1
Labor Cases (Set 2)
1. 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 grounds[3];
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. Slxmis
On November 13, 1995, private respondent filed a complaint for damages before the
Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which
prayed for the payment of the following: Slxsc
a. P709,217.97 plus 12% interest as loss of profit and/or unearned income of three years;
b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties, space,
etc. for three years;
c. P5,000.00 as initial expenses of litigation; and
d. P25,000.00 as attorney's fees.[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. Scslx
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: Slx
Paragraph 5 of the complaint alleged that the defendant violated the plaintiffs policy re: His
business in his branch at Iligan City wherein defendant was the Sales Operations Manager,
and paragraph 7 of the same complaint briefly narrated the modus operandi of defendant,
quoted herein: Defendant canvassed customers personally or through salesmen of plaintiff
which were hired or recruited by him. If said customer decided to buy items from plaintiff on
installment basis, defendant, without the knowledge of said customer and plaintiff, would
buy the items on cash basis at ex-factory price, a privilege not given to customers, and
thereafter required the customer to sign promissory notes and other documents using the
name and property of plaintiff, purporting that said customer purchased the items from
plaintiff on installment basis. Thereafter, defendant collected the installment payments
either personally or through Venus Lozano, a Group Sales Manager of plaintiff but also
utilized by him as secretary in his own business for collecting and receiving of installments,
purportedly for the plaintiff but in reality on his own account or business. The collection and
receipt of payments were made inside the Iligan City branch using plaintiffs facilities,
property and manpower. That accordingly plaintiffs sales decreased and reduced to a
considerable extent the profits which it would have earned.[5]
In declaring itself as having jurisdiction over the subject matter of the instant controversy,
respondent court stated: Mesm
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.) xxx[6]

Petitioner's motion for reconsideration of the above Order was denied for lack of merit on
October 16, 1996. Hence, this petition. Calrky
Acting on petitioner's prayer, the Second Division of this Court issued a Temporary
Restraining Order ("TRO ") on March 5, 1997, enjoining respondents from further proceeding
with Civil Case No. 95-554 until further orders from the Court. Kycalr
By way of assignment of errors, the petition reiterates the grounds raised in the Motion to
Dismiss dated January 30, 1996, namely, lack of jurisdiction over the subject matter of the
action, res judicata, splitting of causes of action, and forum-shopping. The determining
issue, however, is the issue of jurisdiction. Kyle
Article 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the
filing of this case, reads: Exsm
ART. 217. Jurisdiction of Labor Arbiters and the Commission. --- (a) Except as otherwise
provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the submission of the case by the
parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:
xxx
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
xxx
The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.") No.
6715, which took effect on March 21, 1989, and which put to rest the earlier confusion as to
who between Labor Arbiters and regular courts had jurisdiction over claims for damages as
between employers and employees. Sppedjo
2
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."[8] This
limitation in jurisdiction, however, lasted only briefly since on May 1, 1980, P.D. No. 1691
nullified P.D. No. 1367 and restored Article 217 of the Labor Code almost to its original form.
Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the NLRC in
Article 217 is comprehensive enough to include claims for all forms of damages "arising from
the employer-employee relations". Miso
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. Nexold
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: Manikx
Certainly, the present Labor Code is even more committed to the view that on policy
grounds, and equally so in the interest of greater promptness in the disposition of labor
matters, a court is spared the often onerous task of determining what essentially is a factual
matter, namely, the damages that may be incurred by either labor or management as a
result of disputes or controversies arising from employer-employee relations.
There is no mistaking the fact that in the case before us, private respondent's claim against
petitioner for actual damages arose from a prior employer-employee relationship. In the first
place, private respondent would not have taken issue with petitioner's "doing business of his
own" had the latter not been concurrently its employee. Thus, the damages alleged in the

complaint below are: first, those amounting to lost profits and earnings due to petitioner's
abandonment or neglect of his duties as sales manager, having been otherwise preoccupied
by his unauthorized installment sale scheme; and second, those equivalent to the value of
private respondent's property and supplies which petitioner used in conducting his "business
". Maniks
Second, and more importantly, to allow respondent court to proceed with the instant action
for damages would be to open anew the factual issue of whether petitioner's installment
sale scheme resulted in business losses and the dissipation of private respondent's property.
This issue has been duly raised and ruled upon in the illegal dismissal case, where private
respondent brought up as a defense the same allegations now embodied in his complaint,
and presented evidence in support thereof. The Labor Arbiter, however, found to the
contrary ---that no business losses may be attributed to petitioner as in fact, it was by
reason of petitioner's installment plan that the sales of the Iligan branch of private
respondent (where petitioner was employed) reached its highest record level to the extent
that petitioner was awarded the 1989 Field Sales Achievement Award in recognition of his
exceptional sales performance, and that the installment scheme was in fact with the
knowledge of the management of the Iligan branch of private respondent.[12] In other
words, the issue of actual damages has been settled in the labor case, which is now final
and executory. Manikan
Still on the prospect of re-opening factual issues already resolved by the labor court, it may
help to refer to that period from 1979 to 1980 when jurisdiction over employment-predicated
actions for damages vacillated from labor tribunals to regular courts, and back to labor
tribunals. In Ebon vs. de Guzman, 113 SCRA 52,[13] this Court discussed:
The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award moral
and other forms of damages in labor cases could have assumed that the Labor Arbiters'
position-paper procedure of ascertaining the facts in dispute might not be an adequate tool
for arriving at a just and accurate assessment of damages, as distinguished from backwages
and separation pay, and that the trial procedure in the Court of First Instance would be a
more effective means of determining such damages. xxx
Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters
and the NLRC of the jurisdiction to award damages in labor cases because that setup would
mean duplicity of suits, splitting the cause of action and possible conflicting findings and
conclusions by two tribunals on one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217
in its original form) nullified Presidential Decree No. 1367 and restored to the Labor Arbiter
and the NLRC their jurisdiction to award all kinds of damages in cases arising from employer-
employee relations. xxx (Underscoring supplied)
3
Clearly, respondent court's taking jurisdiction over the instant case would bring about
precisely the harm that the lawmakers sought to avoid in amending the Labor Code to
restore jurisdiction over claims for damages of this nature to the NLRC. Oldmiso
This is, of course, to distinguish from cases of actions for damages where the employer-
employee relationship is merely incidental and the cause of action proceeds from a different
source of obligation. Thus, the jurisdiction of regular courts was upheld where the damages,
claimed for were based on tort[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 employer-employee relations ---in other words, the Labor Arbiter has
jurisdiction to award not only the reliefs provided by labor laws, but also damages governed
by the Civil Code.[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. Ncm
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. Ncmmis
SO ORDERED.
2. G.R. No. 184397, September 09, 2015
ROSALINDA G. PAREDES, Petitioner, v. FEED THE CHILDREN PHILIPPINES, INC.
AND/OR DR. VIRGINIA LAO, HERCULES PARADIANG AND BENJAMIN ESCOBIA,
Respondents.

