Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 89621 September 24, 1991
PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General Manager
ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA, petitioners,
vs.
HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS &
FULGENCIO LEGO, respondents.
Aurelio D. Menzon for petitioners.
Mario P. Nicolasora co-counsel for petitioners.
Papiano L. Santo for private respondents.
CRUZ, J.:p
The question now before us has been categorically resolved in earlier decisions of the Court that a
little more diligent research would have disclosed to the petitioners. On the basis of those cases
and the facts now before us, the petition must be denied.
The private respondents were employees of the petitioner who were suspected of complicity in the
irregular disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal
complaint for theft against them but this was later withdrawn and substituted with a criminal
complaint for falsification of private documents. On November 26, 1987, after a preliminary
investigation conducted by the Municipal Trial Court of Tanauan, Leyte, the complaint was
dismissed. The dismissal was affirmed on April 8, 1988, by the Office of the Provincial Prosecutor.
Meantime, allegedly after an administrative investigation, the private respondents were dismissed
by the petitioner company on November 23, 1987. As a result, they lodged a complaint for illegal
dismissal with the Regional Arbitration Branch of the NLRC in Tacloban City on December 1, 1987,
and decisions manded reinstatement with damages. In addition, they instituted in the Regional
Trial Court of Leyte, on April 4, 1988, a separate civil complaint against the petitioners for damages
arising from what they claimed to be their malicious prosecution.
The petitioners moved to dismiss the civil complaint on the ground that the trial court had no
jurisdiction over the case because it involved employee-employer relations that were exclusively
cognizable by the labor arbiter. The motion was granted on February 6, 1989. On July 6, 1989,
however, the respondent judge, acting on the motion for reconsideration, reinstated the
complaint, saying it was "distinct from the labor case for damages now pending before the labor
courts." The petitioners then came to this Court for relief.
The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to
support their position that the private respondents civil complaint for damages falls under the
jurisdiction of the labor arbiter. They particularly cite the case of Getz Corporation v. Court of
Appeals, 1 where it was held that a court of first instance had no jurisdiction over the complaint
filed by a dismissed employee "for unpaid salary and other employment benefits, termination pay
and moral and exemplary damages."
We hold at the outset that the case is not in point because what was involved there was a claim
arising from the alleged illegal dismissal of an employee, who chose to complain to the regular
court and not to the labor arbiter. Obviously, the claim arose from employee-employer relations
and so came under Article 217 of the Labor Code which then provided as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the
original and exclusive jurisdiction to hear and decide within thirty (30) working days after
submission of the case by the parties for decision, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work and other terms and conditions of
employment;

3. All money claims of workers, including those based on non-payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or appropriate
agreement, except claims for employees' compensation, social security, medicare and maternity
benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including questions involving the
legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by labor
Arbiters. 2
It must be stressed that not every controversy involving workers and their employers can be
resolved only by the labor arbiters. This will be so only if there is a "reasonable causal connection"
between the claim asserted and employee-employer relations to put the case under the provisions
of Article 217. Absent such a link, the complaint will be cognizable by the regular courts of justice in
the exercise of their civil and criminal jurisdiction.
In Medina v. Castro-Bartolome, 3 two employees filed in the Court of First Instance of Rizal a civil
complaint for damages against their employer for slanderous remarks made against them by the
company president. On the order dismissing the case because it came under the jurisdiction of the
labor arbiters, Justice Vicente Abad Santos said for the Court:
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs
is a simple action for damages for tortious acts allegedly committed by the defendants. Such being
the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders
under review are based on a wrong premise.
In Singapore Airlines Ltd. v. Pao, 4 where the plaintiff was suing for damages for alleged violation
by the defendant of an "Agreement for a Course of Conversion Training at the Expense of
Singapore Airlines Limited," the jurisdiction of the Court of First Instance of Rizal over the case was
questioned. The Court, citing the earlier case of Quisaba v. Sta. Ines Melale Veneer and Plywood,
Inc., 5 declared through Justice Herrera:
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the
Labor Code. The primary relief sought is for liquidated damages for breach of a contractual
obligation. The other items demanded are not labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages, overtime compensation or separation
pay. The items claimed are the natural consequences flowing from breach of an obligation,
intrinsically a civil dispute.
In Molave Sales, Inc. v. Laron, 6 the same Justice held for the Court that the claim of the plaintiff
against its sales manager for payment of certain accounts pertaining to his purchase of vehicles and
automotive parts, repairs of such vehicles, and cash advances from the corporation was properly
cognizable by the Regional Trial Court of Dagupan City and not the labor arbiter, because "although
a controversy is between an employer and an employee, the Labor Arbiters have nojurisdiction if
the Labor Code is not involved."
The latest ruling on this issue is found in San Miguel Corporation v. NLRC, 7 where the above cases
are cited and the changes in Article 217 are recounted. That case involved a claim of an employee
for a P60,000.00 prize for a proposal made by him which he alleged had been accepted and
implemented by the defendant corporation in the processing of one of its beer products. The claim
was filed with the labor arbiter, who dismissed it for lack of jurisdiction but was reversed by the
NLRC on appeal. In setting aside the appealed decision and dismissing the complaint, the Court
observed through Justice Feliciano:
It is the character of the principal relief sought that appears essential, in this connection. Where
such principal relief is to be granted under labor legislation or a collective bargaining agreement,
the case should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim
for damages might be asserted as an incident to such claim.
xxx xxx xxx
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, resolution of the dispute requires expertise, not in labor
management relations nor in wage structures and other terms and conditions of employment, but
rather in the application of the general civil law. Clearly, such claims fall outside the area of
competence or expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for
granting jurisdiction over such claims to these agencies disappears.
xxx xxx xxx
While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose
that the entire universe of money claims that might be asserted by workers against their employers
has been absorbed into the original and exclusive jurisdiction of Labor Arbiters.
xxx xxx xxx
For it cannot be presumed that money claims of workers which do not arise out of or in connection
with their employer-employee relationship, and which would therefore fall within the general
jurisdiction of the regular courts of justice, were intended by the legislative authority to be taken
away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The
Court, therefore, believes and so holds that the 'money claims of workers" referred to in paragraph
3 of Article 217 embraces money claims which arise out of or in connection with the employeremployee relationship, or some aspect or incident of such relationship. Put a little differently, that
money claims of workers which now fall within the original and exclusive jurisdiction of Labor
Arbiters are those money claims which have some reasonable causal connection with the
employer-employee relationship (Ibid.).
The case now before the Court involves a complaint for damages for malicious prosecution which
was filed with the Regional Trial Court of Leyte by the employees of the defendant company. It
does not appear that there is a "reasonable causal connection" between the complaint and the
relations of the parties as employer and employees. The complaint did not arise from such
relations and in fact could have arisen independently of an employment relationship between the
parties. No such relationship or any unfair labor practice is asserted. What the employees are
alleging is that the petitioners acted with bad faith when they filed the criminal complaint which
the Municipal Trial Court said was intended "to harass the poor employees" and the dismissal of
which was affirmed by the Provincial Prosecutor "for lack of evidence to establish even a slightest
probability that all the respondents herein have committed the crime imputed against them." This
is a matter which the labor arbiter has no competence to resolve as the applicable law is not the
Labor Code but the Revised Penal Code.
"Talents differ, all is well and wisely put," so observed the philosopher-poet. 8 So it must be in the
case we here decide.
WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs against
the petitioner.
SO ORDERED.
Narvasa (Chairman), Grio-Aquino and Medialdea, JJ., concur.
G.R. No. 127639 December 3, 1999
SAN MIGUEL CORPORATION and BERNARDO NOEL in his capacity as Industrial Relations
Manager,petitioners,
vs.
ALFREDO ETCUBAN, BERNABE ETCUBAN, NORBERTO LABUCA, FELIPE ECHAVEZ, BERNARDINO
ENJAMBRE, ROGELIO ABELLANOSA, ROMULO CATALAN, PEDRO EBOT, ANATOLIO GERALDIZO,
JOSE ALFANTA, EDUARDO LOFRANCO, LECERIO PARBA, RAFAEL AGUILAR, RICARDO LACUAREN,
BENJAMIN ALESNA, ANTONIO BACUS, PRIMO SOTEROL, JESUS JADORMEO, MANUEL MANKIKIS,
APRONIANO ANG, RENATO VILLALON, SAMUEL OUANO, JOSE DELA, JESUS BASILGO, CATALINO
COLE, SR., ALFREDO GONZALES, RAMON FLORES, MARCOS VITO CRUZ, JACINTO DIVINAGRACIA,
ALAN ALINSUGAY and CLAUDIO AGAN, respondents.
KAPUNAN, J.:

Before the Court is a petition for review on certiorari of the Decision, dated 16 May 1996 of the
Court of Appeals in CA-G.R. CV No. 46554 and of its Resolution, dated November 1996 denying
petitioners' motion for reconsideration of said decision. The Court of Appeals' decision reversed
and set aside the resolution of the Regional Trial Court of Cebu, Branch 19, in Civil Case No. CEB15310, dismissing for lack of jurisdiction respondents' complaint for damages against petitioners
for terminating their employment by fraudulently inducing them to accept petitioners'
"retrenchment program."
The antecedents of this case are as follows:
In 1981, San Miguel Corporation (SMC) informed its Mandaue City Brewery employees that it was
suffering from heavy losses and financial distress which could eventually lead to its total closure. In
several meetings convened by SMC with its employee, it was explained to them that the distressed
state of SMC was caused by its poor sales performance which, in order to survive, called for a
cutback in production and a corresponding reduction in the work force. Because of this, SMC
offered its "Retrenchment to Prevent Loss Program" to its employees. The offering of the
retrenchment program was coupled with an unsolicited advise from SMC that it would be in the
best interest of the affected employees to avail of the said program since, by doing so, they would
be able to obtain their retrenchment benefits and privileges with ease. SMC admonished its
employees that their failure to avail of the retrenchment program might lead to difficulty in
following-up and obtaining their separation pay from the SMC's main office in Manila.
Convinced by the representations and importunings of SMC, respondents, who had been
employees of SMC since the 1960s, availed of the retrenchment program at various times in 1981,
1982 and 1983. After their inclusion in the retrenchment program, respondents were given their
termination letters and separation pay. In return, respondents executed "receipt and release"
documents in favor of SMC.
Sometime in May of 1986, respondents got hold of an SMC publication allegedly revealing that
SMC was never in financial distress during the time when they were being retrenched but was, in
fact, enjoying a growth in sales. Respondents also learned that, during their retrenchment, SMC
was engaged in hiring new employees. Thus, respondents concluded that SMC's financial distress
story and retrenchment program were merely schemes to rid itself of regular employees and, thus,
avoid the payment of their actual benefits.
On 17 October 1988, respondents filed a complaint before the Regional Arbitration Branch No. VII
of the National Labor Relations Commission (NLRC) for the declaration of nullity of the
retrenchment program. In their complaint, respondents alleged that they were former regular
employees of SMC who were deceived into severing their employment due to SMC's concocted
financial distress story and fraudulent retrenchment program. Respondents prayed for
reinstatement, backwages and damages. On 25 July 1989, the Labor Arbiter dismissed the
complaint on the ground of prescription, stating:
What is apparent from their allegations, however, is that complainants are contesting their
respective terminations pursuant to the Retrenchment Program effected by San Miguel
Corporation in 1981, 1982, and 1983. These then are claims for illegal dismissal which fall within
the ambit of Article 291 of the New Labor Code. It provides:
Art. 291. Money claims. All money claims arising from employer-employee relations accruing
during the effectivity of this Code, shall be filed within three (3) years from the time the cause of
action accrued; otherwise they shall be forever barred. . . .
Under the aforequoted provision therefore, complainants' causes of action have already
prescribed.
Even if this Office were to apply the more liberal interpretation of the above provisions enunciated
by the Honorable Supreme Court in the case of Callanta vs. Carnation Phils., Inc., G.R. No. 70615,
Nov. 3, 1986, an interpretation that views illegal dismissal as an injury upon the rights of a person,
hence, under Article 1146 of the Civil Code prescribes in 4 years, those who were retrenched in
1983, at the very latest, had only until 1987 to institute a complaint against SMC.
The records will show that all the above captioned cases were filed in 1988.
Clearly, therefore, complainants' causes of action have already prescribed. 1

Respondents then appealed to the NLRC which, on 20 December 1990, dismissed the appeal and
affirmed the decision of the labor arbiter.
On 14 December 1993, respondents, who were thirty-one (31) in number, again filed a
complaint 2 against SMC, but this time before the Regional Trial Court of Cebu City, Branch 19.
Although their complaint was captioned as an action for damages, respondents sought the
declaration of nullity of their so-called collective "contract of termination" with SMC. Respondents
theorized that SMC's offer of retrenchment and their acceptance of the same resulted in the
consummation of a collective "contract of termination" between themselves and SMC.
Respondents asserted that since the cause of their "contract of termination" was non-existent, i.e.,
the claim of SMC that it was under financial distress, the said contract is null and void. In this
regard, respondents claimed that they were entitled to damages because of the deception
employed upon them by SMC which led to their separation from the company. They further
asseverated that their separation from employment resulted in the loss of earnings and other
benefits. Hence, they prayed that petitioners jointly and severally be ordered, among others, to
pay each of them the sum of P650,000.00 as actual and compensatory damages, P100,000.00 as
moral damages, P50,000.00 as exemplary damages, and 25% of whatever may be awarded to them
as attorney's fees.
Instead of filing an answer, SMC filed a motion to dismiss on the bases of lack of jurisdiction, res
judicata, payment, prescription and failure to state a cause of action. On 21 June 1994, the RTC
issued a resolution granting SMC's motion to dismiss on the grounds of lack of jurisdiction and
prescription. The pertinent portion of the resolution reads:
Although plaintiffs, among others, pray for the declaration of nullity of the contract of termination,
their main cause is for damages, actual, compensatory and moral damages in the "aggregate
amount of P650,000.00 each and P1,200,000.00 each" for plaintiffs Bernabe Etcuban and Jose Dela.
The alleged acts leading to their signing of the contract of termination are acts constituting labor
disputes. It is a case for damages resulting from illegal termination. Under Article 217 of the Labor
Code, such cases fall within the exclusive original jurisdiction of the Labor Arbiter and the National
Labor Relations Commission. In fact, in 1988, plaintiffs instituted the same case for
"implementation of Art. 217, par. 5, now (sic) Labor Code and Declaration of Nullity of
"Retrenchment" Program, and Damages" (see annex "A" to Motion to Dismiss) with the National
Labor Relations Commission. Their cases were dismissed, not because of lack of jurisdiction, but
because their cause of action already prescribed, the cases having been filed after the three-year
prescriptive period. Plaintiffs have already submitted to the jurisdiction of the NLRC when they
filed their cases with that agency. And they prayed for the declaration of nullity of the
retrenchment program of defendant corporation. It was only after the dismissal of those cases that
they instituted this present suit.
xxx xxx xxx
Moreover, the contract of termination which plaintiffs were allegedly induced to sign is not void
from the beginning. At most, such contract is voidable, plaintiffs' consent thereto being allegedly
vitiated by fraud and deceit.
Thus plaintiffs allege that "the brainwashing conducting (ted) on the affected employees through
briefings and pulong-pulongs relative to the actual economic condition of defendant corporation
finally led plaintiffs to believe that indeed said defendant was incurring losses and has opted to
reduce its production to arrest an immediate collapse of its operations. Thus, the corresponding
need to cut down on its work force;" (par. 11, complaint);" This distressed state of affairs of the
defendant corporation inculcated into their (sic) minds of defendants and the worry of nonrecovery of their benefits in the event defendant corporation closes down, induced plaintiffs to
accept the "offer of retrenchment". Thereupon, they were paid their so-called "separation pay".
Hence, the contract of termination evidenced by individual termination letters and benefits paid to
each plaintiff was consummated." (par. 12). But that "records, however, revealed that from 1973
up to 1983, inclusive, defendant corporation never suffered any business reverses or losses in its
operation."; (par. 13, complaint).

When the consent of one of the contracting parties is vitiated by fraud or deceit, the resulting
contract is only voidable or annulable, not void or inexistent. The action to annul the same should
be filed within four (4) years from discovery of the fraud or deceit. According to plaintiffs'
complaint, they "acquired knowledge of the actual business condition of defendant corporation
only in May 1986 when one of them got hold of a copy of the company's publication. That was the
time they discovered that indeed, defendants deceived them . . . . (par. 14, complaint.) From May
1986 to January 14, 1993, more than six (6) years have already elapsed. Clearly, the action, has
already prescribed.
The rest of the grounds need not be discussed.
WHEREFORE, for want of jurisdiction, and on the further ground of prescription, the above-entitled
case is dismissed.
SO ORDERED. 3
Respondents seasonably appealed to the Court of Appeals (CA). In its Decision dated 16 May 1996,
the CA reversed and set aside the lower court's order of dismissal and remanded the case to the
RTC for further proceedings. The pertinent portion of the decision reads:
A scrutiny of the allegations of the present complaint reveals that plaintiffs' cause of action is not
actually based on an employer-employee relationship between the plaintiffs and the defendants. It
primarily involves a civil dispute arising from the claim of plaintiffs that the cause for the contract
of termination of their services is inexistent rendering said contract as null and void from the
beginning. . . .
xxx xxx xxx
Guided thereby, we find that recourse by plaintiffs-appellants to the civil law on contracts by
raising the issue [of] whether or not the contract of termination of services entered into by
plaintiffs with defendants is void from the beginning due to inexistent cause of action under Article
1409 of the Civil Code, places the case within the jurisdiction of the civil courts.
As refined by the Supreme Court, where the resolution of the dispute requires expertise, not in
labor management relations nor in wage structures and other terms and conditions of
employment, but rather in the application of the general civil law, such claim falls outside the area
of competence of expertise ordinarily ascribed to Labor Arbiters and the NLRC. Thus, the trial court
erred in finding that it has no jurisdiction over the case.
Secondly, the trial court erred in ruling that the complaint of plaintiffs-appellants has prescribed.
Article 1410 of the Civil Code, in relation to Article 1409 as herein before quoted, specifically
provides that the action for the declaration of the inexistence of a contract on ground (3) above
does not prescribe.
Thirdly, one of the requisites for the application of the principle of res judicata is that there must
be a judgment on the merits in the earlier case involving the same parties and the same issues.
Plaintiffs-appellants' complaint was dismissed by the NLRC on the ground that their cause of action
had prescribed; no trial has been held on the first complaint. Thus, the dismissal of the first
complaint is not a judgment on the merits and therefore not applicable to the present case.
xxx xxx xxx
WHEREFORE, the order of dismissal is reversed and set aside. Let the original records of Civil Case
No. CEB-15310, be remanded to the Regional Trial Court (Branch 19), Cebu City for further
proceedings. Costs against defendants-appellees.
SO ORDERED. 4
SMC filed a motion for reconsideration but was denied in the CA's Resolution dated 14 November
1996 5. Hence, this petition.
In its petition, SMC contends that the CA erred:
I
IN HOLDING THAT THE REGIONAL TRIAL COURT OF CEBU, BRANCH 19, HAS JURISDICTION OVER
THE INSTANT CASE AND THE CAUSE OF ACTION OF THE RESPONDENTS ARE NOT ACTUALLY BASED
ON AN EMPLOYER-EMPLOYEE RELATIONSHIP WHEN THE COMPLAINT SHOWS THAT THE
RESPONDENTS ARE CLAIMING TO HAVE BEEN UNJUSTLY SEPARATED FROM THEIR REGULAR
EMPLOYMENTS (sic) BY THE PETITIONERS AND ARE DEMANDING TO BE PAID ACTUAL AND

COMPENSATORY DAMAGES CONSISTING OF "THEIR EXPECTED INCOME BY WAY OF SALARIES AND

OTHER FRINGE BENEFITS DUE THEM UNDER THE LAW FROM THE TIME OF THEIR SEPARATION AND
UNTIL THEIR RETIREMENT DUE TO AGE OR LENGTH OF SERVICE . . . SOCIAL SECURITY SYSTEM
BENEFITS . . . RETIREMENT BENEFITS.
II
IN RULING THAT THE COMPLAINT OF THE RESPONDENTS HAVE NOT YET PRESCRIBED WHEN THE
RESPONDENTS HAVE CLAIMED IN THEIR COMPLAINT THAT THEY HAVE BEEN ALLEGEDLY
BRAINWASHED BY THE PETITIONERS AND THEIR COMPAINT (sic) WAS FILED ONLY AFTER MORE
THAN SIX (6) YEARS HAVE LAPSED FROM THE TIME THAT THE RESPONDENTS CLAIMED TO HAVE
"DISCOVERED THAT INDEED, DEFENDANTS (Petitioners) DECEIVED THEM INTO BELIEVING THAT
THE DEFENDANT CORPORATION WAS INCURRING LOSSES IN ITS OPERATION HENCE, THE
NECESSITY TO TRIM DOWN ITS WORK FORCE TO INDUCE THEM TO ACCEPT THE "OFFER OF
RETRENCHEMENT (sic)."
III
IN RULING THAT "THE DISMISSAL OF THE FIRST COMPLAINT IS NOT A JUDGMENT ON THE MERITS
AND THEREFORE NOT APPLICABLE TO THE PRESENT CASE" WHEN IT IS THE SAID DIVISION'S OWN
FINDING THAT: "THE COMPLAINT FILED BY HEREIN PLAINTIFFS-APPELLANTS (Respondents) WITH
THE REGIONAL ARBITRATION BRANCH PRAYED FOR THE DECLARATION OF THE TERMINATION
SCHEME ALLEGEDLY DECEPTIVELY FORCED UPON THEM TO BE NULL AND VOID WITH THE SAME
PRAYER THAT THEY BE REINSTATED TO THEIR REGULAR EMPLOYMENT WITHOUT ANY LOSS OF ANY
RIGHTS (sic) AND BENEFITS (sic) AS WELL AS PAYMENT OF THEIR BACK WAGES AND DAMAGES." 6
We find the petition impressed with merit.
The demarcation line between the jurisdiction of regular courts and labor courts over cases
involving workers and their employers has always been the subject of dispute. We have recognized
that not all claims involving such groups of litigants can be resolved solely by our labor
courts. 7 However, we have also admonished that the present trend is to refer worker-employer
controversies to labor courts, unless unmistakably provided by the law to be otherwise. 8Because
of this trend, jurisprudence has developed the "reasonable causal connection rule." Under this
rule, if there is a reasonable causal connection between the claim asserted and the employeremployee relations, then the case is within the jurisdiction of our labor courts. 9 In the absence of
such nexus, it is the regular courts that have jurisdiction. 10
The jurisdiction of labor courts is provided under Article 217 of the Labor Code, to wit:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided
under this Code the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from employeremployee 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. 11
With regard to claims for damages under paragraph 4 of the above article, this Court has observed
that:
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
In the present case, while respondents insist that their action is for the declaration of nullity of
their "contract of termination," what is inescapable is the fact that it is, in reality, an action for
damages emanating from employer-employee relations. First, their claim for damages is grounded
on their having been deceived into severing their employment due to SMC's concocted financial
distress and fraudulent retrenchment program a clear case of illegal dismissal. Second, a
comparison of respondents' complaint for the declaration of nullity of the retrenchment program
before the labor arbiter and the complaint for the declaration of nullity of their "contract of
termination" before the RTC reveals that the allegations and prayer of the former are almost
identical with those of the latter except that the prayer for reinstatement was no longer included
and the claim for backwages and other benefits was replaced with a claim for actual damages.
These are telltale signs that respondents' claim for damages is intertwined with their having been
separated from their employment without just cause and, consequently, has a reasonable causal
connection with their employer-employee relations with SMC. Accordingly, it cannot be denied
that respondents' claim falls under the jurisdiction of the labor arbiter as provided in paragraph 4
of Article 217.
Respondents' assertion that their action is for the declaration of nullity of their "contract of
termination" is merely an ingenious way of presenting their actual action, which is a claim for
damages grounded on their having been illegal terminated. However, it would seem that
respondents committed a Freudian slip when they captioned their claim against SMC as an action
for damages. 13 Even the term used for designating the contract, i.e. "contract of termination," was
formulated in a shrewd manner so as to avoid a semblance of employer-employee relations. This
observation is bolstered by the fact that if respondents' designation for the contract were to be
made complete and reflective of its nature, its proper designation would be a "contract of
termination of employment."
The Court is aware that the Civil Code provisions on contracts and damages may be used as bases
for addressing the claim of respondents. However, the fact remains that the present action
primarily involves an employer-employee relationship. The damages incurred by respondents as a
result of the alleged fraudulent retrenchment program and the allegedly defective "contract of
termination" are merely the civil aspect of the injury brought about by their illegal dismissal. 14 The
civil ramifications of their actual claim cannot alter the reality that it is primordially a labor matter
and, as such, is cognizable by labor courts. In Associated Citizens Bank vs. Japson, 15 we held:
For the unlawful termination of employment, this Court in Primero v. Intermediate Appellate
Court,supra, ruled that the Labor Arbiter had the exclusive and original jurisdiction over claims for
moral and other forms of damages, so that the employee in the proceedings before the Labor
Arbiter should prosecute his claims not only for reliefs specified under the Labor Code but also for
damages under the Civil Code. This is because an illegally dismissed employee has only a single
cause of action although the act of dismissal may be a violation not only the Labor Code but also of
the Civil Code. For a single cause of action, the dismissed employee cannot institute a separate
action before the Labor Arbiter for backwages and reinstatement and another action before the
regular court for the recovery of moral and other forms of damages because splitting a single cause
of action is procedurally unsound and obnoxious to the orderly administration of justice. (Primero
v. Intermediate Appellate Court, supra, citing Gonzales v. Province of Iloilo, 38 SCRA 209; Cyphil
Employees Association-Natu v. Pharmaceutical Industries, 77 SCRA 135; Calderon v. Court of
Appeals, 100 SCRA 459, etc.) 16

Even assuming arguendo that the RTC has jurisdiction, it is obvious from respondents' own
pleadings that their action for the declaration of nullity of the "contract of termination" will not
prosper. Respondents allege that they were deceived by SMC into believing that it was under
financial distress which, thus, led them into concluding the "contract of termination" with the
latter. 17 Respondents then posit that since the cause of the contract, SMC's alleged financial
distress, was inexistent, the contract is null and void. The argument is flawed.
The fact that SMC was never in financial distress does not, in any way, affect the cause of their
"contract of termination." Rather, the fraudulent representations of SMC only affected the consent
of respondents in entering into the said contract. 18 If the consent of a contracting party is vitiated
by fraud, the contract is not void but, merely, voidable. 19 In Abando vs. Lozada, 20 we ruled:
As correctly pointed out by the appellate court, the strategem (sic), the deceit, the
misrepresentations employed by Cuevas and Pucan are facts constitutive of fraud which is defined
in Article 1338 of the Civil Code as that (sic) insidious words or machinations of one of the
contracting parties, by which the other is induced to enter into a contract which, without them, he
would not have agreed to. When fraud is employed to obtain the consent of the other party to
enter into a contract, the resulting contract is merely a voidable contract, that is, a valid and
subsisting contract until annulled or set aside by a competent court. . . . 21
An action to annul a voidable contract based on fraud should be brought within four (4) years from
the discovery of the same. 22 In the present case, respondents discovered SMC's fraud in May 1986.
However, the action to question the validity of the contract was only brought on 14 December
1993, or more than seven (7) years after the discovery of the fraud. Clearly, respondents' action
has already prescribed.
The issue of jurisdiction and prescription having been resolved, it is no longer necessary to discuss
the issue onres judicata raised in this petition.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 16 May 1996 and its
Resolution dated 14 November 1996 are hereby REVERSED and SET ASIDE and the Resolution
dated 21 June 1994 of the Regional Trial Court of Cebu, Branch 19, in CEB-15310, REINSTATED.
SO ORDERED.
G.R. No. 128024 May 9, 2000
BEBIANO M. BAEZ, petitioner,
vs.
HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC., respondents.
GONZAGA-REYES, J.:
The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking jurisdiction
over an action for damages filed by an employer against its dismissed employee, are assailed in this
petition for certiorari under Rule 65 of the Rules of Court for having been issued in grave abuse of
discretion.
Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In
1993, private respondent "indefinitely suspended" petitioner and the latter filed a complaint for
illegal dismissal with the National Labor Relations Commission ("NLRC") in Iligan City. In a decision
dated July 7, 1994, Labor Arbiter Nicodemus G. Palangan found petitioner to have been illegally
dismissed and ordered the payment of separation pay in lieu of reinstatement, and of backwages
and attorney's fees. The decision was appealed to the NLRC, which dismissed the same for having
been filed out of time. 2 Elevated by petition for certiorari before this Court, the case was dismissed
on technical grounds3; however, the Court also pointed out that even if all the procedural
requirements for the filing of the petition were met, it would still be dismissed for failure to show
grave abuse of discretion on the part of the NLRC.
On November 13, 1995, private respondent filed a complaint for damages before the Regional Trial
Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which prayed for the
payment of the following:
a. P709,217.97 plus 12% interest as loss of profit and/or unearned income of three years;

b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties, space, etc. for
three years;
c. P5,000.00 as initial expenses of litigation; and
d. P25,000.00 as attorney's fees. 4
On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He interposed in the
court below that the action for damages, having arisen from an employer-employee relationship,
was squarely under the exclusive original jurisdiction of the NLRC under Article 217(a), paragraph 4
of the Labor Code and is barred by reason of the final judgment in the labor case. He accused
private respondent of splitting causes of action, stating that the latter could very well have
included the instant claim for damages in its counterclaim before the Labor Arbiter. He also
pointed out that the civil action of private respondent is an act of forum-shopping and was merely
resorted to after a failure to obtain a favorable decision with the NLRC.
Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which
summarized the basis for private respondent's action for damages in this manner:
Paragraph 5 of the complaint alleged that the defendant violated the plaintiff's policy re: His
business in his branch at Iligan City wherein defendant was the Sales Operations Manager, and
paragraph 7 of the same complaint briefly narrated the modus operandi of defendant, quoted
herein: Defendant canvassed customers personally or through salesmen of plaintiff which were
hired or recruited by him. If said customer decided to buy items from plaintiff on installment basis,
defendant, without the knowledge of said customer and plaintiff, would buy the items on cash
basis at ex-factory price, a privilege not given to customers, and thereafter required the customer
to sign promissory notes and other documents using the name and property of plaintiff, purporting
that said customer purchased the items from plaintiff on installment basis. Thereafter, defendant
collected the installment payments either personally or through Venus Lozano, a Group Sales
Manager of plaintiff but also utilized by him as secretary in his own business for collecting and
receiving of installments, purportedly for the plaintiff but in reality on his own account or business.
The collection and receipt of payments were made inside the Iligan City branch using plaintiff's
facilities, property and manpower. That accordingly plaintiff's sales decreased and reduced to a
considerable extent the profits which it would have earned. 5
In declaring itself as having jurisdiction over the subject matter of the instant controversy,
respondent court stated:
A perusal of the complaint which is for damages does not ask for any relief under the Labor Code of
the Philippines. It seeks to recover damages as redress for defendant's breach of his contractual
obligation to plaintiff who was damaged and prejudiced. The Court believes such cause of action is
within the realm of civil law, and jurisdiction over the controversy belongs to the regular courts.
While seemingly the cause of action arose from employer-employee relations, the employer's claim
for damages is grounded on the nefarious activities of defendant causing damage and prejudice to
plaintiff as alleged in paragraph 7 of the complaint. The Court believes that there was a breach of a
contractual obligation, which is intrinsically a civil dispute. The averments in the complaint
removed the controversy from the coverage of the Labor Code of the Philippines and brought it
within the purview of civil law. (Singapore Airlines, Ltd. Vs. Pao, 122 SCRA 671.) . . . 6
Petitioner's motion for reconsideration of the above Order was denied for lack of merit on October
16, 1996. Hence, this petition.
Acting on petitioner's prayer, the Second Division of this Court issued a Temporary Restraining
Order ("TRO") on March 5, 1997, enjoining respondents from further proceeding with Civil Case
No. 95-554 until further orders from the Court.
By way of assignment of errors, the petition reiterates the grounds raised in the Motion to Dismiss
dated January 30, 1996, namely, lack of jurisdiction over the subject matter of the action, res
judicata, splitting of causes of action, and forum-shopping. The determining issue, however, is the
issue of jurisdiction.
Art. 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the filing of
this case, 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:
xxx xxx xxx
4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations;
xxx xxx xxx
The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.") No. 6715,
which took effect on March 21, 1989, and which put to rest the earlier confusion as to who
between Labor Arbiters and regular courts had jurisdiction over claims for damages as between
employers and employees.
It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers,
including claims for damages, was originally lodged with the Labor Arbiters and the NLRC by Article
217 of the Labor Code. 7 On May 1, 1979, however, Presidential Decree ("P.D.") No. 1367 amended
said Article 217 to the effect that "Regional Directors shall not indorse and Labor Arbiters shall not
entertain claims for moral or other forms of damages." 8This limitation in jurisdiction, however,
lasted only briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article
217 of the Labor Code almost to its original form. Presently, and as amended by R.A. 6715, the
jurisdiction of Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include
claims for all forms of damages "arising from the employer-employee relations"
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217
to claims for damages filed by employees, 9 we hold that by the designating clause "arising from
the employer-employee relations" Article 217 should apply with equal force to the claim of an
employer for actual damages against its dismissed employee, where the basis for the claim arises
from or is necessarily connected with the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case.
Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded by the
Labor Code), jurisprudence was settled that where the plaintiff's cause of action for damages arose
out of, or was necessarily intertwined with, an alleged unfair labor practice committed by the
union, the jurisdiction is exclusively with the (now defunct) Court of Industrial Relations, and the
assumption of jurisdiction of regular courts over the same is a nullity. 10 To allow otherwise would
be "to sanction split jurisdiction, which is prejudicial to the orderly administration of
justice." 11 Thus, even after the enactment of the Labor Code, where the damages separately
claimed by the employer were allegedly incurred as a consequence of strike or picketing of the
union, such complaint for damages is deeply rooted from the labor dispute between the parties,
and should be dismissed by ordinary courts for lack of jurisdiction. As held by this Court in National
Federation of Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that on policy grounds, and
equally so in the interest of greater promptness in the disposition of labor matters, a court is
spared the often onerous task of determining what essentially is a factual matter, namely, the
damages that may be incurred by either labor or management as a result of disputes or
controversies arising from employer-employee relations.
There is no mistaking the fact that in the case before us, private respondent's claim against
petitioner for actual damages arose from a prior employer-employee relationship. In the first place,
private respondent would not have taken issue with petitioner's "doing business of his own" had
the latter not been concurrently its employee. Thus, the damages alleged in the complaint below
are: first, those amounting to lost profits and earnings due to petitioner's abandonment or neglect
of his duties as sales manager, having been otherwise preoccupied by his unauthorized installment
sale scheme; and second, those equivalent to the value of private respondent's property and
supplies which petitioner used in conducting his "business ".

Second, and more importantly, to allow respondent court to proceed with the instant action for
damages would be to open anew the factual issue of whether petitioner's installment sale scheme
resulted in business losses and the dissipation of private respondent's property. This issue has been
duly raised and ruled upon in the illegal dismissal case, where private respondent brought up as a
defense the same allegations now embodied in his complaint, and presented evidence in support
thereof. The Labor Arbiter, however, found to the contrary that no business losses may be
attributed to petitioner as in fact, it was by reason of petitioner's installment plan that the sales of
the Iligan branch of private respondent (where petitioner was employed) reached its highest
record level to the extent that petitioner was awarded the 1989 Field Sales Achievement Award in
recognition of his exceptional sales performance, and that the installment scheme was in fact with
the knowledge of the management of the Iligan branch of private respondent. 12 In other words,
the issue of actual damages has been settled in the labor case, which is now final and executory.
Still on the prospect of re-opening factual issues already resolved by the labor court, it may help to
refer to that period from 1979 to 1980 when jurisdiction over employment-predicated actions for
damages vacillated from labor tribunals to regular courts, and back to labor tribunals. In Ebon vs.
de Guzman, 113 SCRA 52, 1 this Court discussed:
The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award moral and
other forms of damages in labor cases could have assumed that the Labor Arbiters' position-paper
procedure of ascertaining the facts in dispute might not be an adequate tool for arriving at a just
and accurate assessment of damages, as distinguished from backwages and separation pay, and
that the trial procedure in the Court of First Instance would be a more effective means of
determining such damages. . . .
Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and
the NLRC of the jurisdiction to award damages in labor cases because that setup would
mean duplicity of suits, splitting the cause of action and possible conflicting findings and
conclusions by two tribunals on one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217 in its
original form) nullified Presidential Decree No. 1367 and restored to the Labor Arbiter and the
NLRC their jurisdiction to award all kinds of damages in cases arising from employer-employee
relations. . . . (Emphasis supplied).
Clearly, respondent court's taking jurisdiction over the instant case would bring about precisely the
harm that the lawmakers sought to avoid in amending the Labor Code to restore jurisdiction over
claims for damages of this nature to the NLRC.
This is, of course, to distinguish from cases of actions for damages where the employer-employee
relationship is merely incidental and the cause of action proceeds from a different source of
obligation. Thus, the jurisdiction of regular courts was upheld where the damages, claimed for
were based on tort 14, malicious prosecution 15, or breach of contract, as when the claimant seeks
to recover a debt from a former employee 16 or seeks liquidated damages in enforcement of a prior
employment contract. 17
Neither can we uphold the reasoning of respondent court that because the resolution of the issues
presented by the complaint does not entail application of the Labor Code or other labor laws, the
dispute is intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the
Labor Arbiter original and exclusive jurisdiction over claims for damages arising from employeremployee relations in other words, the Labor Arbiter has jurisdiction to award not only the
reliefs provided by labor laws, but also damages governed by the Civil Code. 18
Thus, it is obvious that private respondent's remedy is not in the filing of this separate action for
damages, but in properly perfecting an appeal from the Labor Arbiter's decision. Having lost the
right to appeal on grounds of untimeliness, the decision in the labor case stands as a final judgment
on the merits, and the instant action for damages cannot take the place of such lost appeal.
Respondent court clearly having no jurisdiction over private respondent's complaint for damages,
we will no longer pass upon petitioner's other assignments of error.

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554 before Branch 39
of the Regional Trial Court of Misamis Oriental is hereby DISMISSED. No pronouncement as to
costs.
SO ORDERED.
G.R. No. 152121
July 29, 2003
EDUARDO G. EVIOTA, Petitioner,
vs.
THE HON. COURT OF APPEALS, THE HON. JOSE BAUTISTA, Presiding Judge of Branch 136,
Regional Trial Court of Makati, and STANDARD CHARTERED BANK, Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, of the
Decision1 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 employeremployee 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 employeremployee 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 employeremployee 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.1wphi1The 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.
G.R. No. 121948
October 8, 2001
PERPETUAL HELP CREDIT COOPERATIVE, INC., petitioner,
vs.
BENEDICTO FABURADA, SISINITA VILLAR, IMELDA TAMAYO, HAROLD CATIPAY, and the
NATIONAL LABOR RELATIONS COMMISSION, Fourth Division, Cebu City, respondents.
SANDOVAL-GUTIERREZ, J.:
On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private
respondents, filed a complaint against the Perpetual Help Credit Cooperative, Inc. (PHCCI),
petitioner, with the Arbitration Branch, Department of Labor and Employment (DOLE), Dumaguete
City, for illegal dismissal, premium pay on holidays and rest days, separation pay, wage differential,
moral damages, and attorney's fees.
Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no
employer-employee relationship between them as private respondents are all members and co-

owners of the cooperative. Furthermore, private respondents have not exhausted the remedies
provided in the cooperative by-laws.
On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121
of R.A. No. 6939, otherwise known as the Cooperative Development Authority Law which took
effect on March 26, 1990, requires conciliation or mediation within the cooperative before a resort
to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that the case is
impressed with employer-employee relationship and that the law on cooperatives is subservient to
the Labor Code.
On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring complainants illegally
dismissed, thus respondent is directed to pay Complainants backwages computed from the time
they were illegally dismissed up to the actual reinstatement but subject to the three year
backwages rule, separation pay for one month for every year of service since reinstatement is
evidently not feasible anymore, to pay complainants 13th month pay, wage differentials and Ten
Percent (10%) attorney's fees from the aggregate monetary award. However, complainant
Benedicto Faburada shall only be awarded what are due him in proportion to the nine and a half
months that he had served the respondent, he being a part-time employee. All other claims are
hereby dismissed for lack of merit.
The computation of the foregoing awards is hereto attached and forms an integral part of this
decision."
On appeal,1 the NLRC affirmed the Labor Arbiter's decision.
Hence, this petition by the PHCCI.
The issue for our resolution is whether or not respondent judge committed grave abuse of
discretion in ruling that there is an employer-employee relationship between the parties and that
private respondents were illegally dismissed.
Petitioner PHCCI contends that private respondents are its members and are working for it as
volunteers. Not being regular employees, they cannot sue petitioner.
In determining the existence of an employer-employee relationship, the following elements are
considered: (1 ) the selection and engagement of the worker or the power to hire; (2) the power to
dismiss; (3) the payment of wages by whatever means; and (4) the power to control the worker's
conduct, with the latter assuming primacy in the overall consideration. No particular form of proof
is required to prove the existence of an employer-employee relationship. Any competent and
relevant evidence may show the relationship.2
The above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its
Manager, hired private respondents to work for it. They worked regularly on regular working
hours, were assigned specific duties, were paid regular wages and made to accomplish daily time
records just like any other regular employee. They worked under the supervision of the
cooperative manager. But unfortunately, they were dismissed.
That an employer-employee exists between the parties is shown by the averments of private
respondents in their respective affidavits, carefully considered by respondent NLRC in affirming the
Labor Arbiter's decision, thus:
Benedicto Faburada Regular part-time Computer programmer/ operator. Worked with the
Cooperative since June 1, 1988 up to December 29, 1989. Work schedule: Tuesdays and Thursdays,
from 1:00 p.m. to 5:30 p.m. and every Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and
for at least three (3) hours during Sundays. Monthly salary: P1,000.00 from June to December
1988; P1,350.00 - from January to June 1989; and P1,500.00 from July to December 1989. Duties:
Among others, Enter data into the computer; compute interests on savings deposits, effect
mortuary deductions and dividends on fixed deposits; maintain the masterlist of the cooperative
members; perform various forms for mimeographing; and perform such other duties as may be
assigned from time to time.

