[G.R. NO.

148279 : May 27, 2004]

CORPORATE INN HOTEL, ANNIE DEL ROSARIO AND JULIE PALINSAD, Petitioners,
v. JENNEVIE H. LIZO, Respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

At the heart of the controversy is the issue of whether Petitioners, by the simple expedient
of arguing substantial justice and miscarriage of justice, may be allowed to disregard the
mandatory 10-day period of perfecting an appeal from the decision of the Labor Arbiter.A
reverberating negative ruling was rendered by both the Court of Appeals and the National
Labor Relations Commission (NLRC).

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 dated March 30, 2001 and the
Resolution2 dated May 23, 2001 rendered by the Court of Appeals in CA-G.R. SP No. 59037,
entitled Corporate Inn Hotel, Annie Del Rosario and Julie Palinsad v. Jennevie H. Lizo.

The undisputed facts of the case are as follows:chanroblesvirtua1awlibrary

On January 25, 1999, Corporate Inn Hotel, petitioner,engaged the services of Jennevie Lizo,
respondent, as a probationary account executive.In such capacity, she was tasked to deal
with clients, entertain customers, and promote patronage of the hotel.However, just a few
weeks after her employment, petitioner received complaints from its clients against her for
undesirable conduct.They also called petitioners attention to her inefficiency in discharging
her duties.

Prompted by such reports, Petitioner, on February 8, 1999, evaluated respondents

performance.The evaluation disclosed her inability to deal with hotel guests.Thus, she was
recommended to undergo an additional training under maximum supervision.But barely
twenty-one (21) days after her employment, petitioner terminated her services effective
February 15, 1999.

Aggrieved, respondent filed with the Labor Arbiter a complaint for illegal dismissal and other
monetary claims against petitioner and its officers, Annie Del Rosario and Julie Palinsad,
docketed as NLRC NCR Case No. 00-03-02577-99.

On September 30, 1999, the Labor Arbiter rendered a Decision holding that respondent was
illegally dismissed, thus:chanroblesvirtua1awlibrary

All told, it is the finding of this Arbitration Branch that the imputation against the
complainant are but the product of afterthoughts, if not surmises, and guessworks. The
inevitable conclusion is that complainant was dismissed without just and valid cause and
absent due process. Accordingly, she is entitled to her backwages from February 15, 1999
up to the date of this decision and to separation pay equivalent to one (1) month salary,
hereunder computed as follows:

Backwages: P6,000.00/mo. x7.5 mos=P 45,000.00

Separation Pay:at one (1) month pay=P6,000.00

---------------

TOTAL P51,000.00

On the matter of the complainants claim for moral and exemplary damages, this is not
substantiated by the complainant. Mere allegation of illegal dismissal is not enough as it is
required that complainant must prove that bad faith on the part of the respondents
attended her dismissal from employment.

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
ordering the respondents to pay complainant the sum of P51,000.00.

SO ORDERED.

Upon appeal, the National Labor Relations Commission (NLRC), in a Resolution dated March
31, 2000, dismissed the same for being late.

Petitioners filed a motion for reconsideration but was denied by the NLRC in a Resolution
dated April 28, 2000.

Consequently, petitioners filed with the Court of Appeals a Petition for Certiorari.

In a Decision promulgated on March 30, 2001, the Appellate Court affirmed in toto the NLRC
Resolution, ratiocinating thus:chanroblesvirtua1awlibrary

We dismiss the petition.

First.The perfection of an appeal within the reglementary period and in the manner
prescribed by law is jurisdictional. Non-compliance therewith is fatal and it renders the
judgment final and executory. Non-compliance with the required procedure deprives the
appellate court of jurisdiction to alter the final judgment, much less, to entertain the appeal.
The requirements for the perfection of an appeal are intended to discourage employers from
using the appeal to delay or evade their obligations to their employees. It also assures
employees that the money judgment in their favor will be satisfied.

The reglementary period for perfecting an appeal is provided for in Art. 223 of the Labor
Code, to wit:chanroblesvirtua1awlibrary

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

Whereas, the manner for perfecting an appeal is outlined in Section 3(a), Rule VI of the
NLRC New Rules of Procedure, to wit:chanroblesvirtua1awlibrary

SECTION 3. REQUISITES FOR PERFECTION OF APPEAL. a) The Appeal shall be filed within
the reglementary period as provided in Section 1 of this Rule shall be under oath with proof
of payment of the required appeal fee and the posting of a cash or surety bond as provided
in Section 6 of this Rule; shall be accompanied by memorandum of appeal which shall state
the grounds relied upon and the arguments in support thereof; the relief prayed for and a
statement of the date when the appellant received the appealed decision, order or award
and proof of service on the other party of such appeal.

A mere notice of appeal without complying with the other requisites aforestated
shall not stop the running of the period for perfecting an appeal. (underscoring ours)

In addition, Art. 223 of the Labor Code, 2nd paragraph, provides

that:chanroblesvirtua1awlibrary

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.

Therefore, an appeal is perfected by simultaneously filing a notice of appeal and a

memorandum of appeal and by posting an appeal bond, all within the period of ten (10)
days from receipt of the questioned decision.

In the instant case, petitioner Corporate Inns appeal to the NLRC was filed out of time and
petitioner realized this lapse from start but it pleaded for leniency with the NLRC, as it does
now before Us, x x x:chanroblesvirtua1awlibrary

xxx

Unfortunately, none of these circumstances sways Us to relax the rules in favor of

petitioner.x x x

xxx

Third.So far, petitioner has taken great pains to plead for a relaxation of the reglementary
period for filing an appeal. But while doing so, it failed to establish the other requisite for
the perfection of an appeal - the posting of an appeal bond. Understandably, the NLRC no
longer saw it fit to discuss this requisite due to its conclusion that the appeal was filed out of
time. However, it was incumbent upon petitioner to allege compliance with the required
appeal bond in its petition to add more depth to the theory that it has perfected its appeal,
but it did not. This lapse compounds petitioners clearly untenable position on its tardy
appeal and leaves no doubt in Our minds that indeed petitioners failed in all aspects to
perfect its appeal.

WHEREFORE, the instant petition is hereby DISMISSED and the resolutions of the NLRC,
dated 31 March 2000 and 28 April 2000 are SUSTAINED in toto. Costs against petitioners.

SO ORDERED.

From the said Decision, petitioners filed a motion for reconsideration, but was denied by the
Court of Appeals in a Resolution dated May 23, 2001.

Hence, this Petition for Review on Certiorari .

The issue before us is not novel.

At the outset, it bears stressing that the right to appeal is a statutory right and one who
seeks to avail of the right must comply with the statute or rules.The rules, particularly
the requirements for perfecting an appeal within the reglementary period specified
in the law, must be strictly followed as they are considered indispensable interdictions
against needless delays and for orderly discharge of judicial business.3 cralawred

The NLRC Rules, akin to the Rules of Court, promulgated by authority of law, have the force
and effect of law; and such NLRC rules prescribing the time within which certain acts must
be done, or certain proceedings taken, are considered absolutely indispensable to the
prevention of needless delays and to the orderly and speedy discharge of judicial
business.4 cralawred

Thus, petitioners are mandated to perfect their appeal in the manner and within the period
permitted by law and failure to do so renders the judgment of the Labor Arbiter final and
executory.

In Veterans Philippine Scout Security Agency v. National Labor Relations Commission and
Roberto De Los Santos,5 we held:chanroblesvirtua1awlibrary

Under Article 223 of the Labor Code, a decision of a Labor Arbiter is final and executory
unless appealed to the National Labor Relations Commission by any or both of the parties
within ten (10) days from notice of the said Decision.Thus, the perfection of an appeal
within the reglementary period for the same is jurisdictional in character.

Similarly, in Peftok Integrated Services, Inc. v. NLRC, 6 we considered the appeal of

petitioner therein as flawed for being late, its appeal having been interposed seven (7) days
beyond the 10-day reglementary period.

While we may have sidestepped the rule on the statutory or reglementary period for filing
an appeal, yet, we emphasized this caveat: we cannot respond with alacrity to every clamor
of injustice and bend the rules to placate a vociferous protestor crying and claiming to be a
victim of a wrong.It is only in highly meritorious cases that this Court opts not to strictly
apply the rules and thus prevent a grave injustice from being done.7 However this exception
does not obtain here.

We thus find no compelling reason to reverse the Decision and Resolution of the Court of
Appeals.

WHEREFORE, the petition is DENIED.The Decision dated March 30, 2001 and Resolution
dated May 23, 2001 of the Court of Appeals inCA-G.R. SP No. 59037 are hereby AFFIRMED.

SO ORDERED.
 G.R. No. L-58011-12 July 20, 1982

VIR-JEN SHIPPING AND MARINE SERVICES, INC., Petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, ROGELIO BISULA, RUBEN ARROZA, JUAN GACUTNO,
LEONILO ATOK, NILO CRUZ, ALVARO ANDRADA, NEMESIO ADUG, SIMPLICIO
BAUTISTA, ROMEO ACOSTA, and JOSE ENCABO, respondents.

Maximo A. Savellano, Jr., for petitioner.chanrobles virtual law library

Solicitor General and Romeo M. Devera for respondents.

BARREDO, J.:

Petition for certiorari seeking the annulment or setting aside, on the grounds of excess of
jurisdiction and grave abuse of discretion, of the decision of the National Labor Relations
Commission in consolidated NSB Cases Nos. 2250-79 and 2252-79 thereof, 1 the dispositive
portion of which reads thus: chanrobles virtual law library

WHEREFORE, the Decision appealed from should be, as it is hereby modified in this
wise: chanrobles virtual law library

Respondent Vir-jen Shipping and Marine Services, Inc., is hereby ordered to pay the
following to the complainant Seamen who have not withdrawn from the case, namely: Capt.
Rogelio H. Bisula, Ruben Arroza, Juan Gacutno, Leonilo Atok, Nilo Cruz, Alvaro Andrada,
Nemesio Adug, Simplicio Bautista, Romeo Acosta and Jose Encabo:

1. their earned wages corresponding to the period from 16 to 19 April 1979; chanrobles
virtual law library

2. the wages corresponding to the unexpired portion of their contracts, as adjusted by the
respondent Company effective 1 March 1979; chanrobles virtual law library

3. the adjusted representation allowances of the complainant Seamen who served as

officers and who have not withdrawn from the case, namely: Capt. Rogelio Bisula, Ruben
Arroza, Juan Gacutno, Leonilo Atok and Nilo Cruz; chanrobles virtual law library

4. their vacation pay equivalent to one-half (�) month's pay after six (6) months of service
and another one-half (�) month's pay after the completion of the one-year
contract; chanrobles virtual law library

5. their tanker service bonus equivalent to one-half (�) month's pay; and chanrobles virtual
law library

6. their earned overtime pay from l to l9 April 1979.

The Secretariat of the National Seamen Board is also hereby directed to issue within five (5)
days from receipt of this Decision the necessary clearances to the suspended Seamen. (pp.
86-87, Record.)
The factual and legal background of these cases is related most comprehensively in the
"Manifestation and Comment" filed by the Solicitor General. It is as follows: chanrobles
virtual law library

The records show that private respondents have a manning contract for a period of one (1)
year with petitioner in representation of its principal Kyoei Tanker Co. Ltd. The terms and
conditions of said contract were based on the standard contract of the NSB. The manning
contract was approved by the NSB. Aware of the problem that vessels not paying rates
imposed by the International Transport Workers Federation (ITF) would be detained or
interdicted in foreign ports controlled by the ITF, petitioner and private respondents
executed a side contract to the effect that should the vessel M/T Jannu be required to pay
ITF rates when it calls on any ITF controlled foreign port, private respondents would return
to petitioner the amounts so paid to them.chanroblesvirtualawlibrarychanrobles virtual law
library

On March 23, 1979, the master of the vessel who is one of the private respondents sent a
cable to petitioner, while said vessel was en route to Australia which is an ITF controlled
port, stating that private respondents were not contented with the salary and benefits
stipulated in the manning contract, and demanded that they be given 50% increase thereof,
as the "best and only solution to solve ITF problem." Apparently, reference to "ITF" in
private respondents' cable made petitioner apprehensive since the vessel at that time was
en route to Australia, an ITF port, and would be interdicted and detained thereat, should
private respondents denounce the existing manning contract to the ITF and should
petitioner refuse or be unable to pay the ITF rates, which represent more than 100% of
what is stipulated in the manning contract. Placed under such situation, petitioner replied by
cable dated March 24, 1979 to private respondents, as follows:

... WE ARE SURPRISED WITH THIS SUDDEN CHANGE OF ATTITUDE AND DEMANDS FOR WE
HAVE THOROUGHLY EXPLAINED AND DISCUSSED ALL MATTERS PERTAINING TO YOUR
PRESENT EMPLOYMENT AND BELIEVED THAT WE FULLY UNDERSTOOD EACH OTHER ... WE
SHALL SUFFER AND ABSORB CONSIDERABLE AMOUNT OF LOSSES WITH YOUR DEMAND OF
FIFTY PERCENT AS WE ARE ALREADY COMMITTED TO PRINCIPALS THEREFORE TO
MINIMIZE OUR LOSSES WE PROPOSE AN INCREASE OF TWENTY FIVE PERCENT ON YOUR
BASIC PAYS PLUS THE SPECIAL COMPENSATION FOR THIS PARTICULAR VOYAGE ... (p. 7
Comment)

On March 26, 1979, petitioner wrote a letter to the NSB denouncing the conduct of private
respondents as follows: chanrobles virtual law library

This is to inform you that on March 24, 1979, we received a cable from Capt. Rogelio Bisula,
Master of the above-reference vessel reading as follows:

URINFO ENTIRE JANNU OFFICERS AND CREW NOT CONTENTED WITH PRESENT SALARY
BASED ON VOLUME OF WORK TYPE OF SHIP WITH HAZARDOUS CARGO AND REGISTERED
IN A WORLDWIDE TRADE STOP WHAT WE DEMAND IS ONLY FIFTY PERCENT INCREASE
BASED ON PRESENT BASIC SALARY STOP THIS DEMAND THE BEST AND ONLY SOLUTION
TO SOLVE PROBLEM DUE YOUR PRESENT RATES ESPECIALLY TANKERS VERY FAR IN
COMPARISON WITH OTHER SHIPPING AGENCIES IN MANILA.

to which we replied on March 24, 1979, as follows:

WE ARE SURPRISED WITH SUDDEN CHANGE, OF ATTITUDE AND DEMANDS FOR WE HAVE
THOROUGHLY EXPLAINED AND DISCUSSED ALL MATTERS PERTAINING TO YOUR PRESENT
EMPLOYMENT AND BELIEVED THAT WE FULLY UNDERSTOOD EACH OTHER STOP FRANKLY
SPEAKING WE SHALL SUFFER AND ABSORB CONSIDERABLE AMOUNT OF LOSSES WITH
YOUR DEMAND OF FIFTY PERCENT AS WE ARE COMMITTED TO PRINCIPALS THEREFORE TO
MINIMIZE OUR LOSSES WE PROPOSE AN INCREASE OF TWENTY FIVE PERCENT ON YOUR
BASIC PAY STOP YOUR UNDERSTANDING AND FULL COOPERATION WILL BE VERY MUCH
APPRECIATED STOP PLS CONFIRM SOONEST.

On March 25, 1979 we received the following communication from the Master of said
vessel:

OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF FIFTY PERCENT INCREASE BUT
FOR THE GOOD AND HARMONIOUS RELATIONSHIP ON BOARD AND RECONSIDERING YOUR
SUPPOSED TO BE LOSSES IN CASE WE CONDITIONALLY COOPERATE WITH YOUR
PROPOSED INCREASE AND TWENTY FIVE PERCENT BASED ON INDIVIDUAL BASIC PAY
WITH THE FOLLOWING TERMS AND CONDITION STOP EFFECTIVITY OF TWENTY FIVE
PERCENT INCREASE MUST BE MARCH/79 STOP INCREASE MUST BE COLLECTIBLE ON
BOARD EFFECTIVE ABOVE DATE UNTIL DISEMBARKATION STOP ALLOTMENT TO ALLOTEES
REMAIN AS IS STOP REASONABLE REPALLOWS FOR ALL OFFICERS BE GIVEN EFFECTIVE
MARCH/79 STOP BONUS FOR 6 MONTHS SERVICES RENDERED BE COLLECTIBLE ON BOARD
STOP OFFICERS/CREW 30PCT O/T SHUD BE BASED NEW UPGRADED SALARY SCALE STOP
MASTER/CHENGR/CHMATE SPECIAL COMPENSATION GIVE BY YOUR COMPANY PRIOR
DEPARTURE MANILA REMAIN AS IS.

to which we replied on March 25, 1979, as follows:

WE AGREE ALL CONDITIONS AND CONFIRM IT SHALL BE PROPERLY ENFORCED STOP WILL
PREPARE ALL REQUIRED DOCUMENTS AND WILL BE DELIVERED ON BOARD.

For your further information and guidance, the abovementioned demands of the officers and
crew (25% increase in basic pay, increase in overtime pay and increase in representation
allowance) involve an additional amount of US$3,096.50 per month, which our company is
not in a position to shoulder.chanroblesvirtualawlibrary chanrobles virtual law library

We are, therefore, negotiating with our Principals, Messrs. Kyoei Tanker Company, Limited,
for the amendment of our agency agreement in the sense that our monthly fee be increased
correspondingly. We have sent our Executive Vice-President, Mr. Ericson M. Marquez, to
Japan to represent us in said negotiation and we will inform you of the results thereof.
(Annex "E" of Petition) chanrobles virtual law library

In view of private respondents' conduct and breach of contract, petitioner's principal, Kyoei
Tanker Co., Ltd. terminated the manning contract in a letter dated April 4, 1979, which
reads in part;

This is with reference to your letter of March 26, 1979 and our conference with Mr. Ericson
Marquez in Tokyo on March 29, 1979, regarding the unexpected and unreasonable demand
for salary increase of your officers and crew on the above
vessel.chanroblesvirtualawlibrary chanrobles virtual law library
Frankly speaking, we fully agree with you that this action taken by your officers and crew in
demanding increase in their salaries and overtime after being on board for only three
months was very unreasonable. Considering the circumstances when the demand was
made, we believe that their action was definitely abusive and plain
blackmail.chanroblesvirtualawlibrary chanrobles virtual law library

We regret to advise you that since this vessel is only under our management, we also
cannot afford to grant your request for an increase of US$3,096.50 effective March 1, 1979,
as demanded by your crew. Your crew should respect their employment contracts which was
approved by your government and your National Seamen Board should make sure that all
seamen should follow their contracts.chanroblesvirtualawlibrary chanrobles virtual law
library

For your information, we have discussed this matter with the owners of the vessel,
particularly the attitude and mentality of your crew on board. Our common and final
decision is not to grant your request but also to terminate our Manning Agreement effective
upon crew's change when the vessel arrives at Japan or at any possible port about end
April, 1979.chanroblesvirtualawlibrary chanrobles virtual law library

We regret that we have to take this drastic step in order to protect ourselves from further
problem if we continue with your present officers and crew because if their demand is
granted, there is no guarantee that they will not demand further increase in salaries in the
future when they have chance. Also, as you know the present freight market is very bad
and we cannot afford an unexpected increase in cost of operations and more so with a
troublesome and unreliable crew that you have on
board.chanroblesvirtualawlibrary chanrobles virtual law library

In view of the circumstances mentioned above, please consider this letter as our official
notice of cancellation of our Manning Agreement effective upon the date of crew's change.
(Annex "F" of Petition).

On April 6, 1979, petitioner wrote the NSB asking permission to cancel the manning
contract with petitioner, said letter reading as follows:

This is with reference to our letter of March 26, 1979, informing you of the sudden and
unexpected demands of the officers and crew of the above vessel for a twenty five percent
(25%) increase in their basic salaries and overtime, plus an increase of the officers'
representation allowances, involving a total of US$3,096.50 per
month.chanroblesvirtualawlibrary chanrobles virtual law library

As we have advised in our afore-mentioned letter, we have negotiated with our Principals,
Messrs. Kyoei Tanker Co., Ltd., to amend our Agency Agreement by increasing our monthly
fee by US$3,096.50, and attached herewith is copy of our letter dated March 26, 1979 duly
received by our Principals on March 31, 1979.chanroblesvirtualawlibrary chanrobles virtual
law library

In this connection, we wish to inform your good office that our Principals have refused to
consider our request for an increase and have also advised us of their final decision to
terminate our Manning Agreement effective upon vessel's arrival in Japan on or about April
17, 1979.chanroblesvirtualawlibrary chanrobles virtual law library
For your further information, we enclose herewith xerox copy of the Kyoei Tanker Co., Ltd.
letter dated April 4, 1979, which we just received today via
airfreight.chanroblesvirtualawlibrary chanrobles virtual law library

This is the first time that a cancellation of this nature has been made upon us, and needless
to say, we feel very embarrassed and disappointed but we have no other alternative but to
accept the said cancellation.chanroblesvirtualawlibrary chanrobles virtual law library

In view of the foregoing, we respectfully request your authority to cancel our Contracts of
Employment and to disembark the entire officers and crew upon vessel's arrival in Japan on
or about 17th April, 1979. (Annex "G", of Petition).

On April 10, 1979, the NSB through its Executive Director Cresencio C. Dayao wrote
petitioner authorizing it to cancel the manning contract. The NSB letter to petitioner reads:

We have for acknowledgment your letter of 6 April 1979 in connection with the above-
captioned subject.chanroblesvirtualawlibrary chanrobles virtual law library

Considering the circumstances enumerated in your letter under reply (and also in your letter
of March 1979), we authorize you to cancel your contracts of employment with the
crew/members of the M/T "Jannu" and you may now disembark the whole compliment upon
the vessel's arrival in Japan on or about April 17,
1979.chanroblesvirtualawlibrary chanrobles virtual law library

We trust that you will not encounter any difficulty in connection with the disembarkation of
the crew/members. (Annex "H" of Petition).

The seamen were accordingly disembarked in Japan and repatriated to Manila. They then
filed a complaint with the NSB for illegal dismissal and non-payment of wages. After trial,
the NSB found that the termination of the services of the seamen before the expiration of
their employment contract was justified "when they demanded and in fact received from the
company wages over and above the contracted rates which in effect was an alteration and
modification of a valid and existing contract ..." (Annex "D", Petition). The seamen appealed
the decision to the NLRC which reversed the decision of the NSB and required the petitioner
to pay the wages and other monetary benefits corresponding to the unexpired portion of the
manning contract on the ground that the termination of the said contract by petitioner was
without valid cause. Hence, the present petition. (Pp. 2-9, Manifestation & Comment)

In its petition which contains practically the same facts and circumstances above-quoted,
petitioner submits for Our resolution the following issues: chanrobles virtual law library

I. That the respondent NLRC acted without or in excess of its jurisdiction, or with grave
abuse of discretion in said NSB Cases Nos. 2250-79 and 2252-79 when it adjudged the
petitioner Vir-jen liable to the respondents-seamen for terminating its employment
contracts with them despite the fact that prior authorization to terminate or cancel said
employment contracts and to disembark the said respondents was first secured from and
was granted by, the National Seamen Board, the government agency primarily charged with
the supervision and discipline of seamen and the approval and enforcement of employment
contracts; chanrobles virtual law library
II. That the respondent NLRC acted with grave abuse of discretion, or without or in excess
of its jurisdiction, or contrary to law and the evidence when it concluded that "there is
nothing on record to show that respondents-seamen made any threat that they would
complain or report to the ITF their low wage rates if their demand or proposal for a wage
increase was not met", despite the fact that in their cable of March 23, 1979 to the
petitioner, the said respondents made the following threats and impositions: "WHAT
WE DEMAND IS ONLY 50 PERCENT INCREASE BASED ON PRESENT BASIC SALARY
STOP THIS DEMAND THE BEST AND ONLY SOLUTION TO SOLVE ITF PROBLEMS", that there
are other substantial and conclusive evidence to support the existence of such threats and
intimidation which the respondent NLRC failed and refused to consider; and that the
evidence substantially and conclusively shows that the petitioner Vir-jen was, in fact,
threatened and intimidated into giving such salary increases due to such cabled threats and
intimidation of the private respondents; chanrobles virtual law library

III. That the respondent NLRC acted with grave abuse of discretion or without or in excess
of jurisdiction when it concluded, in effect, that the respondents-seamen acted within their
rights when they imposed upon their employer, the herein petitioner, their demands for
salary and wages increases, in disregard of their existing NSB-approved contracts of
employment, notwithstanding the substantial and conclusive findings of the NSB, the trier of
facts which is in the best position to assess the special circumstances of the case, that the
said respondents breached their respective contracts of employment with the petitioner,
without securing the prior approval of the NSB as required by the New Labor Code, as
amended, and with the use of threats, intimidation and coercion, when they demanded and,
in fact, received from the petitioner salaries or wages over and above their contracted rates
which the petitioner was "constrained to make" in order "to prevent the vessel from being
interdicted and/or detained by the ITF because at the time the demand for salary increase
was made the vessel was en route to Kwinana, Australia (via Senipah, Indonesia), a port
were the ITF is strong and militant," "for in the event the vessel would be detained and/or
interdicted the company (petitioner) would suffer more losses than paying the seamen 25 %
increase of their salary"; chanrobles virtual law library

IV. That respondent NLRC committed a grave abuse of discretion or exceeded its jurisdiction
or acted contrary to law when it failed and refused to admit and take into account the
ADDENDUM AGREEMENT, dated December 27, 1978, entered into between the petitioner
and the private respondents, which would have further enlightened the respondent NLRC on
the "ITF PROBLEMS" insinuated by the private respondents in their cable of March 23, 1979
to threaten and intimidate the petitioner into granting the salary increases in
question; chanrobles virtual law library

V. That respondent NLRC committed a grave abuse of discretion or acted without or in

excess of its jurisdiction or contrary to law when it ordered the petitioner Vir-jen to pay,
among others, to the private respondents their "wages corresponding to the unexpired
portion of their contracts" the said petitioner having already lost its trust and confidence on
the private respondents; that the employer cannot be legally compelled to continue with the
employment of persons in whom it has already lost its trust and confidence; that payment
to the private respondents of their wages corresponding to the unexpired portion of their
contract would be tantamount to retaining their services after their employer, petitioner
herein, had already lost its faith and trust in them; chanrobles virtual law library

VI. That the respondent NLRC committed a grave abuse of discretion or exceeded its
jurisdiction in still including and considering ROMEO ACOSTA as one of the appellants in the
two (2) aforementioned NSB cases and making him a beneficiary of its decision, dated July
8, 1981, modifying the NSB decision, dated July 2, 1980, despite the fact that way back on
October 23, 1980, Acosta had already filed in said NSB cases a pleading, entitled
"SATISFACTION OF JUDGMENT" in which he manifested that he was not appealing the NSB
decision anymore as the judgment in his favor was already fully satisfied by the petitioner
Vir-jen; chanrobles virtual law library

VII. That the respondent NLRC had no more jurisdiction to entertain private respondents'
appeal because the NSB decision became final and executory for failure of said respondents
to serve on he petitioner a copy of their "APPEAL AND MEMORANDUM OF APPEAL" within the
ten (10) day reglementary period for appeal and even after the expiration of said
period; chanrobles virtual law library

VIII. That the respondent NLRC had no jurisdiction to entertain the appeal by the private
respondents based on the supposedly verified "APPEAL AND MEMORANDUM OF APPEAL"
because the supposed signature of the person purportedly verifying the same is forged; and
that the new counsel appearing for the private respondents on appeal was not even
authorized by some of the private respondents to appear for them; chanrobles virtual law
library

IX. That the respondent NLRC committed a grave abuse of discretion or acted without or in
excess of jurisdiction or contrary to law when it misconstrued, misinterpreted and
misapplied to the instant case the ruling of this Honorable Supreme Court in Wallem
Philippines Shipping, Inc. vs. The Hon. Minister of Labor, et al., G.R No. 50734, prom.
February 20, 1981, despite distinct and fundamental differences in facts between the
Wallem Case and the instant case; chanrobles virtual law library

X. That the respondent NLRC committed a grave abuse of discretion or acted without or in
excess of its jurisdiction or acted contrary to law when it failed and refused to consider and
pass upon the substantial issues of jurisdiction, law and facts and matters of public interests
raised by the petitioner in its URGENT MOTION/APPELLEE'S MEMORANDUM ON APPEAL,
dated April 24, 1981, and in its MOTION FOR RECONSIDERATION AND/OR NEW TRIAL,
dated July 20, 1981, filed in the two (2) cases; chanrobles virtual law library

XI. That the respondent NLRC committed a grave abuse of discretion or acted without or in
excess of jurisdiction or contrary to law when it failed and refused to reconsider and set
aside its decision subject-matter of this petition for certiorari, considering Chat if allowed to
stand, the said decision will open the floodgates for Filipino seamen to disregard NSB-
approved contracts of employment with impunity, leading to the destruction of the
Philippine manning industry, which is a substantial source of revenue for the Philippine
government, as well as the image of the Filipino seamen who will undoubtedly become
known far and wide as one prone to violate the solemnity of employment contracts,
compounded with the use of threats, intimidation and blackmail, thereby necessitating a
policy decision by this Honorable Supreme Court on the matter for the survival of the
manning industry. (Pp. 5-9, Record.)

We shall deal first with the jurisdictional issue (No. VII above) to the effect that the appeal
of private respondents from the decision of the National Seamen's Board against them was
filed out of time, considering that copy of said decision was received by them on July 9,
1980 and they filed their memorandum of appeal only on July 23, 1980 or fourteen (14)
days later, whereas under article 223 of the Labor Code which governs appeals from the
National Seamen's Board to the National Labor Relations Commission per Article 20(b) of
the Code provides that such appeals must be made within ten (10)
days.chanroblesvirtualawlibrary chanrobles virtual law library

In this connection, it is contended in the comment of private respondents that petitioner has
overlooked that under Section 7, Rule XIII,, Book V of the Implementing Rules of the Labor
Code, the ten-day period specified in Article 223 refers to working days and that this Court
has already upheld such construction and manner of computation in Fabula vs. NLRC, G.R.
No. 54247, December 19, 1980. Now, computing the number of working days from July 9 to
July 23, 1980 We find that there were exactly ten (10) days, hence, if We adhere to Fabula,
the appeal in question must be held to have been made on
time.chanroblesvirtualawlibrary chanrobles virtual law library

But petitioner herein maintains that the Minister of Labor may not, under the guise of
issuing implementing rules of a law as authorized by the law itself, go beyond the clear and
unmistakable language of the law and expand it at his discretion. In other words, since
Article 223 of the Labor Code literally provides thus:

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

(a) If there is a prima facie evidence of abuse of discretion on the part of the labor Arbiter
or compulsory arbitrator; chanrobles virtual law library

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

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

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

To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall
impose reasonable penalty, including fines or censures, upon the erring parties.

the implementing rules may not provide that the said period should be computed on the
basis of working days. This, indeed, is a legal issue not brought up nor passed upon
squarely in Fabula, and petitioner prays that this Court rule on the point once and for
all.chanroblesvirtualawlibrary chanrobles virtual law library

After mature and careful deliberation, We have arrived at the conclusion that the shortened
period of ten (10) days fixed by Article 223 contemplates calendar days and not working
days. We are persuaded to this conclusion, if only because We believe that it is precisely in
the interest of labor that the law has commanded that labor cases be promptly, if not
peremptorily, dispose of. Long periods for any acts to be done by the contending parties can
be taken advantage of more by management than by labor. Most labor claims are decided in
their favor and management is generally the appellant. Delay, in most instances, gives the
employers more opportunity not only to prepare even ingenious defenses, what with well-
paid talented lawyers they can afford, but even to wear out the efforts and meager
resources of the workers, to the point that not infrequently the latter either give up or
compromise for less than what is due them.chanroblesvirtualawlibrary chanrobles virtual
law library

All the foregoing notwithstanding, and bearing in mind the peculiar circumstances of this
case, particularly, the fact that private respondents must have been misled by the
implementing rules aforementioned. We have opted to just the same pass on the merits of
the substantial issues herein, even as We admonish all concerned to henceforth act in
accordance with our foregoing view. Verily, the Minister of Labor has no legal power to
amend or alter in any material sense whatever the law itself unequivocally specifies or
fixes.chanroblesvirtualawlibrary chanrobles virtual law library

We need not ponder long on the contention of petitioner regarding the alleged forgery of the
signature of respondent Rogelio Bisula and the alleged lack of authority of the new counsel
of respondents, Atty. B. C. Gonzales, to appear for them. Resolution of these minor points,
considering their highly controversial nature, so much so that they could rationally to our
mind, be decided either way, may be dispensed with in order that We may go to the more
transcendentally important main issues before Us.chanroblesvirtualawlibrary chanrobles
virtual law library

As far as issue No. VI above regarding the inclusion of Romeo Acosta among the
beneficiaries of the decision herein in question, there can be no reason why petitioner
should not be sustained. It is undenied that Acosta has filed a formal satisfaction of
judgment. Indeed, it is quite relevant to mention at this point that originally, there were
twenty-eight (28) claimants against petitioner, This number was first reduced to fifteen (15)
then to ten (10) and finally to nine (9) now, by withdrawal of the claimants themselves.
These series of withdrawals lend no little degree to added enlightenment of the discussion
hereunder of the adverse positions of the remaining claimants, on the one hand, and the
petitioner, on the other.chanroblesvirtualawlibrarychanrobles virtual law library

To begin with, let it be borne in mind that seamen's contracts of the nature We have before
Us now are not ordinary ones. There are specie, laws and rules governing them precisely
due to the peculiar circumstances that surround them. Relatedly, We quote from the
Manifestation and Comment of the Solicitor General: chanrobles virtual law library

The employment contract in question is unlike any ordinary contract of employment, for the
reason that a manning contract involves the interests not only of the signatories thereto,
such as the local Filipino recruiting agent (herein petitioner), the foreign owner of the
vessel, and the Filipino crew members (private respondents), but also those of other Filipino
seamen in general as well as the country itself. Accordingly, Article 12 of the Labor Code
provides that it is the policy of the State not only "to insure and regulate the movement of
workers in conformity with the national interest" but also "to insure careful selection of
Filipino workers for overseas employment in order to protect the good name of the
Philippines abroad". The National Seamen Board (NSB), which is the agency created to
implement said state policies, is thus empowered pursuant to Article 20 of the Labor Code
"to secure the best possible terms and conditions of employment for seamen, and to insure
compliance thereof" not only on the part of the owners of the vessel but also on the part of
the crew members themselves.chanroblesvirtualawlibrary chanrobles virtual law library

Conformably to the power vested in the NSB, the law requires that all manning contracts
shall be approved by said agency. It likewise provides that "it shall be unlawful to substitute
or alter any previously approved and certified employment contract without the approval of
NSB" (Section 35, Rules and Regulations in the recruitment and placement of Filipino
seamen aboard foreign going ships) and authorizes the employer or owner of the vessel to
terminate such contract for just causes (Section 32, Ibid). Among such just causes for
termination are "bad conduct and unwanted presence prejudicial to the safety of the ship"
(Guidebook for shipping employers, page 8) and material breach of said
contract.chanroblesvirtualawlibrary chanrobles virtual law library

The stringent rules governing Filipino seamen aboard foreign, going ships are dictated by
national interest. There are about 120,000 registered seamen with the NSB. Only about
50,000 of them are employed and 70,000 or so are still hoping to be employed. Those
Filipino seamen already employed on board foreign-going ships should accordingly conduct
themselves with utmost propriety and abide strictly with the terms and conditions of their
employment contract, and the NSB should see to that, in order that owners of foreignowned
vessels will not only be encouraged to renew their employment contract but will moreover
be induced to hire other Filipino seamen as against other competing foreign sailors. (Pp. 15-
17, Manifestation & Comment of the Solicitor General)

Pertinently, the Labor Code of the Philippines provides for the creation of a National Seamen
Board (NSB) thus: chanrobles virtual law library

ART. 20. National Seamen Board.-(a) A National Seamen Board is hereby created which
shall developed and maintain a comprehensive program for Filipino seamen employed
overseas. It shall have the power and duty:

(1) To provide free placement services for seamen;chanrobles virtual law library

(2) To regulate and supervise the activities of agents or representatives of shipping

companies in the hiring of seamen for overseas employment; and secure the best possible
terms of employment for contract seamen workers and secure compliance therewith;
and chanrobles virtual law library

(3) To maintain a complete registry of all Filipino seamen.

(b) The Board shall have original and exclusive jurisdiction over all matters or cases
including money claims, involving employer-employee relations, arising out of or by virtue
of any law or contracts involving Filipino seamen for overseas employment. The decision of
the Board shall be appealable to the National Labor Relations Commission upon the same
grounds provided in Article 223 hereof. The decisions of the National Labor Relations
Commission shall be final and inappealable.

The finality and unappealability of the decisions of the National Labor Relations Commission
conferred by the above provisions in cases of the nature now before Us necessarily limits
Our power in the premises to the exercise of Our plenary certiorari jurisdiction. And under
the scheme of said Article 20, in relation to Article 223 of the same Code, the reviewing
authority of the Commission is limited only to the following instances:

Appeal.-Decisions, awards, or orders of the Labor Arbiters or compulsory arbitrators are

final and executory unless appealed to the Commission by any or both of the parties within
ten (10) days from receipt of such awards, orders, or decisions. Such appeal may be
entertained only on any of the following grounds: chanrobles virtual law library
(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter or
compulsory arbitrator; chanrobles virtual law library

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

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

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

To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall
impose reasonable penalty, including fines or censures, upon the erring
parties.chanroblesvirtualawlibrary chanrobles virtual law library

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

xxx xxx xxx

In the light of the foregoing perspective of law and policy, all the other issues raised by
petitioner may be disposed of together. Anyway they revolve basically around the following
questions: chanrobles virtual law library

1. In the event of conflict in the conclusions of the National Seamen Board, on the one
hand, and the National Labor Relations Commission on the other, on a matter that is
fundamentally an issue of fact, which one should prevail? chanrobles virtual law library

2. Under the facts of this case, was it legally proper for the Commission to disregard the
permission granted by the NSB to the petitioner to disembark and discontinue the
employment of herein respondents? chanrobles virtual law library

3. As a matter of fact, did respondent breach their contract with petitioner, so as to entitle
the latter to take the punitive action herein complained of? chanrobles virtual law library

4. Was the conformity of petitioner to pay respondents additional compensation of 25%

secured by said respondents thru threats of grave injury to petitioner who, therefore,
acceded to such increase involuntarily? chanrobles virtual law library

We feel that the resolution of the instant controversy hinges on whether or not it was
violative of law and policy in the light of the peculiar nature of the contracts in question as
already explained at the outset of this opinion, for the respondents to make the demand for
an increase of 50% of their respective wages stipulated in their NSB approved contracts
while they were already in the midst of the voyage to Kwinana, Australia (an ITF controlled
post), pointedly mentioning in their cablegram that such "demand (was) the best and only
solution to solve ITF problem"? chanrobles virtual law library

On these questions, the NSB found and held: chanrobles virtual law library
1. Whether or not the Seamen breached their respective employment contracts; chanrobles
virtual law library

2. Whether or not the Seamen were illegally dismissed by the Company; chanrobles virtual
law library

3. Whether or not the monetary claims of the seamen are valid and meritorious; chanrobles
virtual law library

4. Whether or not the monetary claims of the Company are valid and
meritorious; chanrobles virtual law library

5. Whether or not disciplinary action should be taken against the

Seamen.chanroblesvirtualawlibrary chanrobles virtual law library

With respect to the first issue, the Board believes that the answer should be in the
affirmative. This is so for the Seamen demanded and in fact received from the Company
wages over and above their contracted rates, which in effect is an alteration or modification
of a valid and subsisting contract; and the same not having been done thru mutual consent
and without the prior approval of the Board the alteration or modification is contrary to the
provisions of the New Labor Code, as amended, more particularly Art. 34 (i) thereof which
states that: chanrobles virtual law library

Art. 34. Prohibited practices.-It shall be unlawful for any individual, entity, licensee or
holder of authority:chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

(i) To substitute or alter employment contracts approved and verified by the Department of
Labor from the time of actual signing thereof by the parties up to and including the period of
expiration of the same without the approval of the Department of Labor;chanrobles virtual
law library

xxx xxx xxxchanrobles virtual law library

The revision of the contract was not done thru mutual consent for the Company did not
voluntarily agree to an increase of wage, but was only constrained to make a counter-
proposal of 25% increase to prevent the vessel from being interdicted and/or detained by
the ITF because at the time the demand for salary increase was made the vessel was
enroute to Kwinana, Australia (via Senipah, Indonesia), a port where the ITF is strong and
militant. However, a perusal of the Cables (Exhs. "D" & "F", "3" & "5") coming from the
Seamen addressed to the Company would show the threatening manner by which the desire
for a salary increase was manifested, contrary to their claim that it was merely a request.
Aforesaid cables are hereby quoted for ready reference: chanrobles virtual law library

RYCV-11-12-13-14 RECEIVED URINFO ENTIRE JANNU OFFICERS AND CREW NOT

AGREEABLE WITH YOUR SUGGESTIONS THEY ARE NOT CONTENTED WITH PRESENT
SALARY BASED IN VOLUME OF WORKS TYPE OF SHIP WITH HAZARDOUS CARGO AND
REGISTERED IN A WORLD WIDE TRADE STOP REGARDING URCABV-14 OFFICERS AND
CREW NOT INTERESTED IN ITF MEMBERSHIP IF NOT ACTUALLY PAID WITH ITF RATE STOP
WHAT WE DEMAND IS ONLY 50 PERCENT INCREASE BASED ON PRESENT BASIC SALARY
STOP THIS DEMAND THE BEST AND ONLY SOLUTION TO SOLVE ITF PROBLEM DUE YOUR
PRESENT RATE ESPECIALLY IN TANKERS VERY FAR IN COMPARISON WITH OTHER
SHIPPING AGENCIES IN MANILA STOP LET US SHARE EQUALLY THE FRUITS OF
LONELINESS SACRIFICES AND HARDSHIP WE ARE ENCOUNTERING ON BOARD WE
REMAIN ...

REURVIR-JEN-15 OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF 50 PERCENT

INCREASE BUT FOR GOOD AND HARMONIOUS RELATIONSHIP ONBOARD AND
RECONSIDERING YOUR SUPPOSE TO BE LOSSES IN CASE WE CONDITIONALLY COOPERATE
WITH YOUR PROPOSE INCREASE OF 25 PERCENT BASED ON INDIVIDUAL MONTHLY BASIC
PAY WITH FOLLOWING TERMS AND CONDITIONS AA EFFECTIVITY OF 25 PERCENT
INCREASE MUST BE MARCH/79 PLUS SPECIAL COMPENSATION MENTIONED URCAB
VIRJEN-14 BB NEW COMPANY CIRCULAR ON UPGRADED NEW SALARY SCALE DULY SIGNED
AND APPROVED BE FORWARDED KWINANA AUSTRALIA OR HANDCARRIED BY YOUR
REPRESENTATIVE TO DISCUSS MATTERS OFFICIALLY CC 25 PERCENT INCREASE MUST BE
COLLECTABLE ONBOARD EFFECTIVE ABOVE DATE UNTIL DISEMBARKATION STOP
ALLOTMENT TO ALLOTTEES REMAIN AS IS DD REASONABLE REPALLOWS FOR ALL
OFFICERS BE GIVEN EFFECTIVE MARCH/79 EE BONUS FOR 6 MONTHS SERVICE RENDERED
BE COLLECTIBLE ONBOARD FF OFFICERS/CREW 30 PERCENT' OT SHOULD BE BASED NEW
UPGRADED SALARY SCALE GG MASTER/CHENGR/CHMATE SPECIAL COMPENSATION GIVE
BY YOUR COMPANY PRIOR DEPARTURE MANILA BE REMAIN AS IS STOP THE ABOVE TERMS
AND CONDITIONS SHOULD BE PROPERLY ENFORCE AND DOCUMENTED ALSO COPIES AND
FORWARDED ONBOARD ON ARRIVAL KWINANA AUSTRALIA CONFIRM ...

