (pp. 32-35, Rollo) with the NLRC for illegal
dismissal. Named respondent were PSSLU and Sanyo.

On June 20, 1991, PSSLU filed a motion to dismiss the complaint alleging that the Labor Arbiter was without
jurisdiction over the case, relying on Article 217 (c) of P.D. 442, as amended by Section 9 of Republic Act No.
6715 which provides that cases arising from the interpretation or implementation of the collective bargaining
agreements shall be disposed of by the labor arbiter by referring the same to the grievance machinery and
voluntary arbitration.

The complainants opposed the motion to dismiss complaint on these grounds: 1) the series of conferences
before the National Conciliation and Mediation Board had been terminated; 2) the NLRC Labor Arbiter had
jurisdiction over the case which was a termination dispute pursuant to Article 217 (2) of the Labor Code; and
3) there was nothing in the CBA which needs interpretation or implementation (pp. 44-46, Rollo).

On August 7, 1991, the respondent Labor Arbiter issued the first questioned order. It held that:

xxx xxx xxx

While there are seemingly contradictory provisions in the aforecited article of the Labor Code, the better
interpretation will be to give effect to both, and termination dispute being clearly spelled as falling under the
jurisdiction of the Labor Arbiter, the same shall be respected. The jurisdiction of the grievance machinery and
voluntary arbitration shall cover other controversies.

However, the resolution of the instant issue shall be suspended until both parties have fully presented their
respective positions and the said issue shall be included in the final determination of the above-captioned
case.

36 | P a g e
WHEREFORE, the instant Motions to Dismiss are hereby held pending.

Consequently, the parties are hereby directed to submit their position papers and supporting documents
pursuant to Section 2, Rule VII of the Rules of the Commission on or before the hearing on the merit of this
case scheduled on August 29, 1991 at 11:00 a.m. (p. 23, Rollo)

On August 27, 1991, PSSLU filed another motion to resolve motion to dismiss complaint with a prayer that
the Labor Arbiter resolve the issue of jurisdiction.

On September 4, 1991, the respondent Labor Arbiter issued the second questioned order which held that it
was assuming jurisdiction over the complaint of private respondents, in effect, holding that it had jurisdiction
over the case.

On September 19, 1991, PSSLU filed this petition alleging that public respondent Labor Arbiter cannot
assume jurisdiction over the complaint of public respondents because it had no jurisdiction over the dispute
subject of said complaint. It is their submission that under Article 217 (c) of the Labor Code, in relation to
Article 261 thereof, as well as Policy Instruction No. 6 of the Secretary of Labor, respondent Arbiter has no
jurisdiction and authority to take cognizance of the complaint brought by private respondents which involves
the implementation of the union security clause of the CBA. The function of the Labor Arbiter under the same
law and rule is to refer this case to the grievance machinery and voluntary arbitration.

In its comment, private respondents argue that Article 217(a) 2 and 4 of the Labor Code is explicit, to wit:

Art. 217. Jurisdiction of the Labor Arbiters and the Commission.

a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide . . . the following cases involving all workers, . . . :

xxx xxx xxx

2) Termination disputes,

xxx xxx xxx

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

The private respondents also claimed that insofar as Salvo, Baybon, Ricohermoso, Solibel, Valencia, Misterio
and Lasala were concerned, they joined another union, KAMAO during the freedom period which
commenced on May 1, 1989 up to June 30, 1989 or before the effectivity of the July 1, 1989 CBA. Hence, they
are not covered by the provisions of the CBA between Sanyo and PSSLU. Private respondents Tangkay,
Atanacio and Dionisio admit that in September 1989, they resigned from KAMAO and rejoined PSSLU (pp.
66(a)-68, Rollo).

For its part, public respondent, through the Office of the Solicitor General, is of the view that a distinction
should be made between a case involving "interpretation or implementation of collective bargaining
agreement or "interpretation" or "enforcement" of company personnel policies, on the one hand and a case
involving termination, on the other hand. It argued that the case at bar does not involve an "interpretation or
implementation" of a collective bargaining agreement or "interpretation or enforcement" of company
policies but involves a "termination." 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 by voluntary
arbitration. Where there was already actual termination, i.e., violation of rights, it is already cognizable by
the Labor Arbiter.

Article 217 of the Labor Code defines the jurisdiction of the Labor Arbiter.

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

37 | P a g e
1. Unfair labor practice cases;

2. Termination disputes;

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

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

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

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

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

(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided
in said agreements.

It is clear from the above article that termination cases fall under the jurisdiction of the Labor Arbiter. It
should be noted however that said article at the outset excepted from the said provision cases otherwise
provided for in other provisions of the same Code, thus the phrase "Except as otherwise provided under this
Code . . . ." Under paragraph (c) of the same article, it is expressly provided that "cases arising from the
interpretation or implementation of collective bargaining agreements and those arising from the
interpretation and enforcement of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may be provided in said
agreements.

It was provided in the CBA executed between PSSLU and Sanyo that a member's voluntary resignation from
membership, willful refusal to pay union dues and his/her forming, organizing, joining, supporting, affiliating
or aiding directly or indirectly another labor union shall be a cause for it to demand his/her dismissal from
the company. The demand for the dismissal and the actual dismissal by the company on any of these grounds
is an enforcement of the union security clause in the CBA. This act is authorized by law provided that
enforcement should not be characterized by arbitrariness (Manila Mandarin Employee Union v. NLRC, G.R.
No. 76989, 29 Sept. 1987, 154 SCRA 368) and always with due process (Tropical Hut Employees Union v.
Tropical Food Market, Inc., L-43495-99, Jan. 20, 1990).

The reference to a Grievance Machinery and Voluntary Arbitrators for the adjustment or resolution of
grievances arising from the interpretation or implementation of their CBA and those arising from the
interpretation or enforcement of company personnel policies is mandatory. The law grants to voluntary
arbitrators 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 (Art. 261, Labor Code).

In its order of September 4, 1991, respondent Labor Arbiter explained its decision to assume jurisdiction over
the complaint, thus:

The movants failed to show (1) the provisions of the CBA to be implemented, and (2) the grievance
machinery and voluntary arbitrator already formed and properly named. What self-respecting judge would
refer a case from his responsibility to a shadow? To whom really and specifically shall the case be indorsed or
referred? In brief, they could have shown the (1) existence of the grievance machinery and (2) its being
effective.

38 | P a g e
Furthermore, the aforecited law merely directs the "referral" cases. It does not expressly confer jurisdiction
on the grievance machinery or voluntary arbitration panel, created or to be created. Article 260 of the Labor
Code describes the formation of the grievance and voluntary arbitration. All this of course shall be on
voluntary basis. Is there another meaning of voluntary arbitration? (The herein complainant have strongly
opposed the motion to dismiss. Would they go willingly to the grievance machinery and voluntary arbitration
which are installed by their opponents if directed to do so?) (p. 26, Rollo)

The failure of the parties to the CBA to establish the grievance machinery and its unavailability is not an
excuse for the Labor Arbiter to assume jurisdiction over disputes arising from the implementation and
enforcement of a provision in the CBA. In the existing CBA between PSSLU and Sanyo, the procedure and
mechanics of its establishment had been clearly laid out as follows:

ARTICLE XV — GRIEVANCE MACHINERY

Sec. 1. Whenever any controversy should arise between the company and the union as to the interpretation
or application of the provision of this agreement, or whenever any difference shall exist between said parties
relative to the terms and conditions of employment, an earnest effort shall be made to settle such
controversy in substantially the following manner:

First step. (Thru Grievance) The dispute shall initially be resolved by conference between the management to
be represented by the Management's authorized representatives on the one hand, and the Union to be
represented by a committee composed of the local union president and one of the local union officer
appointed by the local union president, on the other hand within three days from date of concurrence of
grievance action. In the absence of the local union president, he (shall) appoint another local union officer to
take over in his behalf. Where a controversy personally affects an employee, he shall not be allowed to be a
member of the committee represented by the union.

Second step. (Thru Arbitrator mutually chosen) Should such dispute remain unsettled after twenty (20) days
from the first conference or after such period as the parties may agree upon in specified cases, it shall be
referred to an arbitrator chosen by the consent of the company and the union. In the event of failure to
agree on the choice of voluntary arbitrator, the National Conciliation and Mediation Board, Department of
Labor and Employment shall be requested to choose an Arbitrator in accordance with voluntary arbitration
procedures.

Sec. 2. The voluntary Arbitrator shall have thirty (30) days to decide the issue presented to him and his
decision shall be final, binding and executory upon the parties. He shall have no authority to add or subtract
from and alter any provision of this agreement. The expenses of voluntary arbitration including the fee of the
arbitrator shall be shared equally by the company and the union. In the event the arbitrator chosen either by
the mutual agreement of the company and the union by (the) way of voluntary arbitration or by the National
Conciliation and Mediation Board (NCMB) failed to assume his position, died, become disabled or any other
manner failed to function and or reach a decision, the company and the union shall by mutual agreement
choose another arbitrator; in the event of failure to agree on the choice of a new voluntary arbitrator, the
matter shall again be referred back to the NCMB who shall be requested again to choose a new arbitrator as
above provided. Any grievance not elevated or processed as above provided within the stipulated period
shall be deemed settled and terminated.

Sec. 3. It is hereby agreed that decisions of the union relative to their members, for implementation by the
COMPANY, should be resolved for review thru the Grievance Machinery; and management be invited to
participate in the Grievance procedure to be undertaken by the union relative to (the) case of the union
against members. (pp. 134-135, Rollo)

All that needs to be done to set the machinery into motion is to call for the convening thereof. If the parties
to the CBA had not designated their representatives yet, they should be ordered to do so.

The procedure introduced in RA 6715 of referring certain grievances originally and exclusively to the
grievance machinery and when not settled at this level, to a panel of voluntary arbitrators outlined in CBA's
does not only include grievances arising from the interpretation or implementation of the CBA but applies as
well to those arising from the implementation of company personnel policies. No other body shall take

39 | P a g e
cognizance of these cases. The last paragraph of Article 261 enjoins other bodies from assuming jurisdiction
thereof:

The commission, its Regional Offices and the Regional Directors of the Department of Labor and Employment
shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of voluntary arbitrators and shall immediately dispose and refer the same to
the grievance machinery or voluntary arbitration provided in the Collective Bargaining Agreement.