Sisinita Vilar Clerk. Worked with the Cooperative since December 1, 1987 up to December 29,
1989.Work schedule: Regular working hours. Monthly salary: P500.00 from December 1, 1987 to
December 31, 1988; P1,000.00 from January 1, 1989 to June 30, 1989; and P1,150.00 from
July 1, 1989 to December 31, 1989. Duties: Among others, Prepare summary of salary advances,
journal vouchers, daily summary of disbursements to respective classifications; schedule loans;
prepare checks and cash vouchers for regular and emergency loans; reconcile bank statements to
the daily summary of disbursements; post the monthly balance of fixed and savings deposits in
preparation for the computation of interests, dividends, mortuary and patronage funds; disburse
checks during regular and emergency loans; and perform such other bookkeeping and accounting
duties as may be assigned to her from time to time.
Imelda C. Tamayo Clerk. Worked with the Cooperative since October 19, 1987 up to December
29, 1989. Work schedule: Monday to Friday - 8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every
Saturday 8:00 to 11:30 a.m and 1:00 to 4:00 p.m; and for one Sunday each month - for at least
three (3) hours. Monthly salary: P60.00 from October to November 1987; P250.00 for December
1987; P500.00 from January to December 1988; P950 from January to June 1989; and
P1,000.00 from July to December 1989.Duties: Among others, pick up balances for the
computation of interests on savings deposit, mortuary, dividends and patronage funds; prepare
cash vouchers; check petty cash vouchers; take charge of the preparation of new passbooks and
ledgers for new applicants; fill up members logbook of regular depositors, junior depositors and
special accounts; take charge of loan releases every Monday morning; assist in the posting and
preparation of deposit slips; receive deposits from members; and perform such other bookkeeping
and accounting duties as may be assigned her from time to time.
Harold D. Catipay Clerk. Worked with the Cooperative since March 3 to December 29,
1989. Work schedule: Monday to Friday 8:00 to 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday
8:00 to 11:30 a.m. and 1:00 to 4:00 p.m.; and one Sunday each month for at least three (3)
hours. Monthly salary: P900.00 from March to June 1989; P1,050.00 - from July to December
1989. Duties: Among others, Bookkeeping, accounting and collecting duties, such as, post daily
collections from the two (2) collectors in the market; reconcile passbooks and ledgers of members
in the market; and assist the other clerks in their duties.
All of them were given a memorandum of termination on January 2, 1990, effective December 29,
1989.
We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the
same being supported by substantial evidence, that quantum of evidence required in quasi judicial
proceedings, like this one.
Necessarily, this leads us to the issue of whether or not private respondents are regular employees.
Article 280 of the Labor Code provides for three kinds of employees: (1) regular employees or
those who have been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer; (2) project employees or those whose employment has
been fixed for a specific project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the season; and (3)
casual employees or those who are neither regular nor project employees.3 The employees who
are deemed regular are: (a) those who have been engaged to perform activities which are usually
necessary or desirable in the usual trade or business of the employer; and (b) those casual
employees who have rendered at least one (1 ) year of service, whether such service is continuous
or broken, with respect to the activity in which they are employed.4 Undeniably, private
respondents were rendering services necessary to the day-to-day operations of petitioner PHCCI.
This fact alone qualified them as regular employees.
All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto
Faburada, for one and a half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C. Tamayo,
for two (2) years and two (2) months. That Benedicto Faburada worked only on a part-time basis,
does not mean that he is not a regular employee. One's regularity of employment is not
determined by the number of hours one works but by the nature and by the length of time one has

been in that particular job.5 Petitioner's contention that private respondents are mere volunteer
workers, not regular employees, must necessarily fail. Its invocation of San Jose City Electric
Cooperative vs. Ministry of Labor and Employment (173 SCRA 697, 703 (1989) is misplaced. The
issue in this case is whether or not the employees-members of a cooperative can organize
themselves for purposes of collective bargaining, not whether or not the members can be
employees. Petitioner missed the point
As regular employees or workers, private respondents are entitled to security of tenure. Thus, their
services may be terminated only for a valid cause, with observance of due process.
The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor
Code and the authorized causes under Articles 283 and 284 of the same Code. The just causes are:
(1) serious misconduct or willful disobedience of lawful orders in connection with the employee's
work; (2) gross or habitual neglect of duties; (3) fraud or willful breach of trust; (4) commission of a
crime or an offense against the person of the employer or his immediate family member or
representative; and, analogous cases. The authorized causes are: (1) the installation of labor-saving
devices; (2) redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation of
operations of the establishment or undertaking, unless the closing is for the purpose of
circumventing the provisions of law. Article 284 provides that an employer would be authorized to
terminate the services of an employee found to be suffering from any disease if the employee's
continued employment is prohibited by law or is prejudicial to his health or to the health of his
fellow employees6
Private respondents were dismissed not for any of the above causes. They were dismissed because
petitioner considered them to be mere voluntary workers, being its members, and as such work at
its pleasure. Petitioner thus vehemently insists that their dismissal is not against the law.
Procedural due process requires that the employer serve the employees to be dismissed two (2)
written notices before the termination of their employment is effected: (a) the first, to apprise
them of the particular acts or omissions for which their dismissal is sought and (b) the second, to
inform them of the decision of the employer that they are being dismissed. 7 In this case, only one
notice was served upon private respondents by petitioner. It was in the form of a Memorandum
signed by the Manager of the Cooperative dated January 2, 1990 terminating their services
effective December 29, 1989. Clearly, petitioner failed to comply with the twin requisites of a valid
notice.
We hold that private respondents have been illegally dismissed.
Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the complaint of
private respondents considering that they failed to submit their dispute to the grievance machinery
as required by P.D. 175 (strengthening the Cooperative Movement) 8 and its implementing rules
and regulations under LOI 23. Likewise, the Cooperative Development Authority did not issue a
Certificate of Non-Resolution pursuant to Section 8 of R.A. 6939 or the Cooperative Development
Authority Law.
As aptly stated by the Solicitor General in his comment, P.D. 175 does not provide for a grievance
machinery where a dispute or claim may first be submitted. LOI 23 refers to instructions to the
Secretary of Public Works and Communications to implement immediately the recommendation of
the Postmaster General for the dismissal of some employees of the Bureau of Post. Obviously, this
LOI has no relevance to the instant case.
Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the procedure
how cooperative disputes are to be resolved, thus:
ART. 121. Settlement of Disputes. Disputes among members, officers, directors, and committee
members, and intra-cooperative disputes shall, as far as practicable, be settled amicably in
accordance with the conciliation or mediation mechanisms embodied in the by-laws of the
cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of
competent jurisdiction."
Complementing this Article is Section8 of R.A. No. 6939 (Cooperative Development Authority Law)
which reads:

SEC. 8 Mediation and Conciliation. Upon request of either or both parties, the Authority shall
mediate and conciliate disputes within a cooperative or between cooperatives: Provided, That if no
mediation or conciliation succeeds within three (3) months from request thereof, a certificate of
non-resolution shall be issued by the Commission prior to the filing of appropriate action before
the proper courts.
The above provisions apply to members, officers and directors of the cooperative involved in
disputes within a cooperative or between cooperatives.
There is no evidence that private respondents are members of petitioner PHCCI and even if they
are, the dispute is about payment of wages, overtime pay, rest day and termination of
employment. Under Art. 217 of the Labor Code, these disputes are within the original and exclusive
jurisdiction of the Labor Arbiter.
As illegally dismissed employees, private respondents are therefore entitled to reinstatement
without loss of seniority rights and other privileges and to full backwages, inclusive of allowances,
plus other benefits or their monetary equivalent computed from the time their compensation was
withheld from them up to the time of their actual reinstatement.9 Since they were dismissed after
March 21, 1989, the effectivity date of R.A. 6715 10 they are granted full backwages, meaning,
without deducting from their backwages the earnings derived by them elsewhere during the period
of their illegal dismissal.11 If reinstatement is no longer feasible, as when the relationship between
petitioner and private respondents has become strained, payment of their separation pay in lieu of
reinstatement is in order.12
WHEREFORE, the petition is hereby DENIED. The decision of respondent NLRC is AFFIRMED, with
modification in the sense that the backwages due private respondents shall be paid in full,
computed from the time they were illegally dismissed up to the time of the finality of this
Decision.13
SO ORDERED.
G.R. No. 124382
August 16, 1999
PASTOR DIONISIO V. AUSTRIA, petitioner,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL
PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS, ELDER HECTOR
V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES,
ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PORFIRIO BALACY, DAVID
RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY,
MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA, respondents.
KAPUNAN, J.:
Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the Resolution 1 of
public respondent National Labor Relations Commission (the "NLRC"), rendered on 23 January
1996, in NLRC Case No. V-0120-93, entitled "Pastor Dionisio V. Austria vs. Central Philippine Union
Mission Corporation of Seventh Day Adventists, et al.," which dismissed the case for illegal
dismissal filed by the petitioner against private respondents for lack of jurisdiction.1wphi1.nt
Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists
(hereinafter referred to as the "SDA") is a religious corporation duly organized and existing under
Philippine law and is represented in this case by the other private respondents, officers of the SDA.
Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991, when his services
were terminated.
The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight
(28) years from 1963 to 1991.2 He began his work with the SDA on 15 July 1963 as a literature
evangelist, selling literature of the SDA over the island of Negros. From then on, petitioner worked
his way up the ladder and got promoted several times. In January, 1968, petitioner became the
Assistant Publishing Director in the West Visayan Mission of the SDA. In July, 1972, he was elevated
to the position of Pastor in the West Visayan Mission covering the island of Panay, and the
provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989,
petitioner was promoted as District Pastor of the Negros Mission of the SDA and was assigned at

Sagay, Balintawak and Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction.
In January, 1991, petitioner was transferred to Bacolod City. He held the position of district pastor
until his services were terminated on 31 October 1991.
On various occasions from August up to October, 1991, petitioner received several
communications3 from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him to
admit accountability and responsibility for the church tithes and offerings collected by his wife,
Mrs. Thelma Austria, in his district which amounted to P15,078.10, and to remit the same to the
Negros Mission.
In his written explanation dated 11 October 1991,4 petitioner reasoned out that he should not be
made accountable for the unremitted collections since it was private respondents Pastor Gideon
Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes and offerings since he
was very sick to do the collecting at that time.
Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat,
the president of the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to
convene the Executive Committee for the purpose of settling the dispute between him and the
private respondent, Pastor David Rodrigo. The dispute between Pastor Rodrigo and petitioner
arose from an incident in which petitioner assisted his friend, Danny Diamada, to collect from
Pastor Rodrigo the unpaid balance for the repair of the latter's motor vehicle which he failed to pay
to Diamada.5 Due to the assistance of petitioner in collecting Pastor Rodrigo's debt, the latter
harbored ill-feelings against petitioner. When news reached petitioner that Pastor Rodrigo was
about to file a complaint against him with the Negros Mission, he immediately proceeded to the
office of Pastor Buhat on the date abovementioned and asked the latter to convene the Executive
Committee. Pastor Buhat denied the request of petitioner since some committee members were
out of town and there was no quorum. Thereafter, the two exchanged heated arguments.
Petitioner then left the office of Pastor Buhat. While on his way out, petitioner overheard Pastor
Buhat saying, "Pastor daw inisog na ina iya (Pador you are talking tough)." 6 Irked by such remark,
petitioner returned to the office of Pastor Buhat, and tried to overturn the latter's table, though
unsuccessfully, since it was heavy. Thereafter, petitioner banged the attach case of Pastor Buhat
on the table, scattered the books in his office, and threw the phone. 7 Fortunately, private
respondents Pastors Yonilo Leopoldo and Claudio Montao were around and they pacified both
Pastor Buhat and petitioner.
On 17 October 1991, petitioner received a letter 8 inviting him and his wife to attend the Executive
Committee meeting at the Negros Mission Conference Room on 21 October 1991, at nine in the
morning. To be discussed in the meeting were the non-remittance of church collection and the
events that transpired on 16 October 1991. A fact-finding committee was created to investigate
petitioner. For two (2) days, from October 21 and 22, the fact-finding committee conducted an
investigation of petitioner. Sensing that the result of the investigation might be one-sided,
petitioner immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the
fact-finding committee, requesting that certain members of the fact-finding committee be
excluded in the investigation and resolution of the case.9 Out of the six (6) members requested to
inhibit themselves from the investigation and decision-making, only two (2) were actually excluded,
namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991, petitioner received a
letter of dismissal10 citing misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties, and commission of an offense against the person
of employer's duly authorized representative, as grounds for the termination of his services.
Reacting against the adverse decision of the SDA, petitioner filed a complaint11 on 14 November
1991, before the Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for
reinstatement with backwages and benefits, moral and exemplary damages and other labor law
benefits.
On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of petitioner, the
dispositive portion of which reads thus:
WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION
CORPORATION OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its officers, respondents

herein, are hereby ordered to immediately reinstate complainant Pastor Dionisio Austria to his
former position as Pastor of Brgy. Taculing, Progreso and Banago, Bacolod City, without loss of
seniority and other rights and backwages in the amount of ONE HUNDRED FIFTEEN THOUSAND
EIGHT HUNDRED THIRTY PESOS (P115,830.00) without deductions and qualificatioons.
Respondent CPUMCSDA is further ordered to pay complainant the following:
A. 13th month pay P 21,060.00
B. Allowance P 4,770.83
C. Service Incentive
Leave Pay P 3,461.85
D. Moral Damages P 50,000.00
E. Exemplary
Damages P 25,000.00
F. Attorney's Fee P 22,012.27
SO ORDERED.12
The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor
Labor Relations Commission, Fourth Division, Cebu City. In a decision, dated 26 August 1994, the
NLRC vacated the findings of the Labor Arbiter. The decretal portion of the NLRC decision states:
WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED dismissing
this case for want of merit.
SO ORDERED.13
Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the
NLRC issued a Resolution reversing its original decision. The dispositive portion of the resolution
reads:
WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and the
decision of the Labor Arbiter dated February 15, 1993 is REINSTATED.
SO ORDERED.14
In view of the reversal of the original decision of the NLRC, the SDA filed a motion for
reconsideration of the above resolution. Notable in the motion for reconsideration filed by private
respondents is their invocation, for the first time on appeal, that the Labor Arbiter has no
jurisdiction over the complaint filed by petitioner due to the constitutional provision on the
separation of church and state since the case allegedly involved an ecclesiastical affair to which the
State cannot interfere.
The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the
argument posed by private respondents and, accordingly, dismissed the complaint of petitioner.
The dispositive portion of the NLRC resolution dated 23 January 1996, subject of the present
petition, is as follows:
WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby granted.
Accordingly, this case is hereby DISMISSED for lack of jurisdiction.
SO ORDERED.15
Hence, the recourse to this Court by petitioner.
After the filing of the petition, the Court ordered the Office of the Solicitor General (the "OSG") to
file its comment on behalf of public respondent NLRC. Interestingly, the OSG filed a manifestation
and motion in lieu of comment16 setting forth its stand that it cannot sustain the resolution of the
NLRC. In its manifestation, the OSG submits that the termination of petitioner from his
employment may be questioned before the NLRC as the same is secular in nature, not
ecclesiastical. After the submission of memoranda of all the parties, the case was submitted for
decision.
The issues to be resolved in this petition are:
1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by
petitioner against the SDA;
2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and, as
such, involves the separation of church and state; and
3) Whether or not such termination is valid.

The first two issues shall be resolved jointly, since they are related.
Private respondents contend that by virtue of the doctrine of separation of church and state, the
Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since
the matter at bar allegedly involves the discipline of a religious minister, it is to be considered a
purely ecclesiastical affair to which the State has no right to interfere.
The contention of private respondents deserves scant consideration. The principle of separation of
church and state finds no application in this case.
The rationale of the principle of the separation of church and state is summed up in the familiar
saying, "Strong fences make good-neighbors."17 The idea advocated by this principle is to delineate
the boundaries between the two institutions and thus avoid encroachments by one against the
other because of a misunderstanding of the limits of their respective exclusive jurisdictions. 18 The
demarcation line calls on the entities to "render therefore unto Ceasar the things that are Ceasar's
and unto God the things that are God's."19 While the state is prohibited from interfering in purely
ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters. 20
The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from
taking cognizance of the same. An ecclesiastical affair is "one that concerns doctrine, creed, or
form of worship of the church, or the adoption and enforcement within a religious association of
needful laws and regulations for the government of the membership, and the power of excluding
from such associations those deemed unworthy of membership. 21 Based on this definition, an
ecclesiastical affair involves the relationship between the church and its members and relate to
matters of faith, religious doctrines, worship and governance of the congregation. To be concrete,
examples of this so-called ecclesiastical affairs to which the State cannot meddle are proceedings
for excommunication, ordinations of religious ministers, administration of sacraments and other
activities with attached religious significance. The case at bar does not even remotely concern any
of the abovecited examples. While the matter at hand relates to the church and its religious
minister it does not ipso facto give the case a religious significance. Simply stated, what is involved
here is the relationship of the church as an employer and the minister as an employee. It is purely
secular and has no relation whatsoever with the practice of faith, worship or doctrines of the
church. In this case, petitioner was not ex-communicated or expelled from the membership of the
SDA but was terminated from employment. Indeed, the matter of terminating an employee, which
is purely secular in nature, is different from the ecclesiastical act of expelling a member from the
religious congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for petitioner's dismissal,
namely: misappropriation of denominational funds, willful breach of trust, serious misconduct,
gross and habitual neglect of duties and commission of an offense against the person of his
employer's duly authorized representative, are all based on Article 282 of the Labor Code which
enumerates the just causes for termination of employment.22 By this alone, it is palpable that the
reason for petitioner's dismissal from the service is not religious in nature. Coupled with this is the
act of the SDA in furnishing NLRC with a copy of petitioner's letter of termination. As aptly stated
by the OSG, this again is an eloquent admission by private respondents that NLRC has jurisdiction
over the case. Aside from these, SDA admitted in a certification 23 issued by its officer, Mr. Ibesate,
that petitioner has been its employee for twenty-eight (28) years. SDA even registered petitioner
with the Social Security System (SSS) as its employee. As a matter of fact, the worker's records of
petitioner have been submitted by private respondents as part of their exhibits. From all of these it
is clear that when the SDA terminated the services of petitioner, it was merely exercising its
management prerogative to fire an employee which it believes to be unfit for the job. As such, the
State, through the Labor Arbiter and the NLRC, has the right to take cognizance of the case and to
determine whether the SDA, as employer, rightfully exercised its management prerogative to
dismiss an employee. This is in consonance with the mandate of the Constitution to afford full
protection to labor.
Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive
enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor
Code on post-employment states that "the provisions of this Title shall apply to all establishments

or undertakings, whether for profit or not." Obviously, the cited article does not make any
exception in favor of a religious corporation. This is made more evident by the fact that the Rules
Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of
Employment and Retirement, categorically includes religious institutions in the coverage of the law,
to wit:
Sec. 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated
for profit or not, including educational, medical, charitable and religious institutions and
organizations, in cases of regular employment with the exception of the Government and its
political subdivisions including government-owned or controlled corporations.24
With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of
separation of church and state to avoid its responsibilities as an employer under the Labor Code.
Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the
issue of lack of jurisdiction for the first time on appeal. It is already too late in the day for private
respondents to question the jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully
participated in the trials and hearings of the case from start to finish. The Court has already ruled
that the active participation of a party against whom the action war brought, coupled with his
failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending,
is tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of
the case and will bar said party from later on impugning the court or body's jurisdiction. 25 Thus, the
active participation of private respondents in the proceedings before the Labor Arbiter and the
NLRC mooted the question on jurisdiction.
The jurisdictional question now settled, we shall now proceed to determine whether the dismissal
of petitioner was valid.
At the outset, we note that as a general rule, findings of fact of administrative bodies like the NLRC
are binding upon this Court. A review of such findings is justified, however, in instances when the
findings of the NLRC differ from those of the labor arbiter, as in this case. 26 When the findings of
NLRC do not agree with those of the Labor Arbiter, this Court must of necessity review the records
to determine which findings should be preferred as more comfortable to the evidentiary facts. 27
We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of
proving that the termination was for a valid or authorized cause rests on the employer. 28 Thus,
private respondents must not merely rely on the weaknesses of petitioner's evidence but must
stand on the merits of their own defense.
The issue being the legality of petitioner's dismissal, the same must be measured against the
requisites for a valid dismissal, namely: (a) the employee must be afforded due process, i.e., he
must be given an opportunity to be heard and to defend himself, and; (b) the dismissal must be for
a valid cause as provided in Article 282 of the Labor Code. 29 Without the concurrence of this twin
requirements, the termination would, in the eyes of the law, be illegal. 30
Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and
Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code further require the
employer to furnish the employee with two (2) written notices, to wit: (a) a written notice served
on the employee specifying the ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side; and, (b) a written notice of termination
served on the employee indicating that upon due consideration of all the circumstances, grounds
have been established to justify his termination.
The first notice, which may be considered as the proper charge, serves to apprise the employee of
the particular acts or omissions for which his dismissal is sought. 31 The second notice on the other
hand seeks to inform the employee of the employer's decision to dismiss him. 32 This decision,
however, must come only after the employee is given a reasonable period from receipt of the first
notice within which to answer the charge and ample opportunity to be heard and defend himself
with the assistance of a representative, if he so desires.33 This is in consonance with the express
provision of the law on the protection to labor and the broader dictates of procedural due
process.34 Non-compliance therewith is fatal because these requirements are conditions sine
quanon before dismissal may be validly effected.35

Private respondent failed to substantially comply with the above requirements. With regard to the
first notice, the letter,36 dated 17 October 1991, which notified petitioner and his wife to attend
the meeting on 21 October 1991, cannot be construed as the written charge required by law. A
perusal of the said letter reveals that it never categorically stated the particular acts or omissions
on which petitioner's impending termination was grounded. In fact, the letter never even
mentioned that petitioner would be subject to investigation. The letter merely mentioned that
petitioner and his wife were invited to a meeting wherein what would be discussed were the
alleged unremitted church tithes and the events that transpired on 16 October 1991. Thus,
petitioner was surprised to find out that the alleged meeting turned out to be an investigation.
From the tenor of the letter, it cannot be presumed that petitioner was actually on the verge of
dismissal. The alleged grounds for the dismissal of petitioner from the service were only revealed
to him when the actual letter of dismissal was finally issued. For this reason, it cannot be said that
petitioner was given enough opportunity to properly prepare for his defense. While admittedly,
private respondents complied with the second requirement, the notice of termination, this does
not cure the initial defect of lack of the proper written charge required by law.
In the letter of termination,37 dated 29 October 1991, private respondents enumerated the
following as grounds for the dismissal of petitioner, namely: misappropriation of denominational
funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and
commission of an offense against the person of employer's duly authorized representative. Breach
of trust and misappropriation of denominational funds refer to the alleged failure of petitioner to
remit to the treasurer of the Negros Mission tithes, collections and offerings amounting to
P15,078.10 which were collected by his wife, Mrs. Thelma Austria, in the churches under his
jurisdiction. On the other hand, serious misconduct and commission of an offense against the
person of the employer's duly authorized representative pertain to the 16 October 1991 incident
wherein petitioner allegedly committed an act of violence in the office of Pastor Gideon Buhat. The
final ground invoked by private respondents is gross and habitual neglect of duties allegedly
committed by petitioner.
We cannot sustain the validity of dismissal based on the ground of breach of trust. Private
respondents allege that they have lost their confidence in petitioner for his failure, despite
demands, to remit the tithes and offerings amounting to P15,078.10, which were collected in his
district. A careful study of the voluminous records of the case reveals that there is simply no basis
for the alleged loss of confidence and breach of trust. Settled is the rule that under Article 282 (c)
of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally,
knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.38 It must rest on substantial grounds and not on the
employer's arbitrariness, whims, caprices or suspicion; otherwise the employee would eternally
remain at the mercy of the employer.39 It should be genuine and not simulated.40 This ground has
never been intended to afford an occasion for abuse, because of its subjective nature. The records
show that there were only six (6) instances when petitioner personally collected and received from
the church treasurers the tithes, collections, and donations for the church.41 The stenographic
notes on the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a witness for
private respondents, show that Pastor Austria was able to remit all his collections to the treasurer
of the Negros Mission.42
Though private respondents were able to establish that petitioner collected and received tithes
and donations several times, they were notable to establish that petitioner failed to remit the same
to the Negros Mission, and that he pocketed the amount and used it for his personal purpose. In
fact, as admitted by their own witness, Naomi Geniebla, petitioner remitted the amounts which he
collected to the Negros Mission for which corresponding receipts were issued to him. Thus, the
allegations of private respondents that petitioner breached their trust have no leg to stand on.
In a vain attempt to support their claim of breach of trust, private respondents try to pin on
petitioner the alleged non-remittance of the tithes collected by his wife. This argument deserves
little consideration. First of all, as proven by convincing and substantial evidence consisting of the
testimonies of the witnesses for private respondents who are church treasurers, it was Mrs.

Thelma Austria who actually collected the tithes and donations from them, and, who failed to remit
the same to the treasurer of the Negros Mission. The testimony of these church treasurers were
corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the
absence of conspiracy and collusion, which private respondents failed to demonstrate, between
petitioner and his wife, petitioner cannot be made accountable for the alleged infraction
committed by his wife. After all, they still have separate and distinct personalities. For this reason,
the Labor Arbiter found it difficult to see the basis for the alleged loss of confidence and breach of
trust. The Court does not find any cogent reason, therefore, to digress from the findings of the
Labor Arbiter which is fully supported by the evidence on record.
With respect to the grounds of serious misconduct and commission of an offense against the
person of the employer's duly authorized representative, we find the same unmeritorious and, as
such, do not warrant petitioner's dismissal from the service.
Misconduct has been defined as improper or wrong conduct. It is the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful in character,
and implies wrongful intent and not mere error in judgment.43 For misconduct to be considered
serious it must be of such grave and aggravated character and not merely trivial or
unimportant.44 Based on this standard, we believe that the act of petitioner in banging the attach
case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat,
although improper, cannot be considered as grave enough to be considered as serious misconduct.
After all, as correctly observed by the Labor Arbiter, though petitioner committed damage to
property, he did not physically assault Pastor Buhat or any other pastor present during the incident
of 16 October 1991. In fact, the alleged offense committed upon the person of the employer's
representatives was never really established or proven by private respondents. Hence, there is no
basis for the allegation that petitioner's act constituted serious misconduct or that the same was an
offense against the person of the employer's duly authorized representative. As such, the cited
actuation of petitioner does not justify the ultimate penalty of dismissal from employment. While
the Constitution does condone wrongdoing by the employee, it nevertheless urges a moderation of
the sanctions that may be applied to him in light of the many disadvantages that weigh heavily on
him like an albatross on his neck.45 Where a penalty less punitive would suffice, whatever missteps
may have been committed by the worker ought not be visited with a consequence so severe such
as dismissal from employment.46 For the foregoing reasons, we believe that the minor infraction
committed by petitioner does not merit the ultimate penalty of dismissal.
The final ground alleged by private respondents in terminating petitioner, gross and habitual
neglect of duties, does not require an exhaustive discussion. Suffice it to say that all private
respondents had were allegations but not proof. Aside from merely citing the said ground, private
respondents failed to prove culpability on the part of petitioner. In fact, the evidence on record
shows otherwise. Petitioner's rise from the ranks disclose that he was actually a hard-worker.
Private respondents' evidence,47 which consisted of petitioner's Worker's Reports, revealed how
petitioner travelled to different churches to attend to the faithful under his care. Indeed, he
labored hard for the SDA, but, in return, he was rewarded with a dismissal from the service for a
non-existent cause.
In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated
from service without just or lawful cause. Having been illegally dismissed, petitioner is entitled to
reinstatement to his former position without loss of seniority right 48 and the payment of full
backwages without any deduction corresponding to the period from his illegal dismissal up to
actual reinstatement.46
WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public
respondent National Labor Relations Commission, rendered on 23 January 1996, is NULLIFIED and
SET ASIDE. The Decision of the Labor Arbiter, dated 15 February 1993, is REINSTATED and hereby
AFFIRMED.1wphi1.nt
SO ORDERED.
G.R. No. 160236
October 16, 2009

"G" HOLDINGS, INC., Petitioner,

vs.
NATIONAL MINES AND ALLIED WORKERS UNION Local 103 (NAMAWU); SHERIFFS RICHARD H.
APROSTA and ALBERTO MUNOZ, all acting Sheriffs; DEPARTMENT OF LABOR AND EMPLOYMENT,
Region VI, Bacolod District Office, Bacolod City, Respondents.
DECISION
NACHURA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the October 14, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 75322.
The Facts
The petitioner, "G" Holdings, Inc. (GHI), is a domestic corporation primarily engaged in the business
of owning and holding shares of stock of different companies. 2 It was registered with the Securities
and Exchange Commission on August 3, 1992. Private respondent, National Mines and Allied
Workers Union Local 103 (NAMAWU), was the exclusive bargaining agent of the rank and file
employees of Maricalum Mining Corporation (MMC),3 an entity operating a copper mine and mill
complex at Sipalay, Negros Occidental.4
MMC was incorporated by the Development Bank of the Philippines (DBP) and the Philippine
National Bank (PNB) on October 19, 1984, on account of their foreclosure of Marinduque Mining
and Industrial Corporations assets. MMC started its commercial operations in August 1985. Later,
DBP and PNB transferred it to the National Government for disposition or privatization because it
had become a non-performing asset.5
On October 2, 1992, pursuant to a Purchase and Sale Agreement6 executed between GHI and Asset
Privatization Trust (APT), the former bought ninety percent (90%) of MMCs shares and financial
claims.7 These financial claims were converted into three Promissory Notes 8 issued by MMC in
favor of GHI totaling P500M and secured by mortgages over MMCs properties. The notes, which
were similarly worded except for their amounts, read as follows:
PROMISSORY NOTE
AMOUNT - Php114,715,360.00

[Php186,550,560.00 in the second

note, and Php248,734,080.00 in the
third note.]

MAKATI, METRO MANILA, PHILIPPINES, October 2, 1992

For Value Received, MARICALUM MINING CORPORATION (MMC) with postal address at 4th Floor,
Manila Memorial Park Bldg., 2283 Pasong Tamo Extension, Makati, Metro Manila, Philippines,
hereby promises to pay "G" HOLDINGS, INC., at its office at Phimco Compound, F. Manalo Street,
Punta, Sta. Ana, Manila, the amount of PESOS ONE HUNDRED FOURTEEN MILLION, SEVEN
HUNDRED FIFTEEN THOUSAND AND THREE HUNDRED SIXTY (Php114,715,360.00) ["PESOS ONE
HUNDRED EIGHTY SIX MILLION FIVE HUNDRED FIFTY THOUSAND FIFE HUNDRED AND SIXTY
(Php186,550,560.00)" in the second note, and "PESOS TWO HUNDRED FORTY EIGHT MILLION,
SEVEN HUNDRED THIRTY FOUR THOUSAND AND EIGHTY (Php248,734,080.00)" in the third note],
PHILIPPINE CURRENCY, on or before October 2, 2002. Interest shall accrue on the amount of this
Note at a rate per annum equal to the interest of 90-day Treasury Bills prevailing on the Friday
preceding the maturity date of every calendar quarter.
As collateral security, MMC hereby establishes and constitutes in favor of "G" HOLDINGS, INC., its
successors and/or assigns:
1. A mortgage over certain parcels of land, more particularly listed and described in the Sheriffs
Certificate of Sale dated September 7, 1984 issued by the Ex-Officio Provincial Sheriff of Negros
Occidental, Rolando V. Ramirez, with office at Bacolod City following the auction sale conducted
pursuant to the provisions of Act 3135, a copy of which certificate of sale is hereto attached as
Annex "A" and made an integral part hereof;
2. A chattel mortgage over assets and personal properties more particularly listed and described in
the Sheriffs Certificate of Sale dated September 7, 1984 issued by the Ex-Officio Provincial Sheriff
of Negros Occidental, Rolando V. Ramirez, with office at Bacolod City following the auction

conducted pursuant to the provisions of Act 1508, a copy of which Certificate of Sale is hereto
attached as Annex "B" and made an integral part hereof.
3. Mortgages over assets listed in APT Specific Catalogue GC-031 for MMC, a copy of which
Catalogue is hereby made an integral part hereof by way of reference, as well as assets presently in
use by MMC but which are not listed or included in paragraphs 1 and 2 above and shall include all
assets that may hereinafter be acquired by MMC.
MARICALUM MINING CORPORATION
(Maker)
x x x x9
Upon the signing of the Purchase and Sale Agreement and upon the full satisfaction of the
stipulated down payment, GHI immediately took physical possession of the mine site and its
facilities, and took full control of the management and operation of MMC. 10
Almost four years thereafter, or on August 23, 1996, a labor dispute (refusal to bargain collectively
and unfair labor practice) arose between MMC and NAMAWU, with the latter eventually filing with
the National Conciliation and Mediation Board of Bacolod City a notice of strike. 11 Then Labor
Secretary, now Associate Justice of this Court, Leonardo A. Quisumbing, later assumed jurisdiction
over the dispute and ruled in favor of NAMAWU. In his July 30, 1997 Order in OS-AJ-10-96-014
(Quisumbing Order), Secretary Quisumbing declared that the lay-off (of workers) implemented on
May 7, 1996 and October 7, 1996 was illegal and that MMC committed unfair labor practice. He
then ordered the reinstatement of the laid-off workers, with payment of full backwages and
benefits, and directed the execution of a new collective bargaining agreement (CBA) incorporating
the terms and conditions of the previous CBA providing for an annual increase in the workers daily
wage.12 In two separate casesG.R. Nos. 133519 and 138996filed with this Court, we sustained
the validity of the Quisumbing Order, which became final and executory on January 26, 2000. 13
On May 11, 2001, then Acting Department of Labor and Employment (DOLE) Secretary, now also an
Associate Justice of this Court, Arturo D. Brion, on motion of NAMAWU, directed the issuance of a
partial writ of execution (Brion Writ), and ordered the DOLE sheriffs to proceed to the MMC
premises for the execution of the same.14Much later, in 2006, this Court, in G.R. Nos. 157696-97,
entitled Maricalum Mining Corporation v. Brion and NAMAWU,15 affirmed the propriety of the
issuance of the Brion Writ.
The Brion Writ was not fully satisfied because MMCs resident manager resisted its
enforcement.16 On motion of NAMAWU, then DOLE Secretary Patricia A. Sto. Tomas ordered the
issuance of the July 18, 2002 Alias Writ of Execution and Break-Open Order (Sto. Tomas Writ).17 On
October 11, 2002, the respondent acting sheriffs, the members of the union, and several armed
men implemented the Sto. Tomas Writ, and levied on the properties of MMC located at its
compound in Sipalay, Negros Occidental.18
On October 14, 2002, GHI filed with the Regional Trial Court (RTC) of Kabankalan City, Negros
Occidental, Special Civil Action (SCA) No. 1127 for Contempt with Prayer for the Issuance of a
Temporary Restraining Order (TRO) and Writ of Preliminary Injunction and to Nullify the Sheriffs
Levy on Properties.19 GHI contended that the levied properties were the subject of a Deed of Real
Estate and Chattel Mortgage, dated September 5, 1996 20executed by MMC in favor of GHI to
secure the aforesaid P550M promissory notes; that this deed was registered on February 24,
2000;21 and that the mortgaged properties were already extrajudicially foreclosed in July 2001 and
sold to GHI as the highest bidder on December 3, 2001, as evidenced by the Certificate of Sale
dated December 4, 2001.22
The trial court issued ex parte a TRO effective for 72 hours, and set the hearing on the application
for a writ of injunction.23 On October 17, 2002, the trial court ordered the issuance of a Writ of
Injunction (issued on October 18, 2002) 24 enjoining the DOLE sheriffs from further enforcing the
Sto. Tomas Writ and from conducting any public sale of the levied-on properties, subject to GHIs
posting of a P5M bond.25
Resolving, among others, NAMAWUs separate motions for the reconsideration of the injunction
order and for the dismissal of the case, the RTC issued its December 4, 2002 Omnibus Order, 26 the
dispositive portion of which reads:

WHEREFORE, premises considered, respondent NAMAWU Local 103s Motion for Reconsideration
dated October 23, 2002 for the reconsideration of the Order of this Court directing the issuance of
Writ of Injunction prayed for by petitioner and the Order dated October 18, 2002 approving
petitioners Injunction Bond in the amount of P5,000,000.00 is hereby DENIED.
Respondents Motion to Dismiss as embodied in its Opposition to Extension of Temporary
Restraining Order and Issuance of Writ of Preliminary Injunction with Motion to Dismiss and
Suspend Period to File Answer dated October 15, 2002 is likewise DENIED.
Petitioners Urgent Motion for the return of the levied firearms is GRANTED. Pursuant thereto,
respondent sheriffs are ordered to return the levied firearms and handguns to the petitioner
provided the latter puts [up] a bond in the amount of P332,200.00.
Respondents lawyer, Atty. Jose Lapak, is strictly warned not to resort again to disrespectful and
contemptuous language in his pleadings, otherwise, the same shall be dealt with accordingly.
SO ORDERED.27
Aggrieved, NAMAWU filed with the CA a petition for certiorari under Rule 65, assailing the October
17, 18 and December 4, 2002 orders of the RTC.28
After due proceedings, on October 14, 2003, the appellate court rendered a Decision setting aside
the RTC issuances and directing the immediate execution of the Sto. Tomas Writ. The CA ruled,
among others, that the circumstances surrounding the execution of the September 5, 1996 Deed of
Real Estate and Chattel Mortgage yielded the conclusion that the deed was sham, fictitious and
fraudulent; that it was executed two weeks after the labor dispute arose in 1996, but surprisingly,
it was registered only on February 24, 2000, immediately after the Court affirmed with finality the
Quisumbing Order. The CA also found that the certificates of title to MMCs real properties did not
contain any annotation of a mortgage lien, and, suspiciously, GHI did not intervene in the long
drawn-out labor proceedings to protect its right as a mortgagee of virtually all the properties of
MMC.29
The CA further ruled that the subsequent foreclosure of the mortgage was irregular, effected
precisely to prevent the satisfaction of the judgment against MMC. It noted that the foreclosure
proceedings were initiated in July 2001, shortly after the issuance of the Brion Writ; and, more
importantly, the basis for the extrajudicial foreclosure was not the failure of MMC to pay the
mortgage debt, but its failure "to satisfy any money judgment against it rendered by a court or
tribunal of competent jurisdiction, in favor of any person, firm or entity, without any legal ground
or reason."30 Further, the CA pierced the veil of corporate fiction of the two corporations. 31 The
dispositive portion of the appellate courts decision reads:
WHEREFORE, in view of the foregoing considerations, the petition is GRANTED. The October 17,
2002 and the December 4, 2002 Order of the RTC, Branch 61 of Kabankalan City, Negros Occidental
are hereby ANNULLED and SET ASIDE for having been issued in excess or without authority. The
Writ of Preliminary Injunction issued by the said court is lifted, and the DOLE Sheriff is directed to
immediately enforce the Writ of Execution issued by the Department of Labor and Employment in
the case "In re: Labor Dispute in Maricalum Mining Corporation" docketed as OS-AJ-10-96-01
(NCMB-RB6-08-96).32
The Issues
Dissatisfied, GHI elevated the case to this Court via the instant petition for review on certiorari,
raising the following issues:
I
WHETHER OR NOT GHI IS A PARTY TO THE LABOR DISPUTE BETWEEN NAMAWU AND MMC.
II
WHETHER OR NOT, ASSUMING ARGUENDO THAT THE PERTINENT DECISION OR ORDER IN THE SAID
LABOR DISPUTE BETWEEN MMC AND NAMAWU MAY BE ENFORCED AGAINST GHI, THERE IS
ALREADY A FINAL DEETERMINATION BY THE SUPREME COURT OF THE RIGHTS OF THE PARTIES IN
SAID LABOR DISPUTE CONSIDERING THE PENDENCY OF G.R. NOS. 157696-97.
III
WHETHER OR NOT GHI IS THE ABSOLUTE OWNER OF THE PROPERTIES UNLAWFULLY GARNISHED
BY RESPONDENTS SHERIFFS.

