JAO VS BCC PRODUCT SALES AND TERRACES

D E C I S I O N
BERSAMIN, J .:
The issue is whether petitioner was respondents employee or not. Respondents denied an employer-
employee relationship with petitioner, who insisted the contrary.
Through his petition for review on certiorari, petitioner appeals the decision promulgated by the Court of
Appeals (CA) on February 27, 2004,1[1] finding no employee-employer relationship between him and respondents,
thereby reversing the ruling by the National Labor Relations Commission (NLRC) to the effect that he was the
employee of respondents.
Antecedents
Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President, respondent Terrance
Ty (Ty), employed him as comptroller starting from September 1995 with a monthly salary of P20,000.00 to handle
the financial aspect of BCCs business;2[2] that on October 19,1995, the security guards of BCC, acting upon the
instruction of Ty, barred him from entering the premises of BCC where he then worked; that his attempts to report to
work in November and December 12, 1995 were frustrated because he continued to be barred from entering the
premises of BCC;3[3] and that he filed a complaint dated December 28, 1995 for illegal dismissal, reinstatement
with full backwages, non-payment of wages, damages and attorneys fees.
Respondents countered that petitioner was not their employee but the employee of Sobien Food
Corporation (SFC), the major creditor and supplier of BCC; and that SFC had posted him as its comptroller in BCC
to oversee BCCs finances and business operations and to look after SFCs interests or investments in BCC.
Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996,4[6] the NLRC vacated the
ruling and remanded the case for further proceedings.5[7] Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a
new decision on September 20, 2001, dismissing petitioners complaint for want of an employer-employee
relationship between the parties.6[8] Petitioner appealed the September 20, 2001 decision of Labor Arbiter Mayor.
On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayors decision, and declaring
that petitioner had been illegally dismissed. It ordered the payment of unpaid salaries, backwages and 13
th
month
pay, separation pay and attorneys fees.7[9] Respondents moved for the reconsideration of the NLRC decision, but
their motion for reconsideration was denied on September 30, 2002.8[10] Thence, respondents assailed the NLRC
decision on certiorari in the CA.
Ruling of the CA
On February 27, 2004, the CA promulgated its assailed decision,9[11] holding:









After a judicious review of the records vis--vis the respective posturing of the contending
parties, we agree with the finding that no employer-employee relationship existed between
petitioner BCC and the private respondent. On this note, the conclusion of the public respondent
must be reversed for being issued with grave abuse of discretion.
Etched in an unending stream of cases are the four (4) standards in determining the
existence of an employer-employee relationship, namely, (a) the manner of selection and
engagement of the putative employee; (b) the mode of payment of wages; (c) the presence or
absence of power of dismissal; and, (d) the presence or absence of control of the putative
employees conduct. Of these powers the power of control over the employees conduct is
generally regarded as determinative of the existence of the relationship.
Apparently, in the case before us, all these four elements are absent. First, there is no proof
that the services of the private respondent were engaged to perform the duties of a comptroller in
the petitioner company. There is no proof that the private respondent has undergone a selection
procedure as a standard requisite for employment, especially with such a delicate position in the
company. Neither is there any proof of his appointment nor is there any showing that the parties
entered into an employment contract, stipulating thereof that he will receive P20,000.00/month
salary as comptroller, before the private respondent commenced with his work as such. Second, as
clearly established on record, the private respondent was not included in the petitioner companys
payroll during the time of his alleged employment with the former. True, the name of the private
respondent Charlie Jao appears in the payroll however it does not prove that he has received his
remuneration for his services. Notably, his name was not among the employees who will receive
their salaries as represented by the payrolls. Instead, it appears therein as a comptroller who is
authorized to approve the same. Suffice it to state that it is rather obscure for a certified public
accountant doing the functions of a comptroller from September 1995 up to December 1995 not to
receive his salary during the said period. Verily, such scenario does not conform with the usual
and ordinary experience of man. Coming now to the most controlling factor, the records
indubitably reveal the undisputed fact that the petitioner company did not have nor did not
exercise the power of control over the private respondent. It did not prescribe the manner by
which the work is to be carried out, or the time by which the private respondent has to report for
and leave from work. As already stated, the power of control is such an important factor that other
requisites may even be disregarded. In Sevilla v. Court of Appeals, the Supreme Court
emphatically held, thus:
The control test, under which the person for whom the services are rendered
reserves the right to direct not only the end to be achieved but also the means for
reaching such end, is generally relied on by the courts.
We have carefully examined the evidence submitted by the private respondent in the formal
offer of evidence and unfortunately, other than the bare assertions of the private respondent which
he miserably failed to substantiate, we find nothing therein that would decisively indicate that the
petitioner BCC exercised the fundamental power of control over the private respondent in relation
to his employmentnot even the ID issued to the private respondent and the affidavits executed
by Bertito Jemilla and Rogelio Santias. At best, these pieces of documents merely suggest the
existence of employer-employee relationship as intimated by the NLRC. On the contrary, it
would appear that the said sworn statement provided a substantial basis to support the contention
that the private respondent worked at the petitioner BCC as SFCs representative, being its major
creditor and supplier of goods and merchandise. Moreover, as clearly pointed out by the petitioner
in his Reply to the private respondents Comment, it is unnatural for SFC to still employ the
private respondent to oversee and supervise collections of account receivables due SFC from its
customers or clients like the herein petitioner BCC on a date later than December, 1995
considering that a criminal complaint has already been instituted against him.

Sadly, the private respondent failed to sufficiently discharge the burden of showing with
legal certainty that employee-employer relationship existed between the parties. On the other
hand, it was clearly shown by the petitioner that it neither exercised control nor supervision over
the conduct of the private respondents employment. Hence, the allegation that there is employer-
employee relationship must necessarily fail.
Consequently, a discussion on the issue of illegal dismissal therefore becomes unnecessary.
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of
the public respondent NLRC dated July 31, 2002 and the Resolution dated September 30, 2002 are
REVERSED and SET ASIDE. Accordingly, the decision of the Labor Arbiter dated September
20, 2001 is hereby REINSTATED.
SO ORDERED.
After the CA denied petitioners motion for reconsideration on May 14, 2004,10[12] he filed a motion for
extension to file petition for review, which the Court denied through the resolution dated July 7, 2004 for failure to
render an explanation on why the service of copies of the motion for extension on respondents was not personally
made.11[13] The denial notwithstanding, he filed his petition for review on certiorari. The Court denied the petition
on August 18, 2004 in view of the denial of the motion for extension of time and the continuing failure of petitioner
to render the explanation as to the non-personal service of the petition on respondents.12[14] However, upon a
motion for reconsideration, the Court reinstated the petition for review on certiorari and required respondents to
comment.
Issue
The sole issue is whether or not an employer-employee relationship existed between petitioner and BCC. A
finding on the existence of an employer-employee relationship will automatically warrant a finding of illegal
dismissal, considering that respondents did not state any valid grounds to dismiss petitioner.
Ruling
The petition lacks merit.
The existence of an employer-employee relationship is a question of fact. Generally, a re-examination of
factual findings cannot be done by the Court acting on a petition for review on certiorari because the Court is not a
trier of facts but reviews only questions of law. Nor may the Court be bound to analyze and weigh again the
evidence adduced and considered in the proceedings below.13[16] This rule is not absolute, however, and admits of
exceptions. For one, the Court may look into factual issues in labor cases when the factual findings of the Labor
Arbiter, the NLRC, and the CA are conflicting.14[17]
Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA. This conflict among
such adjudicating offices compels the Courts exercise of its authority to review and pass upon the evidence
presented and to draw its own conclusions therefrom.
To prove his employment with BCC, petitioner offered the following: (a) BCC Identification Card (ID)
issued to him stating his name and his position as comptroller, and bearing his picture, his signature, and the





signature of Ty; (b) a payroll of BCC for the period of October 1-15, 1996 that petitioner approved as comptroller;
(c) various bills and receipts related to expenditures of BCC bearing the signature of petitioner; (d) various checks
carrying the signatures of petitioner and Ty, and, in some checks, the signature of petitioner alone; (e) a court order
showing that the issuing court considered petitioners ID as proof of his employment with BCC; (f) a letter of
petitioner dated March 1, 1997 to the Department of Justice on his filing of a criminal case for estafa against Ty for
non-payment of wages; (g) affidavits of some employees of BCC attesting that petitioner was their co-employee in
BCC; and (h) a notice of raffle dated December 5, 1995 showing that petitioner, being an employee of BCC,
received the notice of raffle in behalf of BCC.15[18]
Respondents denied that petitioner was BCCs employee. They affirmed that SFC had installed petitioner
as its comptroller in BCC to oversee and supervise SFCs collections and the account of BCC to protect SFCs
interest; that their issuance of the ID to petitioner was only for the purpose of facilitating his entry into the BCC
premises in relation to his work of overseeing the financial operations of BCC for SFC; that the ID should not be
considered as evidence of petitioners employment in BCC;16[19] that petitioner executed an affidavit in March
1996,17[20] stating, among others, as follows:
1. I am a CPA (Certified Public Accountant) by profession but presently associated with, or
employed by, Sobien Food Corporation with the same business address as abovestated;
2. In the course of my association with, or employment by, Sobien Food Corporation
(SFC, for short), I have been entrusted by my employer to oversee and supervise
collections on account of receivables due SFC from its customers or clients; for instance,
certain checks due and turned over by one of SFCs customers is BCC Product Sales,
Inc., operated or run by one Terrance L. Ty, (President and General manager),
pursuant to, or in accordance with, arrangements or agreement thereon; such
arrangement or agreement is duly confirmed by said Terrance Ty, as shown or admitted
by him in a public instrument executed therefor, particularly par. 2 of that certain Counter-
Affidavit executed and subscribed on December 11, 1995, xerox copy of which is hereto
attached, duly marked as Annex A and made integral part hereof.
3. Despite such admission of an arrangement, or agreement insofar as BCC-checks were
delivered to, or turned over in favor of SFC, Mr. Terrance Ty, in a desire to blemish my
reputation or to cause me dishonor as well as to impute unto myself the commission of a
crime, state in another public instrument executed therefor in that:
3. That all the said 158 checks were unlawfully appropriated by a certain Charlie
Jao absolutely without any authority from BCC and the same were reportedly turned
over by said Mr. Jao to a person who is not an agent or is not authorized
representative of BCC.
xerox copy of which document (Affidavit) is hereto attached, duly marked as Annex B and
made integral part hereof. (emphasis supplied)
and that the affidavit constituted petitioners admission of the arrangement or agreement between BCC and
SFC for the latter to appoint a comptroller to oversee the formers operations.
Petitioner counters, however, that the affidavit did not establish the absence of an employer-employee
relationship between him and respondents because it had been executed in March 1996, or after his employment



with respondents had been terminated on December 12, 1995; and that the affidavit referred to his subsequent
employment by SFC following the termination of his employment by BCC.18[21]
We cannot side with petitioner.
Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA and the
Labor Arbiter to the effect that the affidavit actually supported the contention that petitioner had really worked in
BCC as SFCs representative. It does seem more natural and more believable that petitioners affidavit was referring
to his employment by SFC even while he was reporting to BCC as a comptroller in behalf of SFC. As respondents
pointed out, it was implausible for SFC to still post him to oversee and supervise the collections of accounts
receivables due from BCC beyond December 1995 if, as he insisted, BCC had already illegally dismissed him and
had even prevented him from entering the premises of BCC. Given the patent animosity and strained relations
between him and respondents in such circumstances, indeed, how could he still efficiently perform in behalf of SFC
the essential responsibility to oversee and supervise collections at BCC? Surely, respondents would have
vigorously objected to any arrangement with SFC involving him.
We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself made in his
own affidavit dated December 11, 1995 to the effect that petitioner had illegally appropriated some checks without
authority from BCC.19[22] Petitioner thereby sought to show that he had the authority to receive the checks
pursuant to the arrangements between SFC and BCC. This showing would aid in fending off the criminal charge
respondents filed against him arising from his mishandling of the checks. Naturally, the circumstances petitioner
adverted to in his March 1996 affidavit concerned those occurring before December 11, 1995, the same period when
he actually worked as comptroller in BCC.
Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom petitioner offered
as a rebuttal witness, lent credence to respondents denial of petitioners employment. So declared in that affidavit,
among others, that he had known petitioner for being earlier his retained accountant having his own office but did
not hold office in SFCs premises; that Ty had approached him (So) looking for an accountant or comptroller to be
employed by him (Ty) in [BCCs] distribution business of SFCs general merchandise, and had later asked him on
his opinion about petitioner; and that he (So) had subsequently learned that Ty had already employed [petitioner]
as his comptroller as of September 1995.20[23]
The statements of So really supported respondents position in that petitioners association with SFC prior
to his supposed employment by BCC went beyond mere acquaintance with So. That So, who had earlier merely
retained petitioner as his accountant, thereafter employed petitioner as a retained accountant after his supposed
illegal dismissal by BCC raised a doubt as to his employment by BCC, and rather confirmed respondents assertion
of petitioner being an employee of SFC while he worked at BCC.
Moreover, in determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means
and methods by which the work is accomplished. The last element, the so-called control test, is the most important
element.
Hereunder are some of the circumstances and incidents occurring while petitioner was supposedly
employed by BCC that debunked his claim against respondents.
It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority to
deliver some 158 checks to SFC. Considering that he contested respondents challenge by pointing to the existing



arrangements between BCC and SFC, it should be clear that respondents did not exercise the power of control over
him, because he thereby acted for the benefit and in the interest of SFC more than of BCC.
In addition, petitioner presented no document setting forth the terms of his employment by BCC. The
failure to present such agreement on terms of employment may be understandable and expected if he was a common
or ordinary laborer who would not jeopardize his employment by demanding such document from the employer, but
may not square well with his actual status as a highly educated professional.
Petitioners admission that he did not receive his salary for the three months of his employment by BCC, as
his complaint for illegal dismissal and non-payment of wages
21[25]
and the criminal case for estafa he later filed
against the respondents for non-payment of wages
22[26]
indicated, further raised grave doubts about his assertion of
employment by BCC. If the assertion was true, we are puzzled how he could have remained in BCCs employ in
that period of time despite not being paid the first salary of P20,000.00/month. Moreover, his name did not appear in
the payroll of BCC despite him having approved the payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the
insincerity of petitioners assertion of employment by BCC. In the petition for review on certiorari, he averred that
he had been barred from entering the premises of BCC on October 19, 1995,23[27] and thus was illegally dismissed.
Yet, his complaint for illegal dismissal stated that he had been illegally dismissed on December 12, 1995 when
respondents security guards barred him from entering the premises of BCC,24[28] causing him to bring his
complaint only on December 29, 1995, and after BCC had already filed the criminal complaint against him. The
wide gap between October 19, 1995 and December 12, 1995 cannot be dismissed as a trivial inconsistency
considering that the several incidents affecting the veracity of his assertion of employment by BCC earlier noted
herein transpired in that interval.
With all the grave doubts thus raised against petitioners claim, we need not dwell at length on the other
proofs he presented, like the affidavits of some of the employees of BCC, the ID, and the signed checks, bills and
receipts. Suffice it to be stated that such other proofs were easily explainable by respondents and by the aforestated
circumstances showing him to be the employee of SFC, not of BCC.
WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to
pay the costs of suit.
JAVIER VS FLYACE CORPORATION
D E C I S I O N
MENDOZA, J .:
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision25[1]
of the Court of Appeals (CA) and its June 7, 2010 Resolution,26[2] in CA-G.R. SP No. 109975, which reversed the
May 28, 2009 Decision27[3] of the National Labor Relations Commission (NLRC) in the case entitled Bitoy Javier
v. Fly Ace/Flordelyn Castillo,28[4] holding that petitioner Bitoy Javier (Javier) was illegally dismissed from








employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and separation pay in lieu of
reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor
standard benefits. He alleged that he was an employee of Fly Ace since September 2007, performing various tasks
at the respondents warehouse such as cleaning and arranging the canned items before their delivery to certain
locations, except in instances when he would be ordered to accompany the companys delivery vehicles, as
pahinante; that he reported for work from Monday to Saturday from 7:00 oclock in the morning to 5:00 oclock in
the afternoon; that during his employment, he was not issued an identification card and payslips by the company;
that on May 6, 2008, he reported for work but he was no longer allowed to enter the company premises by the
security guard upon the instruction of Ruben Ong (Mr. Ong), his superior;29[5] that after several minutes of
begging to the guard to allow him to enter, he saw Ong whom he approached and asked why he was being barred
from entering the premises; that Ong replied by saying, Tanungin mo anak mo; 30[6] that he then went home and
discussed the matter with his family; that he discovered that Ong had been courting his daughter Annalyn after the
two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong and convince him to spare her
father from trouble but he refused to accede; that thereafter, Javier was terminated from his employment without
notice; and that he was neither given the opportunity to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier
was a stevedore or pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was subscribed
before the Labor Arbiter (LA).
For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries.
Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at
an agreed rate of 300.00 per trip, which was later increased to 325.00 in January 2008. Mr. Ong contracted Javier
roughly 5 to 6 times only in a month whenever the vehicle of its contracted hauler, Milmar Hauling Services, was
not available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that he was their
employee, Fly Ace insisted that there was no illegal dismissal.31[8] Fly Ace submitted a copy of its agreement with
Milmar Hauling Services and copies of acknowledgment receipts evidencing payment to Javier for his contracted
services bearing the words, daily manpower (pakyaw/piece rate pay) and the latters signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to
present proof that he was a regular employee of Fly Ace. He wrote:




Complainant has no employee ID showing his employment with the Respondent nor any
document showing that he received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give him said ID and payslips implies that
indeed he was not a regular employee of Fly Ace considering that complainant was a helper and
that Respondent company has contracted a regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales
of groceries. Since there is a regular hauler to deliver its products, we give credence to
Respondents claim that complainant was contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents
showing salaries of workers on pakiao basis has evidentiary weight because although the
signature of the complainant appearing thereon are not uniform, they appeared to be his true
signature.
x x x x
Hence, as complainant received the rightful salary as shown by the above described
payrolls, Respondents are not liable for salary differentials. 32[9]
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and
immediately concluded that he was not a regular employee simply because he failed to present proof. It was of the
view that a pakyaw-basis arrangement did not preclude the existence of employer-employee relationship. Payment
by result x x x is a method of compensation and does not define the essence of the relation. It is a mere method of
computing compensation, not a basis for determining the existence or absence of an employer-employee
relationship.33[10] The NLRC further averred that it did not follow that a worker was a job contractor and not an
employee, just because the work he was doing was not directly related to the employers trade or business or the
work may be considered as extra helper as in this case; and that the relationship of an employer and an employee
was determined by law and the same would prevail whatever the parties may call it. In this case, the NLRC held that
substantial evidence was sufficient basis for judgment on the existence of the employer-employee relationship.
Javier was a regular employee of Fly Ace because there was reasonable connection between the particular activity
performed by the employee (as a pahinante) in relation to the usual business or trade of the employer
(importation, sales and delivery of groceries). He may not be considered as an independent contractor because he
could not exercise any judgment in the delivery of company products. He was only engaged as a helper.
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For
failing to present proof of a valid cause for his termination, Fly Ace was found to be liable for illegal dismissal of
Javier who was likewise entitled to backwages and separation pay in lieu of reinstatement. The NLRC thus ordered:


WHEREFORE, premises considered, complainants appeal is partially GRANTED. The
assailed Decision of the labor arbiter is VACATED and a new one is hereby entered holding
respondent FLY ACE CORPORATION guilty of illegal dismissal and non-payment of 13
th

month pay. Consequently, it is hereby ordered to pay complainant DANILO Bitoy JAVIER the
following:

1. Backwages -45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13
th
month pay (proportionate) - 5,633.33

TOTAL -59,854.16

All other claims are dismissed for lack of merit.
SO ORDERED.
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly
Ace and reinstated the dismissal of Javiers complaint as ordered by the LA. The CA exercised its authority to make
its own factual determination anent the issue of the existence of an employer-employee relationship between the
parties. According to the CA:
x x x

In an illegal dismissal case the onus probandi rests on the employer to prove that its
dismissal was for a valid cause. However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x x x it is incumbent upon private
respondent to prove the employee-employer relationship by substantial evidence.

x x x

It is incumbent upon private respondent to prove, by substantial evidence, that he is an
employee of petitioners, but he failed to discharge his burden. The non-issuance of a company-
issued identification card to private respondent supports petitioners contention that private
respondent was not its employee.34[12]
The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of
evidence to bolster his contention, pointed to the inescapable conclusion that he was not an employee of Fly Ace.
Further, it found that Javiers work was not necessary and desirable to the business or trade of the company, as it

was only when there were scheduled deliveries, which a regular hauling service could not deliver, that Fly Ace
would contract the services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by Javier did
not pass the control test.
He contracted work outside the company premises; he was not required to observe definite hours of work; he was
not required to report daily; and he was free to accept other work elsewhere as there was no exclusivity of his
contracted service to the company, the same being co-terminous with the trip only.35[13] Since no substantial
evidence was presented to establish an employer-employee relationship, the case for illegal dismissal could not
prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:

I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.36[14]

The petitioner contends that other than its bare allegations and self-serving affidavits of the other
employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on a pakyaw basis. Assuming that
Javier was indeed hired on a pakyaw basis, it does not preclude his regular employment with the company. Even the
acknowledgment receipts bearing his signature and the confirming receipt of his salaries will not show the true
nature of his employment as they do not reflect the necessary details of the commissioned task. Besides, Javiers
tasks as pahinante are related, necessary and desirable to the line of business by Fly Ace which is engaged in the
importation and sale of grocery items. On days when there were no scheduled deliveries, he worked in petitioners
warehouse, arranging and cleaning the stored cans for delivery to clients.37[15] More importantly, Javier was
subject to the control and supervision of the company, as he was made to report to the office from Monday to
Saturday, from 7:00 oclock in the morning until 5:00 oclock in the afternoon. The list of deliverable goods,
together with the corresponding clients and their respective purchases and addresses, would necessarily have been
prepared by Fly Ace. Clearly, he was subjected to compliance with company rules and regulations as regards
working hours, delivery schedule and output, and his other duties in the warehouse.38[16]
The petitioner chiefly relied on Chavez v. NLRC,39[17] where the Court ruled that payment to a worker on
a per trip basis is not significant because this is merely a method of computing compensation and not a basis for





determining the existence of employer-employee relationship. Javier likewise invokes the rule that, in
controversies between a laborer and his master, x x x doubts reasonably arising from the evidence should be
resolved in the formers favour. The policy is reflected is no less than the Constitution, Labor Code and Civil
Code.40[18]
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latters
failure to observe substantive and procedural due process. Since his dismissal was not based on any of the causes
recognized by law, and was implemented without notice, Javier is entitled to separation pay and backwages.

In its Comment,41[19] Fly Ace insists that there was no substantial evidence to prove employer-employee
relationship. Having a service contract with Milmar Hauling Services for the purpose of transporting and delivering
company products to customers, Fly Ace contracted Javier as an extra helper or pahinante on a mere per trip basis.
Javier, who was actually a loiterer in the area, only accompanied and assisted the company driver when Milmar
could not deliver or when the exigency of extra deliveries arises for roughly five to six times a month. Before
making a delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with its loaded company
products. With the vehicle and products in their custody, the driver and Javier would leave the company premises
using their own means, method, best judgment and discretion on how to deliver, time to deliver, where and [when]
to start, and manner of delivering the products.42[20]
Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare allegations,
he presented nothing to substantiate his status as an employee. It is a basic rule of evidence that each party must
prove his affirmative allegation. If he claims a right granted by law, he must prove his claim by competent
evidence, relying on the strength of his own evidence and not upon the weakness of his opponent.43[21] Invoking
the case of Lopez v. Bodega City,44[22] Fly Ace insists that in an illegal dismissal case, the burden of proof is upon
the complainant who claims to be an employee. It is essential that an employer-employee relationship be proved by
substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be established.

Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, which
are unfortunately not supported by proof, documentary or otherwise.45[23] Javier simply assumed that he was an
employee of Fly Ace, absent any competent or relevant evidence to support it. He performed his contracted work
outside the premises of the respondent; he was not even required to report to work at regular hours; he was not made






to register his time in and time out every time he was contracted to work; he was not subjected to any disciplinary
sanction imposed to other employees for company violations; he was not issued a company I.D.; he was not accorded
the same benefits given to other employees; he was not registered with the Social Security System (SSS) as
petitioners employee; and, he was free to leave, accept and engage in other means of livelihood as there is no
exclusivity of his contracted services with the petitioner, his services being co-terminus with the trip only. All these
lead to the conclusion that petitioner is not an employee of the respondents.46[24]

Moreover, Fly Ace claims that it had no right to control the result, means, manner and methods by which
Javier would perform his work or by which the same is to be accomplished.47[25] In other words, Javier and the
company driver were given a free hand as to how they would perform their contracted services and neither were they
subjected to definite hours or condition of work.
Fly Ace likewise claims that Javiers function as a pahinante was not directly related or necessary to its
principal business of importation and sales of groceries. Even without Javier, the business could operate its usual
course as it did not involve the business of inland transportation. Lastly, the acknowledgment receipts bearing
Javiers signature and words pakiao rate, referring to his earned salaries on a per trip basis, have evidentiary
weight that the LA correctly considered in arriving at the conclusion that Javier was not an employee of the
company.
The Court affirms the assailed CA decision.