In the instant case, however, We hold that the Labor Arbiter and not the Grievance Machinery provided for in
the CBA has the jurisdiction to hear and decide the complaints of the private respondents. While it appears
that the dismissal of the private respondents was made upon the recommendation of PSSLU pursuant to the
union security clause provided in the CBA, We are of the opinion that these facts do not come within the
phrase "grievances arising from the interpretation or implementation of (their) Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel policies," the
jurisdiction of which pertains to the Grievance Machinery or thereafter, to a voluntary arbitrator or panel of
voluntary arbitrators. Article 260 of the Labor Code on grievance machinery and voluntary arbitrator states
that "(t)he parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the
mutual observance of its terms and conditions. They shall establish a machinery for the adjustment and
resolution of grievances arising from the interpretation or implementation of their Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel policies." It is
further provided in said article that the parties to a CBA shall name or designate their respective
representatives to the grievance machinery and if the grievance is not settled in that level, it shall
automatically be referred to voluntary arbitrators (or panel of voluntary arbitrators) designated in advance by
the parties. It need not be mentioned that the parties to a CBA are the union and the company. 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. Since there has already been an
actual termination, the matter falls within the jurisdiction of the Labor Arbiter.

ACCORDINGLY, the petition is DISMISSED. Public respondent Labor Arbiter is directed to resolve the
complaints of private respondents immediately.

SO ORDERED.

Cruz, Griño-Aquino and Bellosillo, JJ., concur.

THIRD DIVISION

[G.R. No. 128024. May 9, 2000]

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

DECISION

GONZAGA_REYES, J.:

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

Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In 1993, private
respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal dismissal with the

40 | P a g e
National Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July 7, 1994, Labor Arbiter
Nicodemus G. Palangan found petitioner to have been illegally dismissed and ordered the payment of
separation pay in lieu of reinstatement, and of backwages and attorney's fees. The decision was appealed to
the NLRC, which dismissed the same for having been filed out of time. Elevated by petition for certiorari
before this Court, the case was dismissed on technical grounds; however, the Court also pointed out that
even if all the procedural requirements for the filing of the petition were met, it would still be dismissed for
failure to show grave abuse of discretion on the part of the NLRC.

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

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

b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties, space, etc. for three
years;

c. P5,000.00 as initial expenses of litigation; and

d. P25,000.00 as attorney's fees.

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

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

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

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

A perusal of the complaint which is for damages does not ask for any relief under the Labor Code of the
Philippines. It seeks to recover damages as redress for defendant's breach of his contractual obligation to
plaintiff who was damaged and prejudiced. The Court believes such cause of action is within the realm of civil
law, and jurisdiction over the controversy belongs to the regular courts.

While seemingly the cause of action arose from employer- employee relations, the employer's claim for
damages is grounded on the nefarious activities of defendant causing damage and prejudice to plaintiff as
alleged in paragraph 7 of the complaint. The Court believes that there was a breach of a contractual
obligation, which is intrinsically a civil dispute. The averments in the complaint removed the controversy from

41 | P a g e
the coverage of the Labor Code of the Philippines and brought it within the purview of civil law. (Singapore
Airlines, Ltd. Vs. Pao, 122 SCRA 671.) xxx

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

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

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

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

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

xxx

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

xxx

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

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

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

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

42 | P a g e
Certainly, the present Labor Code is even more committed to the view that on policy grounds, and equally so
in the interest of greater promptness in the disposition of labor matters, a court is spared the often onerous
task of determining what essentially is a factual matter, namely, the damages that may be incurred by either
labor or management as a result of disputes or controversies arising from employer-employee relations.

There is no mistaking the fact that in the case before us, private respondent's claim against petitioner for
actual damages arose from a prior employer-employee relationship. In the first place, private respondent
would not have taken issue with petitioner's "doing business of his own" had the latter not been concurrently
its employee. Thus, the damages alleged in the complaint below are: first, those amounting to lost profits and
earnings due to petitioner's abandonment or neglect of his duties as sales manager, having been otherwise
preoccupied by his unauthorized installment sale scheme; and second, those equivalent to the value of
private respondent's property and supplies which petitioner used in conducting his "business ". Maniks

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

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

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

Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and the NLRC of
the jurisdiction to award damages in labor cases because that setup would mean duplicity of suits, splitting
the cause of action and possible conflicting findings and conclusions by two tribunals on one and the same
claim.

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217 in its original
form) nullified Presidential Decree No. 1367 and restored to the Labor Arbiter and the NLRC their jurisdiction
to award all kinds of damages in cases arising from employer-employee relations. xxx (Underscoring supplied)

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

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

Neither can we uphold the reasoning of respondent court that because the resolution of the issues presented
by the complaint does not entail application of the Labor Code or other labor laws, the dispute is intrinsically
civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and

43 | P a g e
exclusive jurisdiction over claims for damages arising from employer-employee relations ---in other words,
the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages
governed by the Civil Code.

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

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

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

SO ORDERED. Melo, (Chairman), Vitug, and Panganiban, JJ., concur.

Purisima, J., abroad-no part.

SECOND DIVISION

[G.R. No. 120567. March 20, 1998]

PHILIPPINE AIRLINES, INC., petitioner, vs., NATIONAL LABOR RELATIONS COMMISSION, FERDINAND
PINEDA and GODOFREDO CABLING, respondents.

DECISION

MARTINEZ, J.:

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

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

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

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

"I. Upon filing of this Petition, a temporary restraining order be issued, prohibiting respondents (petitioner
herein) from effecting or enforcing the Decision dated Feb. 22, 1995, or to reinstate petitioners temporarily
while a hearing on the propriety of the issuance of a writ of preliminary injunction is being undertaken;

"II. After hearing, a writ of preliminary mandatory injunction be issued ordering respondent to reinstate
petitioners to their former positions pending the hearing of this case, or, prohibiting respondent from
enforcing its Decision dated February 22,1995 while this case is pending adjudication;

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

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

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

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

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

1. in granting a temporary injunction order when it has no jurisdiction to issue an injunction or restraining
order since this may be issued only under Article 218 of the Labor Code if the case involves or arises from
labor disputes;

2. in granting a temporary injunction order when the termination of private respondents have long been
carried out;

3. ..in ordering the reinstatement of private respondents on the basis of their mere allegations, in violation of
PAL's right to due process;

45 | P a g e
4. ..in arrogating unto itself management prerogative to discipline its employees and divesting the labor
arbiter of its original and exclusive jurisdiction over illegal dismissal cases;

5. ..in suspending the effects of termination when such action is exclusively within the jurisdiction of the
Secretary of Labor;

6. ..in issuing the temporary injunction in the absence of any irreparable or substantial injury to both
private respondents.

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

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

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

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

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

But just the same, we have to stress that Article 279 does not speak alone of backwages as an obtainable
relief for illegal dismissal; that reinstatement as well is the concern of said law, enforceable when necessary,
through Article 218 (e) of the Labor Code (without need of an illegal dismissal suit under Article 217 (a) of the
Code) if such whimsical and capricious act of illegal dismissal will 'cause grave or irreparable injury to a party'.
xxx"

46 | P a g e
Hence, the present recourse.

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

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

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

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

"Section 1. Injunction in Ordinary Labor Dispute.-A preliminary injunction or a restraining order may be
granted by the Commission through its divisions pursuant to the provisions of paragraph (e) of Article 218 of
the Labor Code, as amended, when it is established on the bases of the sworn allegations in the petition that
the acts complained of, involving or arising from any labor dispute before the Commission, which, if not
restrained or performed forthwith, may cause grave or irreparable damage to any party or render ineffectual
any decision in favor of such party.

xxx xxx xxx

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

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

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

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

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

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

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

47 | P a g e
(1) Unfair labor practice;

(2) Termination disputes;

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

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

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

(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other
claims arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P 5,000.00), whether or not accompanied with a
claim for reinstatement.

The jurisdiction conferred by the foregoing legal provision to the labor arbiter is both original and exclusive,
meaning, no other officer or tribunal can take cognizance of, hear and decide any of the cases therein
enumerated. The only exceptions are where the Secretary of Labor and Employment or the NLRC exercises
the power of compulsory arbitration, or the parties agree to submit the matter to voluntary arbitration
pursuant to Article 263 (g) of the Labor Code, the pertinent portions of which reads:

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

xxxxxxxxx"

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

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

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

Under the Labor Code, the ordinary and proper recourse of an illegally dismissed employee is to file a
complaint for illegal dismissal with the labor arbiter. In the case at bar, private respondents disregarded this
rule and directly went to the NLRC through a petition for injunction praying that petitioner be enjoined from
enforcing its dismissal orders. In Lamb vs. Phipps, we ruled that if the remedy is specifically provided by law,
it is presumed to be adequate. Moreover, the preliminary mandatory injunction prayed for by the private
respondents in their petition before the NLRC can also be entertained by the labor arbiter who, as shown

48 | P a g e
earlier, has the ancillary power to issue preliminary injunctions or restraining orders as an incident in the
cases pending before him in order to preserve the rights of the parties during the pendency of the case.

Furthermore, an examination of private respondents' petition for injunction reveals that it has no basis since
there is no showing of any urgency or irreparable injury which the private respondents might suffer. An injury
is considered irreparable if it is of such constant and frequent recurrence that no fair and reasonable redress
can be had therefor in a court of law, or where there is no standard by which their amount can be measured
with reasonable accuracy, that is, it is not susceptible of mathematical computation. It is considered
irreparable injury when it cannot be adequately compensated in damages due to the nature of the injury
itself or the nature of the right or property injured or when there exists no certain pecuniary standard for the
measurement of damages.

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

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

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

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

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

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

Regalado (Chairman), Melo, Puno, and Mendoza, JJ., concur.

SECOND DIVISION

[G.R. No. 125298. February 11, 1999]

CMP FEDERAL SECURITY AGENCY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR
ARBITER CRESENCIANO R. INIEGO, and FERNANDO CARANTO, RESTY REMITTERE, REYNALDO ROSALES,
ANTONIO TAPAR, NARCISO CLARO, SIONY MANOS, BALDO VIODOR and DAWAY WAHAB, respondents.

DECISION

BELLOSILLO, J.:

49 | P a g e
CMP FEDERAL SECURITY AGENCY INC. seeks in this petition for certiorari to annul, for having been rendered
with grave abuse of discretion amounting to lack or excess of jurisdiction, the 26 October 1995 Decision of
the National Labor Relations Commission in NLRC NCR CA 007480-94, Fernando Caranto, et al. v. CMP Federal
Security Agency, Inc., et al., affirming with modifications the decision of the Labor Arbiter and ordering herein
petitioner to pay private respondents wage differentials, 13th month pay, holiday pay and service incentive
leave pay; and, its Resolution of 29 November 1995 denying reconsideration.

CMP Federal Security Agency Inc. (CMP hereon) is in the business of providing detective and security services.
Among its employees were herein private respondent security guards Fernando Caranto, Resty Remittere,
Reynaldo Rosales, Antonio Tapar, Narciso Claro, Siony Manos, Baldo Viodor and Daway Wahab, all assigned
at the Maalikaya Health Complex in Quezon City.