IV
WHETHER OR NOT THE HONORABLE HENRY D. ARLES CORRECTLY ISSUED A WRIT OF INJUNCTION
AGAINST THE UNLAWFUL EXECUTIOIN ON GHIS PROPERTIES.
V
WHETHER OR NOT THE VALIDITY OF THE DEED OF REAL AND CHATTEL MORTGAGE OVER THE
SUBJECT PROPERTIES BETWEEN MMC AND GHI MAY BE COLLATERALLY ATTACKED.
VI
WHETHER OR NOT, ASSUMING ARGUENDO THAT THE VALIDITY OF THE SAID REAL AND CHATTEL
MORTGAGE MAY BE COLLATERALLY ATTACKED, THE SAID MORTGAGE IS SHAM, FICTITIOUS AND
FRAUDULENT.
VII
WHETHER OR NOT GHI IS A DISTINCT AND SEPARATE CORPORATE ENTITY FROM MMC.
VIII
WHETHER OR NOT GHI CAN BE PREVENTED THROUGH THE ISSUANCE OF A RESTRAINING ORDER
OR INJUNCTION FROM TAKING POSSESSION OR BE DISPOSSESSED OF ASSETS PURCHASED BY IT
FROM APT.33
Stripped of non-essentials, the core issue is whether, given the factual circumstances obtaining, the
RTC properly issued the writ of injunction to prevent the enforcement of the Sto. Tomas Writ. The
resolution of this principal issue, however, will necessitate a ruling on the following key and
interrelated questions:
1. Whether the mortgage of the MMCs properties to GHI was a sham;
2. Whether there was an effective levy by the DOLE upon the MMCs real and personal properties;
and
3. Whether it was proper for the CA to pierce the veil of corporate fiction between MMC and GHI.
Our Ruling
Before we delve into an extended discussion of the foregoing issues, it is essential to take judicial
cognizance of cases intimately linked to the present controversy which had earlier been elevated to
and decided by this Court.
Judicial Notice.
Judicial notice must be taken by this Court of its Decision in Maricalum Mining Corporation v. Hon.
Arturo D. Brion and NAMAWU,34 in which we upheld the right of herein private respondent,
NAMAWU, to its labor claims. Upon the same principle of judicial notice, we acknowledge our
Decision in Republic of the Philippines, through its trustee, the Asset Privatization Trust v. "G"
Holdings, Inc.,35 in which GHI was recognized as the rightful purchaser of the shares of stocks of
MMC, and thus, entitled to the delivery of the company notes accompanying the said purchase.
These company notes, consisting of three (3) Promissory Notes, were part of the documents
executed in 1992 in the privatization sale of MMC by the Asset Privatization Trust (APT) to GHI.
Each of these notes uniformly contains stipulations "establishing and constituting in favor of GHI"
mortgages over MMCs real and personal properties. The stipulations were subsequently
formalized in a separate document denominated Deed of Real Estate and Chattel Mortgage on
September 5, 1996. Thereafter, the Deed was registered on February 4, 2000.36
We find both decisions critically relevant to the instant dispute. In fact, they should have guided
the courts below in the disposition of the controversy at their respective levels. To repeat, these
decisions respectively confirm the right of NAMAWU to its labor claims 37 and affirm the right of GHI
to its financial and mortgage claims over the real and personal properties of MMC, as will be
explained below. The assailed CA decision apparently failed to consider the impact of these two
decisions on the case at bar. Thus, we find it timely to reiterate that: "courts have also taken
judicial notice of previous cases to determine whether or not the case pending is a moot one or
whether or not a previous ruling is applicable to the case under consideration." 38
However, the CA correctly assessed that the authority of the lower court to issue the challenged
writ of injunction depends on the validity of the third partys (GHIs) claim of ownership over the
property subject of the writ of execution issued by the labor department. Accordingly, the main
inquiry addressed by the CA decision was whether GHI could be treated as a third party or a

stranger to the labor dispute, whose properties were beyond the reach of the Writ of Execution
dated December 18, 2001.39
In this light, all the more does it become imperative to take judicial notice of the two cases
aforesaid, as they provide the necessary perspective to determine whether GHI is such a party with
a valid ownership claim over the properties subject of the writ of execution. In Juaban v.
Espina,40 we held that "in some instances, courts have also taken judicial notice of proceedings in
other cases that are closely connected to the matter in controversy. These cases may be so closely
interwoven, or so clearly interdependent, as to invoke a rule of judicial notice." The two cases that
we have taken judicial notice of are of such character, and our review of the instant case cannot
stray from the findings and conclusions therein.
Having recognized these crucial Court rulings, situating the facts in proper perspective, we now
proceed to resolve the questions identified above.
The mortgage was not a sham.
Republic etc., v. "G" Holdings, Inc. acknowledged the existence of the Purchase and Sale
Agreement between the APT and the GHI, and recounts the facts attendant to that transaction, as
follows:
The series of negotiations between the petitioner Republic of the Philippines, through the APT as
its trustee, and "G" Holdings culminated in the execution of a purchase and sale agreement on
October 2, 1992. Under the agreement, the Republic undertook to sell and deliver 90% of the
entire issued and outstanding shares of MMC, as well as its company notes, to "G" Holdings in
consideration of the purchase price of P673,161,280. It also provided for a down payment
of P98,704,000 with the balance divided into four tranches payable in installment over a period of
ten years."41
The "company notes" mentioned therein were actually the very same three (3) Promissory Notes
amounting toP550M, issued by MMC in favor of GHI. As already adverted to above, these notes
uniformly contained stipulations "establishing and constituting" mortgages over MMCs real and
personal properties.
It may be remembered that APT acquired the MMC from the PNB and the DBP. Then, in
compliance with its mandate to privatize government assets, APT sold the aforesaid MMC shares
and notes to GHI. To repeat, this Court has recognized this Purchase and Sale Agreement in
Republic, etc., v. "G" Holdings, Inc.
The participation of the Government, through APT, in this transaction is significant. Because the
Government had actively negotiated and, eventually, executed the agreement, then the
transaction is imbued with an aura of official authority, giving rise to the presumption of regularity
in its execution. This presumption would cover all related transactional acts and documents
needed to consummate the privatization sale, inclusive of the Promissory Notes. It is obvious, then,
that the Government, through APT, consented to the "establishment and constitution" of the
mortgages on the assets of MMC in favor of GHI, as provided in the notes. Accordingly, the notes
(and the stipulations therein) enjoy the benefit of the same presumption of regularity accorded to
government actions. Given the Government consent thereto, and clothed with the presumption of
regularity, the mortgages cannot be characterized as sham, fictitious or fraudulent.
Indeed, as mentioned above, the three (3) Promissory Notes, executed on October 2, 1992,
"established and constituted" in favor of GHI the following mortgages:
1. A mortgage over certain parcels of land, more particularly listed and described in the Sheriffs
Certificate of Sale dated September 7, 1984 issued by the Ex-Officio Provincial Sheriff of Negros
Occidental, Rolando V. Ramirez, with office at Bacolod City following the auction sale conducted
pursuant to the provisions of Act 3135, a copy of which certificate of sale is hereto attached as
Annex "A" and made an integral part hereof;
2. A chattel mortgage over assets and personal properties more particularly listed and described in
the Sheriffs Certificate of Sale dated September 7, 1984 issued by the Ex-Officio Provincial Sheriff
of Negros Occidental, Rolando V. Ramirez, with office at Bacolod City following the auction
conducted pursuant to the provision of Act 1508, a copy of which Certificate of Sale is hereto
attached as Annex "B" and made an integral part hereof.

3. Mortgages over assets listed in APT Specific catalogue GC-031 for MMC, a copy of which
Catalogue is hereby made an integral part hereof by way of reference, as well as assets presently in
use by MMC but which are not listed or included in paragraphs 1 and 2 above and shall include all
assets that may hereinafter be acquired by MMC.42
It is difficult to conceive that these mortgages, already existing in 1992, almost four (4) years
before NAMAWU filed its notice of strike, were a "fictitious" arrangement intended to defraud
NAMAWU. After all, they were agreed upon long before the seeds of the labor dispute germinated.
While it is true that the Deed of Real Estate and Chattel Mortgage was executed only on September
5, 1996, it is beyond cavil that this formal document of mortgage was merely a derivative of the
original mortgage stipulations contained in the Promissory Notes of October 2, 1992. The execution
of this Deed in 1996 does not detract from, but instead reinforces, the manifest intention of the
parties to "establish and constitute" the mortgages on MMCs real and personal properties.
Apparently, the move to execute a formal document denominated as the Deed of Real Estate and
Chattel Mortgage came about after the decision of the RTC of Manila in Civil Case No. 95-76132
became final in mid-1996. This conclusion surfaces when we consider the genesis of Civil Case No.
95-76132 and subsequent incidents thereto, as narrated in Republic, etc. v. "G" Holdings, Inc., viz:
Subsequently, a disagreement on the matter of when installment payments should commence
arose between the parties. The Republic claimed that it should be on the seventh month from the
signing of the agreement while "G" Holdings insisted that it should begin seven months after the
fulfillment of the closing conditions.
Unable to settle the issue, "G" Holdings filed a complaint for specific performance and damages
with the Regional Trial Court of Manila, Branch 49, against the Republic to compel it to close the
sale in accordance with the purchase and sale agreement. The complaint was docketed as Civil
Case No. 95-76132.
During the pre-trial, the respective counsels of the parties manifested that the issue involved in the
case was one of law and submitted the case for decision. On June 11, 1996, the trial court rendered
its decision. It ruled in favor of "G" Holdings and held:
"In line with the foregoing, this Court having been convinced that the Purchase and Sale Agreement
is indeed subject to the final closing conditions prescribed by Stipulation No. 5.02 and conformably
to Rule 39, Section 10 of the Rules of Court, accordingly orders that the Asset Privatization Trust
execute the corresponding Document of Transfer of the subject shares and financial notes and
cause the actual delivery of subject shares and notes to "G" Holdings, Inc., within a period of
thirty (30) days from receipt of this Decision,and after "G" Holdings Inc., shall have paid in full the
entire balance, at its present value of P241,702,122.86, computed pursuant to the prepayment
provisions of the Agreement. Plaintiff shall pay the balance simultaneously with the delivery of the
Deed of Transfer and actual delivery of the shares and notes.
SO ORDERED."
The Solicitor General filed a notice of appeal on behalf of the Republic on June 28, 1996. Contrary
to the rules of procedure, however, the notice of appeal was filed with the Court of Appeals (CA),
not with the trial court which rendered the judgment appealed from.
No other judicial remedy was resorted to until July 2, 1999 when the Republic, through the APT,
filed a petition for annulment of judgment with the CA. It claimed that the decision should be
annulled on the ground of abuse of discretion amounting to lack of jurisdiction on the part of the
trial court. x x x
Finding that the grounds necessary for the annulment of judgment were inexistent, the appellate
court dismissed the petition. x x x x43
With the RTC decision having become final owing to the failure of the Republic to perfect an
appeal, it may have become necessary to execute the Deed of Real Estate and Chattel Mortgage on
September 5, 1996, in order to enforce the trial courts decision of June 11, 1996. This appears to
be the most plausible explanation for the execution of the Deed of Real Estate and Chattel
Mortgage only in September 1996. Even as the parties had already validly constituted the
mortgages in 1992, as explicitly provided in the Promissory Notes, a specific deed of mortgage in a
separate document may have been deemed necessary for registration purposes. Obviously, this

explanation is more logical and more sensible than the strained conjecture that the mortgage was
executed on September 5, 1996 only for the purpose of defrauding NAMAWU.
It is undeniable that the Deed of Real Estate and Chattel Mortgage was formally documented two
weeks after NAMAWU filed its notice of strike against MMC on August 23, 1996. However, this fact
alone cannot give rise to an adverse inference for two reasons. First, as discussed above, the
mortgages had already been "established and constituted" as early as October 2, 1992 in the
Promissory Notes, showing the clear intent of the parties to impose a lien upon MMCs
properties. Second, the mere filing of a notice of strike by NAMAWU did not, as yet, vest in
NAMAWU any definitive right that could be prejudiced by the execution of the mortgage deed.
The fact that MMCs obligation to GHI is not reflected in the formers financial statementsa
circumstance made capital of by NAMAWU in order to cast doubt on the validity of the mortgage
deedis of no moment. By itself, it does not provide a sufficient basis to invalidate this public
document. To say otherwise, and to invalidate the mortgage deed on this pretext, would furnish
MMC a convenient excuse to absolve itself of its mortgage obligations by adopting the simple
strategy of not including the obligations in its financial statements. It would ignore our ruling
in Republic, etc. v. "G" Holdings, Inc., which obliged APT to deliver the MMC shares and financial
notes to GHI. Besides, the failure of the mortgagor to record in its financial statements its loan
obligations is surely not an essential element for the validity of mortgage agreements, nor will it
independently affect the right of the mortgagee to foreclose.
Contrary to the CA decision, Tanongon v. Samson44 is not "on all fours" with the instant case. There
are material differences between the two cases. At issue in Tanongon was a third-party claim
arising from a Deed of Absolute Sale executed between Olizon and Tanongon on July 29, 1997,
after the NLRC decision became final and executory on April 29, 1997. In the case at bar, what is
involved is a loan with mortgage agreement executed on October 2, 1992, well ahead of the
unions notice of strike on August 23, 1996. No presumption of regularity inheres in the deed of
sale in Tanongon, while the participation of APT in this case clothes the transaction in 1992 with
such a presumption that has not been successfully rebutted. In Tanongon, the conduct of a fullblown trial led to the findingduly supported by evidencethat the voluntary sale of the assets of
the judgment debtor was madein bad faith. Here, no trial was held, owing to the motion to dismiss
filed by NAMAWU, and the CA failed to consider the factual findings made by this Court in Republic,
etc. v. "G" Holdings, Inc. Furthermore, in Tanongon,the claimant did not exercise his option to file a
separate action in court, thus allowing the NLRC Sheriff to levy on execution and to determine the
rights of third-party claimants.45 In this case, a separate action was filed in the regular courts by
GHI, the third-party claimant. Finally, the questioned transaction in Tanongon was a plain,
voluntary transfer in the form of a sale executed by the judgment debtor in favor of a dubious
third-party, resulting in the inability of the judgment creditor to satisfy the judgment. On the other
hand, this case involves an involuntary transfer (foreclosure of mortgage) arising from a loan
obligation that well-existed long before the commencement of the labor claims of the private
respondent.
Three other circumstances have been put forward by the CA to support its conclusion that the
mortgage contract is a sham. First, the CA considered it highly suspect that the Deed of Real Estate
and Chattel Mortgage was registered only on February 4, 2000, "three years after its execution,
and almost one month after the Supreme Court rendered its decision in the labor
dispute."46 Equally suspicious, as far as the CA is concerned, is the fact that the mortgages were
foreclosed on July 31, 2001, after the DOLE had already issued a Partial Writ of Execution on May 9,
2001.47 To the appellate court, the timing of the registration of the mortgage deed was too
coincidental, while the date of the foreclosure signified that it was "effected precisely to prevent
the satisfaction of the judgment awards."48 Furthermore, the CA found that the mortgage deed
itself was executed without any consideration, because at the time of its execution, all the assets of
MMC had already been transferred to GHI.49
These circumstances provided the CA with sufficient justification to apply Article 1387 of the Civil
Code on presumed fraudulent transactions, and to declare that the mortgage deed was void for
being simulated and fictitious.50

We do not agree. We find this Courts ruling in MR Holdings, Ltd. v. Sheriff Bajar51 pertinent and
instructive:
Article 1387 of the Civil Code of the Philippines provides:
"Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are
presumed to have been entered into in fraud of creditors, when the donor did not reserve
sufficient property to pay all debts contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made by persons against whom
some judgment has been rendered in any instance or some writ of attachment has been issued.
The decision or attachment need not refer to the property alienated, and need not have been
obtained by the party seeking rescission.
In addition to these presumptions, the design to defraud creditors may be proved in any other
manner recognized by law and of evidence."
This article presumes the existence of fraud made by a debtor. Thus, in the absence of satisfactory
evidence to the contrary, an alienation of a property will be held fraudulent if it is made after a
judgment has been rendered against the debtor making the alienation. This presumption of fraud is
not conclusive and may be rebutted by satisfactory and convincing evidence. All that is necessary is
to establish affirmatively that the conveyance is made in good faith and for a sufficient and
valuable consideration.
The "Assignment Agreement" and the "Deed of Assignment" were executed for valuable
considerations. Patent from the "Assignment Agreement" is the fact that petitioner assumed the
payment of US$18,453,450.12 to ADB in satisfaction of Marcoppers remaining debt as of March
20, 1997. Solidbank cannot deny this fact considering that a substantial portion of the said
payment, in the sum of US$13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its
major stockholder.
The facts of the case so far show that the assignment contracts were executed in good faith. The
execution of the "Assignment Agreement" on March 20, 1997 and the "Deed of Assignment" on
December 8,1997 is not the alphaof this case. While the execution of these assignment contracts
almost coincided with the rendition on May 7, 1997 of the Partial Judgment in Civil Case No. 9680083 by the Manila RTC, however, there was no intention on the part of petitioner to defeat
Solidbanks claim. It bears reiterating that as early as November 4, 1992, Placer Dome had already
bound itself under a "Support and Standby Credit Agreement" to provide Marcopper with cash
flow support for the payment to ADB of its obligations. When Marcopper ceased operations on
account of disastrous mine tailings spill into the Boac River and ADB pressed for payment of the
loan, Placer Dome agreed to have its subsidiary, herein petitioner, pay ADB the amount of
US$18,453,450.12.
Thereupon, ADB and Marcopper executed, respectively, in favor of petitioner an "Assignment
Agreement" and a "Deed of Assignment." Obviously, the assignment contracts were connected
with transactions that happened long before the rendition in 1997 of the Partial Judgment in Civil
Case No. 96-80083 by the Manila RTC. Those contracts cannot be viewed in isolation. If we may
add, it is highly inconceivable that ADB, a reputable international financial organization, will
connive with Marcopper to feign or simulate a contract in 1992 just to defraud Solidbank for its
claim four years thereafter. And it is equally incredible for petitioner to be paying the huge sum of
US$18,453,450.12 to ADB only for the purpose of defrauding Solidbank of the sum
ofP52,970,756.89.
It is said that the test as to whether or not a conveyance is fraudulent is does it prejudice the
rights of creditors? We cannot see how Solidbanks right was prejudiced by the assignment
contracts considering that substantially all of Marcoppers properties were already covered by the
registered "Deed of Real Estate and Chattel Mortgage" executed by Marcopper in favor of ADB as
early as November 11, 1992. As such, Solidbank cannot assert a better right than ADB, the latter
being a preferred creditor. It is basic that mortgaged properties answer primarily for the
mortgaged credit, not for the judgment credit of the mortgagors unsecured creditor. Considering
that petitioner assumed Marcoppers debt to ADB, it follows that Solidbanks right as judgment
creditor over the subject properties must give way to that of the former.52

From this ruling in MR Holdings, we can draw parallel conclusions. The execution of the subsequent
Deed of Real Estate and Chattel Mortgage on September 5, 1996 was simply the formal
documentation of what had already been agreed in the seminal transaction (the Purchase and Sale
Agreement) between APT and GHI. It should not be viewed in isolation, apart from the original
agreement of October 2, 1992. And it cannot be denied that this original agreement was supported
by an adequate consideration. The APT was even ordered by the court to deliver the shares and
financial notes of MMC in exchange for the payments that GHI had made.
It was also about this time, in 1996, that NAMAWU filed a notice of strike to protest non-payment
of its rightful labor claims.53 But, as already mentioned, the outcome of that labor dispute was yet
unascertainable at that time, and NAMAWU could only have hoped for, or speculated about, a
favorable ruling. To paraphrase MR Holdings, we cannot see how NAMAWUs right was prejudiced
by the Deed of Real Estate and Chattel Mortgage, or by its delayed registration, when substantially
all of the properties of MMC were already mortgaged to GHI as early as October 2, 1992. Given this
reality, the Court of Appeals had no basis to conclude that this Deed of Real Estate and Chattel
Mortgage, by reason of its late registration, was a simulated or fictitious contract.
The importance of registration and its binding effect is stated in Section 51 of the Property
Registration Decree or Presidential Decree (P.D.) No. 1529,54 which reads:
SECTION 51. Conveyance and other dealings by registered owner.An owner of registered land
may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing
laws. He may use such forms, deeds, mortgages, leases or other voluntary instrument as are
sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or effect registered land, shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties and as evidence of authority to the
Registry of Deeds to make registration.
The act of registration shall be the operative act to convey or affect the land insofar as third
persons are concerned, and in all cases under this Decree, the registration shall be made in the
Office of the Register of Deeds for the province or the city where the land lies. 55
Under the Torrens system, registration is the operative act which gives validity to the transfer or
creates a lien upon the land. Further, entrenched in our jurisdiction is the doctrine that registration
in a public registry creates constructive notice to the whole world.56 Thus, Section 51 of Act No.
496, as amended by Section 52 of P.D. No. 1529, provides:
SECTION 52. Constructive notice upon registration.Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed
or entered in the Office of the Register of Deeds for the province or city where the land to which it
relates lies, be constructive notice to all persons from the time of such registering, filing or
entering.
But, there is nothing in Act No. 496, as amended by P.D. No. 1529, that imposes a period within
which to register annotations of "conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land." If liens were not so registered, then it "shall operate
only as a contract between the parties and as evidence of authority to the Registry of Deeds to
make registration." If registered, it "shall be the operative act to convey or affect the land insofar
as third persons are concerned." The mere lapse of time from the execution of the mortgage
document to the moment of its registration does not affect the rights of a mortgagee.
Neither will the circumstance of GHIs foreclosure of MMCs properties on July 31, 2001, or after
the DOLE had already issued a Partial Writ of Execution on May 9, 2001 against MMC, support the
conclusion of the CA that GHIs act of foreclosing on MMCs properties was "effected to prevent
satisfaction of the judgment award." GHIs mortgage rights, constituted in 1992, antedated the
Partial Writ of Execution by nearly ten (10) years. GHIs resort to foreclosure was a legitimate
enforcement of a right to liquidate a bona fide debt. It was a reasonable option open to a
mortgagee which, not being a party to the labor dispute between NAMAWU and MMC, stood to
suffer a loss if it did not avail itself of the remedy of foreclosure.
The well-settled rule is that a mortgage lien is inseparable from the property mortgaged. 57 While it
is true that GHIs foreclosure of MMCs mortgaged properties may have had the "effect to prevent

satisfaction of the judgment award against the specific mortgaged property that first answers for a
mortgage obligation ahead of any subsequent creditors," that same foreclosure does not
necessarily translate to having been "effected to prevent satisfaction of the judgment award"
against MMC.
Likewise, we note the narration of subsequent facts contained in the Comment of the Office of the
Solicitor General. Therein, it is alleged that after the Partial Writ of Execution was issued on May 9,
2001, a motion for reconsideration was filed by MMC; that the denial of the motion was appealed
to the CA; that when the appeal was dismissed by the CA on January 24, 2002, it eventually became
the subject of a review petition before this Court, docketed as G.R. No. 157696; and that G.R. No.
157696 was decided by this Court only on February 9, 2006.
This chronology of subsequent events shows that February 9, 2006 would have been the earliest
date for the unimpeded enforcement of the Partial Writ of Execution, as it was only then that this
Court resolved the issue. This happened four and a half years after July 31, 2001, the date when
GHI foreclosed on the mortgaged properties. Thus, it is not accurate to say that the foreclosure
made on July 31, 2001 was "effected [only] to prevent satisfaction of the judgment award."
We also observe the error in the CAs finding that the 1996 Deed of Real Estate and Chattel
Mortgage was not supported by any consideration since at the time the deed was executed, "all
the real and personal property of MMC had already been transferred in the hands of G
Holdings."58 It should be remembered that the Purchase and Sale Agreement between GHI and APT
involved large amounts (P550M) and even spawned a subsequent court action (Civil Case No. 9576132, RTC of Manila). Yet, nowhere in the Agreement or in the RTC decision is there any mention
of real and personal properties of MMC being included in the sale to GHI in 1992. These properties
simply served as mortgaged collateral for the 1992 Promissory Notes.59 The Purchase and Sale
Agreement and the Promissory Notes themselves are the best evidence that there was ample
consideration for the mortgage.
Thus, we must reject the conclusion of the CA that the Deed of Real Estate and Chattel Mortgage
executed in 1996 was a simulated transaction.
On the issue of whether there had been an effective levy upon the properties of GHI.
The well-settled principle is that the rights of a mortgage creditor over the mortgaged properties
are superior to those of a subsequent attaching creditor. In Cabral v. Evangelista,60 this Court
declared that:
Defendants-appellants purchase of the mortgaged chattels at the public sheriff's sale and the
delivery of the chattels to them with a certificate of sale did not give them a superior right to the
chattels as against plaintiffs-mortgagees. Rule 39, Section 22 of the old Rules of Court (now Rule
39, Section 25 of the Revised Rules), cited by appellants precisely provides that "the sale conveys to
the purchaser all the right which the debtor had in such property on the day the execution or
attachment was levied." It has long been settled by this Court that "The right of those who so
acquire said properties should not and can not be superior to that of the creditor who has in his
favor an instrument of mortgage executed with the formalities of the law, in good faith, and
without the least indication of fraud. This is all the more true in the present case, because, when
the plaintiff purchased the automobile in question on August 22, 1933, he knew, or at least, it is
presumed that he knew, by the mere fact that the instrument of mortgage, Exhibit 2, was
registered in the office of the register of deeds of Manila, that said automobile was subject to a
mortgage lien. In purchasing it, with full knowledge that such circumstances existed, it should be
presumed that he did so, very much willing to respect the lien existing thereon, since he should not
have expected that with the purchase, he would acquire a better right than that which the vendor
then had." In another case between two mortgagees, we held that "As between the first and
second mortgagees, therefore, the second mortgagee has at most only the right to redeem, and
even when the second mortgagee goes through the formality of an extrajudicial foreclosure, the
purchaser acquires no more than the right of redemption from the first mortgagee." The
superiority of the mortgagee's lien over that of a subsequent judgment creditor is now expressly
provided in Rule 39, Section 16 of the Revised Rules of Court, which states with regard to the effect
of levy on execution as to third persons that "The levy on execution shall create a lien in favor of

the judgment creditor over the right, title and interest of the judgment debtor in such property at
the time of the levy, subject to liens or encumbrances then existing."
Even in the matter of possession, mortgagees over chattel have superior, preferential and
paramount rights thereto, and the mortgagor has mere rights of redemption. 61
Similar rules apply to cases of mortgaged real properties that are registered. Since the properties
were already mortgaged to GHI, the only interest remaining in the mortgagor was its right to
redeem said properties from the mortgage. The right of redemption was the only leviable or
attachable property right of the mortgagor in the mortgaged real properties. We have held that
The main issue in this case is the nature of the lien of a judgment creditor, like the petitioner, who
has levied an attachment on the judgment debtor's (CMI) real properties which had been
mortgaged to a consortium of banks and were subsequently sold to a third party, Top Rate.
xxxx
The sheriff's levy on CMI's properties, under the writ of attachment obtained by the petitioner, was
actually a levy on the interest only of the judgment debtor CMI on those properties. Since the
properties were already mortgaged to the consortium of banks, the only interest remaining in the
mortgagor CMI was its right to redeem said properties from the mortgage. The right of redemption
was the only leviable or attachable property right of CMI in the mortgaged real properties. The
sheriff could not have attached the properties themselves, for they had already been conveyed to
the consortium of banks by mortgage (defined as a "conditional sale"), so his levy must be
understood to have attached only the mortgagor's remaining interest in the mortgaged property
the right to redeem it from the mortgage.62
xxxx
There appears in the record a factual contradiction relating to whether the foreclosure by GHI on
July 13, 200163over some of the contested properties came ahead of the levy thereon, or the
reverse. NAMAWU claims that the levy on two trucks was effected on June 22, 2001, 64 which GHI
disputes as a misstatement because the levy was attempted on July 18, 2002, and not 200165 What
is undisputed though is that the mortgage of GHI was registered on February 4, 2000, 66 well ahead
of any levy by NAMAWU. Prior registration of a lien creates a preference, as the act of registration
is the operative act that conveys and affects the land,67 even against subsequent judgment
creditors, such as respondent herein. Its registration of the mortgage was not intended to defraud
NAMAWU of its judgment claims, since even the courts were already judicially aware of its
existence since 1992. Thus, at that moment in time, with the registration of the mortgage, either
NAMAWU had no properties of MMC to attach because the same had been previously foreclosed
by GHI as mortgagee thereof; or by virtue of the DOLEs levy to enforce NAMAWUs claims, the
latters rights are subject to the notice of the foreclosure on the subject properties by a prior
mortgagees right. GHIs mortgage right had already been registered by then, and "it is basic that
mortgaged properties answer primarily for the mortgaged credit, not for the judgment credit of the
mortgagors unsecured creditor."68
On the issue of piercing the veil of corporate fiction.
The CA found that:
"Ordinarily, the interlocking of directors and officers in two different corporations is not a
conclusive indication that the corporations are one and the same for purposes of applying the
doctrine of piercing the veil of corporate fiction. However, when the legal fiction of the separate
corporate personality is abused, such as when the same is used for fraudulent or wrongful ends,
the courts have not hesitated to pierce the corporate veil (Francisco vs. Mejia, 362 SCRA 738). In
the case at bar, the Deed of Real Estate and Chattel Mortgage was entered into between MMC and
G Holdings for the purpose of evading the satisfaction of the legitimate claims of the petitioner
against MMC. The notion of separate personality is clearly being utilized by the two corporations to
perpetuate the violation of a positive legal duty arising from a final judgment to the prejudice of
the petitioners right."69
Settled jurisprudence70 has it that
"(A) corporation, upon coming into existence, is invested by law with a personality separate and
distinct from those persons composing it as well as from any other legal entity to which it may be

related. By this attribute, a stockholder may not, generally, be made to answer for acts or liabilities
of the said corporation, and vice versa. This separate and distinct personality is, however, merely a
fiction created by law for convenience and to promote the ends of justice. For this reason, it may
not be used or invoked for ends subversive to the policy and purpose behind its creation or which
could not have been intended by law to which it owes its being. This is particularly true when the
fiction is used to defeat public convenience, justify wrong, protect fraud, defend crime, confuse
legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. This is
likewise true where the corporate entity is being used as an alter ego, adjunct, or business conduit
for the sole benefit of the stockholders or of another corporate entity. In all these cases, the notion
of corporate entity will be pierced or disregarded with reference to the particular transaction
involved.
Given this jurisprudential principle and the factual circumstances obtaining in this case, we now
ask: Was the CA correct in piercing the veil of corporate identity of GHI and MMC?
In our disquisition above, we have shown that the CAs finding that there was a "simulated
mortgage" between GHI and MMC to justify a wrong or protect a fraud has struggled vainly to find
a foothold when confronted with the ruling of this Court in Republic v. "G" Holdings, Inc.
The negotiations between the GHI and the Government--through APT, dating back to 1992-culminating in the Purchase and Sale Agreement, cannot be depicted as a contrived transaction. In
fact, in the said Republic, etc., v. "G" Holdings, Inc., this Court adjudged that GHI was entitled to its
rightful claims not just to the shares of MMC itself, or just to the financial notes that already
contained the mortgage clauses over MMCs disputed assets, but also to the delivery of those
instruments. Certainly, we cannot impute to this Courts findings on the case any badge of fraud.
Thus, we reject the CAs conclusion that it was right to pierce the veil of corporate fiction, because
the foregoing circumstances belie such an inference. Furthermore, we cannot ascribe to the
Government, or the APT in particular, any undue motive to participate in a transaction designed to
perpetrate fraud. Accordingly, we consider the CA interpretation unwarranted.
We also cannot agree that the presumption of fraud in Article 1387 of the Civil Code relative to
property conveyances, when there was already a judgment rendered or a writ of attachment
issued, authorizes piercing the veil of corporate identity in this case. We find that Article 1387 finds
less application to an involuntary alienation such as the foreclosure of mortgage made before any
final judgment of a court. We thus hold that when the alienation is involuntary, and the foreclosure
is not fraudulent because the mortgage deed has been previously executed in accordance with
formalities of law, and the foreclosure is resorted to in order to liquidate a bona fide debt, it is not
the alienation by onerous title contemplated in Article 1387 of the Civil Code wherein fraud is
presumed.
Since the factual antecedents of this case do not warrant a finding that the mortgage and loan
agreements between MMC and GHI were simulated, then their separate personalities must be
recognized. To pierce the veil of corporate fiction would require that their personalities as creditor
and debtor be conjoined, resulting in a merger of the personalities of the creditor (GHI) and the
debtor (MMC) in one person, such that the debt of one to the other is thereby extinguished. But
the debt embodied in the 1992 Financial Notes has been established, and even made subject of
court litigation (Civil Case No. 95-76132, RTC Manila). This can only mean that GHI and MMC have
separate corporate personalities.
Neither was MMC used merely as an alter ego, adjunct, or business conduit for the sole benefit of
GHI, to justify piercing the formers veil of corporate fiction so that the latter could be held liable to
claims of third-party judgment creditors, like NAMAWU. In this regard, we find American
jurisprudence persuasive. In a decision by the Supreme Court of New York71 bearing upon similar
facts, the Court denied piercing the veil of corporate fiction to favor a judgment creditor who sued
the parent corporation of the debtor, alleging fraudulent corporate asset-shifting effected after a
prior final judgment. Under a factual background largely resembling this case at bar, viz:
In this action, plaintiffs seek to recover the balance due under judgments they obtained against
Lake George Ventures Inc. (hereinafter LGV), a subsidiary of defendant that was formed to develop
the Top O the World resort community overlooking Lake George, by piercing the corporate veil or

upon the theory that LGV's transfer of certain assets constituted fraudulent transfers under the
Debtor and Creditor Law. We previously upheld Supreme Court's denial of defendant's motion for
summary judgment dismissing the complaint (252 A.D.2d 609, 675 N.Y.S.2d 234) and the matter
proceeded to a nonjury trial. Supreme Court thereafter rendered judgment in favor of defendant
upon its findings that, although defendant dominated LGV, it did not use that domination to
commit a fraud or wrong on plaintiffs. Plaintiffs appealed.1avvphi1
The trial evidence showed that LGV was incorporated in November 1985. Defendant's principal,
Francesco Galesi, initially held 90% of the stock and all of the stock was ultimately transferred to
defendant. Initial project funding was provided through a $2.5 million loan from Chemical Bank,
secured by defendant's guarantee of repayment of the loan and completion of the project. The
loan proceeds were utilized to purchase the real property upon which the project was to be
established. Chemical Bank thereafter loaned an additional $3.5 million to LGV, again guaranteed
by defendant, and the two loans were consolidated into a first mortgage loan of $6 million. In
1989, the loan was modified by splitting the loan into a $1.9 term note on which defendant was
primary obligor and a $4.1 million project note on which LGV was the obligor and defendant was a
guarantor.
Due to LGV's lack of success in marketing the project's townhouses and in order to protect itself
from the exercise of Chemical Bank's enforcement remedies, defendant was forced to make
monthly installments of principal and interest on LGV's behalf. Ultimately, defendant purchased
the project note from Chemical Bank for $3.1 million, paid the $1.5 million balance on the term
note and took an assignment of the first mortgage on the project's realty. After LGV failed to make
payments on the indebtedness over the course of the succeeding two years, defendant brought an
action to foreclose its mortgage. Ultimately, defendant obtained a judgment of foreclosure and
sale in the amount of $6,070,246.50. Defendant bid in the property at the foreclosure sale and
thereafter obtained a deficiency judgment in the amount of $3,070,246.50.
Following the foreclosure sale, LGV transferred to defendant all of the shares of Top of the World
Water Company, a separate entity that had been organized to construct and operate the water
supply and delivery system for the project, in exchange for a $950,000 reduction in the deficiency
judgment.
the U.S. Supreme Court of New York held
Based on the foregoing, and accepting that defendant exercised complete domination and control
over LGV, we are at a loss as to how plaintiffs perceive themselves to have been inequitably
affected by defendant's foreclosure action against LGV, by LGV's divestiture of the water company
stock or the sports complex property, or by defendant's transfer to LGV of a third party's
uncollectible note, accomplished solely for tax purposes. It is undisputed that LGV was, and for
some period of time had been, unable to meet its obligations and, at the time of the foreclosure
sale, liens against its property exceeded the value of its assets by several million dollars, even
including the water company and sports complex at the values plaintiffs would assign to them. In
fact, even if plaintiffs' analysis were utilized to eliminate the entire $3 million deficiency judgment,
the fact remains that subordinate mortgages totaling nearly an additional $2 million have priority
over plaintiffs' judgments.
As properly concluded by Supreme Court, absent a finding of any inequitable consequence to
plaintiffs, both causes of action pleaded in the amended complaint must fail. Fundamentally, a
party seeking to pierce the corporate veil must show complete domination and control of the
subsidiary by the parent and also that such domination was used to commit a fraud or wrong
against the plaintiff that resulted in the plaintiff's injury ( 252 A.D.2d 609, 610, 675 N.Y.S.2d
234, supra; see, Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141,
603 N.Y.S.2d 807, 623 N.E.2d 1157). Notably, "[e]vidence of domination alone does not suffice
without an additional showing that it led to inequity, fraud or malfeasance" (TNS Holdings v. MKI
Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 703 N.E.2d 749).
xxxx
In reaching that conclusion, we specifically reject a number of plaintiffs' assertions, including the
entirely erroneous claims that our determination on the prior appeal (252 A.D.2d 609, 675 N.Y.S.2d