It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence of an
employer-employee relationship between him and Fly Ace. This is essentially a question of fact. Generally, the
Court does not review errors that raise factual questions. However, when there is conflict among the factual findings
of the antecedent deciding bodies like the LA, the NLRC and the CA, it is proper, in the exercise of Our equity
jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine the
questioned findings.48[26] In dealing with factual issues in labor cases, substantial evidence that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is sufficient.49[27]
As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as wanting
and deficient. The Court is constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure of
the NLRC50[28] allows a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality does
not mean a complete dispensation of proof. Labor officials are enjoined to use reasonable means to ascertain the
facts speedily and objectively with little regard to technicalities or formalities but nowhere in the rules are they
provided a license to completely discount evidence, or the lack of it. The quantum of proof required, however, must
still be satisfied. Hence, when confronted with conflicting versions on factual matters, it is for them in the exercise





of discretion to determine which party deserves credence on the basis of evidence received, subject only to the
requirement that their decision must be supported by substantial evidence.51[29] Accordingly, the petitioner needs
to show by substantial evidence that he was indeed an employee of the company against which he claims illegal
dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and
cheese. It is, therefore, incumbent upon the Court to determine whether the party on whom the burden to prove lies
was able to hurdle the same. No particular form of evidence is required to prove the existence of such employer-
employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. Hence,
while no particular form of evidence is required, a finding that such relationship exists must still rest on some
substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as its
qualitative aspects.52[30] Although substantial evidence is not a function of quantity but rather of quality, the x x
x circumstances of the instant case demand that something more should have been proffered. Had there been other
proofs of employment, such as x x x inclusion in petitioners payroll, or a clear exercise of control, the Court would
have affirmed the finding of employer-employee relationship.53[31]
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such
claim by the requisite quantum of evidence.54[32] Whoever claims entitlement to the benefits provided by law
should establish his or her right thereto x x x.55[33] Sadly, Javier failed to adduce substantial evidence as basis for
the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace.
By way of evidence on this point, all that Javier presented were his self-serving statements purportedly showing his
activities as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his
claim. Hence, the Court sees no reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work
in the company premises during weekdays arranging and cleaning grocery items for delivery to clients, no other
proof was submitted to fortify his claim. The lone affidavit executed by one Bengie Valenzuela was unsuccessful in
strengthening Javiers cause. In said document, all Valenzuela attested to was that he would frequently see Javier at
the workplace where the latter was also hired as stevedore.56[34] Certainly, in gauging the evidence presented by
Javier, the Court cannot ignore the inescapable conclusion that his mere presence at the workplace falls short in
proving employment therein. The supporting affidavit could have, to an extent, bolstered Javiers claim of being
tasked to clean grocery items when there were no scheduled delivery trips, but no information was offered in this
subject simply because the witness had no personal knowledge of Javiers employment status in the company.
Verily, the Court cannot accept Javiers statements, hook, line and sinker.






The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to
determine the existence of an employer-employee relationship, viz: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees
conduct. Of these elements, the most important criterion is whether the employer controls or has reserved the right
to control the employee not only as to the result of the work but also as to the means and methods by which the
result is to be accomplished.57[35]
In this case, Javier was not able to persuade the Court that the above elements exist in his case. He could
not submit competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as
an employee, or that Fly Ace could dictate what his conduct should be while at work. In other words, Javiers
allegations did not establish that his relationship with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to refute Fly Aces
assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It was also
baffling to realize that Javier did not dispute Fly Aces denial of his services exclusivity to the company. In short,
all that Javier laid down were bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as a stevedore, albeit on
a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary proof that Javier was indeed paid
on a pakyaw basis per the acknowledgment receipts admitted as competent evidence by the LA. Unfortunately for
Javier, his mere denial of the signatures affixed therein cannot automatically sway us to ignore the documents
because forgery cannot be presumed and must be proved by clear, positive and convincing evidence and the burden
of proof lies on the party alleging forgery.58[36]
Considering the above findings, the Court does not see the necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the settled rule that payment by the piece is just a
method of compensation and does not define the essence of the relation.59[37] Payment on a piece-rate basis does
not negate regular employment. The term wage is broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time,
task, piece or commission basis. Payment by the piece is just a method of compensation and does not define the
essence of the relations. Nor does the fact that the petitioner is not covered by the SSS affect the employer-employee
relationship. However, in determining whether the relationship is that of employer and employee or one of an
independent contractor, each case must be determined on its own facts and all the features of the relationship are to
be considered.60[38] Unfortunately for Javier, the attendant facts and circumstances of the instant case do not
provide the Court with sufficient reason to uphold his claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also




has its rights which are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for
the less privileged in life, the Court has inclined, more often than not, toward the worker and upheld his cause in his
conflicts with the employer. Such favoritism, however, has not blinded the Court to the rule that justice is in every
case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.61[39]

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its
June 7, 2010 Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.



















PEOPLES BROADCASTING VS. SECRETARY OF LABOR
D E C I S I O N
TINGA, J.:
The present controversy concerns a matter of first impression, requiring as it does the determination of the
demarcation line between the prerogative of the Department of Labor and Employment (DOLE) Secretary and his
duly authorized representatives, on the one hand, and the jurisdiction of the National Labor Relations Commission,
on the other, under Article 128 (b) of the Labor Code in an instance where the employer has challenged the
jurisdiction of the DOLE at the very first level on the ground that no employer-employee relationship ever existed
between the parties.
I.
The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of
Appeals dated 26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP No. 00855.62[1]
The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against Peoples
Broadcasting Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction, non-payment of service
incentive leave, 13
th
month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed
payment of wages and non-coverage of SSS, PAG-IBIG and Philhealth before the Department of Labor and
Employment (DOLE) Regional Office No. VII, Cebu City.63[2] On the basis of the complaint, the DOLE
conducted a plant level inspection on 23 September 2003. In the Inspection Report Form,64[3] the Labor Inspector
wrote under the heading Findings/Recommendations non-diminution of benefits and Note: Respondent deny
employer-employee relationship with the complainant- see Notice of Inspection results. In the Notice of Inspection
Results65[4] also bearing the date 23 September 2003, the Labor Inspector made the following notations:
Management representative informed that complainant is a drama talent hired on a per
drama participation basis hence no employer-employeeship [sic] existed between them. As
proof of this, management presented photocopies of cash vouchers, billing statement, employments
of specific undertaking (a contract between the talent director & the complainant), summary of
billing of drama production etc. They (mgt.) has [sic] not control of the talent if he ventures into
another contract w/ other broadcasting industries.
On the other hand, complainant Juezans alleged violation of non-diminution of benefits is
computed as follows:
@ P 2,000/15 days + 1.5 mos = P 6,000
(August 1/03 to Sept 15/03)
Note: Recommend for summary investigation or whatever action deem proper.66[5]
Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification
was effected by petitioner; thus, summary investigations were conducted, with the parties eventually ordered to
submit their respective position papers.67[6]





In his Order dated 27 February 2004,68[7] DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional
Director) ruled that respondent is an employee of petitioner, and that the former is entitled to his money claims
amounting to P203,726.30. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave
credence to the documents offered by respondent without examining the originals, but at the same time he missed or
failed to consider petitioners evidence. Petitioners motion for reconsideration was denied.69[8] On appeal to the
DOLE Secretary, petitioner denied once more the existence of employer-employee relationship. In its Order dated
27 January 2005, the Acting DOLE Secretary dismissed the appeal on the ground that petitioner did not post a cash
or surety bond and instead submitted a Deed of Assignment of Bank Deposit.70[9]
Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the
DOLE Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of
respondent. Petitioner maintained that there is no employer-employee relationship had ever existed between it and
respondent because it was the drama directors and producers who paid, supervised and disciplined respondent. It
also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor
arbiter because respondents claim exceeded P5,000.00.
The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an
opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It
further ruled that the latter had the power to order and enforce compliance with labor standard laws irrespective of
the amount of individual claims because the limitation imposed by Article 29 of the Labor Code had been repealed
by Republic Act No. 7730.71[10] Petitioner sought reconsideration of the decision but its motion was denied.72[11]
Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and not the
DOLE Secretary, has jurisdiction over respondents claim, in view of Articles 217 and 128 of the Labor
Code.73[12] It adds that the Court of Appeals committed grave abuse of discretion when it dismissed petitioners
appeal without delving on the issues raised therein, particularly the claim that no employer-employee relationship
had ever existed between petitioner and respondent. Finally, petitioner avers that there is no appeal, or any plain,
speedy and adequate remedy in the ordinary course of law available to it.

On the other hand, respondent posits that the Court of Appeals did not abuse its discretion. He invokes
Republic Act No. 7730, which removes the jurisdiction of the Secretary of Labor and Employment or his duly
authorized representatives, from the effects of the restrictive provisions of Article 129 and 217 of the Labor Code,
regarding the confinement of jurisdiction based on the amount of claims.74[13] Respondent also claims that
petitioner was not denied due process since even when the case was with the Regional Director, a hearing was
conducted and pieces of evidence were presented. Respondent stands by the propriety of the Court of Appeals
ruling that there exists an employer-employee relationship between him and petitioner. Finally, respondent argues
that the instant petition for certiorari is a wrong mode of appeal considering that petitioner had earlier filed a
Petition for Certiorari, Mandamus and Prohibition with the Court of Appeals; petitioner, instead, should have filed
a Petition for Review.75[14]
II.









The significance of this case may be reduced to one simple questiondoes the Secretary of Labor have the
power to determine the existence of an employer-employee relationship?
To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the
DOLE found in Article 128 (b) of the Labor Code, as amended by Republic Act 7730. It reads:
Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection. The Secretary or his duly authorized representative
shall issue writs of execution to the appropriate authority for the enforcement of their orders, except
in cases where the employer contests the findings of the labor employment and enforcement officer
and raises issues supported by documentary proofs which were not considered in the course of
inspection. (emphasis supplied)
x x x
The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only
in cases when the relationship of employer-employee still exists. It also underscores the avowed objective
underlying the grant of power to the DOLE which is to give effect to the labor standard provision of this Code and
other labor legislation. Of course, a persons entitlement to labor standard benefits under the labor laws
presupposes the existence of employer-employee relationship in the first place.
The clause in cases where the relationship of employer-employee still exists signifies that the employer-
employee relationship must have existed even before the emergence of the controversy. Necessarily, the DOLEs
power does not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and
(b) where no such relationship has ever existed.
The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor
Standards Cases76[15] issued by the DOLE Secretary. It reads:
Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE
INSPECTION
Sec. 3. Complaints where no employer-employee relationship actually exists. Where
employer-employee relationship no longer exists by reason of the fact that it has already been
severed, claims for payment of monetary benefits fall within the exclusive and original
jurisdiction of the labor arbiters. Accordingly, if on the face of the complaint, it can be
ascertained that employer-employee relationship no longer exists, the case, whether accompanied
by an allegation of illegal dismissal, shall immediately be endorsed by the Regional Director to
the appropriate branch of the National Labor Relations Commission (NLRC).
In the recent case of Bay Haven, Inc. v. Abuan,77[16] this Court recognized the first situation and
accordingly ruled that a complainants allegation of his illegal dismissal had deprived the DOLE of jurisdiction as
per Article 217 of the Labor Code.78[17]




In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has
jurisdiction in view of the termination of the employer-employee relationship. The same procedure has to be
followed in the second situation since it is the NLRC that has jurisdiction in view of the absence of employer-
employee relationship between the evidentiary parties from the start.
Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee
relationship has terminated or such relationship has not arisen at all. The reason is obvious. In the second situation
especially, the existence of an employer-employee relationship is a matter which is not easily determinable from an
ordinary inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular
examination. The intricacies and implications of an employer-employee relationship demand that the level of
scrutiny should be far above the cursory and the mechanical. While documents, particularly documents found
in the employers office are the primary source materials, what may prove decisive are factors related to the
history of the employers business operations, its current state as well as accepted contemporary practices in the
industry. More often than not, the question of employer-employee relationship becomes a battle of evidence, the
determination of which should be comprehensive and intensive and therefore best left to the specialized quasi-
judicial body that is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has
to make a determination of the existence of an employer-employee relationship. Such prerogatival
determination, however, cannot be coextensive with the visitorial and enforcement power itself. Indeed, such
determination is merely preliminary, incidental and collateral to the DOLEs primary function of enforcing
labor standards provisions. The determination of the existence of employer-employee relationship is still
primarily lodged with the NLRC. This is the meaning of the clause in cases where the relationship of
employer-employee still exists in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved:
(1) Does the employer-employee relationship still exist, or alternatively, was there ever an employer-employee
relationship to speak of; and (2) Are there violations of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to and a limitation
on the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale
underlying this limitation is to eliminate the prospect of competing conclusions of the Secretary of Labor and the
NLRC, on a matter fraught with questions of fact and law, which is best resolved by the quasi-judicial body, which
is the NRLC, rather than an administrative official of the executive branch of the government. If the Secretary of
Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite, as the dissent proposes,
his office confers jurisdiction on itself which it cannot otherwise acquire.
The approach suggested by the dissent is frowned upon by common law. To wit:
[I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by
a wrong decision on a point collateral to the merits of the case upon which the limit to its
jurisdiction depends; and however its decision may be final on all particulars, making up together
that subject matter which, if true, is within its jurisdiction, and however necessary in many cases it
may be for it to make a preliminary inquiry, whether some collateral matter be or be not within the
limits, yet, upon this preliminary question, its decision must always be open to inquiry in the
superior court.79[18]
A more liberal interpretative mode, pragmatic or functional analysis, has also emerged in ascertaining
the jurisdictional boundaries of administrative agencies whose jurisdiction is established by statute. Under this
approach, the Court examines the intended function of the tribunal and decides whether a particular provision falls

within or outside that function, rather than making the provision itself the determining centerpiece of the
analysis.80[19] Yet even under this more expansive approach, the dissent fails.
A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized
representatives was granted visitorial and enforcement powers for the purpose of determining violations of, and
enforcing, the Labor Code and any labor law, wage order, or rules and regulations issued pursuant thereto.
Necessarily, the actual existence of an employer-employee relationship affects the complexion of the putative
findings that the Secretary of Labor may determine, since employees are entitled to a different set of rights under the
Labor Code from the employer as opposed to non-employees. Among these differentiated rights are those accorded
by the labor standards provisions of the Labor Code, which the Secretary of Labor is mandated to enforce. If
there is no employer-employee relationship in the first place, the duty of the employer to adhere to those labor
standards with respect to the non-employees is questionable.
This decision should not be considered as placing an undue burden on the Secretary of Labor in the exercise
of visitorial and enforcement powers, nor seen as an unprecedented diminution of the same, but rather a recognition
of the statutory limitations thereon. A mere assertion of absence of employer-employee relationship does not deprive
the DOLE of jurisdiction over the claim under Article 128 of the Labor Code. At least a prima facie showing of
such absence of relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. The
Secretary of Labor would not have been precluded from exercising the powers under Article 128 (b) over petitioner
if another person with better-grounded claim of employment than that which respondent had. Respondent,
especially if he were an employee, could have very well enjoined other employees to complain with the DOLE, and,
at the same time, petitioner could ill-afford to disclaim an employment relationship with all of the people under its
aegis.
Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that
respondent is not its employee. Certainly, a preliminary determination, based on the evidence offered, and noted by
the Labor Inspector during the inspection as well as submitted during the proceedings before the Regional Director
puts in genuine doubt the existence of employer-employee relationship. From that point on, the prudent recourse on
the part of the DOLE should have been to refer respondent to the NLRC for the proper dispensation of his claims.
Furthermore, as discussed earlier, even the evidence relied on by the Regional Director in his order are mere self-
serving declarations of respondent, and hence cannot be relied upon as proof of employer-employee relationship.
III.
Aside from lack of jurisdiction, there is another cogent reason to to set aside the Regional Directors 27
February 2004 Order. A careful study of the case reveals that the said Order, which found respondent as an
employee of petitioner and directed the payment of respondents money claims, is not supported by substantial
evidence, and was even made in disregard of the evidence on record.

It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other
quasi-judicial agencies. The standard employed in the last sentence of Article 128(b) of the Labor Code that the
documentary proofs be considered in the course of inspection does not apply. It applies only to issues other than
the fundamental issue of existence of employer-employee relationship. A contrary rule would lead to controversies
on the part of labor officials in resolving the issue of employer-employee relationship. The onset of arbitrariness is
the advent of denial of substantive due process.
As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before
quasi-judicial agencies whose findings of fact are accorded great respect and even finality. To be sure, the same
findings should be supported by substantial evidence from which the said tribunals can make its own independent
evaluation of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will

not uphold the tribunals conclusion.81[20] In the same manner, this Court will not hesitate to set aside the labor
tribunals findings of fact when it is clearly shown that they were arrived at arbitrarily or in disregard of the
evidence on record or when there is showing of fraud or error of law.82[21]
At the onset, it is the Courts considered view that the existence of employer- employee relationship could
have been easily resolved, or at least prima facie determined by the labor inspector, during the inspection by looking
at the records of petitioner which can be found in the work premises. Nevertheless, even if the labor inspector had
noted petitioners manifestation and documents in the Notice of Inspection Results, it is clear that he did not give
much credence to said evidence, as he did not find the need to investigate the matter further. Considering that the
documents shown by petitioner, namely: cash vouchers, checks and statements of account, summary billings
evidencing payment to the alleged real employer of respondent, letter-contracts denominated as Employment for
a Specific Undertaking, prima facie negate the existence of employer-employee relationship, the labor inspector
could have exerted a bit more effort and looked into petitioners payroll, for example, or its roll of employees, or
interviewed other employees in the premises. After all, the labor inspector, as a labor regulation officer is given
access to employers records and premises at any time of day or night whenever work is being undertaken therein,
and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may
be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage
order or rules and regulations pursuant thereto.83[22] Despite these far-reaching powers of labor regulation
officers, records reveal that no additional efforts were exerted in the course of the inspection.
The Court further examined the records and discovered to its dismay that even the Regional Director turned
a blind eye to the evidence presented by petitioner and relied instead on the self-serving claims of respondent.
In his position paper, respondent claimed that he was hired by petitioner in September 1996 as a radio
talent/spinner, working from 8:00 am until 5 p.m., six days a week, on a gross rate of P60.00 per script, earning an
average of P15,0000.00 per month, payable on a semi-monthly basis. He added that the payment of wages was
delayed; that he was not given any service incentive leave or its monetary commutation, or his 13
th
month pay; and
that he was not made a member of the Social Security System (SSS), Pag-Ibig and PhilHealth. By January 2001,
the number of radio programs of which respondent was a talent/spinner was reduced, resulting in the reduction of
his monthly income from P15,000.00 to only P4,000.00, an amount he could barely live on. Anent the claim of
petitioner that no employer-employee relationship ever existed, respondent argued that that he was hired by
petitioner, his wages were paid under the payroll of the latter, he was under the control of petitioner and its agents,
and it was petitioner who had the power to dismiss him from his employment.84[23] In support of his position
paper, respondent attached a photocopy of an identification card purportedly issued by petitioner, bearing
respondents picture and name with the designation Spinner; at the back of the I.D., the following is written:
This certifies that the card holder is a duly Authorized MEDIA Representative of BOMBO RADYO PHILIPPINES
THE NO.1 Radio Network in the Country ***BASTA RADYO BOMBO***85[24] Respondent likewise
included a Certification which reads:
This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLES
BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu) since 1990 up to the present.
Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN
THOUSAND (P15,000.00) PESOS.
This certification is issued upon the request of the above stated name to substantiate loan
requirement.





Given this 18
th
day of April 2000, Cebu City , Philippines.

(signed)
GREMAN B. SOLANTE
Station Manager
On the other hand, petitioner maintained in its position paper that respondent had never been its employee.
Attached as annexes to its position paper are photocopies of cash vouchers it issued to drama producers, as well as
letters of employment captioned Employment for a Specific Undertaking, wherein respondent was appointed by
different drama directors as spinner/narrator for specific radio programs.86[25]
In his Order, the Regional Director merely made a passing remark on petitioners claim of lack of
employer-employee relationshipa token paragraphand proceeded to a detailed recitation of respondents
allegations. The documents introduced by petitioner in its position paper and even those presented during the
inspection were not given an iota of credibility. Instead, full recognition and acceptance was accorded to the claims
of respondentfrom the hours of work to his monthly salary, to his alleged actual duties, as well as to his alleged
evidence. In fact, the findings are anchored almost verbatim on the self-serving allegations of respondent.
Furthermore, respondents pieces of evidencethe identification card and the certification issued by
petitioners Greman Solante are not even determinative of an employer-employee relationship. The certification,
issued upon the request of respondent, specifically stated that MR. JANDELEON JUEZAN is a program employee
of PEOPLES BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu), it is not therefore crystal
clear that complainant is a station employee rather than a program employee hence entitled to all the benefits
appurtenant thereto,87[26] as found by the DOLE Regional Director. Respondent should be bound by his own
evidence. Moreover, the classification as to whether one is a station employee and program employee, as lifted
from Policy Instruction No. 40,88[27] dividing the workers in the broadcast industry into only two groups is not
binding on this Court, especially when the classification has no basis either in law or in fact.89[28]
Even the identification card purportedly issued by petitioner is not proof of employer-employee
relationship since it only identified respondent as an Authorized Representative of Bombo Radyo, and not as an
employee. The phrase gains significance when compared vis a vis the following notation in the sample
identification cards presented by petitioner in its motion for reconsideration:
1. This is to certify that the person whose picture and signature appear hereon is an
employee of Bombo Radio Philippines.
2. This ID must be worn at all times within Bombo Radyo Philippines premises for proper
identification and security. Furthermore, this is the property of Bombo Radyo Philippines
and must be surrendered upon separation from the company.
Respondent tried to address the discrepancy between his identification card and the
standard identification cards issued by petitioner to its employees by arguing that what he annexed to his
position paper was the old identification card issued to him by petitioner. He then presented a photocopy
of another old identification card, this time purportedly issued to one of the employees who was issued




the new identification card presented by petitioner.90[29] Respondents argument does not convince. If it
were true that he is an employee of petitioner, he would have been issued a new identification card
similar to the ones presented by petitioner, and he should have presented a copy of such new
identification card. His failure to show a new identification card merely demonstrates that what he has is
only his Media ID, which does not constitute proof of his employment with petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is
sufficient as a basis for judgment on the existence of employer-employee relationship. Substantial evidence, which
is the quantum of proof required in labor cases, is that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion.91[30] No particular form of evidence is required to prove the existence
of such employer-employee relationship. Any competent and relevant evidence to prove the relationship may be
admitted.92[31] Hence, while no particular form of evidence is required, a finding that such relationship exists must
still rest on some substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as
well as its qualitative aspects.93[32]
In the instant case, save for respondents self-serving allegations and self-defeating evidence, there is no
substantial basis to warrant the Regional Directors finding that respondent is an employee of petitioner.
Interestingly, the Order of the Secretary of Labor denying petitioners appeal dated 27 January 2005, as well as the
decision of the Court of Appeals dismissing the petition for certiorari, are silent on the issue of the existence of an
employer-employee relationship, which further suggests that no real and proper determination the existence of such
relationship was ever made by these tribunals. Even the dissent skirted away from the issue of the existence of
employer-employee relationship and conveniently ignored the dearth of evidence presented by respondent.
Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental
circumstances of the instant case demand that something more should have been proffered.94[33] Had there been
other proofs of employment, such as respondents inclusion in petitioners payroll, or a clear exercise of control, the
Court would have affirmed the finding of employer-employee relationship. The Regional Director, therefore,
committed grievous error in ordering petitioner to answer for respondents claims. Moreover, with the conclusion
that no employer-employee relationship has ever existed between petitioner and respondent, it is crystal-clear that
the DOLE Regional Director had no jurisdiction over respondents complaint. Thus, the improvident exercise of
power by the Secretary of Labor and the Regional Director behooves the court to subject their actions for review
and to invalidate all the subsequent orders they issued.
IV.
The records show that petitioners appeal was denied because it had allegedly failed to post a cash or
surety bond. What it attached instead to its appeal was the Letter Agreement95[34] executed by petitioner and its
bank, the cash voucher,96[35] and the Deed of Assignment of Bank Deposits.97[36] According to the DOLE,
these documents do not constitute the cash or surety bond contemplated by law; thus, it is as if no cash or surety
bond was posted when it filed its appeal.
The Court does not agree.
The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the last paragraph
of Art. 128 (b) of the Labor Code, which reads:








An order issued by the duly authorized representative of the Secretary of Labor and
Employment under this article may be appealed to the latter. In case said order involves 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 Secretary of
Labor and Employment in the amount equivalent to the monetary award in the order
appealed from. (emphasis supplied)
While the requirements for perfecting an appeal must be strictly followed as they are considered
indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does admit
exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.98[37] Thus, in some cases, the bond
requirement on appeals involving monetary awards had been relaxed, such as when (i) there was substantial
compliance with the Rules; (ii) the surrounding facts and circumstances constitute meritorious ground to reduce the
bond; (iii) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of
resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their willingness and/or good
faith by posting a partial bond during the reglementary period.99[38]
A review of the documents submitted by petitioner is called for to determine whether they should have
been admitted as or in lieu of the surety or cash bond to sustain the appeal and serve the ends of substantial justice.
That Respondent-Appellant do hereby undertake to guarantee available and sufficient
funds covered by Platinum Savings Deposit (PSD) No. 010-8-00038-4 of PEOPLES
BROADCASTING SERVICES, INC. in the amount of PESOS: TWO HUNDRED THREE
THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30)
payable to Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at
Queen City Development Bank, Cebu Branch, Sanciangko St. Cebu City.
It is understood that the said bank has the full control of Platinum Savings Deposit
(PSD) No. 010-8-00038-4 from and after this date and that said sum cannot be withdrawn by the
Plaintiff-Appellee/ Department of Labor and Employment Regional Office VII until such time
that a Writ of Execution shall be ordered by the Appellate Office.
FURTHER, this Deed of Assignment is limited to the principal amount of PESOS:
TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS &
30/100 ONLY (P203,726.30) Phil. Currency, therefore, any interest to be earned from the said
Deposit will be for the account holder.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 18
th
day if June,
2004, in the City of Cebu, Philippines.