On 10 March 1994 private respondents filed complaints for illegal deduction, underpayment and/or non-
payment of wages, premium pay for holiday, rest day and night shift differential pay, 13th month pay, service
incentive leave pay, separation pay, allowance and unfair labor practice against CMP, Carolina Mabanta Piao
and Ponciano Mabanta Sr. Private respondent Fernando Caranto later amended his complaint to include
illegal dismissal after he was relieved from his post at the Maalikaya Health Complex by CMP, allegedly upon
request of the client.

The case was initially set for mandatory conference or conciliation on 29 March 1994. It was reset to 11 April
1994 by agreement of the parties to give them adequate time to explore the possibility of amicable
settlement. Thereafter the hearing was reset several times with Labor Arbiter Cresencio R. Iniego directing
the parties each time to submit their respective position papers and other documentary evidence. Efforts at
settlement failed.

When the case was finally called for hearing on 23 May 1994 private respondents filed their position paper
and other documentary evidence in compliance with the Labor Arbiters orders. On the other hand, CMP
moved for another postponement which the Labor Arbiter denied. Thereafter, the case was deemed
submitted for decision. It was only on 13 June 1994 that CMP presented its position paper.

On 22 July 1994 the Labor Arbiter rendered a decision in favor of private respondents ordering CMP to
reinstate Fernando Caranto with full back wages, pay salary differentials to all private respondents, plus
attorneys fees.

Both parties appealed to the NLRC. Private respondents, in their Partial Appeal, alleged that the Labor Arbiter
erred in excluding the awards for service incentive leave pay, holiday pay, overtime pay and illegal
deductions. CMP for its part argued that the Labor Arbiter erred in holding that CMP did not submit any
position paper despite his repeated orders; in ruling that the non-filing of the position paper amounted to an
admission of liability by CMP; and, in deciding the case solely on the basis of the position paper and evidence
submitted by complainants.

In its assailed Decision of 26 October 1995 the NLRC denied CMPs appeal, granted private respondents
Partial Appeal and modified the decision of the Labor Arbiter by including in the computation of monetary
awards holiday pay, service incentive leave pay, 13th month pay, overtime pay and reimbursement for illegal
deductions. The dispositive portion reads -

WHEREFORE xxx the appealed decision is xxx modified. Respondent CMP Federal Security Agency is xxx
directed to pay complainants the following:

1. Pay all complainants wage differential(s) in the amount of One Hundred Twenty Eight Thousand Nine
Hundred Eighty Nine and 70/100 (P128,989.70) as well as holiday pay, 13th month pay and service incentive
leave pay, as follows:

FERNANDO CARANTO

13th Month Pay - P3,792.75

Holiday Pay - P1,760.00

Service Incentive Leave Pay - P 590.00

50 | P a g e
 P6,142.75

RESTY REMITTERE

13th Month Pay - P 9,195.49

Holiday Pay - P 3,318.00

Service Incentive Leave Pay - P 1,770.00

P14,283.49

REYNALDO ROSALES

13th Month Pay - P11,280.17

Holiday Pay - P 4,026.00

Service Incentive Leave Pay - P 1,770.00

P17,076.17

ANTONIO TAPAR

13th Month Pay - P10,253.91

Holiday Pay - P 3,355.00

Service Incentive Leave Pay - P 1,770.00

P17,076.17

CLARO NARCISO

13th Month Pay - P 6,186.50

Holiday Pay - P 2,138.00

Service Incentive Leave Pay - P 1,180.00

P 9,504.50

SIONY MANOS

13th Month Pay - P 4,101.83

Holiday Pay - P 1,666.00

Service Incentive Leave Pay - P 1,770.00

P 7,537.83

BALDO VIODOR

13th Month Pay - P11,280.16

Holiday Pay - P 4,026.00

Service Incentive Leave Pay - P 1,770.00

P17,076.16

DAWAY WAHAB

13th Month Pay - P 362.50

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Holiday Pay - P 430.00

P 797.50

GRAND TOTAL - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P87,797.31

2. The individual respondents Carolina Mabanta Piad and Ponciano Mabanta are held liable in their official
capacity.

3. The other findings stand affirmed.

Its motion for reconsideration having been denied by the NLRC through its Resolution of 29 November 1995,
petitioner CMP now comes to us through the present petition imputing grave abuse of discretion on the
NLRC: (a) in holding that private respondent Caranto was illegally dismissed, basing its findings solely on
surmises and baseless conclusion that petitioner resorted to retaliatory acts; and, (b) in granting the money
claims of private respondents on the unfounded presumption that since petitioner failed to submit its
position paper it is deemed to have admitted the charges in the complaint.

The issues are: (a) whether the NLRC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in holding that private respondent Fernando Caranto was illegally dismissed by CMP; and, (b)
whether in granting all the money claims of private respondents CMP was denied due process.

Well-settled is the rule that the findings of the NLRC, except when there is grave abuse of discretion, are
practically conclusive on this Court. It is only when the NLRCs findings are bereft of any substantial support
from the records that the Court may step in and proceed to make its own independent evaluation of the
facts. We see no cogent reason to deviate from this rule.

On the legality of Carantos dismissal, the NLRC held -

On the other hand, respondents [CMP] contention that complainant Fernando Caranto abandoned his work
is without sufficient basis. The plea of abandonment is inconsistent with his immediate filing of a complaint
for illegal dismissal with prayer for reinstatement. It is illogical for an employee to abandon his work and then
immediately seek reinstatement. (Judric Canning Corp. v. Inciong, 115 SCRA 887). Moreover, respondents
failed to prove by evidence that Caranto was indeed absent without leave.

CMP insists that Caranto was never really dismissed but was merely relieved from his post at Maalikaya
Health Complex upon request of the Manager, and transferred by CMP to SM-Feati; that two (2) special
orders were allegedly sent by CMP to Caranto informing him of his relief from guard duties at Maalikaya and
his assignment at SM-Feati but despite receipt of these orders he failed to report at CMP office; that a follow-
up letter was likewise addressed to him requiring him to show cause why he should not be dismissed, which
he never answered; and, that his refusal to accept a new assignment and his prolonged absence justify the
presumption that he voluntarily abandoned his job.

In termination cases like the one before us, the burden of proving that the dismissal of the employee was for
a valid or authorized cause rests on the employer and failure to discharge that duty would mean that the
dismissal is not justified and therefore illegal. The same principle was reiterated by this Court in Golden
Donuts Inc. v. NLRC when it ruled that the employer carries the burden of proof in showing just cause for
terminating the services of an employee.

In the instant case, CMP failed to present evidence to justify Caranto's dismissal. We have scoured the
records but could not find any letter, memorandum or correspondence between CMP and the management
of Maalikaya Health Complex dealing with the latters alleged request for Carantos relief from guard duties at
Maalikaya Health Complex, nor the two (2) special orders supposedly sent by CMP to Caranto: the first order,
informing him of his relief from his post at Maalikaya Health Complex, and the other, reassigning him to SM-
Feati; neither the follow-up letter by CMP requiring Caranto to explain and show cause why his services
should not be terminated. We could not find any evidence, for that matter, which would clearly and
convincingly show that Caranto was absent without any valid reason and with no intention of returning to
work.

52 | P a g e
Apparently, CMP failed to discharge its burden of proof. Its allegation that Caranto was merely relieved and
reassigned is empty and self-serving, too insufficient to establish a just and valid cause for his dismissal as
employee. To allow an employer to terminate the employment of his worker based merely on allegations
without proof places the latter in an uncertain situation. He is at the sole mercy of his employer who, in this
case, has emasculated his right to a security of tenure.

Contrariwise, when Caranto was relieved from his post on 6 May 1994 he immediately pursued his claim
against CMP by amending his complaint six (6) days after to include illegal dismissal among his charges. This
can hardly be expected from one who has voluntarily "abandoned" his job, as claimed by CMP. The
immediate filing of a complaint for illegal dismissal against the employer is a clear indication that the
employee has not given up on his work.

As already stated above, CMP failed to justify Carantos dismissal thereby rendering it illegal. Consequently,
no grave abuse of discretion was committed by the NLRC in upholding the decision of the Labor Arbiter
ordering Carantos reinstatement.

On the second issue, CMP maintains that both the Labor Arbiter and the NLRC gravely abused their discretion
in granting the money claims of private respondents, alleging that a reading of the Labor Arbiters decision
and that of the NLRC clearly shows that only the pleadings and evidence submitted by private respondents
were taken into consideration while those presented by CMP were completely ignored, in clear violation of
its constitutional right to due process.

Before resolving the merit of the argument, it may be worth to mention the nature of the proceedings before
labor courts in relation to the requirements of due process. Under Art. 221 of the Labor Code, technical rules
of evidence prevailing in courts of law or equity are not controlling in any proceeding before the NLRC or the
Labor Arbiter. Both are mandated to use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due
process.

While administrative tribunals exercising quasi-judicial powers, like the NLRC and Labor Arbiters, are free
from the rigidity of certain procedural requirements, they are nonetheless bound by law and practice to
observe the fundamental and essential requirements of due process. The standard of due process that must
be met in administrative tribunals allows a certain degree of latitude as long as fairness is not ignored. Hence,
it is not legally objectionable, for being violative of due process, for the Labor Arbiter to resolve a case based
solely on the position papers, affidavits or documentary evidence submitted by the parties. The affidavits of
witnesses in such case may take the place of their direct testimony.

Set against the records of this case, CMP's claim that it was deprived of its right to be heard readily collapses.
The earlier narration of facts clearly demonstrates that the parties were repeatedly ordered by the Labor
Arbiter to submit their position papers together with the affidavits of their witnesses and other evidence in
support thereof - first on 11 April 1994, then on 22 April 1994, and finally on 6 May 1994. During the 23 May
1994 conference CMP, instead of complying with the order requiring it to submit its position paper, moved
for another postponement which was denied. It was only on 13 June 1994, after the case was submitted for
resolution, that CMP finally presented its position paper. Having been given ample opportunity to put forth
its case, CMP has only itself to blame or, better still, its counsel who was then present, for its failure to do so
within the extended period.

A party before the Labor Arbiter which had a chance to present its side during a period of more than one (1)
month, and despite repeated extensions of time given to enable it to present its position paper still failed to
meet its final deadline, cannot claim denial of due process if subsequently the Labor Arbiter disregarded its
position paper belatedly filed.

