G.R. No.

55159 December 22, 1989

PHILIPPINE AIRLINES, INC., petitioner

vs.
NATIONAL LABOR RELATIONS COMMISSION and ARMANDO DOLINA, respondents.

Ermitano Manzano & Associates for petitioner.

Solon Garcia collaborating counsel for petitioner.

CORTES, J.:

Petitioner impugns in this petition for certiorari that part of the public respondent National Labor
Relations Commission's (NLRC) decision in NLRC Case No. RB-IV-9319-77 which ordered
petitioner to restore private respondent Dolina to its payroll, and to pay his salaries from 1 April 1979
"until this case is finally resolved" [Rollo, p. 33]. Petitioner contends that public respondent NLRC
gravely abused its discretion considering that in the same decision public respondent affirmed the
decision of the Labor Arbiter in toto granting respondent's application for clearance to dismiss the
private respondent.

The pertinent facts are as follows:

Private respondent Dolina was admitted to the Philippine Airlines (PAL) Aviation School for training
as a pilot beginning 16 January 1973. The training agreement bound PAL to provide regular and
permanent employment to Dolina upon completion of the training course. On 25 January 1974,
Dolina completed the course, and undertook an equipment qualification course up to 4 October
1974. On 9 October 1974, the Civil Aeronautics Administration issued him a license as Commercial
Pilot and PAL then extended him a temporary appointment for six (6) months as Limited First Officer.
When his appointment was due to expire on 30 April 1975, Dolina had only logged eighty four (84)
hours and fifty five (55) minutes flying time, short of the minimum 500 flying hours required for
regularization as First Officer. To enable him to complete the requirement, his employment was
extended for another six months which appointment was described as "permanent." On 31 October
1975, when his appointment was again due to expire, he was still short of the minimum flying time
requirement such that his appointment was again extended up to 30 April 1976. During this third
extension of his appointment, Dolina completed the 500 flying hours requirement, and thus on 31
March 1976 he applied for regularization as First Officer. Pending his physical examination by the
chief Flight Surgeon, his appointment was again extended to 31 October 1976. On 17 August 1976,
Dolina took a psychological examination wherein his "Adaptability Rating" was found to be
"unacceptable" [Annex "L" to the Petition. p. 8; Rollo, p. 116]. On 23 September 1976, complainant
was again subjected to an examination and interview by the Pilot Acceptance Qualifications Board
as part of the regularization process, which examination revealed the following:

xxx xxx xxx

b. Armando Dolina - After thorough evaluation of the candidate's past records, his
performance and the result of his medical examination as submitted by the Medical
Sub-Department, the Board finds Mr. A. Dolina not qualified for regular employment
in the Company.
 xxx xxx xxx

[NLRC Decision, pp. 3-4; Rollo, pp. 25-26].

Conformably, the Board recommended the termination of the complainant pursuant to which PAL
filed a clearance application [Rollo, p. 34] for Dolina's termination. In the meantime Dolina was
placed under preventive suspension effective 1 October 1976. Dolina countered with a complaint for
illegal dismissal on 6 October 1976 [Rollo, 35]. On 26 January 1977 the Officer-in-Charge of the
Department of Labor Regional Office No. IV lifted the preventive suspension, and ordered petitioner
to reinstate Dolina to his former position with full backwages from 1 October 1976 up to actual
reinstatement. The issue of termination and damages was referred to the Executive Labor Arbiter for
compulsory arbitration [Rollo, p. 71].

Petitioner appealed the order lifting Dolina's suspension to the Secretary of Labor. However, on 2
March 1977, pending the resolution of petitioner's appeal, the parties signed an agreement before
the Undersecretary of Labor, the terms of which are as follows:

AGREEMENT

The undersigned parties hereby agree to the following:

1 While pending final resolution of the complaint of Mr. Armando Dolina against the
Philippine Airlines, he shall be considered in the payroll effective 1 October 1976.

2 The order of Regional Director Vicente Leogardo for the reinstatement with
backwages of Mr. Dolina is hereby rendered moot and academic.

3 The parties shall consider this arrangement pending final resolution of the case by
arbitration.

xxx xxx xxx

Subsequently, on 30 May 1977, the Acting Secretary of Labor issued an order finding that the
propriety of the suspension had been rendered moot and academic by the above agreement and
referred the case for compulsory arbitration to the Executive Labor Arbiter [Annex "J" to the Petition;
Rollo, p. 85]. On 23 March 1979, the Labor Arbiter rendered its decision, the dispositive portion of
which reads as follows:

IN VIEW OF ALL THE FOREGOING, it is our considered opinion that there is merit
on the application for clearance, and therefore, the same should be as it is hereby
GRANTED. Consequently, the oppositor's TERMINATION IS IN ORDER.

Since the termination is upheld, perforce the claim for moral damages is denied.
Besides pursuant to P.D. No. 1367 dated May 1, 1978, this office is devoid of
jurisdiction to entertain said claim.

SO ORDERED. [Decision of Labor Arbiter, p. 12; Rollo, p. 97].

By virtue of the above decision, PAL removed Dolina from its payroll effective 1 April 1979. Dolina
then appealed the Labor Arbiter's decision to the public respondent NLRC on 29 April 1979 and
there filed a motion praying that PAL be ordered to return him to PAL's payroll, contending that the
Labor Arbiter's decision was not yet final because of his timely appeal. PAL opposed the motion
claiming that it was no longer obliged to return Dolina to its payroll since the decision of the Labor
Arbiter dated 23 March 1979 in its favor was a final resolution of the case by arbitration [Annex "N" to
the Petition, p. 1; Rollo, p. 137].

On 8 February 1980, public respondent NLRC rendered its decision containing the assailed portion
to wit:

xxx xxx xxx

In fine it is our considered view that the respondent's application for clearance to
dismiss the complainant has sufficiently surmounted the test of validity.

Be that as it may, we are not in accord with the discontinuation of the payment of
complainant's salaries. The agreement of the parties stipulated in no uncertain terms
that the complainant [Dolina] is to be carried in respondent's payroll until this case is
finally resolved. As things stand, the main issue is still being litigated. The
complainant, therefore, must be restored to the payroll and paid for his salaries from
1 April 1979, the date he was dropped from the respondent's payroll.

WHEREFORE, the Decision appealed from should be as it is hereby affirmed in toto.

However the respondent is ordered to restore the complainant to its payroll and to
pay his salaries from 1 April 1979 until this case is finally resolved.

SO ORDERED. [NLRC Decision, pp. 10-11; Rollo, pp. 32-33; Italics supplied]

Hence, this petition, with a prayer for a temporary restraining order. The Court issued a temporary
restraining order on 10 October 1980. Private respondent Dolina failed to file his comment and the
Solicitor General submitted his own Comment supporting the stand of petitioner. Due to the adverse
stand of the Solicitor General, public respondent NLRC submitted its own Comment.

The issue before the Court is whether or not the NLRC committed grave abuse of discretion in
holding that private respondent Dolina was entitled to his salaries from 1 April 1979 "until this case is
finally resolved."

PAL contends that inasmuch as the respondent Commission acting en banc had affirmed in toto the
decision of the Labor Arbiter granting petitioner the clearance for the dismissal of private respondent
Dolina, it is an act of grave abuse of discretion amounting to lack of jurisdiction on its part to order
petitioner to pay private respondent's salaries from 1 April 1979 until the case is finally terminated.
PAL contends that said stipulation refers only to the resolution of the case by arbitration and said
arbitration of the case was terminated when the Labor Arbiter rendered its decision dated 23 March
1979. PAL argues that the arbitration of the case is limited to and comprises merely the proceedings
before the Labor Arbiter such that when the latter renders a decision, arbitration of the dispute is
terminated .

Public respondent NLRC on the other hand contends that arbitration is a continuing process from the
time the case is referred by the Secretary of Labor to the Arbitration Branch until the final judgment
is had on appeal. Since the Labor Arbiter's decision in favor of petitioner did not finally resolve the
case in view of the timely appeal by private respondent from said decision, the case was not yet
finally terminated by arbitration and Dolina is entitled to be placed in petitioner's payroll until the
complaint is finally resolved.
The above contentions call for the proper interpretation of the agreement between the parties,
specifically the third stipulation containing the clause "pending final resolution of the case by
arbitration."

It is a basic rule in interpretation of contracts that the circumstances under which an instrument was
made, including the situation of the subject thereof and the parties to it, may be considered so that
the intention of the contracting parties may be judged correctly [Art. 1371, Civil Code of the
Philippines; Section 11, Rule 130, Rules of Court; Lim v. Court of Appeals, G.R. No. L-40258,
September 11, 1980, 99 SCRA 668.] In the instant case, the stipulation in the 2 March 1977
agreement that Dolina shag be included in the payroll of PAL until final resolution of the case by
arbitration was intended to supersede the order of the Regional Director which, by stipulation of the
parties, was rendered moot and academic. In lieu of reinstatement and the payment of his
backwages, private respondent was included in petitioner's payroll, effective from the time he was
preventively suspended until final resolution of the case by arbitration, without having to perform any
work for the petitioner. In entering into the agreement, the parties could not have intended to include
in the clause "final resolution of the case by arbitration" the whole adjudicatory process, including
appeal. For if it were so, even proceedings on certiorari before this Court would be embraced by the
term "arbitration" and private respondent will continue to receive monthly salary without rendering
any service to the petitioner regardless of the outcome of the proceedings before the Labor Arbiter,
for as long as one of the parties appeal to the NLRC and until the case is finally resolved by this
Court. This is clearly an absurdity which could not have been contemplated by the parties.

Neither can proceedings on appeal before the NLRC en banc be considered as part of the arbitration
proceeding. In its broad sense, arbitration is the reference of a dispute to an impartial third person,
chosen by the parties or appointed by statutory authority to hear and decide the case in controversy
[Chan Linte v. Law Union and Rock, Ins. Co., 42 Phil. 548 (1921)]. When the consent of one of the
parties is enforced by statutory provisions, the proceeding is referred to as compulsory arbitration. In
labor cases, compulsory arbitration is the process of settlement of labor disputes by a government
agency which has the authority to investigate and to make an award which is binding on all the
parties [See Wood v. Seattle, 23 Wash. 1, 62 P 135, 52 LRA 369 (1920); Amalgamated Association
v. Wisconsin Employees' Relations Board, 340 U.S. 383-410,95 L. Ed. 381 (1951)]. Under the Labor
Code, it is the Labor Arbiter who is clothed with the authority to conduct compulsory arbitration on
cases involving termination disputes [Article 217, Pres. Decree No. 442, as amended]. When the
Labor Arbiter renders his decision, compulsory arbitration is deemed terminated because by then the
hearing and determination of the controversy has ended. Any appeal raised by an aggrieved party
from the Labor Arbiter's decision is already beyond the scope of arbitration since in the appeal stage,
the NLRC en banc merely reviews the Labor Arbiter's decision for errors of fact or law and no longer
duplicates the proceedings before the Labor Arbiter. Thus, the clause "pending final resolution of the
case by arbitration" should be understood to be limited only to the proceedings before the Labor
Arbiter, such that when the latter rendered his decision, the case was finally resolved by arbitration.

More important, however, is the fact that the NLRC's order for the continued payment of Dolina's
salaries is inconsistent with its affirmance of the Labor Arbiter's decision upholding the validity of
Dolina's dismissal. In affirming the Labor Arbiter's decision granting the termination clearance, the
NLRC held that:

With respect to the issue of whether or not the complainant's [Dolina] dismissal was
sufficiently grounded, we are not persuaded that the respondent [herein petitioner
PAL] is under obligation to employ him as regular employee simply because he was
certified physically fit and technically to proficient by the CAA.
 This is understandable for it concerns the safety of its properties, and above all, the
safety of the lives and properties of its passengers, which by law it is committed to
transport safely. In the absence, therefore, of any showing that its standards are
unreasonable and discriminatory, which we do not find here, We cannot disturb
them. We can only say that for exercising extraordinary diligence in the selection of
its pilots, We join the public in commending it.

xxx xxx xxx

In fine, it is Our considered view that the respondent's application for clearance to
dismiss the complainant has sufficiently surmounted the test of validity.

In view of the above finding of valid dismissal, the NLRC had no authority to order the continued
payment of Dolina's salaries from 1 April 1979 until the case is finally resolved. The NLRC's order
would result in compensating Dolina for services no longer rendered and when he is no longer in
PAL's employ. This is contrary to the age-old rule of "a fair day's wage for a fair day's labor" which
continues to govern the relation between labor and capital and remains a basic factor in determining
employees' wages [Durabilt Recapping Plant & Co. v. National Labor Relations Commission, G.R.
No. 76746, July 27, 1987, 152 SCRA 328]. So that, if there is no work performed by the employee
there can be no wage or pay unless the laborer was able, willing and ready to work but was
prevented by management or was illegally locked out, suspended or dismissed. Where the
employee's dismissal was for a just cause, it would neither be fair nor just to allow the employee to
recover something he has not earned and could not have earned [Santos v. National Labor
Relations Commission, G.R. No. 76721, September 21, 1987, 154 SCRA 166].

Moreover, in ordering the continued payment of Dolina's salaries from 1 April 1979 until the case is
finally resolved, the NLRC in effect ordered the payment of backwages to Dolina notwithstanding its
finding of a valid dismissal.

This is clearly untenable.

In the first place, backwages in general are granted on grounds of equity for earnings which a worker
or employee has lost due to his illegal dismissal [New Manila Candy Workers Union (NACONWA-
PAFLU) v. Court of Industrial Relations, G.R. No. L-29728, October 30, 1978, 86 SCRA 37; Durabilt
Recapping Plant & Co. v. National Labor Relations Commission, supra; Chong Guan Trading v.
National Labor Relations Commission, G. R. No. 81471, April 26, 1989; Santos v. National Labor
Relations Commission, supra]. Where, as in this case, the dismissal was for a just cause, there is no
factual or legal basis for ordering the payment of backwages. The order of the NLRC for the
continued payment of Dolina's salaries would allow the latter to unjustly enrich himself at the
expense of the petitioner. This Court has reiterated time and again that the law, in protecting the
rights of the laborer, authorizes neither oppression nor self-destruction of the employer [Colgate
Palmolive Philippines, Inc. v. Ople, G.R. No. 73681, June 30,1988,163 SCRA 323]. In this case, the
NLRC chose not to adhere with fidelity to this doctrine.

Secondly, NLRC's order for continued payment of Dolina's salary from 1 April 1979 up to the final
resolution of the case would place Dolina in a better position than those workers who were found to
have been illegally dismissed by their employer. For in the latter case, the backwages that can be
recovered by the worker is limited to three years [Mercury Drug Co., Inc. v. Court of Industrial
Relations, G.R. No. L-23357, April 30, 1974, 56 SCRA 694; Philippine Airlines, Inc. v. National Labor
Relations Commission, G.R. No. 64809, November 29, 1983, 126 SCRA 223; Madrigal & Co., Inc. v.
Zamora, G.R. No. L-48237, Madrigal & Co., Inc. v. Minister of Labor, G.R. No. L-49023, June
30,1987] while Dolina, whose dismissal was found to be valid, can recover approximately ten years
backwages, which corresponds to the period from 1 April 1979 until "final resolution" of the instant
case.

Considering the foregoing, the Court holds that respondent NLRC's order for the continued payment
of Dolina's salaries from "l April 1979 until the case is finally resolved" is contrary to law and
established jurisprudence and the NLRC acted in excess of its jurisdiction in issuing the assailed
order. In the recent case of Llora Motors, Inc. v. Drilon, G.R. No. 82895, November 7, 1989 the
Court held as an act without or in excess of jurisdiction the portion of the Labor Arbiter's award,
which required the employer to pay to its employee an amount equivalent to a half month's pay for
every year of service as retirement benefits, for being without basis either in law or contract.
Similarly, there is in this case an excess of jurisdiction on the part of the NLRC in ordering the
continued payment of Dolina's salaries "from 1 April 1979 until the case is finally resolved."

WHEREFORE, that part of the dispositive portion of the decision of the National Labor Relations
Commission in NLRC CASE NO. RB-IV-9319-77 requiring petitioner to restore private respondent to
its payroll and ordering the payment of his salaries from 1 April 1979 until the case is finally resolved
is hereby declared NULL and VOID and SET ASIDE. The temporary Restraining Order issued by the
Court on 10 October 1980 is made PERMANENT.

SO ORDERED.

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

G.R. No. 106231 November 16, 1994

HAWAIIAN-PHILIPPINE COMPANY, petitioner,

vs.
REYNALDO J. GULMATICO, Labor Arbiter, Regional Arbitration Branch No. VI, AND
NATIONAL FEDERATION OF SUGAR WORKERS-FOOD AND GENERAL TRADES representing
all the sugar farm workers of the HAWAIIAN PHILIPPINE MILLING DISTRICT, respondents.

Angara, Abella, Concepcion, Regala & Cruz for petitioner.

Manlapao, Ymballa and Chaves for private respondent.

BIDIN, J.:

This petition for certiorari and prohibition with preliminary injunction seeks to annul the Order dated
June 29, 1992 issued by public respondent Labor Arbiter Reynaldo J. Gulmatico denying petitioner's
motion for "Claims on R.A. 809" in RAB VI Case No. 06-07-10256-89, the dispositive portion of
which reads, in part:

WHEREFORE, premises considered, the motion to dismiss dated July 31, 1989 and
the supplement thereto dated September 19, 1989 filed by respondent company
together with the motion to dismiss filed by respondent Ramon Jison dated August
27, 1990 and Francisco Jison dated September 20, 1990, respectively, are hereby
DENIED.
 xxx xxx xxx

(Rollo, p. 59)

The antecedent facts are as follows:

On July 4, 1989, respondent union, the National Federation of Sugar Workers-Food and General
Trades (NFSW-FGT) filed RAB VI Case No. 06-07-10256-89 against herein petitioner Hawaiian-
Philippine Company for claims under Republic Act 809 (The Sugar Act of 1952). Respondent union
claimed that the sugar farm workers within petitioner's milling district have never availed of the
benefits due them under the law.

Under Section 9 of R.A 809, otherwise known as the Sugar Act of 1952, it is provided, to wit:

Sec. 9. In addition to the benefits granted by the Minimum Wage Law, the proceeds
of any increase in participation granted to planters under this Act and above their
present share shall be divided between the planter and his laborers in the following
proportions;

Sixty per centum of the increase participation for the laborers and forty per
centum for the planters. The distribution of the share corresponding to the laborers
shall be made under the supervision of the Department of Labor.

xxx xxx xxx

(Emphasis supplied.)

On July 31, 1989, petitioner filed a "Motion to Dismiss," followed by a "Supplemental Motion to
Dismiss" on September 19, 1989. Petitioner contended that public respondent Labor Arbiter has no
jurisdiction to entertain and resolve the case, and that respondent union has no cause of action
against petitioner.

On August 23, 1989, respondent union filed an "Opposition to Motion to Dismiss."

On October 3,1989, petitioner applied a "Reply to Opposition" followed by a "Citation of Authorities in

Support of Motion to Dismiss."

On December 20, 1989, respondent union filed an amended complaint additionally impleading as
complainants Efren Elaco, Bienvenido Gulmatico, Alberto Amacio, Narciso Vasquez, Mario
Casociano and all the other farm workers of the sugar planters milling with petitioner from 1979 up to
the present, and as respondents, Jose Maria Regalado, Ramon Jison, Rolly Hernaez, Rodolfo
Gamboa, Francisco Jison and all other sugar planters milling their canes with petitioner from 1979
up to the present.

On August 27, 1990, Ramon Jison, one of the respondents impleaded in the amended complaint,
filed a "Motion to Dismiss and/or to Include Necessary Parties," praying for the inclusion as co-
respondents of the Asociacion de Hacenderos de Silan-Saravia, Inc. and the Associate Planters of
Silay-Saravia, Inc.

On June 29, 1992, public respondent promulgated the assailed Order denying petitioner's Motion to
Dismiss and Supplemental Motion to Dismiss.
Hence, this petition filed by Hawaiian-Philippine Company.

Petitioner reasserts the two lesson earlier raised in its Motion to Dismiss which public respondent
unfavorably resolved in the assailed Order.

These two issues are first, whether public respondent Labor Arbiter has jurisdiction to hear and
decide the case against petitioner; and the second, whether respondent union and/or the farm
workers represented by it have a cause of action against petitioner.

Petitioner contends that the complaint filed against it cannot be categorized under any of the cases
falling within the jurisdiction of the Labor Arbiter as enumerated in Article 217 of the Labor Code, as
amended, considering that no employer-employee relationship exists between petitioner milling
company and the farm workers represented by respondent union. Article 217 of the Labor Code
provides:

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

1. Unfair labor practice cases;

2. Termination disputes;

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

4. Claims for actual, moral, exemplary and other forms of damages arising from
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 from

maternity benefits, all other claims arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding Five Thousand Pesos (P5,000.00), whether or not accompanied with a
claim for reinstatement. (Emphasis supplies)

In support of the contention that the Labor Arbiter has no jurisdiction to hear and decide the case
against petitioner, the latter cites the ruling in San Miguel Corporation vs. NLRC, 161 SCRA 719
[1988], wherein it was held that a single unifying element runs through the cases and disputes falling
under the jurisdiction of the Labor Arbiter and that is that all the enumerated cases and disputes
arise out of or are in connection with an employer-employee relationship, or some aspect or incident
of such relationship. Likewise, in Federation of Free Farmers vs. Court of Appeals, 107 SCRA 411
[1981], this Court held that:
 . . . . From the beginning of the sugar industry, the centrals have never had any
privity with the plantation laborers, since they had their own laborers to take care of. .
. . Nowhere in Republic Act 809 (the Sugar Act of 1952) can we find anything that
creates any relationship between the laborers of the planters and the centrals. . . .

. . . Under no principle of law or equity can we impose on the central . . . any liability
to the plantation laborers. . . . (Emphasis supplied)

On the strength of the aforecited authorities, petitioner contends that it is not a proper party and has
no involvement in the case filed by respondent union as it is not the employer of the respondent
sugar workers.

Furthermore, to bolster its contention, petitioner cites the Rules and Regulations Implementing RA
809 issued by the then Wage Administration Service pursuant to the Administrative Order of the
Labor Secretary dated October 1, 1952. Section 1 thereof states:

Sec. 1. The payment of the proceeds derived from the sixty per centum of any
increase in the participation due the laborers shall be directly paid to the individual
laborer concerned at the end of each milling season by his respective planter under
the Supervision of the Secretary of Labor or his duly authorized representative by
means of payrolls prepared by said planter. (Emphasis supplied)

In addition, under Letter of Instruction No. 854 dated May 1, 1979, it is provided:

1. Payment subject to supervision. The workers' share shall be paid directly by the
planter concerned to the workers or claimants entitled thereto subject to the
supervision of the Minister of Labor or his duly designated representative.

The responsibility for the payment of the sugar workers' benefits under R.A. 809 was categorically
ruled upon in the Federation of Free Farmers case, supra., to wit:

. . . the matter of paying the plantation laborers of the respective planters becomes
exclusively the concern of the planters, the laborers and the Department of
Labor. Under no principle of law or equity can we impose on the Central — here
VICTORIAS any liability to the respective plantation laborers, should any of their
respective planters-employers fail to pay their legal share. After all, since under the
law it is the Department of Labor which is the office directly called upon to supervise
such payment, it is but reasonable to maintain that if any blame is to be fixed for the
unfortunate situation of the unpaid laborers, the same should principally be laid on
the planters and secondarily on the Department of Labor, but surely never on the
central.

Whatever liability there exists between favor of the plantation laborers should be
pinned on the PLANTERS, their respective employers. (Emphasis supplied)

On the other hand, public respondent and respondent union maintain the position that privity exists
between petitioner and the sugar workers. Actually, public respondent, in resolving petitioner's
Motion to Dismiss, skirted the issue of whether an employer-employee relationship indeed exists
between petitioner milling company and the sugar workers. He did not categorically rule thereon but
instead relied on the observation that when petitioner delivered to its planters the quedans
representing its share, petitioner did not first ascertain whether the shares of all workers or claimants
were fully paid/covered pursuant to LOI No. 854, and that petitioner did not have the necessary
certification from the Department of Labor attesting to such fact of delivery. In view of these
observations, public respondent subscribed to the possibility that petitioner may still have a
liability vis-a-vis the workers' share. Consequently, in order that the workers would not have to
litigate their claim separately, which would be tantamount to tolerating the splitting of a cause of
action, public respondent held that petitioner should still be included in this case as an indispensable
party without which a full determination of this case would not be obtained.

We find for petitioner.

The Solicitor General, in its adverse Comment, correctly agreed with petitioner's contention that
while the jurisdiction over controversies involving agricultural workers has been transferred from the
Court of Agrarian Relations to the Labor Arbiters under the Labor Code as amended, the said
transferred jurisdiction is however, not without limitations. The dispute or controversy must still fall
under one of the cases enumerated under Article 217 of the Labor Code, which cases, as ruled
in San Miguel, supra., arise out of or are in connection with an employer-employee relationship.

In the case at bar, it is clear that there is no employer-employee relationship between petitioner
milling company and respondent union and/or its members-workers, a fact which, the Solicitor
General notes, public respondent did not dispute or was silent about. Absent the jurisdictional
requisite of an employer-employee relationship between petitioner and private respondent, the
inevitable conclusion is that public respondent is without jurisdiction to hear and decide the case with
respect to petitioner.

Anent the issue of whether respondent union and/or its members-workers have a cause of action
against petitioner, the same must be resolved in the negative. To have a cause of action, the
claimant must show that he has a legal right and the respondent a correlative duty in respect thereof,
which the latter violated by some wrongful act or omission (Marquez vs. Varela, 92 Phil. 373 [1952]).
In the instant case, a simple reading of Section 9 of R.A. 809 and Section 1 of LOI 845 as
aforequoted, would show that the payment of the workers' share is a liability of the planters-
employers, and not of the milling company/sugar central. We thus reiterate Our ruling on this matter,
as enunciated in Federation of Free Farmers, supra., to wit:

. . . . Nowhere in Republic Act No. 809 can we find anything that creates any
relationship between the laborers of the planters and the centrals. Under the terms of
said Act, the old practice of the centrals issuing the quedans to the respective
PLANTERS for their share of the proceeds of milled sugar per their milling contracts
has not been altered or modified. In other words, the language of the Act does not in
any manner make the central the insurer on behalf of the plantation laborers that the
latter's respective employers-planters would pay them their share. . . .

. . . . Accordingly, the only obligation of the centrals (under Section 9 of the Act), like
VICTORIAS, is to give to the respective planters, like PLANTERS herein, the
planters' share in the proportion stipulated in the milling contract which would
necessarily include the portion of 60% pertaining to the laborers. Once this has been
done, the central is already out of the picture. . . . (Emphasis supplied)

In the case at bar, it is disputed that petitioner milling company has already distributed to its planters
their respective shares. Consequently, petitioner has fulfilled its part and has nothing more to do with
the subsequent distribution by the planters of the workers' share.

Public respondent's contention that petitioner is an indispensable party is not supported by the
applicable provisions of the Rules of Court. Under Section 7, Rule 3 thereof, indispensable parties
are "parties in interest" without whom no final determination of the action can be obtained. In this
case, petitioner cannot be deemed as a party in interest since there is no privity or legal obligation
linking it to respondent union and/or its members-workers.

In order to further justify petitioner's compulsory joinder as a party to this case, public respondent
relies on petitioners' lack of certification from the Department of Labor of its delivery of the planters'
shares as evidence of an alleged "conspicuous display of concerted conspiracy between the
respondent sugar central (petitioner) and its adherent planters to deprive the workers or claimants of
their shares in the increase in participation of the adherent planters." (Rollo, p. 56)

The assertion is based on factual conclusions which have yet to be proved. And even assuming for
the sake of argument that public respondent's conclusions are true, respondent union's and/or its
workers' recourse lies with the Secretary of Labor, upon whom authority is vested under RA 809 to
supervise the payment of the workers' shares. Any act or omission involving the legal right of the
workers to said shares may be acted upon by the Labor Secretary either motu proprio or at the
instance of the workers. In this case however, no such action has been brought by the subject
workers, thereby raising the presumption that no actionable violation has been committed.

Public respondent is concerned that the respondent planters may easily put up the defense that the
workers' share is with petitioner milling company, giving rise to multiplicity of suits. The Solicitor
General correctly postulates that the planters cannot legally set up the said defense since the
payment of the workers' share is a direct obligation of the planters to their workers that cannot be
shifted to the miller/central. Furthermore, the Solicitor General notes that there is nothing in RA 809
which suggests directly or indirectly that the obligation of the planter to pay the workers' share is
dependent upon his receipt from the miller of his own share. If indeed the planter did not receive his
just and due share from the miller, he is not without legal remedies to enforce his rights. The proper
recourse against a reneging miller or central is for the planter to implead the former not as an
indispensable party but as a third party defendant under Section 12, Rule 6 of the Rules of Court. In
such case, herein petitioner milling company would be a proper third party dependent because it is
directly liable to the planters (the original defendants) for all or part of the workers' claim. However,
the planters involved in this controversy have not filed any complaint of such a nature against
petitioner, thereby lending credence to the conclusion that petitioner has fulfilled its part vis-a-vis its
obligation under RA 809.

WHEREFORE, premises considered, the petition is GRANTED. Public respondent Reynaldo J.

Gulmatico is hereby ORDERED to DISMISS RAB VI Case No. 06-07-10256-89 with respect to
herein petitioner Hawaiian-Philippine Company and to PROCEED WITH DISPATCH in resolving the
said case.

SO ORDERED.

Romero, Melo and Vitug, JJ., concur.

Feliciano, J., is on leave.

G.R. No. 157010 June 21, 2005

PHILIPPINE NATIONAL BANK, petitioner,
vs.
FLORENCE O. CABANSAG, respondent.

DECISION

PANGANIBAN, J.:

The Court reiterates the basic policy that all Filipino workers, whether employed locally or overseas,
enjoy the protective mantle of Philippine labor and social legislations. Our labor statutes may not be
rendered ineffective by laws or judgments promulgated, or stipulations agreed upon, in a foreign
country.

The Case

Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to
reverse and set aside the July 16, 2002 Decision2 and the January 29, 2003 Resolution3 of the Court
of Appeals (CA) in CA-GR SP No. 68403. The assailed Decision dismissed the CA Petition (filed by
herein petitioner), which had sought to reverse the National Labor Relations Commission (NLRC)’s
June 29, 2001 Resolution,4 affirming Labor Arbiter Joel S. Lustria’s January 18, 2000 Decision.5

The assailed CA Resolution denied herein petitioner’s Motion for Reconsideration.

The Facts

The facts are narrated by the Court of Appeals as follows:

"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She applied
for employment, with the Singapore Branch of the Philippine National Bank, a private banking
corporation organized and existing under the laws of the Philippines, with principal offices at the
PNB Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was under
the helm of Ruben C. Tobias, a lawyer, as General Manager, with the rank of Vice-President of the
Bank. At the time, too, the Branch Office had two (2) types of employees: (a) expatriates or the
regular employees, hired in Manila and assigned abroad including Singapore, and (b) locally (direct)
hired. She applied for employment as Branch Credit Officer, at a total monthly package of
$SG4,500.00, effective upon assumption of duties after approval. Ruben C. Tobias found her
eminently qualified and wrote on October 26, 1998, a letter to the President of the Bank in Manila,
recommending the appointment of Florence O. Cabansag, for the position.

xxxxxxxxx

"The President of the Bank was impressed with the credentials of Florence O. Cabansag that he
approved the recommendation of Ruben C. Tobias. She then filed an ‘Application,’ with the Ministry
of Manpower of the Government of Singapore, for the issuance of an ‘Employment Pass’ as an
employee of the Singapore PNB Branch. Her application was approved for a period of two (2) years.

"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a
temporary appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month
and, upon her successful completion of her probation to be determined solely, by the Bank, she may
be extended at the discretion of the Bank, a permanent appointment and that her temporary
appointment was subject to the following terms and conditions:
 ‘1. You will be on probation for a period of three (3) consecutive months from the date of your
assumption of duty.

‘2. You will observe the Bank’s rules and regulations and those that may be adopted from
time to time.

‘3. You will keep in strictest confidence all matters related to transactions between the Bank
and its clients.

‘4. You will devote your full time during business hours in promoting the business and
interest of the Bank.

‘5. You will not, without prior written consent of the Bank, be employed in anyway for any
purpose whatsoever outside business hours by any person, firm or company.

‘6. Termination of your employment with the Bank may be made by either party after notice
of one (1) day in writing during probation, one month notice upon confirmation or the
equivalent of one (1) day’s or month’s salary in lieu of notice.’

"Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine
Embassy in Singapore processed the employment contract of Florence O. Cabansag and, on March
8, 1999, she was issued by the Philippine Overseas Employment Administration, an ‘Overseas
Employment Certificate,’ certifying that she was a bona fide contract worker for Singapore.

xxxxxxxxx

"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on March 9,
1999, her initial ‘Performance Report.’ Ruben C. Tobias was so impressed with the ‘Report’ that he
made a notation and, on said ‘Report’: ‘GOOD WORK.’ However, in the evening of April 14, 1999,
while Florence O. Cabansag was in the flat, which she and Cecilia Aquino, the Assistant Vice-
President and Deputy General Manager of the Branch and Rosanna Sarmiento, the Chief Dealer of
the said Branch, rented, she was told by the two (2) that Ruben C. Tobias has asked them to tell
Florence O. Cabansag to resign from her job. Florence O. Cabansag was perplexed at the sudden
turn of events and the runabout way Ruben C. Tobias procured her resignation from the Bank. The
next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia Aquino and
Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the
information, with the explanation that her resignation was imperative as a ‘cost-cutting measure’ of
the Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB Singapore Branch will
be sold or transformed into a remittance office and that, in either way, Florence O. Cabansag had to
resign from her employment. The more Florence O. Cabansag was perplexed. She then asked
Ruben C. Tobias that she be furnished with a ‘Formal Advice’ from the PNB Head Office in Manila.
However, Ruben C. Tobias flatly refused. Florence O. Cabansag did not submit any letter of
resignation.

"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and
demanded that she submit her letter of resignation, with the pretext that he needed a Chinese-
speaking Credit Officer to penetrate the local market, with the information that a Chinese-speaking
Credit Officer had already been hired and will be reporting for work soon. She was warned that,
unless she submitted her letter of resignation, her employment record will be blemished with the
notation ‘DISMISSED’ spread thereon. Without giving any definitive answer, Florence O. Cabansag
asked Ruben C. Tobias that she be given sufficient time to look for another job. Ruben C. Tobias
told her that she should be ‘out’ of her employment by May 15, 1999.
"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and
adamantly ordered her to submit her letter of resignation. She refused. On April 20, 1999, she
received a letter from Ruben C. Tobias terminating her employment with the Bank.

xxxxxxxxx

"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and against
the Respondents, the decretal portion of which reads as follows:

‘WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding

respondents guilty of Illegal dismissal and devoid of due process, and are hereby ordered:

1. To reinstate complainant to her former or substantially equivalent position without loss of

seniority rights, benefits and privileges;

2. Solidarily liable to pay complainant as follows:

a) To pay complainant her backwages from 16 April 1999 up to her actual

reinstatement. Her backwages as of the date of the promulgation of this decision
amounted to SGD 40,500.00 or its equivalent in Philippine Currency at the time of
payment;

b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine

Currency at the time of payment;

c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in
Philippine Currency at the time of payment;

d) Monetary equivalent of leave credits earned on Sunday banking in the amount of

SGD 1,557.67 or its equivalent in Philippine Currency at the time of payment;

e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60
or its equivalent in Philippine Currency at the time of payment.

f) Monetary equivalent of unused vacation leave benefits in the amount of SGD

319.85 or its equivalent in Philippine Currency at the time of payment.

g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine
Currency at the time of payment;

3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its
equivalent in Philippine Currency at the time of payment, and moral damages in the amount
of PhP 200,000.00, exemplary damages in the amount of PhP 100,000.00;

4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine Currency
at the time of payment, representing attorney’s fees.

SO ORDERED." 6 [Emphasis in the original.]

PNB appealed the labor arbiter’s Decision to the NLRC. In a Resolution dated June 29, 2001, the
Commission affirmed that Decision, but reduced the moral damages to ₱100,000 and the exemplary
damages to ₱50,000. In a subsequent Resolution, the NLRC denied PNB’s Motion for
Reconsideration.

Ruling of the Court of Appeals

In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in
evidence the Singaporean law supposedly governing the latter’s employment Contract with
respondent. The appellate court found that the Contract had actually been processed by the
Philippine Embassy in Singapore and approved by the Philippine Overseas Employment
Administration (POEA), which then used that Contract as a basis for issuing an Overseas
Employment Certificate in favor of respondent.

According to the CA, even though respondent secured an employment pass from the Singapore
Ministry of Employment, she did not thereby waive Philippine labor laws, or the jurisdiction of the
labor arbiter or the NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit
herself solely to the Ministry of Manpower of Singapore’s jurisdiction over disputes arising from her
employment. The appellate court further noted that a cursory reading of the Ministry’s letter will
readily show that no such waiver or submission is stated or implied.

Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of
respondent. The bank had also failed to give her sufficient notice and an opportunity to be heard and
to defend herself. The CA ruled that she was consequently entitled to reinstatement and back
wages, computed from the time of her dismissal up to the time of her reinstatement.

Hence, this Petition.7

Issues

Petitioner submits the following issues for our consideration:

"1. Whether or not the arbitration branch of the NLRC in the National Capital Region has
jurisdiction over the instant controversy;

"2. Whether or not the arbitration of the NLRC in the National Capital Region is the most
convenient venue or forum to hear and decide the instant controversy; and

"3. Whether or not the respondent was illegally dismissed, and therefore, entitled to recover
moral and exemplary damages and attorney’s fees."8

In addition, respondent assails, in her Comment,9 the propriety of Rule 45 as the procedural mode
for seeking a review of the CA Decision affirming the NLRC Resolution. Such issue deserves scant
consideration. Respondent miscomprehends the Court’s discourse in St. Martin Funeral Home v.
NLRC,10 which has indeed affirmed that the proper mode of review of NLRC decisions, resolutions or
orders is by a special civil action for certiorari under Rule 65 of the Rules of Court. The Supreme
Court and the Court of Appeals have concurrent original jurisdiction over such petitions
for certiorari. Thus, in observance of the doctrine on the hierarchy of courts, these petitions should
be initially filed with the CA.11

Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for Certiorari. In
seeking a review by this Court of the CA Decision -- on questions of jurisdiction, venue and validity
of employment termination -- petitioner is likewise correct in invoking Rule 45.12
It is true, however, that in a petition for review on certiorari, the scope of the Supreme Court’s judicial
review of decisions of the Court of Appeals is generally confined only to errors of law. It does not
extend to questions of fact. This doctrine applies with greater force in labor cases. Factual questions
are for the labor tribunals to resolve. 13 In the present case, the labor arbiter and the NLRC have
already determined the factual issues. Their findings, which are supported by substantial evidence,
were affirmed by the CA. Thus, they are entitled to great respect and are rendered conclusive upon
this Court, absent a clear showing of palpable error or arbitrary disregard of evidence.14

The Court’s Ruling

The Petition has no merit.

First Issue:

Jurisdiction

The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as
follows:

"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
wage, 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 of exceeding five thousand
pesos (₱5,000.00) regardless of whether accompanied with a claim for reinstatement.

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

x x x x x x x x x."

More specifically, Section 10 of RA 8042 reads in part:

"SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the
claims arising out of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and other
forms of damages.

x x x x x x x x x"

Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over
claims arising from employer-employee relations, including termination
disputes involving all workers, among whom are overseas Filipino workers (OFW).15

We are not unmindful of the fact that respondent was directly hired, while on a tourist status in
Singapore, by the PNB branch in that city state. Prior to employing respondent, petitioner had to
obtain an employment pass for her from the Singapore Ministry of Manpower. Securing the pass
was a regulatory requirement pursuant to the immigration regulations of that country.16

Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a
local work permit in order to be legally employed here. That permit, however, does not automatically
mean that the non-citizen is thereby bound by local laws only, as averred by petitioner. It does not at
all imply a waiver of one’s national laws on labor. Absent any clear and convincing evidence to the
contrary, such permit simply means that its holder has a legal status as a worker in the issuing
country. 1avv phil.zw+

Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment
Certificate from the POEA through the Philippine Embassy in Singapore. The Certificate, issued on
March 8, 1999, declared her a bona fide contract worker for Singapore. Under Philippine law, this
document authorized her working status in a foreign country and entitled her to all benefits and
processes under our statutes. Thus, even assuming arguendo that she was considered at the start
of her employment as a "direct hire" governed by and subject to the laws, common practices and
customs prevailing in Singapore17 she subsequently became a contract worker or an OFW who was
covered by Philippine labor laws and policies upon certification by the POEA. At the time her
employment was illegally terminated, she already possessed the POEA employment Certificate.

Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office
in Singapore.18 Significantly, respondent’s employment by the Singapore branch office had to be
approved by Benjamin P. Palma Gil,19 the president of the bank whose principal offices were in
Manila. This circumstance militates against petitioner’s contention that respondent was "locally
hired"; and totally "governed by and subject to the laws, common practices and customs" of
Singapore, not of the Philippines. Instead, with more reason does this fact reinforce the presumption
that respondent falls under the legal definition of migrant worker, in this case one deployed in
Singapore. Hence, petitioner cannot escape the application of Philippine laws or the jurisdiction of
the NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court in Royal Crown
Internationale v. NLRC:20

"x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers. For the State assures the basic rights of all
1awphi1.net

workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and
Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of
the Civil Code which states that laws ‘which have for their object public order, public policy and good
customs shall not be rendered ineffective by laws or judgments promulgated, or by determination or
conventions agreed upon in a foreign country.’"

Second Issue:

Proper Venue

Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:

"Section 1. Venue – (a) All cases which Labor Arbiters have authority to hear and decide may be
filed in the Regional Arbitration Branch having jurisdiction over the workplace of the
complainant/petitioner; Provided, however that cases of Overseas Filipino Worker (OFW) shall be
filed before the Regional Arbitration Branch where the complainant resides or where the principal
office of the respondent/employer is situated, at the option of the complainant.

"For purposes of venue, workplace shall be understood as the place or locality where the employee
is regularly assigned when the cause of action arose. It shall include the place where the employee
is supposed to report back after a temporary detail, assignment or travel. In the case of field
employees, as well as ambulant or itinerant workers, their workplace is where they are regularly
assigned, or where they are supposed to regularly receive their salaries/wages or work instructions
from, and report the results of their assignment to their employers."

Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a migrant worker "refers
to a person who is to be engaged, is engaged or has been engaged in a remunerated activity in a
state of which he or she is not a legal resident; to be used interchangeably with overseas Filipino
worker."21 Undeniably, respondent was employed by petitioner in its branch office in Singapore.
Admittedly, she is a Filipino and not a legal resident of that state. She thus falls within the category
of "migrant worker" or "overseas Filipino worker."

As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal.
The law gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2)
at the RAB where the principal office of her employer is situated. Since her dismissal by petitioner,
respondent has returned to the Philippines -- specifically to her residence at Filinvest II, Quezon City.
Thus, in filing her Complaint before the RAB office in Quezon City, she has made a valid choice of
proper venue.

Third Issue:

Illegal Dismissal

The appellate court was correct in holding that respondent was already a regular employee at the
time of her dismissal, because her three-month probationary period of employment had already
ended. This ruling is in accordance with Article 281 of the Labor Code: "An employee who is allowed
to work after a probationary period shall be considered a regular employee." Indeed, petitioner
recognized respondent as such at the time it dismissed her, by giving her one month’s salary in lieu
of a one-month notice, consistent with provision No. 6 of her employment Contract.
Notice and Hearing Not Complied With

As a regular employee, respondent was entitled to all rights, benefits and privileges provided under
our labor laws. One of her fundamental rights is that she may not be dismissed without due process
of law. The twin requirements of notice and hearing constitute the essential elements of procedural
due process, and neither of these elements can be eliminated without running afoul of the
constitutional guarantee.22

In dismissing employees, the employer must furnish them two written notices: 1) one to apprise them
of the particular acts or omissions for which their dismissal is sought; and 2) the other to inform them
of the decision to dismiss them. As to the requirement of a hearing, its essence lies simply in the
opportunity to be heard.23

The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission
for which her dismissal was being sought. Neither was she given any chance to be heard, as
required by law. At any rate, even if she were given the opportunity to be heard, she could not have
defended herself effectively, for she knew no cause to answer to.

All that petitioner tendered to respondent was a notice of her employment termination effective the
very same day, together with the equivalent of a one-month pay. This Court has already held that
nothing in the law gives an employer the option to substitute the required prior notice and opportunity
to be heard with the mere payment of 30 days’ salary.24

Well-settled is the rule that the employer shall be sanctioned for noncompliance with the
requirements of, or for failure to observe, due process that must be observed in dismissing an
employee.25

No Valid Cause for Dismissal

Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid grounds or causes for
an employee’s dismissal. The employer has the burden of proving that it was done for any of those
just or authorized causes. The failure to discharge this burden means that the dismissal was not
justified, and that the employee is entitled to reinstatement and back wages.29

Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for
terminating the employment of respondent. It merely insists that her dismissal was validly effected
pursuant to the provisions of her employment Contract, which she had voluntarily agreed to be
bound to.

Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of law between them. However, petitioner overlooks
the qualification that those terms and conditions agreed upon must not be contrary to law, morals,
customs, public policy or public order.30 As explained earlier, the employment Contract between
petitioner and respondent is governed by Philippine labor laws. Hence, the stipulations, clauses, and
terms and conditions of the Contract must not contravene our labor law provisions.

Moreover, a contract of employment is imbued with public interest. The Court has time and time
again reminded parties that they "are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply contracting with each other."31 Also, while a
contract is the law between the parties, the provisions of positive law that regulate such contracts
are deemed included and shall limit and govern the relations between the parties.32
Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal
cause for the termination of employment, the law considers the matter a case of illegal dismissal.33

Awards for Damages Justified

Finally, moral damages are recoverable when the dismissal of an employee is attended by bad faith
or constitutes an act oppressive to labor or is done in a manner contrary to morals, good customs or
public policy.34 Awards for moral and exemplary damages would be proper if the employee was
harassed and arbitrarily dismissed by the employer.35

In affirming the awards of moral and exemplary damages, we quote with approval the following
ratiocination of the labor arbiter:

"The records also show that [respondent’s] dismissal was effected by [petitioners’] capricious and
high-handed manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to morals,
good customs and public policy. Bad faith and fraud are shown in the acts committed by [petitioners]
before, during and after [respondent’s] dismissal in addition to the manner by which she was
dismissed. First, [respondent] was pressured to resign for two different and contradictory reasons,
namely, cost-cutting and the need for a Chinese[-]speaking credit officer, for which no written advice
was given despite complainant’s request. Such wavering stance or vacillating position indicates bad
faith and a dishonest purpose. Second, she was employed on account of her qualifications,
experience and readiness for the position of credit officer and pressured to resign a month after she
was commended for her good work. Third, the demand for [respondent’s] instant resignation on 19
April 1999 to give way to her replacement who was allegedly reporting soonest, is whimsical,
fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic] until 15 May
1999 within which to leave. Fourth, the pressures made on her to resign were highly oppressive,
anti-social and caused her absolute torture, as [petitioners] disregarded her situation as an overseas
worker away from home and family, with no prospect for another job. She was not even provided
with a return trip fare. Fifth, the notice of termination is an utter manifestation of bad faith and whim
as it totally disregards [respondent’s] right to security of tenure and due process. Such notice
together with the demands for [respondent’s] resignation contravenes the fundamental guarantee
and public policy of the Philippine government on security of tenure.

"[Respondent] likewise established that as a proximate result of her dismissal and prior demands for
resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock and social humiliation. Her standing in the social and
business community as well as prospects for employment with other entities have been adversely
affected by her dismissal. [Petitioners] are thus liable for moral damages under Article 2217 of the
Civil Code.

xxxxxxxxx

"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating

[respondent’s] employment and are therefore liable for exemplary damages. This should served [sic]
as protection to other employees of [petitioner] company, and by way of example or correction for
the public good so that persons similarly minded as [petitioners] would be deterred from committing
the same acts."36

The Court also affirms the award of attorney’s fees. It is settled that when an action is instituted for
the recovery of wages, or when employees are forced to litigate and consequently incur expenses to
protect their rights and interests, the grant of attorney’s fees is legally justifiable.37
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs
against petitioner.

SO ORDERED.

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

G.R. No. 117650 March 7, 1996

SULPICIO LINES, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and JAIME CAGATAN, respondents.

KAPUNAN, J.:p

Petitioner Sulpicio Lines, Inc., owner of MV Cotabato Princess, on January 15, 1992 dismissed private respondent Jaime Cagatan, a
messman of the said vessel, allegedly for being absent without leave for a "prolonged" period of six (6) months.