234, supra) set forth a "roadmap" for the proof required at trial and mandated a verdict in favor of
plaintiffs upon their production of evidence that supported the decision's "listed facts". To the
contrary, our decision was predicated upon the existence of such evidence, absent which we would
have granted summary judgment in favor of defendant. We are equally unpersuaded by plaintiffs'
continued reliance upon defendant's December 1991 unilateral conversion of its intercompany
loans with LGV from debt to equity, which constituted nothing more than a "bookkeeping
transaction" and had no apparent effect on LGV's obligations to defendant or defendant's right to
foreclose on its mortgage.72
This doctrine is good law under Philippine jurisdiction.
In Concept Builders, Inc. v. National Labor Relations Commission,73 we laid down the test in
determining the applicability of the doctrine of piercing the veil of corporate fiction, to wit:
1. Control, not mere majority or complete control, but complete domination, not only of finances
but of policy and business practice in respect to the transaction attacked so that the corporate
entity as to this transaction had at the time no separate mind, will or existence of its own.
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal duty, or dishonest and, unjust act in
contravention of plaintiffs legal rights; and,
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.
xxxx
Time and again, we have reiterated that mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not, by itself, a sufficient
ground for disregarding a separate corporate personality.74 It is basic that a corporation has a
personality separate and distinct from that composing it as well as from that of any other legal
entity to which it may be related. Clear and convincing evidence is needed to pierce the veil of
corporate fiction.75
In this case, the mere interlocking of directors and officers does not warrant piercing the separate
corporate personalities of MMC and GHI. Not only must there be a showing that there was
majority or complete control, but complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked, so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own. The mortgage deed
transaction attacked as a basis for piercing the corporate veil was a transaction that was an
offshoot, a derivative, of the mortgages earlier constituted in the Promissory Notes dated October
2, 1992. But these Promissory Notes with mortgage were executed by GHI with APT in the name of
MMC, in a full privatization process. It appears that if there was any control or domination
exercised over MMC, it was APT, not GHI, that wielded it. Neither can we conclude that the
constitution of the loan nearly four (4) years prior to NAMAWUs notice of strike could have been
the proximate cause of the injury of NAMAWU for having been deprived of MMCs corporate
assets.
On the propriety of injunction to prevent execution by the NLRC on the properties of third-party
claimants
It is settled that a Regional Trial Court can validly issue a Temporary Restraining Order (TRO) and,
later, a writ of preliminary injunction to prevent enforcement of a writ of execution issued by a
labor tribunal on the basis of a third-partys claim of ownership over the properties levied
upon.76 While, as a rule, no temporary or permanent injunction or restraining order in any case
involving or growing out of a labor dispute shall be issued by any court--where the writ of
execution issued by a labor tribunal is sought to be enforced upon the property of a stranger to the
labor dispute, even upon a mere prima facie showing of ownership of such claimant--a separate
action for injunctive relief against such levy may be maintained in court, since said action neither
involves nor grows out of a labor dispute insofar as the third party is concerned. 77 Instructively,
National Mines and Allied Workers Union v. Vera78
Petitioners' reliance on the provision of Art. 254 of the New Labor Code (herein earlier quoted)
which prohibits injunctions or restraining orders in any case involving or growing out of a 'labor

dispute' is not well-taken. This has no application to the case at bar. Civil Case No. 2749 is one
which neither "involves" nor "grows out" of a labor dispute. What 'involves' or 'grows out' of a
labor dispute is the NLRC case between petitioners and the judgment debtor, Philippine Iron
Mines. The private respondents are not parties to the said NLRC case. Civil Case No. 2749 does not
put in issue either the fact or validity of the proceeding in theNLRC case nor the decision therein
rendered, much less the writ of execution issued thereunder. It does not seek to enjoin the
execution of the decision against the properties of the judgment debtor. What is sought to be tried
in Civil Case No. 2749 is whether the NLRC's decision and writ of execution, above mentioned, shall
be permitted to be satisfied against properties of private respondents, and not of the judgment
debtor named in the NLRC decision and writ of execution. Such a recourse is allowed under the
provisions of Section 17, Rule 39 of the Rules of Court.
To sustain petitioners' theory will inevitably lead to disastrous consequences and lend judicial
imprimatur to deprivation of property without due process of law. Simply because a writ of
execution was issued by the NLRC does not authorize the sheriff implementing the same to levy on
anybody's property. To deny the victim of the wrongful levy, the recourse such as that availed of by
the herein private respondents, under the pretext that no court of general jurisdiction can interfere
with the writ of execution issued in a labor dispute, will be sanctioning a greater evil than that
sought to be avoided by the Labor Code provision in question. Certainly, that could not have been
the intendment of the law creating the NLRC. For well-settled is the rule that the power of a court
to execute its judgment extends only over properties unquestionably belonging to the judgment
debtor."
Likewise, since the third-party claimant is not one of the parties to the action, he cannot, strictly
speaking, appeal from the order denying his claim, but he should file a separate reivindicatory
action against the execution creditor or the purchaser of the property after the sale at public
auction, or a complaint for damages against the bond filed by the judgment creditor in favor of the
sheriff.79
A separate civil action for recovery of ownership of the property would not constitute interference
with the powers or processes of the labor tribunal which rendered the judgment to execute upon
the levied properties. The property levied upon being that of a stranger is not subject to levy. Thus,
a separate action for recovery, upon a claim and prima facie showing of ownership by the
petitioner, cannot be considered as interference.80
Upon the findings and conclusions we have reached above, petitioner is situated squarely as such
third-party claimant. The questioned restraining order of the lower court, as well as the order
granting preliminary injunction, does not constitute interference with the powers or processes of
the labor department. The registration of the mortgage document operated as notice to all on the
matter of the mortgagees prior claims. Official proceedings relative to the foreclosure of the
subject properties constituted a prima facie showing of ownership of such claimant to support the
issuance of injunctive reliefs.
As correctly held by the lower court:
The subject incidents for TRO and/or Writ of Injunction were summarily heard and in resolving the
same, the Court believes, that the petitioner has a clear and unmistakable right over the levied
properties. The existence of the subject Deed of Real Estate and Chattel Mortgage, the fact that
petitioner initiated a foreclosure of said properties before the Clerk of Court and Ex-Officio Sheriff,
RTC Branch 61, Kabankalan City on July 13, 2001, the fact that said Ex-Officio Sheriff and the Clerk
of Court issue a Notice of Foreclosure, Possession and Control over said mortgaged properties on
July 19, 2001 and the fact that a Sheriffs Certificate of Sale was issued on December 3, 2001 are
the basis of its conclusion. Unless said mortgage contract is annulled or declared null and void, the
presumption of regularity of transaction must be considered and said document must be looked
[upon] as valid.
Notably, the Office of the Solicitor General also aptly observed that when the respondent
maintained that the Deed of Real Estate and Chattel mortgage was entered into in fraud of
creditors, it thereby admitted that the mortgage was not void, but merely rescissible under Article
1381(3) of the Civil Code; and, therefore, an independent action is needed to rescind the contract

of mortgage.81 We, however, hold that such an independent action cannot now be maintained,
because the mortgage has been previously recognized to exist, with a valid consideration, in
Republic, etc., v. "G" Holdings, Inc.
A final word
The Court notes that the case filed with the lower court involves a principal action for injunction to
prohibit execution over properties belonging to a third party not impleaded in the legal dispute
between NAMAWU and MMC. We have observed, however, that the lower court and the CA failed
to take judicial notice of, or to consider, our Decisions in Republic, etc., v. "G" Holdings, Inc., and
Maricalum Mining Corporation v. Brion and NAMAWU, in which we respectively recognized the
entitlement of GHI to the shares and the company notes of MMC (under the Purchase and Sale
Agreement), and the rights of NAMAWU to its labor claims. At this stage, therefore, neither the
lower court nor the CA, nor even this Court, can depart from our findings in those two cases
because of the doctrine of stare decisis.
From our discussion above, we now rule that the trial court, in issuing the questioned orders, did
not commit grave abuse of discretion, because its issuance was amply supported by factual and
legal bases.
We are not unmindful, however, of the fact that the labor claims of NAMAWU, acknowledged by
this Court in Maricalum, still awaits final execution. As success fades from NAMAWUs efforts to
execute on the properties of MMC, which were validly foreclosed by GHI, we see that NAMAWU
always had, and may still have, ample supplemental remedies found in Rule 39 of the Rules of
Court in order to protect its rights against MMC. These include the examination of the judgment
obligor when judgment is unsatisfied,82 the examination of the obligors of judgment obligors,83 or
even the resort to receivership.841avvphi1
While, theoretically, this case is not ended by this decision, since the lower court is still to try the
case filed with it and decide it on the merits, the matter of whether the mortgage and foreclosure
of the assets that are the subject of said foreclosure is ended herein, for the third and final time. So
also is the consequential issue of the separate and distinct personalities of GHI and MMC. Having
resolved these principal issues with certainty, we find no more need to remand the case to the
lower court, only for the
purpose of resolving again the matter of whether GHI owns the properties that were the subject of
the latters foreclosure.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated October 14,
2003 is SET ASIDE. The Omnibus Order dated December 4, 2002 of the Regional Trial Court, Branch
61 of Kabankalan City, Negros Occidental is AFFIRMED. No costs.
SO ORDERED.
G.R. No. 110226 June 19, 1997
ALBERTO S. SILVA, EDILBERTO VIRAY ANGELES BARON, CEFERINO ROMERO, JAIME ACEVEDO,
RODOLFO JUAN, ANDREW DE LA ISLA BAYANI PILAR, ULDARICO GARCIA, ANANIAS HERMOCILLA,
WALLY LEONES, PABLO ALULOD, RODOLFO MARIANO, HERNANI ABOROT, CARLITO CHOSAS,
VALERIANO MAUBAN, RENAN HALILI, MANOLITO CUSTODIO, NONILON DAWAL, RICARDO
ESCUETA, SEVERINO ROSETE, ERNESTO LITADA, ERNESTO BARENG, BONIFACIO URBANO,
VICENTE SANTOS, MARIO CREDO BERNABE GERONIMO, ERNESTO BANAY, PASTOR VELUZ,
RICARDO CUEVAS, FELOMENO BALLON, ORLANDO MENDOZA, ANICETO ARBAN, GERONIMO
ESPLANA, VICENTE CHAVEZ, STEVE VELECINA, and RICARDO B. VENTURA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILTREAD (FIRESTONE) TIRE AND RUBBER
CORPORATION, respondents.
ROMERO, J.:
Petitioners, all former employees of private respondent Philtread (Firestone) Tire and Rubber
Corporation (Philtread, for brevity), impute grave abuse of discretion on the National Labor
Relations Commission (NLRC) 1 for issuing two resolutions, dated April 7, 1993, and November 18,
1992, which reconsidered a resolution it rendered on April 15, 1992. They allege that its resolution

of April 15, 1992 became final and executory when Philtread failed to seasonably file a motion for
reconsideration within the ten-day reglementary period required by Article 223 of the Labor Code.
The record unfolds the following facts:
Sometime in 1985, petitioners, then rank-and-file employees and members of Philtread Workers
Union (PWU), volunteered for, and availed of, the retrenchment program instituted by Philtread
with the understanding that they would have priority in re-employment in the event that the
company recovers from its financial crisis, in accordance with Section 4, Article III of the Collective
Bargaining Agreement concluded on July 5, 1983. 2
In November 1986, Philtread, apparently having recovered from its financial reverses, expanded its
operations and hired new personnel. Upon discovery of this development, petitioners filed their
respective applications for employment with Philtread, which however, merely agreed to consider
them for future vacancies. Subsequent demands for re-employment made by petitioners were
ignored. Even the request of the incumbent union for Philtread to stop hiring new personnel until
petitioners were first hired failed to elicit any favorable response.
Thus, on December 5, 1988, petitioners lodged a complaint 3 with the National Capital Region
Arbitration Branch of the NLRC for unfair labor practice (ULP), damages and attorney's fees against
Philtread.
Both parties submitted their respective position papers. On its part, Philtread moved for the
dismissal of the complaint based on two grounds, namely: (1) that the NLRC lacked jurisdiction,
there being no employer-employee relationship between it and petitioners and that the basic issue
involved was the interpretation of a contract, the CBA, which was cognizable by the regular courts;
and (2) that petitioners had no locus standi, not being privy to the CBA executed between the
union and Philtread.
Petitioners, however, challenging Philtread's motion to dismiss, stressed that the complaint was
one for unfair labor practice precipitated by the unjust and unreasonable refusal of Philtread to reemploy them, as mandated by the provisions of Section 4, Article III of the 1986 and 1983 CBAs.
Being one for unfair labor practice, petitioners concluded that the NLRC had jurisdiction over the
case, pursuant to Article 217 (a) (1) of the Labor Code.
On August 31, 1989, Labor Arbiter Edgardo M. Madriaga rendered a decision dismissing the
complaint but directing Philtread to give petitioners priority in hiring, as well as those former
employees similarly situated for available positions provided they meet the necessary current
qualifications. 4 In dismissing the complaint, the Labor Arbiter, however, did not tackle the
jurisdictional issue posed by Philtread in its position paper. Instead, he dwelt solely on the question
whether the petitioners were entitled to priority in re-employment on the basis of the CBA.
Petitioners duly appealed the decision of the Labor Arbiter to the NLRC. Philtread opted not to
interpose an appeal despite the Labor Arbiter's failure to rule squarely on the question of
jurisdiction.
On April 15, 1992, the NLRC issued a resolution reversing the decision of the Labor Arbiter. It
directed Philtread to re-employ petitioners and other employees similarly situated, regardless of
age qualifications and other pre-employment conditions, subject only to existing vacancies and a
finding of good physical condition. This resolution was received by Atty. Abraham B. Borreta of the
law firm of Borreta, Gutierrez and Leogardo on May 5, 1992, as shown by the bailiff's return.
Subsequently, Atty. Borreta filed with the NLRC on May 20, 1992, an ex parte manifestation
explaining that he was returning the copy of the resolution rendered on April 15, 1992, which,
according to him, was erroneously served on him by the process server of the NLRC. He alleged
that in the several conciliation conferences held, it was Atty. Daniel C. Gutierrez who exclusively
handled the case on behalf of Philtread and informed the Labor Arbiter and petitioners that the law
firm of Borreta, Gutierrez and Leogardo had already been dissolved.
Being of the impression that the April 15, 1992 resolution of the NLRC had been properly served at
the address of the law firm of Atty. Gutierrez and that no seasonable motion for reconsideration
was ever filed by Philtread, petitioners moved for its execution.
On November 18, 1992, the NLRC, acting on a motion for reconsideration filed by Atty. Gutierrez,
promulgated one of its challenged resolutions dismissing the complaint of petitioners. It ruled that

while petitioners had standing to sue, the complaint should have been filed with the voluntary
arbitrator, pursuant to Article 261 of the Labor Code, since the primary issue was the
implementation and interpretation of the CBA.
Dismayed by the NLRC's sudden change of position, petitioners immediately moved for
reconsideration. They pointed out that the NLRC's reliance on Article 261 of the Labor Code was
patently erroneous because it was the amended provision which was being cited by the NLRC. They
added that the amendment of Article 261 introduced by Republic Act No. 6715 took effect only on
March 21, 1989, or after the filing of the complaint on December 5, 1988. This being the case,
petitioners argued that the subsequent amendment cannot retroactively divest the Labor Arbiter
of the jurisdiction already acquired in accordance with Articles 217 and 248 of the Labor Code.
Petitioners further stressed that the resolution of April 15, 1992, had already become final and
executory since Philtread's counsel of record did not file any motion for reconsideration within the
period of ten (10) days from receipt of the resolution on May 5, 1992.
The NLRC, however, was not convinced by petitioners' assertions. In another resolution issued on
April 7, 1993, it affirmed its earlier resolution dated November 18, 1992, ruling that even before
the amendatory law took effect, matters involving bargaining agreements were already within the
exclusive jurisdiction of the voluntary arbitrator, as set forth in Article 262 of the Labor Code.
Hence, this petition.
As stated at the outset, petitioners fault the NLRC for issuing the assailed resolutions even when
the resolution sought to be reconsidered had already attained finality upon Philtread's failure to
timely move for its reconsideration. They posit that since the bailiff's return indicated May 5, 1992,
as the date of receipt of the April 15, 1992 resolution by the law firm of Borreta, Gutierrez and
Leogardo, Philtread's counsel of record, then Philtread only had ten (10) calendar days or until May
15, 1992, within which to file a motion for reconsideration. Since Philtread indisputably failed to
file any such motion within said period, petitioners deemed it highly irregular and capricious for the
NLRC to still allow reconsideration of its April 15, 1992 resolution.
The petition is impressed with merit.
Time and again, this Court has been emphatic in ruling that the seasonable filing of a motion for
reconsideration within the l0-day reglementary period following the receipt by a party of any
order, resolution or decision of the NLRC, is a mandatory requirement to forestall the finality of
such order, resolution or decision. 5 The statutory bases for this is found in Article 223 of the Labor
Code 6 and Section 14, Rule VII of the New Rules of Procedure of the National Labor Relations
Commission. 7
In the case at bar, it is uncontroverted that Philtread's counsel filed a motion for reconsideration of
the April 15, 1992 resolution only on June 5, 1992, 8 or 31 days after receipt of said resolution. 9 It
was thus incumbent upon the NLRC to have dismissed outright Philtread's late motion for
reconsideration. By doing exactly the opposite, its actuation was not only whimsical and capricious
but also a demonstration of its utter disregard for its very own rules. Certiorari, therefore, lies.
To be sure, it is settled doctrine that the NLRC, as an administrative and quasi-judicial body, is not
bound by the rigid application of technical rules of procedure in the conduct of its
proceedings. 10 However, the filing of a motion for reconsideration and filing it ON TIME are not
mere technicalities of procedure. These are jurisdictional and mandatory requirements which must
be strictly complied with. Although there are exceptions to said rule, the case at bar presents no
peculiar circumstances warranting a departure therefrom.
The Court is aware of Philtread's obvious attempt to skirt the requirement for seasonable filing of a
motion for reconsideration by persuading us that both the Labor Arbiter and the NLRC have no
jurisdiction over petitioners' complaint. Jurisdiction, Philtread claims, lies instead with the
voluntary arbitrator so that when the Labor Arbiter and the NLRC took cognizance of the case, their
decisions thereon were null and void and, therefore, incapable of attaining finality. In short,
Philtread maintains that the ten-day reglementary period could not have started running and,
therefore, its motion could not be considered late.
The argument is not tenable. While we agree with the dictum that a void judgment cannot attain
finality, said rule, however, is only relevant if the tribunal or body which takes cognizance of a

particular subject matter indeed lacks jurisdiction over the same. In this case, the rule adverted to
is misapplied for it is actually the Labor Arbiter and the NLRC which possess jurisdiction over
petitioners' complaint and NOT the voluntary arbitrator, as erroneously contended by Philtread.
In this regard, we observe that there is a confusion in the minds of both Philtread and the NLRC
with respect to the proper jurisdiction of the voluntary arbitrator. They appear to share the view
that once the question involved is an interpretation or implementation of CBA provisions, which in
this case is the re-employment clause, then the same necessarily falls within the competence of the
voluntary arbitrator pursuant to Article 261 of the Labor Code.
Respondents' posture is too simplistic and finds no support in law or in jurisprudence. When the
issue concerns an interpretation or implementation of the CBA, one cannot immediately jump to
the conclusion that jurisdiction is with the voluntary arbitrator. There is an equally important need
to inquire further if the disputants involved are the union and the employer; otherwise, the
voluntary arbitrator cannot assume jurisdiction. To this effect was the ruling of the Court in Sanyo
Philippines Workers Union-PSSLU v. Canizares, 11 where we clarified the jurisdiction of the voluntary
arbitrator in this manner:
In the instant case, however, We hold that the Labor Arbiter and not the Grievance Machinery
provided for in the CBA has the jurisdiction to hear and decide the complaints of the private
respondents. While it appears that the dismissal of the private respondents was made upon the
recommendation of PSSLU pursuant to the union security clause provided in the CBA, We are of
the opinion that these facts do not come within the phrase "grievances arising from the
interpretation or implementation of (their) Collective Bargaining Agreement and those arising from
the interpretation or enforcement of company personnel policies," the jurisdiction of which
pertains to the Grievance Machinery or thereafter, to a voluntary arbitrator or panel of voluntary
arbitrators. Article 260 of the Labor Code on grievance machinery and voluntary arbitrator states
that "(t)he parties to a Collective Bargaining Agreement shall include therein provisions that will
ensure the mutual observance of its terms and conditions. They shall establish a machinery for the
adjustment and resolution of grievances arising from the interpretation or implementation of their
Collective Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies." It is further provided in said article that the parties to a CBA shall
name or designate their respective representatives to the grievance machinery and if the grievance
is not settled in that level, it shall automatically be referred to voluntary arbitrators (or panel of
voluntary arbitrators) designated in advance by the parties. It need not be mentioned that the
parties to a CBA are the union and the company. Hence, only disputes involving the union and the
company shall be referred to the grievance machinery or voluntary arbitrators. (Emphasis supplied)
Since the contending parties in the instant case are not the union and Philtread, then pursuant to
the Sanyodoctrine, it is not the voluntary arbitrator who can take cognizance of the complaint,
notwithstanding Philtread's claim that the real issue is the interpretation of the CBA provision on
re-employment.
The Court, however, does not write finis to the discussion. A more important question arises: If the
voluntary arbitrator could not have assumed jurisdiction over the case, did the Labor Arbiter and
the NLRC validly acquire jurisdiction when both of them entertained the complaint?
A brief review of relevant statutory provisions is in order.
We note that at the time petitioners filed their complaint for unfair labor practice, damages and
attorney's fees on December 5, 1988, the governing provision of the Labor Code with respect to
the jurisdiction of the Labor Arbiter and the NLRC was Article 217 which states:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the
original and exclusive jurisdiction to hear and decide within thirty (30) working days after
submission of the case by the parties for decision, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work and other terms and conditions of
employment;

3. All money claims of workers, including those based on non-payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or appropriate
agreement, except claims for employees' compensation, social security, medicare and maternity
benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including questions involving the
legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.
Articles 261 and 262, on the other hand, defined the jurisdiction of the voluntary arbitrator, viz.:
Art. 261. Grievance machinery. Whenever a grievance arises from the interpretation or
implementation of a collective agreement, including disciplinary actions imposed on members of
the bargaining unit, the employer and the bargaining representative shall meet to adjust the
grievance. Where there is no collective agreement and in cases where the grievance procedure as
provided herein does not apply, grievances shall be subject to negotiation, conciliation or
arbitration as provided elsewhere in this Code.
Art. 262. Voluntary arbitration. All grievances referred to in the immediately preceding Article
which are not settled through the grievance procedure provided in the collective agreement shall
be referred to voluntary arbitration prescribed in said agreement: Provided, That termination
disputes shall be governed by Article 278 of this Code, as amended, unless the parties agree to
submit them to voluntary arbitration.
Under the above provisions then prevailing, one can understand why petitioners lodged their
complaint for ULP with the Labor Arbiter. To their mind, Philtread's refusal to re-employ them was
tantamount to a violation of the re-employment clause in the 1983 CBA which was also
substantially reproduced in the 1986 CBA. At the time, any violation of the CBA was unqualifiedly
treated as ULP of the employer falling within the competence of the Labor Arbiter to hear and
decide. Thus:
Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any
of the following unfair labor practice:
xxx xxx xxx
(i) To violate a collective bargaining agreement.
On March 21, 1989, however, Republic Act 6715, 12 or the so-called "Herrera-Veloso Amendments,"
took effect, amending several provisions of the Labor Code, including the respective jurisdictions of
the Labor Arbiter, the NLRC and the voluntary arbitrator. As a result, the present jurisdiction of the
Labor Arbiter and the NLRC is as follows:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided
under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving
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 employeremployee 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.
while that of the voluntary arbitrator is defined in this wise:
Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article. According violations
of a Collective Bargaining Agreement, except those which are gross in character, shall no longer be
treated as unfair labor practice and shall be resolved as as grievances under the Collective
Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining
Agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of
such agreement. . . . (Emphasis supplied)
Art. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks.
With the amendments introduced by RA 6715, it can be gleaned that the Labor Arbiter still retains
jurisdiction over ULP cases. There is, however, a significant change: The unqualified jurisdiction
conferred upon the Labor Arbiter prior to the amendment by RA 6715 has been narrowed down so
that "violations of a Collective Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice but as grievances under the Collective
Bargaining Agreement. It is further stated that "gross violations of Collective Bargaining Agreement
shall mean flagrant and/or malicious refusal to comply with the economic provisions of such
agreement." Hence, for a ULP case to be cognizable by the Labor Arbiter, and the NLRC to exercise
its appellate jurisdiction, the allegations in the complaint should show prima facie the concurrence
of two things, namely: (1) gross violation of the CBA; AND (2) the violation pertains to the
economic provisions of the CBA.
In several instances prior to the instant case, the Court already made its pronouncement that RA
6715 is in the nature of a curative statute. As such, we declared that it can be applied retroactively
to pending cases. Thus, inBriad Agro Development Corporation v. Dela Cerna, 13 we held:
Republic Act No. 6715, like its predecessors, Executive Order No. 111 and Article 217, as amended,
has retroactive application. Thus, when this new law divested Regional Directors of the power to
hear money claims, the divestment affected pending litigations. It also affected this particular case.
(Note that under par 6, where the claim does not exceed P5,000.00, regional directors have
jurisdiction).
In Garcia v. Martinez, we categorically held that amendments relative to the jurisdiction of labor
arbiters (under Presidential Decree No. 1367, divesting the labor arbiter of jurisdiction) partake of
the nature of curative statutes, thus:
It now appears that at the time this case was decided the lower court had jurisdiction over
Velasco's complaint although at the time it was filed said court was not clothed with such
jurisdiction. The lack of jurisdiction was cured by the issuance of the amendatory decree which is in
the nature of a curative statute with retrospective application to a pending proceeding, like Civil
Case No. 9657 (See 82 C.J.S. 1004).
Garcia has since been uniformly applied in subsequent cases. Thus, in Calderon v. Court of Appeals,
reiterated that PD No. 1367 [is] curative and retrospective in nature.
The Decision of this case, finally, acknowledged the retrospective characteristics of Executive Order
No. 111. . . .
With the Briad ruling in place, the implication is that the qualified jurisdiction of the Labor Arbiter
and the NLRC should have been applied when the ULP complaint was still pending. This means that

petitioners should have been required to show in their complaint the gross nature of the CBA
violation, as well as the economic provision violated, without which the complaint would be
dismissible. Herein lies the problem. The Court's appreciation of petitioners' cause of action is that,
while it would make out a case for ULP, under present law, however, the same falls short of the
special requirements necessary to make it cognizable by the Labor Arbiter and the NLRC.
Unsubstantiated conclusions of bad faith and unjustified refusal to re-employ petitioners, to our
mind, do not constitute gross violation of the CBA for purposes of lodging jurisdiction with the
Labor Arbiter and the NLRC. Although evidentiary matters are not required (and even discouraged)
to be alleged in complaint, still, sufficient details supporting the conclusion of bad faith and unjust
refusal to re-employ petitioners must be indicated. Furthermore, it is even doubtful if the CBA
provision on re-employment fits into the accepted notion of an economic provision of the CBA.
Thus, given the foregoing considerations, may the Briad doctrine be applied to the instant case and
cause its dismissal for want of jurisdiction of the Labor Arbiter and the NLRC?
Upon a careful and meticulous study of Briad, the Court holds that the rationale behind it does not
apply to the present case. We adopt instead the more recent case of Erectors, Inc. v. National
Labor Relations Commission,14 where we refused to give retroactive application to Executive Order
No. 797 which created the Philippine Overseas Employment Administration (POEA). Under said
law, POEA was vested with "original and exclusive jurisdiction over all cases, including money
claims, involving employer-employee relations arising out of or by virtue of any law or contract
involving Filipino workers for overseas employment," 15 which jurisdiction was originally conferred
upon the Labor Arbiter. As in the instant case, the Labor Arbiter's assumption of jurisdiction therein
was likewise questioned in view of the subsequent enactment of E.O. 797. In ruling against the
retroactive application of the law, the Court explained its position as follows:
The rule is that jurisdiction over the subject matter is determined by the law in force at the time of
the commencement of the action. On March 31, 1982, at the time private respondent filed his
complaint against the petitioner, the prevailing laws were Presidential Decree No. 1691 and
Presidential Decree No. 1391 which vested the Regional Offices of the Ministry of Labor and the
Labor Arbiters with "original and exclusive jurisdiction over all cases involving employer-employee
relations including money claims arising out of any law or contracts involving Filipino workers for
overseas employment." At the time of the filing of the complaint, the Labor Arbiter had clear
jurisdiction over the same.
E.O. No. 797 did not divest the Labor Arbiter's authority to hear and decide the case filed by private
respondent prior to its effectivity. Laws should only be applied prospectively unless the legislative
intent to give them retroactive effect is expressly declared or is necessarily implied from the
language used. We fail to perceive in the language of E.O. No. 797 an intention to give it retroactive
effect.
The case of Briad Agro Development Corp. vs. Dela Cerna cited by the petitioner is not applicable to
the case at bar. In Briad, the Court applied the exception rather than the general rule. In this case,
Briad Agro Development Corp. and L.M. Camus Engineering Corp. challenged the jurisdiction of the
Regional Director of the Department of Labor and Employment over cases involving workers'
money claims, since Article 217 of the Labor Code, the law in force at the time of the filing of the
complaint, vested in the Labor Arbiters exclusive jurisdiction over such cases. The Court dismissed
the petition in its Decision dated June 29, 1989. It ruled that the enactment of E.O. No. 111,
amending Article 217 of the Labor Code, cured the Regional Director's lack of jurisdiction by giving
the Labor Arbiter and the Regional Director concurrent jurisdiction over all cases involving money
claims. However, on November 9, 1989, the Court, in a Resolution, reconsidered and set aside its
June 29 Decision and referred the case to the Labor Arbiter for proper proceedings, in view of the
promulgation of Republic Act (R.A.) 6715 which divested the Regional Directors of the power to
hear money claims. It bears emphasis that the Court accorded E.O. No. 111 and R.A. 6715 a
retroactive application because as curative statutes, they fall under the exceptions to the rule on
prospectivity of laws.
E.O. No. 111, amended Article 217 of the Labor Code to widen the worker's access to the
government for redress of grievances by giving the Regional Directors and Labor Arbiters

concurrent jurisdiction over cases involving money claims. This amendment, however, created a
situation where the jurisdiction of the Regional Directors and the Labor Arbiters overlapped. As a
remedy, R.A. 6715 further amended Article 217 by delineating their respective jurisdictions. Under
R.A. 6715, the Regional Director has exclusive original jurisdiction over cases involving money
claims provided: (1) the claim is presented by an employer or person employed in domestic or
household service, or househelper under the Code; (2) the claimant, no longer being employed,
does not seek reinstatement; and (3) the aggregate money claim of the employee or househelper
does not exceed P5,000.00. All other cases within the exclusive and original jurisdiction of the
Labor Arbiter. E.O. No. 111 and R.A. 6715 are therefore curative statutes. A curative statute is
enacted to cure defects in a prior law or to validate legal proceedings, instruments or acts of public
authorities which would otherwise be void for want of conformity with certain existing legal
requirements.
The law at bar, E.O. No. 797, is not a curative statute. . . .
We do not find any reason why the Court should not apply the above ruling to the case at bar,
notwithstanding the fact that a different law is involved. Actually, this is not the first time that the
Court refused to apply RA 6715 retroactively. 16 Our previous decisions on whether to give it
retroactive application or not depended to a great extent on what amended provisions were under
consideration, as well as the factual circumstances to which they were made to apply. In Briad, the
underlying reason for applying RA 6715 retroactively was the fact that prior to its amendment,
Article 217 of the Labor Code, as amended by then Executive Order No. 111, created a scenario
where the Labor Arbiters and the Regional Directors of the Department of Labor and Employment
(DOLE) had overlapping jurisdiction over money claims. This situation was viewed as a defect in the
law so that when RA No. 6715 was passed and delineated the jurisdiction of the Labor Arbiters and
Regional Directors, the Court deemed it a rectification of such defect; hence, the conclusion that it
was curative in nature and, therefore, must be applied retroactively.
The same thing cannot be said of the case at bar. Like in Erectors, the instant case presents no
defect in the law requiring a remedy insofar as the jurisdiction of the Labor Arbiter and the
Voluntary Arbitrator is concerned. There is here no overlapping of jurisdiction to speak of because
matters involving interpretation and implementation of CBA provisions, as well as interpretation
and enforcement of company personnel policies, have always been determined by the Voluntary
Arbitrator even prior to RA 6715. Similarly, all ULP cases were exclusively within the jurisdiction of
the Labor Arbiter. What RA 6715 merely did was to re-apportion the jurisdiction over ULP cases by
conferring exclusive jurisdiction over such ULP cases that do not involve gross violation of a CBA's
economic provision upon the voluntary arbitrator. We do not see anything in the act of reapportioning jurisdiction curative of any defect in the law as it stood prior to the enactment of RA
6715. The Court view it as merely a matter of change in policy of the lawmakers, especially since
the 1987 Constitution adheres to the preferential use of voluntary modes of dispute
settlement. 17 This, instead of the inherent defect in the law, must be the rationale that prompted
the amendment. Hence, we uphold the jurisdiction of the Labor Arbiter which attached to this case
at the time of its filing on December 5, 1988.
Finally, the contention that it was Atty. Gutierrez who exclusively represented Philtread and that
the law firm of Borreta, Gutierrez and Leogardo had been dissolved, are lame excuses to cast doubt
on the propriety of service to Atty. Borreta. It must be noted that the complaint of petitioners was
filed on December 5, 1988. Presumably, the preliminary conferences adverted to by Atty. Borreta,
where Atty. Gutierrez supposedly declared that he was exclusively representing Philtread,
transpired at around that date. The Court, however, is surprised to discover that the record bears a
Notice of Change of Address dated March 12, 1990, filed by Atty. Gutierrez, indicating therein that
the counsel for respondent (Philtread) was "Borreta, Gutierrez and Leogardo" whose address could
be found at the "3rd Floor, Commodore Condominium Arquiza corner M. Guerrero Streets, Ermita,
Manila." If, indeed, Atty. Gutierrez declared during the Labor Arbiter's proceedings that he was
exclusively representing Philtread, why then did he use the firm's name, and its new address at
that, in the aforementioned notice to the NLRC? Moreover, why did Atty. Borreta take fifteen days
to file his Manifestation and inform the NLRC of the "improper" service of the resolution to him?

Why did he not object immediately to the service by the bailiff? Considering that Atty. Gutierrez
and Atty. Borreta were once partners in their law firm, it behooves Atty. Borreta to have at least
advised his former partner of the receipt of the resolution. As a lawyer, his receipt of the adverse
resolution should have alerted him of the adverse consequences which might follow if the same
were not acted upon promptly, as what in fact happened here. As for Atty. Gutierrez, if the law
firm of Borreta, Gutierrez, and Leogardo were really dissolved, it was incumbent upon him not to
have used the firm's name in the first place, or he should have withdrawn the appearance of the
firm and entered his own appearance, in case the dissolution took place midstream. By failing to
exercise either option, Atty. Gutierrez cannot now blame the NLRC for serving its resolution at the
address of the firm still on record. 18 To our mind, these excuses cannot camouflage the clever ploy
of Philtread's counsel to earn a last chance to move for reconsideration. This Court, it bears
emphasizing, is not impressed, but looks incredulously at such superficial moves.
WHEREFORE, the instant petition is hereby GRANTED. The assailed resolutions of the NLRC dated
November 18, 1992, and April 7, 1993, are SET ASIDE, while its resolution dated April 15, 1992, is
REINSTATED for immediate execution.
SO ORDERED.
G.R. No. 157376
October 2, 2007
CORAZON C. SIM, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EQUITABLE PCI-BANK, respondents*.
DECISION
AUSTRIA-MARTINEZ, J.:
Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor Arbiter, alleging that she
was initially employed by Equitable PCI-Bank (respondent) in 1990 as Italian Remittance Marketing
Consultant to the Frankfurt Representative Office. Eventually, she was promoted to Manager
position, until September 1999, when she received a letter from Remegio David -- the Senior
Officer, European Head of PCIBank, and Managing Director of PCIB- Europe -- informing her that
she was being dismissed due to loss of trust and confidence based on alleged mismanagement and
misappropriation of funds.
Respondent denied any employer-employee relationship between them, and sought the dismissal
of the complaint.
On September 3, 2001, the Labor Arbiter rendered its Decision dismissing the case for want of
jurisdiction and/or lack of merit.1 According to the Labor Arbiter:
It should be stressed at this juncture that the labor relations system in the Philippines has no extraterritorial jurisdiction. It is limited to the relationship between labor and capital within the
Philippines. Since complainant was hired and assigned in a foreign land, although by a Philippine
Corporation, it follows that the law that govern their relationship is the law of the place where the
employment was executed and her place of work or assignment. On this premise, the Italian law
allegedly provides severance pay which was applied and extended to herein complainant (Annex
"P", respondent's position paper).
As can be gleaned from the foregoing, a further elucidation on the matter would be an exercise in
futility. Hence, this case should be dismissed for want of jurisdiction.
Assuming for the sake of argument that this Office has jurisdiction over this case, still, this Office is
inclined to rule in favor of the respondent.
Complainant, as General Manager is an employee whom the respondent company reposed its trust
and confidence. In other words, she held a position of trust. It is well-settled doctrine that the basic
premise for dismissal on the ground of loss of confidence is that the employee concerned holds a
position of trust and confidence. (National Sugar Refineries Corporation vs. NLRC, 286 SCRA 478.)
xxx
In this case, the respondent company had strong reason to believe that the complainant was guilty
of the offense charged against her.2
On appeal, the National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's Decision
and dismissed petitioner's appeal for lack of merit.3

Without filing a motion for reconsideration with the NLRC, petitioner went to the Court of Appeals
(CA) via a petition for certiorari under Rule 65 of the Rules of Court.
In a Resolution dated October 29, 2002, the CA4 dismissed the petition due to petitioner's nonfiling of a motion for reconsideration with the NLRC.5
Petitioner filed a motion for reconsideration but it was nonetheless denied by the CA per
Resolution dated February 26, 2003.
Hence, the present recourse under Rule 45 of the Rules of Court.
Petitioner alleges that:
I. The Court of Appeals departed from the accepted and usual concepts of remedial law when it
ruled that the petitioner should have first filed a Motion for Reconsideration with the National
Labor Relations Commission.
II. The National Labor Relations Commission decided a question of jurisdiction heretofore not yet
determined by the Court and decided the same in a manner not in accord with law when it ruled
that it had no jurisdiction over a labor dispute between a Philippine corporation and its employee
which it assigned to work for a foreign land.6
The pivotal question that needs to be resolved is whether or not a prior motion for reconsideration
is indispensable for the filing of a petition for certiorari under Rule 65 of the Rules of Court with the
CA.
Under Rule 65, the remedy of filing a special civil action for certiorari is available only when there is
no appeal; or any plain, speedy, and adequate remedy in the ordinary course of law. 7 A "plain" and
"adequate remedy" is a motion for reconsideration of the assailed order or resolution, the filing of
which is an indispensable condition to the filing of a special civil action for certiorari.8 This is to give
the lower court the opportunity to correct itself.9
There are, of course, exceptions to the foregoing rule, to wit:
(a) where the order is a patent nullity, as where the court a quo has no jurisdiction;
(b) where the questions raised in the certiorari proceedings have been duly raised and passed upon
by the lower court, or are the same as those raised and passed upon in the lower court;
(c) where there is an urgent necessity for the resolution of the question and any further delay
would prejudice the interests of the Government or of the petitioner or the subject matter of the
action is perishable;
(d) where, under the circumstances, a motion for reconsideration would be useless;
(e) where petitioner was deprived of due process and there is extreme urgency for relief;
(f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief
by the trial court is improbable;
(g) where the proceedings in the lower court are a nullity for lack of due process;
(h) where the proceeding was ex parte or in which the petitioner had no opportunity to object; and
(i) where the issue raised is one purely of law or public interest is involved. 10
Petitioner, however, failed to qualify her case as among the few exceptions. In fact, the Court notes
that the petition filed before the CA failed to allege any reason why a motion for reconsideration
was dispensed with by petitioner. It was only in her motion for reconsideration of the CA's
resolution of dismissal and in the petition filed in this case that petitioner justified her non-filing of
a motion for reconsideration.
Petitioner argues that filing a motion for reconsideration with the NLRC would be merely an
exercise in futility and useless. But it is not for petitioner to determine whether it is so. As stressed
in Cervantes v. Court of Appeals:
It must be emphasized that a writ of certiorari is a prerogative writ, never demandable as a matter
of right, never issued except in the exercise of judicial discretion. Hence, he who seeks a writ
of certiorari must apply for it only in the manner and strictly in accordance with the provisions of
the law and the Rules.Petitioner may not arrogate to himself the determination of whether a
motion for reconsideration is necessary or not. To dispense with the requirement of filing a
motion for reconsideration, petitioner must show a concrete, compelling, and valid reason for
doing so, which petitioner failed to do. Thus, the Court of Appeals correctly dismissed the
petition.11 (Emphasis supplied)