Moreover, CMP had all the chances to ventilate its arguments in its appeal to the NLRC where, in fact, it
submitted a memorandum, presented its position paper and supporting documents allegedly ignored by the
Labor Arbiter, as well as a motion for reconsideration - which documents were considered by that Labor
Tribunal in the course of resolving the case. Consequently, the alleged defect in the proceedings before the
Labor Arbiter, if there be any, was deemed cured.

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The fact that the NLRC in its decision made no reference to the position paper and evidence of petitioner
does not mean that they were not considered. It is simply that the NLRC agreed with the Labor Arbiters
findings and conclusions and found nothing substantial in petitioners position paper and documentary
evidence to warrant a reversal of those findings and conclusions.

The essence of due process is simply an opportunity to be heard or, as applied to administrative proceedings,
an opportunity to explain ones side or an opportunity to seek reconsideration of the action or ruling
complained of. Where, as in this case, the party has had ample opportunity to present its side of the
controversy not only before the Labor Arbiter but also the NLRC on appeal, it cannot thereafter interpose
lack of due process for what the fundamental law abhors is simply the absolute absence of opportunity to be
heard.

Finally, while it may be true that in labor cases stringent rules of procedure may be dispensed with in the
interest of justice, it does not mean that a party litigant is at liberty to completely disregard or ignore the
rules, particularly those relating to the periods for filing of pleadings. In this connection, if we are to sustain
petitioners argument that it was denied due process when its position paper and documentary evidence
were not considered by the Labor Arbiter in deciding the case, we will in effect put a premium on the
undesirable practice of filing position papers late and only after the case has already been submitted for
decision.

WHEREFORE, the petition is DISMISSED. The Decision of the National Labor Relations Commission dated 26
October 1995 affirming with modifications the Decision of the Labor Arbiter and ordering petitioner CMP
FEDERAL SECURITY AGENCY, INC., to pay private respondents FERNANDO CARANTO, RESTY REMITTERE,
REYNALDO ROSALES, ANTONIO TAPAR, NARCISO CLARO, SIONY MANOS, BALDO VIODOR and DAWAY WAHAB
wage differentials, 13th month pay, holiday pay and service incentive leave pay as earlier quoted in this
Decision, and its Resolution of 29 November 1995 denying petitioners Motion for Reconsideration, are
AFFIRMED. Costs against petitioner.

SO ORDERED.

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

SECOND DIVISION

[G.R. No. 153660. June 10, 2003]

PRUDENCIO BANTOLINO, NESTOR ROMERO, NILO ESPINA, EDDIE LADICA, ARMAN QUELING, ROLANDO
NIETO, RICARDO BARTOLOME, ELUVER GARCIA, EDUARDO GARCIA and NELSON MANALASTAS, petitioners,
vs. COCA-COLA BOTTLERS PHILS., INC., respondent.

DECISION

BELLOSILLO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision of the
Court of Appeals dated 21 December 2001 which affirmed with modification the decision of the National
Labor Relations Commission promulgated 30 March 2001.

On 15 February 1995 sixty-two (62) employees of respondent Coca-Cola Bottlers, Inc., and its officers,
Lipercon Services, Inc., Peoples Specialist Services, Inc., and Interim Services, Inc., filed a complaint against
respondents for unfair labor practice through illegal dismissal, violation of their security of tenure and the
perpetuation of the Cabo System. They thus prayed for reinstatement with full back wages, and the
declaration of their regular employment status.

For failure to prosecute as they failed to either attend the scheduled mandatory conferences or submit their
respective affidavits, the claims of fifty-two (52) complainant-employees were dismissed. Thereafter, Labor
Arbiter Jose De Vera conducted clarificatory hearings to elicit information from the ten (10) remaining
complainants (petitioners herein) relative to their alleged employment with respondent firm.

In substance, the complainants averred that in the performance of their duties as route helpers, bottle
segregators, and others, they were employees of respondent Coca-Cola Bottlers, Inc. They further

54 | P a g e
maintained that when respondent company replaced them and prevented them from entering the company
premises, they were deemed to have been illegally dismissed.

In lieu of a position paper, respondent company filed a motion to dismiss complaint for lack of jurisdiction
and cause of action, there being no employer-employee relationship between complainants and Coca-Cola
Bottlers, Inc., and that respondents Lipercon Services, Peoples Specialist Services and Interim Services being
bona fide independent contractors, were the real employers of the complainants. As regards the corporate
officers, respondent insisted that they could not be faulted and be held liable for damages as they only acted
in their official capacities while performing their respective duties.

On 29 May 1998 Labor Arbiter Jose De Vera rendered a decision ordering respondent company to reinstate
complainants to their former positions with all the rights, privileges and benefits due regular employees, and
to pay their full back wages which, with the exception of Prudencio Bantolino whose back wages must be
computed upon proof of his dismissal as of 31 May 1998, already amounted to an aggregate of
P1,810,244.00.

In finding for the complainants, the Labor Arbiter ruled that in contrast with the negative declarations of
respondent companys witnesses who, as district sales supervisors of respondent company denied knowing
the complainants personally, the testimonies of the complainants were more credible as they sufficiently
supplied every detail of their employment, specifically identifying who their salesmen/drivers were, their
places of assignment, aside from their dates of engagement and dismissal.

On appeal, the NLRC sustained the finding of the Labor Arbiter that there was indeed an employer-employee
relationship between the complainants and respondent company when it affirmed in toto the latters
decision.

In a resolution dated 17 July 2001 the NLRC subsequently denied for lack of merit respondents motion for
consideration.

Respondent Coca-Cola Bottlers appealed to the Court of Appeals which, although affirming the finding of the
NLRC that an employer-employee relationship existed between the contending parties, nonetheless agreed
with respondent that the affidavits of some of the complainants, namely, Prudencio Bantolino, Nestor
Romero, Nilo Espina, Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and Nelson Manalastas, should not
have been given probative value for their failure to affirm the contents thereof and to undergo cross-
examination. As a consequence, the appellate court dismissed their complaints for lack of sufficient evidence.
In the same Decision however, complainants Eddie Ladica, Arman Queling and Rolando Nieto were declared
regular employees since they were the only ones subjected to cross-examination. Thus -

x x x (T)he labor arbiter conducted clarificatory hearings to ferret out the truth between the opposing claims
of the parties thereto. He did not submit the case based on position papers and their accompanying
documentary evidence as a full-blown trial was imperative to establish the parties claims. As their allegations
were poles apart, it was necessary to give them ample opportunity to rebut each others statements through
cross-examination. In fact, private respondents Ladica, Quelling and Nieto were subjected to rigid cross-
examination by petitioners counsel. However, the testimonies of private respondents Romero, Espina, and
Bantolino were not subjected to cross-examination, as should have been the case, and no explanation was
offered by them or by the labor arbiter as to why this was dispensed with. Since they were represented by
counsel, the latter should have taken steps so as not to squander their testimonies. But nothing was done by
their counsel to that effect.

Petitioners now pray for relief from the adverse Decision of the Court of Appeals; that, instead, the favorable
judgment of the NLRC be reinstated.

In essence, petitioners argue that the Court of Appeals should not have given weight to respondents claim of
failure to cross-examine them. They insist that, unlike regular courts, labor cases are decided based merely
on the parties position papers and affidavits in support of their allegations and subsequent pleadings that
may be filed thereto. As such, according to petitioners, the Rules of Court should not be strictly applied in this
case specifically by putting them on the witness stand to be cross-examined because the NLRC has its own
rules of procedure which were applied by the Labor Arbiter in coming up with a decision in their favor.

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In its disavowal of liability, respondent commented that since the other alleged affiants were not presented
in court to affirm their statements, much less to be cross-examined, their affidavits should, as the Court of
Appeals rightly held, be stricken off the records for being self-serving, hearsay and inadmissible in evidence.
With respect to Nestor Romero, respondent points out that he should not have been impleaded in the
instant petition since he already voluntarily executed a Compromise Agreement, Waiver and Quitclaim in
consideration of P450,000.00. Finally, respondent argues that the instant petition should be dismissed in
view of the failure of petitioners to sign the petition as well as the verification and certification of non-forum
shopping, in clear violation of the principle laid down in Loquias v. Office of the Ombudsman.

The crux of the controversy revolves around the propriety of giving evidentiary value to the affidavits despite
the failure of the affiants to affirm their contents and undergo the test of cross-examination.

The petition is impressed with merit. The issue confronting the Court is not without precedent in
jurisprudence. The oft-cited case of Rabago v. NLRC squarely grapples a similar challenge involving the
propriety of the use of affidavits without the presentation of affiants for cross-examination. In that case, we
held that the argument that the affidavit is hearsay because the affiants were not presented for cross-
examination is not persuasive because the rules of evidence are not strictly observed in proceedings before
administrative bodies like the NLRC where decisions may be reached on the basis of position papers only.

In Rase v. NLRC, this Court likewise sidelined a similar challenge when it ruled that it was not necessary for
the affiants to appear and testify and be cross-examined by counsel for the adverse party. To require
otherwise would be to negate the rationale and purpose of the summary nature of the proceedings
mandated by the Rules and to make mandatory the application of the technical rules of evidence.

Southern Cotabato Dev. and Construction Co. v. NLRC7[11] succinctly states that under Art. 221 of the Labor
Code, the rules of evidence prevailing in courts of law do not control proceedings before the Labor Arbiter
and the NLRC. Further, it notes that the Labor Arbiter and the NLRC are authorized to adopt reasonable
means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law
and procedure, all in the interest of due process. We find no compelling reason to deviate therefrom.

To reiterate, administrative bodies like the NLRC are not bound by the technical niceties of law and
procedure and the rules obtaining in courts of law. Indeed, the Revised Rules of Court and prevailing
jurisprudence may be given only stringent application, i.e., by analogy or in a suppletory character and effect.
The submission by respondent, citing People v. Sorrel, that an affidavit not testified to in a trial, is mere
hearsay evidence and has no real evidentiary value, cannot find relevance in the present case considering
that a criminal prosecution requires a quantum of evidence different from that of an administrative
proceeding. Under the Rules of the Commission, the Labor Arbiter is given the discretion to determine the
necessity of a formal trial or hearing. Hence, trial-type hearings are not even required as the cases may be
decided based on verified position papers, with supporting documents and their affidavits.

As to whether petitioner Nestor Romero should be properly impleaded in the instant case, we only need to
follow the doctrinal guidance set by Periquet v. NLRC which outlines the parameters for valid compromise
agreements, waivers and quitclaims -

Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered
into and represents a reasonable settlement, it is binding on the parties and may not later be disowned
simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will
step in to annul the questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as a valid and binding undertaking.