As a result of his dismissal, the private respondent filed a complaint for illegal dismissal before the
National Labor Relations Commission (NLRC) through its National Capital Region Arbitration Branch
in Manila, docketed as NLRC-NCR Case No. 00-06-3163-92.1

Responding to the said complaint, petitioner, on June 25, 1992, filed a Motion to Dismiss on the
ground of improper venue, stating, among other things, that the case for illegal dismissal should
have been lodged with the NLRC's Regional Branch No. VII (Cebu), as its main office was located in
Cebu City.2

In an Order dated August 21, 1992 Labor Arbiter Arthur L. Amansec of the NLRC-NCR denied
petitioner's Motion to Dismiss, holding that:

Considering that the complainant is a ship steward, traveled on board respondent's

ship along the Manila-Enstancia-lloilo-Zamboanga-Cotabato vice-versa route, Manila
Can be said to be part of the complainant's territorial workplace.3

The aforequoted Order was seasonably appealed to the NLRC by petitioner. On February 28, 1994,
respondent NLRC found petitioner's appeal unmeritorious and sustained the Labor Arbiter's August
21, 1992 ruling, explaining that "under the New NLRC Rules, the Commission or the Labor Arbiter
before whom the case is pending may order a change of venue."4 Finding no grave abuse of
discretion in the Labor Arbiter's assailed Order, respondent NLRC emphasized that:

[T]he complainant instituted the Action in Manila where he resides. Hence, we see no
grave abuse of discretion on the part of the labor arbiter in denying the respondent's
Motion to Dismiss as We find support in the basic principle that the State shall afford
protection to labor and that the NLRC is not bound by strict technical rules of
procedure.5

Undaunted, petitioner sought a reconsideration of the above Order, which the public respondent
denied in its Resolution dated July 22, 1994.6 Consequently, petitioner comes to this Court for relief,
in the form of a Special Civil Action for Certiorari under Rule 65 of the Rules of Court, contending
that public respondent NLRC acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it issued its assailed rulings.7

It is petitioner's principal contention that a ship or vessel as workplace is an extension of its

homeport or principal place of business, and that "being part of the territory of the homeport, (such)
vessel is governed to a large extent by the laws and is under the jurisdiction of the homeport.8 Based
on this submission, petitioner avers that its vessel-as-workplace is "under the territorial jurisdiction of
the Regional Arbitration branch where (its) . . . principal office is located," which is Branch VII,
located in Cebu City.9

We disagree.

As early as 1911, this Court held that the question of venue essentially relates to the trial and
touches more upon the convenience of the parties, rather than upon the substance and merits of the
case.10 Our permissive rules underlying provisions on venue are intended to assure convenience for
the plaintiff and his witnesses and to promote the ends of justice. This axiom all the more finds
applicability in cases involving labor and management because of the principle, paramount in our
jurisdiction, that the State shall afford full protection to labor.11

Even in cases where venue has been stipulated by the parties by contract, this Court has not
hesitated to set aside agreements on venue if the same would lead to a situation so grossly
inconvenient to one party as to virtually negate his claim. In Sweet Lines vs. Teves,12 involving a
contract of adhesion, we held that:

An agreement will not be held valid where it practically negates the action of the
claimants, such as the private respondents herein. The philosophy underlying the
provisions on transfer of venue of actions is the convenience of the plaintiffs as well
as his witnesses and to promote the ends of justice. Considering the expense and
trouble a passenger residing outside Cebu City would incur to prosecute a claim in
the City of Cebu, he would most probably decide not to file the action at all. The
condition will thus defeat, instead of enhance, the ends of justice. Upon the other
hand, petitioner had branches or offices in the respective ports of call of the vessels
and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI
of Misamis Oriental, as was done in the instant case will not cause inconvenience to,
much less prejudice petitioner.13

In the case at bench, it is not denied that while petitioner maintains its principal office in Cebu City, it
retains a major booking and shipping office in Manila from which it earns considerable revenue, and
from which it hires and trains a significant number of its workforce. Its virulent insistence on holding
the proceedings in the NLRC's regional arbitration branch in Cebu City is obviously a ploy to
inconvenience the private respondent, a mere steward who resides in Metro Manila, who would
obviously not be able to afford the frequent trips to Cebu City in order to follow up his case.

Even the provisions cited by petitioner in support of its contention that venue of the illegal dismissal
case lodged by private respondent is improperly laid, would not absolutely support his claim that
respondent NLRC acted with grave abuse of discretion in allowing the private respondent to file his
case with the NCR arbitration branch.

Section 1, Rule IV of the NLRC Rules of Procedure on Venue, provides that:

 Sec. 1. Venue — (a) All cases in which Labor Arbiters have authority to hear and
decide may be filed in the Regional Arbitration Branch having jurisdiction the
workplace of the complainant/petitioner.

This provision is obviously permissive, for the said section uses the word "may," allowing a different
venue when the interests of substantial justice demand a different one. In any case, as stated
earlier, the Constitutional protection accorded to labor is a paramount and compelling factor,
provided the venue chosen is not altogether oppressive to the employer.

Moreover, Section Rule IV of the 1990 NLRC Rules additionally provides that, "for purposes of
venue, workplace shall be understood as the place or locality where the employee is regularly
assigned when the cause of action arose." Since the private respondent's regular place of
assignment is the vessel MV Cotabato Princess which plies the Manila-Estancia-Iloilo-Zamboanga-
Cotabato route, we are of the opinion that Labor Arbiter Arthur L. Amansec was correct in concluding
that Manila could be considered part of the complainant's territorial workplace. Respondent NLRC,
therefore, committed no grave abuse of discretion in sustaining the labor arbiter's denial of herein
petitioner's Motion to Dismiss.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit.

SO ORDERED.

Padilla, Bellosillo, Vitug and Hermosisima, Jr., JJ., concur.

G.R. No. 124193 March 6, 1998

WILLIAM DAYAG, EDUARDO CORTON, EDGARDO CORTON, LEOPOLDO NAGMA, ALOY

FLORES, ROMEO PUNAY and EDWIN DAYAG, petitioners,
vs.
HON. POTENCIANO S. CANIZARES, JR., NATIONAL LABOR RELATIONS COMMISSION and
YOUNG'S CONSTRUCTION CORPORATION, respondents.

ROMERO, J.:

On March 11, 1993, petitioners William Dayag, Edwin Dayag, Eduardo Corton, Edgardo Corton,
Leopoldo Nagma, Aloy Flores, and Romeo Punay filed a complaint for illegal dismissal, non-
payment of wages, overtime pay, premium pay, holiday pay, service incentive leave, 13th month
pay, and actual, moral and exemplary damages against Alfredo Young, a building contractor doing
business under the firm name Young's Construction. They filed the complaint with the National
Capital Region Arbitration Branch of the NLRC which docketed the same as NLRC-NCR-Case No.
00-03-01891-93. The case was subsequently assigned to Labor Arbiter Potenciano Canizares, Jr.

Petitioners alleged that they were hired in 1990 by Young to work as tower crane operators at the
latter's construction site at Platinum 2000 in San Juan, Metro Manila. In November 1991, they were
transferred to Cebu City to work at the construction of his Shoemart Cebu project. Petitioners
worked in Cebu until February 1993, except for Punay who stayed up to September 29, 1992 only
and Nagma, until October 21, 1992.
On January 30, 1993, William Dayag asked for permission to go to Manila to attend to family
matters. He was allowed to do so but was not paid for the period January 23-30, 1993, allegedly due
to his accountability for the loss of certain construction tools. Eduardo Corton had earlier left on
January 16, 1993, purportedly due to harassment by Young. In February 1993, Edgardo Corton,
Aloy Flores and Edwin Dayag also left Cebu for Manila, allegedly for the same reason. Thereafter,
petitioners banded together and filed the complaint previously mentioned.

Instead of attending the initial hearings set by the labor arbiter, Young filed, on July 6, 1993, a
motion to transfer the case to the Regional Arbitration Branch, Region VII of the NLRC. He claimed
that the workplace where petitioners were regularly assigned was in Cebu City and that, in
consonance with Section 1(a) of Rule IV of the New Rules of Procedure of the NLRC,1 the case
should have been filed in Cebu City. Young submitted in evidence a certificate of registration of
business name showing his company's address as "Corner Sudlon-España Streets, Pari-an, Cebu
City"; its business permit issued by the Office of the Mayor of Cebu City and a certification by the
Philippine National Police-Cebu City Police Station 2 that petitioners had been booked therein for
qualified theft upon the complaint of Young's Construction.

Petitioners opposed the same, arguing that all of them, except for Punay, were, by that time,
residents of Metro Manila and that they could not afford trips to Cebu City. Besides, they claimed
that respondent had its main office at Corinthian Gardens in Quezon City. Young, in reply, declared
that the Corinthian Gardens address was not his principal place of business, but actually his
residence, which he also used as a correspondent office for his construction firm.

Agreeing that petitioners' workplace when the cause of action accrued was Cebu City, the labor
arbiter, on September 8, 1993, granted Young's motion and ordered the transmittal of the case to the
regional arbitration branch of Region VII. Petitioners promptly appealed said order to the NLRC,
which, however, dismissed the same on January 31, 1995, for lack of merit.

Citing Nestle Philippines, Inc. vs. NLRC2 and Cruzvale, Inc. vs. Laguesma3 petitioners moved for a
reconsideration of the January 31, 1995 resolution of the Commission. Acting favorably on said
motion, the Commission, on August 25, 1995, annulled and set aside its resolution of January 31,
1995, and remanded the case to the original arbitration branch of the National Capital Region for
further proceedings. This prompted Young, in turn, to file his own motion for reconsideration seeking
the reversal of the August 25, 1995 resolution of the Commission. Finding the two above-cited cases
to be inapplicable to instant case, the Commission made a volte-face and reconsidered its August
25, 1995 resolution. It reinstated the resolution of January 31, 1995, directing the transfer of the case
to Cebu City. In addition, it ruled that no further motion of a similar nature would be entertained.
Hence, the recourse to this Court by petitioners, who raise the following as errors:

1. THE LABOR ARBITER A QUO ERRED IN ISSUING THE DISPUTED ORDER

DATED SEPTEMBER 8, 1993 WHEN, OBVIOUSLY, THE SAID MOTION TO
TRANSFER VENUE WAS FILED IN VIOLATION OF SECTIONS 4 AND 5 OF RULE
15 OF THE REVISED RULES OF COURT.

2. PUBLIC RESPONDENTS ERRED IN ISSUING THE DISPUTED JUDGMENT

WHEN, OBVIOUSLY, THE RESPONDENT, BY FILING ITS POSITION PAPER,
HAS WAIVED ITS RIGHT TO QUESTION THE VENUE OF THE INSTANT CASE.

3. THE PUBLIC RESPONDENTS ERRED IN CONCLUDING THAT THE

WORKPLACE OF THE COMPLAINANTS IS AT CEBU CITY AND IN DECLARING
THAT THE PROPER VENUE IS AT CEBU CITY.
Petitioner contends that the labor arbiter acted with grave abuse of discretion when it entertained
Young's motion to transfer venue since it did not specify the time and date when it would be heard
by the labor arbiter. They raise the suppletory application of the Rules of Court, specifically Sections
4 and 5 of Rule 15,4 in relation to Section 3 of Rule I of the New Rules of Procedure of the NLRC, in
support of their contention.

We find no merit in petitioners' argument. In a long line of decisions,5 this Court has consistently
ruled that the application of technical rules of procedure in labor cases may be relaxed to serve the
demands of substantial justice. As provided by Article 221 of the Labor Code "rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this
Code that the Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process." Furthermore, while it is true that
any motion that does not comply with the requirements of Rule 15 should not be accepted for filing
and, if filed, is not entitled to judicial cognizance, this Court has likewise held that where a rigid
application of the rule will result in a manifest failure or miscarriage of justice, technicalities may be
disregarded in order to resolve the case. Litigations should, as much as possible, be decided on the
merits and not on technicalities.6 Lastly, petitioners were able to file an opposition to the motion to
transfer venue which, undisputedly, was considered by the labor arbiter when he issued the disputed
order of September 8, 1993. There is, hence, no showing that petitioners have been unduly
prejudiced by the motion's failure to give notice of hearing.

Given the foregoing, it seems improper to nullify Young's motion on a mere technicality. Petitioners'
averments should be given scant consideration to give way to the more substantial matter of
equitably determining the rights and obligations of the parties. It need not be emphasized that rules
of procedure must be interpreted in a manner that will help secure and not defeat justice.7

Likewise, petitioners harp on Young's so-called "waiver" of his right to contest the venue of the
instant case. They argue that Young is estopped from questioning the venue herein as his motion to
transfer venue was actually a position paper, a close scrutiny of the same purportedly showing that
he admitted and denied certain allegations found in petitioners' complaint.

Petitioners' contention rings hollow. Even if the questioned motion was at the same time a position
paper, Section 1(c) of Rule IV provides: "(w)hen improper venue is not objected to before or at the
time of the filing of position papers, such question shall be deemed waived" (Emphasis supplied).
Consequently, there is no waiver of improper venue if a party questions venue simultaneously with
the filing of a position paper. Moreover, nowhere in the New Rules of Procedure of the NLRC is
there a requirement that a party must object solely to venue, on penalty of waiving the same. In fact,
Section 1(d) provides that:

The venue of an action may be changed or transferred to a different Regional

Arbitration Branch other than where the complaint was filed by written agreement of
the parties or when the Commission or Labor Arbiter before whom the case is
pending so orders, upon motion by the proper party in meritorious cases (Emphasis
supplied).

Young's acts are in consonance with this provision, for he seasonably made representations to
transfer the venue of the action in the proper motion.

Finally, while it is true that objections to venue are deemed waived if the respondent, through
conduct, manifests satisfaction with the venue until after the trial, or abides by it until the matter has
proceeded to a hearing,8 no waiver of the defense of venue on the ground of estoppel by conduct
can be attributed to Young, who consistently and persistently contested the same even before trial.

Similarly, petitioners' reliance on Nestle9 and Cruzvale 10 is likewise misplaced. While Nestle ruled
that Rule IV of the New Rules of Procedure of the NLRC does not constitute a complete rule on
venue in cases cognizable by labor arbiters, Section 2, Rule 4 of the Rules of Court 11 having
suppletory effect, it also held that the foregoing provision of the Rules of Court applies only where
the petitioners are labor unions or where a single act of an employer gives rise to a cause of action
common to many of its employees working in different branches or workplaces of the former. It is not
denied that petitioners herein are not represented by a union; nor were they assigned to different
workplaces by Young. Likewise, Cruzvale is inapplicable to the case at bar, the issue involved
therein being the propriety of the DOLE Region IV Office's taking cognizance of a petition for
certification election when the company's place of business was in Cubao, Quezon City, while the
workplace of the petitioning union was elsewhere. The instant case does not involve any certification
election; nor are the workplace of the employees and place of business of the employer different.

Young cannot, however, derive comfort from the foregoing, this petition having been overtaken by
events. In the recent case of Sulpicio Lines, Inc. vs. NLRC 12 this Court held that the question of
venue essentially pertains to the trial and relates more to the convenience of the parties rather than
upon the substance and merits of the case. It underscored the fact that the permissive rules
underlying provisions on venue are intended to assure convenience for the plaintiff and his
witnesses and to promote the ends of justice. With more reason does the principle find applicability
in cases involving labor and management because of the doctrine well-entrenched in our jurisdiction
that the State shall afford full protection to labor. The Court held that Section 1(a), Rule IV of the
NLRC Rules of Procedure on Venue was merely permissive. In its words:

This provision is obviously permissive, for the said section uses the word "may,"
allowing a different venue when the interests of substantial justice demand a different
one. In any case, as stated earlier, the Constitutional protection accorded to labor is
a paramount and compelling factor, provided the venue chosen is not altogether
oppressive to the employer.

The rationale for the rule is obvious. The worker, being the economically-disadvantaged party—
whether as complainant/petitioner or as respondent, as the case may be, the nearest governmental
machinery to settle the dispute must be placed at his immediate disposal, and the other party is not
to be given the choice of another competent agency sitting in another place as this will unduly
burden the former. 13 In fact, even in cases where venue has been stipulated by the parties, this
Court has not hesitated to set aside the same if it would lead to a situation so grossly inconvenient to
one party as to virtually negate his claim. Again, in Sulpicio Lines, this Court, citing Sweet
Lines vs. Teves, 14 held that:

An agreement will not be held valid where it practically negates the action of the
claimant, such as the private respondents herein. The philosophy underlying the
provisions on transfer of venue of actions is the convenience of the plaintiffs as well
as his witnesses and to promote the ends of justice. Considering the expense and
trouble a passenger residing outside Cebu City would incur to prosecute a claim in
the City of Cebu, he would probably decide not to file the action at all. The condition
will thus defeat, instead of enhance, the ends of justice. Upon the other hand,
petitioner had branches or offices in the respective ports of call of the vessels and
could afford to litigate in any of these places. Hence, the filing of the suit in the CFI of
Misamis Oriental, as was done in the instant case will not cause inconvenience to,
much less prejudice petitioner.
In the case at hand, the ruling specifying the National Capital Region Arbitration Branch as the
venue of the present action cannot be considered oppressive to Young. His residence in Corinthian
Gardens also serves as his correspondent office. Certainly, the filing of the suit in the National
Capital Region Arbitration Branch in Manila will not cause him as much inconvenience as it would
the petitioners, who are now residents of Metro Manila, if the same was heard in Cebu. Hearing the
case in Manila would clearly expedite proceedings and bring about the speedy resolution of instant
case.

WHEREFORE, premises considered, the resolution of February 12, 1996, of public respondent
NLRC, transferring the instant case to the Seventh Regional Arbitration Branch, Cebu City, is SET
ASIDE. Instead, its resolution dated August 25, 1995, remanding the case to the Arbitration Branch
of Origin, is hereby REINSTATED and AFFIRMED.

SO ORDERED.

Narvasa, C.J., Kapunan and Purisima, JJ., concur.

G.R. No. 124100 April 1, 1998

PHILTRANCO SERVICE ENTERPRISES, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MR. ROBERTO NIEVA, respondents.

ROMERO, J.:

Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of the resolution of the
National Labor Relations Commission dated November 29, 1995, ordering petitioner to pay private
respondent Roberto Nieva back wages and separation pay.

The facts of the case are as follows:

Roberto Nieva who was employed as a driver by petitioner Philtranco Services Enterprises, Inc.
(hereafter Philtranco) on April 13, 1977, was assigned to the Legaspi City-Pasay City route. On May
15, 1989, Nieva sideswiped an owner-type jeep, damaging the latter's park light. Unfortunately, the
vehicle's owner turned out to be a PC colonel who arrested Nieva and brought him to Camp Crame
where the corresponding criminal complaint was filed against him.

Nieva obtained his release from detention by virtue of a bail bond secured by Philtranco. He was
suspended by the latter for thirty days effective June 8, 1989. Nieva reported back to work after
serving his suspension. A few days after resuming his driving duties, however, he was re-arrested
on the ground that his bailbond was fake. Nieva reported the incident to the management of
Philtranco. On October 15, 1989, Nieva was advised by Philtranco's administrative officer, Epifanio
Llado, that to avoid re-arrest, he would have to refrain from driving until a settlement could be
reached with the jeep owner. From then on, Nieva would report for work only to be told to wait until
his case was settled. The case was finally settled on July 20, 1991, with Philtranco paying for the
damages to the jeep. Three days thereafter, Nieva reported for work, but he was requested to file a
new application as he was no longer considered an employee of Philtranco, allegedly for being
absent without leave from October 19 to November 20, 1989.
Aggrieved by this turn of events, Nieva filed a complaint for illegal dismissal and 13th month pay with
the NLRC's National Capital Region Arbitration Branch in Manila, which docketed the same as
NLRC NCR Case No. 03-01891-92. The case was subsequently assigned to Labor Arbiter Cornelio
L. Linsangan.

Philtranco did not appear at the first four conferences scheduled by the arbiter, prompting the latter
to warn Philtranco that it would be declared in default if it failed to appear at the next hearing.
Threatened with such an eventuality, Philtranco's representative finally appeared. On August 28,
1992, it filed a position paper with motion to dismiss, stating, among other things, that the complaint
should have been lodged with the NLRC's Regional Arbitration Branch in Legaspi City, not only
because Nieva was a resident thereof, but also because the latter was hired, assigned, and based in
Legaspi City.1

The motion to dismiss was denied by the labor arbiter in an order dated January 26, 1993. Nieva
then presented his evidence. On August 30, 1993, Philtranco filed a second motion to dismiss, which
was likewise denied by the arbiter on the ground that the same did not raise any new arguments.
Thereafter, Philtranco presented its evidence to prove that Nieva had abandoned his work, having
been absent without leave from October 19 to November 20, 1989.

After considering the evidence of the parties, the labor arbiter gave more credence to Nieva's
version of facts, finding that the latter's absences were incurred with Philtranco's permission, since
he was instructed not to drive until his case was settled. The arbiter dismissed Philtranco's allegation
that Nieva had abandoned his work, stating that:

Persistence in pursuing his claim before the Labor Arbiter negates allegation of
abandonment (Antonio Evangelista vs. NLRC and Arturo Mendoza 195 SCRA 603). In the
instant case, even before complainant filed his present complaint he had already shown his
determination (and) persistence to return to his work as he untiringly kept on reporting for
duty. In fact, as ordered by his supervisor in Legaspi City, he even went to respondent's
main office in Pasay City to talk to the operations manager regarding his return to work.
There could be no better manifestation of one's interest to his work than what complainant
had done. Definitely, therefore, complainant did not abandon his job.2

Thus, on June 14, 1994, the labor arbiter rendered a decision awarding back wages and separation
pay to Nieva. Said decision was seasonably appealed to the NLRC by Philtranco. In a resolution
issued on September 15, 1995, the NLRC affirmed the decision of the labor arbiter, granting back
wages and separation benefits as follows:

PREMISES CONSIDERED, WHEREFORE, respondent is directed to pay individual

complainant Roberto Nieva both his backwages in the amount of P67,392.00 PESOS and
separation benefits in the amount of P33,696.00 PESOS.

SO ORDERED.3

Philtranco's motion for reconsideration of said resolution having been likewise denied by the NLRC
in its resolution of November 29, 1995, Philtranco elevated its case to this Court, raising the
following issues:

1. The NLRC committed grave abuse of discretion amounting to lack of jurisdiction when it
denied the motion of Philtranco to dismiss complaint based on improper venue;
 2. The Commission gravely abused its discretion amounting to lack or in excess of
jurisdiction in ruling that Philtranco should be imposed backwages and separation pay;

3. Respondent Commission acted with grave abuse of discretion amounting to lack of

jurisdiction as to its findings of facts and when it confirmed the labor arbiter's decision that
there was no abandonment of work by the private respondent and that the latter showed his
persistence to return to work.

The petition lacks merit.

As regards the first issue, this Court has previously declared that the question of venue essentially
pertains to the trial and relates more to the convenience of the parties rather than upon the
substance and merits of the
case.4 Provisions on venue are intended to assure convenience for the plaintiff and his witnesses
and to promote the ends of justice. In fact, Section 1(a), Rule IV of the New Rules of Procedure of
the NLRC, cited by Philtranco in support of its contention that venue of the illegal dismissal case filed
by Nieva is improperly laid, speaks of the complainant/petitioner's workplace, evidently showing that
the rule is intended for the exclusive benefit of the worker. This being the case, the worker may
waive said benefit.5

Furthermore, the aforesaid Section has been declared by this Court to be merely permissive.
In Dayag vs. NLRC,6 this Court held that:

This provision is obviously permissive, for the said section uses the word "may," allowing a
different venue when the interests of substantial justice demand a different one. In any case,
as stated earlier, the Constitutional protection accorded to labor is a paramount and
compelling factor, provided the venue chosen is not altogether oppressive to the employer.

Moreover, Nieva, as a driver of Philtranco, was assigned to the Legaspi City — Pasay City
route. Sulpicio Lines, Inc. vs. NLRC7 is exactly in point. In said case, we held that:

Section 1, Rule IV of the 1990 NLRC Rules additionally provides that, "for purposes of
venue, workplace shall be understood as the place or locality where the employee is
regularly assigned when the cause of action arose." Since the private respondent's regular
place of assignment is the vessel MV Cotabato Princess which plies the Manila-Estancia-
Iloilo-Zamboanga-Cotabato route, we are of the opinion that Labor Arbiter Arthur L. Amansec
was correct in concluding that Manila could be considered part of the complainant's territorial
workplace.

From the foregoing, it is obvious that the filing of the complaint with the National Capital Region
Arbitration Branch was proper, Manila being considered as part of Nieva's workplace by reason of
his plying the Legaspi City — Pasay City route.

As regards the second and third issues, Philtranco contends that the NLRC committed grave abuse
of discretion when it affirmed the labor arbiter's finding of non-abandonment by Nieva of his work. It
harps on the alleged paucity of Nieva's evidence, while citing the numerous exhibits marshaled on its
behalf. Philtranco cites, as proof of Nieva's abandonment of his work, two irregularity reports to the
effect that Nieva was absent without leave from October 19-31 and November 1-20, 1989; a letter
from Philtranco's assistant manager to Nieva requiring the latter to report within five days from
receipt thereof, on pain of being dropped from the roll; and a termination letter from Philtranco's
company lawyer to Nieva, for his failure to report for work as directed.
Suffice it to say that these issues raised by Philtranco relate to the veracity of the findings of fact of
the NLRC and the labor arbiter. It should be noted that a petition for certiorari under Rule 65 of the
Rules of Court will prosper only if there is a showing of grave abuse of discretion or an act without or
in excess of jurisdiction on the part of the National Labor Relations Commission. It does not include
an inquiry as to the correctness of the evaluation of evidence which was the basis of the labor official
or officer in determining his conclusion. It is not for this Court to re-examine conflicting evidence, re-
evaluate the credibility of witnesses, nor substitute the findings of fact of an administrative tribunal
which has gained expertise in its special field.8

Parenthetically, the labor arbiter, in finding that Nieva did not abandon his job, held that:

Complainant categorically stated in his position paper and Sinumpaang Salaysay that on 15
October 1989 he was instructed by Epifanio Llado, respondent company's administrative
officer, not to drive his vehicle until the case filed by the PC Colonel arising from the
vehicular accident is settled. This assertion repeatedly made by complainant was never
refuted by respondent. Such being the case, the respondent cannot conveniently contend
that the absence of complainant was without permission.9

Considering that the findings of fact of the Labor Arbiter and the NLRC are supported by evidence
on record, the same must be accorded due respect and finality.10

Likewise, the labor arbiter considered Nieva's absence from work as not equivalent to abandonment.
We agree. Time and again, we have held that the immediate filing of a complaint for illegal dismissal
by an employee, as in this case, is inconsistent with abandonment.11

From the foregoing, we hold that the NLRC did not commit abuse of discretion, much less grave
abuse, when it denied Philtranco's motion to dismiss Nieva's complaint on the ground of improper
venue and affirmed the labor arbiter's award of back wages and separation pay to the latter.

WHEREFORE, finding no grave abuse of discretion committed by public respondent NLRC, the
assailed Resolution of November 29, 1995 is AFFIRMED and this petition is hereby DISMISSED for
lack of merit. Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Kapunan and Purisima, JJ., concur.

G.R. No. L-56431 January 19, 1988

NATIONAL UNION OF BANK EMPLOYEES, In Its Own Right And In Behalf Of CBTC
EMPLOYEES Affiliated With It; CBTC EMPLOYEES UNION, In Its Own Right And Interest And
In Behalf Of All CBTC Rank And File Employees Including Its Members, BENJAMIN GABAT,
BIENVENIDO MORALEDA, ELICITA GAMBOA, FAUSTINO TEVES, SALVADOR LISING, and
NESTOR DE LOS SANTOS, petitioners,
vs.
THE HON. JUDGE ALFREDO M. LAZARO, CFI-MANILA BRANCH XXXV; COMMERCLKL BANK
AND TRUST COMPANY OF THE PHILIPPINES; BANK OF THE PHILIPPINE ISLANDS; AYALA
CORPORATION; MANUEL J. MARQUEZ; ENRIQUE ZOBEL; ALBERTO VILLA-ABRILLE;
VICENTE A. PACIS, JR.; and DEOGRACIAS A. FERNANDO, respondents.
SARMIENTO, J.:

The sole issue in this special civil action for certiorari is whether or not the courts may take cognizance of claims for damages arising from a
labor controversy.

The antecedent facts are not disputed.

On July 1, 1977, the Commercial Bank and Trust Company, a Philippine banking institution, entered
into a collective bargaining agreement with the Commercial Bank and Trust Company Union,
representing the rank and file of the bank with a membership of over one thousand employees, and
an affiliated local of the National Union of Bank Employees, a national labor organization.

The agreement was effective until June 30, 1980, with an automatic renewal clause until the parties
execute a new agreement.

On May 20, 1980, the union, together with the National Union of Bank Employees, submitted to the
bank management proposals for the renegotiation of a new collective bargaining agreement. The
following day, however, the bank suspended negotiations with the union. The bank had meanwhile
entered into a merger with the Bank of the Philippine Islands, another Philippine banking institution,
which assumed all assets and liabilities thereof.

As a consequence, the union went to the then Court of First Instance of Manila, presided over by the
respondent Judge, on a complaint for specific performance, damages, and preliminary injunction
against the private respondents. Among other things, the complaint charged:

xxx xxx xxx

51. In entering in to such arrangement for the termination of the CURRENT CBA,
and the consequent destruction to existing rights, interests and benefits
thereunder,CBTC is liable for wilful injury to the contract and property rights
thereunder as provided in Article 2220 of the Civil Code of the Philippines;

52. By arranging for the termination of the CURRENT CBA in the manner above
described, CBTC committed breach of said contract in bad faith, in that CBTC had
taken undue advantage of its own employees, by concealing and hiding the
negotiations towards an agreement on the sales and merger, when it was under a
statutory duty to disclose and bargain on the effects thereof, according to law;

xxx xxx xxx

54. In virtually suppressing the collective bargaining rights of plaintiffs under the law
and as provided in the CURRENT CBA, through shadow bargaining, calculated
delay, suspension of negotiations, concealment of bargainable issues and high-
handed dictation, the CBTC and its defendant officials, as well as the BANK OF P.I.
and its defendant officials, were all actuated by a dishonest purpose to secure an
undue advantage; on the part of the CBTC it was to avoid fresh and additional
contractual commitments, which would substantially lessen and diminish the
profitability of the sale; and on the part of the BANKOF P.I., it was to avoid having to
face higher compensation rates of CBTC employees in the course of integration and
merger which could force the upgrading of the benefit package for the personnel of
the merged operations, and thereby pushed personnel costs upwards; substantial
 outlays and costs thereby entailed were all deftly avoided and evaded, through the
expedient of deliberate curtailment and suppression of contractual bargaining rights;

55. All the other defendants have actively cooperated with and abetted the CBTC
and its defendant officers in negotiating, contriving and effecting the above
arrangements for the attainment of its dishonest purpose, for abuse of its rights, and
for taking undue advantage of its very own employees, through the secret sale and
scheduled merger; the collective participation therein evinces machination, deceit,
wanton attitude, bad faith, and oppressive intent, wilfully causing loss or injury to
plaintiffs in a manner that is contrary to law, morals, good customs and public policy,
in violation of Articles 21 and 28 of the Civil Code; 1

xxx xxx xxx

Predictably, the private respondents moved for the dismissal of the case on the ground, essentially,
of lack of jurisdiction of the court.

On November 26, 1980, the respondent Judge issued an order, dismissing the case for lack of
jurisdiction. According to the court, the complaint partook of an unfair labor practice dispute
notwithstanding the incidental claim for damages, jurisdiction over which is vested in the labor
arbiter. This order, as well as a subsequent one denying reconsideration, is now alleged as having
been issued 'in excess of his jurisdiction amounting to a grave abuse of discretion."

We sustain the dismissal of the case, which is, as correctly held by the respondent court, an unfair
labor practice controversy within the original and exclusive jurisdiction of the labor arbiters and the
exclusive appellate jurisdiction of the National Labor Relations Commission. The claim against the
Bank of Philippine Islands — the principal respondent according to the petitioners — for allegedly
inducing the Commercial Bank and Trust Company to violate the existing collective bargaining
agreement in the process of re-negotiation, consists mainly of the civil aspect of the unfair labor
practice charge referred to under Article 247 2 of the Labor Code.

Under Article 248 3 of the Labor Code, it shall be an unfair labor practice:

(a) To interfere with, restrain or coerce employees in the exercise of their right to self-
organization;

xxx xxx xxx

(g) To violate the duty to bargain collectively as prescribed by this Code;

xxx xxx xxx

The act complained of is broad enough to embrace either provision. Since it involves collective
bargaining — whether or not it involved an accompanying violation of the Civil Code — it may rightly
be categorized as an unfair labor practice. The civil implications thereof do not defeat its nature as a
fundamental labor offense.

As we stated, the damages (allegedly) suffered by the petitioners only form part of the civil
component of the injury arising from the unfair labor practice. Under Article 247 of the Code, "the
civil aspects of all cases involving unfair labor practices, which may include claims for damages and
other affirmative relief, shall be under the jurisdiction of the labor arbiters. 4
The petitioners' claimed injury as a consequence of the tort allegedly committed by the private
respondents, specifically, the Bank of the Philippine Islands, under Article 1314 of the Civil
Code, 5 does not necessarily give the courts jurisdiction to try the damage suit. Jurisdiction is
conferred by law 6 and not necessarily by the nature of the action. Civil controversies are not the
exclusive domain of the courts. In the case at bar, Presidential Decree No. 442, as amended by
Batas Blg. 70, has vested such a jurisdiction upon the labor arbiters, a jurisdiction the courts may not
assume.

Jurisdiction over unfair labor practice cases, moreover, belongs generally to the labor department of
the government, never the courts. In Associated Labor Union v. Gomez, 7 we said:

A rule buttressed upon statute and reason that is frequently reiterated in

jurisprudence is that labor cases involving unfair practice are within the exclusive
jurisdiction of the CIR. By now, this rule has ripened into dogma. It thus commands
adherence, not breach.

The fact that the Bank of the Philippine Islands is not a party to the collective bargaining agreement,
for which it "cannot be sued for unfair labor practice at the time of the action," 8 cannot bestow on the
respondent court the jurisdiction it does not have. In Cebu Portland Cement Co. v. Cement Workers'
Union, 9 we held:

xxx xxx xxx

There is no merit in the allegation. In the first place, it must be remembered that
jurisdiction is conferred by law; it is not determined by the existence of an action in
another tribunal. In other words, it is not filing of an unfair labor case in the Industrial
Court that divests the court of first instance jurisdiction over actions properly
belonging to the former. It is the existence of a controversy that properly falls within
the exclusive jurisdiction of the Industrial Court and to which the civil action is linked
or connected that removes said civil case from the competence of the regular courts.
It is for this reason that civil actions found to be intertwined with or arising out of, a
dispute exclusively cognizable by the Court of Industrial Relations were dismissed,
even if the cases were commenced ahead of the unfair labor practice proceeding,
and jurisdiction to restrain picketing was decreed to belong to the Court of Industrial
Relations although no unfair labor practice case has as yet been instituted. For the
court of first instance to lose authority to pass upon a case, therefore, it is enough
that unfair labor practice case is in fact involved in or attached to the action, such fact
of course being established by sufficient proof. 10

xxx xxx xxx

Furthermore, to hold that the alleged tortious act now attributed to the Bank of the Philippine Islands
may be the subject of a separate suit is to sanction split jurisdiction long recognized to be an offense
against the orderly administration of justice. As stated in Nolganza v. Apostol: 11

xxx xxx xxx

As far back as Associated Labor Union vs. Gomez [L-25999, February 9, 1967, 19
SCRA 304] 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." Then, in Progressive Labor Association vs. Atlas
 Consolidated Mining and Development Corporation [L-27585, May 29, 1970, 33
SCRA 349] 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'. Thereafter, this Court, in the cases of Leoquinco vs.
Canada Dry Bottling Co. [L-28621, February 22, 1971, 37 SCRA 535] and
Associated Labor Union v. Cruz ([L-28978, September 22, 1971, 41 SCRA 12], 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 [L-30211, October 5, 1976, 73 SCRA 297].

xxx xxx xxx

The petitioners' reliance upon Calderon v. Court of Appeals 12 is not well-taken. Calderon has since
lost its persuasive force, beginning with our ruling in PEPSI-COLA BOTTLING COMPANY v.
MARTINEZ, 13 EBON v. DE GUZMAN, 14 and AGUSAN DEL NORTE ELECTRIC COOP., INC. v.
SUAREZ, 15 and following the promulgation of Presidential Decree No. 1691, restoring the jurisdiction
to decide money claims unto the labor arbiters.

Neither does the fact that the Bank of the Philippine Islands "was not an employer at the time the act
was committed' abate a recourse to the labor arbiter. It should be noted indeed that the Bank of the
Philippine Islands assumed "all the assets and liabilities" 16 of the Commercial Bank and Trust
Company. Moreover, under the Corporation Code:

xxx xxx xxx

5. The surviving or consolidated corporation shall be responsible and liable for all the
liabilities and obligations of each of the constituent corporations in the same manner
as if such surviving or consolidated corporation had itself incurred such liabilities or
obligations; and any claim, action or proceeding pending by or against any of such
constituent corporations may be prosecuted by or against the surviving or
consolidated corporation, as the case may be. Neither the rights of creditors nor any
lien upon the property of any of such constituent corporations shall be impaired by
such merger or consolidation. 17

xxx xxx xxx

In sum, the public respondent has not acted with grave abuse of discretion.

WHEREFORE, the petition is DISMISSED. No costs.

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

Padilla, J., took no part.

G.R. No. 108001 March 15, 1996

SAN MIGUEL CORPORATION, ANGEL G. ROA and MELINDA MACARAIG, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division), LABOR ARBITER
EDUARDO J. CARPIO, ILAW AT BUKLOD NG MANGGAGAWA (IBM), ET AL., respondents.

HERMOSISIMA, JR., J.:p

In the herein petition for certiorari under Rule 65, petitioners question the jurisdiction of the Labor Arbiter to hear a complaint for unfair labor
practice, illegal dismissal, and damages, notwithstanding the provision for grievance and arbitration in the Collective Bargaining Agreement.

Let us unfurl the facts.

Private respondents, employed by petitioner San Miguel Corporation (SMC) as mechanics,

machinists, and carpenters, were and still are, bona fide officers and members of private respondent
Ilaw at Buklod ng Manggagawa.

On or about July 31, 1990, private respondents were served a Memorandum from petitioner Angel
G. Roa, Vice-President and Manager of SMC's Business Logistics Division (BLD), to the effect that
they had to be separated from the service effective October 31, 1990 on the ground of "redundancy
or excess personnel." Respondent union, in behalf of private respondents, opposed the intended
dismissal and asked for a dialogue with management.

Accordingly, a series of dialogues were held between petitioners and private respondents. Even
before the conclusion of said dialogues, the aforesaid petitioner Angel Roa issued another
Memorandum on October 1, 1990 informing private respondents that they would be dismissed from
work effective as of the close of business hours on November 2, 1990. Private respondents were in
fact purged on the date aforesaid.

Thus, on February 25, 1991, private respondents filed a complaint against petitioners for Illegal
Dismissal and Unfair Labor Practices, with a prayer for damages and attorney's fees, with the
Arbitration Branch of respondent National Labor Relations Commission. The complaint1 was
assigned to Labor Arbiter Eduardo F. Carpio for hearing and proper disposition.

On April 15, 1991, petitioners filed a motion to dismiss the complaint, alleging that respondent Labor
Arbiter had no jurisdiction over the subject matter of the complaint, and that respondent Labor
Arbiter must defer consideration of the unfair labor practice complaint until after the parties have
gone through the grievance procedure provided for in the existing Collective Bargaining Agreement
(CBA). Respondent Labor Arbiter denied this motion in a Resolution, dated September 23, 1991.

The petitioners appealed the denial to respondent Commission on November 8, 1991. Unimpressed
by the grounds therefor, respondent Commission dismissed the appeal in its assailed Resolution,
dated August 11, 1992. Petitioners promptly filed a Motion for Reconsideration which, however, was
denied through the likewise assailed Resolution, dated October 29, 1992.

Hence, the instant petition for certiorari alleging the following grounds was filed by the petitioners:

RESPONDENT LABOR ARBITER CANNOT EXERCISE JURISDICTION OVER

THE ALLEGED ILLEGAL TERMINATION AND ALLEGED ULP CASES WITHOUT
PRIOR RESORT TO GRIEVANCE AND ARBITRATION PROVIDED UNDER THE
CBA.
 II

THE STRONG STATE POLICY ON 'THE PROMOTION OF VOLUNTARY MODES

OF SETTLEMENT OF LABOR DISPUTES CRAFTED IN THE CONSTITUTION AND
THE LABOR CODE DICTATES THE SUBMISSION OF THE CBA DISPUTE TO
GRIEVANCE AND ARBITRATION.2

Petitioners posit the basic principle that a collective bargaining agreement is a contract between
management and labor that must bind and be enforced in the first instance as between the parties
thereto. In this case, the CBA between the petitioners and respondent union provides, under Section
1, Article V entitled ARBITRATION, that "wages, hours of work, conditions of employment and/or
employer-employee relations shall be settled by arbitration." Petitioners' thesis is that the dispute as
to the termination of the union members and the unfair labor practice should first be settled by
arbitration, and not directly by the labor arbiter, following the above provision of the CBA, which
ought to be treated as the law between the parties thereto.

The argument is unmeritorious. The law in point is Article 217 (a) of the Labor Code. It is elementary
that this law is deemed written into the CBA. In fact, the law speaks in plain and unambiguous terms
that termination disputes, together with unfair labor practices, are matters falling under the original
and exclusive jurisdiction of the Labor Arbiter, to wit:

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 . . . the following
cases involving all workers, whether agricultural or non-agricultural:

(1) Unfair labor practice cases;

(2) Termination disputes;

xxx xxx xxx

The sole exception to the above rule can be found under Article 262 of the same Code, which
provides:

Art. 262. Jurisdiction over other labor disputes — The voluntary arbitrator or panel of
voluntary arbitrators, upon agreement of the parties, shall also hear and decide all
other labor disputes including unfair labor practices and bargaining dead locks. (As
added by RA 6715).

We subjected the records of this case, particularly the CA to meticulous scrutiny and we find
no agreement between SMC and the respondent union that would state in unequivocal
language that petitioners and the respondent union conform to the submission of termination
disputes and unfair labor practices to voluntary arbitration. Section 1, Article V of the CBA,
cited by the herein petitioners, certainly does not provide so. Hence, consistent with the
general rule under Article 217 (a) of the Labor Code, the Labor Arbiter properly has
jurisdiction over the complaint filed by the respondent union on February 25, 1991 for illegal
dismissal and unfair labor practice.

Petitioners point however to Section 2, Article III of the CBA, under the heading Job Security,
to show that the dispute is a proper subject of the grievance procedure, viz:
 . . . The UNION, however, shall have the right to seek reconsideration of any
discharge, lay-off or disciplinary action, and such requests for reconsideration shall
be considered a dispute or grievance to be dealt with in accordance with the
procedure outlined in Article IV hereof [on Grievance Machinery] . . . 3 (Emphasis
ours)

Petitioners allege that respondent union requested management for a "reconsideration and
review" of the company's decision to terminate the employment of the union members. By
this act, petitioners argue, respondent union recognized that the questioned dismissal is a
grievable dispute by virtue of Section 2, Article III of the CBA. This allegation was strongly
denied by the respondent union. In a Memorandum filed for the public respondent NLRC, the
Solicitor General supported the position of the respondent union that it did not seek
reconsideration from the SMC management in regard to the dismissal of the employees.

Petitioners fail miserably to prove that, indeed, the respondent union requested for a reconsideration
or review of the management decision to dismiss the private respondents. A punctilious examination
of the records indubitably reveals that at no time did the respondent union exercise its right to seek
reconsideration of the company's move to terminate the employment of the union members, which
request for reconsideration would have triggered the application of Section 2, Article III of the CBA,
thus resulting in the treatment of the dispute as a grievance to be dealt with in accordance with the
Grievance Machinery laid down in Article IV of the CBA. Stated differently, the filing of a request for
reconsideration by the respondent union, which is the condition sine qua non to categorize the
termination dispute and the ULP complaint as a grievable dispute, was decidedly absent in the case
at bench. Hence, the respondent union acted well within their rights in filing their complaint for illegal
dismissal and ULP directly with the Labor Arbiter under Article 217 (a) of the Labor Code.

Second. Petitioners insist that involved in the controversy is the interpretation and implementation of
the CBA which is grievable and arbitrable by law under Article 217 (c) of the Labor Code, viz:

Art. 217 (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. (As amended by RA 6715).

Petitioners theorize that since respondents questioned the discharges, the main question for
resolution is whether SMC had the management right or prerogative to effect the discharges on the
ground of redundancy, and this necessarily calls for the interpretation or implementation of Article III
(Job Security) in relation to Article IV (Grievance Machinery) of the CBA.4

Petitioner's theory does not hold water. There is no connection whatsoever between SMC's
management prerogative to effect the discharges and the interpretation or implementation of Articles
III and IV of the CBA. The only relevant provision under Article III that may need interpretation or
implementation is Section 2 which was cited herein. However, as patiently pointed out by this court,
said provision does not come into play considering that the union never exercised its right to seek
reconsideration of the discharges effected by the company. It would have been different had the
union sought reconsideration. Such recourse under Section 2 would have been treated as a
grievance under Article IV (Grievance Machinery) of the CBA, thus calling for the possible
interpretation or implementation of the entire provision on Grievance Machinery as agreed upon by
the parties. This was not the case however. The union brought the termination dispute directly to the
Labor Arbiter rendering Articles III and IV of the CBA inapplicable for the resolution of this case.
The discharges, petitioners also contend, call for the interpretation or enforcement of company
personnel policies, particularly SMC's personnel policies on lay-offs arising from redundancy, and
so, they may be considered grievable and arbitrable by virtue of Article 217 (c). Not necessarily so.
Company personnel policies are guiding principles stated in broad, long-range terms that express
the philosophy or beliefs of an organization's top authority regarding personnel matters. They deal
with matters affecting efficiency and well being of employees and include, among others, the
procedure in the administration of wages, benefits, promotions, transfer and other personnel
movements which are usually not spelled out in the collective agreement. The usual source of
grievances, however, is the rules and regulations governing disciplinary actions.5 Judging therefrom,
the questioned discharges due to alleged redundancy can hardly be considered company personnel
policies and therefore need not directly be subject to the grievance machinery nor to voluntary
arbitration.

Third. Petitioners would like to persuade us that respondents' ULP claims are merely conclusory and
cannot serve to vest jurisdiction to the Labor Arbiters. Petitioners argue with passion: "How was the
employee discharges' (sic) right to self-organization restrained by their termination? Respondent did
not show. There is no allegation of the existence of anti-union animus or of the ultimate facts
showing how the discharges affected the rights to self-organization of individual respondents." 6 In
short, petitioners maintain that respondents complaint does not allege a genuine case for ULP.

The Court is not convinced.

The complaint alleges that:

5. Individual complainants are bona fide officers and members of complainant Ilaw at
Buklod ng Manggagawa (IBM). They are active and militant in the affairs and
activities of the union.

xxx xxx xxx

23. The dismissal or lock-out from work of the individual complainants clearly
constitutes an act of unfair labor practices in the light of the fact that the work being
performed by the individual complainants are being contracted out by the respondent
company, and, therefore, deprives individual complainants of their right to work and it
constitutes a criminal violation of existing laws.

xxx xxx xxx

25. The acts of the respondent company in economically coercing employees to

accept payment of separation and/or retirement benefits, pending final resolution of
the labor disputes between the parties constitute acts of unfair labor practice in the
light of the fact that there is undue interference, restraint, and coercion of employees
in the exercise of their right to self-organization and collective bargaining. 7

Short of pre-empting the proceedings before the Labor Arbiter, the above complaint, makes out a
genuine case for ULP.

In Manila Pencil Co. v. CIR,8 this Court had occasion to observe that even where business conditions
justified a lay-off of employees, unfair labor practices were committed in the form of discriminatory
dismissal where only unionists were permanently dismissed. This was despite the valid excuse given
by the Manila Pencil Company that the dismissal of the employees was due to the reduction of the
company's dollar allocations for importation and that both union members and non-union members
were laid-off. The Court, thru Justice Makalintal, rebuffed the petitioner Company and said:

. . . The explanation, however, does not by any means account for the permanent
dismissal of five of the unionists, where it does not appear that non-unionists were
similarly dismissed.

xxx xxx xxx

And the discrimination shown by the Company strongly is confirmed by the fact that
during the period from October 1958 to August 17, 1959 it hired from fifteen to twenty
new employees and ten apprentices. It says these employees were for its new lead
factory, but is (sic) not shown that the five who had been permanently dismissed
were not suitable for work in that new factory.

A similar ruling was made by this Court in People's Bank and Trust Co. v. People's Bank and Trust
Co. Employees Union9 involving the lay-off by a bank of sixty-five (65) employees who were active
union members allegedly by reason of retrenchment. The Court likewise found the employer in that
case to have committed ULP in effecting the discharges.