As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between Queen
City Development Bank and petitioner concerning Platinum Savings Deposit (PSD) No. 010-8-00038-4,100[39]
and a Cash Voucher issued by petitioner showing the amount of P203,726.30 deposited at the said bank.
Casting aside the technical imprecision and inaptness of words that mark the three documents, a liberal
reading reveals the documents petitioner did assign, as cash bond for the monetary award in favor of respondent in
LSED Case NO. RO700-2003-CI-09, the amount of P203,726.30 covered by petitioners PSD Account No. 010-8-
00038-4 with the Queen City Development Bank at Sanciangko St. Cebu City, with the depositary bank authorized



to remit the amount to, and upon withdrawal by respondent and or the Department of Labor and Employment
Regional Office VII, on the basis of the proper writ of execution. The Court finds that the Deed of Assignment
constitutes substantial compliance with the bond requirement.
The purpose of an appeal bond is to ensure, during the period of appeal, against any occurrence that
would defeat or diminish recovery by the aggrieved employees under the judgment if subsequently
affirmed.101[40] The Deed of Assignment in the instant case, like a cash or surety bond, serves the same purpose.
First, the Deed of Assignment constitutes not just a partial amount, but rather the entire award in the appealed Order.
Second, it is clear from the Deed of Assignment that the entire amount is under the full control of the bank, and not
of petitioner, and is in fact payable to the DOLE Regional Office, to be withdrawn by the same office after it had
issued a writ of execution. For all intents and purposes, the Deed of Assignment in tandem with the Letter
Agreement and Cash Voucher is as good as cash. Third, the Court finds that the execution of the Deed of
Assignment, the Letter Agreement and the Cash Voucher were made in good faith, and constituted clear
manifestation of petitioners willingness to pay the judgment amount.
The Deed of Assignment must be distinguished from the type of bank certification submitted by
appellants in Cordova v. Keysas Boutique,102[41] wherein this Court found that such bank certification did not
come close to the cash or surety bond required by law. The bank certification in Cordova merely stated that the
employer maintains a depository account with a balance of P23,008.19, and that the certification was issued upon
the depositors request for whatever legal purposes it may serve. There was no indication that the said deposit was
made specifically for the pending appeal, as in the instant case. Thus, the Court ruled that the bank certification had
not in any way ensured that the award would be paid should the appeal fail. Neither was the appellee in the case
prevented from making withdrawals from the savings account. Finally, the amount deposited was measly compared
to the total monetary award in the judgment.103[42]
V.
Another question of technicality was posed against the instant petition in the hope that it would not be
given due course. Respondent asserts that petitioner pursued the wrong mode of appeal and thus the instant
petition must be dismissed. Once more, the Court is not convinced.
A petition for certiorari is the proper remedy when any tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction and there is no appeal, nor any plain speedy, and adequate remedy at law.
There is grave abuse of discretion when respondent acts in a capricious or whimsical manner in the exercise of its
judgment as to be equivalent to lack of jurisdiction.104[43]
Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong mode of appeal, as
indeed the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate
jurisdiction. Nevertheless, it is settled, as a general proposition, that the availability of an appeal does not foreclose
recourse to the extraordinary remedies, such as certiorari and prohibition, where appeal is not adequate or equally
beneficial, speedy and sufficient, as where the orders of the trial court were issued in excess of or without
jurisdiction, or there is need to promptly relieve the aggrieved party from the injurious effects of the acts of an
inferior court or tribunal, e.g., the court has authorized execution of the judgment.105[44] This Court has even
recognized that a recourse to certiorari is proper not only where there is a clear deprivation of petitioners
fundamental right to due process, but so also where other special circumstances warrant immediate and more direct
action.106[45]






In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily established
that the tribunal acted capriciously and whimsically in total disregard of evidence material to or even decisive of the
controversy,107[46] and if it is shown that the refusal to allow a Rule 65 petition would result in the infliction of an
injustice on a party by a judgment that evidently was rendered whimsically and capriciously, ignoring and
disregarding uncontroverted facts and familiar legal principles without any valid cause whatsoever.108[47]
It must be remembered that a wide breadth of discretion is granted a court of justice in certiorari
proceedings.109[48] The Court has not too infrequently given due course to a petition for certiorari, even when the
proper remedy would have been an appeal, where valid and compelling considerations would warrant such a
recourse.110[49] Moreover, the Court allowed a Rule 65 petition, despite the availability of plain, speedy or
adequate remedy, in view of the importance of the issues raised therein.111[50] The rules were also
relaxed by the Court after considering the public interest involved in the case;112[51] when public welfare and the
advancement of public policy dictates; when the broader interest of justice so requires; when the writs issued are
null and void; or when the questioned order amounts to an oppressive exercise of judicial authority.113[52]
The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals, 107
SCRA 504, 524, the exercise once more of our exclusive prerogative to suspend our own rules or to exempt a
particular case from its operation as in x x Republic of the Philippines v. Court of Appeals, et al., (83 SCRA 453,
478-480 [1978]), thus: x x The Rules have been drafted with the primary objective of enhancing fair trials and
expediting justice. As a corollary, if their applications and operation tend to subvert and defeat instead of promote
and enhance it, their suspension is justified.114[53]
The Regional Director fully relied on the self-serving allegations of respondent and misinterpreted the
documents presented as evidence by respondent. To make matters worse, DOLE denied petitioners appeal based
solely on petitioners alleged failure to file a cash or surety bond, without any discussion on the merits of the case.
Since the petition for certiorari before the Court of Appeals sought the reversal of the two aforesaid orders, the
appellate court necessarily had to examine the evidence anew to determine whether the conclusions of the DOLE
were supported by the evidence presented. It appears, however, that the Court of Appeals did not even review the
assailed orders and focused instead on a general discussion of due process and the jurisdiction of the Regional
Director. Had the appellate court truly reviewed the records of the case, it would have seen that there existed valid
and sufficient grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the Regional
Director. In ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its
certiorari jurisdiction. After all, this Court has previously ruled that the extraordinary writ of certiorari will lie
if it is satisfactorily established that the tribunal had acted capriciously and whimsically in total disregard of
evidence material to or even decisive of the controversy.115[54]
The most important consideration for the allowance of the instant petition is the opportunity for the
Court not only to set the demarcation between the NLRCs jurisdiction and the DOLEs prerogative but also
the procedure when the case involves the fundamental challenge on the DOLEs prerogative based on lack
of employer-employee relationship. As exhaustively discussed here, the DOLEs prerogative hinges on the
existence of employer-employee relationship, the issue is which is at the very heart of this case. And the
evidence clearly indicates private respondent has never been petitioners employee. But the DOLE did not
address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the instant petition
on a technicality would deprive the Court of the opportunity to resolve the novel controversy.









WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution
dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE.
The Order of the then Acting Secretary of the Department of Labor and Employment dated 27 January 2005
denying petitioners
appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004,
respectively, are ANNULLED. The complaint against petitioner is DISMISSED.






















G.R. No. 171275 July 13, 2009
VICTOR METEORO, REY CAGA, JIMMY CORONEL, COSME TAMOR, FELIXES LATONERO,
ENRIQUE SALAZAR, MAYLA LAQUI, ORLY BANUA, BERNARDO MADRID, ARIEL REYES,
ALFREDO REYES, JAVIER TIMERESA, ARMANDO MACA, JR., ROLANDO FALQUERA, JOSE
BENITEZ, RODOLFO TIMERESA, ROLANDO LUCENA, NOEL SUBTINIENTE, GUILLERMA
QUIMADO, BENIGNO REGALADO, RANDY DELA CRUZ, JUVY MACA, AMBROSIO CANARIA, JR.,
FELICIANO PAJARO, PETER BADIANA, DANILO JORDAN, DENNIS EDIESCA, JOGIL AVILA,
ABRAHAM BURCE, ONOFRE VINAS, DENNIS VITARA, ARIEL GALUPO and ALBERT AUSTERO,
Petitioners,
vs.
CREATIVE CREATURES, INC., Respondent.
D E C I S I O N
NACHURA, J .:
Assailed in this petition for review on certiorari are the Court of Appeals Decision
1
dated May 31, 2005 and
Resolution
2
dated January 27, 2006 in CA-G.R. SP No. 76942.
The facts of the case are as follows:
Respondent is a domestic corporation engaged in the business of producing, providing, or procuring the production
of set designs and set construction services for television exhibitions, concerts, theatrical performances, motion
pictures and the like. It primarily caters to the production design requirements of ABS-CBN Broadcasting
Corporation in Metro Manila and nationwide.
3
On the other hand, petitioners were hired by respondent on various
dates as artists, carpenters and welders. They were tasked to design, create, assemble, set-up and dismantle props,
and provide sound effects to respondents various TV programs and movies.
4

Sometime in February and March 1999, petitioners filed their respective complaints for non-payment of night shift
differential pay, overtime pay, holiday pay, 13th month pay, premium pay for Sundays and/or rest days, service
incentive leave pay, paternity leave pay, educational assistance, rice benefits, and illegal and/or unauthorized
deductions from salaries against respondent, before the Department of Labor and Employment (DOLE), National
Capital Region (NCR). Their complaints were consolidated and docketed as NCR00-9902-IS-011.
5

After the inspection conducted at respondents premises, the labor inspector noted that "the records were not made
available at the time of the inspection;" that respondent claimed that petitioners were contractual employees and/or
independent talent workers; and that petitioners were required to punch their cards.
6

In its position paper, respondent argued that the DOLE-NCR had no jurisdiction over the complaint of the
petitioners because of the absence of an employer-employee relationship. It added that petitioners were free-lance
individuals, performing special services with skills and expertise inherently exclusive to them like actors, actresses,
directors, producers, and script writers, such that they were treated as special types of workers.
7

Petitioners, on the other hand, averred that they were employees of respondent, as the elements of an employer-
employee relationship existed.
Meanwhile, on April 12, 1999, petitioners filed a complaint for illegal dismissal against petitioner, with prayer for
payment of overtime pay, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13th
month pay and attorneys fees before the National Labor Relations Commission (NLRC). The case was docketed as
NLRC-NCR Case No. 00-04-04459-9.
8

On October 11, 1999, DOLE Regional Director Maximo Baguyot Lim issued an Order
9
directing respondent to pay
petitioners the total amount of P2,694,709.00. The dispositive portion of the Order reads as follows:
WHEREFORE, premises considered, this Office finds merit in the complaint. Accordingly, Respondent Creative
Creatures, Inc. and/or Mr. Edmond Ty, is hereby ordered to pay thirty three (33) Complainants, within ten (10) days
from receipt hereof, the total amount of TWO MILLION SIX HUNDRED NINETY FOUR THOUSAND SEVEN
HUNDRED NINE PESOS (P2,694,709.00) representing unpaid 13th month pay, vacation and sick leave benefits,
regular holiday pay, rest day and holiday premiums, overtime pay, educational allowance, and rice allowance
presented as follows:
x x x x
Failure to pay Complainants within the given period will constrain this Office to issue a WRIT OF EXECUTION
for the immediate enforcement of this order.
SO ORDERED.
10

The Regional Director sustained petitioners claim on the existence of an employer-employee relationship using the
determinants set forth by the Labor Code, specifically, the elements of control and supervision, power of dismissal,
payment of wages, and the selection and engagement of employees. He added that since the petitioners had worked
for more than one year doing the same routine work, they were regular employees with respect to the activity in
which they were employed. Lastly, he upheld the DOLE-NCRs jurisdiction to hear and determine cases in violation
of labor standards law.
11

On appeal, then DOLE Secretary Patricia A. Sto. Tomas affirmed the findings of the DOLE Regional Director.
12
In
upholding the jurisdiction of the DOLE-NCR, she explained that the Secretary of Labor or his duly authorized
representative is allowed to use his visitorial and enforcement powers to give effect to labor legislation, regardless of
the amount involved, pursuant to Article 128 of the Labor Code, as amended by Republic Act (R.A.) No. 7730.
For failure to obtain a favorable decision, respondent elevated the matter to the Court of Appeals in CA-G.R. SP No.
76942. On May 31, 2005, the appellate court rendered the assailed decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the instant petition is GRANTED. For lack of jurisdiction, the Orders dated
October 18, 2002 and February 5, 2003, issued by respondent Secretary are hereby declared NULL and VOID.
However, in view of the filing of a similar case before the NLRC, referral of the instant case to the NLRC for
appropriate determination is no longer necessary.
SO ORDERED.
13

While recognizing the visitorial and enforcement powers of the Regional Director and his jurisdiction to entertain
money claims, the appellate court noted that Article 128 of the Labor Code provides an instance when he (Regional
Director) may be divested of jurisdiction. The CA pointed out that respondent had consistently disputed the
existence of employer-employee relationship, thereby placing the case beyond the jurisdiction of the Regional
Director.
Petitioners now come before this Court in this petition for review on certiorari raising the lone issue of:
Whether or not the Court of Appeals committed an error when it ruled that the instant case falls within the exception
clause of Article 128 (b) of the Labor Code, as amended, and in annulling and setting aside the Orders of the
Secretary of Labor which affirmed the Order of the Regional Director of DOLE-NCR awarding the claims of the
petitioners for benefits under the Labor Standards laws, namely, 13th month benefit, overtime pay, night shift
differentials, premium on rest days, vacation and sick leave and other benefits accorded to employees of the
responden[t] in the exercise of its visitorial powers pursuant to Article 128 (b) of the Labor Code as
amended.
14
1avvphi1
In fine, we are tasked to determine which body/tribunal has jurisdiction over petitioners money claims --- the
DOLE Secretary or his duly authorized representative, or the NLRC.
We sustain the appellate courts conclusion that the instant case falls within the exclusive jurisdiction of the NLRC.
The DOLE Secretary and her authorized representatives, such as the DOLE-NCR Regional Director, have
jurisdiction to enforce compliance with labor standards laws under the broad visitorial and enforcement powers
conferred by Article 128 of the Labor Code, and expanded by Republic Act (R.A.) No. 7730,
15
to wit:
16

Art. 128. Visitorial and Enforcement Power
(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall
have access to employers records and premises at anytime of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or which may aid in the enforcement of
this Code and of any labor law, wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where
the relationship of employer-employee relation still exists, the Secretary of Labor and Employment or his
duly authorized representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his
duly authorized representatives shall issue writs of execution, to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.
x x x x
As it is now worded, and as consistently held in a number of cases,
17
the visitorial and enforcement powers of the
Secretary, exercised through his representatives, encompass compliance with all labor standards laws and other
labor legislation, regardless of the amount of the claims filed by workers.
It is well to note that the Regional Directors visitorial and enforcement powers have undergone a series of
amendments. Confusion was engendered with the promulgation of the decision in Servandos Inc. v. Secretary of
Labor and Employment.
18
In that case, this Court held that to harmonize Articles 217 (a) (6),
19
129,
20
and 128 of the
Labor Code, the Secretary of Labor should be deemed as clothed with plenary visitorial powers to order the
inspection of all establishments where labor is employed, and to look into all possible violations of labor laws and
regulations; but the power to hear and decide employees claims exceeding P5,000.00 for each employee should be
left to the Labor Arbiter as the exclusive repository of the power to hear and decide such claims.
Jurisprudence, however, rendered the Servando ruling inapplicable. In Guico, Jr. v. Quisumbing,
21
Allied
Investigation Bureau, Inc. v. Sec. of Labor,
22
and Cirineo Bowling Plaza, Inc. v. Sensing,
23
we had occasion to
explain that while it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to
hear and decide cases where the aggregate money claim of each employee exceeds P5,000.00, these provisions of
law do not contemplate or cover the visitorial and enforcement powers of the Secretary of Labor or his duly
authorized representatives. Thus, we upheld the jurisdiction of the Regional Director, notwithstanding the fact that
the amount awarded exceeded P5,000.00 per employee.
In order to do away with the jurisdictional limitations imposed by the Servando ruling and to finally settle any
lingering doubts on the extent of the visitorial and enforcement powers of the Secretary of Labor and Employment,
R.A. 7730 was enacted, amending Article 128 (b) to its present formulation, so as to free it from the jurisdictional
restrictions found in Articles 129 and 217.
This notwithstanding, the power of the Regional Director to hear and decide the monetary claims of employees is
not absolute. The last sentence of Article 128 (b) of the Labor Code, otherwise known as the "exception clause,"
provides an instance when the Regional Director or his representatives may be divested of jurisdiction over a labor
standards case.
Under prevailing jurisprudence, the so-called "exception clause" has the following elements, all of which must
concur:
(a) that the employer contests the findings of the labor regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine evidentiary matters; and
(c) that such matters are not verifiable in the normal course of inspection.
24

In the present case, the CA aptly applied the "exception clause." At the earliest opportunity, respondent registered its
objection to the findings of the labor inspector. The labor inspector, in fact, noted in its report that "respondent
alleged that petitioners were contractual workers and/or independent and talent workers without control or
supervision and also supplied with tools and apparatus pertaining to their job."
25
In its position paper, respondent
again insisted that petitioners were not its employees. It then questioned the Regional Directors jurisdiction to
entertain the matter before it, primarily because of the absence of an employer-employee relationship. Finally, it
raised the same arguments before the Secretary of Labor and the appellate court. It is, therefore, clear that
respondent contested and continues to contest the findings and conclusions of the labor inspector.
To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship, there is need
to examine evidentiary matters. The following elements constitute the reliable yardstick to determine such
relationship: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct.
26
There is no hard and fast rule designed
to establish the aforesaid elements. Any competent and relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration, appointment letters or employment contracts,
payrolls, organization charts, and personnel lists, serve as evidence of employee status.
27
These pieces of evidence
are readily available, as they are in the possession of either the employee or the employer; and they may easily be
looked into by the labor inspector (in the course of inspection) when confronted with the question of the existence or
absence of an employer-employee relationship.
Some businessmen, however, try to avoid an employer-employee relationship from arising in their enterprises,
because that juridical relation spawns obligations connected with workmens compensation, social security,
medicare, termination pay, and unionism.
28
Thus, in addition to the above-mentioned documents, other pieces of
evidence are considered in ascertaining the true nature of the parties relationship. This is especially true in
determining the element of "control." The most important index of an employer-employee relationship is the so-
called "control test," that is, whether the employer controls or has reserved the right to control the employee, not
only as to the result of the work to be done, but also as to the means and methods by which the same is to be
accomplished.
29

In the case at bar, whether or not petitioners were independent contractors/project employees/free lance workers is a
question of fact that necessitates the examination of evidentiary matters not verifiable in the normal course of
inspection. Indeed, the contracts of independent services, as well as the check vouchers, were kept and maintained in
or about the premises of the workplace and were, therefore, verifiable in the course of inspection. However,
respondent likewise claimed that petitioners were not precluded from working outside the service contracts they had
entered into with it (respondent); and that there were instances when petitioners abandoned their service contracts
with the respondent, because they had to work on another project with a different company. Undoubtedly, the
resolution of these issues requires the examination of evidentiary matters not verifiable in the normal course of
inspection. Verily, the Regional Director and the Secretary of Labor are divested of jurisdiction to decide the case.
We would like to emphasize that "to contest" means to raise questions as to the amounts complained of or the
absence of violation of labor standards laws; or, as in the instant case, issues as to the complainants right to labor
standards benefits. To be sure, raising lack of jurisdiction alone is not the "contest" contemplated by the exception
clause.
30
It is necessary that the employer contest the findings of the labor regulations officer during the hearing or
after receipt of the notice of inspection results.
31
More importantly, the key requirement for the Regional Director
and the DOLE Secretary to be divested of jurisdiction is that the evidentiary matters be not verifiable in the course
of inspection. Where the evidence presented was verifiable in the normal course of inspection, even if presented
belatedly by the employer, the Regional Director, and later the DOLE Secretary, may still examine it; and these
officers are not divested of jurisdiction to decide the case.
32

In sum, respondent contested the findings of the labor inspector during and after the inspection and raised issues the
resolution of which necessitated the examination of evidentiary matters not verifiable in the normal course of
inspection. Hence, the Regional Director was divested of jurisdiction and should have endorsed the case to the
appropriate Arbitration Branch of the NLRC.
33
Considering, however, that an illegal dismissal case had been filed
by petitioners wherein the existence or absence of an employer-employee relationship was also raised, the CA
correctly ruled that such endorsement was no longer necessary.
WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision
dated May 31, 2005 and its Resolution dated January 27, 2006 in CA-G.R. SP No. 76942, are AFFIRMED.
D E C I S I O N
NACHURA, J .:
For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of
Court. G.R. No. 148132 assails the February 28, 2000 Decision
1
and the May 7, 2001 Resolution
2
of the Court of
Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001 Decision
3
and
the December 18, 2001 Resolution
4
in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May
8, 1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD).
She was receiving a monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits,
namely, annual performance incentive equivalent to 30% of her annual gross salary, a group life and hospitalization
insurance coverage, and a car plan in the amount of P455,000.00.
5

In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was
made known to the employees on February 27, 1998.
6
Part of the reorganization was the outsourcing of the
marketing and sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed
SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work,
SMART abolished the CSMG/FSD, Astorgas division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by
SMART. SMART then conducted a performance evaluation of CSMG personnel and those who garnered the
highest ratings were favorably recommended to SNMI. Astorga landed last in the performance evaluation, thus, she
was not recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART
issued a memorandum advising Astorga of the termination of her employment on ground of redundancy, effective
April 3, 1998. Astorga received it on March 16, 1998.
7

The termination of her employment prompted Astorga to file a Complaint
8
for illegal dismissal, non-payment of
salaries and other benefits with prayer for moral and exemplary damages against SMART and Ann Margaret V.
Santiago (Santiago). She claimed that abolishing CSMG and, consequently, terminating her employment was illegal
for it violated her right to security of tenure. She also posited that it was illegal for an employer, like SMART, to
contract out services which will displace the employees, especially if the contractor is an in-house agency.
9

SMART responded that there was valid termination. It argued that Astorga was dismissed by reason of redundancy,
which is an authorized cause for termination of employment, and the dismissal was effected in accordance with the
requirements of the Labor Code. The redundancy of Astorgas position was the result of the abolition of CSMG and
the creation of a specialized and more technically equipped SNMI, which is a valid and legitimate exercise of
management prerogative.
10

In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value
of the Honda Civic Sedan which was given to her under the companys car plan program, or to surrender the same to
the company for proper disposition.
11
Astorga, however, failed and refused to do either, thus prompting SMART to
file a suit for replevin with the Regional Trial Court of Makati (RTC) on August 10, 1998. The case was docketed as
Civil Case No. 98-1936 and was raffled to Branch 57.
12

Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action;
(iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the regular courts have no jurisdiction over the
complaint because the subject thereof pertains to a benefit arising from an employment contract; hence, jurisdiction
over the same is vested in the labor tribunal and not in regular courts.
13

Pending resolution of Astorgas motion to dismiss the replevin case, the Labor Arbiter rendered a Decision
14
dated
August 20, 1998, declaring Astorgas dismissal from employment illegal. While recognizing SMARTs right to
abolish any of its departments, the Labor Arbiter held that such right should be exercised in good faith and for
causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes
beyond the control of SMART, but a ploy to terminate Astorgas employment. The Arbiter also ruled that
contracting out the functions performed by Astorga to an in-house agency like SNMI was illegal, citing Section 7(e),
Rule VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and unjust.
[SMART and Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of
seniority rights and other privileges, with full backwages, inclusive of allowances and other benefits from
the time of [her] dismissal to the date of reinstatement, which computed as of this date, are as follows:
(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00
UNPAID SALARIES (February 15, 1998-April 3, 1998
February 15-28, 1998 = P 16,823.00
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69
CAR MAINTENANCE ALLOWANCE
(P2,000.00 x 4)
= P 8,000.00
FUEL ALLOWANCE
(300 liters/mo. x 4 mos. at P12.04/liter)
= P 14,457.83
TOTAL = P211,415.52
x x x x
3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary damages in
the amount of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorneys fees.
SO ORDERED.
15

Subsequently, on March 29, 1999, the RTC issued an Order
16
denying Astorgas motion to dismiss the replevin case.
In so ruling, the RTC ratiocinated that:
Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of possession over a company car assigned to the
defendant under a car plan privilege arrangement. The car is registered in the name of the plaintiff.
Recovery thereof via replevin suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is
undoubtedly within the jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant
refused to return said car. This is clearly sufficient statement of plaintiffs cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the
judgment in the labor dispute will not constitute res judicata to bar the filing of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.
SO ORDERED.
17

Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.
18

Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision,
19

reversed the RTC ruling. Granting the petition and, consequently, dismissing the replevin case, the CA held that the
case is intertwined with Astorgas complaint for illegal dismissal; thus, it is the labor tribunal that has rightful
jurisdiction over the complaint. SMARTs motion for reconsideration having been denied,
20
it elevated the case to
this Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the
National Labor Relations Commission (NLRC). In its September 27, 1999 Decision,
21
the NLRC sustained
Astorgas dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of
SNMI to do the sales and marketing services for SMART a valid organizational action. It overruled the Labor
Arbiters ruling that SNMI is an in-house agency, holding that it lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose of increasing efficiency are allowed under the law.
The NLRC further found erroneous the Labor Arbiters disquisition that redundancy to be valid must be impelled by
economic reasons, and upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further
ordered to immediately return the company vehicle assigned to her. [Smart and Santiago] are hereby
ordered to pay the final wages of [Astorga] after [she] had submitted the required supporting papers
therefor.
SO ORDERED.
22

Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999.
23

Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision
24
affirming with
modification the resolutions of the NLRC. In gist, the CA agreed with the NLRC that the reorganization undertaken
by SMART resulting in the abolition of CSMG was a legitimate exercise of management prerogative. It rejected
Astorgas posturing that her non-absorption into SNMI was tainted with bad faith. However, the CA found that
SMART failed to comply with the mandatory one-month notice prior to the intended termination. Accordingly, the
CA imposed a penalty equivalent to Astorgas one-month salary for this non-compliance. The CA also set aside the
NLRCs order for the return of the company vehicle holding that this issue is not essentially a labor concern, but is
civil in nature, and thus, within the competence of the regular court to decide. It added that the matter had not been
fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the Decision. On
December 18, 2001, the CA resolved the motions, viz.:
WHEREFORE, [Astorgas] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is
hereby ordered to pay [Astorga] her backwages from 15 February 1998 to 06 November 1998. [Smarts]
motion for reconsideration is outrightly DENIED.
SO ORDERED.
25

Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R
Nos. 151079 and 151372. On February 27, 2002, this Court ordered the consolidation of these petitions with G.R.
No. 148132.
26

In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGAS DISMISSAL
DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE
CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO
GENUINE GROUND FOR HER DISMISSAL.
II
SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS
REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES
DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT
HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR WHICH
ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.
27

On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT SMART DID NOT
COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE
GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF
LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS
COMMISSION FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN THE
SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.
28

IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM
THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL
COURT DOES NOT HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY
SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO
WAS LEGALLY DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE
SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE
BUT SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT
ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE
LABOR CODE.
29

The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City
allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those
goods or chattels from one who has wrongfully distrained or taken, or who wrongfully detains such goods or
chattels. It is designed to permit one having right to possession to recover property in specie from one who has
wrongfully taken or detained the property.
30
The term may refer either to the action itself, for the recovery of
personalty, or to the provisional remedy traditionally associated with it, by which possession of the property may be
obtained by the plaintiff and retained during the pendency of the action.
31

That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly
admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the
following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment package.
We doubt that [SMART] would extend [to Astorga] the same car plan privilege were it not for her
employment as district sales manager of the company. Furthermore, there is no civil contract for a loan
between [Astorga] and [Smart]. Consequently, We find that the car plan privilege is a benefit arising out of
employer-employee relationship. Thus, the claim for such falls squarely within the original and exclusive
jurisdiction of the labor arbiters and the NLRC.
32