Petitioner also contends that the issue at bench is purely a question of law, hence, an exception to
the rule. A reading of the petition filed with the CA shows otherwise. The issues raised in this case
are mixed questions of fact and law. There is a question of fact when doubt or difference arises as
to the truth or falsehood of the alleged facts, and there is a question of law where the doubt or
difference arises as to what the law is on a certain state of facts. 12
Petitioner, aside from questioning the ruling of the NLRC sustaining the Labor Arbiter's view that it
does not have any jurisdiction over the case, also questions the NLRC's ruling affirming the Labor
Arbiter's conclusion that she was validly dismissed by respondent. The legality of petitioner's
dismissal hinges on the question of whether there was an employer-employee relationship, which
was denied by respondent; and, if in the affirmative, whether petitioner, indeed, committed a
breach of trust and confidence justifying her dismissal. These are mixed questions of fact and law
and, as such, do not fall within the exception from the filing of a motion for reconsideration.
Consequently, the CA was not in error when it dismissed the petition. More so since petitioner
failed to show any error on the part of the Labor Arbiter and the NLRC in ruling that she was
dismissed for cause.
The rule is that the Court is bound by the findings of facts of the Labor Arbiter or the NLRC, unless it
is shown that grave abuse of discretion or lack or excess of jurisdiction has been committed by said
quasi-judicial bodies.13 The Court will not deviate from said doctrine without any clear showing that
the findings of the Labor Arbiter, as affirmed by the NLRC, are bereft of sufficient substantiation.
Petitioner does not deny having withdrawn the amount of P3,000,000.00 lire from the bank's
account. What petitioner submits is that she used said amount for the Radio Pilipinas sa
Roma radio program of the company. Respondent, however, countered that at the time she
withdrew said amount, the radio program was already off the air. Respondent is a managerial
employee. Thus, loss of trust and confidence is a valid ground for her dismissal. 14 The mere
existence of a basis for believing that a managerial employee has breached the trust of the
employer would suffice for his/her dismissal.15
[w]hen an employee accepts a promotion to a managerial position or to an office requiring full
trust and confidence, she gives up some of the rigid guaranties available to ordinary workers.
Infractions which if committed by others would be overlooked or condoned or penalties mitigated
may be visited with more severe disciplinary action. A company's resort to acts of self-defense
would be more easily justified.16
The Court notes, however, a palpable error in the Labor Arbiter's disposition of the case, which was
affirmed by the NLRC, with regard to the issue on jurisdiction. It was wrong for the Labor Arbiter to
rule that "labor relations system in the Philippines has no extra-territorial jurisdiction."17
Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter and the National
Labor Relations Commission, viz.:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided
under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage,
rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount of exceeding five thousand pesos (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.
Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas
Filipinos Act of 1995,18 provides:
SECTION 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint,
the claims arising out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims for actual, moral, exemplary
and other forms of damages.
Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 19 provides that
the Labor Arbiters of the NLRC shall have the original and exclusive jurisdiction to hear and decide
all claims arising out of employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims for actual, moral, exemplary
and other forms of damages, subject to the rules and procedures of the NLRC.
Under these provisions, it is clear that labor arbiters have original and exclusive jurisdiction over
claims arising from employer-employee relations, including termination disputes involving all
workers, among whom are overseas Filipino workers.20 In Philippine National Bank v. Cabansag,
the Court pronounced:
x x x Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers. For the State assures the basic rights of all
workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and
Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of
the Civil Code which states that laws "which have for their object public order, public policy and
good customs shall not be rendered ineffective by laws or judgments promulgated, or by
determination or conventions agreed upon in a foreign country." 21 (Emphasis supplied)
In any event, since the CA did not commit any error in dismissing the petition before it for failure to
file a prior motion for reconsideration with the NLRC, and considering that the Labor Arbiter and
the NLRC's factual findings as regards the validity of petitioner's dismissal are accorded great
weight and respect and even finality when the same are supported by substantial evidence, the
Court finds no compelling reason to relax the rule on the filing of a motion for reconsideration prior
to the filing of a petition for certiorari.
WHEREFORE, the petition is DENIED.
Costs against petitioner.
SO ORDERED.
G.R. No. 178610
November 17, 2010
HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT PLAN, Retirement Trust
Fund, Inc.) Petitioner,
vs.
SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.
DECISION
CARPIO, J.:
G.R. No. 178610 is a petition for review1 assailing the Decision2 promulgated on 30 March 2006 by
the Court of Appeals (CA) in CA-G.R. SP No. 62685. The appellate court granted the petition filed by
Fe Gerong (Gerong) and Spouses Bienvenido and Editha Broqueza (spouses Broqueza) and
dismissed the consolidated complaints filed by Hongkong and Shanghai Banking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP) for recovery of sum of money. The appellate court reversed and
set aside the Decision3 of Branch 139 of the Regional Trial Court of Makati City (RTC) in Civil Case
No. 00-787 dated 11 December 2000, as well as its Order 4 dated 5 September 2000. The RTCs

decision affirmed the Decision5 dated 28 December 1999 of Branch 61 of the Metropolitan Trial
Court (MeTC) of Makati City in Civil Case No. 52400 for Recovery of a Sum of Money.
The Facts
The appellate court narrated the facts as follows:
Petitioners Gerong and [Editha] Broqueza (defendants below) are employees of Hongkong and
Shanghai Banking Corporation (HSBC). They are also members of respondent Hongkong Shanghai
Banking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below). The HSBCL-SRP is a
retirement plan established by HSBC through its Board of Trustees for the benefit of the
employees.
On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount of
Php175,000.00. On December 12, 1991, she again applied and was granted an appliance loan in the
amount of Php24,000.00. On the other hand, petitioner Gerong applied and was granted an
emergency loan in the amount of Php35,780.00 on June 2, 1993. These loans are paid through
automatic salary deduction.
Meanwhile [in 1993], a labor dispute arose between HSBC and its employees. Majority of HSBCs
employees were terminated, among whom are petitioners Editha Broqueza and Fe Gerong. The
employees then filed an illegal dismissal case before the National Labor Relations Commission
(NLRC) against HSBC. The legality or illegality of such termination is now pending before this
appellate Court in CA G.R. CV No. 56797, entitledHongkong Shanghai Banking Corp. Employees
Union, et al. vs. National Labor Relations Commission, et al.
Because of their dismissal, petitioners were not able to pay the monthly amortizations of their
respective loans. Thus, respondent HSBCL-SRP considered the accounts of petitioners delinquent.
Demands to pay the respective obligations were made upon petitioners, but they failed to pay.6
HSBCL-SRP, acting through its Board of Trustees and represented by Alejandro L. Custodio, filed
Civil Case No. 52400 against the spouses Broqueza on 31 July 1996. On 19 September 1996, HSBCLSRP filed Civil Case No. 52911 against Gerong. Both suits were civil actions for recovery and
collection of sums of money.
The Metropolitan Trial Courts Ruling
On 28 December 1999, the MeTC promulgated its Decision7 in favor of HSBCL-SRP. The MeTC ruled
that the nature of HSBCL-SRPs demands for payment is civil and has no connection to the ongoing
labor dispute. Gerong and Editha Broquezas termination from employment resulted in the loss of
continued benefits under their retirement plans. Thus, the loans secured by their future retirement
benefits to which they are no longer entitled are reduced to unsecured and pure civil obligations.
As unsecured and pure obligations, the loans are immediately demandable.
The dispositive portion of the MeTCs decision reads:
WHEREFORE, premises considered and in view of the foregoing, the Court finds that the plaintiff
was able to prove by a preponderance of evidence the existence and immediate demandability of
the defendants loan obligations as judgment is hereby rendered in favor of the plaintiff and
against the defendants in both cases, ordering the latter:
1. In Civil Case No. 52400, to pay the amount of Php116,740.00 at six percent interest per annum
from the time of demand and in Civil Case No. 52911, to pay the amount of Php25,344.12 at six
percent per annum from the time of the filing of these cases, until the amount is fully paid;
2. To pay the amount of Php20,000.00 each as reasonable attorneys fees;
3. Cost of suit.
SO ORDERED.8
Gerong and the spouses Broqueza filed a joint appeal of the MeTCs decision before the RTC.
Gerongs case was docketed Civil Case No. 00-786, while the spouses Broquezas case was
docketed as Civil Case No. 00-787.
The Regional Trial Courts Ruling
The RTC initially denied the joint appeal because of the belated filing of Gerong and the spouses
Broquezas memorandum. The RTC later reconsidered the order of denial and resolved the issues
in the interest of justice.
On 11 December 2000, the RTC affirmed the MeTCs decision in toto.9

The RTC ruled that Gerong and Editha Broquezas termination from employment disqualified them
from availing of benefits under their retirement plans. As a consequence, there is no longer any
security for the loans. HSBCL-SRP has a legal right to demand immediate settlement of the unpaid
balance because of Gerong and Editha Broquezas continued default in payment and their failure to
provide new security for their loans. Moreover, the absence of a period within which to pay the
loan allows HSBCL-SRP to demand immediate payment. The loan obligations are considered pure
obligations, the fulfillment of which are demandable at once.
Gerong and the spouses Broqueza then filed a Petition for Review under Rule 42 before the CA.
The Ruling of the Court of Appeals
On 30 March 2006, the CA rendered its Decision 10 which reversed the 11 December 2000 Decision
of the RTC. The CA ruled that the HSBCL-SRPs complaints for recovery of sum of money against
Gerong and the spouses Broqueza are premature as the loan obligations have not yet matured.
Thus, no cause of action accrued in favor of HSBCL-SRP. The dispositive portion of the appellate
courts Decision reads as follows:
WHEREFORE, the assailed Decision of the RTC is REVERSED and SET ASIDE. A new one is hereby
rendered DISMISSING the consolidated complaints for recovery of sum of money.
SO ORDERED.11
HSBCL-SRP filed a motion for reconsideration which the CA denied for lack of merit in its
Resolution12promulgated on 19 June 2007.
On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the petition against Gerong
because she already settled her obligations. In a Resolution 13 of this Court dated 10 September
2007, this Court treated the manifestation as a motion to withdraw the petition against Gerong,
granted the motion, and considered the case against Gerong closed and terminated.
Issues
HSBCL-SRP enumerated the following grounds to support its Petition:
I. The Court of Appeals has decided a question of substance in a way not in accord with law and
applicable decisions of this Honorable Court; and
II. The Court of Appeals has departed from the accepted and usual course of judicial proceedings in
reversing the decision of the Regional Trial Court and the Metropolitan Trial Court. 14
The Courts Ruling
The petition is meritorious. We agree with the rulings of the MeTC and the RTC.
The Promissory Notes uniformly provide:
PROMISSORY NOTE
P_____ Makati, M.M. ____ 19__
FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to THE HSBC RETIREMENT
PLAN (hereinafter called the "PLAN") at its office in the Municipality of Makati, Metro Manila, on or
before until fully paid the sum of PESOS ___ (P___) Philippine Currency without discount, with
interest from date hereof at the rate of Six per cent (6%) per annum, payable monthly.
I/WE agree that the PLAN may, upon written notice, increase the interest rate stipulated in this
note at any time depending on prevailing conditions.
I/WE hereby expressly consent to any extensions or renewals hereof for a portion or whole of the
principal without notice to the other(s), and in such a case our liability shall remain joint and
several.1avvphi1
In case collection is made by or through an attorney, I/WE jointly and severally agree to pay ten
percent (10%) of the amount due on this note (but in no case less than P200.00) as and for
attorneys fees in addition to expenses and costs of suit.
In case of judicial execution, I/WE hereby jointly and severally waive our rights under the provisions
of Rule 39, Section 12 of the Rules of Court.15
In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code:
Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event,
or upon a past event unknown to the parties, is demandable at once.
x x x. (Emphasis supplied.)

We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in the
Promissory Notes. The RTC is correct in ruling that since the Promissory Notes do not contain a
period, HSBCL-SRP has the right to demand immediate payment. Article 1179 of the Civil Code
applies. The spouses Broquezas obligation to pay HSBCL-SRP is a pure obligation. The fact that
HSBCL-SRP was content with the prior monthly check-off from Editha Broquezas salary is of no
moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to
enforce a pure obligation.
In their Answer, the spouses Broqueza admitted that prior to Editha Broquezas dismissal from
HSBC in December 1993, she "religiously paid the loan amortizations, which HSBC collected
through payroll check-off."16A definite amount is paid to HSBCL-SRP on a specific date. Editha
Broqueza authorized HSBCL-SRP to make deductions from her payroll until her loans are fully paid.
Editha Broqueza, however, defaulted in her monthly loan payment due to her dismissal. Despite
the spouses Broquezas protestations, the payroll deduction is merely a convenient mode of
payment and not the sole source of payment for the loans. HSBCL-SRP never agreed that the loans
will be paid only through salary deductions. Neither did HSBCL-SRP agree that if Editha Broqueza
ceases to be an employee of HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP
can immediately demand payment of the loans at anytime because the obligation to pay has no
period. Moreover, the spouses Broqueza have already incurred in default in paying the monthly
installments.
Finally, the enforcement of a loan agreement involves "debtor-creditor relations founded on
contract and does not in any way concern employee relations. As such it should be enforced
through a separate civil action in the regular courts and not before the Labor Arbiter." 17
WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R. SP No. 62685
promulgated on 30 March 2006 is REVERSED and SET ASIDE. The decision of Branch 139 of the
Regional Trial Court of Makati City in Civil Case No. 00-787, as well as the decision of Branch 61 of
the Metropolitan Trial Court of Makati City in Civil Case No. 52400 against the spouses Bienvenido
and Editha Broqueza, are AFFIRMED. Costs against respondents.
SO ORDERED.
G.R. No. 172013
October 2, 2009
PATRICIA HALAGUEA, MA. ANGELITA L. PULIDO, MA. TERESITA P. SANTIAGO, MARIANNE V.
KATINDIG, BERNADETTE A. CABALQUINTO, LORNA B. TUGAS, MARY CHRISTINE A. VILLARETE,
CYNTHIA A. STEHMEIER, ROSE ANNA G. VICTA, NOEMI R. CRESENCIO, and other flight attendants
of PHILIPPINE AIRLINES, Petitioners,
vs.
PHILIPPINE AIRLINES INCORPORATED, Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision1 and the Resolution2 of the Court of Appeals (CA) in CA-G.R. SP.
No. 86813.
Petitioners were employed as female flight attendants of respondent Philippine Airlines (PAL) on
different dates prior to November 22, 1996. They are members of the Flight Attendants and
Stewards Association of the Philippines (FASAP), a labor organization certified as the sole and
exclusive certified as the sole and exclusive bargaining representative of the flight attendants, flight
stewards and pursers of respondent.
On July 11, 2001, respondent and FASAP entered into a Collective Bargaining
Agreement3 incorporating the terms and conditions of their agreement for the years 2000 to 2005,
hereinafter referred to as PAL-FASAP CBA.
Section 144, Part A of the PAL-FASAP CBA, provides that:
A. For the Cabin Attendants hired before 22 November 1996:
xxxx
3. Compulsory Retirement

Subject to the grooming standards provisions of this Agreement, compulsory retirement shall be
fifty-five (55) for females and sixty (60) for males. x x x.
In a letter dated July 22, 2003,4 petitioners and several female cabin crews manifested that the
aforementioned CBA provision on compulsory retirement is discriminatory, and demanded for an
equal treatment with their male counterparts. This demand was reiterated in a letter 5 by
petitioners' counsel addressed to respondent demanding the removal of gender discrimination
provisions in the coming re-negotiations of the PAL-FASAP CBA.
On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA
proposals6 and manifested their willingness to commence the collective bargaining negotiations
between the management and the association, at the soonest possible time.
On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the
Issuance of Temporary Restraining Order and Writ of Preliminary Injunction 7 with the Regional Trial
Court (RTC) of Makati City, Branch 147, docketed as Civil Case No. 04-886, against respondent for
the invalidity of Section 144, Part A of the PAL-FASAP CBA. The RTC set a hearing on petitioners'
application for a TRO and, thereafter, required the parties to submit their respective memoranda.
On August 9, 2004, the RTC issued an Order 8 upholding its jurisdiction over the present case. The
RTC reasoned that:
In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA which is allegedly
discriminatory as it discriminates against female flight attendants, in violation of the Constitution,
the Labor Code, and the CEDAW. The allegations in the Petition do not make out a labor dispute
arising from employer-employee relationship as none is shown to exist. This case is not directed
specifically against respondent arising from any act of the latter, nor does it involve a claim against
the respondent. Rather, this case seeks a declaration of the nullity of the questioned provision of
the CBA, which is within the Court's competence, with the allegations in the Petition constituting
the bases for such relief sought.
The RTC issued a TRO on August 10, 2004,9 enjoining the respondent for implementing Section 144,
Part A of the PAL-FASAP CBA.
The respondent filed an omnibus motion 10 seeking reconsideration of the order overruling its
objection to the jurisdiction of the RTC the lifting of the TRO. It further prayed that the (1)
petitioners' application for the issuance of a writ of preliminary injunction be denied; and (2) the
petition be dismissed or the proceedings in this case be suspended.
On September 27, 2004, the RTC issued an Order 11 directing the issuance of a writ of preliminary
injunction enjoining the respondent or any of its agents and representatives from further
implementing Sec. 144, Part A of the PAL-FASAP CBA pending the resolution of the case.
Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with
Prayer for a Temporary Restraining Order and Writ of Preliminary Injunction 12 with the Court of
Appeals (CA) praying that the order of the RTC, which denied its objection to its jurisdiction, be
annuled and set aside for having been issued without and/or with grave abuse of discretion
amounting to lack of jurisdiction.
The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and ruled
that:
WHEREFORE, the respondent court is by us declared to have NO JURISDICTION OVER THE CASE
BELOW and, consequently, all the proceedings, orders and processes it has so far issued therein are
ANNULED and SET ASIDE. Respondent court is ordered to DISMISS its Civil Case No. 04-886.
SO ORDERED.
Petitioner filed a motion for reconsideration,13 which was denied by the CA in its Resolution dated
March 7, 2006.
Hence, the instant petition assigning the following error:
THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR DISPUTE OR
GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.
The main issue in this case is whether the RTC has jurisdiction over the petitioners' action
challenging the legality or constitutionality of the provisions on the compulsory retirement age
contained in the CBA between respondent PAL and FASAP.

Petitioners submit that the RTC has jurisdiction in all civil actions in which the subject of the
litigation is incapable of pecuniary estimation and in all cases not within the exclusive jurisdiction of
any court, tribunal, person or body exercising judicial or quasi-judicial functions. The RTC has the
power to adjudicate all controversies except those expressly witheld from the plenary powers of
the court. Accordingly, it has the power to decide issues of constitutionality or legality of the
provisions of Section 144, Part A of the PAL-FASAP CBA. As the issue involved is constitutional in
character, the labor arbiter or the National Labor Relations Commission (NLRC) has no jurisdiction
over the case and, thus, the petitioners pray that judgment be rendered on the merits declaring
Section 144, Part A of the PAL-FASAP CBA null and void.
Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the present
case, as the controversy partakes of a labor dispute. The dispute concerns the terms and conditions
of petitioners' employment in PAL, specifically their retirement age. The RTC has no jurisdiction
over the subject matter of petitioners' petition for declaratory relief because the Voluntary
Arbitrator or panel of Voluntary Arbitrators have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or implementation of the CBA.
Regular courts have no power to set and fix the terms and conditions of employment. Finally,
respondent alleged that petitioners' prayer before this Court to resolve their petition for
declaratory relief on the merits is procedurally improper and baseless.
The petition is meritorious.
Jurisdiction of the court is determined on the basis of the material allegations of the complaint and
the character of the relief prayed for irrespective of whether plaintiff is entitled to such relief. 14
In the case at bar, the allegations in the petition for declaratory relief plainly show that petitioners'
cause of action is the annulment of Section 144, Part A of the PAL-FASAP CBA. The pertinent
portion of the petition recites:
CAUSE OF ACTION
24. Petitioners have the constitutional right to fundamental equality with men under Section 14,
Article II, 1987 of the Constitution and, within the specific context of this case, with the male cabin
attendants of Philippine Airlines.
26. Petitioners have the statutory right to equal work and employment opportunities with men
under Article 3, Presidential Decree No. 442, The Labor Code and, within the specific context of this
case, with the male cabin attendants of Philippine Airlines.
27. It is unlawful, even criminal, for an employer to discriminate against women employees with
respect to terms and conditions of employment solely on account of their sex under Article 135 of
the Labor Code as amended by Republic Act No. 6725 or the Act Strengthening Prohibition on
Discrimination Against Women.
28. This discrimination against Petitioners is likewise against the Convention on the Elimination of
All Forms of Discrimination Against Women (hereafter, "CEDAW"), a multilateral convention that
the Philippines ratified in 1981. The Government and its agents, including our courts, not only must
condemn all forms of discrimination against women, but must also implement measures towards
its elimination.
29. This case is a matter of public interest not only because of Philippine Airlines' violation of the
Constitution and existing laws, but also because it highlights the fact that twenty-three years after
the Philippine Senate ratified the CEDAW, discrimination against women continues.
31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory retirement from service
is invidiously discriminatory against and manifestly prejudicial to Petitioners because, they are
compelled to retire at a lower age (fifty-five (55) relative to their male counterparts (sixty (60).
33. There is no reasonable, much less lawful, basis for Philippine Airlines to distinguish,
differentiate or classify cabin attendants on the basis of sex and thereby arbitrarily set a lower
compulsory retirement age of 55 for Petitioners for the sole reason that they are women.
37. For being patently unconstitutional and unlawful, Section 114, Part A of the PAL-FASAP 20002005 CBA must be declared invalid and stricken down to the extent that it discriminates against
petitioner.

38. Accordingly, consistent with the constitutional and statutory guarantee of equality between
men and women, Petitioners should be adjudged and declared entitled, like their male
counterparts, to work until they are sixty (60) years old.
PRAYER
WHEREFORE, it is most respectfully prayed that the Honorable Court:
c. after trial on the merits:
(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID, NULL and VOID to the
extent that it discriminates against Petitioners; x x x x
From the petitioners' allegations and relief prayed for in its petition, it is clear that the issue raised
is whether Section 144, Part A of the PAL-FASAP CBA is unlawful and unconstitutional. Here, the
petitioners' primary relief in Civil Case No. 04-886 is the annulment of Section 144, Part A of the
PAL-FASAP CBA, which allegedly discriminates against them for being female flight attendants. The
subject of litigation is incapable of pecuniary estimation, exclusively cognizable by the RTC,
pursuant to Section 19 (1) of Batas Pambansa Blg. 129, as amended. 15 Being an ordinary civil
action, the same is beyond the jurisdiction of labor tribunals.
The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the
application of the Constitution, labor statutes, law on contracts and the Convention on the
Elimination of All Forms of Discrimination Against Women,16 and the power to apply and interpret
the constitution and CEDAW is within the jurisdiction of trial courts, a court of general jurisdiction.
In Georg Grotjahn GMBH & Co. v. Isnani,17 this Court held that not every dispute between an
employer and employee involves matters that only labor arbiters and the NLRC can resolve in the
exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the
NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code, other labor statutes, or
their collective bargaining agreement.
Not every controversy or money claim by an employee against the employer or vice-versa is within
the exclusive jurisdiction of the labor arbiter. Actions between employees and employer where the
employer-employee relationship is merely incidental and the cause of action precedes from a
different source of obligation is within the exclusive jurisdiction of the regular court. 18 Here, the
employer-employee relationship between the parties is merely incidental and the cause of action
ultimately arose from different sources of obligation, i.e., the Constitution and CEDAW.
Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or
other labor relations statute or a collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and not to the labor arbiter and
the NLRC. In such situations, resolution of the dispute requires expertise, not in labor management
relations nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to labor arbiters and the NLRC and the rationale for granting
jurisdiction over such claims to these agencies disappears.19
If We divest the regular courts of jurisdiction over the case, then which tribunal or forum shall
determine the constitutionality or legality of the assailed CBA provision?
This Court holds that the grievance machinery and voluntary arbitrators do not have the power to
determine and settle the issues at hand. They have no jurisdiction and competence to decide
constitutional issues relative to the questioned compulsory retirement age. Their exercise of
jurisdiction is futile, as it is like vesting power to someone who cannot wield it.
In Gonzales v. Climax Mining Ltd.,20 this Court affirmed the jurisdiction of courts over questions on
constitutionality of contracts, as the same involves the exercise of judicial power. The Court said:
Whether the case involves void or voidable contracts is still a judicial question. It may, in some
instances, involve questions of fact especially with regard to the determination of the
circumstances of the execution of the contracts. But the resolution of the validity or voidness of the
contracts remains a legal or judicial question as it requires the exercise of judicial function. It
requires the ascertainment of what laws are applicable to the dispute, the interpretation and
application of those laws, and the rendering of a judgment based thereon. Clearly, the dispute is

not a mining conflict. It is essentially judicial. The complaint was not merely for the determination
of rights under the mining contracts since the very validity of those contracts is put in issue.
In Saura v. Saura, Jr.,21 this Court emphasized the primacy of the regular court's judicial power
enshrined in the Constitution that is true that the trend is towards vesting administrative bodies
like the SEC with the power to adjudicate matters coming under their particular specialization, to
insure a more knowledgeable solution of the problems submitted to them. This would also relieve
the regular courts of a substantial number of cases that would otherwise swell their already
clogged dockets. But as expedient as this policy may be, it should not deprive the courts of justice
of their power to decide ordinary cases in accordance with the general laws that do not require
any particular expertise or training to interpret and apply. Otherwise, the creeping take-over by
the administrative agencies of the judicial power vested in the courts would render the judiciary
virtually impotent in the discharge of the duties assigned to it by the Constitution.
To be sure, in Rivera v. Espiritu,22 after Philippine Airlines (PAL) and PAL Employees Association
(PALEA) entered into an agreement, which includes the provision to suspend the PAL-PALEA CBA
for 10 years, several employees questioned its validity via a petition for certiorari directly to the
Supreme Court. They said that the suspension was unconstitutional and contrary to public policy.
Petitioners submit that the suspension was inordinately long, way beyond the maximum statutory
life of 5 years for a CBA provided for in Article 253-A of the Labor Code. By agreeing to a 10-year
suspension, PALEA, in effect, abdicated the workers' constitutional right to bargain for another CBA
at the mandated time.
In that case, this Court denied the petition for certiorari, ruling that there is available to petitioners
a plain, speedy, and adequate remedy in the ordinary course of law. The Court said that while the
petition was denominated as one for certiorari and prohibition, its object was actually the
nullification of the PAL-PALEA agreement. As such, petitioners' proper remedy is an ordinary civil
action for annulment of contract, an action which properly falls under the jurisdiction of the
regional trial courts.
The change in the terms and conditions of employment, should Section 144 of the CBA be held
invalid, is but a necessary and unavoidable consequence of the principal relief sought, i.e.,
nullification of the alleged discriminatory provision in the CBA. Thus, it does not necessarily follow
that a resolution of controversy that would bring about a change in the terms and conditions of
employment is a labor dispute, cognizable by labor tribunals. It is unfair to preclude petitioners
from invoking the trial court's jurisdiction merely because it may eventually result into a change of
the terms and conditions of employment. Along that line, the trial court is not asked to set and fix
the terms and conditions of employment, but is called upon to determine whether CBA is
consistent with the laws.
Although the CBA provides for a procedure for the adjustment of grievances, such referral to the
grievance machinery and thereafter to voluntary arbitration would be inappropriate to the
petitioners, because the union and the management have unanimously agreed to the terms of the
CBA and their interest is unified.
In Pantranco North Express, Inc., v. NLRC,23 this Court held that:
x x x Hence, only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents. No grievance between them exists which could be
brought to a grievance machinery. The problem or dispute in the present case is between the
union and the company on the one hand and some union and non-union members who were
dismissed, on the other hand. The dispute has to be settled before an impartial body. The
grievance machinery with members designated by the union and the company cannot be expected
to be impartial against the dismissed employees. Due process demands that the dismissed workers
grievances be ventilated before an impartial body. x x x .
Applying the same rationale to the case at bar, it cannot be said that the "dispute" is between the
union and petitioner company because both have previously agreed upon the provision on

"compulsory retirement" as embodied in the CBA. Also, it was only private respondent on his own
who questioned the compulsory retirement. x x x.
In the same vein, the dispute in the case at bar is not between FASAP and respondent PAL, who
have both previously agreed upon the provision on the compulsory retirement of female flight
attendants as embodied in the CBA. The dispute is between respondent PAL and several female
flight attendants who questioned the provision on compulsory retirement of female flight
attendants. Thus, applying the principle in the aforementioned case cited, referral to the grievance
machinery and voluntary arbitration would not serve the interest of the petitioners.
Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator under the
CBA would be futile because respondent already implemented Section 114, Part A of PAL-FASAP
CBA when several of its female flight attendants reached the compulsory retirement age of 55.
Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its association's
bargaining proposal for the remaining period of 2004-2005 of the PAL-FASAP CBA, which includes
the renegotiation of the subject Section 144. However, FASAP's attempt to change the questioned
provision was shallow and superficial, to say the least, because it exerted no further efforts to
pursue its proposal. When petitioners in their individual capacities questioned the legality of the
compulsory retirement in the CBA before the trial court, there was no showing that FASAP, as their
representative, endeavored to adjust, settle or negotiate with PAL for the removal of the difference
in compulsory age retirement between its female and male flight attendants, particularly those
employed before November 22, 1996. Without FASAP's active participation on behalf of its female
flight attendants, the utilization of the grievance machinery or voluntary arbitration would be
pointless.
The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA.
Interpretation, as defined in Black's Law Dictionary, is the art of or process of discovering and
ascertaining the meaning of a statute, will, contract, or other written document.24 The provision
regarding the compulsory retirement of flight attendants is not ambiguous and does not require
interpretation. Neither is there any question regarding the implementation of the subject CBA
provision, because the manner of implementing the same is clear in itself. The only controversy lies
in its intrinsic validity.
Although it is a rule that a contract freely entered between the parties should be respected, since a
contract is the law between the parties, said rule is not absolute.
In Pakistan International Airlines Corporation v. Ople,25 this Court held that:
The principle of party autonomy in contracts is not, however, an absolute principle. The rule in
Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as they
may deem convenient, "provided they are not contrary to law, morals, good customs, public order
or public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the
equally general rule that provisions of applicable law, especially provisions relating to matters
affected with public policy, are deemed written into the contract. Put a little differently, the
governing principle is that parties may not contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily impressed with public interest. The law
relating to labor and employment is clearly such an area and parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws and regulations by simply
contracting with each other.
Moreover, the relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.x x x 26 The
supremacy of the law over contracts is explained by the fact that labor contracts are not ordinary
contracts; these are imbued with public interest and therefore are subject to the police power of
the state.27 It should not be taken to mean that retirement provisions agreed upon in the CBA are
absolutely beyond the ambit of judicial review and nullification. A CBA, as a labor contract, is not
merely contractual in nature but impressed with public interest. If the retirement provisions in the
CBA run contrary to law, public morals, or public policy, such provisions may very well be voided. 28
Finally, the issue in the petition for certiorari brought before the CA by the respondent was the
alleged exercise of grave abuse of discretion of the RTC in taking cognizance of the case for

declaratory relief. When the CA annuled and set aside the RTC's order, petitioners sought relief
before this Court through the instant petition for review under Rule 45. A perusal of the petition
before Us, petitioners pray for the declaration of the alleged discriminatory provision in the CBA
against its female flight attendants.
This Court is not persuaded. The rule is settled that pure questions of fact may not be the proper
subject of an appeal by certiorari under Rule 45 of the Revised Rules of Court. This mode of appeal
is generally limited only to questions of law which must be distinctly set forth in the petition. The
Supreme Court is not a trier of facts.29
The question as to whether said Section 114, Part A of the PAL-FASAP CBA is discriminatory or not
is a question of fact. This would require the presentation and reception of evidence by the parties
in order for the trial court to ascertain the facts of the case and whether said provision violates the
Constitution, statutes and treaties. A full-blown trial is necessary, which jurisdiction to hear the
same is properly lodged with the the RTC. Therefore, a remand of this case to the RTC for the
proper determination of the merits of the petition for declaratory relief is just and proper.1avvphi1
WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of
Appeals, dated August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813
are REVERSED and SET ASIDE. The Regional Trial Court of Makati City, Branch 147 is DIRECTED to
continue the proceedings in Civil Case No. 04-886 with deliberate dispatch.
SO ORDERED.
G.R. No. 160146
December 11, 2009
LESLIE OKOL, Petitioner,
vs.
SLIMMERS WORLD INTERNATIONAL, BEHAVIOR MODIFICATIONS, INC., and RONALD JOSEPH
MOY,Respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review on certiorari1 assailing the Decision2 dated 18 October
2002 and Resolution dated 22 September 2003 of the Court of Appeals in CA-G.R. SP No. 69893,
which set aside the Resolutions dated 29 May 2001 and 21 December 2001 of the National Labor
Relations Commission (NLRC).
The Facts
Respondent Slimmers World International operating under the name Behavior Modifications, Inc.
(Slimmers World) employed petitioner Leslie Okol (Okol) as a management trainee on 15 June
1992. She rose up the ranks to become Head Office Manager and then Director and Vice President
from 1996 until her dismissal on 22 September 1999.
On 28 July 1999, prior to Okols dismissal, Slimmers World preventively suspended Okol. The
suspension arose from the seizure by the Bureau of Customs of seven Precor elliptical machines
and seven Precor treadmills belonging to or consigned to Slimmers World. The shipment of the
equipment was placed under the names of Okol and two customs brokers for a value less than
US$500. For being undervalued, the equipment were seized.
On 2 September 1999, Okol received a memorandum that her suspension had been extended from
2 September until 1 October 1999 pending the outcome of the investigation on the Precor
equipment importation.
On 17 September 1999, Okol received another memorandum from Slimmers World requiring her
to explain why no disciplinary action should be taken against her in connection with the equipment
seized by the Bureau of Customs.
On 19 September 1999, Okol filed her written explanation. However, Slimmers World found Okols
explanation to be unsatisfactory. Through a letter dated 22 September 1999 signed by its president
Ronald Joseph Moy (Moy), Slimmers World terminated Okols employment.
Okol filed a complaint3 with the Arbitration branch of the NLRC against Slimmers World, Behavior
Modifications, Inc. and Moy (collectively called respondents) for illegal suspension, illegal dismissal,

unpaid commissions, damages and attorneys fees, with prayer for reinstatement and payment of
backwages.
On 22 February 2000, respondents filed a Motion to Dismiss4 the case with a reservation of their
right to file a Position Paper at the proper time. Respondents asserted that the NLRC had no
jurisdiction over the subject matter of the complaint.
In an Order,5 dated 20 March 2000, the labor arbiter granted the motion to dismiss. The labor
arbiter ruled that Okol was the vice-president of Slimmers World at the time of her dismissal. Since
it involved a corporate officer, the dispute was an intra-corporate controversy falling outside the
jurisdiction of the Arbitration branch.
Okol filed an appeal with the NLRC. In a Resolution6 dated 29 May 2001, the NLRC reversed and set
aside the labor arbiters order. The dispositive portion of the resolution states:
WHEREFORE, the Order appealed from is SET ASIDE and REVERSED. A new one is hereby ENTERED
ordering respondent Behavior Modification, Inc./Slimmers World International to reinstate
complainant Leslie F. Okol to her former position with full back wages which to date stood in the
amount of P10,000,000.00 computed from July 28, 1999 to November 28, 2000 until fully
reinstated; and the further sum of P1,250,000.00 as indemnity pay plus attorneys fee equivalent
to ten (10%) of the total monetary award. However, should reinstatement be not feasible
separation pay equivalent to one month pay per year of service is awarded, a fraction of at least six
months considered one whole year.
All other claims are dismissed for lack of factual or legal basis.
SO ORDERED.7
Respondents filed a Motion for Reconsideration with the NLRC. Respondents contended that the
relief prayed for was confined only to the question of jurisdiction. However, the NLRC not only
decided the case on the merits but did so in the absence of position papers from both parties. In a
Resolution8 dated 21 December 2001, the NLRC denied the motion for lack of merit.
Respondents then filed an appeal with the Court of Appeals, docketed as CA-G.R. SP No. 69893.
The Ruling of the Court of Appeals
In a Decision9 dated 18 October 2002, the appellate court set aside the NLRCs Resolution dated 29
May 2001 and affirmed the labor arbiters Order dated 20 March 2000. The Court of Appeals ruled
that the case, being an intra-corporate dispute, falls within the jurisdiction of the regular courts
pursuant to Republic Act No. 8799.10 The appellate court added that the NLRC had acted without
jurisdiction in giving due course to the complaint and deprived respondents of their right to due
process in deciding the case on the merits.
Okol filed a Motion for Reconsideration which was denied in a Resolution 11 dated 22 September
2003.
Hence, the instant petition.
The Issue
The issue is whether or not the NLRC has jurisdiction over the illegal dismissal case filed by
petitioner.
The Courts Ruling
The petition lacks merit.
Petitioner insists that the Court of Appeals erred in ruling that she was a corporate officer and that
the case is an intra-corporate dispute falling within the jurisdiction of the regular courts. Petitioner
asserts that even as vice-president, the work that she performed conforms to that of an employee
rather than a corporate officer. Mere title or designation in a corporation will not, by itself,
determine the existence of an employer-employee relationship. It is the "four-fold" test, namely (1)
the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to
control, which must be applied.
Petitioner enumerated the instances that she was under the power and control of Moy, Slimmers
Worlds president: (1) petitioner received salary evidenced by pay slips, (2) Moy deducted
Medicare and SSS benefits from petitioners salary, and (3) petitioner was dismissed from
employment not through a board resolution but by virtue of a letter from Moy. Thus, having shown

that an employer-employee relationship exists, the jurisdiction to hear and decide the case is
vested with the labor arbiter and the NLRC.
Respondents, on the other hand, maintain that petitioner was a corporate officer at the time of her
dismissal from Slimmers World as supported by the General Information Sheet and Directors
Affidavit attesting that petitioner was an officer. Also, the factors cited by petitioner that she was a
mere employee do not prove that she was not an officer of Slimmers World. Even the alleged
absence of any resolution of the Board of Directors approving petitioners termination does not
constitute proof that petitioner was not an officer. Respondents assert that petitioner was not only
an officer but also a stockholder and director; which facts provide further basis that petitioners
separation from Slimmers World does not come under the NLRCs jurisdiction.
The issue revolves mainly on whether petitioner was an employee or a corporate officer of
Slimmers World. Section 25 of the Corporation Code enumerates corporate officers as the
president, secretary, treasurer and such other officers as may be provided for in the by-laws. In
Tabang v. NLRC,12 we held that an "office" is created by the charter of the corporation and the
officer is elected by the directors or stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by action of the directors or stockholders but by
the managing officer of the corporation who also determines the compensation to be paid to such
employee.
In the present case, the respondents, in their motion to dismiss filed before the labor arbiter,
questioned the jurisdiction of the NLRC in taking cognizance of petitioners complaint. In the
motion, respondents attached the General Information Sheet 13 (GIS) dated 14 April 1998,
Minutes14 of the meeting of the Board of Directors dated 14 April 1997 and Secretarys
Certificate,15 and the Amended By-Laws16 dated 1 August 1994 of Slimmers World as submitted to
the SEC to show that petitioner was a corporate officer whose rights do not fall within the NLRCs
jurisdiction. The GIS and minutes of the meeting of the board of directors indicated that petitioner
was a member of the board of directors, holding one subscribed share of the capital stock, and an
elected corporate officer.
The relevant portions of the Amended By-Laws of Slimmers World which enumerate the power of
the board of directors as well as the officers of the corporation state:
Article II
The Board of Directors
1. Qualifications and Election The general management of the corporation shall be vested in a
board of five directors who shall be stockholders and who shall be elected annually by the
stockholders and who shall serve until the election and qualification of their successors.
xxx
Article III
Officers
xxx
4. Vice-President Like the Chairman of the Board and the President, the Vice-President shall be
elected by the Board of Directors from [its] own members.
The Vice-President shall be vested with all the powers and authority and is required to perform all
the duties of the President during the absence of the latter for any cause.
The Vice-President will perform such duties as the Board of Directors may impose upon him from
time to time.
xxx
Clearly, from the documents submitted by respondents, petitioner was a director and officer of
Slimmers World. The charges of illegal suspension, illegal dismissal, unpaid commissions,
reinstatement and back wages imputed by petitioner against respondents fall squarely within the
ambit of intra-corporate disputes. In a number of cases,17 we have held that a corporate officers
dismissal is always a corporate act, or an intra-corporate controversy which arises between a
stockholder and a corporation. The question of remuneration involving a stockholder and officer,
not a mere employee, is not a simple labor problem but a matter that comes within the area of

corporate affairs and management and is a corporate controversy in contemplation of the

Corporation Code.18
Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A19 (PD 902-A) provided that
intra-corporate disputes fall within the jurisdiction of the Securities and Exchange Commission
(SEC):
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:
xxx
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.
xxx
It is a settled rule that jurisdiction over the subject matter is conferred by law. 20 The determination
of the rights of a director and corporate officer dismissed from his employment as well as the
corresponding liability of a corporation, if any, is an intra-corporate dispute subject to the
jurisdiction of the regular courts. Thus, the appellate court correctly ruled that it is not the NLRC
but the regular courts which have jurisdiction over the present case.
WHEREFORE, we DENY the petition. We AFFIRM the 18 October 2002 Decision and 22 September
2003 Resolution of the Court of Appeals in CA-G.R. SP No. 69893. This Decision is without prejudice
to petitioner Leslie Okols taking recourse to and seeking relief through the appropriate remedy in
the proper forum.
SO ORDERED.
G.R. No. 145587
October 26, 2007
EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELEAZAR S. GRAN, respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari1 seeks to set aside the October 18, 2000 Decision2 of the
Court of Appeals (CA) in CA-G.R. SP No. 56120 which affirmed the January 15, 1999 Decision 3 and
September 30, 1999 Resolution4 rendered by the National Labor Relations Commission (NLRC)
(Third Division) in POEA ADJ (L) 94-06-2194, ordering Expertise Search International (ESI), EDIStaffbuilders International, Inc. (EDI), and Omar Ahmed Ali Bin Bechr Est. (OAB) jointly and severally
to pay Eleazar S. Gran (Gran) the amount of USD 16,150.00 as unpaid salaries.
The Facts
Petitioner EDI is a corporation engaged in recruitment and placement of Overseas Filipino Workers
(OFWs).5 ESI is another recruitment agency which collaborated with EDI to process the
documentation and deployment of private respondent to Saudi Arabia.
Private respondent Gran was an OFW recruited by EDI, and deployed by ESI to work for OAB, in
Riyadh, Kingdom of Saudi Arabia.6
It appears that OAB asked EDI through its October 3, 1993 letter for curricula vitae of qualified
applicants for the position of "Computer Specialist." 7 In a facsimile transmission dated November
29, 1993, OAB informed EDI that, from the applicants' curricula vitae submitted to it for evaluation,
it selected Gran for the position of "Computer Specialist." The faxed letter also stated that if Gran
agrees to the terms and conditions of employment contained in it, one of which was a monthly
salary of SR (Saudi Riyal) 2,250.00 (USD 600.00), EDI may arrange for Gran's immediate dispatch. 8

After accepting OAB's offer of employment, Gran signed an employment contract 9 that granted
him a monthly salary of USD 850.00 for a period of two years. Gran was then deployed to Riyadh,
Kingdom of Saudi Arabia on February 7, 1994.
Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salaryhis employment
contract stated USD 850.00; while his Philippine Overseas Employment Agency (POEA) Information
Sheet indicated USD 600.00 only. However, through the assistance of the EDI office in Riyadh, OAB
agreed to pay Gran USD 850.00 a month.10
After Gran had been working for about five months for OAB, his employment was terminated
through OAB's July 9, 1994 letter,11 on the following grounds:
1. Non-compliance to contract requirements by the recruitment agency primarily on your salary
and contract duration.
2. Non-compliance to pre-qualification requirements by the recruitment agency[,] vide OAB letter
ref. F-5751-93, dated October 3, 1993.12
3. Insubordination or disobedience to Top Management Order and/or instructions (non-submittal
of daily activity reports despite several instructions).
On July 11, 1994, Gran received from OAB the total amount of SR 2,948.00 representing his final
pay, and on the same day, he executed a Declaration 13 releasing OAB from any financial obligation
or otherwise, towards him.
After his arrival in the Philippines, Gran instituted a complaint, on July 21, 1994, against ESI/EDI,
OAB, Country Bankers Insurance Corporation, and Western Guaranty Corporation with the NLRC,
National Capital Region, Quezon City, which was docketed as POEA ADJ (L) 94-06-2194 for
underpayment of wages/salaries and illegal dismissal.
The Ruling of the Labor Arbiter
In his February 10, 1998 Decision,14 Labor Arbiter Manuel R. Caday, to whom Gran's case was
assigned, ruled that there was neither underpayment nor illegal dismissal.
The Labor Arbiter reasoned that there was no underpayment of salaries since according to the
POEA-Overseas Contract Worker (OCW) Information Sheet, Gran's monthly salary was USD 600.00,
and in his Confirmation of Appointment as Computer Specialist, his monthly basic salary was fixed
at SR 2,500.00, which was equivalent to USD 600.00.
Arbiter Caday also cited the Declaration executed by Gran, to justify that Gran had no claim for
unpaid salaries or wages against OAB.
With regard to the issue of illegal dismissal, the Labor Arbiter found that Gran failed to refute EDI's
allegations; namely, (1) that Gran did not submit a single activity report of his daily activity as
dictated by company policy; (2) that he was not qualified for the job as computer specialist due to
his insufficient knowledge in programming and lack of knowledge in ACAD system; (3) that Gran
refused to follow management's instruction for him to gain more knowledge of the job to prove his
worth as computer specialist; (4) that Gran's employment contract had never been substituted; (5)
and that Gran was paid a monthly salary of USD 850.00, and USD 350.00 monthly as food
allowance.
Accordingly, the Labor Arbiter decided that Gran was validly dismissed from his work due to
insubordination, disobedience, and his failure to submit daily activity reports.
Thus, on February 10, 1998, Arbiter Caday dismissed Gran's complaint for lack of merit.
Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the NLRC, Third Division. However, it
appears from the records that Gran failed to furnish EDI with a copy of his Appeal Memorandum.
The Ruling of the NLRC
The NLRC held that EDI's seemingly harmless transfer of Gran's contract to ESI is actually
"reprocessing," which is a prohibited transaction under Article 34 (b) of the Labor Code. This
scheme constituted misrepresentation through the conspiracy between EDI and ESI in misleading
Gran and even POEA of the actual terms and conditions of the OFW's employment. In addition, it
was found that Gran did not commit any act that constituted a legal ground for dismissal. The
alleged non-compliance with contractual stipulations relating to Gran's salary and contract
duration, and the absence of pre-qualification requirements cannot be attributed to Gran but to
EDI, which dealt directly with OAB. In addition, the charge of insubordination was not

substantiated, and Gran was not even afforded the required notice and investigation on his alleged
offenses.
Thus, the NLRC reversed the Labor Arbiter's Decision and rendered a new one, the dispositive
portion of which reads:
WHEREFORE, the assailed decision is SET ASIDE. Respondents Expertise Search International, Inc.,
EDI Staffbuilders Int'l., Inc. and Omar Ahmed Ali Bin Bechr Est. (OAB) are hereby ordered jointly and
severally liable to pay the complainant Eleazar Gran the Philippine peso equivalent at the time of
actual payment of SIXTEEN THOUSAND ONE HUNDRED FIFTY US DOLLARS (US$16,150.00)
representing his salaries for the unexpired portion of his contract.
SO ORDERED.16
Gran then filed a Motion for Execution of Judgment 17 on March 29, 1999 with the NLRC and
petitioner receiving a copy of this motion on the same date.18
To prevent the execution, petitioner filed an Opposition19 to Gran's motion arguing that the Writ of
Execution cannot issue because it was not notified of the appellate proceedings before the NLRC
and was not given a copy of the memorandum of appeal nor any opportunity to participate in the
appeal.
Seeing that the NLRC did not act on Gran's motion after EDI had filed its Opposition, petitioner
filed, on August 26, 1999, a Motion for Reconsideration of the NLRC Decision after receiving a copy
of the Decision on August 16, 1999.20
The NLRC then issued a Resolution21 denying petitioner's Motion for Reconsideration, ratiocinating
that the issues and arguments raised in the motion "had already been amply discussed, considered,
and ruled upon" in the Decision, and that there was "no cogent reason or patent or palpable error
that warrant any disturbance thereof."
Unconvinced of the NLRC's reasoning, EDI filed a Petition for Certiorari before the CA. Petitioner
claimed in its petition that the NLRC committed grave abuse of discretion in giving due course to
the appeal despite Gran's failure to perfect the appeal.
The Ruling of the Court of Appeals
The CA subsequently ruled on the procedural and substantive issues of EDI's petition.
On the procedural issue, the appellate court held that "Gran's failure to furnish a copy of his appeal
memorandum [to EDI was] a mere formal lapse, an excusable neglect and not a jurisdictional
defect which would justify the dismissal of his appeal." 22 The court also held that petitioner EDI
failed to prove that private respondent was terminated for a valid cause and in accordance with
due process; and that Gran's Declaration releasing OAB from any monetary obligation had no force
and effect. The appellate court ratiocinated that EDI had the burden of proving Gran's
incompetence; however, other than the termination letter, no evidence was presented to show
how and why Gran was considered to be incompetent. The court held that since the law requires
the recruitment agencies to subject OFWs to trade tests before deployment, Gran must have been
competent and qualified; otherwise, he would not have been hired and deployed abroad.
As for the charge of insubordination and disobedience due to Gran's failure to submit a "Daily
Activity Report," the appellate court found that EDI failed to show that the submission of the "Daily
Activity Report" was a part of Gran's duty or the company's policy. The court also held that even if
Gran was guilty of insubordination, he should have just been suspended or reprimanded, but not
dismissed.
The CA also held that Gran was not afforded due process, given that OAB did not abide by the twin
notice requirement. The court found that Gran was terminated on the same day he received the
termination letter, without having been apprised of the bases of his dismissal or afforded an
opportunity to explain his side.
Finally, the CA held that the Declaration signed by Gran did not bar him from demanding benefits
to which he was entitled. The appellate court found that the Declaration was in the form of a
quitclaim, and as such is frowned upon as contrary to public policy especially where the monetary
consideration given in the Declaration was very much less than what he was legally entitled tohis
backwages amounting to USD 16,150.00.