In closely examining the subject agreements, we find that on their face the Compromise Agreement and
Release, Waiver and Quitclaim are devoid of any palpable inequity as the terms of settlement therein are fair

56 | P a g e
and just. Neither can we glean from the records any attempt by the parties to renege on their contractual
agreements, or to disavow or disown their due execution. Consequently, the same must be recognized as
valid and binding transactions and, accordingly, the instant case should be dismissed and finally terminated
insofar as concerns petitioner Nestor Romero.

We cannot likewise accommodate respondents contention that the failure of all the petitioners to sign the
petition as well as the Verification and Certification of Non-Forum Shopping in contravention of Sec. 5, Rule
7, of the Rules of Court will cause the dismissal of the present appeal. While the Loquias case requires the
strict observance of the Rules, it however provides an escape hatch for the transgressor to avoid the harsh
consequences of non-observance. Thus -

x x x x We find that substantial compliance will not suffice in a matter involving strict observance of the rules.
The attestation contained in the certification on non-forum shopping requires personal knowledge by the
party who executed the same. Petitioners must show reasonable cause for failure to personally sign the
certification. Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal
construction (underscoring supplied).

In their Ex Parte Motion to Litigate as Pauper Litigants, petitioners made a request for a fifteen (15)-day
extension, i.e., from 24 April 2002 to 8 May 2002, within which to file their petition for review in view of the
absence of a counsel to represent them. The records also reveal that it was only on 10 July 2002 that Atty.
Arnold Cacho, through the UST Legal Aid Clinic, made his formal entry of appearance as counsel for herein
petitioners. Clearly, at the time the instant petition was filed on 7 May 2002 petitioners were not yet
represented by counsel. Surely, petitioners who are non-lawyers could not be faulted for the procedural
lapse since they could not be expected to be conversant with the nuances of the law, much less
knowledgeable with the esoteric technicalities of procedure. For this reason alone, the procedural infirmity in
the filing of the present petition may be overlooked and should not be taken against petitioners.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is REVERSED and SET ASIDE and
the decision of the NLRC dated 30 March 2001 which affirmed in toto the decision of the Labor Arbiter dated
29 May 1998 ordering respondent Coca-Cola Bottlers Phils., Inc., to reinstate Prudencio Bantolino, Nilo
Espina, Eddie Ladica, Arman Queling, Rolando Nieto, Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and
Nelson Manalastas to their former positions as regular employees, and to pay them their full back wages,
with the exception of Prudencio Bantolino whose back wages are yet to be computed upon proof of his
dismissal, is REINSTATED, with the MODIFICATION that herein petition is DENIED insofar as it concerns Nestor
Romero who entered into a valid and binding Compromise Agreement and Release, Waiver and Quitclaim
with respondent company.

SO ORDERED.

Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 75347 December 11, 1987

FORD PHILIPPINES SALARIED EMPLOYEES ASSOCIATION; ENSITE LIMITED SALARIED EMPLOYEES UNION;
FORD PHILIPPINES WORKERS UNION; FORD ENSITE WORKERS UNION; and FORD PHILIPPINES PARTS
DEPOT WORKERS UNION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (En Banc) LABOR ARBITER VIRGINIA G. SON, FORD
PHILIPPINES, INC. ENSITE LTD. (Phil. Branch-Ford Stamping Plant), JOHN SAGOVAC (President and
Managing Director), ARMANDO DAVID (Finance Director), and BANK OF THE PHILIPPINE ISLANDS,
respondents.

No. 75628 December 11, 1987

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 FORD PHILIPPINES, INC., ENSITE LTD. (Phil. Branch) and RICARDO J. ROMULO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FORD PHILIPPINES SALARIED EMPLOYEES ASSOCIATION,
ENSITE Ltd. SALARIED EMPLOYEES UNION, FORD PHILIPPINES WORKERS UNION, INC., FORD PHILIPPINES
PARTS DEPOT WORKERS UNION and ENSITE LTD. WORKERS UNION, respondents.

PADILLA, J.:

These two (2) cases are considered jointly because they involve related issues.

In G.R. No. 75347, the petition for certiorari seeks to set aside the Resolution of the NLRC en banc, dated 19
June 1986, in NLRC Case No. 11-4073-84, together with NLRC Resolutions, dated 28 January 1986, and 4
December 1985, and the Decision of Labor Arbiter Virginia Son, dated 25 June 1985, insofar as said
Resolutions and Decision upheld the validity of the deduction of P13,000,000.00 from the Retirement Fund,
for payment of separation benefits to the Ford and Ensite Unions, for the benefit of their members.

On the other hand, in G.R. No. 75628, the petition for certiorari, with a prayer for issuance of restraining
order and preliminary injunction, seeks to set aside the Resolutions dated 20 May 1986 and 19 June 1986,
issued by the NLRC en banc also in NLRC Case No. 11-4073-84, insofar as said Resolutions authorized the
issuance of a writ of execution in favor of the Ford and Ensite Unions, against their respective employer-
companies, for the amount of P10,117,016.20.

The facts are as follows:

In 1971 and 1978, Ford Philippines, Inc. (Ford, for short) and Ensite Ltd. [Phil. Branch] Ensite for short),
established their respective Employees' Retirement Plans (Plans or Plan, for short), 1 exclusively funded from
the companies' own contributions, and for which, the Bank of the Philippine Islands (BPI) was appointed as
irrevocable trustee. 2 Both Plans contain an "integration provision," which authorizes the companies to
integrate the employees' retirement, death and disability benefits under the Plans, with and in lieu of
statutory benefits under the provisions on termination pay and retirement benefits in the Labor Code as wen
as other similar laws, and analogous benefits granted under present or future collective bargaining
agreements and other employees' benefit plans. The "integration provision" is found in Article XI I 1, Section
5 of the two (2) Plans, to wit:

To the fullest extent, the retirement, death, and disability benefits accorded participants under the terms of
this Plan shall be deemed integrated with and in lieu of, statutory benefits in the New Labor Code, as well as
other similar laws, as now or hereafter amended, analogous benefits granted under present or future
Collective Bargaining Agreements, and other employee benefit plans providing analogous benefits which may
be imposed by future legislations. In the event private benefits due under the plan are less than those due
and demandable under the provisions of the termination pay law and/or present or future Collective
Bargaining Agreement and/or future plans of similar nature imposed by law, the company shall respond for
the difference. (Retirement/Pension Plan as amended, August 1, 1983)

Since the establishment and effectivity of the Retirement Plans, the employees' termination, retirement and
other analogous benefits have been paid out of the Retirement Fund, pursuant to the "integration provision."
3

In 1984, Ford and Ensite ceased operations in the Philippines, resulting in the termination of all their
employees. The employees were correspondingly paid their full separation benefits totalling about
P50,000,000.00 or an average of around P45,454.00 for each employee. Of the P50,000,000.00, an estimated
amount of P37,000,000.00 was drawn from the companies' operating funds and the sum of about
P13,000,000.00 was deducted from and paid out of the accumulated P25,000,000.00 (more or less)
Retirement Fund. After the amount of P13,000,000.00 was withdrawn from the Retirement Fund, there
remained a balance of around P10,000,000.00, which under the Plan should be distributed among all the
employees. 4

However, before the actual distribution of the Fund residue, the different labor unions, Ford Salaried Union,
Ford Workers Union and Ensite Salaried Union, filed a complaint dated 19 November 1984 before the

58 | P a g e
Ministry of Labor and Employment (now Department of Labor and Employment, National Capital Region),
assailing the validity of the deduction of P13,000.000.00 from the Retirement Fund, which were used for
separation benefits. 5

For their part, Ford and Ensite maintained that the deduction of the P13,000,000.00 from the Retirement
Fund is in accord with the "integration provision" of the Plans as well as the various CBAs entered into
between management and the different unions involved.

After due hearing, Labor Arbiter Virginia Son rendered a Decision dated 25 June 1985: 6 1) upholding the
validity of the deduction of P13,000,000.00 from the Retirement Fund; 2) ordering Ford and Ensite to
distribute among the unions their respective shares in the remaining assets of the Fund, including
investments in real estate and stocks, after liquidation of the Fund, ten percent (10%) of which shag be paid
to the unions' counsel as attorney's fees.

On 8 July 1985, the unions appealed to the NLRC from the abovecited decision of the Labor Arbiter, insofar as
it sustained the validity of the deduction by the companies from the Retirement Fund of said P13,000,000.00
for employees' separation benefits. But, pending the appeal, the unions filed with the Labor Arbiter on 20
August 1985 a "Motion for Clarification." The unions informed the Labor Arbiter that there is reportedly a
Fund residue of P8,300,000.00 (later clarified 'by the companies to be P10,117,016.20) which, according to
the unions, may be distributed, even pending their appeal before the NLRC, as said appeal allegedly involved
only the deduction of P13,000,000.00. In the same Motion, the unions prayed for the issuance of an order
directing the immediate distribution of the P8,300,000.00 Pl0,l17,016.20) among an the employees. 7

Without acting on the Motion, Labor Arbiter Son called both parties to a series of conferences. During one
such conference, Labor Arbiter Son proposed the immediate distribution of the Fund residue by the
companies, preferably before Christmas of 1985, provided the unions would agree to withdraw their appeal
then pending before the NLRC in the matter of the amount deducted from the Fund. Ford and Ensite agreed
to the proposal. However, the unions reserved their final decision on whether or not to agree with the
proposal until they had an exact quantification by the companies of the Fund residue. Hence, Ford and
Ensite, through counsel, disclosed that the Fund residue is actually P10,117,016.20, not P8,300,000.00. 8

But, eventually, the unions rejected the Labor Arbiter's proposal, for they believed that they would lose out if
they were to abandon their appeal. On 15 November 1985, the unions filed a motion for execution, relative
to the Fund residue, before the NLRC [Second Division). 9 However, the companies opposed said motion for
execution on the ground that "to establish the remaining balances in the retirement funds, so that they could
be ripe for liquidation, there must be a final resolution as to what are the exact amounts thereof; that
execution was not possible at that point in time because the Labor Unions' appeal had prevented the final
determination of the amount involved." 10

On 4 December 1985, NLRC (Second Division) promulgated a Resolution affirming the decision of Labor
Arbiter Son "with modification." The dispositive portion of said Resolution reads:

WHEREFORE, the appealed decision is, as it is hereby, modified. Consequently, respondents are hereby
ordered to pay in full the retirement pay, the amount to be taken from the retirement plan, to those
complainants who are entitled to retirement pay and to shoulder whatever balances to be paid according to
the Retirement plan (Art. XVII, Sec. 5).

In all other aspects, the decision is hereby affirmed.