We do not agree. Contrary to the CAs ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted
well within its discretion in denying Astorgas motion to dismiss. SMARTs demand for payment of the market
value of the car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It involves the
relationship of debtor and creditor rather than employee-employer relations.
33
As such, the dispute falls within the
jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,
34
this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary
relief sought therein is the return of the property in specie wrongfully detained by another person. It is an
ordinary statutory proceeding to adjudicate rights to the title or possession of personal property. The
question of whether or not a party has the right of possession over the property involved and if so, whether
or not the adverse party has wrongfully taken and detained said property as to require its return to plaintiff,
is outside the pale of competence of a labor tribunal and beyond the field of specialization of Labor
Arbiters.
x x x x
The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues
raised in each forum can be resolved independently on the other. In fact in 18 November 1986, the NLRC
in the case before it had issued an Injunctive Writ enjoining the petitioners from blocking the free ingress
and egress to the Vessel and ordering the petitioners to disembark and vacate. That aspect of the
controversy is properly settled under the Labor Code. So also with petitioners right to picket. But the
determination of the question of who has the better right to take possession of the Vessel and whether
petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that right to possess in
addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as laid
down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the
replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorgas dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee.
The nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co.,
Inc. v. National Labor Relations Commission,
35
viz:
x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of
work. That no other person was holding the same position that private respondent held prior to termination
of his services does not show that his position had not become redundant. Indeed, in any well organized
business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the
work of one person. We believe that redundancy, for purposes of the Labor Code, exists where the services
of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business,
or dropping of a particular product line or service activity previously manufactured or undertaken by the
enterprise.
The characterization of an employees services as superfluous or no longer necessary and, therefore, properly
terminable, is an exercise of business judgment on the part of the employer. The wisdom and soundness of such
characterization or decision is not subject to discretionary review provided, of course, that a violation of law or
arbitrary or malicious action is not shown.
36

Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the
reorganization was done in order to get rid of her. But except for her barefaced allegation, no convincing evidence
was offered to prove it. This Court finds it extremely difficult to believe that SMART would enter into a joint
venture agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a
particular employee, such as Astorga. Moreover, Astorga never denied that SMART offered her a supervisory
position in the Customer Care Department, but she refused the offer because the position carried a lower salary rank
and rate. If indeed SMART simply wanted to get rid of her, it would not have offered her a position in any
department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was no compelling economic
reason for redundancy. But contrary to her claim, an employer is not precluded from adopting a new policy
conducive to a more economical and effective management even if it is not experiencing economic reverses. Neither
does the law require that the employer should suffer financial losses before he can terminate the services of the
employee on the ground of redundancy.
37

We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition
of CSMG/FSD and termination of Astorgas employment was an honest effort to make SMARTs sales and
marketing departments more efficient and competitive. As the CA had taken pains to elucidate:
x x x a careful and assiduous review of the records will yield no other conclusion than that the
reorganization undertaken by SMART is for no purpose other than its declared objective as a labor and
cost savings device. Indeed, this Court finds no fault in SMARTs decision to outsource the corporate sales
market to SNMI in order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group
under the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in charge of selling
SMARTs telecommunications services to the corporate market. SMART, to ensure it can respond quickly,
efficiently and flexibly to its customers requirement, abolished CSMG/FSD and shortly thereafter assigned
its functions to newly-created SNMI Multimedia Incorporated, a joint venture company of SMART and
NTT of Japan, for the reason that CSMG/FSD does not have the necessary technical expertise required for
the value added services. By transferring the duties of CSMG/FSD to SNMI, SMART has created a more
competent and specialized organization to perform the work required for corporate accounts. It is also
relieved SMART of all administrative costs management, time and money-needed in maintaining the
CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a
sound business judgment based on relevant criteria and is therefore a legitimate exercise of management
prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and
upheld his cause in most of his conflicts with his employer. This favored treatment is consonant with the social
justice policy of the Constitution. But while tilting the scales of justice in favor of workers, the fundamental law also
guarantees the right of the employer to reasonable returns for his investment.
38
In this light, we must acknowledge
the prerogative of the employer to adopt such measures as will promote greater efficiency, reduce overhead costs
and enhance prospects of economic gains, albeit always within the framework of existing laws. Accordingly, we
sustain the reorganization and redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice prior to
termination. The record is clear that Astorga received the notice of termination only on March 16, 1998
39
or less
than a month prior to its effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was
notified of the redundancy program only on March 6, 1998.
40

Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof
x x x.
SMARTs assertion that Astorga cannot complain of lack of notice because the organizational realignment was
made known to all the employees as early as February 1998 fails to persuade. Astorgas actual knowledge of the
reorganization cannot replace the formal and written notice required by the law. In the written notice, the employees
are informed of the specific date of the termination, at least a month prior to the effectivity of such termination, to
give them sufficient time to find other suitable employment or to make whatever arrangements are needed to
cushion the impact of termination. In this case, notwithstanding Astorgas knowledge of the reorganization, she
remained uncertain about the status of her employment until SMART gave her formal notice of termination. But
such notice was received by Astorga barely two (2) weeks before the effective date of termination, a period very
much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination of Astorgas employment illegal. The
validity of termination can exist independently of the procedural infirmity of the dismissal.
41
In DAP Corporation v.
CA,
42
we found the dismissal of the employees therein valid and for authorized cause even if the employer failed to
comply with the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal, but held
the employer liable for non-compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorgas dismissal and at the same time, awarding
indemnity for violation of Astorga's statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on
SMART for non-compliance with the one-month mandatory notice requirement, in light of our ruling in Jaka Food
Processing Corporation v. Pacot,
43
viz.:
[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the
notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process
was, in effect, initiated by an act imputable to the employee, and (2) if the dismissal is based on an
authorized cause under Article 283 but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was initiated by the employers exercise of his
management prerogative.
We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent to at least
one (1) month salary or to at least one (1) months pay for every year of service, whichever is higher. The records
show that Astorgas length of service is less than a year. She is, therefore, also entitled to separation pay equivalent
to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never
rebutted by SMART in the proceedings a quo. No proof of payment was presented by SMART to disprove the
allegation. It is settled that in labor cases, the burden of proving payment of monetary claims rests on the
employer.
44
SMART failed to discharge the onus probandi. Accordingly, it must be held liable for Astorgas salary
from February 15, 1998 until the effective date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief
given to an illegally dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust
or illegal dismissal from work.
45
The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the
NLRC reversed the Labor Arbiters ruling and categorically declared Astorgas dismissal valid. This ruling was
affirmed by the CA in its assailed Decision. Since Astorgas dismissal is for an authorized cause, she is not entitled
to backwages. The CAs award of backwages is totally inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28, 2000
Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The
Regional Trial Court of Makati City, Branch 57 is DIRECTED to proceed with the trial of Civil Case No. 98-1936
and render its Decision with reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED.
The June 11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED
with MODIFICATION. Astorga is declared validly dismissed. However, SMART is ordered to pay Astorga
P50,000.00 as indemnity for its non-compliance with procedural due process, her separation pay equivalent to one
(1) month pay, and her salary from February 15, 1998 until the effective date of her termination on April 3, 1998.
The award of backwages is DELETED for lack of basis.
SO ORDERED













GRANDTEQ INDUSTRIAL STEEL PRODUCTS, INC. and ABELARDO M. GONZALES, Petitioners,
vs.
EDNA MARGALLO, Respondent.
D E C I S I O N
CHICO-NAZARIO, J .:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision
1
dated 21
January 2008 of the Court of Appeals in CA-G.R. SP No. 100012, which affirmed the Decision
2
dated 18 October
2006, as modified by the Resolution
3
dated 21 May 2007, of the National Labor Relations Commission (NLRC) in
NLRC NCR CA No. 045888-05. The NLRC effectively reversed the Decision
4
dated 11 July 2005 of the Labor
Arbiter in NLRC NCR Case No. 00-09-10803-04, which entirely dismissed the Complaint filed by respondent Edna
Margallo (Margallo) against petitioners Grandteq Industrial Steel Products, Inc. (Grandteq) and Abelardo M.
Gonzales (Gonzales); and, instead, ordered Grandteq and Gonzales to refund to Margallo her car loan payments, as
well as to pay the latter sales commission and attorneys fees.
Grandteq is a domestic corporation engaged in the business of selling welding electrodes, alloy steels, aluminum and
copper alloys.
5
Gonzales is the President/Owner of Grandteq.
6
Grandteq employed Margallo as Sales Engineer
beginning 3 August 1999.
7

Margallo claimed that on an unstated date, she availed herself of the car loan program offered to her by Grandteq as
a reward for being "Salesman of the Year." She paid the down payment on a brand new Toyota Corolla,
8
amounting
to P201,000.00, out of her own pocket. The monthly amortization for the car was P10,302.00, of which P5,302.00
was to be her share and P5,000.00 was to be the share of Grandteq.
On 29 December 2003, Margallo received a letter
9
signed by Gonzales and Rolando de Leon (De Leon), Vice-
President for Administration of Grandteq, which reads:
Mrs. Edna E. Margallo
c/o Grandteq Industrial
Steel Products, Inc.
#2 Cooper St., cor. Benitez
SFDM, Quezon City
Dear Mrs. Margallo:
This is to inform you that our records show the following:
1) That, last December 18, 2003, you instructed our company driver and helper to load 4 pcs. tool
steel to be delivered at circle freight.
2) That together with Mr. Steve Rivera, on or about 12:00 noon, you went at (sic) Eagle Global
Logistics at Circle Freight, NAIA, Paraaque City to ship the following items to Moog Control
Corp. Phils. Branch located at Baguio Ecozone, Baguio City, using the Sales Invoice of JVM
Industrial Supply and Allied Services.
a) 2 pcs. tool steel 4140 " x 2x 3
b) 2 pcs. tool steel 4140 1"x 2 x 3
3) That you are working with JVM Industrial Supply and Allied Services concurrent with your
being employed with Grandteq Industrial Steel Products, Inc.
4) That JVM Industrial Supply and Allied Services are supplying steel products to Moog Control
Corp. Phils. Branch which is also a client of Grandteq and which you are the authorized salesman
of the company.
Because of this, you are given a (sic) twenty-four (24) hours upon receipt of this letter to submit a written
explanation on why you should not be given a disciplinary action for allegedly violating/committing:
a) Moonlighting
b) Sabotage
c) Breach of trust and confidence (labor code).
You are also invited to attend a meeting with regards to the allegations on Jan. 5, 2004 at 10:00 a.m. You may bring
with you a lawyer or any representative to assist you on (sic) the said meeting.
Failure on your part to submit a written explanation on the specified period and failure to attend the hearing would
mean that you are waiving your rights to be heard and the appropriate action will be taken against you.
Moreover, to protect the evidences and witnesses against you, management has decided to place you under
preventive suspension effective December 29, 2003.
Very truly yours,
(Signed)
Abelardo M. Gonzales
President
(Signed)
Ronaldo A. de Leon
VP - Administration
Responding to the foregoing letter, Margallo wrote the following letter-reply dated 30 December 2003:
December 30, 2003
To: Mr. Abelardo M. Gonzales
President
Thru: Mr. Ronald A. de Leon
VP Administration
Dear Sir,
Last December 18, 2003, Mr. Steve D. Rivera instructed me to tell to our delivery people to bring the said item to
circle freight. Which I did that (sic) I thought it was ok because it was inside the company. Sir I was just following
orders from Mr. D. Rivera who is one of my boss (sic). Sir, what I did is the same thing that Ive been doing with
my other bosses. That i[f] they instructed me to do things I immediately follow. Because I am only an employee. Sir
never that I work with JVM (sic).
Sir im (sic) sorry if I did wrong by not asking what to do. Which I think an ordinary employee like me would do is
to follow orders from my superiors.
IM SO SORRY SIR IF I FAIL YOU.
(Signed)
Edna E. Margallo
10

Margallo then averred that in January 2004, De Leon asked her to just resign, promising that if she did, she would
still be paid her commissions and other benefits, as well as be reimbursed her car loan payments. Relying on De
Leons promise, Margallo tendered on 13 January 2004, her irrevocable resignation, effective immediately.
11

Margallo, however, alleged that she was never paid her money claims. Grandteq failed to pay her commissions in
the sum of P87,508.00, equivalent to 5% of the total sales that she collected as of January 2004, which amounted to
P1,750,148.84. Grandteq likewise failed to refund the "sales accommodations" or advances she gave her customers.
In addition, after Margallos resignation, Grandteq sold her car to Annaliza Estrella, another employee, for
P550,000.00.
12
These events prompted her to file before the Labor Arbiter a Complaint
13
against Grandteq and
Gonzales, for recovery of sales commission, cash incentive and car loan payment, damages and attorney fees, which
was docketed as NLRC Case No. 0009-108-03-04.
Grandteq and Gonzales opposed Margallos claims. They maintained that Margallo was not entitled to sales
commissions because the computation thereof, according to company policy, should be based on actual collections
within 180 days from invoice date. All of Margallos credit sales transactions were unpaid, outstanding, and past
due. Margallo was also not entitled to any sales incentive, because said benefit was intended for customers, and not
for the sales personnel.
14
Grandteq and Gonzales further insisted that Margallo had no right to the refund of her car
loan payments under the car loan agreement she executed with Grandteq, which expressly provided that in the event
that Margallo resigned or was terminated for cause during the effectivity of said agreement, her car loan payments
would be forfeited in favor of Grandteq, and Grandteq would regain possession of the car.
The Labor Arbiter rendered a Decision on 11 July 2005, dismissing all of Margallos claims, thus:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant case for lack of merit.
15

The Labor Arbiter held that Margallo was not able to prove by substantial evidence her entitlement to the sales
commission:
After a careful review of the records, this Office finds that considering [Margallo] already receives a basic salary
plus allowances, her claim for sales commission is therefore an added benefit wholly dependent upon her sales
performance based on existing company policy. As such, it is an affirmative allegation or claim that is not normally
included in the regular course of business and for which law presumes that an employee is generally not entitled to.
Thus, it behooves, upon the employee to prove that he is entitled to said affirmative allegations and the onus is upon
him to establish his right thereto (see Eternit Employees and Workers Unions vs. De Veyra, 189 SCRA 752 and
Nucum vs. Inciong, 204 SCRA 697).
In the instant case, this Office finds [Margallo] to have failed to substantially discharge her burden of proving that
she is entitled to the P87,508.00 in sales commissions since other than her bare allegations, [Margallo] did not show
any other proof, including prior payment of said sales commissions, to justify her claim.
And, quite noteworthy too is that under the [Grandteq]s policy, rules and regulations on the grant of sales
commissions, the computation thereof shall be based on actual collection against all sales on credit and the validity
of the said commission shall be 180 days from invoice dates; otherwise, the salesman shall not be entitled thereto
and forfeits any right to demand payment of the commission thereon as the sales are considered bad debts as
uncollectible. Since the records of [Grandteq] showed that [Margallo]s credit sales remain unpaid and outstanding
for over 180 days, [Margallo] is therefore not entitled to sales commissions.
No denial whatsoever of the above-discussed company policy was made by [Margallo] in her Reply.
Thus, having failed to establish entitlement to said sales commission, the same is hereby denied.
16

For a similar reason, the Labor Arbiter denied Margallos claim for payment of cash incentive:
As regards to cash incentives, once again this Office finds that the same is also an affirmative allegation and the
burden of proving entitlement thereto rests upon the employee. And having failed to even mention how much of the
alleged cash incentive she is entitled to in Annexes "A" and "2-a" of her position paper, the same is hereby denied.
17

Finally, the Labor Arbiter found that Margallo had no right to the reimbursement of her car loan payments under her
car loan agreement with Grandteq:
And as regards of (sic) the car loan, the same should be governed by the undisputed terms and conditions of the
Agreement between complainant and respondent company (Annex "A" of respondents position paper). And page 2
of said Agreement clearly stipulates that in case of resignation, all payments made by the personnel shall be forfeited
in favor of the company. Thus, the claim for refund of the car loan should likewise be denied.
18

Margallo filed an appeal with the NLRC, docketed as NLRC NCR CA No. 045888-05. Although the NLRC, in its
Decision dated 18 October 2006, stated that it merely "modified" the Decision dated 11 July 2005 of the Labor
Arbiter, it effectively reversed the same by granting Margallo her claims for sales commission, reimbursement of
her car loan payments, and attorneys fees. The fallo of the NLRC Decision is quoted below:
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners] Grandteq Industrial
Products, Inc. and/or its President/General Manager, [petitioner] Abelardo M. Gonzales, are hereby ordered to
refund to the [herein respondent Margallo] her car loan payments amounting to P217,815.94 and to pay her the
amount of P10,870.79 representing her unpaid sales commissions plus ten percent (10%) of the total monetary
award as attorneys fees.
19

In ordering that Grandteq and Gonzales reimburse the car loan payments made by Margallo, the NLRC reasoned:
It is unlikely for an employee who has invested his time and industry in a particular job to simply give it up after
being accused of violating company rules and regulations. It is more likely that he did so upon the expectation that
she would derive a certain benefit from it. Thus, the claim that the [herein respondent Margalllo] resigned because
she was promised that she would be paid her money claims if she did, is more credible than the contention that she
did so without any prodding from the [herein petitioners Grandteq and Gonzales].
It would therefore appear that the provision, in the agreement (records, pp. 32-340) executed by the parties, that "in
case of resignation of the PERSONNEL from the COMPANY, all payments made by the PERSONNEL shall be
forfeited in favor of the COMPANY" has been superseded by the above-mentioned subsequent agreement between
the parties.
Besides, it is uncontroverted that the car loan program was offered to the complainant as a reward for being the
"Salesman of the Year." Moreover, nowhere in their pleadings did the [petitioners Grandteq and Gonzales]
controvert the claim that the [respondent Margallo] paid the down payment, entire first amortization, insurance, and
her share in the monthly amortizations for seventeen months, or the total amount of P214,395.90 for the car. It is
also uncontroverted that after the [respondent Margallo]s negotiated resignation, her car was resold to another
employee for the original price. Under the circumstances, the above-quoted contractual provision is null and void for
being contrary to morals, good customs, and public policy. The law overrides contracts which are prepared by
employers to circumvent the rights of their employees (Baguio Country Club vs. NLRC, 206 SCRA 643). Thus, the
above-quoted contractual provision does not bar the [respondent Margallo] from recovering her car loan payments
from the [petitioners Grandteq and Gonzales].
20

As for Margallos other claims, the NLRC affirmed her entitlement to the unpaid sales commission, but not to the
cash incentive:
Insofar as the [respondent Margallo]s claim for unpaid sales commission is concerned, it is noteworthy that in the
list (records, pp. 16-18) of sales she adduced in evidence, the column bearing the heading "collected" indicates that,
as of January 2004, the total collections from her sales amount to only P217,815.94. Since it is undisputed hat her
sales commission are equivalent to 5% of her collections, she may recover unpaid sales commissions amounting to
P10,890.79. Finally, since there is no showing that the [respondent Margallo]s claim for cash incentive is based on
a particular contract or company practice, it was correctly dismissed for lack of merit.
21

Grandteq and Gonzales filed a Motion for Reconsideration,
22
while Margallo also filed an Omnibus Motion for
Partial Reconsideration and Issuance of Subpoena.
23
The NLRC denied the Motions for Reconsideration of all
parties in a Resolution dated 21 May 2007, but modified the NLRC Decision dated 18 October 2006 by slightly
reducing the amount of car loan payments to be refunded to Margallo:
WHEREFORE, the Motions for Reconsideration are hereby DENIED for lack of merit. However, the dispositive
portion of this Commissions (2nd Division) October 18, 2006 Decision is hereby corrected to read:
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners] Grandteq Industrial
Products, Inc. and/or its President/General Manager, [petitioner] Abelardo M. Gonzales, are hereby ordered to
refund to [herein respondent Margallo] her car loan payments amounting to P214,395.90 and to pay her the amount
of P10,870.79 representing her unpaid sales commissions plus ten percent (10%) of the total monetary award as
attorneys fees.
24

Grandteq and Gonzales elevated the case to the Court of Appeals by way of a Petition for Certiorari, under Rule 65
of the Rules of Court, which was docketed as CA-G.R. SP No. 100012.lawphil
In its Decision dated 21 January 2008, the Court of Appeals agreed with the NLRC, dismissing the therein Petition
of Grandteq and Gonzales in this wise:
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs against petitioners.
25

Like the NLRC, the Court of Appeals found that Margallo had a right to be reimbursed her car loan payments, and
the terms of the car loan agreement between Margallo and Grandteq should not be applied for being highly
prejudicial to the employees interest:
Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their
agreement would have the force of law between them. However, those terms and conditions agreed upon must not
be contrary to law, morals, customs, public policy or public order. Precisely, the law overrides such conditions
which are prejudicial to the interest of the worker. The law affords protection to an employee, and it will not
countenance any attempt to subvert its spirit and intent. The sheer inequality that characterizes employer-employee
relations, where the scales generally tip against the employee, often scarcely provides him real and better options.
Moreover, in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in the formers favor.
26

The Court of Appeals likewise affirmed the order of the NLRC that Grandteq and Gonzales pay Margallo her sales
commission, placing the burden upon the employer to prove that the employees money claims had been paid:
With respect to the unpaid sales commissions of P10,870.79 to be paid by petitioners in favor of private respondent,
it is incumbent upon petitioner employer to prove that said money claim has been paid. This is in tune with the
general precept that: "one who pleads payment has the burden of proving it, and even where the employees must
allege nonpayment, the general rule is that the burden rests on the defendant to prove (payment), rather than on the
plaintiff to prove non-payment." The reason for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents which will show that overtime, differentials, service incentive leave and
other claims of workers have been paid are not in the possession of the worker but in the custody and absolute
control of the employer. In the present case, petitioners [Grandteq and Gonzales] failed to discharge the burden of
proving that the amount of P10,870.79 representing [herein respondent Margallo]s sales commissions has already
been paid to the latter. Thus, the NLRC (Second Division) did not commit grave abuse of discretion in awarding
said money claim in favor of [respondent Margallo].
27

Assiduous, Grandteq and Gonzales are now before this Court via the Petition at bar.
Grandteq and Gonzales assert that the Court of Appeals erred in declaring the car loan agreement between Grandteq
and Margallo, particularly the provision therein on the forfeiture of car loan payments in favor of Grandteq should
Margallo resign from the company, as null and void.
28

The Court, however, is in agreement with the Court of Appeals and the NLRC.
Generally speaking, contracts are respected as the law between the contracting parties. The contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy.
29

The questionable provision in the car loan agreement between Grandteq and Margallo provides: "In case of
resignation, of the personnel from the company, all payments made by the personnel shall be forfeited in favor of the
company."
30
Connected thereto is the provision in the same car loan agreement, which reads:
1. The COMPANY shall have the right to regain the possession of the car before the expiration of the term of the
loan in the event of any of the following:
a. The PERSONNEL resigns from the COMPANY during the effectivity of this agreement.
31

Said provisions plainly are contrary to the fundamental principles of justice and fairness. It must be remembered that
Margallo herself paid for the down payment and her share in the monthly amortization of the car. However, she did
not get to leave with the car when she resigned from Grandteq. In effect, Margallo parted with her hard-earned
money for nothing, being left, as she is, with an empty bag. The inequitableness in the conduct of Grandteq and
Gonzales is heightened by the fact that after they regained possession of the car, they resold the same to another
employee under a similar contract bearing the same terms and conditions signed by Margallo.
The principle that no person may unjustly enrich oneself at the expense of another (Nemo cum alteris detrimento
locupletari potest) is embodied in Article 22 of the New Civil Code, to wit:
ART. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were
formulated as "basic principles to be observed for the rightful relationship between human beings and for the
stability of the social order; designed to indicate certain norms that spring from the fountain of good conscience;
[are] guides for human conduct that should run as golden threads through society to the end that law may approach
its supreme ideal, which is the sway and dominance of justice." There is unjust enrichment when a person unjustly
retains a benefit at the loss of another, or when a person retains the money or property of another against the
fundamental principles of justice, equity and good conscience.
32

As can be gleaned from the foregoing, there is unjust enrichment when (1) a person is unjustly benefited, and (2)
such benefit is derived at the expense of or with damages to another. The main objective of the principle of unjust
enrichment is to prevent one from enriching oneself at the expense of another. It is commonly accepted that this
doctrine simply means that a person shall not be allowed to profit or enrich himself inequitably at anothers expense.
One condition for invoking this principle is that the aggrieved party has no other action based on a contract, quasi-
contract, crime, quasi-delict, or any other provision of law.
This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is
exercised in this case "as the complement of legal jurisdiction [that] seeks to reach and to complete justice where
courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special
circumstances of cases, are incompetent to do so."
33

The principle against unjust enrichment obliges Grandteq and Gonzales to refund to Margallo the car loan payments
she had made, since she has not actually acquired the car. To relieve Grandteq and Gonzales of their obligation to
reimburse Margallo would, indeed, be to sanction unjust enrichment in favor of the first two and cause unjust
poverty to the latter.
34

The Court rigorously disapproves contracts that demonstrate a clear attempt to exploit the employee and deprive him
of the protection sanctioned by both the Constitution and the Labor Code.
The Constitution and the Labor Code mandate the protection of labor. Hence, as a matter of judicial policy, this
Court has, in a number of instances, leaned backwards to protect labor and the working class against the
machinations and incursions of their more financially entrenched employers.
35

Although not strictly a labor contract, the car loan agreement herein involves a benefit extended by the employers,
Grandteq and Gonzales, to their employee, Margallo. It should benefit, and not unduly burden, Margallo. The Court
cannot, in any way, uphold a car loan agreement that threatens the employee with the forfeiture of all the car loan
payments he/she had previously made, plus loss of the possession of the car, should the employee wish to resign;
otherwise, said agreement can then be used by the employer as an instrument to either hold said employee hostage to
the job or punish him/her for resigning.
The Court further finds no error in the grant by the Court of Appeals and the NLRC of Margallos claim for sales
commission.
In cases involving money claims of employees, the employer has the burden of proving that the employees did
receive their wages and benefits and that the same were paid in accordance with law.
36

It is settled that once the employee has set out with particularity in his complaint, position paper, affidavits and other
documents the labor standard benefits he is entitled to, and which the employer allegedly failed to pay him, it
becomes the employers burden to prove that it has paid these money claims. One who pleads payment has the
burden of proving it; and even where the employees must allege nonpayment, the general rule is that the burden
rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment.
37