As a result of these findings, on October 18, 2000, the appellate court denied the petition to set
aside the NLRC Decision.
Hence, this instant petition is before the Court.
The Issues
Petitioner raises the following issues for our consideration:
I. WHETHER THE FAILURE OF GRAN TO FURNISH A COPY OF HIS APPEAL MEMORANDUM TO
PETITIONER EDI WOULD CONSTITUTE A JURISDICTIONAL DEFECT AND A DEPRIVATION OF
PETITIONER EDI'S RIGHT TO DUE PROCESS AS WOULD JUSTIFY THE DISMISSAL OF GRAN'S APPEAL.
II. WHETHER PETITIONER EDI HAS ESTABLISHED BY WAY OF SUBSTANTIAL EVIDENCE THAT GRAN'S
TERMINATION WAS JUSTIFIABLE BY REASON OF INCOMPETENCE. COROLLARY HERETO, WHETHER
THE PRIETO VS. NLRC RULING, AS APPLIED BY THE COURT OF APPEALS, IS APPLICABLE IN THE
INSTANT CASE.
III. WHETHER PETITIONER HAS ESTABLISHED BY WAY OF SUBSTANTIAL EVIDENCE THAT GRAN'S
TERMINATION WAS JUSTIFIABLE BY REASON OF INSUBORDINATION AND DISOBEDIENCE.
IV. WHETHER GRAN WAS AFFORDED DUE PROCESS PRIOR TO TERMINATION.
V. WHETHER GRAN IS ENTITLED TO BACKWAGES FOR THE UNEXPIRED PORTION OF HIS
CONTRACT.23
The Court's Ruling
The petition lacks merit except with respect to Gran's failure to furnish EDI with his Appeal
Memorandum filed with the NLRC.
First Issue: NLRC's Duty is to Require Respondent to Provide Petitioner a Copy of the Appeal
Petitioner EDI claims that Gran's failure to furnish it a copy of the Appeal Memorandum constitutes
a jurisdictional defect and a deprivation of due process that would warrant a rejection of the
appeal.
This position is devoid of merit.
In a catena of cases, it was ruled that failure of appellant to furnish a copy of the appeal to the
adverse party is not fatal to the appeal.
In Estrada v. National Labor Relations Commission,24 this Court set aside the order of the NLRC
which dismissed an appeal on the sole ground that the appellant did not furnish the appellee a
memorandum of appeal contrary to the requirements of Article 223 of the New Labor Code and
Section 9, Rule XIII of its Implementing Rules and Regulations.
Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order of dismissal of an appeal to the
NLRC based on the ground that "there is no showing whatsoever that a copy of the appeal was
served by the appellant on the appellee"25was annulled. The Court ratiocinated as follows:
The failure to give a copy of the appeal to the adverse party was a mere formal lapse, an excusable
neglect. Time and again We have acted on petitions to review decisions of the Court of Appeals
even in the absence of proof of service of a copy thereof to the Court of Appeals as required by
Section 1 of Rule 45, Rules of Court. We act on the petitions and simply require the petitioners to
comply with the rule.26 (Emphasis supplied.)
The J.D. Magpayo ruling was reiterated in Carnation Philippines Employees Labor Union-FFW v.
National Labor Relations Commission,27 Pagdonsalan v. NLRC,28 and in Sunrise Manning Agency,
Inc. v. NLRC.29
Thus, the doctrine that evolved from these cases is that failure to furnish the adverse party with a
copy of the appeal is treated only as a formal lapse, an excusable neglect, and hence, not a
jurisdictional defect. Accordingly, in such a situation, the appeal should not be dismissed; however,
it should not be given due course either. As enunciated in J.D. Magpayo, the duty that is imposed
on the NLRC, in such a case, is to require the appellant to comply with the rule that the opposing
party should be provided with a copy of the appeal memorandum.
While Gran's failure to furnish EDI with a copy of the Appeal Memorandum is excusable, the abject
failure of the NLRC to order Gran to furnish EDI with the Appeal Memorandum constitutes grave
abuse of discretion.
The records reveal that the NLRC discovered that Gran failed to furnish EDI a copy of the Appeal
Memorandum. The NLRC then ordered Gran to present proof of service. In compliance with the

order, Gran submitted a copy of Camp Crame Post Office's list of mail/parcels sent on April 7,
1998.30 The post office's list shows that private respondent Gran sent two pieces of mail on the
same date: one addressed to a certain Dan O. de Guzman of Legaspi Village, Makati; and the other
appears to be addressed to Neil B. Garcia (or Gran),31 of Ermita, Manilaboth of whom are not
connected with petitioner.
This mailing list, however, is not a conclusive proof that EDI indeed received a copy of the Appeal
Memorandum.
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof and completeness of service in
proceedings before the NLRC:
Section 5.32 Proof and completeness of service.The return is prima facie proof of the facts
indicated therein.Service by registered mail is complete upon receipt by the addressee or his
agent; but if the addressee fails to claim his mail from the post office within five (5) days from the
date of first notice of the postmaster, service shall take effect after such time. (Emphasis supplied.)
Hence, if the service is done through registered mail, it is only deemed complete when the
addressee or his agent received the mail or after five (5) days from the date of first notice of the
postmaster. However, the NLRC Rules do not state what would constitute proper proof of service.
Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service:
Section 13. Proof of service.Proof of personal service shall consist of a written admission of the
party served or the official return of the server, or the affidavit of the party serving, containing a
full statement of the date, place and manner of service. If the service is by ordinary mail, proof
thereof shall consist of an affidavit of the person mailing of facts showing compliance with section
7 of this Rule. If service is made by registered mail, proof shall be made by such affidavit and
registry receipt issued by the mailing office. The registry return card shall be filed immediately
upon its receipt by the sender, or in lieu thereof the unclaimed letter together with the certified
or sworn copy of the notice given by the postmaster to the addressee (emphasis supplied).
Based on the foregoing provision, it is obvious that the list submitted by Gran is not conclusive
proof that he had served a copy of his appeal memorandum to EDI, nor is it conclusive proof that
EDI received its copy of the Appeal Memorandum. He should have submitted an affidavit proving
that he mailed the Appeal Memorandum together with the registry receipt issued by the post
office; afterwards, Gran should have immediately filed the registry return card.
Hence, after seeing that Gran failed to attach the proof of service, the NLRC should not have simply
accepted the post office's list of mail and parcels sent; but it should have required Gran to
properly furnish the opposing parties with copies of his Appeal Memorandum as prescribed
in J.D. Magpayo and the other cases. The NLRC should not have proceeded with the adjudication
of the case, as this constitutes grave abuse of discretion.
The glaring failure of NLRC to ensure that Gran should have furnished petitioner EDI a copy of the
Appeal Memorandum before rendering judgment reversing the dismissal of Gran's complaint
constitutes an evasion of the pertinent NLRC Rules and established jurisprudence. Worse, this
failure deprived EDI of procedural due process guaranteed by the Constitution which can serve as
basis for the nullification of proceedings in the appeal before the NLRC. One can only surmise the
shock and dismay that OAB, EDI, and ESI experienced when they thought that the dismissal of
Gran's complaint became final, only to receive a copy of Gran's Motion for Execution of Judgment
which also informed them that Gran had obtained a favorable NLRC Decision. This is not level
playing field and absolutely unfair and discriminatory against the employer and the job recruiters.
The rights of the employers to procedural due process cannot be cavalierly disregarded for they
too have rights assured under the Constitution.
However, instead of annulling the dispositions of the NLRC and remanding the case for further
proceedings we will resolve the petition based on the records before us to avoid a protracted
litigation.33
The second and third issues have a common matterwhether there was just cause for Gran's
dismissalhence, they will be discussed jointly.
Second and Third Issues: Whether Gran's dismissal is justifiable by reason of incompetence,
insubordination, and disobedience

In cases involving OFWs, the rights and obligations among and between the OFW, the local
recruiter/agent, and the foreign employer/principal are governed by the employment contract. A
contract freely entered into is considered law between the parties; and hence, should be
respected. In formulating the contract, the 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.34
In the present case, the employment contract signed by Gran specifically states that Saudi Labor
Laws will govern matters not provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties (lex loci intentiones) to apply
to the contract, Saudi Labor Laws should govern all matters relating to the termination of the
employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute or case has the
burden of proving the foreign law. The foreign law is treated as a question of fact to be properly
pleaded and proved as the judge or labor arbiter cannot take judicial notice of a foreign law. He is
presumed to know only domestic or forum law.35
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the
International Law doctrine ofpresumed-identity approach or processual presumption comes into
play.36 Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is
that foreign law is the same as ours.37 Thus, we apply Philippine labor laws in determining the
issues presented before us.
Petitioner EDI claims that it had proven that Gran was legally dismissed due to incompetence and
insubordination or disobedience.
This claim has no merit.
In illegal dismissal cases, it has been established by Philippine law and jurisprudence that the
employer should prove that the dismissal of employees or personnel is legal and just.
Section 33 of Article 277 of the Labor Code38 states that:
ART. 277. MISCELLANEOUS PROVISIONS39
(b) Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a statement of the causes for
termination and shall afford the latter ample opportunity to be heard and to defend himself with
the assistance of his representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice to the right of the workers to
contest the validity or legality of his dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission.The burden of proving that the termination was for a valid
or authorized cause shall rest on the employer. x x x
In many cases, it has been held that in termination disputes or illegal dismissal cases, the employer
has the burden of proving that the dismissal is for just and valid causes; and failure to do so would
necessarily mean that the dismissal was not justified and therefore illegal. 40 Taking into account the
character of the charges and the penalty meted to an employee, the employer is bound to adduce
clear, accurate, consistent, and convincing evidence to prove that the dismissal is valid and
legal.41 This is consistent with the principle of security of tenure as guaranteed by the Constitution
and reinforced by Article 277 (b) of the Labor Code of the Philippines. 42
In the instant case, petitioner claims that private respondent Gran was validly dismissed for just
cause, due to incompetence and insubordination or disobedience. To prove its allegations, EDI
submitted two letters as evidence. The first is the July 9, 1994 termination letter,43 addressed to
Gran, from Andrea E. Nicolaou, Managing Director of OAB. The second is an unsigned April 11,
1995 letter44 from OAB addressed to EDI and ESI, which outlined the reasons why OAB had
terminated Gran's employment.
Petitioner claims that Gran was incompetent for the Computer Specialist position because he had
"insufficient knowledge in programming and zero knowledge of [the] ACAD system." 45 Petitioner

also claims that Gran was justifiably dismissed due to insubordination or disobedience because he
continually failed to submit the required "Daily Activity Reports." 46However, other than the
abovementioned letters, no other evidence was presented to show how and why Gran was
considered incompetent, insubordinate, or disobedient. Petitioner EDI had clearly failed to
overcome the burden of proving that Gran was validly dismissed.
Petitioner's imputation of incompetence on private respondent due to his "insufficient knowledge
in programming and zero knowledge of the ACAD system" based only on the above mentioned
letters, without any other evidence, cannot be given credence.
An allegation of incompetence should have a factual foundation. Incompetence may be shown by
weighing it against a standard, benchmark, or criterion. However, EDI failed to establish any such
bases to show how petitioner found Gran incompetent.
In addition, the elements that must concur for the charge of insubordination or willful
disobedience to prosper were not present.
In Micro Sales Operation Network v. NLRC, we held that:
For willful disobedience to be a valid cause for dismissal, the following twin elements must concur:
(1) the employee's assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to
the employee and must pertain to the duties which he had been engaged to discharge. 47
EDI failed to discharge the burden of proving Gran's insubordination or willful disobedience. As
indicated by the second requirement provided for in Micro Sales Operation Network, in order to
justify willful disobedience, we must determine whether the order violated by the employee is
reasonable, lawful, made known to the employee, and pertains to the duties which he had been
engaged to discharge. In the case at bar, petitioner failed to show that the order of the company
which was violatedthe submission of "Daily Activity Reports"was part of Gran's duties as a
Computer Specialist. Before the Labor Arbiter, EDI should have provided a copy of the company
policy, Gran's job description, or any other document that would show that the "Daily Activity
Reports" were required for submission by the employees, more particularly by a Computer
Specialist.
Even though EDI and/or ESI were merely the local employment or recruitment agencies and not
the foreign employer, they should have adduced additional evidence to convincingly show that
Gran's employment was validly and legally terminated. The burden devolves not only upon the
foreign-based employer but also on the employment or recruitment agency for the latter is not
only an agent of the former, but is also solidarily liable with the foreign principal for any claims or
liabilities arising from the dismissal of the worker.48
Thus, petitioner failed to prove that Gran was justifiably dismissed due to incompetence,
insubordination, or willful disobedience.
Petitioner also raised the issue that Prieto v. NLRC,49 as used by the CA in its Decision, is not
applicable to the present case.
In Prieto, this Court ruled that "[i]t is presumed that before their deployment, the petitioners were
subjected to trade tests required by law to be conducted by the recruiting agency to insure
employment of only technically qualified workers for the foreign principal." 50 The CA, using the
ruling in the said case, ruled that Gran must have passed the test; otherwise, he would not have
been hired. Therefore, EDI was at fault when it deployed Gran who was allegedly "incompetent"
for the job.
According to petitioner, the Prieto ruling is not applicable because in the case at hand, Gran
misrepresented himself in his curriculum vitae as a Computer Specialist; thus, he was not qualified
for the job for which he was hired.
We disagree.
The CA is correct in applying Prieto. The purpose of the required trade test is to weed out
incompetent applicants from the pool of available workers. It is supposed to reveal applicants with
false educational backgrounds, and expose bogus qualifications. Since EDI deployed Gran to
Riyadh, it can be presumed that Gran had passed the required trade test and that Gran is qualified
for the job. Even if there was no objective trade test done by EDI, it was still EDI's responsibility to

subject Gran to a trade test; and its failure to do so only weakened its position but should not in
any way prejudice Gran. In any case, the issue is rendered moot and academic because Gran's
incompetency is unproved.
Fourth Issue: Gran was not Afforded Due Process
As discussed earlier, in the absence of proof of Saudi laws, Philippine Labor laws and regulations
shall govern the relationship between Gran and EDI. Thus, our laws and rules on the requisites of
due process relating to termination of employment shall apply.
Petitioner EDI claims that private respondent Gran was afforded due process, since he was allowed
to work and improve his capabilities for five months prior to his termination. 51 EDI also claims that
the requirements of due process, as enunciated in Santos, Jr. v. NLRC,52 and Malaya Shipping
Services, Inc. v. NLRC,53 cited by the CA in its Decision, were properly observed in the present case.
This position is untenable.
In Agabon v. NLRC,54 this Court held that:
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give
the employee two written notices and a hearing or opportunity to be heard if requested by the
employee before terminating the employment: a notice specifying the grounds for which dismissal
is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a
notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under
Articles 283 and 284, the employer must give the employee and the Department of Labor and
Employment written notices 30 days prior to the effectivity of his separation.
Under the twin notice requirement, the employees must be given two (2) notices before their
employment could be terminated: (1) a first notice to apprise the employees of their fault, and (2)
a second notice to communicate to the employees that their employment is being terminated. In
between the first and second notice, the employees should be given a hearing or opportunity to
defend themselves personally or by counsel of their choice.55
A careful examination of the records revealed that, indeed, OAB's manner of dismissing Gran fell
short of the two notice requirement. While it furnished Gran the written notice informing him of
his dismissal, it failed to furnish Gran the written notice apprising him of the charges against him,
as prescribed by the Labor Code.56 Consequently, he was denied the opportunity to respond to said
notice. In addition, OAB did not schedule a hearing or conference with Gran to defend himself and
adduce evidence in support of his defenses. Moreover, the July 9, 1994 termination letter was
effective on the same day. This shows that OAB had already condemned Gran to dismissal, even
before Gran was furnished the termination letter. It should also be pointed out that OAB failed to
give Gran the chance to be heard and to defend himself with the assistance of a representative in
accordance with Article 277 of the Labor Code. Clearly, there was no intention to provide Gran with
due process. Summing up, Gran was notified and his employment arbitrarily terminated on the
same day, through the same letter, and for unjustified grounds. Obviously, Gran was not afforded
due process.
Pursuant to the doctrine laid down in Agabon,57 an employer is liable to pay nominal damages as
indemnity for violating the employee's right to statutory due process. Since OAB was in breach of
the due process requirements under the Labor Code and its regulations, OAB, ESI, and EDI, jointly
and solidarily, are liable to Gran in the amount of PhP 30,000.00 as indemnity.
Fifth and Last Issue: Gran is Entitled to Backwages
We reiterate the rule that with regard to employees hired for a fixed period of employment, in
cases arising before the effectivity of R.A. No. 8042 58 (Migrant Workers and Overseas Filipinos Act)
on August 25, 1995, that when the contract is for a fixed term and the employees are dismissed
without just cause, they are entitled to the payment of their salaries corresponding to the
unexpired portion of their contract.59 On the other hand, for cases arising after the effectivity of
R.A. No. 8042, when the termination of employment is without just, valid or authorized cause as
defined by law or contract, the worker shall be entitled to the full reimbursement of his placement
fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of
his employment contract or for three (3) months for every year of the unexpired term whichever is
less.60

In the present case, the employment contract provides that the employment contract shall be valid
for a period of two (2) years from the date the employee starts to work with the employer.61 Gran
arrived in Riyadh, Saudi Arabia and started to work on February 7, 1994; 62 hence, his employment
contract is until February 7, 1996. Since he was illegally dismissed on July 9, 1994, before the
effectivity of R.A. No. 8042, he is therefore entitled to backwages corresponding to the unexpired
portion of his contract, which was equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages and mainly relies on the
Declaration which is claimed to have been freely and voluntarily executed by Gran. The relevant
portions of the Declaration are as follows:
I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY FINAL SETTLEMENT ON THIS DATE
THE AMOUNT OF:
S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE
HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE SERVICES I RENDERED TO OAB
ESTABLISHMENT.
I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION IN MY FAVOUR AFTER
RECEIVING THE ABOVE MENTIONED AMOUNT IN CASH.
I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME IN WHATEVER FORM.
I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING MY SIGNATURE VOLUNTARILY.
SIGNED.
ELEAZAR GRAN
Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more particularly
those executed by employees. This requirement was clearly articulated by Chief Justice Artemio V.
Panganiban in Land and Housing Development Corporation v. Esquillo:
Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor of workers
should be strictly scrutinized to protect the weak and the disadvantaged. The waivers should be
carefully examined, in regard not only to the words and terms used, but also the factual
circumstances under which they have been executed.63 (Emphasis supplied.)
This Court had also outlined in Land and Housing Development Corporation, citing Periquet v.
NLRC,64 the parameters for valid compromise agreements, waivers, and quitclaims:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later
be disowned simply because of a change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are
unconscionable on its face, that the law will step in to annul the questionable transaction. But
where it is shown that the person making the waiver did so voluntarily, with full understanding of
what he was doing, and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. (Emphasis supplied.)
Is the waiver and quitclaim labeled a Declaration valid? It is not.
The Court finds the waiver and quitclaim null and void for the following reasons:
1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is unreasonably low.
As correctly pointed out by the court a quo, the payment of SR 2,948.00 is even lower than his
monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also very much less than the USD
16,150.00 which is the amount Gran is legally entitled to get from petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for Gran's salary
for the services he rendered to OAB as Computer Specialist. If the Declaration is a quitclaim, then
the consideration should be much much more than the monthly salary of SR 3,190.00 (USD
850.00)although possibly less than the estimated Gran's salaries for the remaining duration of his
contract and other benefits as employee of OAB. A quitclaim will understandably be lower than the
sum total of the amounts and benefits that can possibly be awarded to employees or to be earned
for the remainder of the contract period since it is a compromise where the employees will have to
forfeit a certain portion of the amounts they are claiming in exchange for the early payment of a
compromise amount. The court may however step in when such amount is unconscionably low or

unreasonable although the employee voluntarily agreed to it. In the case of the Declaration, the
amount is unreasonably small compared to the future wages of Gran.
3. The factual circumstances surrounding the execution of the Declaration would show that Gran
did not voluntarily and freely execute the document. Consider the following chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;
b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his plane
ticket;65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
The foregoing events readily reveal that Gran was "forced" to sign the Declaration and constrained
to receive the amount of SR 2,948.00 even if it was against his willsince he was told on July 10,
1994 to leave Riyadh on July 12, 1994. He had no other choice but to sign the Declaration as he
needed the amount of SR 2,948.00 for the payment of his ticket. He could have entertained some
apprehensions as to the status of his stay or safety in Saudi Arabia if he would not sign the
quitclaim.
4. The court a quo is correct in its finding that the Declaration is a contract of adhesion which
should be construed against the employer, OAB. An adhesion contract is contrary to public policy
as it leaves the weaker partythe employeein a "take-it-or-leave-it" situation. Certainly, the
employer is being unjust to the employee as there is no meaningful choice on the part of the
employee while the terms are unreasonably favorable to the employer. 66
Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under Philippine
laws in the absence of proof of the applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of quitclaims and waivers of
employees under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding amounts, which the employees
are giving up in consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the employee in English, Filipino, or in
the dialect known to the employeesthat by signing the waiver or quitclaim, they are forfeiting or
relinquishing their right to receive the benefits which are due them under the law; and
4. A statement that the employees signed and executed the document voluntarily, and had fully
understood the contents of the document and that their consent was freely given without any
threat, violence, duress, intimidation, or undue influence exerted on their person.
It is advisable that the stipulations be made in English and Tagalog or in the dialect known to the
employee. There should be two (2) witnesses to the execution of the quitclaim who must also sign
the quitclaim. The document should be subscribed and sworn to under oath preferably before any
administering official of the Department of Labor and Employment or its regional office, the Bureau
of Labor Relations, the NLRC or a labor attach in a foreign country. Such official shall assist the
parties regarding the execution of the quitclaim and waiver.67 This compromise settlement
becomes final and binding under Article 227 of the Labor Code which provides that:
[A]ny compromise settlement voluntarily agreed upon with the assistance of the Bureau of Labor
Relations or the regional office of the DOLE, shall be final and binding upon the parties and the
NLRC or any court "shall not assume jurisdiction over issues involved therein except in case of noncompliance thereof or if there is prima facieevidence that the settlement was obtained through
fraud, misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor contracts of
OFWs in the absence of proof of the laws of the foreign country agreed upon to govern said
contracts. Otherwise, the foreign laws shall apply.
WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R. SP No. 56120 of the
Court of Appeals affirming the January 15, 1999 Decision and September 30, 1999 Resolution of the
NLRC

is AFFIRMED with the MODIFICATION that petitioner EDI-Staffbuilders International, Inc. shall pay
the amount of PhP 30,000.00 to respondent Gran as nominal damages for non-compliance with
statutory due process.
No costs.
SO ORDERED.
G.R. No. 178551
October 11, 2010
ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL and MINISTRY OF PUBLIC HEALTHKUWAITPetitioners,
vs.
MA. JOSEFA ECHIN, Respondent.
DECISION
CARPIO MORALES, J.:
Josefina Echin (respondent) was hired by petitioner ATCI Overseas Corporation in behalf of its
principal-co-petitioner, the Ministry of Public Health of Kuwait (the Ministry), for the position of
medical technologist under a two-year contract, denominated as a Memorandum of Agreement
(MOA), with a monthly salary of US$1,200.00.
Under the MOA,1 all newly-hired employees undergo a probationary period of one (1) year and are
covered by Kuwaits Civil Service Board Employment Contract No. 2.
Respondent was deployed on February 17, 2000 but was terminated from employment on
February 11, 2001, she not having allegedly passed the probationary period.
As the Ministry denied respondents request for reconsideration, she returned to the Philippines on
March 17, 2001, shouldering her own air fare.
On July 27, 2001, respondent filed with the National Labor Relations Commission (NLRC) a
complaint2 for illegal dismissal against petitioner ATCI as the local recruitment agency, represented
by petitioner, Amalia Ikdal (Ikdal), and the Ministry, as the foreign principal.
By Decision3 of November 29, 2002, the Labor Arbiter, finding that petitioners neither showed that
there was just cause to warrant respondents dismissal nor that she failed to qualify as a regular
employee, held that respondent was illegally dismissed and accordingly ordered petitioners to pay
her US$3,600.00, representing her salary for the three months unexpired portion of her contract.
On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the Labor Arbiters decision by
Resolution4 of January 26, 2004. Petitioners motion for reconsideration having been denied by
Resolution5 of April 22, 2004, they appealed to the Court of Appeals, contending that their
principal, the Ministry, being a foreign government agency, is immune from suit and, as such, the
immunity extended to them; and that respondent was validly dismissed for her failure to meet the
performance rating within the one-year period as required under Kuwaits Civil Service Laws.
Petitioners further contended that Ikdal should not be liable as an officer of petitioner ATCI.
By Decision6 of March 30, 2007, the appellate court affirmed the NLRC Resolution.
In brushing aside petitioners contention that they only acted as agent of the Ministry and that they
cannot be held jointly and solidarily liable with it, the appellate court noted that under the law, a
private employment agency shall assume all responsibilities for the implementation of the contract
of employment of an overseas worker, hence, it can be sued jointly and severally with the foreign
principal for any violation of the recruitment agreement or contract of employment.
As to Ikdals liability, the appellate court held that under Sec. 10 of Republic Act No. 8042, the
"Migrant and Overseas Filipinos Act of 1995," corporate officers, directors and partners of a
recruitment agency may themselves be jointly and solidarily liable with the recruitment agency for
money claims and damages awarded to overseas workers.
Petitioners motion for reconsideration having been denied by the appellate court by
Resolution7 of June 27, 2007, the present petition for review on certiorari was filed.
Petitioners maintain that they should not be held liable because respondents employment
contract specifically stipulates that her employment shall be governed by the Civil Service Law and
Regulations of Kuwait. They thus conclude that it was patent error for the labor tribunals and the
appellate court to apply the Labor Code provisions governing probationary employment in deciding
the present case.

Further, petitioners argue that even the Philippine Overseas Employment Act (POEA) Rules relative
to master employment contracts (Part III, Sec. 2 of the POEA Rules and Regulations) accord respect
to the "customs, practices, company policies and labor laws and legislation of the host country."
Finally, petitioners posit that assuming arguendo that Philippine labor laws are applicable, given
that the foreign principal is a government agency which is immune from suit, as in fact it did not
sign any document agreeing to be held jointly and solidarily liable, petitioner ATCI cannot likewise
be held liable, more so since the Ministrys liability had not been judicially determined as
jurisdiction was not acquired over it.
The petition fails.
Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the money claims
of Overseas Filipino workers (OFWs) which it deploys abroad by the mere expediency of claiming
that its foreign principal is a government agency clothed with immunity from suit, or that such
foreign principals liability must first be established before it, as agent, can be held jointly and
solidarily liable.
In providing for the joint and solidary liability of private recruitment agencies with their foreign
principals, Republic Act No. 8042 precisely affords the OFWs with a recourse and assures them of
immediate and sufficient payment of what is due them. Skippers United Pacific v.
Maguad8 explains:
. . . [T]he obligations covenanted in the recruitment agreement entered into by and between the
local agent and its foreign principal are not coterminous with the term of such agreement so that
if either or both of the parties decide to end the agreement, the responsibilities of such parties
towards the contracted employees under the agreement do not at all end, but the same extends
up to and until the expiration of the employment contracts of the employees recruited and
employed pursuant to the said recruitment agreement.Otherwise, this will render nugatory the
very purpose for which the law governing the employment of workers for foreign jobs abroad
was enacted. (emphasis supplied)
The imposition of joint and solidary liability is in line with the policy of the state to protect and
alleviate the plight of the working class.9 Verily, to allow petitioners to simply invoke the immunity
from suit of its foreign principal or to wait for the judicial determination of the foreign principals
liability before petitioner can be held liable renders the law on joint and solidary liability inutile.
As to petitioners contentions that Philippine labor laws on probationary employment are not
applicable since it was expressly provided in respondents employment contract, which she
voluntarily entered into, that the terms of her engagement shall be governed by prevailing Kuwaiti
Civil Service Laws and Regulations as in fact POEA Rules accord respect to such rules, customs and
practices of the host country, the same was not substantiated.
Indeed, a contract freely entered into is considered the law between the parties who can establish
stipulations, clauses, terms and conditions as they may deem convenient, including the laws which
they wish to govern their respective obligations, as long as they are not contrary to law, morals,
good customs, public order or public policy.
It is hornbook principle, however, that the party invoking the application of a foreign law has the
burden of proving the law, under the doctrine of processual presumption which, in this case,
petitioners failed to discharge. The Courts ruling in EDI-Staffbuilders Intl., v. NLRC10 illuminates:
In the present case, the employment contract signed by Gran specifically states that Saudi Labor
Laws will govern matters not provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties (lex loci intentiones) to apply
to the contract, Saudi Labor Laws should govern all matters relating to the termination of the
employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute or case has the
burden of proving the foreign law. The foreign law is treated as a question of fact to be properly
pleaded and proved as the judge or labor arbiter cannot take judicial notice of a foreign law. He is
presumed to know only domestic or forum law.
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the
International Law doctrine of presumed-identity approach or processual presumption comes into

play. Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that
foreign law is the same as ours. Thus, we apply Philippine labor laws in determining the issues
presented before us. (emphasis and underscoring supplied)
The Philippines does not take judicial notice of foreign laws, hence, they must not only be alleged;
they must be proven. To prove a foreign law, the party invoking it must present a copy thereof and
comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court which reads:
SEC. 24. Proof of official record. The record of public documents referred to in paragraph (a) of
Section 19, when admissible for any purpose, may be evidenced by an official publication thereof
or by a copy attested by the officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the
custody. If the office in which the record is kept is in a foreign country, the certificate may be made
by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or
by any officer in the foreign service of the Philippines stationed in the foreign country in which the
record is kept, and authenticated by the seal of his office. (emphasis supplied)
SEC. 25. What attestation of copy must state. Whenever a copy of a document or record is
attested for the purpose of the evidence, the attestation must state, in substance, that the copy is
a correct copy of the original, or a specific part thereof, as the case may be. The attestation must
be under the official seal of the attesting officer, if there be any, or if he be the clerk of a court
having a seal, under the seal of such court.
To prove the Kuwaiti law, petitioners submitted the following: MOA between respondent and the
Ministry, as represented by ATCI, which provides that the employee is subject to a probationary
period of one (1) year and that the host countrys Civil Service Laws and Regulations apply; a
translated copy11 (Arabic to English) of the termination letter to respondent stating that she did not
pass the probation terms, without specifying the grounds therefor, and a translated copy of the
certificate of termination,12 both of which documents were certified by Mr. Mustapha Alawi, Head
of the Department of Foreign Affairs-Office of Consular Affairs Inslamic Certification and
Translation Unit; and respondents letter 13 of reconsideration to the Ministry, wherein she noted
that in her first eight (8) months of employment, she was given a rating of "Excellent" albeit it
changed due to changes in her shift of work schedule.
These documents, whether taken singly or as a whole, do not sufficiently prove that respondent
was validly terminated as a probationary employee under Kuwaiti civil service laws. Instead of
submitting a copy of the pertinent Kuwaiti labor laws duly authenticated and translated by
Embassy officials thereat, as required under the Rules, what petitioners submitted were mere
certifications attesting only to the correctness of the translations of the MOA and the
termination letter which does not prove at all that Kuwaiti civil service laws differ from
Philippine laws and that under such Kuwaiti laws, respondent was validly terminated. Thus the
subject certifications read:
xxxx
This is to certify that the herein attached translation/s from Arabic to English/Tagalog and or vice
versa was/were presented to this Office for review and certification and the same was/were found
to be in order. This Office, however, assumes no responsibility as to the contents of the
document/s.
This certification is being issued upon request of the interested party for whatever legal purpose it
may serve. (emphasis supplied)1avvphi1
Respecting Ikdals joint and solidary liability as a corporate officer, the same is in order too
following the express provision of R.A. 8042 on money claims, viz:
SEC. 10. Money Claims.Notwithstanding any provision of law to the contrary, the Labor Arbiters
of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction
to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual moral, exemplary and other
forms of damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond
to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the recruitment/placement
agency is a juridical being, the corporate officers and directors and partners as the case may be,
shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid
claims and damages. (emphasis and underscoring supplied)
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. No. 176700
September 4, 2009
ROMERO MONTEDERAMOS, Petitioner,
vs.
TRI-UNION INTERNATIONAL CORPORATION, Respondent.
DECISION
CARPIO MORALES, J.:
Respondent Tri-Union International Corp. (respondent), which markets and distributes Company B
products, hired on July 18, 1997 Romero Montederamos (petitioner) as a stockman at its outlet at
the Metro Ayala Department Store, Cebu Business Park, Cebu City.
By Memorandum of June 27, 2003, respondent suspended petitioner for one month effective July
1, 2003, drawing him to file on July 2, 2003 a Complaint1 for illegal dismissal and non-payment of
overtime pay, service incentive leave, allowances and separation pay before the National Labor
Relations Commission (NLRC) Regional Arbitration Branch No. VII.
By petitioners claim, in August 2002, respondent asked him to sign a contract of employment
covering five months2 but he refused, knowing that he was already a regular employee; that
on June 24, 2003, he informed respondent of his need for a letter of introduction to Metro Ayala
since his Metro Ayala Identification Card (I.D.) was due to expire on June 30, 2003; that he was told
to return the following day but was unable to do so because he had to accomplish clearance
requirements with Metro Ayala; that on June 26, 2003, he repaired to respondents office but was
told that his supervisor was absent and that the latters assistant could not give the letter of
introduction by herself; that he later learned that the assistant could and actually did sign letters of
introduction for and in behalf of the supervisor; 3 and that as his wait for a letter of introduction did
not come by June 30, 2003, he realized that respondent had no intention of giving him one and was
terminating his employment, hence, his filing on July 2, 2003 of the Complaint against respondent.
Upon the other hand, respondent claimed as follows: 4
On April 15, 2003, it sent petitioner a Violation Memorandum5 warning him for habitual tardiness,
citing his tardiness on February 18, 2003, March 4, 2003, March 18, 2003, and April 1, 2003; and
that on June 17, 2003, it sent petitioner a second Violation Memorandum 6 for habitual tardiness,
citing his tardiness on April 22, 2003, May 6, 2003, May 20, 2003, and June 3, 2003, which
Memorandum required him to submit a written explanation therefor, but that petitioner refused
to receive it and in fact answered back and walked out on his immediate supervisor, prompting the
latter to send him a Memorandum on June 18, 2003 reading:
You were given second memorandum last June 17, 2003 with a request of explanation in your part
of your habitual tardiness. However, you refuse[d] to sign the memorandum for the said violation.
Instead, you answered and walked out from the office before your superior told you to do so.
This memo serves as your warning. Another situation that may arise after this memorandum will
be a ground for your suspension.7 (Underscoring supplied)
Again petitioner refused to receive the third Memorandum. And he failed to submit an explanation
behind his habitual tardiness, drawing respondent to send him a June 27, 2003 Memorandum via
registered mail suspending him for one month effective July 1, 2003, viz:
You are hereby warned to follow all rules and regulations of our company where you are
employed, one of these is to attend [the] company meeting scheduled every Tuesday of the week.
However, there has been no improvement of your habitual tardiness since our first memorandum

last April 15, 2003. Thereby, you were given a second memo with a request of explanation on your
part last June 17, 2003 but you refuse[d] to sign. Instead, you showed insubordination [on] your
part by answering back your immediate superior. The same incident took place last June 26, 2003
[sic]. You disrespect our office personnel. This is the third time you did this, first was last April 15,
2003. With these offenses, you are suspended for one month effective July 1, 2003. You
will resume work on August 1, 2003.
This memo serves as your last warning. Another situation that may arise after this memo will be a
ground for your termination.8 (Emphasis and underscoring supplied)
Hence, petitioners filing on July 2, 2003 of his Complaint.
On July 31, 2003, the last day of the 30-day suspension of petitioner, respondent advised petitioner
as follows:
This is to remind you that your suspension ends this July 31, 2003. You are supposed to report at
the office this August 1, 2003 but we are giving you a chance to report on August 11, 2003 at 9
oclock in the morning. I am hoping [for] your presence on the date mentioned above.9 (Emphasis
and underscoring supplied)
Petitioner never ever reported for work, however.
Finally, respondent claimed that it had paid petitioner overtime pay, allowance, and service
incentive leave.10
By Decision11 of November 10, 2003, Labor Arbiter Ernesto F. Carreon, finding that there was
neither illegal dismissal nor abandonment, ordered respondent to reinstate petitioner without
backwages, and pay him service incentive leave pay in the amount of P3,000.00. Petitioners claim
for overtime pay was denied as it was unsubstantiated.
On appeal, the NLRC,12 by Decision dated February 21, 2005, reversed and set aside the Labor
Arbiters decision and entered a new one declaring petitioner to have been illegally dismissed.
Brushing aside petitioners alleged tardiness in 2003 in light of respondents failure to present the
daily time records of petitioner who had been working for respondent since 1997, the NLRC held
that respondent failed to refute petitioners allegation that he was made to sign a 5-month
contract but that he refused as he had attained regular status. Such refusal of petitioner, the NLRC
concluded, precipitated, and ended in his illegal dismissal when respondent denied his request for
the issuance of a letter of introduction for the renewal of his Metro Ayala I.D.
Noting that "it is to the best interest of complainant that he should no longer be reinstated to his
former position," the NLRC granted him backwages and separation pay covering the period July 1,
2003 to 2004, subject to recomputation upon finality of the Decision.
Respondents Motion for Reconsideration 13 having been denied by Resolution14 of July 22, 2005, it
appealed via Certiorari to the Court of Appeals.
By Decision15 of July 27, 2006, the Court of Appeals reversed and set aside the NLRC decision
and reinstated the Labor Arbiters decision. The appellate court held that respondents June 27,
2003 Memorandum to petitioner suspending him for one month ending July 31, 2003 but later
advising him to resume work 10 days later or on August 11, 2003 belied the charge of illegal
dismissal. It went on to hold that petitioners infractions resulting in his suspension tardiness and
refusal to attend company meetings because he was not allegedly paid remuneration were of his
own wrongdoings.
Respecting petitioners claim that his refusal to sign the 5-month contract precipitated his
suspension, the appellate court noted that the refusal occurred in August 2002 yet, but the
Violation Memoranda were issued to petitioner much later starting April 2003. It thus held that if
indeed respondent wanted to terminate the services of petitioner on the basis of such refusal, it
could have done so much earlier.
Finally, the appellate court held that respondents offer of reinstatement to petitioner runs counter
to the charge of illegal dismissal.
His Motion for Reconsideration16 having been denied by Resolution17 of January 23, 2007,
petitioner filed the present Petition for Review on Certiorari,18 insisting that he was
illegally/constructively dismissed and not merely suspended by respondent, hence, entitled to
separation pay, backwages and other money claims. He particularly highlights the fact that his one

month suspension ended on July 31, 2003 but he was given "a chance to report on August 9(sic),
2003" as amounting to constructive dismissal.
The petition is bereft of merit.
While the employer bears the burden in illegal dismissal cases to prove that the termination was
for valid or authorized cause, the employee must first establish by substantial evidence the fact of
dismissal from service.19This petitioner failed to discharge. He, in fact, failed to refute respondents
claim that it sent him a Violation Memorandum, which was duly received by him on April 15, 2003,
and a subsequent Memorandum via registered mail,20 requiring him to explain his habitual
tardiness on the therein indicated dates but that he failed to comply therewith.
That respondent advised petitioner on July 31, 2003 that he was "supposed to report . . . [the
following day], August 1, 2003" but that he was given a chance to report on August 11, 2003 does
not, in itself, amount to constructive dismissal. Bare allegations of constructive dismissal, when
uncorroborated by the evidence on record, cannot be given credence. 21
Constructive dismissal contemplates, among other things, quitting because continued employment
is rendered impossible, unreasonable or unlikely, or a demotion in rank or a diminution of pay. It
clearly exists when an act of clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee, leaving him with no option but to forego his continued
employment.22 Not any of these circumstances exists to call for a ruling that petitioner was
constructively dismissed.
Respondents inability to provide the letter-introduction for the renewal of petitioners Metro
Ayala I.D. cannot be considered an act of discrimination or insensibility to warrant a finding of
constructive dismissal. It bears noting that petitioners Metro Ayala I.D. was yet to expire on June
30, 2003. He was, however, by June 27, 2003 Memorandum, suspended effective July 1, 2003.
In another vein, petitioners failure to report for work after the expiration of the period of his
suspension notwithstanding, respondent just the same, by its claim, offered to reinstate him during
the mandatory conference and even after receiving the promulgation of the decision of Labor
Arbiter, which claim he did not refute.23
Respecting petitioners claim for service incentive leave, the Court finds well-taken the Labor
Arbiters grant thereto. For respondents claim of having settled it bears no documentation.
As for petitioners claim for overtime pay, the same fails, there being no concrete proof that he had
indeed rendered overtime service.
WHEREFORE, the petition is, in light of the foregoing discussions, DENIED.
SO ORDERED.
NATIONAL UNION OF WORKERS IN HOTELS,
G.R. No. 179402
RESTAURANTS AND ALLIED INDUSTRIES
Present:
MANILA PAVILLION HOTEL CHAPTER,Petitioner,
YNARES-SANTIAGO, J.,
- versus Chairperson,
NATIONAL LABOR RELATIONS COMMISSION
AUSTRIA-MARTINEZ,
and ACESITE PHILIPPINES HOTEL
CHICO-NAZARIO,
CORPORATION, Respondents.
NACHURA, and
REYES, JJ.
Promulgated:
September 30, 2008
x-------------------------------------------------x
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision1dated 30 May 2007 rendered by the Court of Appeals in CA-G.R. SP No. 96171, which
affirmed the Resolution2 dated 5 May 2006 of the National Labor Relations Commission (NLRC) in
NLRC NCR CC No. 000307-05 NCMB NCR NS 09-199-05, dismissing for lack of merit the complaint
for unfair labor practice filed by petitioner National Union of Workers in Hotels, Restaurants and
Allied Industries-Manila Pavilion Hotel (NUWHRAIN) against Manila Pavilion Hotel (the Hotel).