SO ORDERED. 11

Affirmed were the right of the companies to deduct separation benefits from the Retirement Fund pursuant
to the "integration provision," and the order to distribute the Fund residue among the employees after
liquidation of the Fund. But, as to the modifying portion of the aforequoted dispositive portion of the
Resolution, it seemed both superfluous and confusing, considering that the employees' separation benefits
(inadvertently referred to by NLRC as "retirement benefits") were already long fully paid. 12

Because of the superfluous modifying portion of the Resolution, the unions filed a Motion for Clarification
and/or Reconsideration on 9 December 1985. They particularly inquired as to what portion of the Decision of
the Labor Arbiter was modified, and why retirement benefits were being ordered to be paid, and asking for

59 | P a g e
reconsideration of the Resolution sustaining the companies' right to pay the employees' separation benefits
from the Retirement Fund. 13

The Motion for Clarification and/or Reconsideration was elevated by the Second Division to the NLRC en
banc, which in turn issued a Resolution dated 4 February 1986, denying the motion for lack of merit, and at
the same time stating that the Decision of the Second Division of the Commission (NLRC) in its entirety clearly
orders the respondents (companies) to pay the complainants the remaining amount of the retirement fund,
after deducting the separation pay as provided for in the integration provision. 14

On 13 February 1986, the unions filed a Second (Urgent) Motion for Reconsideration with a prayer for oral
argument, which prayer for oral argument was granted. Oral arguments were held on 6 March 1986 before
the NLRC en banc. During the oral arguments, the unions called the attention of the NLRC regarding their
then pending motion for execution earlier filed on 15 November 1985, for the distribution of the Fund
residue. 15

On 20 May 1986, NLRC en banc issued a Resolution granting the unions' Motion for Execution with specific
order for Ford and Ensite to set aside 10% of the Fund residue as attorney's fees for the unions' counsel.

The dispositive portion of the Resolution states: 16

Wherefore, the complainants' motion for issuance of a writ of execution is hereby granted.

Accordingly, let a writ of execution be issued for P10,117,016.20, ten percent (10%) of which is to set (sic)
aside by the respondent company for the complainant's counsel as attorney's fees in accordance with the
Decision of Labor Arbiter Virginia G. Son dated 25 June 1985.

On 5 June 1986, Ford and Ensite filed a motion for reconsideration of the foregoing resolution. On 19 June
1986, the NLRC en banc issued another Resolution 17 denying the companies' Motion for Reconsideration
relative to the execution over the Fund residue, and at the same time dismissing the unions' Urgent Motion
for Reconsideration concerning the deduction from the Fund of the separation benefits of the employees.

Hence, these two (2) petitions, separately filed by Ford Philippines Salaried Employees Association et al. (G.R.
No. 75347) and Ford Philippines and Ensite Ltd. (G.R. No. 75628).

The issue in G.R. No. 75347 is whether or not the companies' action in charging the Retirement Fund for
payment of the employees' separation benefits is valid, while the issue in G.R. No. 75628 is whether or not
the issuance of a writ of execution against the companies, for the distribution of the Fund residue of
P10,117,016.20 to the employees is legal.

The unions contend that the "integration provision" in the Retirement Plan authorizing Ford and Ensite to
integrate the retirement, death and disability benefits under the Plan with and in lieu of statutory benefits
under the provisions on termination pay and retirement benefits in the Labor Code, is applicable only in cases
of death, disability or retirement, but not to termination of employment due to closure of business.

Article XIII, Section 5 of the Retirement Plan, otherwise known as the integration provision is again hereunder
quoted:

xxx xxx xxx

Section 5. To the fullest extent the retirement, death and disability benefits accorded participants under the
terms of this Plan shall be deemed integrated with and in lieu of, statutory benefits under the provisions on
termination pay and retirement benefits in the New Labor Code, as well as other similar laws, as now or
hereafter amended, analogous benefits granted under present or future Collective Bargaining-Agreements,
and other employee benefit plans providing analogous benefits which may be imposed by future legislations.
In the event private benefits due under the Plan are less than those due and demandable under the
provisions of the termination pay law and/or present or future Collective Bargaining Agreement and/or
future benefit plans of similar nature imposed by law, the Company shall respond for the difference. 18
(Annex A)

60 | P a g e
A careful perusal of the foregoing provision shows that the retirement, death and disability benefits paid
under the Plan are deemed integrated with and in lieu of termination benefits required to be paid under the
Labor Code, which in turn includes instances where the employees are terminated due to closure of business.

The pertinent provision of the Labor Code is found in Article 283 which reads:

Art. 283. Closure of establishment and reduction of personnel ... in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

Consequently, the deduction of P13,000,000.00 from the Retirement Fund, utilized for the payment of
separation benefits is well in accord with the "integration provision," and, as such, cannot be seriously
assailed.

Likewise, the fact that the "integration provision" was incorporated in the respective CBAs of the companies
and the unions, is a clear manifestation that the same was acceptable to, and accepted by the employees,
and that they recognized the right of the companies to charge the Retirement Fund for payment of
separation benefits. The pertinent provisions of the different Collective Bargaining Agreements CBAs entered
into between management and the various unions provide the following: 19

FORD SALARIED UNION CBA

ENSITE SALARIED UNION CBA —

Section 4(3). Retirement and Ternination. — The severance and/or retirement benefits stipulated in the
preceding three sections include and are in lieu of any severance or termination pay provided by law. The
Company may pay the foregoing retirement or severance benefits from a fund established for that purpose.

FORD WORKERS' UNION CBA

FORD DEPOT UNION CBA

ENSITE WORKERS'UNION CBA —

Section 4. (15.05). The severance or disability benefits stipulated in the preceding section include and are in
lieu of any severance or termination pay provided by law.

The fact that, since the establishment and effectivity of the Retirement Plans, it had been the policy and
practice of the companies to charge termination, retirement and analogous benefits for separated
employees to the Retirement Fund, 20 without a single complaint or dissent on the part of the unions or any
employee, for that matter, is a manifestation on the part of the unions that separation benefits (not
necessarily retirement benefits) are covered by the "integration provision" of the Retirement Plans and are
chargeable to and deductible from the Retirement Fund.

The purpose of the Plans or Fund, as provided in Article 1, Section 2 of the Retirement Plans, is "to assist the
employees financially in providing for their retirement years." 21 This purpose, however, is subject to the
terms and conditions set forth in the Plan. And one such condition is the integration of separation benefits
with and in lieu of the retirement, death, and disability benefits under the Plan. Such being the case, and
considering that the Retirement Plan should be interpreted in its entirety so as to give meaning to an the
provisions therein, the phrase retirement years should not be literally construed as referring only to cases of
employees' retirement from the companies, but should be broadly interpreted as inclusive of all other
instances of employees' separation from the companies, such as, by reason of death, disability or closure of
business.

Furthermore, the companies cannot be charged with "diversion of funds" for deducting the separation
benefits from the Retirement Fund, because payment of separation benefits is among the liabilities
contemplated in Section 3, Article 1 of the Plan, which reads:

xxx xxx xxx

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Section 3. Exclusive Benefit of the Employees

xxx xxx xxx

Under no circumstances, prior to the satisfaction of all liabilities with respect to the participants and their
beneficiaries under the plan, shall any income or corpus of the Trust Fund or any Funds contributed to the
Trust Fund by the Company be diverted to or used for purposes other than for the exclusive benefit of the
Plan participants and their beneficiaries. (emphasis supplied)

It cannot also be said that, by deducting the separation benefits from the Retirement Fund, the companies
are paying the employees who have earned vested rights under the plan, with separation benefits out of
their own money, and that in effect, a "recovery" is made by the companies of their contribution to the Plan.

The Retirement Fund was fully and solely funded by Ford and Ensite, that is, without contributions from any
of their employees. And the "vested right" of the employees in the Plan simply means that they are entitled
to the Fund even in cases of their voluntary resignation from the companies. But, as it happened, the
companies closed down, thereby pre-empting any voluntary resignation on the part of the employees. Still,
the employees are paid full separation benefits.

Based on the foregoing, the NLRC and the Labor Arbiter were justified in sustaining the companies' action in
charging the Retirement Fund for payment of the employees' separation benefits occasioned by the
companies' closure of business in the Philippines.

With regard to the issue in G.R. No. 75628, Ford and Ensite allege that the Resolution of 20 May 1986
granting the unions' Motion for Execution relative to the non-controverted amount of P10,117,016.20 is void,
having been allegedly issued after the NLRC had lost jurisdiction over the case. The companies contend that
the NLRC Resolution dated 4 February 1986 denying the unions' first motion for reconsideration, is a final
resolution of all the issues in the case, so that when the unions filed their second urgent motion for
reconsideration, dated 13 February 1986, the NLRC could not and should not have legally entertained the
same, because under the Interim Guidelines of the Rules of Court, second motions for reconsideration of
final orders or judgments are not allowed.

The contention of the companies is without merit, because the Fund residue of P10,117,016.20 was never
the subject of any motion for reconsideration, much less a second motion for reconsideration on the part of
the unions. Instead, said amount had been the subject only of the Urgent Manifestation and Motion for Writ
of Execution, and the Urgent Motion for Resolution of Motion for Writ of Execution, respectively filed by the
unions on 15 November and 9 December 1985, both before the NLRC. In any event, the filing of a second
motion for reconsideration is not barred under the Labor Code or the NLRC Rules. Administrative and quasi-
judicial bodies, like the NLRC, are not bound by the technical rules of procedure in the adjudication of cases
filed before them. 22

Ford and Ensite admit that the Retirement Fund indeed has a balance of 10,117,016.20. Likewise, they
recognize the right of the employees to receive their respective shares in the Fund residue, pursuant to
Article XI, Section 3 of the Retirement Plan, to wit:

Section 3. In the event of termination of the Plan, no future obligation shall be payable under the Fund. The
Trustee shall pay all debts or claims then outstanding against the trust. Thereafter, the Trustee shall
distribute the property held in the Fund to the pensioners, participants and their beneficiaries on the basis of
the mortality and other present value tables approved by the company. 23

The companies' alternative excuse that it is "actuarially impossible" for them to compute the individual
shares of the employees in the Fund residue, is likewise untenable. This is because the residue amounting to
P10,117,016.20 is obviously Identifiable up to the last centavo. Not only that. The companies have in their
possession all the necessary documents upon which the computations can be based, to wit: list of all the
entitled employees; their respective service records; and books of accounts in the possession of the trustee
bank (BPI).

Moreover, in one of their conciliation conferences in 1985, before Labor Arbiter Son, the companies agreed
to the distribution of the Fund residue if only the unions would withdraw their appeal. The fact that the
companies agreed to such a proposal (which however was eventually rejected by the unions as they would

62 | P a g e
allegedly lose out if their appeal were abandoned), is also an indication that the computations of the
employees' individual shares in the Fund residue were already prepared and ready at that time, or that at
least the companies were then prepared and willing to immediately make the desired computations on the
basis of the pertinent documents in their possession.