DECISION
PERALTA, J.:
For this Court's resolution is a petition for review on certiorari, dated October 23, 2008, of
petitioner Rosalinda G. Paredes, seeking to reverse and set aside the Decision1 dated March
25, 2008 and Resolution2 dated August 28, 2008 of the Court of Appeals (CA). The assailed
Decision annulled and set aside the rulings of the National Labor Relations Commission
(NLRC) Fourth Division, Cebu City and affirmed the rulings of the Labor Arbiter (LA), which
held that petitioner voluntarily resigned and was not constructively dismissed.
The antecedents are as follows:chanRoblesvirtualLawlibrary
Respondent Feed the Children Philippines, Inc. (FTCP) is a nonstock, non-profit, and non-
government organization duly incorporated under the Philippine laws in 1989. Its objective is
to provide food, clothing, educational supplies and other necessities of indigent children
worldwide3 Respondents Dr. Virginia Lao, Hercules Paradiang and Benjamin Escobia were
members of the FTCP Board of Trustees (Board) and Executive Committee (Execom) of
FTCP.4
Petitioner Rosalinda Paredes was FTCP's National Director. Her functions and duties include
project management, fund accessing, income generation, financial management, and
administration of the organization. She also signed all the FTCP checks and approved all
requisitions and disbursements of FTCP funds.5 As per FTCP's By-laws, it was also her duty to
execute all resolutions and/or decisions of the Board.6
Petitioner was first hired by FTCP in 1999 as Country Director. Her contract was renewed
several times until her last contract for the period from October 1, 2004 to September 30,
2007. Her initial salary was US$1000.00 and then later, she was paid P70,000.00 aside from
other benefits and allowances.7
On August 12, 2005, forty-two (42) FTCP employees signed a petition letter addressed to the
Board expressing their complaints against alleged detestable practices of petitioner, to wit:
seeking exemption from policies which she herself had approved; withholding organization
funds despite approval of its release; procuring health insurance for herself without paying
her share of the premium; and receiving additional fees contrary to the terms of her
contract.8
The next day, August 13, 2005, the staff of FTCP called Lao to a meeting to submit their
petition. They included Atty. Edgar Chatto, then Chairman of the Board, in the meeting when
they realized that it was only her and Escobia who were present. The group was edgy and
demanded for outright solution. However, the three Board members told them that they
should follow a process.9
4
Petitioner learned from Atty. Chatto that Program Manager Primitivo Fostanes and his co-
employees prepared a petition questioning her leadership and management of FTCP. She
filed an administrative complaint against Fostanes on August 24, 2005, but the same was
not acted upon.10
When the Board convened for a meeting on August 28, 2005, petitioner was not allowed to
participate. She was only allowed to join the meeting after three hours. As ex officio member
of the Board and as head of the secretariat, she was always present in every meeting to
discuss her reports, programs and proposals.11
During the meeting, the Board discussed the animosity between the petitioner and the staff
of FTCP and how they would address the issue since they have inadequate grievance
mechanism for issues involving top management.12 According to Lao, petitioner became
combative in issuing memos and filing of administrative charges.13 Atty. Chatto recounted
that when petitioner heard about the protesting senior management and staff, her initial
reaction was to resign but then she asked that the complaints be put in writing.14 After their
discussion, they called the representatives of the complaining staff and petitioner to air their
side.
Consequently, the Board decided that: Acting Board Chair Lao will issue a back-to-work
memorandum and status quo to ensure that all the scheduled tasks be accomplished; there
will be a Supervisory Team, composing of Lao and Escobia, that will draw a definite work
plan and be compensated; the Supervisory Team will not replace the functions of the
National Director; and FTCP will hire an independent professional management and financial
auditor.15
Petitioner sent letters to the Board inquiring about the scope of audit. When the Board did
not respond, her lawyers demanded Lao to address petitioner's concerns regarding the
management and financial audit and that the manual of operations be strictly followed.16 In
another letter, her lawyers informed individual respondents that petitioner raised the legality
and propriety of the conduct of the audit, thus, they requested that they desist from
conducting the audit. The letter also indicated that failure to do so would implead them as
respondents in a preliminary injunction case that they would file.17
While she was at an orientation for local government officials of Surigao del Norte at the
Bohol Tropics Resort on October 24, 2005, petitioner received a phone call from her staff at
FTCP that the auditors from SRD & Co. were already at their office. Lao also called to instruct
her that she should meet the auditors and accommodate them. She refrained from obeying
the order and was adamant that she should receive her requested information first.18
On October 26, 2005, the FTCP management executive committee, headed by petitioner,
informed the Board that they were not afraid of the audit. They wanted due process as
provided by the by-laws, manual of operations, and manual of financial policies and
 5

accounting procedures approved by the Board itself. They also inquired about the meetings The LA ruled in favor of the respondents, the dispositive portion of the Decision29
and processes of the Execom that they were not aware of. Lastly, they asked for a dialogue reads:cralawlawlibrary
to settle their differences.19

On the same date, petitioner wrote an electronic mail (e-mail) to Dr. Larry Jones, the founder
of Feed the Children International, Inc. and reported that Paradiang and two members of the
Board initiated a surprise and secret audit. She expressed that the management was upset
to the manner of conducting the audit. She also insinuated that Paradiang was always after
her despite steering the organization to development. She intimated that she would legally
protect herself should she be illegally dismissed and that they would seek relief from the
harassment by Paradiang.20
The Board resolved to suspend petitioner because of her indifferent attitude and unjustified
refusal to submit to an audit.21 Before it could be implemented, respondent FTCP received
her resignation letter.22 In her resignation letter, she wrote that she can only serve the
organization up to December 31, 2005. She found it no longer tenable to work with the
Board since she had differences with majority of the members regarding resolutions, policies
and procedures.23
On October 29, 2005, the Board accepted her resignation with the condition that its
effectivity be moved to November 30, 2005. She was not obliged to report for work and FTCP
was willing to pay her salary for the month of November to aid her while she looked for
other employment.24
WHEREFORE, foregoing considered, the case is hereby DISMISSED for lack of merit and
judgment is hereby rendered ordering complainant Rosalinda G. Paredes to pay the
following:
1. One Hundred Forty-Three Thousand Six Hundred [F]orty-Six and 73/100 (P143,646.73)
representing her accountabilities to respondent FTCP in Philippine Currency;
2. One Thousand Dollars ($1,000.00) to respondent FTCP representing complainant's
accountability in US Currency;
3. Five Hundred Thousand Pesos (P500,000.00) each to respondents Dr. Virginia Lao,
Benjamin Escobia and Hercules Paradiang for moral damages;
4. One Million Pesos (P1,000,000.00) to respondent FTCP for damages incurred;
5. One Hundred Thousand Pesos (P100,000.00) to respondents collectively for exemplary
damages; and
6. Attorney's Fees to 10% of the total award.
SO ORDERED.