While the Board recognizes the rights of the Seamen to seek higher wages provided the
increase is arrived at thru mutual consent, it could not however, sanction the same if the
consent of the employer is secured thru threats, intimidation or force. In the case at bar,
the Company was compelled to accede to the demand of the Seamen for a salary increase
to forestall the possibility of the vessel being interdicted by the ITF at Kwinana, Australia,
for in the event the vessel would be detained and/or interdicted the Company would suffer
more losses than paying the Seamen 25% increase of their chanrobles virtual law library

With respect to the second issue, the Board believes that the termination of the services of
the Seamen was legal and in accordance with the provisions of their respective employment
contracts. Considering the findings of the Board that the Seamen breached their contracts,
their subsequent repatriation was justified. While it may be true that the Seamen were hired
for a definite period their services could be terminated prior to the completion of the fun
term thereof for a just and valid cause.chanroblesvirtualawlibrary chanrobles virtual law
library

It may be stated in passing that Vir-jen Shipping & Marine Services, Inc., despite the fact
that it was compelled to accede to a 25% salary increase for the Seamen, tried to convince
its principal Kyoei Tanker, Ltd. to an adjustment in their agency fee to answer for the 25%
increase, but the latter not only denied the request but likewise terminated their Manning,
Agreement. The Seamen's breach of their employment contracts and the subsequent
termination of the Manning Agreement of Vir-jen Shipping & Marine Services, Inc. with the
Kyoei Tanker, Ltd., justified the termination of the Seamen's
services.chanroblesvirtualawlibrary chanrobles virtual law library

With respect to the third issue the following are the findings of the Board: chanrobles virtual
law library
As regards the claim of the Seamen for the payment of their salaries for the unexpired
portion of their employment contracts the same should be denied. This is so because of the
findings of the Board that their dismissal was legal and for a just cause. Awards of this
nature is proper only in cases where a seafarer is illegally dismissed. (Pp. 148-151, Record)

Disagreeing with the foregoing findings of the NSB, the NLRC held: chanrobles virtual law
library

The more important issue to be resolved in this case, however, is the question of whether
the Seamen violated their employment contracts when they demanded or proposed and in
fact accepted wages over and above their contracted rates. Stated otherwise, could the
Seamen rightfully demand or propose the revision of their employment contracts? While
they concede that they are bound by their contracts, the Seamen claim that their cable
asking for the revision of their contract rates was a valid exercise of their right to
grievance.chanroblesvirtualawlibrary chanrobles virtual law library

The right to grievance is recognized in this jurisdiction even if there is a valid and subsisting
contract, especially where there are supervening facts or events of which a party to the
contract was not apprised at the time of its conclusion. As pointed out by the Supreme
Court in the Wallem case, supra, it "is a basic right of all working men to seek greater
benefits not only for themselves but for their families as well ..." and the "Constitution itself
guarantees the promotion of social welfare and protection to labor." In this care, records
show that it was impressed on the Seamen that their vessel would be trading only in
Caribbean ports. This was admitted by the Company in its cable to the Seamen on 10
January 1979. After the conclusion of their contracts, however, and after they had boarded
the vessel, the principals of the Company directed the vessel to can at different ports or to
engage in "worldwide trade" which is admittedly more difficult and hazardous than trading
in only one maritime area. This is a substantial change in the original understanding of the
parties. Thus, in their cable asking for a wage increase, the Seamen expressed their
dissatisfaction by informing the Company that they were "not contented with (their) present
salary based on volume of work, type of ship with hazardous cargo and registered in world
wide trade."(emphasis supplied.) With such change in the original agreement of the parties,
we find that the Seamen were well within their rights in demanding for the revision of their
contract rates.chanroblesvirtualawlibrary chanrobles virtual law library

We also note that the Company was not exactly in good faith in contracting the service of
the Seamen. During his briefing in Manila, the Company instructed the master of the vessel,
complainant Bisula, to prepare two (2) sets of payrolls, one set reflecting the actual salary
rates of the Seamen and the other showing higher rates based on Panamanian Shipping
articles which approximate those prescribed by ITF for its member seafarers. In compliance
with this instruction, Bisula prepared the latter payrolls. These payrolls were intended for
the consumption of ITF if and when the vessel called on ports where ITF rates were
operational, the evident purpose being to show ITF that the Company was paying the same
rates prescribed by said labor federation and thereby prevent the interdiction of the vessel.
And when the vessel was en route to Australia, an ITF-controlled port, the Company
arranged for the Seamen's membership with ITF and actually paid their membership fees
without their knowledge and consent, thereby exposing them to the danger of being
disciplined by the NSB Secretariat for having affiliated with ITF. All these have to be
mentioned here to better understand the feelings of the Seamen when they asked for the
revision of their wage rates. 2 (Pp. 83-85, Record)
Comparing these two decisions, We do not hesitate to hold that the NLRC overstepped the
boundaries of its reviewing authority and was overlenient. Whether or not respondents had
breached their contract wit petitioner is a factual issue, the peculiar nuances of which were
better known to the NSB, the fact-finding authority. Indeed, even if it was nothing more
than the interpretation of the cablegram sent by respondents to petitioner on March 23,
1979 that were the only question to be resolved, that is, whether or not it carried with it or
connoted a threat which naturally panicked petitioner, which, to be sure, could be a
question of law, still, as We see it, the conclusion of the NLRC cannot be
justified.chanroblesvirtualawlibrary chanrobles virtual law library

The NLRC ruled that in the exercise of their right to present any grievances they had and in
their desire to alleviate their condition, it was but well and proper for respondents to make a
proposal for increase of their wages, which petitioner could accept or reject. We do not see
it that way.chanroblesvirtualawlibrary chanrobles virtual law library

Definitely, the reference in the cablegram to the conformity of petitioner to respondents'

demand was "the best and only solution to ITF problem" had an undertone which naturally
placed petitioner hardly in a position to answer them with a flat denial. It would be the
acme of naivete for Us to go along with the contention that the cablegram of March 23,
1979 was a mere proposal and had no trace nor tint of threat at all. Indeed, it is alleged in
the petition and there is no denial thereof that on April 23, 1979, Chief Mate Jacobo Catabay
of the M/T Jannu, who was among the claimants at first, revealed that: chanrobles virtual
law library

On April 23, 1979, Chief Mate Jacobo H. Catabay of the M/T Jannu, in a signed statement-
report to the petitioner, marked and admitted in evidence as Exh. "10-A" during the trial
stated, as follows:

On our departure at Keelung, we did not have destination until three (3) days later that
Harman cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged at
Kwinana , Australia. Captain told everyone that if only we stayed so long with the ship, he
will report to ITF personally in order to get back wages. In view that we only worked for
three months so the back wages is so small and does not worth. From that time on, Chief
Engr. and Captain have a nightly closed door conference they arrived at the conclusion to
ask for 50% salary increase and they have modified a certain platforms. They certainly
believe that Vir-jen have no choice because the vessel is going to ITF port so they called a
general meeting conducted at the bridge during my duty hours in the afternoon. All engine
and deck personnel were present in that meeting. (Pp. 19-20, Record.)

Well taken, indeed, is the Solicitor General's observation that: chanrobles virtual law library

Private respondents'conduct is uncalled for. While employees may be free to request their
employers to increase their wages, they should not use threat of such a nature and in such
a situation as to put the employer at their complete mercy and with no choice but to accede
to their demands or to face bankruptcy. This is what private respondents did, which is an
act of bad conduct prejudicial to the vessel, and a material breach of the existing manning
contract. It has adverse consequences that led not only to the termination of the existing
manning contract but to the rejection by Kyoei Tanker Co. Ltd. of petitioner's offer to supply
crew members to three other vessels, thereby depriving unemployed Filipino seamen of the
opportunity to work on said vessels. Thus, in a letter dated May 17, 1979, Kyoei Tanker Co.
Ltd. wrote petitioner as follows: chanrobles virtual law library
This is with reference to your letter of Feb. 23, 1979, submitting your manning offers on our
three (3) managed vessels for delivery as follows: chanrobles virtual law library

1. M/V "Maya" - crew,delivery end May, 1979, chanrobles virtual law library

2. M/T "Cedar" - 28 crew, delivery end June, 1979, chanrobles virtual law library

3. M/T "Global Oath" - 30 crew, delivery end, June

1979.chanroblesvirtualawlibrary chanrobles virtual law library

In this connection, we wish to advise you that, as a result of our unpleasant experience with
your crew on the M/T "Jannu", owners have decided to give the manning contracts on the
above three vessels to other foreign crew instead of your
company.chanroblesvirtualawlibrary chanrobles virtual law library

We deeply regret that although your crew performance on our other four (4) vessels have
been satisfactory, we were unable to persuade owners to consider your Philippine crew
because of the bad attitude and actuation of your crew manned on board M/T
"Jannu".chanroblesvirtualawlibrary chanrobles virtual law library

As we have already advised you, owners have spent more than US$30,000.00 to replace
the crew of M/T "Jannu" in Japan last April 19, 1979 which would have been saved if your
crew did not violate their employment contracts.(Annex "K"of Petition), chanrobles virtual
law library

In the light of all the foregoing and the law and policy on the matter, it is submitted that
there was valid justification on the part of petitioner and/or its principal to terminate the
manning contract. (Pp. 12-14, Manifestation and Comment of the Solicitor General.)

At first glance it might seem that the judgment of the NLRC should have more weight than
that of NSB. Having in view, however, the set up and relationship of these two entities
framed by the Labor Code, the NSB is not only charged directly with the administration of
shipping companies in the hiring of seamen for overseas employment by seeing to it that
our seamen "secure the best possible terms of employment for contract seamen workers
and secure compliance therewith." Its composition as of the time this controversy arose is
worth noting-for it is made up of the Minister of Labor as Chairman, the Deputy Minister as
Vice Chairman, and a representative each of the Ministries of Foreign Affairs, National
Defense, Education and Culture, the Central Bank, the Bureau of Employment Service, a
worker's organization and an employee's organization and the Executive Director of the
Overseas Employment Development Board. (Article 23, Labor Code) It is such a board that
has to approve all contracts of Filipino seamen (Article 18, Labor Code). And after such
approval, the contract becomes unalterable, it being "unlawful" under Article 34 of the Code
"for any individual, entity, licensee or holder of authority: (i) to substitute or alter
employment contracts approved and verified by Department of Labor from the time of
actual signing thereof by the parties up to and including the period of expiration of the same
without the approval of the Department of Labor." In other words, it is not only that
contracts may not be altered or modified or amended without mutual consent of the parties
thereto; it is further necessary to have the change approved by the Department, otherwise,
the guilty parties would be penalized.chanroblesvirtualawlibrary chanrobles virtual law
library
The power of the NLRC in relation to the works and actuations of the NSB is only appellate,
according to Article 20 (b), read in relation to Article 223, principally, over questions of law,
since as to factual matters, it may exercise such appellate jurisdiction only "if errors in the
findings of fact are raised which would cause grave or irreparable damage or injury to the
appellant." (par. d) chanrobles virtual law library

The NLRC has noted in its decision that respondents were originally made to believe that
their ship would go only to the Caribbean ports and yet after completing trips to Inchon,
Korea and Kuwait and Keelung, Taiwan, it was suddenly directed to call at Kwinana,
Australia, an ITF controlled port. The record shows that this imputation is more apparent
than real, for respondents knew from the very moment they were hired that world-wide
voyages or destinations were contemplated in their agreement. So much so that
corresponding steps had to be taken to avoid interference of or trouble about the ITF upon
the ship's arrival at ITF controlled ports. As already stated earlier, the ITF requires the
seamen working on any vessel calling at ports controlled by them to be paid the rates fixed
by the ITF which are much higher than those provided in the contract's signed here, to the
extent of causing tremendous loss if not bankruptcy of the
employer.chanroblesvirtualawlibrary chanrobles virtual law library

And so, as revealed to the NLRC later, in anticipation precisely of such peril to the employer
and ultimate unemployment of the seamen, in the instant case, the usual procedure
undeniably known to respondents of having two payroll's, one containing the actually
agreed rates and the other ITF rates, the latter to be shown to the ITF in order that the ship
may not be detained or interdicted in Kwinana, was followed. But according to the NLRC,
this practice constitutes deception and bad faith, and worse, it is an effect within the
prohibition against alteration of contracts approved by the NSB, considering there is nothing
to show that NSB was made aware of the so-called addendum or side agreement to the
effect that should the ship manned by respondents be made to call an any ITF controlled
port, the contract with ITF rates would be shown and, if for any reason, the respondents are
required to be actually paid higher rates and they are so paid, the excess over the rates
agreed in the NSB contract shall be returned to petitioner
later.chanroblesvirtualawlibrary chanrobles virtual law library

It is of insubstantial moment that the side agreement or addendum was not made known to
or presented as evidence before the NSB. We are persuaded that more or less the NSB
knows that the general practice is to have such side contracts. More importantly, the said
side contracts are not meant at all to alter or modify the contracts approved by the NSB.
Rather, they are precisely purported to enforce them to the letter, making it clearer that
even if the ships have to call at ITF controlled ports, the same shall remain to be the real
and binding agreement between the parties, in intentional disregard of whatever the ITF
may exact.chanroblesvirtualawlibrary chanrobles virtual law library

We hold that there was no bad faith in having said side contracts, the intent thereof being
to put into effect the NSB directed arrangements that would protect the ship manning
industry from unjust and ruinning effects of ITF intervention. Indeed, examining the said
side agreements, it is not correct to say that the respondents were caught unaware, or by
surprise when they were advised that the ship would proceed to Kwinana, Australia, even
assuming they had been somehow informed that they would sail to the Caribbean. Said side
agreements textually provide: chanrobles virtual law library

KNOW ALL MEN BY THESE PRESENTS: chanrobles virtual law library

This Addendum Agreement entered into by and between KYOEI TANKER CO., LTD.,
Principals, of the vessel M.T. "JANNU", represented herein by VIR-JEN SHIPPING & MARINE
SERVICES, INC., Manila, Philippines, as Manning Agents (hereinafter referred to as the
Company),

- and -

The herein-mentioned officers and crew, and engaged by the Company as crewmembers of
the vessel M/T "JANNU" with their positions, seaman certificate numbers and signatures
(hereinafter referred to as the Crewmember), hereunder shown: chanrobles virtual law
library

W I T N E S S E T H that: chanrobles virtual law library

1. WHEREAS, the Crewmember is hired and recruited as a member of the crew on board the
vessel M/T "JANNU" with the corresponding Contracts of Employment submitted to, verified
and duly approved by the National Seamen Board; that the employment contract referred
to, has clearly defined the rate of salary, wages, and/or employment benefits for a period of
one (1) year (or twelve (12) months), and any extension
thereof.chanroblesvirtualawlibrary chanrobles virtual law library

2. WHEREAS, the parties hereby further agree and covenant that should the above-
mentioned vessel enter, dock or drop anchor in ports of other countries, the Crewmember
shall not demand, ask or receive, and the Company shall have no obligation to pay the
Crewmember, salaries,, wages and/or benefits over and above those provided for in the
employment contract submitted to, verified and approved by the National Seamen Board,
which shall remain in full force and effect between the parties. The Company as well as the
Owners,, Charterers, Agents shall neither be held accountable nor liable for any amount
other than what is agreed upon and stipulated in the aforesaid NSB-approved Contracts of
Employment.chanroblesvirtualawlibrary chanrobles virtual law library

3. WHEREAS, the parties likewise agree that should the vessel enter, dock or drop anchor in
any foreign port, and in the event that the Company (and/or its Owners, Charterers,
Agents), are forced, pressured, coerced or compelled, in any way and for whatever cause or
reason, to pay the Crewmember either directly or thru their respective allottees or other
persons, salaries and benefits higher than those rates imposed in the NSB-approved
contract, the Crewmember hereby agrees and binds himself to receive the said payment in
behalf of, and in trust for, the Company (and/or its Owners, Charterers, Agents), and to
return the said amount in full to the Company or to its agent/s in Manila, Philippines
immediately upon his and/or his allottees receipt thereof; the Crewmember hereby waives
formal written demand by the Company or its agent/s for the return thereof. The
Crewmember hereby fully understands that failure or refusal by him to return to the
Company the said amount, will render him criminally liable for Estafa, as provided for in the
Revised Penal Code of the Philippines, and in such case, the parties hereby agree that any
criminal and/or civil action in connection therewith shall be within the exclusive jurisdiction
of Philippine Courts.chanroblesvirtualawlibrary chanrobles virtual law library

4. WHEREAS, if, in order to avoid delays to the vessels, the Company is forced, pressured,
coerced or compelled to sign a Collective Bargaining Agreement or any other Agreement
with any foreign union, particularly ITF or ITF affiliated unions, and to sign new crews'
contract of employment stipulating higher wages, salaries or benefits than the NSB-
approved contract, the said agreements and contracts shall be void from the beginning and
the Crewmember shall be deemed to have automatically waived the increased salaries and
benefits stipulated in the said agreements and employment contracts unto and in favor of
the Company, and shall remain unalterably bound by the rates, terms, and conditions of the
NSB-approved contract.chanroblesvirtualawlibrary chanrobles virtual law library

5. WHEREAS, the parties also agree that should the Company, as a precautionary or
anticipatory measure for the purpose of avoiding costly delays to the vessel prejudicial to its
own interest, decide to negotiate and/or enter into any agreement in advance with any
foreign based union, particularly ITF or ITF affiliated unions, in any foreign port where the
vessel involved herein may enter, dock or drop anchor, whatever increases in salaries or
benefits to the Crewmember that the Company may be compelled to give, over and above
those stipulated in the NSB-approved employment contracts of the Crewmember, shag,
likewise, be deemed ineffective or void from the beginning as far as the Crewmember is
concerned, and any such increases in salaries or benefits which the Crewmember shall
receive pursuant thereto shall be held by the Crewmembers in trust for the Company with
the obligation to return the same immediately upon receipt thereof, at the Company's or its
agent's office at Manila, Philippines. It is fully understood that the rates of pay and all other
terms and conditions embodied in the NSB-approved employment contracts shall be of
continuing validity and effectivity between the parties, irrespective of the countries or ports
where the said vessel shall enter, dock or drop anchor, and irrespective of any agreement
which the Company may enter or may have entered into with any union, particularly ITF or
ITF affiliated unions.chanroblesvirtualawlibrary chanrobles virtual law library

6. WHEREAS, it is likewise agreed that any undertaking made by the Company and/or the
National Seamen Board upon the request of the Company, imposed by any foreign union,
particularly ITF or ITF affiliated unions, which will negate or render in effective any
provisions of this agreement, shall also be considered null and void from the
beginning.chanroblesvirtualawlibrary chanrobles virtual law library

7. WHEREAS, lastly, this Addendum Agreement is entered into for the mutual interest of
both parties in line with the Company's desire to continue the service of the Filipino
crewmembers on board their vessel and the Crewmembers'desire to keep their employment
on board the subject vessel, thus maintaining the good image of the Filipino seamen and
contributing to the development of the Philippine manning
industry.chanroblesvirtualawlibrary chanrobles virtual law library

8. That both the Company and the Crewmember agree and bind themselves that this
Agreement shall be considered an addendum to, or as part of, the NSB-approved
employment contract entered into by the Company and the
Crewmember.chanroblesvirtualawlibrary chanrobles virtual law library

IN WITNESS WHEREOF, we have hereunto affixed our signatures this December 28, 1978 at
Manila, Philippines.chanroblesvirtualawlibrary chanrobles virtual law library

THE COMPANY
VIR-JEN SHIPPING & MARINE SERVICES, INC.

By:

(SGD.) CAPT. RUBEN R. BALTAZAR

Operations Dept.
THE CREWMEMBERS

Name Position SC# Signature

1. Ruben Arroza 2nd Mate 104728 SGD.

2. Cresenciano Abrazaldo 3rd Mate 91663 SGD.
3. Salvador Caunan Third Engr. 84995 SGD.
4. Nilo Cruz 4th Engr. 157762 SGD.
5. Pacifico Labios A/B 139045 SGD.
6. Ramon Javier A/B 170545 SGD.
7. Joaquin Cordero A/B 96556 SGD.
8. Rodolfo Crisostomo O/S 162121 SGD.
9. Renato Oliveros O/S 137132 SGD.
10. Rogelio Saraza O/S 149635 SGD.
11. Nemesio Adug Pumpman 157215 SGD.
12. Francisco Benemerito Oiler 89467 SGD.
13. Rufino Gutierrez Oiler 173663 SGD.
14. Juol Ram Maul Oiler 84934 SGD.
15. Steve Mariño Wiper 146096 SGD.
16. Simplicio Bautista Chief Cook 169142 SGD.
17. Romeo Acosta Second Cook 159960 SGD.
18. Delfin Dagohoy Messman 144096 SGD.
19. Jose Encabo Messman 179551 SGD.

(Pp. 99-103, Annex D-1 of Petition)

The NLRC has cited Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R. No.
50734-37, February 20, 1981 (102 SCRA 835). No less than the Solicitor General maintains
that said cited case is not controlling: chanrobles virtual law library

A careful examination of Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R. No.
50734-37, February, 20, 1981 shows that the same is dissimilar to the case at bar. In the
Wallem case, there was an express agreement between the employer and the ITF
representative, under which said employer bound itself to pay the crew members salary
rates similar to those of ITF. When the crew members in the Wallem case demanded that
they be paid ITF rates, they were merely asking their employer to comply with what had
been agreed upon with the ITF representative, which conduct on their part cannot be said to
be a violation of contract but an effort to urge performance thereof. Such is not the
situation in the case at bar. In the case at bar, petitioner and private respondents had a
side agreement, whereby private respondents agreed to return to petitioner whatever
amounts petitioner would be required to pay under ITF rates. In other words, petitioner and
private respondents agreed that petitioner would not pay the ITF rate. When private
respondents used ITF as threat to secure increase in salary, they violated the manning
contract. Moreover, in the case at bar, petitioner terminated the manning contract only after
the NSB authorized it to do so, after it found the grounds therefor to be valid. On the other
hand, the termination of the manning contract in the Wallem case was without prior
authorization from the NSB.chanroblesvirtualawlibrary chanrobles virtual law library
It will be noted that private respondents sent a cable to petitioner demanding an increase of
50% of their basic salary as the only solution to the ITF problem at a time when the vessel
M/T JANNU was enroute to Australia, an ITF port. The fact that private respondents
mentioned ITF in their cable clearly shows that if petitioner would not accede to their
demands, they would denounce petitioner to ITF. Thus, Chief Mate Jacobo Catabay in his
report dated April 23, 1979 (Exh. 10-A) stated:

On our departure at Keelung, we did not have destination until three days later that Harman
cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged at Kwinana,
Australia. Captain told everyone that if only we stayed so long with the ship, he will report
to ITF personally in order to get back wages. In view that we only worked for three months
so the back wages is so small and does not worth. From that time on, Chief Engr. and
Captain have a nightly closed door conference until they arrived at the conclusion to ask for
50% salary increase and they have modified a certain platforms. They certainly believe
that Vir-jen have no choice because the vessel is going to ITF port so they called a general
meeting conducted at the bridge during my duty hours in the afternoon. All engines and
deck personnel were present in that meeting. (Emphasis supplied)

Reporting the wage scheme to the ITF would mean that the vessel would be interdicted and
detained in Australia unless petitioner pay the ITF rates, which represent more than 100%
of what is stipulated in the manning contract. Petitioner was thus forced to grant private
respondents an increase of 25% in their basic salary. That such grant of a 25% increase
was not voluntary is shown by the fact that petitioner immediately denounced the seamen's
conduct to NSB and subsequently asked said agency authority to terminate the manning
contract. (Pp. 10-12, Manifestation & Comment of Solicitor General)

Summarizing, We are convinced that since the NSB, considering its official role in matters
like those now before Us, is the fact-finding body, and there is no sufficient cogency in the
NLRC's finding that there was no threat employed by respondents on petitioner, and, it
appearing further that the well prepared Manifestation and Comment of the Solicitor General
supports the decision of the NSB, which body, to Our mind, was in a better position than the
NLRC to appraise the relevant nuances of the actuations of both parties, We are of the
considered view that the decision of the NLRC under question constitutes grave abuse of
discretion and should be set aside in favor of the NSB's
decision.chanroblesvirtualawlibrary chanrobles virtual law library

In El Hogar Filipino Mutual Building and Loan Association vs. Building Employees Inc., 107
Phil. 473, citing San Miguel Brewery vs. National Labor Union, 97 Phil. 378, We
emphasized: chanrobles virtual law library

Much as we should expand beyond economic orthodoxy, we hold that an employer cannot
be legally compelled to continue with the employment of a person who admittedly was
guilty of misfeasance or malfeasance towards his employer, and whose continuance in the
service of the latter is patently inimical to his interest. The law in protecting the rights of
the laborer, authorizes neither the oppression nor self-destruction of the employer. (Page 3,
Record) (Emphasis supplied)

It is timely to add here in closing that situations wherein employers are practically laid in
ambush or placed in a position not unlike those in a highjack whether in the air, land or
midsea must be considered to be what they really are: acts of coercion, threat and
intimidation against which the victim has generally no recourse but to yield at the peril of
irreparable loss. And when such happenings affect the national economy, as pointed out by
the Solicitor General, they must be treated to be in the nature of economic sabotage. They
should not be tolerated. This Court has to be careful not to sanction
them.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, the petition herein is granted and the decision of the NLRC complained of
hereby set aside; the decision of the NSB should
stand.chanroblesvirtualawlibrary chanrobles virtual law library

No costs.
 [G.R. No. 113541. November 22, 2001.]

THE HONGKONG AND SHANGHAI BANKING CORPORATION EMPLOYEES

UNION, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION And THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

The instant petition for certiorari 1 with prayer for a temporary restraining order assails the
Resolution 2 dated January 31, 1994 of the National Labor Relations Commission in NLRC IC
CASE No. 000422-93, entitled "THE HONGKONG AND SHANGHAI BANKING CORPORATION,
LIMITED, versus THE HONGKONG AND SHANGHAI BANKING CORPORATION EMPLOYEES
UNION, Et. Al."cralaw virtua1aw library

The challenged Resolution issued by the NLRC granted the preliminary injunction prayed for
by The Hongkong and Shanghai Banking Corporation, Limited ("respondent bank") enjoining
The Hongkong and Shanghai Banking Corporation Employees Union ("petitioner union"), its
agents, sympathizers or anyone acting in its behalf from unlawfully barricading and/or
obstructing the free ingress to and egress from the respondent bank’s offices in Makati City
and Ortigas Center, Pasig City.chanrob1es virtua1 1aw 1ibrary

On December 22, 1993, the officers and members of petitioner union staged a strike against
respondent bank for its (1) arbitrary and unilateral reduction of the "CBA-established entry
level of clerical pay rates" and (2) whimsical refusal to bargain collectively on wage rates,
among others.

The next day, December 23, 1993, respondent bank filed a petition for injunction 3 with the
National Labor Relations Commission ("respondent NLRC") praying that petitioner union’s
acts of obstructing the ingress to and egress from the bank’s premises be enjoined and, in
the interim, a temporary restraining order be issued. Respondent bank claimed that the
unlawful obstruction has caused grave and irreparable damage to its banking activities, and
that unless these acts are restrained, it will continue to suffer greater injury.

At the initial hearing of the petition for injunction on December 28, 1993 before Labor
Arbiter Jesus B. Afable (whom respondent NLRC delegated to receive evidence thereon),
petitioner union orally prayed for the dismissal of the petition on the ground that respondent
bank failed to specifically allege therein the provisions of Article 218 (e, 3 and 4) of the
Labor Code, as amended, to wit:jgc:chanrobles.com.ph

"ART. 218. POWERS OF THE COMMISSION. — The Commission shall have the power and
authority:chanrob1es virtual 1aw library

x x x

(e). To enjoin or restrain any actual or threatened commission of any or all prohibited or
unlawful acts or to require the performance of a particular act in any labor dispute which, if
not restrained or performed forthwith, may cause grave or irreparable damage to any party
or render ineffectual any decision in favor of such party: Provided, That no temporary or
permanent injunction in any case involving or growing out of a labor dispute as defined in
this Code shall be issued except after hearing . . ., and only after a finding of fact by the
Commission, to the effect:chanrob1es virtual 1aw library

x x x

(3) That as to each item of relief to be granted, greater injury will be inflicted upon
complainant by the denial of relief than will be inflicted upon defendants by the granting of
relief;

(4) That complainant has no adequate remedy at law; and

. . ." (Emphasis ours)

On January 4, 1994, respondent bank filed a supplemental petition alleging that petitioner
union’s officers and members continue to commit acts of intimidation, coercion, and
obstruction in violation of Article 264 (e) 4 of the Labor Code.chanrob1es virtua1 1aw
1ibrary

Finding the petition and the supplemental petition to be in accordance with Article 218 of
the Labor Code, respondent NLRC issued a Resolution 5 on January 6, 1994 granting a
temporary restraining order and setting the hearing of respondent bank’s application for
preliminary injunction, thus impliedly denying petitioner union’s oral motion to dismiss the
petition.

Petitioner union then filed a motion for reconsideration of the said Resolution but was
denied by respondent NLRC in its Resolution of January 20, 1994. This Resolution also
directed Labor Arbiter Afable to conduct trial on January 24, 25 and 26, 1994. During these
dates, respondent bank presented testimonial, documentary and real evidence. Upon
motion by petitioner union, the Labor Arbiter ordered the exclusion for being immaterial, of
all evidence pertaining to the events prior to the said dates. Respondent bank then objected
to this order of exclusion by filing an "Exception with Tender of Excluded Evidence (Ex
Abundante Cautelam)." After respondent bank rested its case, petitioner union did not
present evidence. Its counsel argued in open session for the dismissal of the petition, citing
the insufficiency of evidence in support of the issuance of a temporary restraining order or
preliminary injunction.

On January 31, 1994, respondent NLRC issued the questioned Resolution (1) denying
petitioner union’s oral motion to dismiss the petition; (2) issuing a writ of preliminary
injunction in favor of respondent bank, and (3) directing the Labor Arbiter to conduct further
hearing for the reception of additional evidence to sustain the issuance of a writ of
permanent injunction.

Without first filing a motion for reconsideration of the said Resolution, petitioner union
comes to this Court via the present petition raising the sole issue of whether or not
respondent NLRC acted with grave abuse of discretion in denying its motion to dismiss and
granting respondent bank’s prayer for the issuance of a writ of preliminary
injunction.chanrob1es virtua1 1aw 1ibrary

Petitioner union vigorously maintains that the petition for injunction filed by the respondent
bank with the NLRC suffers from a fatal flaw for it failed to specifically allege therein the
matters set forth under Nos. 3 and 4 of Article 218 (e) of the Labor Code. Petitioner union
further alleges that it was deprived of its right to due process because it was not given the
opportunity "to cross-examine the bank’s witnesses concerning the excluded evidence relied
upon by respondent Commission for its findings, and to present testimony in opposition
thereto." 6

The petition is devoid of merit.

In a special civil action for certiorari, the petitioner has to show not merely a reversible
error committed by the public respondent, but that it acted with grave abuse of discretion
amounting to lack or excess of jurisdiction. 7 "Grave abuse of discretion" implies such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or
where the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility which must be so patent and gross as to amount to an invasion of positive
duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of
law. 8 Mere abuse of discretion is not enough. 9

Here, we see no grave abuse of discretion on the part of respondent NLRC in giving due
course to the petition for injunction filed by respondent bank. As aptly observed by the
Solicitor General, it is not necessary for the respondent bank to allege in verbatim the
requisites for the issuance of the temporary restraining order and/or writ of preliminary
injunction under Article 218 (e) of the Labor Code. 10 In its original and supplemental
petition for injunction, respondent bank made sufficient allegations that members of
petitioner union were unlawfully preventing or obstructing the free ingress to and egress
from the respondent bank premises; and disrupting operations, causing great and
continuing damage to the bank in terms of lost revenues. These allegations, as found by
respondent NLRC, were proven by respondent bank during the proceedings for the issuance
of a writ of preliminary injunction. Incidentally, it is not our function in
this certiorari proceedings to review the findings of facts of respondent NLRC since we are
confined only to issues of jurisdiction or grave abuse of discretion. 11 Indeed, this Court is
not a trier of facts; factual issues are beyond the ambit of our authority to review
on certiorari. 12

Anent the contention of petitioner union that it was deprived of the opportunity to cross-
examine the bank’s witnesses, the same is totally unavailing. In the proceedings before
respondent NLRC, petitioner union’s counsel, instead of cross-examining those witnesses,
merely resorted to oral argument and moved to dismiss the petition for insufficiency of
evidence. The oral motion to dismiss was opposed, also in open session, by respondent
bank, after which, the entire incident was considered submitted for resolution. Respondent
NLRC had no recourse but to decide the motion based solely on the evidence presented. In
any event, respondent NLRC gave petitioner union the opportunity to controvert respondent
bank’s evidence when it directed the Labor Arbiter to receive evidence. Clearly, respondent
NLRC, in issuing the assailed Resolution, did not commit any grave abuse of discretion.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.
 G.R. No. 140853. February 27, 2003

ARIEL A. TRES REYES, Petitioner, v. MAXIMS TEA HOUSE and JOCELYN

POON, respondents.

DECISION

QUISUMBING, J.:

This is a petition for review of the decision1 of the Court of Appeals, dated November 22,
1999 in CA-G.R. SP No. 54110, setting aside the decision2 of the Third Division, National
Labor Relations Commission (NLRC) dated March 11, 1999, in NLRC CA No. 017339-98. In
NLRC NCR Case No. 00-12-08773-97, the NLRC vacated the Labor Arbiters decision and
ordered herein respondent Maxims Tea House to reinstate petitioner Ariel Tres Reyes to his
former position or, should reinstatement no longer prove feasible, to pay Tres Reyes his
separation pay and backwages.

The facts of this case, as found by the NLRC and affirmed by the Court of Appeals, are as
follows:

Respondent Maxims Tea House (hereinafter Maxims for brevity) had employed Ariel Tres
Reyes as a driver since October 1995. He was assigned to its M.H. del Pilar Street, Ermita,
Manila branch. His working hours were from 5:00 P.M. to 3:00 A.M., and among his duties
was to fetch and bring to their respective homes the employees of Maxims after the
restaurant closed for the day.

In the wee hours of the morning of September 27, 1997, petitioner was driving a Mitsubishi
L300 van and was sent to fetch some employees of Savannah Moon, a ballroom dancing
establishment in Libis, Quezon City. Petitioner complied and took his usual route along Julia
Vargas Street in Pasig City. He was headed towards Meralco Avenue at a cruising speed of
50 to 60 kilometers per hour, when he noticed a ten-wheeler truck coming his way at full
speed despite the fact that the latters lane had a red signal light on. Petitioner maneuvered
to avoid a collision, but nonetheless the van he was driving struck the truck. As a result,
petitioner and seven of his passengers sustained physical injuries and both vehicles were
damaged.

On October 15, 1997, the management of Maxims required petitioner to submit, within
forty-eight hours, a written explanation as to what happened that early morning of
September 27, 1997. He complied but his employer found his explanation unsatisfactory
and as a result he was preventively suspended for thirty (30) days, effective October 20,
1997.

On November 19, 1997, Maxims terminated petitioner for cause.

Feeling that the vehicular accident was neither a just nor a valid cause for the severance of
his employment, petitioner filed a complaint3 for illegal dismissal docketed as NLRC NCR
Case No. 00-12-08773-97.

On July 20, 1998, the Labor Arbiter decided NLRC NCR Case No. 00-12-08773-97 as
follows:
WHEREFORE, as we sustain the validity of the dismissal of complainant Ariel A. Tres Reyes,
we order respondent Maxim (sic) Tea House to pay him the following amount(s):

Financial assistance (210 x 26 days) P5,460.00

13th month pay for 1997 (P210 x 28 days)

x 11.6 months over 12) P5,278.00

Service incentive leave pay (P210 x 5 days) 1,050.00

TOTAL AWARD P11,788.00

SO ORDERED.4

In his decision, the Labor Arbiter found that petitioner was grossly negligent in failing to
avoid the collision.

On October 8, 1998, instead of filing the requisite pleading for appeal, petitioner filed a
Motion for Partial Reconsideration with the NLRC. The NLRC opted to treat petitioners
motion as an appeal docketed as NLRC CA No. 017339-98.

On March 11, 1999, the NLRC reversed the decision of the Labor Arbiter on the ground that
there was no negligence on petitioners part. The decision concluded, thus:

WHEREFORE, foregoing premises considered, the appeal is hereby GRANTED. The assailed
Decision dated July 20, 1998 is hereby ordered VACATED and SET ASIDE and new one is
hereby entered ordering respondent MAXIMS TEA HOUSE to reinstate herein complainant
Ariel T. Tres Reyes to his former position without loss of seniority rights plus full backwages.

In the event that reinstatement is no longer feasible, respondents are hereby ordered to
pay complainant separation pay in the amount of one month for every year of service
computed from October 7, 1995 to the date of this Decision, in addition to payment of
backwages computed from date of termination on November 19, 1997 up to date of this
decision.

All other reliefs herein sought and prayed for are hereby DENIED for lack of merit.

SO ORDERED.5cräläwvirtualibräry

Respondents moved for reconsideration of the foregoing decision, but said motion was
denied by the Commission in its resolution6 dated May 12, 1999.

Respondents then filed a special civil action for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 54110. It was alleged that the NLRC committed a grave abuse
of discretion amounting to want or excess of jurisdiction in: (a) giving due course to
petitioners Motion for Partial Reconsideration notwithstanding that it was a prohibited
pleading under Sec. 17 (now Sec. 19),7 Rule V of the NLRC Rules of Procedure and despite
want of showing that it was seasonably filed; and (b) for substituting its own findings to the
factual findings of the Labor Arbiter.
On November 22, 1999, the appellate court decided CA-G.R. SP No. 54110 in favor of the
employer and its manager, thus:

WHEREFORE, premises considered, the petition is given due course and the assailed
decision of public respondent is hereby set aside and the complaint of private respondent
DISMISSED for utter lack of merit.

SO ORDERED.8cräläwvirtualibräry

Hence, the instant case.

Before us, petitioner alleges that the Court of Appeals erred:

...IN HOLDING THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN TREATING
AS APPEAL THE PARTIAL MOTION FOR RECONSIDERATION OF MR. TRES REYES, BECAUSE
THE COURT OF APPEALS TURNED A BLIND EYE ON THE FACTS ON RECORD (A) THAT MR.
TRES REYES FILED SAID MOTION ON OCTOBER 8, 1998 (THE 10TH DAY FROM HIS RECEIPT
OF A COPY OF ARBITER DINOPOLS DECISION), (B) THAT HE PROPERLY VERIFIED SAID
MOTION; AND (C) PAID THE APPEAL FEE, BOTH ON THE SAME DATE.

II

...IN CONCLUDING THAT THE FREAK TRAFFIC ACCIDENT ON SEPTEMBER 27, 1997 WAS
DUE TO NEGLIGENCE OF MR. TRES REYES AS FOUND BY THE LABOR ARBITER WHO HAD
THE CHANCE TO OBSERVE THE DEMEANOR OF LITIGANTS AND WITNESSES, DESPITE THE
FACT (A) THAT NO TRIAL WAS HAD IN THE ARBITERS LEVEL TO PROVIDE SUCH A
PRETENDED OPPORTUNITY; (B) THAT THE NLRCS FACTUAL FINDING BEING IN ACCORD
WITH REALITY AND SUPPORTED BY PREPONDERANCE OF EVIDENCE, IS CONCLUSIVE UPON
THE CA, AND (C) THAT THE COURT OF APPEALS REVERSAL OF THE NLRC RULING IS
SADDLED WITH SURMISES, CONJECTURES, AND SUPPOSITIONS, WITHOUT CATEGORICAL
SUPPORT OF ANY GROSS OR HABITUAL NEGLECT TO TERMINATE
EMPLOYMENT.9cräläwvirtualibräry

Petitioners assigned errors may be reduced to two issues for our resolution, namely:

(1) Could the Motion for Partial Reconsideration be considered as an appeal to the NLRC?

(2) Is petitioners dismissal from employment valid and legal?

On the first issue, petitioner argues that the Court of Appeals grievously erred in holding
that the NLRC has gravely abused its discretion in treating his Motion for Partial
Reconsideration as an appeal. Petitioner asserts that when a motion for reconsideration of a
decision of a Labor Arbiter is filed, the Commission will properly treat it as an appeal. He
stresses that under labor law, rules of procedure should be liberally construed to assist the
parties in obtaining a just, expeditious, and inexpensive settlement of disputes. Hence,
technicalities should not prevail over substantial merits of the labor case.

In the instant case, we note that the Office of the Solicitor General (OSG), whom we
required to comment on the petition, filed instead a Manifestation and Motion In Lieu of
Comment agreeing with petitioner. The OSG submits that the Motion for Partial
Reconsideration was correctly treated by the NLRC as an appeal, on the principle that
technical rules and procedure should be liberally applied in labor cases.

Respondents counter that granting without admitting, that the NLRC did indeed correctly
treat petitioners Motion for Partial Reconsideration as an appeal, nonetheless, it still
behooves petitioner to comply with the other requisites for perfection of an appeal.
Respondents point out that said motion contained no statement when petitioner received a
copy of the Labor Arbiters decision to determine the timeliness of the motion cum appeal, as
required by Section 3,10 Rule VI of the NLRC Rules of Procedure. Respondents also point to
petitioners failure to pay the necessary filing fees. They submit that the appellate court
committed no reversible error when it ruled that petitioners Motion for Partial
Reconsideration failed to comply with the requisites of a valid appeal, hence fatally
defective, e.g. for want of verification and absence of proof that it was filed within the
reglementary period.

The first issue involves a question of substance versus form. Strictly speaking, a motion for
reconsideration of a decision, order, or award of a Labor Arbiter is prohibited by Section 19,
Rule V of the NLRC Rules of Procedure. But said rule likewise allows that a motion for
reconsideration shall be treated as an appeal provided it meets all the requisites of an
appeal. Petitioner insists that his pleading was in form a motion for reconsideration, but in
substance it was an appeal which complied with all the technical requirements. Respondents
counter that the formal requisites take precedence.

We have minutely scrutinized the records of this case, particularly the questioned Motion for
Partial Reconsideration, but we find no basis for the appellate courts finding that said
pleading did not contain a statement as to when petitioner received a copy of the decision in
NLRC NCR Case No. 00-12-08773-97. The lead paragraph of said motion reads:

Complainant ARIEL A. TRES REYES, thru counsel, most respectfully moves to reconsider the
Decision dated July 20, 1998 rendered by the Honorable Labor Arbiter Ernesto S. Dinopol in
the above-captioned case (copy of which was received by the Complainant on September
28, 1998), and alleges as follows:11cräläwvirtualibräry

Note that all that Section 3, Rule VI of the NLRC Rules of Procedure requires with respect to
material dates is a statement of the date when the appellant received the appealed
decision. We rule that petitioners declaration in his motion that he received a copy of the
Labor Arbiters decision on September 28, 1998 is more than sufficient compliance with said
requirement imposed by Section 3, Rule VI. We likewise find that the motion in question
was filed with the NLRC on October 8, 1998 or on the tenth (10th) day from the date of
receipt by petitioner of his copy of the Labor Arbiters decision. Otherwise put, said pleading
was filed within the reglementary ten-day period, as provided for in Section 1,12 Rule VI of
the NLRC Rules of Procedure. The law13 on the timeliness of an appeal from the decision,
award, or order of the Labor Arbiters, states clearly that the aggrieved party has ten (10)
calendar days from receipt thereof to appeal to the Commission.14 Needless to say, an
appeal filed at the last minute of the last day of said period is, for all intents and purposes,
still seasonably filed.

In CA-G.R. SP No. 54110, the Court of Appeals accepted respondents averment that
petitioners Motion for Partial Reconsideration was not verified. The records, however,
contradict their averments. We find that petitioner verified his motion to reconsider the
Labor Arbiters decision on October 8, 1998, or on the same day that it was filed. 15 We must,
perforce, rule that petitioner has substantially complied with the verification requirement as
provided for in Section 3, Rule VI of the Commissions Rules of Procedure.

Anent respondents claim that petitioner failed to pay the requisite appeal fee in NLRC CA
No. 0 17339-98, the NLRC stated in its decision that:

A review of the record shows that October 8, 1998, complainant-appellant paid the amount
of P110.00 in cash as appeal fee. For this he was issued, O.R.
#0073761.16cräläwvirtualibräry

This finding refutes respondents claim. The records clearly show the basis for the finding of
the Commission that the appeal fees were paid.17 Thus, on this point respondents averment,
without any supporting evidence and contradicted by the records, deserves scant
consideration.

How the Court of Appeals could have been misled by respondents allegations of technical
deficiencies with respect to the questioned Motion for Partial Reconsideration in NLRC CA
No. 0 17339-98, is surprising. Had the court a quo, to use its own words, carefully perused
the case records, it would have readily seen that said pleading had complied with the
technical requirements of an appeal. Hence, we are constrained to conclude that the
appellate court had no basis for concluding that the NLRC had gravely abused its discretion
when the NLRC gave due course to the motion and treated it as an appeal.

In labor cases, rules of procedure should not be applied in a very rigid and technical
sense.18 They are merely tools designed to facilitate the attainment of justice, and where
their strict application would result in the frustration rather than promotion of substantial
justice, technicalities must be avoided. Technicalities should not be permitted to stand in
the way of equitably and completely resolving the rights and obligations of the
parties.19 Where the ends of substantial justice shall be better served, the application of
technical rules of procedure may be relaxed.20cräläwvirtualibräry

On the second issue, petitioner contends that the Court of Appeals erred in holding that the
factual findings made by the Labor Arbiter regarding negligence should be sustained
because at the trial, the Labor Arbiter had the opportunity to observe the demeanor of the
litigants. Petitioner points out that no such trial or hearing was made. In NLRC NCR Case
No. 00-12-08773-97, the Labor Arbiter decided the case based on the position papers
submitted by the parties. Moreover, says the petitioner, the Court of Appeals ignored
substantial evidence, showing that there was no gross negligence on his part because the
vehicular accident was entirely due to the fault of the truck driver who was speeding on the
wrong lane.

The OSG joins petitioner in his stance, pointing out that the police report relied upon by the
parties before the Labor Arbiter clearly showed that the ten-wheeler truck lost its brakes,
intruded into the lane of the vehicle driven by petitioner, and collided with petitioners van.
These factual findings could not be rebutted by the Labor Arbiter by observing the
demeanor of the parties at the hearings, more so since the Labor Arbiter did not conduct
any trial-type hearing. Thus, concluded the OSG, the Court of Appeals erred when it relied
upon such ground in sustaining the Labor Arbiters finding that petitioner was grossly
negligent.

Respondents counter that the factual findings of the Labor Arbiter showing gross negligence
on petitioners part were correctly upheld by the Court of Appeals as these were based on
the Labor Arbiters independent evaluation of the evidence before him. Thus, they add, said
findings are final and conclusive.

The issue of whether a party is negligent is a question of fact. 21 As a rule, the Supreme
Court is not a trier of facts and this applies with greater force in labor cases.22 Hence,
factual findings of quasi-judicial bodies like the NLRC, particularly when they coincide with
those of the Labor Arbiter and if supported by substantial evidence, are accorded respect
and even finality by this Court.23 But where the findings of the NLRC and the Labor Arbiter
are contradictory, as in this case, the reviewing court may delve into the records and
examine for itself the questioned findings.24cräläwvirtualibräry

Our perusal of the records shows that the proceedings before the Labor Arbiter primarily
involved the submission of position papers by the parties. 25 No trial-type hearing was
conducted at all by the Labor Arbiter. Thus, the finding of the Court of Appeals that the
latter was in a better position to evaluate the evidence as he had the better opportunity to
observe the demeanor of the parties at the hearing has no leg to stand on. Moreover, based
on the police traffic accident investigation report, we are convinced that the accident was
the fault of the ten-wheeler trucks driver. On seeing the signal light change to red, this
driver stepped on his brake, not just once but three times, but his truck could not stop.
Since the truck was on the wrong lane, petitioners van, which was in its proper lane with
the green light, smashed into the out-of-control truck. 26 This episode led to petitioners
dismissal which, in our view, is unjustified.

Under the Labor Code,27 gross negligence is a valid ground for an employer to terminate an
employee. Gross negligence is negligence characterized by want of even slight care, acting
or omitting to act in a situation where there is a duty to act, not inadvertently but willfully
and intentionally with a conscious indifference to consequences insofar as other persons
may be affected.28 In this case, however, there is no substantial basis to support a finding
that petitioner committed gross negligence.

In sustaining the Labor Arbiters finding that petitioner was grossly negligent, the appellate
court stressed that the cited episode was the second vehicular accident involving petitioner,
and as such it may clearly reflect against [his] attitudinal character as a driver. 29 We note,
however, that the Commission found that in the first vehicular accident involving petitioner
he was the victim of the reckless and negligent act of a fellow driver. 30 We agree with the
NLRC that an imputation of habitual negligence cannot be drawn against petitioner, since
the earlier accident was not of his own making.

The CA decision further faulted petitioner despite his explanation that he had the right in
traversing the point of collision because the traffic lights along his right of way was green.
According to the CA, a good driver of a motor vehicle has to know defensive attitude even
on a clear way.31 However, such observation does not support the conclusion that petitioner
was negligent. The test to determine the existence of negligence is as follows: Did petitioner
in doing the alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would use in the same situation?32 It is not disputed that petitioner tried to
turn left to avoid a collision. To put it otherwise, petitioner did not insist on his right of way,
notwithstanding the green light in his lane. Still, the collision took place as the ten-wheeler
careened on the wrong lane. Clearly, petitioner exerted reasonable effort under the
circumstances to avoid injury not only to himself but also to his passengers and the van he
was driving. To hold that petitioner was grossly negligent under the circumstances goes
against the factual circumstances shown. It appears to us he was more a victim of a
vehicular accident rather than its cause.
There being no clear showing that petitioner was culpable for gross negligence, petitioners
dismissal is illegal. It was error for the Court of Appeals to reverse and set aside the
decision of the Third Division of the NLRC.

WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals dated
November 22, 1999 in CA-G.R. SP No. 54110 is SET ASIDE. The decision of the National
Labor Relations Commission dated March 11, 1999 in NLRC CA No. 017339-98 is
REINSTATED in full. No pronouncement as to costs.

SO ORDERED.
 G.R. No. 130866 September 16, 1998

ST. MARTIN FUNERAL HOME, Petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and BIENVENIDO ARICAYOS, Respondents.

REGALADO, J.:

The present petition for certiorari stemmed from a complaint for illegal dismissal filed by
herein private respondent before the National Labor Relations Commission (NLRC), Regional
Arbitration Branch No. III, in San Fernando, Pampanga. Private respondent alleges that he
started working as Operations Manager of petitioner St. Martin Funeral Home on February 6,
1995. However, there was no contract of employment executed between him and petitioner
nor was his name included in the semi-monthly payroll. On January 22, 1996, he was
dismissed from his employment for allegedly misappropriating P38,000.00 which was
intended for payment by petitioner of its value added tax (VAT) to the Bureau of Internal
Revenue (BIR). 1

Petitioner on the other hand claims that private respondent was not its employee but only
the uncle of Amelita Malabed, the owner of petitioner St. Martin's Funeral Home. Sometime
in 1995, private respondent, who was formerly working as an overseas contract worker,
asked for financial assistance from the mother of Amelita. Since then, as an indication of
gratitude, private respondent voluntarily helped the mother of Amelita in overseeing the
business.

In January 1996, the mother of Amelita passed away, so the latter then took over the
management of the business. She then discovered that there were arrears in the payment
of taxes and other government fees, although the records purported to show that the same
were already paid. Amelita then made some changes in the business operation and private
respondent and his wife were no longer allowed to participate in the management thereof.
As a consequence, the latter filed a complaint charging that petitioner had illegally
terminated his employment. 2

Based on the position papers of the parties, the labor arbiter rendered a decision in favor of
petitioner on October 25, 1996 declaring that no employer-employee relationship existed
between the parties and, therefore, his office had no jurisdiction over the case. 3

Not satisfied with the said decision, private respondent appealed to the NLRC contending
that the labor arbiter erred (1) in not giving credence to the evidence submitted by him; (2)
in holding that he worked as a "volunteer" and not as an employee of St. Martin Funeral
Home from February 6, 1995 to January 23, 1996, or a period of about one year; and (3) in
ruling that there was no employer-employee relationship between him and petitioner. 4

On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision and
remanding the case to the labor arbiter for immediate appropriate proceedings. 5 Petitioner
then filed a motion for reconsideration which was denied by the NLRC in its resolution dated
August 18, 1997 for lack of merit, 6 hence the present petition alleging that the NLRC
committed grave abuse of discretion. 7
Before proceeding further into the merits of the case at bar, the Court feels that it is now
exigent and opportune to reexamine the functional validity and systemic practicability of the
mode of judicial review it has long adopted and still follows with respect to decisions of the
NLRC. The increasing number of labor disputes that find their way to this Court and the
legislative changes introduced over the years into the provisions of Presidential Decree
(P.D.) No. 442 (The Labor Code of the Philippines and Batas Pambansa Blg. (B.P. No.) 129
(The Judiciary Reorganization Act of 1980) now stridently call for and warrant a
reassessment of that procedural aspect.

We prefatorily delve into the legal history of the NLRC. It was first established in the
Department of Labor by P.D. No. 21 on October 14, 1972, and its decisions were expressly
declared to be appealable to the Secretary of Labor and, ultimately, to the President of the
Philippines.

On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the same to take
effect six months after its promulgation. 8 Created and regulated therein is the present
NLRC which was attached to the Department of Labor and Employment for program and
policy coordination only. 9 Initially, Article 302 (now, Article 223) thereof also granted an
aggrieved party the remedy of appeal from the decision of the NLRC to the Secretary of
Labor, but P.D. No. 1391 subsequently amended said provision and abolished such appeals.
No appellate review has since then been provided for.

Thus, to repeat, under the present state of the law, there is no provision for appeals from
the decision of the NLRC. 10 The present Section 223, as last amended by Section 12 of R.A.
No. 6715, instead merely provides that the Commission shall decide all cases within twenty
days from receipt of the answer of the appellee, and that such decision shall be final and
executory after ten calendar days from receipt thereof by the parties.

When the issue was raised in an early case on the argument that this Court has no
jurisdiction to review the decisions of the NLRC, and formerly of the Secretary of Labor,
since there is no legal provision for appellate review thereof, the Court nevertheless
rejected that thesis. It held that there is an underlying power of the courts to scrutinize the
acts of such agencies on questions of law and jurisdiction even though no right of review is
given by statute; that the purpose of judicial review is to keep the administrative agency
within its jurisdiction and protect the substantial rights of the parties; and that it is that part
of the checks and balances which restricts the separation of powers and forestalls arbitrary
and unjust adjudications. 11

Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the
remedy of the aggrieved party is to timely file a motion for reconsideration as a precondition
for any further or subsequent remedy, 12 and then seasonably avail of the special civil action
of certiorari under Rule 65, 13 for which said Rule has now fixed the reglementary period of
sixty days from notice of the decision. Curiously, although the 10-day period for finality of
the decision of the NLRC may already have lapsed as contemplated in Section 223 of the
Labor Code, it has been held that this Court may still take cognizance of the petition
for certiorari on jurisdictional and due process considerations if filed within the reglementary
period under Rule 65. 14

Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129 originally
provided as follows:

Sec. 9. Jurisdiction. - The Intermediate Appellate Court shall exercise:

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

(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial
Courts; and

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards, or
commissions, except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the provisions of this Act, and of subparagraph (1) of the
third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary
Act of 1948.

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

These provisions shall not apply to decisions and interlocutory orders issued under the Labor
Code of the Philippines and by the Central Board of Assessment Appeals. 15

Subsequently, and as it presently reads, this provision was amended by R.A. No. 7902
effective March 18, 1995, to wit:

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

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

(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial
Courts; and

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission, the Social Security
Commission, the Employees Compensation Commission and the Civil Service Commission,
except those falling within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442,
as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The Court of Appeals shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases
falling within its original and appellate jurisdiction, including the power to grant and conduct
new trials or further proceedings. Trials or hearings in the Court of Appeals must be
continuous and must be completed within, three (3) months, unless extended by the Chief
Justice.
It will readily be observed that, aside from the change in the name of the lower appellate
court, 16 the following amendments of the original provisions of Section 9 of B.P. No. 129
were effected by R.A. No. 7902, viz.:

1. The last paragraph which excluded its application to the Labor Code of the Philippines and
the Central Board of Assessment Appeals was deleted and replaced by a new paragraph
granting the Court of Appeals limited powers to conduct trials and hearings in cases within
its jurisdiction.

2. The reference to the Labor Code in that last paragraph was transposed to paragraph (3)
of the section, such that the original exclusionary clause therein now provides "except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948."
(Emphasis supplied).

3. Contrarily, however, specifically added to and included among the quasi-judicial agencies
over which the Court of Appeals shall have exclusive appellate jurisdiction are the Securities
and Exchange Commission, the Social Security Commission, the Employees Compensation
Commission and the Civil Service Commission.

This, then, brings us to a somewhat perplexing impassè, both in point of purpose and
terminology. As earlier explained, our mode of judicial review over decisions of the NLRC
has for some time now been understood to be by a petition for certiorari under Rule 65 of
the Rules of Court. This is, of course, a special original action limited to the resolution of
jurisdictional issues, that is, lack or excess of jurisdiction and, in almost all cases that have
been brought to us, grave abuse of discretion amounting to lack of jurisdiction.

It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now grants
exclusive appellate jurisdiction to the Court of Appeals over all final adjudications of the
Regional Trial Courts and the quasi-judicial agencies generally or specifically referred to
therein except, among others, "those falling within the appellate jurisdiction of the Supreme
Court in accordance with . . . the Labor Code of the Philippines under Presidential Decree
No. 442, as amended, . . . ." This would necessarily contradict what has been ruled and said
all along that appeal does not lie from decisions of the NLRC. 17 Yet, under such excepting
clause literally construed, the appeal from the NLRC cannot be brought to the Court of
Appeals, but to this Court by necessary implication.

The same exceptive clause further confuses the situation by declaring that the Court of
Appeals has no appellate jurisdiction over decisions falling within the appellate jurisdiction of
the Supreme Court in accordance with the Constitution, the provisions of B.P. No. 129, and
those specified cases in Section 17 of the Judiciary Act of 1948. These cases can, of course,
be properly excluded from the exclusive appellate jurisdiction of the Court of Appeals.
However, because of the aforementioned amendment by transposition, also supposedly
excluded are cases falling within the appellate jurisdiction of the Supreme Court in
accordance with the Labor Code. This is illogical and impracticable, and Congress could not
have intended that procedural gaffe, since there are no cases in the Labor Code the
decisions, resolutions, orders or awards wherein are within the appellate jurisdiction of the
Supreme Court or of any other court for that matter.
A review of the legislative records on the antecedents of R.A. No. 7902 persuades us that
there may have been an oversight in the course of the deliberations on the said Act or an
imprecision in the terminology used therein. In fine, Congress did intend to provide for
judicial review of the adjudications of the NLRC in labor cases by the Supreme Court, but
there was an inaccuracy in the term used for the intended mode of review. This conclusion
which we have reluctantly but prudently arrived at has been drawn from the considerations
extant in the records of Congress, more particularly on Senate Bill No. 1495 and the
Reference Committee Report on S. No. 1495/H. No. 10452. 18

In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his sponsorship
speech 19 from which we reproduce the following excerpts:

The Judiciary Reorganization Act, Mr. President, Batas Pambansa Blg. 129, reorganized the
Court of Appeals and at the same time expanded its jurisdiction and powers. Among others,
its appellate jurisdiction was expanded to cover not only final judgment of Regional Trial
Courts, but also all final judgment(s), decisions, resolutions, orders or awards of quasi-
judicial agencies, instrumentalities, boards and commissions, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
provisions of BP Blg. 129 and of subparagraph 1 of the third paragraph and subparagraph 4
of Section 17 of the Judiciary Act of 1948.

Mr. President, the purpose of the law is to ease the workload of the Supreme Court by the
transfer of some of its burden of review of factual issues to the Court of Appeals. However,
whatever benefits that can be derived from the expansion of the appellate jurisdiction of the
Court of Appeals was cut short by the last paragraph of Section 9 of Batas Pambansa Blg.
129 which excludes from its coverage the "decisions and interlocutory orders issued under
the Labor Code of the Philippines and by the Central Board of Assessment Appeals.

Among the highest number of cases that are brought up to the Supreme Court are labor
cases. Hence, Senate Bill No. 1495 seeks to eliminate the exceptions enumerated in Section
9 and, additionally, extends the coverage of appellate review of the Court of Appeals in the
decision(s) of the Securities and Exchange Commission, the Social Security Commission,
and the Employees Compensation Commission to reduce the number of cases elevated to
the Supreme Court. (Emphases and corrections ours)

xxx xxx xxx

Senate Bill No. 1495 authored by our distinguished Colleague from Laguna provides the
ideal situation of drastically reducing the workload of the Supreme Court without depriving
the litigants of the privilege of review by an appellate tribunal.

In closing, allow me to quote the observations of former Chief Justice Teehankee in 1986 in
the Annual Report of the Supreme Court:

. . . Amendatory legislation is suggested so as to relieve the Supreme Court of the burden of

reviewing these cases which present no important issues involved beyond the particular fact
and the parties involved, so that the Supreme Court may wholly devote its time to cases of
public interest in the discharge of its mandated task as the guardian of the Constitution and
the guarantor of the people's basic rights and additional task expressly vested on it now "to
determine whether or not there has been a grave abuse of discretion amounting to lack of
jurisdiction on the part of any branch or instrumentality of the Government.
We used to have 500,000 cases pending all over the land, Mr. President. It has been cut
down to 300,000 cases some five years ago. I understand we are now back to 400,000
cases. Unless we distribute the work of the appellate courts, we shall continue to mount and
add to the number of cases pending.

In view of the foregoing, Mr. President, and by virtue of all the reasons we have submitted,
the Committee on Justice and Human Rights requests the support and collegial approval of
our Chamber.

xxx xxx xxx

Surprisingly, however, in a subsequent session, the following Committee Amendment was

introduced by the said sponsor and the following proceedings transpired: 20

Senator Roco. On page 2, line 5, after the line "Supreme Court in accordance with the
Constitution," add the phrase "THE LABOR CODE OF THE PHILIPPINES UNDER P.D. 442, AS
AMENDED." So that it becomes clear, Mr. President, that issues arising from the Labor Code
will still be appealable to the Supreme Court.

The President. Is there any objection? (Silence) Hearing none, the amendment is approved.

Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This was also
discussed with our Colleagues in the House of Representatives and as we understand it, as
approved in the House, this was also deleted, Mr. President.

The President. Is there any objection? (Silence) Hearing none, the amendment is approved.

Senator Roco. There are no further Committee amendments, Mr. President.

Senator Romulo. Mr. President, I move that we close the period of Committee amendments.

The President. Is there any objection? (Silence) Hearing none, the amendment is approved.
(Emphasis supplied).

xxx xxx xxx

Thereafter, since there were no individual amendments, Senate Bill No. 1495 was passed on
second reading and being a certified bill, its unanimous approval on third reading
followed. 21 The Conference Committee Report on Senate Bill No. 1495 and House Bill No.
10452, having theretofore been approved by the House of Representatives, the same was
likewise approved by the Senate on February 20, 1995, 22 inclusive of the dubious
formulation on appeals to the Supreme Court earlier discussed.

The Court is, therefore, of the considered opinion that ever since appeals from the NLRC to
the Supreme Court were eliminated, the legislative intendment was that the special civil
action of certiorari was and still is the proper vehicle for judicial review of decisions of the
NLRC. The use of the word "appeal" in relation thereto and in the instances we have noted
could have been a lapsus plumae because appeals by certiorari and the original action
for certiorari are both modes of judicial review addressed to the appellate courts. The
important distinction between them, however, and with which the Court is particularly
concerned here is that the special civil action of certiorari is within the concurrent original
jurisdiction of this Court and the Court of Appeals; 23 whereas to indulge in the assumption
that appeals by certiorari to the Supreme Court are allowed would not subserve, but would
subvert, the intention of Congress as expressed in the sponsorship speech on Senate Bill
No. 1495.

Incidentally, it was noted by the sponsor therein that some quarters were of the opinion
that recourse from the NLRC to the Court of Appeals as an initial step in the process of
judicial review would be circuitous and would prolong the proceedings. On the contrary, as
he commendably and realistically emphasized, that procedure would be advantageous to
the aggrieved party on this reasoning:

On the other hand, Mr. President, to allow these cases to be appealed to the Court of
Appeals would give litigants the advantage to have all the evidence on record be
reexamined and reweighed after which the findings of facts and conclusions of said bodies
are correspondingly affirmed, modified or reversed.

Under such guarantee, the Supreme Court can then apply strictly the axiom that factual
findings of the Court of Appeals are final and may not be reversed on appeal to the
Supreme Court. A perusal of the records will reveal appeals which are factual in nature and
may, therefore, be dismissed outright by minute resolutions. 24

While we do not wish to intrude into the Congressional sphere on the matter of the wisdom
of a law, on this score we add the further observations that there is a growing number of
labor cases being elevated to this Court which, not being a trier of fact, has at times been
constrained to remand the case to the NLRC for resolution of unclear or ambiguous factual
findings; that the Court of Appeals is procedurally equipped for that purpose, aside from the
increased number of its component divisions; and that there is undeniably an imperative
need for expeditious action on labor cases as a major aspect of constitutional protection to
labor.

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals
from the NLRC to the Supreme Court are interpreted and hereby declared to mean and refer
to petitions for certiorari under Rule 65. Consequently, all such petitions should hence forth
be initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy
of courts as the appropriate forum for the relief desired.

Apropos to this directive that resort to the higher courts should be made in accordance with
their hierarchical order, this pronouncement in Santiago vs. Vasquez, et al. 25 should be
taken into account:

One final observation. We discern in the proceedings in this case a propensity on the part of
petitioner, and, for that matter, the same may be said of a number of litigants who initiate
recourses before us, to disregard the hierarchy of courts in our judicial system by seeking
relief directly from this Court despite the fact that the same is available in the lower courts
in the exercise of their original or concurrent jurisdiction, or is even mandated by law to be
sought therein. This practice must be stopped, not only because of the imposition upon the
precious time of this Court but also because of the inevitable and resultant delay, intended
or otherwise, in the adjudication of the case which often has to be remanded or referred to
the lower court as the proper forum under the rules of procedure, or as better equipped to
resolve the issues since this Court is not a trier of facts. We, therefore, reiterate the judicial
policy that this Court will not entertain direct resort to it unless the redress desired cannot
be obtained in the appropriate courts or where exceptional and compelling circumstances
justify availment of a remedy within and calling for the exercise of our primary jurisdiction.

WHEREFORE, under the foregoing premises, the instant petition for certiorari is hereby
REMANDED, and all pertinent records thereof ordered to be FORWARDED, to the Court of
Appeals for appropriate action and disposition consistent with the views and ruling herein
set forth, without pronouncement as to costs.

SO ORDERED.
 [G.R. NO. 151325 : June 27, 2005]

D' ARMOURED SECURITY AND INVESTIGATION AGENCY,

INC., Petitioner, v. ARNULFO ORPIA, LODUVICO ABUCEJO, ROWEL AGURO, EFREN
ALMOETE, ROMEO AMISTA, WARLITO BALAGOSA, ROMEO BALINGBING, RAMON
BARROA, MONTECLARO BATAWIL, ARNEL BON, RICARDO CAPENTES, DANILO
DADA, JOEL DELA CRUZ, HERNANO DELOS REYES, FLORENTINO DELOS TRINO,
ROGELIO DUERME, NONITO ESTRELLADO, JOSEPH FALCESO, ISIDRO FLORES,
VICTOR GUNGON, SONNY JULBA, PATRICIO LACANA, JR., FELIX LASCONA,
JUANITO LUNA, RAUL LUZADAS, ROMMEL MAGBANUA, ROGELIO MARIBUNG,
NICOLAS MENDOZA, EZVENER OGANA, RICKY ORANO, REYNALDO OZARAGA,
SAMUEL PADILLA, EDWIN PARRENO, IRENEO PARTOLAN, JUAN PIGTUAN,
GUILLERMO PUSING, RODEL SIBAL, SILVESTRE SOLEDAD, JOVENAR TEVER,
VIRGILIO TIMAJO, ERMILIO TOMARONG, JR., VIRGILIO VERDEFLOR and JOEREX
VICTORINO, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

For resolution is a Petition for Review on Certiorariunder Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 dated December 18, 2001 rendered by the
Court of Appeals in CA-G.R. SP No. 61799, entitled "D Armoured Security and Investigation
Agency, Inc. v. National Labor Relations Commission, Arbiter Ariel C. Santos, NLRC Sheriff
Ricardo Perona, Arnulfo Orpia, Ludovico Abucejo, Rowel Aguro, Efren Almoete, Romeo
Amista, Warlito Balgosa, Romeo Balingbing, Ramon Barroa, Monteclaro Batawil, Arnel Bon,
Ricardo Capentes, Danilo Dada, Joel dela Cruz, Hernando delos Reyes, Florentino delos
Trino, Rogelio Duerme, Nonito Estrellado, Joseph Falceso, Isidro Flores, Victor Gungon,
Sonny Julba, Patricio Lacana, Jr., Felix Lascona, Juanito Luna, Raul Lozadas, Rommel
Magbanua, Rogelio Maribung, Nicolas Mendoza, Ezvener Ogana, Ricky Orano, Reynaldo
Ozaraga, Samuel Padilla, Edwin Parreno, Ireneo Partolan, Juan Pigtuan, Guillermo Pusing,
Rodel Sibal, Silvestre Soledad, Jovener Tever, Virgilio Timajo, Emilio Tomarong, Jr., Virgilio
Verdeflor and Joerex Victorino."

On February 9, 1995, the above-named respondents, who were employed as security

guards by D Armoured Security and Investigation Agency, Inc., petitioner, and assigned to
Fortune Tobacco, Inc. (Fortune Tobacco), filed with the Labor Arbiter a complaint for illegal
dismissal and various monetary claims against petitioner and Fortune Tobacco, docketed as
NLRC-NCR Case No. 00-02-01148-95.

On June 11, 1998, the Labor Arbiter rendered a Decision, the dispositive portion of which
reads:

"WHEREFORE, premises considered, all the respondents except Antonio Cabangon Chua are
jointly and severally liable to pay complainants the total sum of ONE MILLION SEVENTY
SEVEN THOUSAND ONE HUNDRED TWENTY FOUR AND TWENTY NINE CENTAVOS
(P1,077,124.29) for underpayment, overtime pay, legal holiday pay, service incentive leave
pay, 13th month pay, illegal deduction and refund of firearms bond, as indicated in Annex
'A'.
Finally, ten (10%) percent of all sums owing to complainants is hereby awarded as
attorney's fees.

SO ORDERED."

From the said Decision, Fortune Tobacco interposed an appeal to the National Labor
Relations Commission (NLRC). Petitioner did not appeal. On March 26, 1999, the NLRC
rendered its Decision affirming with modification the assailed Arbiter's Decision in the sense
that the complaint against Fortune Tobacco was dismissed. This Decision became final and
executory. Thus, the award specified in the Decision of the Arbiter became the sole liability
of petitioner.

The records were then remanded to the Arbiter for execution.

Upon respondents' motion, the Arbiter issued a writ of execution. Eventually, the sheriff
served a writ of garnishment upon the Chief Accountant of Foremost Farms, Inc., a
corporation with whom petitioner has an existing services agreement. Thus, petitioner's
receivables with Foremost were garnished.

Petitioner filed with the NLRC a "Motion to Quash/Recall Writ of Execution and Garnishment"
which was opposed by respondents.

On March 10, 2000, the Arbiter issued an Order denying the motion and directing the sheriff
to release the garnished sum of money to respondents pro rata.

Petitioner's motion for reconsideration was denied, hence, it interposed an appeal to the
NLRC.

In a Resolution dated July 27, 2000, the NLRC dismissed the appeal for petitioner's failure
to post a bond within the reglementary period. Its motion for reconsideration was denied in
a Resolution dated September 25, 2000.

Forthwith, petitioner filed with the Court of Appeals a Petition for Certiorariand prohibition
with prayer for issuance of a writ of preliminary injunction.

In a Decision dated December 18, 2001, the Court of Appeals dismissed the petition.

Hence, this Petition for Review on certiorari.

In this petition, the issue posed is whether the Court of Appeals erred in holding that
petitioner's monthly receivables from the Foremost Farms, Inc. (garnishee) are not exempt
from execution.

The petition lacks merit. We have ruled that an order of execution of a final and
executory judgment, as in this case, is not appealable, otherwise, there would be
no end to litigation.2 On this ground alone, the instant petition is dismissible.

Assuming that an appeal is proper, still we have to deny the instant petition. Section 1, Rule
IV of the NLRC Manual on Execution of Judgment provides:

"Rule IV
EXECUTION
SECTION 1. Properties exempt from execution. - Only the properties of the losing party
shall be the subject of execution, except:

(a) The losing party's family home constituted in accordance with the Civil Code or Family
Code or as may be provided for by law or in the absence thereof, the homestead in which
he resides, and land necessarily used in connection therewith, subject to the limits fixed by
law;

(b) His necessary clothing, and that of his family;

(c) Household furniture and utensils necessary for housekeeping, and used for that purpose
by the losing party such as he may select, of a value not exceeding the amount fixed by
law;

(d) Provisions for individual or family use sufficient for three (3) months;

(e) The professional libraries of attorneys, judges, physicians, pharmacists, dentists,

engineers, surveyors, clergymen, teachers, and other professionals, not exceeding the
amount fixed by law;

(f) So much of the earnings of the losing party for his personal services within the month
preceding the levy as are necessary for the support of his family;

(g) All monies, benefits, privileges, or annuities accruing or in any manner growing out of
any life insurance;

(h) Tools and instruments necessarily used by him in his trade or employment of a value
not exceeding three thousand (P3,000.00) pesos;

(i) Other properties especially exempted by law."

The above Rule clearly enumerates what properties are exempt from execution. It is
apparent that the exemption pertains only to natural persons and not to juridical entities.
On this point, the Court of Appeals correctly ruled that petitioner, being a corporate entity,
does not fall within the exemption, thus:

"We cannot accede to petitioner's position that the garnished amount is exempt from
execution.

Section 13 of Rule 39 of the Rules of Court is plain and clear on what properties are exempt
from execution. Section 13 (i) of the Rules pertinently reads:
'SECTION 13. Property exempt from execution. - Except as otherwise expressly provided by
law, the following property, and no other, shall be exempt from execution:

xxx

(i) So much of the salaries, wages or earnings of the judgment obligor for his personal
services within the four months preceding the levy as are necessary for the support of his
family. '

The exemption under this procedural rule should be read in conjunction with the Civil Code,
the substantive law which proscribes the execution of employee's wages, thus:

'ART. 1708. The laborer's wage shall not be subject to execution or attachment, except for
debts incurred for food, shelter, clothing and medical attendance.'

Obviously, the exemption under Rule 39 of the Rules of Court and Article 1708 of the New
Civil Code is meant to favor only laboring men or women whose works are manual. Persons
belonging to this class usually look to the reward of a day's labor for immediate or present
support, and such persons are more in need of the exemption than any other [Gaa v. Court
of Appeals, 140 SCRA 304 (1985)].

In this context, exemptions under this rule are confined only to natural persons and not
to juridical entities such as petitioner. Thus, the rule speaks of salaries, wages and
earning from the 'personal services' rendered by the judgment obligor. The rule further
requires that such earnings be intended for the support of the judgment debtor's family.

Necessarily, petitioner which is a corporate entity, does not fall under the exemption. If at
all, the exemption refers to petitioner's individual employees and not to petitioner as a
corporation.

x x x. Parenthetically, in a parallel case where a security agency claimed that the guns it
gives to its guards are tools and implements exempt from execution, the Supreme Court
had the occasion to rule that the exemption pertains only to natural and not to juridical
persons, thus:

'However, it would appear that the exemption contemplated by the provision involved is
personal, available only to a natural person, such as a dentist's dental chair and electric fan
(Belen v. de Leon, G.R. No. L-15612, 30 Nov. 1962). As pointed out by the Solicitor
General, if properties used in business are exempt from execution, there can hardly be an
instance when a judgment claim can be enforced against the business entity' [Pentagon
Security and Investigation Agency v. Jimenez, 192 SCRA 492 (1990)].

It stands to reason that only natural persons whose salaries, wages and earnings are
indispensable for his own and that of his family's support are exempted under Section 13 (i)
of Rule 39 of the Rules of Court. Undeniably, a corporate entity such as petitioner security
agency is not covered by the exemption.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED."
WHEREFORE, the petition is DENIED. The assailed Decision dated December 18, 2001 of
the Court of Appeals in CA-G.R. SP No. 61799 is AFFIRMED IN TOTO. Costs against
petitioner.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

 [G.R. NO. 167614 : March 24, 2009]

ANTONIO M. SERRANO, Petitioner, v. Gallant MARITIME SERVICES, INC. and

MARLOW NAVIGATION CO., INC., Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

For decades, the toil of solitary migrants has helped lift entire families and communities out
of poverty. Their earnings have built houses, provided health care, equipped schools and
planted the seeds of businesses. They have woven together the world by transmitting ideas
and knowledge from country to country. They have provided the dynamic human link
between cultures, societies and economies. Yet, only recently have we begun to understand
not only how much international migration impacts development, but how smart public
policies can magnify this effect.

United Nations Secretary-General Ban Ki-Moon

Global Forum on Migration and Development
Brussels, July 10, 20071

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of
Section 10, Republic Act (R.A.) No. 8042,2 to wit:

Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just,
valid or authorized cause as defined by law or contract, the workers shall be entitled to the
full reimbursement of his placement fee with interest of twelve percent (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less.

x x x x (Emphasis and underscoring supplied)cralawlibrary

does not magnify the contributions of overseas Filipino workers (OFWs) to national
development, but exacerbates the hardships borne by them by unduly limiting their
entitlement in case of illegal dismissal to their lump-sum salary either for the unexpired
portion of their employment contract "or for three months for every year of the unexpired
term, whichever is less" (subject clause). Petitioner claims that the last clause violates the
OFWs' constitutional rights in that it impairs the terms of their contract, deprives them of
equal protection and denies them due process.

By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the
December 8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA),
which applied the subject clause, entreating this Court to declare the subject clause
unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
(respondents) under a Philippine Overseas Employment Administration (POEA)-approved
Contract of Employment with the following terms and conditions:

Duration of contract 12 months

Position Chief Officer
Basic monthly salary US$1,400.00
Hours of work 48.0 hours per week
Overtime US$700.00 per month
Vacation leave with 7.00 days per month5
pay

On March 19, 1998, the date of his departure, petitioner was constrained to accept a
downgraded employment contract for the position of Second Officer with a monthly salary of
US$1,000.00, upon the assurance and representation of respondents that he would be
made Chief Officer by the end of April 1998.6

Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence,
petitioner refused to stay on as Second Officer and was repatriated to the Philippines on
May 26, 1998.8

Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up
to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only
two (2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9)
months and twenty-three (23) days.

Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive
dismissal and for payment of his money claims in the total amount of US$26,442.73, broken
down as follows:

May 27/31, 1998 (5 days) incl. Leave pay US$ 413.90

June 01/30, 1998 2,590.00
July 01/31, 1998 2,590.00
August 01/31, 1998 2,590.00
Sept. 01/30, 1998 2,590.00
Oct. 01/31, 1998 2,590.00
Nov. 01/30, 1998 2,590.00
Dec. 01/31, 1998 2,590.00
Jan. 01/31, 1999 2,590.00
Feb. 01/28, 1999 2,590.00
Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00
------------
 - - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - -
25,382.23
Amount adjusted to chief mate's salary
(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - - - -
- - - - - - - - - -
TOTAL CLAIM US$ 26,442.7311

as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal
and awarding him monetary benefits, to wit:

WHEREFORE, premises considered, judgment is hereby rendered declaring that the

dismissal of the complainant (petitioner) by the respondents in the above-entitled case was
illegal and the respondents are hereby ordered to pay the complainant [petitioner], jointly
and severally, in Philippine Currency, based on the rate of exchange prevailing at the time
of payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S.
DOLLARS (US $8,770.00), representing the complainant's salary for three (3)
months of the unexpired portion of the aforesaid contract of
employment.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

The respondents are likewise ordered to pay the complainant [petitioner], jointly and
severally, in Philippine Currency, based on the rate of exchange prevailing at the time of
payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the
complainant's claim for a salary differential. In addition, the respondents are hereby ordered
to pay the complainant, jointly and severally, in Philippine Currency, at the exchange rate
prevailing at the time of payment, the complainant's (petitioner's) claim for attorney's fees
equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee
under this Decision.

The claims of the complainant for moral and exemplary damages are hereby DISMISSED for
lack of merit.

All other claims are hereby DISMISSED.

SO ORDERED.13 (Emphasis supplied)cralawlibrary

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on
the salary period of three months only - - rather than the entire unexpired portion of nine
months and 23 days of petitioner's employment contract - applying the subject clause.
However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic
salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month,
vacation leave pay = US$2,590.00/compensation per month."14

Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the
finding of the LA that petitioner was illegally dismissed.

Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the
ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations
Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18

In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby
ordered to pay complainant, jointly and severally, in Philippine currency, at the prevailing
rate of exchange at the time of payment the following:

1. Three (3) months salary

$1,400 x 3 US$4,200.00
2. Salary differential 45.00
US$4,245.00
3. 10% Attorney's fees 424.50
TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.19

The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by
reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No.
8042 "does not provide for the award of overtime pay, which should be proven to have been
actually performed, and for vacation leave pay."20

Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the subject clause.21 The NLRC denied the motion.22

Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge
against the subject clause.24 After initially dismissing the petition on a technicality, the CA
eventually gave due course to it, as directed by this Court in its Resolution dated August 7,
2003 which granted the Petition for Certiorari, docketed as G.R. No. 151833, filed by
petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of
the applicable salary rate; however, the CA skirted the constitutional issue raised by
petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause
to this Court on the following grounds:

The Court of Appeals and the labor tribunals have decided the case in a way not in accord
with applicable decision of the Supreme Court involving similar issue of granting unto the
migrant worker back wages equal to the unexpired portion of his contract of employment
instead of limiting it to three (3) months

II

In the alternative that the Court of Appeals and the Labor Tribunals were merely applying
their interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of
Appeals gravely erred in law when it failed to discharge its judicial duty to decide questions
of substance not theretofore determined by the Honorable Supreme Court, particularly, the
constitutional issues raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award for back wages of
overseas workers to three (3) months.

III

Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No.
8042, the Court of Appeals gravely erred in law in excluding from petitioner's award the
overtime pay and vacation pay provided in his contract since under the contract they form
part of his salary.28

On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already
old and sickly, and he intends to make use of the monetary award for his medical treatment
and medication.29 Required to comment, counsel for petitioner filed a motion, urging the
court to allow partial execution of the undisputed monetary award and, at the same time,
praying that the constitutional question be resolved.30

Considering that the parties have filed their respective memoranda, the Court now takes up
the full merit of the petition mindful of the extreme importance of the constitutional
question raised therein.

On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is
not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to
petitioner in all three fora. What remains disputed is only the computation of the lump-sum
salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of
petitioner at the monthly rate of US$1,400.00 covering the period of three months out of
the unexpired portion of nine months and 23 days of his employment contract or a total of
US$4,200.00.

Impugning the constitutionality of the subject clause, petitioner contends that, in addition to
the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or
a total of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days
left of his employment contract, computed at the monthly rate of US$2,590.00.31

The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly impairs the
freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary package.32 It also impinges on the equal
protection clause, for it treats OFWs differently from local Filipino workers (local workers) by
putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of
illegal dismissal, while setting no limit to the same monetary award for local workers when
their dismissal is declared illegal; that the disparate treatment is not reasonable as there is
no substantial distinction between the two groups;33 and that it defeats Section 18,34 Article
II of the Constitution which guarantees the protection of the rights and welfare of all Filipino
workers, whether deployed locally or overseas.35

Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in
line with existing jurisprudence on the issue of money claims of illegally dismissed OFWs.
Though there are conflicting rulings on this, petitioner urges the Court to sort them out for
the guidance of affected OFWs.36

Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042
serves no other purpose but to benefit local placement agencies. He marks the statement
made by the Solicitor General in his Memorandum, viz.:

Often, placement agencies, their liability being solidary, shoulder the payment of money
claims in the event that jurisdiction over the foreign employer is not acquired by the court
or if the foreign employer reneges on its obligation. Hence, placement agencies that are in
good faith and which fulfill their obligations are unnecessarily penalized for the acts of the
foreign employer. To protect them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money claims was reduced under Section 10
37
of R.A. No. 8042. (Emphasis supplied)cralawlibrary

Petitioner argues that in mitigating the solidary liability of placement agencies, the subject
clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign
employers better off than local employers because in cases involving the illegal dismissal of
employees, foreign employers are liable for salaries covering a maximum of only three
months of the unexpired employment contract while local employers are liable for the full
lump-sum salaries of their employees. As petitioner puts it:

In terms of practical application, the local employers are not limited to the amount of
backwages they have to give their employees they have illegally dismissed, following well-
entrenched and unequivocal jurisprudence on the matter. On the other hand, foreign
employers will only be limited to giving the illegally dismissed migrant workers the
maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the
contract that can be more than three (3) months.38

Lastly, petitioner claims that the subject clause violates the due process clause, for it
deprives him of the salaries and other emoluments he is entitled to under his fixed-period
employment contract.39

The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the constitutional issue
should not be entertained, for this was belatedly interposed by petitioner in his appeal
before the CA, and not at the earliest opportunity, which was when he filed an appeal before
the NLRC.40

The Arguments of the Solicitor General

The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995,
its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A.
No. 8042 having preceded petitioner's contract, the provisions thereof are deemed part of
the minimum terms of petitioner's employment, especially on the matter of money claims,
as this was not stipulated upon by the parties.42

Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of
their employment, such that their rights to monetary benefits must necessarily be treated
differently. The OSG enumerates the essential elements that distinguish OFWs from local
workers: first, while local workers perform their jobs within Philippine territory, OFWs
perform their jobs for foreign employers, over whom it is difficult for our courts to acquire
jurisdiction, or against whom it is almost impossible to enforce judgment; and second, as
held in Coyoca v. National Labor Relations Commission43 and Millares v. National Labor
Relations Commission,44 OFWs are contractual employees who can never acquire regular
employment status, unlike local workers who are or can become regular employees. Hence,
the OSG posits that there are rights and privileges exclusive to local workers, but not
available to OFWs; that these peculiarities make for a reasonable and valid basis for the
differentiated treatment under the subject clause of the money claims of OFWs who are
illegally dismissed. Thus, the provision does not violate the equal protection clause nor
Section 18, Article II of the Constitution.45

Lastly, the OSG defends the rationale behind the subject clause as a police power measure
adopted to mitigate the solidary liability of placement agencies for this "redounds to the
benefit of the migrant workers whose welfare the government seeks to promote. The
survival of legitimate placement agencies helps [assure] the government that migrant
workers are properly deployed and are employed under decent and humane conditions."46

The Court's Ruling

The Court sustains petitioner on the first and second issues.

When the Court is called upon to exercise its power of judicial review of the acts of its co-
equals, such as the Congress, it does so only when these conditions obtain: (1) that there is
an actual case or controversy involving a conflict of rights susceptible of judicial
determination;47 (2) that the constitutional question is raised by a proper party48 and at the
earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the
case,50 otherwise the Court will dismiss the case or decide the same on some other
ground.51

Without a doubt, there exists in this case an actual controversy directly involving petitioner
who is personally aggrieved that the labor tribunals and the CA computed his monetary
award based on the salary period of three months only as provided under the subject
clause.

The constitutional challenge is also timely. It should be borne in mind that the requirement
that a constitutional issue be raised at the earliest opportunity entails the interposition of
the issue in the pleadings before a competent court, such that, if the issue is not raised in
the pleadings before that competent court, it cannot be considered at the trial and, if not
considered in the trial, it cannot be considered on appeal.52 Records disclose that the issue
on the constitutionality of the subject clause was first raised, not in petitioner's appeal with
the NLRC, but in his Motion for Partial Reconsideration with said labor tribunal,53 and
reiterated in his Petition for Certiorari before the CA.54 Nonetheless, the issue is deemed
seasonably raised because it is not the NLRC but the CA which has the competence to
resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-
judicial function - its function in the present case is limited to determining questions of fact
to which the legislative policy of R.A. No. 8042 is to be applied and to resolving such
questions in accordance with the standards laid down by the law itself;55 thus, its foremost
function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its
provisions. The CA, on the other hand, is vested with the power of judicial review or the
power to declare unconstitutional a law or a provision thereof, such as the subject
clause.56 Petitioner's interposition of the constitutional issue before the CA was undoubtedly
seasonable. The CA was therefore remiss in failing to take up the issue in its decision.

The third condition that the constitutional issue be critical to the resolution of the case
likewise obtains because the monetary claim of petitioner to his lump-sum salary for the
entire unexpired portion of his 12-month employment contract, and not just for a period of
three months, strikes at the very core of the subject clause.

Thus, the stage is all set for the determination of the constitutionality of the subject clause.

Does the subject clause violate Section 10,

Article III of the Constitution on non-impairment
of contracts?

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his
contract on the term of his employment and the fixed salary package he will receive57 is not
tenable.

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted have only a
prospective operation,58 and cannot affect acts or contracts already perfected;59 however, as
to laws already in existence, their provisions are read into contracts and deemed a part
thereof.60 Thus, the non-impairment clause under Section 10, Article II is limited in
application to laws about to be enacted that would in any way derogate from existing acts
or contracts by enlarging, abridging or in any manner changing the intention of the parties
thereto.

As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the
execution of the employment contract between petitioner and respondents in 1998. Hence,
it cannot be argued that R.A. No. 8042, particularly the subject clause, impaired the
employment contract of the parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated into it all the provisions of
R.A. No. 8042.

But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was
enacted in the exercise of the police power of the State to regulate a business, profession or
calling, particularly the recruitment and deployment of OFWs, with the noble end in view of
ensuring respect for the dignity and well-being of OFWs wherever they may be
employed.61 Police power legislations adopted by the State to promote the health, morals,
peace, education, good order, safety, and general welfare of the people are generally
applicable not only to future contracts but even to those already in existence, for all private
contracts must yield to the superior and legitimate measures taken by the State to promote
public welfare.62

Does the subject clause violate Section 1,

Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of law nor shall
any person be denied the equal protection of the law.

Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector,
without distinction as to place of deployment, full protection of their rights and welfare.

To Filipino workers, the rights guaranteed under the foregoing constitutional provisions
translate to economic security and parity: all monetary benefits should be equally enjoyed
by workers of similar category, while all monetary obligations should be borne by them in
equal degree; none should be denied the protection of the laws which is enjoyed by, or
spared the burden imposed on, others in like circumstances.65

Such rights are not absolute but subject to the inherent power of Congress to incorporate,
when it sees fit, a system of classification into its legislation; however, to be valid, the
classification must comply with these requirements: 1) it is based on substantial
distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing
conditions only; and 4) it applies equally to all members of the class.66

There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law: a) the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally related to serving a legitimate
state interest;67 b) the middle-tier or intermediate scrutiny in which the government must
show that the challenged classification serves an important state interest and that the
classification is at least substantially related to serving that interest;68 and c) strict judicial
scrutiny69 in which a legislative classification which impermissibly interferes with the
exercise of a fundamental right70 or operates to the peculiar disadvantage of a suspect
class71 is presumed unconstitutional, and the burden is upon the government to prove that
the classification is necessary to achieve a compelling state interest and that it is
the least restrictive means to protect such interest.72

Under American jurisprudence, strict judicial scrutiny is triggered by suspect

classifications73 based on race74 or gender75 but not when the classification is drawn along
income categories.76

It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a
provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial
institution (GFI), was challenged for maintaining its rank-and-file employees under the
Salary Standardization Law (SSL), even when the rank-and-file employees of other GFIs
had been exempted from the SSL by their respective charters. Finding that the disputed
provision contained a suspect classification based on salary grade, the Court deliberately
employed the standard of strict judicial scrutiny in its review of the constitutionality of said
provision. More significantly, it was in this case that the Court revealed the broad outlines of
its judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid classification, and its policies
should be accorded recognition and respect by the courts of justice except when they run
afoul of the Constitution. The deference stops where the classification violates a
fundamental right, or prejudices persons accorded special protection by the
Constitution. When these violations arise, this Court must discharge its primary role as the
vanguard of constitutional guaranties, and require a stricter and more exacting adherence
to constitutional limitations. Rational basis should not suffice.

Admittedly, the view that prejudice to persons accorded special protection by the
Constitution requires a stricter judicial scrutiny finds no support in American or English
jurisprudence. Nevertheless, these foreign decisions and authorities are not per se
controlling in this jurisdiction. At best, they are persuasive and have been used to support
many of our decisions. We should not place undue and fawning reliance upon them and
regard them as indispensable mental crutches without which we cannot come to our own
decisions through the employment of our own endowments. We live in a different ambience
and must decide our own problems in the light of our own interests and needs, and of our
qualities and even idiosyncrasies as a people, and always with our own concept of law and
justice. Our laws must be construed in accordance with the intention of our own lawmakers
and such intent may be deduced from the language of each law and the context of other
local legislation related thereto. More importantly, they must be construed to serve our own
public interest which is the be-all and the end-all of all our laws. And it need not be stressed
that our public interest is distinct and different from others.

xxx

Further, the quest for a better and more "equal" world calls for the use of equal protection
as a tool of effective judicial intervention.

Equality is one ideal which cries out for bold attention and action in the Constitution. The
Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in
Philippine society. The command to promote social justice in Article II, Section 10, in "all
phases of national development," further explicitated in Article XIII, are clear commands to
the State to take affirmative action in the direction of greater equality. x x x [T]here is thus
in the Philippine Constitution no lack of doctrinal support for a more vigorous state effort
towards achieving a reasonable measure of equality.

Our present Constitution has gone further in guaranteeing vital social and economic rights
to marginalized groups of society, including labor. Under the policy of social justice, the law
bends over backward to accommodate the interests of the working class on the humane
justification that those with less privilege in life should have more in law. And the obligation
to afford protection to labor is incumbent not only on the legislative and executive branches
but also on the judiciary to translate this pledge into a living reality. Social justice calls for
the humanization of laws and the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception may at least be approximated.

xxx

Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its
legislative power. Judicial scrutiny would be based on the "rational basis" test, and the
legislative discretion would be given deferential treatment.

But if the challenge to the statute is premised on the denial of a fundamental right, or the
perpetuation of prejudice against persons favored by the Constitution with special
protection, judicial scrutiny ought to be more strict. A weak and watered down view
would call for the abdication of this Court's solemn duty to strike down any law repugnant to
the Constitution and the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its
instrumentalities. Oppressive acts will be struck down regardless of the character or nature
of the actor.

xxx

In the case at bar, the challenged proviso operates on the basis of the salary grade or
officer-employee status. It is akin to a distinction based on economic class and status, with
the higher grades as recipients of a benefit specifically withheld from the lower grades.
Officers of the BSP now receive higher compensation packages that are competitive with the
industry, while the poorer, low-salaried employees are limited to the rates prescribed by the
SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly
regimented rates of the SSL while employees higher in rank - possessing higher and better
education and opportunities for career advancement - are given higher compensation
packages to entice them to stay. Considering that majority, if not all, the rank-and-file
employees consist of people whose status and rank in life are less and limited, especially in
terms of job marketability, it is they - and not the officers - who have the real economic and
financial need for the adjustment . This is in accord with the policy of the Constitution "to
free the people from poverty, provide adequate social services, extend to them a decent
standard of living, and improve the quality of life for all." Any act of Congress that runs
counter to this constitutional desideratum deserves strict scrutiny by this Court before it can
pass muster. (Emphasis supplied)cralawlibrary

Imbued with the same sense of "obligation to afford protection to labor," the Court in the
present case also employs the standard of strict judicial scrutiny, for it perceives in the
subject clause a suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs.
However, a closer examination reveals that the subject clause has a discriminatory intent
against, and an invidious impact on, OFWs at two levels:

First, OFWs with employment contracts of less than one year vis - Ã -vis OFWs with
employment contracts of one year or more;

Second, among OFWs with employment contracts of more than one year; and

Third, OFWs vis - Ã -vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis - Ã -vis OFWs with
employment contracts of one year or more

As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission79 (Second Division, 1999) that the Court laid down the following rules
on the application of the periods prescribed under Section 10(5) of R.A. No. 804, to wit:

A plain reading of Sec. 10 clearly reveals that the choice of which amount to
award an illegally dismissed overseas contract worker, i.e., whether his salaries
for the unexpired portion of his employment contract or three (3) months' salary
for every year of the unexpired term, whichever is less, comes into play only when
the employment contract concerned has a term of at least one (1) year or
more. This is evident from the words "for every year of the unexpired term" which
follows the words "salaries x x x for three months."