With regard to the automatic deduction by the companies of 10% of the Fund residue for attorney's fees of
the unions' counsel, based on the Decision of Labor Arbiter Son, we find no rule of law or tenet of judicial
ethics violated thereby. Considering that the workplaces of the employees have been closed simultaneously
with the companies' closure of business, it would be almost impossible for the unions' counsel to be able to
personally collect attorney's fees from his clients who are presently spread out here and abroad.

Being the custodian of the Fund residue duly belonging to the employees, and from which Fund, the
attorney's fees of unions' counsel are to be paid, the companies are in a proper position to effect the
automatic deduction of the attomey's fees of the unions' counsel. By doing so, the companies wig not be
acting as agents of the unions, but merely complying with a legal order of the labor court.

The questioned motion for execution should, however, include only the individual shares of the members of
the unions which are party litigants in these cases, and should not include the shares of employees who are
non- union members, such as the managerial, supervisory and other non-rank- and-file employees. The 10%
attorney's fees of the unions counsel should also be charged exclusively against the individual shares of the
union members in the Fund residue.

With regard to the motion for supplemental relief of the unions counsel, dated 23 March 1987, praying that
Ford Philippines, Inc. should be ordered to pay the former the amount of ten percent (10%) of P5,700,000.00
(corresponding to the employee's share in the selling price of the real estate of Ford Philippines Inc. located
in Sucat Road) which were allegedly distributed to the employees without the knowledge of the unions'
counsel, 24 the same is denied for being unsubstantiated.

WHEREFORE, the petition in G.R. No. 75347 is DENIED. The Resolutions of the NLRC en banc, dated 19 June
1986 in NLRC Case No. 11-4073-84, together with NLRC Resolutions, dated 28 January 1986, and 4 December
1985, insofar as they sustain the companies' right and action of deducting the amount of P13,000,000.00
from the Retirement Fund as separation benefits for the employees, are AFFIRMED.

In G.R. No. 75628, the temporary restraining order dated 25 August 1986 is LIFTED. The Resolutions of the
NLRC dated 20 May 1986 and 19 June 1986, insofar as they authorize the issuance of a writ of execution in
favor of the unions, are AFFIRMED, as above qualified, with the modification that the writ of execution issued
as to the union members' shares in the amount of P10,117,016.20, shall include the corresponding interests
earned from 30 September 1985, up to the actual payment of such award.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Paras and Sarmiento, JJ., concur.

THIRD DIVISION

[G.R. No. 155278. September 16, 2003]

PRUDENCIO J. TANJUAN, petitioner, vs. PHILIPPINE POSTAL SAVINGS BANK, INC.; PEDRITO TORRES; and
CHAIRMAN and MEMBERS OF THE BOARD, respondents.

DECISION

PANGANIBAN, J.:

Well-settled is the rule that technical rules of procedure shall not be strictly applied in labor cases. Pursuant
to this policy, employers may, on cogent grounds, be allowed to present, even on appeal, evidence of
business losses to justify the retrenchment of workers.

The Case

63 | P a g e
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 28, 2002 Decision
and September 12, 2002 Resolution of the Court of Appeals (CA) in CA-GR SP No. 67233. The CA disposed as
follows:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly
DISMISSED for lack of merit. Consequently, the Resolution dated August 31, 2001 issued by the National
Labor Relations Commission in CA No. 026604-00/NCR-30-11-00567-99 is hereby AFFIRMED with
MODIFICATION in the sense that in the event petitioner Prudencio J. Tanjuan is absolved from any liability
arising from the act or omission complained of in OMB-0-98-2342 filed before the Office of the Ombudsman,
respondent Philippine Postal Savings Bank, Inc. is hereby ordered to promptly release his separation pay,
after the usual clearance/s as required by law.

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA narrated the facts as follows:

Petitioner Prudencio J. Tanjuan (petitioner for brevity) was employed by respondent Philippine Postal Savings
Bank, Inc. (respondent PPSBI for brevity), a government financing institution and a subsidiary of the
Philippine Postal Corporation (Philpost), as Property Appraisal Specialist and Officer-in-Charge of its Credit
Supervision and Control Department. At the time material to this case, he was on his fourth year of service.

On November 13, 1998, respondent Pedrito Torres (respondent Torres for brevity), PPSBIs President and
Chief Executive Officer, issued Memorandum 145-98 addressed to petitioner and five (5) other employees
belonging to its Accounts Management Department and Credit Supervision and Control Department charging
them with negligence in the performance of duties and misrepresentation in violation of Article VI, Sections 2
(d) and 3 (d) of the banks rules and regulations for approving the applications for loan of Corinthian de
Tagaytay and Clavecilla Marine Service. They were given five (5) days within which to submit their written
explanations otherwise they shall be considered to have waived the filing of the same.

On November 27, 1998, petitioner submitted his written explanation alleging that he merely reviewed and
validated the findings of the Property Appraiser.

On January 11, 1999, OP Order No. 003-99 was issued by respondent Torres to petitioner informing him of
his preventive suspension for a period of ninety (90) days in view of the pending administrative investigation
against him. The next day, petitioner, represented by counsel, wrote respondent Torres asking for the lifting
of the order of preventive suspension on the ground that pursuant to Secs. 24 and 36 of The Ombudsman Act
of 1989 (R.A. No. 6770), only the Ombudsman may preventively order his suspension. Respondent Torres, on
January 14, 1999, replied that the preventive suspension was an internal decision of respondent PPSBI in
connection with the pending administrative case against petitioner and not pursuant to any complaint filed
with the Office of the Ombudsman. Moreover, being a subsidiary of a government-owned and controlled
corporation with [an] original charter, the pertinent civil service rules and regulations are not applicable to
respondent PPSBI.

In riposte, petitioner countered that his preventive suspension should therefore not exceed thirty (30) days
in accordance with the provisions of the Labor Code, as amended.

As a result of petitioners manifestation, on February 1, 1999, respondent Torres issued OP Order No. 011-99
ordering the amendment of the order of preventive suspension against the former from ninety (90) days to
thirty (30) days. Consequently, petitioners suspension would only be up to February 11, 1999, after which he
could already report back to work.

On April 27, 1999, the Board of Directors of respondent PPSBI issued Board Resolution No. 99-14 approving
the banks reorganization via retrenchment of employees and re-alignment of functions and positions for the
purpose of preventing further serious losses. In furtherance of the Boards decision, a letter dated July 15,
1999 was released by respondent Torres addressed to all employees of respondent PPSBI, informing them of
the impending reorganization and enjoining them to apply for their desired plantilla positions under the new
organizational set-up not later than July 20, 1999, otherwise they shall not be included in the selection

64 | P a g e
process and shall be deemed to have opted to be separated instead. Petitioner did not apply for any position
in the new organizational set-up.

On October 5, 1999, petitioner received a Notice of Termination dated October 4, 1999 informing him that
pursuant to respondent PPSBIs adoption of a new organizational structure under Board Resolution No. 99-14,
his employment therewith shall cease [at] the close of office hours on November 4, 1999 or thirty (30)
calendar days from date of receipt of the notice on the ground of abolition of position. The Department of
Labor and Employment was likewise seasonably notified prior to the effectivity date of petitioners
termination as required by law. However, the release of his separation pay of one and a half (1 1/2) months
salary for every year of service was withheld in view of the pendency of a criminal case against him with the
Office of the Ombudsman for alleged irregularities in the granting of loans for which he could likewise be
held pecuniarily liable.

Displeased with his termination, petitioner filed a complaint for illegal dismissal with money claims against
respondent on November 15, 1999.

Petitioner alleged that there was no just or authorized cause to warrant his termination from service and that
the procedural requirements as mandated by law were not complied with. He pointed out that no other
measures were first taken before resort to retrenchment or any other mode of reducing personnel was
made. Moreover, respondents were guilty of bad faith in terminating its employees considering that despite
the retrenchment, new positions were created for which they were invited to apply.

In refutation, respondents averred that in view of the dwindling financial position of the bank, the Board of
Directors approved the banks reorganization plan to prevent or minimize business losses which involved the
retrenchment of employees and the subsequent right-sizing of the organization through elimination or
merger of overlapping functions or divisions which resulted to the abolition of thirty-six (36) positions, one
(1) of which was then occupied by petitioner. Consequently, petitioner and the DOLE were served the
required termination notice one (1) month before the effectivity date of his separation from service.
However, the payment of his separation pay was deferred in view of the case against him which is pending
resolution before the Office of the Ombudsman [and] which could x x x find him pecuniarily liable aside from
the penalty of forfeiture of benefits x x x. In the event though that he is exonerated, they manifested that his
separation pay and other benefits shall be promptly released to him.

As to the required proof of business losses, a reservation was made as to its submission on the ground of
confidentiality of records due to the nature of respondent PPSBIs business. However, respondents avowed
that the same shall be presented if and when required by the Labor Arbiter to do so.

On June 30, 2000, Labor Arbiter Isabel G. Panganiban-Ortiguerra rendered a Decision, the dispositive portion
of which reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring Philippine Postal Savings Bank,
Inc. guilty of illegal dismissal and it is hereby ordered as follows:

1. To reinstate complainant to his former position which may now have a different title, without loss of
seniority rights and with full backwages reckoned from the date of his dismissal up to his actual or payroll
reinstatement as of this date is in the amount of P124,638.40; and

2. To pay complainants attorneys fee in an amount equivalent to 10% of whatever he may receive by
virtue of this decision.

The claims for moral and exemplary damages are dismissed for lack of merit.

SO ORDERED.

Aggrieved, respondents appealed to the x x x NLRC asseverating that they were denied due process of law
when Labor Arbiter Panganiban-Ortiguerra allegedly hastily decided that they did not adduce evidence to
support their claim of business losses to justify retrenchment. In support of their appeal, respondents
submitted in evidence the following documents: (A) Audited Consolidated Statements of Condition, Income
and Loss Statements for the periods 1996-1997, 1997-1998 and 1998-1999; (B) Statement of Financial
Condition for the periods June 23, 1998, December 24, 1998 and December 21, 1999; (C) COA Annual Audit

65 | P a g e
Report for the years ended December 31, 1997 and 1996; (D) COA Annual Audit Report for the years ended
December 31, 1998 and 1997; (E) COA Annual Audit Report for the years ended December 31, 1999 and
1998; (F) PDIC Preliminary Findings as of March 31, 1996; (G) PDIC Results of Follow-Through Examination as
of March 31, 1997; (H) PDIC Preliminary Findings as of May 31, 1998; (I) BSP Letter to the PPSBI Board of
Directors dated December 28, 1995; (J) BSP Letter to the PPSBI Board of Directors dated March 18, 1997,
with attached detailed report; (K) BSP Letter to the PPSBI Board of Directors dated May 14, 1997; and (L) BSP
Letter to the PPSBI Board of Directors dated October 25, 1999.