This Court was more emphatic however in Bataan Shipyard and Engineering Co., Inc. v. NLRC, et
al.: 10

Under the circumstances obtaining in this case, We are inclined to believe that the
company had indeed been discriminatory in selecting the employees who were to be
retrenched. All of the retrenched employees are officers and members of the NAFLU.
The record of the case is bereft of any satisfactory explanation from the Company
regarding this situation. As such, the action taken by the firm becomes highly
suspect. It leads Us to conclude that the firm had been discriminating against
membership in the NAFLU, an act which amounts to interference in the employees'
exercise of their right of self-organization. Under Art. 249 (now Art. 248) of the Labor
Code of the Philippines, such interference is considered an act of unfair labor
practice on the part of the Company . . . (Emphasis ours).

It matters not that the cause of termination in the above cited cases was retrenchment while that in
the instant case was redundancy. The important fact is that in all of these cases, including the one at
bar, all of the dismissed employees were officers and members of their respective unions, and their
employers failed to give a satisfactory explanation as to why this group of employees was singled
out.

It may be the case that employees other than union members may have been terminated also by
petitioner SMC on account of its redundancy program. If that is true, the discharges may really be for
a bona fide authorized cause under Article 283 11 of the Labor Code. On the other hand, it is also
possible that such may only be a clever scheme of the petitioner company to camouflage its real
intention of discriminating against union members particularly the private respondents. In any case,
these matters will be best ventilated in a hearing before the Labor Arbiter.

It is for the above reason that we cannot hold the petitioners guilty of the ULP charge. This will be
the task of the Labor Arbiter. We however find that based on the circumstances surrounding this
case and settled jurisprudence on the subject, the complaint filed by the private respondents on
February 25, 1991 alleges facts sufficient to constitute a bona fide case of ULP, and therefore
properly cognizable by the Labor Arbiter under Article 217 (a) of the Labor Code. This is consistent
with the rule that jurisdiction over the subject matter is determined by the allegations of the
complaint. 12

Finally, petitioners try to impress on this Court the strong State policy on the promotion of voluntary
modes of settlement of labor disputes crafted in the Constitution and the Labor Code which dictate
the submission of the CBA dispute to grievance and arbitration. 13

In this regard, the response of the Solicitor General is apt:

Petitioners deserve commendation for divulging and bringing to public respondents'

attention the noble legislative intent behind the law mandating the inclusion of
grievance and voluntary arbitration provisions in the CBA. However, in the absence
of an express legal conferment thereof, jurisdiction cannot be appropriated by an
official or tribunal (sic) no matter how well-intentioned it is, even in the pursuit of the
dearest substantial right (Concurring Opinion of Justice Barredo, Estanislao v.
Honrado, 114 SCRA 748, 29 June 1982).14

In the same manner, petitioners cannot arrogate into the powers of voluntary
arbitrators the original and exclusive jurisdiction of Labor Arbiters over unfair labor
practices, termination disputes, and claims for damages, in the absence of an
express agreement between the parties in order for Article 262 15 of the Labor Law to
apply in the case at bar. 16

WHEREFORE, the instant petition is DISMISSED for lack of merit and the resolutions of the National
Labor Relations Commission dated August 11, 1992 and October 29, 1992 are hereby AFFIRMED.

SO ORDERED.

Bellosillo, Vitug and Kapunan, JJ., concur.

Padilla, J., took no part.

G.R. No. 76989 September 29, 1987

MANILA MANDARIN EMPLOYEES UNION, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, and MELBA C. BELONCIO, respondents.

GUTIERREZ, JR., J.:

This is a petition to review on certiorari the National Labor Relations Commission's (NLRC) decision
which modified the Labor Arbiter's decision and ordered the Manila Mandarin Employees Union to
pay the wages and fringe benefits of Melba C. Beloncio from the time she was placed on forced
leave until she is actually reinstated, plus ten percent (10%) thereof as attorney's fees. Manila
Mandarin Hotel was ordered to reinstate Beloncio and to pay her whatever service charges may be
due her during that period, which amount would be held in escrow by the hotel.
The petition was filed on January 19, 1987. The private respondent filed her comment on March 7,
1987 while the Solicitor General filed a comment on June 1, 1987 followed by the petitioner's reply
on August 22, 1987. We treat the comment as answer and decide the case on its merits.

The facts of the case are undisputed.

Herein private respondent, Melba C. Beloncio, an employee of Manila Mandarin Hotel since 1976
and at the time of her dismissal, assistant head waitress at the hotel's coffee shop, was expelled
from the petitioner Manila Mandarin Employees Union for acts allegedly inimical to the interests of
the union. The union demanded the dismissal from employment of Beloncio on the basis of the
union security clause of their collective bargaining agreement and the Hotel acceded by placing
Beloncio on forced leave effective August 10, 1984.

The union security clause of the collective bargaining agreement provides:

Section 2. Dismissals.

xxx xxx xxx

b) Members of the Union who cease to be such members and/or who fail to maintain
their membership in good standing therein by reason of their resignation from the
Union and/or by reason of their expulsion from the Union in accordance with the
Constitution and By-Laws of the Union, for non-payment of union dues and other
assessment for organizing, joining or forming another labor organization shall, upon
written notice of such cessation of membership or failure to maintain membership in
the Union and upon written demand to the company by the Union, be dismissed from
employment by the Company after complying with the requisite due process
requirement; ... (Emphasis supplied) (Rollo, p. 114)

Two days before the effective date of her forced leave or on August 8, 1984, Beloncio filed a
complaint for unfair labor practice and illegal dismissal against herein petitioner-union and Manila
Mandarin Hotel Inc. before the NLRC, Arbitration Branch.

Petitioner-union filed a motion to dismiss on grounds that the complainant had no cause of action
against it and the NLRC had no jurisdiction over the subject matter of the complaint.

This motion was denied by the Labor Arbiter.

After the hearings that ensued and the submission of the parties' respective position papers, the
Labor Arbiter held that the union was guilty of unfair labor practice when it demanded the separation
of Beloncio. The union was then ordered to pay all the wages and fringe benefits due to Beloncio
from the time she was on forced leave until actual reinstatement, and to pay P30,000.00 as
exemplary damages and P10,000.00 as attorney's fees. The charge against the hotel was
dismissed.

The Union then appealed to the respondent NLRC which modified the Labor Arbiter's decision as
earlier stated.

A subsequent motion for reconsideration and a second motion for reconsideration were denied.

Hence, this present petition.

The petitioner raises the following assignment of errors:

THAT RESPONDENT NLRC ERRED IN NOT DECLARING THAT THE PRESENT

CONTROVERSY INVOLVED INTRA-UNION CONFLICTS AND THEREFOR IT HAS
NO JURISDICTION OVER THE SUBJECT-MATTER THEREOF.

II

THAT RESPONDENT NLRC SERIOUSLY ERRED IN HOLDING PETITIONER

LIABLE FOR THE PAYMENT OF PRIVATE RESPONDENT'S SALARY AND
FRINGE BENEFITS, AND AWARD OF 10% ATTORNEY'S FEES, AFTER FINDING
AS UNMERITORIOUS HER PRETENDED CLAIMS OR COMPLAINTS FOR
UNFAIR LABOR PRACTICE, ILLEGAL DISMISSAL, AND DAMAGES. (Rollo, pp. 6-
9)

On the issue of the NLRC jurisdiction over the case, the Court finds no grave abuse of discretion in
the NLRC conclusion that the dispute is not purely intra-union but involves an interpretation of the
collective bargaining agreement (CBA) provisions and whether or not there was an illegal dismissal.
Under the CBA, membership in the union may be lost through expulsion only if there is non-payment
of dues or a member organizes, joins, or forms another labor organization. The charge of disloyalty
against Beloncio arose from her emotional remark to a waitress who happened to be a union
steward, "Wala akong tiwala sa Union ninyo." The remark was made in the course of a heated
discussion regarding Beloncio's efforts to make a lazy and recalcitrant waiter adopt a better attitude
towards his work.

We agree with the Solicitor General when he noted that:

... The Labor Arbiter explained correctly that "(I)f the only question is the legality of
the expulsion of Beloncio from the Union undoubtedly, the question is one cognizable
by the BLR (Bureau of Labor Relations). But, the question extended to the dismissal
of Beloncio or steps leading thereto. Necessarily, when the hotel decides the
recommended dismissal, its acts would be subject to scrutiny. Particularly, it will be
asked whether it violates or not the existing CBA. Certainly, violations of the CBA
would be unfair labor practice."

Article 250 of the Labor Code provides the following:

Art. 250. Unfair labor practices of labor organizations. — It shall be

unfair labor practice for a labor organization, its officers, agents or
representatives:

xxx xxx xxx

(b) To cause or attempt to cause an employer to discriminate against

an employee, including discrimination against an employee with
respect to whom membership in such organization has been denied
or to terminate an employee on any ground other than the usual
terms and conditions under which membership or continuation of
 membership is made available to other members. (Emphasis
supplied)

Article 217 of the Labor Code also provides:

Art. 217. Jurisdiction of Labor Arbiters and the Commission — (a)

The Labor Arbiters shall have the original and exclusive jurisdiction to
hear and decide ... the following cases involving all workers, whether
agricultural or nonagricultural;

(1) Unfair labor practice cases;

xxx xxx xxx

(b) The Commission shall have exclusive appellate jurisdiction over

all cases decided by Labor Arbiters. (Rollo, pp. 155-157.)

The petitioner also questions the factual findings of the public respondent on the reasons for
Beloncio's dismissal and, especially, on the argument that she was on forced leave; she was never
dismissed; and not having worked, she deserved no pay.

The Court finds nothing in the records that indicates reversible error, much less grave abuse of
discretion, in the NLRC's findings of facts.

It is a well-settled principle that findings of facts quasi-judicial agencies like the NLRC, which have
acquired expertise because their jurisdiction is confined to specific matters, are generally accorded
not only respect but at times even finality if such findings are supported by substantial evidence.
(Akay Printing Press vs. Minister of Labor and Employment, 140 SCRA 381; Alba Patio de Makati
vs. Alba Patio de Makati Employees Association, 128 SCRA 253; Dangan vs. National Labor
Relations Commission, 127 SCRA 706; De la Concepcion vs. Mindanao Portland Cement
Corporation, 127 SCRA 647).

The petitioner now questions the decision of the National Labor Relations Commission ordering the
reinstatement of the private respondent and directing the Union to pay the wages and fringe benefits
which she failed to receive as a result of her forced leave and to pay attorney's fees.

We find no error in the questioned decision.

The Hotel would not have compelled Beloncio to go on forced leave were it not for the union's
insistence and demand to the extent that because of the failure of the hotel to dismiss Beloncio as
requested, the union filed a notice of strike with the Ministry of Labor and Employment on August 17,
1984 on the issue of unfair labor practice. The hotel was then compelled to put Beloncio on forced
leave and to stop payment of her salary from September 1, 1984.

Furthermore, as provided for in the collective bargaining agreement between the petitioner-the Union
and the Manila Mandarin Hotel "the Union shall hold the Company free and blameless from any and
all liabilities that may arise" should the employee question the dismissal, as has happened in the
case at bar.

It is natural for a union to desire that all workers in a particular company should be its dues-paying
members. Since it would be difficult to insure 100 percent membership on a purely voluntary basis
and practically impossible that such total membership would continuously be maintained purely on
the merits of belonging to the union, the labor movement has evolved the system whereby the
employer is asked, on the strength of collective action, to enter into what are now familiarly known as
"union security" agreements.

The collective bargaining agreement in this case contains a union security clause — a closed-shop
agreement.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members
of the contracting union who must continue to remain members in good standing to keep their jobs. It
is "the most prized achievement of unionism." It adds membership and compulsory dues. By holding
out to loyal members a promise of employment in the closed-shop, it welds group solidarity.
(National Labor Union vs. Aguinaldo's Echague, Inc., 97 Phil. 184). It is a very effective form of union
security agreement.

This Court has held that a closed-shop is a valid form of union security, and such a provision in a
collective bargaining agreement is not a restriction of the right of freedom of association guaranteed
by the Constitution. (Lirag Textile Mills, Inc. vs. Blanco, 109 SCRA 87; Manalang vs. Artex
Development Company, Inc., 21 SCRA 561).

The Court stresses, however, that union security clauses are also governed by law and by principles
of justice, fair play, and legality. Union security clauses cannot be used by union officials against an
employer, much less their own members, except with a high sense of responsibility, fairness,
prudence, and judiciousness.

A union member may not be expelled from her union, and consequently from her job, for personal or
impetuous reasons or for causes foreign to the closed-shop agreement and in a manner
characterized by arbitrariness and whimsicality.

This is particularly true in this case where Ms. Beloncio was trying her best to make a hotel bus boy
do his work promptly and courteously so as to serve hotel customers in the coffee shop
expeditiously and cheerfully. Union membership does not entitle waiters, janitors, and other workers
to be sloppy in their work, inattentive to customers, and disrespectful to supervisors. The Union
should have disciplined its erring and troublesome members instead of causing so much hardship to
a member who was only doing her work for the best interests of the employer, all its employees, and
the general public whom they serve.

WHEREFORE, the petition is hereby DISMISSED. The questioned decision of the National Labor
Relations Commission is AFFIRMED. Costs against the petitioner.

SO ORDERED.

Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. 124382 August 16, 1999

PASTOR DIONISIO V. AUSTRIA, petitioner,

vs.
HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL
PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS, ELDER
HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U.
DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE,
PORFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR.
EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO
LOBITANA, respondents.

KAPUNAN, J.:

Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the Resolution1 of
public respondent National Labor Relations Commission (the "NLRC"), rendered on 23 January
1996, in NLRC Case No. V-0120-93, entitled "Pastor Dionisio V. Austria vs. Central Philippine Union
Mission Corporation of Seventh Day Adventists, et al.," which dismissed the case for illegal dismissal
filed by the petitioner against private respondents for lack of jurisdiction.
1âwphi1.nêt

Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists
(hereinafter referred to as the "SDA") is a religious corporation duly organized and existing under
Philippine law and is represented in this case by the other private respondents, officers of the SDA.
Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991, when his services
were terminated.

The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight
(28) years from 1963 to 1991.2 He began his work with the SDA on 15 July 1963 as a literature
evangelist, selling literature of the SDA over the island of Negros. From then on, petitioner worked
his way up the ladder and got promoted several times. In January, 1968, petitioner became the
Assistant Publishing Director in the West Visayan Mission of the SDA. In July, 1972, he was
elevated to the position of Pastor in the West Visayan Mission covering the island of Panay, and the
provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989,
petitioner was promoted as District Pastor of the Negros Mission of the SDA and was assigned at
Sagay, Balintawak and Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction.
In January, 1991, petitioner was transferred to Bacolod City. He held the position of district pastor
until his services were terminated on 31 October 1991.

On various occasions from August up to October, 1991, petitioner received several

communications3 from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit
accountability and responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma
Austria, in his district which amounted to P15,078.10, and to remit the same to the Negros Mission.

In his written explanation dated 11 October 1991,4 petitioner reasoned out that he should not be
made accountable for the unremitted collections since it was private respondents Pastor Gideon
Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes and offerings since he
was very sick to do the collecting at that time.

Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat,
the president of the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to
convene the Executive Committee for the purpose of settling the dispute between him and the
private respondent, Pastor David Rodrigo. The dispute between Pastor Rodrigo and petitioner arose
from an incident in which petitioner assisted his friend, Danny Diamada, to collect from Pastor
Rodrigo the unpaid balance for the repair of the latter's motor vehicle which he failed to pay to
Diamada.5 Due to the assistance of petitioner in collecting Pastor Rodrigo's debt, the latter harbored
ill-feelings against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a
complaint against him with the Negros Mission, he immediately proceeded to the office of Pastor
Buhat on the date abovementioned and asked the latter to convene the Executive Committee.
Pastor Buhat denied the request of petitioner since some committee members were out of town and
there was no quorum. Thereafter, the two exchanged heated arguments. Petitioner then left the
office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, "Pastor daw
inisog na ina iya (Pador you are talking tough)."6 Irked by such remark, petitioner returned to the
office of Pastor Buhat, and tried to overturn the latter's table, though unsuccessfully, since it was
heavy. Thereafter, petitioner banged the attaché case of Pastor Buhat on the table, scattered the
books in his office, and threw the phone.7 Fortunately, private respondents Pastors Yonilo Leopoldo
and Claudio Montaño were around and they pacified both Pastor Buhat and petitioner.

On 17 October 1991, petitioner received a letter8 inviting him and his wife to attend the Executive
Committee meeting at the Negros Mission Conference Room on 21 October 1991, at nine in the
morning. To be discussed in the meeting were the non-remittance of church collection and the
events that transpired on 16 October 1991. A fact-finding committee was created to investigate
petitioner. For two (2) days, from October 21 and 22, the fact-finding committee conducted an
investigation of petitioner. Sensing that the result of the investigation might be one-sided, petitioner
immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding
committee, requesting that certain members of the fact-finding committee be excluded in the
investigation and resolution of the case.9 Out of the six (6) members requested to inhibit themselves
from the investigation and decision-making, only two (2) were actually excluded, namely: Pastor
Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991, petitioner received a letter of
dismissal10 citing misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties, and commission of an offense against the person
of employer's duly authorized representative, as grounds for the termination of his services.

Reacting against the adverse decision of the SDA, petitioner filed a complaint11 on 14 November
1991, before the Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for
reinstatement with backwages and benefits, moral and exemplary damages and other labor law
benefits.

On 15 February 1993, Labor Arbiter Cesar D. Sideño rendered a decision in favor of petitioner, the
dispositive portion of which reads thus:

WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION

MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its
officers, respondents herein, are hereby ordered to immediately reinstate complainant Pastor
Dionisio Austria to his former position as Pastor of Brgy. Taculing, Progreso and Banago,
Bacolod City, without loss of seniority and other rights and backwages in the amount of ONE
HUNDRED FIFTEEN THOUSAND EIGHT HUNDRED THIRTY PESOS (P115,830.00)
without deductions and qualificatioons.

Respondent CPUMCSDA is further ordered to pay complainant the following:

A. 13th month pay — P 21,060.00

B. Allowance — P 4,770.83

C. Service Incentive

Leave Pay — P 3,461.85

D. Moral Damages — P 50,000.00

 E. Exemplary

Damages — P 25,000.00

F. Attorney's Fee — P 22,012.27

SO ORDERED.12

The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor Labor
Relations Commission, Fourth Division, Cebu City. In a decision, dated 26 August 1994, the NLRC
vacated the findings of the Labor Arbiter. The decretal portion of the NLRC decision states:

WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED
dismissing this case for want of merit.

SO ORDERED.13

Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the
NLRC issued a Resolution reversing its original decision. The dispositive portion of the resolution
reads:

WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and
the decision of the Labor Arbiter dated February 15, 1993 is REINSTATED.

SO ORDERED.14

In view of the reversal of the original decision of the NLRC, the SDA filed a motion for
reconsideration of the above resolution. Notable in the motion for reconsideration filed by private
respondents is their invocation, for the first time on appeal, that the Labor Arbiter has no jurisdiction
over the complaint filed by petitioner due to the constitutional provision on the separation of church
and state since the case allegedly involved an ecclesiastical affair to which the State cannot
interfere.

The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the
argument posed by private respondents and, accordingly, dismissed the complaint of petitioner. The
dispositive portion of the NLRC resolution dated 23 January 1996, subject of the present petition, is
as follows:

WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby
granted. Accordingly, this case is hereby DISMISSED for lack of jurisdiction.

SO ORDERED.15

Hence, the recourse to this Court by petitioner.

After the filing of the petition, the Court ordered the Office of the Solicitor General (the "OSG") to file
its comment on behalf of public respondent NLRC. Interestingly, the OSG filed a manifestation and
motion in lieu of comment16 setting forth its stand that it cannot sustain the resolution of the NLRC. In
its manifestation, the OSG submits that the termination of petitioner from his employment may be
questioned before the NLRC as the same is secular in nature, not ecclesiastical. After the
submission of memoranda of all the parties, the case was submitted for decision.
The issues to be resolved in this petition are:

1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint
filed by petitioner against the SDA;

2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and,
as such, involves the separation of church and state; and

3) Whether or not such termination is valid.

The first two issues shall be resolved jointly, since they are related.

Private respondents contend that by virtue of the doctrine of separation of church and state, the
Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since
the matter at bar allegedly involves the discipline of a religious minister, it is to be considered a
purely ecclesiastical affair to which the State has no right to interfere.

The contention of private respondents deserves scant consideration. The principle of separation of
church and state finds no application in this case.

The rationale of the principle of the separation of church and state is summed up in the familiar
saying, "Strong fences make good-neighbors."17 The idea advocated by this principle is to delineate
the boundaries between the two institutions and thus avoid encroachments by one against the other
because of a misunderstanding of the limits of their respective exclusive jurisdictions.18 The
demarcation line calls on the entities to "render therefore unto Ceasar the things that are Ceasar's
and unto God the things that are God's."19 While the state is prohibited from interfering in purely
ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters.20

The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from
taking cognizance of the same. An ecclesiastical affair is "one that concerns doctrine, creed, or form
of worship of the church, or the adoption and enforcement within a religious association of needful
laws and regulations for the government of the membership, and the power of excluding from such
associations those deemed unworthy of membership.21 Based on this definition, an ecclesiastical
affair involves the relationship between the church and its members and relate to matters of faith,
religious doctrines, worship and governance of the congregation. To be concrete, examples of this
so-called ecclesiastical affairs to which the State cannot meddle are proceedings for
excommunication, ordinations of religious ministers, administration of sacraments and other
activities with attached religious significance. The case at bar does not even remotely concern any of
the abovecited examples. While the matter at hand relates to the church and its religious minister it
does not ipso facto give the case a religious significance. Simply stated, what is involved here is the
relationship of the church as an employer and the minister as an employee. It is purely secular and
has no relation whatsoever with the practice of faith, worship or doctrines of the church. In this case,
petitioner was not ex-communicated or expelled from the membership of the SDA but was
terminated from employment. Indeed, the matter of terminating an employee, which is purely secular
in nature, is different from the ecclesiastical act of expelling a member from the religious
congregation.

As pointed out by the OSG in its memorandum, the grounds invoked for petitioner's dismissal,
namely: misappropriation of denominational funds, willful breach of trust, serious misconduct, gross
and habitual neglect of duties and commission of an offense against the person of his employer's
duly authorized representative, are all based on Article 282 of the Labor Code which enumerates the
just causes for termination of employment.22 By this alone, it is palpable that the reason for
petitioner's dismissal from the service is not religious in nature. Coupled with this is the act of the
SDA in furnishing NLRC with a copy of petitioner's letter of termination. As aptly stated by the OSG,
this again is an eloquent admission by private respondents that NLRC has jurisdiction over the case.
Aside from these, SDA admitted in a certification23 issued by its officer, Mr. Ibesate, that petitioner
has been its employee for twenty-eight (28) years. SDA even registered petitioner with the Social
Security System (SSS) as its employee. As a matter of fact, the worker's records of petitioner have
been submitted by private respondents as part of their exhibits. From all of these it is clear that when
the SDA terminated the services of petitioner, it was merely exercising its management prerogative
to fire an employee which it believes to be unfit for the job. As such, the State, through the Labor
Arbiter and the NLRC, has the right to take cognizance of the case and to determine whether the
SDA, as employer, rightfully exercised its management prerogative to dismiss an employee. This is
in consonance with the mandate of the Constitution to afford full protection to labor.

Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive
enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor
Code on post-employment states that "the provisions of this Title shall apply to all establishments or
undertakings, whether for profit or not." Obviously, the cited article does not make any exception in
favor of a religious corporation. This is made more evident by the fact that the Rules Implementing
the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and
Retirement, categorically includes religious institutions in the coverage of the law, to wit:

Sec. 1. Coverage. — This Rule shall apply to all establishments and undertakings, whether
operated for profit or not, including educational, medical, charitable and religious institutions
and organizations, in cases of regular employment with the exception of the Government and
its political subdivisions including government-owned or controlled corporations.24

With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of
separation of church and state to avoid its responsibilities as an employer under the Labor Code.

Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the
issue of lack of jurisdiction for the first time on appeal. It is already too late in the day for private
respondents to question the jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully
participated in the trials and hearings of the case from start to finish. The Court has already ruled
that the active participation of a party against whom the action war brought, coupled with his failure
to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the
case and will bar said party from later on impugning the court or body's jurisdiction.25 Thus, the active
participation of private respondents in the proceedings before the Labor Arbiter and the NLRC
mooted the question on jurisdiction.

The jurisdictional question now settled, we shall now proceed to determine whether the dismissal of
petitioner was valid.

At the outset, we note that as a general rule, findings of fact of administrative bodies like the NLRC
are binding upon this Court. A review of such findings is justified, however, in instances when the
findings of the NLRC differ from those of the labor arbiter, as in this case.26 When the findings of
NLRC do not agree with those of the Labor Arbiter, this Court must of necessity review the records
to determine which findings should be preferred as more comfortable to the evidentiary facts.27

We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of
proving that the termination was for a valid or authorized cause rests on the employer.28 Thus,
private respondents must not merely rely on the weaknesses of petitioner's evidence but must stand
on the merits of their own defense.

The issue being the legality of petitioner's dismissal, the same must be measured against the
requisites for a valid dismissal, namely: (a) the employee must be afforded due process, i.e., he
must be given an opportunity to be heard and to defend himself, and; (b) the dismissal must be for a
valid cause as provided in Article 282 of the Labor Code.29 Without the concurrence of this twin
requirements, the termination would, in the eyes of the law, be illegal.30

Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and
Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code further require the
employer to furnish the employee with two (2) written notices, to wit: (a) a written notice served on
the employee specifying the ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side; and, (b) a written notice of termination
served on the employee indicating that upon due consideration of all the circumstances, grounds
have been established to justify his termination.

The first notice, which may be considered as the proper charge, serves to apprise the employee of
the particular acts or omissions for which his dismissal is sought.31 The second notice on the other
hand seeks to inform the employee of the employer's decision to dismiss him.32 This decision,
however, must come only after the employee is given a reasonable period from receipt of the first
notice within which to answer the charge and ample opportunity to be heard and defend himself with
the assistance of a representative, if he so desires.33 This is in consonance with the express
provision of the law on the protection to labor and the broader dictates of procedural due
process.34 Non-compliance therewith is fatal because these requirements are conditions sine
qua non before dismissal may be validly effected.35

Private respondent failed to substantially comply with the above requirements. With regard to the
first notice, the letter,36 dated 17 October 1991, which notified petitioner and his wife to attend the
meeting on 21 October 1991, cannot be construed as the written charge required by law. A perusal
of the said letter reveals that it never categorically stated the particular acts or omissions on which
petitioner's impending termination was grounded. In fact, the letter never even mentioned that
petitioner would be subject to investigation. The letter merely mentioned that petitioner and his wife
were invited to a meeting wherein what would be discussed were the alleged unremitted church
tithes and the events that transpired on 16 October 1991. Thus, petitioner was surprised to find out
that the alleged meeting turned out to be an investigation. From the tenor of the letter, it cannot be
presumed that petitioner was actually on the verge of dismissal. The alleged grounds for the
dismissal of petitioner from the service were only revealed to him when the actual letter of dismissal
was finally issued. For this reason, it cannot be said that petitioner was given enough opportunity to
properly prepare for his defense. While admittedly, private respondents complied with the second
requirement, the notice of termination, this does not cure the initial defect of lack of the proper
written charge required by law.

In the letter of termination,37 dated 29 October 1991, private respondents enumerated the following
as grounds for the dismissal of petitioner, namely: misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an
offense against the person of employer's duly authorized representative. Breach of trust and
misappropriation of denominational funds refer to the alleged failure of petitioner to remit to the
treasurer of the Negros Mission tithes, collections and offerings amounting to P15,078.10 which
were collected by his wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other
hand, serious misconduct and commission of an offense against the person of the employer's duly
authorized representative pertain to the 16 October 1991 incident wherein petitioner allegedly
committed an act of violence in the office of Pastor Gideon Buhat. The final ground invoked by
private respondents is gross and habitual neglect of duties allegedly committed by petitioner.

We cannot sustain the validity of dismissal based on the ground of breach of trust. Private
respondents allege that they have lost their confidence in petitioner for his failure, despite demands,
to remit the tithes and offerings amounting to P15,078.10, which were collected in his district. A
careful study of the voluminous records of the case reveals that there is simply no basis for the
alleged loss of confidence and breach of trust. Settled is the rule that under Article 282 (c) of the
Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally, knowingly
and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.38 It must rest on substantial grounds and not on the
employer's arbitrariness, whims, caprices or suspicion; otherwise the employee would eternally
remain at the mercy of the employer.39 It should be genuine and not simulated.40 This ground has
never been intended to afford an occasion for abuse, because of its subjective nature. The records
show that there were only six (6) instances when petitioner personally collected and received from
the church treasurers the tithes, collections, and donations for the church.41 The stenographic notes
on the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a witness for private
respondents, show that Pastor Austria was able to remit all his collections to the treasurer of the
Negros Mission.42

Though private respondents were able to establish that petitioner collected and received tithes and
donations several times, they were notable to establish that petitioner failed to remit the same to the
Negros Mission, and that he pocketed the amount and used it for his personal purpose. In fact, as
admitted by their own witness, Naomi Geniebla, petitioner remitted the amounts which he collected
to the Negros Mission for which corresponding receipts were issued to him. Thus, the allegations of
private respondents that petitioner breached their trust have no leg to stand on.

In a vain attempt to support their claim of breach of trust, private respondents try to pin on petitioner
the alleged non-remittance of the tithes collected by his wife. This argument deserves little
consideration. First of all, as proven by convincing and substantial evidence consisting of the
testimonies of the witnesses for private respondents who are church treasurers, it was Mrs. Thelma
Austria who actually collected the tithes and donations from them, and, who failed to remit the same
to the treasurer of the Negros Mission. The testimony of these church treasurers were corroborated
and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the absence of
conspiracy and collusion, which private respondents failed to demonstrate, between petitioner and
his wife, petitioner cannot be made accountable for the alleged infraction committed by his wife.
After all, they still have separate and distinct personalities. For this reason, the Labor Arbiter found it
difficult to see the basis for the alleged loss of confidence and breach of trust. The Court does not
find any cogent reason, therefore, to digress from the findings of the Labor Arbiter which is fully
supported by the evidence on record.

With respect to the grounds of serious misconduct and commission of an offense against the person
of the employer's duly authorized representative, we find the same unmeritorious and, as such, do
not warrant petitioner's dismissal from the service.

Misconduct has been defined as improper or wrong conduct. It is the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment.43 For misconduct to be considered serious it
must be of such grave and aggravated character and not merely trivial or unimportant.44 Based on
this standard, we believe that the act of petitioner in banging the attaché case on the table, throwing
the telephone and scattering the books in the office of Pastor Buhat, although improper, cannot be
considered as grave enough to be considered as serious misconduct. After all, as correctly observed
by the Labor Arbiter, though petitioner committed damage to property, he did not physically assault
Pastor Buhat or any other pastor present during the incident of 16 October 1991. In fact, the alleged
offense committed upon the person of the employer's representatives was never really established
or proven by private respondents. Hence, there is no basis for the allegation that petitioner's act
constituted serious misconduct or that the same was an offense against the person of the employer's
duly authorized representative. As such, the cited actuation of petitioner does not justify the ultimate
penalty of dismissal from employment. While the Constitution does condone wrongdoing by the
employee, it nevertheless urges a moderation of the sanctions that may be applied to him in light of
the many disadvantages that weigh heavily on him like an albatross on his neck.45 Where a penalty
less punitive would suffice, whatever missteps may have been committed by the worker ought not be
visited with a consequence so severe such as dismissal from employment.46 For the foregoing
reasons, we believe that the minor infraction committed by petitioner does not merit the ultimate
penalty of dismissal.

The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect
of duties, does not require an exhaustive discussion. Suffice it to say that all private respondents had
were allegations but not proof. Aside from merely citing the said ground, private respondents failed
to prove culpability on the part of petitioner. In fact, the evidence on record shows otherwise.
Petitioner's rise from the ranks disclose that he was actually a hard-worker. Private respondents'
evidence,47 which consisted of petitioner's Worker's Reports, revealed how petitioner travelled to
different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but,
in return, he was rewarded with a dismissal from the service for a non-existent cause.

In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated
from service without just or lawful cause. Having been illegally dismissed, petitioner is entitled to
reinstatement to his former position without loss of seniority right48 and the payment of full
backwages without any deduction corresponding to the period from his illegal dismissal up to actual
reinstatement.46

WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public
respondent National Labor Relations Commission, rendered on 23 January 1996, is NULLIFIED and
SET ASIDE. The Decision of the Labor Arbiter, dated 15 February 1993, is REINSTATED and
hereby AFFIRMED. 1âwphi1.nêt

SO ORDERED.

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

G.R. No. L-68544 October 27, 1986

LORENZO C. DY, ZOSIMO DY, SR., WILLIAM IBERO, RICARDO GARCIA AND RURAL BANK
OF AYUNGON, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND EXECUTIVE LABOR ARBITER ALBERTO
L. DALMACION, AND CARLITO H. VAILOCES, respondents.

Marcelino C. Maximo and Ramon Barrameda for petitioners.

Carlito H. Vailoces for private respondent.

NARVASA, J.:

Petitioners assail in this Court the resolution of the National Labor Relations Commission (NLRC)
dismissing their appeal from the decision of the Executive Labor Arbiter 1 in Cebu City which found private
respondent to have been illegally dismissed by them.

Said private respondent, Carlito H. Vailoces, was the manager of the Rural Bank of Ayungon
(Negros Oriental), a banking institution duly organized under Philippine laws. He was also a director
and stockholder of the bank.

On June 4, 1983, a special stockholders' meeting was called for the purpose of electing the
members of the bank's Board of Directors. Immediately after the election the new Board proceeded
to elect the bank's executive officers.

Pursuant to Article IV of the bank's by-laws, 2 providing for the election by the entire membership of the Board of the
executive officers of the bank, i.e., the president, vice-president, secretary, cashier and bank manager, in that board meeting of June 4,
1983, petitioners Lorenzo Dy, William Ibero and Ricardo Garcia were elected president, vice-president and corporate secretary, respectively.
Vailoces was not re-elected as bank manager, 3 Because of this development, the Board, on July 2, 1983, passed Resolution No. 5, series of
1983, relieving him as bank manager.

On August 3, 1983, Vailoces filed a complaint for illegal dismissal and damages with the Ministry of
Labor and Employment against Lorenzo Dy and Zosimo Dy, Sr. The complaint was amended on
September 22, 1983 to include additional respondents-William Ibero, Ricardo Garcia and the Rural
Bank of Ayungon, and additional causes of action for underpayment of salary and non-payment of
living allowance.

In his complaint and position paper, Vailoces asserted that Lorenzo Dy, after obtaining control of the
majority stock of the bank by buying the shares of Marcelino Maximo, called an illegal stockholders'
meeting and elected a Board of Directors controlled by him; that after its illegal constitution, said
Board convened on July 2, 1983 and passed a resolution dismissing him as manager, without giving
him the opportunity to be heard first; that his dismissal was motivated by Lorenzo Dy's desire to take
over the management and control of the bank, not to mention the fact that he (Dy) harbored ill
feelings against Vailoces on account of the latter's filing of a complaint for violation of the corporation
code against him and another complaint for compulsory recognition of natural child with damages
against Zosimo Dy, Sr. 4

In their answer, Lorenzo Dy, et al. denied the charge of illegal dismissal. They pointed out that
Vailoces' position was an elective one, and he was not re-elected as bank manager because of the
Board's loss of confidence in him brought about by his absenteeism and negligence in the
performance of his duties; and that the Board's action was taken to protect the interest of the bank
and was "designed as an internal control measure to secure the check and balance of authority
within the organization." 5

The Executive Labor Arbiter found that Vailoces was:

(a) Illegally dismissed, first not because of absenteeism and negligence, but of the
resentment of petitioners against Vailoces which arose from the latter's filing of the
cases for recognition as natural child against Zosimo Dy, Sr. and for violation of the
corporation code against Lorenzo Dy; and second, because he was not afforded the
due process of law when he was dismissed during the Board meeting of July 2, 1983
the validity of which is seriously doubted;

(b) Not paid his cost of living allowance; and

 (c) Underpaid with only P500 monthly salary,

and consequently ordered the individual petitioners — Lorenzo Dy and Zosimo Dy-but not the Bank
itself, to:

(a) Pay Vailoces jointly and severally, the sum of P111,480.60 representing his
salary differentials, cost of living allowances, back wages from date of dismissal up to
the date of the decision (November 29, 1983), moral and exemplary damages, and
attorney's fees; and

(b) Reinstate Vailoces to his position as bank manager, with additional backwages
from December 1, 1983 on the adjusted salary rate of P620.00 r month until he is
actually reinstated, plus cost-of-living allowance. 6

Lorenzo Dy, et al. appealed to the NLRC, assigning error to the decision of the Labor Arbiter on
various grounds, among them: that Vailoces was not entitled to notice of the Board meeting of July
2, 1983 which decreed his relief because he was no longer a member of the Board on said date; that
he nonetheless had the opportunity to refute the charges against him and seek a formal investigation
because he received a copy of the minutes of said meeting while he was still the bank manager (his
removal was to take effect only on August 15, 1983), instead of which he simply abandoned the
work he was supposed to perform up to the effective date of his relief; and that the matter of his
relief was within the adjudicatory powers of the Securities and Exchange Commission.7

The NLRC, however bypassed the issues raised and simply dismissed the appeal for having been
filed late. It ruled that:

The record shows that a copy of the decision sent by registered mail to respondents'
counsel, Atty. Edmund Tubio, was received on January 11, 1984 by a certain Atty.
Ramon Elesteria, a law office partner of Atty. Tubio. ... This fact is corroborated by
the certification issued by the Postmaster of Dumaguete City... Moreover, the same
is admitted by no less than Atty. Ramon Elesteria himself in his affidavit. It further
appears in the record that on January 30, 1984 a certain Atty. Francisco Zerna, a
new lawyer engaged by the respondents for the appeal, received a copy of the
decision in this case as certified by Julia Pepito in an affidavit subscribed before the
Senior Labor Arbitration Specialist. The appeal was filed only on February 17, 1984.

Considering that it was a law partner of the respondents' counsel who received on
January 11, 1984 the registered letter, his actual receipt thereof completes the
service. ... And even assuming that such was not a valid service, since the
respondents received another copy of the decision on January 30, 1984, through
their newly engaged counsel, it is therefore our opinion that the appeal herein was
filed out of time, whether the time is reckoned from the receipt by Atty. Elesteria or
Atty. Zerna, and, for this reason, we can not give due course to his appeal. 8

In this Court, petitioners assail said ruling as an arbitrary deprivation of their right to appeal through
unreasonable adherence to procedural technicality. They argue that they should not be bound by the
service of the Labor Arbiter's decision by Atty. Elesteria on January 11, 1984 or by Atty. Zerna on
January 30, 1984, because neither lawyer was authorized to accept service for their counsel Atty.
Tubio, and that their 10 day period of appeal should be counted from February 10, 1984 when they
actually received the copy of the decision from Atty. Zerna. On the merits, they assert that the
Arbiter's finding of illegal dismissal was without evidentiary basis, that it was error to impose the
obligation to pay damages upon the individual petitioners, instead of the Rural Bank of Ayungon,
which was Vailoces' real employer, and that the damages awarded are exorbitant and oppressive.

While the comment of Vailoces traverses the averments of the petition, that of the Solicitor General
on behalf of public respondents perceives the matter as an intracorporate controversy of the class
described in Section 5, par. (c), of Presidential Decree No. 902-A, namely:

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

managers of such corporations, partnerships or associations.

explicitly declared to be within the original and exclusive jurisdiction of the Securities and Exchange
Commission, and recommends that the questioned resolution of the NLRC as well as the decision of
the Labor Arbiter be set aside as null and void.9

In truth, the issue of jurisdiction is decisive and renders unnecessary consideration of the other
questions raised.

There is no dispute that the position from which private respondent Vailoces claims to have been
illegally dismissed is an elective corporate office. He himself acquired that position through election
by the bank's Board of Directors at the organizational meeting of November 17, 1979. 10 He lost that
position because the Board that was elected in the special stockholders' meeting of June 4, 1983 did not re-elect him. And when Vailoces, in
his position paper submitted to the Labor Arbiter, impugned said stockholders' meeting as illegally convoked and the Board of Directors
thereby elected as illegally constituted, 11 he made it clear that at the heart of the matter was the validity of the directors' meeting of June 4,
1983 which, by not re-electing him to the position of manager, in effect caused termination of his services.

The case thus falls squarely within the purview of Section 5, par. (c), No. 902-A just cited. In PSBA
vs. Leaño, 12 this Court, confronted with a similar controversy, ruled that the Securities and Exchange Commission, not the NLRC, has
jurisdiction:

It was at a Board regular monthly meeting held on August 1, 1981, that three
directors were elected to fill vacancies. And, it was at the regular Board meeting of
September 5, 1981 that all corporate positions were declared vacant in order to
effect a reorganization, and at the ensuing election of officers, Tan was not re-
elected as Executive Vice-President.

Basically, therefore, the question is whether the election of directors on August 1,

1981 and the election of officers on September 5, 1981, which resulted in Tan's
failure to be re-elected, were validly held. This is the crux of the question that Tan
has raised before the SEC. Even in his position paper before the NLRC, Tan alleged
that the election on August 1, 1981 of the three directors was in contravention of the
PSBA By-Laws providing that any vacancy in the Board shall be filled by a majority
vote of the stockholders at a meeting specially called for the purpose. Thus, he
concludes, the Board meeting on September 5, 1981 was tainted with irregularity on
account of the presence of illegally elected directors without whom the results could
have been different.

Tan invoked the same allegations in his complaint filed with the SEC. So much so,
that on December 17, 1981, the SEC (Case No. 2145) rendered a Partial Decision
annulling the election of the three directors and ordered the convening of a
stockholders' meeting for the purpose of electing new members of the Board. The
correctness of d conclusion is not for us to pass upon in this case. Tan was present
at said meeting and again sought the issuance of injunctive relief from the SEC.
 The foregoing indubitably show that, fundamentally, the controversy is intra-
corporate in nature. It revolves around the election of directors, officers or managers
of the PSBA, the relation between and among its stockholders, and between them
and the corporation. Private respondent also contends that his "ouster" was a
scheme to intimidate him into selling his shares and to deprive him of his just and fair
return on his investment as a stockholder received through his salary and allowances
as Executive Vice-President. Vis-a-vis the NLRC, these matters fall within the
jurisdiction of the SEC. Presidential Decree No. 902-A vests in the Securities and
Exchange Commission:

... Original and exclusive jurisdiction to hear and decide cases involving:

a) Devices or schemes employed by or any acts, of the board of directors, business

associates, its officers or partners, amounting to fraud and misrepresentation) which
may be detrimental to the interest of the public and/or of the stockholders, partners,
members of associations or organizations registered with the Commission.

b) Controversies arising out of intracorporate or partnership relations, between and

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

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

managers of such corporations, partnership or associations.

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

Respondent Vailoces' invocation of estoppel as against petitioners with respect to the issue of
jurisdiction is unavailing. In the first place, it is not quite correct to state that petitioners did not raise
the point in the lower tribunal. Although rather off handedly, in their appeal to the NLRC they called
attention to the Labor Arbiter's lack of jurisdiction to rule on the validity of the meeting of July 2,
1983, but the dismissal of the appeal for alleged tardiness effectively precluded consideration of that
or any other question raised in the appeal. More importantly, estoppel cannot be invoked to prevent
this Court from taking up the question of jurisdiction, which has been apparent on the face of the
pleadings since the start of litigation before the Labor Arbiter. It is well settled that the decision of a
tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, 13 this
Court held:

A rule that had been settled by unquestioned acceptance and upheld in decisions so
numerous to cite is that the jurisdiction of a court over the subject matter of the action
is a matter of law and may not be conferred by consent or agreement of the parties.
The lack of jurisdiction of a court may be raised at any stage of the proceedings,
even on appeal. This doctrine has been qualified by recent pronouncements which
stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be
 regretted, however, that the holding in said case had been applied to situations which
were obviously not contemplated therein. The exceptional circumstances involved
in Sibonghanoy which justified the departure from the accepted concept of non-
waivability of objection to jurisdiction has been ignored and, instead a blanket
doctrine had been repeatedly upheld that rendered the supposed ruling
in Sibonghanoy not as the exception, but rather the general rule, virtually
overthrowing altogether the time-honored principle that the issue of jurisdiction is not
lost by waiver or by estoppel.

xxx xxx xxx

It is neither fair nor legal to bind a party by the result of a suit or proceeding which
was taken cognizance of in a court which lacks jurisdiction over the same
irrespective of the attendant circumstances. The equitable defense of estoppel
requires knowledge or consciousness of the facts upon which it is based . The same
thing is true with estoppel by conduct which may be asserted only when it is shown,
among others, that the representation must have been made with knowledge of the
facts and that the party to whom it was made is ignorant of the truth of the matter (De
Castro vs. Gineta, 27 SCRA 623). The filing of an action or suit in a court that does
not possess jurisdiction to entertain the same may not be presumed to be deliberate
and intended to secure a ruling which could later be annulled if not favorable to the
party who filed such suit or proceeding in a court that lacks jurisdiction to take
cognizance of the same, such act may not at once be deemed sufficient basis of
estoppel. It could have been the result of an honest mistake or of divergent
interpretation of doubtful legal provisions. If any fault is to be imputed to a party
taking such course of action, part of the blame should be placed on the court which
shall entertain the suit, thereby lulling the parties into believing that they pursued
their remedies in the correct forum. Under the rules, it is the duty of the court to
dismiss an action 'whenever it appears that court has no jurisdiction over the subject
matter.' (Section 2, Rule 9, Rules of Court) Should the Court render a judgment
without jurisdiction, such judgment may be impeached or annulled for lack of
jurisdiction (Sec. 30, Rule 132, Ibid), within ten (10) years from the finality of the
same (Art. 1144, par. 3, Civil Code).

To be sure, petitioners failed to raise the issue of jurisdiction in their petition before this Court. But
this, too, is no hindrance to the Court's considering said issue.

The failure of the appellees to invoke anew the aforementioned solid ground of want of jurisdiction of
the lower court in this appeal should not prevent this Tribunal to take up that issue as the lack of
jurisdiction of the lower court is apparent upon the face of the record and it is fundamental that a
court of justice could only validly act upon a cause of action or subject matter of a case over which it
has jurisdiction and said jurisdiction is one conferred only by law; and cannot be acquired through, or
waived by, any act or omission of the parties (Lagman vs. CA, 44 SCRA 234 [1972]); hence may be
considered by this court motu proprio (Gov't. vs. American Surety Co., 11 Phil. 203 [1908])... 14

These considerations make inevitable the conclusion that the judgment of the Labor Arbiter and the
resolution of the NLRC are void for lack of cause of jurisdiction, and this Court must set matters
aright in the exercise of its judicial power. It is of no moment that Vailoces, in his amended
complaint, seeks other relief which would seemingly fan under the jurisdiction of the Labor Arbiter,
because a closer look at these-underpayment of salary and non-payment of living allowance-shows
that they are actually part of the perquisites of his elective position, hence, intimately linked with his
relations with the corporation. The question of remuneration, involving as it does, a person who is
not a mere employee but a stockholder and officer, an integral part, it might be said, of the
corporation, is not a simple labor problem but a matter that comes within the area of corporate affairs
and management, and is in fact a corporate controversy in contemplation of the Corporation Code.

WHEREFORE, the questioned decision of the Labor Arbiter and the Resolution of the NLRC
dismissing petitioners' appeal from said decision are hereby set aside because rendered without
jurisdiction. The amended complaint for illegal dismissal, etc., basis of said decision and Resolution,
is ordered dismissed, without prejudice to private respondent's seeking recourse in the appropriate
forum.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Cruz and Feliciano, JJ., concur.

G.R. No. 79762 January 24, 1991

FORTUNE CEMENT CORPORATION, petitioner,

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

De Leon, Diokno & Associates Law Offices for petitioner.

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

GRIÑO-AQUINO, J.:

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

Lagdameo is a registered stockholder of FCC.

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

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

At subsequent regular meetings held on June 14 and 21, 1983, the FCC Board approved and
adopted a resolution dismissing Lagdameo as Executive Vice-President of the company, effective
immediately, for loss of trust and confidence (p. 4, Rollo).
On June 21, 1983, Lagdameo filed with the National Labor Relations Commission (NLRC), National
Capital Region, a complaint for illegal dismissal against FCC (NLRC-NCR Case No. 1-228-85)
alleging that his dismissal was done without a formal hearing and investigation and, therefore,
without due process (p. 63, Rollo).

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

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

We find merit in the petition.

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

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

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

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

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

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

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

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

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

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

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

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

The position of "Executive Vice-President," from which private respondent Lagdameo claims
to have been illegally dismissed, is an elective corporate office. He himself acquired that
position through election by the corporation's Board of Directors, although he also lost the
same as a consequence of the latter's resolution.

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

prerogative vested upon a corporate board.