Petitioner wrote to the members of management and foreign funders informing them that
she was no longer connected with FTCP. She moved out all her belongings and even brought
FTCP's documents.25cralawred Undaunted, petitioner appealed the decision to the NLRC. In its Decision31 dated March 28,
2007, the NLRC reversed and set aside the decision of the LA and ruled in her favor, the
On November 2, 2005, petitioner filed a Complaint for illegal dismissal, claiming that she dispositive portion of which states
was forced to resign, thus, was constructively dismissed, and impleaded Lao, Paradiang and
Escobia in their personal capacities.26 WHEREFORE, premises considered, the decision of the Labor Arbiter dated 08 November
2006 is REVERSED and SET aside and a new one is entered, to
Upon failure of the parties to settle amicably, the mandatory conference was terminated. wit:chanRoblesvirtualLawlibrary

In her position paper, petitioner alleged that she was not included in the Supervisory Team I. Ordering respondent Feed the Children Philippines, Inc. to pay the complainant of her
which performed her functions and issued memorandum directly to her subordinates. She salaries and allowances corresponding to the unexpired portion of her contract in the
also alleged that she was excluded from Execom meetings.27 aggregate amount of One Million Six Hundred Eighty-Five Thousand Nine Hundred and
00/100 (PI,685,900.00), broken down as follows:cralawlawlibrary
Respondents, on the other hand, claimed that petitioner was signatory to all the bank
checks of respondent FTCP and approved all requisitions and disbursements. She received a. Salaries corresponding to the unexpired portion of the contract
an excess of US$1,000.00 for her salary and did not return the same. They alleged that - P1,610,000.00
petitioner voluntarily resigned from her position and removed all her belongings from the b. Transportation allowances
FTCP.28 - 29,900.00
c. Representation allowances
- 46,000.00
 6

Total Martin Funeral Homes to justify its act of delving into the findings of the NLRC which were
P1,685,900.00; outside the scope of extraordinary remedy of certiorari.
chanrobleslaw
II. The CA grossly contradicts the law and jurisprudence on constructive dismissal and
and ignored, misunderstood or misinterpreted cogent facts and circumstances which, if
considered, would change the outcome of the case when it ruled that petitioner voluntarily
2. Ordering respondent Feed the Children Philippines, Inc. to pay complainant of moral resigned and was not constructively dismissed.
damages in the amount of One Hundred Thousand Pesos (P100,000.00); and exemplary
damages in the amount of One Hundred Thousand Pesos (P100,000.00). III. The CA effectively reverses the law and jurisprudence on damages and recognized
money claims in labor cases when it condemned petitioner to pay respondents' claims for
Respondents Dr. Virginia Lao, Hercules Paradiang and Benjamin Escobia are absolved from damages that were not duly proven by the latter and that clearly did not arise from an
any liability for lack of legal basis. employer-employee relationship.

SO ORDERED.32
In a Resolution33 dated June 14, 2007, the NLRC dismissed the motion for reconsideration of
the respondents. Thus, respondents filed before the CA a petition for certiorari. The CA ruled
for the respondents. The fallo of said decision reads:cralawlawlibrary
IV. The CA violates the Constitution, the law and the prevailing jurisprudence when it
resolved the lingering doubts that remain in the present case, as those arising from
evidence and from interpretation of agreements and writings, against labor.chanrobleslaw
The present petition is partly meritorious.

WHEREFORE, the Decision dated March 28, 2007 and the Resolution dated June 14, 2007, of It is elementary that this Court is not a trier of facts, and only errors of law are generally
the National Labor Relations Commission (NLRC), Fourth Division, Cebu City, in NLRC Case reviewed in petitions for review on certiorari. Judicial review of labor cases does not go
No. V-000074-2007, are NULLIFIED and a new one rendered as follows:cralawlawlibrary beyond the evaluation of the sufficiency of the evidence upon which its labor officials'
findings rest. As such, the findings of facts and conclusion of the NLRC are generally
1. Declaring private respondent to have voluntarily resigned from her accorded not only great weight and respect but even clothed with finality and deemed
employment/consultancy with FTCP; binding on this Court as long as they are supported by substantial evidence.36
2. Directing private respondent to pay FTCP
a. Thirty-four thousand four hundred thirty-eight pesos and 37/100 (P34,438.37) for her However, if the factual findings of the LA and the NLRC are conflicting, as in this case, the
unpaid loans; reviewing court may delve into the records and examine for itself the questioned findings.37
b. One hundred nine thousand two hundred eight pesos and 36/100 (P109.208.36) The exception, rather than the general rule, applies in the present case since the LA and the
respecting her disbursement and withdrawals from the FTCP Provident Fund.chanrobleslaw CA found facts supporting the conclusion that petitioner was not constructively dismissed,
while the NLRC's factual findings contradicted the LA's findings. Under this situation, such
Costs against private respondent. conflicting factual findings are not binding on us, and we retain the authority to pass on the
evidence presented and draw conclusions therefrom.
SO ORDERED
After judicious review on the records of the case, this Court deems it proper to disregard the
The CA did not find any valid. reason to disturb its decision, hence, it denied petitioner's findings of fact of the NLRC. This Court finds that the NLRC committed grave abuse of
Motion for Reconsideration.35 discretion when it ruled for the petitioner without substantial evidence to support its findings
of facts and conclusion.
In this recourse, petitioner raises the following issues for this Court's
consideration:cralawlawlibrary Petitioner, relying in the principle of finality and conclusiveness of the decisions of labor
tribunals, faults the CA for reversing the findings of the NLRC and affirming the factual
I. The CA contravenes the law and jurisprudence when it granted the petition for certiorari findings of the LA that she voluntarily resigned. She averred that the CA erred when it
that raised questions factual in nature and when it sweepingly applied the ruling in St. applied the ruling in the case of St. Martin Funeral Homes v. NLRC38 to justify its inquiring
into the findings of the NLRC which was outside the scope of extraordinary remedy of

certiorari. She posited that NLRC's findings cannot be delved into without first declaring the
decision itself to have been issued with grave abuse of discretion.39
Courts generally accord great respect and finality to factual findings of administrative
agencies, like labor tribunals, in the exercise of their quasi-judicial function. However, this
doctrine espousing comity to administrative findings of facts are not infallible and cannot
preclude the courts from reviewing and, when proper, disregarding these findings of facts
when shown that the administrative body committed grave abuse of discretion.40
It is settled that in a special civil action for certiorari under Rule 65, the issues are limited to
errors of jurisdiction or grave abuse of discretion. However, in labor cases elevated to it via
petition for certiorari, the CA is empowered to evaluate the materiality and significance of
the evidence alleged to have been capriciously, whimsically, or arbitrarily disregarded by the
NLRC in relation to all other evidence on record.41
The CA can grant this prerogative writ when the factual findings complained of are not
supported by the evidence on record; when it is necessary to prevent a substantial wrong or
to do substantial justice; when the findings of the NLRC contradict those of the LA; and when
necessary to arrive at a just decision of the case.42 To make this finding, the CA necessarily
has to view the evidence if only to determine if the NLRC ruling had basis in evidence.43
Contrary to petitioner's contention, the CA, by express legal mandate and pursuant to its
equity jurisdiction, may review factual findings and evidence of the parties to determine
whether the NLRC gravely abused its discretion in its findings.44 Since this Court finds that
the findings of the LA and NLRC contradicting and that the findings of NLRC are not
supported by the evidence on record, we rule that it is within the CA's power to review the
factual findings of the NLRC. Accordingly, this Court does not find erroneous the course that
the CA took in resolving that petitioner was not constructively dismissed.
This Court, in turn, has the same authority to sift through the factual findings of both the CA
and the NLRC in the event of their conflict.45 This Court, therefore, is not precluded from
reviewing the factual issues when there are conflicting findings by the Labor Arbiter, the
NLRC and the Court of Appeals.46
Since petitioner admittedly resigned, it is incumbent upon her to prove that her resignation
was involuntary and that it was actually a case of constructive dismissal with clear, positive
and convincing evidence.47
Petitioner alleged that she was forced to resign by Lao, Paradiang and Escobia. For her, it
was the overbearing and prejudiced attitude towards her by individual respondents that
7
rendered her continued employment impossible, unreasonable or unlikely. She maintained
that the prevailing working environment compelled her to disassociate with FTCP. She
recounted that the individual respondents deliberately excluded her from important
meetings despite being the chief executive officer and a fixture to all Board meetings.
Petitioner cited the August 28, 2005 Board meeting and a subsequent Execom meeting
where she was apparently banished as proof of respondents' discrimination. She emphasized
in all her pleadings that, aside from it being provided by the by-laws, she believed that her
presence at all Board meetings cannot be dispensed with since it was through her effort that
the Board of Trustees became functional. For her, she was isolated and singled out. She
claimed that these circumstances clearly denoted that the actions of the respondents were
motivated by discrimination and made in bad faith.
Case law holds that constructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable or unlikely; when there is a
demotion in rank or diminution in pay or both; or when a clear discrimination, insensibility,
or disdain by an employer becomes unbearable to the employee.48 The test is whether a
reasonable person in the employee's position would have felt compelled to give up his
position under the circumstances.49
In this case, petitioner cannot be deemed constructively dismissed. She failed to present
clear and positive evidence that respondent FTCP, through its Board of Trustees, committed
acts of discrimination, insensibility, or disdain towards her which rendered her continued
employment unbearable or forced her to terminate her employment from the respondent. As
settled, bare allegations of constructive dismissal, when uncorroborated by the evidence on
record, cannot be given credence.50
It is highly unlikely and incredible for someone of petitioner's position and educational
attainment to so easily succumb to individual respondents' alleged harassment without
defending herself. In fact, records reveal that she wrote directly to Jones when her contract
was not to be renewed and whenever she felt threatened. She vehemently opposed the
audit and openly disobeyed the Board when she was not informed of the scope. She, along
with other management staff, questioned the meetings of the Execom that they were not
informed.51 It is also noted that her husband is a lawyer and that she employed lawyers
who sent a series of demand letters to the Board to provide her the details of the audit and
even ordered the Board to desist from pursuing the audit.
There was no urgency for petitioner to submit her resignation letter. In fact, the day before it
was given, she and other management staff requested for a dialogue with the Board to
address the issue regarding the management and financial audit.52 It is, therefore,
improbable that her continued employment is rendered impossible or unreasonable.