Under the terms and conditions of Margallos employment with Grandteq, it is provided that she "will do field sales
with commission on sales made after a months training."
38
On this basis, Margallos entitlement to sales
commission is unrebutted.
Hence, it was actually the Labor Arbiter who erred in denying Margallos claim for sales commission "for failure to
state the particulars to substantiate the same." Grandteq and Gonzales have the burden of proof to show, by
substantial evidence, their claim that Margallo was not entitled to sales commissions because the sales made by the
latter remained outstanding and unpaid, rendering these sales as bad debts and thus nullifying Margallos right to
this monetary benefit. Grandteq and Gonzales could have presented pertinent company records to prove this claim.
It is a rule that failure of employers to submit the necessary documents that are in their possession as employers
gives rise to the presumption that the presentation thereof is prejudicial to its cause.
39

WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The Decision dated 21 January 2008
of the Court of Appeals in CA-GR SP No. 100012 is AFFIRMED. Costs against petitioners Grandteq Industrial
Steel Products, Inc. and Abelardo M. Gonzales.
SO ORDERED
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER,
CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
D E C I S I O N
BERSAMIN, J .:
This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is cognizable by the
Labor Arbiter (LA) or by the Regional Trial Court (RTC). The determination of whether the dismissed officer was a
regular employee or a corporate officer unravels the conundrum. In the case of the regular employee, the LA has
jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the decision dated September 13, 2002
1

and the resolution dated April 2, 2003,
2
both promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and
Commercial Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission, whereby by the
Court of Appeals (CA) sustained the ruling of the National Labor Relations Commission (NLRC) to the effect that
the LA had jurisdiction because the respondent was not a corporate officer of petitioner Matling Industrial and
Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on August
10, 2000 a complaint for illegal suspension and illegal dismissal against Matling and some of its corporate officers
(petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.
3

The petitioners moved to dismiss the complaint,
4
raising the ground, among others, that the complaint pertained to
the jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being intra-corporate
inasmuch as the respondent was a member of Matlings Board of Directors aside from being its Vice-President for
Finance and Administration prior to his termination.
The respondent opposed the petitioners motion to dismiss,
5
insisting that his status as a member of Matlings Board
of Directors was doubtful, considering that he had not been formally elected as such; that he did not own a single
share of stock in Matling, considering that he had been made to sign in blank an undated indorsement of the
certificate of stock he had been given in 1992; that Matling had taken back and retained the certificate of stock in its
custody; and that even assuming that he had been a Director of Matling, he had been removed as the Vice President
for Finance and Administration, not as a Director, a fact that the notice of his termination dated April 10, 2000
showed.
On October 16, 2000, the LA granted the petitioners motion to dismiss,
6
ruling that the respondent was a corporate
officer because he was occupying the position of Vice President for Finance and Administration and at the same
time was a Member of the Board of Directors of Matling; and that, consequently, his removal was a corporate act of
Matling and the controversy resulting from such removal was under the jurisdiction of the SEC, pursuant to Section
5, paragraph (c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,
7
urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING
APPELLEES MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO FILE
HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR LACK
OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondents complaint for illegal
dismissal was properly cognizable by the LA, not by the SEC, because he was not a corporate officer by virtue of his
position in Matling, albeit high ranking and managerial, not being among the positions listed in Matlings
Constitution and By-Laws.
8
The NLRC disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the case at
bench does not involve any intracorporate matter. Hence, jurisdiction to hear and act on said case is vested with the
Labor Arbiter, not the SEC, considering that the position of Vice-President for Finance and Administration being
held by complainant-appellant is not listed as among respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the Labor
Arbiter below could act on the case at bench, hear both parties, receive their respective evidence and position papers
fully observing the requirements of due process, and resolve the same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,
9
reiterating that the respondent, being a member of the Board of Directors,
was a corporate officer whose removal was not within the LAs jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified machine
copies of Matlings Amended Articles of Incorporation and By Laws to prove that the President of Matling was
thereby granted "full power to create new offices and appoint the officers thereto, and the minutes of special meeting
held on June 7, 1999 by Matlings Board of Directors to prove that the respondent was, indeed, a Member of the
Board of Directors.
10

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

Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP 65714,
contending that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing the
correct decision of the LA.
In its assailed decision promulgated on September 13, 2002,
12
the CA dismissed the petition for certiorari,
explaining:
For a position to be considered as a corporate office, or, for that matter, for one to be considered as a corporate
officer, the position must, if not listed in the by-laws, have been created by the corporation's board of directors, and
the occupant thereof appointed or elected by the same board of directors or stockholders. This is the implication of
the ruling in Tabang v. National Labor Relations Commission, which reads:
"The president, vice president, secretary and treasurer are commonly regarded as the principal or executive officers
of a corporation, and modern corporation statutes usually designate them as the officers of the corporation.
However, other offices are sometimes created by the charter or by-laws of a corporation, or the board of directors
may be empowered under the by-laws of a corporation to create additional offices as may be necessary.
It has been held that an 'office' is created by the charter of the corporation and the officer is elected by the directors
or stockholders. On the other hand, an 'employee' usually occupies no office and generally is employed not by action
of the directors or stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations Commission and De
Rossi v. National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to hold in the corporation, was not
created by the corporations board of directors but only by its president or executive vice-president pursuant to the
by-laws of the corporation. Moreover, Coros appointment to said position was not made through any act of the
board of directors or stockholders of the corporation. Consequently, the position to which Coros was appointed and
later on removed from, is not a corporate office despite its nomenclature, but an ordinary office in the corporation.
Coros alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners motion for reconsideration on April 2, 2003.
13

Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent was a
stockholder/member of the Matlings Board of Directors as well as its Vice President for Finance and
Administration; and that the CA consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or not. The resolution of the issue
determines whether the LA or the RTC had jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the
LA. This is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this
Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits,
all other claims arising from employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be
provided in said agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the
jurisdiction of the Securities and Exchange Commission (SEC), because the controversy arises out of intra-corporate
or partnership relations between and among stockholders, members, or associates, or between any or all of them and
the corporation, partnership, or association of which they are stockholders, members, or associates, respectively; and
between such corporation, partnership, or association and the State insofar as the controversy concerns their
individual franchise or right to exist as such entity; or because the controversy involves the election or appointment
of a director, trustee, officer, or manager of such corporation, partnership, or association.
14
Such controversy, among
others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799,
15
otherwise known as The Securities
Regulation Code, the SECs jurisdiction over all intra-corporate disputes was transferred to the RTC, pursuant to
Section 5.2 of RA No. 8799, to wit:
5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the
Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise
jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this
Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of
30 June 2000 until finally disposed.
Considering that the respondents complaint for illegal dismissal was commenced on August 10, 2000, it might
come under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that the respondent was a
corporate, not a regular, officer of Matling.
II
Was the Respondents Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondents position as Vice President for Finance and Administration was
a corporate office. If it was, his dismissal by the Board of Directors rendered the matter an intra-corporate dispute
cognizable by the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and Administration was a corporate office,
having been created by Matlings President pursuant to By-Law No. V, as amended,
16
to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over the meetings of the stockholders and
directors; shall countersign all certificates, contracts and other instruments of the corporation as authorized by the
Board of Directors; shall have full power to hire and discharge any or all employees of the corporation; shall have
full power to create new offices and to appoint the officers thereto as he may deem proper and necessary in the
operations of the corporation and as the progress of the business and welfare of the corporation may demand; shall
make reports to the directors and stockholders and perform all such other duties and functions as are incident to his
office or are properly required of him by the Board of Directors. In case of the absence or disability of the President,
the Executive Vice President shall have the power to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the individuals to assume the offices
was delegated by Matlings Board of Directors to its President through By-Law No. V, as amended; and that any
office the President created, like the position of the respondent, was as valid and effective a creation as that made by
the Board of Directors, making the office a corporate office. In justification, they cite Tabang v. National Labor
Relations Commission,
17
which held that "other offices are sometimes created by the charter or by-laws of a
corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional
officers as may be necessary."
The respondent counters that Matlings By-Laws did not list his position as Vice President for Finance and
Administration as one of the corporate offices; that Matlings By-Law No. III listed only four corporate officers,
namely: President, Executive Vice President, Secretary, and Treasurer;
18
that the corporate offices contemplated in
the phrase "and such other officers as may be provided for in the by-laws" found in Section 25 of the Corporation
Code should be clearly and expressly stated in the By-Laws; that the fact that Matlings By-Law No. III dealt with
Directors & Officers while its By-Law No. V dealt with Officers proved that there was a differentiation between the
officers mentioned in the two provisions, with those classified under By-Law No. V being ordinary or non-corporate
officers; and that the officer, to be considered as a corporate officer, must be elected by the Board of Directors or the
stockholders, for the President could only appoint an employee to a position pursuant to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a corporation must
formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a
director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be
provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except
that no one shall act as president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws
of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of
the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the
transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a
meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall
require the vote of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered as a
corporate office. Thus, the creation of an office pursuant to or under a By-Law enabling provision is not enough to
make a position a corporate office. Guerrea v. Lezama,
19
the first ruling on the matter, held that the only officers of a
corporation were those given that character either by the Corporation Code or by the By-Laws; the rest of the
corporate officers could be considered only as employees or subordinate officials. Thus, it was held in Easycall
Communications Phils., Inc. v. King:
20

An "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders. On
the other hand, an employee occupies no office and generally is employed not by the action of the directors or
stockholders but by the managing officer of the corporation who also determines the compensation to be paid to
such employee.
In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner's general
manager, not by the board of directors of petitioner. It was also Malonzo who determined the compensation package
of respondent. Thus, respondent was an employee, not a "corporate officer." The CA was therefore correct in ruling
that jurisdiction over the case was properly with the NLRC, not the SEC (now the RTC).
This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the
corporate officers are the President, Secretary, Treasurer and such other officers as may be provided for in the By-
Laws. Accordingly, the corporate officers in the context of PD No. 902-A are exclusively those who are given that
character either by the Corporation Code or by the corporations By-Laws.
A different interpretation can easily leave the way open for the Board of Directors to circumvent the constitutionally
guaranteed security of tenure of the employee by the expedient inclusion in the By-Laws of an enabling clause on
the creation of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code,
adopted a similar interpretation of Section 25 of the Corporation Code in its Opinion dated November 25, 1993,
21
to
wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers
enumerated in the by-laws are the exclusive Officers of the corporation and the Board has no power to create other
Offices without amending first the corporate By-laws. However, the Board may create appointive positions other
than the positions of corporate Officers, but the persons occupying such positions are not considered as
corporate officers within the meaning of Section 25 of the Corporation Code and are not empowered to exercise
the functions of the corporate Officers, except those functions lawfully delegated to them. Their functions and duties
are to be determined by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to the
President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate
officers. Verily, the power to elect the corporate officers was a discretionary power that the law exclusively vested
in the Board of Directors, and could not be delegated to subordinate officers or agents.
22
The office of Vice
President for Finance and Administration created by Matlings President pursuant to By Law No. V was an ordinary,
not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by By-
Law No. V merely allowed Matlings President to create non-corporate offices to be occupied by ordinary
employees of Matling. Such powers were incidental to the Presidents duties as the executive head of Matling to
assist him in the daily operations of the business.
The petitioners reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that offices not
expressly mentioned in the By-Laws but were created pursuant to a By-Law enabling provision were also
considered corporate offices, was plainly obiter dictum due to the position subject of the controversy being
mentioned in the By-Laws. Thus, the Court held therein that the position was a corporate office, and that the
determination of the rights and liabilities arising from the ouster from the position was an intra-corporate
controversy within the SECs jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,
23
which may be the more appropriate ruling, the position
subject of the controversy was not expressly mentioned in the By-Laws, but was created pursuant to a By-Law
enabling provision authorizing the Board of Directors to create other offices that the Board of Directors might see fit
to create. The Court held there that the position was a corporate office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the soundness of their dicta is not unassailable,
Tabang and Nacpil should no longer be controlling.
III
Did Respondents Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and relying on Paguio
v. National Labor Relations Commission
24
and Ongkingko v. National Labor Relations Commission,
25
the NLRC
had no jurisdiction over his complaint, considering that any case for illegal dismissal brought by a
stockholder/officer against the corporation was an intra-corporate matter that must fall under the jurisdiction of the
SEC conformably with the context of PD No. 902-A.
The petitioners insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants were
undeniably corporate officers due to their positions being expressly mentioned in the By-Laws, aside from the fact
that both of them had been duly elected by the respective Boards of Directors. But the herein respondents position
of Vice President for Finance and Administration was not expressly mentioned in the By-Laws; neither was the
position of Vice President for Finance and Administration created by Matlings Board of Directors. Lastly, the
President, not the Board of Directors, appointed him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no
distinction, qualification or any exemption whatsoever. The provision is broad and covers all kinds of controversies
between stockholders and corporations.
26

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

The establishment of any of the relationships mentioned above will not necessarily always confer jurisdiction over
the dispute on the SEC to the exclusion of regular courts. The statement made in one case that the rule admits of no
exceptions or distinctions is not that absolute. The better policy in determining which body has jurisdiction over a
case would be to consider not only the status or relationship of the parties but also the nature of the question that is
the subject of their controversy.
Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can
resolve in the exercise of its adjudicatory or quasi-judicial powers. If, for example, a person leases an apartment
owned by a corporation of which he is a stockholder, there should be no question that a complaint for his ejectment
for non-payment of rentals would still come under the jurisdiction of the regular courts and not of the SEC. By the
same token, if one person injures another in a vehicular accident, the complaint for damages filed by the victim will
not come under the jurisdiction of the SEC simply because of the happenstance that both parties are stockholders of
the same corporation. A contrary interpretation would dissipate the powers of the regular courts and distort the
meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,
28
the Court reiterated these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to any of
the following relationships:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or license
to operate is concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all stockholders or that the parties involved are the
stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of SEC.
The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors
such as the status or relationship of the parties or the nature of the question that is the subject of their controversy. In
the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily
follow that every conflict between the corporation and its stockholders would involve such corporate matters as only
the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers.
29

The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand, and
ordinary corporate employees who may only be terminated for just cause, on the other hand, do not depend on the
nature of the services performed, but on the manner of creation of the office. In the respondents case, he was
supposedly at once an employee, a stockholder, and a Director of Matling. The circumstances surrounding his
appointment to office must be fully considered to determine whether the dismissal constituted an intra-corporate
controversy or a labor termination dispute. We must also consider whether his status as Director and stockholder had
any relation at all to his appointment and subsequent dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President for Finance and Administration because of
his being a stockholder or Director of Matling. He had started working for Matling on September 8, 1966, and had
been employed continuously for 33 years until his termination on April 17, 2000, first as a bookkeeper, and his
climb in 1987 to his last position as Vice President for Finance and Administration had been gradual but steady, as
the following sequence indicates:
1966 Bookkeeper
1968 Senior Accountant
1969 Chief Accountant
1972 Office Supervisor
1973 Assistant Treasurer
1978 Special Assistant for Finance
1980 Assistant Comptroller
1983 Finance and Administrative Manager
1985 Asst. Vice President for Finance and Administration
1987 to April 17, 2000 Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his promotion to the position of Vice
President for Finance and Administration in 1987 was by virtue of the length of quality service he had rendered as
an employee of Matling. His subsequent acquisition of the status of Director/stockholder had no relation to his
promotion. Besides, his status of Director/stockholder was unaffected by his dismissal from employment as Vice
President for Finance and Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,
30
a case involving a lady bank manager who had risen from the
ranks but was dismissed, the Court held that her complaint for illegal dismissal was correctly brought to the NLRC,
because she was deemed a regular employee of the bank. The Court observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position
she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she occupied until
her illegal dismissal on July 19, 1991. The banks contention that she merely holds an elective position and that
in effect she is not a regular employee is belied by the nature of her work and her length of service with the
Bank. As earlier stated, she rose from the ranks and has been employed with the Bank since 1963 until the
termination of her employment in 1991. As Assistant Vice President of the Foreign Department of the Bank, she is
tasked, among others, to collect checks drawn against overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the signing of transmittal letters covering the same. It has
been stated that "the primary standard of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer.
Additionally, "an employee is regular because of the nature of work and the length of service, not because of the
mode or even the reason for hiring them." As Assistant Vice-President of the Foreign Department of the Bank she
performs tasks integral to the operations of the bank and her length of service with the bank totaling 28 years speaks
volumes of her status as a regular employee of the bank. In fine, as a regular employee, she is entitled to security of
tenure; that is, her services may be terminated only for a just or authorized cause. This being in truth a case of illegal
dismissal, it is no wonder then that the Bank endeavored to the very end to establish loss of trust and confidence and
serious misconduct on the part of private respondent but, as will be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED.





ARSENIO Z. LOCSIN, Petitioner,
vs.
NISSAN LEASE PHILS. INC. and LUIS BANSON, Respondents.
D E C I S I O N
BRION, J .:
Through a petition for review on certiorari,
1
petitioner Arsenio Z. Locsin (Locsin) seeks the reversal of the Decision
2

of the Court of Appeals (CA) dated August 28, 2008,
3
in "Arsenio Z. Locsin v. Nissan Car Lease Phils., Inc. and
Luis Banson," docketed as CA-G.R. SP No. 103720 and the Resolution dated December 9, 2008,
4
denying Locsins
Motion for Reconsideration. The assailed ruling of the CA reversed and set aside the Decision
5
of the Hon. Labor
Arbiter Thelma Concepcion (Labor Arbiter Concepcion) which denied Nissan Lease Phils. Inc.s (NCLPI) and Luis
T. Bansons (Banson) Motion to Dismiss.
THE FACTUAL ANTECEDENTS
On January 1, 1992, Locsin was elected Executive Vice President and Treasurer (EVP/Treasurer) of NCLPI. As
EVP/Treasurer, his duties and responsibilities included: (1) the management of the finances of the company; (2)
carrying out the directions of the President and/or the Board of Directors regarding financial management; and (3)
the preparation of financial reports to advise the officers and directors of the financial condition of NCLPI.
6
Locsin
held this position for 13 years, having been re-elected every year since 1992, until January 21, 2005, when he was
nominated and elected Chairman of NCLPIs Board of Directors.
7

On August 5, 2005, a little over seven (7) months after his election as Chairman of the Board, the NCLPI Board held
a special meeting at the Manila Polo Club. One of the items of the agenda was the election of a new set of officers.
Unfortunately, Locsin was neither re-elected Chairman nor reinstated to his previous position as EVP/Treasurer.
8

Aggrieved, on June 19, 2007, Locsin filed a complaint for illegal dismissal with prayer for reinstatement, payment
of backwages, damages and attorneys fees before the Labor Arbiter against NCLPI and Banson, who was then
President of NCLPI.
9

The Compulsory Arbitration Proceedings before the Labor Arbiter.
On July 11, 2007, instead of filing their position paper, NCLPI and Banson filed a Motion to Dismiss,
10
on the
ground that the Labor Arbiter did not have jurisdiction over the case since the issue of Locsins removal as
EVP/Treasurer involves an intra-corporate dispute.
On August 16, 2007, Locsin submitted his opposition to the motion to dismiss, maintaining his position that he is an
employee of NCLPI.
On March 10, 2008, Labor Arbiter Concepcion issued an Order denying the Motion to Dismiss, holding that her
office acquired "jurisdiction to arbitrate and/or decide the instant complaint finding extant in the case an employer-
employee relationship."
11

NCLPI, on June 3, 2008, elevated the case to the CA through a Petition for Certiorari under Rule 65 of the Rules of
Court.
12
NCLPI raised the issue on whether the Labor Arbiter committed grave abuse of discretion by denying the
Motion to Dismiss and holding that her office had jurisdiction over the dispute.
The CA Decision - Locsin was a corporate officer; the issue of his removal as EVP/Treasurer is an intra-corporate
dispute under the RTCs jurisdiction.
On August 28, 2008,
13
the CA reversed and set aside the Labor Arbiters Order denying the Motion to Dismiss and
ruled that Locsin was a corporate officer.
Citing PD 902-A, the CA defined "corporate officers as those officers of a corporation who are given that character
either by the Corporation Code or by the corporations by-laws." In this regard, the CA held:
Scrutinizing the records, We hold that petitioners successfully discharged their onus of establishing that private
respondent was a corporate officer who held the position of Executive Vice-President/Treasurer as provided in the
by-laws of petitioner corporation and that he held such position by virtue of election by the Board of Directors.
That private respondent is a corporate officer cannot be disputed. The position of Executive Vice-
President/Treasurer is specifically included in the roster of officers provided for by the (Amended) By-Laws of
petitioner corporation, his duties and responsibilities, as well as compensation as such officer are likewise set forth
therein.
14

Article 280 of the Labor Code, the receipt of salaries by Locsin, SSS deductions on that salary, and the element of
control in the performance of work duties indicia used by the Labor Arbiter to conclude that Locsin was a regular
employee were held inapplicable by the CA.
15
The CA noted the Labor Arbiters failure to address the fact that the
position of EVP/Treasurer is specifically enumerated as an "office" in the corporations by-laws.
16

Further, the CA pointed out Locsins failure to "state any circumstance by which NCLPI engaged his services as a
corporate officer that would make him an employee." The CA found, in this regard, that Locsins assumption and
retention as EVP/Treasurer was based on his election and subsequent re-elections from 1992 until 2005. Further, he
performed only those functions that were "specifically set forth in the By-Laws or required of him by the Board of
Directors.
17
"
With respect to the suit Locsin filed with the Labor Arbiter, the CA held that:
Private respondent, in belatedly filing this suit before the Labor Arbiter, questioned the legality of his "dismissal"
but in essence, he raises the issue of whether or not the Board of Directors had the authority to remove him from the
corporate office to which he was elected pursuant to the By-Laws of the petitioner corporation. Indeed, had private
respondent been an ordinary employee, an election conducted by the Board of Directors would not have been
necessary to remove him as Executive Vice-President/Treasurer. However, in an obvious attempt to preclude the
application of settled jurisprudence that corporate officers whose position is provided in the by-laws, their election,
removal or dismissal is subject to Section 5 of P.D. No. 902-A (now R.A. No. 8799), private respondent would even
claim in his Position Paper, that since his responsibilities were akin to that of the companys Executive Vice-
President/Treasurer, he was "hired under the pretext that he was being elected into said post.
18
[Emphasis
supplied.]
As a consequence, the CA concluded that Locsin does not have any recourse with the Labor Arbiter or the NLRC
since the removal of a corporate officer, whether elected or appointed, is an intra-corporate controversy over which
the NLRC has no jurisdiction.
19
Instead, according to the CA, Locsins complaint for "illegal dismissal" should have
been filed in the Regional Trial Court (RTC), pursuant to Rule 6 of the Interim Rules of Procedure Governing Intra-
Corporate Controversies.
20

Finally, the CA addressed Locsins invocation of Article 4 of the Labor Code. Dismissing the application of the
provision, the CA cited Dean Cesar Villanueva of the Ateneo School of Law, as follows:
x x x the non-coverage of corporate officers from the security of tenure clause under the Constitution is now well-
established principle by numerous decisions upholding such doctrine under the aegis of the 1987 Constitution in the
face of contemporary decisions of the same Supreme Court likewise confirming that security of tenure covers all
employees or workers including managerial employees.
21

THE PETITIONERS ARGUMENTS
Failing to obtain a reconsideration of the CAs decision, Locsin filed the present petition on January 28, 2009,
raising the following procedural and substantive issues:
(1) Whether the CA has original jurisdiction to review decision of the Labor Arbiter under Rule 65?
(2) Whether he is a regular employee of NCLPI under the definition of Article 280 of the Labor Code? and
(3) Whether Locsins position as Executive Vice-President/Treasurer makes him a corporate officer thereby
excluding him from the coverage of the Labor Code?
Procedurally, Locsin essentially submits that NCLPI wrongfully filed a petition for certiorari before the CA, as the
latters remedy is to proceed with the arbitration, and to appeal to the NLRC after the Labor Arbiter shall have ruled
on the merits of the case. Locsin cites, in this regard, Rule V, Section 6 of the Revised Rules of the National Labor
Relations Commission (NLRC Rules), which provides that a denial of a motion to dismiss by the Labor Arbiter is
not subject to an appeal. Locsin also argues that even if the Labor Arbiter committed grave abuse of discretion in
denying the NCLPI motion, a special civil action for certiorari, filed with the CA was not the appropriate remedy,
since this was a breach of the doctrine of exhaustion of administrative remedies.
Substantively, Locsin submits that he is a regular employee of NCLPI since - as he argued before the Labor Arbiter
and the CA - his relationship with the company meets the "four-fold test."
First, Locsin contends that NCLPI had the power to engage his services as EVP/Treasurer. Second, he received
regular wages from NCLPI, from which his SSS and Philhealth contributions, as well as his withholding taxes were
deducted. Third, NCLPI had the power to terminate his employment.
22
Lastly, Nissan had control over the manner
of the performance of his functions as EVP/Treasurer, as shown by the 13 years of faithful execution of his job,
which he carried out in accordance with the standards and expectations set by NCLPI.
23
Further, Locsin maintains
that even after his election as Chairman, he essentially performed the functions of EVP/Treasurer handling the
financial and administrative operations of the Corporation thus making him a regular employee.
24

Under these claimed facts, Locsin concludes that the Labor Arbiter and the NLRC not the RTC (as NCLPI posits)
has jurisdiction to decide the controversy. Parenthetically, Locsin clarifies that he does not dispute the validity of
his election as Chairman of the Board on January 1, 2005. Instead, he theorizes that he never lost his position as
EVP/Treasurer having continuously performed the functions appurtenant thereto.
25
Thus, he questions his
"unceremonious removal" as EVP/Treasurer during the August 5, 2005 special Board meeting.
THE RESPONDENTS ARGUMENTS
It its April 17, 2009 Comment,
26
Nissan prays for the denial of the petition for lack of merit. Nissan submits that the
CA correctly ruled that the Labor Arbiter does not have jurisdiction over Locsins complaint for illegal dismissal. In
support, Nissan maintains that Locsin is a corporate officer and not an employee. In addressing the procedural defect
Locsin raised, Nissan brushes the issue aside, stating that (1) this issue was belatedly raised in the Motion for
Reconsideration, and that (2) in any case, Rule VI, Section 2(1) of the NLRC does not apply since only appealable
decisions, resolutions and orders are covered under the rule.
THE COURTS RULING
We resolve to deny the petition for lack of merit.
At the outset, we stress that there are two (2) important considerations in the final determination of this case. On the
one hand, Locsin raises a procedural issue that, if proven correct, will require the Court to dismiss the instant
petition for using an improper remedy. On the other hand, there is the substantive issue that will be disregarded if a
strict implementation of the rules of procedure is upheld.
Prefatorily, we agree with Locsins submission that the NCLPI incorrectly elevated the Labor Arbiters denial of the
Motion to Dismiss to the CA. Locsin is correct in positing that the denial of a motion to dismiss is unappealable. As
a general rule, an aggrieved partys proper recourse to the denial is to file his position paper, interpose the grounds
relied upon in the motion to dismiss before the labor arbiter, and actively participate in the proceedings. Thereafter,
the labor arbiters decision can be appealed to the NLRC, not to the CA.
As a rule, we strictly adhere to the rules of procedure and do everything we can, to the point of penalizing violators,
to encourage respect for these rules. We take exception to this general rule, however, when a strict implementation
of these rules would cause substantial injustice to the parties.
We see it appropriate to apply the exception to this case for the reasons discussed below; hence, we are compelled to
go beyond procedure and rule on the merits of the case. In the context of this case, we see sufficient justification to
rule on the employer-employee relationship issue raised by NCLPI, even though the Labor Arbiters interlocutory
order was incorrectly brought to the CA under Rule 65.
The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss is not appealable because the
denial is merely an interlocutory order.
In Metro Drug v. Metro Drug Employees,
27
we definitively stated that the denial of a motion to dismiss by a labor
arbiter is not immediately appealable.
28