To follow petitioners' thinking that private respondent is entitled to three (3) months salary
only simply because it is the lesser amount is to completely disregard and overlook some
words used in the statute while giving effect to some. This is contrary to the well-
established rule in legal hermeneutics that in interpreting a statute, care should be taken
that every part or word thereof be given effect since the law-making body is presumed to
know the meaning of the words employed in the statue and to have used them advisedly. Ut
res magis valeat quam pereat.80 (Emphasis supplied)cralawlibrary

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month
contract, but was awarded his salaries for the remaining 8 months and 6 days of his
contract.

Prior to Marsaman, however, there were two cases in which the Court made conflicting
rulings on Section 10(5). One was Asian Center for Career and Employment System and
Services v. National Labor Relations Commission (Second Division, October 1998),81 which
involved an OFW who was awarded a two-year employment contract, but was dismissed
after working for one year and two months. The LA declared his dismissal illegal and
awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired
portion of his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent to
his three months' salary, this being the lesser value, to wit:

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without
just, valid or authorized cause is entitled to his salary for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired term,
whichever is less.
In the case at bar, the unexpired portion of private respondent's employment contract is
eight (8) months. Private respondent should therefore be paid his basic salary
corresponding to three (3) months or a total of SR3,600.82

Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations

Commission (Third Division, December 1998),83 which involved an OFW (therein respondent
Erlinda Osdana) who was originally granted a 12-month contract, which was
deemed renewed for another 12 months. After serving for one year and seven-and-a-half
months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for
the entire unexpired portion of four and one-half months of her contract.

The Marsaman interpretation of Section 10(5) has since been adopted in the following
cases:

Case Title Contract Period of Unexpired Period Applied

Period Service Period in the
Computation of
the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia 9 months 8 months 4 months 4 months

Shipping v.
Reynaldo
Chua 85

Centennial 9 months 4 months 5 months 5 months

Transmarine
v. dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87

Univan v. 12 months 3 months 9 months 3 months

CA 88

Oriental v. 12 months more than 2 10 months 3 months

CA 89 months

PCL v. NLRC90 12 months more than 2 more or less 9 3 months

months months

Olarte v. 12 months 21 days 11 months and 3 months

Nayona91 9 days

JSS 12 months 16 days 11 months and 3 months

v. .Ferrer92 24 days

Pentagon v. 12 months 9 months 2 months and 2 months and 23

Adelantar93 and 7 days 23 days days

Phil. Employ 12 months 10 months 2 months Unexpired portion

v. Paramio, et
 al.94

Flourish 2 years 26 days 23 months and 6 months or 3

Maritime v. 4 days months for each
Almanzor 95 year of contract

Athenna 1 year, 10 1 month 1 year, 9 6 months or 3

Manpower v. months months and 28 months for each
Villanos 96 and 28 days year of contract
days

As the foregoing matrix readily shows, the subject clause classifies OFWs into two
categories. The first category includes OFWs with fixed-period employment contracts of less
than one year; in case of illegal dismissal, they are entitled to their salaries for the entire
unexpired portion of their contract. The second category consists of OFWs with fixed-period
employment contracts of one year or more; in case of illegal dismissal, they are entitled to
monetary award equivalent to only 3 months of the unexpired portion of their contracts.

The disparity in the treatment of these two groups cannot be discounted. In Skippers, the
respondent OFW worked for only 2 months out of his 6-month contract, but was awarded
his salaries for the remaining 4 months. In contrast, the respondent OFWs
in Oriental and PCL who had also worked for about 2 months out of their 12-month
contracts were awarded their salaries for only 3 months of the unexpired portion of their
contracts. Even the OFWs involved in Talidano and Univan who had worked for a longer
period of 3 months out of their 12-month contracts before being illegally dismissed were
awarded their salaries for only 3 months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with
an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a
hypothetical OFW-B with an employment contract of 15 months with the same monthly
salary rate of US$1,000.00. Both commenced work on the same day and under the same
employer, and were illegally dismissed after one month of work. Under the subject clause,
OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the remaining 9
months of his contract, whereas OFW-B will be entitled to only US$3,000.00, equivalent to
his salaries for 3 months of the unexpired portion of his contract, instead of US$14,000.00
for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser
amount.

The disparity becomes more aggravating when the Court takes into account jurisprudence
that, prior to the effectivity of R.A. No. 8042 on July 14, 1995, 97 illegally dismissed
OFWs, no matter how long the period of their employment contracts, were entitled to their
salaries for the entire unexpired portions of their contracts. The matrix below speaks for
itself:

Case Title Contract Period of Unexpired Period Applied in

Period Service Period the Computation
of the Monetary
Award

ATCI v. CA, et 2 years 2 months 22 months 22 months

al.98
 Phil. 2 years 7 days 23 months 23 months and 23
Integrated v. and 23 days days
NLRC99

JGB v. NLC100 2 years 9 months 15 months 15 months

Agoy v. 2 years 2 months 22 months 22 months

NLRC101

EDI v. NLRC, 2 years 5 months 19 months 19 months

et al.102

Barros v. 12 months 4 months 8 months 8 months

NLRC, et al.103

Philippine 12 months 6 months 5 months 5 months and 18

Transmarine and 22 days and 18 days days
v. Carilla104

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the
unexpired portions thereof, were treated alike in terms of the computation of their
monetary benefits in case of illegal dismissal. Their claims were subjected to a uniform rule
of computation: their basic salaries multiplied by the entire unexpired portion of their
employment contracts.

The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of
computation of the money claims of illegally dismissed OFWs based on their employment
periods, in the process singling out one category whose contracts have an unexpired
portion of one year or more and subjecting them to the peculiar disadvantage of having
their monetary awards limited to their salaries for 3 months or for the unexpired portion
thereof, whichever is less, but all the while sparing the other category from such prejudice,
simply because the latter's unexpired contracts fall short of one year.

Among OFWs With Employment Contracts of More Than One Year

Upon closer examination of the terminology employed in the subject clause, the Court now
has misgivings on the accuracy of the Marsaman interpretation.

The Court notes that the subject clause "or for three (3) months for every year of the
unexpired term, whichever is less" contains the qualifying phrases "every year" and
"unexpired term." By its ordinary meaning, the word "term" means a limited or definite
extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is
significant in many ways: first, the unexpired term must be at least one year, for if it were
any shorter, there would be no occasion for such unexpired term to be measured by every
year; and second, the original term must be more than one year, for otherwise, whatever
would be the unexpired term thereof will not reach even a year. Consequently, the more
decisive factor in the determination of when the subject clause "for three (3) months
for every year of the unexpired term, whichever is less" shall apply is not the length of the
original contract period as held in Marsaman,106 but the length of the unexpired portion of
the contract period - - the subject clause applies in cases when the unexpired portion of the
contract period is at least one year, which arithmetically requires that the original contract
period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs
whose contract periods are for more than one year: those who are illegally dismissed with
less than one year left in their contracts shall be entitled to their salaries for the entire
unexpired portion thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the subject clause, and their monetary
benefits limited to their salaries for three months only.

To concretely illustrate the application of the foregoing interpretation of the subject clause,
the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at
a salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month,
and OFW-D, on the 13th month. Considering that there is at least 12 months remaining in
the contract period of OFW-C, the subject clause applies to the computation of the latter's
monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total
salaries for the 12 months unexpired portion of the contract, but to the lesser amount of
US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired term of the
contract. On the other hand, OFW-D is spared from the effects of the subject clause, for
there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to
US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month
unexpired portion.

OFWs vis - Ã -vis Local Workers

With Fixed-Period Employment

As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the
monetary awards of illegally dismissed OFWs was in place. This uniform system was
applicable even to local workers with fixed-term employment.107

The earliest rule prescribing a uniform system of computation was actually Article 299 of the
Code of Commerce (1888),108 to wit:

Article 299. If the contracts between the merchants and their shop clerks and employees
should have been made of a fixed period, none of the contracting parties, without the
consent of the other, may withdraw from the fulfillment of said contract until the
termination of the period agreed upon.

Persons violating this clause shall be subject to indemnify the loss and damage suffered,
with the exception of the provisions contained in the following articles.

In Reyes v. The Compañia Maritima,109 the Court applied the foregoing provision to
determine the liability of a shipping company for the illegal discharge of its managers prior
to the expiration of their fixed-term employment. The Court therein held the shipping
company liable for the salaries of its managers for the remainder of their fixed-term
employment.

There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of
Commerce which provides:

Article 605. If the contracts of the captain and members of the crew with the agent should
be for a definite period or voyage, they cannot be discharged until the fulfillment of their
contracts, except for reasons of insubordination in serious matters, robbery, theft, habitual
drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or
proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in

which the Court held the shipping company liable for the salaries and subsistence allowance
of its illegally dismissed employees for the entire unexpired portion of their employment
contracts.

While Article 605 has remained good law up to the present,111 Article 299 of the Code of
Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:

Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time
and for a certain work cannot leave or be dismissed without sufficient cause, before the
fulfillment of the contract. (Emphasis supplied.)

Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as
a conjunctive "and" so as to apply the provision to local workers who are employed for a
time certain although for no particular skill. This interpretation of Article 1586 was
reiterated in Garcia Palomar v. Hotel de France Company.113 And in both Lemoine and
Palomar, the Court adopted the general principle that in actions for wrongful discharge
founded on Article 1586, local workers are entitled to recover damages to the extent of the
amount stipulated to be paid to them by the terms of their contract. On the computation of
the amount of such damages, the Court in Aldaz v. Gay114 held:

The doctrine is well-established in American jurisprudence, and nothing has been brought to
our attention to the contrary under Spanish jurisprudence, that when an employee is
wrongfully discharged it is his duty to seek other employment of the same kind in the same
community, for the purpose of reducing the damages resulting from such wrongful
discharge. However, while this is the general rule, the burden of showing that he failed to
make an effort to secure other employment of a like nature, and that other employment of
a like nature was obtainable, is upon the defendant. When an employee is wrongfully
discharged under a contract of employment his prima facie damage is the amount which he
would be entitled to had he continued in such employment until the termination of the
period. (Howard v. Daly, 61 N. Y., 362; Allen v. Whitlark, 99 Mich., 492; Farrell v. School
District No. 2, 98 Mich., 43.)115 (Emphasis supplied)cralawlibrary

On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term
employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2
(Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book
IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code
do not expressly provide for the remedies available to a fixed-term worker who is illegally
discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the
Court carried over the principles on the payment of damages underlying Article 1586 of the
Civil Code of 1889 and applied the same to a case involving the illegal discharge of a local
worker whose fixed-period employment contract was entered into in 1952, when the new
Civil Code was already in effect.118

More significantly, the same principles were applied to cases involving overseas Filipino
workers whose fixed-term employment contracts were illegally terminated, such as in First
Asian Trans & Shipping Agency, Inc. v. Ople,119 involving seafarers who were illegally
discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations
Commission,120 an OFW who was illegally dismissed prior to the expiration of her fixed-
period employment contract as a baby sitter, was awarded salaries corresponding to the
unexpired portion of her contract. The Court arrived at the same ruling in Anderson v.
National Labor Relations Commission,121 which involved a foreman hired in 1988 in Saudi
Arabia for a fixed term of two years, but who was illegally dismissed after only nine months
on the job - - the Court awarded him salaries corresponding to 15 months, the unexpired
portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations
Commission,122 a Filipino working as a security officer in 1989 in Angola was awarded his
salaries for the remaining period of his 12-month contract after he was wrongfully
discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission,123 an
OFW whose 12-month contract was illegally cut short in the second month was declared
entitled to his salaries for the remaining 10 months of his contract.

In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who
were illegally discharged were treated alike in terms of the computation of their money
claims: they were uniformly entitled to their salaries for the entire unexpired portions of
their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the
subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in
their employment contract have since been differently treated in that their money claims
are subject to a 3-month cap, whereas no such limitation is imposed on local workers with
fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in
that, in the computation of the monetary benefits of fixed-term employees who
are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an
unexpired portion of one year or more in their contracts, but none on the claims of
other OFWs or local workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a peculiar disadvantage.

There being a suspect classification involving a vulnerable sector protected by the

Constitution, the Court now subjects the classification to a strict judicial scrutiny, and
determines whether it serves a compelling state interest through the least restrictive
means.

What constitutes compelling state interest is measured by the scale of rights and powers
arrayed in the Constitution and calibrated by history.124 It is akin to the paramount interest
of the state125 for which some individual liberties must give way, such as the public interest
in safeguarding health or maintaining medical standards,126 or in maintaining access to
information on matters of public concern.127

In the present case, the Court dug deep into the records but found no compelling state
interest that the subject clause may possibly serve.

The OSG defends the subject clause as a police power measure "designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months
[sic], Filipino seafarers have better chance of getting hired by foreign employers." The
limitation also protects the interest of local placement agencies, which otherwise may be
made to shoulder millions of pesos in "termination pay."128

The OSG explained further:

Often, placement agencies, their liability being solidary, shoulder the payment of money
claims in the event that jurisdiction over the foreign employer is not acquired by the court
or if the foreign employer reneges on its obligation. Hence, placement agencies that are in
good faith and which fulfill their obligations are unnecessarily penalized for the acts of the
foreign employer. To protect them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money are reduced under Section 10 of RA
8042.

This measure redounds to the benefit of the migrant workers whose welfare the government
seeks to promote. The survival of legitimate placement agencies helps [assure] the
government that migrant workers are properly deployed and are employed under decent
and humane conditions.129 (Emphasis supplied)cralawlibrary

However, nowhere in the Comment or Memorandum does the OSG cite the source of its
perception of the state interest sought to be served by the subject clause.

The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in
sponsorship of House Bill No. 14314 (HB 14314), from which the law originated;130 but the
speech makes no reference to the underlying reason for the adoption of the subject clause.
That is only natural for none of the 29 provisions in HB 14314 resembles the subject clause.

On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to
wit:

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

The liability of the principal and the recruitment/placement agency or any and all claims
under this Section shall be joint and several.

Any compromise/amicable settlement or voluntary agreement on any money claims

exclusive of damages under this Section shall not be less than fifty percent (50%) of such
money claims: Provided, That any installment payments, if applicable, to satisfy any such
compromise or voluntary settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this paragraph shall be null and void.

Non-compliance with the mandatory period for resolutions of cases provided under this
Section shall subject the responsible officials to any or all of the following penalties:

(1) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies
therewith;

(2) Suspension for not more than ninety (90) days; or

(3) Dismissal from the service with disqualification to hold any appointive public office for
five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any
liability which any such official may have incurred under other existing laws or rules and
regulations as a consequence of violating the provisions of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of
money claims.

A rule on the computation of money claims containing the subject clause was inserted and
eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court
examined the rationale of the subject clause in the transcripts of the "Bicameral Conference
Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing
Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no
discernible state interest, let alone a compelling one, that is sought to be protected or
advanced by the adoption of the subject clause.

In fine, the Government has failed to discharge its burden of proving the existence of a
compelling state interest that would justify the perpetuation of the discrimination against
OFWs under the subject clause.

Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the
employment of OFWs by mitigating the solidary liability of placement agencies, such callous
and cavalier rationale will have to be rejected. There can never be a justification for any
form of government action that alleviates the burden of one sector, but imposes the same
burden on another sector, especially when the favored sector is composed of private
businesses such as placement agencies, while the disadvantaged sector is composed of
OFWs whose protection no less than the Constitution commands. The idea that private
business interest can be elevated to the level of a compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary liability of
placement agencies vis-a-vis their foreign principals, there are mechanisms already in place
that can be employed to achieve that purpose without infringing on the constitutional rights
of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based
Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures
on erring foreign employers who default on their contractual obligations to migrant workers
and/or their Philippine agents. These disciplinary measures range from temporary
disqualification to preventive suspension. The POEA Rules and Regulations Governing the
Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar
administrative disciplinary measures against erring foreign employers.

Resort to these administrative measures is undoubtedly the less restrictive means of aiding
local placement agencies in enforcing the solidary liability of their foreign principals.

Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of
the right of petitioner and other OFWs to equal protection.ςηαñrοblεš νιr†υαl
lαω lιbrαrÿ

Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly
violates state policy on labor under Section 3,131 Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,132 there are
some which this Court has declared not judicially enforceable, Article XIII being
one,133 particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National
Labor Relations Commission,134 has described to be not self-actuating:

Thus, the constitutional mandates of protection to labor and security of tenure may be
deemed as self-executing in the sense that these are automatically acknowledged and
observed without need for any enabling legislation. However, to declare that the
constitutional provisions are enough to guarantee the full exercise of the rights embodied
therein, and the realization of ideals therein expressed, would be impractical, if not
unrealistic. The espousal of such view presents the dangerous tendency of being overbroad
and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when
examined in isolation, are facially unqualified, and the broadest interpretation possible
suggests a blanket shield in favor of labor against any form of removal regardless of
circumstance. This interpretation implies an unimpeachable right to continued employment-
a utopian notion, doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of these guaranteed rights to
ensure the protection and promotion, not only the rights of the labor sector, but of the
employers' as well. Without specific and pertinent legislation, judicial bodies will be at a
loss, formulating their own conclusion to approximate at least the aims of the Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a

positive enforceable right to stave off the dismissal of an employee for just cause owing
to the failure to serve proper notice or hearing. As manifested by several framers of the
1987 Constitution, the provisions on social justice require legislative enactments for their
enforceability.135 (Emphasis added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable
rights, for the violation of which the questioned clause may be declared unconstitutional. It
may unwittingly risk opening the floodgates of litigation to every worker or union over every
conceivable violation of so broad a concept as social justice for labor.

It must be stressed that Section 3, Article XIII does not directly bestow on the working class
any actual enforceable right, but merely clothes it with the status of a sector for whom the
Constitution urges protection through executive or legislative action and judicial
recognition. Its utility is best limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to protect the welfare of the working
class.And it was in fact consistent with that constitutional agenda that the Court in Central
Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng
Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated
the judicial precept that when the challenge to a statute is premised on the perpetuation of
prejudice against persons favored by the Constitution with special protection - - such as the
working class or a section thereof - - the Court may recognize the existence of a suspect
classification and subject the same to strict judicial scrutiny.

The view that the concepts of suspect classification and strict judicial scrutiny formulated
in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is
a groundless apprehension. Central Bank applied Article XIII in conjunction with the equal
protection clause. Article XIII, by itself, without the application of the equal protection
clause, has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates
petitioner's right to substantive due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental purpose.136

The argument of the Solicitor General, that the actual purpose of the subject clause of
limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to
give them a better chance of getting hired by foreign employers. This is plain speculation.
As earlier discussed, there is nothing in the text of the law or the records of the
deliberations leading to its enactment or the pleadings of respondent that would indicate
that there is an existing governmental purpose for the subject clause, or even just a pretext
of one.

The subject clause does not state or imply any definitive governmental purpose; and it is for
that precise reason that the clause violates not just petitioner's right to equal protection,
but also her right to substantive due process under Section 1,137 Article III of the
Constitution.

The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire
unexpired period of nine months and 23 days of his employment contract, pursuant to law
and jurisprudence prior to the enactment of R.A. No. 8042.

On the Third Issue

Petitioner contends that his overtime and leave pay should form part of the salary basis in
the computation of his monetary award, because these are fixed benefits that have been
stipulated into his contract.

Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers
like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard
Employment Contract of Seafarers, in which salary is understood as the basic wage,
exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation
for all work "performed" in excess of the regular eight hours, and holiday pay is
compensation for any work "performed" on designated rest days and holidays.

By the foregoing definition alone, there is no basis for the automatic inclusion of overtime
and holiday pay in the computation of petitioner's monetary award, unless there is evidence
that he performed work during those periods. As the Court held in Centennial Transmarine,
Inc. v. Dela Cruz,138

However, the payment of overtime pay and leave pay should be disallowed in light of our
ruling in Cagampan v. National Labor Relations Commission, to wit:

The rendition of overtime work and the submission of sufficient proof that said was actually
performed are conditions to be satisfied before a seaman could be entitled to overtime pay
which should be computed on the basis of 30% of the basic monthly salary. In short, the
contract provision guarantees the right to overtime pay but the entitlement to such benefit
must first be established.

In the same vein, the claim for the day's leave pay for the unexpired portion of the contract
is unwarranted since the same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for
every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of
Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004
Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect
that petitioner is AWARDED his salaries for the entire unexpired portion of his employment
contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per
month.

No costs.

SO ORDERED.
 G.R. No. 128003. July 26, 2000

RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG,, Petitioner, v. NATIONAL

LABOR RELATIONS COMMISSION, AQUINO MAGSALIN, PEDRO MAIBO, RICARDO
BORJA, ALICIA M. SAN PEDRO AND FELOMENA B. TOLIN, Respondents.

DECISION

PARDO, J.:

What is before the Court for resolution is a petition to annul the resolution of the National
Labor Relations Commission (NLRC),1 affirming the labor-arbiter's award but deleting the
moral and exemplary damages.

The facts are as follows:

Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a corporation established in

1965, was engaged in manufacturing footwear, bags and garments.

Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan, Alicia M. San Pedro, and
Felomena Tolin were employed as dispatcher, warehouseman, issue monitor, foreman, jacks
cementer and outer sole attacher, respectively.

On August 26, 1994, Rubberworld filed with the Department of Labor and Employment a
notice of temporary shutdown of operations to take effect on September 26, 1994. Before
the effectivity date, however, Rubberworld was forced to prematurely shutdown its
operations.

On November 11, 1994, private respondents filed with the National Labor Relations
Commission a complaint2 against petitioner for illegal dismissal and non-payment of
separation pay.

On November 22, 1994, Rubberworld filed with the Securities and Exchange Commission
(SEC) a petition for declaration of suspension of payments with a proposed rehabilitation
plan.3

On December 28, 1994, SEC issued the following order:

"Accordingly, with the creation of the Management Committee, all actions for claims against
Rubberworld Philippines, Inc. pending before any court, tribunal, office, board, body,
Commission or sheriff are hereby deemed SUSPENDED.

"Consequently, all pending incidents for preliminary injunctions, writ or attachments,

foreclosures and the like are hereby rendered moot and academic.

"SO ORDERED."4

On January 24, 1995, petitioners submitted to the labor arbiter a motion to suspend the
proceedings invoking the SEC order dated December 28, 1994. The labor arbiter did not act
on the motion and ordered the parties to submit their respective position papers.

On December 10, 1995, the labor arbiter rendered a decision, which provides:

"In the light of the foregoing, respondents are hereby declared guilty of ILLEGAL
SHUTDOWN and that respondents are ordered to pay complainants their separation pay
equivalent to one (1) month pay for every year of service.
Considering the malicious act of closing the business precipitately without due regard to the
rights of complainants, moral damages and exemplary damage in the sum of P 50,000.00
and P 30,000.00 respectively is hereby awarded for each of the complainants.

Finally 10 % of all sums owing to complainants is hereby adjudged as attorney's fees.

SO ORDERED."5

On February 5, 1996, petitioners appealed to the National Labor Relations Commission

(NLRC) alleging abuse of discretion and serious errors in the findings of facts of the labor
arbiter.

On August 30, 1996, NLRC issued a resolution, the dispositive portion of which reads:

"PREMISES CONSIDERED, the decision appealed from is hereby, AFFIRMED with

MODIFICATION in that the award of moral and exemplary damages is hereby, DELETED.

SO ORDERED."6

On November 20, 1996, NLRC denied petitioners' motion for reconsideration.

Hence, this petition.7

The issue is whether or not the Department of Labor and Employment, the Labor Arbiter
and the National Labor Relations Commission may legally act on the claims of respondents
despite the order of the Securities and Exchange Commission suspending all actions against
a company under rehabilitation by a management committee created by the Securities and
Exchange Commission.

Presidential Decree No. 902-A is clear that "all actions for claims against corporations,
partnerships or associations under management or receivership pending before any court,
tribunal, board or body shall be suspended accordingly." The law did not make any
exception in favor of labor claims.8

"The justification for the automatic stay of all pending actions for claims is to enable the
management committee or the rehabilitation receiver to effectively exercise its/his powers
free from any judicial or extra judicial interference that might unduly hinder or prevent the
'rescue' of the debtor company. To allow such other actions to continue would only add to
the burden of the management committee or rehabilitation receiver, whose time, effort and
resources would be wasted in defending claims against the corporation instead of being
directed toward its restructuring and rehabilitation."9

Thus, the labor case would defeat the purpose of an automatic stay. To rule otherwise
would open the floodgates to numerous claims and would defeat the rescue efforts of the
management committee.

Besides, even if an award is given to private respondents, the ruling could not be enforced
as long as petitioner is under management committee.10

This finds ratiocination in that the power to hear and decide labor disputes is deemed
suspended when the Securities and Exchange Commission puts the corporation under
rehabilitation.
Thus, when NLRC proceeded to decide the case despite the SEC suspension order, the NLRC
acted without or in excess of its jurisdiction to hear and decide cases. As a consequence,
any resolution, decision or order that it rendered or issued without jurisdiction is a nullity.

WHEREFORE , the petition is hereby GRANTED. The decision of the labor arbiter dated
December 10, 1995 and the NLRC resolution dated August 30, 1996, are SET ASIDE.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.
 G. R. No. 152329 - April 22, 2003

ALEJANDRO ROQUERO, Petitioner, vs. PHILIPPINE AIRLINES, INC., Respondent.

PUNO, J.:

Brought up on this Petition for Review is the decision of the Court of Appeals dismissing
Alejandro Roquero as an employee of the respondent Philippine Airlines, Inc.

Roquero, along with Rene Pabayo, were ground equipment mechanics of respondent
Philippine Airlines, Inc. (PAL for brevity). From the evidence on record, it appears that
Roquero and Pabayo were caught red-handed possessing and using Methampethamine
Hydrochloride or shabu in a raid conducted by PAL security officers and NARCOM personnel.

The two alleged that they did not voluntarily indulge in the said act but were instigated by a
certain Jojie Alipato who was introduced to them by Joseph Ocul, Manager of the Airport
Maintenance Division of PAL. Pabayo alleged that Alipato often bragged about the drugs he
could smuggle inside the company premises and invited other employees to take the
prohibited drugs. Alipato was unsuccessful, until one day, he was able to persuade Pabayo
to join him in taking the drugs. They met Roquero along the way and he agreed to join
them. Inside the company premises, they locked the door and Alipato lost no time in
preparing the drugs to be used. When they started the procedure of taking the drugs,
armed men entered the room, arrested Roquero and Pabayo and seized the drugs and the
paraphernalia used.1 Roquero and Pabayo were subjected to a physical examination where
the results showed that they were positive of drugs. They were also brought to the security
office of PAL where they executed written confessions without the benefit of counsel.2

On March 30, 1994, Roquero and Pabayo received a "notice of administrative charge"3 for
violating the PAL Code of Discipline. They were required to answer the charges and were
placed under preventive suspension.

Roquero and Pabayo, in their "reply to notice of administrative charge,"4 assailed their
arrest and asserted that they were instigated by PAL to take the drugs. They argued that
Alipato was not really a trainee of PAL but was placed in the premises to instigate the
commission of the crime. They based their argument on the fact that Alipato was not
arrested. Moreover, Alipato has no record of employment with PAL.

In a Memorandum dated July 14, 1994, Roquero and Pabayo were dismissed by PAL.5 Thus,
they filed a case for illegal dismissal.6

In the Labor Arbiter's decision, the dismissal of Roquero and Pabayo was upheld. The Labor
Arbiter found both parties at fault PAL for applying means to entice the complainants into
committing the infraction and the complainants for giving in to the temptation and
eventually indulging in the prohibited activity. Nonetheless, the Labor Arbiter awarded
separation pay and attorney's fees to the complainants.7

While the case was on appeal with the National Labor Relations Commission (NLRC), the
complainants were acquitted by the Regional Trial Court (RTC) Branch 114, Pasay City, in
the criminal case which charged them with "conspiracy for possession and use of a
regulated drug in violation of Section 16, Article III of Republic Act 6425," on the ground of
instigation.

The NLRC ruled in favor of complainants as it likewise found PAL guilty of instigation. It
ordered reinstatement to their former positions but without backwages.8 Complainants did
not appeal from the decision but filed a motion for a writ of execution of the order of
reinstatement. The Labor Arbiter granted the motion but PAL refused to execute the said
order on the ground that they have filed a Petition for Review before this Court.9 In
accordance with the case of St. Martin Funeral Home vs. NLRC and Bienvenido
Aricayos,10 PAL's petition was referred to the Court of Appeals.11

During the pendency of the case with the Court of Appeals, PAL, and Pabayo filed a Motion
to Withdraw/Dismiss the case with respect to Pabayo, after they voluntarily entered into a
compromise agreement.12 The motion was granted in a Resolution promulgated by the
Former Thirteenth Division of the Court of Appeals on January 29, 2002.13

The Court of Appeals later reversed the decision of the NLRC and reinstated the decision of
the Labor Arbiter insofar as it upheld the dismissal of Roquero. However, it denied the
award of separation pay and attorney's fees to Roquero on the ground that one who has
been validly dismissed is not entitled to those benefits.14

The motion for reconsideration by Roquero was denied. In this Petition for Review on
Certiorari under Rule 45, he raises the following issues:

1. Whether or not the instigated employee shall be solely responsible for an action arising
from the instigation perpetrated by the employer;

2. Can the executory nature of the decision, more so the reinstatement aspect of a labor
tribunal's order be halted by a petition having been filed in higher courts without any
restraining order or preliminary injunction having been ordered in the meantime?

3. Would the employer who refused to reinstate an employee despite a writ duly issued be
held liable to pay the salary of the subject employee from the time that he was ordered
reinstated up to the time that the reversed decision was handed down?15

There is no question that petitioner Roquero is guilty of serious misconduct for possessing
and using shabu. He violated Chapter 2, Article VII, section 4 of the PAL Code of Discipline
which states:

"Any employee who, while on company premises or on duty, takes or is under the influence
of prohibited or controlled drugs, or hallucinogenic substances or narcotics shall be
dismissed."16

Serious misconduct is defined as "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."17 For serious misconduct to warrant the dismissal of an
employee, it (1) must be serious; (2) must relate to the performance of the employee's
duty; and (3) must show that the employee has become unit to continue working for the
employer.18
It is of public knowledge that drugs can damage the mental faculties of the user. Roquero
was tasked with the repair and maintenance of PAL's airplanes. He cannot discharge that
duty if he is a drug user. His failure to do his job can mean great loss of lives and
properties. Hence, even if he was instigated to take drugs he has no right to be reinstated
to his position. He took the drugs fully knowing that he was on duty and more so that it is
prohibited by company rules. Instigation is only a defense against criminal liability. It cannot
be used as a shield against dismissal from employment especially when the position
involves the safety of human lives.

Petitioner cannot complain he was denied procedural due process. PAL complied with the
twin-notice requirement before dismissing the petitioner. The twin-notice rule requires (1)
the notice which apprises the employee of the particular acts or omissions for which his
dismissal is being sought along with the opportunity for the employee to air his side, and
(2) the subsequent notice of the employer's decision to dismiss him.19 Both were given by
respondent PAL.

II

Article 223 (3rd paragraph) of the Labor Code20 as amended by Section 12 of Republic Act
No. 6715,21 and Section 2 of the NLRC Interim Rules on Appeals under RA No. 6715,
Amending the Labor Code,22 provide that an order of reinstatement by the Labor Arbiter is
immediately executory even pending appeal. The rationale of the law has been explained
in Aris (Phil.) Inc. vs. NLRC:23

"In authorizing execution pending appeal of the reinstatement aspect of a decision of the
Labor Arbiter reinstating a dismissed or separated employee, the law itself has laid down a
compassionate policy which, once more, vivifies and enhances the provisions of the 1987
Constitution on labor and the working man.

xxx - xxx - xxx

These duties and responsibilities of the State are imposed not so much to express sympathy
for the workingman as to forcefully and meaningfully underscore labor as a primary social
and economic force, which the Constitution also expressly affirms with equal intensity.
Labor is an indispensable partner for the nation's progress and stability.

xxx - xxx - xxx

. . . In short, with respect to decisions reinstating employees, the law itself has determined
a sufficiently overwhelming reason for its execution pending appeal.

xxx - xxx - xxx

. . . Then, by and pursuant to the same power (police power), the State may authorize an
immediate implementation, pending appeal, of a decision reinstating a dismissed or
separated employee since that saving act is designed to stop, although temporarily since
the appeal may be decided in favor of the appellant, a continuing threat or danger to the
survival or even the life of the dismissed or separated employee and his family."

The order of reinstatement is immediately executory. The unjustified refusal of the

employer to reinstate a dismissed employee entitles him to payment of his salaries effective
from the time the employer failed to reinstate him despite the issuance of a writ of
execution.24 Unless there is a restraining order issued, it is ministerial upon the Labor
Arbiter to implement the order of reinstatement. In the case at bar, no restraining order
was granted. Thus, it was mandatory on PAL to actually reinstate Roquero or reinstate him
in the payroll. Having failed to do so, PAL must pay Roquero the salary he is entitled to, as
if he was reinstated, from the time of the decision of the NLRC until the finality of the
decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of
Court are applied only in a suppletory manner and only to effectuate the objectives of the
Labor Code and not to defeat them.25 Hence, even if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and
pay the wages of the dismissed employee during the period of appeal until reversal by the
higher court. On the other hand, if the employee has been reinstated during the appeal
period and such reinstatement order is reversed with finality, the employee is not required
to reimburse whatever salary he received for he is entitled to such, more so if he actually
rendered services during the period.

IN VIEW WHEREOF, the dismissal of petitioner Roquero is AFFIRMED, but respondent PAL is
ordered to pay the wages to which Roquero is entitled from the time the reinstatement
order was issued until the finality of this decision.

SO ORDERED.

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

 [G.R. NOS. 142732-33 : December 4, 2007]

MARILOU S. GENUINO, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION,

CITIBANK, N.A., WILLIAM FERGUSON, and AZIZ RAJKOTWALA, Respondents.

[G.R. NOS. 142753-54]

CITIBANK, N.A., WILLIAM FERGUSON, and AZIZ

RAJKOTWALA, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION and
MARILOU GENUINO, Respondents.

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks to set aside the September 30,
1999 Decision1 and March 31, 2000 Resolution2 of the Court of Appeals (CA) in the
consolidated cases docketed as CA-G.R. SP Nos. 51532 and 51533. The appellate court
dismissed the parties' petitions involving the National Labor Relations Commission's
(NLRC's) Decision3 and Resolution,4 which held that Marilou S. Genuino was validly
dismissed by Citibank, N.A. (Citibank). The NLRC likewise ordered the payment of salaries
from the time that Genuino was reinstated in the payroll to the date of the NLRC decision.
Upon reconsideration, however, the CA modified its decision and held that Citibank failed to
observe due process in CA-G.R. SP No. 51532; hence, Citibank should indemnify Genuino in
the amount of PhP 5,000. Both parties are now before this Court assailing portions of the
CA's rulings. In G.R. NOS. 142732-33, Genuino assails the CA's finding that her dismissal
was valid. In G.R. NOS. 142753-54, Citibank questions the CA's finding that Citibank
violated Genuino's right to procedural due process and that Genuino has a right to salaries.

Citibank is an American banking corporation duly licensed to do business in the Philippines.

William Ferguson was the Manila Country Corporate Officer and Business Head of the Global
Finance Bank of Citibank while Aziz Rajkotwala was the International Business Manager for
the Global Consumer Bank of Citibank.5

Genuino was employed by Citibank sometime in January 1992 as Treasury Sales Division
Head with the rank of Assistant Vice-President. She received a monthly compensation of
PhP 60,487.96, exclusive of benefits and privileges.6

On August 23, 1993, Citibank sent Genuino a letter charging her with "knowledge and/or
involvement" in transactions "which were irregular or even fraudulent." In the same letter,
Genuino was informed she was under preventive suspension.7

Genuino wrote Citibank on September 13, 1993 and asked the bank the following:

A. Confront our client with the factual and legal basis of your charges, and afford her an
opportunity to explain;
b. Substantiate your charge of fraudulent transactions against our client; or if the same
cannot be substantiated;

c. Correct/repair/compensate the damage you have caused our client.8

On September 13, 1993, Citibank, through Victorino P. Vargas, its Country Senior Human
Resources Officer, sent a letter to Genuino, the relevant portions of which read:

As you are well aware, the bank served you a letter dated August 23, 1993 advising you
that ongoing investigations show that you are involved and/or know of irregular transactions
which are at the very least in conflict with the bank's interest, and, may even be fraudulent
in nature.

These transactions are those involving Global Pacific and/or Citibank and the following bank
clients, among others:

1. Norma T. de Jesus

2. Carmen Intengan/Romeo Neri

3. Mario Mamon

4. Vienna Ochoa/IETI

5. William Samara

6. Roberto Estandarte

7. Rita Browner

8. Ma. Redencion Sumpaico

9. Cesar Bautista

10. Teddy Keng

11. NDC-Guthrie

12. Olivia Sy
In view of the foregoing, you are hereby directed to explain in writing three (3) days from
your receipt hereof why your employment should not be terminated in view of your
involvement in these irregular transactions. You are also directed to appear in an
administrative investigation of the matter which is set on Tuesday, Sept. 21, 1993 at 2:00
P.M. at the HR Conference Room, 6th Floor, Citibank Center. You may bring your counsel if
you so desire.9

Genuino's counsel replied through a letter dated September 17, 1993, demanding for a bill
of particulars regarding the charges against Genuino. Citibank's counsel replied on
September 20, 1993, as follows:

1.2. [T]he bank has no intention of converting the administrative investigation of this case
to a full blown trial. What it is prepared to do is give your client, as required by law and
Supreme Court decisions, an opportunity to explain her side on the issue of whether she
violated the conflict of interest rule either in writing (which could be in the form of a letter-
reply to the September 13, 1993 letter to Citibank, N.A.) or in person, in the administrative
investigation which is set for tomorrow afternoon vis - Ã -vis the bank clients/parties
mentioned in the letter of Citibank, N.A.

xxx

2.2. You will certainly not deny that we have already fully discussed with you what is meant
by the conflict with the bank's interest vis - Ã -vis the bank clients/parties named in the
September 13, 1993 letter of Citibank to Ms. Genuino. As we have repeatedly explained to
you, what the bank meant by it is that your client and Mr. Dante Santos, using the facilities
of their family corporations (Torrance and Global) appear to have participated in the
diversion of bank clients' funds from Citibank to, and investment thereof in, other
companies and that they made money in the process, in violation of the conflict of law rule.
It is her side of this issue that Citibank, N.A. is waiting to receive/hear from Ms. Genuino.10

Genuino did not appear in the administrative investigation held on September 21, 1993. Her
lawyers wrote a letter to Citibank's counsel asking "what bank clients' funds were diverted
from the bank and invested in other companies, the specific amounts involved, the manner
by which and the date when such diversions were purportedly affected." In reply, Citibank's
counsel noted Genuino's failure to appear in the investigation and gave Genuino up to
September 23, 1993 to submit her written explanation. Genuino did not submit her written
explanation.11

On September 27, 1993, Citibank informed Genuino of the result of their investigation. It
found that Genuino with Santos used "facilities of Genuino's family corporation, namely,
Global Pacific, personally and actively participated in the diversion of bank clients' funds to
products of other companies that yielded interests higher than what Citibank products
offered, and that Genuino and Santos realized substantial financial gains, all in violation of
existing company policy and the Corporation Code, which for your information, carries a
penal sanction."12

Genuino's employment was terminated by Citibank on grounds of (1) serious misconduct,

(2) willful breach of the trust reposed upon her by the bank, and (3) commission of a crime
against the bank.13

On October 15, 1993, Genuino filed before the Labor Arbiter a Complaint14 against Citibank
docketed as NLRC Case No. 00-10-06450-93 for illegal suspension and illegal dismissal with
damages and prayer for temporary restraining order and/or writ of preliminary injunction.
The Labor Arbiter rendered a Decision15 on May 2, 1994, the dispositive portion of which
reads:

WHEREFORE, finding the dismissal of the complainant Marilou S. Genuino to be without just
cause and in violation of her right to due process, respondent CITIBANK, N.A., and any and
all persons acting on its behalf or by or under their authority are hereby ordered to reinstate
complainant immediately to her former position as Treasury Sales Division Head or its
equivalent without loss of seniority rights and other benefits, with backwages from August
23, 1993 up to April 30, 1994 in the amount of P493,800.00 (P60,000 x 8.23 mos.) subject
to adjustment until reinstated actually or in the payroll.

Respondents are likewise ordered to pay complainant the amount of 1.5 Million Pesos and
P500,000.00 by way of moral and exemplary damages plus 10% of the total monetary
award as attorney's fees.16

Both parties appealed to the NLRC. The NLRC, in its September 3, 1994 Decision in NLRC-
NCR Case No. 00-10-06450-93 (CA No. 006947-94), reversed the Labor Arbiter's decision
with the following modification:

WHEREFORE, Judgment is hereby rendered (1) SETTING ASIDE the appealed decision of the
Labor Arbiter; (2) DECLARING the dismissal of the complainant valid and legal on the
ground of serious misconduct and breach of trust and confidence and consequently
DISMISSING the complaint a quo; but (3) ORDERING the respondent bank to pay the
salaries due to the complainant from the date it reinstated complainant in the payroll
(computed at P60,000.00 a month, as found by the Labor Arbiter) up to and until the date
of this decision.

SO ORDERED.17

The parties' motions for reconsideration were denied by the NLRC in a resolution dated
October 28, 1994.18
 The Ruling of the Court of Appeals

On December 6, 1994, Genuino filed a petition for certiorari docketed as G.R. No. 118023
with this Court. Citibank's petition for certiorari, on the other hand, was docketed as G.R.
No. 118667. In the January 27, 1999 Resolution, we referred these petitions to the CA
pursuant to our ruling in St. Martin Funeral Home v. NLRC.19

Genuino's petition before the CA was docketed as CA-G.R. SP No. 51532 while Citibank's
petition was docketed as CA-G.R. SP No. 51533. Genuino prayed for the reversal of the
NLRC's decision insofar as it declared her dismissal valid and legal. Meanwhile, Citibank
questioned the NLRC's order to pay Genuino's salaries from the date of reinstatement until
the date of the NLRC's decision.

The CA promulgated its decision on September 30, 1999, denying due course to and
dismissing both petitions.20 Both parties filed motions for reconsideration and on March 31,
2000, the appellate court modified its decision and held:

WHEREFORE, save for the MODIFICATION ordering Citibank, N.A. to pay Ms. Marilou S.
Genuino five thousand pesos (P5,000.00) as indemnity for non-observance of due process
in CA-G.R. SP No. 51532, this Court's 30 September 1999 decision
is REITERATED and AFFIRMED in all other respects.

SO ORDERED.21

Hence, we have this petition.

The Issue

WHETHER OR NOT THE DISMISSAL OF GENUINO IS FOR A JUST CAUSE AND IN

ACCORDANCE WITH DUE PROCESS

In G.R. NOS. 142732-33, Genuino contends that Citibank failed to observe procedural due
process in terminating her employment. This failure is allegedly an indication that there
were no valid grounds in dismissing her. In G.R. NOS. 142753-54, Citibank questions the
ruling that Genuino has a right to reinstatement under Article 223 of the Labor Code.
Citibank contends that the Labor Arbiter's finding is not supported by evidence; thus, the
decision is void. Since a void decision cannot give rise to any rights, Citibank opines that
there can be no right to payroll reinstatement.

The dismissal was for just cause but lacked due process

We affirm that Genuino was dismissed for just cause but without the observance of due
process.

In a string of cases, 22 we have repeatedly said that the requirement of twin notices must be
met. In the recent case of King of Kings Transport, Inc. v. Mamac, we explained:

To clarify, the following should be considered in terminating the services of employees:

(1) The 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.

(2) After serving the first notice, the employers should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence in
support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance to
defend themselves personally, with the assistance of a representative or counsel of their
choice. Moreover, this conference or hearing could be used by the parties as an opportunity
to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been considered; and (2) grounds have
been established to justify the severance of their employment.23

The Labor Arbiter found that Citibank failed to adequately notify Genuino of the charges
against her. On the contrary, the NLRC held that "the function of a 'notice to explain' is only
to state the basic facts of the employer's charges, which x x x the letters of September 13
and 17, 1993 in question have fully served."24

We agree with the CA that the dismissal was valid and legal, and with its modification of the
NLRC ruling that PhP 5,000 is due Genuino for failure of Citibank to observe due process.

The Implementing Rules and Regulations of the Labor Code provide that any employer
seeking to dismiss a worker shall furnish the latter a written notice stating the particular
acts or omissions constituting the grounds for dismissal.25 The purpose of this notice is to
sufficiently apprise the employee of the acts complained of and enable him/her to prepare
his/her defense.

In this case, the letters dated August 23, September 13 and 20, 1993 sent by Citibank did
not identify the particular acts or omissions allegedly committed by Genuino. The August
23, 1993 letter charged Genuino with having "some knowledge and/or involvement" in
some transactions "which have the appearance of being irregular at the least and may even
be fraudulent." The September 13, 1993 letter, on the other hand, mentioned "irregular
transactions" involving Global Pacific and/or Citibank and 12 bank clients. Lastly, the
September 20, 1993 letter stated that Genuino and "Mr. Dante Santos, using the facilities of
their family corporations (Torrance and Global) appear to have participated in the diversion
of bank clients' funds from Citibank to, and investment thereof in, other companies and that
they made money in the process, in violation of the conflict of law rule [sic]." The extent of
Genuino's alleged knowledge and participation in the diversion of bank's clients' funds,
manner of diversion, and amounts involved; the acts attributed to Genuino that conflicted
with the bank's interests; and the circumstances surrounding the alleged irregular
transactions, were not specified in the notices/letters.

While the bank gave Genuino an opportunity to deny the truth of the allegations in writing
and participate in the administrative investigation, the fact remains that the charges were
too general to enable Genuino to intelligently and adequately prepare her defense.