Records do not show any demotion in rank or a diminution in pay made against her.
Petitioner claimed that the fact that the Supervisory Team performed her functions and
issued memorandum directly to her subordinates, and her being barred from subsequent
Execom meetings constituted constructive dismissal. However, there was no evidence to
corroborate her claim of usurpation. She did not present evidence of the supposed direct
memorandum issued by the Supervisory Team to the staff. Aside from the minutes of the
September 29, 2005 meeting of the Execom, there was no other proof of petitioner's
exclusion from other subsequent Execom meetings.
We find that, apart from her self-serving and uncorroborated allegations, petitioner did not
present any substantial evidence of constructive dismissal. She was not able to present a
single witness to corroborate her claims of harassment by Lao, Paradiang and Escobia.
Petitioner supported her claim with the minutes of the August 28, 2005 meeting and another
minutes of the meeting of the Execom that she was excluded. She argued that her sudden
exclusion from board meetings despite established practice constituted grave abuse of
managerial rights of the respondent FTCP.
We are not persuaded that her exclusion to the meeting constituted discrimination or
harassment. A careful perusal of the minutes would reveal that the Board convened to
deliberate on the solution to the apparent conflict between petitioner and the staff since
they have insufficient grievance mechanism for issues involving top management. She could
not fault the Board to not include her in that particular meeting since she was a party
involved and to avoid. possible influence that she could have exerted.
Petitioner presented documents like e-mail correspondences with Paradiang about the non-
renewal of her contract earlier in her employment, e-mail correspondences to Jones about
harassment towards her and specifically mentioning Paradiang, demand letters from her and
her lawyers, her resignation letter, and the board resolution accepting her resignation. These
do not verify that respondents committed discrimination or disdain towards her. Hence, her
allegations are sell-serving and uncorroborated and should not be given evidentiary weight.
On the other hand, respondent FTCP presented a letter53 dated August 28, 2005 written by
petitioner addressed to the Board wherein she presented her side about the petition of the
employees against her. She also praised the Board for strengthening the organization, for
putting valuable policies in the organization, and for opening the organization to new
partnerships.
In another letter54 dated September 6, 2005, she reported that on the same date as the
August 28 Board meeting, she and Fostanes met to discuss concerns and apologized for
what happened and other members of management also apologized and accepted the
reconciliation that she extended to them. She also reported that during the September 5,
2005 General Staff meeting, the issues were discussed, feelings and sentiments were
8
shared, and concluded with a firm commitment from everyone to rebuild the good name of
FTCP and work together to enhance its system and maintain its integrity.
The letters did not mention nor hinted that petitioner protested about being excluded from
the meeting which she has considered as a hearing against her. It did not even reveal that
there was undue prejudice from individual respondents. Records are bereft of proof that she
even attempted to address the Board about the supposed discrimination or disdain by
individual respondents. It is only upon filing of the illegal dismissal case that she alleged that
she felt that she was discriminated against and treated with disdain by respondents.
Respondents presented an affidavit and a police blotter55 attesting that some employees
who signed in the August 12 letter-petition were intimidated by the secretary of petitioner's
lawyer-husband to sign a recantation. She refuted the same by alleging that they could have
not known that it was recantation when it appeared in the blotter that they only saw the
page they were made to sign. Respondents also presented an affidavit56 attesting that
petitioner intimidated an employee by telling her that she would file suits against those who
defamed her when the employee refused to recant her signature in the petition against her.
For petitioner, the fact that the effectivity of her resignation was moved to November
showed the eagerness of Lao, Paradiang and Escobia to get rid of her.57
We held that the act of the employer moving the effectivity of the resignation is not an act of
harassment. The 30-day notice requirement for an employee's resignation is actually for the
benefit of the employer who has the discretion to waive such period. Its purpose is to afford
the employer enough time to hire another employee if needed and to see to it that there is
proper turn-over of the tasks which the resigning employee may be handling.58
Such rule requiring an employee to stay or complete the 30-day period prior to the
effectivity of his resignation becomes discretionary on the part of management as an
employee who intends to resign may be allowed a shorter period before his resignation
becomes effective.59
Thus, the act of respondents moving the effectivity date of petitioner's resignation to a date
earlier than what she had stated cannot be deemed malicious. This cannot be viewed as an
act of harassment but merely the exercise of respondent's management prerogative. We
cannot expect employers to maintain in their employ employees who intend to resign, just
so the latter can have continuous work as they look for a new source of income.
Petitioner alleged that the CA erred when it ruled that she should pay respondents' claims
for damages. She maintained that they were not duly proven and that they clearly didnot
arise from an employer-employee relationship.