Petitioner duly opposed the presentation of the aforesaid documents contending that [these] cannot be
presented for the first time on appeal. Moreover, even if the same can be admitted on appeal, the aforesaid
documents are insufficient to prove the existence of business losses. Finally, petitioner posits that if serious
losses were in fact incurred by respondent PPSBI, the same was due to the mismanagement of its officers
which should not be borne by its rank and file employees.

On August 31, 2001, x x x NLRC issued a Resolution admitting the evidence presented by respondents on
appeal and finding the same adequate to prove the existence of business losses on the part of respondent
PPSBI. x x x.

Dissatisfied with the NLRC Decision, petitioner elevated the case to the CA.

Ruling of the Court of Appeals

Affirming the NLRC, the CA ruled that proof of respondents business losses had been correctly admitted,
pursuant to the NLRC Rules of Procedure and the mandate of the Labor Code that technical rules of evidence
are not binding in labor cases. It noted that, before the labor arbiter, respondents had made a clear
reservation to present the subject evidence if required to do so.

The CA thereafter held that the evidence presented had sufficiently proved the existence of business losses,
and that petitioners retrenchment was legal.

As to the withholding of petitioners separation pay, the appellate court ruled that the pendency of the
criminal complaint against him had barred Respondent PPSBIs issuance of a certificate clearing him of any
accountability to the agency. Under the rules of the Commission on Audit, the accountability clearance is one
of several supporting documents needed for the payment of separation pay.

Hence, this Petition.

Issues

Petitioner submits the following issues for our consideration:

A. Whether or not the petitioner was illegally dismissed by respondents;

B. Whether or not the Court of Appeals can disregard the findings of the Labor Arbiter [that] there was
no valid retrenchment;

C. Whether or not respondents are estopped from attaching [as] annexes to the Memorandum on
Appeal evidenc[e] not submitted to the Labor Arbiter x x x after they were given opportunity to do so.

Since the question of whether petitioner was validly retrenched hinges on the admission of evidence proving
alleged business losses, we shall discuss issues A and B in reverse sequence.

The Courts Ruling

The Petition has no merit.

First Issue:

Proof of Business Losses

May Be Admitted on Appeal

66 | P a g e
It is well-settled that the NLRC is not precluded from receiving evidence, even for the first time on appeal,
because technical rules of procedure are not binding in labor cases. This rule applies equally to both the
employee and the employer. In the interest of due process, the Labor Code directs labor officials to use all
reasonable means to ascertain the facts speedily and objectively, with little regard to technicalities or
formalities. However, delay in the submission of evidence should be clearly explained and should adequately
prove the employers allegation of the cause for termination.

In the instant case, it is undisputed that the evidence of business losses for the years 1996 up to 1999 was
introduced before the NLRC only. The CA correctly noted, however, that respondents reserved the right to
introduce the evidence to the labor arbiter, if and when required to do so. Reasons of confidentiality and the
volatile nature of PPSBIs business as a banking institution prompted respondents to limit the presentation of
this evidence at the outset. Indeed, it would have been foolhardy for the NLRC and the CA to reject the
evidence, just because it had not been presented before the labor arbiter. Such evidence was absolutely
necessary to resolve the issue of whether petitioners employment was validly terminated. For strictly
adhering to technical rules of procedure at the expense of equity, the Commission has in fact been chided by
the Court in Philippine Telegraph and Telephone Corporation v. NLRC, from which we quote:

Thus, even if the evidence was not submitted to the labor arbiter, the fact that it was duly introduced on
appeal to respondent commission is enough basis for the latter to have been more judicious in admitting the
same, instead of falling back on the mere technicality that said evidence can no longer be considered on
appeal. Certainly, the first course of action would be more consistent with equity and the basic notions of
fairness.

As to petitioners claim that he was denied due process because of the belated admission of the evidence,
suffice it to say that he was given every opportunity to refute it and to submit counter-evidence. The essence
of due process consists simply in according parties reasonable opportunity to be heard and to submit any
evidence they may have in support of their defense.

Second Issue:

The CAs Power to Review Findings of Fact

Petitioner argues that the CA erred in disregarding the labor arbiters factual findings. It is well to remind him
that those findings were rejected in the first instance by the NLRC, pursuant to its exclusive appellate
jurisdiction over all cases decided by labor arbiters. Thereafter, its Decision was reviewed by the CA via a
petition for certiorari under Rule 65 of the Rules of Court.

St. Martin Funeral Home v. NLRC laid down the mode of judicial review of NLRC decisions. In that case, this
Court held that the proper vehicle for such review was a special civil action for certiorari under Rule 65 of the
Rules of Court, and that this action should be filed in the CA in strict observance of the doctrine of the
hierarchy of courts. As the rule now stands, special civil actions for certiorari of NLRC cases filed in this Court
after June 1, 1999 are to be dismissed, not referred to the CA.

Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, expanded the jurisdiction of the
CA as follows:

SEC. 9. Jurisdiction. - The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto,
and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;

xxx xxx xxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform
any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate
jurisdiction, including the power to grant and conduct new trials or further proceedings. x x x.

Verily, the appellate court, pursuant to the exercise of its original jurisdiction over petitions for certiorari, has
the power to review NLRC cases. Such review extends to the factual findings of the labor arbiter when, as in
this case, these are at variance with those of the NLRC.

67 | P a g e
The CA thus acted within its power when it disregarded the labor arbiters findings and upheld the contrary
ruling of the NLRC. In turn, the factual findings of the former affirming those of the latter are generally
binding on this Court and will not as a rule be reviewed on appeal. Petitioner has not shown any reason for us
to depart from this rule.

Third Issue:

Validity of Petitioners Retrenchment

This Court has consistently recognized and affirmed the employers management right and prerogative to
terminate the services of its employees in order to obviate or minimize business losses. Retrenchment, one
of the authorized causes for termination under the Labor Code, has been defined as the termination of
employment initiated by the employer through no fault of the employees and without prejudice to the latter,
resorted by management during periods of business recession, industrial depression, or seasonal
fluctuations[;] or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a
new production program or the introduction of new methods or more efficient machinery, or of automation.

For the exercise of such prerogative, Article 283 of the Labor Code provides these conditions:

Art. 283. Closure of establishment and reduction of personnel. -- The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the worker and
the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half () month
pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as
one (1) whole year. (Italics supplied)

Thus, the requisites for valid retrenchment are the following: (1) necessity of the retrenchment to prevent
losses, and proof of such losses; (2) written notice to the employees and to the Department of Labor and
Employment (DOLE) at least one month prior to the intended date of retrenchment; and (3) payment of
separation pay equivalent to one-month pay or at least one-half month pay for every year of service,
whichever is higher.

There is no dispute that respondents have seasonably complied with the procedural requirement of serving
written notice to petitioner and the DOLE. On the other hand, the withholding of separation pay, which has
not been raised as an issue in this Petition, was satisfactorily resolved by the CA.

The only remaining question is whether respondents have sufficiently and convincingly established business
reverses of the kind or the amount that would justify the retrenchment. As this Court has held, before any
reduction of personnel becomes legal, any claim of actual or potential business losses must satisfy
established standards as follows: (1) the losses incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in
preventing the expected losses; and (4) the alleged losses, if already incurred, or the expected imminent
losses sought to be forestalled are proven by sufficient and convincing evidence. The employer has the
burden of proving that the losses are serious, actual and real.

In the instant case, both the NLRC and the CA found that the audited financial statements submitted by
respondents adequately supported their claim of actual, real and substantial losses. The Court had previously
ruled that financial statements audited by independent external auditors constituted the normal method of
proof of the profit-and-loss performance of a company. The CA appreciated the evidence as follows:

A perusal of respondent PPSBIs audit reports conducted by no less than the Commission on Audit (COA)
pursuant to Section 4, Article IX-D of the Constitution and Section 43 of Presidential Decree No. 1445,
otherwise known as the Government Auditing Code of the Philippines, for the years 1996, 1997, 1998 and
1999 reveal the following significant facts:

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Surplus (Deficit) Undivided profits (net loss)

1996 P 11,413,884.00 P 22,617,592.00

1997 33,569,370.00 2,950,989.00

1998 35,875,290.00 31,374,806.00

1999 66,274,745.00 79,588,715.00

Based on the foregoing, the losses alleged by respondents to have been the primary reason for the Board of
Directors decision to effect retrenchment and reorganization were clearly not at all fictitious, imaginary or
mere conjectures as claimed by petitioner. Furthermore, the fact that respondent PPSBI was being regularly
monitored by the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corporation (PDIC)
due to its precarious financial position for several years positively affirms respondents asseveration of
continuous serious business losses. There is then no doubt that respondent PPSBI, prior to, at the time [of],
and immediately after the termination of petitioner, was suffering from real and serious business losses.

The findings of the CA affirming those of the NLRC showed real and grave financial reverses, which made
downsizing the only recourse for the bank to follow. Indeed, the retrenchment of petitioner was the
consequence of the banks reorganization and a cost-saving device recognized by jurisprudence.

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

SO ORDERED.

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

THIRD DIVISION

[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, v. PHILIPPINE AIRLINES INCORPORATED, Respondent.

DECISION

PERALTA, J.:

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 Decision1 and the Resolution2 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.

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On July 11, 2001, respondent and FASAP entered into a Collective Bargaining Agreement3 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

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. x x x.

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 letter5 by petitioners' counsel
addressed to respondent demanding the removal of gender discrimination provisions in the coming re-
negotiations of the PALFASAP CBA.

On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA proposals 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 Injunction7 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 Order8 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 motion10 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 Order11 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. Aggrieved, respondent, on October 8, 2004, filed a
Petition for Certiorari and Prohibition

with Prayer for a Temporary Restraining Order and Writ of Preliminary Injunction12 with the Court of
Appeals (CA) praying that the order of the RTC, which denied its objection to its jurisdiction, be annulled and

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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 withheld 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 PALFASAP
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.

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.

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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.

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; x x x x

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.

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

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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.

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.

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.

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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.

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, endeavoured 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. The provision regarding the compulsory retirement of
flight attendants is not ambiguous and does not require interpretation. Neither is there any question

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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.

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, 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.

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 annulled 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.

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 fullblown trial is necessary, which jurisdiction to hear the same is properly lodged with 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.

SO ORDERED.

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