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

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

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

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

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

The issue of the SEC's power or jurisdiction is decisive and renders unnecessary a consideration of
the other questions raised by Lagdameo. Thus did this Court rule in the case of Dy vs. National
Labor Relations Commission (145 SCRA 211) which involved a similar situation:
 It is of no moment that Vailoces, in his amended complaint, seeks other reliefs which would
seemingly fall under the jurisdiction of the Labor Arbiter, because a closer look at these —
underpayment of salary and non-payment of living allowance — shows that they are actually
part of the perquisites of his elective position, hence, intimately linked with his relations with
the corporation. The question of remuneration, involving as it does, a person who is not a
1âwphi1

mere employee but a stockholder and officer, an integral part, it might be said, of the
corporation, is not a simple labor problem but a matter that comes within the area of
corporate affairs and management, and is in fact a corporate controversy in contemplation of
the Corporation Code. (Emphasis ours.)

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

SO ORDERED.

Narvasa, Gancayco and Medialdea, JJ., concur.

Cruz, J., took no part.

G.R. No. L-104033 December 27, 1993

NOE S. ANDAYA, petitioner,

vs.
LISANDRO C. ABADIA, RENE R. CRUZ, VICTOR M. PUNZALAN, LYSIAS C. CABUSAO, JOSE
O. BARNUEVO, JOSE M. FORONDA, LAMBERTO TORRES, EDGAR C. GALVANTE, EMERSON
C. TANGAN, PRIMITIVO A. SOMERA, and BENJAMIN N. SANTOS, SR., respondents.

Bernardo P. Fernandez and Doroteo B. Daguna for petitioner.

M.M. Lazaro & Associates for respondents.

BELLOSILLO, J.:

Maintaining that the Regional Trial Court (RTC) and not the securities and Exchange Commission
(SEC) has jurisdiction over his complaint, petitioner argues that the court a quo 1 should not have
dismissed Civil Case No. Q-91-10470 filed by him against herein respondents, who were original
defendants in the court below. He asserts that "actually, the complaint is based not so much on
plaintiff's attempted removal but rather on the manner of his removal and the consequent effects
thereof." 2 Specifically, he alleges in his petition that —

Before the Regional Trial Court, Branch 101, Quezon City, in an action denominated
"Injunction and Damages with Restraining Order and/or Preliminary Injunction",
docketed as Civil Case No. Q-91-10470 of said Court, petitioner NOE S. ANDAYA,
as plaintiff, sued respondents LISANDRO C. ABADIA, RENE R. CRUZ, VICTOR M.
PUNZALAN, LYSIAS C. CABUSAO, JOSE O. BARNUEVO, JOSE M. FORONDA,
LAMBERTO TORRES, EDGAR C. GALVANTE, EMERSON, C. TANGAN,
PRIMITIVO A. SOMERA AND BENJAMIN N. SANTOS, SR., as defendants, alleging
 . . . that said respondents, as directors of the Armed Forces and Police Savings and
Loan Association, Inc., (AFPSLAI) . . . acting in concerts and pursuant to an illegal
and nefarious scheme to oust petitioner from his then positions as President and
General Manager of the AFPSLAI, with grave abuse of authority and in gross and
deliberate violation of the norms of human relations and of petitioner's right to due
process, illegally, maliciously and with evident bad faith, convened a meeting of the
AFPSLAI Board of Directors and illegally reorganized the management of AFPSLAI
by ousting and removing, without just and lawful cause, petitioner from his positions
therein, causing petitioner moral and exemplary damages, and praying . . . for the
issuance of a temporary restraining order . . . and . . . a writ of preliminary injunction,
restraining respondents from implementing the result of the irregularity convened and
illegally conducted reorganization of the management of AFPSLAI, as well as
respondents Punzalan and Tangan from assuming and taking over from petitioner
the offices of President and General Manager of said AFPSLAI and from performing
and exercising the functions and powers thereof pending final determination of the
case.3

On 30 October 1991, the trial court granted the prayer of petition for temporary restraining order and
set the hearing on the injunctive relief.4

On 4 November 1991, respondents filed an Urgent Motion to Dismiss on the ground that the
complaint raised intra-corporate controversies over which the Securities and Exchange Commission,
and not the court a quo, has exclusive original jurisdiction. 5 On 5 November 1991, respondents filed
an Urgent Motion to Lift Restraining Order and Opposition to Preliminary Injunction. 6 Petitioner filed
a Consolidated Opposition to Urgent Motion to Dismiss and Motion to Lift Restraining Order with
Reply to Opposition to Preliminary Injunction and Reiteration of Motions for Contempt (for violation of
the Temporary Restraining Order), arguing that "the case is mainly based not on petitioner's
attempted removal per se but rather on the manner of his removal and the effect thereof, which was
done anti-socially, oppressively, in gross violation of the norms of human relations and without giving
petitioner his due . . ."7

On 12 November 1991, before the trial court could rule on the motion to dismiss, petitioner filed an
amended complaint impleading as additional defendants then Central bank Governor Jose L. Cuisia,
Jr., Central Bank SRDC Managing Director Ricardo P. Lirio and Central Bank SES Acting Director
Candon B. Guerrero. 8 On 13 November 1991, respondents filed an Omnibus Motion
contending, inter alia, that the filing of an amended complaint seeking to confer jurisdiction on the
court was improper and should not be allowed.9

On 14 November 1991, Judge Pedro T. Santiago of the court a quo issued an order dismissing the
case for lack of jurisdiction insofar as herein respondents were concerned and denied petitioner's
motions to declare respondents in contempt of court. While the order mentioned the amended
complaint, it made no express disposition thereon. It simply ruled that —

Evidently, the prayers for damages and injunction are predicated on corporate
matters. It should be stressed at this point that the subject causes of action stated in
the complaint, from the alleged illegal notices of meetings to the election and tenure
of officers, are matters covered by the AFPSLAI By-Laws. Specifically, on the
allegation that the plaintiff was ousted and removed in a votation by the AFPSLAI
Board of Directors, whether rightly or without just cause, this is covered by the
AFPSLAI By-Laws, Sec. 3, that: "All executive officers shall hold office at the
pleasure of the Board, and all other officers, agents and employees shall hold office
 for such time as it is provided for in their contract of employment and if none is
provided, at the pleasure of the Board (emphasis supplied).

The specific law, P.D. No. 902-A, defines and vests jurisdiction over corporate matter
in the Securities and Exchange Commission in no uncertain terms, Section 3, to be
"absolute jurisdiction, supervision and control over all corporations." In the case at
bar, AFPSLAI is a corporation and the alleged causes of action in the complaint are
clearly corporate matters.

The damages sought as a consequence of the alleged corporate wrongs committed

by the defendants becomes merely incidental. The other relief for injunction prayed
for is also within the jurisdictional power of the SEC (Sec. 6, P.D. 902-A).

In resume therefore, the very allegations in the complaint being indubitably corporate
matters militate against the jurisdiction of this Court over the instant case. 10

On 18 November 1991, petitioner moved to reconsider the 14 November 1991 order arguing, among
others, that "since the case under Amended Complaints impleads parties-defendant not in any way
connected with the AFPSLAI, any apparent corporate element in the case is swept
away." 11 Respondents filed an opposition thereto, and on 10 February 1992, the court a quo denied
the motion for reconsideration as well as the motion to dismiss the amended complaint earlier filed
by defendants Cuisia, et al., holding that —

. . . the fact remains that the substance and essence of the complaint against the
original 11 defendants in both the first and the amended complaint are the same —
that the said defendants are being held civilly liable for their corporate acts in the
AFPSLAI.

Consequently, the Court finds no reason to change its lack of resolution dismissing
the instant complaint FOR LACK OF JURISDICTION insofar as the original
defendants are concerned, namely: Lisandro C. Abadia, Rene R. Cruz, Victor M.
Punzalan, Lysias C. Cabusao, Jose O. Barnuevo, Jose M. Foronda, Lamberto
Torres, Edgar C. Galvante, Emerson C. Tangan, Primitivo A. Somera, Benjamin N.
Santos, Sr.

. . . . Thus, where the defendants Abadia, et al., were dismissed from the case, it
does not necessarily follow that the whole case, specifically the amended complaint,
is also dismissed as the allegations therein insofar as the defendants Cuisia, et al. . .
. . are concerned, are within the context of the jurisdiction of this Court. The matter
does not only present a case of splitting the causes of action, which is frowned upon,
but a matter of jurisdiction. This Court has no jurisdiction on corporate matters as in
the case of defendants Abadia, et al. . . . . but no so, however, in the case of
defendants Cuisia, et al . . . . where their alleged acts stated in the amended
complaint fall within the jurisdiction of the Court. 12

Petitioner now comes to us on appeal praying for the reversal of the orders of the court dated 14
November 1991 and 10 February 1992 insofar as the case against herein respondents is concerned.

The allegations against herein respondents in the amended complaint unquestionably reveal intra-
corporate controversies cleverly concealed, although unsuccessfully, by use of civil law terms and
phrases. The amended complaint impleads herein respondents who, in their capacity as directors of
AFPSLAI, allegedly convened an illegal meeting and voted for the reorganization of management
resulting in petitioner's ouster as corporate officer. While it may be said that the same corporate acts
also give rise to civil liability for damages, it does not follow that the case is necessarily taken out of
the jurisdiction of the SEC as it may award damages which can be considered consequential in the
exercise of its adjudicative powers. Besides, incidental issues that properly fall within the authority of
a tribunal may also be considered by it to avoid multiplicity of actions. Consequently, in intra-
corporate matters such as those affecting the corporation, its directors, trustees, officers,
shareholders, the issue of consequential damages may just as well be resolved and adjudicated by
the SEC.

Moreover, mere allegations of violation of the provisions of the Civil Code on human relations do not
necessarily call for the application of the provisions of the Civil Code in place of AFPSLAI By-Laws.
In De Tavera v. Philippine Tuberculosis Society, Inc., 13 ruled —

Petitioner cannot likewise seek relief from the general provisions on the New Civil
Code on Human Relations nor from the fundamental principles of the New
Constitution on preservation of human dignity. While these provisions present some
basic principles that are to be observed for the rightful relationship between human
beings and the stability of social order, these are merely guides for human conduct in
the absence of specific legal provisions and definite contractual stipulations. In the
case at bar, the Code of By-Laws of the Society contains a specific provision
governing the term of office of petitioner. The same necessarily limits her right under
the new Civil Code and the New Constitution upon acceptance of the appointment.

The determination of the rights of petitioner arising from the alleged illegal convening of the meeting
of AFPSLAI Board of Directors and his subsequent ouster from corporate offices as a result of the
voting for the reorganization of management are obviously intra-corporate controversies subject to
the jurisdiction of SEC as provided in P.D. No. 902-A which states:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and
Exchange Commission over corporations . . . it shall have original and exclusive
jurisdiction to hear and decide cases involving . . . . (b) Controversies arising out of
intra-corporate . . . relations . . . . (c) Controversies in the election or appointment of
directors, trustees, officers or managers of such corporations . . . .

The same may also be said of petitioner's prayer for damages, considering that his right thereto
either depends on, or is inextricably linked with, the resolution of the corporate controversies. For
instance, the prayer for moral damages is grounded on "defendants' gross and evident bad faith,
insidious machinations and conspirational acts, false and derogatory misinterpretations and
imputations against plaintiff and other malevolent and illegal acts calculated to realize and
accomplish the threatened illegal removal of plaintiff from his positions aforesaid . . . .;" 14 while the
prayer for exemplary damages is dependent on alleged respondents' "concerted illegal effort to
maliciously set him up for, and fraudulently consummate, his illegal ouster from his positions in the
AFPSLAI . . . ." 15

Even the supposed allegations of violation of the provisions of the Civil Code on human relations, as
in par. 7 of the Complaint which states that "certain parties, including defendant SANTOS,
"masterminded a plot to degrade plaintiff and to denigrate his accomplishments in the AFPSLAI by
spreading false and derogatory rumors against plaintiff," are all treated in the complaint as mere
components of the general scheme allegedly perpetrated by respondents as directors to oust him
from his corporate offices, and not as causes of action independent of intra-corporate matters.
Moreover, the injunction prayed for in the complaint is within the jurisdiction of SEC pursuant to Sec.
6, par. (a), of P.D. 902-A which states: "(i)n order to effectively exercise such jurisdiction, the
Commission shall possess the following powers . . . . (t)o issue preliminary or permanent injunction,
whether prohibitory or mandatory, in all cases in which it has jurisdiction . . . ."

In his Supplemental Appeal by Certiorari With Prayer for Issuance of Preliminary Injunction or
Restraining Order, 16 petitioner refers to allegations in pars. 7, 11, 15 and 16 17 of the complaint which
supposedly disclose that the case is within the jurisdiction of the court a quo. Petitioner wilily, but
unavailingly, tries to mangle his complaint, dismember its parts, and present to us only those
paragraphs which he considers are beyond the jurisdiction of SEC.

We are not distracted by this artful maneuver. In giving utmost importance to these paragraphs and
in treating them as his strongest arguments to support his position, petitioner unwittingly exposes his
achilles' heel. These paragraphs themselves show that the allegations of violations of the rules on
human relations also fall within the jurisdiction of SEC because they are treated merely as
ingredients of "malevolent and illegal acts calculated to realize and accomplish the threatened illegal
removal of plaintiff from his (corporate) positions."

In sum, what petitioner filed against respondents before the court a quo was an intra-corporate case
under the guise of an action for injunction and damages.

Petitioner also seeks reversal of the assailed orders on the alleged procedural infirmity that "despite
the filing of an Amended Complaint before a responsive pleading has been filed, which superseded
the original complaint and rendered respondents' Motion to Dismiss the original complaint functus
oficio, the Court a quo without first admitting the Amended Complaint and merely upon respondents'
Omnibus Motion . . . dismissed the case as against respondents."

First of all, under Sec. 2, Rule 10, Rules of Court, the filing of an amended complaint before answer
is an undisputed right of plaintiff, hence, there is no need for the court to allow its admission. 18 Quite
obviously, any statement admitting such amended complaint may reasonably be considered a
superfluity. Considered in this light, the court a quo could not be faulted for not making any
statement admitting the amended complaint.

It appears however that the Omnibus Motion (seeking dismissal of the Amended Complaint) was
already filed when the court a quo rendered the order of 14 November 1991 resolving, not the
Omnibus Motion, but the Urgent Motion to Dismiss (seeking dismissal of the original Complaint).
Ordinarily, the filing of the Omnibus Motion should render the Urgent Motion to Dismiss
superseded. 19 Petitioner thus posits that the court a quo was precluded from acting not only on the
Urgent Motion to Dismiss because it was deemed superseded, but also on the Omnibus Motion
because no hearing was had thereon thus leaving the assailed orders without basis to lean on.
Where in this case, however, the Omnibus Motion already comprehended the lone issue raised in
the Urgent Motion to Dismiss (i.e., the court has no jurisdiction over intra-corporate matters) and
upon which ground the court a quo dismissed the case against respondents, the previous
hearing 20 on the Urgent Motion to Dismiss may cure the defect of absence of hearing on the
Omnibus Motion but only insofar as said issue was concerned. What is important is that petitioner
was heard on that issue, hence, due process was observed. Moreover, the Omnibus Motion made
an express statement adopting the arguments in the Urgent Motion to Dismiss. While this practice of
adopting another pleading is not necessarily encouraged, 21 the peculiar circumstances of this case
demand the application of liberality. Besides, even if the Urgent Motion to Dismiss may have been
deemed superseded, the Court is not precluded from considering the same which still remains in the
record. The withdrawal of motions or pleadings from the record cannot easily be implied. 22

The foregoing notwithstanding, remedial rights and privileges under the Rules of Court are utterly
useless in a forum that has no jurisdiction over the case. It should be noted that the court a
quo dismissed the case against respondents on the ground that it has no jurisdiction over the subject
matter thereof which mainly involves intra-corporate controversies.

Jurisdiction over subject matter is essential in the sense that erroneous assumption thereof may put
at naught whatever proceedings the court might have had. Hence, even on appeal, and even if the
parties do not raise the issue of jurisdiction, the reviewing court is not precluded from ruling that it
has no jurisdiction over the case. It is elementary that jurisdiction is vested by law and cannot be
conferred or waived by the parties or even by the judge. It is also irrefutable that a court may at any
stage of the proceedings dismiss the case for want of jurisdiction. For this matter, the ground of lack
of jurisdiction in dismissing a case is not waivable. Hence, the last sentence of Sec. 2, Rule 9, Rules
of Court, expressly states: "Whenever it appears that the court has no jurisdiction over the subject
matter, it shall dismiss the action."

We note that Sec. 2, Rule 9 uses the word "shall," leaving the court no choice under the given
situation but to dismiss the case. The same Rule also uses the phrase "whenever it appears," which
means at anytime after the complaint or amended complaint is filed, because the lack of jurisdiction
may be apparent from the allegations therein. Hence, from the foregoing, even if no answer or
motion to dismiss is filed the court may dismiss the case for want of jurisdiction. In this sense,
dismissal for lack jurisdiction may be ordered by the court motu propio. Applying this notion to the
case at bar, with the dismissal of the case against respondents for lack of jurisdiction, it then
becomes inconsequential whether the court acted on the Urgent Motion to Dismiss or on the
Omnibus Motion without the requisite notice as provided in Secs. 4 and 6 of Rule 15 of the Rules of
Court. The determination of lack of jurisdiction over respondents being apparent from the face of the
amended complaint, the defect of want of prior notice and hearing of the Omnibus Motion could not
by itself confer jurisdiction upon the court a quo.

WHEREFORE, finding no reversible error committed by the court a quo, the instant petition is
DISMISSED and the assailed orders of 14 November 1991 and 10 February 1992 are AFFIRMED.
Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Nocon, Quiason, Puno
and Vitug, JJ., concur.

Melo, J. took no part.

G.R. No. 118088 November 23, 1995

MAINLAND CONSTRUCTION, CO., INC., and/or LUCITA LU CARABUENA, ROBERT L.

CARABUENA, ELLEN LU CARABUENA, and MARTIN LU, petitioners,
vs.
MILA MOVILLA, ERNESTO MOVILLA, JR., MILA JUDITH C. MOVILLA, JUDE BRIX C.
MOVILLA, JONARD ELLERY C. MOVILLA, AND MAILA JONAH M. QUIMBO, surviving heirs of
ERNESTO MOVILLA, and THE HONORABLE COMMISSIONER of the NATIONAL LABOR
RELATIONS COMMISSION-5TH DIVISION, respondents.

HERMOSISIMA, JR., J.:

Petitioners urge this Court to set aside the Decision of the National Labor Relations Commission
(NLRC), dated May 30, 1994, in NLRC-CA No.
M-000949-92 for having been rendered with grave abuse of discretion amounting to lack of
jurisdiction. This reversed the decision of the Labor Arbiter in case No. RAB-11-10-99883-91.
Petitioners' motion for reconsideration of the NLRC decision was denied in a Resolution, dated
August 31, 1994.

Mainland Construction Co., Inc. is a domestic corporation, duly organized and existing under
Philippine laws, having been issued a certificate of registration by the Securities and Exchange
Commission (SEC) on July 26, 1977, under Registry Number 74691. Its principal line of business is
the general construction of roads and bridges and the operation of a service shop for the
maintenance of equipment. Respondents on the other hand, are the surviving heirs of complainant,
Ernesto Movilla, who died during the pendency of the action with the Labor Arbiter.

Records show that Ernesto Movilla, who was a Certified Public Accountant during his lifetime, was
hired as such by Mainland in 1977. Thereafter, he was promoted to the position of Administrative
Officer with a monthly salary of P4,700.00.1

Ernesto Movilla, recorded as receiving a fixed salary of P4,700.00 a month, was registered with the
Social Security System (SSS) as an employee of petitioner Corporation. His contributions to the
SSS, Medicare and Employees Compensation Commission (ECC) were deducted from his monthly
earnings by his said employer.2

On April 12, 1987, during petitioner corporation's annual meeting of stockholders, the following were
elected members of the Board of Directors, viz.: Robert L. Carabuena, Ellen L. Carabuena, Lucita Lu
Carabuena, Martin G. Lu and Ernesto L. Movilla.

On the same day, an organizational meeting was held and the Board of Directors elected Ernesto
Movilla as Administrative Manager.3 He occupied the said position up to the time of his death.

On April 2, 1991, the Department of Labor and Employment (DOLE) conducted a routine inspection
on petitioner corporation and found that it committed such irregularities in the conduct of its business
as:

1. Underpayment of wages under R.A. 6727 and RTWPB-XI-01;

2. Non-implementation of Wage Order No. RTWPB-XI-02;

3. Unpaid wages for 1989 and 1990;

4. Non-payment of holiday pay and service incentive leave pay; and

5. Unpaid 13th month pay (remaining balance for 1990).4

On the basis of this finding, petitioner corporation was ordered by DOLE to pay to its thirteen
employees, which included Movilla, the total amount of P309,435.89, representing their salaries,
holiday pay, service incentive leave pay differentials, unpaid wages and 13th month pay.

All the employees listed in the DOLE's order were paid by petitioner corporation, except Ernesto
Movilla.
On October 8, 1991, Ernesto Movilla filed a case against petitioner corporation and/or Lucita,
Robert, and Ellen, all surnamed Carabuena, for unpaid wages, separation pay and attorney's fees,
with the Department of Labor and Employment, Regional Arbitration, Branch XI, Davao City.

On February 29, 1992, Ernesto Movilla died while the case was being tried by the Labor Arbiter and
was promptly substituted by his heirs, private respondents herein, with the consent of the Labor
Arbiter.

The Labor Arbiter rendered judgment on June 26, 1992, dismissing the complaint on the ground of
lack of jurisdiction. Specifically, the Labor Arbiter made the following ratiocination:

It is clear that in the case at bar, the controversy presented by complainant is intra-
corporate in nature and is within the jurisdiction of the Securities and Exchange
Commission, pursuant to P.D. 902-A (Phil. School of Business Administration, et al.
v. Leano, G.R. No. L-58468, February 24, 1984; Dy et al. v. NLRC, et al., G.R. No. L-
68544, October 27, 1986). What Movilla is claiming against respondents are his
alleged unpaid salaries and separation pay as Administrative Manager of the
corporation for which position he was appointed by the Board of Directors. His claims
therefore fall under the jurisdiction of the Securities and Exchange Commission
because this is not a simple labor problem; but a matter that comes within the area of
corporate affairs and management, and is in fact a corporate controversy in
contemplation of the Corporation Code. (Fortune Cement Corporation v. NLRC, et
al., G.R. No. 79762, January 24, 1991).5

Aggrieved by this decision, respondents appealed to the National Labor Relations Commission
(NLRC). The NLRC ruled that the issue in the case was one which involved a labor dispute between
an employee and petitioner corporation and, thus, the NLRC had jurisdiction to resolve the case.
The dispositive portion of the NLRC decision reads:

WHEREFORE, the assailed decision is Reversed and Set Aside. Respondents are
ordered to pay the heirs of complainant the following:

1. Unpaid salaries from January 1989 to September 1991 in the sum of P155,100.00;

2. Separation pay in the sum of P65,800.00;

3. Moral damages in the sum of P10,000.00;

4. Indemnity in the sum of P3,000.00; and,

5. Attorney's fees equivalent to 10% of the total award.6

The pivotal issue in this case is which of the two agencies of the government — the NLRC or the
SEC — has jurisdiction over the controversy.

As we stated earlier, it is of course the contention of petitioners that the NLRC committed grave
abuse of discretion when it nullified the decision of the Labor Arbiter which dismissed the complaint
of Movilla for unpaid wages, separation pay and attorney's fees on the ground of lack of jurisdiction.
Petitioners take the position that, since Ernesto Movilla was a corporate officer, the controversy as to
his compensation is within the jurisdiction of the SEC as mandated by P.D. 902-A and not with the
NLRC.
We find for the respondents, it appearing that petitioners' contention is bereft of merit.

In order that the SEC can take cognizance of a case, the controversy must pertain to any of the
following relationships: a) between the corporation, partnership or association and the public; b)
between the corporation, partnership or association and its stockholders, partners, members or
officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or
license to operate is concerned; and d) among the stockholders, partners or associates
themselves.7 The fact that the parties involved in the controversy are all stockholders or that the
parties involved are the stockholders and the corporation does not necessarily place the dispute
within the ambit of the jurisdiction of SEC. The better policy to be followed in determining jurisdiction
over a case should be to consider concurrent factors such as the status or relationship of the parties
or the nature of the question that is the subject of their controversy.8 In the absence of any one of
these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that
every conflict between the corporation and its stockholders would involve such corporate matters as
only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers.9

In the case at bench, the claim for unpaid wages and separation pay filed by the complainant against
petitioner corporation involves a labor dispute. It does not involve an intra-corporate matter, even
when it is between a stockholder and a corporation. It relates to an employer-employee relationship
which is distinct from the corporate relationship of one with the other. Moreover, there was no
showing of any change in the duties being performed by complainant as an Administrative Officer
and as an Administrative Manager after his election by the Board of Directors. What comes to the
fore is whether there was a change in the nature of his functions and not merely the nomenclature or
title given to his job.

Indeed, Ernesto Movilla worked as an administrative officer of the company for several years and
was given a fixed salary every month. To further sustain this assertion Movilla also submitted a joint
affidavit executed by Juanito S. Malubay and Delia S. Luciano, Project Engineer and Personnel-In-
Charge, respectively, of petitioner corporation, attesting that they personally knew Movilla and that
he was employed in the company. A Premium Certification issued by an authorized representative of
petitioners was also presented to show his actual monthly earnings as well as his monthly
contributions to the SSS, Medicare and ECC.10 Movilla's registration in the SSS by petitioner
corporation added strength to the conclusion that he was petitioner corporation's employee as
coverage by the said law is predicated on the existence of an employer-employee
relationship. 11 Furthermore, petitioner corporation failed to present evidence which showed that,
after his election as Administrative Manager, he was excluded from the coverage of the SSS,
Medicare and ECC.

He also presented, appearing to be relevant to the issue, the result of the investigation conducted by
DOLE which found that petitioner corporation has transgressed several labor standard laws against
its employees.

As correctly ruled by the NLRC:

The claims for unpaid salaries/monetary benefits and separation pay, are not a
corporate conflict as respondents presented them to be. If complainant is not an
employee, respondent should have contested the DOLE inspection report, What they
did was to exclude complainant from the order of payment . . . and worse, he was not
both given responsibilities and paid his salaries for the succeeding months . . . . This
is a clear case of constructive dismissal without due process . . .12
The existence of an employer-employee relationship is a factual question and public respondent's
findings are accorded great weight and respect as the same are supported by substantial
evidence.13 Hence, we uphold the conclusion of public respondent that Ernesto Movilla was an
employee of petitioner corporation.

It is pertinent to note that petitioner corporation is not prohibited from hiring its corporate officers to
perform services under a circumstance which will make him an employee.14 Moreover, although a
director of a corporation is not, merely by virtue of his position, its employee, said director may act as
an employee or accept duties that make him also an employee.15

Since Ernesto Movilla's complaint involves a labor dispute, it is the NLRC, under Article 217 of the
Labor Code of the Philippines, which has jurisdiction over the case at bench.

WHEREFORE, the petition is DISMISSED for lack of showing of any grave abuse of discretion on
the part of public respondent NLRC. The assailed decision of public respondent is thus AFFIRMED.

SO ORDERED.

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

G.R. No. 107660 January 2, 1995

RAMON C. LOZON, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and PHILIPPINE AIRLINES,
INC., respondents.

VITUG, J.:

Petitioner Ramon C. Lozon, a certified public accountant, was a Senior

Vice-President-Finance of Private respondent Philippine Airlines, Inc. ("PAL"), when his services
were terminated on 19 December 1990 in the aftermath of the much-publicized "two-billion-peso
PALscam." Lozon started to work for the national carrier on 23 August 1967 and, for twenty-three
years, steadily climbed the corporate ladder until he became one of its vice-presidents.1

His termination from the service was spawned by a letter sent some time in June 1990 by a member
of PAL's board of directors, then Solicitor General Francisco Chavez, to PAL President Dante
Santos. Chavez demanded an investigation of twenty-three irregularities allegedly committed by
twenty-two high-ranking PAL officials. Among these officials was petitioner; he had been
administratively charged by Romeo David, Senior Vice-President for Corporate Services and
Logistics Group, for his (Lozon) purported involvement in four cases, labeled "Goldair,"
"Autographics," "Big Bang of 1983" and "Middle
East."2 Pending the investigation of these cases by a panel3 constituted by then President Corazon
C. Aquino, petitioner was placed under preventive suspension.

In the organizational meeting of the PAL board of directors on 19 October 1990 which occasion
Feliciano R. Belmonte, Jr., was elected chairman of the board while Dante G. Santos was
designated president and chief executive officer,4 the board deferred action on the election or
appointment of some senior officers of the company who, like petitioner, had been charged with
various offenses.

On 18 January 1991, the PAL board of directors issued two resolutions relative to the investigation
conducted by the presidential investigating panel in the "Autographics" and "Goldair" cases. In
"Autographics," petitioner was charged, along with three other officials,5 with "gross inefficiency,
negligence, imprudence, mismanagement, dereliction of duty, failure to observe and/or implement
administrative and executive policies" and with the "concealment, or cover-up and prevention of the
seasonal discovery of the anomalous transactions" had with Autographics, Inc., resulting in, among
other things, an overpayment by PAL to Autographics in the amount of around P12 million. Petitioner
was forthwith considered "resigned from the service . . . for loss of confidence and for acts inimical to
the interests of the company."6 A similar conclusion was arrived at by the PAL board of directors with
regard to petitioner in the "Goldair" case where he, together with six other PAL officials,7 were
charged with like "offenses" that had caused PAL's defraudation by Goldair, PAL's general sales
agent in Australia, of 14.6 million Australian dollars.8

Aggrieved by the action taken by the PAL board of directors, petitioner, on 26 June 1991 filed with
the National Labor Relations Commission ("NLRC") in Manila a complaint (docketed NLRC-NCR
Case No. 00-06-03684-91) for illegal dismissal and for reinstatement, with backwages and "fringe
benefits such as Vacation leave, Sick leave, 13th month pay, Christmas Bonus, Medical Expenses,
car expenses, trip pass entitlement, etc., plus moral damages of P40 Million, exemplary damages of
P10 Million and reasonable attorney's fees."9

On 09 August 1991, 10 the PAL board of directors also held petitioner as "resigned from the
company" for loss of confidence and for acts inimical to the interests of the company in the "Big
Bang of 1983" case for his alleged role in the irregularities that had precipitated the write-down
(write-off) of assets amounting to P553 million from the books and financial statements of PAL. 11 In
the "Middle East" case, the PAL board of directors, on the anomalous administration of commercial
marketing arrangements in which PAL had lost an estimated P120 million. 12

PAL defended the validity of petitioner's dismissal before the Labor Arbiter. It questioned at the same
time the jurisdiction of the NLRC, positing the theory that since the investigating panel was
constituted by then President Aquino, said panel, along with the PAL board of directors, became "a
parallel arbitration unit" which, in legal contemplation, should be deemed to have substituted for the
NLRC. Thus, PAL averred, petitioner's recourse should have been to appeal his case to the Office of
the President. 13 On the other hand, petitioner questioned the authority of the panel to conduct the
investigation, asseverating that the charges leveled against him were purely administrative in nature
that could have well been ventilated under the grievance procedure outline in PAL's Code of
Discipline.

On 17 March 1992, Labor Arbiter Jose G. de Vera rendered a decision ruling for petitioner.14 The
decretal portion of the decision read:

WHEREFORE, all the foregoing premises being considered, judgment is hereby

rendered ordering the respondent Philippine Airlines, Inc., to reinstate the
complainant to his former position with all the rights, privileges, and benefits
appertaining thereto plus backwages, which as of March 15, 1992 already amounted
to P2,632,500.00, exclusive of fringes. Further, the respondent company is ordered
to pay complainant as follows: P5,000.00 as moral damages; P1,000,000.00 as
exemplary damages, and attorney's fees equivalent to ten percent (10%) of all of the
foregoing awards.
 SO ORDERED. 15

A day after promulgating the decision, the labor arbiter issued a writ of execution. PAL filed a motion
to quash the writ petitioner promptly opposed. After the labor arbiter had denied the motion to quash,
PAL filed a petition for injunction with the NLRC (docketed NLRC IC Case No. 00261-92). No
decision was rendered by NLRC on this petition. 16

Meanwhile, PAL appealed the decision of the labor arbiter by filing a memorandum on
appeal, 17 assailing, once again, the jurisdiction of the NLRC but this time on the ground that the
issue pertaining to the removal or dismissal of petitioner, a corporate officer, was within the exclusive
and original jurisdiction of the Securities and Exchange Commission ("SEC"). Petitioner interposed a
partial appeal praying for an increase in the amount of moral and exemplary damages awarded by
the labor arbiter. 18

On 24 July 1992, the NLRC rendered a decision (in NLRC NCR Case No. 00-06-03684-
91) 19 dismissing the case on the strength of PAL's new argument on the issue of
jurisdiction. 20 Petitioner's motion for reconsideration was denied by the NLRC.

The instant petition for certiorari filed with this Court raises these issues: (a) Whether or not the
NLRC has jurisdiction over the illegal dismissal case, and (b) on the assumption that the SEC has
that jurisdiction, whether or not private respondent is estopped from raising NLRC's lack of
jurisdiction over the controversy.

We sustain NLRC's dismissal of the case.

Presidential Decree No. 902-A confers on the SEC original and exclusive jurisdiction to hear and
decide controversies and cases involving —

a. Intra-corporate and partnership relations between or among the corporation,

officers and stockholders and partners, including their elections or appointments;

b. State and corporate affairs in relation to the legal existence of corporations,

partnerships and associations or to their franchises; and

c. Investors and corporate affairs, particularly in respect of devices and schemes,

such as fraudulent practices, employed by directors, officers, business associates,
and/or other stockholders, partners, or members of registered firms; as well as

d. Petitions for suspension of payments filed by corporations, partnerships or

associations possessing sufficient property to cover all their debts but which foresee
the impossibility of meeting them when they respectively fall due, or possessing
insufficient assets to cover their liabilities and said entities are upon petition or motu
propio, placed under the management of a Rehabilitation Receiver or Management
Committee.

Specifically, in intra-corporate matters concerning the election or appointment of officers of a

corporation, the decree provides:

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

xxx xxx xxx

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

managers of such corporations, partnerships or association.

Petitioner himself admits that vice presidents are senior members of

management, 21 whose designations are no longer than just by means of ordinary promotions. In his
own case, petitioner has been elected to the position of Senior Vice-President — Finance Group by
PAL's board of directors at its organizational meeting held on 20 October 1989 pursuant to the By-
laws, 22 under which, he would serve for a term of one year and until his successor shall have been
elected and qualified. 23 Petitioner, for reasons already mentioned, did not get to be re-elected
thereafter. 24

In Fortune Cement Corporation v. NLRC, 25 the Court has quoted with approval the Solicitor
General's contention that "a corporate officer's dismissal is always a corporate act and/or intra-
corporate controversy and that nature is not altered by the reason or wisdom which the Board of
Directors may have in taking such action." Not the least insignificant in the case at bench is that
petitioner's dismissal is intertwined with still another intra-corporate affair, earlier so ascribed as the
"two-billion-peso PALscam," that inevitably places the case under the specialized competence of the
SEC and well beyond the ambit of a labor arbiter's normal jurisdiction under the general provisions of
Article 217 of the Labor Code. 26

Petitioner contends that the jurisdiction of the SEC excludes its cognizance over claims for vacation
and sick leaves, 13th month pay, Christmas bonus, medical expenses, car expenses, and other
benefits, as well as for moral damages and attorney's fees. 27 Dy v. NLRC28 categorically states that
the question of remuneration being asserted by an officer of a corporation is "not a simple labor
problem but a matter that comes within the area of corporate affairs and management, and is in fact,
a corporate controversy in contemplation of the Corporation Code." With regard to the matter of
damages, in Andaya v.
Abadia 29 where, in a complaint filed before the Regional Trial Court, the president and general
manager of the Armed Forces and Police Savings and Loan Association ("AFPSLAI") questioned his
ouster from the stewardship of the association, this Court, in dismissing the petition assailing the
order of the trial court which ruled that SEC, not the regular courts, had jurisdiction over the case,
has said:

The allegations against herein respondents in the amended complaint

unquestionably reveal intra-corporate controversies cleverly conceals, although
unsuccessfully, by use of civil law terms and phrases. The amended complaint
impleads herein respondents who, in their capacity as directors of AFPSLAI,
allegedly convened an illegal meeting and voted for the reorganization of
management resulting in petitioner's ouster as corporate officer. While it may be said
that the same corporate acts also give rise to civil liability for damages, it does not
follow that the case is necessarily taken out of the jurisdiction of the SEC as it may
award damages which can be considered consequential in the exercise of its
adjudicative powers. Besides, incidental issues that properly fall within the authority
of a tribunal may also be considered by it to avoid multiplicity of
actions. Consequently, in intra-corporate matters such as those affecting the
corporation, its directors, trustees, officers, shareholders, the issue of consequential
 damages may just as well be resolved and adjudicated by the SEC. (Emphasis
supplied.)

We here reiterate the above holdings for, indeed, controversies within the purview of Section 5 of
P.D. No. 902-A must not be so constricted as to deny to the SEC the sound exercise of its expertise
and competence in resolving all closely related aspects of such corporate disputes.

Petitioner maintains that PAL is estopped, nevertheless, from questioning the jurisdiction of the
NLRC considering that PAL did not hold the dispute to be intra-corporate until after the case had
already been brought on appeal to the NLRC.

In the first place, there would not be much basis to indicate that PAL was "effectively barred by
estoppel." 30 As early as the initial stages of the controversy PAL had already raised the issue of
jurisdiction albeit mistakenly at first on the ground that petitioner's recourse was an appeal to the
Office of the President. The error could not alter the fact that PAL did question even then the
jurisdiction of both the labor arbiter and the NLRC.

It has long been the established rule, moreover, that jurisdiction over a subject matter is conferred by
law, 31 and the question of lack of jurisdiction may be raised at anytime even on appeal. 32 In the
recent case of La Naval Drug Corporation vs. Court of Appeals, G.R. No. 103200, 31 August 1994,
this Court said:

Lack of jurisdiction over the subject matter of the suit is yet another matter.
Whenever it appears that the court has no jurisdiction over the subject matter, the
action shall be dismissed (Section 2, Rule 9, Rules of Court). This defense may be
interpose at any time, during appeal (Roxas vs. Rafferty, 37 Phil. 957) or even after
final judgment (Cruzcosa vs. Judge Concepcion, et al., 101 Phil. 146). Such is
understandable, as this kind of jurisdiction is conferred by law and not within the
courts, let alone the parties, to themselves determine or conveniently set aside.
In People vs. Casiano (111 Phil. 73, 93-94), this Court, on the issue of estoppel,
held:

"The operation of the principle of estoppel on the question of

jurisdiction seemingly depends upon whether the lower court actually
had jurisdiction or not. If it had no jurisdiction, but the case was tried
and decided upon the theory that it had jurisdiction, the parties are
not barred, on appeal, from assailing such jurisdiction, for the same
"must exist as a matter of law, and may not be conferred by consent
of the parties or by estoppel" (5 C.J.S., 861-863). However, if the
lower court had jurisdiction, and the case was heard and decided
upon a given theory, such, for instance, as that the court had no
jurisdiction, the party who induced it to adopt such theory will not be
permitted, on appeal, to assume a inconsistent position — that the
lower court had jurisdiction. Here, the principle of estoppel applies.
The rule that jurisdiction is conferred by law, and does not depend
upon the will of the parties, has no bearing thereon."

Petitioner points to "PAL's scandalous duplicity" in questioning the jurisdiction of the NLRC in this
particular controversy while upholding it (NLRC's jurisdiction) in "Robin Dui v. Philippine Airlines"
(Case No. 00-4-20267) pending before the Commission. We need not delve into whether or not
PAL's conduct does indeed smack of opportunities; suffice it to say that Robin Dui is entirely an
independent and separate case and, more than that, it is not before us in this instance.
WHEREFORE, the herein petition for certiorari is DISMISSED, and the decision appealed from is
AFFIRMED, without prejudice to petitioner's seeking, if circumstances permit, a recourse in the
proper forum. No costs.

SO ORDERED.

Bidin, Romero and Melo, JJ., concur.

Feliciano, J., is on leave.

G.R. No. 121143 January 21, 1997

PURIFICACION G. TABANG, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PAMANA GOLDEN CARE MEDICAL
CENTER FOUNDATION, INC., respondents.

REGALADO, J.:

This is a petition for certiorari which seeks to annul the resolution of the National Labor Relations
Commission (NLRC), dated June 26, 1995, affirming in toto the order of the labor arbiter, dated April
26, 1994, which dismissed petitioner's complaint for illegal dismissal with money claims for lack of
jurisdiction.

The records show that petitioner Purificacion Tabang was a founding member, a member of the
Board of Trustees, and the corporate secretary of private respondent Pamana Golden Care Medical
Center Foundation, Inc., a non-stock corporation engaged in extending medical and surgical
services.

On October 30, 1990, the Board of Trustees issued a memorandum appointing petitioner as Medical
Director and Hospital Administrator of private respondent's Pamana Golden Care Medical Center in
Calamba, Laguna.

Although the memorandum was silent as to the amount of remuneration for the position, petitioner
claims that she received a monthly retainer fee of five thousand pesos (P5,000.00) from private
respondent, but the payment thereof was allegedly stopped in November, 1991.

As medical director and hospital administrator, petitioner was tasked to run the affairs of the
aforesaid medical center and perform all acts of administration relative to its daily operations.

On May 1, 1993, petitioner was allegedly informed personally by Dr. Ernesto Naval that in a special
meeting held on April 30, 1993, the Board of Trustees passed a resolution relieving her of her
position as Medical Director and Hospital Administrator, and appointing the latter and Dr. Benjamin
Donasco as acting Medical Director and acting Hospital Administrator, respectively. Petitioner
averred that she thereafter received a copy of said board resolution.

On June 6, 1993, petitioner filled a complaint for illegal dismissal and non-payment of wages,
allowances and 13th month pay before the labor arbiter.
Respondent corporation moved for the dismissal of the complaint on the ground of lack of jurisdiction
over the subject matter. It argued that petitioner's position as Medical Director and Hospital
Administrator was interlinked with her position as member of the Board of Trustees, hence, her
dismissal is an intra-corporate controversy which falls within the exclusive jurisdiction of the
Securities and Exchange Commission (SEC).

Petitioner opposed the motion to dismiss, contending that her position as Medical Director and
Hospital Administrator was separate and distinct from her position as member of the Board of
Trustees. She claimed that there is no intra-corporate controversy involved since she filed the
complaint in her capacity as Medical Director and Hospital Administrator, or as an employee of
private respondent.

On April 26, 1994, the labor arbiter issued an order dismissing the complaint for lack of jurisdiction.
He ruled that the case falls within the jurisdiction of the SEC, pursuant to Section 5 of Presidential
Decree No.
902-A. 1

Petitioner's motion for reconsideration was treated as an appeal by the labor arbiter who
consequently ordered the elevation of the entire records of the case to public respondent NLRC for
appellate review. 2

On appeal, respondent NLRC affirmed the dismissal of the case on the additional ground that "the
position of a Medical Director and Hospital Administrator is akin to that of an executive position in a
corporate ladder structure." hence, petitioner's removal from the said position was an intra-corporate
controversy within the original and exclusive jurisdiction of the SEC. 3

Aggrieved by the decision, petitioner filed the instant petition which we find, however, to be without
merit.

We agree with the findings of the NLRC that it is the SEC which has jurisdiction over the case at bar.
The charges against herein private respondent partake of the nature of an intra-corporate
controversy. Similarly, the determination of the rights of petitioner and the concomitant liability of
private respondent arising from her ouster as a medical director and/or hospital administrator, which
are corporate offices, is an intra-corporate controversy subject to the jurisdiction of the SEC.

Contrary to the contention of petitioner, a medical director and a hospital administrator are
considered as corporate officers under the by-laws of respondent corporation. Section 2(i), Article I
thereof states that one of the powers of the Board of Trustees is "(t)o appoint a Medical Director,
Comptroller/Administrator, Chiefs of Services and such other officers as it may deem necessary and
prescribe their powers and duties."4

The president, vice-president, secretary and treasurer are commonly regarded as the principal or
executive officers of a corporation, and modern corporation statutes usually designate them as the
officers of the corporation. 5 However, other offices are sometimes created by the charter or by-laws
of a corporation, or the board of directors may be empowered under the by-laws of a corporation to
create additional offices as may be necessary. 6 It has been held that an "office'' is created by the
charter of the corporation and the officer is elected by the directors or stockholders. 7 On the other
hand, an "employee" usually occupies no office and generally is employed not by action of the
directors or stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee. 8
In the case at bar, considering that herein petitioner, unlike an ordinary employee, was appointed by
respondent corporation's Board of Trustees in its memorandum of October 30, 1990, 9 she is
deemed an officer of the corporation. Perforce, Section 5(c) of Presidential Decree No. 902-A, which
provides that the SEC exercises exclusive jurisdiction over controversies in the election appointment
of directors, trustees, officers or managers of corporations, partnerships or associations, applies in
the present dispute. Accordingly, jurisdiction over the same is vested in the SEC, and not in the
Labor Arbiter or the NLRC.

Moreover, the allegation of petitioner that her being a member of the Board of Trustees was not one
of the considerations for her appointment is belied by the tenor of the memorandum itself. It states:
"We hope that you will uphold and promote the mission of our foundation," 10 and this cannot be
construed other than in reference to her position or capacity as a corporate trustee.

A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy, and the
nature is not altered by the reason or wisdom with which the Board of Directors may have in taking
such action. 11 Also, an intra-corporate controversy is one which arises between a stockholder and
the corporation. There is no distinction, qualification, nor any exemption whatsoever. The provision is
broad and covers all kinds of controversies between stockholders and corporations. 12

With regard to the amount of P5,000,00 formerly received by herein petitioner every month, the
same cannot be considered as compensation for her services rendered as Medical Director and
Hospital Administrator. The vouchers 13 submitted by petitioner show that the said amount was paid
to her by PAMANA, Inc., a stock corporation which is separate and distinct from herein private
respondent. Although the payments were considered advances to Pamana Golden Care, Calamba
branch, there is no evidence to show that the Pamana Golden Care stated in the vouchers refers to
herein respondent Pamana Golden Care Medical Center Foundation, Inc.

Pamana Golden Care is a division of Pamana, Inc., while respondent Pamana Golden Care Medical
Center Foundation, Inc. is a non-stock, non-profit corporation. It is stated in the memorandum of
petitioner that Pamana, Inc. is a stock and profit corporation selling pre-need plan for education,
pension and health care. The health care plan is called Pamana Golden Care Plan and the holders
are called Pamana Golden Care Card Holders or, simply, Pamana Members. 14

It is an admitted fact that herein petitioner is a retained physician of Pamana, Inc., whose patients
are holders of the Pamana Golden Care Card. In fact, in her complaint 15 filed before the Regional
Trial Court of Calamba, herein petitioner is asking among others, for professional fees and/or
retainer fees earned for her treatment of Pamana Golden Care card holders. 16 Thus, at most, said
vouchers can only be considered as proof of payment of retainer fees made by Pamana, Inc. to
herein petitioner as a retained physician of Pamana Golden Care.

Moreover, even assuming that the monthly payment of P5,000.00 was a valid claim against
respondent corporation, this would not operate to effectively remove this case from the jurisdiction of
the SEC. In the case of Cagayan de Oro Coliseum, Inc. vs. Office of the Minister of Labor and
Employment, etc., et al., 17 we ruled that "(a)lthough the reliefs sought by Chavez appear to fall under
the jurisdiction of the labor arbiter as they are claims for unpaid salaries and other remunerations for
services rendered, a close scrutiny thereof shows that said claims are actually part of the perquisites
of his position in, and therefore interlinked with, his relations with the corporation. In Dy, et
al., vs. NLRC, et al., the Court said: "(t)he question of remuneration involving as it does, a person
who is not a mere employee but a stockholder and officer, an integral part, it might be said, of the
corporation, is not a simple labor problem but a matter that comes within the area of corporate affairs
and management and is in fact a corporate controversy in contemplation of the Corporation Code."
WHEREFORE, the questioned resolution of the NLRC is hereby AFFIRMED, without prejudice to
petitioner's taking recourse to and seeking relief through the appropriate remedy in the proper forum.

SO ORDERED.

Romero, Puno, Mendoza and Torres, Jr., JJ., concur.

[G.R. No. L-58468. February 24, 1984.]

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, MANILA, ANTONIO M.

MAGTALAS, JOSE ARANAS, JUAN D. LIM, JOSE F. PERALTA and BENJAMIN P.
PAULINO, Petitioners, v. LABOR ARBITER LACANDOLA S. LEANO of the
National Labor Relations Commission and RUFINO R. TAN, Respondents.

De Santos, Balgos and Perez Law Office, for Petitioners.

The Solicitor General for respondent Arbiter.

Caparas, Ilagan, Alcantara & Gatmaytan Law Office for Private Respondent.