This Court held that the "money claims of workers" referred to in Article 21760 of the Labor
Code embraces money claims which arise out of or in connection with the employer-
employee relationship, or some aspect or incident of such relationship.61
Applying the rule of noscitur a sociis in clarifying the scope of Article 217, it is evident that
paragraphs 1 to 5 refer to cases or disputes arising out of or in connection with an employer-
employee relationship. In other words, the money claims within the original and exclusive
jurisdiction of labor arbiters are those which have some reasonable causal connection with
the employer-employee relationship.62
This claim is distinguished 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 regular courts have jurisdiction where the damages claimed for were
based on: tort, malicious prosecution, or breach of contract, as when the claimant seeks to
recover a debt from a former employee or seeks liquidated damages in the enforcement of a
prior employment contract.'"
By the designating clause "arising from the employer-employee relations," Article 217
applies 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.64
In this case, the CA erred in awarding P34,438.37 for petitioner's unpaid debt to
respondents. The claim for recovery of a debt has no reasonable causal connection with any
of the claims provided for in Article 217. The fact that the transaction happened at the time
they were employer and employee did not negate the civil jurisdiction of trial court. Hence, it
is erroneous for the LA and the CA to rule on such claim arising from a different source of
obligation and where the employer-employee relationship was merely incidental.
Likewise, the CA erred in awarding P109,208.36 for the reimbursement of the FTCP provident
Fund allegedly withdrawn by petitioner. Although it was entered by the respondents in its
counterclaim, this claim does not arise from or is necessarily connected with the fact of
termination. It also had no reasonable causal connection with employer-employee
relationship.
Lastly, petitioner maintained that the CA erred when it resolved the lingering doubt in the
present case against labor. She alleged that the CA violated the Constitution, the law, and
jurisprudence.
We held that the law and jurisprudence guarantee security of tenure to every employee.
However, in protecting the rights of the workers, the law does not authorize the oppression
or self-destruction of the employer. Social justice does not mean that every labor dispute
shall automatically be decided in favor of labor. Thus, the Constitution and the law equally
9
recognize the employer's right and prerogative to manage its operation according to
reasonable standards and norms of fair play.65
It is settled that the law serves to equalize the unequal. The labor force is a special class
that is constitutionally protected because of the inequality between capital and labor. This
constitutional protection presupposes that the labor force is weak. However, the level of
protection to labor should vary from case to case; otherwise, the state might appear to be
too paternalistic in affording protection to labor.66 Petitioner could not expect to have the
same level of ardent protection that the laws bestow upon a lowly laborer be given to her, a
high ranking officer of respondent FTCP. As proven, she was considered on equal footing with
her employer and even had the occasion to demand the renewal of her contract by sending
an e-mail to the organization's founder.67
We cannot subscribe to petitioner's allegation that the CA ruled against labor when it
resolved the factual issues of the case. As discussed, it is well within the powers and
jurisdiction of the CA to evaluate the evidence alleged to have been capriciously,
whimsically, or arbitrarily disregarded by the NLRC, or as in the present case, for considering
petitioner's bare allegations without support of substantial evidence. This Court finds that
the CA did not violate the Constitution, the law and jurisprudence. Hence, the resolution of
the doubt as to whether petitioner voluntarily resigned or was constructively dismissed
based on the evidence on record was proper and was not against labor.
WHEREFORE, the petition for review on certiorari, dated October 23, 2008, of petitioner
Rosalinda G. Paredes is hereby PARTLY GRANTED. Accordingly, the ruling of the Court of
Appeals in its Decision dated March 25, 2008, that petitioner was not constructively
dismissed, is hereby AFFIRMED. However, the awards of F34,438.37 and PI09,208.36 for the
unpaid debt of petitioner and reimbursement of the FTCP provident Fund, respectively, are
hereby SET ASIDE.
SO ORDERED.
3. CENTURY PROPERTIES, INC., Petitioner, v. EDWIN J. BABIANO AND EMMA B.
CONCEPCION, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated April 8, 2015 and
the Resolution3 dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No.
132953, which affirmed, with modification the Decision4 dated June 25, 2013 and the

Resolution5 dated October 16, 2013 of the National Labor Relations Commission (NLRC) in
NLRC LAC No. 05-001615-12, and ordered petitioner Century Properties, Inc. (CPI) to pay
respondents Edwin J. Babiano (Babiano) and Emma B. Concepcion (Concepcion; collectively,
respondents) unpaid commissions in the amounts of P889,932.42 and P591,953.05,
respectively.
The Facts
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was eventually6
appointed as Vice President for Sales effective September 1, 2007. As CPFs Vice President
for Sales, Babiano was remunerated with, inter alia, the following benefits: (a) monthly
salary of P70,000.00; (b) allowance of P50,000.00; and (c) 0.5% override commission for
completed sales. His employment contract7 also contained a "Confidentiality of Documents
and Non-Compete Clause"8 which, among others, barred him from disclosing confidential
information, and from working in any business enterprise that is in direct competition with
CPI "while [he is] employed and for a period of one year from date of resignation or
termination from [CPI]." Should Babiano breach any of the terms thereof, his "forms of
compensation, including commissions and incentives will be forfeited."9chanrobleslaw
During the same period, Concepcion was initially hired as Sales Agent by CPI and was
eventually10 promoted as Project Director on September 1, 2007.11 As such, she signed an
employment agreement, denominated as "Contract of Agency for Project Director"12 which
provided, among others, that she would directly report to Babiano, and receive, a monthly
subsidy of P60,000.00, 0.5% commission, and cash incentives.13 On March 31, 2008,
Concepcion executed a similar contract14 anew with CPI in which she would receive a
monthly subsidy of P50,000.00, 0.5% commission, and cash incentives as per company
policy. Notably, it was stipulated in both contracts that no employer-employee relationship
exists between Concepcion and CPI.15chanrobleslaw
After receiving reports that Babiano provided a competitor with information regarding CPFs
marketing strategies, spread false information regarding CPI and its projects, recruited CPI's
personnel to join the competitor, and for being absent without official leave (AWOL) for five
(5) days, CPI, through its Executive Vice President for Marketing and Development, Jose
Marco R. Antonio (Antonio), sent Babiano a Notice to Explain16 on February 23, 2009
directing him to explain why he should not be charged with disloyalty, conflict of interest,
and breach of trust and confidence for his actuations.17chanrobleslaw
On February 25, 2009, Babiano tendered18 his resignation and revealed that he had been
accepted as Vice President of First Global BYO Development Corporation (First Global), a
competitor of CPI.19 On March 3, 2009, Babiano was served a Notice of Termination20 for:
(a) incurring AWOL; (b) violating the "Confidentiality of Documents and Non-Compete
Clause" when he joined a competitor enterprise while still working for CPI and provided such
10
competitor enterprise information regarding CPFs marketing strategies; and (c) recruiting
CPI personnel to join a competitor.21chanrobleslaw
On the other hand, Concepcion resigned as CPFs Project Director through a letter22 dated
February 23, 2009, effective immediately.
On August 8, 2011, respondents filed a complaint23 for non-payment of commissions and
damages against CPI and Antonio before the NLRC, docketed as NLRC Case No. NCR-08-
12029-11, claiming that their repeated demands for the payment and release of their
commissions remained unheeded.24chanrobleslaw
For its part, CPI maintained25cralawred that Babiano is merely its agent tasked with selling
its projects. Nonetheless, he was afforded due process in the termination of his employment
which was based on just causes.26 It also claimed to have validly withheld Babiano's
commissions, considering that they were deemed forfeited for violating the "Confidentiality
of Documents and Non-Compete Clause."27 On Concepcion's money claims, CPI asserted
that the NLRC had no jurisdiction to hear the same because there was no employer-
employee relations between them, and thus, she should have litigated the same in an
ordinary civil action.28chanrobleslaw
The LA Ruling
In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor and,
accordingly, dismissed the complaint for lack of merit.30chanrobleslaw
The LA found that: (a) Babiano's acts of providing information on CPI's marketing strategies
to the competitor and spreading false information about CPI and its projects are blatant
violations of the "Confidentiality of Documents and Non-Compete Clause" of his employment
contract, thus, resulting in the forfeiture of his unpaid commissions in accordance with the
same clause;31 and (b) it had no jurisdiction over Concepcion's money claim as she was not
an employee but a mere agent of CPI, as clearly stipulated in her engagement contract with
the latter.32chanrobleslaw
Aggrieved, respondents appealed33 to the NLRC.
The NLRC Ruling
In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and
entered a new one ordering CPI to pay Babiano and Concepcion the amounts of P685,211.76
and P470,754.62, respectively, representing their commissions from August 9, 2008 to
August 8, 2011, as well as 10% attorney's fees of the total monetary
awards.35chanrobleslaw