The two-notice requirement of the Labor Code is an essential part of due process. The first
notice informing the employee of the charges should neither be pro-forma nor vague. It
should set out clearly what the employee is being held liable for. The employee should be
afforded ample opportunity to be heard and not mere opportunity. As explained in King of
Kings Transport, Inc., ample opportunity to be heard is especially accorded the employees
sought to be dismissed after they are specifically informed of the charges in order to give
them an opportunity to refute such accusations leveled against them. Since the notice of
charges given to Genuino is inadequate, the dismissal could not be in accordance with due
process.

While we hold that Citibank failed to observe procedural due process, we nevertheless find
Genuino's dismissal justified.

Citibank maintains that Genuino was aware of the bank's Corporate Policy Manual
specifically Chapter 3 on "Principles and Policies" with regard to avoiding conflicts of
interest. She had even submitted a Conflict of Interest Survey to Citibank. In that survey,
she denied any knowledge of engaging in transactions in conflict with Citibank's interests.
Citibank, for its part, submitted evidence showing 99% ownership of Global stocks by
Genuino and Santos. In July 1993, Citibank discovered that Genuino and Santos were
instrumental in the withdrawal by bank depositors of PhP 120 million of investments in
Citibank. This amount was subsequently invested in another foreign bank, Internationale
Nederlanden Bank, N.V., under the control of Global and Torrance, another corporation
controlled by Genuino and Santos.26 Citibank also filed two criminal complaints against
Genuino and Santos for violations of the conflict of interest rule provided in Sec. 31 in
relation to Sec. 14427 of the Corporation Code.28

We note also that during the proceedings before the Labor Arbiter, Citibank presented the
following affidavits, with supporting documentary evidence against Genuino:
1) Vic Lim, an officer of Citibank who investigated the anomalies of Genuino and Santos,
concluded that Genuino and Santos realized substantial financial gains out of the transfer of
monies as supported by the following documents:

1) [S]ome of the Term Investment Applications (TIA), Applications for Money Transfer, all
filled up in the handwriting of Ms. Marilou Genuino. These documents cover/show the
transfer of the monies of the Citibank clients from their money placements/deposits with
Citibank, N.A. to Global and/or Torrance.

2) [S]ome of the checks that were drawn by Global and Torrance against their Citibank
accounts in favor of the other companies by which Global and Torrance transferred the
monies of the bank clients to the other companies.

3) [S]ome of the checks drawn by the other companies in favor of Global or Torrance by
which the other companies remitted back to Global and/or Torrance the monies of the bank
clients concerned.

4) [S]ome of the checks drawn by Global and Torrance against their Citibank accounts in
favor of Mr. Dante Santos and Ms. Marilou Genuino, covering the shares of the latter in the
spreads or margins Global and Torrance had derived from the investments of the monies of
the Citibank clients in the other companies.

5) [S]ome of the checks drawn by Torrance and Global in favor of Citibank clients by which
Global and Torrance remitted back to said bank clients their principal investments (or
portions thereof) and the rates of interests realized from their investment placed with the
other companies less the spreads made by Global and/or Torrance, Mr. Dante L. Santos and
Ms. Marilou Genuino.29

In Lim's Reply-Affidavit with attached supporting documents, he stated that out of the
competing money placement activities, Genuino and Santos derived financial gains
amounting to PhP 2,027,098.08 and PhP 2,134,863.80, respectively.30

2) Marilyn Bautista, a Treasury Sales Specialist in the Treasury Department of the Global
Consumer Bank of Citibank and whose superiors were Genuino and Santos, stated that:

Based on documents that have subsequently come to my knowledge, I realized that the two
(Genuino and Dante L. Santos), with the active cooperation of Redencion Sumpaico (the
Accountant of Global) had - brokered for their own benefits and/or of Global the sale of the
financial products of Citibank called "Mortgage Backed Securities" or MBS and in the process
made money at the expense of the (Citibank) investors and the bank.31

3) Patrick Cheng attested to other transactions from which Genuino, Santos, and Global
brokered the Mortgage Backed Securities (MBS), namely: ICC/Nemesio and Olivia Sy
transaction, San Miguel Corporation/ICC, CIPI/Asiatrust, FAPE, PERAA and Union Bank, and
NDC-Guthrie transactions.32

In her defense, Genuino asserts that Citibank has no evidence of any wrongful act or
omission imputable to her. According to her, she did not try to conceal from the bank her
participation in Global and she even disclosed the information when Global designated
Citibank as its depositary. She avers there was no conflict of interest because Global was
not engaged in Citibank's accepting deposits and granting loans, nor in money placement
activities that compete with Citibank's activities; and neither does Citibank invest in the
outlets used by Global. She claims that the controversy between Santos and Global had
already been amicably resolved in a Compromise Agreement between the two parties.33

Genuino further asserts that the letter of termination did not indicate what existing
company policy had been violated, and what acts constituted serious misconduct or willful
breach of the trust reposed by the bank. She claims that Lim's testimony that the checks
issued by Global in her name were profits was malicious, hearsay, and lacked factual basis.
She also posits that as to the withdrawals of clients, she could not possibly dictate on the
depositors. She pointed out that the depositors even sent Citibank a letter dated August 25,
1993 informing the bank that the withdrawals were made upon their express instructions.
Genuino avers the bank's loss of confidence should have to be proven by substantial
evidence, setting out the facts upon which loss of confidence in the employee may be made
to rest.34

Contrary to the Labor Arbiter's finding, the NLRC found the following facts supported by the
records:

a) Respondent bank has a conflict of interest rule, embodied in Chapter 3 of its Corporate
Policy Manual, prohibiting the officers of the bank from engaging in business activities,
situations or circumstances that are in conflict with the interest of the bank.

b) Complainant was familiar with said conflict of interest rule of the bank and of her duty to
disclose to the bank in writing any personal circumstances which conflicts or appears to be
in conflict with Citibank's interest.

c) Complainant is a substantial stockholder of Global Pacific, but she did not disclose fact to
the bank.

d) Global Pacific is engaged in money placement business like Citibank, N.A.; that in
carrying out its said money placement business, it used funds belonging to Citibank clients
which were withdrawn from Citibank with participation of complainant and Dante L. Santos.
In one transaction of this nature, P120,000,000.00 belonging to Citibank clients was
withdrawn from Citibank, N.A. and placed in another foreign bank, under the control of
Global Pacific. Said big investment money was returned to Citibank, N.A. only when
Citibank, N.A. filed an injunction suit.

e) Global Pacific also engaged in the brokering of the ABS or MBS, another financial product
of Citibank. It was the duty of complainant Genuino and Dante L. Santos to sell said product
on behalf of Citibank, N.A. and for Citibank N.A.'s benefit. In the brokering of the ABS or
MBS, Global Pacific made substantial profits which otherwise would have gone to Citibank,
N.A. if only they brokered the ABS or MBS for and on behalf of Citibank, N.A.

Art. 282(c) of the Labor Code provides that an employer may terminate an employment for
fraud or willful breach by the employee of the trust reposed in him/her by his/her employer
or duly authorized representative. In order to constitute as just cause for dismissal, loss of
confidence should relate to acts inimical to the interests of the employer.35 Also, the act
complained of should have arisen from the performance of the employee's duties.36 For loss
of trust and confidence to be a 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.37 We also held that:

[L]oss of confidence is a valid ground for dismissing an employee and proof beyond
reasonable doubt of the employee's misconduct is not required. It is sufficient if there is
some basis for such loss of confidence or if the employer has reasonable ground to believe
or to entertain the moral conviction that the employee concerned is responsible for the
misconduct and that the nature of his participation therein rendered him unworthy of the
trust and confidence demanded by his position.38

As Assistant Vice-President of Citibank's Treasury Department, Genuino was tasked to solicit

investments, and peso and dollar deposits for, and keep them in Citibank; and to sell and/or
push for the sale of Citibank's financial products, such as the MBS, for the account and
benefit of Citibank.39 She held a position of trust and confidence. There is no way she could
deny any knowledge of the bank's policies nor her understanding of these policies as
reflected in the survey done by the bank. She could not likewise feign ignorance of the
businesses of Citibank, and of Global and Torrance. Assuming that Citibank did not engage
in the same securities dealt with by Global and Torrance; nevertheless, it is to the interests
of Citibank to retain its clients and continue investing in Citibank. Curiously, Genuino did not
even dissuade the depositors from withdrawing their monies from Citibank, and was even
instrumental in the transfers of monies from Citibank to a competing bank through Global
and Torrance, the corporations under Genuino's control.

All the pieces of evidence compel us to conclude that Genuino did not have her employer's
interest. The letter of the bank's clients which attested that the withdrawals from Citibank
were made upon their instructions is of no import. It did not explain why they preferred to
invest in Global and Torrance, nor did it mention that Genuino tried to dissuade them from
withdrawing their deposits. Genuino herself admitted her relationship with some of the
depositors in her affidavit, to wit:

6. Contrary to the allegations of Mr. Lim in par. 6.1 up to 8.1 concerning the alleged scheme
employed in the questioned transactions, insinuating an "in" and "out" movement of funds
of the seven (7) depositors, the truth is that after said "depositors"
instructed/authorized us to effect the withdrawal of their respective monies from
Citibank to attain the common goal of higher yields utilizing Global as the vehicle
for bulk purchases of securities or papers not dealt with/offered by Citibank, said
pooled investment remained with Global, and were managed through Global for over a
year until the controversy arose;

10. The seven (7) "depositors" mentioned in Mr. Lim's Affidavits are the long-time
friends of affiant Genuino who had formed a loosely constituted investment group for
purposes of realizing higher yields derivable from pooled investments, and as the advisor of
the group she had in effect chosen Citibank as the initial repository of their respective
monies prior to the implementation of plans for pooled investments under Global. Hence,
she had known and dealt with said "depositors" before they became substantial depositors
of Citibank. She did not come across them because of Citibank.40 (Emphasis supplied.)

All told, Citibank had valid grounds to dismiss Genuino on ground of loss of confidence.

In view of Citibank's failure to observe due process, however, nominal damages are in order
but the amount is hereby raised to PhP 30,000 pursuant to Agabon v. NLRC. The NLRC's
order for payroll reinstatement is set aside.

In Agabon, we explained:

The violation of the petitioners' right to statutory due process by the private respondent
warrants the payment of indemnity in the form of nominal damages. The amount of such
damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances. Considering the prevailing circumstances in the case at bar, we deem it
proper to fix it at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right granted to the
latter under the Labor Code and its Implementing Rules.41

Thus, the award of PhP 5,000 to Genuino as indemnity for non-observance of due process
under the CA's March 31, 2000 Resolution in CA-G.R. SP No. 51532 is increased to PhP
30,000.
Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay
the salaries due to the complainant from the date it reinstated complainant in the payroll
(computed at P60,000.00 a month, as found by the Labor Arbiter) up to and until the date
of this decision," the Court hereby cancels said award in view of its finding that the
dismissal of Genuino is for a legal and valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the
appeal pursuant to Art. 223, paragraph 3 of the Labor Code, which states:

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

If the decision of the labor arbiter is later reversed on appeal upon the finding that the
ground for dismissal is valid, then the employer has the right to require the dismissed
employee on payroll reinstatement to refund the salaries s/he received while the case was
pending appeal, or it can be deducted from the accrued benefits that the dismissed
employee was entitled to receive from his/her employer under existing laws, collective
bargaining agreement provisions, and company practices.42 However, if the employee was
reinstated to work during the pendency of the appeal, then the employee is entitled to the
compensation received for actual services rendered without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement,
and her dismissal is based on a just cause, then she is not entitled to be paid the salaries
stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision.

WHEREFORE, the petitions of Genuino in G.R. NOS. 142732-33 are DENIED for lack of
merit. The petitions of Citibank in G.R. NOS. 142753-54 are GRANTED. The September
30, 1999 Decision and March 31, 2000 Resolution in CA-G.R. SP Nos. 51532 and 51533
are AFFIRMED with MODIFICATION that Genuino is entitled to PhP 30,000 as indemnity
for non-observance of due process. Item (3) in the dispositive portion of the September 3,
1994 Decision of the NLRC in NLRC-NCR Case No. 00-10-06450-93 (CA No. 006947-94)
is DELETED and SET ASIDE, andsaid NLRC decision is MODIFIED as follows:

WHEREFORE, Judgment is hereby rendered (1) SETTING ASIDE the appealed decision of the
Labor Arbiter; (2) DECLARING the dismissal of the complainant valid and legal on the
ground of serious misconduct and breach of trust and confidence and consequently
DISMISSING the complaint a quo; but (3) ORDERING the respondent bank to pay the
complainant nominal damages in the amount of PhP 30,000.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, Carpio-Morales, Tinga, JJ., concur.

 [G.R. NO. 164856 : August 29, 2007]

JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners, v. PHILIPPINE

AIRLINES, INC., Respondent.

DECISION

QUISUMBING, J.:

This Petition for Review assails both the Decision1 dated December 5, 2003 and the
Resolution2 dated April 16, 2004 of the Court of Appeals in CA-G.R. SP No. 69540, which
had annulled the Resolutions3 dated November 26, 2001 and January 28, 2002 of the
National Labor Relations Commission (NLRC) in NLRC Injunction Case No. 0001038-01, and
also denied the motion for reconsideration, respectively.

The antecedent facts of the case are as follows:

Petitioners Alberto J. Dumago and Juanito A. Garcia were employed by respondent

Philippine Airlines, Inc. (PAL) as Aircraft Furnishers Master "C" and Aircraft Inspector,
respectively. They were assigned in the PAL Technical Center.

On July 24, 1995, a combined team of the PAL Security and National Bureau of
Investigation (NBI) Narcotics Operatives raided the Toolroom Section - Plant Equipment
Maintenance Division (PEMD) of the PAL Technical Center. They found petitioners, with four
others, near the said section at that time. When the PAL Security searched the section, they
found shabu paraphernalia inside the company-issued locker of Ronaldo Broas who was also
within the vicinity. The six employees were later brought to the NBI for booking and proper
investigation.

On July 26, 1995, a Notice of Administrative Charge4 was served on petitioners. They were
allegedly "caught in the act of sniffing shabu inside the Toolroom Section," then placed
under preventive suspension and required to submit their written explanation within ten
days from receipt of the notice.

Petitioners vehemently denied the allegations and challenged PAL to show proof that they
were indeed "caught in the act of sniffing shabu." Dumago claimed that he was in the
Toolroom Section to request for an allen wrench to fix the needles of the sewing and
zigzagger machines. Garcia averred he was in the Toolroom Section to inquire where he
could take the Trackster's tire for vulcanizing.

On October 9, 1995, petitioners were dismissed for violation of Chapter II, Section 6, Article
46 (Violation of Law/Government Regulations) and Chapter II, Section 6, Article 48
(Prohibited Drugs) of the PAL Code of Discipline.5 Both simultaneously filed a case for illegal
dismissal and damages.

In the meantime, the Securities and Exchange Commission (SEC) placed PAL under an
Interim Rehabilitation Receiver due to severe financial losses.

On January 11, 1999, the Labor Arbiter rendered a decision6 in petitioners' favor:

WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding the
respondents guilty of illegal suspension and illegal dismissal and ordering them to reinstate
complainants to their former position without loss of seniority rights and other privileges.
Respondents are hereby further ordered to pay jointly and severally unto the complainants
the following:

Alberto J. Dumago - P409,500.00 backwages as of 1/10/99

34,125.00 for 13th month pay

Juanito A. Garcia - P1,290,744.00 backwages as of 1/10/99

107,562.00 for 13th month pay

The amounts of P100,000.00 and P50,000.00 to each complainant as and by way of moral
and exemplary damages; and

The sum equivalent to ten percent (10%) of the total award as and for attorneys fees.

Respondents are directed to immediately comply with the reinstatement aspect of this
Decision. However, in the event that reinstatement is no longer feasible, respondent[s] are
hereby ordered, in lieu thereof, to pay unto the complainants their separation pay computed
at one month for [e]very year of service.

SO ORDERED.7

Meanwhile, the SEC replaced the Interim Rehabilitation Receiver with a Permanent
Rehabilitation Receiver.

On appeal, the NLRC reversed the Labor Arbiter's decision and dismissed the case for lack of
merit.8 Reconsideration having been denied, an Entry of Judgment9 was issued on July 13,
2000.

On October 5, 2000, the Labor Arbiter issued a Writ of Execution10 commanding the sheriff
to proceed:

xxx

1. To the Office of respondent PAL Building I, Legaspi St., Legaspi Village, Makati City or to
any of its Offices in the Philippines and cause reinstatement of complainants to their former
position and to cause the collection of the amount of [P]549,309.60 from respondent PAL
representing the backwages of said complainants on the reinstatement aspect;

2. In case you cannot collect from respondent PAL for any reason, you shall levy on the
office equipment and other movables and garnish its deposits with any bank in the
Philippines, subject to the limitation that equivalent amount of such levied movables and/or
the amount garnished in your own judgment, shall be equivalent to [P]549,309.60. If still
insufficient, levy against immovable properties of PAL not otherwise exempt from execution.
x x x x11

Although PAL filed an Urgent Motion to Quash Writ of Execution, the Labor Arbiter issued a
Notice of Garnishment12 addressed to the President/Manager of the Allied Bank Head Office
in Makati City for the amount of P549,309.60.

PAL moved to lift the Notice of Garnishment while petitioners moved for the release of the
garnished amount. PAL opposed petitioners' motion. It also filed an Urgent Petition for
Injunction which the NLRC resolved as follows:

WHEREFORE, premises considered, the Petition is partially GRANTED. Accordingly, the Writ
of Execution dated October 5, 2000 and related [N]otice of Garnishment [dated October 25,
2000] are DECLARED valid. However, the instant action is SUSPENDED and REFERRED to
the Receiver of Petitioner PAL for appropriate action.

SO ORDERED.13

PAL appealed to the Court of Appeals on the grounds that: (1) by declaring the writ of
execution and the notice of garnishment valid, the NLRC gave petitioners undue advantage
and preference over PAL's other creditors and hampered the task of the Permanent
Rehabilitation Receiver; and (2) there was no longer any legal or factual basis to reinstate
petitioners as a result of the reversal by the NLRC of the Labor Arbiter's decision.

The appellate court ruled that the Labor Arbiter issued the writ of execution and the notice
of garnishment without jurisdiction. Hence, the NLRC erred in upholding its validity. Since
PAL was under receivership, it could not have possibly reinstated petitioners due to
retrenchment and cash-flow constraints. The appellate court declared that a stay of
execution may be warranted by the fact that PAL was under rehabilitation receivership. The
dispositive portion of the decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is
hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution, as well as the
January 28, 2002 Resolution of public respondent National Labor Relations Commission is
hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the
Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET
ASIDE.

SO ORDERED.14

Hence, the instant petition raising a single issue as follows:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
PETITIONERS ARE ENTITLED TO THEIR ACCRUED WAGES DURING THE PENDENCY OF PAL'S
APPEAL.15

Simply put, however, there are really two issues for our consideration: (1) Are petitioners
entitled to their wages during the pendency of PAL's appeal to the NLRC? and (2) In the
light of new developments concerning PAL's rehabilitation, are petitioners entitled to
execution of the Labor Arbiter's order of reinstatement even if PAL is under receivership?
cralaw library
We shall first resolve the issue of whether the execution of the Labor Arbiter's order is
legally possible even if PAL is under receivership.

We note that during the pendency of this case, PAL was placed by the SEC first, under an
Interim Rehabilitation Receiver and finally, under a Permanent Rehabilitation Receiver. The
pertinent law on this matter, Section 5(d) of Presidential Decree (P.D.) No. 902-A, as
amended, provides that:

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

xxx

d) Petitions of corporations, partnerships or associations to be declared in the state of

suspension of payments in cases where the corporation, partnership or association
possesses property to cover all of its debts but foresees the impossibility of meeting them
when they respectively fall due or in cases where the corporation, partnership or association
has no sufficient assets to cover its liabilities, but is under the [management of a
rehabilitation receiver or] Management Committee created pursuant to this Decree.

The same P.D., in Section 6(c) provides that:

SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess
the following powers:

xxx

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

xxx

Worth stressing, upon appointment by the SEC of a rehabilitation receiver, all actions for
claims against the corporation pending before any court, tribunal or board shall ipso jure be
suspended. The purpose of the automatic stay of all pending actions for claims is to enable
the rehabilitation receiver to effectively exercise its/his powers free from any judicial or
extra-judicial interference that might unduly hinder or prevent the rescue of the
corporation.16

More importantly, the suspension of all actions for claims against the corporation embraces
all phases of the suit, be it before the trial court or any tribunal or before this Court.17 No
other action may be taken, including the rendition of judgment during the state of
suspension. It must be stressed that what are automatically stayed or suspended are the
proceedings of a suit and not just the payment of claims during the execution stage after
the case had become final and executory.18
Furthermore, the actions that are suspended cover all claims against the corporation
whether for damages founded on a breach of contract of carriage, labor cases, collection
suits or any other claims of a pecuniary nature.19 No exception in favor of labor claims is
mentioned in the law.20 chanrobles virtual law library

This Court's adherence to the above-stated rule has been resolute and steadfast as
evidenced by its oft-repeated application in a plethora of cases involving PAL, the most
recent of which is Philippine Airlines, Inc. v. Zamora.21

Since petitioners' claim against PAL is a money claim for their wages during the pendency of
PAL's appeal to the NLRC, the same should have been suspended pending the rehabilitation
proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have
abstained from resolving petitioners' case for illegal dismissal and should instead have
directed them to lodge their claim before PAL's receiver.22

However, to still require petitioners at this time to re-file their labor claim against PAL under
the peculiar circumstances of the case - that their dismissal was eventually held valid with
only the matter of reinstatement pending appeal being the issue - this Court deems it
legally expedient to suspend the proceedings in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings
herein are SUSPENDED until further notice from this Court. Accordingly, respondent
Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the Court as to the status
of its ongoing rehabilitation. No costs.

SO ORDERED.
 [G.R. NO. 157146. April 29, 2005]

LAGUNA AUTOPARTS MANUFACTURING CORPORATION, Petitioners, v. OFFICE OF

THE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) and LAGUNA
AUTOPARTS MANUFACTURING CORPORATION OBRERO PILIPINO-LAMCOR
CHAPTER, Respondents.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No.
67424 dated September 13, 2002, and the Resolution dated February 5, 2003 denying the
motion for reconsideration thereof. The assailed decision affirmed in toto the decision of the
Secretary of Labor and Employment, granting the petition for certification election filed by
respondent Laguna Autoparts Manufacturing Corporation Obrero Pilipino-LAMCOR Chapter.

On May 3, 1999, the respondent union filed a petition for certification election before the
Department of Labor and Employment (DOLE), Regional Office No. IV, Calamba, Laguna. In
its petition, the respondent union alleged that Obrero Pilipino was a legitimate labor
organization under Registration Certificate No. NCR-LF-11-04-92 issued by DOLE on
November 11, 1992 and that its chapter affiliate, LAMCOR Chapter, had been assigned
Control No. RO400-9807-CC-030 dated March 23, 1999. A copy of the respondent union's
Certificate of Creation was attached to the petition. The petition further alleged that the
bargaining unit sought to be represented was composed of all the rank-and-file employees
in the petitioner company, more or less, 160 employees. It averred that the said bargaining
unit is unorganized and that there has been no certification election conducted for the past
12 months prior to the filing of the petition.2

The petitioner company moved to dismiss the petition for certification election. It claimed
that the respondent union was not a legitimate labor organization for failure to show that it
had complied with the registration requirements, such as the submission of the following
requirements to the Regional Office or the Bureau of Labor Relations (BLR):

a) Proof of payment of registration fee;

b) List of officers and their addresses, and the address of the principal place of business of
the union;

c) Minutes of the organizational meeting and the list of workers who participated in the said
meeting;

d) Names of the members comprising at least twenty percent (20%) of all the employees in
the bargaining unit where the union seeks to operate;

e) Copies of financial reports or books of accounts; andcralawlibrary

f) Copies of petitioner's constitution and by-laws, minutes of its adoption or ratification, and
list of members who participated in it.3
The petitioner company further asserted in the said motion that even if the respondent
union was issued a certificate of registration, it could not file a petition for certification
election since its legal personality was at question.4

On October 24, 2000, Med-Arbiter Anastasio L. Bactin dismissed the petition for certification
election for the respondent union's lack of legal personality. The Med-Arbiter found that the
respondent union had not yet attained the status of a legitimate labor organization because
it failed to indicate its principal office on the documents it submitted to the Regional Office.
He opined that this was a fatal defect tantamount to failure to submit the complete
requirements, which warranted the dismissal of the petition for certification election.5

The respondent union appealed the case to the Secretary of Labor and Employment, Patricia
A. Sto. Tomas, who ruled as follows:

WHEREFORE, the appeal is GRANTED. The order dated 24 October 2000 of the Med-
Arbiter is REVERSED and SET ASIDE. Accordingly, let the entire records of this case be
remanded to the regional office of origin for the immediate conduct of a certification
election, subject to the usual pre-election conference, among the rank-and-file employees of
Laguna Auto Parts Manufacturing Corporation (LAMCOR), with the following choices:

1. Obrero Pilipino 'LAMCOR Chapter; andcralawlibrary

2. No Union

Pursuant to Section 11.1, Rule XI of the New Implementing Rules, the employer is hereby
directed to submit to the regional office of origin the certified list of current employees in
the bargaining unit for the last three months prior to the issuance of this decision.

SO DECIDED.6

Finding no cogent reason to alter her decision, the Secretary of Labor and Employment
denied the motion for reconsideration thereof.7

Not convinced, the petitioner filed a petition for certiorari with the CA on the following
grounds:

I. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN FINDING THAT

PRIVATE RESPONDENT HAS COMPLIED WITH ALL REQUIREMENTS FOR REGISTRATION;

II. THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN FINDING

THAT PRIVATE RESPONDENT IS A LEGITIMATE LABOR UNION DESPITE LACK OF
REGISTRATION AS SUCH.8

On September 13, 2002, the CA rendered a Decision in favor of the respondent union, thus:

WHEREFORE, the instant petition is hereby DENIED and the assailed decision of the
Secretary of Labor and Employment is AFFIRMED in toto.

SO ORDERED.9

The CA stressed that a local or chapter need not be registered to become a legitimate labor
organization. It pointed out that a local or chapter acquires legal personality as a labor
organization from the date of filing of the complete documents enumerated in Section 110 of
Rule VI of the Implementing Rules of Book V (as amended by Department Order [D.O.] No.
9). The CA held that the findings of the Labor Secretary was amply supported by the
records; such findings would not be reversed since she is considered to have acquired
expertise as her jurisdiction is confined to specific matters. The CA, citing the case
of Pagpalain Haulers, Inc. v. Trajano,11 also upheld the validity of D.O. No. 9 since the
petitioner failed to show that it was contrary to law or the Constitution.

Finally, the CA noted that it was the employer which offered the most tenacious resistance
to the holding of a certification election among its regular rank-and-file employees. It
opined that this must not be so for the choice of a collective bargaining agent was the sole
concern of the employees, and the employer should be a mere bystander.12

The petitioner filed a motion for reconsideration of the CA decision, but the same was
likewise denied in a Resolution dated February 5, 2003.

Hence, this Petition for Review wherein the petitioner relies on the sole ground'

WITH DUE RESPECT, THE HON. COURT OF APPEALS COMMITTED REVERSIBLE ERRORS OF
FACTS AND LAW WHEN IT AFFIRMED THE DECISION DATED JULY 5, 2001 OF THE HON.
SECRETARY PATRICIA STO. TOMAS IN THE CASE IN RE: PETITION FOR CERTIFICATION
ELECTION AMONG THE RANK - AND-FILE EMPLOYEES OF LAGUNA AUTO PARTS MFTG.
CORP. CASE NO. RO400-9905-RU-001 WHEN IT RENDERED ITS DECISION DATED
SEPTEMBER 13, 2002.13

The issues are the following: (a) whether or not the respondent union is a legitimate labor
organization; (b) whether or not a chapter's legal personality may be collaterally attacked in
a petition for certification election; and (c) whether or not the petitioner, as the employer,
has the legal standing to oppose the petition for certification election.

The petitioner submits that there is no law prohibiting it from questioning and impugning
the status of the respondent union even in a petition for certification election. It stresses
that the right to file a petition for certification election is a mere statutory right and, to
enjoy such right, the respondent union must comply with the requirements provided under
the law, particularly the requirement that the applicant must be a legitimate labor
organization. In this case, the Med-Arbiter found that the respondent union, which is a local
or chapter, had not yet attained the status of a legitimate labor organization for failure to
indicate its principal office on the list of officers it submitted to the Regional Office. The
petitioner insists that substantial compliance with the requirements is not sufficient; as
such, even if such address was indicated in the other documents submitted to the Regional
Office, the requirement would still not be considered fulfilled. The petitioner concludes that
the respondent union, therefore, does not have the right to file a petition for certification
election.

The petitioner further postulates that in order to be considered legitimate, a labor

organization must be issued a certificate of registration. It contends that D.O. No. 9, insofar
as it requires that the mere submission of documentary requirements as sufficient to give
legitimate personality to a labor organization, is ultra vires. The petitioner avers that the
said Department Order could not amend Article 234 of the Labor Code which clearly states
that the registration of a union is the operative act that imbues it with legitimate
personality.

The petitioner then argues that since the mere submission of documents does not vest
legitimate status on a local or chapter, it follows that such status may be questioned
collaterally in a petition for certification election. It adds that the issue of whether or not the
respondent union has the legal personality must first be resolved before the petition for
certification election should be granted.

Finally, the petitioner maintains that in a number of cases,14 the employer was allowed to
question the status of the union-applicant in a petition for certification election.15

For its part, the respondent union avers that the petitioner's active participation in the
representation proceedings was an act of intervention of the employee's right to self-
organization. It asserts that the CA was correct in finding that the petitioner did not observe
a strictly hands-off policy in the representation proceedings, in violation of established
jurisprudence. It argues that the petitioner's alleged violation of the requirements of D.O.
No. 9, for failure to indicate its principal address, has already been resolved by the decision
of the Secretary of Labor and Employment.16

The petition is unmeritorious.

In a Petition for Review on Certiorari as a mode of appeal under Rule 45 of the Rules of
Court, a petitioner can raise only questions of law - the Supreme Court is not the proper
venue to consider a factual issue as it is not a trier of facts.17 Findings of fact of
administrative agencies and quasi-judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally accorded not only great
respect but even finality.18 This is particularly true where the CA affirms such findings of
fact. In this case, the CA affirmed the finding of the Secretary of Labor and Employment
that the respondent union is a legitimate labor organization.

Indeed, a local or chapter need not be independently registered to acquire legal personality.
Section 3, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9 clearly
states'

SEC. 3. Acquisition of legal personality by local/chapter. 'A local/chapter constituted

in accordance with Section 1 of this Rule shall acquire legal personality from the date of
filing of the complete documents enumerated therein. Upon compliance with all
documentary requirements, the Regional Office or Bureau shall issue in favor of the
local/chapter a certificate indicating that it is included in the roster of legitimate labor
organizations.19

As gleaned from the said provision, the task of determining whether the local or chapter has
submitted the complete documentary requirements is lodged with the Regional Office or the
BLR, as the case may be. The records of the case show that the respondent union submitted
the said documents to Regional Office No. IV and was subsequently issued the following
certificate:

CERTIFICATE OF CREATION OF LOCAL/ CHAPTER NO.

This certifies that as of July 16, 1998 the OBRERO PILIPINO-LAMCOR submitted to this
Office Charter Certificate No. 07-98 issued by OBRERO PILIPINO with complete supporting
documents. From said date, it has acquired legal personality as a labor organization. It shall
have the right to represent its members for all purposes not contrary to law or applicable
regulations and to its constitution and by-laws.
The legitimate personality of OBRERO PILIPINO-LAMCOR CHAPTER is without prejudice to
whatever grounds for revocation or cancellation as may be prescribed by applicable laws
and regulations.

March 23, 1999

Date

By:

(SGD.)

RAYMUNDO G. AGRAVANTE

Labor Relations Division Chief20

Hence, the Regional Office, through the Labor Relations Division Chief, has determined that
the respondent union complied with the requirements under the law. It, therefore, declared
that the respondent union has acquired legal personality as a labor organization. Absent any
pronouncement to the contrary, such determination of the Labor Relations Division Chief will
stand, on the presumption that the duty of determining whether the respondent union
submitted the complete documentary requirements has been regularly performed.

We rule, however, that such legal personality may not be subject to a collateral attack but
only through a separate action instituted particularly for the purpose of assailing it. This is
categorically prescribed by Section 5, Rule V of the Implementing Rules of Book V, which
states as follows:

SEC. 5. Effect of registration. 'The labor organization or workers' association shall be

deemed registered and vested with legal personality on the date of issuance of its certificate
of registration. Such legal personality cannot thereafter be subject to collateral attack but
may be questioned only in an independent petition for cancellation in accordance with these
Rules.21

Hence, to raise the issue of the respondent union's legal personality is not proper in this
case. The pronouncement of the Labor Relations Division Chief, that the respondent union
acquired a legal personality with the submission of the complete documentary requirement,
cannot be challenged in a petition for certification election.

The discussion of the Secretary of Labor and Employment on this point is also enlightening,
thus:

'Section 5, Rule V of D.O. 9 is instructive on the matter. It provides that the legal
personality of a union cannot be the subject of collateral attack in a petition for certification
election, but may be questioned only in an independent petition for cancellation of union
registration. This has been the rule since NUBE v. Minister of Labor, 110 SCRA 274 (1981).
What applies in this case is the principle that once a union acquires legitimate status as a
labor organization, it continues as such until its certificate of registration is cancelled or
revoked in an independent action for cancellation.

Equally important is Section 11, Paragraph II, Rule IX of D.O. 9, which provides for the
dismissal of a petition for certification election based on the lack of legal personality of a
labor organization only in the following instances: (1) appellant is not listed by the Regional
Office or the BLR in its registry of legitimate labor organizations; or (2) appellant's legal
personality has been revoked or cancelled with finality. Since appellant is listed in the
registry of legitimate labor organizations, and its legitimacy has not been revoked or
cancelled with finality, the granting of its petition for certification election is proper.22

Finally, on the issue of whether the petitioner has the legal standing to oppose the petition
for certification election, we rule in the negative. Our ruling in San Miguel Foods, Inc.-Cebu
B-Meg Feed Plant v. Laguesma23 is still sound, thus:

In any case, this Court notes that it is petitioner, the employer, which has offered the most
tenacious resistance to the holding of a certification election among its monthly-paid rank-
and-file employees. This must not be so, for the choice of a collective bargaining agent is
the sole concern of the employees. The only exception to this rule is where the employer
has to file the petition for certification election pursuant to Article 258 of the Labor Code
because it was requested to bargain collectively, which exception finds no application in the
case before us. Its role in a certification election has aptly been described in Trade Unions
of the Philippines and Allied Services (TUPAS) v. Trajano, as that of a mere bystander. It
has no legal standing in a certification election as it cannot oppose the petition or appeal the
Med-Arbiter's orders related thereto. '24

In conclusion, we find no reversible error in the CA's decision dismissing the Petition
for Certiorari for the nullification of the decision of the Secretary of Labor and Employment.
It should be stressed that certiorari will issue only to correct errors of jurisdiction and not to
correct errors of judgment or mistakes in the tribunal's findings and conclusions.25 The
petitioner failed to demonstrate any grave abuse of discretion on the part of the Secretary
of Labor and Employment in granting the petition for certification election.

WHEREFORE, premises considered, the petition is DENIED DUE COURSE. The Decision of
the Court of Appeals in CA-G.R. SP No. 67424 and the Resolution dated February 5, 2003
are AFFIRMED.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

 [G.R. No. 110007. October 18, 1996.]

HOLY CROSS OF DAVAO COLLEGE, INC., Petitioner, v. HON. JEROME JOAQUIN, in

his capacity as Voluntary Arbitrator, and HOLY CROSS OF DAVAO COLLEGE UNION
- KALIPUNAN NG MANGGAGAWANG PILIPINO (KAMAPI), Respondents.

DECISION

NARVASA, C.J.:

A collective bargaining agreement, effective from June 1, 1986 to May 31, 1989 was
entered into between petitioner Holy Cross of Davao College, Inc. (hereafter Holy Cross), an
educational institution, and the affiliate labor organization representing its employees,
respondent Holy Cross of Davao College Union-KAMAPI (hereafter KAMAPI). Shortly before
the expiration of the agreement, KAMAPI President, Jose Lagahit, wrote Holy Cross under
date of April 12, 1989 expressing his union’s desire to renew the agreement, withal seeking
its extension for two months, or until July 31, 1989, on the ground that the teachers were
still on summer vacation and union activities necessary or incident to the negotiation of a
new agreement could not yet be conducted. 1 Holy Cross President Emilio P. Palma-Gil
replied that he had no objection to the extension sought, it being allowable under the
collective bargaining agreement. 2

On July 24, 1989, Jose Lagahit convoked a meeting of the KAMAPI membership for the
purpose of electing a new set of union officers, at which Rodolfo Gallera won-election as
president. To the surprise of many, and with resultant dissension among the membership,
Galera forthwith initiated discussions for the union’s disaffiliation from the KAMAPI
Federation.

Gallera’s group subsequently formed a separate organization known as the Holy Cross of
Davao College Teachers Union, and elected its own officers. For its part, the existing union,
KAMAPI, sent to the School its proposals for a new collective bargaining contract; this it did
on July 31, 1989, the expiry date of the two-month extension it had sought. 3

Holy Cross thereafter stopped deducting from the salaries and wages of its teachers and
employees the corresponding union dues and special assessments (payable by union
members), and agency fees (payable by non-members), in accordance with the check-off
clause of the CBA, 4 prompting KAMAPI, on September 1, 1989, to demand an explanation.

In the meantime, there ensued between the two unions a full-blown action on the basic
issue of representation, which was to last for some two years. It began with the filing by the
new union (headed by Gallera) of a petition for certification election in the Office of the
Med-Arbiter. 5 KAMAPI responded by filing a motion asking the Med-Arbiter to dismiss the
petition. On August 31, 1989, KAMAPI also advised Holy Cross of the election of a new set
of officers who would also comprise its negotiating panel. 6

The Med-Arbiter denied KAMAPI’s motion to dismiss, and ordered the holding of a
certification election. On appeal, however, the Secretary of Labor reversed the Med-Arbiter’s
ruling and ordered the dismissal of the petition for certification election, which action was
eventually sustained by this Court in appropriate proceedings.
After its success in the certification election case KAMAPI presented, on April 11, 1991,
revised bargaining proposals to Holy Cross; 7 and on July 11, 1991, it sent a letter to the
School asking for its counter-proposals. The School replied, that it did not know if the
Supreme Court had in fact affirmed the Labor Secretary’s decision in favor of KAMAPI as the
exclusive bargaining representative of the School employees, whereupon KAMAPI’s counsel
furnished it with a copy of the Court’s resolution to that effect; and on September 7, 1991,
KAMAPI again wrote to Holy Cross asking for its counter-proposals as regards the terms of a
new CBA.

In response, Holy Cross declared that it would take no action towards a new CBA without a
"definitive ruling" on the proper interpretation of Article I of the old CBA which should have
expired on May 31, 1989 (but, as above stated, had been extended for two months at the
KAMAPI’s request). Said Article provides inter alia for the automatic extension of the CBA
for another period of three (3) years counted from its expiration, if the parties fail to agree
on a renewal, modification or amendment thereof. It appears, in fact, that the opinion of the
DOLE Regional Director on the meaning and import of said Article I had earlier been sought
by the College president, Emilio Palma Gil. 8

KAMAPI then sent another letter to Holy Cross, this time accusing it of unfair labor practice
for refusing to bargain despite the former’s repeated demands; and on the following day, it
filed a notice of strike with the National Mediation and Conciliation Board. 9

KAMAPI and Holy Cross were ordered to appear before Conciliator-Mediator Agapito J.
Adipen on October 2, 1991. Several conciliation meetings were thereafter held between
them, and when these failed to bring about any amicable settlement, the parties agreed to
submit the case to voluntary arbitration. 10 Both parties being of the view that the dispute
did indeed revolve around the interpretation of �1 and �2 of Article I of the CBA, they
submitted position papers explicitly dealing with the following issues presented by them for
resolution to the voluntary arbitrator:chanrob1es virtual 1aw library

a. Whether or not the CBA which expired on May 31, 1989 was automatically renewed and
did not serve merely as a holdover CBA; and

b. Whether or not there was refusal to negotiate on the part of the Holy Cross of Davao
College.

On both issues, Voluntary Arbitrator Jerome C. Joaquin found in favor of KAMAPI.

Respecting the matter of the automatic renewal of the bargaining agreement, the Voluntary
Arbitrator ruled that the request for extension filed by KAMAPI constituted seasonable notice
of its intention to renew, modify or amend the agreement, which it could not however
pursue because of the absence of the teachers who were then on summer vacation. 11 He
rejected the contention of Holy Cross that KAMAPI had unreasonably delayed (until July 31,
1989) the submission of bargaining proposals, opining that the delay was partly attributable
to the School’s prolonged inaction on KAMAPI’s request for extension of the CBA. He also
ruled that Holy Cross was estopped from claiming automatic renewal of the CBA because it
ceased to implement the check-off provision embodied in the CBA, declaring said School’s
argument — that a "definitive ruling" by the DOLE on the correct interpretation of the
automatic-extension clause of the old CBA was a condition precedent to negotiations for a
new CBA — to be a mere afterthought set up to justify its refusal to bargain with KAMAPI
after the latter had proven that it was the legally-empowered bargaining agent of the school
employees. In the dispositive portion of his award, the Voluntary Arbitrator ordered Holy
Cross to:chanrob1es virtual 1aw library

1. sit down, negotiate and conclude (an agreement) with the Holy Cross of Davao College
Faculty Union-KAMAPI, which, by Resolution of the Supreme Court, remains the collective
bargaining agent of the permanent and regular teachers of said educational institution;
(and)

2. pay to the Union the amount equivalent to the uncollected union dues from August 1989
up to the time respondent shall have concluded a new CBA with the Union, it appearing that
respondent stopped complying with the CBA’s check-off provisions as of said date. 12

The Voluntary Arbitrator also requested the Fiscal Examiner of the NLRC, Region XI, Davao
City, to make the proper computation of the union dues to be paid by management to the
complainant union.

Dissatisfied, Holy Cross filed the petition at bar, challenging the Voluntary Arbitrator’s
decision on the following grounds, viz.: 13

1. That the voluntary arbitrator erred and acted in grave abuse of discretion amounting to
lack or excess of jurisdiction in ordering petitioner to pay the union the uncollected union
dues to private respondent which was not even an issue submitted for voluntary arbitration,
resulting in serious violation of due process.

2. That the voluntary arbitrator erred in considering that petitioner refused to negotiate with
(the) Union, contrary to the records and evidence presented in the case.

The Voluntary Arbitrator’s conclusion — that petitioner Holy Cross had, in light of the
evidence on record, failed to negotiate with KAMAPI, adjudged as the collective bargaining
agent of the school’s permanent and regular teachers — is a conclusion of fact that the
Court will not review, the inquiry at bar being limited to the issue of whether or not said
Voluntary Arbitrator had acted without or in excess of his jurisdiction, or with grave abuse
of discretion; nor does the Court see its way clear, after analyzing the record, to
pronouncing that reasoned conclusion to have been made so whimsically, capriciously,
oppressively, or unjustifiably — in other words, attended by grave abuse of discretion
amounting to lack or excess of jurisdiction — as to call for extension of the Court’s
correcting hand through the extraordinary writ of certiorari. Said finding should therefore
be, and is hereby, sustained.

Now, concerning its alleged failure to observe the check-off provisions of the collective
bargaining agreement, Holy Cross contends that this was not one of the issues raised in the
arbitration proceedings; that said issue was therefore extraneous and improper; and that
even assuming the contrary, it (Holy Cross) had not in truth violated the CBA.

Holy Cross asserts that it could not comply with the check-off provision because contrary to
established practice prior to August, 1989, KAMAPI failed to submit to the college
comptroller every 8th day of the month, a list of employees from whom union. dues and the
corresponding agency fees were to be deducted, further, that there was an uncertainty as to
the recognized bargaining agent with whom it would deal — a matter settled only upon its
receipt of a copy of this Court’s Resolution on July 18, 1991 — and in any case, the
Voluntary Arbitrator’s order for it to pay to the union the uncollected employees’ dues or
agency fees — would amount to the union’s unjust enrichment. 14

KAMAPI maintains, on the other hand, that the check-off issue was raised in the position
paper it submitted in the voluntary arbitration proceedings; and that in any case, the issue
was intimately connected with those submitted for resolution and necessary for complete
adjudication of the rights and obligations of the parties; 15 and that said position paper had
alleged the manifest bad faith of management in not providing information as to who were
regular employees, thereby precluding determination of teachers eligible for union
membership.

Disregarding the objection of failure to seasonably set up the check-off question — the
factual premises thereof not being indisputable, and technical objections of this sort being
generally inconsequential in quasi-judicial proceedings — the issues here ultimately boil
down to whether or not an employer is liable to pay to the union of its employees, the
amounts it failed to deduct from their salaries — as union dues (with respect to union
members) or agency fees (as regards those not union members) — in accordance with the
check-off provisions of the collective bargaining contract (CBA) which it claims to have been
automatically extended.

A check-off is a process or device whereby the employer, on agreement with the union
recognized as the proper bargaining representative, or on prior authorization from its
employees, deducts union dues or agency fees from the latter’s wages and remits them
directly to the union. 16 Its desirability to a labor organization is quite evident; by it, it is
assured of continuous funding. Indeed, this Court has acknowledged that the system of
check-off is primarily for the benefit of the union and, only indirectly, of the individual
laborers. 17 When so stipulated in a collective bargaining agreement; or authorized in
writing by the employees concerned — the Labor Code and its Implementing Rules
recognize it to be the duty of the employer to deduct sums equivalent to the amount of
union dues from the employees’ wages for direct remittance to the union, in order to
facilitate the collection of funds vital to the role of the union as representative of employees
in a bargaining unit if not, indeed, to its very existence. And it may be mentioned in this
connection that the right to union dues deducted pursuant to a check-off, pertains to the
local union which continues to represent the employees under the terms of a CBA, and not
to the parent association from which it has disaffiliated. 18

The legal basis of check-off is thus found in statute or in contract. 19 Statutory limitations
on check-offs generally require written authorization from each employee to deduct wages;
however, a resolution approved and adopted by a majority of the union members at a
general meeting will suffice when the right to check-off has been recognized by the
employer, including collection of reasonable assessments in connection with mandatory
activities of the union, or other special assessments and extraordinary fees. 20

Authorization to effect a check-off of union dues is co-terminous with the union affiliation or
membership of employees. 21 On the other hand, the collection of agency fees in an
amount equivalent to union dues and fees, from employees who are not union members, is
recognized by Article 248 (e) of the Labor Code. No requirement of written authorization
from the non-union employee is imposed. The employee’s acceptance of benefits resulting
from a collective bargaining agreement justifies the deduction of agency fees from his pay
and the union’s entitlement thereto. In this aspect, the legal basis of the union’s right to
agency fees is neither contractual nor statutory, but quasi-contractual, deriving from the
established principle that non-union employees may not unjustly enrich themselves by
benefiting from employment conditions negotiated by the bargaining union. 22

No provision of law makes the employer directly liable for the payment to the labor
organization of union dues and assessments that the former fails to deduct from its
employees’ salaries and wages pursuant to a check-off stipulation. The employer’s failure to
make the requisite deductions may constitute a violation of a contractual commitment for
which it may incur liability for unfair labor practice. 23 But it does not by that omission,
incur liability to the union for the aggregate of dues or assessments uncollected from the
union members, or agency fees for non-union employees.