SYLLABUS

1. COMMERCIAL LAW; CORPORATION LAW; SECURITIES AND EXCHANGE

COMMISSION; JURISDICTION THEREOF VIS-A-VIS THE NATIONAL LABOR RELATIONS
COMMISSION; CASE AT BAR. — The jurisdiction of the Securities and Exchange
Commission (SEC) vis-a-vis the National Labor Relations Commission (NLRC) is in
issue. An intracorporate controversy would call for SEC jurisdiction. A labor dispute,
that of the NLRC.

2. ID.; ID.; INTRA-CORPORATE CONTROVERSIES; LEGALITY OF ELECTION OF

CORPORATE DIRECTORS, IN THE NATURE OF; CASE AT BAR. — Basically, therefore,
the question is whether the election of directors on August 1, 1981 and the election of
officers on September 5, 1981, which resulted in TAN’s failure to be re-elected, were
validly held. This is the crux of the question that TAN has raised before the SEC. Even
in his position paper before the NLRC, TAN alleged that the election on August 1, 1981
of the three directors was in contravention of the PSBA By-Laws providing that any
vacancy in the Board shall be filled by a majority vote of the stockholders at a meeting
specially called for the purpose. Thus, he concludes, the Board meeting on September
5, 1981 was tainted with irregularity on account of the presence of illegally elected
directors without whom the results could have been different. TAN invoked the same
allegations in his complaint filed with the SEC. So much so, that on December 17,
1981, the SEC (Case No. 2145) rendered a Partial Decision annulling the election of the
three directors and ordered the convening of a stockholders’ meeting for the purpose of
electing new members of the Board. 9 The correctness of said conclusion is not for us
to pass upon in this case. TAN was present at said meeting and again sought the
issuance of injunctive relief from the SEC. The foregoing indubitably show that,
fundamentally, the controversy is intra-corporate in nature.
3. ID.; ID.; SECURITIES AND EXCHANGE COMMISSION; JURISDICTION; ORIGINAL
AND EXCLUSIVE OVER INTRA-CORPORATE CONTROVERSIES UNDER PRESIDENTIAL
DECREE NO. 902-A; CASE AT BAR. — Presidential Decree No. 902-A vests in the
Securities and Exchange Commission original and exclusive jurisdiction to hear and
decide controversies involving the election of directors, officers, or managers of
corporations registered with the Commission, the relation between and among its
stockholders, and between them and the corporation. The instant case is not a case of
dismissal. The situation is that of a corporate office having been declared vacant, and of
TAN’s not having been elected thereafter. The matter of whom to elect is a prerogative
that belongs to the Board, and involves the exercise of deliberate choice and the faculty
of discriminative selection. Generally speaking, the relationship of a person to a
corporation, whether as officer or as agent or employee, is not determined by the
nature of the services performed, but by the incidents of the relationship as they
actually exist. (Bruce v. Travelers Ins. Co., 266 F2d 781, cited in 19 Am. Jur. 2d 526).

DECISION

MELENCIO-HERRERA, J.:

This Petition for Certiorari questions the jurisdiction of respondent Labor Arbiter over
the present controversy (No. NCR-9-20-81) involving private respondent-complainant,
Rufino R. Tan (TAN), and petitioners, the Philippine School of Business Administration
(PSBA), a domestic corporation, and majority of its Directors. chanroble s lawlib ra ry : rednad

TAN is one of the principal stockholders of PSBA. Before September 5, 1981, he was a
Director and the Executive Vice President enjoying salaries and allowances.

On August 1, 1981, at the PSBA Board of Directors’ regular meeting, three members
were elected to fill vacancies in the seven-man body.

On September 5, 1981, also during a regular meeting, the Board declared all corporate
positions vacant except those of the Chairman and President, and at the same time
elected a new set of officers. TAN was not re-elected as Executive Vice-President. 1

On September 16, 1981, TAN filed with the National Labor Relations Commission
(NLRC) (National Capital Region) a complaint for Illegal Dismissal against petitioners
alleging that he was "summarily, illegally, irregularly and improperly removed from his
position as Executive Vice-President . . . without cause, investigation or notice" (NLRC
Case No. NCR-9-20-81) (the Labor Case, in brief).

On September 21, 1981, TAN also filed a one-million-peso damage suit against
petitioners before the then Court of First Instance of Rizal, Quezon City, for illegal and
oppressive removal (Civil Case No. Q-33444).

And, on September 28, 1981, TAN lodged before the Securities and Exchange
Commission (SEC) another complaint against petitioners essentially questioning the
validity of the PSBA elections of August 1, 1981 and September 5, 1981, and of his
"ouster" as Executive Vice-President (SEC Case No. 2145). chanrobles lawl ibra ry : red nad

On October 13, 1981, SEC issued a subpoena duces tecum commanding the production
of corporate documents, books and records. 2

On October 15, 1981, respondent Labor Arbiter also issued a subpoena duces tecum to
submit the same books and documents. 3

Before the NLRC, petitioners moved for the dismissal of TAN’s complaint, invoking the
principle against split jurisdiction.

On October 22, 1981, petitioners availed of this Petition contending mainly that: jgc:chanrobles .com.p h

"1. The respondent labor arbiter illegally assumed jurisdiction over the complaint for
‘Illegal Dismissal’ because the failure of the private respondent to be re-elected to the
corporate position of Executive Vice-President was an intra-corporate question over
which the Securities and Exchange Commission had already assumed jurisdiction.

"2. The issuance by the respondent labor arbiter of a subpoena duces tecum was
likewise without jurisdiction especially if considered in the light of procedural and
substantial requirements therefor such that it is imperative that the supervising
authority of this Honorable Court should be exercised to prevent a substantial wrong
and to do substantial justice." 4

TAN counter-argues that his sole and exclusive cause of action is illegal dismissal,
falling within the jurisdiction of the NLRC, for he was dismissed suddenly and summarily
without cause in violation of his constitutional rights to due process and security of
tenure. He prays that his dismissal be declared illegal and that his reinstatement be
ordered with full backwages and without loss of other benefits. chanroblesv irt ualawli bra ry

We issued a Temporary Restraining Order, enjoining respondent Labor Arbiter from

proceeding in any manner with the Labor Case, and subsequently gave due course to
the Petition.

The jurisdiction of the SEC vis-a-vis the NLRC is in issue. An intracorporate controversy
would call for SEC jurisdiction. A labor dispute, that of the NLRC.

Relevant and pertinent it is to note that the PSBA is a domestic corporation duly
organized and existing under our laws. General management is vested in a Board of
seven directors elected annually by the stockholders entitled to vote, who serve until
the election and qualification of their successors. Any vacancy in the Board of Directors
is filled by a majority vote of the subscribed capital stock entitled to vote at a meeting
specially called for the purpose, and the director or directors so chosen hold office for
the unexpired term. 5 Corporate officers are provided for, among them, the Executive
Vice-President, who is elected by the Board of Directors from their own number. 6 The
officers receive such salaries or compensation as the Board of Directors may fix. 7 The
By-Laws likewise provide that should the position of any officer of the corporation
become vacant by reason of death, resignation, disqualification, or otherwise, the Board
of Directors, by a majority vote, may choose a successor or successors who shall hold
office for the expired term of his predecessor. 8

It was at a board regular monthly meeting held on August 1, 1981, that three directors
were elected to fill vacancies. And, it was at the regular Board Meeting of September 5,
1981 that all corporate positions were declared vacant in order to effect a
reorganization, and at the ensuing election of officers, TAN was not re-elected as
Executive Vice-President.

Basically, therefore, the question is whether the election of directors on August 1, 1981
and the election of officers on September 5, 1981, which resulted in TAN’s failure to be
re-elected, were validly held. This is the crux of the question that TAN has raised before
the SEC. Even in his position paper before the NLRC, TAN alleged that the election on
August 1, 1981 of the three directors was in contravention of the PSBA By-Laws
providing that any vacancy in the Board shall be filled by a majority vote of the
stockholders at a meeting specially called for the purpose. Thus, he concludes, the
Board meeting on September 5, 1981 was tainted with irregularity on account of the
presence of illegally elected directors without whom the results could have been
different.

TAN invoked the same allegations in his complaint filed with the SEC. So much so, that
on December 17, 1981, the SEC (Case No. 2145) rendered a Partial Decision annulling
the election of the three directors and ordered the convening of a stockholders’ meeting
for the purpose of electing new members of the Board. 9 The correctness of said
conclusion is not for us to pass upon in this case. TAN was present at said meeting and
again sought the issuance of injunctive relief from the SEC.

The foregoing indubitably show that, fundamentally, the controversy is intra-corporate

in nature. It revolves around the election of directors, officers or managers of the PSBA,
the relation between and among its stockholders, and between them and the
corporation. Private respondent also contends that his "ouster" was a scheme to
intimidate him into selling his shares and to deprive him of his just and fair return on
his investment as a stockholder received through his salary and allowances as
Executive Vice-President. Vis-a-vis the NLRC, these matters fall within the jurisdiction
of the SEC. Presidential Decree No. 902-A vests in the Securities and Exchange
Commission: jgc:chanrobles. com.ph

". . . original and exclusive jurisdiction to hear and decide cases involving: jgc:chanrob les.co m.ph

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

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

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

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

managers of such corporations, partnerships or associations. 10

This is not a case of dismissal. The situation is that of a corporate office having been
declared vacant, and of TAN’s not having been elected thereafter. The matter of whom
to elect is a prerogative that belongs to the Board, and involves the exercise of
deliberate choice and the faculty of discriminative selection. Generally speaking, the
relationship of a person to a corporation, whether as officer or as agent or employee, is
not determined by the nature of the services performed, but by the incidents of the
relationship as they actually exist. 11

With the foregoing conclusion, it follows that the issuance of a subpoena duces tecum
by the Labor Arbiter will have to be set aside.

WHEREFORE, judgment is hereby rendered (1) ordering respondent Labor Arbiter to

dismiss the complaint in NLRC Case No. NCR-9-20-81 for lack of jurisdiction; (2)
nullifying the subpoena duces tecum issued by him in said case; and (3) declaring the
Temporary Restraining Order heretofore issued permanent.

No costs.

SO ORDERED.

Plana and Gutierrez, Jr., JJ., concur.

Teehankee, and Relova, JJ., concur in the result.

G.R. No. 157802 October 13, 2010

MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER,

CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.

DECISION

BERSAMIN, J.:

This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is
cognizable by the Labor Arbiter (LA) or by the Regional Trial Court (RTC). The determination of
whether the dismissed officer was a regular employee or a corporate officer unravels the
conundrum. In the case of the regular employee, the LA has jurisdiction; otherwise, the RTC
exercises the legal authority to adjudicate.

In this appeal via petition for review on certiorari, the petitioners challenge the decision dated
September 13, 20021 and the resolution dated April 2, 2003,2 both promulgated in C.A.-G.R. SP No.
65714 entitled Matling Industrial and Commercial Corporation, et al. v. Ricardo R. Coros and
National Labor Relations Commission, whereby by the Court of Appeals (CA) sustained the ruling of
the National Labor Relations Commission (NLRC) to the effect that the LA had jurisdiction because
the respondent was not a corporate officer of petitioner Matling Industrial and Commercial
Corporation (Matling).
 Antecedents

After his dismissal by Matling as its Vice President for Finance and Administration, the respondent
filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal against Matling and
some of its corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan
City.3

The petitioners moved to dismiss the complaint,4 raising the ground, among others, that the
complaint pertained to the jurisdiction of the Securities and Exchange Commission (SEC) due to the
controversy being intra-corporate inasmuch as the respondent was a member of Matling’s Board of
Directors aside from being its Vice-President for Finance and Administration prior to his termination.

The respondent opposed the petitioners’ motion to dismiss,5 insisting that his status as a member of
Matling’s Board of Directors was doubtful, considering that he had not been formally elected as
such; that he did not own a single share of stock in Matling, considering that he had been made to
sign in blank an undated indorsement of the certificate of stock he had been given in 1992; that
Matling had taken back and retained the certificate of stock in its custody; and that even assuming
that he had been a Director of Matling, he had been removed as the Vice President for Finance and
Administration, not as a Director, a fact that the notice of his termination dated April 10, 2000
showed.

On October 16, 2000, the LA granted the petitioners’ motion to dismiss,6 ruling that the respondent
was a corporate officer because he was occupying the position of Vice President for Finance and
Administration and at the same time was a Member of the Board of Directors of Matling; and that,
consequently, his removal was a corporate act of Matling and the controversy resulting from such
removal was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of Presidential
Decree No. 902.

Ruling of the NLRC

The respondent appealed to the NLRC,7 urging that:

THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING

APPELLEE’S MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO
FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE
PROCESS.

II

THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR
LACK OF JURISDICTION.

On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondent’s complaint
for illegal dismissal was properly cognizable by the LA, not by the SEC, because he was not a
corporate officer by virtue of his position in Matling, albeit high ranking and managerial, not being
among the positions listed in Matling’s Constitution and By-Laws.8 The NLRC disposed thuswise:

WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding
that the case at bench does not involve any intracorporate matter. Hence, jurisdiction to hear and act
on said case is vested with the Labor Arbiter, not the SEC, considering that the position of Vice-
President for Finance and Administration being held by complainant-appellant is not listed as among
respondent's corporate officers.

Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order
that the Labor Arbiter below could act on the case at bench, hear both parties, receive their
respective evidence and position papers fully observing the requirements of due process, and
resolve the same with reasonable dispatch.

SO ORDERED.

The petitioners sought reconsideration,9 reiterating that the respondent, being a member of the
Board of Directors, was a corporate officer whose removal was not within the LA’s jurisdiction.

The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified
machine copies of Matling’s Amended Articles of Incorporation and By Laws to prove that the
President of Matling was thereby granted "full power to create new offices and appoint the officers
thereto, and the minutes of special meeting held on June 7, 1999 by Matling’s Board of Directors to
prove that the respondent was, indeed, a Member of the Board of Directors.10

Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for reconsideration.11

Ruling of the CA

The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP
65714, contending that the NLRC committed grave abuse of discretion amounting to lack of
jurisdiction in reversing the correct decision of the LA.

In its assailed decision promulgated on September 13, 2002,12 the CA dismissed the petition for
certiorari, explaining:

For a position to be considered as a corporate office, or, for that matter, for one to be considered as
a corporate officer, the position must, if not listed in the by-laws, have been created by the
corporation's board of directors, and the occupant thereof appointed or elected by the same board of
directors or stockholders. This is the implication of the ruling in Tabang v. National Labor Relations
Commission, which reads:

"The president, vice president, secretary and treasurer are commonly regarded as the principal or
executive officers of a corporation, and modern corporation statutes usually designate them as the
officers of the corporation. However, other offices are sometimes created by the charter or by-laws
of a corporation, or the board of directors may be empowered under the by-laws of a corporation to
create additional offices as may be necessary.

It has been held that an 'office' is created by the charter of the corporation and the officer is elected
by the directors or stockholders. On the other hand, an 'employee' usually occupies no office and
generally is employed not by action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to such employee."

This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations
Commission and De Rossi v. National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to hold in the
corporation, was not created by the corporation’s board of directors but only by its president or
executive vice-president pursuant to the by-laws of the corporation. Moreover, Coros’ appointment to
said position was not made through any act of the board of directors or stockholders of the
corporation. Consequently, the position to which Coros was appointed and later on removed from, is
not a corporate office despite its nomenclature, but an ordinary office in the corporation.

Coros’ alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter.

WHEREFORE, the petition for certiorari is hereby DISMISSED.

SO ORDERED.

The CA denied the petitioners’ motion for reconsideration on April 2, 2003.13

Issue

Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent
was a stockholder/member of the Matling’s Board of Directors as well as its Vice President for
Finance and Administration; and that the CA consequently erred in holding that the LA had
jurisdiction.

The decisive issue is whether the respondent was a corporate officer of Matling or not. The
resolution of the issue determines whether the LA or the RTC had jurisdiction over his complaint for
illegal dismissal.

Ruling

The appeal fails.

The Law on Jurisdiction in Dismissal Cases

As a rule, the illegal dismissal of an officer or other employee of a private employer is properly
cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which
provides as follows:

Article 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, within thirty (30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes, the following cases involving
all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
 4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

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

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (₱5,000.00) 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. (As amended
by Section 9, Republic Act No. 6715, March 21, 1989).

Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls
under the jurisdiction of the Securities and Exchange Commission (SEC), because the controversy
arises out of intra-corporate or partnership relations between and among stockholders, members, or
associates, or between any or all of them and the corporation, partnership, or association of which
they are stockholders, members, or associates, respectively; and between such corporation,
partnership, or association and the State insofar as the controversy concerns their individual
franchise or right to exist as such entity; or because the controversy involves the election or
appointment of a director, trustee, officer, or manager of such corporation, partnership, or
association.14 Such controversy, among others, is known as an intra-corporate dispute.

Effective on August 8, 2000, upon the passage of Republic Act No. 8799,15 otherwise known as The
Securities Regulation Code, the SEC’s jurisdiction over all intra-corporate disputes was transferred
to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:

5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate
the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final
resolution which should be resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed
as of 30 June 2000 until finally disposed.

Considering that the respondent’s complaint for illegal dismissal was commenced on August 10,
2000, it might come under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that
the respondent was a corporate, not a regular, officer of Matling.

II

Was the Respondent’s Position of Vice President

for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as Vice President for Finance and
Administration was a corporate office. If it was, his dismissal by the Board of Directors rendered the
matter an intra-corporate dispute cognizable by the RTC pursuant to RA No. 8799.

The petitioners contend that the position of Vice President for Finance and Administration was a
corporate office, having been created by Matling’s President pursuant to By-Law No. V, as
amended,16 to wit:

BY LAW NO. V
Officers

The President shall be the executive head of the corporation; shall preside over the meetings of the
stockholders and directors; shall countersign all certificates, contracts and other instruments of the
corporation as authorized by the Board of Directors; shall have full power to hire and discharge any
or all employees of the corporation; shall have full power to create new offices and to appoint the
officers thereto as he may deem proper and necessary in the operations of the corporation and as
the progress of the business and welfare of the corporation may demand; shall make reports to the
directors and stockholders and perform all such other duties and functions as are incident to his
office or are properly required of him by the Board of Directors. In case of the absence or disability of
the President, the Executive Vice President shall have the power to exercise his functions.

The petitioners argue that the power to create corporate offices and to appoint the individuals to
assume the offices was delegated by Matling’s Board of Directors to its President through By-Law
No. V, as amended; and that any office the President created, like the position of the respondent,
was as valid and effective a creation as that made by the Board of Directors, making the office a
corporate office. In justification, they cite Tabang v. National Labor Relations Commission,17 which
held that "other offices are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to create additional officers
as may be necessary."

The respondent counters that Matling’s By-Laws did not list his position as Vice President for
Finance and Administration as one of the corporate offices; that Matling’s By-Law No. III listed only
four corporate officers, namely: President, Executive Vice President, Secretary, and
Treasurer; 18 that the corporate offices contemplated in the phrase "and such other officers as may
be provided for in the by-laws" found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matling’s By-Law No. III dealt with Directors &
Officers while its By-Law No. V dealt with Officers proved that there was a differentiation between
the officers mentioned in the two provisions, with those classified under By-Law No. V being ordinary
or non-corporate officers; and that the officer, to be considered as a corporate officer, must be
elected by the Board of Directors or the stockholders, for the President could only appoint an
employee to a position pursuant to By-Law No. V.

We agree with respondent.

Section 25 of the Corporation Code provides:

Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a
corporation must formally organize by the election of a president, who shall be a director, a treasurer
who may or may not be a director, a secretary who shall be a resident and citizen of the
Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more
positions may be held concurrently by the same person, except that no one shall act as president
and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law
and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate business, and every decision
of at least a majority of the directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which shall require the vote of a
majority of all the members of the board.

Directors or trustees cannot attend or vote by proxy at board meetings.

Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be
considered as a corporate office. Thus, the creation of an office pursuant to or under a By-Law
enabling provision is not enough to make a position a corporate office. Guerrea v. Lezama,19 the first
ruling on the matter, held that the only officers of a corporation were those given that character either
by the Corporation Code or by the By-Laws; the rest of the corporate officers could be considered
only as employees or subordinate officials. Thus, it was held in Easycall Communications Phils., Inc.
v. King:20

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

In this case, respondent was appointed vice president for nationwide expansion by Malonzo,
petitioner’'s general manager, not by the board of directors of petitioner. It was also Malonzo who
determined the compensation package of respondent. Thus, respondent was an employee, not a
"corporate officer." The CA was therefore correct in ruling that jurisdiction over the case was properly
with the NLRC, not the SEC (now the RTC).

This interpretation is the correct application of Section 25 of the Corporation Code, which plainly
states that the corporate officers are the President, Secretary, Treasurer and such other officers as
may be provided for in the By-Laws. Accordingly, the corporate officers in the context of PD No. 902-
A are exclusively those who are given that character either by the Corporation Code or by the
corporation’s By-Laws.

A different interpretation can easily leave the way open for the Board of Directors to circumvent the
constitutionally guaranteed security of tenure of the employee by the expedient inclusion in the By-
Laws of an enabling clause on the creation of just any corporate officer position.

It is relevant to state in this connection that the SEC, the primary agency administering the
Corporation Code, adopted a similar interpretation of Section 25 of the Corporation Code in its
Opinion dated November 25, 1993,21 to wit:

Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the
corporate officers enumerated in the by-laws are the exclusive Officers of the corporation and the
Board has no power to create other Offices without amending first the corporate By-laws. However,
the Board may create appointive positions other than the positions of corporate Officers, but
the persons occupying such positions are not considered as corporate officers within the
meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions
of the corporate Officers, except those functions lawfully delegated to them. Their functions and
duties are to be determined by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to create a
corporate office to the President, in light of Section 25 of the Corporation Code requiring the Board
of Directors itself to elect the corporate officers. Verily, the power to elect the corporate officers was
a discretionary power that the law exclusively vested in the Board of Directors, and could not be
delegated to subordinate officers or agents.22 The office of Vice President for Finance and
Administration created by Matling’s President pursuant to By Law No. V was an ordinary, not a
corporate, office.

To emphasize, the power to create new offices and the power to appoint the officers to occupy them
vested by By-Law No. V merely allowed Matling’s President to create non-corporate offices to be
occupied by ordinary employees of Matling. Such powers were incidental to the President’s duties as
the executive head of Matling to assist him in the daily operations of the business.

The petitioners’ reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that
offices not expressly mentioned in the By-Laws but were created pursuant to a By-Law enabling
provision were also considered corporate offices, was plainly obiter dictum due to the position
subject of the controversy being mentioned in the By-Laws. Thus, the Court held therein that the
position was a corporate office, and that the determination of the rights and liabilities arising from the
ouster from the position was an intra-corporate controversy within the SEC’s jurisdiction.

In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more appropriate ruling,
the position subject of the controversy was not expressly mentioned in the By-Laws, but was created
pursuant to a By-Law enabling provision authorizing the Board of Directors to create other offices
that the Board of Directors might see fit to create. The Court held there that the position was a
corporate office, relying on the obiter dictum in Tabang.

Considering that the observations earlier made herein show that the soundness of their dicta is not
unassailable, Tabang and Nacpil should no longer be controlling.

III

Did Respondent’s Status as Director and

Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?

Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and
relying on Paguio v. National Labor Relations Commission24 and Ongkingko v. National Labor
Relations Commission,25 the NLRC had no jurisdiction over his complaint, considering that any case
for illegal dismissal brought by a stockholder/officer against the corporation was an intra-corporate
matter that must fall under the jurisdiction of the SEC conformably with the context of PD No. 902-A.

The petitioners’ insistence is bereft of basis.

To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants
were undeniably corporate officers due to their positions being expressly mentioned in the By-Laws,
aside from the fact that both of them had been duly elected by the respective Boards of Directors.
But the herein respondent’s position of Vice President for Finance and Administration was not
expressly mentioned in the By-Laws; neither was the position of Vice President for Finance and
Administration created by Matling’s Board of Directors. Lastly, the President, not the Board of
Directors, appointed him.

True it is that the Court pronounced in Tabang as follows:

Also, an intra-corporate controversy is one which arises between a stockholder and the corporation.
There is no distinction, qualification or any exemption whatsoever. The provision is broad and covers
all kinds of controversies between stockholders and corporations.26

However, the Tabang pronouncement is not controlling because it is too sweeping and does not
accord with reason, justice, and fair play. In order to determine whether a dispute constitutes an
intra-corporate controversy or not, the Court considers two elements instead, namely: (a) the status
or relationship of the parties; and (b) the nature of the question that is the subject of their
controversy. This was our thrust in Viray v. Court of Appeals:27

The establishment of any of the relationships mentioned above will not necessarily always confer
jurisdiction over the dispute on the SEC to the exclusion of regular courts. The statement made in
one case that the rule admits of no exceptions or distinctions is not that absolute. The better policy in
determining which body has jurisdiction over a case would be to consider not only the status or
relationship of the parties but also the nature of the question that is the subject of their controversy.

Not every conflict between a corporation and its stockholders involves corporate matters that only
the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers. If, for example, a
person leases an apartment owned by a corporation of which he is a stockholder, there should be no
question that a complaint for his ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts and not of the SEC. By the same token, if one person injures
another in a vehicular accident, the complaint for damages filed by the victim will not come under the
jurisdiction of the SEC simply because of the happenstance that both parties are stockholders of the
same corporation. A contrary interpretation would dissipate the powers of the regular courts and
distort the meaning and intent of PD No. 902-A.

In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated these determinants
thuswise:

In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must
pertain to any of the following relationships:

a) between the corporation, partnership or association and the public;

b) between the corporation, partnership or association and its stockholders, partners,

members or officers;

c) between the corporation, partnership or association and the State as far as its franchise,
permit or license to operate is concerned; and

d) among the stockholders, partners or associates themselves.

The fact that the parties involved in the controversy are all stockholders or that the parties involved
are the stockholders and the corporation does not necessarily place the dispute within the ambit of
the jurisdiction of SEC. The better policy to be followed in determining jurisdiction over a case should
be to consider concurrent factors such as the status or relationship of the parties or the nature of the
question that is the subject of their controversy. In the absence of any one of these factors, the SEC
will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the
corporation and its stockholders would involve such corporate matters as only the SEC can resolve
in the exercise of its adjudicatory or quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from office at will, on
one hand, and ordinary corporate employees who may only be terminated for just cause, on the
other hand, do not depend on the nature of the services performed, but on the manner of creation of
the office. In the respondent’s case, he was supposedly at once an employee, a stockholder, and a
Director of Matling. The circumstances surrounding his appointment to office must be fully
considered to determine whether the dismissal constituted an intra-corporate controversy or a labor
termination dispute. We must also consider whether his status as Director and stockholder had any
relation at all to his appointment and subsequent dismissal as Vice President for Finance and
Administration.

Obviously enough, the respondent was not appointed as Vice President for Finance and
Administration because of his being a stockholder or Director of Matling. He had started working for
Matling on September 8, 1966, and had been employed continuously for 33 years until his
termination on April 17, 2000, first as a bookkeeper, and his climb in 1987 to his last position as Vice
President for Finance and Administration had been gradual but steady, as the following sequence
indicates:

1966 – Bookkeeper

1968 – Senior Accountant

1969 – Chief Accountant

1972 – Office Supervisor

1973 – Assistant Treasurer

1978 – Special Assistant for Finance

1980 – Assistant Comptroller

1983 – Finance and Administrative Manager

1985 – Asst. Vice President for Finance and Administration

1987 to April 17, 2000 – Vice President for Finance and Administration

Even though he might have become a stockholder of Matling in 1992, his promotion to the position
of Vice President for Finance and Administration in 1987 was by virtue of the length of quality
service he had rendered as an employee of Matling. His subsequent acquisition of the status of
Director/stockholder had no relation to his promotion. Besides, his status of Director/stockholder was
unaffected by his dismissal from employment as Vice President for Finance and Administration. 1avv phi 1

In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank manager who had
risen from the ranks but was dismissed, the Court held that her complaint for illegal dismissal was
correctly brought to the NLRC, because she was deemed a regular employee of the bank. The Court
observed thus:

It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963.
From that position she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-
President which she occupied until her illegal dismissal on July 19, 1991. The bank’s contention
that she merely holds an elective position and that in effect she is not a regular employee is
belied by the nature of her work and her length of service with the Bank. As earlier stated, she
rose from the ranks and has been employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the Foreign Department of the Bank, she is
tasked, among others, to collect checks drawn against overseas banks payable in foreign currency
and to ensure the collection of foreign bills or checks purchased, including the signing of transmittal
letters covering the same. It has been stated that "the primary standard of determining regular
employment is the reasonable connection between the particular activity performed by the employee
in relation to the usual trade or business of the employer. Additionally, "an employee is regular
because of the nature of work and the length of service, not because of the mode or even the reason
for hiring them." As Assistant Vice-President of the Foreign Department of the Bank she performs
tasks integral to the operations of the bank and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of the bank. In fine, as a regular employee, she
is entitled to security of tenure; that is, her services may be terminated only for a just or authorized
cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored
to the very end to establish loss of trust and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no avail.

WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of
Appeals.

Costs of suit to be paid by the petitioners.

SO ORDERED.

G.R. No. 141093 February 20, 2001

PRUDENTIAL BANK and TRUST COMPANY, petitioner,

vs.
CLARITA T. REYES, respondent.

GONZAGA-REYES, J.:

Before the Court is a petition for review on certiorari of the Decision,1 dated October 15, 1999 of the
Court of Appeals in C.A.-G.R. SP No. 30607 and of its Resolution, dated December 6, 1999 denying
petitioner's motion for reconsideration of said decision. The Court of Appeals reversed and set aside
the resolution2 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No.009364-
95, reversing and setting aside the labor arbiter's decision and dismissing for lack of merit private
respondent's complaint.3

The case stems from NLRC NCR Case No.00-06-03462-92, which is a complaint for illegal
suspension and illegal dismissal with prayer for moral and exemplary damages, gratuity, fringe
benefits and attorney's fees filed by Clarita Tan Reyes against Prudential Bank and Trust Company
(the Bank) before the labor arbiter. Prior to her dismissal, private respondent Reyes held the position
of Assistant Vice President in the foreign department of the Bank, tasked with the duties, among
others, to collect checks drawn against overseas banks payable in foreign currency and to ensure
the collection of foreign bills or checks purchased, including the signing of transmittal letters covering
the same.

After proceedings duly undertaken by the parties, judgment was rendered by labor Arbiter Cornelio
L. Linsangan, the dispositive portion of which reads:
 "WHEREFORE, finding the dismissal of complainant to be without factual and legal basis,
judgment is hereby rendered ordering the respondent bank to pay her back wages for three
(3) years in the amount of P540,000.00 (P15,000.00 x 36 mos.). In lieu of reinstatement, the
respondent is also ordered to pay complainant separation pay equivalent to one month
salary for every year of service, in the amount of P420,000.00 (P15,000 x 28 mos.). In
addition, the respondent should. also pay complainant profit sharing and unpaid fringe
benefits. Attorney's fees equivalent to ten (10%) percent of the total award should likewise
be paid by respondent.

SO ORDERED."4

Not satisfied, the Bank appealed to the NLRC which, as mentioned at the outset, reversed the Labor
Arbiter's decision in its Resolution dated 24 March 1997. Private respondent sought reconsideration
which, however, was denied by the NLRC in its Resolution of 28 July 1998. Aggrieved, private
respondent commenced on October 28, 1998, a petition for certiorari before the Supreme
Court.5 The subject petition was referred to the Court of Appeals for appropriate action and
disposition per resolution of this Court dated November 25, 1998, in accordance with the ruling in St.
Marlin Funeral Homes vs. NLRC.6

In its assailed decision, the Court of Appeals adopted the following antecedent facts leading to
Reyes's dismissal as summarized by the NLRC:

"The auditors of the Bank discovered that two checks, No.011728-7232-146, in the amount
of US$109,650.00, and No. 011730-7232-146, in the amount of US$115,000.00, received by
the Bank on April 6, 1989, drawn ,by the Sanford Trading against Hongkong and Shanghai
Banking Corporation, Jurong Branch, Singapore, in favor of Filipinas Tyrom, were not sent
out for collection to Hongkong Shanghai Banking Corporation on the alleged order of the
complainant until the said checks became stale.

The Bank created a committee to investigate the findings of the auditors involving the two
checks which were not collected and became stale.

On March 8, 1991, the president of the Bank issued a memorandum to the complainant
informing her of the findings of the auditors and asked her to give her side. In reply,
complainant requested for an extension of one week to submit her explanation. In a
"subsequent letter, dated March 14, 1991, to the president, complainant stated that in view of
the refusal of the Bank that she be furnished copies of the pertinent documents she is
requesting and the refusal to grant her a reasonable period to prepare her answer, she was
constrained to make a general denial of any misfeasance or malfeasance on her part and
asked that a formal investigation be made.

As the complainant failed to attend and participate in the formal investigation conducted by
the Committee on May 24, 1991, despite due notice, the Committee proceeded with its
hearings and heard the testimonies of several witnesses.

The Committee's findings were:

'a) The two (2) HSBC checks were received by the Foreign Department on 6 April
1989. On the same day, complainant authorized the crediting of the account of
Filipinas Tyrom in the amount of P4,780,102.70 corresponding to the face value of
the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the following day, a
transmittal letter was prepared by Ms. Cecilia Joven, a remittance clerk then
 assigned in the Foreign Department, for the purpose of sending out the two (2)
HSBC checks for collection. She then requested complainant to sign the said
transmittal letters (Exhibits 1, 7 and 25; TSN, 11 March 1993, pp. 42-52), as it is
complainant who gives her instructions directly concerning the transmittal of foreign
bills purchased. All other transmittal letters are in fact signed by complainant.

b) After Ms. Joven delivered the transmittal letters and the checks to the Accounting
Section of the Foreign Department, complainant instructed her to withdraw the same
for the purpose of changing the addressee thereon from American Express Bank to
Bank of Hawaii (ibid.) under a special collection scheme (Exhibits 4 and 5 to 5-B).

c) After complying with complainant's instruction, Ms. Joven then returned to

complainant for the latter to sign the new transmittal letters. However, complainant
told Ms. Joven to just hold on to the letters and checks and await further instructions
(ibid.). Thus, the new transmittal letters remained unsigned. (See Exhibits 5 to 5-B).

d) In June 1989, Ms. Joven was transferred to another department. Hence, her
duties, responsibilities and functions, including the responsibility over the two (2)
HSBC checks, were turned over to another remittance clerk, Ms. Analisa Castillo
(Exhibit 14; TSN, 4 June 1993, pp. 27-29).

e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms. Joven relayed to
the latter complainant's instruction (Exhibit 14; TSN, 4 June 1993, p. 42).

f) About fifteen (15) months after the HSBC checks were received by the Bank, the
said checks were discovered in the course of an audit conducted by the Bank's
auditors. Atty. Pablo Magno, the Bank's legal counsel, advised complainant to send
the checks for collection despite the lapse of fifteen (15) months.

g) Complainant, however, deliberately withheld Atty. Magno's advice from her

superior, the Senior Vice-President, Mr. Renato Santos and falsely informed the
latter that Atty . Magno advised that a demand letter be sent instead, thereby further
delaying the collection of the HSBC checks.

h) On 10 July 1990, the HSBC checks were finally sent for collection, but were
returned on 16 July 1990 for the reason 'account closed' (Exhibits 2-A and 3-A).'

After a review of the Committee's findings, the Board of Directors of the Bank resolved not to
re-elect complainant any longer to the position of assistant president pursuant to the Bank's
By-laws.

On July 19, 1991, complainant was informed of her termination of employment from the Bank
by Senior Vice President Benedicto L. Santos, in a letter the text of which is quoted in full:

'Dear Mrs. Reyes:

After a thorough investigation and appreciation of the charges against you as

contained in the Memorandum of the President dated March 8, 1991, the Fact
Finding Committee which was created to investigate the commission and/or omission
of the acts alluded therein, has found the following:
 1. You have deliberately held the clearing of Checks Nos. 11728 and 11730 of
Hongkong and Shanghai Banking Corporation in the total amount of US$224,650.00
by giving instructions to the collection clerk not to send the checks for collection. In
view thereof, when the said checks were finally sent to clearing after the lapse of 15
months from receipt of said checks, they were returned for the reason 'Account
closed.' To date, the value of said checks have not been paid by Filipinas Tyrom,
which as payee of the checks, had been credited with their peso equivalent;

2. You tried to influence the decision of Atty. Pablo P. Magno, Bank legal counsel, by
asking him to do something allegedly upon instructions of a Senior Vice President of
the Bank or else lose his job when in truth and in fact no such instructions was given;
and

3. You deliberately withheld from Mr. Santos, Senior Vice President, the advice given
by the legal counsel of the Bank which Mr. Santos had asked you to seek. As a
matter of fact, you even relayed a false advice which delayed further the sending of
the two checks for collection. Likewise, you refused to heed the advice of the Bank's
legal counsel to send the checks for collection.

These findings have given rise to the Bank's loss of trust and confidence in you, the
same being acts of serious misconduct in the performance of your duties resulting in
monetary loss to the Bank. In view thereof, the Board has resolved not to re-elect
you to the position of Assistant Vice President of the Bank. Accordingly, your
services are terminated effective immediately. In relation thereto, your monetary and
retirement benefits are forfeited except those that have vested in you.'

In her position paper, complainant alleged that the real reason for her dismissal was her filing
of the criminal cases against the bank president, the vice president and the auditors of the
Bank, such filing not being a valid ground for her dismissal. Furthermore, she alleged that it
would be self-serving for the respondent to state that she was found guilty of gross
misconduct in deliberately withholding the clearing of the two dollar checks. She further
alleged that she was not afforded due process as she was not given the chance to refute the
charges mentioned in the letter of dismissal. Hence, she was illegally dismissed.

On the other hand, respondent argues that there were substantial bases for the bank to lose
its trust and confidence on the complainant and, accordingly, had just cause for terminating
her services. Moreover, for filing the clearly unfounded suit against the respondent's officers,
complainant is liable to pay moral and exemplary damages and attorney's fees."7

The Court of Appeals found that the NLRC committed grave abuse of discretion in ruling that the
dismissal of Reyes is valid. In effect, the Court of Appeals reinstated the judgment of the labor
arbiter with modification as follows:

"WHEREFORE, in the light of the foregoing, the decision appealed from is hereby
REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered ordering
respondent Bank as follows:

1. To pay petitioner full backwages and other benefits from July 19, 1991 up to the
finality of this judgment;

2. To pay petitioner separation pay equivalent to one (1) month salary for every year
of service in lieu of reinstatement; and
 3. To pay attorney's fee equivalent to ten (10%) percent of the total award.

SO ORDERED."8

Hence, the Bank's recourse to this Court contending in its memorandum that:

"IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997 AND THE RESOLUTION
DATED 28 JULY 1998 OF THE NLRC AND REINSTATING WITH MODIFICATION THE
DECISION DATED 20 JULY 1995 OF LABOR ARBITER CORNELIO L. LINSANGAN, THE
HONORABLE COURT OF APPEALS SERIOUSLY ERRED, IN VIEW OF THE
FOLLOWING:

I.

IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT THE NLRC WHICH HAS
ORIGINAL AND EXCLUSIVE JURISDICTION OVER CASES INVOLVING THE REMOVAL
FROM OFFICE OF CORPORATE OFFICERS.

II.

EVEN ASSUMING ARGUENDO THAT THE NLRC HAS JURISDICTION, THERE WAS
SUBSTANTIAL EVIDENCE OF RESPONDENT'S MISCONDUCT JUSTIFYING THE
BANK'S LOSS OF TRUST AND CONFIDENCE ON (sic) HER.

III.

EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO BACKWAGES,

THE HONORABLE COURT OF APPEALS ERRED IN AWARDING UNLIMITED AND
UNQUALIFIED BACKWAGES THEREBY GOING FAR BEYOND THE LABOR ARBITER'S
DECISION LIMITING THE SAME TO THREE YEARS, WHICH DECISION RESPONDENT
HERSELF SOUGHT TO EXECUTE."9

In sum, the resolution of this petition hinges on (1) whether the NLRC has jurisdiction over the
complaint for illegal dismissal; (2) whether complainant Reyes was illegally dismissed; and (3)
whether the amount of back wages awarded was proper.

On the first issue, petitioner seeks refuge behind the argument that the dispute is an intra-corporate
controversy concerning as it does the non-election of private respondent to the position of Assistant
Vice-President of the Bank which falls under the exclusive and original, jurisdiction of the Securities
and Exchange Commission (now the Regional Trial Court) under Section 5 of Presidential Decree
No. 902-A. More specifically, petitioner contends that complainant is a corporate officer, an elective
position under the corporate by-laws and her non-election is an intra-corporate controversy
cognizable by the SEC invoking lengthily a number of this Court's decisions.10

Petitioner Bank can no longer raise the issue of jurisdiction under the principle of estoppel. The Bank
participated in the proceedings from start to finish. It filed its position paper with the Labor Arbiter.
When the decision of the Labor Arbiter was adverse to it, the Bank appealed to the NLRC. When the
NLRC decided in its favor, the bank said nothing about jurisdiction. Even before the Court of
Appeals, it never questioned the proceedings on the ground of lack of jurisdiction. It was only when
the Court of Appeals ruled in favor of private respondent did it raise the issue of jurisdiction. The
Bank actively participated in the proceedings before the Labor Arbiter, the NLRC and the Court of
Appeals. While it is true that jurisdiction over the subject matter of a case may be raised at any time
of the proceedings, this rule presupposes that laches or estoppel has not supervened. In this
regard, Bañaga vs. Commission on the Settlement of Land Problems,11 is most enlightening. The
Court therein stated:

"This Court has time and again frowned upon the undesirable practice of a party submitting
his case for decision and then accepting the judgment, only if favorable, and attacking it for
lack of jurisdiction when adverse. Here, the principle of estoppel lies. Hence, a party may be
estopped or barred from raising the question of jurisdiction for the first time in a petition
before the Supreme Court when it failed to do so in the early stages of the proceedings."

Undeterred, the Bank also contends that estoppel cannot lie considering that "from the beginning,
petitioner Bank has consistently asserted in all its pleadings at all stages of the proceedings that
respondent held the position of Assistant Vice President, an elective position which she held by
virtue of her having been elected as such by the Board of Directors." As far as the records before
this Court reveal however, such an assertion was made only in the appeal to the NLRC and raised
again before the Court of Appeals, not for purposes of questioning jurisdiction but to establish that
private respondent's tenure was subject to the discretion of the Board of Directors and that her non-
reelection was a mere expiration of her term. The Bank insists that private respondent was elected
Assistant Vice President sometime in 1990 to serve as such for only one year. This argument will not
do either and must be rejected.

It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963.
From that position she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-
President which she occupied until her illegal dismissal on July 19, 1991. The bank's contention that
she merely holds an elective position and that in effect she is not a regular employee is belied by the
nature of her work and her length of service with the Bank. As earlier stated, she rose from the ranks
and has been employed with the Bank since 1963 until the termination of her employment in 1991.
As Assistant Vice President of the foreign department of the Bank, she is tasked, among others, to
collect checks drawn against overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the signing of transmittal letters covering the
same. It has been stated that "the primary standard of determining regular employment is the
reasonable connection between the particular activity performed by the employee in relation to the
usual trade or business of the employer.12 Additionally, "an employee is regular because of the
nature of work and the length of service, not because of the mode or even the reason for hiring
them."13 As Assistant Vice-President of the Foreign Department of the Bank she performs tasks
integral to the operations of the bank and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of the bank. In fine, as a regular employee, she
is entitled to security of tenure; that is, her services may be terminated only for a just or authorized
cause.14 This being in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored
to the very end to establish loss of trust and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no avail.

This brings us to the second issue wherein the Bank insists that it has presented substantial
evidence to prove the breach of trust on the part of private respondent warranting her dismissal. On
this point, the Court of Appeals disagreed and set aside the findings of the NLRC that Reyes
deliberately withheld the release of the two dollar checks; that she is guilty of conflict of interest that
she waived her right to due process for not attending the hearing; and that she was dismissed based
on loss of trust and confidence. We quote pertinent portions of the decision, to wit:

"FIRST: Respondent Bank heavily relied on the testimony and affidavit of Remittance Clerk
Joven' in trying to establish loss of confidence. However, Joven's allegation that petitioner
instructed her to hold the subject two dollar checks amounting to $224,650.00 falls short of
the requisite proof to warrant petitioner's dismissal. Except for Joven's bare assertion to
withhold the dollar checks per petitioner's instruction, respondent Bank failed to adduce
convincing evidence to prove bad faith and malice. It bears emphasizing that respondent
Bank's witnesses merely corroborate Joven's testimony.

Upon this point, the rule that proof beyond reasonable doubt is not required to terminate an
employee on the charge of loss of confidence and that it is sufficient that there is some basis
for such loss of confidence, is not absolute. The right of an employer to dismiss employees
on the ground that it has lost its trust and confidence in him must not be exercised arbitrarily
and without just cause. For loss of trust and confidence to be valid ground for an employee's
dismissal, it must be substantial and not arbitrary, and must be founded on clearly
established facts sufficient to warrant the employee's separation from work (Labor vs. NLRC,
248 SCRA 183).

SECOND. Respondent Bank's charge of deliberate withholding of the two dollar checks finds
no support in the testimony of Atty. Jocson, Chairman of the Investigating Committee. On
cross examination, Atty. Jocson testified that the documents themselves do not show any
direct withholding (pp. 186-187, Rollo). There being conflict in the statement of witnesses,
the court must adopt the testimony which it believes to be true (U.S. vs. Losada, 18 Phil. 90).

THIRD. Settled is the rule that when the conclusions of the Labor Arbiter are sufficiently
substantiated by the evidence on record, the same should be respected by appellate
tribunals since he is in a better position to assess and evaluate the credibility of the
contending parties (Ala Mode Garments, Inc. vs. NLRC, 268 SCRA 497). In this regard, the
Court quotes with approval the following disquisition of Labor Arbiter Linsangan, thus:

This Office has repeatedly gone over the records of the case and painstakingly
examined the testimonies of respondent bank's witnesses. One thing was clearly
established: that the legality of complainant's dismissal based on the first ground
stated in respondent's letter of termination (exh. 25-J, supra) will rise or fall on the
credibility of Miss Joven who undisputedly is the star witness for the bank. It will be
observed that the testimonies of the bank's other witnesses, Analiza Castillo, Dante
Castor and Antonio Ragasa pertaining to the non-release of the dollar checks and
their corresponding transmittal letters were all anchored on what was told them by
Ms. Joven, that is: she was instructed by complainant to hold the release of subject
checks. In a nutshell, therefore, the issue boils down to who between complainant
and Ms. Joven is more credible.

After painstakingly examining the testimonies of Ms. Joven and respondent's other
witnesses' this Office finds the evidence still wanting in proof of complainant's guilt.
This Office had closely observed the demeanor of Ms. Joven while testifying on the
witness stand and was not impressed by her assertions. The allegation of Ms. Joven
in that her non-release of the dollar checks was upon the instruction of complainant
Reyes is extremely doubtful. In the first place, the said instruction constitutes a gross
violation of the bank's standard operating procedure. Moreover, Ms. Joven was fully
aware that the instruction, if carried out, will greatly prejudice her employer bank. It
was incumbent upon Ms. Joven not only to disobey the instruction but even to report
the matter to management, if same was really given to her by complainant.

Our doubt on the veracity of Ms. Joven's allegation even deepens as we consider the
fact that when the non-release of the checks was discovered by Ms. Castillo the
former contented herself by continuously not taking any action on the two dollar
checks. Worse, Ms. Joven even impliedly told by Ms. Castillo (sic) to ignore the two
checks and just withhold their release. In her affidavit Ms. Castillo said:

'4. When I asked Cecille Joven what I was supposed to do with those checks,
she said the same should be held as per instruction of Mrs. Reyes.' (Exh.
"14", supra).

The evidence shows that it was only on 16 May 1990 that Ms. Joven broke her
silence on the matter despite the fact that on 15 November 1989, at about 8:00 p.m.
the complainant, accompanied by driver Celestino Banito, went to her residence and
confronted her regarding the non-release of the dollar checks. It took Ms. Joven
eighteen (18) months before she explained her side on the controversy. As to what
prompted her to make her letter of explanation was not even mentioned.

On the other hand, the actions taken by the complainant were spontaneous. When
complainant was informed by Mr. Castor and Ms. Castillo regarding the non-release
of the checks sometime in November, 1989 she immediately reported the matter to
Vice President Santos, Head of the Foreign Department. And as earlier mentioned,
complainant went to the residence of Ms. Joven to confront her. In this regard,
Celestino Bonito, complainant's driver, stated in his affidavit, thus:

'1. Sometime on November 15, 1989 at about 7:00 o'clock in the evening,
Mrs. Clarita Tan Reyes and I were in the residence of one Ms. Cecille Joven,
then a Processing Clerk in the Foreign Department of Prudential Bank;

2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes were
seated in the sala when the latter asked the former, Ms. Cecille Joven, how it
came about that the two dollar checks which she was then holding with the
transmittal letters, were found in a plastic envelope kept day-to-day by the
former;

3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan Reyes had been
intimately called Mother in the Bank) akala ko bouncing checks yon mga yon.