While the NLRC initially concurred with the LA that Babiano's acts constituted just cause
which would warrant the termination of his employment from CPI, it, however, ruled that the
forfeiture of all earned commissions of Babiano under the "Confidentiality of Documents and
Non-Compete Clause" is confiscatory and unreasonable and hence, contrary to law and
public policy.36 In this light, the NLRC held that CPI could not invoke such clause to avoid the
payment of Babiano's commissions since he had already earned those monetary benefits
and, thus, should have been released to him. However, the NLRC limited the grant of the
money claims in light of Article 291 (now Article 306)37 of the Labor Code which provides for
a prescriptive period of three (3) years. Consequently, the NLRC awarded unpaid
commissions only from August 9, 2008 to August 8, 2011 i.e., which was the date when
the complaint was filed.38 Meanwhile, contrary to the LA's finding, the NLRC ruled that
Concepcion was CPI's employee, considering that CPI: (a) repeatedly hired and promoted her
since 2002; (b) paid her wages despite referring to it as "subsidy"; and (c) exercised the
power of dismissal and control over her.39 Lastly, the NLRC granted respondents' claim for
attorney's fees since they were forced to litigate and incurred expenses for the protection of
their rights and interests.40chanrobleslaw
Respondents did not assail the NLRC findings. In contrast, only CPI moved for
reconsideration,41 which the NLRC denied in a Resolution42 dated October 16, 2013.
Aggrieved, CPI filed a petition for certiorari43 before the CA.
The CA Ruling
In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with modification
increasing the award of unpaid commissions to Babiano and Concepcion in the amounts of
P889,932.42 and P591.953.05, respectively, and imposing interest of six percent (6%) per
annum on all monetary awards from the finality of its decision until fully
paid.45chanrobleslaw
The CA held that Babiano properly instituted his claim for unpaid commissions before the
labor tribunals as it is a money claim arising from an employer-employee relationship with
CPI. In this relation, the CA opined that CPI cannot withhold such unpaid commissions on the
ground of Babiano's alleged breach of the "Confidentiality of Documents and Non-Compete
Clause" integrated in the latter's employment contract, considering that such clause referred
to acts done after the cessation of the employer-employee relationship or to the "post-
employment" relations of the parties. Thus, any such supposed breach thereof is a civil law
dispute that is best resolved by the regular courts and not by labor
tribunals.46chanrobleslaw
Similarly, the CA echoed the NLRC's finding that there exists an employer-employee
relationship between Concepcion and CPI, because the latter exercised control over the
performance of her duties as Project Director which is indicative of an employer-employee
relationship. Necessarily therefore, CPI also exercised control over Concepcion's duties in
recruiting, training, and developing directors of sales because she was supervised by
11
Babiano in the performance of her functions. The CA likewise observed the presence of
critical factors which were indicative of an employer-employee relationship with CPI, such as:
(a) Concepcion's receipt of a monthly salary from CPI; and (b) that she performed tasks
besides selling CPI properties. To add, the title of her contract which was referred to as
"Contract of Agency for Project Director" was not binding and conclusive, considering that
the characterization of the juridical relationship is essentially a matter of law that is for the
courts to determine, and not the parties thereof. Moreover, the totality of evidence sustains
a finding of employer-employee relationship between CPI and Concepcion.47chanrobleslaw
Further, the CA held that despite the NLRC's proper application of the three (3)-year
prescriptive period under Article 291 of the Labor Code, it nonetheless failed to include all of
respondents' earned commissions during that time - i.e., August 9, 2008 to August 8, 2011 -
thus, necessitating the increase in award of unpaid commissions in respondents'
favor.48chanrobleslaw
Undaunted, CPI sought for reconsideration,49 which was, however, denied in a Resolution50
dated October 12, 2015; hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA erred in denying CPI's
petition for certiorari, thereby holding it liable for the unpaid commissions of respondents.
The Court's Ruling
The petition is partly meritorious.
I.
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and leave
no doubt upon the intention of the contracting parties, the literal meaning of its stipulations
shall control."51 In Norton Resources and Development Corporation v. All Asia Bank
Corporation,52 the Court had the opportunity to thoroughly discuss the said rule as
follows:ChanRoblesVirtualawlibrary