Petitioner NUWHRAIN is a legitimate labor organization composed of rank-and-file employees of

the Hotel,3 while respondent Acesite Philippines Hotel Corporation is the owner and operator of
said Hotel.4
The factual antecedents of the instant Petition are as follows:
The Hotel entered into a Collective Bargaining Agreement with HI-MANILA PAVILION HOTEL LABOR
UNION (HIMPHLU), the exclusive bargaining agent of the rank-and-file employees of the Hotel.
Both parties consented that the representation aspect and other non-economic provisions of the
Collective Bargaining Agreement were to be effective for five years or until 30 June 2005; and the
economic provisions of the same were to be effective for three years or until 30 June 2003. The
parties subsequently re-negotiated the economic provisions of the Collective Bargaining
Agreement and extended the term of their effectivity for another two years or until 30 June 2005.5
During the 60-day freedom period which preceded the expiration of the Collective Bargaining
Agreement, starting on 1 May 2005 and ending on 30 June 2005, the Hotel and HIMPHLU
negotiated the extension of the provisions of the existing Collective Bargaining Agreement for two
years, effective 1 July 2005 to 30 June 2007. The parties signed the Memorandum of Agreement on
20 May 2005 and the employees ratified it on 27 May 2005.6
On 21 June 2005, NUWHRAIN was accorded by the Labor Relations Division of the Department of
Labor and Employment (DOLE) the status of a legitimate labor organization.7 Thereafter,
NUWHRAIN exercised the right to challenge the majority status of the incumbent union, HIMPHLU,
by filing a Petition for Certification Election on 28 June 2005.8
On 5 July 2007, the Industrial Relations Division of the DOLE allowed the registration of the
Memorandum of Agreement executed between HIMPHLU and the Hotel, extending the effectivity
of the existing Collective Bargaining Agreement for another two years. 9
After the lapse of the 60-day freedom period, but pending the disposition of the Petition for
Certification Election filed by NUWHRAIN, HIMPHLU served the Hotel with a written demand dated
28 July 200510 for the dismissal of 36 employees following their expulsion from HIMPHLU for
alleged acts of disloyalty and violation of its Constitution and by-laws. An Investigation
Report11 was attached to the said written demand, stating that the 36 employees, who were
members of HIMPHLU, joined NUWHRAIN, in violation of Section 2, Article IV of the Collective
Bargaining Agreement, which provided for a union security clause that reads: 12
Section 2. DISMISSAL PURSUANT TO UNION SECURITY CLAUSE. Accordingly, failure to join the
UNION within the period specified in the immediately preceding section or failure to maintain
membership with the UNION in good standing either through resignation or expulsion from the
UNION in accordance with the UNIONs Constitution and by-laws due to disloyalty, joining another
union or non-payment of UNION dues shall be a ground for the UNION to demand the dismissal
from the HOTEL of the employee concerned. The demand shall be accompanied by the UNIONs
investigation report and the HOTEL shall act accordingly subject to existing laws and jurisprudence
on the matter, provided, however, that the UNION shall hold the HOTEL free and harmless from
any and all liabilities that may arise should the dismissed employee question in any manner the
dismissal. The HOTEL shall not, however, be compelled to act on any such UNION demand if made
within a period of sixty (60) days prior to the expiry date of this agreement. (Emphasis provided)
On 1 August 2005, the Hotel issued Disciplinary Action Notices 13 (Notices) to the 36 employees
identified in the written demand of HIMPHLU. The Notices directed the 36 employees to submit a
written explanation for their alleged acts of disloyalty and violation of the union security clause for
which HIMPHLU sought their dismissal.
The Hotel called the contending unions and the employees concerned for a reconciliatory
conference in an attempt to avoid the dismissal of the 36 employees. The reconciliatory
conferences facilitated by the Hotel were held on 5 August 2005 and 1 September
2005.14 However, NUWHRAIN proceeded to file a Notice of Strike before the National Conciliation
and Mediation Board (NCMB) on 8 September 2005 on the ground of unfair labor practice under
Article 248, paragraphs (a) and (b) of the Labor Code.15 The Secretary of Labor intervened and
certified the case for compulsory arbitration with the NLRC. The case was docketed as NLRC NCR

CC No. 000307-05 NCMB NCR NS 09-199-05, entitled IN RE: Labor Dispute at Manila Pavilion
Hotel.16
NUWHRAIN asserted that the Hotel committed unfair labor practice when it issued the Notices to
the 36 employees who switched allegiance from HIMPHLU to NUWHRAIN. During the
reconciliatory conference held on 5 August 2005, respondents Vice President, Norma Azores,
stated her preference to deal with HIMPHLU, while blaming NUWHRAIN for the labor problems of
the Hotel. On 1 September 2005, the Resident Manager of the Hotel, Bernardo Corpus, Jr.,
implored NUWHRAINs members to withdraw their Petition for Certification Election and reaffirm
their membership in HIMPHLU. The Notices and the statements made by the officers of the
respondent and the Hotel were allegedly intended to intimidate and coerce the employees in the
exercise of their right to self-organization. NUWHRAIN claimed that it was entitled to moral
damages in the amount of P50,000.00 and exemplary damages of P20,000.0017
Respondent countered that it merely complied with its contractual obligations with HIMPHLU
when it issued the assailed Notices, and clarified that none of the 36 employees were dismissed by
the Hotel. It further denied that respondents Vice President Norma Azores and the Hotels
Resident Manager Bernardo Corpus, Jr. made the statements attributed to them, purportedly
expressing their preference for HIMPHLU during the reconciliatory conferences. Thus, respondent
insisted that it did not commit unfair labor practice, nor was it liable for moral and exemplary
damages.18
In a Resolution19 dated 5 May 2006, the NLRC pronounced that the Hotel was not guilty of unfair
labor practice. Firstly, the NLRC adjudged that the execution of the Memorandum of Agreement
between respondent and HIMPHLU, extending the effectivity of the existing Collective Bargaining
Agreement, was entered into with the view of responding to the employees economic needs, and
not intended to interfere with or restrain the exercise of the right to self-organization of
NUWHRAINs members. Secondly, the NLRC determined that the issuance of the Notices directing
the 36 employees to explain why they should not be dismissed was in compliance with the
Collective Bargaining Agreement provisions regarding the union security clause. Even thereafter,
the Hotel had not acted improperly as it did not wrongfully terminate any of the 36 employees.
Thirdly, the NLRC interpreted the statements made by the officials of respondent and the Hotel
during the reconciliatory conferences encouraging the withdrawal of the Petition for Certification
Election and the reaffirmation by the 36 employees of their membership in HIMPHLU as
proposed solutions to avoid the dismissal of the said employees. The NLRC concluded that these
statements did not constitute unfair labor practice for they could not have coerced or influenced
either of the contending unions, both of whom did not agree in the suggested course of action or
to any other manner of settling the dispute. Finally, the NLRC declared that the claim for moral and
exemplary damages of NUWHRAIN lacked sufficient factual and legal bases.
NUWHRAIN filed a Motion for Reconsideration of the foregoing NLRC Resolution. It was denied by
the NLRC in another Resolution dated 30 June 2006.20 Thus, NUWHRAIN filed a Petition
forCertiorari before the Court of Appeals, docketed as C.A. G.R. SP No. 96171.
In the meantime, on 16 June 2006, the Certification Election for regular rank and file employees of
the Hotel was held, which HIMPHLU won. It was accordingly certified as the exclusive bargaining
agent for rank and file employees of the Hotel.21
On 30 May 2007, the Court of Appeals promulgated its Decision 22 in C.A. G.R. SP No. 96171,
upholding the Resolution dated 5 May 2006 of the NLRC in NLRC NCR CC No. 000307-05 NCMB NCR
NS 09-199-05. It declared that the Hotel had acted prudently when it issued the Notices to the 36
employees after HIMPHLU demanded their dismissal. It clarified that these Notices did not amount
to the termination of the employees concerned but merely sought their explanation on why the
union security clause should not be applied to them. The appellate court also gave credence to the
denial by the officers of the respondent and the Hotel that they made statements favoring
HIMPHLU over NUWHRAIN during the reconciliatory conferences. The Court of Appeals further
noted that the unhampered organization and registration of NUWHRAIN negated its allegation that
the Hotel required its employees not to join a labor organization as a condition for their
employment.

NUWHRAINs Motion for Reconsideration of the aforementioned Decision of the Court of Appeals
was denied by the same court in a Resolution dated 24 August 2007. 23
Hence, the present Petition, in which NUWHRAIN makes the following assignment of errors:
I
THE COURT OF APPEALS GAVE MORE PROBATIVE VALUE TO RESPONDENT HOTELS GENERAL AND
UNSWORN DENIAL VERSUS THAT OF PETITIONERS SWORN TESTIMONY NARRATING
RESPONDENTS HOTELS VIOLATION OF PETITIONERS RIGHT TO SELF ORGANIZATION. SUCH A
RULING CONTRADICTS EXISTING JURISPRUDENCE SUCH AS MASAGANA CONCRETE PRODUCTS INC.
V. NLRC, G.R. NO. 106916, SEPTEBMER 3, 1999; JRS BUSINESS CORPORATION V. NLRC, 246 SCRA
445 [1995]; and ASUNCION V. NLRC, 362 SCRA 56 [2001].
II
THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT HOTEL IS NOT GUILTY OF UNFAIR
LABOR PRACTICE CONTRARY TO ARTICLE 248 OF THE LABOR CODE AND THE SUPREME COURTS
RULING IN PROGRESSINVE DEVELOPMENT CORPORATION V. CIR, 80 SCRA 434 [1977] and INSULAR
LIFE ASSURANCE CO. LTC EMPLOYEES ASSOCIATION-NATU V. THE INSULAR LIFE ASSURANCE CO.
LTD., 37 SCRA 244 [1971].24
The instant Petition lacks merit, and must accordingly be denied.
NUWHRAIN maintains that the respondent committed unfair labor practice when (1) the Hotel
issued the Notices to the 36 employees, former members of HIMPHLU, who switched allegiance to
NUWHRAIN; and (2) the officers of the respondent and the Hotel allegedly uttered statements
during the reconciliatory conferences indicating their preference for HIMPHLU and their
disapproval of NUWHRAIN. This argument is specious.
The records clearly show that the Notices were issued after HIMPHLU served the Hotel with a letter
dated 28 July 2005, demanding the dismissal of 36 of its former members who joined NUWHRAIN.
In its letter, HIMPHLU alleged that it had found these members guilty of disloyalty and demanded
their dismissal pursuant to the union security clause in the Collective Bargaining Agreement. Had
the Hotel totally ignored this demand, as NUWHRAIN suggests it should have done, the Hotel
would have been subjected to a suit for its failure to comply with the terms of the Collective
Bargaining Agreement.
"Union security" is a generic term which is applied to and comprehends "closed shop," "union
shop," "maintenance of membership" or any other form of agreement which imposes upon
employees the obligation to acquire or retain union membership as a condition affecting
employment.25 Article 248(e) of the Labor Code recognizes the effectivity of a union shop clause:
Art. 248. Unfair labor practices of employers.
(e) To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization. Nothing in
this Code or in any other law shall prevent the parties from requiring membership in a recognized
collective bargaining agent as a condition for employment, except of those employees who are
already members of another union at the time of the signing of the collective bargaining
agreement x x x. (Emphasis supplied.)
The law allows stipulations for "union shop" and "closed shop" as a means of encouraging workers
to join and support the union of their choice in the protection of their rights and interests vis--vis
the employer. By thus promoting unionism, workers are able to negotiate with management on an
even playing field and with more persuasiveness than if they were to individually and separately
bargain with the employer.26 In Villar v. Inciong,27 this Court held that employees have the right to
disaffiliate from their union and form a new organization of their own; however, they must suffer
the consequences of their separation from the union under the security clause of the Collective
Bargaining Agreement.
In the present case, the Collective Bargaining Agreement includes a union security provision.28 To
avoid the clear possibility of liability for breaching the union security clause of the Collective
Bargaining Agreement and to protect its own interests, the only sensible option left to the Hotel,
upon its receipt of the demand of HIMPHLU for the dismissal of the 36 employees, was to conduct
its own inquiry so as to make its own findings on whether there was sufficient ground to dismiss

the said employees who defected from HIMPHLU. The issuance by the respondent of the Notices
requiring the 36 employees to submit their explanations to the charges against them was the
reasonable and logical first step in a fair investigation. It is important to note that the Hotel did not
take further steps to terminate the 36 employees. Instead, it arranged for reconciliatory
conferences between the contending unions in order to avert the possibility of dismissing the 36
employees for violation of the union security clause of the Collective Bargaining Agreement.
This Court, in Malayang Samahan ng Manggagawa sa M. Greenfield v. Ramos 29 clearly stated the
general rule: the dismissal of an employee by the company pursuant to a labor unions demand in
accordance with a union security agreement does not constitute unfair labor practice. An employer
is not considered guilty of unfair labor practice if it merely complied in good faith with the request
of the certified union for the dismissal of employees expelled from the union pursuant to the union
security clause in the Collective Bargaining Agreement. 30 In the case at bar, there is even less
possibility of sustaining a finding of guilt for unfair labor practice where respondent did not dismiss
the 36 employees, despite the insistence of HIMPHLU, the sole bargaining agent for the rank and
file employees of the Hotel, on the basis of the union security clause of the Collective Bargaining
Agreement. The only act attributed to the respondent is its issuance of the Notices which, contrary
to being an unfair labor practice, even afforded the employees involved a chance to be heard.
The cases cited by NUWHRAIN are not applicable to the present case given their diverse factual
backgrounds. In Progressive Development Corporation v. Court of Industrial Relations, 31 the Court
declared the employer guilty of unfair labor practice for singling out its workers who refused to join
the employers preferred union by not giving them work assignments and regular status, and
eventually dismissing said employees. The employer was found guilty of unfair labor practice in
Insular Life Assurance Co., Ltd., Employees Association-NATU v. Insular Life Assurance Co.,
Ltd.,32 for (1) the dismissal of some of its striking employees without even giving them an
opportunity to explain their side; and (2) the acts of discrimination, including the delayed
reinstatement of striking employees and the offering of bribes, bonuses, and wage increases to
loyal employees after refusing to bargain with the union. None of these acts were attributed to the
respondent in the present case.
NUWHRAIN claimed that during the reconciliatory conferences, respondents Vice President Norma
Azores expressed her preference to deal with HIMPHLU, while blaming NUWHRAIN for the Hotels
labor problems; and the Hotels Resident Manager Bernardo Corpus, Jr. implored NUWHRAINs
members to withdraw their Petition for Certification Election and reaffirm their membership in
HIMPHLU. Before the Court of Appeals, respondent denied that such statements were made and
that the officers of the respondent and the Hotel were merely misquoted. During the reconciliatory
conferences, wherein the officers of the respondent and the Hotel acted as mediators, one of the
proposals laid on the table to settle the dispute between the unions and preclude the dismissal of
the 36 employees was for NUWHRAIN to withdraw its Petition for Certification Election and, in
return, for HIMPHLU to re-accept the employees without sanctions.
Still, NUWHRAIN asserts that the sworn testimony signed by its six union members that the officers
of the respondent and the Hotel did utter the offending statements deserve more credence than
the unsworn denial of respondent.
NUWHRAIN has the burden of proving its allegation that Norma Azores and Bernardo Corpus, Jr.
did make the statements being attributed to them. The burden of proof rests upon the party who
asserts the affirmative of an issue.33 And in labor cases, the quantum of proof necessary is
substantial evidence, or such amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion,34 which NUWHRAIN failed to discharge in the present case.
Undoubtedly, the members of NUWHRAIN would owe their loyalty to their union, a natural bias
which somewhat puts into question their credibility as witnesses, especially since the success of
this case would also redound to their benefit. The fact that six members of the union signed a
single statement, instead of each member presenting their sincere and individual narrations of
events, gives the impression that it was signed in a perfunctory manner and motivated by a sense
of union solidarity. The self-serving statement signed by six of NUWHRAINs members have very
little weight, even if made under oath, absent any other independent evidence which indicates that

the officers of the respondent and the Hotel made such hostile and coercive utterances that tend
to interfere or influence the employees exercise of the right to self-organization.
In the case at bar, the NLRC found, and the Court of Appeals affirmed, that the officers of the
respondent and the Hotel did not make statements that would have constituted unfair labor
practice. Findings of fact of the NLRC are given much weight and are considered conclusive by this
Court. It is only when such findings are not substantially supported by the records that this Court
will step in and make its independent evaluation of the facts. 35 Considering the expertise of these
agencies in matters pertaining to labor disputes, the findings of administrative agencies of the
Department of Labor are generally accorded not only respect, but also finality.36
Even the surrounding circumstances would contradict NUWHRAINs allegation that the respondent
interfered with or coerced its employees in their choice of union membership. In their Reply before
the NLRC, NUWHRAIN admitted that before issuing its Notices, the respondent maintained a
neutral stand in the dispute between HIMPHLU and NUWHRAIN. 37 Neither did the respondent
threaten the 36 employees who shifted their allegiance to NUWHRAIN with any form of reprisal;
they were not dismissed for their affiliation with NUWHRAIN. The records are bereft of any
instance that would show that respondent rode roughshod over its employees freedom to decide
which union to join.
In all, respondent had not committed any act which would constitute unfair labor practice.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision dated 30 May
2007 of the Court of Appeals in CA-G.R. SP No. 96171 is hereby AFFIRMED. Costs against petitioner
NUWHRAIN.
SO ORDERED.
G.R. No. 174141
June 26, 2009
PENTAGON STEEL CORPORATION, Petitioner,
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and PERFECTO
BALOGO,Respondents.
DECISION
Before this Court is the Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court filed by Pentagon Steel Corporation (the petitioner). It seeks to set aside:
(a) the Decision of the Court of Appeals (CA) dated June 28, 20062 modifying the Decision
of the National Labor Relations Commission (NLRC) dated January 31, 2005; 3 and
(b) the Resolution of the CA dated August 15, 2006, 4 denying the motion for
reconsideration that the petitioner subsequently filed.
THE FACTUAL ANTECEDENTS
The petitioner, a corporation engaged in the manufacture of G.I. wire and nails, employed
respondent Perfecto Balogo (the respondent) since September 1, 1979 in its wire drawing
department. The petitioner alleged that the respondent absented himself from work on
August 7, 2002 without giving prior notice of his absence. As a result, the petitioner sent
him a letter by registered mail dated August 12, 2002, written in Filipino, requiring an
explanation for his absence. The petitioner sent another letter to the respondent on August
21, 2002, also by registered mail, informing him that he had been absent without official
leave (AWOL) from August 7, 2002 to August 21, 2002. Other letters were sent to the
respondent by registered mail, all pointing out his absences; however, the respondent
failed to respond. Thus, the petitioner considered him on AWOL from August 7, 2002. 5
On September 13, 2002, the respondent filed a complaint with the Arbitration Branch of the
NLRC for underpayment/nonpayment of salaries and wages, overtime pay, holiday pay,
service incentive leave, 13th month pay, separation pay, and ECOLA. The respondent
alleged that on August 6, 2002, he contracted flu associated with diarrhea and suffered
loose bowel movement due to the infection. The respondent maintained that his illness had
prevented him from reporting for work for ten (10) days. When the respondent finally
reported for work on August 17, 2002, the petitioner refused to take him back despite the
medical certificate he submitted. On August 19, 2002, the respondent again reported for

work, exhibiting a note from his doctor indicating that he was fit to work. The petitioner,
however, did not allow him to resume work on the same date. Subsequently, the
respondent again reported for work on August 21 and 23, 2002 and October 10 and 18,
2002, to no avail. He was thus driven to file a complaint against the petitioner. 6
During the conciliation proceedings on October 9, 2002, the respondent presented the
medical certificate covering his period of absence. The petitioner required him, however, to
submit himself to the company physician to determine whether he was fit to return to work
in accordance with existing policies. On October 22, 2002, still during the conciliation
proceedings, the respondent presented a medical certificate issued by the company
physician; according to the petitioner, the respondent refused to return to work and insisted
that he be paid his separation pay. The petitioner refused the respondents demand for
separation pay for lack of basis.
On January 20, 2003, the respondent formally amended his complaint to include his claim
of illegal dismissal.7
The Labor Arbiter Ruling
On October 27, 2003, the labor arbiter rendered his decision dismissing the illegal
dismissal charge, but directed the petitioner "to pay the complainant his SIL and 13th
month pay in the amount of Five Thousand One Hundred Sixty-Six Pesos and 66/100
(P5,166.66)."8
In dismissing the respondents claim of illegal dismissal, the labor arbiter found that no
dismissal took place; thus, the petitioner never carried the burden of proving the legality of
a dismissal. The labor arbiter noted that the respondents allegation that he reported for
work is not reliable for lack of corroborating evidence, as the respondent in fact failed to
respond to the petitioners memoranda. Thus, the decision was confined to the directive to
pay service incentive leave and 13th month pay.
The NLRC Ruling
The respondent appealed the labor arbiters decision to the NLRC on November 14, 2003,
specifically questioning the ruling that no illegal dismissal took place. On January 31, 2005,
the NLRC Third Division vacated and set aside the decision of the labor arbiter.9 The
decision directed the company to pay the respondent separation pay, backwages, 13th
month pay, and service incentive leave.10
The NLRC ruled that the petitioners defense of abandonment has no legal basis since
there was no clear intent on the respondents part to sever the employer-employee
relationship. The NLRC found it difficult to accept the petitioners allegation that the
respondent absented himself for unknown reasons; this kind of action is inconsistent with
the respondents twenty-three (23) years of service and lack of derogatory record during
these years. As a consequence, the NLRC held that the respondent was illegally
dismissed. Together with this conclusion, however, the NLRC also considered the strained
relationship existing between the parties and, for this reason, awarded separation pay in
lieu of reinstatement, in addition to backwages. On March 31, 2005, the NLRC denied the
petitioners motion for reconsideration.
The CA Ruling
On May 6, 2006, the petitioner filed a special civil action for certiorari11 with the CA, alleging
grave abuse of discretion on the part of the NLRC in ruling that illegal dismissal took place,
and in awarding the respondent separation pay and backwages.
In a Decision dated June 28, 2006, the CA affirmed the NLRCs finding that the dismissal
was illegal, but modified the challenged decision by adding reinstatement and the payment
of "full backwages, inclusive of allowances and other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his
actual reinstatement."12
The CA held that the respondent was constructively dismissed when the petitioner
repeatedly refused to accept the respondent back to work despite the valid medical reason
that justified his absence from work. The CA concluded that the respondent complied with
the petitioners directive to submit a written explanation when the former presented the
medical certificate to explain his absences.

The CA also disregarded the petitioners charge of abandonment against the respondent.
The appellate court ruled that the petitioner failed to prove a clear and deliberate intent on
the respondents part to discontinue working with no intention of returning. The CA took
note of the respondents eagerness to return to work when he obtained a note from his
doctor about his fitness to return to work. The CA also ruled that the respondents filing of a
complaint for illegal dismissal with a prayer for reinstatement manifested his desire to
return to his job, thus negating the petitioners charge of abandonment.
The CA, however, disagreed with the NLRCs application of the doctrine of "strained
relations," citing jurisprudence that the doctrine should be strictly applied in order not to
deprive an illegally dismissed employee of his right to reinstatement. The CA also held that
to deny the respondent the benefits due from his long service with the company would be
very harsh since his long service would not be amply compensated by giving him only
separation pay.
Petitioner moved for reconsideration of the decision, but the CA denied the motion for lack
of merit in the Resolution dated August 15, 2006.13
In this present petition, the petitioner imputes grave abuse of discretion against the CA:
1) in basing its decision on the proceedings that transpired when the parties were
negotiating for a compromise agreement during the preliminary conference of the case;
2) in declaring that respondent was illegally dismissed by the petitioner; and
3) in ordering that respondent be reinstated to his former position with backwages.
THE COURTS RULING
We do not find the petition meritorious.
Before going into the substantive merits of the controversy, we shall first resolve the
propriety of the CAs consideration of the proceedings that transpired during the mandatory
preliminary conference of the case.
Statements and/or agreements made at conciliation proceedings are privileged and cannot
be used as evidence
The petitioner contends that the CA cannot use the parties actions and/or agreements
during the negotiation for a compromise agreement as basis for the conclusion that the
respondent was illegally dismissed because an offer of compromise is not admissible in
evidence under Section 27, Rule 130 of the Rules of Court.14
We agree with the petitioner, but for a different reason. The correct reason for the CAs
error in considering the actions and agreements during the conciliation proceedings before
the labor arbiter is Article 233 of the Labor Code which states that "[i]nformation and
statements made at conciliation proceedings shall be treated as privileged communication
and shall not be used as evidence in the Commission. Conciliators and similar officials
shall not testify in any court or body regarding any matters taken up at conciliation
proceedings conducted by them." This was the provision we cited in Nissan Motors
Philippines, Inc. v. Secretary of Labor15 when we pointedly disallowed the award made by
the public respondent Secretary; the award was based on the information NCMB
Administrator Olalia secured from the confidential position given him by the company
during conciliation.
In the present case, we find that the CA did indeed consider the statements the parties
made during conciliation; thus, the CA erred by considering excluded materials in arriving
at its conclusion. The reasons behind the exclusion are two-fold.
First, since the law favors the settlement of controversies out of court, a person is entitled
to "buy his or her peace" without danger of being prejudiced in case his or her efforts fail;
hence, any communication made toward that end will be regarded as privileged. 16 Indeed,
if every offer to buy peace could be used as evidence against a person who presents it,
many settlements would be prevented and unnecessary litigation would result, since no
prudent person would dare offer or entertain a compromise if his or her compromise
position could be exploited as a confession of weakness.17
Second, offers for compromise are irrelevant because they are not intended as admissions
by the parties making them.18 A true offer of compromise does not, in legal contemplation,
involve an admission on the part of a defendant that he or she is legally liable, or on the
part of a plaintiff, that his or her claim is groundless or even doubtful, since it is made with a

view to avoid controversy and save the expense of litigation. It is the distinguishing mark of
an offer of compromise that it is made tentatively, hypothetically, and in contemplation of
mutual concessions.19
While we agree with the petitioner that the CA should not have considered the agreements
and/or statements made by the parties during the conciliation proceedings, the CAs
conclusion on illegal dismissal, however, was not grounded solely on the parties
statements during conciliation, but was amply supported by other evidence on record,
which we discuss below. Based on these other pieces of evidence, the respondent was
illegally dismissed; hence, our ruling regarding the statement made during conciliation has
no effect at all on our final conclusion.
Respondent did not abandon his job
The rule is that the burden of proof lies with the employer to show that the dismissal was
for a just cause.20 In the present case, the petitioner claims that there was no illegal
dismissal since the respondent abandoned his job. The petitioner points out that it wrote
the respondent various memoranda requiring him to explain why he incurred absences
without leave, and requiring him as well to report for work; the respondent, however, never
bothered to reply in writing.
In evaluating a charge of abandonment, the jurisprudential rule is that abandonment is a
matter of intention that cannot be lightly presumed from equivocal acts.21 To constitute
abandonment, two elements must concur: (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intent, manifested through overt acts, to
sever the employer-employee relationship. The employer bears the burden of showing a
deliberate and unjustified refusal by the employee to resume his employment without any
intention of returning.22
We agree with the CA that the petitioner failed to prove the charge of abandonment.
First, the respondent had a valid reason for absenting himself from work. The respondent
presented a medical certificate from his doctor attesting to the fact that he was sick with flu
associated with diarrhea or loose bowel movement which prevented him from reporting for
work for 10 days. The petitioner never effectively refuted the respondents reason for his
absence. We thus concur with the CAs view that the respondent submitted a valid reason
for his absence and thereby substantially complied with the petitioners requirement of a
written explanation. We quote with approval the following discussion in the CAs decision:
In his case, Balogo should be judged as having fully complied with the petitioners directive
by his presenting of the medical certificate to justify or explain his absences because the
medical certificate already constituted the required "written explanation." Another written
explanation from him would be superfluous and even redundant if the facts already
appearing in the medical certificate would inevitably be stated again in that other written
explanation.
Why the petitioner persistently refused to accept Balogo back despite his presentation of
the medical certificate and the doctors note about his fitness to work was not credibly
explained by the petitioner. The refusal is indicative of the petitioners ill motive towards
him, using the lack of written explanation as a clever ruse to terminate Balogos
employment.
Second, there was no clear intention on the respondents part to sever the employeremployee relationship. Considering that "intention" is a mental state, the petitioner must
show that the respondents overt acts point unerringly to his intent not to work
anymore.23 In this case, we see no reason to depart from the unanimous factual findings of
the NLRC and the CA that the respondents actions after his absence from work for ten
(10) days due to illness showed his willingness to return to work. Both tribunals found that
after the respondent presented his medical certificate to the petitioner to explain his
absence, he even went back to his doctor for a certification that he was already fit to return
to work. These findings of fact we duly accept as findings that we must not only respect,
but consider as final, since they are supported by substantial evidence.24
In addition, the respondents filing of the amended complaint for illegal dismissal on
January 20, 2003 strongly speaks against the petitioners charge of abandonment, for it is

illogical for an employee to abandon his employment and, thereafter, file a complaint for
illegal dismissal.
That abandonment is negated finds support in a long line of cases where the immediate
filing of a complaint for illegal dismissal was coupled with a prayer for reinstatement; the
filing of the complaint for illegal dismissal is proof enough of the desire to return to
work.25 The prayer for reinstatement, as in this case, speaks against any intent to sever the
employer-employee relationship.26
We additionally take note of the undisputed fact that the respondent had been in the
petitioners employ for 23 years. Prior to his dismissal, the respondents service record was
unblemished having had no record of infraction of company rules. As the NLRC correctly
held, we find it difficult to accept the petitioners allegation that the respondent absented
himself for unjustifiable reasons with the intent to abandon his job. To our mind,
abandonment after the respondents long years of service and the consequent surrender of
benefits earned from years of hard work are highly unlikely. Under the given facts, no basis
in reason exists for the petitioners theory that the respondent abandoned his job.
Respondent was constructively dismissed
The above conclusion necessarily leads us to sustain the NLRCs finding, as affirmed by
the CA, that the respondent was dismissed without just cause. Again, we quote with
approval the CAs disquisition:
That Balogo was dismissed in contravention of the letter and spirit of the Constitution and
the Labor Code on the security of tenure guaranteed to him as employee is clear for us. A
dismissal need not be expressed orally or in writing, for it can also be implied. When the
employer continuously refuses to accept the employee back despite his having a valid
reason for his absence from work, illegal dismissal results because the employee is thus
prevented from returning to work under the faade of a violation of a company directive.
A dismissal effected through the fig leaf of an alleged violation of a company directive is no
less than an actual illegal dismissal that jurisprudence has labeled as a constructive
dismissal. Hyatt Taxi Services, Inc. v. Catinoy27describes this type of company action when
it ruled that "[c]onstructive dismissal does not always involve forthright dismissal or
diminution in rank, compensation, benefit and privileges there may be constructive
dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes
so unbearable on the part of the employee that it could foreclose any choice by him except
to forego his continued employment."
The respondents situation is no different from what Hyatt defined, given the result of the
petitioners action and the attendant insensibility and disdain the employer exhibited. We
significantly note that by reporting for work repeatedly, the respondent manifested his
willingness to comply with the petitioners rules and regulations and his desire to continue
working for the latter. The petitioner, however, barred him from resuming his work under
the pretext that he had violated a company directive. This is a clear manifestation of the
petitioners lack of respect and consideration for the respondent who had long served the
company without blemish, but who had to absent himself because of illness.1avvphi1 The
petitioners actions, under these circumstances, constitute constructive dismissal.28
The respondents illegal dismissal carries the legal consequence defined under Article 279
of the Labor Code: the illegally dismissed employee is entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances
and other benefits or their monetary equivalent, computed from the time his compensation
was withheld from him up to the time of his actual reinstatement. 29 The imposition of this
legal consequence is a matter of law that allows no discretion on the part of the decision
maker, except only to the extent recognized by the law itself as expressed in jurisprudence.
Respondent is entitled to reinstatement not separation pay
As the CA correctly ruled, the NLRC erred when it awarded separation pay instead of
reinstatement. The circumstances in this case do not warrant an exception to the rule that
reinstatement is the consequence of an illegal dismissal.
First. The existence of strained relations between the parties was not clearly established.
We have consistently ruled that the doctrine of strained relations cannot be used recklessly
or applied loosely to deprive an illegally dismissed employee of his means of livelihood and

deny him reinstatement. Since the application of this doctrine will result in the deprivation of
employment despite the absence of just cause, the implementation of the doctrine of
strained relationship must be supplemented by the rule that the existence of a strained
relationship is for the employer to clearly establish and prove in the manner it is called upon
to prove the existence of a just cause; the degree of hostility attendant to a litigation is not,
by itself, sufficient proof of the existence of strained relations that would rule out the
possibility of reinstatement.30 Indeed, labor disputes almost always result in "strained
relations," and the phrase cannot be given an overarching interpretation; otherwise, an
unjustly dismissed employee can never be reinstated. 31
In the present case, we find no evidentiary support for the conclusion that strained relations
existed between the parties. To be sure, the petitioner did not raise the defense of strained
relationship with the respondent before the labor arbiter. Consequently, this issue factual
in nature was not the subject of evidence on the part of both the petitioner and the
respondent. There thus exists no competent evidence on which to base the conclusion that
the relationship between the petitioner and the respondent has reached the point where
their relationship is now best severed.32 We agree with the CAs specific finding that the
conflict, if any, occasioned by the respondents filing of an illegal dismissal case, does not
merit the severance of the employee-employer relationship between the parties.
Second. The records disclose that respondent has been in the petitioners employ for 23
years and has no previous record of inefficiency or infraction of company rules prior to his
illegal dismissal from service. We significantly note that payment of separation pay in lieu of
respondents reinstatement will work injustice to the latter when considered with his long
and devoted years in the petitioners service. Separation pay may take into account the
respondents past years of service, but will deprive the respondent of compensation for the
future productive years that his security of tenure protects. We take note, too, that the
respondent, after 23 years of service, shall in a few years retire; any separation pay paid at
this point cannot equal the retirement pay due the respondent upon retirement.
For all these reasons, we uphold the CA ruling that the respondent should be reinstated to
his former position or to a substantially equivalent position without loss of seniority rights.
WHEREFORE, premises considered, we hereby DENY the petition, and, consequently,
AFFIRM the Decision of the Court of Appeals dated June 28, 2006 and its Resolution dated
August 15, 2006 in CA-G.R. SP No. 89587.
SO ORDERED.
G.R. No. 182216
December 4, 2009
PLANTATION BAY RESORT and SPA and EFREN BELARMINO, Petitioners,
vs.
ROMEL S. DUBRICO, GODFREY D. NGUJO and JULIUS D. VILLAFLOR, Respondents.
DECISION
CARPIO MORALES, J.:
Via petition for review on certiorari, petitioners Plantation Bay Resort and Spa (Plantation
Bay) and Efren Belarmino (Belarmino) challenge the Court of Appeals August 30, 2007
Decision1 and March 3, 2008 Resolution2dismissing their petition and affirming the March
24, 20063 and June 23, 20064 Resolutions of the National Labor Relations Commission
(NLRC) in Case No. V-000366-2005 in favor of herein respondents.
Respondents are former employees of Plantation Bay located in Cebu, of which Belarmino
is the Manager. On several dates in September 2004, after Plantation Bay issued a series
of memoranda and conducted seminars5relative to its drug-free workplace
policy,6 Plantation Bay, in compliance with Republic Act No. 9165 (Comprehensive
Dangerous Drugs Act of 2002), conducted surprise random drug tests on its employees.
The drug tests, said to have been carried out with the assistance of the Philippine National
Police-Scene of Crime Operations (SOCO), were administered on about 122 employees by
the Martell Medical Trade and Lab Services (Martell), a drug testing laboratory. And
confirmatory tests were conducted by the Philippine Drug Screening Laboratory, Inc. (Phil.
Drug), a Department of Health-accredited laboratory.
Respondent Romel Dubrico (Dubrico) failed to take the drug test conducted on September
14, 2004, hence, he was issued a memorandum7 requiring him to appear in a mandatory

conference on September 20, 2004. Before the scheduled conference or on September 19,
2004, Dubrico explained in writing8 his failure to undergo the drug test, he averring
that, inter alia, the procedure for the random drug testing was not followed such that he
was not informed about his selection; and that he was at the appointed time and place for
the pre-test meeting but that the duty manager was not around, hence, he left and failed to
be tested.
Dubrico was later tested and found positive for use of methamphetamine hydrochloride
(shabu).
Twenty other employees were found positive for use of shabu including herein respondents
Godfrey Ngujo (Ngujo) and Julius Villaflor (Villaflor).
In compliance with separate memoranda9 issued by the management of Plantation Bay, the
employees submitted their explanations on the result of the tests, which explanations were
found unsatisfactory, hence, Plantation Bay dismissed them including herein respondents.
Respondents Dubrico, Ngujo and Villaflor and three others thereupon filed on November
18, 2004 their respective complaints10 for illegal dismissal, questioning the conduct of the
drug tests without the presence of the DOLE Regional Director or his representative.
By Decision11 of April 18, 2005, Labor Arbiter Jose G. Gutierrez dismissed the employees
complaints, holding that in testing positive for the use of shabu, they were guilty of serious
misconduct, hence, Plantation Bay validly terminated their employment; and that they were
afforded due process, they having been issued memoranda as to the mandatory
investigation and given the chance to, as they did refute the results of the drug tests by
submitting results of recent drug tests.12
The Labor Arbiter discredited the drug test results presented by the employees as the tests
were taken more than 72 hours after the conduct of the random drug tests.
On appeal, the NLRC, by Decision of October 26, 2005, affirmed the Decision of the Labor
Arbiter. On respondents motion for reconsideration, it, however, by Resolution of March
24, 2006, reversed its October 26, 2005 Decision and declared that respondents were
illegally dismissed.
In finding for respondents, the NLRC held that the results of the confirmatory drug tests
cannot be given credence since they were conducted prior to the conduct by the employer
of the drug tests. It ratiocinated:
Considering the indubitable documentary evidence on record notably submitted by
respondents [petitioners herein] themselves, we agree with complainants that either or
both drug tests and confirmatory tests conducted on them were fabricated, farce or
sham. For how could one "confirm" some thing which was yet to be established or
discovered? Needless to say, the drug testing should always come ahead of the
confirmatory testing, not the other way around. We thus agree with complainants that if
the drug tests against them were true, the supposed confirmatory tests conducted on them
were not based on their urine samples that were the subject of the drug tests. Or that is the
confirmatory tests were correct, these could not have been gotten from their urine samples
which were yet to undergo drug testing. At any rate, there is not only doubt that on the
version of respondents but also their conduct is highly suspicious based on their own
evidence. Thus, we now rule that respondents were not really into drugs. (Emphasis
and underscoring supplied)1avvphi1
On the issue of due process, the NLRC abandoned its earlier statement that it was the
SOCO which conducted the drug tests, this time declaring that it was Martell which actually
administered them. It added that respondents were not given the opportunity to examine
the evidence and confront the witnesses against them through their counsel.
The NLRC accordingly reversed the Decision of the Labor Arbiter, disposing as follows:
WHEREFORE, the Appeal is DISMISSED, and the assailed Decision is AFFIRMED in toto.
SO ORDERED.13
Its motion for reconsideration having been denied by Resolution of June 23, 2006,
Plantation Bay appealed to the Court of Appeals, arguing that, inter alia, the veracity of the
confirmatory tests was raised by respondents only when they filed a belated Motion for
Reconsideration of the NLRC Decision, hence, the NLRC gravely abused its discretion
when it reversed its findings based on such new issue.