Check-offs in truth impose an extra burden on the employer in the form of additional
administrative and bookkeeping costs. It is a burden assumed by management at the
instance of the union and for its benefit, in order to facilitate the collection of dues
necessary for the latter’s life and sustenance. But the obligation to pay union dues and
agency fees obviously devolves not upon the employer, but the individual employee. It is a
personal obligation not demandable from the employer upon default or refusal of the
employee to consent to a check-off. The only obligation of the employer under a check-off is
to effect the deductions and remit the collections to the union. The principle of unjust
enrichment necessarily precludes recovery of union dues — or agency fees — from the
employer, these being, to repeat, obligations pertaining to the individual worker in favor of
the bargaining union. Where the employer fails or refuses to implement a check-off
agreement, logic and prudence dictate that the union itself undertake the collection of union
dues and assessments from its members (and agency fees from non-union employees);
this, of course, without prejudice to suing the employer for unfair labor practice.

There was thus no basis for the Voluntary Arbitrator to require Holy Cross to assume liability
for the union dues and assessments, and agency fees that it had failed to deduct from its
employees’ salaries on the proffered plea that contrary to established practice, KAMAPI had
failed to submit to the college comptroller every 8th day of the month, a list of employees
from whose pay union dues and the corresponding agency fees were to be deducted.

WHEREFORE, the requirement imposed on petitioner Holy Cross by the challenged decision
of the Voluntary Arbitrator, to pay respondent KAMAPI the amount equivalent to the
uncollected union dues and agency fees from August 1989 up to the time a new collective
bargaining agreement is concluded, is NULLIFIED and SET ASIDE; but in all other respects,
the decision of the Voluntary Arbitrator is hereby AFFIRMED.

SO ORDERED.

Davide, Jr., Melo, Francisco and Panganiban, JJ., concur.

 [G.R. No. 120506. October 28, 1996.]

PHILIPPINE AIRLINES, INC., Petitioner, v. NATIONAL LABOR RELATIONS

COMMISSION, HON. LABOR ARBITER CORNELIO LINSANGAN, UNICORN SECURITY
SERVICES, INC., and FRED BAUTISTA, Et Al., Respondents.

DECISION

DAVIDE, JR., J.:

This is a petition for certiorari under Rule 65 of the Rules of Court to annul the decision of
the Labor Arbiter dated 12 August 1991 in NLRC Case No. 00-11-06008-90 and the
resolutions of public respondent National Labor Relations Commission (NLRC) promulgated
on 27 October 1994 and 31 May 1995 dismissing the appeal filed by the petitioner and
denying the motion for reconsideration, respectively.

The dispute arose from these antecedents:chanrob1es virtual 1aw library

On 23 December 1987, private respondent Unicorn Security Services, Inc. (USSI) and
petitioner Philippine Airlines, Inc. (PAL) executed a security service agreement. 1 USSI was
designated therein as the CONTRACTOR. Among the pertinent terms and conditions of the
agreement are as follows:chanrob1es virtual 1aw library

(4) The CONTRACTOR shall assign to PAL an initial force of EIGHTY ONE (81) bodies. . .
which may be decreased or increased by agreement on writing. . . . It is, of course,
understood that the CONTRACTOR undertakes to pay the wages or salaries and cost of
living allowance of the guards in accordance with the provisions of the Labor Code, as
amended, the different Presidential Decrees, Orders and with the rules and regulations
promulgated by competent authorities implementing said acts, assuming all responsibilities
therefore. . . .

x x x

(6) Without any expense on the part of PAL, CONTRACTOR shall see to it that the guards
assigned in PAL . . . are provided, at the expense of CONTRACTOR, with the necessary
firearms, ammunitions and facilities needed for the rendition of the security services as
aforesaid;

(7) CONTRACTOR shall select, engage and discharge the guards, employees, or agents, and
shall otherwise direct and control their services herein provided or herefore to be set forth
or prescribed. The determination of wages, salaries and compensation of the guards or
employees of the CONTRACTOR shall be within its full control but shall in no way contravene
existing laws on the matter. It is further understood that CONTRACTOR as the employer of
the security guards agrees to comply with all relevant laws and regulations, including
compulsory coverage under the social Security Act, Labor Code, as amended and the
Medical Care Act, in its operations. Although it is understood and agreed between parties
hereto that CONTRACTOR in the performance of its obligations under this Agreement, is
subject to the control and direction of PAL merely as to the result as to be accomplished by
the work or services herein specified, and not as to the means and methods for
accomplishing such result, CONTRACTOR hereby warrants that it will perform such work or
services in such manner as will achieve the result herein desired by PAL.

(8) Discipline and administration of the security guards shall be the sole responsibility of the
CONTRACTOR to the end that CONTRACTOR shall be able to render the desired security
service requirements of PAL. CONTRACTOR, therefore, shall conform to such rules and
regulations that may be issued by PAL. For this purpose, Annex "A", which forms part of this
Agreement, contains such rules and regulations and CONTRACTOR is expected to comply
with them. At its discretion, PAL may. however, work out with CONTRACTOR such rules and
regulations before their implementation.

(9) Should PAL at any time have any justifiable objection to the presence in its premises of
any of CONTRACTOR’s officer, guard or agent under this Agreement, it shall send such
objection in writing to CONTRACTOR and the latter shall immediately take proper action.

(10) The security guards employed by CONTRACTOR in performing this Agreement shall be
paid by the CONTRACTOR and it is distinctly understood that there is no employee-employer
relationship between CONTRACTOR and/or his guards on the one hand, and PAL on the
other. CONTRACTOR shall have entire charge, control and supervision of the work and
services herein agreed upon, and PAL shall in no manner be answerable or accountable for
any accident or injury of any kind which may occur to any guard or guards of the
CONTRACTOR in the course of, or as a consequence of, their performance of work and
services under this Agreement, or for any injury, loss or damage arising from the negligence
or carelessness of the guards of the CONTRACTOR or of anyone of its employ to any person
or persons or to its or their property whether in the premises of PAL or elsewhere; and the
CONTRACTOR hereby covenants and agrees to assume, as it does hereby assume, any and
all liability or on account of any such injury, loss or damage, and shall indemnify PAL for any
liability or expense it may incur by reason thereof and to hold PAL free and harmless from
any such liability.

x x x

(13) For and in consideration of the services to be rendered by CONTRACTOR under these
presents, PAL shall pay CONTRACTOR the amount of PESOS NINE & 40/100 CTVS (P9.40)
PER HOUR multiplied by 905 hours equivalent to PESOS TWO HUNDRED SEVENTY FIVE
THOUSAND NINE HUNDRED NINE & 58/100 CTVS, Philippine currency, — (P275,909.58) the
basis of eight (8) working hours per office/guard a day, Sundays and holidays included, the
same to be payable on or before the 15th of each month for the services on the first half of
the month and on or before the end of the month for services for the 2nd half of the month.

Nothing herein contained shall prevent the parties from meeting for a review of the rates
should circumstances warrant.

x x x

(20) This Agreement shall take effect on 06 December 1987 and shall be in force for a
period of SIX (6) MONTHS — 05 JUNE 1988 thereafter it shall continue indefinitely unless
sooner terminated upon thirty (30) days notice served upon by one party to the other,
except as provided for in Articles 16, 17 & 18 hereof.
Sometime in August of 1988, PAL requested 16 additional security guards. USSI provided
what was requested; however, PAL insisted that what USSI did was merely to pick out 16
guards from the 86 already assigned by it and directed them to render overtime duty.

On 16 February 1990, PAL terminated the security service agreement with USSI without
giving the latter the 30-day prior notice required in paragraph 20 thereof. Instead, PAL paid
each of the security guards actually assigned at the time of the termination of the
agreement an amount equivalent to their one-month salary to compensate for the lack of
notice.

In November 1990, USSI, allegedly "in its capacity as Trustee for Sixteen or so Security
Guards," filed with the NLRC Arbitration Branch, National Capital Region, a complaints 2
against PAL for the recovery of P75,600.00 representing termination pay benefit due the
alleged 16 additional; security guards, which PAL failed and refused to pay despite
demands. It further asked for an award of not less than P15,000.00 for each of the 16
guards as damages for the delay in the performance of PAL’s obligation, and also for
attorney’s fees in an amount equivalent to 10% of whatever might be recovered. Pertinent
portions of the complaint read as follows:chanrob1es virtual 1aw library

3. By virtue of said contract and upon its effectivity, respondent required eighty-six (86)
security guards whom complainant USSI supplied; on or sometime in August 1989,
respondent asked for sixteen (16) security guards to render twelve (12) hours each.

4. In February 1990 and for reasons of its own, respondent caused to terminate not only
the contract but also the services of the security guards; in effecting such termination, said
respondent caused to pay the equivalent of one (1) month’s notice unto all the security
guards, except the 16 who, as aforementioned were rendering 12 hours each from date of
assignment up to and until their termination.

5. As computed, the termination pay benefits due the 16 security guards amount to
P75,600.00, or less, which , despite demands, respondent fails, neglects or refuses to pay,
as it continue refusing, failing or neglecting to so do up to the present time.

6. Respondent has not only incurred in delay in the performance of its obligation but also
contravened the tenor thereof, hence, complainants are by law, entitled to be indemnified
with damages for no less than P15,000.00 each for complainants though the correct amount
is left solely to the sound discretion of the Honorable Labor Arbiter.

7. Complainants are now compelled to litigate their plainly valid, just or demandable claim
on account of which services of counsel have been required and thereby obligated
themselves to pay, for and as attorney’s fees, the sum equivalent to ten percent (10%) of
whatever sums or sum may be recovered in the case.

The complaint was docketed as NLRC-NCR Case No. 00-11-06008-90 and assigned to Labor
Arbiter Cornelio L. Linsangan.

PAL filed a motion to dismiss the complaint 3 on the grounds that the Labor Arbiter had no
jurisdiction over the subject matter or nature of the complaint and that USSI had no cause
of action against PAL. In amplification thereof, PAL argued that the case involved the
interpretation of the security service agreement, which is purely civil in character and falls
outside of the Labor Arbiter’s jurisdiction. It is clear from Article 217 of the Labor Code that
for claims to be within the jurisdiction of Labor Arbiters, they must arise from an employer-
employee relationship. PAL claimed that USSI did not allege the existence of an employer-
employee relationship between PAL and USSI or its guards, and that in fact, paragraph 10
of the agreement provides that there is no employers-employee relationship between the
CONTRACTOR and/or his guards on the one hand and PAL on the other.

In its Oppositions 4 USSI pointed out that PAL forgot or overlooked the fact that "insofar as
labor standards, benefits, etc. have to be resolved or adjudicated, liability therefor is shifted
to, or assumed by, respondent [herein petitioners] which, in law, has been constituted as an
indirect employer."cralaw virtua1aw library

PAL filed a supplemental motion to dismiss 5 wherein it cites the following reasons for the
dismissal of the complaint: (1) the clear stipulations in the agreement (paragraphs 4 and
10) that there exists no employer-employee relationship between PAL on the one hand and
USSI and the guards on the other : (2) there were no 16 additional guards. as the 16
guards who were required to render 12-hour shifts were picked out from the original 86
guards already assigned and were already given one-month salary in lieu of the 30-day
notice of termination of the agreement; (3) USSI had no legal personality to file the case as
alleged trustee of the 16 security guards; and (4) the real parties in interest — the 16
security guards — never showed any interest in the case wither by attending any hearing or
conference, or by following up the status of the case.

Attached to the supplemental motion to dismiss were, among other things, xerox copies of
confirmation letters of USSI to PAL to show that no additional guards were in fact provided.
6

Labor Arbiter Linsangan did not resolve the motion to dismiss and the supplemental motion
to dismiss. On 12 August 1991, he handed down a decision 7 ordering PAL to pay : (1) the
sum of P75,600.00 representing the equivalent of one-month’s separation pay due the 16
individual security guards, plus 10% interest from the date of filing of the case until the
whole obligation shall have been fully settled; (2) the sum of P5,000.00 by way of
exemplary damages due each of the 16 security guards; and (3) another sum equivalent to
10% of the total award for and as attorney’s fees.

It was in that decision that Labor Arbiter Linsangan mentioned for the first time that the
resolution of the motion to dismiss and supplemental motion to dismiss "was deferred until
[the] case is decided on the merits" considering "the ground not to be indubitable." In
holding that he had jurisdiction over the case, he stated:chanrob1es virtual 1aw library

As herefore and invariably held in similar cases, the issue of whether or not Labor Arbiters
have jurisdiction over money claims affecting security guards assigned by security agencies
(like complainant herein) to their client-companies such as PAL is, more or less, settled,
especially since, as the law views such as peculiar relationship, such money claims insofar
as they have to be paid, are the ultimate responsibility of the client-firms. In effect, the
security guards have been constituted as indirect employees of the client just as the client
becomes the indirect employer of the guards. Art. 107 and 109 of the Labor Code expressly
provide that. . . .

To justify the awards, Labor Arbiter Linsangan opined:chanrob1es virtual 1aw library

Evidence adduced clearly show that sometime in December 1987, aforementioned security
service contract was executed, based on which the required number of security guards were
assigned to, or posted at, the various premises of respondent — PAL. Said number of
security guards may, as the contract provides, be increased or reduced at respondent’s
request, such that the original number or eighty-six (86) guards, an additional sixteen (16)
were needed and, accordingly supplied who, pursuant to PAL’s instructions, were required to
render twelve (12) hours each, per day.

In February 1990, and for reasons of its own, PAL caused to terminate, as it did, the
contract of security service. Unequivocably, it caused to pay the separation pay benefits of
the 86 - security guards for the equivalent amount of one (1) month’s pay. As to the
additional 16, it failed and refused to grant similar equivalent, without any valid reasons
therefor.

As earlier stated, respondent opted to rely solely on the ground set forth in its Motion to
Dismiss as well as Supplement thereto. It failed to file, despite directive made thereon, its
position paper. Neither did it submit, nor adduce, evidence (documentary or otherwise) to
rebut or controvert complainant’s claims especially since the money equivalent of the one
month separation pay due the 16 guards has been duly quantified as amounting to Seventy
Five Thousand Six Hundred (P75,600.00) Pesos. Thus established, it is clear that there was
absolutely no legal/justifiable reason why said 16 guards applied and who rendered 12
hours each per day had to be discriminated against.

Following PAL’s failure or refusal to pay, demands were made by complainant, asking at the
same time why that was so. Conceivably, respondent has smarted itself on its mistaken
belief that there was, as between the guards and itself, no employer-employee relationship
and, hence, there is no legal basis for it to pay. If that was so, why did it pay separation pay
unto the 86 regular employed guards.

PAL being widely known as a progressively-minded employer, it should be the first to show
good example for emulation. In this instant case, it did not; in fact, its actuations were not
consistent with good faith. It should, therefore, beheld liable for exemplary damages and
having required complainant to litigate a plainly valid, just or demandable claim, an award
for attorney’s fees must perforce be assessed.

On 3 September 1991, PAL filed its Appeal 8 wherein it indicated that it received a copy of
the decision on 26 August 1991. Attached thereto was a machine copy of the Notice of
Judgment/Final Order, with the date of its receipt, i.e., 26 August 1991, 9 having been
stamped on the upper right hand corner by PAL’s Legal Department.

USSI countered this Appeal with a motion for execution of judgment 10 on the ground that
since PAL, received a copy of the decision on the 23rd, not on the 26th, of August 1991 it
had until 2 September 1991 to appeal; hence, the appeal interposed on 3 September was
late by one day. The decision had then become final and executory.

In its opposition 11 to this motion, PAL insisted that it received a copy of the decision on 26
August 1991; thus, it had until 5 September 1991 to file its appeal.

On 30 September 1991, Labor Arbiter Linsangan issued a writ of execution. 12

On 1 October 1991, PAL filed a motion to quash 13 the writ of execution. It tried to explain
therein why it thought all along that it received a copy of the decision on 26 August 1991,
thus:chanrob1es virtual 1aw library

4. Upon investigation the undersigned counsel learned that on 23 August 1991 (Friday) a
server-messenger went to PAL Legal Department to serve said decision. The receiving clerks
at that time were all out to the office so that the server persuaded a secretary, Ms. April
Rose del Rosario to receive the same, notwithstanding the fact that Ms. Del Rosario told him
(server) that she was not authorized to receive documents for and in behalf of PAL. Ms. Del
Rosario then stamped the date of receipt on the services copy without stamping (the date of
receipt) PAL’s copy of the decision which was left by the server. Thereafter, Ms. del Rosario
placed PAL’s copy of the Decision on the incoming documents rack of the receiving clerk.

Attached herewith is the affidavit of Ms. Del Rosario and as Annex "A" hereof.

5. On 26 August 1991 (Monday), the receiving clerk/messenger Mr. Greg Soriano upon
finding the Decision among the documents in the incoming documents rack, immediately
stamped "Received 26 August 1991" thereon, on the honest and sincere belief that the
same just arrived that day (26 August 1991). He then forwarded the same to the secretary
of the undersigned counsel.

Attached herewith is the affidavit of Mr. Greg Soriano marked as Annex "B" hereof.

6. The undersigned counsel believing that the said decision was received on 26 August 1991
reckoned/counted the ten (10) day period for appeal from said date.

7. Considering the foregoing circumstances, the undersigned counsel’s innocent reliance on

the date of receipt stamped on the copy of the Decision furnished him was clearly due to an
innocent mistake and/or excusable neglect. Hence, justice and equity dictates that
respondent PAL should be considered to have filed its Appeal within the reglementary period
for Appeal. 14

On 8 October 1991, Labor Arbiter Linsangan issued an order 15 denying the motion to
quash.

On 10 October 1991, PAL appealed 16 to the NLRC the aforesaid order of 8 October 1991 on
the ground that it was issued with grave abuse of discretion.

In its resolution of 27 October 1994, 17 the Second Division of the NLRC dismissed PAL’s
appeal for having been filed out of time. It sustained the Labor Arbiter’s finding that PAL
had received a copy of the decision on 23 August 1991, and hence the last day to appeal
was 2 September 1991. It ruled that whether or not the decision was received by an
employee other than the receiving clerk or messenger was of no moment, as the proper
performance of employee’s duties was PAL’s concern.

On 31 May 1991, the NLRC denied the motion for reconsideration 18 for the reason that it
cannot accept PAL’s excuse at it may "open the floodgates to abuse" ; and that the lapse of
the period to appeal had already deprived the Commission of jurisdiction over the case. 19

PAL then filed this special civil action for certiorari under Rule 65 of the Rules of Court
alleging that (1) public respondents committed serious and patent error in failing to declare
that the Labor Arbiter had no jurisdiction over the instant case; (2) The Labor Arbiter
gravely abused its discretion in ordering PAL to pay the separation pay of the 16 security
guards assigned at the PAL’s premises by USSI; and (3) respondent NLRC committed grave
abuse of discretion in declaring PAL’s appeal to have been filed out of time.

PAL argues that since USSI’s cause of action was founded on the security service
agreement, and that thereunder no employer-employee relationship existed between PAL
and the security guards who were USSI’s employees, the Labor Arbiter had no jurisdiction
over the complaint. Moreover, assuming arguendo that the claims of the security guards
were valid, USSI had no personality to file the complaint, for there is nothing whatsoever to
show that it was expressly authorized by the security guards to act as their "trustee."cralaw
virtua1aw library

As to the second assigned error, PAL asserts that it is not liable to pay separation pay
because (1) it was not employer of the security guards; (2) even as an indirect employer,
as held by the Labor Arbiter, its liability was limited to violations of labor standards law, and
non-payment of the separation pay is not violation of the said law; (3) the security service
agreement with USSI did not provide for payment of separation pay; (4) the payment made
to the 86 security guards upon the termination of the agreement without the prior 30-day
notice was not separation pay but a benefit in lieu of the 30-day notice required under
paragraph 20 of the agreement; and (5) since PAL was not the employer of the security
guards, in no way could it terminate their services.

In its third assigned error, PAL submits that rules of procedure ought not to be applied in a
very rigid technical sense, since they are used only to help secure and not override
substantial justice, especially in this case where the appeal was meritorious. Moreover, the
delay in the perfection of the appeal, reckoned from the finding of the Labor Arbiter, was
only one day; but if reckoned from what its counsel innocently believed to be PAL’s date of
receipt of the decision, which was 26 August 1991, the appeal could be said to have been
seasonably filed.

In its Comment, USSI points out that the grounds relied upon by PAL are based on factual a
issue, namely, the discrimination made by PAL in paying the 86 and not the 16 security
guards. It argues that the case touched upon the rights of the 16 security guards as
employees; thus the same was within the jurisdiction of the Labor Arbiter. As regards PAL’s
plea for the relaxation of the rule of perfection of appeals, USSI contends that the
negligence of PAL’s counsel should not be deemed "compelling reason to warrant relaxation
of the rule."cralaw virtua1aw library

In its Manifestation and Motion in Lieu of Comment, 20 the Office of the Solicitor General
agrees with the PAL that the Labor Arbiter did not have jurisdiction over the complaint
because there was no employer-employee relationship between PAL and the 16 security
guards; that Articles 107 and 109 of the Labor Code which provide for joint and several
liability for payment of wages by the direct and indirect employer find no application in the
present case because the 16 security guards employed by USSI were not after unpaid
wages; and that in the interest of justice and considering that the appeal was filed only one
day late, the rule of perfection of appeals should have been relaxed to prevent a
miscarriage of justice.

In view of the stand of the Office of the Solicitor General, we advised public respondents to
file their own comment if they so desired.

In their Comment, the NLRC and Labor Arbiter Linsangan maintain that they had jurisdiction
over the case because of Articles 107 and 109 of the Labor Code which constitute PAL as
indirect employer of the 16 security guards, there being a question involving separation pay
due the latter; that the 16 security guards were entitled to separation pay, because PAL
paid the other 86 security guards when the service agreement was terminated; and that for
the NLRC to excuse the delay of one day in filing the appeal would open the floodgates of
abuse.

The instant petition is impressed with merit.

We agree with petitioner PAL that the Labor Arbiter was without jurisdiction over the subject
matter of NLRC-NCR Case No. 00-11-06008-90, because no employer-employee
relationship existed between PAL and the security guards provided by USSI under the
security service agreement, including the alleged 16 additional security guards.

We have pronounce in numerous cases 21 that in determining the existence of an

employer-employee relationship, the following elements are generally considered: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power to
dismiss; and (4) the power to control the employee’s conduct.

In the instant case, the security service agreement between PAL and USSI provides the key
to such consideration. A careful perusal thereof, especially the terms and conditions
embodied in paragraphs 4, 6, 7, 8, 9, 10, 13 and 20 quoted earlier in this ponencia,
demonstrates beyond doubt that USSI — and not PAL — was the employer of the security
guards. It was USSI which (a) selected, engaged or hired and discharged the security
guards; (b) assigned them to PAL according to the number agreed upon; (c) provided, at its
own expense, the security guards with firearms and ammunitions; (d) disciplined and
supervised them or controlled their conduct; and (e) determined their wages, salaries, and
compensation; and (f) paid them salaries or wages. Even if we disregard the explicit
covenant in said agreement that "there exists no employer-employee relationship between
CONTRACTOR and/or his guards on the one hand, and PAL in the other" all other
considerations confirm the fact that PAL was not security guards’ employer. Analogous to
the instant case is Canlubang Security Agency Corp. v. NLRC. 22

Considering then that no employer-employee relationship existed between PAL and the
security guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR Case No.
00-11-06008-90. Article 217 of the Labor Code (P.D. No. 442), as amended, vests upon
Labor Arbiters exclusive original jurisdiction only over the following:chanrob1es virtual 1aw
library

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claims 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
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.

In all these cases, an employer-employee relationship is an indispensable jurisdictional

requisite.

The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption or
jurisdiction on the pretext that PAL was the indirect employer of the security guards under
Article 107 in relation to Articles 106 and 109 of the Labor Code and, therefore, it is
solidarily liable with USSI. We agree with the Solicitor General that these Articles are
inapplicable to PAL under the facts of this case. Article 107 provides:chanrob1es virtual 1aw
library

ART. 107. Indirect Employer. — The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer contracts with an independent contractor for the performance or any work, task,
job or project.

The preceding Article referred to, which is Article 106, partly reads as follows:chanrob1es
virtual 1aw library

ART. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with
another person for the performance of the former’s work, the employees of the contractor
and to the latter’s subcontractor, if any, shall be paid in accordance with the provisions of
this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.

While USSI is an independent contractor under the security service agreement and PAL may
be considered an indirect employer,. that status did not make PAL the employer of the
security guards in every respect. As correctly posited by the Office of the Solicitor General,
PAL may be considered an indirect employer only for purposes of unpaid wages since Article
106, which is applicable to the situation contemplated in Section 107, speaks of wages. The
concept of indirect employer only relates or refers to the liability for unpaid wages. Read
together, Articles 106 and 109 simply mean that party with whom an independent
contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent
and for the purpose that the latter is considered a direct employer. The term "wage" is
defined in Article 97 (f) of the Labor Code as "the remuneration or earning, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece, or commission basis, or other method of calculating the unwritten
contract of employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee."cralaw virtua1aw library

No valid claim for wages or separation pay can arise from the security service agreement in
question by reason of its termination at the instance of PAL. The agreement contains no
provision for separation pay. A breach thereof could only give rise to damages under the
Civil code, which is cognizable by the appropriate regular court of justice. Besides, there is
no substantial proof that USSI in fact provided 16 additional guards. On the contrary, PAL
was able to prove in the annexes attached to its supplemental motion to dismiss that the 16
guards were actually picked out from the original group and were just required to render
overtime service.

The Labor Arbiter’s lack of jurisdiction was too obvious from the allegations in the complain
and its annex (the security service agreement) in NLRC-NCR Case No. 00-11-06008-90. The
Labor Arbiter then should have forthwith resolved the motion to dismiss and the
supplemental motion to dismiss. As correctly pointed out by PAL, under Section 15 of Rule V
of the New Rules of Procedure of the NLRC, any motion to dismiss on the ground of lack of
jurisdiction, improper venue, res judicata, or prescription shall be immediately resolved by
the Labor Arbiter by a written order. Yet, the Labor Arbiter did not, and it was not only his
decision that he mentioned that the resolution of the motion to dismiss "was deferred until
this case is decided on the merits" because the ground therefore was not "indubitable." On
this score the Labor Arbiter acted with grave abuse of discretion for disregarding the rules
he was bound to observe.

We shall now turn to the issue of tardiness of the appeal. The record does indeed show that
on the original copy of the Notice of Judgment/Final Order, 23 there is stamped by the PAL
Legal Department the date of its receipt of the Decision, viz., "AUG. 23 1991."cralaw
virtua1aw library

It is not also denied by respondents that on the right upper hand corner of PAL’s copy of the
Notice of Judgment/Final Orders, 24 there is stamped the date of receipt thereof by PAL
Legal Department, viz., "AUG. 23 1991." PAL explained how this discrepancy occurred and
how its counsel was misled into believing that PAL received a copy of the decision only on
26 August 1991. This belief in good faith rendered excusable any negligence it might have
committed. Besides, the delay in the perfection of the appeal was only one day. Considering
that the Labor Arbiter had no jurisdiction over the subject matter of NLRC-NCR Case No. 00-
11-06008-90 and that the 16 security guards are not in fact entitled to separation pay
under the security service agreement, the higher interest of justice favors a relaxation of
the rule on perfection of appeals in labor cases.

While it is an established rule that the perfection of an appeal in the manner and within the
period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an
appeal has the effect of rendering the judgment final and executory, it is equally settled that
the NLRC may disregard the procedural lapse where there is an acceptable reason to excuse
tardiness in the taking of the appeal. 25 Among the acceptable reasons recognized by this
Court are (a) counsel’s reliance on the footnote of the notice of the decision of the Labor
Arbiter that "the aggrieved party may appeal. . . within ten (10) working days" ; 26 (b)
fundamental consideration of substantial justice; 27 (c) prevention of miscarriage of justice
or of unjust enrichment, as where the tardy appeal is from a decision granting separation
pay which was already granted in an earlier final decision; 28 and (d) special circumstances
of the case combined with its legal merits 29 or the amount and the issue involved. 30 A
one-day delay in the perfection of the appeal was excused in Pacific Asia Overseas Shipping
Corp. v. NLRC., 31 Insular life Assurance Co. v. NLRC, 32 and City Fair Corp. v. NLRC . 33

In the instant case, the Labor Arbiter’s lack of jurisdiction — so palpably clear on the face of
the complaint — and the perpetuation of unjust enrichment if the appeal is disallowed are
enough combination of reasons that warrant a relaxation of the rules on perfection of
appeals in labor cases.

WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the Labor
Arbiter dated 12 August 1991 and the resolutions of the Second Division of the National
Labor Relations Commission promulgated on 27 October 1994 and 31 May 1995 are hereby
SET ASIDE, and NLRC-NCR Case No. 00-11-06008-90 is DISMISSED.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

 [G.R. No. 122078. April 21, 1999.]

PHILIPPINE RABBIT BUS LINES, INC., Petitioner, v. NATIONAL LABOR RELATIONS

COMMISSION AND PROCOPIO EVANGELISTA, Respondents.

DECISION

BELLOSILLO, J.:

PHILIPPINE RABBIT BUS LINES, INC., through this special civil action of certiorari under
Rule 65 of the Rules of Court as amended, seeks to reverse and set aside the decision of
respondent National Labor Relations Commission ordering petitioner to pay private
respondent Procopio Evangelista back wages and separation pay equivalent to one (1)
month pay for every year of service.

Procopio Evangelista, private respondent, was employed by petitioner on 6 May 1962, first
as a bus conductor and later as a dispatcher. On 26 October 1975 petitioner terminated the
services of respondent Evangelista; hence, respondent sued petitioner for illegal
dismissal.chanroblesvirtuallawlibrary:red

On 14 April 1976 Labor Arbiter Julio F. Andres, Jr., declared the dismissal of Evangelista as
illegal and ordered his reinstatement with payment of back wages. Petitioner appealed to
respondent National Labor Relations Commission (NLRC); however, the appeal was
dismissed for failure to file the same within the reglementary period.

Petitioner appealed to the Office of the President which, on 10 May 1978, held through
Presidential Assistant for Legal Affairs Ronaldo B. Zamora that although there was just
cause for terminating the employment of Evangelista the dismissal was nonetheless illegal
due to the failure of petitioner to observe the mandatory procedural requirements for
termination of employment under the rules implementing the Labor Code. The Office of the
President also directed petitioner to reinstate Evangelista and pay him six (6) months back
wages.chanrobles virtual lawlibrary

Petitioner filed a motion for reconsideration; it was denied. Petitioner filed a second motion
for reconsideration; it was likewise denied under Executive Order No. 19, series of 1966,
which allows only one motion for reconsideration.

On 17 November 1978, the Labor Arbiter issued a writ of execution directing petitioner to
reinstate Evangelista and to pay him six (6) months back wages.

In a manifestation dated 10 September 1979 respondent Evangelista informed the Labor

Arbiter that the monetary award in his favor had already been fully satisfied, although he
had not yet been reinstated by petitioner.chanroblesvirtual|awlibrary

On 16 December 1985 respondent Evangelista moved for the issuance of a second alias writ
of execution for his reinstatement and payment of additional back wages from 4 September
1979, the day he presented himself for reinstatement, until he could be actually reinstated.

On 8 January 1986 petitioner opposed the motion asserting that the inaction of private
respondent Evangelista for seven (7) years to pursue his reinstatement had rendered that
portion of the decision dormant and therefore could no longer be executed by mere motion.
On 26 April 1986 Labor Arbiter Antonio Tria Tirona issued an alias writ of execution of the
10 May 1978 decision of the Office of the President for the reinstatement of respondent
Evangelista. The order did not grant the prayer of private respondent for additional back
wages from 4 September 1979 to actual reinstatement as the same was not provided in the
dispositive portion of the decision.

Petitioner appealed to respondent NLRC reiterating among others its opposition that the 10
May 1978 order had indeed become dormant hence could not be enforced by mere motion.

On 30 August 1988 respondent NLRC affirmed the order of the Labor Arbiter directing
reinstatement of Evangelista without any award of additional back wages. Petitioner filed a
motion for reconsideration alleging that reinstatement was inconsistent with the finding of
the Office of the President that the dismissal of Evangelista was for a just cause.
Respondent Evangelista also filed a motion for reconsideration reiterating his prayer for
additional back wages from 4 September 1979 up to actual reinstatement. On 29 November
1988 respondent NLRC denied both motions for reconsideration.

On 5 April 1989 respondent Evangelista submitted a manifestation inviting the attention of

respondent NLRC to the reluctance of petitioner to comply with the order to reinstate him
and that he was willing to accept separation pay equivalent to one (1) month salary for
every year of service. On 16 November 1989 Labor Arbiter Arthur L. Amansec granted
Evangelista’s request for payment of separation pay in lieu of reinstatement. For its part,
petitioner manifested its willingness to grant separation pay to private respondent computed
at the wage rate prevailing at the time of his dismissal in 1975.chanrobles virtual lawlibrary

On 10 January 1990 Labor Arbiter Amansec issued an order directing that the separation
pay of Evangelista, which was equivalent to thirty (30) days salary for every year of service,
should be based on the minimum wage rate prevailing in April 1989.

Petitioner appealed to respondent NLRC which ruled on 20 July 1995 that respondent
Evangelista should be awarded back wages from 26 April 1986, the date of the issuance of
the second writ of execution directing his reinstatement, up to April 1989 when he
manifested his willingness to accept separation pay in lieu of reinstatement, and back wages
based on the statutory minimum wage prevailing in April 1989 computed from the date of
hiring up to April 1989, excluding the period 23 August 1979 to 16 December 1985.

This petition was filed by petitioner alleging that respondent NLRC in its decision of 20 July
1995 committed grave abuse of discretion in modifying and amending the final and
executory judgment of the Office of the President; and, in enforcing by mere motion the
final judgment of the Office of the President despite the lapse of seven (7) years. Petitioner
also assailed the 20 May 1978 decision of the Office of the President for having been issued
with grave abuse of discretion because it ordered the reinstatement of private respondent
despite its own finding that there was just cause in terminating his employment.

We cannot find any jurisdictional error committed by respondent NLRC.

The decision of 10 May 1978 of the Office of the President, which has long been final and
executory, declared that private respondent was illegally dismissed; hence, he was entitled
to reinstatement and six (6) months back wages. Although the monetary award to private
respondent had been fully satisfied by petitioner, respondent Evangelista had not been
reinstated despite the issuance of a writ of execution to enforce the
decision.chanroblesvirtuallawlibrary
Neither can we perceive any grave abuse of discretion in the issuance of the NLRC decision
of 20 July 1995 which ordered petitioner to pay separation pay plus back wages for its
refusal to reinstate the latter, for the period commencing 26 April 1986 when the second
alias writ of execution was issued directing reinstatement, to April 1989, the date when
private respondent manifested his preference for separation pay instead of reinstatement. It
must be emphasized that respondent NLRC, in the enforcement of the final decision of the
Office of the President, had the authority to look into the correctness of the execution of the
decision and to modify or make a recomputation of the monetary award to conform with the
decision. 1

The award of separation pay in lieu of reinstatement is an equitable recourse that has been
sanctioned by this Court in a number of cases. 2 Moreover, the order of reinstatement is
immediately executory. The unjustified refusal of the employer to reinstate an illegally
dismissed employee entitles him to payment of his salaries effective from the time the
employer failed to reinstate him despite the issuance of a writ of execution. 3 Therefore, the
payment of back wages by petitioner to respondent Evangelista for the period he was not
reinstated despite the alias writ of execution up to the time he opted for separation pay in
lieu of reinstatement is equitable and justified under the law.chanroblesvirtuallawlibrary:red

Petitioner cannot legally invoke in this case the strict application of the rule limiting
execution of judgment by mere motion within a period of five (5) years only. There have
been cases where on meritorious grounds this Court allowed execution by mere motion
even after the lapse of five (5) years. Their common denominator in those instances was
the delay caused or occasioned by actions of the judgment debtor and/or incurred for his
benefit or advantage. 4 Here, petitioner had unduly delayed the full implementation of the
final decision of the Office of the President since 1978 by filing numerous dilatory appeals
and persistently failing and refusing to immediately reinstate private Respondent.
Technicalities have no room in labor cases where the Rules of Court are applied only in a
suppletory manner and only to effectuate the objectives of the Labor Code, and not to
defeat them. 5 The law bends over backwards, under the policy of social justice, to
accommodate the interests of the working class on the humane justification that those with
less privileges in life should have more in law. 6chanrobles lawlibrary : rednad

Finally, petitioner can no longer assail the propriety of the final decision of the Office of the
President issued way back on 10 May 1978. The finality of a decision is a jurisdictional event
which cannot be made to depend on the convenience of a party. 7 Once a decision attains
finality, it becomes the law of the case whether or not the decision is erroneous. 8

WHEREFORE, the decision of respondent National Labor Relations Commission dated 20 July
1995 directing petitioner Philippine Rabbit Bus Line, Inc., to pay private respondent Procopio
Evangelista separation pay plus back wages from 26 April 1986 to April 1989 is AFFIRMED.
This decision is immediately executory. The Labor Arbiter is directed to ensure the speedy
implementation of this decision which has long been unduly delayed.

SO ORDERED.chanroblesvirtuallawlibrary
 G.R. No. 189871, August 13, 2013

DARIO NACAR, Petitioner, v. GALLERY FRAMES AND/OR FELIPE BORDEY,

JR., Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008
of the Court of Appeals (CA) in CA-G.R. SP No. 98591, and the Resolution2 dated October 9,
2009 denying petitioner�s motion for reconsideration.

The factual antecedents are undisputed.

Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration
Branch of the National Labor Relations Commission (NLRC) against respondents Gallery
Frames (GF) and/or Felipe Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97.

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found
that he was dismissed from employment without a valid or just cause. Thus, petitioner was
awarded backwages and separation pay in lieu of reinstatement in the amount of
P158,919.92. The dispositive portion of the decision, reads:
With the foregoing, we find and so rule that respondents failed to discharge the burden of
showing that complainant was dismissed from employment for a just or valid cause. All the
more, it is clear from the records that complainant was never afforded due process before
he was terminated. As such, we are perforce constrained to grant complainant�s prayer
for the payments of separation pay in lieu of reinstatement to his former position,
considering the strained relationship between the parties, and his apparent reluctance to be
reinstated, computed only up to promulgation of this decision as follows:cralawlibrary

SEPARATION PAY
Date Hired = August 1990
Rate = P198/day
Date of Decision = Aug. 18, 1998
Length of Service = 8 yrs. & 1 month
P198.00 x 26 days x 8
= P41,184.00
months
BACKWAGES
Date Dismissed = January 24, 1997
Rate per day = P196.00
Date of Decisions = Aug. 18, 1998
a) 1/24/97 to
2/5/98 = 12.36 mos.
P196.00/day x 12.36 = P62,986.5
mos. 6
b) 2/6/98 to
8/18/98 = 6.4 months
Prevailing Rate per day = P62,986.0
 0
P198.00 x 26 days x 6.4 = P32,947.2
mos. 0
= P95.933.7
TOTAL
6

xxxx

WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty

of constructive dismissal and are therefore, ordered:

1. To pay jointly and severally the complainant the amount of sixty-two

thousand nine hundred eighty-six pesos and 56/100 (P62,986.56) Pesos
representing his separation pay;chanr0blesvirtualawlibrary

2. To pay jointly and severally the complainant the amount of nine (sic) five
thousand nine hundred thirty-three and 36/100 (P95,933.36) representing his
backwages; and

3. All other claims are hereby dismissed for lack of merit.

SO ORDERED.4cralaw virtualaw library

Respondents appealed to the NLRC, but it was dismissed for lack of merit in the
Resolution5 dated February 29, 2000. Accordingly, the NLRC sustained the decision of the
Labor Arbiter. Respondents filed a motion for reconsideration, but it was denied.6cralaw
virtualaw library

Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August
24, 2000, the CA issued a Resolution dismissing the petition. Respondents filed a Motion for
Reconsideration, but it was likewise denied in a Resolution dated May 8, 2001.7cralaw
virtualaw library

Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332.
Finding no reversible error on the part of the CA, this Court denied the petition in the
Resolution dated April 17, 2002.8cralaw virtualaw library

An Entry of Judgment was later issued certifying that the resolution became final and
executory on May 27, 2002.9 The case was, thereafter, referred back to the Labor Arbiter. A
pre-execution conference was consequently scheduled, but respondents failed to
appear.10cralaw virtualaw library

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his
backwages be computed from the date of his dismissal on January 24, 1997 up to the
finality of the Resolution of the Supreme Court on May 27, 2002.11 Upon recomputation, the
Computation and Examination Unit of the NLRC arrived at an updated amount in the sum of
P471,320.31.12cralaw virtualaw library

On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the
Sheriff to collect from respondents the total amount of P471,320.31. Respondents filed a
Motion to Quash Writ of Execution, arguing, among other things, that since the Labor
Arbiter awarded separation pay of P62,986.56 and limited backwages of P95,933.36, no
more recomputation is required to be made of the said awards. They claimed that after the
decision becomes final and executory, the same cannot be altered or amended
anymore.14 On January 13, 2003, the Labor Arbiter issued an Order15 denying the motion.
Thus, an Alias Writ of Execution16 was issued on January 14, 2003.

Respondents again appealed before the NLRC, which on June 30, 2003 issued a
Resolution17 granting the appeal in favor of the respondents and ordered the recomputation
of the judgment award.

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC
to be final and executory. Consequently, another pre-execution conference was held, but
respondents failed to appear on time. Meanwhile, petitioner moved that an Alias Writ of
Execution be issued to enforce the earlier recomputed judgment award in the sum of
P471,320.31.18cralaw virtualaw library

The records of the case were again forwarded to the Computation and Examination Unit for
recomputation, where the judgment award of petitioner was reassessed to be in the total
amount of only P147,560.19.

Petitioner then moved that a writ of execution be issued ordering respondents to pay him
the original amount as determined by the Labor Arbiter in his Decision dated October 15,
1998, pending the final computation of his backwages and separation pay.

On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the
judgment award that was due to petitioner in the amount of P147,560.19, which petitioner
eventually received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the
monetary award to include the appropriate interests.19cralaw virtualaw library

On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to
the amount of P11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998
Decision that should be enforced considering that it was the one that became final and
executory. However, the Labor Arbiter reasoned that since the decision states that the
separation pay and backwages are computed only up to the promulgation of the said
decision, it is the amount of P158,919.92 that should be executed. Thus, since petitioner
already received P147,560.19, he is only entitled to the balance of P11,459.73.

Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its
Resolution22 dated September 27, 2006. Petitioner filed a Motion for Reconsideration, but it
was likewise denied in the Resolution23 dated January 31, 2007.

Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No.
98591.

On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined
that since petitioner no longer appealed the October 15, 1998 Decision of the Labor Arbiter,
which already became final and executory, a belated correction thereof is no longer allowed.
The CA stated that there is nothing left to be done except to enforce the said judgment.
Consequently, it can no longer be modified in any respect, except to correct clerical errors
or mistakes.

Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated
October 9, 2009.
Hence, the petition assigning the lone error:
I

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED,

COMMITTED GRAVE ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN
UPHOLDING THE QUESTIONED RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED
THE MAY 10, 2005 ORDER OF LABOR ARBITER MAGAT MAKING THE DISPOSITIVE PORTION
OF THE OCTOBER 15, 1998 DECISION OF LABOR ARBITER LUSTRIA SUBSERVIENT TO AN
OPINION EXPRESSED IN THE BODY OF THE SAME DECISION.26cralaw virtualaw library
Petitioner argues that notwithstanding the fact that there was a computation of backwages
in the Labor Arbiter�s decision, the same is not final until reinstatement is made or until
finality of the decision, in case of an award of separation pay. Petitioner maintains that
considering that the October 15, 1998 decision of the Labor Arbiter did not become final and
executory until the April 17, 2002 Resolution of the Supreme Court in G.R. No. 151332 was
entered in the Book of Entries on May 27, 2002, the reckoning point for the computation of
the backwages and separation pay should be on May 27, 2002 and not when the decision of
the Labor Arbiter was rendered on October 15, 1998. Further, petitioner posits that he is
also entitled to the payment of interest from the finality of the decision until full payment by
the respondents.

On their part, respondents assert that since only separation pay and limited backwages
were awarded to petitioner by the October 15, 1998 decision of the Labor Arbiter, no more
recomputation is required to be made of said awards. Respondents insist that since the
decision clearly stated that the separation pay and backwages are �computed only up to
[the] promulgation of this decision,� and considering that petitioner no longer appealed
the decision, petitioner is only entitled to the award as computed by the Labor Arbiter in the
total amount of P158,919.92. Respondents added that it was only during the execution
proceedings that the petitioner questioned the award, long after the decision had become
final and executory. Respondents contend that to allow the further recomputation of the
backwages to be awarded to petitioner at this point of the proceedings would substantially
vary the decision of the Labor Arbiter as it violates the rule on immutability of judgments.

The petition is meritorious.

The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v.
Court of Appeals (Sixth Division),27 wherein the issue submitted to the Court for resolution
was the propriety of the computation of the awards made, and whether this violated the
principle of immutability of judgment. Like in the present case, it was a distinct feature of
the judgment of the Labor Arbiter in the above-cited case that the decision already provided
for the computation of the payable separation pay and backwages due and did not further
order the computation of the monetary awards up to the time of the finality of the
judgment. Also in Session Delights, the dismissed employee failed to appeal the decision of
the labor arbiter. The Court clarified, thus:
In concrete terms, the question is whether a re-computation in the course of execution of
the labor arbiter's original computation of the awards made, pegged as of the time the
decision was rendered and confirmed with modification by a final CA decision, is legally
proper. The question is posed, given that the petitioner did not immediately pay the awards
stated in the original labor arbiter's decision; it delayed payment because it continued with
the litigation until final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from
the way the original labor arbiter framed his decision. The decision consists essentially of
two parts.