4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised and she
said: "Ano, papaano mong alam na bouncing na hindi mo pa pinadadala:

5. Mrs. Cecille Joven turned pale and was not able to answer.'

There are other factors that constrain this Office to doubt even more the legality of
complainant's dismissal based on the first ground stated in the letter of dismissal.
The non-release of the dollar checks was reported to top management sometime on
15 November 1989 when complainant, accompanied by Supervisor Dante Castor
and Analiza Castillo, reported the matter to Vice President Santos. And yet, it was
only on 08 March 1991, after a lapse of sixteen (16) months from the time the non-
release of the checks was reported to the Vice President, that complainant was
issued a memorandum directing her to submit an explanation. And it took the bank
another four (4) months before it dismissed complainant.
 The delayed action taken by respondent against complainant lends credence to the
assertion of the latter that her dismissal was a mere retaliation to the criminal
complaints she filed against the bank's top officials.

It clearly appears from the foregoing that the complainant herein has no knowledge
of, much less participation in, the non-release of the dollar checks under discussion.
Ms. Joven is solely responsible for the same. Incidentally, she was not even
reprimanded by the bank.

FOURTH. Respondent Bank having failed to furnish petitioner necessary documents

imputing loss of confidence, petitioner was not amply afforded opportunity to prepare an
intelligent answer. The Court finds nothing confidential in the auditor's report and the affidavit
of Transmittal Clerk Joven. Due process dictates that management accord the employees
every kind of assistance to enable him to prepare adequately for his defense, including legal
representation.

The issue of conflict of interest not having been covered by the investigation, the Court finds
it irrelevant to the charge."15

We uphold the findings of the Court of Appeals that the dismissal of private respondent on the
ground of loss of trust and confidence was without basis. The charge was predicated on the
testimony of Ms. Joven and we defer to the findings of the Labor Arbiter as confirmed and adopted
by the Court of Appeals on the credibility of said witness. This Court is not a trier of facts and will not
weigh anew the evidence already passed upon by the Court of Appeals.16

On the third issue, the Bank questions the award of full backwages and other benefits from July 19,
1991 up to the finality of this judgment; separation pay equivalent to one (1) month salary for every
year of service in lieu of reinstatement; and attorney's fees equivalent to ten (10%) percent of the
total award. The Bank argues, in the main, that private respondent is not entitled to full backwages in
view of the fact that she did not bother to appeal that portion of the labor arbiter's judgment awarding
back wages limited to three years. It must be stressed that private respondent filed a special civil
action for certiorari to review the decision of the NLRC17 and not an ordinary appeal. An ordinary
appeal is distinguished from the remedy of certiorari under Rule 65 of the Revised Rules of Court in
that in ordinary appeals it is settled that a party who did not appeal cannot seek affirmative relief
other than the ones granted in the decision of the court below.18 On the other hand, resort to a
judicial review of the decisions of the National Labor Relations Commission in a petition for certiorari
under Rule 65 of Rules of Court is confined to issues of want or excess of jurisdiction and grave
abuse of discretion.19 In the instant case, the Court of Appeals found that the NLRC gravely abused
its discretion in finding that the private respondent's dismissal was valid and so reversed the same.
Corollary to the foregoing, the appellate court awarded backwages in accordance with current
jurisprudence.

Indeed, jurisprudence is clear on the amount of backwages recoverable in cases of illegal dismissal.
Employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989 are
entitled to backwages up to three (3) years without deduction or qualification, while those illegally
dismissed after are granted full backwages inclusive of allowances and other benefits or their
monetary equivalent from the time their actual compensation was withheld from them up to the time
of their actual reinstatement.20 Considering that private respondent was terminated on July 19, 1991,
she is entitled to full backwages from the time her actual compensation was withheld from her
(which, as a rule, is from the time of her illegal dismissal) up to the finality of this judgment (instead
of reinstatement) considering that reinstatement is no longer feasible as correctly pointed out by the
Court of Appeals on account of the strained relations brought about by the litigation in this case.
Since reinstatement is no longer viable, she is also entitled to separation pay equivalent to one (1)
month salary for every year of service.21 Lastly, since private respondent was compelled to file an
action for illegal dismissal with the labor arbiter, she is likewise entitled to attorney's fees22 at the rate
above-mentioned. There is no room to argue, as the Bank does here, that its liability should be
mitigated on account of its good faith and that private respondent is not entirely blameless. There is
no showing that private respondent is partly at fault or that the Bank acted in good faith in
terminating an employee of twenty-eight years. In any event, Article 279 of Republic Act No.
671523 clearly and plainly provides for "full backwages" to illegally dismissed employees. 1âwphi 1.nêt

WHEREFORE, the instant petition for review on certiorari is DENIED, and the assailed Decision of
the Court of Appeals, dated October 15, 1999, is AFFIRMED.

SO ORDERED.

Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

[ G.R. No. 193857, November 28, 2012 ]

MA. MERCEDES L. BARBA, PETITIONER, VS. LICEO DE CAGAYAN

UNIVERSITY, RESPONDENT.

DECISION

VILLARAMA, JR., J.:

Before the Court is a petition for review on certiorari assailing the March
29, 2010 Amended Decision[1] and September 14, 2010 Resolution[2] of the
Court of Appeals (CA) in CA-G.R. SP No. 02508-MIN. The CA had
reconsidered its earlier Decision[3] dated October 22, 2009 and set aside the
September 25, 2007 and June 30, 2008 Resolutions[4] of the National
Labor Relations Commission (NLRC) as well as the September 29, 2006
Decision[5] of the Labor Arbiter. The CA held that the Labor Arbiter and
NLRC had no jurisdiction over the illegal dismissal case filed by petitioner
against respondent because petitioner's position as Dean of the College of
Physical Therapy of respondent is a corporate office.

The facts follow.

Petitioner Dr. Ma. Mercedes L. Barba was the Dean of the College of
Physical Therapy of respondent Liceo de Cagayan University, Inc., a private
educational institution with school campus located at Carmen, Cagayan de
Oro City.

Petitioner started working for respondent on July 8, 1993 as medical

officer/school physician for a period of one school year or until March 31,
1994. In July 1994, she was chosen by respondent to be the recipient of a
scholarship grant to pursue a three-year residency training in
Rehabilitation Medicine at the Veterans Memorial Medical Center
(VMMC). The Scholarship Contract[6] provides:

5. That the SCHOLAR after the duration of her study and training shall
serve the SCHOOL in whatever position the SCHOOL desires related to the
SCHOLAR's studies for a period of not less than ten (10) years;

After completing her residency training with VMMC in June 1997,

petitioner returned to continue working for respondent. She was appointed
as Acting Dean of the College of Physical Therapy and at the same time
designated as Doctor-In-Charge of the Rehabilitation Clinic of the Rodolfo
N. Pelaez Hall, City Memorial Hospital.

On June 19, 2002, petitioner's appointment as Doctor-In-Charge of the

Rehabilitation Clinic was renewed and she was appointed as Dean of the
College of Physical Therapy by respondent's President, Dr. Jose Ma. R.
Golez. The appointment letter[7] reads:

xxxx

Dear Dr. Barba:

You are hereby re-appointed Dean of the College of Physical Therapy and
Doctor-In-Charge of the Rehabilitation Clinic at Rodolfo N. Pelaez Hall,
City Memorial Hospital and other rehabilitation clinics under the
management of Liceo de Cagayan University for a period of three years
effective July 1, 2002 unless sooner revoked for valid cause or causes.

Your position is one of trust and confidence and the appointment is subject
to the pertinent provisions of the University Administrative Personnel and
Faculty Manuals, and Labor Code.

xxxx

Petitioner accepted her appointment and assumed the position of Dean of

the College of Physical Therapy. In the school year 2003 to 2004, the
College of Physical Therapy suffered a dramatic decline in the number of
enrollees from a total of 1,121 students in the school year 1995 to 1996 to
only 29 students in the first semester of school year 2003 to 2004. This
worsened in the next year or in school year 2004 to 2005 where a total of
only 20 students enrolled.[8]

Due to the low number of enrollees, respondent decided to freeze the

operation of the College of Physical Therapy indefinitely. Respondent's
President Dr. Rafaelita Pelaez-Golez wrote petitioner a letter[9] dated March
16, 2005 informing her that her services as dean of the said college will end
at the close of the school year. Thereafter, the College of Physical Therapy
ceased operations on March 31, 2005, and petitioner went on leave without
pay starting on April 9, 2005. Subsequently, respondent's Executive Vice
President, Dr. Mariano M. Lerin, through Dr. Glory S. Magdale,
respondent's Vice President for Academic Affairs, sent petitioner a
letter[10] dated April 27, 2005 instructing petitioner to return to work on
June 1, 2005 and report to Ma. Chona Palomares, the Acting Dean of the
College of Nursing, to receive her teaching load and assignment as a full-
time faculty member in that department for the school year 2005-2006.

In reply, petitioner informed Dr. Lerin that she had not committed to teach
in the College of Nursing and that as far as she can recall, her employment
is not dependent on any teaching load. She then requested for the
processing of her separation benefits in view of the closure of the College of
Physical Therapy.[11] She did not report to Palomares on June 1, 2005.

On June 8, 2005, petitioner followed up her request for separation pay and
other benefits but Dr. Lerin insisted that she report to Palomares;
otherwise, sanctions will be imposed on her. Thus, petitioner through
counsel wrote Dr. Golez directly, asking for her separation pay and other
benefits.

On June 21, 2005, Dr. Magdale wrote petitioner a letter[12] directing her to
report for work and to teach her assigned subjects on or before June 23,
2005. Otherwise, she will be dismissed from employment on the ground of
abandonment. Petitioner, through counsel, replied that teaching in the
College of Nursing is in no way related to her scholarship and training in
the field of rehabilitation medicine. Petitioner added that coercing her to
become a faculty member from her position as College Dean is a great
demotion which amounts to constructive dismissal.[13]

Dr. Magdale sent another letter[14] to petitioner on June 24, 2005 ordering
her to report for work as she was still bound by the Scholarship Contract to
serve respondent for two more years. But petitioner did not do so. Hence,
on June 28, 2005, Dr. Magdale sent petitioner a notice terminating her
services on the ground of abandonment.

Meanwhile, on June 22, 2005, prior to the termination of her services,

petitioner filed a complaint before the Labor Arbiter for illegal dismissal,
payment of separation pay and retirement benefits against respondent, Dr.
Magdale and Dr. Golez. She alleged that her transfer to the College of
Nursing as a faculty member is a demotion amounting to constructive
dismissal.

Respondent claimed that petitioner was not terminated and that it was only
petitioner's appointment as College Dean in the College of Physical Therapy
that expired as a necessary consequence of the eventual closure of the said
college. Respondent further averred that petitioner's transfer as full-time
professor in the College of Nursing does not amount to constructive
dismissal since the transfer was without loss of seniority rights and without
diminution of pay. Also, respondent added that pursuant to the Scholarship
Contract, petitioner was still duty bound to serve respondent until 2007 in
whatever position related to her studies the school desires.

Labor Arbiter's Ruling

In a Decision[15] dated September 29, 2006, the Labor Arbiter found that
respondent did not constructively dismiss petitioner; therefore, she was not
entitled to separation pay. The Labor Arbiter held that petitioner's
assignment as full-time professor in the College of Nursing was not a
demotion tantamount to constructive dismissal. The dispositive portion of
the Labor Arbiter's decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered

dismissing the complaint for illegal dismissal for utter lack of merit, but
ordering the respondent Liceo de Cagayan University to reinstate
complainant to an equivalent position without loss of seniority rights, but
without back wages.
However, if reinstatement is no longer feasible or if there is no equivalent
position to which complainant may be reinstated, respondent may opt to
pay complainant her separation pay equivalent to one-half (1/2) month pay
for every year of service or in the sum of P195,000.00, subject to deduction
for advances or accountabilities which complainant may have had.

Other claims are ordered dismissed for lack of merit.

SO ORDERED.[16]

NLRC's Ruling

Petitioner appealed the above decision to the NLRC. On September 25,

2007, the NLRC issued a Resolution[17] reversing the Labor Arbiter's
decision and holding that petitioner was constructively dismissed. The
NLRC held that petitioner was demoted when she was assigned as a
professor in the College of Nursing because there are functions and
obligations and certain allowances and benefits given to a College Dean but
not to an ordinary professor. The NLRC ruled:

WHEREFORE, in view of the foregoing, the assailed decision is hereby

MODIFIED in that complainant is hereby considered as constructively
dismissed and thus entitled to backwages and separation pay of one (1)
month salary for every year of service, plus attorney's fees, which shall be
computed at the execution stage before the Arbitration Branch of origin.

SO ORDERED.[18]

The NLRC denied respondent's motion for reconsideration in a

Resolution[19] dated June 30, 2008.

Ruling of the Court of Appeals

Respondent went to the CA on a petition for certiorari alleging that the

NLRC committed grave abuse of discretion when it declared that
petitioner's transfer to the College of Nursing as full-time professor but
without diminution of salaries and without loss of seniority rights
amounted to constructive dismissal because there was a demotion involved
in the transfer and because petitioner was compelled to accept her new
assignment.

Respondent also filed a Supplemental Petition[20] raising for the first time
the issue of lack of jurisdiction of the Labor Arbiter and the NLRC over the
case. Respondent claimed that a College Dean is a corporate officer under
its by-laws and petitioner was a corporate officer of respondent since her
appointment was approved by the board of directors. Respondent posited
that petitioner was a corporate officer since her office was created by the
by-laws and her appointment, compensation, duties and functions were
approved by the board of directors. Thus, respondent maintained that the
jurisdiction over the case is with the regular courts and not with the labor
tribunals.

In its original Decision[21] dated October 22, 2009, the CA reversed and set
aside the NLRC resolutions and reinstated the decision of the Labor
Arbiter. The CA did not find merit in respondent's assertion in its
Supplemental Petition that the position of petitioner as College Dean was a
corporate office. Instead, the appellate court held that petitioner was
respondent's employee, explaining thus:

Corporate officers in the context of PD 902-A are those officers of a

corporation who are given that character either by the Corporation Code or
by the corporation's By-Laws. Under Section 25 of the Corporation Code,
the "corporate officers" are the president, secretary, treasurer and such
other officers as may be provided for in the By-Laws.

True, the By-Laws of LDCU provides that there shall be a College Director.
This means a College Director is a corporate officer. However, contrary to
the allegation of petitioner, the position of Dean does not appear to be the
same as that of a College Director.

Aside from the obvious disparity in name, the By-Laws of LDCU provides
for only one College Director. But as shown by LDCU itself, numerous
persons have been appointed as Deans. They could not be the College
Director contemplated by the By-Laws inasmuch as the By-Laws authorize
only the appointment of one not many. If it is indeed the intention of
LDCU to give its many Deans the rank of College Director, then
it exceeded the authority given to it by its By-Laws because only
one College Director is authorized to be appointed. It must amend
its By-Laws. Prior to such an amendment, the office of College Dean is not a
corporate office.

Another telling sign that a College Director is not the same as a Dean is the
manner of appointment. A College Director is directly appointed by
the Board of Directors. However, a College Dean is appointed by
the President upon the recommendation of the Vice President for
Academic Affairs and the Executive Vice President and approval of the
Board of Directors. There is a clear distinction on the manner of
appointment indicating that the offices are not one and the same.

xxxx

This shows that it was not the intention of LDCU to make Dr.
Barba a corporate officer as it was stated in her letter of appointment
that the same shall be subject to the provisions of the Labor Code.
Otherwise, the appointment letter should have stated that her appointment
is governed by the Corporation Code. Thus, We find the arguments in the
Supplemental Petition on the matter of lack of jurisdiction of the Labor
Arbiter and the NLRC to be without merit. Dr. Barba, being a College Dean,
was not a corporate officer.[22] (Emphasis not ours)

The CA further found that no constructive dismissal occurred nor has

petitioner abandoned her work. According to the CA, a transfer amounts to
constructive dismissal when the transfer is unreasonable, unlikely,
inconvenient, impossible, or prejudicial to the employee or it involves a
demotion in rank or a diminution of salary and other benefits. In the case of
petitioner, the CA held that she was never demoted and her transfer, being
a consequence of the closure of the College of Physical Therapy, was valid.

The CA also noted that petitioner's appointment as Dean of the College of

Physical Therapy was for a term of three years. Hence, when her
appointment as College Dean was no longer renewed on June 1, 2005 or
after her three-year term had expired, it cannot be said that there was a
demotion or that she was dismissed. Her term as Dean had expired and she
can no longer claim to be entitled to the benefits emanating from such
office.
On the issue of alleged lack of jurisdiction, the CA observed that respondent
never raised the issue of jurisdiction before the Labor Arbiter and the
NLRC and respondent even actively participated in the proceedings below.
Hence, respondent is estopped from questioning the jurisdiction of the
labor tribunals.

Unsatisfied, both petitioner and respondent sought reconsideration of the

CA decision. Petitioner prayed for the reversal of the ruling that there was
no constructive dismissal. Respondent meanwhile maintained that the
labor tribunals have no jurisdiction over the case, petitioner being a
corporate officer.

On March 29, 2010, the CA issued the assailed Amended

Decision[23] setting aside its earlier ruling. This time the CA held that the
position of a College Dean is a corporate office and therefore the labor
tribunals had no jurisdiction over the complaint for constructive dismissal.
The CA noted that petitioner's appointment as Dean of the College of
Physical Therapy was approved by the respondent's board of directors
thereby concluding that the position of a College Dean is a corporate office.
Also, the CA held that the College Director mentioned in respondent's by-
laws is the same as a College Dean and no one has ever been appointed as
College Director. The CA added that in the Administrative Manual the
words "college" and "department" were used in the same context in the
section on the Duties and Responsibilities of the College Dean, and that
there could not have been any other "head of department" being alluded to
in the by-laws but the college dean.

The dispositive portion of the Amended Decision reads:

WHEREFORE, in view of the foregoing, We reconsider Our Decision on

October [22], 2009, and declare that the position of College Dean is a
corporate office of Petitioner [Liceo de Cagayan University], thereby
divesting the Labor Arbiter and the National Labor Relations Commission
of jurisdiction over the instant case. Hence, the Resolutions of the Public
Respondent dated September 25, 2007 and June 30, 2008 as well as that of
the Regional Labor Arbiter dated 29 September 2006
are VACATED and SET ASIDE as they were rendered by tribunals that
had no jurisdiction over the case.
SO ORDERED.[24]

Petitioner filed a motion for reconsideration from the above decision, but
her motion was denied by the CA in its Resolution[25] dated September 14,
2010. Hence, petitioner filed the present petition.

Petitioner argues that the CA erred in ruling that she was a corporate officer
and asserts that the CA's previous finding that she was respondent's
employee is more in accord with law and jurisprudence. Petitioner adds
that the appellate court erred when it ruled that the labor tribunals had no
jurisdiction over her complaint for illegal dismissal against
respondent. She faults the CA for allowing respondent to raise the issue of
jurisdiction in a Supplemental Petition after respondent has actively
participated in the proceedings before the labor tribunals. Petitioner also
asserts that the CA erred in denying her motion for reconsideration from its
Amended Decision on the ground that it is a second motion for
reconsideration which is a prohibited pleading. Lastly, petitioner claims
that respondent violated the rule against forum shopping when it failed to
inform the CA of the pendency of the complaint for breach of contract
which it filed against petitioner before the Regional Trial Court of Misamis
Oriental, Branch 23.

Respondent, for its part, counters that the petition was filed out of time and
petitioner's motion for reconsideration from the Amended Decision was a
prohibited pleading since petitioner has already filed a motion for
reconsideration from the original decision of the CA. It is respondent's
posture that an Amended Decision is not really a new decision but the
appellate court's own modification of its prior decision. More importantly,
respondent points out that the arguments raised by petitioner do not justify
a reversal of the Amended Decision of the appellate court. Respondent
insists on the correctness of the Amended Decision and quotes the assailed
decision in its entirety.

Issue

The decisive issue in the present petition is whether petitioner was an

employee or a corporate officer of respondent university. Resolution of this
issue resolves the question of whether the appellate court was correct in
ruling that the Labor Arbiter and the NLRC had no jurisdiction over
petitioner's complaint for constructive dismissal against respondent.

Our Ruling

We grant the petition.

Prefatorily, we first discuss the procedural matter raised by respondent that

the present petition is filed out of time. Respondent claims that petitioner's
motion for reconsideration from the Amended Decision is a second motion
for reconsideration which is a prohibited pleading. Respondent's assertion,
however, is misplaced for it should be noted that the CA's Amended
Decision totally reversed and set aside its previous ruling. Section 2, Rule
52 of the 1997 Rules of Civil Procedure, as amended, provides that no
second motion for reconsideration of a judgment or final resolution by the
same party shall be entertained. This contemplates a situation where a
second motion for reconsideration is filed by the same party assailing the
same judgment or final resolution. Here, the motion for reconsideration of
petitioner was filed after the appellate court rendered an Amended
Decision totally reversing and setting aside its previous ruling. Hence,
petitioner is not precluded from filing another motion for reconsideration
from the Amended Decision which held that the labor tribunals lacked
jurisdiction over petitioner's complaint for constructive dismissal. The
period to file an appeal should be reckoned not from the denial of her
motion for reconsideration of the original decision, but from the date of
petitioner's receipt of the notice of denial of her motion for reconsideration
from the Amended Decision. And as petitioner received notice of the denial
of her motion for reconsideration from the Amended Decision on
September 23, 2010 and filed her petition on November 8, 2010, or within
the extension period granted by the Court to file the petition, her petition
was filed on time.

Now on the main issue.

As a general rule, only questions of law may be allowed in a petition for

review on certiorari.[26] Considering, however, that the CA reversed its
earlier decision and made a complete turnaround from its previous ruling,
and consequently set aside both the findings of the Labor Arbiter and the
NLRC for allegedly having been issued without jurisdiction, it is necessary
for the Court to reexamine the records and resolve the conflicting rulings.

After a careful review and examination of the records, we find that the CA's
previous ruling that petitioner was respondent's employee and not a
corporate officer is supported by the totality of the evidence and more in
accord with law and prevailing jurisprudence.

Corporate officers are elected or appointed by the directors or stockholders,

and are those who are given that character either by the Corporation
Code or by the corporation's by-laws.[27] Section 25[28] of the Corporation
Code enumerates corporate officers as the president, the secretary, the
treasurer and such other officers as may be provided for in the by-laws.
In Matling Industrial and Commercial Corporation v. Coros,[29] the phrase
"such other officers as may be provided for in the by-laws" has been
clarified, thus:

Conformably with Section 25, a position must be expressly

mentioned in the By-Laws in order to be considered as a
corporate office. Thus, the creation of an office pursuant to or under a
By-Law enabling provision is not enough to make a position a corporate
office. Guerrea v. Lezama, the first ruling on the matter, held that the only
officers of a corporation were those given that character either by
the Corporation Code or by the By-Laws; the rest of the corporate
officers could be considered only as employees of subordinate
officials. Thus, it was held in Easycall Communications Phils., Inc. v.
King:

An "office" is created by the charter of the corporation and the

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

In declaring petitioner a corporate officer, the CA considered respondent's

by-laws and gave weight to the certifications of respondent's secretary
attesting to the resolutions of the board of directors appointing the various
academic deans for the School Years 1991-2002 and 2002-2005, including
petitioner. However, an assiduous perusal of these documents does not
convince us that petitioner occupies a corporate office position in
respondent university.

The relevant portions of respondent's by-laws[30] are hereby quoted as

follows:

Article III
The Board of Directors

Sec. 3. The Board of Directors shall appoint a College Director, define his
powers and duties, and determine his compensation; approve or
disapprove recommendations for appointment or dismissal of teachers and
employees submitted to it by the College Director; and exercise other
powers and perform such duties as may be required of it hereafter for the
proper functioning of the school.

xxxx

Article IV
Officers

Sec. 1. The officers of the corporation shall consist of a President, a Vice

President, and a Secretary-Treasurer, who shall be chosen from the
directors and by the directors themselves. They shall be elected annually at
the first meeting of the directors immediately after their election, and shall
hold office for one (1) year and until their successors are elected and
qualified.

xxxx

Article V
Other Appointive Officials

Sec. 1. The Liceo de Cagayan shall have a College Director and such
heads of departments as may exist in the said college whose appointments,
compensations, powers and duties shall be determined by the Board of
Directors.[31] (Emphasis supplied)

On the other hand, the pertinent portions of the two board resolutions
appointing the various academic deans in the university including
petitioner, read as follows:

xxxx

RESOLVE, as it is hereby resolved, that pursuant to Section 3[,] Article III

and Section 1[,] Article V of the Corporation's By-laws, the various
academic deans for the school years 1999-2002 of the University, as
recommended by the President of the Corporation, are hereby appointed,
whose names are enumerated hereunder and their respective colleges and
their honoraria are indicated opposite their names, all of them having a
three (3) year term, to wit:

Name and College Honorarium

Ma. Mercedes Vivares 2,660.00

Physical Therapy

xxxx

RESOLVE, as it is hereby resolved, that pursuant to Section 3[,] Article III

and Section 1[,] Article V of the Corporation's By-laws, the various
academic deans for the school years 2002-2005 of the University, as
recommended by the President of the Corporation, are hereby appointed,
whose names are enumerated hereunder and their respective colleges and
their honoraria are indicated opposite their names, all of them having a
three (3) year term, to wit:

Name and College Honorarium

Ma. Mercedes Vivares 2,450.00

Physical Therapy
x x x x[32]

In respondent's by-laws, there are four officers specifically mentioned,

namely, a president, a vice president, a secretary and a treasurer. In
addition, it is provided that there shall be other appointive officials, a
College Director and heads of departments whose appointments,
compensations, powers and duties shall be determined by the board of
directors. It is worthy to note that a College Dean is not among the
corporate officers mentioned in respondent's by-laws. Petitioner, being an
academic dean, also held an administrative post in the university but not a
corporate office as contemplated by law. Petitioner was not directly elected
nor appointed by the board of directors to any corporate office but her
appointment was merely approved by the board together with the other
academic deans of respondent university in accordance with the procedure
prescribed in respondent's Administrative Manual.[33] The act of the board
of directors in approving the appointment of petitioner as Dean of the
College of Therapy did not make her a corporate officer of the corporation.

Moreover, the CA, in its amended decision erroneously equated the

position of a College Director to that of a College Dean thereby concluding
that petitioner is an officer of respondent.

It bears stressing that the appointive officials mentioned in Article V of

respondent's by-laws are not corporate officers under the contemplation of
the law. Though the board of directors may create appointive positions
other than the positions of corporate officers, the persons occupying such
positions cannot be deemed as corporate officers as contemplated by
Section 25 of the Corporation Code. On this point, the SEC Opinion dated
November 25, 1993 quoted in the case of Matling Industrial and
Commercial Corporation v. Coros,[34] is instructive:

Thus, pursuant to the above provision (Section 25 of the Corporation

Code), whoever are the corporate officers enumerated in the by-laws are the
exclusive Officers of the corporation and the Board has no power to create
other Offices without amending first the corporate By-laws. However, the
Board may create appointive positions other than the positions
of corporate Officers, but the persons occupying such positions
are not considered as corporate officers within the meaning of
Section 25 of the Corporation Code and are not empowered to
exercise the functions of the corporate Officers, except those
functions lawfully delegated to them. Their functions and duties are to be
determined by the Board of Directors/Trustees.

But even assuming that a College Director may be considered a corporate

officer of respondent, a review of the records as well as the other documents
submitted by the parties fails to persuade that petitioner was the "College
Director" mentioned in the by-laws of respondent. Nowhere in petitioner's
appointment letter was it stated that petitioner was designated as the
College Director or that petitioner was to assume the functions and duties
of a College Director. Neither can it be inferred in respondent's by-laws that
a dean of a college is the same as a College Director of
respondent. Respondent's lone surviving incorporating director Yolanda
Rollo even admitted that no College Director has ever been appointed by
respondent. In her affidavit, Yolanda also explained the reason for the
creation of the position of a College Director, to wit:

4. At the time we signed the By-Laws of the Corporation, we, as directors,

did envision to form only a college of law as that was the main thrust of our
president, the late Atty. Rodolfo N. Pelaez. The original plan then was to
have a "College Director" as the head of the college of law and below him
within the college were heads of departments. The appointments,
remuneration, duties and functions of the "College Director" and the heads
of departments were to be approved by the Board of Directors. x x x[35]

Notably, the CA has sufficiently explained why petitioner could not be

considered a College Director in its previous decision. The appellate court
explained:

True, the By-Laws of [Liceo de Cagayan University] provides that there

shall be a College Director. This means a College Director is a corporate
officer. However, contrary to the allegation of petitioner, the position of
Dean does not appear to be the same as that of a College Director.

Aside from the obvious disparity in name, the By-Laws of [Liceo de

Cagayan University] provides for only one College Director. But as shown
by [Liceo de Cagayan University] itself, numerous persons have been
appointed as Deans. They could not be the College Director contemplated
by the By-Laws inasmuch as the By-Laws authorize only the appointment
of one not many. If it is indeed the intention of [Liceo de Cagayan
University] to give its many Deans the rank of College Director,
then it exceeded the authority given to it by its By-Laws because
only one College Director is authorized to be appointed. It must
amend its By-Laws. Prior to such amendment, the office of [the] College
Dean is not a corporate office.

Another telling sign that a College Director is not the same as a Dean is the
manner of appointment. A College Director is directly appointed by
the Board of Directors. However, a College Dean is appointed by
the President upon the recommendation of the Vice President for
Academic Affairs and the Executive Vice President and approval of the
Board of Directors. There is a clear distinction on the manner of
appointment indicating that the offices are not one and the
same.[36] (Additional emphasis supplied)

Undoubtedly, petitioner is not a College Director and she is not a corporate

officer but an employee of respondent. Applying the four-fold test
concerning (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; (4) the employer's power to
control the employee with respect to the means and methods by which the
work is to be accomplished, it is clear that there exists an employer-
employee relationship between petitioner and respondent. Records show
that petitioner was appointed to her position as Dean by Dr. Golez, the
university president and was paid a salary of P32,500 plus transportation
allowance. It was evident that respondent had the power of control over
petitioner as one of its deans. It was also the university president who
informed petitioner that her services as Dean of the College of Physical
Therapy was terminated effective March 31, 2005 and she was
subsequently directed to report to the Acting Dean of the College of Nursing
for assignment of teaching load.

Thus, petitioner, being an employee of respondent, her complaint for

illegal/constructive dismissal against respondent was properly within the
jurisdiction of the Labor Arbiter and the NLRC. Article 217 of the Labor
Code provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a)
Except as otherwise provided under this Code, the Arbiters shall have
original and exclusive jurisdiction to hear and decide xxx 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 wage, rates of pay, hours of work and other terms and
conditions of employment;

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

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

6. Except claims for Employees Compensation, Social Security, Medicare

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

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

xxxx

Moreover, we agree with the CA's earlier pronouncement that since

respondent actively participated in the proceedings before the Labor
Arbiter and the NLRC, it is already estopped from belatedly raising the
issue of lack of jurisdiction. In this case, respondent filed position papers
and other supporting documents to bolster its defense before the labor
tribunals but in all these pleadings, the issue of lack of jurisdiction was
never raised. It was only in its Supplemental Petition filed before the CA
that respondent first brought the issue of lack of jurisdiction. We have
consistently held that while jurisdiction may be assailed at any stage, a
party's active participation in the proceedings will estop such party from
assailing its jurisdiction. It is an undesirable practice of a party
participating in the proceedings and submitting his case for decision and
then accepting the judgment, only if favorable, and attacking it for lack of
jurisdiction, when adverse.[37]

Under Section 6, Rule 10 of the 1997 Rules of Civil Procedure, as amended,

governing supplemental pleadings, the court "may" admit supplemental
pleadings, such as the supplemental petition filed by respondent before the
appellate court, but the admission of these pleadings remains in the sound
discretion of the court. Nevertheless, we have already found no credence in
respondent's claim that petitioner is a corporate officer, consequently, the
alleged lack of jurisdiction asserted by respondent in the supplemental
petition is bereft of merit.

On the issue of constructive dismissal, we agree with the Labor Arbiter and
the appellate court's earlier ruling that petitioner was not constructively
dismissed. Petitioner's letter of appointment specifically appointed her as
Dean of the College of Physical Therapy and Doctor-in-Charge of the
Rehabilitation Clinic "for a period of three years effective July 1, 2002
unless sooner revoked for valid cause or causes." Evidently, petitioner's
appointment as College Dean was for a fixed term, subject to
reappointment and revocation or termination for a valid cause. When
respondent decided to close its College of Physical Therapy due to drastic
decrease in enrollees, petitioner's appointment as its College Dean was
validly revoked and her subsequent assignment to teach in the College of
Nursing was justified as it is still related to her scholarship studies in
Physical Therapy.

As we observed in Brent School, Inc. v. Zamora,[38] also cited by the CA, it

is common practice in educational institutions to have fixed-term contracts
in administrative positions, thus:

Some familiar examples may be cited of employment contracts which may

be neither for seasonal work nor for specific projects, but to which a fixed
term is an essential and natural appurtenance: overseas employment
contracts, for one, to which, whatever the nature of the engagement, the
concept of regular employment with all that it implies does not appear ever
to have been applied, Article 280 of the Labor Code notwithstanding; also
appointments to the positions of dean, assistant dean, college secretary,
principal, and other administrative offices in educational institutions,
which are by practice or tradition rotated among the faculty members, and
where fixed terms are a necessity without which no reasonable rotation
would be possible. x x x (Emphasis supplied)

In constructive dismissal cases, the employer has the burden of proving

that its conduct and action or the transfer of an employee are for valid and
legitimate grounds such as genuine business necessity.[39] Particularly, for
a transfer not to be considered a constructive dismissal, the employer must
be able to show that such transfer is not unreasonable, inconvenient, or
prejudicial to the employee. In this case, petitioner's transfer was not
unreasonable, inconvenient or prejudicial to her. On the contrary, the
assignment of a teaching load in the College of Nursing was undertaken by
respondent to accommodate petitioner following the closure of the College
of Physical Therapy. Respondent further considered the fact that petitioner
still has two years to serve the university under the Scholarship Contract.

Petitioner's subsequent transfer to another department or college is not

tantamount to demotion as it was a valid transfer. There is therefore no
constructive dismissal to speak of. That petitioner ceased to enjoy the
compensation, privileges and benefits as College Dean was but a logical
consequence of the valid revocation or termination of such fixed-term
position. Indeed, it would be absurd and unjust for respondent to maintain
a deanship position in a college or department that has ceased to exist.
Under the circumstances, giving petitioner a teaching load in another
College/Department that is related to Physical Therapy -- thus enabling her
to serve and complete her remaining two years under the Scholarship
Contract -- is a valid exercise of management prerogative on the part of
respondent.

Lastly, as to whether respondent was guilty of forum shopping when it

failed to inform the appellate court of the pendency of Civil Case No. 2009-
320, a complaint for breach of contract filed by respondent against
petitioner, we rule in the negative. Forum shopping exists when the
elements of litis pendentia are present or where a final judgment in one
case will amount to res judicata in another. Litis pendentia requires the
concurrence of the following requisites: (1) identity of parties, or at least
such parties as those representing the same interests in both actions; (2)
identity of rights asserted and reliefs prayed for, the reliefs being founded
on the same facts; and (3) identity with respect to the two preceding
particulars in the two cases, such that any judgment that may be rendered
in the pending case, regardless of which party is successful, would amount
to res judicata in the other case.[40]

While there is identity of parties in the two cases, the causes of action and
the reliefs sought are different. The issue raised in the present case is
whether there was constructive dismissal committed by respondent. On the
other hand, the issue in the civil case pending before the RTC is whether
petitioner was guilty of breach of contract. Hence, respondent is not guilty
of forum shopping.

WHEREFORE, the petition for review on certiorari is GRANTED. The

Amended Decision dated March 29, 2010 and Resolution dated September
14, 2010 of the Court of Appeals in CA-G.R. SP No. 02508-MIN are
hereby SET ASIDE. The earlier Decision dated October 22, 2009 of the
Court of Appeals in said case is REINSTATED and UPHELD.

No pronouncement as to costs.

SO ORDERED.

Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin,

and Perez,* JJ., concur.
G.R. No. 201298 February 5, 2014

RAUL C. COSARE, Petitioner,

vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.

DECISION

REYES, J.:

Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court, which
assails the Decision2 dated November 24, 2011 and Resolution3 dated March 26, 2012 of the Court
of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the CA ruled that the Regional Trial Court
(RTC), and not the Labor Arbiter (LA), had the jurisdiction over petitioner Raul C. Cosare's (Cosare)
complaint for illegal dismissal against Broadcom Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo),
the President of Broadcom (respondents).

The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary claims
filed with the National Capital Region Arbitration Branch of the National Labor Relations Commission
(NLRC) by Cosare against the respondents.

Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo, who was
then in the business of selling broadcast equipment needed by television networks and production
houses. In December 2000, Arevalo set up the company Broadcom, still to continue the business of
trading communication and broadcast equipment. Cosare was named an incorporator of Broadcom,
having been assigned 100 shares of stock with par value of ₱1.00 per share.5 In October 2001,
Cosare was promoted to the position of Assistant Vice President for Sales (AVP for Sales) and Head
of the Technical Coordination, having a monthly basic net salary and average commissions of
₱18,000.00 and ₱37,000.00, respectively.6

Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for Sales
and thus, became Cosare’s immediate superior. On March 23, 2009, Cosare sent a confidential
memo7 to Arevalo to inform him of the following anomalies which were allegedly being committed by
Abiog against the company: (a) he failed to report to work on time, and would immediately leave the
office on the pretext of client visits; (b) he advised the clients of Broadcom to purchase camera units
from its competitors, and received commissions therefor; (c) he shared in the "under the-table
dealings" or "confidential commissions" which Broadcom extended to its clients’ personnel and
engineers; and (d) he expressed his complaints and disgust over Broadcom’s uncompetitive salaries
and wages and delay in the payment of other benefits, even in the presence of office staff. Cosare
ended his memo by clarifying that he was not interested in Abiog’s position, but only wanted Arevalo
to know of the irregularities for the corporation’s sake.

Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was instead
called for a meeting by Arevalo on March 25, 2009, wherein he was asked to tender his resignation
in exchange for "financial assistance" in the amount of ₱300,000.00.8 Cosare refused to comply with
the directive, as signified in a letter9 dated March 26, 2009 which he sent to Arevalo.

On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s Manager for
Finance and Administration, a memo10 signed by Arevalo, charging him of serious misconduct and
willful breach of trust, and providing in part:

1. A confidential memo was received from the VP for Sales informing me that you had
directed, or at the very least tried to persuade, a customer to purchase a camera from
another supplier. Clearly, this action is a gross and willful violation of the trust and confidence
this company has given to you being its AVP for Sales and is an attempt to deprive the
company of income from which you, along with the other employees of this company, derive
your salaries and other benefits. x x x.

2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in
another place outside of the office without proper turnover from you to this office which had
assigned said vehicle to you. The vehicle was found to be inoperable and in very bad
condition, which required that the vehicle be towed to a nearby auto repair shop for extensive
repairs.

3. You have repeatedly failed to submit regular sales reports informing the company of your
activities within and outside of company premises despite repeated reminders. However, it
has been observed that you have been both frequently absent and/or tardy without proper
information to this office or your direct supervisor, the VP for Sales Mr. Alex Abiog, of your
whereabouts.
 4. You have been remiss in the performance of your duties as a Sales officer as evidenced
by the fact that you have not recorded any sales for the past immediate twelve (12) months.
This was inspite of the fact that my office decided to relieve you of your duties as technical
coordinator between Engineering and Sales since June last year so that you could focus and
concentrate [on] your activities in sales.11

Cosare was given forty-eight (48) hours from the date of the memo within which to present his
explanation on the charges. He was also "suspended from having access to any and all company
files/records and use of company assets effective immediately."12 Thus, Cosare claimed that he was
precluded from reporting for work on March 31, 2009, and was instead instructed to wait at the
office’s receiving section. Upon the specific instructions of Arevalo, he was also prevented by
Villareal from retrieving even his personal belongings from the office.

On April 1, 2009, Cosare was totally barred from entering the company premises, and was told to
merely wait outside the office building for further instructions. When no such instructions were given
by 8:00 p.m., Cosare was impelled to seek the assistance of the officials of Barangay San Antonio,
Pasig City, and had the incident reported in the barangay blotter.13

On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he addressed
and denied the accusations cited in Arevalo’s memo dated March 30, 2009. The respondents
refused to receive the memo on the ground of late filing, prompting Cosare to serve a copy thereof
by registered mail. The following day, April 3, 2009, Cosare filed the subject labor complaint,
claiming that he was constructively dismissed from employment by the respondents. He further
argued that he was illegally suspended, as he placed no serious and imminent threat to the life or
property of his employer and co-employees.15

In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally suspended
nor dismissed from employment. They also contended that Cosare committed the following acts
inimical to the interests of Broadcom: (a) he failed to sell any broadcast equipment since the year
2007; (b) he attempted to sell a Panasonic HMC 150 Camera which was to be sourced from a
competitor; and (c) he made an unauthorized request in Broadcom’s name for its principal,
Panasonic USA, to issue an invitation for Cosare’s friend, one Alex Paredes, to attend the National
Association of Broadcasters’ Conference in Las Vegas, USA.16 Furthermore, they contended that
Cosare abandoned his job17 by continually failing to report for work beginning April 1, 2009,
prompting them to issue on April 14, 2009 a memorandum18 accusing Cosare of absence without
leave beginning April 1, 2009.

The Ruling of the LA

On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19 dismissing the
complaint on the ground of Cosare’s failure to establish that he was dismissed, constructively or
otherwise, from his employment. For the LA, what transpired on March 30, 2009 was merely the
respondents’ issuance to Cosare of a show-cause memo, giving him a chance to present his side on
the charges against him. He explained:

It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges leveled
against him in the show-cause memo. What he did was to pre-empt that action by filing this
complaint just a day after he submitted his written explanation. Moreover, by specifically seeking
payment of "Separation Pay" instead of reinstatement, [Cosare’s] motive for filing this case becomes
more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations of illegal
suspension and non-payment of allowances and commissions.

Unyielding, Cosare appealed the LA decision to the NLRC.

The Ruling of the NLRC

On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese. The
dispositive portion of the NLRC Decision reads:

WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are found
guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA, INC. and Dante Arevalo
are ordered to pay [Cosare’s] backwages, and separation pay, as well as damages, in the total
amount of ₱1,915,458.33, per attached Computation.

SO ORDERED.22

In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded to
[Cosare’s] contention that he was constructively dismissed by Respondent Arevalo when he was
asked to resign from his employment."23 The fact that Cosare was suspended from using the assets
of Broadcom was also inconsistent with the respondents’ claim that Cosare opted to abandon his
employment.

Exemplary damages in the amount of ₱100,000.00 was awarded, given the NLRC’s finding that the
termination of Cosare’s employment was effected by the respondents in bad faith and in a wanton,
oppressive and malevolent manner. The claim for unpaid commissions was denied on the ground of
the failure to include it in the prayer of pleadings filed with the LA and in the appeal.

The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a petition for
certiorari with the CA founded on the following arguments: (1) the respondents did not have to prove
just cause for terminating the employment of Cosare because the latter’s complaint was based on an
alleged constructive dismissal; (2) Cosare resigned and was thus not dismissed from employment;
(3) the respondents should not be declared liable for the payment of Cosare’s monetary claims; and
(4) Arevalo should not be held solidarily liable for the judgment award.

In a manifestation filed by the respondents during the pendency of the CA appeal, they raised a new
argument, i.e., the case involved an intra-corporate controversy which was within the jurisdiction of
the RTC, instead of the LA.25 They argued that the case involved a complaint against a corporation
filed by a stockholder, who, at the same time, was a corporate officer.

The Ruling of the CA

On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents’ petition.
It agreed with the respondents’ contention that the case involved an intra-corporate controversy
which, pursuant to Presidential Decree No. 902-A, as amended, was within the exclusive jurisdiction
of the RTC. It reasoned:

Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed as one
of its directors. Moreover, he held the position of [AVP] for Sales which is listed as a corporate office.
Generally, the president, vice-president, secretary or treasurer are commonly regarded as the
principal or executive officers of a corporation, and modern corporation statutes usually designate
them as the officers of the corporation. However, it bears mentioning that under Section 25 of the
Corporation Code, the Board of Directors of [Broadcom] is allowed to appoint such other officers as
it may deem necessary. Indeed, [Broadcom’s] By-Laws provides:

Article IV
Officer

Section 1. Election / Appointment – Immediately after their election, the Board of Directors shall
formally organize by electing the President, the Vice-President, the Treasurer, and the Secretary at
said meeting.

The Board, may, from time to time, appoint such other officers as it may determine to be necessary
or proper. x x x

We hold that [the respondents] were able to present substantial evidence that [Cosare] indeed held
a corporate office, as evidenced by the General Information Sheet which was submitted to the
Securities and Exchange Commission (SEC) on October 22, 2009.27 (Citations omitted and emphasis
supplied)

Thus, the CA reversed the NLRC decision and resolution, and then entered a new one dismissing
the labor complaint on the ground of lack of jurisdiction, finding it unnecessary to resolve the main
issues that were raised in the petition. Cosare filed a motion for reconsideration, but this was denied
by the CA via the Resolution28 dated March 26, 2012. Hence, this petition.

The Present Petition

The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the case
instituted by Cosare was an intra-corporate dispute that was within the original jurisdiction of the
RTC, and not of the LAs; and (2) whether or not Cosare was constructively and illegally dismissed
from employment by the respondents.

The Court’s Ruling

The petition is impressed with merit.

Jurisdiction over the controversy

As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the CA, it
is the LA, and not the regular courts, which has the original jurisdiction over the subject controversy.
An intra-corporate controversy, which falls within the jurisdiction of regular courts, has been
regarded in its broad sense to pertain to disputes that involve any of the following relationships: (1)
between the corporation, partnership or association and the public; (2) between the corporation,
partnership or association and the state in so far as its franchise, permit or license to operate is
concerned; (3) between the corporation, partnership or association and its stockholders, partners,
members or officers; and (4) among the stockholders, partners or associates, themselves.29 Settled
jurisprudence, however, qualifies that when the dispute involves a charge of illegal dismissal, the
action may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination
disputes and claims for damages arising from employer-employee relations as provided in Article
217 of the Labor Code. Consistent with this jurisprudence, the mere fact that Cosare was a
stockholder and an officer of Broadcom at the time the subject controversy developed failed to
necessarily make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between a
"regular employee" and a "corporate officer" for purposes of establishing the true nature of a dispute
or complaint for illegal dismissal and determining which body has jurisdiction over it. Succinctly, it
was explained that "[t]he determination of whether the dismissed officer was a regular employee or
corporate officer unravels the conundrum" of whether a complaint for illegal dismissal is cognizable
by the LA or by the RTC. "In case of the regular employee, the LA has jurisdiction; otherwise, the
RTC exercises the legal authority to adjudicate.31

Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for
illegal dismissal because Cosare, although an officer of Broadcom for being its AVP for Sales, was
not a "corporate officer" as the term is defined by law. We emphasized in Real v. Sangu Philippines,
Inc.32 the definition of corporate officers for the purpose of identifying an intra-corporate controversy.
Citing Garcia v. Eastern Telecommunications Philippines, Inc.,33 we held:

" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the
corporation who are given that character by the Corporation Code or by the corporation’s by-laws.
There are three specific officers whom a corporation must have under Section 25 of the Corporation
Code. These are the president, secretary and the treasurer. The number of officers is not limited to
these three. A corporation may have such other officers as may be provided for by its by-laws like,
but not limited to, the vice-president, cashier, auditor or general manager. The number of corporate
officers is thus limited by law and by the corporation’s by-laws."34 (Emphasis ours)

In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate
offices:

It has been held that an "office" is created by the charter of the corporation and the officer is elected
by the directors and stockholders. On the other hand, an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to such employee.36 (Citations
omitted)

As may be deduced from the foregoing, there are two circumstances which must concur in order for
an individual to be considered a corporate officer, as against an ordinary employee or officer,
namely: (1) the creation of the position is under the corporation’s charter or by-laws; and (2) the
election of the officer is by the directors or stockholders. It is only when the officer claiming to have
been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-
corporate dispute which falls within the jurisdiction of the trial courts.

To support their argument that Cosare was a corporate officer, the respondents referred to Section
1, Article IV of Broadcom’s by-laws, which reads:

ARTICLE IV
OFFICER

Section 1. Election / Appointment – Immediately after their election, the Board of Directors shall
formally organize by electing the President, the Vice-President, the Treasurer, and the Secretary at
said meeting.

The Board may, from time to time, appoint such other officers as it may determine to be necessary
or proper. Any two (2) or more compatible positions may be held concurrently by the same person,
except that no one shall act as President and Treasurer or Secretary at the same time.37 (Emphasis
ours)
This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute that was
within the trial courts’ jurisdiction.