The appellate court affirmed the NLRC March 24, 2006 Resolution with modification by
deleting the award of damages. Hence, the present petition, petitioners reiterating the
same issues raised in the appellate court. Additionally, they maintain that in terminating the
services of respondents, they relied on the results of the random drug tests undertaken by
an accredited and licensed drug testing facility, and if the results turned out to be
questionable or erroneous, they should not be made liable therefor.
The petition is bereft of merit.
While it is a well-settled rule, also applicable in labor cases, that issues not raised below
cannot be raised for the first time on appeal, 14 there are exceptions thereto among which
are for reasons of public policy or interest.
The NLRC did not err in considering the issue of the veracity of the confirmatory tests even
if the same was raised only in respondents Motion for Reconsideration of its Decision, it
being crucial in determining the validity of respondents dismissal from their employment.
Technical rules of procedure are not strictly adhered to in labor cases. In the interest of
substantial justice, new or additional evidence may be introduced on appeal before the
NLRC. Such move is proper, provided due process is observed, as was the case here, by
giving the opposing party sufficient opportunity to meet and rebut the new or additional
evidence15 introduced.
The Constitution no less directs the State to afford full protection to labor. To achieve this
goal, technical rules of procedure shall be liberally construed in favor of the working class
in accordance with the demands of substantial justice. 16
On the merits, the petition just the same fails. The importance of the confirmatory test is
underscored in Plantation Bays own "Policy and Procedures," in compliance with Republic
Act No. 9165, requiring that a confirmatory test must be conducted if an employee is found
positive for drugs in the Employees Prior Screening Test, and that both tests must arrive at
the same positive result.171avvphil1
Records show the following timeline, based on the reports on respondents respective drug
tests18 administered by Martell and confirmatory tests19 undertaken by the Phil. Drug:
Name

Drug Test

Confirmatory Test

Romel
Dubrico

Urine sample received on 09/29/04

at 5:14 p.m.

Issued on 09/29/04 at
p.m.

Godfrey
Ngujo

Urine sample received on 09/29/04

at 5:24 p.m.

Issued on 09/29/04 at
p.m.

Julius
Villaflor

Urine sample received on 09/29/04

at 5:32 p.m.

Issued on 09/29/04 at
p.m.

(Underscoring supplied)
As reflected in the above matrix, the confirmatory test results were released earlier than
those of the drug test, thereby casting doubts on the veracity of the confirmatory results.
Indeed, how can the presence of shabu be confirmed when the results of the initial
screening were not yet out? Plantation Bays arguments that it should not be made liable
thereof and that the doubt arising from the time of the conduct of the drug and confirmatory
tests was the result of the big volume of printouts being handled by Martell do not thus lie.
It was Plantation Bays responsibility to ensure that the tests would be properly
administered, the results thereof being the bases in terminating the employees services.
Time and again, we have ruled that where there is no showing of a clear, valid and
legal cause for termination of employment, the law considers the case a matter of
illegal dismissal. The burden is on the employer to prove that the termination of
employment was for a valid and legal cause. For an employee's dismissal to be valid,
(a) the dismissal must be for a valid cause and (b) the employee must be afforded due
process.20 (Emphasis supplied)

In fine, as petitioners failed to indubitably prove that respondents were guilty of drug use in
contravention of its drug-free workplace policy amounting to serious misconduct,
respondents are deemed to have been illegally dismissed.
As to the appellate courts deletion of the award of damages, the same is in order, there
being no clear showing that the termination of respondents services was actuated by bad
faith.
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. No. 182626
December 4, 2009
HILARIO S. RAMIREZ, Petitioner,
vs.
HON. COURT OF APPEALS, Cebu City, HON. NLRC, 4th Division, Cebu City and
MARIO S. VALCUEBA,Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review under Rule 45 of the Rules of Court assailing the (a) 13 July
2007 Resolution1 of the Court of Appeals which dismissed the Petition for Certiorari under
Rule 65 filed by petitioner Hilario Ramirez for failure to properly verify his petition and to
state material dates and (b) the 7 March 2008 Resolution2 of the same court denying
petitioners Motion for reconsideration.
The facts are:
Respondent Mario Valcueba (Valcueba) filed a Complaint3 for illegal dismissal and
nonpayment of wage differential, 13th month pay differential, holiday pay, premium pay for
holidays and rest days, and service incentive leaves with claims for moral and exemplary
damages and attorneys fees, against Hilario Ramirez (Ramirez). Valcueba claimed that
Ramirez hired him as mechanic on 28 May 1999. By 2002, he was paid a daily wage
of P140.00, which was increased to P165.00 a day in 2003 and to P190.00 in 2005. He
was not paid for holidays and rest days. He was not also paid the complete amount of his
13th month pay. On 27 February 2006, Josephine Torres, secretary of Ramirez, informed
Valcueba that he would not be allowed to return to work unless he agreed to work on
pakyaw basis.4 Aggrieved, he filed this case.
Ramirez, on the other hand, presented a different version of the antecedents, asserting that
Valcueba was first hired as construction worker, then as helper of the mechanic, and
eventually as mechanic. There were three categories of mechanics at the workplace. First
were the mechanics assigned to specific stations. Second were the mechanics paid on
pakyaw basis; and finally, those who were classified as rescue/emergency mechanics.
Valcueba belonged to the last category. As emergency/rescue mechanic, he was assigned
to various stations to perform emergency/rescue work. On 26 February 2006, while he was
assigned at the Babag station, Ramirez directed him to proceed to Calawisan, Lapu-lapu
City, as a unit had developed engine trouble and the mechanic assigned in that area was
absent. Valcueba did not report to the Calawisan station. In fact, he did not report for work
anymore, as he allegedly intended to return to Mindanao.5
Further, Ramirez insisted that Valcueba was never terminated from his employment. On
the contrary, it was the latter who abandoned his job. On 26 February 2006, Valcueba, as
rescue or emergency mechanic, temporarily assigned at Babag Station, did not report at
Calawisan, Lapu-lapu City when Ramirez ordered him to answer an emergency call, which
required him to fix Ramirezs troubled taxi unit. The mechanic assigned in the area was
then absent at that time. The refusal of Valcueba to obey the lawful order of Ramirez was
bolstered by his failure to report for work the following day, 27 February 2006. Valcueba
advanced no reason regarding his failure to answer an emergency call of duty, nor did he
file an application for a leave of absence when he failed to report for work that day.
After hearing, the Labor Arbiter rendered her decision, where she pointed out that:
The allegation of complainant that his refusal to work on pakiao basis prompted respondent
Hilario Ramirez to dismiss him from the service is not substantiated by any piece of
evidence. Not even a declaration under oath by any affiant attesting to the credibility of
complainants allegation is presented. No documentary evidence purporting to clearly

indicate that complainant was discharged was submitted for Our judicious consideration. A
fortiori, there is reason for Us to doubt complainants submission that he was dismissed
from his employment grounded on disobedience to the lawful order of respondent.
On the side of respondent Ramirez, he insisted that complainant was never terminated
from his employment. On the contrary, he alleged that it was complainant who abandoned
his job. As rescue or emergency mechanic temporarily assigned at Babag Station, on
February 26, 2006, complainant did not report at Calawisan, Lapu-Lapu City when
respondent Ramirez ordered him to answer an emergency call, which required him to fix
the respondents troubled taxi unit. The mechanic assigned in the area was then absent at
that time. The refusal of complainant to obey the lawful order of respondent Ramirez is
bolstered by his failure to report for work the following day, February 27, 2006.
Complainant advanced no reason as to why he failed to answer an emergency call of duty
nor did he file an application for a leave of absence when he failed to report for work that
day.
Nonetheless, as the records are bereft of any evidence that respondent sent complainant a
letter which advised the latter to report for work, We do not rule out a case of abandonment
because the overt act of not answering an emergency call is not insufficient to constitute
abandonment.
Consequently, there being no dismissal nor abandonment involved in this case, it is best
that the parties to this case should be restored to their previous employment relations.
Complainant must go back to work within ten (10) days from receipt of this judgment, while
respondent must accept complainant back to work, also within ten (10) days from receipt of
this decision.6
In the end, the Labor Arbiter decreed:
WHEREFORE, VIEWED FROM THE FOREGOING, judgment is hereby rendered
declaring respondent HILARIO RAMIREZ, OWNER OF H.R. TAXI, NOT GUILTY of illegally
dismissing complainant from the service, it appearing that there is no dismissal to speak of
in this case. Consequently, complainant is ordered to report back for work within ten (10)
days from receipt hereof, and respondent Hilario Ramirez must complainant (sic) back to
work as soon as the latter would express his intention to report for work or within the same
period of ten (10) days from receipt hereof, whichever comes first. Proof of compliance
hereof, must be submitted within the same period (sic), complainant would be guilty of
abandonment and respondent of illegal dismissal.
In addition, respondent HILARIO RAMIREZ, owner of H.R. Taxi, is hereby ordered to pay
complainant MARIO S. VALCUEBA the following:
a.

Wage Differential - P30,538.00

b.

13th Month Pay -

15,287.98

Total Award -

P45,825.98

Philippine currency, within ten (10) days from receipt hereof, through the Cashier of this
Arbitration Branch.
Other claims are DISMISSED for failure to substantiate.7
Records show that Ramirez received the Labor Arbiters decision on 5 June 2006. He filed
a Motion for Reconsideration and/or Memorandum of Appeal with Urgent Motion to Reduce
Appeal Bond8 on the 9th day of the reglementary period or on 14 June 2006 before the
National Labor Relations Commission (NLRC).
Resolving the motion, the NLRC issued a Resolution9 dated 29 September 2006, which
reads:
Upon a careful perusal of the motion to reduce bond, however, the Commission found that
the same does not comply with Section 6, Rule VI of the NLRC Rules of Procedure.
xxxx
Respondent has not offered a meritorious ground for the reduction of the appeal bond and
the amount ofP10,000.00 he posted is not a reasonable amount in relation to the monetary

award of P45,825.98. Consequently, his motion to reduce appeal bond shall not be
entertained and his appeal is dismissed for non-perfection due to lack of an appeal bond.
The NLRC then held:
WHEREFORE, premises considered, the appeal of respondent is hereby DISMISSED for
non-perfection due to want of an appeal bond.10
Ramirez filed a Motion for Reconsideration, which the NLRC resolved in a Resolution dated
20 December 2006 in this wise:
The mere filing of a motion to reduce bond without complying with the requisites of
meritorious grounds and posting of a bond in a reasonable amount in relation to the
monetary award does not stop the running of the period to perfect an appeal. Thus,
respondents failure to abide with the requisites so mentioned has not perfected his appeal.
Verily, since the assailed Decision of the Labor Arbiter contains a monetary award in favor
of complainant, it behooves upon respondent to post the required bond.
While the filing of a motion to reduce bond can be considered as a motion of preference in
case of an appeal, the same holds true only when such motion complies with the
requirements stated above. Consequently, respondents motion to reduce bond which
missed to comply with such requisites does not deserve to be entertained nor to be given a
preferred resolution.
WHEREFORE, premises considered, the motion for reconsideration of respondent is
hereby DENIED for lack of merit.11
The decision of the Labor Arbiter became final and executory on 19 February 2007 and
was entered in the Book of Entries of Judgment on 4 May 2007.12
Ramirez went up to the Court of Appeals. The case was docketed as CA-G.R. SP No.
02614. In a resolution dated 13 July 2007,13 the Court of Appeals dismissed the Petition
outright for failure of Ramirez to properly verify his petition and to state material dates.
Ramirezs Motion for Reconsideration was denied by the Court of Appeals in a resolution
dated 7 March 2008;14hence, this petition where Ramirez prays that the "dismissal
resolution issued by the Court of Appeals be set aside and in its stead to give due course
to this petition by dismissing the unwarranted claims imposed by the NLRC for being highly
speculative, with no evidence to support of (sic)."15
The issues are:
I
PUBLIC RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE
SUBSTANTIAL COMPLIANCE OF THE FILED PETITION.
II
THE DISMISSAL RESOLUTION (ANNEX "A") HAS NOT RESOLVED THE LEGAL
ISSUES RAISED IN CA-G.R. SP NO. 02614.16
The case presents no novel issue.
We first resolve the propriety of dismissal by the NLRC.
At the outset, it should be stressed that the right to appeal is not a natural right or a part of
due process; it is merely a statutory privilege, and may be exercised only in the manner
prescribed by and in accordance with the provisions of law. The party who seeks to avail
himself of the same must comply with the requirements of the rules. Failing to do so, he
loses the right to appeal.17
Article 223 of the Labor Code provides for the procedure in case of appeal to the NLRC:
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;
b. If the decision, order or award was secured through fraud or coercion, including graft and
corruption;
c. If made purely on questions of law; and
d. If serious errors in the finding of facts are raised which would cause grave or irreparable
damage or injury to the appellant.

In case of a judgment involving a monetary award, an appeal by the employer may be

perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from. (Emphasis supplied.)
Sections 4(a) and 6 of Rule VI of the New Rules of Procedure of the NLRC, as amended,
reaffirms the explicit jurisdictional principle in Article 223 even as it allows in justifiable
cases the reduction of the appeal bond. The relevant provision states:
SECTION 4. Requisites for Perfection of Appeal. - (a) The appeal shall be: 1) filed within
the reglementary period provided in Section 1 of this Rule; 2) verified by the appellant
himself in accordance with Section 4, Rule 7 of the Rules of Court, as amended; 3) in the
form of a memorandum of appeal which shall state the grounds relied upon and the
arguments in support thereof, the relief prayed for, and with a statement of the date the
appellant received the appealed decision, resolution or order; for in three (3) legibly type
written or printed copies; and 5) accompanied by i) proof payment of the required appeal
fee; ii) posting of a cash or surety bond as provided in Section 6 of this Rule; iii) a certificate
of non-forum shopping; and iv) proof of service upon the other parties.
xxxx
SECTION 6. Bond. In case the decision of the Labor Arbiter or the Regional Director
involves a monetary award, an appeal by the employer may be perfected only upon the
posting of a bond, which shall either be in the form of cash deposit or surety bond
equivalent in amount to the monetary award, exclusive of damages and attorney's fees.
xxxx
No motion to reduce bond shall be entertained except on meritorious grounds, and only
upon the posting of a bond in a reasonable amount in relation to the monetary award.
The mere filing of a motion to reduce bond without complying with the requisites in the
preceding paragraphs shall not stop the running of the period to perfect an appeal.
Under the Rules, appeals involving monetary awards are perfected only upon compliance
with the following mandatory requisites, namely: (1) payment of the appeal fees; (2) filing of
the memorandum of appeal; and (3) payment of the required cash or surety bond. 18
The posting of a bond is indispensable to the perfection of an appeal in cases involving
monetary awards from the decision of the labor arbiter. The intention of the lawmakers to
make the bond a mandatory requisite for the perfection of an appeal by the employer is
clearly expressed in the provision that an appeal by the employer may be perfected "only
upon the posting of a cash or surety bond." The word "only" in Articles 223 of the Labor
Code makes it unmistakably plain that the lawmakers intended the posting of a cash or
surety bond by the employer to be the essential and exclusive means by which an
employer's appeal may be perfected. The word "may" refers to the perfection of an appeal
as optional on the part of the defeated party, but not to the compulsory posting of an appeal
bond, if he desires to appeal. The meaning and the intention of the legislature in enacting a
statute must be determined from the language employed; and where there is no ambiguity
in the words used, then there is no room for construction.19
Clearly, the filing of the bond is not only mandatory but also a jurisdictional requirement that
must be complied with in order to confer jurisdiction upon the NLRC. Non-compliance with
the requirement renders the decision of the Labor Arbiter final and executory. This
requirement is intended to assure the workers that if they prevail in the case, they will
receive the money judgment in their favor upon the dismissal of the employer's appeal.
It is intended to discourage employers from using an appeal to delay or evade their
obligation to satisfy their employees just and lawful claims.20
In this case, although Ramirez posted an appeal bond, the same was insufficient, as it was
not equivalent to the monetary award of the Labor Arbiter. Moreover, when Ramirez sought
a reduction of the bond, he merely said that the bond was excessive and baseless without
amplifying why he considered it as such. 21
Colby Construction and Management Corporation v. National Labor Relations
Commission22 succinctly elucidates that an employer who files a motion to reduce the
appeal bond is still required to post the full amount of cash or surety bond within the tenday reglementary period, even pending resolution of his motion.

Very recently, in Mcburnie v. Guanzon, the respondents therein filed their memorandum of
appeal and motion to reduce bond on the 10th or last day of the reglementary period.
Although they posted an initial appeal bond, the same was inadequate compared to the
monetary award. The Court found no basis for therein respondents contention that the
awards of the Labor Arbiter were null and excessive. We emphasized in that case that it
behooves the Court to give utmost regard to the legislative and administrative intent to
strictly require the employer to post a cash or surety bond securing the full amount of the
monetary award within the 10-day reglementary period. Nothing in the Labor Code or the
NLRC Rules of Procedure authorizes the posting of a bond that is less than the monetary
award in the judgment, or deems such insufficient posting as sufficient to perfect the
appeal.23
By stating that the bond is excessive and baseless without more, and without proof that he
is incapable of raising the amount of the bond, Ramirez did not even come near to
substantially complying with the requirements of Art. 223 of the Labor Code and NLRC
Rule of Procedure. Given that Ramirez is involved in taxi business, he has not shown that
he had difficulty raising the amount of the bond or was unable to raise the amount specified
in the award of the Labor Arbiter.
All given, the NLRC justifiably denied the motion to reduce bond, as it had no basis upon
which it could actually and completely determine Ramirezs motion to reduce bond. We
have consistently enucleated that a mere claim of excessive bond without more does not
suffice. Thus, in Ong v. Court of Appeals,24 this Court held that the NLRC did not act with
grave abuse of discretion when it denied petitioners motion, for the same failed to
elucidate why the amount of the bond was either unjustified or prohibitive.
In Calabash Garments, Inc. v. National Labor Relations Commission, 25 it was held that "a
substantial monetary award, even if it runs into millions, does not necessarily give the
employer-appellant a `meritorious case and does not automatically warrant a reduction of
the appeal bond."
It is clear from both the Labor Code and the NLRC Rules of Procedure that there is
legislative and administrative intent to strictly apply the appeal bond requirement, and the
Court should give utmost regard to this intention. There is a concession to the employer, in
excluding damages and attorney's fees from the computation of the appeal bond. Not even
the filing of a motion to reduce bond is deemed to stay the period for requiring an appeal.
Nothing in the Labor Code or the NLRC Rules of Procedure authorizes the posting of a
bond that is less than the monetary award in the judgment, or would deem such insufficient
postage as sufficient to perfect the appeal.
On the other hand, Article 223 indubitably requires that the appeal be perfected only upon
the posting of the cash or surety bond which is equivalent to the monetary award in the
judgment appealed from. The clear intent of both statutory and procedural law is to require
the employer to post a cash or surety bond securing the full amount of the monetary award
within the ten (10)-day reglementary period. While the bond may be reduced upon motion
by the employer, there is that proviso in Rule VI, Section [6] that the filing of such motion
does not stay the reglementary period. The qualification effectively requires that unless the
NLRC grants the reduction of the cash bond within the ten (10)-day reglementary period,
the employer is still expected to post the cash or surety bond securing the full amount
within the said ten (10)-day period. If the NLRC does eventually grant the motion for
reduction after the reglementary period has elapsed, the correct relief would be to reduce
the cash or surety bond already posted by the employer within the ten (10)-day
period.26 (Emphases supplied.)
While in certain instances, we allow a relaxation in the application of the rules to set right
an arrant injustice, we never intend to forge a weapon for erring litigants to violate the rules
with impunity. The liberal interpretation and application of rules apply only to proper cases
of demonstrable merit and under justifiable causes and circumstances, but none obtains in
this case. The NLRC had, therefore, the full discretion to grant or deny Ramirezs motion to
reduce the amount of the appeal bond. The finding of the labor tribunal that Ramirez did
not present sufficient justification for the reduction thereof cannot be said to have been
done with grave abuse of discretion.27

While Section 6, Rule VI of the NLRCs New Rules of Procedure allows the Commission to
reduce the amount of the bond, the exercise of the authority is not a matter of right on the
part of the movant, but lies within the sound discretion of the NLRC upon a showing of
meritorious grounds.28
It is daylight-clear from the foregoing that while the bond may be reduced upon motion by
the employer, this is subject to the conditions that (1) the motion to reduce the bond shall
be based on meritorious grounds; and (2) a reasonable amount in relation to the monetary
award is posted by the appellant; otherwise, the filing of the motion to reduce bond shall
not stop the running of the period to perfect an appeal. The qualification effectively requires
that unless the NLRC grants the reduction of the cash bond within the 10-day reglementary
period, the employer is still expected to post the cash or surety bond securing the full
amount within the said 10-day period.
We have always stressed that Article 223, which prescribes the appeal bond requirement,
is a rule of jurisdiction and not of procedure. There is little leeway for condoning a liberal
interpretation thereof, and certainly none premised on the ground that its requirements are
mere technicalities. It must be emphasized that there is no inherent right to an appeal in a
labor case, as it arises solely from grant of statute, namely, the Labor Code.
For the same reason, we have repeatedly emphasized that the requirement for posting the
surety bond is not merely procedural but jurisdictional and cannot be trifled with. Noncompliance with such legal requirements is fatal and has the effect of rendering the
judgment final and executory.29
That settled, we next resolve the issue of whether or not the Court of Appeals correctly
dismissed the petition of Ramirez. The Court of Appeals found that he committed the
following fatal defects in his petition:
1. Failure of petitioner to properly verify the petition in accordance with A.M. No. 00-2-10SC amending Section 4, Rule 7 in relation to Section 1, Rule 65 of the Rules of Court which
now requires that a pleading must be verified by an affidavit that the affiant has read the
pleading and the allegations therein are true and correct of his personal knowledge or
based on authentic records, as a consequence of which the petition is treated as an
unsigned pleading, which under Section 3, Rule 7 of the Rules of Court, produces no legal
effect.
2. Petitioner failed to indicate in the petition the material dates showing when notice of the
resolution subject hereof was received and when the motion for reconsideration was filed in
violation of Section 3, Rule 46 of the Rules of Court. 30
On Ramirezs failure to verify his petition, it is true that verification is merely a formal
requirement intended to secure an assurance that matters that are alleged are true and
correct. Thus, the court may simply order the correction of unverified pleadings or act on
them and waive strict compliance with the rules. 31 However, this Court invariably sustains
the Court of Appeals dismissal of the petition on technical grounds under this provision,
unless considerations of equity and substantial justice present cogent reasons to hold
otherwise. In Moncielcoji Corporation v. National Labor Relations Commission,32 the Court
states the rationale
Rules of procedure are tools designed to promote efficiency and orderliness as well as to
facilitate attainment of justice, such that strict adherence thereto is required. The
application of the Rules may be relaxed only when rigidity would result in a defeat of equity
and substantial justice. But, petitioner has not presented any persuasive reason for this
Court to be liberal, even pro hac vice. Thus, we sustain the dismissal of its petition by the
Court of Appeals on technical grounds.
Again as in the NLRC, Ramirez has not shown any justifiable ground to set aside technical
rules for his failure to comply with the requirement regarding the verification of his petition.
For the same reasons above, we also find no reversible error in the assailed resolution of
the Court of Appeals dismissing Ramirezs petition on the ground of failure to state material
dates, because in filing a special civil action for certiorari without indicating the requisite
material date therein, Ramirez violated basic tenets of remedial law, particularly Rule 65 of
the Rules of Court, which states:
SECTION 1. Petition for certiorari. x x x.

xxxx
The petition shall be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum shopping as provided in the third paragraph
of Section 3, Rule 46.
On the other hand, the pertinent provision under Rule 46 is explicit:
Sec. 3. Contents and filing of petition; effect of non-compliance with requirements. x x x .
In actions filed under Rule 65, the petition shall further indicate the material dates showing
when notice of the judgment or final order or resolution subject thereof was received, when
a motion for new trial or reconsideration, if any, was filed and when notice of the denial
thereof was received.
xxxx
The failure of the petitioner to comply with any of the foregoing requirements shall be
sufficient ground for the dismissal of the petition.
There are three material dates that must be stated in a petition for certiorari brought under
Rule 65. First, the date when notice of the judgment or final order or resolution was
received; second, the date when a motion for new trial or for reconsideration was filed; and
third, the date when notice of the denial thereof was received. In the case before us, the
petition filed with the Court of Appeals failed to indicate when the notice of the NLRC
Resolution was received and when the Motion for Reconsideration was filed, in violation of
Rule 65, Section 1 (2nd par.) and Rule 46, Section 3 (2nd par.). 1avvphi1
As explicitly stated in the aforementioned Rule, failure to comply with any of the
requirements shall be sufficient ground for the dismissal of the petition.
The rationale for this strict provision of the Rules of Court is not difficult to appreciate. In
Santos v. Court of Appeals,33 the court explains that the requirement is for purpose of
determining the timeliness of the petition, thus:
The requirement of setting forth the three (3) dates in a petition for certiorari under Rule 65
is for the purpose of determining its timeliness. Such a petition is required to be filed not
later than sixty (60) days from notice of the judgment, order or Resolution sought to be
assailed. Therefore, that the petition for certiorari was filed forty-one (41) days from receipt
of the denial of the motion for reconsideration is hardly relevant. The Court of Appeals was
not in any position to determine when this period commenced to run and whether the
motion for reconsideration itself was filed on time since the material dates were not stated.
x x x.
In the instant case, the petition was bereft of any persuasive explanation as to why
Ramirez failed to observe procedural rules properly. 34
Quite apparent from the foregoing is that the Court of Appeals did not err, much less
commit grave abuse of discretion, in denying due course to and dismissing the petition for
certiorari for its procedural defects. Ramirezs failure to verify and state material dates as
required under the rules warranted the outright dismissal of his petition.
We are not unmindful of exceptional cases where this Court has set aside procedural
defects to correct a patent injustice. However, concomitant to a liberal application of the
rules of procedure should be an effort on the part of the party invoking liberality to at least
explain its failure to comply with the rules.
In sum, we find no sufficient justification to set aside the NLRC and Court of Appeals
resolutions. Thus, the decision of the Labor Arbiter is already final and executory and
binding upon this Court.35
The relaxation of procedural rules cannot be made without any valid reasons proffered for
or underpinning it. To merit liberality, Ramirez must show reasonable cause justifying his
non-compliance with the rules and must convince the court that the outright dismissal of the
petition would defeat the administration of substantive justice. The desired leniency cannot
be accorded, absent valid and compelling reasons for such procedural lapse. The appellate
court saw no compelling need meriting the relaxation of the rules; neither do we see any. 36
Wherefore, premises considered, the petition is Denied for lack of merit. The Resolutions of
the Court of Appeals dated 13 July 2007 and 7 March 2008 and the Resolutions of the

NLRC dated 29 September 2006 and 20 December 2006 are AFFIRMED. Costs against
petitioner.
SO ORDERED.
G.R. No. 106915 August 31, 1993
JARDINE DAVIES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY, and
SALVADOR SALUTIN,respondents.
Hilado, Hagad, & Hilado Law Office for petitioner.
Romeo B. Esuerte for private respondent.
VITUG, J.:
The instant petition for certiorari seeks the reversal of the resolution of respondent National
Labor Relations Commission, dated 22 July 1992, which declared private respondent
Salvador Salutin as not having abandoned his work by his alleged failure to report for work
during the pendency of the petitioner's appeal before the respondent Commission.
Respondent Salvador Salutin ("Salutin") was employed by petitioner Jardine Davies, Inc.
("JDI"), on 15 July 1985, as a demonstrator/agronomist to provide services relating to, and
to give advice on, the promotion and use of JDI's pesticides and other products.
The controversy that spawned two (2) special Civil actions for certiorari (this instance
included) with this Court, began when respondent Salutin filed a complaint against
petitioner JDI for illegal dismissal, with prayer for reinstatement and backwages or, in the
alternative, separation pay plus wage differential, service incentive leave pay, thirteenth
(13th) month pay, holiday pay, moral and exemplary damages, and attorney's fees. The
complaint was decided by the Labor Arbiter in favor of respondent Salutin in a decision,
dated 08 August 1991, the decretal portion of which reads:
WHEREFORE, PREMISES CONSIDERED, respondent Jardine Davies, Inc./Jardine
Agchem is hereby ordered to reinstate complaint to his former position, without loss of
seniority and other rights, and with backwages, in amount of FIFTY SIX THOUSAND
SEVEN HUNDRED PESOS (P56,700.00), without deduction and qualification.
Respondent is further ordered to pay complaint the following:
a.) 13th month pay P 8,100.00
b.) Holiday pay 13,115.84
c.) Service Incentive pay 1,557.60
d.) Moral Damages 20,000.00
e.) Exemplary Damages 10,000.00
f.) Attorney's fees, which is ten percent (10%) of the total awarded amount.
SO ORDERED.
JDI appealed the case to the National Labor Relations Commission (NLRC), and it posted
a supersedeas bond to answer for the monetary awards. It also reinstated Salutin, "on
payroll only", beginning 26 August 1991, 1 in compliance with the writ of execution issued
by the Labor Arbiter pursuant to Article 223, paragraph 3, of the Labor Code. In a decision,
dated 17 October 1991, NLRC dismissed JDI's appeal for lack of merit but modified the
decision by eliminating the awards given for holiday pay, service incentive leave pay, moral
and exemplary damages. 2 A motion for reconsideration was filed which was denied in
NLRC's resolution of 13 January 1992. 3
On 14 February 1992, JDI filed its first petition for certiorari with this Court, docketed as
G.R. No. 103720, assailing the 17 October 1991 decision and the resolution of 13 January
1992 of respondent Commission. In our resolution, dated 26 February 1992, the petition
was dismissed for failure to comply with this Court's Circular No. 28-91 on forum-shopping.
Its subsequent motion for reconsideration was itself denied on 20 May 1992. The resolution
of 26 February 1992 became final and executory on 19 June 1992, and an entry of
judgment was accordingly made on 20 August 1992.
At the time when the above narrated events were still unfolding, some material facts
occured beginning with JDI's appeal to the NLRC on the 08 August 1991 decision of the

Labor Arbiter. Shortly after the reinstatement of Salutin "on payroll only", JDI sent a letter,
dated 21 September 1991, to Salutin directing him to report for work to their Bacolod
Branch Manager. Salutin, as directed reported on the 24th of September 1991 at around
9:20 a.m. He did not stay long, however, since after fifteen minutes or so, he left and was
reported not to have thereafter returned for work. JDI forthwith stopped further payment of
salary to Salutin.
On 17 October 1991, JDI filed a "Manisfestation and Motion" with the respondent
Commission stating, inter alia, that:
Salutin be considered as having abandoned his work considering his continuous absence
of more than three (3) weeks since he was required to report for work . . . and that any
award for reinstatement to his former position, without loss of seniority and other rights, in
the Arbiter's decision subject of this appeal be considered and held as waived or lost. 4
Salutin opposed the motion, claiming that he was forced to leave in haste because he was
then suffering from a serious ailment. He submitted a medical certificate to support his
claim. 5
On 13 January 1992, respondent Commission denied JDI's "Manifestation & Motion"
stating, among other things, that:
As to the issue of whether the complaint-appellee Salvador Salutin is guilty of work
abandonment, this is a new and factual matter which has to be determined and resolved in
appropriate proceedings before the Arbitration Branch, more especially in the present case,
where the charge of abandonment is seriously controverted.
Prescinding from its receipt of an information that Salutin was employed elsewhere, JDI
filed an ex parte motion, dated 16 June 1992, to set for hearing the aforestated
"Manifestation and Motion." 6 Salutin, on his part, also filed a motion praying that JDI be
ordered to release his withheld salary, 7 claiming that he had reported for work when he
recovered from his ailment on 11 December 1991. 8
On 22 July 1992, respondent Commission issued its assailed resolution stating, viz:
WHEREFORE, Premises considered, the respondent's prayer to declare or consider the
complainant to have abandoned his job for his alleged failure to report back to work during
the pendency of the appeal in this case is hereby denied for lack of merit.
The complainant's motion for release of his salary since 24 September 1991, until he
formally seeks for the enforcement of the decision is likewise denied.
SO ORDERED.
When the motion for reconsideration was likewise denied, JDI instituted on 18 September
1992 the present petition for certiorari.
During the pendency of this petition, JDI filed an "urgent motion for the issuance of writ of
preliminary injunction and/or restraining order" to prevent the respondent Commission from
enforcing its resolution of 22 July 1992 and 25 August 1992 insofar as it ordered the
reinstatement of Salutin. In its resolution, dated 3 March 1993, this Court resolved to issue
a temporary restraining order.
Petitioner raises this sole assignment of error, to wit:
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN
DENYING PETITIONER'S CONTENTION/SUBMISSION THAT PRIVATE RESPONDENT
SALUTIN SHOULD BE CONSIDERED AS HAVING ABANDONED HIS WORK WHEN HE
FAILED TO REPORT FOR WORK PENDING THE PETITIONER-EMPLOYER'S APPEAL
FROM THE ARBITER'S DECISION GRANTING REINSTATEMENT, ALTHOUGH AT
THAT TIME HE WAS ON REINSTATEMENT ON PAYROLL THIS
NOTWITHSTANDING PETITIONER'S SHOWING THAT SUCH FAILURE TO REPORT
WAS BECAUSE RESPONDENT-EMPLOYEE WAS THEN WORKING ALSO WITH
ANOTHER COMPANY, HENCE HE WAS RECEIVING SALARIES FROM BOTH.
In the subsequent pages of its petition, JDI paraphrased the assigned issue in this wise: Is
Salutin, who was then on payroll reinstatement since 26 August 1991, not guilty of
abandonment when his failure to report for work was because he was also working for
another entity from 01 September 1991 to 31 December 1991? Correlatively, did
respondent Commission not gravely abuse its discretion when it did not take into
consideration such other employment?

Our answer is in the negative.

The records show that at the time JDI filed its Manifestation and Motion, dated 17 October
1991, the sole basis of its prayer for a declaration that Salutin abandoned his work was his
alleged unauthorized absences from the date he was notified to report for work. 11 A shift to
a new focus took place when, on 30 January 1992, JDI, at its request, received a lettercertification issued by the Officer-in-Charge of King's Enterprises of Iloilo City that Salutin
was employed by Monsato Philippines, Inc., from 01 September to 31 December 1991, as
Aggressive Crop Technician, for which he was paid P5,146.00 per month. 12 Thus, this was
the reason given by JDI in its ex parte motion, dated 16 June 1992, to set for hearing the
Manifestation and Motion of 17 October 1991. NLRC denied the said ex parte motion in the
now assailed resolution of 22 July 1992.
When JDI filed its first petition for certiorari (in G.R. No. 103720) with this Court on 14
February 1992, assailing the 17 October 1991 decision of NLRC, it also raised, as an
added argument on the alleged abandonment of work by Salutin, the fact that he was
gainfully employed elsewhere. 13 Considering that this matter was thus already taken up by
the petitioner in its first petition for certiorari, which this Court dismissed with finality, the
petitioner should really now be barred from invoking anew that issue in this present
(second) petition.
Be that as it may, the same fate of dismissal is still inevitable. Although this Court is not a
trier of facts, it may still wade through the records of a case if only to prevent any possible
misgiving in its ultimate disposition. 14 The petitioner's evidence to establish Salutin's
supposed abandonment of work is the certification of employment issued by King's
Enterprises at the request of herein petitioner to the effect that Salutin had indeed been
employed by Monsato Philippines, Inc., during the period from 01 September to 31
December 1991. Is this enough? What we have heretofore said is this
For abandonment to constitute a valid cause for termination of employment, there must be
a deliberate unjustified refusal of the employee to resume his employment. This refusal
must be clearly shown. Mere absence is not sufficient; it must be accompanied by overt
acts pointing to the fact that the employee simply does not want to work anymore. 15
Abandonment of position is a matter of intention expressed in clearly certain and
unequivocal acts. In this instance, however, certain uncontroverted facts show just exactly
the opposite. Hence, Salutin did report, as directed, on 24 September 1991, but that he
could not stay long because he was ailing at that time; he, although perhaps belatedly
made, did seek medical consultation on 7 November 1991, at the Corazon Locsin
Montelibano Memorial Regional Hospital, for "peptic ulcer"; and on 11 December 1991, he
did, in fact, manifest his desire to assume his work with the petitioner.
This Court's resolution of 26 February 1992, denying the petition in G.R. No. 103720,
became final and executory on 19 June 1992. Respondent Salutin's interim employment,
stressed by the petitioner, did not stain the picture at all. Here, we second the wellconsidered view of NLRC, thus
The order of immediate reinstatement pending appeal, in cases of illegal dismissal is an
ancillary relief under R.A. 6715 granted to a dismissed employee to cushion him and his
family against the impact of economic dislocation or abrupt loss of earnings. If the
employee chooses not to report for work pending resolution of the case appeal, he
foregoes such a temporary relief and is not paid of his salary. The final determination of the
rights and obligations respectively of the parties is the ultimate and final resolution of this
Commission.
WHEREFORE, the petition is hereby DISMISSED. The questioned resolutions of the
National Labor Relations Commission are AFFIRMED, and the temporary restraining order
issued by this Court is hereby LIFTED.
SO ORDERED.