The first is that part of the decision that cannot now be disputed because it has been
confirmed with finality. This is the finding of the illegality of the dismissal and the awards of
separation pay in lieu of reinstatement, backwages, attorney's fees, and legal interests.

The second part is the computation of the awards made. On its face, the computation the
labor arbiter made shows that it was time-bound as can be seen from the figures used in
the computation. This part, being merely a computation of what the first part of the decision
established and declared, can, by its nature, be re-computed. This is the part, too, that the
petitioner now posits should no longer be re-computed because the computation is already
in the labor arbiter's decision that the CA had affirmed. The public and private respondents,
on the other hand, posit that a re-computation is necessary because the relief in an illegal
dismissal decision goes all the way up to reinstatement if reinstatement is to be made, or up
to the finality of the decision, if separation pay is to be given in lieu reinstatement.

That the labor arbiter's decision, at the same time that it found that an illegal dismissal had
taken place, also made a computation of the award, is understandable in light of Section 3,
Rule VIII of the then NLRC Rules of Procedure which requires that a computation be made.
This Section in part states:
[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as
practicable, shall embody in any such decision or order the detailed and full amount
awarded.
Clearly implied from this original computation is its currency up to the finality of the labor
arbiter's decision. As we noted above, this implication is apparent from the terms of the
computation itself, and no question would have arisen had the parties terminated the case
and implemented the decision at that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the
finding of illegality as well as on all the consequent awards made. Hence, the petitioner
appealed the case to the NLRC which, in turn, affirmed the labor arbiter's decision. By law,
the NLRC decision is final, reviewable only by the CA on jurisdictional grounds.

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds
through a timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC
exceeded its authority in affirming the payment of 13th month pay and indemnity, lapsed to
finality and was subsequently returned to the labor arbiter of origin for execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal
portion of the original labor arbiter's decision, the implementing labor arbiter ordered the
award re-computed; he apparently read the figures originally ordered to be paid to be the
computation due had the case been terminated and implemented at the labor arbiter's level.
Thus, the labor arbiter re-computed the award to include the separation pay and the
backwages due up to the finality of the CA decision that fully terminated the case on the
merits. Unfortunately, the labor arbiter's approved computation went beyond the finality of
the CA decision (July 29, 2003) and included as well the payment for awards the final CA
decision had deleted - specifically, the proportionate 13th month pay and the indemnity
awards. Hence, the CA issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it

essentially considered the labor arbiter's original decision in accordance with its basic
component parts as we discussed above. To reiterate, the first part contains the finding of
illegality and its monetary consequences; the second part is the computation of the awards
or monetary consequences of the illegal dismissal, computed as of the time of the labor
arbiter's original decision.28cralaw virtualaw library
Consequently, from the above disquisitions, under the terms of the decision which is sought
to be executed by the petitioner, no essential change is made by a recomputation as this
step is a necessary consequence that flows from the nature of the illegality of dismissal
declared by the Labor Arbiter in that decision.29 A recomputation (or an original
computation, if no previous computation has been made) is a part of the law �
specifically, Article 279 of the Labor Code and the established jurisprudence on this
provision � that is read into the decision. By the nature of an illegal dismissal case, the
reliefs continue to add up until full satisfaction, as expressed under Article 279 of the Labor
Code. The recomputation of the consequences of illegal dismissal upon execution of the
decision does not constitute an alteration or amendment of the final decision being
implemented. The illegal dismissal ruling stands; only the computation of monetary
consequences of this dismissal is affected, and this is not a violation of the principle of
immutability of final judgments.30cralaw virtualaw library

That the amount respondents shall now pay has greatly increased is a consequence that it
cannot avoid as it is the risk that it ran when it continued to seek recourses against the
Labor Arbiter's decision. Article 279 provides for the consequences of illegal dismissal in no
uncertain terms, qualified only by jurisprudence in its interpretation of when separation pay
in lieu of reinstatement is allowed. When that happens, the finality of the illegal dismissal
decision becomes the reckoning point instead of the reinstatement that the law decrees. In
allowing separation pay, the final decision effectively declares that the employment
relationship ended so that separation pay and backwages are to be computed up to that
point.31cralaw virtualaw library

Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines,
Inc. v. Court of Appeals,32 the Court laid down the guidelines regarding the manner of
computing legal interest, to wit:
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:cralawlibrary

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.33cralaw virtualaw library
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its
Resolution No. 796 dated May 16, 2013, approved the amendment of Section 234 of Circular
No. 905, Series of 1982 and, accordingly, issued Circular No. 799,35 Series of 2013, effective
July 1, 2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following
revisions governing the rate of interest in the absence of stipulation in loan contracts,
thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits
and the rate allowed in judgments, in the absence of an express contract as to such rate of
interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations for
Banks and Sections 4305Q.1,37 4305S.338 and 4303P.139 of the Manual of Regulations for
Non-Bank Financial Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest
that would govern the parties, the rate of legal interest for loans or forbearance of any
money, goods or credits and the rate allowed in judgments shall no longer be twelve
percent (12%) per annum - as reflected in the case of Eastern Shipping Lines40 and
Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3
and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its
amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per
annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could only
be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per
annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate
of six percent (6%) per annum shall be the prevailing rate of interest when applicable.

Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B.
Olaguer v. Bangko Sentral Monetary Board,41 this Court affirmed the authority of the BSP-
MB to set interest rates and to issue and enforce Circulars when it ruled that �the BSP-MB
may prescribe the maximum rate or rates of interest for all loans or renewals thereof or the
forbearance of any money, goods or credits, including those for loans of low priority such as
consumer loans, as well as such loans made by pawnshops, finance companies and similar
credit institutions. It even authorizes the BSP-MB to prescribe different maximum rate or
rates for different types of borrowings, including deposits and deposit substitutes, or loans
of financial intermediaries.�

Nonetheless, with regard to those judgments that have become final and executory prior to
July 1, 2013, said judgments shall not be disturbed and shall continue to be implemented
applying the rate of interest fixed therein.

To recapitulate and for future guidance, the guidelines laid down in the case
of Eastern Shipping Lines42 are accordingly modified to embody BSP-MB Circular
No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts
or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions
under Title XVIII on �Damages� of the Civil Code govern in determining the measure of
recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:

1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages, except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.

And, in addition to the above, judgments that have become final and executory prior to July
1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of
interest fixed therein.

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of
Appeals in CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009
are REVERSED and SET ASIDE. Respondents are Ordered to Pay petitioner:cralawlibrary

(1) backwages computed from the time petitioner was illegally dismissed on January 24,
1997 up to May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became
final and executory;chanr0blesvirtualawlibrary

(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one
month pay per year of service; and

(3) interest of twelve percent (12%) per annum of the total monetary awards, computed
from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013
until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total
monetary benefits awarded and due to petitioner in accordance with this Decision.

SO ORDERED.
 [G.R. Nos. 76579-82. August 31, 1988.]

BENEDICTO RODRIGUEZ, etc., Petitioner, v. HON. DIRECTOR, BUREAU OF LABOR

RELATIONS, CARLOS GALVADORES and LIVI MARQUEZ, Respondents.

[G.R. No. 80504. August 31, 1988.]

REY C. SUMANGIL, VIRGILIO V. HERNANDEZ, Et Al., Petitioners, v. MANOLITO

PARAN, ROSALINDA DE GUZMAN, FREE TELEPHONE WORKERS UNION, PHILIPPINE
LONG DISTANCE TELEPHONE CO., and HON. PURA FERRER-CALLEJA, Respondents.

Conrado Leaño for petitioner in G.R No. 76579-82 and private respondent in G.R.
No. 80504.

King and Adorio Law Offices for petitioners in G.R. No. L-80504. .

Potenciano Flores for private respondent Marquez in G.R. No. 76579-82.

The Solicitor General for public Respondent.

SYLLABUS

1. LABOR LAW; LABOR ORGANIZATION; ELECTION OF UNION OFFICERS HELD INVALID;

CASE AT BAR. — The provincial elections for union officers were moved to a later date
without prior notice to all voting members and without ground rules duly prescribed
therefor. The elections in Metro Manila were conducted under no better circumstances, were
held in defiance of the temporary restraining order issued on July 23, 1986 despite previous
notice of said order to all parties concerned. Said elections must therefor be rendered void.
The claim that a heavy voter turn-out of 73%, even if true cannot purge the elections of
their grave defects. Besides, the protected right of workers to self-organization would be
diluted if the election of the officers who will govern their affairs is not fairly and honestly
conducted.

2. ID.; ID.; FILING OF COMPLAINT FOR VIOLATION OF RIGHTS; ASSENT OF 30% OF

UNION MEMBERSHIP, NOT MANDATORY. — Art 242 of the Labor Code provides that a report
of any violation of rights or conditions in union membership maybe made by at least 30% of
all members concerned. The provision uses the permissive "may" which negates the notion
that the 30% assent of all members is mandatory. Further, the 30% assent of union
members is not a factor in determining the jurisdiction by the Bureau of Labor Relations.

3. ID.; ID.; ID.; ASSUMPTION OF JURISDICTION OVER THE CASES BY THE LABOR
RELATIONS DIRECTOR, PROPER. — The petition to nullify the 1986 union elections could not
be deemed defective because it did not have the assent of 30% of the union membership.
The petition clearly involved an intra-union conflict — one directly affecting the right of
suffrage of more than 800 union members and the integrity of the union elections — over
which, as the law explicitly provides, jurisdiction could be assumed by the Labor Relations
Director or the Med-Arbiters "at their own initiative" or "upon request of either or both
parties." The Med-Arbiter and the Labor Relations Director over the cases at bar was
entirely proper. It was in fact their duty to do so, given the facts presented to them.

4. ID.; ID.; RESOLUTION ALLOWING INCREASE IN UNION DUES, ILLEGAL AND ARBITRARY.
— Concerning the increase of union dues, the respondent Director found that the resolution
of the union’s Legislative Council to this effect does not bear the signature of at least two-
thirds (2/3) of the members of the Council, contrary to the requirement of the union
constitution and by-laws; and that proof is wanting of proper ratification of the resolution by
a majority of the general union membership at a plebiscite called and conducted for that
purpose, again in violation of the constitution and by-laws. The resolution increasing the
union dues must therefore be struck down, as illegal and void, arbitrary and oppressive. The
collection of union dues at the increased rates must be discontinued; and the dues thus far
improperly collected — refunded to the union members or held in trust for disposition by
them in accordance with their charter and rules, in line with this Court’s ruling in a parallel
situation (San Miguel Corporation v. Noriel, 103 SCRA 185).

DECISION

NARVASA, J.:

The above entitled special civil actions of certiorari were separately instituted but have been
consolidated because they involve disputes among employees of the Philippines Long
Distance Telephone Company (PLDT), who are members of the same union, the Free
Telephone Workers Union (FTWU). The disputes concern the validity of the general elections
for union officers in 1986, and the increase of union dues adopted and put into effect by the
incumbent officers subsequent to said elections.chanrobles.com:cralaw:red

G.R. Nos. 76579-82: Controversy Respecting Elections of Officers

Assailed by the petitioners in G.R. No. 76579-82 are (1) the decision dated October 10,
1986 of the Director of Labor Relations (BLR) annulling the elections of officers of the labor
union above mentioned, FTWU, and (2) the resolution dated October 30, 1986, denying
their motion for reconsideration of the decision.

The union’s by-laws provide for the election of officers every three (3) years, in the month
of July. Pursuant thereto, the union’s Legislative Council set the provincial elections for its
officers on July 14 to 18, 1986, and those for Metro Manila on July 25, 1986.

The same Council also quite drastically raised the fees for the filing of certificates of
candidates which had therefore ranged from P75.00 to P100.00. The filing fee for each
candidate for president of the labor organization was increased to P3,000; that for each
candidate for vice-president, secretary-general, treasurer and auditor, to P2,000.00; and
that for assistant secretary, assistant treasurer and assistant auditor, to P1,000.00
each.chanroblesvirtualawlibrary

Bureau of Labor Relations Cases: Nos. LRD-M-7-503-86 & LRD-M-7-504-86

Although the increased fees were paid in due course by the candidates, no less than two
complaints were filed with the Bureau of Labor Relations for their invalidation as excessive,
prohibitive and arbitrary. One, docketed as Case No. LRD-M-7-503-86, was presented by
Rey Sumangil, a candidate for president, and the members of his slate. The other, Case No.
LRD-M-7-504-86, was filed by Carlos Galvadores, also a presidential candidate, and his
group. Impleaded as respondents in both complaints were Benedicto Rodriguez, the
Chairman of the Commission on Elections of the union, and the incumbent union officers,
headed by the president, Manolito Paran. Acting on the complaints, the Med-Arbiter issued
on July 8, 1986 a restraining order against the enforcement of the new rates of fees.

Other BLR Cases: Nos. LRD-M-7-557-86 and LRD-M-7-559-86

It appears that notwithstanding the cases questioning the candidates’ fees, the elections for
the provinces of Visayas and Mindanao and certain areas of Luzon were nevertheless held
on July 21 and 22, 1986, which are dates different from those specified by the Legislative
Council (i.e., July 14 to 18, 1986). The validity of the elections was very shortly challenged
on the ground of lack of (1) due notice and (2) adequate ground rules. Carlos Galvadores
and his fellow candidates filed on July 22, 1986 a petition with the BLR, docketed as Case
No. LRD-M-7557-86, praying that the Union’s COMELEC be directed to promulgate ground
rules for the conduct of the provincial elections. On the day following, Livi Marquez, a
candidate for vice-president, together with other candidates in his ticket, filed another
petition against the same Union COMELEC and Manolito Paran, the union president -
docketed as Case No. LRD-M-7-559-86 - seeking to restrain the holding of the elections
scheduled on July 25, 1986 in the Metro Manila are until (1) ground rules therefor had been
formulated and made known to all members of the labor organization, and (2) the issue of
the filing fees had been finally decided. In connection with these complaints, a temporary
restraining order was issued on July 23, 1986 prohibiting the holding of elections on July 25,
1986.

The restraining order notwithstanding, the Union COMELEC proceeded with the general
elections in all the PLDT branches in Metro Manila on July 25, 1986. It then reported that as
of July 15, 1986 the number of qualified voters was 9,429 of which 6,903 actually voted,
the percentage of turn-out being 73%, and that those who obtained the highest number of
votes for the various elective positions were:chanrob1es virtual 1aw library

Manolito Paran President 3,030 votes

Eduardo de Leon 1st Vice-President 2,185 votes

Efren de Lima 2nd Vice-President 2,806 votes

Roger Rubio Secretary General 2,462 votes

Virgilio Tulay Asst. Sec. General 2,924 votes

Rosalinda de Guzman Treasurer 2,659 votes

Filmore Dalisay Asst. Treasurer 2,525 votes

Damiana Yalung Auditor 2,942 votes

Jaime Pineda Asst. Auditor 3,082 votes

Livi Marquez and Carlos Galvadores, and their respective groups, forthwith filed separate
motions praying that the COMELEC be declared guilty of contempt for defying the temporary
restraining order, and for the nullification not only of the Metro Manila elections of July 25,
1986 but also the provincial elections of July 21 and 22, 1986.

The four (4) cases were jointly decided by Med-Arbiter Rasidali Abdullah on August 28,
1986. His judgment denied the petitions to nullify the elections, as well as the motion for
contempt, but invalidated the increase in rates of filing fees for certificates of candidacies.
The judgment accorded credence to the Union COMELEC’s averment that it had not received
the restraining order on time. It took account, too, of the fact that the turn-out of voters
was 73%, much higher than the turn-out of 62% to 63% in prior elections, which fact, in
the Med-Arbiter’s view was a clear manifestation of the union members’ desire to go ahead
with the elections and express their will therein.

This judgment was however overturned by the Officer-in-Charge of Labor Relations, on

appeal seasonably taken. The OIC’s decision, dated October 10, 1986 nullified the general
elections in the provinces and Metro Manila on the ground of (1) lack of notice to the
candidates and voters, (2) failure to disseminate the election ground rules to all parties
concerned, and (3) disregard of the temporary restraining order of the Med-Arbiter. The
decision stressed the following points: 1

"The undue haste with which the questioned general elections were held raises doubts as to
its validity. In its desire to conduct the elections as scheduled, the respondents unwittingly
disregarded mandatory procedural requirements. The respondents’ pretensions that the
appellants were duly furnished with the ground rules/guidelines of the general elections and
that the same were properly disseminated to the qualified voters of the union are not
supported by the records.

"x x x

"Moreover, the Union’s Comelec did not follow the schedule of election outlined in the
guidelines. Specifically, the guidelines fixed the elections in Visayas-Mindanao on July 14, 16
and 18, 1986, in Northern Luzon, on July 16, 17, 18 and 21, 1986 and in Southern Luzon on
July 16,17 and 18,1986 (records, pp. 67-70). Surprisingly, however, the Union’s Comelec
conducted the elections in Northern and Southern Luzon on July 21, and 22, 1986 and in
Visayas-Mindanao on July 25, 1986 without proper notice to the appellants.

"Accordingly, the unwarranted failure of the Union’s Comelec to duly furnish the appellants
the guidelines and properly disseminate the same to the voters, and the holding of the
elections not in accordance with the schedule set by the guidelines and in open defiance of
the July 23, 1986 Restraining Order, precipitated an uncalled for confusion among the
appellants’ supporters and unduly prevented them from adopting the appropriate electoral
safeguards to protect their interests. Under the circumstances, this Office is constrained to
invalidate the general elections held on July 21, 22 and 25, 1986 and declare the results
thereof null and void.

"Furthermore, only 6,903 out of the 9,426 qualified voters trooped to the polls during the
July 21, 22 and 25, 1986 general elections. Considering the closeness of the result of the
elections, the 2,056 qualified voters, if they were able to cast their votes, could have
drastically altered the results of the elections. But more important, the disenfranchisement
of the remaining 27% qualified voters is a curtailment of Trade Unionism implicitly ordained
in the worker’s right to self-organization explicitly protected by the Constitution.

"x x x

"The submission of the respondents that they did not receive a copy of the injunctive order
is completely rebuffed by the records. It appears that the same was received and signed by
a certain Cenidoza for respondent Manolito Paran at 4:30 P.M. of July 23,1986 and by
respondent Benedicto Rodriguez himself, also on July 23, 1986 at 4:30 P.M. In the case of
Manolitao Paran, the restraining order in question was served at his office/postal address at
Rm. 310 Regina Bldg., Escolta, Manila."cralaw virtua1aw library

It is this decision of the BLR Officer-in-Charge which is the subject of the certiorari actions
filed in this Court by Benedicto Rodriguez, the chairman of the Union COMELEC, and
docketed as G.R. Nos. 76579-82. He claims the decision was rendered with grave abuse of
discretion considering that (a) the Med-Arbiter had found no fraud or irregularity in the
elections; (b) the election was participated in by more than 73% of the entire union
membership; and (c) the petition for nullity was not supported by 30% of the general
membership.

G.R. No. 80504: Controversy Respecting Labor Union Dues

The terms of office of the old officers (Manolito Paran, Et. Al.) ended in August, 1986.
However, the new set of officers (headed by the same Manolito Paran) apparently could not
assume office under a new term because of the proceedings assailing the validity of the
elections pending before the Bureau of Labor Relations. What happened was that the old
officers continued to exercise the functions of their respective offices under the leadership of
Manolito Paran.

On January 17, 1987, the Legislative Council of the union passed a resolution which
generated another controversy. That resolution increased the amount of the union dues
from P21.00 to P50.00 a month. It was then presented to the general membership for
ratification at a referendum called for the purpose. Rey Sumangil and his followers objected
to the holding of the referendum. When their objection went unheeded, they and their
supporters, all together numbering 829 or so, boycotted the referendum and formally
reiterated their protest against it. Subsequently the union officers announced that the
referendum has resulted in a ratification of the increased union dues.

On March 1, 1987 Manolito Paran requested the PLDT to deduct the union dues at the new,
increased rates, from the salaries of all union members and dispense with their individual
written authorizations therefor. PLDT acceded to the request and effected the check-off of
the increased dues for the payroll period from March 1 to March 15, 1987.

BLR Case No. NCR-OD-M-7-3-206-87

Once again Rey Sumangil and his followers hired themselves off to the Bureau of Labor
Relations. They filed a petition on March 26, 1987 challenging the resolution for the increase
in union dues, docketed as BLR Case No. NCR-OD-M-73-206-87. They contended that since
the terms of the members of the Legislative Council who approved the resolution had
already expired in August, 1986, and their reelection had been nullified by the Bureau, they
had no authority to act as members of the council; consequently, it could not be said that
the resolution for the increase of union dues had been approved by 2/3 vote of the Council
members, as provided by the union constitution and by laws; hence, the resolution was
void. They further contended that there had been no valid ratification of the resolution
because the plebiscite had been "rigged."cralaw virtua1aw library

Once again Rey Sumangil and his group were unsuccessful in proceedings at the level of the
Med-Arbiter. The latter denied their petition on the ground of lack of support of at least 30%
of all members of the union, citing Article 242 of the Labor Code which reads as
follows:jgc:chanrobles.com.ph

"Art. 242. Rights and conditions of membership in a labor organization. — . . . Any violation
of the above rights and conditions of membership shall be a ground for cancellation of union
registration and expulsion of officer from office, whichever is appropriate. At least thirty
percent (30%) of all the members of a union or any member or members specially
concerned may report such violation to the Bureau. The Bureau shall have the power to
hear and decide any reported violation to mete the appropriate penalty."cralaw virtua1aw
library

Again Sumangil and his group went up on appeal to the Director of Labor Relations, before
whom they raised the issue of whether or not the petition in fact had the support of at least
30% of the members, and said 30%-support was indeed a condition sine qua non for
acquisition by the Med-Arbiters (in the Labor Relations Division in a Regional Office of the
MOLE) of jurisdiction over the case. Again Sumangil and his followers were successful in
their appeal.

On July 1, 1987 the Director of Labor Relations rendered a decision reversing that of the
Med-Arbiter. The Director ordered the cessation of the collection of the twenty-nine peso
increase and the return of the amounts already collected. In the first place, according to
her, the petition was supported by 6,022 signatures, a number comprising more than 30%
of the total membership of the union (10,413). In the second place, the Director ruled, even
assuming the contrary, the lack of 30%-support will not preclude the BLR from taking
cognizance of the petition where there is a clear violation of the rights and conditions of
union membership because Article 226 of the Labor Code, expressly confers on it the
authority to act on all intra-union and inter-union conflicts and grievances affecting labor
and management relations, at the instance of either or both parties. The provision cited
reads as follows:jgc:chanrobles.com.ph

"Art. 226. Bureau of Labor Relations. — The Bureau of Labor Relations and the Labor
Relations division in the Regional Offices of the Department of Labor shall have original and
exclusive authority to act, at their own initiative or upon request of either or both parties,
on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising
from or affecting labor management relations . . ."cralaw virtua1aw library

As regards Article 242 of the Labor Code, relied upon by the Med-Arbiter, the Director
expressed the new that the 30%-support therein provided is not mandatory, and is not a
condition precedent to the valid presentation of a grievance before the Bureau of Labor
Relations. The Director ruled, finally, that Sumangil and the other union members had a
valid grievance calling for redress, since the record disclosed no compliance with the
requirement that the resolution for the increase of union dues be passed by at least 2/3
vote of the members of the Legislative Council and be ratified by a majority of the entire
membership at a plebiscite.

But not long afterwards, the Director reversed herself. The Manggagawa sa Komunikasyon
sa Pilipinas (MKP) — with which Paran’s Union, the FTWU, is affiliated — intervened in the
case and moved for reconsideration of her decision. By resolution dated October 1, 1987,
the Director set aside her decision of July 1, 1987 and entered a new one dismissing the
petition of Sumangil and company, in effect affirming the Med-Arbiter’s order. The Director
opined that the intervenor (MKP) was correct in its contention that there was no 30%-
membership-support for the petition, since only 829 members had signed their support
therefor, as correctly found by the Med-Arbiter, and because of this, the BLR never acquired
jurisdiction over the case. According to her: 2

"The rationale for such requirement is not difficult to discern. It is to make certain that there
is a prima facie case against prospective respondents whether it be the union/or its officers
and thus forestall nuisance or harassment petitions complaints. The requirement was
intended to shield the union from destabilization and paralyzation coming from adventurous
and ambitious members or non-members engaged in union politics under the guise of
working for the union welfare.

". . . As found out by the Med-Arbiter in the Office of origin all signatures except that of 829
were obtained without the knowledge of the signatories. At this point we cannot permit 829
members to ‘rock the boat.’ so to speak, of a union which has at present ten thousand four
hundred and thirteen (10,413) passengers."cralaw virtua1aw library

In an effort to set aside this reversing resolution of the Labor Relations Director, Rey
Sumangil and his group have come to this Court via the instant special civil action
of certiorari. In their petition they insist that the support of 30% of the union membership is
not a jurisdictional requirement for the ventilation of their grievance before the BLR, and
assuming the contrary, they have proven that 3,501 workers had in fact joined in the
petition, constituting 33% of the total membership. They also emphasize the validity of their
grievance, drawing attention to the absence of the requisite 2/3 vote essential for validity of
any resolution increasing the rates of union dues, and the doubtful result of the referendum
at which the resolution had allegedly been ratified.

Three issues are thus presented to the Court in these cases. The first involves the validity of
the 1986 general elections for union officers; the second, whether or not 30%-membership
support is indispensable for acquisition of jurisdiction by the Bureau of Labor Relations of a
complaint for alleged violation of rights and conditions of union members; and third, the
validity of the increase in union dues.

The General Elections of 1986

A review of the record fails to disclose any grave abuse of discretion tainting the
adjudgment of respondent Director of Labor Relations that the general elections for union
officers held in 1986 were attended by grave irregularities, rendering the elections invalid.
That finding must thus be sustained.

The dates for provincial elections were set for July 14 to 18, 1986. But they were in fact
held on July 21 to 22, 1986, without prior notice to all voting members, and without ground
rules duly prescribed therefor. The elections in Metro Manila were conducted under no better
circumstances. It was held on July 25, 1986 in disregard and in defiance of the temporary
restraining order properly issued by the Med-Arbiter on July 23, 1986, notice of which
restraining order had been regularly served on the same date, as the proofs adequately
show, on both the Union, President, Manolito Paran, and the Chairman of the Union
COMELEC, Benedicto Rodriguez. Moreover, as in the case of the provincial elections, there
were no ground rules or guidelines set for the Metro Manila elections. Undue haste, lack of
adequate safeguards to ensure integrity of the voting, and absence of notice of the dates of
balloting, thus attended the elections in the provinces and in Metro Manila. They cannot but
render the proceedings void.

The claim that there had been a record-breaking voter turnout of 73%, even if true, cannot
purge the elections of their grave infirmities. The elections were closely contested. For
example, in the presidential contest, Manolito Paran appeared to have won over Rey
Sumangil by only 803 votes, and in the vice-presidential race, Eduardo de Leon won over
Dominador Munar by only 204 votes. These results would obviously have been affected by
the ballots of the 2,056 voters who had been unable to cast their votes because of lack of
notice of actual dates of the elections.chanrobles lawlibrary : rednad
It goes without saying that free and honest elections are indispensable to the enjoyment by
employees and workers of their constitutionally protected right to self-organization. That
right "would be diluted if in the choice of the officials to govern . . . (union) affairs, the
election is not fairly and honestly conducted," and the labor officers concerned and the
courts have the duty "to see to it that no abuse is committed by any official of a labor
organization in the conduct of its affairs." 3

The Matter of 30%-Support for Complaints for Violations of Union Membership Rights

The respondent Director’s ruling, however, that the assent of 30% of the union
membership, mentioned in Article 242 of the Labor Code, was mandatory and essential to
the filing of a complaint for any violation of rights and conditions of membership in a labor
organization (such as the arbitrary and oppressive increase of union dues here complained
of), cannot be affirmed and will be reversed. The very article relied upon militates against
the proposition. It states that a report of a violation of rights and conditions of membership
in a labor organization may be made by" (a)t least thirty percent (30%) of all the members
of a union or any member or members specially concerned." 4 The use of the permissive
"may" in the provision at once negates the notion that the assent of 30% of all the
members is mandatory. More decisive is the fact that the provision expressly declares that
the report may be made, alternatively by "any member or members specially concerned."
And further confirmation that the assent of 30% of the union members is not a factor in the
acquisition of jurisdiction by the Bureau of Labor Relations is furnished by Article 226 of the
same Labor Code, which grants original and exclusive jurisdiction to the Bureau, and the
Labor Relations Division in the Regional Offices of the Department of Labor, over "all inter-
union and intra-union conflicts, and all disputes, grievances or problems arising from or
affecting labor management relations," making no reference whatsoever to any such 30%-
support requirement. Indeed, the officials mentioned are given the power to act "on all
inter-union and intra-union conflicts (1) "upon request of either or both parties" as well as
(2) "at their own initiative." There can thus be no question about the capacity of Rey
Sumangil and his group of more than eight hundred, to report and seek redress in an intra-
union conflict involving a matter they are specially concerned, i.e., the rates of union dues
being imposed on them.

These considerations apply equally well to controversies over elections. In the cases at bar,
the petition to nullify the 1986 union elections could not be deemed defective because it did
not have the assent of 30% of the union membership. The petition clearly involved an intra-
union conflict - one directly affecting the right of suffrage of more than 800 union members
and the integrity of the union elections - over which, as the law explicitly provides,
jurisdiction could be assumed by the Labor Relations Director or the Med-Arbiters "at their
own initiative" or "upon request of either or both parties."cralaw virtua1aw library

The assumption of jurisdiction by the Med-Arbiter and the Labor Relations Director over the
cases at bar was entirely proper. It was in fact their duty to do so, given the facts presented
to them. So this Court has had occasion to rule: 5

"The labor officials should not hesitate to enforce strictly the law and regulations governing
trade unions even if that course of action would curtail the so-called union autonomy and
freedom from government interference.

"For the protection of union members and in order that the affairs of the union may be
administered honestly, labor officials should be vigilant and watchful in monitoring and
checking the administration of union affairs.
"Laxity, permissiveness, neglect and apathy in supervising and regulating the activities of
union officials would result in corruption and oppression. Internal safeguards within the
union can easily be ignored or swept aside by abusive, arrogant and unscrupulous union
officials to the prejudice of the members.

"It is necessary and desirable that the Bureau of Labor Relations and the Ministry of Labor
should exercise close and constant supervision over labor unions, particularly the handling
of their funds, so as to forestall abuses and venalities."cralaw virtua1aw library

As regards the final issue concerning the increase of union dues, the respondent Director
found that the resolution of the union’s Legislative Council to this effect 6 does not bear the
signature of at least two-thirds (2/3) of the members of the Council, contrary to the
requirement of the union constitution and by-laws; and that proof is wanting of proper
ratification of the resolution by a majority of the general union membership at a plebiscite
called and conducted for that purpose, again in violation of the constitution and by-laws.
The resolution increasing the union dues must therefore be struck down, as illegal and void,
arbitrary and oppressive. The collection of union dues at the increased rates must be
discontinued; and the dues thus far improperly collected must be refunded to the union
members or held in trust for disposition by them in accordance with their charter and rules,
in line with this Court’s ruling in a parallel situation, 7 viz:jgc:chanrobles.com.ph

". . . All amounts already collected must be credited accordingly in favor of the respective
members either for their future legal dues or other assessments or even delinquencies, if
any. And if this arrangement regarding the actual refund of what might be excessive dues is
not acceptable to the majority of the members, the matter may be decided in a general
meeting called for the purpose."cralaw virtua1aw library

WHEREFORE, in G.R. Nos. 76579-82, the petition for certiorari is DISMISSED, no grave
abuse of discretion or other serious error having been shown in the decision of the
respondent Director of Labor Relations, said decision — ordering the holding of new
elections for officers of the Free Telephone Workers Union — being on the contrary in accord
with the facts and the law, but in the G.R. No. 80504, the petition for certiorari is granted,
the challenged order dated October 1, 1987 is set aside, and the decision of July 1, 1987 of
the Labor Relations Director reinstated, modified only as to the treatment of the excess
collections which shall be disposed of in the manner herein indicated. Costs against
petitioner in G.R. Nos. 7657982 and private respondents (except the PLDT) in G.R. No.
80504.

Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

 G. R. No. 140753 - April 30, 2003

BENJAMIN S. SANTOS, Petitioner, vs. ELENA VELARDE, TERESITA GUTIERREZ,

LAURA FIGUEROA, CONCHITA TRINIDAD, CARMEN BALIDOY, GINA RAZ, ENGRACIA
AMPONIN, JESUSA BUDIONGAN, MAGDALENA CONDESA, NADIA OJANO and EMILY
MACAYAON, Respondents.

CORONA, J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R.
SP No. 52577 annulling the resolution dated July 9, 1997 of the National Labor Relations
Commission (NLRC) and finding that petitioner Benjamin S. Santos failed to perfect his
appeal from the Labor Arbiter's Decision in NLRC NCR Case No. 00-11-07591-95 which
found him jointly and solidarily liable with Fordien Garments Ltd. Co. for the backwages,
allowances and other benefits due to certain illegally dismissed workers, herein
respondents. The dispositive portion of the assailed Decision2 of the Court of Appeals read:

WHEREFORE, the Resolution dated July 9, 1997, of respondent NLRC is hereby ANNULLED
and SET ASIDE. Consequently, the Decision dated October 3, 1996 of Labor Arbiter
Francisco S. Canizares, Jr., is REINSTATED.

SO ORDERED.

The facts of the case were succinctly summarized by the Court of Appeals:3

Petitioners are among the forty (40) complainants in a complaint for illegal dismissal filed
against Fordien Garments Ltd. Co. and/or Benjamin Santos and docketed as NLRC-NCR
Case No. 00-11-07591-95.

Respondent Santos moved for the dismissal of the complaint, insofar as he is concerned, on
the ground of lack of cause of action, claiming that he is neither a partner nor an officer of
respondent Fordien Garments. His motion to dismiss was denied on March 8, 1996, by the
Labor Arbiter who forthwith required the parties to submit their respective position papers.

In a Manifestation dated March 28, 1996, respondent Santos adopted his Motion to Dismiss
as his position paper.

Respondent partnership did not file any position paper.

Complainants complied on April 15, 1996. In their position paper, they narrate the
circumstances pertinent to their dismissal, thus:

1. Complainants Elena Velarde and 39 other persons, a list of which is attached hereto as
ANNEX 'A' were employed by Respondent company Fordien Garments Ltd. as factory sewers
in the latter's business. Complainants have been working with the respondent company for
approximately three years from June 15, 1992 to October 15, 1995 when they were illegally
terminated therefrom;

2. Complainants were just surprised that upon arriving at work on October 15, 1995, they
were not allowed to enter the premises anymore. The representative of Respondent told
them that the business had already closed down and thus, it was forced to terminate the
services of the Complainants;

3. Complainants have not received any prior notice as to the intended closure of
Respondent's business nor have they been given an opportunity to question and look into
the validity of their consequent dismissal, in violation of their rights to security of tenure
and to due process;

4. As a result of their termination from Respondent's company, Complainants filed a

complaint with the Arbitration Branch of the NLRC on November 23, 1995 alleging that they
were illegally dismissed and pray for reinstatement or separation pay in lieu of
reinstatement. Complainants also alleged that they had been underpaid of their salaries,
they have not (sic) given their service incentive leave and 13th month pay, and have not
been reported to the SSS by respondent company;

5. It is important to note that Complainants learned soon after they were dismissed that
Respondent has continued its garment business in Bataan under a different name employing
an entirely new and different set of factory workers.

On October 3, 1996, the Labor Arbiter rendered a decision, the dispositive portion of which
reads:

WHEREFORE, the respondents are jointly and solidarily hereby ordered to reinstate the
complainants with full backwages, inclusive of allowances, and to their other benefits or
their monetary equivalent computed from the time their compensation were (sic) withheld
from them up to the time of their actual reinstatement.

The complainants' backwages up to the date of this Decision as computed by Ms. Julieta C.
Nicolas, Labor Arbitration Associate of the Commission's NCR Arbitration Branch are the
following: (Please see attached xerox copy of the computation).

The respondents are also ordered to pay the complainants 10% of the monetary awards as
attorney's fee.

In lieu of reinstatement, the complainants may opt for payment of separation pay, in which
case, the respondents shall pay them their separation pay equivalent to one-half month pay
for every year of service, a fraction of 6 months being considered one year.

Article 223 of the Labor Code in part provides that, 'In any event, the decision of the Labor
Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect
is concerned, shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated in the payroll.
The posting of a bond by the employer shall not stay the execution for reinstatement
provided herein.' Consequently, the respondents are further directed to reinstate the
complainants when they report for work by virtue of this Decision.

SO ORDERED.

Petitioner appealed the Labor Arbiter's decision and filed his Appeal Memorandum with the
NLRC within the reglementary period but did not pay the bond on the ground that "[T]he
appeal is made by one who is not an employer, hence there is no need for the posting of a
cash or surety bond."4 The NLRC treated this solitary statement as a motion "seek[ing]
exemption from posting the requisite bond" and denied the same. Petitioner was then
ordered to pay a cash or surety bond within 10 days from the receipt of the
decision.5 Thereafter, petitioner filed a "Motion for Reduction of Surety or Cash Bond and
Admission of Reduced Bond"6 which was unacted upon; thus, petitioner filed a "Motion to
Admit Surety Bond" on April 24, 1997. 7 The NLRC gave due course to the appeal and
affirmed the decision of the Labor Arbiter, with the modification that petitioner Santos be
deleted as a party respondent. The dispositive portion8 read:

Wherefore, prescinding from the foregoing considerations, the appeal is hereby given due
course.

Accordingly, the complaint as against respondent Santos is hereby dismissed and the
decision appealed from is AFFIRMED with MODIFICATION deleting respondent Santos as
party respondent.

After respondents' motion for reconsideration was denied, they filed a petition for certiorari
with this Court but the same was referred to the Court of Appeals which rendered the
assailed decision.

In this petition for review, petitioner submits the following issues:

I. WHETHER OR NOT PETITIONER'S APPEAL WAS DULY PERFECTED IN SUCH A MANNER AS

TO PREVENT THE DECISION OF THE LABOR ARBITER FROM BECOMING FINAL AND
EXECUTORY;

II. WHETHER OR NOT THE PETITIONER'S APPEAL, THE BELATED POSTING OF THE BOND
NOTWITHSTANDING, SHOULD BE GIVEN DUE COURSE IN THE INTEREST OF SUBSTANTIAL
JUSTICE.

The petition is without merit. The Court finds that petitioner failed to perfect his appeal by
the non-payment of the appeal bond within the 10-day period provided by law. Thus, the
decision of the Labor Arbiter became final and executory upon the expiration of the
reglementary period.

Article 223 of the Labor Code provides that:

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 the receipt of
such decisions, awards, or orders. x x x

xxx - xxx - xxx

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.
xxx - xxx - xxx

This Court has repeatedly ruled that the posting of a cash or surety bond is a
requirement sine qua non for the perfection of an appeal from the labor arbiter's monetary
award.9 The posting of a bond within the period provided by law is not merely mandatory
but jurisdictional. Failure to perfect an appeal has the effect of rendering the judgment final
and executory.10

There have been instances when this Court allowed the belated filing of the appeal bond.
In Quiambao vs. NLRC,11 this Court had occasion to cite cases where the belated filing of the
appeal bond was justified:

Thus, in Rada vs. NLRC the bond was paid although belatedly (because the labor arbiter's
Decision did not state the amount awarded as back wages and overtime pay). On the other
hand, in the case of Blancaflor v. NLRC the failure to give a bond was in part due to the
failure of the Labor Arbiter to state the exact amount of backwages and separation pay due.
There was therefore no basis for determining the amount of the bond to be filed by private
respondents therein. x x x

In Your Bus Line vs. NLRC, the petitioner was excused for its failure to give the bond
because it was misled by the notice of the decision which, stating the requirements for
perfecting an appeal, did not mention that a bond must be filed. The lawyer for petitioner
relied on such notice, and this Court, considering the circumstance as an excusable mistake,
allowed petitioner to file the bond and appeal from the decision of the Labor Arbiter. x x x

It should be noted, however, that, in these cases, delayed payment was allowed because
the failure to pay was due to the excusable oversight or error of a third party, that is, the
failure of the labor arbiter to state in the notice of decision the amount of award and the
inclusion of the bond as among the requirements for perfecting an appeal. In the case at
bar, petitioner's failure to post a bond was due to his own negligent and mistaken belief that
he was exempt. The Labor Arbiter's decision stated the exact award of backwages to be
paid by petitioner Santos. There was nothing in the decision which could have given
petitioner the impression that the bond was not necessary or that he was excused from
paying it.

In the aforecited case of Quiambao vs. NLRC, the Court pointed out that, in the cases where
belated posting of a bond was allowed, there was substantial compliance with the rule.
Thus, technical considerations had to give way to considerations of equity and justice. In the
present case, no similar justifications exist. The eventual posting of the bond by petitioner
cannot be considered by this Court as substantial compliance warranting the relaxation of
the rules in the interest of justice. In the instances where the Court acknowledged
substantial compliance, the appellants, at the very least, exhibited willingness to pay by
posting a partial bond12 or filing a motion for reduction of bond13 within the 10-day period
provided by law. In the present case, no such willingness was exhibited by petitioner.
Petitioner's failure to pay the bond was due simply to his own mistaken conclusion that he
was exempt from paying because he was not liable to them. His statement that "[T]he
appeal is made by one who is not an employer, hence there is no need for the posting of a
cash or surety bond," was a reckless conclusion since there was no circumstance which
would have warranted such a belief.

The rule on perfection of appeals cannot be classified as a difficult question of law which
excused petitioner's mistaken conclusion. Petitioner was just too presumptuous in assuming
that mere denial of his status as employer exempted him from paying the appeal bond. The
Court is reminded of Peftok Integrated Services, Inc. vs. NLRC14 where the appellant also
relied on his erroneous belief that a surety bond was not required to perfect an appeal. He
therefore failed to put up a surety bond which resulted in the dismissal of his appeal.

In view of the foregoing, the NLRC erred in giving due course to the appeal despite the non-
payment of the appeal bond within the reglementary period. Treating the one-sentence
declaration of petitioner as a motion for exemption to pay bond and allowing him to post it
well beyond the 10-day period was tantamount to extending such period. This is not allowed
under the NLRC Rules of Procedure.15 In Lamzon vs. NLRC,16 petitioner filed a motion for
extension to file the bond within the 10-day period but posted bond only on the 13th day
from receipt of the decision. This Court ruled that:17

x x x . Considering that the motion for extension to file appeal bond remained unacted
upon, petitioner, pursuant to the NLRC rules, should have seasonably filed the appeal bond
within the ten (10) day reglementary period following the receipt of the order, resolution or
decision of the NLRC to forestall the finality of such order, resolution or decision. x x x . The
motion filed by petitioner in this case is tantamount to an extension of the period for
perfecting an appeal. As payment of the appeal bond is an indispensable and jurisdictional
requirement and not a mere technicality of law or procedure, we find the challenged NLRC
Resolution of October 26, 1993 and Order dated January 11, 1994 in accordance with law.

In Lamzon, there was a proper motion filed which was not even for exemption but merely
for extension of time. Nevertheless, we ruled that petitioner should have paid within the 10-
day period, notwithstanding the pendency of the motion, to forestall the finality of the
decision appealed from.

The Court is aware that the NLRC is not bound by the technical rules of procedure and is
allowed to be liberal in the interpretation of rules in deciding labor cases. However, such
liberality should not be applied in the instant case as it would render futile the very purpose
for which the principle of liberality is adopted. The liberal interpretation in favor of labor
stems from the mandate that the workingman's welfare should be the primordial and
paramount consideration.18 Validating petitioner's unilateral act of declaring his exemption
from posting a bond will set a dangerous precedent since such act will only serve to delay
the case. From the decision of the Labor Arbiter, it took the NLRC four months to rule on the
"motion" for exemption to pay bond and another four months to decide the merits of the
case. This Court has repeatedly ruled that delay in the settlement of labor cases cannot be
countenanced. Not only does it involve the survival of an employee and his loved ones who
are dependent on him for food, shelter, clothing, medicine and education, 19 it also wears
down the meager resources of the workers to the point that, not infrequently, they either
give up or compromise for less than what is due them. 20 Also, in Favila vs. NLRC,21 we ruled
that:

While it is true that the NLRC Rules must be liberally construed and that the NLRC is not
bound by the technicalities of law and procedure, the NLRC itself must not be the first to
arbitrarily disregard specific provisions of the Rules which are precisely intended to assist
the parties in obtaining just, expeditious and inexpensive settlement of labor disputes. In
short, the rule on liberal construction is not a license to disregard the rules of procedure.
Rules of Procedure exist for a purpose, and to disregard such rules in the guise of Liberal
Construction would be to defeat such purpose. x x x .
WHEREFORE, the Court of Appeals Decision, dated August 4, 1999, nullifying the resolution
of the NLRC, dated July 9, 1997, and affirming the Labor Arbiter's decision, dated October
3, 1996, is hereby AFFIRMED.

SO ORDERED.

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

 [G.R. No. 93381. September 28, 1990.]

YBL (YOUR BUS LINE) AND PRUDENCIO JARING, Petitioners, v. NATIONAL LABOR
RELATIONS COMMISSION, RUFINO C. LAMBINO, ALEJANDRO BASBAS,
CRESENCIANO BELTRAN, NANCY MARCAIDA, YOLANDA MENDOZA, RODELIO
TAPIA, REYNALDO RAMILO, FRANCISCO BALINGIT, PURITA GUPIT, M. DIONADA,
and NOEL DEOCAREZA, Respondents.

Redemberto R. Villanueva, for Petitioners.

Venida & Associates for Private Respondents.

DECISION

GANCAYCO, J.:

The need to render substantial justice as against technicality is put to test in this case.

Private respondents were drivers and conductors of petitioner-corporation which was

operating buses it leased from the Metro Manila Transit Corporation (MMTC). During the
period 1983-1986, it appears that it incurred serious business losses and failed to pay
rentals to the MMTC which in turn instituted a civil action against it. During the pendency of
the case the MMTC was able to repossess all the buses operated by petitioner corporation.
Since it had no more buses to operate and was severely financially distressed, it stopped its
operations and the employment of private respondents was discontinued.

Private respondents thus filed a case for illegal dismissal in the National Labor Relations
Commission (NLRC) which was subsequently amended to a complaint for payment of
separation pay.

Impleaded in the complaint was petitioner Prudencio Jaring who is sought to be principally
liable with the petitioner corporation as president thereof.