The rule is that where the language of a contract is plain and unambiguous, its meaning
should be determined without reference to extrinsic facts or aids. The intention of the parties
must be gathered from that language, and from that language alone. Stated differently,
where the language of a written contract is clear and unambiguous, the contract must be
taken to mean that which, on its face, it purports to mean, unless some good reason can be
assigned to show that the words should be understood in a different sense. Courts cannot
make for the parties better or more equitable agreements than they themselves have been
satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one
of the parties, or alter them for the benefit of one party and to the detriment of the other, or
by construction, relieve one of the parties from the terms which he voluntarily consented to,
or impose on him those which he did not.53 (Emphases and underscoring supplied)
Thus, in the interpretation of contracts, the Court must first determine whether a provision
or stipulation therein is ambiguous. Absent any ambiguity, the provision on its face will be
read as it is written and treated as the binding law of the parties to the
contract.54chanrobleslaw
In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-Compete
Clause" found in Babiano's employment contract55 to justify the forfeiture of his
commissions, viz.:ChanRoblesVirtualawlibrary
Confidentiality of Documents and Non-Compete Clause
All records and documents of the company and all information pertaining to its business or
affairs or that of its affiliated companies are confidential and no unauthorized disclosure or
reproduction or the same will be made by you any time during or after your employment.
And in order to ensure strict compliance herewith, you shall not work for whatsoever
capacity, either as an employee, agent or consultant with any person whose business is in
direct competition with the company while you are employed and for a period of one year
from date of resignation or termination from the company.
In the event the undersigned breaches any term of this contract, the undersigned agrees
and acknowledges that damages may not be an adequate remedy and that in addition to
any other remedies available to the Company at law or in equity, the Company is entitled to
enforce its rights hereunder by way of injunction, restraining order or other relief to enjoin
any breach or default of this contract.
The undersigned agrees to pay all costs, expenses and attorney's fees incurred by the
Company in connection with the enforcement of the obligations of the undersigned. The
undersigned also agrees to .pay the Company all profits, revenues and income or benefits
derived by or accruing to the undersigned resulting from the undersigned's breach of the
obligations hereunder. This Agreement shall be binding upon the undersigned, all
employees, agents, officers, directors, shareholders, partners and representatives of the
undersigned and all heirs, successors and assigns of the foregoing.
12
Finally, if undersigned breaches any terms of this contract, forms of compensation including
commissions and incentives will be forfeited.56 (Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is
barred to "work for whatsoever capacity x x x with any person whose business is in direct
competition with [CPI] while [he is] employed and for a period of one year from date of [his]
resignation or termination from the company," it also expressly provided in no uncertain
terms that should Babiano "[breach] any term of [the employment contract], forms of
compensation including commissions and incentives will be forfeited." Here, the contracting
parties - namely Babiano on one side, and CPI as represented by its COO-Vertical, John Victor
R. Antonio, and Director for Planning and Controls, Jose Carlo R. Antonio, on the other
-indisputably wanted the said clause to be effective even during the existence of the
employer-employee relationship between Babiano and CPI, thereby indicating their intention
to be bound by such clause by affixing their respective signatures to the employment
contract. More significantly, as CPFs Vice President for Sales, Babiano held a highly sensitive
and confidential managerial position as he "was tasked, among others, to guarantee the
achievement of agreed sales targets for a project and to ensure that his team has a qualified
and competent manpower resources by conducting recruitment activities, training sessions,
sales rallies, motivational activities, and evaluation programs."57 Hence, to allow Babiano to
freely move to direct competitors during and soon after his employment with CPI would
make the latter's trade secrets vulnerable to exposure, especially in a highly competitive
marketing environment. As such, it is only reasonable that CPI and Babiano agree on such
stipulation in the latter's employment contract in order to afford a fair and reasonable
protection to CPI.58 Indubitably, obligations arising from contracts, including employment
contracts, have the force of law between the contracting parties and should be complied
with in good faith.59 Corollary thereto, parties are bound by the stipulations, clauses, terms,
and conditions they have agreed to, provided that these stipulations, clauses, terms, and
conditions are not contrary to law, morals, public order or public policy,60 as in this case.
Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-Compete
Clause" only to acts done after the cessation of the employer-employee relationship or to
the "post-employment" relations of the parties. As clearly stipulated, the parties wanted to
apply said clause during the pendency of Babiano's employment, and CPI correctly invoked
the same before the labor tribunals to resist the former's claim for unpaid commissions on
account of his breach of the said clause while the employer-employee relationship between
them still subsisted. Hence, there is now a need to determine whether or not Babiano
breached said clause while employed by CPI, which would then resolve the issue of his
entitlement to his unpaid commissions.
A judicious review of the records reveals that in his resignation letter61 dated February 25,
2009, Babiano categorically admitted to CPI Chairman Jose Antonio that on February 12,
2009, he sought employment from First Global, and five (5) days later, was admitted thereto
as vice president. From the foregoing, it is evidently clear that when he sought and
eventually accepted the said position with First Global, he was still employed by CPI as he
has not formally resigned at that time. Irrefragably, this is a glaring violation of the

"Confidentiality of Documents and Non-Compete Clause" in his employment contract with
CPI, thus, justifying the forfeiture of his unpaid commissions.
II.
Anent the nature of Concepcion's engagement, based on case law, the presence of the
following elements evince the existence of an employer-employee relationship: (a) the
power to hire, i.e., the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee's
conduct, or the so called "control test." The control test is commonly regarded as the most
important indicator of the presence or absence of an employer-employee relationship.62
Under this test, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end achieved, but also the
manner and means to be used in reaching that end.63chanrobleslaw
Guided by these parameters, the Court finds that Concepcion was an employee of CPI
considering that: (a) CPI continuously hired and promoted Concepcion from October 2002
until her resignation on February 23, 2009,64 thus, showing that CPI exercised the power of
selection and engagement over her person and that she performed functions that were
necessary and desirable to the business of CPI; (b) the monthly "subsidy" and cash
incentives that Concepcion was receiving from CPI are actually remuneration in the concept
of wages as it was regularly given to her on a monthly basis without any qualification, save
for the "complete submission of documents on what is a sale policy";65 (c) CPI had the
power to discipline or even dismiss Concepcion as her engagement contract with CPI
expressly conferred upon the latter "the right to discontinue [her] service anytime during the
period of engagement should [she] fail to meet the performance standards,"66 among
others, and that CPI actually exercised such power to dismiss when it accepted and
approved Concepcion's resignation letter; and most importantly, (d) as aptly pointed out by
the CA, CPI possessed the power of control over Concepcion because in the performance of
her duties as Project Director - particularly in the conduct of recruitment activities, training
sessions, and skills development of Sales Directors - she did not exercise independent
discretion thereon, but was still subject to the direct supervision of CPI, acting through
Babiano.67chanrobleslaw
Besides, while the employment agreement of Concepcion was denominated as a "Contract
of Agency for Project Director," it should be stressed that the existence of employer-
employee relations could not be negated by the mere expedient of repudiating it in a
contract. In the case of Insular Life Assurance Co., Ltd. v. NLRC,68 it was ruled that one's
employment status is defined and prescribed by law, and not by what the parties say it
should be, viz.:ChanRoblesVirtualawlibrary
It is axiomatic that the existence of an employer-employee relationship cannot be negated
by expressly repudiating it in the management contract and providing therein that the
"employee" is an independent contractor when the terms of the agreement clearly show
otherwise. For, the employment status of a person is defined and prescribed by law and not
13
by what the parties say it should be. In determining the status of the management contract,
the "four-fold test" on employment earlier mentioned has to be applied.69 (Emphasis and
underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee relationship
between Concepcion and CPI, the labor tribunals correctly assumed jurisdiction over her
money claims.
III.
Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her the
amount of P470,754.62 representing unpaid commissions rendered the same final and
binding upon her. As such, the CA erred in increasing her monetary award to
P591,953.05.70chanrobleslaw
The contention lacks merit.
As a general rule, a party who has not appealed cannot obtain any affirmative relief other
than the one granted in the appealed decision. However, jurisprudence admits an exception
to the said rule, such as when strict adherence thereto shall result in the impairment of the
substantive rights of the parties concerned. In Global Resource for Outsourced Workers, Inc.
v. Velasco:71
Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it
and can no longer obtain from the appellate court any affirmative relief other than what was
already granted under said judgment. However, when strict adherence to such technical rule
will impair a substantive right, such as that of an illegally dismissed employee to monetary
compensation as provided by law, then equity dictates that the Court set aside the rule to
pave the way for a full and just adjudication of the case.72 (Emphasis and underscoring
supplied)
In the present case, the CA aptly pointed out that the NLRC failed to account for all the
unpaid commissions due to Concepcion for the period of August 9, 2008 to August 8,
2011.73 Indeed, Concepcion's right to her earned commissions is a substantive right which
cannot be impaired by an erroneous computation of what she really is entitled to. Hence,
following the dictates of equity and in order to arrive at a complete and just resolution of the
case, and avoid a piecemeal dispensation of justice over the same, the CA correctly
recomputed Concepcion's unpaid commissions, notwithstanding her failure to seek a review
of the NLRC's computation of the same.
In sum, the Court thus holds that the commissions of Babiano were properly forfeited for
violating the "Confidentiality of Documents and Non-Compete Clause." On.the other hand,
CPI remains liable for the unpaid commissions of Concepcion in the sum of P591,953.05.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the
Resolution dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953