We similarly ruled in Texon Manufacturing v. Millena,
29
in Sime Darby Employees Association v. National Labor
Relations Commission
30
and in Westmont Pharmaceuticals v. Samaniego.
31
In Texon, we specifically said:
The Order of the Labor Arbiter denying petitioners motion to dismiss is interlocutory. It is well-settled that a denial
of a motion to dismiss a complaint is an interlocutory order and hence, cannot be appealed, until a final judgment on
the merits of the case is rendered. [Emphasis supplied.]
32

and indicated the appropriate recourse in Metro Drug, as follows:
33

x x x The NLRC rule proscribing appeal from a denial of a motion to dismiss is similar to the general rule observed
in civil procedure that an order denying a motion to dismiss is interlocutory and, hence, not appealable until final
judgment or order is rendered [1 Feria and Noche, Civil Procedure Annotated 453 (2001 ed.)]. The remedy of the
aggrieved party in case of denial of the motion to dismiss is to file an answer and interpose, as a defense or defenses,
the ground or grounds relied upon in the motion to dismiss, proceed to trial and, in case of adverse judgment, to
elevate the entire case by appeal in due course [Mendoza v. Court of Appeals, G.R. No. 81909, September 5, 1991,
201 SCRA 343]. In order to avail of the extraordinary writ of certiorari, it is incumbent upon petitioner to establish
that the denial of the motion to dismiss was tainted with grave abuse of discretion. [Macawiwili Gold Mining and
Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998, 297 SCRA 602]
In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of the Rules of Court, which specifically
enumerates interlocutory orders as one of the court actions that cannot be appealed. In the same rule, as amended by
A.M. No. 07-7-12-SC, the aggrieved party is allowed to file an appropriate special civil action under Rule 65. The
latter rule, however, also contains limitations for its application, clearly outlined in its Section 1 which provides:
Section 1. Petition for certiorari.
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require.
In the labor law setting, a plain, speedy and adequate remedy is still open to the aggrieved party when a labor arbiter
denies a motion to dismiss. This is Article 223 of Presidential Decree No. 442, as amended (Labor Code),
34
which
states:
ART. 223. APPEAL
Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any
or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; x x x [Emphasis
supplied.]
Pursuant to this Article, we held in Metro Drug (citing Air Services Cooperative, et al. v. Court of Appeals
35
) that
the NLRC is clothed with sufficient authority to correct any claimed "erroneous assumption of jurisdiction" by labor
arbiters:
In Air Services Cooperative, et al. v. The Court of Appeals, et al., a case where the jurisdiction of the labor arbiter
was put in issue and was assailed through a petition for certiorari, prohibition and annulment of judgment before a
regional trial court, this Court had the opportunity to expound on the nature of appeal as embodied in Article 223 of
the Labor Code, thus:
x x x Also, while the title of the Article 223 seems to provide only for the remedy of appeal as that term is
understood in procedural law and as distinguished from the office of certiorari, nonetheless, a closer reading thereof
reveals that it is not as limited as understood by the petitioners x x x.
Abuse of discretion is admittedly within the ambit of certiorari and its grant of review thereof to the NLRC indicates
the lawmakers intention to broaden the meaning of appeal as that term is used in the Code. For this reason,
petitioners cannot argue now that the NLRC is devoid of any corrective power to rectify a supposed erroneous
assumption of jurisdiction by the Labor Arbiter x x x. [Air Services Cooperative, et al. v. The Court of Appeals, et
al. G.R. No. 118693, 23 July 1998, 293 SCRA 101]
Since the legislature had clothed the NLRC with the appellate authority to correct a claimed "erroneous assumption
of jurisdiction" on the part of the labor arbiter a case of grave abuse of discretion - the remedy availed of by
petitioner in this case is patently erroneous as recourse in this case is lodged, under the law, with the NLRC.
In Metro Drug, as in the present case, the defect imputed through the NLCPI Motion to Dismiss is the labor arbiters
lack of jurisdiction since Locsin is alleged to be a corporate officer, not an employee. Parallelisms between the two
cases is undeniable, as they are similar on the following points: (1) in Metro Drug, as in this case, the Labor Arbiter
issued an Order denying the Motion to Dismiss by one of the parties; (2) the basis of the Motion to Dismiss is also
the alleged lack of jurisdiction by the Labor Arbiter to settle the dispute; and (3) dissatisfied with the Order of the
Labor Arbiter, the aggrieved party likewise elevated the case to the CA via Rule 65.
The similarities end there, however. Unlike in the present case, the CA denied the petition for certiorari and the
subsequent Motion for Reconsideration in Metro Drug; the CA correctly found that the proper appellate mechanism
was an appeal to the NLRC and not a petition for certiorari under Rule 65. In the present case, the CA took a
different position despite our clear ruling in Metro Drug, and allowed, not only the use of Rule 65, but also ruled on
the merits.
From this perspective, the CA clearly erred in the application of the procedural rules by disregarding the relevant
provisions of the NLRC Rules, as well as the requirements for a petition for certiorari under the Rules of Court. To
reiterate, the proper action of an aggrieved party faced with the labor arbiters denial of his motion to dismiss is to
submit his position paper and raise therein the supposed lack of jurisdiction. The aggrieved party cannot
immediately appeal the denial since it is an interlocutory order; the appropriate remedial recourse is the procedure
outlined in Article 223 of the Labor Code, not a petition for certiorari under Rule 65.
A strict implementation of the NLRC Rules and the Rules of Court would cause injustice to the parties because the
Labor Arbiter clearly has no jurisdiction over the present intra-corporate dispute.
Our ruling in Mejillano v. Lucillo
36
stands for the proposition that we should strictly apply the rules of procedure.
We said:
Time and again, we have ruled that procedural rules do not exist for the convenience of the litigants. Rules of
Procedure exist for a purpose, and to disregard such rules in the guise of liberal construction would be to defeat such
purpose. Procedural rules were established primarily to provide order to and enhance the efficiency of our judicial
system. [Emphasis supplied.]
An exception to this rule is our ruling in Lazaro v. Court of Appeals
37
where we held that the strict enforcement of
the rules of procedure may be relaxed in exceptionally meritorious cases:
x x x Procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in
prejudice to a party's substantive rights. Like all rules, they are required to be followed except only for the most
persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the
degree of his thoughtlessness in not complying with the procedure prescribed. The Court reiterates that rules of
procedure, especially those prescribing the time within which certain acts must be done, "have oft been held as
absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of business. x
x x The reason for rules of this nature is because the dispatch of business by courts would be impossible, and
intolerable delays would result, without rules governing practice x x x. Such rules are a necessary incident to the
proper, efficient and orderly discharge of judicial functions." Indeed, in no uncertain terms, the Court held that the
said rules may be relaxed only in exceptionally meritorious cases. [Emphasis supplied.]
Whether a case involves an exceptionally meritorious circumstance can be tested under the guidelines we
established in Sanchez v. Court of Appeals,
38
as follows:
Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most
mandatory character and an examination and review by the appellate court of the lower courts findings of fact, the
other elements that should be considered are the following: (a) the existence of special or compelling circumstances,
(b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the
other party will not be unjustly prejudiced thereby. [Emphasis supplied.]
Under these standards, we hold that exceptional circumstances exist in the present case to merit the relaxation of the
applicable rules of procedure.
Due to existing exceptional circumstances, the ruling on the merits that Locsin is an officer and not an employee of
Nissan must take precedence over procedural considerations.
We arrived at the conclusion that we should go beyond the procedural rules and immediately take a look at the
intrinsic merits of the case based on several considerations.
First, the parties have sufficiently ventilated their positions on the disputed employer-employee relationship and
have, in fact, submitted the matter for the CAs consideration.
Second, the CA correctly ruled that no employer-employee relationship exists between Locsin and Nissan.
Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board pursuant to
its By-laws.
39
As such, he was a corporate officer, not an employee. The CA reached this conclusion by relying on
the submitted facts and on Presidential Decree 902-A, which defines corporate officers as "those officers of a
corporation who are given that character either by the Corporation Code or by the corporations by-laws." Likewise,
Section 25 of Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation Code) provides that
corporate officers are the president, secretary, treasurer and such other officers as may be provided for in the by-
laws.
Third. Even as Executive Vice-President/Treasurer, Locsin already acted as a corporate officer because the position
of Executive Vice-President/Treasurer is provided for in Nissans By-Laws. Article IV, Section 4 of these By-Laws
specifically provides for this position, as follows:
ARTICLE IV
Officers
Section 1. Election and Appointment The Board of Directors at their first meeting, annually thereafter, shall elect
as officers of the Corporation a Chairman of the Board, a President, an Executive Vice-President/Treasurer, a Vice-
President/General Manager and a Corporate Secretary. The other Senior Operating Officers of the Corporation shall
be appointed by the Board upon the recommendation of the President.
x x x x
Section 4. Executive Vice-President/Treasurer The Executive Vice-President/Treasurer shall have such powers
and perform such duties as are prescribed by these By-Laws, and as may be required of him by the Board of
Directors. As the concurrent Treasurer of the Corporation, he shall have the charge of the funds, securities, receipts,
and disbursements of the Corporation. He shall deposit, or cause to be deposited, the credit of the Corporation in
such banks or trust companies, or with such banks of other depositories, as the Board of Directors may from time to
time designate. He shall tender to the President or to the Board of Directors whenever required an account of the
financial condition of the corporation and of all his transactions as Treasurer. As soon as practicable after the close
of each fiscal year, he shall make and submit to the Board of Directors a like report of such fiscal year. He shall keep
correct books of account of all the business and transactions of the Corporation.
In Okol v. Slimmers World International,
40
citing Tabang v. National Labor Relations Commission,
41
we held that
x x x an "office" is created by the charter of the corporation and the officer is elected by the directors or
stockholders. On the other hand, an "employee" usually occupies no office and generally is employed not by action
of the directors or stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee. [Emphasis supplied.]
In this case, Locsin was elected by the NCLPI Board, in accordance with the Amended By-Laws of the corporation.
The following factual determination by the CA is elucidating:
More important, private respondent failed to state any such "circumstance" by which the petitioner corporation
"engaged his services" as corporate officer that would make him an employee. In the first place, the Vice-
President/Treasurer was elected on an annual basis as provided in the By-Laws, and no duties and responsibilities
were stated by private respondent which he discharged while occupying said position other than those specifically
set forth in the By-Laws or required of him by the Board of Directors. The unrebutted fact remains that private
respondent held the position of Executive Vice-President/Treasurer of petitioner corporation, a position provided for
in the latters by-laws, by virtue of election by the Board of Directors, and has functioned as such Executive Vice-
President/Treasurer pursuant to the provisions of the said By-Laws. Private respondent knew very well that he was
simply not re-elected to the said position during the August 5, 2005 board meeting, but he had objected to the
election of a new set of officers held at the time upon the advice of his lawyer that he cannot be "terminated" or
replaced as Executive Vice-President/Treasurer as he had attained tenurial security.
42

We fully agree with this factual determination which we find to be sufficiently supported by evidence. We likewise
rule, based on law and established jurisprudence, that Locsin, at the time of his severance from NCLPI, was the
latters corporate officer.
a. The Question of Jurisdiction
Given Locsins status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to hear
the legality of the termination of his relationship with Nissan. As we also held in Okol, a corporate officers
dismissal from service is an intra-corporate dispute:
In a number of cases [Estrada v. National Labor Relations Commission, G.R. No. 106722, 4 October 1996, 262
SCRA 709; Lozon v. National Labor Relations Commission, 310 Phil. 1 (1995); Espino v. National Labor Relations
Commission, 310 Phil. 61 (1995); Fortune Cement Corporation v. National Labor Relations Commission, G.R. No.
79762, 24 January 1991, 193 SCRA 258], we have held that a corporate officers dismissal is always a corporate act,
or an intra-corporate controversy which arises between a stockholder and a corporation.
43
[Emphasis supplied.]
so that the RTC should exercise jurisdiction based on the following legal reasoning:
Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided that intra-corporate
disputes fall within the jurisdiction of the Securities and Exchange Commission (SEC):
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws
and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:
x x x x
c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations,
partnerships or associations.
Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000, transferred to regional
trial courts the SECs jurisdiction over all cases listed in Section 5 of PD 902-A:
5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court. [Emphasis supplied.]
b. Precedence of Substantive Merits;
Primacy of Element of Jurisdiction
Based on the above jurisdictional considerations, we would be forced to remand the case to the Labor Arbiter for
further proceedings if we were to dismiss the petition outright due to the wrongful use of Rule 65.
44
We cannot close
our eyes, however, to the factual and legal reality, established by evidence already on record, that Locsin is a
corporate officer whose termination of relationship is outside a labor arbiters jurisdiction to rule upon.
Under these circumstances, we have to give precedence to the merits of the case, and primacy to the element of
jurisdiction. Jurisdiction is the power to hear and rule on a case and is the threshold element that must exist before
any quasi-judicial officer can act. In the context of the present case, the Labor Arbiter does not have jurisdiction
over the termination dispute Locsin brought, and should not be allowed to continue to act on the case after the
absence of jurisdiction has become obvious, based on the records and the law. In more practical terms, a contrary
ruling will only cause substantial delay and inconvenience as well as unnecessary expenses, to the point of injustice,
to the parties. This conclusion, of course, does not go into the merits of termination of relationship and is without
prejudice to the filing of an intra-corporate dispute on this point before the appropriate RTC.
WHEREFORE, we DISMISS the petitioners petition for review on certiorari, and AFFIRM the Decision of the
Court of Appeals, in CA-G.R. SP No. 103720, promulgated on August 28, 2008, as well as its Resolution of
December 9, 2008, which reversed and set aside the March 10, 2008 Order of Labor Arbiter Concepcion in NLRC
NCR Case No. 00-06-06165-07. This Decision is without prejudice to petitioner Locsins available recourse for
relief through the appropriate remedy in the proper forum.
No pronouncement as to costs.
SO ORDERED.


















RENATO REAL, Petitioner,
vs.
SANGU PHILIPPINES, INC. and/ or KIICHI ABE, Respondents.
D E C I S I O N
DEL CASTILLO, J .:
The perennial question of whether a complaint for illegal dismissal is intra-corporate and thus beyond the
jurisdiction of the Labor Arbiter is the core issue up for consideration in this case.
This Petition for Review on Certiorari assails the Decision
1
dated June 28, 2005 of the Court of Appeals (CA) in
CA-G.R. SP. No. 86017 which dismissed the petition for certiorari filed before it.
Factual Antecedents
Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a corporation engaged in
the business of providing manpower for general services, like janitors, janitresses and other maintenance personnel,
to various clients. In 2001, petitioner, together with 29 others who were either janitors, janitresses, leadmen and
maintenance men, all employed by respondent corporation, filed their respective Complaints
2
for illegal dismissal
against the latter and respondent Kiichi Abe, the corporations Vice-President and General Manager. These
complaints were later on consolidated.
With regard to petitioner, he was removed from his position as Manager through Board Resolution 2001-03
3

adopted by respondent corporations Board of Directors. Petitioner complained that he was neither notified of the
Board Meeting during which said board resolution was passed nor formally charged with any infraction. He just
received from respondents a letter
4
dated March 26, 2001 stating that he has been terminated from service effective
March 25, 2001 for the following reasons: (1) continuous absences at his post at Ogino Philippines Inc. for several
months which was detrimental to the corporations operation; (2) loss of trust and confidence; and, (3) to cut down
operational expenses to reduce further losses being experienced by respondent corporation.
Respondents, on the other hand, refuted petitioners claim of illegal dismissal by alleging that after petitioner was
appointed Manager, he committed gross acts of misconduct detrimental to the company since 2000. According to
them, petitioner would almost always absent himself from work without informing the corporation of his
whereabouts and that he would come to the office only to collect his salaries. As he was almost always absent,
petitioner neglected to supervise the employees resulting in complaints from various clients about employees
performance. In one instance, petitioner together with a few others, while apparently drunk, went to the premises of
one of respondents clients, Epson Precision (Phils.) Inc., and engaged in a heated argument with the employees
therein. Because of this, respondent Abe allegedly received a complaint from Epsons Personnel Manager
concerning petitioners conduct. Respondents likewise averred that petitioner established a company engaged in the
same business as respondent corporations and even submitted proposals for janitorial services to two of the latters
clients. Because of all these, the Board of Directors of respondent corporation met on March 24, 2001 and adopted
Board Resolution No. 2001-03 removing petitioner as Manager. Petitioner was thereafter informed of his removal
through a letter dated March 26, 2001 which he, however, refused to receive.
Further, in what respondents believed to be an act of retaliation, petitioner allegedly encouraged the employees who
had been placed in the manpower pool to file a complaint for illegal dismissal against respondents. Worse, he later
incited those assigned in Epson Precision (Phils.) Inc., Ogino Philippines Corporation, Hitachi Cable Philippines
Inc. and Philippine TRC Inc. to stage a strike on April 10 to 16, 2001. Not satisfied, petitioner together with other
employees also barricaded the premises of respondent corporation. Such acts respondents posited constitute just
cause for petitioners dismissal and that same was validly effected.
Rulings of the Labor Arbiter and the National Labor Relations Commission
The Labor Arbiter in a Decision
5
dated June 5, 2003 declared petitioner and his co-complainants as having been
illegally dismissed and ordered respondents to reinstate complainants to their former positions without loss of
seniority rights and other privileges and to pay their full backwages from the time of their dismissal until actually
reinstated and furthermore, to pay them attorneys fees. The Labor Arbiter found no convincing proof of the causes
for which petitioner was terminated and noted that there was complete absence of due process in the manner of his
termination.
Respondents thus appealed to the National Labor Relations Commission (NLRC) and raised therein as one of the
issues the lack of jurisdiction of the Labor Arbiter over petitioners complaint. Respondents claimed that petitioner
is both a stockholder and a corporate officer of respondent corporation, hence, his action against respondents is an
intra-corporate controversy over which the Labor Arbiter has no jurisdiction.
The NLRC found such contention of respondents to be meritorious. Aside from petitioners own admission in the
pleadings that he is a stockholder and at the same time occupying a managerial position, the NLRC also gave weight
to the corporations General Information Sheet
6
(GIS) dated October 27, 1999 listing petitioner as one of its
stockholders, consequently his termination had to be effected through a board resolution. These, the NLRC opined,
clearly established petitioners status as a stockholder and as a corporate officer and hence, his action against
respondent corporation is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction. As to the
other complainants, the NLRC ruled that there was no dismissal. The NLRC however, modified the appealed
decision of the Labor Arbiter in a Decision
7
dated February 13, 2004, the dispositive portion of which reads:
WHEREFORE, all foregoing premises considered, the appealed Decision dated June 5, 2003 is hereby MODIFIED.
Accordingly, judgment is hereby rendered DISMISSING the complaint of Renato Real for lack of jurisdiction. As to
the rest of the complainants, they are hereby ordered to immediately report back to work but without the payment of
backwages.
All other claims against respondents including attorneys fees are DISMISSED for lack of merit.
SO ORDERED.
Still joined by his co-complainants, petitioner brought the case to the CA by way of petition for certiorari.
Ruling of the Court of Appeals
Before the CA, petitioner imputed upon the NLRC grave abuse of discretion amounting to lack or excess of
jurisdiction in declaring him a corporate officer and in holding that his action against respondents is an intra-
corporate controversy and thus beyond the jurisdiction of the Labor Arbiter.
While admitting that he is indeed a stockholder of respondent corporation, petitioner nevertheless disputed the
declaration of the NLRC that he is a corporate officer thereof. He posited that his being a stockholder and his being
a managerial employee do not ipso facto confer upon him the status of a corporate officer. To support this
contention, petitioner called the CAs attention to the same GIS relied upon by the NLRC when it declared him to be
a corporate officer. He pointed out that although said information sheet clearly indicates that he is a stockholder of
respondent corporation, he is not an officer thereof as shown by the entry "N/A" or "not applicable" opposite his
name in the officer column. Said column requires that the particular position be indicated if the person is an officer
and if not, the entry "N/A". Petitioner further argued that the fact that his dismissal was effected through a board
resolution does not likewise mean that he is a corporate officer. Otherwise, all that an employer has to do in order to
avoid compliance with the requisites of a valid dismissal under the Labor Code is to dismiss a managerial employee
through a board resolution. Moreover, he insisted that his action for illegal dismissal is not an intra-corporate
controversy as same stemmed from employee-employer relationship which is well within the jurisdiction of the
Labor Arbiter. This can be deduced and is bolstered by the last paragraph of the termination letter sent to him by
respondents stating that he is entitled to benefits under the Labor Code, to wit:
In this connection (his dismissal) you are entitled to separation pay and other benefits provided for under the Labor
Code of the Philippines.
8
(Emphasis supplied)
In contrast, respondents stood firm that the action against them is an intra-corporate controversy. It cited Tabang v.
National Labor Relations Commission
9
wherein this Court declared that "an intra-corporate controversy is one
which arises between a stockholder and the corporation;" that "[t]here is no distinction, qualification, nor any
exemption whatsoever;" and that it is "broad and covers all kinds of controversies between stockholders and
corporations." In view of this ruling and since petitioner is undisputedly a stockholder of the corporation,
respondents contended that the action instituted by petitioner against them is an intra-corporate controversy
cognizable only by the appropriate regional trial court. Hence, the NLRC correctly dismissed petitioners complaint
for lack of jurisdiction.
In the assailed Decision
10
dated June 28, 2005, the CA sided with respondents and affirmed the NLRCs finding that
aside from being a stockholder of respondent corporation, petitioner is also a corporate officer thereof and
consequently, his complaint is an intra-corporate controversy over which the labor arbiter has no jurisdiction. Said
court opined that if it was true that petitioner is a mere employee, the respondent corporation would not have called
a board meeting to pass a resolution for petitioners dismissal considering that it was very tedious for the Board of
Directors to convene and to adopt a resolution every time they decide to dismiss their managerial employees. To
support its finding, the CA likewise cited Tabang. As to petitioners co-complainants, the CA likewise affirmed the
NLRCS finding that they were never dismissed from the service. The dispositive portion of the CA Decision reads:
WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the assailed decision and resolution of the
public respondent National Labor Relations Commission in NLRC NCR CA No. 036128-03 NLRC SRAB-IV-05-
6618-01-B/05-6619-02-B/05-6620-02-B/10-6637-01-B/10-6833-01-B, STANDS.
SO ORDERED.
Now alone but still undeterred, petitioner elevated the case to us through this Petition for Review on Certiorari.
The Parties Arguments
Petitioner continues to insist that he is not a corporate officer. He argues that a corporate officer is one who holds an
elective position as provided in the Articles of Incorporation or one who is appointed to such other positions by the
Board of Directors as specifically authorized by its By-Laws. And, since he was neither elected nor is there any
showing that he was appointed by the Board of Directors to his position as Manager, petitioner maintains that he is
not a corporate officer contrary to the findings of the NLRC and the CA.
Petitioner likewise contends that his complaint for illegal dismissal against respondents is not an intra-corporate
controversy. He avers that for an action or suit between a stockholder and a corporation to be considered an intra-
corporate controversy, same must arise from intra-corporate relations, i.e., an action involving the status of a
stockholder as such. He believes that his action against the respondents does not arise from intra-corporate relations
but rather from employer-employee relations. This, according to him, was even impliedly recognized by respondents
as shown by the earlier quoted portion of the termination letter they sent to him.
For their part, respondents posit that what petitioner is essentially assailing before this Court is the finding of the
NLRC and the CA that he is a corporate officer of respondent corporation. To the respondents, the question of
whether petitioner is a corporate officer is a question of fact which, as held in a long line of jurisprudence, cannot be
the subject of review under this Petition for Review on Certiorari. At any rate, respondents insist that petitioner who
is undisputedly a stockholder of respondent corporation is likewise a corporate officer and that his action against
them is an intra-corporate dispute beyond the jurisdiction of the labor tribunals. To support this, they cited several
jurisprudence such as Pearson & George (S.E. Asia), Inc. v. National Labor Relations Commission,
11
Philippine
School of Business Administration v. Leano,
12
Fortune Cement Corporation v. National Labor Relations
Commission
13
and again, Tabang v. National Labor Relations Commission.
14

Moreover, in an attempt to demolish petitioners claim that the present controversy concerns employer-employee
relations, respondents enumerated the following facts and circumstances: (1) Petitioner was an incorporator,
stockholder and manager of respondent company; (2) As an incorporator, he was one of only seven incorporators of
respondent corporation and one of only four Filipino members of the Board of Directors; (3) As stockholder, he has
One Thousand (1,000) of the Ten Thousand Eight Hundred (10,800) common shares held by Filipino stockholders,
with a par-value of One Hundred Thousand Pesos (P100,000.00); (4) His appointment as manager was by virtue of
Section 1, Article IV of respondent corporations By-Laws; (5) As manager, he had direct management and
authority over all of respondent corporations skilled employees; (6) Petitioner has shown himself to be an
incompetent manager, unable to properly supervise the employees and even causing friction with the corporations
clients by engaging in unruly behavior while in clients premises; (7) As if his incompetence was not enough, in a
blatant and palpable act of disloyalty, he established another company engaged in the same line of business as
respondent corporation; (8) Because of these acts of incompetence and disloyalty, respondent corporation through a
Resolution adopted by its Board of Directors was finally constrained to remove petitioner as Manager and declare
his office vacant; (9) After his removal, petitioner urged the employees under him to stage an unlawful strike by
leading them to believe that they have been illegally dismissed from employment.
15
Apparently, respondents
intended to show from this enumeration that petitioners removal pertains to his relationship with respondent
corporation, that is, his utter failure to advance its interest and the prejudice caused by his acts of disloyalty. For this
reason, respondents see the action against them not as a case between an employer and an employee as what
petitioner alleges, but one by an officer and at same time a major stockholder seeking to be reinstated to his former
office against the corporation that declared his position vacant.
Finally, respondents state that the fact that petitioner is being given benefits under the Labor Code as stated in his
termination letter does not mean that they are recognizing the employer-employee relations between them. They
explain that the benefits provided under the Labor Code were merely made by respondent corporation as the basis in
determining petitioners compensation package and that same are merely part of the perquisites of petitioners office
as a director and manager. It does not and it cannot change the intra-corporate nature of the controversy. Hence,
respondents pray that this petition be dismissed for lack of merit.
Issues
From the foregoing and as earlier mentioned, the core issue to be resolved in this case is whether petitioners
complaint for illegal dismissal constitutes an intra-corporate controversy and thus, beyond the jurisdiction of the
Labor Arbiter.
Our Ruling
Two-tier test in determining the existence of intra-corporate controversy
Respondents strongly rely on this Courts pronouncement in the 1997 case of Tabang v. National Labor Relations
Commission, to wit:
[A]n intra-corporate controversy is one which arises between a stockholder and the corporation. There is no
distinction, qualification nor any exemption whatsoever. The provision is broad and covers all kinds of controversies
between stockholders and corporations.
16