After the parties submitted their position papers, the labor arbiter rendered a decision
declaring private respondents entitled to separation pay and ordering the petitioners to
jointly and severally pay private respondents their separation pay computed from the date
of hiring up to their termination at the rate of one-half (1/2) month for every year of
service. Within the reglementary period for appeal, petitioners filed a notice of appeal and a
memorandum of appeal with the respondent NLRC wherein they questioned the award of
separation pay despite the acknowledgment by the labor arbiter that petitioner corporation
suffered business losses. It was also advocated in the same appeal that petitioner Jaring
was no longer an officer at the time of the termination of private respondents, and granting
that he was the president of petitioner corporation then, the latter has a separate and
distinct personality from petitioner Jaring who cannot be jointly and severally be held liable
in this case with petitioner corporation.

However, on January 30, 1990 an order was issued by the NLRC stating that as the
petitioners failed to post the required bond, their appeal was rendered imperfect making the
decision appealed from final and executory. 1
A motion for reconsideration filed by petitioners was denied by the NLRC in a resolution
dated May 8, 1990.

Hence, this petition for review, which this Court will treat as a special civil action
for certiorari, whereby petitioners raised the sole issue that the NLRC erred in not giving
due course to the appeal for failure to satisfy a purely technical requirement when issues
involving substantial rights were raised in the appeal.

The petition is impressed with merit.

Article 223 of the Labor Code as amended by Republic Act No. 6715 provides as
follows:jgc:chanrobles.com.ph

"ART. 223. Appeal. . . . — 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." (Emphasis supplied.)

The NLRC Interim Rules on Appeals under Republic Act No. 6715, which took effect on
September 5, 1989, provide in Section 5 thereof as follows:jgc:chanrobles.com.ph

"Section 5. Requisites of Appeal; When Perfected. . . . shall be under oath with proof of
payment of the required appeal fee and the posting of a cash or surety bond as provided in
Section 7 of these rules. . . ." (Emphasis supplied.)

The appeal interposed by petitioners to the NLRC was made on September 11, 1989, or just
after six (6) days from the effectivity of the aforestated Interim Rules. In undertaking the
appeal, the counsel of petitioners relied on the notice of the decision in the case which
stated the requirements of an appeal without any mention that a bond must be filed. 2
Apparently said counsel did not know as yet of said new law and Interim Rules requiring the
posting of a bond on appeal. It also appears that private respondents did not know about it
as no opposition to the appeal was made on this account.

Moreover, in the appealed decision of the labor arbiter the exact total amount due to the
private respondents as separation pay is not stated which would be the basis of the bond
that is required to be filed by petitioners under the said law. Thus even if petitioners may be
expected to know the law, then they allege that they would have to go to the socio-analyst
of the NLRC to compute the approximate amount due the private respondents as the basis
of the amount of the bond to be filed so that it is not probable that they may be able to
secure such computation within the non-extendible period of ten (10) days to appeal
provided for by law.

Petitioners also assert that at that time the petitioner corporation was in financial distress.
At any rate they offered to post the bond in compliance with the requirement of the law so
that they may be afforded the relief of an appeal.

The Court finds that while Article 223 of the Labor Code, as amended by Republic Act No.
6715, requiring a cash or surety bond in the amount equivalent to the monetary award in
the judgment appealed from for the appeal to be perfected, may be considered a
jurisdictional requirement, nevertheless, adhering to the principle that substantial justice is
better served by allowing the appeal on the merits threshed out by the NLRC, 3 the Court
finds and so holds that the foregoing requirement of the law should be given a liberal
interpretation.
In Sun Insurance Office, Ltd. v. Maximiano C . Asuncion, 4 this Court relaxed the rule in
Manchester Development Corporation v. Court of Appeals, 5 by allowing a liberal
interpretation of the rule that the payment of the docket fees is jurisdictional. More so when
the party involved demonstrated his willingness to abide by the rules to pay the docket fees
required. This Court held that the payment of said fees may be authorized by the Court
within a reasonable time but in no case beyond the applicable prescriptive or reglementary
period. The greater interest of justice will be served by giving due course to the appeal
despite the much delayed filing of the appeal bond. 6

In this case, the circumstances of the non-filing of the bond are understandable and could
be attributed to excusable oversight. The Court holds that petitioners should be given the
opportunity to file the required bond and avail of the remedy of appeal.

Further, considering that in the appeal valid issues are raised as to whether or not under
Rule 1, Section 9 of the Implementing Rules of the Labor Code where the termination of
employment is due to serious business losses or financial reverses, as in this case, the
employee shall still be entitled to separation pay, and whether or not petitioner Jaring,
assuming that he was president of petitioner corporation at the time of the separation from
the service of private respondents, can be held jointly and severally liable with petitioner
corporation for the separation pay due private respondents.

WHEREFORE, the petition is GRANTED. The questioned orders of the public respondent
NLRC dated January 30, 1990 and May 3, 1990 are hereby SET ASIDE. The respondent
NLRC is hereby directed to give due course to the appeal of the petitioners after the filing of
the required appeal bond within such reasonable period of time it may set. No
pronouncement as to costs.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

 GOLDEN DONUTS, INC. and LEOPOLDO PRIETO, Petitioners, v. NATIONAL LABOR
RELATIONS COMMISSION, AGAPITO MACANDOG, LEONISA M. HONTIVEROS,
ROSITA D. TAMARGO, LUCITA TEGIO and ALMA MAGTARAYO, Respondents.

DECISION

PARDO, J.:

The petition at bar is actually one for certiorari 1 impugning the resolution 2 of the National
Labor Relations Commission (NLRC), which modified the Labor Arbiter’s decision and
ordered petitioner to reinstate complainants (respondents) to their former positions without
loss of seniority rights and back wages limited to three (3) years from dismissal up to time
of reinstatement and to pay respondents Rosita Tamargo, Lucita Tegio, Alma Magtarayo,
and Leonisa Hontiveros each separation pay of P4,000.00; to pay complainant Agapito
Macandog separation pay of P4,000.00, unpaid salary of P1,000.00; thirteenth month pay of
P1,329.25 and attorney’s fee of ten (10%) per cent of the total amount due; and the order
3 denying reconsideration of the aforementioned resolution.

Private respondents Macandog, Hontiveros, Tamargo, Tegio and Magtarayo, were

employees of petitioner Golden Donuts, Inc., and were the complainants in three
consolidated cases filed in September 1990 with the Labor Arbiter.

The facts are aptly summarized in the Labor Arbiter’s decision dated January 29, 1993, as
follows:jgc:chanrobles.com.ph

"Complainants were members of the Kapisanan ng Manggagawa sa Dunkin Donut-CFW

(KMDD-CFW, for short) whose collective bargaining agreement with the corporation expired
on November 16, 1989. During the freedom period, or on October 17, 1989, respondents
through its Human Resources and Industrial Relations Manager informed the President of
the Union that the initial CBA negotiation was on October 26, 1989 and, at the same time,
requested for the confirmation of the people who shall be the regular members of the union
panel in order to avoid any misunderstanding. At which date however, despite the absence
of Leopoldo Prieto, Jr., the management representative, and the President of the Union,
both panels were able to agree on the rules regarding the negotiation, including the time,
date and number of days the panels had to meet. On November 7, 1989 (sic) CBA
negotiations, the management panel arrived late, or at 1:35 P.M. which was thirty five
minutes late, thus prompting the union panel to walkout. Despite the management request
to go back and proceed with the agenda, the union simply ignored the same. A day after, or
on November 8, 1989, the management addressed a letter of apology to the union and
requested that the CBA negotiation be resumed on November 9, 15 and 17, 1989 which was
discredited in the following wise:chanroblesvirtuallawlibrary

‘November 9, 1989

‘The Management CBA Negotiating Panel Golden Donuts, Inc.

‘Attention: Ms. Gertrudes P. Bangalan

HRIR Manager

‘We are in receipt of your letter expressing your sincere apology for the incident that
happened last Nov. 7, 1989 at AIT.

‘Truly, it is our interest to come up with a peaceful negotiation, as we had displayed during
our previous meetings. From punctuality even up to the manner of discussion we had shown
our concern and sincere interest that we could finish our CBA as soon as possible smoothly
and peacefully.

‘However, as we go on with the process, we observed that you are taking our CBA
negotiation for granted, not considering it as one of your priorities.

‘However further, we would like to inform you that our final decision is to declare the
negotiation DEADLOCK (sic).

‘Thus, we regret to inform you that we could not attent (sic) to your scheduled meeting this
afternoon.

‘Sincerely yours,

‘Florante M. Vicedo

‘KMDD President’

"Came November 15 and 17, but the union panel did not show up despite the management
letters advising the former about the CBA meetings. Again, on November 20, 1989
management sent a letter informing the union regarding the resumption of the negotiation,
but the same turned out fruitless. Finally, despite management’s open letter of admonition
under date of November 23, 1989, the union struck on December 18, 1989.

"On the ground that the strike was illegal because (a) it was started without the union
having first exercised the ritht (sic) to collective bargaining in violation of Article 264 (a) of
the Labor Code; (b) the strikers barricaded the company premises, barring ingress to and
egress from the premises, which resulted to the trapping of officers and employees; (c) the
strikers, on December 19, 1989, overturned the company’s Isuzu Kc-20 Van with Plate No.
506 and, thereafter, smashed its windshield, headlights and sidemirrors; (d) the strikers
brandished broken bottles of Coca-Cola and effectively prevented Ernesto de Castillo, the
traffic dispatcher, and his driver, Narciso Urjal, from making any move to pacify the mob;
and (e) the strike was effected without any strike vote for the purpose and without the
approval of the majority of the membership, and for not having reported the same to the
Ministry (now Department) of Labor and Employment; a Complaint with Prayer for
Preliminary Injunction was filed by Golden Donuts, Inc. on January 9, 1990, seeking the
following relief (sic): a) to declare the strike illegal and to dismiss all officers of the union
and members who participated in the commission of illegal acts; b) to pay petitioner actual
damages as may be proven, the sum of Five Hundred Thousand (P500,000.00) Pesos and
Three Hundred Thousand (P300,000.00) Pesos, respectively, as moral and exemplary
damages, plus attorney’s fees. After KMU’s Atty. Pontenciano Flores was retained as counsel
by the union and strikers, and sensing the gravity of the penalties attendant to the strike
resorted to, including the financial award that may be due the Golden Donuts, Inc. and civil
liabilities that may be awarded thereafter, said counsel pleaded for a comprome (sic).
Hence, on July 16, 1990, a compromise agreement was entered into by the KMDD-CFW and
Golden Donuts, Inc. whereby:chanrob1es virtual 1aw library

‘4.4. The parties agree to withdraw/dismiss with prejudice any and all cases, whether
criminal, civil or labor filed against each other and agree to execute affidavit of desistance
and/or Motion to Dismiss to ensure the dismissal of these cases.

‘5. Upon execution of this Agreement, the parties undertake not to file any other
charges/complaints against each other as this act constitutes a general waiver or
release/quitclaim by them (sic).’chanrobles.com : red

apart from the separation pay said strikers, 262 in all, should receive from the corporation,
the variable amounts of which are stated in the list of workers attached to the agreement.
Out of the said 262 striking force, only the five (5) aforenamed complainants disagree (sic)
and did not receive the amount due, arguing that the compromise agreement was entered
into by their counsel and the President of the Union without their individual consent and/or
authority and that the same was not approved nor ratified by the majority of the union
membership. Hence, these complaints which were filed on the dates mentioned earlier." 4

On January 29, 1993, the Labor Arbiter rendered a decision upholding the dismissal of
private respondents and ruling that they were bound by the compromise agreement entered
into by the union with petitioners. The dispositive portion of the decision
states:jgc:chanrobles.com.ph

"WHEREFORE, in conformity with the opinion above expressed, judgment is hereby

rendered ordering the Golden Donuts, Inc.:jgc:chanrobles.com.ph

"1. To pay complainants Rosita D. Tamargo, Lucita N. Tegio, Alma Magtarayo and Leonisa
Hontiveros each the sum of Four Thousand Five Hundred (P4,500.00) Pesos as separation
pay;

"2. To pay complainant Agapito Macandog the following amounts:chanrob1es virtual 1aw
library

a. Four Thousand Five Hundred (P4,500.00) Pesos as separation pay;

b. One Thousand (P1,000.00) Pesos as unpaid salary;

c. One Thousand Three Hundred Twenty-Nine and Twenty Five (P1,329.25) Centavos as
balance of his thirteenth month pay.

"3. To pay complainants’ counsel ten percent (10%) of the total amount due them as
attorney’s fees.

SO ORDERED." 5

In due time, private respondents interposed an appeal to the NLRC, claiming that the union
had no authority to waive or compromise their individual rights and that they were not
bound by the compromise agreement entered into by the union with petitioners.

On October 29, 1993, the NLRC issued a resolution which disposed of the case as
follows:jgc:chanrobles.com.ph

"WHEREFORE, the decision of the Labor Arbiter is hereby accordingly modified and a new
one entered ordering respondent to reinstate complainants to their former positions without
loss of seniority rights and back-wages limited to three years from the time of their
dismissal up to the time of reinstatement.
"Furthermore, respondent is hereby ordered as follows:jgc:chanrobles.com.ph

"1. To pay complainants Rosita D. Tamargo, Lucita N. Tegio, Alma Magtarayo and Leonisa
Hontiveros each the sum of Four Thousand Five Hundred (P4,500.00) Pesos as separation
pay;chanrobles.com : virtuallawlibrary

"2. To pay complainant Agapito Macandog the following amounts:jgc:chanrobles.com.ph

"a. Four Thousand Five Hundred (P4,500.00) Pesos as separation pay;

"b. On Thousand (P1,000.00) Pesos as unpaid salary;

"c. One Thousand Three Hundred Twenty-Nine and Twenty-Five (P1,329.25) Centavos as
balance of his thirteenth month pay.

"3. To pay complainant’s counsel ten percent (10%) of the total amount due them as
attorney’s fees." 6

On January 31, 1994, the NLRC denied petitioners’ motion for reconsideration of the
resolution, for lack of an assignment of "palpable" or "patent" errors. 7

Hence, this petition. 8

The questions presented in the petition are: (1) whether or not a union may compromise or
waive the rights to security of tenure and money claims of its minority members, without
the latter’s consent, and (2) whether or not the compromise agreement entered into by the
union with petitioner company, which has not been consented to nor ratified by respondents
minority members has the effect of res judicata upon them.

As a consequence of a negative ruling on the foregoing issues, there arises the issue of
whether private respondents are entitled to monetary benefits subject of their individual
complaints.

The petition is anchored on the argument that a preponderant majority of the union
members, that is, 257 out of 262 members, having agreed to a compromise settlement
whereby they shall be paid separation pay in exchange for the dismissal of the criminal and
unfair labor practice cases filed by petitioners against them, the union is authorized to waive
and compromise even the claims of those who did not consent to the terms of such
compromise agreement. In other words, petitioners claim that the compromise agreement
is binding on union members including those who did not consent thereto, such as private
respondents.

We find the petition without merit.

First, even if a clear majority of the union members agreed to a settlement with the
employer, the union has no authority to compromise the individual claims of members who
did not consent to such settlement. Rule 138 Section 23 of the 1964 Revised Rules of Court
requires a special authority before an attorney may compromise his client’s litigation. "The
authority to compromise cannot lightly be presumed and should be duly established by
evidence." 9

In the case at bar, minority union members did not authorize the union to compromise their
individual claims. Absent a showing of the union’s special authority to compromise the
individual claims of private respondents for reinstatement and back wages, there is no valid
waiver of the aforesaid rights. As private respondents did not authorize the union to
represent them in the compromise settlement, they are not bound by the terms thereof. 10

Second, whether minority union members who did not consent to a compromise agreement
are bound by the majority decision approving a compromise settlement has been resolved
in the negative. 11

In La Campana, we explicitly declared:chanroblesvirtuallawlibrary

"Money claims due to laborers cannot be the object of settlement or compromise effected by
a union or counsel without the specific individual consent of each laborer concerned. The
beneficiaries are the individual complainants themselves. The union to which they belong
can only assist them but cannot decide for them." 12

The case of La Campana was re-affirmed in the General Rubber case as

follows:jgc:chanrobles.com.ph

"In the instant case, there is no dispute that private respondent has not ratified the Return-
to-Work Agreement. It follows, and we so hold, that private respondents cannot be held
bound by the Return-to-Work Agreement. The waiver of money claims, which in this case
were accrued money claims, by workers and employees must be regarded as a personal
right, that is, a right that must be personally exercised. For a waiver thereof to be legally
effective, the individual consent or ratification of the workers or employees involved must
be shown. Neither the officers nor the majority or the union had any authority to waive the
accrued rights pertaining to the dissenting minority members, even under a collective
bargaining agreement which provided for a ‘union shop’. The same considerations of public
policy which impelled the Court to reach the conclusion it did in La Campana, are equally
compelling in the present case. The members of the union need the protective shield of this
doctrine not only vis-a-vis their employer but also, at times, vis-a-vis the management of
their own union, and at other times even against their own imprudence or
impecuniousness." 13

We have consistently ruled that "a compromise is governed by the basic principle that the
obligations arising therefrom have the force of law between the parties." 14

Consequently, private respondents may pursue their individual claims against petitioners
before the Labor Arbiter.

The judgment of the Labor Arbiter based on the compromise agreement in question does
not have the effect of res judicata upon private respondents who did not agree
thereto.chanroblesvirtuallawlibrary

"A compromise, once approved by final orders of the court has the force of res judicata
between the parties and should not be disturbed except for vices of consent or forgery." 15
A compromise is basically a contract perfected by mere consent. "Consent is manifested by
the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract." 16 A compromise agreement is not valid when a party in the case
has not signed the same or when someone signs for and in behalf of such party without
authority to do so. 17

In SMI Fish Industries, Inc. v. NLRC, 18 this Court declared that where the compromise
agreement was signed by only three of the five respondents, the non-signatories cannot be
bound by that amicable settlement. This is so as a compromise agreement is a contract and
cannot affect third persons who are not parties to it. 19

Private respondents were not parties to the compromise agreement. Hence, the judgment
approving such agreement cannot have the effect of res judicata upon them since the
requirement of identity of parties 20 is not satisfied. A judgment upon a compromise
agreement has all the force and effect of any other judgment, hence conclusive only upon
parties thereto and their privies. 21

Viewed in light of the foregoing legal principles, the conclusion is inescapable that private
respondents are not bound by the compromise agreement entered into by the union without
their consent. They have not waived their right to security of tenure nor can they be barred
from entitlement of their individual claims.

Since the Labor Arbiter found no evidence showing that private respondents committed any
illegal act during the strike, petitioners’ failure to reinstate them after the settlement of the
strike amounts to illegal dismissal, entitling them to the twin reliefs of reinstatement and
back wages. 22

"The burden is on the employer to prove that the termination was after due process, and for
a valid or authorized cause. 23 For the two requisites in our jurisdiction to constitute a valid
dismissal are: (a) the existence of a cause expressly stated in Article 282 of the Labor Code;
and (b) the observance of due process, including the opportunity given the employee to be
heard and defend himself." 24

However, the separation pay must be deleted, as private respondents are entitled to
reinstatement and back wages and there is no showing of strained relations as would
prevent their reinstatement.25cralaw:red

WHEREFORE, the Court DISMISSES the petition and AFFIRMS the NLRC resolution dated
October 29, 1993 and the order dated January 31, 1994, in NLRC NCR Case Nos. 00-08-
04180-90, 00-09-04807-90, and 00-09-04840-90, with modification deleting the award of
separation pay to private respondents.chanrobles virtuallawlibrary

No costs.

SO ORDERED.

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

 [G.R. NO. 143542 : June 8, 2006]

SIME DARBY PILIPINAS, INC. and LARRY C. DUBBERLY, Petitioners, v. ALFREDO

ARGUILLA and HENRY C. PEDRAJAS, Respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 50377 affirming the Decision of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 004693-93, which, in turn, affirmed the ruling of
the Labor Arbiter in NLRC NCR Case No. 08-04696-90.

The Antecedents

On March 27, 1984, Sime Darby Pilipinas, Inc. (SDPI) employed Alfredo Arguilla as truck
helper in its Recapping Department in Marikina (now Marikina City), Metro Manila. Henry C.
Pedrajas was employed as truck driver in the same department on June 1, 1981.2

On May 31, 1990, Arguilla and Pedrajas received separate letters3 from SDPI informing
them that due to the insufficiency of available jobs in its recapping operations, it had
decided "to retrench the excess personnel based on the 'last in, first out' principle," and that
their services were considered terminated effective June 30, 1990. Arguilla and Pedrajas
were assured that they would receive the following from SDPI:

A. Severance Pay equivalent to one and one-half (1-1/2) months pay for every year of
service;

b. Commutation of proportionate unused sick leave credits;

c. Commutation of proportionate unused emergency leave credits;

d. Proportionate 13th month pay; and

e. Enjoyment of balance of [their] vacation leave credits.4

In a Letter5 dated June 8, 1990, SDPI informed the Department of Labor and Employment
(DOLE) that it had undertaken a retrenchment program in its recap operations "in view of
the insufficiency of available jobs resulting in redundancy and/or excess personnel," and
that Arguilla and Pedrajas were among the retrenched employees.

On August 28, 1990, Arguilla and Pedrajas signed, under protest, their respective receipts
and quitclaims, worded as follows:

KNOW ALL MEN BY THESE PRESENTS:

For and in consideration of the sum of PESOS ONE HUNDRED TWO THOUSAND FIVE
HUNDRED NINETY THREE & 32/100 (P102,593.32) the receipt of which is by these presents
acknowledged, I hereby release and quitclaim SIME DARBY PILIPINAS, INC. and/or SIME
DARBY PILIPINAS, INC. - AMENDED RETIREMENT PLAN from any and all claims and
demands which I have, or even to the present, and particularly from all claims, demands,
damages and/or causes of action arising out of my employment with, and separation from
SIME DARBY PILIPINAS, INC.

IN WITNESS WHEREOF, I hereby sign and execute these presents in Makati, Metro Manila,
this 28th day of August 1990.

(Signature)
HENRY C. PEDRAJAS

UNDER PROTEST 8/31/90

SIGNED IN THE PRESENCE OF:

(Signature) (Signature)

xxxx

RECEIPT AND QUITCLAIM

KNOW ALL MEN BY THESE PRESENTS:

For and in consideration of the sum of PESOS SEVENTY ONE THOUSAND EIGHT HUNDRED
THIRTY EIGHT & 16/100 (P71,838.16) the receipt of which is by these presents
acknowledged, I hereby release and quitclaim SIME DARBY PILIPINAS, INC. and/or SIME
DARBY PILIPINAS, INC. - AMENDED RETIREMENT PLAN from any and all claims and demand
which I have, or even to the present, and particularly from all claims, demands, damages
and/or causes of action arising out of my employment with, and separation from SIME
DARBY PILIPINAS, INC.

IN WITNESS WHEREOF, I hereby sign and execute these presents in Makati, Metro Manila,
this 28th day of August 1990.

(Signature)
ALFREDO A. ARGUILLA

UNDER PROTEST 8/31/90

SIGNED IN THE PRESENCE OF:

(Signature) (Signature)6

Arguilla and Pedrajas (herein respondents), thereafter filed a complaint for illegal dismissal
with plea for their reinstatement and monetary benefits against SDPI and its President,
Larry C. Dubberly (herein petitioners). The case was docketed as NLRC NCR Case No. 08-
04696-90.

In their Position Paper,7 petitioners alleged the following:

10. There should be no dispute at all that the retrenchment program undertaken by the
respondents is legitimate and was done in good faith and for a valid purpose. For one, not
only the two (2) complainants were affected or singled out, as they would want to project
and impress upon this Honorable Office. To state a fact, there were a total of not less than
sixty-five (65) employees from the company's different departments, in the provinces and
in Metro Manila since February 1990, who were similarly retrenched and were paid their
respective separation pay and other benefits due them by reason of such retrenchment
move undertaken by the respondent company. x x x

11. Secondly, to show its good faith and the legitimacy of the retrenchment program,
respondents complied with and observed the requirement of thirty (30) days prior notice to
each and every affected employee, and the payment of benefits grossly over and above
what was required under the law, and in fact, both complainants received and were paid
substantial benefits in the amounts of P102,593.32 and P71,838.16, respectively, which
they acknowledged receipt in a quitclaim and release, which they, however, inexplicably
signed "Under Protest" on August 31, 1990, after receiving and benefiting from the
proceeds thereof.

12. Thirdly, respondents complied with the reportorial requirements whereby it reported to
the Chief, Labor Statistics Service of the Department of Labor and Employment (DOLE) the
names of the employees of the Company who were/would be affected by the retrenchment
program of the respondent company x x x, even only for statistical purposes. By and large,
contrary to the contention by the complainants, the retrenchment program undertaken by
the respondents, in whatever angle one is to look at it, is legitimate and was done in good
faith. Consequently, unless shown to have been done in bad faith, and as a means to
circumvent or defeat the intention of the law, the prerogative of the company to undertake
an honest-to-goodness retrenchment program is inviolable and could not validly be
interfered with.8

Sometime in 1991, petitioner SDPI closed its Bacolod branch and retrenched 15 employees
who were members of the Sime Darby Salaried Employees Association, Inc. (Union), the
duly recognized collective bargaining unit of SDPI employees.9 The Union, in behalf of its
members, filed a complaint for unfair labor practice against petitioner SDPI, alleging therein
that the retrenchment program, the closure of the Bacolod, Iriga and Cagayan de Oro City
branches, and the termination of the employment of its members were intended to bust the
Union. They insisted that these were in the nature of unfair labor practice, as the dismissed
employees were not given the opportunity to resign. The Union prayed that, after due
proceedings, judgment be rendered, thus:

WHEREFORE, it is respectfully prayed that a decision be rendered in favor of complainant

against the respondents ordering the latter:

a) Guilty of committing unfair labor practice acts;

b) To reinstate with full backwages and without loss of seniority rights the following:
1. Antonio Domantay - Sales Dept., Head Office-Marketing Coordinator - Original & TBA
Sales. One of the most senior of the Sales Dept.

2. Leonardo Amodia - Accounts Receivable Clerk - Cebu Branch - A union officer and the
most senior of the Dept.

3. Bethoven Tupas - Davao Branch - Inside Salesman - previously a marketing

coordinator/outside salesman.

4. Romulo Reblingca - Davao Branch - Partsman.

5. Rommel Felstado - Sales Engineer, Head Office Tractors Division.

c. To immediately comply [with] the decision in:

c.1 NCR Case No. 1-34-85

c.2 G.R. No. 77188

d. To open up all those closed positions which were formerly handled by union members and
contracted out;

e. To cease and desist from committing acts of union-busting, contracting out of jobs and
other similar or analogous acts which may constitute unfair labor practice.

Considering that the charges in this case constituted criminal liabilities, it is respectfully
prayed that this case be immediately, as much as possible, terminated in order to
discourage and prevent the individual respondents from further committing unfair labor
practice acts similar to the charges in the above-entitled case.

It is so finally prayed that complainant be granted with such other reliefs and remedies
under the premises.10

The case was docketed as NLRC NCR Case No. 00-06-0355-91.

On December 8, 1992, the Labor Arbiter rendered judgment in NLRC NCR Case No. 08-
04696-90 in favor of respondents. The fallo of the decision reads:

Accordingly, respondent is hereby declared guilty of illegal dismissal and is hereby ordered
to reinstate complainants to their former or equivalent positions without loss of seniority
rights and other benefits plus one year backwages, computed as follows:

HENRY PEDRAJAS

6/30/90 - 6/30/91 = 12.0 mos.

P257.76 x 26 x 12.0 mos. = P80,421.12

1/12 of P80,421.12 6,701.76
Total P87,122.88
ALFREDO ARGUILLA
3/30/90 - 3/30/91 = 12.0 mos.
P257.76 x 26 x 12.0 mos. = P80,421.12
1/12 of P80,421.12 6,701.76

Total P87,122.88

SO ORDERED.11

The Labor Arbiter anchored his ruling on the finding that petitioners failed to produce
evidence to support the contention that they resorted to retrenchment for reasons of
"economic survival," let alone submit record and documents to prove their claim. The Labor
Arbiter emphasized that any act sanctioning the dismissal of respondents would open the
floodgates to abuse, as there simply was no evidence to prove that petitioner SDPI has
been suffering losses or that the position the dismissed employees were occupying had
become redundant.12

According to the Labor Arbiter, the fact that respondents executed their respective
Quitclaims and Releases and had received amounts corresponding to their years of service
was of no moment, since respondents, from the very start, had manifested their protest
against petitioners' decision to do away with their services. It was not surprising that they
accepted the amounts paid to them, as they were left with no choice. The Labor Arbiter,
likewise, considered the ages of the respondents at the time of their separation from the
service, and how it would be very hard for them to get other jobs.13

Petitioners appealed the decision to the NLRC. In the meantime, respondents were
reinstated to their former positions, per their manifestation to the NLRC dated July 5, 1995.

In a separate development, the Labor Arbiter rendered judgment in NLRC NCR Case No. 00-
06-0355-91 on August 4, 1992, dismissing the complaint for unfair labor practice against
petitioners. The Labor Arbiter ruled that the retrenchment program implemented by
petitioners in the SDPI head office, including the closure of its Bacolod office, was a valid
exercise of management prerogative. It was further pointed out that even the Union itself
admitted that the retrenchment of employees would reduce labor costs by at
least P7,200,000.00, and that even Goodyear Philippines, a competitor of petitioner SDPI,
was winding up its affairs.

The Union appealed the decision to the NLRC.

Meanwhile, on August 4, 1995, respondents received P18,884.03 and P18,887.80,

respectively, from petitioner SDPI, and signed their respective Receipt and
Quitclaims14 pertinent thereto.

A few months later, petitioner SDPI and Goodyear Philippines, Inc. executed a Memorandum
of Agreement15 dated April 24, 1996 in which petitioner SDPI sold all its assets, including all
its buildings, machineries and equipment at the Recapping Department in Marikina City
for P1,500,000,000.00. The NLRC was duly informed of the agreement.

In the meantime, the NLRC rendered judgment in NLRC NCR Case No. 08-04696-90 on
December 18, 1997 affirming the decision of the Labor Arbiter.16 Petitioners moved for the
partial reconsideration of the decision on the ground that the NLRC in NLRC NCR Case No.
00-06-0355-91 had affirmed the validity of its retrenchment program; hence, there was no
factual and legal basis to hold them liable for illegal dismissal.17 Petitioners further averred
that the decision of the NLRC in NLRC Case No. 00-06-0355-91 had likewise resolved the
issues and matters in NLRC Case No. 08-04696-90. They alleged that the NLRC decision in
the unfair labor practice case constitutes a bar to the filing of NLRC Case No. 08-04696-90
for illegal dismissal.

Petitioners alleged that even assuming the validity of the order of reinstatement, it was
impossible for respondents to be reinstated pending appeal and receive all the benefits of
their employment in conformity with the Labor Arbiter's decision, since supervening events
had rendered their reinstatement totally impossible. They pointed out that the recapping
operations ceased sometime in 1995, consistent with SDPI's streamlining operations which
began at the inception of the present case. The economic conditions resulted in the
downward trend of the market, prompting petitioners to sell their tire factory to Goodyear in
1996 if only to cut its losses while it still could. As a result, respondents' positions in the
company no longer existed; neither were there similar positions in the company where they
could be assigned due to the complete abolition of the tire factory. In fact, the necessity of
cost-cutting to protect the company's business interest has been acknowledged by
petitioners. Petitioners insisted that respondents never questioned or denied the validity of
their separation from the company in 1995 and they each voluntarily signed a Release and
Quitclaim to forego any further claims against the company.18

On October 21, 1998, the NLRC rendered a Decision in NLRC NCR Case No. 08-04696-90
denying the motion for reconsideration of petitioners. The NLRC declared that its decision in
NLRC NCR Case No. 00-06-0355-91 was not a bar to the resolution of the instant complaint
for illegal dismissal.

After evaluation, this Commission deems it proper to deny the Motion for Reconsideration
filed by respondents. No grave abuse of discretion was committed when this Commission
upheld the illegality of complainant's dismissal. It may be true that the Second Division of
this Commission recognized the validity of respondents' retrenchment program. This does
not, however, mean that there is no uniformity in the rulings of this Commission. Decisions
are based on the evidence presented on record. It may have happened that respondents
were able to present sufficient evidence in the case decided by the Second Division, hence,
the decision in their favor. In the instant case, however, their position paper only proffered
the notices to their employees who will be retrenched, the computation of their benefits and
the notices to the Department of Labor and Employment.19

Petitioners filed a petition for certiorari before the Court of Appeals against the retrenched
employees, assailing the decision and resolution of the NLRC on appeal on the following
grounds:

I
THE PUBLIC RESPONDENT NLRC (FIRST DIVISION) COMMITTED GRAVE ABUSE OF
DISCRETION IN NOT UPHOLDING THE VALIDITY OF THE RETRENCHMENT PROGRAM OF
SDPI.

II

THE PUBLIC RESPONDENT NLRC (FIRST DIVISION) COMMITTED GRAVE ABUSE OF

DISCRETION IN FAILING TO APPLY THE DOCTRINE OF RES JUDICATA IN THE INSTANT
CASE.

III

THE PUBLIC RESPONDENT NLRC (FIRST DIVISION) COMMITTED GRAVE ABUSE OF

DISCRETION IN FAILING TO RULE THAT SUPERVENING EVENTS HAVE RENDERED THE
INSTANT CASE MOOT AND ACADEMIC.20

Petitioners point out that the respondents had been reinstated to their former positions
pending appeal before the NLRC, and that it had sold its Recapping Department to Goodyear
Philippines, Inc. on April 24, 1996. Moreover, complainants had already received their
separation pay as a result of the company's compulsory retrenchment program.21

On January 6, 2000, petitioners submitted to the court a copy of the Memorandum of

Agreement executed by SDPI and Goodyear Philippines, Inc., and manifested that
respondents executed their respective Receipt and Quitclaim on August 4, 1995. Petitioners
assert that, in view of these supervening events, the case had been rendered moot and
academic, and should be considered closed and terminated.22

On March 20, 2000, the CA rendered judgment dismissing the petition for lack of
merit.23 The appellate court ratiocinated that petitioners failed to substantiate their claim
that the employees had been validly retrenched; the case was not mooted by the
reinstatement of respondents pending appeal and the sale of the Recapping Department of
SDPI to Goodyear Philippines, Inc.; and, respondents were not barred from pursuing their
claim for monetary benefits under the decision of the Labor Arbiter, considering that the
amounts given to them relate to their illegal dismissal from employment and not due to
their separation from SDPI due to cessation of its Recapping Department. According to the
appellate court, respondents' receipt of separation pay pendente lite did not prevent them
from contesting the legality of their dismissal arising from an unfair labor practice. It ruled,
however, that it was not competent to determine the amount of separation pay of
respondents.24

Petitioners filed a motion for reconsideration which the appellate court denied; hence, the
instant Petition for Review on Certiorari where they contend that:

IN ANY EVENT, THERE ARE SUPERVENING EVENTS WHICH NOT ONLY RENDER THE
PRESENT CASE MOOT AND ACADEMIC, BUT WILL MAKE THE EXECUTION OF THE
JUDGMENT AGAINST THE PETITIONERS INEQUITABLE AND UNJUST: (1) RESPONDENTS
HAVE EXECUTED VALID AND BINDING QUITCLAIMS TWICE AND WERE CORRESPONDINGLY
PAID SEPARATION BENEFITS TWICE MORE THAN THE MINIMUM REQUIRED BY LAW; (2)
PETITIONER SDPI'S ENTIRE [RECAPPING] OPERATIONS HAD CLOSED. TO AWARD
RESPONDENTS THEIR MONETARY CLAIMS WOULD CLEARLY RESULT IN UNJUST
ENRICHMENT.

II

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN UPHOLDING THE NLRC DECISION
FINDING THAT RESPONDENTS ARE ENTITLED TO THEIR MONETARY CLAIMS.
RESPONDENTS WERE DISMISSED AS A RESULT OF PETITIONER SDPI'S VALID
RETRENCHMENT PROGRAM.

III

THE VALIDITY OF SDPI'S RETRENCHMENT PROGRAM HAS ALREADY BEEN AFFIRMED WITH
FINALITY BY THE NLRC. THUS, THIS IS ALREADY RES JUDICATA.25

Petitioners aver that the CA erred in declaring that respondents were entitled to their
monetary claim. Petitioners recall that, in 1990, respondent Arguilla received P71,838.16
and respondent Pedrajas received P102,593.32 by way of separation pay, including the
commutation of their unused leave credits and the proportionate amount of their 13th
month pay; on August 4, 1995, respondent Arguilla again received P18,884.03, while
respondent Pedrajas received P18,887.80 from the corporation. Petitioners point out that in
both instances, respondents executed deeds of quitclaim which effectively discharged the
corporation from any and all claims, liability, and damages which respondents had or may
have in the future, and all causes of action arising from and in connection with their
respective employment and separation from the corporation. Petitioners state that
respondents executed their respective deeds of quitclaim voluntarily, with full knowledge of
the pending case and of the implication of the deeds. Petitioners assert that to rule in favor
of respondents would be tantamount to allowing them to enrich themselves at the expense
of the corporation.

Petitioners posit that the validity of the corporation's retrenchment program had been
affirmed with finality by the NLRC in NLRC NCR Case No. 00-06-0355-91. The case is barred
by said decision of the NLRC insofar as the validity of its retrenchment program is
concerned. Petitioners maintain that there is ample evidence to prove the validity of
petitioners' retrenchment program, independent of the NLRC decision in NLRC NCR Case No.
00-06-0355-91.

By way of comment, respondents aver that they were not parties in NLRC NCR Case No. 00-
06-0355-91; hence, the decision of the Labor Arbiter declaring the retrenchment program of
SDPI in its Bacolod branch was valid, and the NLRC decision which affirmed that of the
Labor Arbiter was in no way binding on them. Petitioners failed to adduce competent
substantial evidence to prove the essential requisites of a valid retrenchment. They assert
that the issues raised in the case at bench are factual, hence, inappropriate in a petition
under Rule 45 of the Rules of Court.

Respondents further assert that the "receipt issue" raised by petitioners, i.e., whether there
is factual basis for the retrenchment of respondents, is improper in a Petition for Review
on Certiorari under Rule 45 of the Rules of Court. They maintain that the factual findings of
the Labor Arbiter, affirmed on appeal by the NLRC and by no less than the Court of Appeals
on a petition for certiorari, are conclusive on this Court.
Respondents insist that petitioner SDPI did not stop its recapping operations when its assets
were sold to Goodyear Philippines, Inc. on April 24, 1996. On the contrary, petitioner SDPI
continued with its recapping operations by putting up a subsidiary corporation, the SD
Retread Systems, which is owned (controlling interest) and managed by the top officers of
SDPI. They point out that the president and vice-president for sales, the vice-president for
finance, and the vice-president production of SDPI are the incorporators of SD Retread
System; counsel of SDPI is also the counsel for SD Retread System, with the same principal
purpose26 as the Recapping Department of SDPI. They point out that when petitioner SDPI
retrenched its employees in 1990, it earned a net profit
of P100,227,000.00; P119,127,000.00 in 1992 and P166,445,000.00 in 1993. From 1989 to
1990, SDPI declared dividends amounting to P193,281,000.00. The jobs of respondents had
been ferried out by SDPI to hire new workers who would be paid lower wages.

In reply, petitioners aver that, absent evidence of duress or force against respondents, the
receipts and quitclaims which they executed pendente lite must be declared valid, and as
such, the case has been rendered moot and academic. They claim, that in affirming the
decision of the NLRC, the CA thereby allowed respondents to enrich themselves unjustly at
their expense, which is proscribed by Articles 22, 2149, and 2175 of the New Civil Code.

The petition is partially granted.

Whether or not there is factual basis for the retrenchment of respondents is one proscribed
by Rule 45 of the Rules of Court as amended. The Court is not a trier of facts. It is not
tasked to review the evidence on record, documentary and testimonial, and reassess the
probative weight thereof. Besides, the Labor Arbiter declared that petitioners failed to prove
the requisites for a valid retrenchment of petitioner's employees and that the respondents
were illegally dismissed. The findings of the Labor Arbiter were affirmed by the NLRC on
appeal, which was, in turn affirmed by the CA. Considering that there is no evidence that
the Labor Arbiter and the NLRC ignored, misconstrued and misapplied facts and
circumstances of substance which, if considered, would warrant a reversal or modification of
the outcome of the case, such findings are conclusive on this Court.

The decision of the NLRC in the unfair labor practice case (NLRC NCR Case No. 00-06-0355-
91) is not a bar to the instant case, for the reason that respondents were not parties
therein. The principle of res judicata does not apply because one who was not a party to a
case is not bound by any decision rendered therein.27 Only parties in interest in an action
are bound by the judgment. Strangers to a case are not bound by the judgment rendered
therein and such judgment is not available as an adjudication either against or in favor of
such person.28 For res judicata to apply, there must be identity of parties in both cases.
While the requirement does not mean that the parties be physically identical, it is satisfied if
there is privity between the parties or their successors-in-interest by title subsequent to the
commencement of the previous causes of action, litigating for the same thing, title or
capacity.29 It must be stressed that there is no privity between the Union, which is the
complainant in NLRC NCR Case No. 00-06-0355-91 for unfair labor practice, and the
respondents who as complainants below filed the case for illegal dismissal. Although the
Union sued for and in behalf of its members, who were at the same time employees of
petitioner SDPI, respondents who were employees of SDPI were not members thereof.

It cannot be validly claimed that there is identity of the causes of action in the two cases.
NLRC NCR Case No. 00-06-0355-91 was one for unfair labor practice involving the dismissal
of union members stationed in the head office and in SDPI's Davao branch; it likewise
invoked the implementation of the decisions in NLRC NCR Case No. 1-34-85 and G.R. No.
77188. On the other hand, the complaint of respondents was for illegal dismissal, on
account of petitioners' claim that there were excess personnel in its Recapping Department
in Marikina. The evidence necessary to sustain the action of respondents against petitioners
would not have been sufficient to grant reliefs in NLRC NCR Case No. 00-06-0355-91 and
vice versa.

The fact that respondents received P18,884.03 and P18,887.80, respectively, (allegedly as
separation pay as a result of the compulsory retrenchment program of petitioner SDPI) and
that they executed separate deeds of quitclaim on August 4, 1995 does not completely
render this case moot and academic.

It bears stressing that the law looks with disfavor on quitclaims and releases by employees
who have been inveigled or pressured into signing them by unscrupulous employers seeking
to evade their legal responsibilities and frustrate just claims of employees.30 In line with the
policy of the State to promote the welfare of execution, quitclaims executed by employees
are often frowned upon as contrary to public policy. Acceptance of benefits therefrom does
not amount to estoppel. Indeed, in Lopez Sugar Corporation v. Federation of Free
Workers,31 this Court ruled that:

Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer
and employee, obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of money. Because, out of the job,
he has to face harsh necessities of life. He thus found himself in no position to resist money
proferred. His, then, is a case of adherence, not of choice. One thing sure, however, is that
petitioners did not relent their claim. They pressed it. They are deemed not to have waived
any of their rights. x x x"32

In exceptional cases, the Court has given effect to quitclaim executed by employees if the
employer is able to prove the following requisites: (1) the employee executes a deed of
quitclaim voluntarily; (2) there is no fraud or deceit on the part of any of the parties; (3)
the consideration of the quitclaim is credible and reasonable; and (4) the contract is not
contrary to law, public order, public policy, morals or good customs or prejudicial to a third
person with a right recognized by law.33 In this case, petitioners failed to prove all the
foregoing requisites.

Admittedly, respondents signed their respective Receipts and Deeds of Quitclaims. However,
a careful review of the record shows that petitioners failed to disclose the names of the
officers/employees of SDPI who allegedly explained to respondents the implications and
consequences of the execution of said quitclaims. The records show that, even after signing
the quitclaims, respondents opposed the motion for partial reconsideration of petitioners of
the decision of the CA and sought the affirmance of the decision of the NLRC.

Indeed, the quitclaims prepared by petitioners, which they had the respondents sign, are
deceptive. It is made to appear in said deeds that respondents received P18,884.03
and P18,887.80, respectively, as full and final payment of separation pay from petitioner
SDPI as a result of the latter's compulsory retrenchment program. However, the Labor
Arbiter had already declared that there was no factual basis for the retrenchment of
respondents and that they were illegally dismissed from their employment by SDPI. It is
inconceivable that, after having won a favorable decision from the Labor Arbiter,
respondents would make a volte face on August 4, 1995 and declare that, after all, the
compulsory retrenchment program of SDPI was valid.
Moreover, at the time respondents received the said amounts of P18,884.03
and P18,887.80 on August 4, 1995, the NLRC had already determined that there was no
factual basis for the termination of the employment of respondents on account of the sale of
the machineries and equipment of petitioner SDPI in its Recapping Department in Marikina
City. It was only on April 24, 1996, or eight months after respondents had signed the
subject quitclaims, that SDPI and Goodyear Philippines, Inc. executed their Memorandum of
Agreement.

Under the quitclaims, it is made to appear that respondents are discharging and releasing
petitioner SDPI and its officers, including petitioner Larry Dubberly, from any and all claims,
complaints, liability and demands which may be had in the future and all causes of actions,
arising from and in connection with respondents' employment and separation from
petitioner SDPI. The quitclaims are worded so broadly that respondents discharged the
petitioners of their liabilities under the decision of the Labor Arbiter in the amounts
of P18,884.03 and P18,887.80, respectively, and to their reinstatement to their jobs solely
and merely for and in consideration of such measly amounts.

If petitioners acted in good faith, they should have required respondents to be assisted by
counsel before signing the said quitclaim. After all, the appeal of petitioners in the NLRC was
still pending, and respondents were represented by counsel. What petitioners did was to
have respondents sign the quitclaims without prior knowledge, much less, conformity of
their counsel.

Petitioners claim that, by not dismissing the case before it by reason of a supervening event
and despite the execution by respondents of the Receipts and Quitclaim during the
pendency of their appeal, the NLRC and the CA thereby allowed respondents to enrich
themselves at the expense of petitioners. This contention is barren of merit. It goes without
saying that the amounts of P18,884.03 and P18,887.80 received by respondents on August
4, 1995 should be deducted from the Labor Arbiter's monetary award. We agree with
petitioners' claim that respondents can no longer be reinstated because SDPI had already
sold its assets and that its Recapping Department had already been taken over by Goodyear
Philippines, Inc. on April 24, 1996.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the
Court of Appeals, finding that the NLRC found no grave abuse of discretion in affirming in
toto the Decision of the Labor Arbiter, is AFFIRMED. Considering that reinstatement is no
longer feasible, the P18,884.03 received by respondent Alfredo Arguilla and the P18,887.80
received by respondent Henry C. Pedrajas on August 4, 1995 shall be deducted from the
respective sums awarded to them. No costs.

SO ORDERED.