The Court disagrees with the respondents and the CA. As may be gleaned from the aforequoted
provision, the only officers who are specifically listed, and thus with offices that are created under
Broadcom’s by-laws are the following: the President, Vice-President, Treasurer and Secretary.
Although a blanket authority provides for the Board’s appointment of such other officers as it may
deem necessary and proper, the respondents failed to sufficiently establish that the position of AVP
for Sales was created by virtue of an act of Broadcom’s board, and that Cosare was specifically
elected or appointed to such position by the directors. No board resolutions to establish such facts
form part of the case records. Further, it was held in Marc II Marketing, Inc. v. Joson38 that an
enabling clause in a corporation’s by-laws empowering its board of directors to create additional
officers, even with the subsequent passage of a board resolution to that effect, cannot make such
position a corporate office. The board of directors has no power to create other corporate offices
without first amending the corporate by-laws so as to include therein the newly created corporate
office.39 "To allow the creation of a corporate officer position by a simple inclusion in the corporate
by-laws of an enabling clause empowering the board of directors to do so can result in the
circumvention of that constitutionally well-protected right [of every employee to security of tenure]."40

The CA’s heavy reliance on the contents of the General Information Sheets41, which were submitted
by the respondents during the appeal proceedings and which plainly provided that Cosare was an
"officer" of Broadcom, was clearly misplaced. The said documents could neither govern nor establish
the nature of the office held by Cosare and his appointment thereto. Furthermore, although Cosare
could indeed be classified as an officer as provided in the General Information Sheets, his position
could only be deemed a regular office, and not a corporate office as it is defined under the
Corporation Code. Incidentally, the Court noticed that although the Corporate Secretary of
Broadcom, Atty. Efren L. Cordero, declared under oath the truth of the matters set forth in the
General Information Sheets, the respondents failed to explain why the General Information Sheet
officially filed with the Securities and Exchange Commission in 2011 and submitted to the CA by the
respondents still indicated Cosare as an AVP for Sales, when among their defenses in the charge of
illegal dismissal, they asserted that Cosare had severed his relationship with the corporation since
the year 2009.

Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s filing did
not necessarily make the action an intra- corporate controversy. "Not all conflicts between the
stockholders and the corporation are classified as intra-corporate. There are other facts to consider
in determining whether the dispute involves corporate matters as to consider them as intra-corporate
controversies."42 Time and again, the Court has ruled that in determining the existence of an intra-
corporate dispute, the status or relationship of the parties and the nature of the question that is the
subject of the controversy must be taken into account.43 Considering that the pending dispute
particularly relates to Cosare’s rights and obligations as a regular officer of Broadcom, instead of as
a stockholder of the corporation, the controversy cannot be deemed intra-corporate. This is
consistent with the "controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142,44 to wit:

Under the nature of the controversy test, the incidents of that relationship must also be considered
for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy
must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to
the enforcement of the parties’ correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents
are merely incidental to the controversy or if there will still be conflict even if the relationship does not
exist, then no intra-corporate controversy exists.45 (Citation omitted)
It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom when the
dispute commenced was unsupported by the case records, as even the General Information Sheet
of 2009 referred to in the CA decision to support such finding failed to provide such detail.

All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored Cosare solely
on the ground that the dispute was an intra-corporate controversy within the jurisdiction of the
regular courts.

The charge of constructive dismissal

Towards a full resolution of the instant case, the Court finds it appropriate to rule on the correctness
of the NLRC’s ruling finding Cosare to have been illegally dismissed from employment.

In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing among
other circumstances the charges that were hurled and the suspension that was imposed against him
via Arevalo’s memo dated March 30, 2009. Even prior to such charge, he claimed to have been
subjected to mental torture, having been locked out of his files and records and disallowed use of his
office computer and access to personal belongings.47 While Cosare attempted to furnish the
respondents with his reply to the charges, the latter refused to accept the same on the ground that it
was filed beyond the 48-hour period which they provided in the memo.

Cosare further referred to the circumstances that allegedly transpired subsequent to the service of
the memo, particularly the continued refusal of the respondents to allow Cosare’s entry into the
company’s premises. These incidents were cited in the CA decision as follows:

On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could retrieve his
personal belongings, but the latter said that x x x Arevalo directed her to deny his request, so
[Cosare] again waited at the receiving section of the office. On April 1, 2009, [Cosare] was not
allowed to enter the office premises. He was asked to just wait outside of the Tektite (PSE) Towers,
where [Broadcom] had its offices, for further instructions on how and when he could get his personal
belongings. [Cosare] waited until 8 p.m. for instructions but none were given. Thus, [Cosare] sought
the assistance of the officials of Barangay San Antonio, Pasig who advised him to file a labor or
replevin case to recover his personal belongings. x x x.48 (Citation omitted)

It is also worth mentioning that a few days before the issuance of the memo dated March 30, 2009,
Cosare was allegedly summoned to Arevalo’s office and was asked to tender his immediate
resignation from the company, in exchange for a financial assistance of ₱300,000.00.49 The directive
was said to be founded on Arevalo’s choice to retain Abiog’s employment with the company.50 The
respondents failed to refute these claims.

Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal dismissal.
"[C]onstructive dismissal occurs when there is cessation of work because continued employment is
rendered impossible, unreasonable, or unlikely as when there is a demotion in rank or diminution in
pay or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to
the employee leaving the latter with no other option but to quit."51 In Dimagan v. Dacworks United,
Incorporated,52 it was explained:

The test of constructive dismissal is whether a reasonable person in the employee’s position would
have felt compelled to give up his position under the circumstances. It is an act amounting to
dismissal but is made to appear as if it were not. Constructive dismissal is therefore a dismissal in
disguise. The law recognizes and resolves this situation in favor of employees in order to protect
their rights and interests from the coercive acts of the employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosare’s continued
involvement with the company. Even their refusal to accept the explanation which Cosare tried to
tender on April 2, 2009 further evidenced the resolve to deny Cosare of the opportunity to be heard
prior to any decision on the termination of his employment. The respondents allegedly refused
acceptance of the explanation as it was filed beyond the mere 48-hour period which they granted to
Cosare under the memo dated March 30, 2009. However, even this limitation was a flaw in the
memo or notice to explain which only further signified the respondents’ discrimination, disdain and
insensibility towards Cosare, apparently resorted to by the respondents in order to deny their
employee of the opportunity to fully explain his defenses and ultimately, retain his employment. The
Court emphasized in King of Kings Transport, Inc. v. Mamac54 the standards to be observed by
employers in complying with the service of notices prior to termination:

[T]he first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity to
submit their written explanation within a reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as a period of at
least five (5) calendar days from receipt of the notice to give the employees an opportunity to study
the accusation against them, consult a union official or lawyer, gather data and evidence, and decide
on the defenses they will raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged
against the employees.55 (Citation omitted, underscoring ours, and emphasis supplied)

In sum, the respondents were already resolute on a severance of their working relationship with
Cosare, notwithstanding the facts which could have been established by his explanations and the
respondents’ full investigation on the matter. In addition to this, the fact that no further investigation
and final disposition appeared to have been made by the respondents on Cosare’s case only
negated the claim that they actually intended to first look into the matter before making a final
determination as to the guilt or innocence of their employee. This also manifested from the fact that
even before Cosare was required to present his side on the charges of serious misconduct and
willful breach of trust, he was summoned to Arevalo’s office and was asked to tender his immediate
resignation in exchange for financial assistance.

The clear intent of the respondents to find fault in Cosare was also manifested by their persistent
accusation that Cosare abandoned his post, allegedly signified by his failure to report to work or file
a leave of absence beginning April 1, 2009. This was even the subject of a memo56 issued by
Arevalo to Cosare on April 14, 2009, asking him to explain his absence within 48 hours from the date
of the memo. As the records clearly indicated, however, Arevalo placed Cosare under suspension
beginning March 30, 2009. The suspension covered access to any and all company files/records
and the use of the assets of the company, with warning that his failure to comply with the memo
would be dealt with drastic management action. The charge of abandonment was inconsistent with
this imposed suspension. "Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment. To constitute abandonment of work, two elements must concur: ‘(1) the
employee must have failed to report for work or must have been absent without valid or justifiable
reason; and (2) there must have been a clear intention on the part of the employee to sever the
employer- employee relationship manifested by some overt act.’"57 Cosare’s failure to report to work
beginning April 1, 2009 was neither voluntary nor indicative of an intention to sever his employment
with Broadcom. It was illogical to be requiring him to report for work, and imputing fault when he
failed to do so after he was specifically denied access to all of the company’s assets. As correctly
observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April 1,
2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid) suspended
[Cosare] from using not only the equipment but the "assets" of Respondent [Broadcom]. This insults
rational thinking because the Respondents tried to mislead us and make [it appear] that [Cosare]
failed to report for work when they had in fact had [sic] placed him on suspension. x x x.58

Following a finding of constructive dismissal, the Court finds no cogent reason to modify the NLRC's
monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons Supermarket Corporation v.
Ranchez,59 the Court reiterated that an illegally or constructively dismissed employee is entitled to:
(1) either reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2)
backwages.60 The award of exemplary damages was also justified given the NLRC's finding that the
respondents acted in bad faith and in a wanton, oppressive and malevolent manner when they
dismissed Cosare. It is also by reason of such bad faith that Arevalo was correctly declared solidarily
liable for the monetary awards.

WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and Resolution
dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are SET ASIDE. The
Decision dated August 24, 2010 of the National Labor Relations Commission in favor of petitioner
Raul C. Cosare is AFFIRMED.

SO ORDERED.

G.R. No. 178762 June 16, 2010

LUZVIMINDA A. ANG, Petitioner,

vs.
PHILIPPINE NATIONAL BANK, Respondent.

DECISION

ABAD, J.:

This case is about the dismissal of an employee for offenses committed during her employment in a
government-owned corporation but which offenses were discovered after the privatized corporation
rehired her to work for it.

The Facts and the Case

In her Position Paper,1 petitioner Luzviminda A. Ang (Ang) claimed that respondent Philippine
National Bank (PNB), then a government-owned corporation, hired her on December 4, 1967 as a
probationary clerk. But she rose from the ranks, eventually becoming an Assistant Department
Manager I, a position she held when the PNB was privatized on May 26, 1996 and when she, like
her co-employees, was deemed automatically retired. The bank computed Ang’s gratuity benefits,
the monetary value of her leave credits, and the other benefits due her and cleared her of any
accountability.

But the PNB re-employed Ang as Assistant Manager effective on May 27, 1996 and assigned her in
its Tuguegarao, Cagayan Branch.2 Less than four months later, however, or on September 3, 1996
the PNB administratively charged her with serious misconduct and willful breach of trust for taking
part in a scam, called "kiting operation," where a depositor used a conduit bank account for
depositing several unfunded checks drawn against the same depositor’s other current accounts and
from which conduit bank account he later withdrew those checks. The PNB alleged that Ang had
allowed this illegal activity from January 2 to April 3, 1996 while she was the Assistant Department
Manager I in its Tuguegarao Branch.3

On September 16, 1996 the PNB heaped other charges against Ang of serious misconduct and
gross violation of the bank’s rules and regulations as follows:

-- She issued six certificates of deposit between June 5, 1992 up to January 10, 1996 in
amounts exceeding the true deposit balance of various depositors;

-- She issued two bank commitments dated January 24, 1994 and for providing a credit line
in favor of a government contractor without authority and in violation of SEL Cir. 2-166/91 of
July 10, 1996; and

-- She committed tardiness and "under time" from October to December 1995 and January to
March 1996 in violation of Gen. Cir. 1-61/91 of February 1, 1991.4

In answer to the first charge, Ang claimed that it was not a "kiting operation," but an accommodation
of a very valued client. She admitted that the checks were not funded and were converted into
account receivables or accommodation loans that the client had settled, including interests,
penalties, and other charges. Consequently, the PNB did not suffer any loss from those transactions;
it even reaped enormous profits from them.5

On the second charge, Ang claimed that the issuance of the certificates had been tolerated to
accommodate valued clients as a marketing strategy and prevent their move to other banks. These
had been open transactions, said Ang, which were known to all the officers of the branch. Again, the
PNB did not suffer any loss on account of the issuance of those certificates. The clients involved
maintained their loyalty to the bank.6

On the third charge, Ang claimed that the PNB’s loan commitments in those cases amounted to
mere recommendations since she had no authority to approve loans. Furthermore, she could not
have violated SEL Cir. 2-166/91 dated July 10, 1996 since this was not yet in effect when she issued
those commitments on January 24, 1994. Besides, the circular merely prescribed the fees to be
collected.7

On the last charge, Ang claimed that she was not covered by the circular governing office hours
because she was a bank officer. Managerial employees, according to her, worked beyond the usual
eight hours and even worked on Saturdays and Sundays. She added that, since the bank had
already made deductions for tardiness on her pay check, she cannot anymore be administratively
charged for it.8

Ang further pointed out that the causes for her termination took place when she was yet a
government official. The PNB had since ceased to be government-owned. If she were to be charged
for those causes, the jurisdiction over her case would lie with the Civil Service Commission. Even
then, since she already retired from the government service, the employment that could be
terminated no longer existed.9

Ang added that the causes for her termination had also become academic after the PNB cleared her
of any accountability when she once retired from employment with it.
Pending administrative investigation, the PNB assigned Ang to its Aparri Branch on April 3,
1997.10 Its Inspection and Investigation Unit recommended her dismissal on June 3, 1997 to the
Board of Inquiry.11 Ang alleged that the PNB dismissed her from work on July 25, 1997, withholding
her fringe benefits, gratuity benefits, monetary value of her leave credits, rights and interests in the
provident fund, and other benefits due her as of May 26, 1996.12 She sought reconsideration, but the
bank denied it.

On January 27, 1998 Ang filed a complaint against the PNB before the National Labor Relations
Commission (NLRC), Regional Arbitration Branch II, Tuguegarao, Cagayan in NLRC RAB II CN 01-
00022-98 for illegal dismissal, illegal deductions, non-payment of 13th month pay, allowances,
separation pay, and retirement benefits with prayer for payment of moral and exemplary damages,
attorney’s fees, and litigation expenses.

Answering the complaint, the PNB claimed that it observed due process in terminating Ang, notifying
her of the charges and giving her a chance to defend herself in a formal hearing but she waived this
and opted to submit a position paper. The PNB Board of Inquiry informed her of its decision before
implementing the same. Indeed, she even sought its reconsideration.13 The PNB pointed out that
since it separated petitioner Ang for a just cause, she was not entitled to termination pay. Further
she ceased to be entitled to the benefits she claimed.14

The PNB also pointed out that although it cleared Ang of any accountability before her retirement as
a civil servant, it premised such clearance from existing knowledge and records. The PNB had not
yet discovered her frauds and omissions when it issued the clearance. Besides, what the PNB
issued was not really a clearance but a certification that Ang had no pending administrative case. It
issued that certification on August 12, 1996 and filed the first administrative charge against her on
September 3, 1996.15

On March 30, 1999 the Labor Arbiter (LA) rendered a Decision,16 finding the PNB’s dismissal of Ang
illegal for failure to show that the dismissal was for a valid cause and after notice and hearing.
Specifically, the PNB failed to prove any basis for loss of trust. The LA ordered the reinstatement of
petitioner Ang to her former position or its substantial equivalent, without loss of seniority rights and
with full backwages and other benefits or their money value from the time of her actual dismissal on
July 25, 1996 up to her reinstatement.

Further, the LA ordered the PNB to pay Ang ₱488,567.87 in gratuity pay plus 1 percent interest per
month from the time it fell due until actual payment, ₱1 million as moral damages, and ₱500,000.00
as exemplary damages plus 10 percent of the total monetary award as attorney’s fees. The LA made
the monetary value of her fringe benefits and others, not included in the computed amount, subject
to recomputation upon the finality of the NLRC decision. In case reinstatement was not feasible, Ang
was to have the option to be paid separation pay of at least one month pay for every year of her 30
years of service in addition to her full backwages and gratuity benefits.

The PNB appealed the decision to the NLRC but the latter dismissed the appeal on January 30,
2004.17 Upon motion for reconsideration, however, or on October 29, 2004 the NLRC reconsidered
its finding of lack of due process, considering Ang’s admission during direct examination that the
PNB informed her of the charges against her and gave her a chance to present her side with the
assistance of a counsel. The NLRC deleted the award of damages because of absence of bad faith
on the part of the PNB officers but maintained the LA’s finding that the PNB had not proved loss of
trust as a ground for dismissal.

On petition for certiorari with the Court of Appeals (CA), the latter rendered a decision on January
30, 2007,18 finding valid reason to uphold Ang’s dismissal from the service for willful breach of the
trust reposed in her by the PNB. As to the procedural aspect, the CA found that without doubt the
PNB observed due process in dismissing Ang. She received two memoranda; first informing her of
the charges against her, and second informing her of the decision to terminate her services. The CA
reversed the NLRC Decision and dismissed Ang’s complaint. She moved for reconsideration, but
this was denied.

The Issues Presented

Petitioner presents the following issues:

1. Whether or not the CA erred in finding that the PNB dismissed Ang based on the evidence
that she betrayed its trust in her as a bank officer;

2. Whether or not the CA erred in holding that the PNB accorded Ang due process when it
dismissed her from the service; and

3. Whether or not the CA erred in holding that Ang was not entitled to the benefits that the
PNB withheld from her.

The Court’s Ruling

One. Ang claims that her dismissal by PNB, the private corporation, was illegal since she had
committed no offense under its employ. The offense for which she was removed took place when
the government still owned PNB and she was then a government employee. But while PNB began
as a government corporation, it did not mean that its corporate being ceased and was subsequently
reestablished when it was privatized. It remained the same corporate entity before, during, and after
the change over with no break in its life as a corporation.

Consequently, the offenses that Ang committed against the bank before its privatization continued to
be offenses against the bank after the privatization. But, since the PNB was already a private
corporation when it looked into Ang’s offenses, the provisions of the Labor Code governed its
disciplinary action.

Ordinarily, the Court would not inquire into factual issues raised in a petition for review but, since the
findings of the CA clashed with those of the LA and the NLRC, such inquiry would be justified in this
case. As to the existence of just cause, it is clear to the Court that Ang did not deny the acts and
omissions constituting the offense. The transcript of stenographic notes taken during her direct
examination on April 22, 1998 before the NLRC Regional Arbitration Branch in Tuguegarao,
Cagayan, shows that her defense consisted in her claim that she accommodated a client’s unfunded
checks and issued false bank certificates with the knowledge and consent of the branch manager
and comptroller.

But such uncorroborated defense is unsatisfactory, revealing a mind that was willing to disregard
bank rules and regulations when other branch officers concurred. The PNB rightfully separated her
from work for willful breach of the trust that it reposed in her under the Labor Code. Her defense that
the PNB did not suffer any loss is of no moment. The focal point is that she betrayed the trust of the
bank in her fidelity to its interest and rules.

Two. As to the issue of due process, a review of the transcript of stenographic notes taken during
Ang’s cross-examination on December 17, 1998 before the NLRC Regional Arbitration Branch in
Tuguegarao, Cagayan, reveals that she admitted having received from the PNB a memorandum of
September 15, 1996, containing the administrative charges against her and a memorandum of June
3, 1997 containing the decision to terminate her service.19 She likewise admitted that the bank gave
her a chance to present her side and to consult a lawyer.

Three. Ang claims that she is entitled to the monetary value of her leave credits, gratuity benefits,
retirement pay, rights and interests in the provident fund, and other benefits due her as of May 26,
1996.

The PNB points out, however, that Ang did not seek reconsideration from the NLRC of its deletion of
the LA’s award of accrued compensation and other benefits to her. And, although she received an
unfavorable decision from the CA, her motion for reconsideration did not raise the matter of accrued
compensation and other benefits. Only before this Court did she raise them for the first time. But,
contrary to the PNB’s position, what the NLRC decision deleted was only the award of damages. It
did not touch the benefits mentioned. Consequently, when the CA apparently deleted these as well,
Ang has a right to elevate the issue before this Court. 1avv phi 1

Although the transformation of the PNB from a government-owned corporation to a private one did
not result in a break in its life as juridical person, the same idea of continuity cannot be said of its
employees. Section 27 of Presidential Proclamation 50 provided for the automatic termination of
employer-employee relationship upon privatization of a government-owned and controlled
corporation. Further, such privatization cannot deprive the government employees involved of their
accrued benefits or compensation. Thus:

Sec. 27. Automatic Termination of Employer-Employee Relations. — Upon the sale or other
disposition of the ownership and/or controlling interest of the government in a corporation
held by the Trust, or all or substantially all of the assets of such corporation, the employer-
employee relations between the government and the officers and other personnel of such
corporations shall terminate by operation of law. None of such officers or employees shall
retain any vested right to future employment in the privatized or disposed corporation, and
the new owners or controlling interest holders thereof shall have full and absolute discretion
to retain or dismiss said officers and employees and to hire the replacement or replacements
of any one or all of them as the pleasure and confidence of such owners or controlling
interest holders may dictate.

Nothing in this section shall, however, be construed to deprive said officers and employees of their
vested entitlements in accrued benefits or the compensation and other benefits incident to their
employment or attaching to termination under applicable employment contracts, collective
bargaining agreements, and applicable legislation.

Here, when PNB was privatized, Ang’s employment with it as a government-owned corporation
ceased. Indeed, the PNB already computed the retirement and other benefits to which she was
entitled as a result of the cessation of her employment. Since she had no pending administrative
case on the day she ceased to be a PNB employee and had been cleared of any accountability,20 all
those benefits already accrued to her on the date of her termination.

Of course, the PNB rehired her immediately but that is another story. In the eyes of the law, her
record as employee of the government-owned PNB was untarnished at the time of her separation
from it. In fact, the PNB already computed the benefits to which she was entitled and readied their
payment. The GSIS rule that the PNB now relies on applied only to employees with pending
administrative charge at the time of their retirement. Since Ang had none of that, the cited rule did
not apply to her. The Court sees no reason why she should not receive the benefits which she
earned or which accrued to her as of May 26, 1996.
As for possible benefits accruing to Ang after May 26, 1996, the same should be deemed governed
by the Labor Code since the PNB that rehired her on May 27, 1996 has become a private
corporation. Under the Omnibus Rules Implementing the Labor Code, Book VI, Rule I, Section 7, the
employee’s separation from work for a just cause does not entitle her to termination pay. Thus, the
PNB may rightfully withhold Ang’s termination pay that accrued beginning on May 27, 1996 because
of her dismissal.

WHEREFORE, the Court AFFIRMS the Court of Appeals decision dated January 30, 2007 and its
resolution dated July 6, 2007 in CA-G.R. SP 88449 in favor of respondent Philippine National Bank
but with the MODIFICATION that it directs the latter to pay petitioner Luzviminda A. Ang the benefits
due her from the bank as of the date of her retirement on May 26, 1996.

SO ORDERED.

G.R. No. 121227 August 17, 1998

VICENTE SAN JOSE, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and OCEAN TERMINAL SERVICES,
INC., respondent.

PURISIMA, J.:

Before the Court is a Petition for Certiorari seeking to annul a Decision of the National Labor
Relations Commission dated April 20, 1995 in NLRC-NCR-CA-No. 00671-94 which reversed, on
jurisdictional ground, a Decision of the Labor Arbiter dated January 19, 1994 in NLRC-NCR Case
No. 00-03-02101-93 a case for a money claim — underpayment of retirement benefit. Records do
not show that petitioner presented a Motion for Reconsideration of subject Decision of the National
Labor Relations Commission, which motion is, generally required before the filing of Petition
for Certiorari.

While the rule prescribing the requisite motion for reconsideration is not absolute and recognizes
some exceptions, there is no showing that the case at bar constitutes an exception. Nevertheless,
we gave due course to the petition to enable the Court to reiterate and clarify the jurisdictional
boundaries between Labor Arbiters and Voluntary Arbitrator or Panel of Voluntary Arbitrators over
money claims, and to render substantial and speedy justice to subject aged stevedore retiree who
first presented his claim for retirement benefit in April 1991, or seven years ago.

Labor law practitioners and all lawyers, for that matter, should be fully conversant with the
requirements for the institution of certiorari proceedings under Rule 65 of the Revised Rules of
Court. For instance, it is necessary that a Motion for Reconsideration of the Decision of the National
Labor Relations Commission must first be resorted to. The ruling in Corazon Jamer v. National
Labor Relations Commission, G.R. No. 112630, September 5, 1997, comes to the fore and should
be well understood and observed. An ordinary allegation — ". . . and there is no appeal, nor any
plain, speedy, and adequate remedy in the ordinary course of law" (Rule 65, Sec. 1, Revised Rules
of Court) is not a foolproof substitute for a Motion for Reconsideration, absence of which can be fatal
to a Petition for Certiorari. Petitioner cannot and should not rely on the liberality of the Court simply
because he is a working man.
In the Jamer case, this court said:

. . . This premature action of petitioners constitutes a fatal infirmity as ruled in a long

line of decisions, most recently is the case of Building Care Corporation v. National
Labor Relations Commission —

The filing of such motion is intended to afford public respondent an

opportunity to correct any actual or fancied error attributed to it by
way of a re-examination of the legal and factual aspects of the case.
Petitioner's inaction or negligence under the circumstances is
tantamount to a deprivation of the right and opportunity of the
respondent commission to cleanse itself of an error unwittingly
committed or to vindicate itself of an act unfairly imputed. . . .

Likewise, a motion for reconsideration is an adequate remedy;

hence certiorari proceedings, as in this case, will not prosper.

As stated in the Decision of the Labor Arbiter in NLRC-NCR-Case No. 00-03-0201-93, dated
January 19, 1994, the facts of this case are undisputed. The Labor Arbiter reported, thus:

Complainant, in his position paper (Record, pages 11 to 14) states that he was hired
sometime in July 1980 as a stevedore continuously until he was advised in April
1991 to retire from service considering that he already reached 65 years old (sic);
that accordingly, he did apply for retirement and was paid P3,156.39 for retirement
pay . . . (Rollo, pp. 15, 26-27, 58-59).

Decision of the Labor Arbiter in NLRC-NCR-

Case No. 00-03-02101-93, January 9, 1994
(Rollo, pp. 15017, at pp. 16-17).

The Labor Arbiter decided the case solely on the merits of the complaint. Nowhere in the Decision is
made mention of or reference to the issue of jurisdiction of the Labor Arbiter (Rollo, pp. 15-17). But
the issue of jurisdiction is the bedrock of the Petition because, as earlier intimated, the Decision of
the National Labor Relations Commission, hereinbelow quoted, reversed the Labor Arbiter's
Decision on the issue of jurisdiction. Reads subject Decision of the Labor Arbiter:

Respondents, in their Reply to complainant's position paper, allege (Record, pages

18 to 21) that complainant's latest basic salary was P120.34 per day; that he only
worked on rotation basis and not seven days a week due to numerous stevedores
who can not all be given assignments at the same time; that all stevedores only for
paid every time they were assigned or actually performed stevedoring; that the
computation used in arriving at the amount of P3,156.30 was the same computation
applied to the other stevedores; that the use of divisor 303 is not applicable because
complainant performed stevedoring job only on call, so while he was connected with
the company for the past 11 years, he did not actually render 11 years of service;
that the burden of proving that complainant's latest salary was P200.00 rests upon
him; that he already voluntarily signed a waiver of quitclaim; that if indeed respondent
took advantage of his illiteracy into signing his quitclaim, he would have immediately
filed this complaint but nay, for it took him two (2) years to do so.

The issue therefore is whether or not complainant is entitled to the claimed

differential of separation pay.
 We find for the complainant. He is entitled to differential.

We cannot sustain a computation of length of service based on the ECC contribution

records. Likewise, the allegation that complainant rendered service for only five days
a month for the past 11 years is statistically improbable, aside from the fact that the
best evidence thereof are complainant's daily time records which respondent are
(sic) duty bound to keep and make available anytime in case of this.

The late filing has no bearing. The prescription period is three years. It is suffice (sic)
that the filing falls within the period.

Whether or not complainant worked on rotation basis is a burden which lies upon the
employer. The presumption is that the normal working period is eight (8) hours a day
and six (6) days a week, or 26 days a month, unless proven otherwise.

Also, the burden of proving the amount of salaries paid to employees rests upon the
employer not on the employee. It can be easily proven by payrolls, vouchers, etc.
which the employers are likewise duty bound to keep and present. There being non,
we have to sustain complainant's assertion that his latest salary rate was P200 a day
or P5,200 a month. Therefore, his retrenchment pay differential is P25,443.70 broken
down as follows:

P200 x 26 days = P5,200 x 11 years

= (P2,600 x 11 years) - P3,156.30

= P28,600 - P3,156.30

= P25,443.70

The Decision of the National Labor Relations

Commission in NLRC-NCR-CA No. 06701-94
April 20, 1995 (Rollo, pp. 18-21).

The National Labor Relations Commission reversed on jurisdictional ground the aforesaid Decision
of the Labor Arbiter; ruling, as follows:

. . . His claim for separation pay differential is based on the Collective Bargaining
Agreement (CBA) between his union and the respondent company, the pertinent
portion of which reads:

. . . ANY UNION member shall be compulsory retired (sic) by the company upon
reaching the age of sixty (60) years, unless otherwise extended by the company for
justifiable reason. He shall be paid his retirement pay equivalent to one-half (1/2)
month salary for every year of service, a fraction of at least six months being
considered as one (1) whole year.

. . . The company agrees that in case of casual employees and/or workers who work
on rotation basis the criterion for determining their retirement pay shall be 303
 rotation calls or work days as equivalent to one (1) year and shall be paid their
retirement pay equivalent to one half (1/2) month for every year of service.

xxx xxx xxx

Since the instant case arises from interpretation or implementation of a collective

bargaining agreement, the Labor Arbiter should have dismissed it for lack of
jurisdiction in accordance with Article 217 (c) of the Labor Code, which reads:
(Emphasis supplied)

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

xxx xxx xxx

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

agreement and those arising from the interpretation or enforcement of company
procedure/policies shall be disposed of by the Labor Arbiter by referring the same to
the grievance machinery and voluntary arbitrator as may be provided in said
agreements.

Petitioner contends that:

I. THE PUBLIC RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN

GIVING DUE COURSE TO THE APPEAL DESPITE THE FACT 4 (SIC) THAT IT
WAS FILED OUT OF TIME AND THERE IS NO SHOWING THAT A SURETY BOND
WAS POSTED.

II. THE PUBLIC RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN

SETTING ASIDE THE DECISION OF . . . DATED 19 JANUARY 1994 AND
DISMISSING THE CASE ON THE GROUND OF LACK OF JURISDICTION WHEN
THE ISSUE DOES NOT INVOLVE ANY PROVISION OF THE COLLECTIVE
BARGAINING AGREEMENT. (Rollo, pp. 7-8)

The Manifestation and Motion (In Lieu of Comment) sent in on December 6, 1995 by the Office of
the Solicitor General support the second issue, re: jurisdiction raised by the Petitioner (Rollo, pp. 26-
33, at pp. 38-32).

Labor Arbiter Decision

Labor Arbiters should exert all efforts to cite statutory provisions and/or judicial decision to buttress
their dispositions. An Arbiter cannot rely on simplistic statements, generalizations, and assumptions.
These are not substitutes for reasoned judgment. Had the Labor Arbiter exerted more research
efforts, support for the Decision could have been found in pertinent provisions of the Labor Code, its
implementing Rules, and germane decisions of the Supreme Court. As this Court said in Juan
Saballa, at al. v. NLRC, G.R. No. 102472-84, August 22, 1996:

. . . This Court has previously held that judges and arbiters should draw up their
decisions and resolutions with due care, and make certain that they truly and
accurately reflect their conclusions and their final dispositions. A decision should
faithfully comply with Section 14, Article VIII of the Constitution which provides that
no decision shall be rendered by any court without expressing therein clearly and
 distinctly the facts of the case and the law on which it is based. If such decision had
to be completely overturned or set aside, upon the modified decision, such resolution
or decision should likewise state the factual and legal foundation relied upon. The
reason for this is obvious: aside from being required by the Constitution, the court
should be able to justify such a sudden change of course; it must be able to
convincingly explain the taking back of its solemn conclusions and pronouncements
in the earlier decision. The same thing goes for the findings of fact made by the
NLRC, as it is a settled rule that such findings are entitled to great respect and even
finality when supported by substantial evidence; otherwise, they shall be struck down
for being whimsical and capricious and arrived at with grave abuse of discretion. It is
a requirement of due process and fair play that the parties to a litigation be informed
of how it was decided, with an explanation of the factual and legal reasons that led to
the conclusions of the court. A decision that does not clearly and distinctly state the
facts and the law on which it is based leaves the parties in the dark as to how it was
reached and is especially prejudicial to the losing party, who is unable to pinpoint the
possible errors of the court for review by a higher tribunal. . . .

This is not an admonition but rather, advice and a critique to stress that both have obligations to the
Courts and students of the law. Decisions of the Labor Arbiters, the National Labor Relations
Commission, and the Supreme Court serve not only to adjudicate disputes, but also as an
educational tool to practitioners, executives, labor leaders and law students. They all have a keen
interest in methods of analysis and the reasoning processes employed in labor dispute adjudication
and resolution. In fact, decisions rise or fall on the basis of the analysis and reasoning processes of
decision makers or adjudicators.

On the issues raised by the Petitioner, we rule:

1. Timeliness of Appeal
And Filing of Appeal Bond

The Court rules that the appeal of the respondent corporation was interposed within the
reglementary period, in accordance with the Rules of the National Labor Relations Commission, and
an appeal bond was duly posted. We adopt the following Comment dated August 14, 1996,
submitted by the National Labor Relations Commission, to wit:

. . . While it is true that private respondent company received a copy of the decision
dated January 19, 1994 of the Labor Arbiter . . . and filed its appeal on February 14,
1994, it is undisputed that the tenth day within which to file an appeal fell on a
Saturday, the last day to perfect an appeal shall be the next working day.

Thus, the amendments to the New Rules of Procedure of the NLRC, Resolution No.
11-01-91 which took effect on January 14, 1992, provides in part:

xxx xxx xxx

1. Rule VI, Sections 1 and 6 are hereby amended to read as follows:

Sec. 1. Period of Appeal — Decisions, awards or orders of the Labor Arbiter . . . shall
be final and executory unless appealed to the Commission by any or both parties
within ten (10) calendar days from receipt of such decisions, awards or orders of the
Labor Arbiter . . . . . . If the 10th day . . . falls on a Saturday, Sunday or a Holiday, the
last day to perfect the decision shall be the next working day. (Emphasis supplied)
 Hence, it is crystal clear that the appeal was filed within the prescriptive period to
perfect an appeal. Likewise, the petitioner's contention that private respondent did
not post the required surety bond, deserves scant consideration, for the simple
reason that a surety bond was issued by BF General Insurance Company, Inc., in the
amount of P25,443.70 (Rollo, pp. 63-64).

2. Jurisdictional Issue

The jurisdiction of Labor Arbiters and Voluntary Arbitrator or Panel of Voluntary Arbitrators is clearly
defined and specifically delineated in the Labor Code. The pertinent provisions of the Labor Code,
read:

A. Jurisdiction of Labor Arbiters

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

1. Unfair labor practice cases;

2. Termination disputes;

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

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

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

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000) regardless of whether accompanied with a
claim for reinstatement.

xxx xxx xxx

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

agreement and those arising from the interpretation or enforcement of company
procedure/policies shall be disposed of by the Labor Arbiter by referring the same to
the grievance machinery and voluntary arbitrator so maybe provided in said
agreement.

B. Jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators

 Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. — The
Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies referred
to in the immediately preceding article. Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in character, shall no longer be
treated as unfair labor practice and shall be resolved as grievances under the
collective bargaining agreement. For purposes of this Article, gross violations of
Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to
comply with the economic provisions of such agreement.

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

Art. 262. Jurisdiction over other labor disputes. — The Voluntary Arbitrator or panel
of Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all
other labor disputes including unfair labor practices and bargaining deadlocks.

The aforecited provisions of law cannot be read in isolation or separately. They must be read as a
whole and each Article of the Code reconciled one with the other. An analysis of the provisions of
Articles 217, 261, and 262 indicates, that:

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

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

3. The original and exclusive jurisdiction of Labor Arbiters is qualified by an exception as indicated in
the introductory sentence of Article 217 (a), to wit:

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

The phrase "Except as otherwise provided under this Code" refers to the following exceptions:

A. Art. 217. Jurisdiction of Labor Arbiters . . .

xxx xxx xxx

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

agreement and those arising from the interpretation or enforcement of company
procedure/policies shall be disposed of by the Labor Arbiter by referring the same to
the grievance machinery and voluntary arbitrator as may be provided in said
agreement.
 B. Art. 262. Jurisdiction over other labor disputes. — The Voluntary Arbitrator or
panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear and
decide all other labor disputes including unfair labor practices and bargaining
deadlocks.

Parenthetically, the original and exclusive jurisdiction of the Labor Arbiter under Article 217
(c), for money claims is limited only to those arising from statutes or contracts other than a
Collective Bargaining Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators
will have original and exclusive jurisdiction over money claims "arising from the interpretation
or implementation of the Collective Bargaining Agreement and, those arising from the
interpretation or enforcement of company personnel policies", under Article 261.

4. The jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is provided for in Arts. 261
and 262 of the Labor Code as indicated above.

1. A close reading of Article 261 indicates that the original and exclusive jurisdiction of Voluntary
Arbitrator or Panel of Voluntary Arbitrators is limited only to:

. . . unresolved grievances arising from the interpretation or implementation of the

Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies . . . Accordingly, violations of a collective
bargaining agreement, except those which are gross in character, shall no longer be
treated as unfair labor practice and shall be resolved as grievances under the
Collective Bargaining Agreement. . . . .

2. Voluntary Arbitrators or Panel of Voluntary Arbitrators, however, can exercise jurisdiction over any
and all disputes between an employer and a union and/or individual worker as provided for in Article
262.

Art. 262. Jurisdiction over other labor disputes. — The voluntary arbitrator or panel of
voluntary arbitrators, upon agreement of the parties, shall also hear and decide all
other labor disputes including unfair labor practices and bargaining deadlocks.

It must be emphasized that the jurisdiction of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators under Article 262 must be voluntarily conferred upon by both labor and management. The
labor disputes referred to in the same Article 262 can include all those disputes mentioned in Article
217 over which the Labor Arbiter has original and exclusive jurisdiction.

As shown in the above contextual and wholistic analysis of Articles 217, 261, and 262 of the Labor
Code, the National Labor Relations Commission correctly ruled that the Labor Arbiter had no
jurisdiction to hear and decide petitioner's money-claim-underpayment of retirement benefits, as the
controversy between the parties involved an issue "arising from the interpretation or implementation"
of a provision of the collective bargaining agreement. The Voluntary Arbitrator or Panel of Voluntary
Arbitrators has original and exclusive jurisdiction over the controversy under Article 261 of the Labor
Code, and not the Labor Arbiter.

3. Merits of the Case

The Court will not remand the case to the Voluntary Arbitrator or Panel of Voluntary Arbitrators for
hearing. This case has dragged on far too long — eight (8) years. Any further delay would be a
denial of speedy justice to an aged retired stevedore. There is further the possibility that any
Decision by the Voluntary Arbitrator or Panel of Voluntary Arbitrators will be appealed to the Court of
Appeals, and finally to this Court. Hence, the Court will rule on the merits of the case.

We adopt as our own the retirement benefit computation formula of the Labor Arbiter, and the
reasons therefor as stated in the decision abovequoted.

The simple statement of the Labor Arbiter that "we cannot sustain a computation of length of service
based on ECC contribution records", was not amply explained by the Labor Arbiter; however, there
is legal and factual basis for the same. It is unrealistic to expect a lowly stevedore to know what
reports his employer submits to the Employee's Compensation Commission under Book IV, Health,
Safety and Welfare Benefits, Title II, Employees Compensation and State Insurance Fund, of the
Labor Code, simply because the insurance fund is solely funded by the employer and the rate of
employer's contribution varies according to time and actuarial computations. (See Articles 183-184;
Labor Code). The worker has no ready access to this employer's record. In fact, it is farthest from his
mind to inquire into the amount of employer's contribution, much less whether the employer remits
the contributions. The worker is at all times entitled to benefits upon the occurrence of the defined
contingency even when the employer fails to remit the contributions. (See Article 196 (b), Labor
Code).

All employers are likewise required to keep an employment record of all their employees, namely:
payrolls; and time records. (See Book III, Rule X, specifically Secs. 6, 7, 8, 1 and 12, Omnibus Rules
— Implementing the Labor Code).

The respondent-employer was afforded the opportunity to show proof of the petitioner's length of
service and pay records. In both instances, the respondent-employer failed. By its own folly, it must
therefore suffer the consequences of such failure. (South Motorists Enterprises v. Tosoc, 181 SCRA
386, [1990]) From the very beginning — by the provision of the retirement provision of the Collective
Bargaining Agreement, i.e., the length of service as requirement for retirement, and salary as a basis
for benefit computation — the employer was forewarned of the need for accurate record keeping.
This is precisely the basis of retirement, and the computation of benefits based on years of service
and monthly wage.

To recapitulate; the Court hereby rules —

1. That the National Labor Relations Commission correctly ruled that the Labor Arbiter had no
jurisdiction over the case, because the case involved an issue "arising from the interpretation or
implementation" of a Collective Bargaining Agreement;

2. That the appeal to the National Labor Relations Commission was filed within the reglementary
period and that the appeal bond was filed; and

3. That we adopt the computation formula for the retirement benefits by the Labor Arbiter, and the
basis thereof, The respondent must therefore pay the petitioner the additional amount of Twenty-
Five Thousand Four Hundred Forty-Three and Seventy Centavos P25,443.70) Pesos.

In view of the long delay in the disposition of the case, this decision is immediately executory.

SO ORDERED.

Narvasa, C.J., Romero and Kapunan, JJ., concur.

G.R. No. L-58877 March 15, 1982

PEPSI-COLA BOTTLING COMPANY, COSME DE ABOITIZ, and ALBERTO M.

DACUYCUY, petitioners,
vs.
HON. JUDGE ANTONIO M. MARTINEZ, in his official capacity, and ABRAHAM TUMALA,
JR., respondents.

ESCOLIN, J.:

This petition for certiorari, prohibition and mandamus raises anew the legal question often brought to
this Court: Which tribunal has exclusive jurisdiction over an action filed by an employee against his
employer for recovery of unpaid salaries, separation benefits and damages — the court of general
jurisdiction or the Labor Arbiter of the National Labor Relations Commission [NLRC]?

The facts that gave rise to this petition are as follows:

On September 19, 1980, respondent Abraham Tumala, Jr. filed a complaint in the Court of First
Instance of Davao, docketed as Civil Case No. 13494, against petitioners Pepsi-Cola Bottling Co.,
Inc., its president Cosme de Aboitiz and other company officers. Under the first cause of action, the
complaint averred inter alia that Tumala was a salesman of the company in Davao City from 1977 up
to August 21, 1980; that in the annual "Sumakwel" contest conducted by the company in 1979,
Tumala was declared winner of the "Lapu-Lapu Award" for his performance as top salesman of the
year, an award which entitled him to a prize of a house and lot; and that petitioners, despite
demands, have unjustly refused to deliver said prize Under the second cause of action, it was
alleged that on August 21, 1980, petitioners, "in a manner oppressive to labor" and "without prior
clearance from the Ministry of Labor", "arbitrarily and ilegally" terminated his employment. He prayed
that petitioners be ordered, jointly and severally, to deliver his prize of house and lot or its cash
equivalent, and to pay his back salaries and separation benefits, plus moral and exemplary
damages, attorney's fees and litigation expenses. He did not ask for reinstatement.

Petitioners moved to dismiss the complaint on grounds of lack of jurisdiction and cause of action.
Petitioners further alleged that Tumala was not entitled to the "Sumakwel" prize for having misled the
company into declaring him top salesman for 1979 through various deceitful and fraudulent
manipulations and machinations in the performance of his duties as salesman and depot in-charge
of the bottling company in Davao City, which manipulations consisted of "unremitted cash
collections, fictitious collections of trade accounts, fictitious loaned empties, fictitious product deals,
uncollected loaned empties, advance sales confirmed as fictitious, and route shortages which
resulted to the damage and prejudice of the bottling company in the amount of P381,851.76." The
alleged commission of these fraudulent acts was also advanced by petitioners to justify Tumala's
dismissal.

The court below, sustaining its jurisdiction over the case, denied the motion for reconsideration.
Hence the present recourse.

We rule that the Labor Arbiter has exclusive jurisdiction over the case.

Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority
which organizes the court; and it is given only by law. 1 Jurisdiction is never presumed; it must be
conferred by law in words that do not admit of doubt. 2
Since the jurisdiction of courts and judicial tribunals is derived exclusively from the statutes of the forum,
the issue efore Us should be resolved on the basis of the law or statute now in force. We find that law in
Presidential Decree 1691 which took effect on May 1, 1980, Section 3 of which reads as follows:

SEC. 3. Article 217, 222 and 262 of Book V of the Labor Code are hereby amended
to read as follows:

Article 217. Jurisdiction of Labor Arbiters and the Commission. — The Labor Arbiters
shall have the original and exclusive jurisdiction to hear and decide the following
cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Unresolved issues in collective bargaining, including those that involve waged

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. All other claims arising from employer-employee relations, unless expressly

excluded by this Code.

Under paragraphs 3 and 5 of the above Presidential Decree, the case is exclusively cognizable by
the Labor Arbiters of the National Labor Relations Commission.

It is to be noted that P.D. 1691 is an exact reproduction of Article 217 of the Labor Code (P.D. 442),
which took effect on May 1, 1974. In Garcia vs. Martinez 3, an action filed on August 2, 1976 in the
Court of First Instance of Davao by a dismissed employee against his employer for actual, moral and
exemplary damages, We held that under Article 217 of the Labor Code, the law then in force, the case
was within the exclusive jurisdiction of the Labor Arbiters and the National Labor Relations Commission
[NLRC]. This Court, per Justice Aquino, rational this holding thus:

The provisions of paragraph 3 and 5 of Article 217 are broad and comprehensive
enough to cover Velasco's [employee's] claim for damages allegedly arising from his
unjustified dismissal by Garcia [employer]. His claim was a consequence of the
termination of their employer-employee relations [Compare with Ruby Industrial
Corporation vs. Court of First Instance of Manila, L- 38893, August 31, 1977, 78
SCRA 499].

Article 217 of the Labor Code words amended by P.D. 1367, which was promulgated on May 1,
1978, the full text of which is quoted as follows:

SECTION 1. Paragraph [a] of Art, 217 of the Labor Code as amended is hereby
further amended to read as follows:

[a] The Labor Arbiters shall have exclusive jurisdiction hear and decide the following
cases involving all workers, whether agricultural or non-agricultural:
 1] Unfair labor practice cases;

2] Unresolved issues in collective bargaining, including those which

involve wages, hours of work, and other terms conditions of
employment; and

3] All other cases arising from employer-employee relations duly

indorsed by the Regional Directors in accordance with the provisions
of this Code.

Provided, that the Regional Directors shall not indorse and Labor Arbiters shall not
entertain claims for moral or other forms of damages.

It will be noted that paragraphs 3 and 5 of Article 217 were deleted from the text of the above decree
and a new provision incorporated therein, to wit: "Provided that the Regional Directors shall not
indorse and Labor Arbiters shall not en certain claims for moral or other forms of damages." This
amendatory act thus divested the Labor Arbiters of their competence to pass upon claims for
damages by employees against their employers.

However, on May 1, 1980, Article 217, as amended by P.D. 1367, was amended anew by P.D.
1691. This last decree, which is a verbatim reproduction of the original test of Article 217 of the
Labor Code, restored to the Labor Arbiters of the NLRC exclusive jurisdiction over claims, money or
otherwise, arising from employer-employee relations, except those expressly excluded therefrom.

In sustaining its jurisdiction over the case at bar, the respondent court relied on Calderon vs. Court
of Appeals 4 , where We ruled that an employee's action for unpaid salaries, alowances and other
reimbursable expenses and damages was beyond the periphery of the jurisdictional competence of the
Labor Arbiters. Our ruling in Calderon, however, no longer applaies to this case because P.D. 1367, upon
which said decision was based, had already been superceded by P.D. 1691. As heretofore stated, P.D.
1691 restored to the Labor Arbiters their exlcusive jurisdiction over said classes of claims.

Respondent Tumala maintains that his action for delivery of the house and lot, his prize as top
salesman of the company for 1979, is a civil controversy triable exclusively by the court of the
general jurisdiction. We do not share this view. The claim for said prize unquestionably arose from
an employer-employee relation and, therefore, falls within the coverage of par. 5 of P.D. 1691, which
speaks of "all claims arising from employer-employee relations, unless expressly excluded by this
Code." Indeed, Tumala would not have qualitfied for the content, much less won the prize, if he was
not an employee of the company at the time of the holding of the contest. Besides, the cause
advanced by petitioners to justify their refusal to deliver the prize—the alleged fraudulent
manipulations committed by Tumala in connection with his duties as salesman of the company—
involves an inquiry into his actuations as an employee.

Besides, to hold that Tumala's claim for the prize should be passed upon by the regular court of
justice, independently and separately from his claim for back salaries, retirement benefits and
damages, would be to sanction split juridiction and multiplicity of suits which are prejudicial to the
orderly administration of justice.