In view of this, respondents contend that even if petitioner challenges his being a corporate officer, the present case
still constitutes an intra-corporate controversy as petitioner is undisputedly a stockholder and a director of
respondent corporation.
It is worthy to note, however, that before the promulgation of the Tabang case, the Court provided in Mainland
Construction Co., Inc. v. Movilla
17
a "better policy" in determining which between the Securities and Exchange
Commission (SEC) and the Labor Arbiter has jurisdiction over termination disputes,
18
or similarly, whether they are
intra-corporate or not, viz:
The fact that the parties involved in the controversy are all stockholders or that the parties involved are the
stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of the
SEC (now the Regional Trial Court
19
). The better policy to be followed in determining jurisdiction over a case
should be to consider concurrent factors such as the status or relationship of the parties or the nature of the
question that is subject of their controversy. In the absence of any one of these factors, the SEC will not have
jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its
stockholders would involve such corporate matters as only SEC (now the Regional Trial Court
20
) can resolve in the
exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours)
And, while Tabang was promulgated later than Mainland Construction Co., Inc., the "better policy" enunciated in
the latter appears to have developed into a standard approach in classifying what constitutes an intra-corporate
controversy. This is explained lengthily in Reyes v. Regional Trial Court of Makati, Br. 142,
21
to wit:
Intra-Corporate Controversy
A review of relevant jurisprudence shows a development in the Courts approach in classifying what constitutes an
intra-corporate controversy. Initially, the main consideration in determining whether a dispute constitutes an intra-
corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among
the parties. The types of relationships embraced under Section 5(b) x x x were as follows:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or license
to operate is concerned; and
d) among the stockholders, partners or associates themselves.
The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC (now the
RTC), regardless of the subject matter of the dispute. This came to be known as the relationship test.
However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the Court introduced the
nature of the controversy test. We declared in this case that it is not the mere existence of an intra-corporate
relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the
regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or
stockholders. We saw that there is no legal sense in disregarding or minimizing the value of the nature of the
transactions which gives rise to the dispute.
Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the
existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative
rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the
corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be
conflict even if the relationship does not exist, then no intra-corporate controversy exists.
The Court then combined the two tests and declared that jurisdiction should be determined by considering not only
the status or relationship of the parties, but also the nature of the question under controversy. This two-tier test was
adopted in the recent case of Speed Distribution Inc. v. Court of Appeals:
To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the
branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur:
(a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy.
The first element requires that the controversy must arise out of intra-corporate or partnership relations between any
or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or
associates, between any or all of them and the corporation, partnership or association of which they are stockholders,
members or associates, respectively; and between such corporation, partnership, or association and the State insofar
as it concerns the individual franchises. The second element requires that the dispute among the parties be
intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that
are purely civil in character, necessarily, the case does not involve an intra-corporate controversy. [Citations
omitted.]
Guided by this recent jurisprudence, we thus find no merit in respondents contention that the fact alone that
petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-
corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as
intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as
to consider them as intra-corporate controversies.
What then is the nature of petitioners Complaint for Illegal Dismissal? Is it intra-corporate and thus beyond the
jurisdiction of the Labor Arbiter? We shall answer this question by using the standards set forth in the Reyes case.
No intra-corporate relationship between the parties
As earlier stated, petitioners status as a stockholder and director of respondent corporation is not disputed. What the
parties disagree on is the finding of the NLRC and the CA that petitioner is a corporate officer. An examination of
the complaint for illegal dismissal, however, reveals that the root of the controversy is petitioners dismissal as
Manager of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is
involved in this case not in his capacity as a stockholder or director, but as an alleged corporate officer. In applying
the relationship test, therefore, it is necessary to determine if petitioner is a corporate officer of respondent
corporation so as to establish the intra-corporate relationship between the parties. And albeit respondents claim that
the determination of whether petitioner is a corporate officer is a question of fact which this Court cannot pass upon
in this petition for review on certiorari, we shall nonetheless proceed to consider the same because such question is
not the main issue to be resolved in this case but is merely collateral to the core issue earlier mentioned.
Petitioner negates his status as a corporate officer by pointing out that although he was removed as Manager through
a board resolution, he was never elected to said position nor was he appointed thereto by the Board of Directors.
While the By-Laws of respondent corporation provides that the Board may from time to time appoint such officers
as it may deem necessary or proper, he avers that respondents failed to present any board resolution that he was
appointed pursuant to said By-Laws. He instead alleges that he was hired as Manager of respondent corporation
solely by respondent Abe. For these reasons, petitioner claims to be a mere employee of respondent corporation
rather than as a corporate officer.
We find merit in petitioners contention.
"Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who are
given that character by the Corporation Code or by the corporations by-laws. There are three specific officers
whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the
treasurer. The number of officers is not limited to these three. A corporation may have such other officers as may be
provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The
number of corporate officers is thus limited by law and by the corporations by-laws."
22

Respondents claim that petitioner was appointed Manager by virtue of Section 1, Article IV of respondent
corporations By-Laws which provides:
ARTICLE IV
OFFICER
Section 1. Election/Appointment Immediately after their election, the Board of Directors shall formally organize
by electing the President, Vice-President, the Secretary at said meeting.
The Board, may from time to time, appoint such other officers as it may determine to be necessary or proper. Any
two (2) or more positions may be held concurrently by the same person, except that no one shall act as President and
Treasurer or Secretary at the same time.
x x x x
23
(Emphasis ours)
We have however examined the records of this case and we find nothing to prove that petitioners appointment was
made pursuant to the above-quoted provision of respondent corporations By-Laws. No copy of board resolution
appointing petitioner as Manager or any other document showing that he was appointed to said position by action of
the board was submitted by respondents. What we found instead were mere allegations of respondents in their
various pleadings
24
that petitioner was appointed as Manager of respondent corporation and nothing more. "The
Court has stressed time and again that allegations must be proven by sufficient evidence because mere allegation is
definitely not evidence."
25

It also does not escape our attention that respondents made the following conflicting allegations in their
Memorandum on Appeal
26
filed before the NLRC which cast doubt on petitioners status as a corporate officer, to
wit:
x x x x
24. Complainant-appellee Renato Real was appointed as the manager of respondent-appellant Sangu on November
6, 1998. Priorly [sic], he was working at Atlas Ltd. Co. at Mito-shi, Ibaraki-ken Japan. He was staying in Japan as an
illegal alien for the past eleven (11) years. He had a problem with his family here in the Philippines which prompted
him to surrender himself to Japans Bureau of Immigration and was deported back to the Philippines. His former
employer, Mr. Tsutomo Nogami requested Mr. Masahiko Shibata, one of respondent-appellant Sangus Board of
Directors, if complainant-appellee Renato Real could work as one of its employees here in the Philippines because
he had been blacklisted at Japans Immigration Office and could no longer go back to Japan. And so it was arranged
that he would serve as respondent-appellant Sangus manager, receiving a salary of P25,000.00. As such, he was
tasked to oversee the operations of the company. x x x (Emphasis ours)
x x x x
As earlier stated, complainant-appellee Renato Real was hired as the manager of respondent-appellant Sangu. As
such, his position was reposed with full trust and confidence. x x x
While respondents repeatedly claim that petitioner was appointed as Manager pursuant to the corporations By-
Laws, the above-quoted inconsistencies in their allegations as to how petitioner was placed in said position, coupled
by the fact that they failed to produce any documentary evidence to prove that petitioner was appointed thereto by
action or with approval of the board, only leads this Court to believe otherwise. It has been consistently held that
"[a]n office is created by the charter of the corporation and the officer is elected (or appointed) by the directors or
stockholders."
27
Clearly here, respondents failed to prove that petitioner was appointed by the board of directors.
Thus, we cannot subscribe to their claim that petitioner is a corporate officer. Having said this, we find that there is
no intra-corporate relationship between the parties insofar as petitioners complaint for illegal dismissal is concerned
and that same does not satisfy the relationship test.
Present controversy does not relate to intra-corporate dispute
We now go to the nature of controversy test. As earlier stated, respondents terminated the services of petitioner for
the following reasons: (1) his continuous absences at his post at Ogino Philippines, Inc; (2) respondents loss of trust
and confidence on petitioner; and, (3) to cut down operational expenses to reduce further losses being experienced
by the corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement, backwages,
moral damages and attorneys fees. From these, it is not difficult to see that the reasons given by respondents for
dismissing petitioner have something to do with his being a Manager of respondent corporation and nothing with his
being a director or stockholder. For one, petitioners continuous absences in his post in Ogino relates to his
performance as Manager. Second, respondents loss of trust and confidence in petitioner stemmed from his alleged
acts of establishing a company engaged in the same line of business as respondent corporations and submitting
proposals to the latters clients while he was still serving as its Manager. While we note that respondents also claim
these acts as constituting acts of disloyalty of petitioner as director and stockholder, we, however, think that same is
a mere afterthought on their part to make it appear that the present case involves an element of intra-corporate
controversy. This is because before the Labor Arbiter, respondents did not see such acts to be disloyal acts of a
director and stockholder but rather, as constituting willful breach of the trust reposed upon petitioner as Manager.
28

It was only after respondents invoked the Labor Arbiters lack of jurisdiction over petitioners complaint in the
Supplemental Memorandum of Appeal
29
filed before the NLRC that respondents started considering said acts as
such. Third, in saying that they were dismissing petitioner to cut operational expenses, respondents actually want to
save on the salaries and other remunerations being given to petitioner as its Manager. Thus, when petitioner sought
for reinstatement, he wanted to recover his position as Manager, a position which we have, however, earlier declared
to be not a corporate position. He is not trying to recover a seat in the board of directors or to any appointive or
elective corporate position which has been declared vacant by the board. Certainly, what we have here is a case of
termination of employment which is a labor controversy and not an intra-corporate dispute. In sum, we hold that
petitioners complaint likewise does not satisfy the nature of controversy test.
With the elements of intra-corporate controversy being absent in this case, we thus hold that petitioners complaint
for illegal dismissal against respondents is not intra-corporate. Rather, it is a termination dispute and, consequently,
falls under the jurisdiction of the Labor Arbiter pursuant to Section 217
30
of the Labor Code.
We take note of the cases cited by respondents and find them inapplicable to the case at bar. Fortune Cement
Corporation v. National Labor Relations Commission
31
involves a member of the board of directors and at the same
time a corporate officer who claims he was illegally dismissed after he was stripped of his corporate position of
Executive Vice-President because of loss of trust and confidence. On the other hand, Philippine School of Business
Administration v. Leano
32
and Pearson & George v. National Labor Relations Commission
33
both concern a
complaint for illegal dismissal by corporate officers who were not re-elected to their respective corporate positions.
The Court declared all these cases as involving intra-corporate controversies and thus affirmed the jurisdiction of the
SEC (now the RTC)
34
over them precisely because they all relate to corporate officers and their removal or non-
reelection to their respective corporate positions. Said cases are by no means similar to the present case because as
discussed earlier, petitioner here is not a corporate officer.
With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which dismissed petitioners
complaint for lack of jurisdiction. In cases such as this, the Court normally remands the case to the NLRC and
directs it to properly dispose of the case on the merits. "However, when there is enough basis on which a proper
evaluation of the merits of petitioners case may be had, the Court may dispense with the time-consuming procedure
of remand in order to prevent further delays in the disposition of the case."
35
"It is already an accepted rule of
procedure for us to strive to settle the entire controversy in a single proceeding, leaving no root or branch to bear the
seeds of litigation. If, based on the records, the pleadings, and other evidence, the dispute can be resolved by us, we
will do so to serve the ends of justice instead of remanding the case to the lower court for further proceedings."
36
We
have gone over the records before us and we are convinced that we can now altogether resolve the issue of the
validity of petitioners dismissal and hence, we shall proceed to do so.
Petitioners dismissal not in accordance with law
"In an illegal dismissal case, the onus probandi rests on the employer to prove that [the] dismissal of an employee is
for a valid cause."
37
Here, as correctly observed by the Labor Arbiter, respondents failed to produce any convincing
proof to support the grounds for which they terminated petitioner. Respondents contend that petitioner has been
absent for several months, yet they failed to present any proof that petitioner was indeed absent for such a long time.
Also, the fact that petitioner was still able to collect his salaries after his alleged absences casts doubts on the
truthfulness of such charge. Respondents likewise allege that petitioner engaged in a heated argument with the
employees of Epson, one of respondents clients. But just like in the charge of absenteeism, there is no showing that
an investigation on the matter was done and that disciplinary action was imposed upon petitioner. At any rate, we
have reviewed the records of this case and we agree with the Labor Arbiter that under the circumstances, said
charges are not sufficient bases for petitioners termination. As to the charge of breach of trust allegedly committed
by petitioner when he established a new company engaged in the same line of business as respondent corporations
and submitted proposals to two of the latters clients while he was still a Manager, we again observe that these are
mere allegations without sufficient proof. To reiterate, allegations must be proven by sufficient evidence because
mere allegation is definitely not evidence.
38

Moreover, petitioners dismissal was effected without due process of law.lawphi1 "The twin requirements of notice
and hearing constitute the essential elements of due process. The law requires the employer to furnish the employee
sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a
written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to
afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a
subsequent notice informing the employee of the employers decision to dismiss him. This procedure is mandatory
and its absence taints the dismissal with illegality."
39
Since in this case, petitioners dismissal was effected through a
board resolution and all that petitioner received was a letter informing him of the boards decision to terminate him,
the abovementioned procedure was clearly not complied with. All told, we agree with the findings of the Labor
Arbiter that petitioner has been illegally dismissed. And, as an illegally dismissed employee is entitled to the two
reliefs of backwages and reinstatement,
40
we affirm the Labor Arbiters judgment ordering petitioners reinstatement
to his former position without loss of seniority rights and other privileges and awarding backwages from the time of
his dismissal until actually reinstated. Considering that petitioner has to secure the services of counsel to protect his
interest and necessarily has to incur expenses, we likewise affirm the award of attorneys fees which is equivalent to
10% of the total backwages that respondents must pay petitioner in accordance with this Decision.
WHEREFORE, the petition is hereby GRANTED. The assailed June 28, 2005 Decision of the Court of Appeals
insofar as it affirmed the National Labor Relations Commissions dismissal of petitioners complaint for lack of
jurisdiction, is hereby REVERSED and SET ASIDE. The June 5, 2003 Decision of the Labor Arbiter with respect to
petitioner Renato Real is AFFIRMED and this case is ordered REMANDED to the National Labor Relations
Commission for the computation of petitioners backwages and attorneys fees in accordance with this Decision.
SO ORDERED.










G.R. No. 92598 May 20, 1994
PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and BENJAMIN C. YBANEZ, petitioners,
vs.
THE COURT OF APPEALS, ET AL., respondents.
Rufino L. Remoreras for petitioners.
Danilo L. Pilapil for private respondents.
PUNO, J .:
This is an appeal by certiorari from the Decision of the Court of Appeals,
1
dated November 16, 1989, denying due
course to and dismissing the petition in CA-G.R. SP NO. 18017.
2

The case at bench finds its roots in the Decision of the Department of Labor and Employment (Region VII),
ordering Inductocast Cebu, a partnership based in Mandaue City, to pay its former employees a total of
P232,908.00. As a consequence of the judgment, the labor department's regional sheriff levied the buildings and
improvements standing on Lot 109, Plan 11-5121-Amd., at Tipolo, Mandaue City. The levied properties (hereinafter
referred to as the "Tipolo properties") were subsequently sold at public auction to said employees.
On May 25, 1988, petitioners filed with the RTC of Cebu City, 7th Judicial Branch, a Complaint
3
which sought the
lifting of the levy over, and annulment of the sale of, the Tipolo properties. The Complaint was docketed as Civil
Case No. Ceb-6917, and raffled to Branch 8 of the trial court. Petitioners therein alleged that: they are the owners of
the Lot 109; they entered into a lease agreement with Inductocast Cebu over Lot 109; the lease contract provided
that, except for machineries and equipment, all improvements introduced in the leased premises shall automatically
be owned by the Lessor (petitioners) upon the expiration/termination of the contract;
4
the lease agreement was
terminated by petitioners in November, 1980 due to non-payment of rentals by Inductocast Cebu;
5
thereafter,
petitioners took actual possession of and occupied the Tipolo properties. Petitioners likewise alleged in their
Complaint that they became aware of the labor dispute involving Inductocast only after the impugned public auction
sale.
6

Atty. Danilo Pilapil, claiming to be the John Doe named in the Complaint, filed a motion to dismiss on the ground
that the trial court had no jurisdiction over the case. The buyers of the Tipolo properties, as intervenors, also filed a
motion to dismiss on the same ground. Both motions, which were opposed by petitioners, were denied.
The intervenors, however, moved for reconsideration of the denial. In an Order dated April 18, 1989, the trial court
granted the motion and dismissed Civil Case No. Ceb-6917. It held that the civil case "is actually in the nature of a
quashal of the levy and the certificate of sale, a case arising out of a dispute that was instituted by the previous
employees of Inductocast before the Department of Labor and Employment, Region 7."
7
Citing Pucan vs. Bengzon,
155 SCRA 692 (1987), it held it had no jurisdiction over the case since the levy and sale "are connected with the
case within the exclusive jurisdiction of the Department of Labor and Employment."
8

Petitioners questioned the dismissal of their Complaint to the respondent Court of Appeals, through a petition for
certiorari and preliminary injunction.
9
The appellate court, in its impugned Decision, denied the petition as it held:
To Our minds, the issue on what forum the case must be tried or heard is a settled one. The
Department of Labor is the agency upon which devolves the jurisdiction over disputes emanating
from and in relation with labor controversies to the exclusion of the regular courts.
The issue in the case at bar concerns the levy of a property in pursuance to a writ of execution,
arising out of labor disputes. There can be no doubt that jurisdiction pertains to the Department of
Labor.
xxx xxx xxx
In the light of the factual antecedents and incidents that transpired in the hearing of this case at
bar, the (trial court) correctly ruled that indeed the Department of Labor has jurisdiction over the
case. Consequently, WE see no abuse of discretion let alone a grave one, amounting to lack or in
excess of its jurisdiction correctible with a writ of certiorari.
Indeed, the issue of granting or denying a motion to dismiss is addressed to the sound discretion of
the court, and in the absence of a capricious and whimsical exercise of power, certiorari will not
lie.
Thus, this appeal where petitioners contend:
THE RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT
THE DEPARTMENT OF LABOR HAS JURISDICTION ON THE SUBJECT
MATTER AND NATURE OF THE CASE AS AGAINST THE CIVIL
COURT.
We find merit in the appeal. Firstly, respondent court erred in holding that the trial court does not have jurisdiction
over the case filed by petitioners. It is at once evident that the Civil Case No. Ceb-6917 is not a labor case. No
employer-employee relationship exists between petitioners and the other parties, and no issue is involved which may
be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement. Neither can
we characterize petitioner's action before the trial court as arising out of a labor dispute. It was not brought to
reverse or modify the judgment of the Department of Labor and Employment (DOLE). Neither did it question the
validity of, or pray for, the quashal of the writ of execution against Inductocast.
What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the Tipolo properties. Clearly, it is
the RTC and not the labor department which can take cognizance of the case, as provided by B.P. Blg. 129 ("An Act
Reorganizing the Judiciary, Appropriating Funds Therefor, and For Other Purposes"), thus:
Sec. 19. Jurisdiction in civil case. Regional Trial Courts shall exercise exclusive original
jurisdiction:
xxx xxx xxx
(2) In all civil actions which involve the title to, or possession of real property, or any interest
therein, except actions for forcible entry into and unlawful detainer of lands or buildings, original
jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;
xxx xxx xxx
The action taken by petitioners before the RTC asserting their ownership over the levied properties is mandated by
Section 17, Rule 39 of the Revised Rules of Court. Time and again, we have held that:
Under Section 17, Rule 39, a third person who claims property levied upon on execution may
vindicate such claim by action. . . . The right of a person who claims to be the owner of property
levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may
file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor
of the sheriff to answer for any damages that may be suffered by the third-party claimant. By
"action", as stated in the Rule, what is meant is a separate and independent action.
10

Secondly, it is incorrect to argue that the trial court cannot take cognizance of Civil Case No. Ceb-6917 without
interfering with the writ of attachment and writ of execution of a co-equal body. It is settled that the levy and sale of
property by virtue of a writ of attachment is lawful only when the levied property indubitably belongs to the
defendant. If property other than those of the defendant is attached and sold by the sheriff, he acts beyond the limits
of his and the court's authority.
11
In this regard, we held in the case of Uy, Jr. vs. Court of Appeals, 191 SCRA 275
(1991) that:
The main issue in this case is whether or not properties levied and seized by virtue of a writ of
attachment and later by a writ of execution, were under custodia legis and therefore not subject to
the jurisdiction of another co-equal court where a third party claimant claimed ownership of the
same properties.
The issue has long been laid to rest in the case of Manila Herald Publishing Co., Inc. v. Ramos (88
Phil. 94 [1951]) where the Court ruled that while it is true that property in custody of the law may
not be interfered with, without the permission of the proper court, this rule is confined to cases
where the property belongs to the defendant or one in which the defendant has proprietary
interests. But when the Sheriff, acting beyond the bounds of his office seizes a stranger's property,
the rule does not apply and interference with his custody is not interference with another court's
order of attachment.
Also, in the more recent case of Santos vs. Bayhon, 199 SCRA 525 (1991), we stated, viz.:
The general rule that no court has the power to interfere by injunction with the judgments or
decrees of another court with concurrent or coordinate jurisdiction possessing equal power to grant
injunctive relief, applies only when no third-party claimant is involved. . . . When a third party, or
stranger to the action, asserts a claim over the property levied upon, the claimant may vindicate his
claim by an independent action in the proper civil court which may stop the execution of the
judgment on property not belonging to the judgment debtor (Citations omitted.)
Finally, it must be noted that the Pucan case relied upon by respondent court is inapplicable to the case at bench
which involves a third-party claim over property levied on execution. In Pucan, we enjoined the Regional Trial
Court from acting on the petition for damages and prohibition against the enforcement of the writ of execution
issued by the NCR director of the then Ministry of Labor and Employment in a labor case for the following reason:
A perusal of the petition for damages and prohibition filed by Saulog Transit, Inc., in the lower
court reveals that basically, what was being questioned was the legality or propriety of the alias
writ of execution dated March 1, 1985, as well as the acts performed by the Ministry officials in
implementing the same. In other words, the petition was actually in the nature of a motion to
quash the writ; and with respect to the acts of the Ministry officials, a case growing out of a labor
dispute, as the acts complained of, were perpetrated during the execution of a decision of the then
Minister of Labor and Employment. However characterized, jurisdiction over the petition pertains
to the Labor Ministry, now Department and not the regular courts. This conclusion is evident, not
only from the provisions of Article 224(b) of the Labor Code, but also of
Article 218, as amended by Batas Pambansa Blg. 227 in connection with Article 255 of the same
Code.
xxx xxx xxx
Apparently, Saulog Transit, Inc. was misled by its own prayer for actual, moral and exemplary
damages. It believed that such additional cause of action could clothe the petition with the mantle
of a regular action cognizable by the regular courts. It was, of course, mistaken for the fact
remains that the acts complained of are mere incidents of a labor dispute. Such prayer therefore
did not alter the complexion of the case as one arising from a labor dispute, but was subsumed by
the nature of the main case, over which the regular courts had no jurisdiction, much less the power
to issue a temporary or permanent injunction or restraining order. . . .
12

In fine, we prohibited the action before the trial court in Pucan because it attacked the regularity of the issuance of
the alias writ of execution in the labor case, which is but an incident of the labor dispute. This is not so in the case at
bench where the civil case filed by petitioners does not even collaterally attack the validity of the DOLE's writ of
attachment. On the contrary, petitioners in Civil Case No. Ceb-6917 pray for the trial court's ruling that the DOLE's
judgment could not be validly executed on the Tipolo properties, which allegedly do not belong to Inductocast.
IN VIEW WHEREOF, the petition for review is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 18017, dated November 16, 1989, is REVERSED and SET ASIDE. The Regional Trial Court of Cebu City,
Branch 8 is ordered to try Civil Case Ceb-6917 on its merit. No costs.
SO ORDERED.


