One last point. Petitioners content that Tumala has no cause of action to as for back salaries and
damages because his dimissal was authorized by the Regional Director of the MInistry of Labor.
This question calls for the presentaiton of evidence and the same may well be entilated before the
labor Arbiter who has jurisdiction over the case. Besides, the issue raised is not for Us to determine
in this certiorari proceeding. The extraordinary remedy of certiorari proceeding. The extraordinary
remedy of certiorari offers only a limited form of review and its principal function is to keep an inferior
tribunal within its jurisdiction. 5

WHEREFORE, the petition is granted, and respondent judge is hereby directed to dismiss Civil Case No.
13494, without prejudice to the right of respondent Tumala to refile the same with the Labor Arbiter. No
costs.

SO ORDERED.

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

Abad Santos, J., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur. Under Presidential Decree No. 1691, which took effect on May 1, 1980 and which
amended article 217 of the Labor Code by nullifying the amendment intorduced by Presidential
Decree No. 1367 (which took effect on May 1, 1978), that Labor Arbiters shall not etertain claims for
moral or other forms of damages," such claims may now be passed upon by Labor Arbiters just as
they had juristiction over such claims when the Labor Code took effect on October 1, 1974. (Garcia
vs. Martinez, L-47806-07, August 3, 1978, 84 SCRA 577, reconsidered in Resolution of May 28,
1979, 90 SCRA 331; Bengzon vs. Inciong, L-48706-07, June 29, 1979, 91 SCRA 248; Caderon vs.
Amor, et al. and Court of Appeals, G.R. No. 52235, October 28, 1980, 100 SCRA 459 and Abad vs.
Philippine American General Ins. Co., Inc., G.R. No. 50563, October 30, 1981).

G.R. No. 178184 January 29, 2014

GRAND ASIAN SHIPPING LINES, INC., EDUARDO P. FRANCISCO and WILLIAM

HOW, Petitioners,
vs.
WILFREDO GALVEZ, JOEL SALES, CRISTITO GRUTA, DANILO ARGUELLES, RENATO
BATAYOLA, PATRICIO FRESMILLO,* JOVY NOBLE, EMILIO DOMINICO, BENNY NILMAO, and
JOSE AUSTRAL, Respondents.

DECISION

DEL CASTILLO, J.:

The employer has broader discretion in dismissing managerial employees on the ground of loss of
trust and confidence than those occupying ordinary ranks. While plain accusations are not sufficient
to justify the dismissal of rank and file employees, the mere existence of a basis for believing that
managerial employees have breached the trust reposed on them by their employer would suffice to
justify their dismissal.1

Before us is a Petition for Review on Certiorari2 assailing the September 12, 2006 Decision3 of the
Court of Appeals (CA) in CA-G.R. SP No. 82379, which annulled the September 10, 2003
Decision4 and January 14, 2004 Resolution5 of the National Labor Relations Commission (NLRC),
thereby reinstating the August 30, 2001 Decision6 of the Labor Arbiter for having attained finality as a
result of petitioners’ failure to post the correct amount of bond in their appeal before the NLRC.
Likewise assailed is the May 23, 2007 Resolution7 of the CA which denied petitioners’ Motion for
Reconsideration.8

Factual Antecedents

Petitioner Grand Asian Shipping Lines, Inc. (GASLI) is a domestic corporation engaged in
transporting liquified petroleum gas (LPG) from Petron Corporation’s refinery in Limay, Bataan to
Petron’s Plant in Ugong, Pasig and Petron’s Depot in Rosario, Cavite. Petitioners William How and
Eduardo Francisco are its President and General Manager, respectively. Respondents, on the other
hand, are crewmembers of one of GASLI’s vessels, M/T Dorothy Uno, with the following
designations: Wilfredo Galvez (Galvez) as Captain; Joel Sales (Sales) as Chief Mate; Cristito Gruta
(Gruta) as Chief Engineer; Danilo Arguelles (Arguelles) as Radio Operator; Renato Batayola
(Batayola), Patricio Fresmillo (Fresmillo) and Jovy Noble (Noble) as Able Seamen; Emilio Dominico
(Dominico) and Benny Nilmao (Nilmao) as Oilers; and Jose Austral (Austral) as 2nd Engineer.

Sometime in January 2000, one of the vessel’s Oilers, Richard Abis (Abis), reported to GASLI’s
Office and Crewing Manager, Elsa Montegrico (Montegrico), an alleged illegal activity being
committed by respondents aboard the vessel. Abis revealed that after about four to five voyages a
week, a substantial volume of fuel oil is unconsumed and stored in the vessel’s fuel tanks. However,
Gruta would misdeclare it as consumed fuel in the Engineer’s Voyage Reports. Then, the saved fuel
oil is siphoned and sold to other vessels out at sea usually at nighttime. Respondents would then
divide among themselves the proceeds of the sale. Abis added that he was hesitant at first to report
respondents’ illegal activities for fear for his life.

An investigation on the alleged pilferage was conducted. After audit and examination of the
Engineer’s Voyage Reports, GASLI’s Internal Auditor, Roger de la Rama (De la Rama), issued a
Certification of Overstatement of Fuel Oil Consumption9 for M/T Dorothy Uno stating that for the
period June 30, 1999 to February 15, 2000 fuel oil consumption was overstated by 6,954.3 liters
amounting to ₱74,737.86.10

On February 11, 2000, a formal complaint11 for qualified theft was filed with the Criminal Investigation
and Detection Group (CIDG) at Camp Crame against respondents, with Montegrico’s Complaint-
Affidavit12 attached. On February 14, 2000, Abis submitted his Sinumpaang Salaysay,13 attesting to
the facts surrounding respondents’ pilferage of fuel oil while on board the vessel, which he alleged
started in August of 1999. On March 22, 2000, GASLI’s Port Captain, Genaro Bernabe (Bernabe),
and De la Rama submitted a Complaint-Joint Affidavit,14 stating that in Gruta’s Engineer’s Voyage
Reports, particularly for the period June 30, 1999 to February 15, 2000, he overstated the number of
hours the vessel’s main and auxiliary engines, as well as its generators, were used resulting in the
exaggerated fuel consumption. They also stated that according to independent surveyor Jade Sea-
Land Inspection Services, the normal diesel fuel consumption of M/T Dorothy Uno for Petron
Ugong–Bataan Refinery–Petron Ugong route averaged 1,021 liters only. Thus, comparing this with
the declared amount of fuel consumed by the vessel when manned by the respondents, Bernabe
and De la Rama concluded that the pilferage was considerable.15 In her Supplementary Complaint
Affidavit,16 Montegrico implicated respondents except Sales, in the illegal activity. Bernabe, in his
Reply-Affidavit,17 further detailed their analysis of the voyage reports vis-a-vis the report of Jade Sea-
Land Inspection Services to strengthen the accusations.

In their Joint Counter-Affidavit18 and Joint Rejoinder-Affidavit,19 respondents denied the charge. They
alleged that the complaint was based on conflicting and erroneous computation/estimates of fuel
consumption; that the complaint was fabricated as borne out by its failure to specify the exact time
the alleged pilferage took place; that the allegations that the pilferage has been going on since
August 1999 and that Austral and Sales acted as lookouts are not true because both embarked on
the vessel only on December 28, 1999 and January of 2000, respectively; that four other officers
who were on board the vessel much longer than Austral and Sales were not included in the charge;
and, that the complaint was intended as a mere leverage.

In a letter20 dated April 14, 2000, the CIDG referred the case to the Office of the City Prosecutor of
Manila, which, after finding a prima facie case, filed the corresponding Information for Qualified
Theft21 dated August 18, 2000 with the Regional Trial Court (RTC) of Manila.

Meanwhile, GASLI placed respondents under preventive suspension. After conducting

administrative hearings, petitioners decided to terminate respondents from employment.
Respondents (except Sales) were thus served with notices22 informing them of their termination for
serious misconduct, willful breach of trust, and commission of a crime or offense against their
employer.

It appears that several other employees and crewmembers of GASLI’s two other vessels were
likewise suspended and terminated from employment. Nine seafarers of M/T Deborah Uno were
charged and terminated for insubordination, defying orders and refusal to take responsibility of cargo
products/fuel.23 For vessel M/T Coral Song, two crewmembers were dismissed for serious act of
sabotage and grave insubordination.24 Proceedings before the Labor Arbiter Respondents and the
other dismissed crewmembers of M/T Deborah Uno and M/T Coral Song (complainants) filed with
the NLRC separate complaints25 for illegal suspension and dismissal, underpayment/non-payment of
salaries/wages, overtime pay, premium pay for holiday and rest day, holiday pay, service incentive
leave pay, hazard pay, tax refunds and indemnities for damages and attorney’s fees against
petitioners. The complaints, docketed as NLRC NCR Case Nos. 00-04-02026-00, 00-04-02062-00,
00-05-02620-00 and 00-07-03769-00, were consolidated. 1âwphi1

On August 30, 2001, the Labor Arbiter rendered a Decision26 finding the dismissal of all 21
complainants illegal. As regards the dismissal of herein respondents, the Labor Arbiter ruled that the
filing of a criminal case for qualified theft against them did not justify their termination from
employment. The Labor Arbiter found it abstruse that the specific date and time the alleged pilferage
took place were not specified and that some crewmembers who boarded the vessel during the same
period the alleged pilferage transpired were not included in the charge. With regard to the other
complainants, petitioners likewise failed to prove the legality of their dismissal.

The Labor Arbiter ordered petitioners to reinstate complainants with full backwages and to pay their
money claims for unpaid salary, overtime pay, premium pay for holidays and rest days, holiday and
service incentive leave pay, as indicated in the Computation of Money Claims. Complainants were
likewise awarded damages due to the attending bad faith in effecting their termination, double
indemnity prescribed by Republic Act (RA) No. 818827 in view of violation of the Minimum Wage Law,
as well as 10% attorney’s fee. With respect to the claim for tax refund, the same was referred to the
Bureau of Internal Revenue, while the claim for hazard pay was dismissed for lack of basis. The
Labor Arbiter modified and recomputed the money claims of respondents, as follows:

1. WILFREDO GALVEZ – (Dismissed in Mar. 2000)

Backwages from Mar. 2000 to
May 2001 (₱8,658.74 x 14 mos.) ---------- P 121,225.16
13th Month Pay for the period ---------- 8,658.94

Unpaid Salary from Feb 16 to 29, 2000 ---------- 3,985.38

Non-payment of Premium Pay for Holiday; ---------- 22,188.70
Restday and Non-payment of Holiday Pay;
(limited to 3 years’ only = ₱7,372.90 x 3 yrs.)
Non-payment of (5 days) Service Incentive
Leave Pay (for every year of service, but
Limited to 3 years only): = ₱1,423.35 x 3 yrs.) ---------- P 4,270.05

Actual Moral Exemplary & Compensatory

Damages ---------- P 100,000.00

(₱260,258.23)
Ten (10%) Percent Attorney’s Fees P 26,025.82
TOTAL P 286,284.05

2. JOEL SALES – (Dismissed in Mar. 2000)

Backwages from Mar. 2000 to May 2001 -P
(₱8,274.14 x 14 mos.) ---------- 115,840.76

13th Month Pay for the period& ---------- 8,274.34

Actual, Moral, Exemplary &
Compensatory Damages ---------- P 100,000.00
(₱224,115.10)

Ten (10%) Percent Attorney’s Fees P 22,411.51

TOTAL P 246,526.61
3. CRISTITO G. GRUTA – (Dismissed in Mar. 2000)
Backwages from Mar. 200[0] to May 2001
(₱8,274.14 x 14 mos.) ---------- P 115,840.76

13th Month Pay for the period ---------- 8,274.34

Non-payment of Premium Pay for Holiday; Restday and

Non-payment of Holiday Pay: (₱7,045.57 x 2 yrs.) 14,091.51
Non-payment of (5 days) Service Incentive Leave Pay
(for every year of service = ₱1,360.15 x 2 yrs.) ---------- 2,720.30
Actual, Moral, Exemplary &
Compensatory Damages ---------- P 100,000.00
(₱240,926.91)

Ten (10%) Percent Attorney’s Fees ---------- P 24,092.69

TOTAL P 265,019.60
4. DANILO ARGUELLES – (Dismissed in Feb. 2000)
Backwages from Mar. 2000 to May 2001
(₱7,340.62 x 15 mos.) ---------- [P]110,109.30
13th Month Pay for the period ---------- 7,340.62
Unpaid Salary from Feb. 16 to 29, 2000
(₱225.00 x 14 days) ---------- 3,150.00
Underpayment/Non-payment of Salary/Wages:
A. From April 98 to Nov. 98 (7 mos.)
Minimum Wage – ₱198 x 391.5 [/] 12 = P 6,459.75

Actual Basic Wage for the period 4,320.00

Difference P 2,139.75

x 7 mos.

P 14,978.25

Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 29,956.50

B. From Dec. 98 to Mar. 2000 (16 mos.)
Minimum Wage – ₱225 391.5 [/] 12 = P 7,340.62

Actual Basic Wage for the period 6,240.00

Difference P 1,100.62

x 16 mos.

P 17,609.92

Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 35,219.84

Underpayment/Non-payment of Overtime Pay:
A. From Apr. 98 to Nov. 98 (7 mos.)
30% of Minimum Wage –

(₱6,459.75 x 30%) P 1,937.92

30% of Salary Actually Paid –

(₱4,320.00 x 30%) 1,872.00
Difference P 641.92

x 7 mos.

P 4,493.44 P 4,493.44
B. From Dec. 98 to Mar. 2000 (16 mos.)
30% of Minimum Wage –

(₱7,340.62 x 30%) 2,202.18

30% of Salary Actually Paid –
1,872.00
(₱6,240.00 x 30%)
 P 330.18
x 16 mos.
Difference
P 5,282.88 P 5,282.88

Non-payment of Premium Pay for Holiday; Restday and P 11,655.00

Non-payment of Holiday Pay (₱5,872.50 x 2 yrs.)

Non-payment of (5 days) Service Incentive Leave Pay
(for every year of service/but limited to 2 yrs. only): 2,250.00
= P 1,125.00 x 2 yrs.
Actual, Moral, Exemplary & P 100,000.00
Compensatory Damages
(₱309,457.58)

Ten (10%) Percent Attorney’s Fees P 30,945.75

TOTAL P 340,403.33
5. RENATO BATAYOLA
6. PATRICIO FRESNILLO
7. JOVY NOBLE
8. EMILIO DOMINICO
9. BENNY NILMAO – (All dismissed in Feb. 2001)
Backwages from Mar. 2000 to May 2001
(₱7,340.62 x 15 mos.) P 110,109.30
13th Month Pay for the period ---------- 7,340.62

Unpaid Salary from Feb. 16 to 29, 2000

(₱225.00 x 14 days) 3,150.00
Underpayment/Non-payment of Salary/Wages:
A. From Apr. 97 to Jan. 98 ([9] mos.)
Minimum Wage – ₱185 x 391.5 [/] 12 = P 6,035.62
Actual Basic Wage for the period 4,098.24

Difference P 1,932.58
x 9 mos.

P 17,436.42

Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 34,872.84

B. From Feb. 98 to Nov. 98 (10 mos.)
Minimum Wage – ₱198 x 391.5 [/] 12 = P 6,459.75
Actual Basic Wage for the period 4,098.24
 Difference P 2,361.51
x 10 mos.

P 23,615.10

Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 47,230.20

C. From Dec. 98 to Mar. 2000 (16 mos.)
Minimum Wage – ₱225 x 391.5 [/] 12 = 7,340.62
Actual Basic Wage for the period 6,022.00

Difference P 1,318.62

x 16 mos.

P 21,098.00

Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 42,196.00

Underpayment/Non-payment of Overtime Pay:

A. From Apr. 97 to Jan. 98 (9 mos.)

30% Minimum Wage –

(₱6,035.62 x 30%) P 1,810.68

30% of Salary Actually Paid –

(₱4,098.24 x 30%) 1,226.77

Difference P 583.91
x 9 mos.

P 5,255.19 - P 5,255.19

B. From Feb. 98 to Nov. 98 (10 mos.)

30% Minimum Wage –

(₱6,459.75 x 30%) P 1,937.92

30% of Salary Actually Paid –

1,226.72
(₱4,098.24 x 30%)
Difference P 711.15

x 10 mos.

P 7,111.70 - P 7,111.70
 C. From Dec. 98 to Mar. 2000 (16 mos.)
30% Minimum Wage – P 2,202.18
(₱7,340.62 x 30%)
30% of Salary Actually Paid – P 1,806.75

(₱6,022.50 x 30%)

x 16 mos.
Difference

P 6,326.97 - P 6,326.97

Non-Payment of Premium Pay for Holiday & Restday; and

Non-Payment of Holiday Pay: (₱5,827.50 x 3 yrs.) P 17,482.50
Non-Payment of (5 days) Service Incentive Leave Pay
(for every year of service/but limited to 3 years only)
= ₱1,125.00 x 3 yrs.) 3,375.00
Actual, Moral, Exemplary &
Compensatory Damages ---------- 100,000.00
(₱384,450.12)

P 38, 445.01
Ten (10%) Percent Attorney’s Fees

₱2,114,475.00)
(Total for 5 above-named Complainants
10. JOSE AUSTRAL – (Dismissed in Feb. 2000)
Backwages from Mar. 2000 to May 2001

(₱8,900.00 x 15 mos.) P 133.500.00

13th Month Pay for the period 8,900.00
Unpaid Salary from Feb. 16 to 29, 2000
(₱8,900.00 x 12 mos. / 365 days = (₱292.60 x 14 days) 4,096.40
Actual, [M]oral, Exemplary &
Compensatory Damages ---------- P 100,000.00
(₱246,496.40)

Ten (10%) Percent Attorney’s Fees P 24,679.64

TOTAL P 271, 146.04 28

The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, premises all considered, judgment is hereby rendered finding the dismissal of all 21
complainants herein as illegal and ordering respondents Grand Asian Shipping Lines, Inc., Eduardo
P. Franscisco and William How to pay, jointly and severally, each complainant the amounts, as
follows, to wit:

A) 1. Wilfredo Galvez P 286,284.05

2. Joel Sales 246,526.61

3. Cristito G. Gruta 265,019.60

4. Danilo Arguelles 340,403.33
5. Renato Batayola 422,895.13

6. Patricio Fresnillo 422,895.13

7. Jovy Noble 422,895.13

8. Emilio Dominico 422,895.13

9. Benny Nilmao 422,895.13
10. Jose Austral 271,146.04

11. Nobelito Rivas 281,900.13

12. Elias Facto 259,471.41

13. Jeremias Bonlagua 316,683.53

14. Rannie Canon 391,816.70

15. Fernando Malia 411,355.45
16. Calixto Flores 411,355.45

17. Necito Llanzana 411,355.45

18. Ramie Barrido 411,355.45

19. Albert Faulan 265,982.28

20. Magno Tosalem 419,352.79
21. Rolando Dela Guardia 419,352.79

(Grand Total) P 7,104,483.84

B) The awards of ₱100,000.00 each, as indemnity for damages and ten percent (10%) of the
total amount, as attorney’s fees, are included in the above-individual amount so awarded.

C) Respondents should immediately reinstate all the complainants to their former position
without loss of seniority [sic] and other benefits; and to pay them full backwages up to the
time of their actual reinstatement.

All other claims of complainants, not included in the above awards, are hereby ordered dismissed for
lack of merit.
SO ORDERED.29

Proceedings before the National Labor Relations Commission

Petitioners filed a Notice of Appeal With A Very Urgent Motion to Reduce Bond30 before the NLRC
and posted a cash bond in the amount of ₱500,000.00.

In a Supplemental Motion to Reduce Bond,31 petitioners cited economic depression, legality of the
employees’ termination, compliance with labor standards, and wage increases as grounds for the
reduction of appeal bond.

The NLRC issued an Order32 dated February 20, 2002 denying petitioners’ motion to reduce bond
and directing them to post an additional bond in the amount of ₱4,084,736.70 in cash or surety
within an unextendible period of 10 days; otherwise, their appeal would be dismissed. Petitioners
failed to comply with the Order. Thus, on February 3, 2003, complainants moved for the dismissal of
the appeal since petitioners had thus far posted only ₱1.5 million supersedeas bond and
₱500,000.00 cash bond, short of the amount required by the NLRC.33

In a Decision34 dated September 10, 2003, the NLRC, despite its earlier Order denying petitioners’
motion for the reduction of bond, reduced the amount of appeal bond to ₱1.5 million and gave due
course to petitioners’ appeal. It also found the appeal meritorious and ruled that petitioners
presented sufficient evidence to show just causes for terminating complainants’ employment and
compliance with due process. Accordingly, complainants’ dismissal was valid, with the exception of
Sales. The NLRC adjudged petitioners to have illegally dismissed Sales as there was absence of
any record that the latter received any notice of suspension, administrative hearing, or termination.

The NLRC struck down the monetary awards given by the Labor Arbiter, which, it ruled, were based
merely on the computations unilaterally prepared by the complainants. It also ruled that Galvez, a
ship captain, is considered a managerial employee not entitled to premium pay for holiday and rest
day, holiday pay and service incentive leave pay. As for the other complainants, the award for
premium pay, holiday pay, rest day pay and overtime pay had no factual basis because no proof
was adduced to show that work was performed on a given holiday or rest day or beyond the eight
hours normal work time. Even then, the NLRC opined that these claims had already been given
since complainants’ salaries were paid on a 365-day basis. Likewise, service incentive leave pay,
awards for damages and double indemnity were deleted. Further, the NLRC sustained respondents’
contention that it is the Secretary of Labor or the Regional Director who has jurisdiction to impose
the penalty of double indemnity for violations of the Minimum Wage Laws and not the Labor Arbiter.
The NLRC disposed of the case as follows:

WHEREFORE, premises considered, the assailed Decision is hereby reversed as to all

complainants but modified with respect to Joel Sales.

Respondents are adjudged not guilty of illegal dismissal with respect to all complainants except
complainant Joel Sales. With the exception of Joel Sales, all the monetary awards to all
complainants are deleted from the decision. 1âw phi 1

Respondents are ordered to pay, jointly and severally complainant Joel Sales his backwages in the
amount of ₱124,115.10 as computed in the assailed decision plus ten (10%) thereof as attorney’s
fees.

We also sustain the order to reinstate him to his former position without loss of seniority rights and
other benefits and to pay him backwages up to the time of his actual reinstatement.
SO ORDERED.35

Complainants filed Motions for Reconsideration while petitioners filed a Motion for Partial
Reconsideration. In a Resolution36 dated January 14, 2004, the NLRC reconsidered its ruling with
respect to Sales, absolving petitioners from the charge of illegally dismissing him as Sales was
neither placed under preventive suspension nor terminated from the service. The NLRC upheld
petitioners’ claim that it was Sales who abandoned his work by failing to report back for re-
assignment. The dispositive portion of the Resolution reads:

WHEREFORE, premises considered, the Motions for Reconsideration filed by complainants are
denied for lack of merit. The Motion for Partial Reconsideration filed by respondents is granted. The
assailed decision is reconsidered in that Respondents are likewise adjudged not guilty of illegal
dismissal with respect to complainant Joel Sales. The monetary awards in favor of complainant Joel
Sales as well as the reinstatement order are hereby deleted from the Decision.

SO ORDERED.37

Proceedings before the Court of Appeals

Respondents, excluding the other complainants, filed a Petition for Certiorari38 with the CA, attributing
grave abuse of discretion on the part of the NLRC in entertaining the appeal despite the insufficiency
of petitioners’ appeal bond. Respondents also assailed the NLRC’s ruling upholding the validity of
their dismissal. They posited that the charge of pilferage is not supported by clear, convincing and
concrete evidence. In fact, the RTC, Branch 15 of Manila already rendered a Decision39 on
December 19, 2003 acquitting them of the crime of qualified theft lodged by the petitioners.
Respondents further prayed for the reinstatement of the Labor Arbiter’s monetary awards in their
favor.

In a Decision40 dated September 12, 2006, the CA set aside the NLRC’s Decision and Resolution. It
held that the NLRC’s act of entertaining the appeal is a jurisdictional error since petitioners’ failure to
post additional bond rendered the Labor Arbiter’s Decision final, executory and immutable. The CA,
nonetheless, proceeded to discuss the merits of the case insofar as the illegal dismissal charge is
concerned. The CA conformed with the Labor Arbiter’s ruling that petitioners’ evidence was
inadequate to support the charge of pilferage and justify respondents’ termination. The CA ruled that
Sales was also illegally dismissed, stating that Sales’ active participation in the labor case against
petitioners belies the theory that he was not terminated from employment. The dispositive portion of
the CA Decision reads:

WHEREFORE, the petition is GRANTED and the assailed September 10, 2003 Decision and
January 14, 2003 Resolution are, accordingly, ANNULLED and SET ASIDE. In lieu thereof, the
Labor Arbiter’s August 30, 2001 Decision is ordered REINSTATED.

SO ORDERED.41

Petitioners filed a Motion for Reconsideration,42 questioning the CA in finding that respondents were
illegally dismissed, in reinstating the monetary awards granted by the Labor Arbiter without passing
upon the merits of these money claims and in ascribing grave abuse of discretion on the part of the
NLRC in taking cognizance of the appeal before it.

On May 23, 2007, the CA issued a Resolution43 denying petitioners’ Motion for Reconsideration.
Hence, the instant Petition.
 Issues

Petitioners assign the following errors:

I.

THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE

JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS WERE ILLEGALLY
DISMISSED.

A. THIS HONORABLE COURT OF APPEAL[S] OF APPEALS [sic] DISREGARDED THE

FACT THAT THE OFFICE OF THE CITY PROSECUTOR OF MANILA DETERMINED THAT
THERE WAS A PRIMA FACIE CASE FOR QUALIFIED THEFT AGAINST PETITIONERS,
CONTRARY TO DECISIONS THIS MOST HONORABLE COURT OF APPEAL[S] HAS
HELD WHERE SIMILAR FINDINGS OF THE INVESTIGATING PUBLIC PROSECUTOR
HAD BEEN CONSIDERED SUBSTANTIAL EVIDENCE TO JUSTIFY TERMINATION OF
EMPLOYMENT BASED ON LOSS OF TRUST AND CONFIDENCE.

B. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN DISCREDITING

PRIVATE RESPONDENTS’ EVIDENCE ONE BY ONE WHEN, TAKEN TOGETHER, SUCH
EVIDENCE PROVIDED ADEQUATE BASIS FOR THE DISMISSAL OF PETITIONERS IN
ACCORDANCE WITH RELEVANT SUPREME COURT OF APPEAL [sic] DECISIONS.

C. IN SUM, PETITIONERS WERE NOT ILLEGALLY DISMISSED SINCE THE

SUBSTANTIVE AND PROCEDURAL REQUIREMENTS FOR THE TERMINATION OF
THEIR EMPLOYMENT WERE SATISFIED IN THIS CASE.

D. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN RULING THAT

PETITIONER JOEL SALES WAS ILLEGALLY DISMISSED.

II.

THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE

JURISPRUDENCE WHEN IT CONCLUDED THAT PETITIONERS WERE NOT ABLE TO VALIDLY
PERFECT [THEIR] APPEAL OF THE LABOR ARBITER’S DECISION.44

Petitioners claim that the NLRC properly took cognizance of their appeal and properly granted their
motion for reduction of the appeal bond, explaining that strict implementation of the rules may be
relaxed in certain cases so as to avoid a miscarriage of justice. Petitioners also claim that there was
adequate basis to render respondents’ dismissal from service valid, as correctly ruled by the NLRC.

Our Ruling

The assailed CA Decision must be vacated and set aside.

There was substantial compliance with

the rules on appeal bonds.

In order to perfect an appeal from the Decision of the Labor Arbiter granting monetary award, the
Labor Code requires the posting of a bond, either in cash or surety bond, in an amount equivalent to
the monetary award. Article 223 of the Labor Code provides:

ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of
such decisions, awards, or orders. x x x

xxxx

In case of a judgment involving a monetary award, an appeal by the employer [may] be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the monetary award in the judgment
appealed from.

Nonetheless, we have consistently held that rules should not be applied in a very rigid and strict
sense.45 This is especially true in labor cases wherein the substantial merits of the case must
accordingly be decided upon to serve the interest of justice.46 When there has been substantial
compliance, relaxation of the Rules is warranted.47

In Mendoza v. HMS Credit Corporation,48 we held that the posting of an appeal bond in the amount of
₱650,000.00 instead of ₱1,025,081.82 award stated in the Decision of the Labor Arbiter is
substantial compliance with the requirement under Article 223. Likewise, in Pasig Cylinder Mfg.
Corp. v. Rollo,49 we ruled that the filing of a reduced appeal bond of ₱100,000.00 is not fatal in an
appeal from the labor arbiter’s ruling awarding ₱3,132,335.57 to the dismissed employees. In
Rosewood Processing, Inc. v. National Labor Relations Commission,50 we allowed the filing of a
reduced bond of ₱50,000.00, accompanied with a motion, in an appeal from the Labor Arbiter’s
award of ₱789,154.39.

In the case at bench, petitioners appealed from the Decision of the Labor Arbiter awarding to
crewmembers the amount of ₱7,104,483.84 by filing a Notice of Appeal with a Very Urgent Motion to
Reduce Bond and posting a cash bond in the amount of ₱500,000.00 and a supersedeas bond in
the amount of ₱1.5 million. We find this to be in substantial compliance with Article 223 of the Labor
Code. It is true that the NLRC initially denied the request for reduction of the appeal bond. However,
it eventually allowed its reduction and entertained petitioners’ appeal. We disagree with the CA in
holding that the NLRC acted with grave abuse of discretion as the granting of a motion to reduce
appeal bond lies within the sound discretion of the NLRC upon showing of the reasonableness of the
bond tendered and the merits of the grounds relied upon.51 Hence, the NLRC did not err or commit
grave abuse of discretion in taking cognizance of petitioners’ appeal before it.

Galvez and Gruta were validly dismissed

on the ground of loss of trust and
confidence; there were no valid grounds
for the dismissal of Arguelles, Batayola,
Fresnillo, Noble, Dominico, Nilmao and
Austral.

We do not, however, agree with the findings of the NLRC that all respondents were dismissed for
just causes. In termination disputes, the burden of proving that the dismissal is for a just or valid
cause rests on the employers. Failure on their part to discharge such burden will render the
dismissal illegal.52
As specified in the termination notice, respondents were dismissed on the grounds of (i) serious
misconduct, particularly in engaging in pilferage while navigating at sea, (ii) willful breach of the trust
reposed by the company, and (iii) commission of a crime or offense against their employer.
Petitioners claim that based on the sworn statement of Abis, joint affidavit of Bernabe and De la
Rama, letter of petitioner Francisco requesting assistance from the CIDG, formal complaint sheet,
complaint and supplementary complaint affidavit of Montegrico, CIDG’s letter referring respondents’
case to the Office of the City Prosecutor of Manila, resolution of the City Prosecutor finding a prima
facie case of qualified theft, and the Information for qualified theft, there is a reasonable ground to
believe that respondents were responsible for the pilferage of diesel fuel oil at M/T Dorothy Uno,
which renders them unworthy of the trust and confidence reposed on them.

After examination of the evidence presented, however, we find that petitioners failed to substantiate
adequately the charges of pilferage against respondents. "[T]he quantum of proof which the
employer must discharge is substantial evidence. x x x Substantial evidence is that amount of
relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if
other minds, equally reasonable, might conceivably opine otherwise."53

Here, the mere filing of a formal charge, to our mind, does not automatically make the dismissal
valid. Evidence submitted to support the charge should be evaluated to see if the degree of proof is
met to justify respondents’ termination. The affidavit executed by Montegrico simply contained the
accusations of Abis that respondents committed pilferage, which allegations remain uncorroborated.
"Unsubstantiated suspicions, accusations, and conclusions of employers do not provide for legal
justification for dismissing employees."54 The other bits of evidence were also inadequate to support
the charge of pilferage. The findings made by GASLI’s port captain and internal auditor and the
resulting certification executed by De la Rama merely showed an overstatement of fuel consumption
as revealed in the Engineer’s Voyage Reports. The report of Jade Sea Land Inspection Services
only declares the actual usage and amount of fuel consumed for a particular voyage. There are no
other sufficient evidence to show that respondents participated in the commission of a serious
misconduct or an offense against their employer.

As for the second ground for respondents’ termination, which is loss of trust and confidence,
distinction should be made between managerial and rank and file employees. "[W]ith respect to
rank-and-file personnel, loss of trust and confidence, as ground for valid dismissal, requires proof of
involvement in the alleged events x x x [while for] managerial employees, the mere existence of a
basis for believing that such employee has breached the trust of his employer would suffice for his
dismissal."55

In the case before us, Galvez, as the ship captain, is considered a managerial employee since his
duties involve the governance, care and management of the vessel.56 Gruta, as chief engineer, is
also a managerial employee for he is tasked to take complete charge of the technical operations of
the vessel.57 As captain and as chief engineer, Galvez and Gruta perform functions vested with
authority to execute management policies and thereby hold positions of responsibility over the
activities in the vessel. Indeed, their position requires the full trust and confidence of their employer
for they are entrusted with the custody, handling and care of company property and exercise
authority over it.

Thus, we find that there is some basis for the loss of confidence reposed on Galvez and Gruta. The
certification issued by De la Rama stated that there is an overstatement of fuel consumption.
Notably, while respondents made self-serving allegations that the computation made therein is
erroneous, they never questioned the competence of De la Rama to make such certification. Neither
did they question the authenticity and validity of the certification. Thus, the fact that there was an
overstatement of fuel consumption and that there was loss of a considerable amount of diesel fuel oil
remained unrefuted. Their failure to account for this loss of company property betrays the trust
reposed and expected of them. They had violated petitioners’ trust and for which their dismissal is
justified on the ground of breach of confidence.

As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, proof of involvement in
the loss of the vessel’s fuel as well as their participation in the alleged theft is required for they are
ordinary rank and file employees. And as discussed above, no substantial evidence exists in the
records that would establish their participation in the offense charged. This renders their dismissal
illegal, thus, entitling them to reinstatement plus full backwages, inclusive of allowances and other
benefits, computed from the time of their dismissal up to the time of actual reinstatement.

No evidence of Sales’ dismissal from employment.

The rule that the employer bears the burden of proof in illegal dismissal cases finds no application
when the employer denies having dismissed the employee.58 The employee must first establish by
substantial evidence the fact of dismissal59 before shifting to the employer the burden of proving the
validity of such dismissal.

We give credence to petitioners’ claim that Sales was not dismissed from employment. Unlike the
other respondents, we find no evidence in the records to show that Sales was preventively
suspended, that he was summoned and subjected to any administrative hearing and that he was
given termination notice. From the records, it appears Sales was not among those preventively
suspended on February 26, 2000. To bolster this fact, petitioners presented the Payroll Journal
Register for the period March 1-15, 200060 showing that Sales was still included in the payroll and
was not among those who were charged with an offense to warrant suspension. In fact, Sales’
signature in the Semi-Monthly Attendance Report for February 26, 2000 to March 10, 200061 proves
that he continued to work as Chief Mate for the vessel M/T Dorothy Uno along with a new set of
crewmembers. It is likewise worth noting that in the Supplemental Complaint Affidavit of Montegrico,
Sales was not included in the list of those employees who were accused of having knowledge of the
alleged pilferage. This only shows that he was never subjected to any accusation or investigation as
a prelude to termination. Hence, it would be pointless to determine the legality or illegality of his
dismissal because, in the first place, he was not dismissed from employment.

Respondents are not entitled to their

money claims except 13th month pay for
the period of their illegal dismissal,
unpaid salaries, salary differentials,
double indemnity for violation of the
Minimum Wage Law and attorney’s fees.

As for the money claims of respondents, we note that petitioners did not bring this issue before us or
assign it as error in this Petition. It was raised by the petitioners only in their Memorandum of Appeal
filed with the NLRC and in their Motion for Reconsideration of the CA’s Decision reinstating the
Labor Arbiter’s award. Nonetheless, in order to arrive at a complete adjudication of the case and
avoid piecemeal dispensation of justice, we deem it necessary to resolve the validity of respondents’
money claims and to discuss the propriety of the Labor Arbiter’s award.

Galvez and Gruta, as managerial employees, are not entitled to their claims for holiday pay, service
incentive leave pay and premium pay for holiday and restday. Article 82 of the Labor Code
specifically excludes managerial employees from the coverage of the law regarding conditions of
employment which include hours of work, weekly rest periods, holidays, service incentive leaves and
service charges.62
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, we cannot sustain the
argument that they are classified as field personnel under Article 82 of the Labor Code who are
likewise excluded. Article 82 defines field personnel as referring to "non-agricultural employees who
regularly perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with reasonable
certainty." They are those who perform functions which "cannot be effectively monitored by the
employer or his representative."63 Here, respondents, during the entire course of their voyage,
remain on board the vessel. They are not field personnel inasmuch as they were constantly
supervised and under the effective control of the petitioners through the vessel’s ship captain.

Nevertheless, we cannot grant them their claims for holiday pay, premium pay for holiday and
restday, overtime pay and service incentive leave pay. Respondents do not dispute petitioners’
assertion that in computing respondents’ salaries, petitioners use 365 days as divisor. In fact, this
was the same divisor respondents used in computing their money claims against petitioners. Hence,
they are paid all the days of the month, which already include the benefits they claim.64 As for
overtime pay and premium pay for holidays and restdays, no evidence was presented to prove that
they rendered work in excess of the regular eight working hours a day or worked during holidays and
restdays. In the absence of such proof, there could be no basis to award these benefits.65

For the claim of service incentive leave pay, respondents did not specify what year they were not
paid such benefit. In addition, records show that they were paid their vacation leave benefits.66 Thus,
in accordance with Article 95 of the Labor Code,67 respondents can no longer claim service incentive
leave pay.

On the other hand, for failure to effectively refute the awards for 13th month pay for the period that
respondents were illegally dismissed, unpaid salaries and salary differentials,68 we affirm the grant
thereof as computed by the Labor Arbiter. Petitioners’ evidence which consist of a mere
tabulation69 of the amount of actual benefits paid and given to respondents is self-serving as it does
not bear the signatures of the employees to prove that they had actually received the amounts
stated therein.

Next, we come to the legitimacy of the Labor Arbiter’s authority to impose the penalty of double
indemnity for violations of the Minimum Wage Law. Petitioners argue that the authority to issue
compliance orders in relation to underpayment of wages is vested exclusively on the Secretary of
Labor or the Regional Director and that the Labor Arbiter has no jurisdiction thereover. They cite
Section 12 of RA 6727,70 as amended by RA 8188, which provides:

Sec. 12. Any person, corporation, trust, firm, partnership, association or entity which refuses or fails
to pay any of the prescribed increases or adjustments in the wage rates made in accordance with
this Act shall be punished by a fine [of] not less than Twenty-five thousand pesos (₱25,000) nor
more than One hundred thousand pesos (₱100,000) or imprisonment of not less than two (2) years
nor more than four (4) years or both such fine and imprisonment at the discretion of the court:
Provided, That any person convicted under this Act shall not be entitled to the benefits provided for
under the Probation Law.

The employer concerned shall be ordered to pay an amount equivalent to double the unpaid benefits
owing to the employees: Provided, That payment of indemnity shall not absolve the employer from
the criminal liability under this Act.

If the violation is committed by a corporation, trust or firm, partnership, association or any other
entity, the penalty of imprisonment shall be imposed upon the entity’s responsible officers including
but not limited to, the president, vice president, chief executive officer, general manager, managing
director or partner.

Petitioners’ contention is untenable. First, there is no provision in RA 6727 or RA 8188 which

precludes the Labor Arbiter from imposing the penalty of double indemnity against employers.
Second, Article 217 of the Labor Code gives the Labor Arbiter jurisdiction over cases of termination
disputes and those cases accompanied with a claim for reinstatement. Thus, in Bay Haven, Inc. v.
Abuan71 the Court held that an allegation of illegal dismissal deprives the

Secretary of Labor of jurisdiction over claims to enforce compliance with labor standards law. This
1âwphi1

was also pronounced in People’s Broadcasting Service (Bombo Radyo Phils., Inc.) v. Secretary of
the Department of Labor and Employment,72 wherein we stated that the Secretary of Labor has no
jurisdiction in cases where employer-employee relationship has been terminated. We thus sustain
the Labor Arbiter’s award of double indemnity.

We also sustain the award of attorney’s fees since respondents were compelled to file a complaint
for the recovery of wages and were forced to litigate and incur expenses.73

The Labor Arbiter’s grant of actual/compensatory, moral and exemplary damages in the amount of
₱100,000.00 is, however, incorrect. In order to recover actual or compensatory damages, it must be
capable of proof and must be necessarily proved with a reasonable degree of certainty.74 While moral
damages is given to a dismissed employee when the dismissal is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good
customs or public policy. Exemplary damages, on the other hand, is given if the dismissal is effected
in a wanton, oppressive or malevolent manner.75 Here, the Labor Arbiter erred in awarding the
damages by lumping actual, moral and exemplary damages. Said damages rest on different jural
foundations and, hence, must be independently identified and justified.76 Also, there are no
competent evidence of actual expenses incurred that would justify the award of actual damages.
Lastly, respondents were terminated after being accused of the charge of pilferage of the vessel’s
fuel oil after examination of the report made by the vessel’s chief engineer which showed a
considerable amount of fuel lost. Although the dismissal of Arguelles, Batayola, Fresnillo, Noble,
Dominico, Nilmao and Austral is illegal, based on the circumstances surrounding their dismissal,
petitioners could not have been motivated by bad faith in deciding to terminate their services.

Lastly, this Court exculpates petitioners Francisco and How from being jointly and severally liable
with GASLI for the illegal dismissal and payment of money claims of herein respondents. In order to
hold them liable, it must first be shown by competent proof that they have acted with malice and bad
faith in directing the corporate affairs.77 For want of such proof, Francisco and How should not be
held liable for the corporate obligations of GASLI.

WHEREFORE, the Court of Appeals’ Decision dated September 12, 2006 and the Resolution dated
May 23, 2007 in CA-G.R. SP No. 82379 are ANNULLED and SET ASIDE. Respondents Wilfredo
Galvez and Cristito Gruta are hereby DECLARED dismissed from employment for just cause while
respondent Joel Sales was not dismissed from employment. Respondents Danilo

Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico, Benny Nilmao, and
Jose Austral are DECLARED to have been illegally dismissed; hence, petitioners are ordered to
reinstate them to their former position or its equivalent without loss of seniority rights and to pay
them full backwages, inclusive of allowances and other benefits, computed from the time of
dismissal up to the time of actual reinstatement, as well as 13th month pay for the period of their
illegal dismissal.
Petitioner Grand Asian Shipping Lines, Inc. is also ordered to pay respondents Wilfredo Galvez,
Danilo Arguelles, Renato Batayola, Patricio Fresnillo, Jovy Noble, Emilio Dominico, Benny Nilmao
and Jose Austral unpaid salaries from February 16 to 29, 2000, as computed by the Labor Arbiter;
and to pay respondents Danilo Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio
Dominico and Benny Nilmao salary differentials plus double indemnity, as computed by the Labor
Arbiter. Ten percent (10%) of the monetary award should be added as and by way of attorney’s fees.
Interest at the rate of six percent (6%) per annum shall be imposed on all monetary awards from
date of finality of this Decision until full payment pursuant to Nacar v. Gallery Frames.78

Petitioners Eduardo P. Francisco and William How are absolved from the liability adjudged against
petitioner Grand Asian Shipping Lines, Inc.

SO ORDERED.

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 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). It is evident that there is a unifying element which runs through paragraphs 1 to 5 and
<äre|| anº•1àw>

that is, that they all refer to cases or 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:

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.

G.R. No. 121948 October 8, 2001

PERPETUAL HELP CREDIT COOPERATIVE, INC., petitioner,

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

SANDOVAL-GUTIERREZ, J.:

On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private
respondents, filed a complaint against the Perpetual Help Credit Cooperative, Inc. (PHCCI),
petitioner, with the Arbitration Branch, Department of Labor and Employment (DOLE), Dumaguete
City, for illegal dismissal, premium pay on holidays and rest days, separation pay, wage differential,
moral damages, and attorney's fees.

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

On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121 of
R.A. No. 6939, otherwise known as the Cooperative Development Authority Law which took effect
on March 26, 1990, requires conciliation or mediation within the cooperative before a resort to
judicial proceeding.

On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that the case is
impressed with employer-employee relationship and that the law on cooperatives is subservient to
the Labor Code.

On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which
reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants

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

The computation of the foregoing awards is hereto attached and forms an integral part of this
decision."

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

Hence, this petition by the PHCCI.

The issue for our resolution is whether or not respondent judge committed grave abuse of discretion
in ruling that there is an employer-employee relationship between the parties and that private
respondents were illegally dismissed.

Petitioner PHCCI contends that private respondents are its members and are working for it as
volunteers. Not being regular employees, they cannot sue petitioner.

In determining the existence of an employer-employee relationship, the following elements are

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

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

That an employer-employee exists between the parties is shown by the averments of private
respondents in their respective affidavits, carefully considered by respondent NLRC in affirming the
Labor Arbiter's decision, thus:

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

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

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

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

All of them were given a memorandum of termination on January 2, 1990, effective

December 29, 1989.

We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the
same being supported by substantial evidence, that quantum of evidence required in quasi judicial
proceedings, like this one.

Necessarily, this leads us to the issue of whether or not private respondents are regular employees.
Article 280 of the Labor Code provides for three kinds of employees: (1) regular employees or those
who have been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; (2) project employees or those whose employment has been
fixed for a specific project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the season; and (3) casual
employees or those who are neither regular nor project employees.3 The employees who are
deemed regular are: (a) those who have been engaged to perform activities which are usually
necessary or desirable in the usual trade or business of the employer; and (b) those casual
employees who have rendered at least one (1 ) year of service, whether such service is continuous
or broken, with respect to the activity in which they are employed.4 Undeniably, private respondents
were rendering services necessary to the day-to-day operations of petitioner PHCCI. This fact alone
qualified them as regular employees.

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

As regular employees or workers, private respondents are entitled to security of tenure. Thus, their
services may be terminated only for a valid cause, with observance of due process.
The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor
Code and the authorized causes under Articles 283 and 284 of the same Code. The just causes are:
(1) serious misconduct or willful disobedience of lawful orders in connection with the employee's
work; (2) gross or habitual neglect of duties; (3) fraud or willful breach of trust; (4) commission of a
crime or an offense against the person of the employer or his immediate family member or
representative; and, analogous cases. The authorized causes are: (1) the installation of labor-saving
devices; (2) redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation of
operations of the establishment or undertaking, unless the closing is for the purpose of
circumventing the provisions of law. Article 284 provides that an employer would be authorized to
terminate the services of an employee found to be suffering from any disease if the employee's
continued employment is prohibited by law or is prejudicial to his health or to the health of his fellow
employees6

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

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

We hold that private respondents have been illegally dismissed.

Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the complaint of
private respondents considering that they failed to submit their dispute to the grievance machinery
as required by P.D. 175 (strengthening the Cooperative Movement) 8 and its implementing rules and
regulations under LOI 23. Likewise, the Cooperative Development Authority did not issue a
Certificate of Non-Resolution pursuant to Section 8 of R.A. 6939 or the Cooperative Development
Authority Law.

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

Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the procedure
how cooperative disputes are to be resolved, thus:

ART. 121. Settlement of Disputes. — Disputes among members, officers, directors, and
committee members, and intra-cooperative disputes shall, as far as practicable, be settled
amicably in accordance with the conciliation or mediation mechanisms embodied in the by-
laws of the cooperative, and in applicable laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of
competent jurisdiction."
Complementing this Article is Section8 of R.A. No. 6939 (Cooperative Development Authority Law)
which reads:

SEC. 8 Mediation and Conciliation. — Upon request of either or both parties, the Authority
shall mediate and conciliate disputes within a cooperative or between
cooperatives: Provided, That if no mediation or conciliation succeeds within three (3) months
from request thereof, a certificate of non-resolution shall be issued by the Commission prior
to the filing of appropriate action before the proper courts.

The above provisions apply to members, officers and directors of the cooperative involved in
disputes within a cooperative or between cooperatives.

There is no evidence that private respondents are members of petitioner PHCCI and even if they
are, the dispute is about payment of wages, overtime pay, rest day and termination of employment.
Under Art. 217 of the Labor Code, these disputes are within the original and exclusive jurisdiction of
the Labor Arbiter.

As illegally dismissed employees, private respondents are therefore entitled to reinstatement without
loss of seniority rights and other privileges and to full backwages, inclusive of allowances, plus other
benefits or their monetary equivalent computed from the time their compensation was withheld from
them up to the time of their actual reinstatement.9 Since they were dismissed after March 21, 1989,
the effectivity date of R.A. 671510 they are granted full backwages, meaning, without deducting from
their backwages the earnings derived by them elsewhere during the period of their illegal
dismissal.11 If reinstatement is no longer feasible, as when the relationship between petitioner and
private respondents has become strained, payment of their separation pay in lieu of reinstatement is
in order.12

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

SO ORDERED.

Melo, Vitug and Panganiban, JJ., concur.