GEORG GROTJAHN GMBH & CO., petitioner,
vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br. 59; ROMANA R.
LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents.
A.M. Sison, Jr. & Associates for petitioner.
Pedro L. Laso for private respondents.
PUNO, J .:
Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent judge for lack of
jurisdiction and lack of capacity to sue.
The records show that petitioner is a multinational company organized and existing under the laws of the Federal
Republic of Germany. On July 6, 1983, petitioner filed an application, dated July 2, 1983,
1
with the Securities and
Exchange Commission (SEC) for the establishment of a regional or area headquarters in the Philippines, pursuant to
Presidential Decree No. 218. The application was approved by the Board of Investments (BOI) on September 6,
1983. Consequently, on September 20, 1983, the SEC issued a Certificate of Registration and License to petitioner.
2

Private respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983 to mid-1992. On
March 12, 1992, she secured a loan of twenty-five thousand pesos (P25,000.00) from petitioner. On March 26 and
June 10, 1992, she made additional cash advances in the sum of ten thousand pesos (P10,000.00). Of the total
amount, twelve thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained unpaid.
Despite demand, private respondent Romana failed to settle her obligation with petitioner.
On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch of the National Labor
Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal and non-payment of
commissions against petitioner. On August 18, 1992, petitioner in turn filed against private respondent a Complaint
for damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the NLRC Arbitration
Branch (Manila).
3
The two cases were consolidated.
On September 2, 1992, petitioner filed another Complaint for collection of sum of money against private
respondents spouses Romana and Teofilo Lanchinebre which was docketed as Civil Case No. 92-2486 and raffled to
the sala of respondent judge. Instead of filing their Answer, private respondents moved to dismiss the Complaint.
This was opposed by petitioner.
On December 21, 1992, respondent judge issued the first impugned Order, granting the motion to dismiss. She held,
viz:
Jurisdiction over the subject matter or nature of the action is conferred by law and not subject to
the whims and caprices of the parties.
Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of
the case by the parties for decision, the following cases involving all workers, whether agricultural
or non-agricultural:
(4) claims for actual, moral, exemplary and other forms of damages arising from an employer-
employee relations.
xxx xxx xxx
(6) Except claims for employees compensation, social security, medicare and maternity benefits,
all other claims arising from employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether or not accompanied with a claim for reinstatement.
In its complaint, the plaintiff (petitioner herein) seeks to recover alleged cash advances made by
defendant (private respondent herein) Romana Lanchinebre while the latter was in the employ of
the former. Obviously the said cash advances were made pursuant to the employer-employee
relationship between the (petitioner) and the said (private respondent) and as such, within the
original and exclusive jurisdiction of the National Labor Relations Commission.
Again, it is not disputed that the Certificate of Registration and License issued to the (petitioner)
by the Securities and Exchange Commission was merely "for the establishment of a regional or
area headquarters in the Philippines, pursuant to Presidential Decree No. 218 and its implementing
rules and regulations." It does not include a license to do business in the Philippines. There is no
allegation in the complaint moreover that (petitioner) is suing under an isolated transaction. It
must be considered that under Section 4, Rule 8 of the Revised Rules of Court, facts showing the
capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative
capacity or the legal existence of an organized association of persons that is made a party must be
averred. There is no averment in the complaint regarding (petitioner's) capacity to sue or be sued.
Finally, (petitioner's) claim being clearly incidental to the occupation or exercise of (respondent)
Romana Lanchinebre's profession, (respondent) husband should not be joined as party defendant.
4

On March 8, 1993, the respondent judge issued a minute Order denying petitioner's Motion for Reconsideration.
Petitioner now raises the following assignments of errors:
I
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE REGULAR COURTS
HAVE NO JURISDICTION OVER DISPUTES BETWEEN AN EMPLOYER AND AN
EMPLOYEE INVOLVING THE APPLICATION PURELY OF THE GENERAL CIVIL LAW.
II
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT PETITIONER HAS NO
CAPACITY TO SUE AND BE SUED IN THE PHILIPPINES DESPITE THE FACT THAT
PETITIONER IS DULY LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION
TO SET UP AND OPERATE A REGIONAL OR AREA HEADQUARTERS IN THE
COUNTRY AND THAT IT HAS CONTINUOUSLY OPERATED AS SUCH FOR THE LAST
NINE (9) YEARS.
III
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE ERRONEOUS
INCLUSION OF THE HUSBAND IN A COMPLAINT IS A FATAL DEFECT THAT SHALL
RESULT IN THE OUTRIGHT DISMISSAL OF THE COMPLAINT.
IV
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE HUSBAND IS NOT
REQUIRED BY THE RULES TO BE JOINED AS A DEFENDANT IN A COMPLAINT
AGAINST THE WIFE.
There is merit to the petition.
Firstly, the trial court should not have held itself without jurisdiction over Civil Case No. 92-2486. It is true that the
loan and cash advances sought to be recovered by petitioner were contracted by private respondent Romana
Lanchinebre while she was still in the employ of petitioner. Nonetheless, it does not follow that Article 217 of the
Labor Code covers their relationship.
Not every dispute between an employer and employee involves matters that only labor arbiters and the NLRC can
resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the
NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship
which can only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining
agreement. In this regard, we held in the earlier case of Molave Motor Sales, Inc. vs. Laron, 129 SCRA 485 (1984),
viz:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of
Article 217 of the Labor Code had jurisdiction over "all other cases arising from employer-
employee relation, unless expressly excluded by this Code." Even then, the principal followed by
this Court was that, although a controversy is between an employer and an employee, the Labor
Arbiters have no jurisdiction if the Labor Code is not involved. In Medina vs. Castro-Bartolome,
116 SCRA 597, 604 in negating jurisdiction of the Labor Arbiter, although the parties were an
employer and two employees, Mr. Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor Code has any
relevance to the reliefs sought by plaintiffs. For if the Labor Code has no
relevance, any discussion concerning the statutes amending it and whether or not
they have retroactive effect is unnecessary.
xxx xxx xxx
And in Singapore Airlines Limited vs. Pao, 122 SCRA 671, 677, the following was said:
Stated differently, petitioner seeks protection under the civil laws and claims no
benefits under the Labor Code. The primary relief sought is for liquidated
damages for breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation pay.
The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
xxx xxx xxx
In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the doctrines set forth in the Medina,
Singapore Airlines, and Molave Motors cases, thus:
. . . The important principle that runs through these three (3) cases is that where the claim to the
principal relief sought is to be resolved not by reference to the Labor Code or other labor relations
statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such
situations, resolutions of the dispute requires expertise, not in labor management relations nor in
wage structures and other terms and conditions of employment, but rather in the application of the
general civil law. Clearly, such claims fall outside the area of competence or expertise ordinarily
ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such
claims to these agencies disappears.
Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as creditor, against private
respondent Romana Lanchinebre, as debtor. The fact that they were employer and employee at the time of the
transaction does not negate the civil jurisdiction of the trial court. The case does not involve adjudication of a labor
dispute but recovery of a sum of money based on our civil laws on obligation and contract.
Secondly, the trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is clear
that petitioner is a foreign corporation doing business in the Philippines. Petitioner is covered by the Omnibus
Investment Code of 1987. Said law defines "doing business," as follows:
. . . shall include soliciting orders, purchases, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one
hundred eighty (180) days or more; participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines, and any other act or acts that
imply a continuity of commercial dealings or arrangements and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the business
organization.
5

There is no general rule or governing principle as to what constitutes "doing" or "engaging in" or "transacting" business in the
Philippines. Each case must be judged in the light of its peculiar circumstances.
6
In the case at bench, petitioner does not engage
in commercial dealings or activities in the country because it is precluded from doing so by P.D. No. 218, under which it was
established.
7
Nonetheless, it has been continuously, since 1983, acting as a supervision, communications and coordination center
for its home office's affiliates in Singapore, and in the process has named its local agent and has employed Philippine nationals
like private respondent Romana Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its primary
purposes and functions as a regional/area headquarters for its home office, it is clear that petitioner is doing business in the
country. Moreover, private respondents are estopped from assailing the personality of petitioner. So we held in Merrill Lynch
Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837 (1992):
The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged
the same by entering into a contract with it. And the "doctrine of estoppel to deny corporate existence applies
to foreign as well as to domestic corporations;" "one who has dealth with a corporation of foreign origin as a
corporate entity is estopped to deny its corporate existence and capacity." The principle "will be applied to
prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance
with the statutes chiefly in cases where such person has received the benefits of the contract, . . . (Citations
omitted.)
Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be the misjoinder of private respondent
Teofilo Lanchinebre as party defendant. It is a basic rule that "(m)isjoinder or parties is not ground for dismissal of an action."
8

Moreover, the Order of the trial court is based on Section 4(h), Rule 3 of the Revised Rules of Court, which provides:
A married woman may not . . . be sued alone without joining her husband, except . . . if the litigation is
incidental to the profession, occupation or business in which she is engaged,
Whether or not the subject loan was incurred by private respondent as an incident to her profession, occupation or business is a
question of fact. In the absence of relevant evidence, the issue cannot be resolved in a motion to dismiss.
IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992 and March 8, 1993, in Civil
Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby ordered to hear the reinstated case
on its merits. No costs.
EDUARDO G. EVIOTA, Petitioner,
vs.
THE HON. COURT OF APPEALS, THE HON. JOSE BAUTISTA, Presiding Judge of Branch 136, Regional
Trial Court of Makati, and STANDARD CHARTERED BANK, Respondents.
D E C I S I O N
CALLEJO, SR., J .:
Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, of the Decision
1
of the
Court of Appeals in CA-G.R. SP No. 60141 denying the petition for certiorari filed by the petitioner praying the
nullification of the Order of the Regional Trial Court of Makati, Branch 136.
2

Sometime on January 26, 1998, the respondent Standard Chartered Bank and petitioner Eduardo G. Eviota executed
a contract of employment under which the petitioner was employed by the respondent bank as Compensation and
Benefits Manager, VP (M21). However, the petitioner abruptly resigned from the respondent bank barely a month
after his employment and rejoined his former employer.
On June 19, 1998, the respondent bank filed a complaint against the petitioner with the RTC of Makati City. The
respondent bank alleged inter alia in its complaint that:
1. It is a foreign banking institution authorized to do business in the Philippines, with principal offices at
the 5th Floor, Bankmer Bldg., 6756 Ayala Avenue, Makati City.
2. Defendant Eduardo Eviota ("Eviota") is a former employee of the Bank, and may be served with
summons and other court processes at 8 Maple Street, Cottonwoods, Antipolo, Metro Manila.
3. On December 22, 1997, Eviota began negotiating with the Bank on his possible employment with the
latter. Taken up during these negotiations were not only his compensation and benefit package, but also the
nature and demands of his prospective position. The Bank made sure that Eviota was fully aware of all the
terms and conditions of his possible job with the Bank.
4. On January 26, 1998, Eviota indicated his conformity with the Banks Offer of Employment by signing a
written copy of such offer dated January 22, 1998 (the "Employment Contract"). A copy of the
Employment Contract between Eviota and the Bank is hereto attached as Annex "A."
5. Acting on the Employment Contract and on Eviotas uninhibited display of interest in assuming his
position, the Bank promptly proceeded to carry out the terms of the Employment Contract as well as to
facilitate his integration into the workforce. Among others, the Bank: (a) renovated and refurbished the
room which was to serve as Eviotas office; (b) purchased a 1998 Honda CR-V (Motor No.
PEWED7P101101; Chassis No. PADRD 1830WV00108) for Eviotas use; (c) purchased a desktop IBM
computer for Eviotas use; (d) arranged the takeout of Eviotas loans with Eviotas former employer; (e)
released Eviotas signing bonus in the net amount of P300,000.00; (f) booked Eviotas participation in a
Singapore conference on Y2K project scheduled on March 10 and 11, 1998; and (g) introduced Eviota to
the local and regional staff and officers of the Bank via personal introductions and electronic mail.
6. The various expenses incurred by the Bank in carrying out the above acts are itemized below, as follows:
a. Signing Bonus P 300,000.00
b. 1 Honda CR-V 800,000.00
c. IBM Desktop Computer 89,995.00
d. Office Reconfiguration 29,815.00
e. 2-Drawer Lateral File
Cabinet 13,200.00
f. 1 Officers Chair 31,539.00
g. 1 Guest Chair 2,200.00
h. 1 Hanging Shelf 2,012.00
i. Staff Loan Processing
Title Verification 375.00
Cost of Appraisal
Housing Loan 3,500.00
TOTAL P1,272,636.00
An itemized schedule of the above expenses incurred by the Bank is hereto attached as Annex "B."
7. On February 25, 1998, Eviota assumed his position as Compensation and Benefits Manager with the
Bank and began to discharge his duties. At one Human Resources ("HR") Committee meeting held on
March 3, 1998, Eviota energetically presented to senior management his projects for the year, thus raising
the latters expectations. The same day, Eviota instructed the Banks HR Administrator to book him a flight
for Singapore, where he was scheduled to participate in a Y2K project on March 10 and 11, 1998.
Confident of Eviotas professed commitment to the Bank, the latter made the aforementioned airline
booking for him. In addition, the Bank allowed Eviota access to certain sensitive and confidential
information and documents concerning the Banks operations.
8. After leading the Bank to believe that he had come to stay, Eviota suddenly resigned his employment
with immediate effect to re-join his previous employer. His resignation, which did not comply with the 30-
day prior notice rule under the law and under the Employment Contract, was so unexpected that it disrupted
plans already in the pipeline (e.g., the development of a salary/matrix grid and salary structure, and the
processing of merit promotion recommendations), aborted meetings previously scheduled among Bank
officers, and forced the Bank to hire the services of a third party to perform the job he was hired to do. For
the services of this third party, the Bank had to pay a total of P208,807.50. A copy of a receipt for the
above expenses is hereto attached as Annex "C" (See also, Annex "B").
9. Aside from causing no small degree of chaos within the Bank by reason of his sudden resignation, Eviota
made off with a computer diskette and other papers and documents containing confidential information on
employee compensation and other Bank matters, such as the salary schedule of all Corporate and
Institutional Banking officers and photocopies of schedules of benefits provided expatriates being
employed by the Bank.
10. With the benefit of hindsight, the Bank realizes that it was simply used by Eviota as a mere leverage for
his selfish efforts at negotiating better terms of employment with his previous employer. Worse, there is
evidence to show that in his attempts to justify his hasty departure from the Bank and conceal the real
reason for his move, Eviota has resorted to falsehoods derogatory to the reputation of the Bank. In
particular, he has been maliciously purveying the canard that he had hurriedly left the Bank because it had
failed to provide him support. His untruthful remarks have falsely depicted the Bank as a contract violator
and an undesirable employer, thus damaging the Banks reputation and business standing in the highly
competitive banking community, and undermining its ability to recruit and retain the best personnel in the
labor market.
11. On March 16, 1998, the Bank made a written demand on Eviota to return the aforementioned computer
diskette and other confidential documents and papers, reimburse the Bank for the various expenses incurred
on his account as a result of his resignation (with legal interest), and pay damages in the amount of at least
P500,000.00 for the inconvenience and work/program disruptions suffered by the Bank.
A copy of the Banks demand letter dated March 16, 1998 is hereto attached as Annex "D."
12. In partial compliance with said demand, Eviota made arrangements with his previous employer to
reimburse the Bank for the expenses incurred in connection with the Banks purchase of the Honda CR-V
for his use. The Bank informed Eviota that in addition to the Honda CR-Vs purchase price of P848,000.00
(of which Eviota initially shouldered P48,000.00), incidental costs in the form of Processing Fees
(P1,000.00), FPD/MCAR/98-155684 (P1,232.53) and Fund Transfer Price (P18,646.84) were incurred,
bringing the total cost of the Honda CR-V to P868,881.38. On April 29, 1998, the Bank received two
managers checks in the aggregate amount of P868,881.38, representing costs incurred in connection with
the purchase of the Honda CR-V, inclusive of processing fees and other incidental costs. Previously, Eviota
had returned his P300,000.00 signing bonus, less the P48,000.00 he had advanced for the Honda CR-Vs
purchase price.
13. Eviota never complied with the Banks demand that he reimburse the latter for the other expenses
incurred on his account, amounting to P360,562.12 (see, Annex "B").
3

The respondent bank alleged, by way of its causes of action against the petitioner, the following:
First Cause of Action
14. Eviotas actions constitute a clear violation of Articles 19, 20 and 21 of Republic Act No. 386, as
amended (the "Civil Code"). Assuming arguendo that Eviota had the right to terminate his employment
with the Bank for no reason, the manner in and circumstances under which he exercised the same are
clearly abusive and contrary to the rules governing human relations.
14.1. By his actions and representations, Eviota had induced the Bank to believe that he was
committed to fulfilling his obligations under the Employment Contract. As a result, the Bank
incurred expenses in carrying out its part of the contract (see Annexes "B" and "C"). Less
reimbursements received from Eviota, the Bank is entitled to actual damages of P360,562.12.
(See, Annex "C").
Second Cause of Action
15. Under Article 285 (a) of Presidential Decree No. 442, as amended (the Labor Code), an employee may
terminate without just cause the employer-employee relationship by serving written notice on the employer
at least one (1) month in advance. In addition, Section 13 of the Employment Contract specifically provides
that: "Your [i.e., Eviotas] employment may be terminated by either party giving notice of at least one
month." (Annex "A," p. 5.)
15.1. Eviotas failure to comply with the above requirement threw a monkey wrench into the
Banks operations Eviotas sudden resignation aborted meetings previously scheduled among
Bank officers and disrupted plans for a salary/merit review program and development of a salary
structure and merit grid already in the pipeline.
Hence, Eviota is liable to the Bank for damages in the amount of at least P100,000.00.
Third Cause of Action
16. Eviotas false and derogatory statements that the Bank had failed to deliver what it had purportedly
promised have besmirched the Banks reputation and depicted it as a contract violator and one which does
not treat its employees properly. These derogatory statements have injured the Banks business standing in
the banking community, and have undermined the Banks ability to recruit and retain the best personnel.
Hence, plaintiff is entitled to moral damages of at least P2,000,000.00.
17. By way of example or correction for the public good, and to deter other parties from committing similar
acts in the future, defendant should be held liable for exemplary damages of at least P1,000,000.00
18. Eviotas actions have compelled plaintiff to obtain the services of undersigned counsel for a fee, in
order to protect its interests. Hence, plaintiff is entitled to attorneys fees of at least P200,000.00.
4

The respondent bank prayed, that after due proceedings, judgment be rendered in its favor as follows:
WHEREFORE, it is respectfully prayed that judgment be rendered ordering the defendant to pay the plaintiff:
1. As actual damages, the amount of P360,562.12, representing expenses referred to in items c to i of par. 6
and the cost of the third-party services mentioned in par. 8;
2. For violating the 30-day notice requirement under the Labor Code and order (sic) the Employment
Contract, damages in the amount of at least P100,000.00;
3. As moral damages, the amount of P2,000,000.00;
4. As exemplary damages, the amount of P1,000,000.00;
5. As attorneys fees, the amount of P200,000.00; and
6. Costs of the suit.
Other just and equitable reliefs are likewise prayed for.
5

The respondent bank appended to its complaint a copy of the petitioners employment contract.
The petitioner filed a motion to dismiss the complaint on the ground that the action for damages of the respondent
bank was within the exclusive jurisdiction of the Labor Arbiter under paragraph 4, Article 217 of the Labor Code of
the Philippines, as amended. The petitioner averred that the respondent banks claim for damages arose out of or
were in connection with his employer-employee relationship with the respondent bank or some aspect or incident of
such relationship. The respondent bank opposed the motion, claiming that its action for damages was within the
exclusive jurisdiction of the trial court. Although its claims for damages incidentally involved an employer-
employee relationship, the said claims are actually predicated on the petitioners acts and omissions which are
separately, specifically and distinctly governed by the New Civil Code.
On November 29, 1999, the trial court issued an order denying the petitioners motion to dismiss, ratiocinating that
the primary relief prayed for by the respondent bank was grounded on the tortious manner by which the petitioner
terminated his employment with the latter, and as such is governed by the New Civil Code:
The Court holds that here, since the primary relief prayed for by the plaintiff is for damages, grounded on the
tortious manner by which the defendant terminated his employment with the company, the same are recoverable
under the applicable provision of the Civil Code, the present controversy is removed from the jurisdiction of the
Labor Arbiter and brings in within the purview of the regular courts.
6

The petitioner filed a motion for reconsideration of the said order, but the court issued an order denying the same.
The petitioner filed a petition for certiorari with the Court of Appeals for the nullification of the orders of the trial
court, alleging that the court a quo committed grave abuse of its discretion amounting to excess or lack of
jurisdiction in issuing the said orders. The petitioner further asserted that contrary to the ruling of the court, the
respondent bank claimed damages in its complaint against the petitioner based on his employment contract, and not
on tortious acts.
On November 15, 2001, the CA promulgated a decision dismissing the petition, holding that the trial court and not
the Labor Arbiter had exclusive jurisdiction over the action of the respondent bank. It held that the latters claims for
damages were grounded on the petitioners sudden and unceremonious severance of his employment with the
respondent bank barely a month after assuming office.
With his motion for reconsideration of the decision having been denied by the CA, the petitioner filed his petition
with this Court contending that:
Suffice to state immediately that on the basis of the allegations in the complaint, it is the Labor Arbiter, not the
Regional Trial Court, which has jurisdiction of the subject matter of the complaint in Civil Case No. 98-1397, the
principal cause of action being the alleged omission of petitioner in giving notice to the respondent Bank employer
of termination of their relationship; whereas the claims for other actual/moral/exemplary damages are well within
the competence of the Labor Arbiter.
7

The petition is barren of merit.
Article 217 of the Labor Code of the Philippines, as amended by Rep. Act No. 6715 which took effect on March 21,
1989 reads:
ART. 217. Jurisdiction of Labor Arbiters and the Commission.(a) Except as otherwise provided under this Code
the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days
after the submission of the case by the parties for decision without extension, even in the absence of stenographic
notes, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates
of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations.
Case law has it that the nature of an action and the subject matter thereof, as well as which court has jurisdiction
over the same, are determined by the material allegations of the complaint and the reliefs prayed for in relation to the
law involved.
Not every controversy or money claim by an employee against the employer or vice-versa is within the exclusive
jurisdiction of the labor arbiter. A money claim by a worker against the employer or vice-versa is within the
exclusive jurisdiction of the labor arbiter only if there is a "reasonable causal connection" between the claim asserted
and employee-employer relation. Absent such a link, the complaint will be cognizable by the regular courts of
justice.
8

Actions between employees and employer where the employer-employee relationship is merely incidental and the
cause of action precedes from a different source of obligation is within the exclusive jurisdiction of the regular
court.
9
In Georg Grotjahn GMBH & Co. v. Isnani,
10
we held that the jurisdiction of the Labor Arbiter under Article
217 of the Labor Code, as amended, is limited to disputes arising from an employer-employee relationship which
can only be resolved by reference to the Labor Code of the Philippines, other labor laws or their collective
bargaining agreements. In Singapore Airlines Limited v. Pao,
11
the complaint of the employer against the employee
for damages for wanton justice and refusal without just cause to report for duty, and for having maliciously and with
bad faith violated the terms and conditions of their agreement for a course of conversion training at the expense of
the employer, we ruled that jurisdiction over the action belongs to the civil court:
On appeal to this court, we held that jurisdiction over the controversy belongs to the civil courts. We stated that the
action was for breach of a contractual obligation, which is intrinsically a civil dispute. We further stated that while
seemingly the cause of action arose from employer-employee relations, the employers claim for damages is
grounded on "wanton failure and refusal" without just cause to report to duty coupled with the averment that the
employee "maliciously and with bad faith" violated the terms and conditions of the contract to the damage of the
employer. Such averments removed the controversy from the coverage of the Labor Code of the Philippines and
brought it within the purview of the Civil Law.
Jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be cognizable by the
Labor Arbiter, must have a reasonable causal connection with any of the claims provided for in that article. Only if
there is such a connection with the other claims can the claim for damages be considered as arising from employer-
employee relations.
12

The claims were the natural consequences flowing from a breach of an obligation, intrinsically civil in nature.
In Medina v. Castro-Bartolome,
13
we held that a complaint of an employee for damages against the employer for
slanderous remarks made against him was within the exclusive jurisdiction of the regular courts of justice because
the cause of action of the plaintiff was for damages for tortious acts allegedly committed by the employer. The fact
that there was between the parties an employer-employee relationship does not negate the jurisdiction of the trial
court.
In Singapore Airlines Ltd. v. Pao,
14
we held that:
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor
Code.1wphi1 The primary relief sought is for liquidated damages for breach of a contractual obligation. The other
items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such
as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences
flowing from breach of an obligation, intrinsically a civil dispute.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,
15
the petitioner sued its employee Adonis
Limjuco for breach of contract which reads:
That for a period of two (2) years after termination of service from EMPLOYER, EMPLOYEE shall not in any
manner be connected, and/or employed, be a consultant and/or be an informative body directly or indirectly, with
any business firm, entity or undertaking engaged in a business similar to or in competition with that of the
EMPLOYER."
16

The petitioner alleged in its complaint with the trial court that:
Petitioner claimed that private respondent became an employee of Angel Sound Philippines Corporation, a
corporation engaged in the same line of business as that of petitioner, within two years from January 30, 1992, the
date of private respondents resignation from petitioners employ. Petitioner further alleged that private respondent
is holding the position of Head of the Material Management Control Department, the same position he held while in
the employ of petitioner.
17

The trial court dismissed the case for lack of jurisdiction over the subject matter because the cause of action for
damages arose out of the parties employer-employee relationship. We reversed the order of the trial court and held,
thus:
Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages agreed
upon in the contract as redress for private respondents breach of his contractual obligation to its "damage and
prejudice" (Rollo, p. 57). Such cause of action is within the realm of Civil Law, and jurisdiction over the
controversy belongs to the regular courts. More so when we consider that the stipulation refers to the post-
employment relations of the parties.
18

In this case, the private respondents first cause of action for damages is anchored on the petitioners employment of
deceit and of making the private respondent believe that he would fulfill his obligation under the employment
contract with assiduousness and earnestness. The petitioner volte face when, without the requisite thirty-day notice
under the contract and the Labor Code of the Philippines, as amended, he abandoned his office and rejoined his
former employer; thus, forcing the private respondent to hire a replacement. The private respondent was left in a
lurch, and its corporate plans and program in jeopardy and disarray. Moreover, the petitioner took off with the
private respondents computer diskette, papers and documents containing confidential information on employee
compensation and other bank matters. On its second cause of action, the petitioner simply walked away from his
employment with the private respondent sans any written notice, to the prejudice of the private respondent, its
banking operations and the conduct of its business. Anent its third cause of action, the petitioner made false and
derogatory statements that the private respondent reneged on its obligations under their contract of employment;
thus, depicting the private respondent as unworthy of trust.
It is evident that the causes of action of the private respondent against the petitioner do not involve the provisions of
the Labor Code of the Philippines and other labor laws but the New Civil Code. Thus, the said causes of action are
intrinsically civil. There is no causal relationship between the causes of action of the private respondents causes of
action against the petitioner and their employer-employee relationship. The fact that the private respondent was the
erstwhile employer of the petitioner under an existing employment contract before the latter abandoned his
employment is merely incidental. In fact, the petitioner had already been replaced by the private respondent before
the action was filed against the petitioner.
IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED. The Decision of the Court of Appeals
dismissing the petition of the petitioner is AFFIRMED.
SO ORDERED.