are hereby MODIFIED in that the commissions of respondent Edwin J. Babiano are deemed
FORFEITED. The rest of the CA Decision stands.
SO ORDERED.
4. G.R. No. 200114, August 24, 2015
SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE UBAA, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the July 29, 2011 Decision2 of the Court of
Appeals (CA) denying the Petition for Certiorari in CA-G.R. SP No. 110006 and affirming the
March 6, 2007 Order3 of the Regional Trial Court (RTC) of Daet, Camarines Norte, Branch 39
in Civil Case No. 7304; and 2) the CA's January 10, 2012 Resolution4 denying petitioner's
Motion for Reconsideration of the herein assailed Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubana filed a civil case for damages against the
DBP Service Corporation, petitioner Social Security System (SSS), and the SSS Retirees
Association5 before the RTC of Daet, Camarines Norte. The case was docketed as Civil Case
No. 7304 and assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995, she applied for employment with
the petitioner. However, after passing the examinations and accomplishing all the
requirements for employment, she was instead referred to DBP Service Corporation for
14
"transitory employment." She took the pre-employment examination given by DBP Service
Corporation and passed the same. On May 20, 1996, she was told to report for training to
SSS, Naga City branch, for immediate deployment to SSS Daet branch. On May 28, 1996,
she was made to sign a six-month Service Contract Agreement7 by DBP Service Corporation,
appointing her as clerk for assignment with SSS Daet branch effective May 27, 1996, with a
daily wage of only P171.00. She was assigned as "Frontliner" of the SSS Members Assistance
Section until December 15, 1999. From December 16, 1999 to May 15, 2001, she was
assigned to the Membership Section as Data Encoder. On December 16, 2001, she was
transferred to the SSS Retirees Association as Processor at the Membership Section until her
resignation on August 26, 2002. As Processor, she was paid only P229.00 daily or P5,038.00
monthly, while a regular SSS Processor receives a monthly salary of P18,622.00 or P846.45
daily wage. Her May 28, 1996 Service Contract Agreement with DBP Service Corporation was
never renewed, but she was required to work for SSS continuously under different
assignments with a maximum daily salary of only P229.00; at the same time, she was
constantly assured of being absorbed into the SSS plantilla. Respondent claimed she was
qualified for her position as Processor, having completed required training and passed the
SSS qualifying examination for Computer Operations Course given by the National Computer
Institute, U.P. Diliman from May 16 to June 10, 2001, yet she was not given the proper salary.
Because of the oppressive and prejudicial treatment by SSS, she was forced to resign on
August 26, 2002 as she could no longer stand being exploited, the agony of dissatisfaction,
anxiety, demoralization, and injustice. She asserted that she dedicated six years of her
precious time faithfully serving SSS, foregoing more satisfying employment elsewhere, yet
she was merely exploited and given empty and false promises; that defendants conspired to
exploit her and violate civil service laws and regulations and Civil Code provisions on Human
Relations, particularly Articles 19, 20, and 21.8 As a result, she suffered actual losses by way
of unrealized income, moral and exemplary damages, attorney's fees and litigation
expenses.
Respondent prayed for an award of P572,682.67 actual damages representing the difference
between the legal and proper salary she should have received and the actual salary she
received during her six-year stint with petitioner; P300,000.00 moral damages; exemplary
damages at the discretion of the court; P20,000.00 attorney's fees and P1,000.00
appearance fees; and other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and DBP Service Corporation filed
their respective motions to dismiss, arguing that the subject matter of the case and
respondent's claims arose out of employer-employee relations, which are beyond the RTC's
jurisdiction and properly cognizable by the National Labor Relations Commission (NLRC).
Respondent opposed the motions to dismiss, arguing that pursuant to civil service rules and
regulations, service contracts such as her Service Contract Agreement with DBP Service
Corporation should cover only a) lump sum work or services such as janitorial, security or
consultancy services, and b) piece work or intermittent jobs of short duration not exceeding
six months on a daily basis.9 She posited that her service contract involved the performance

of sensitive work, and not merely janitorial, security, consultancy services, or work of
intermittent or short duration. In fact, she was made to work continuously even after the
lapse of her 6-month service contract. Citing Civil Service Commission Memorandum Circular
No. 40, respondent contended that the performance of functions outside of the nature
provided in the appointment and receiving salary way below that received by regular SSS
employees amount to an abuse of rights; and that her cause of action is anchored on the
provisions of the Civil Code on Human Relations.
Ruling of the Regional Trial Court
On October 1, 2003, the RTC issued an Order10 dismissing respondent's complaint for lack
of jurisdiction, stating that her claim for damages "has a reasonable causal connection with
her employer-employee relations with the defendants"11 and "is grounded on the alleged
fraudulent and malevolent manner by which the defendants conspired with each other in
exploiting [her], which is a clear case of unfair labor practice,"12 falling under the
jurisdiction of the Labor Arbiter of the NLRC. Thus, it decreed:cralawlawlibrary
WHEREFORE, premises considered, the aforementioned Motion to Dismiss the complaint of
the herein plaintiff for lack of jurisdiction is hereby GRANTED. The above-entitled complaint
is hereby DISMISSED.
SO ORDERED.13
Respondent moved for reconsideration. On March 6, 2007, the RTC issued another Order14
granting respondent's motion for reconsideration. The trial court held:cralawlawlibrary
Section 2(1), Art. K-B, 1987 Constitution, expressly provides that "the civil service embraces
all branches, subdivisions, instrumentalities, and agencies of the government, including
government-owned or controlled corporation[s] with original charters." Corporations with
original charters are those which have been created by special law[s] and not through the
general corporation law. In contrast, labor law claims against government-owned and
controlled corporations without original charters fall within the jurisdiction of the Department
of Labor and Employment and not the Civil Service Commission. (Light Rail Transit Authority
vs. Perfecto Venus, March 24, 2006.)
Having been created under an original charter, RA No. 1161 as amended by R.A. 8282,
otherwise known as the Social Security Act of 1997, the SSS is governed by the provision[s]
of the Civil Service Commission. However, since the SSS denied the existence of an
employer-employee relationship, and the case is one for Damages, it is not the Civil Service
Commission that has jurisdiction to try the case, but the regular courts.
A perusal of the Complaint filed by the plaintiff against the defendant SSS clearly shows that
the case is one for Damages.
Paragraph 15 of her complaint states, thus:ChanRoblesvirtualLawlibrary
15
xxx. Likewise, they are contrary to the Civil Code provisions on human relations which
[state], among others, that Every person, must in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due and observe honesty and
good faith (Article 19) and that Every person who, contrary to law, willfully or negligently
[causes] damages to another, shall indemnify the latter for the same. (Art. 20)
"Article 19 provides a rule of conduct that is consistent with an orderly and harmonious
relationship between and among men and women It codifies the concept of what is justice
and fair play so that abuse of right by a person will be prevented. Art. 20 speaks of general
sanction for all other provisions of law which do not especially provide their own sanction.
Thus, anyone, who, whether willfully or negligently, in the exercise of his legal right or duty,
causes damage to another, shall indemnify his or her victim for injuries suffered thereby."
(Persons and Family Relations, Sta. Maria, Melencio, Jr. (2004) pp. 31-32.)
Wherefore, all premises considered, the Motion for Reconsideration is hereby GRANTED. The
case against defendant Social Security System represented by its President is hereby
reinstated in the docket of active civil cases of this court.
SO ORDERED.15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its ground in its June 24, 2009
Order16cralawrednad
Ruling of the Court of Appeals
In a Petition for Certiorari17 filed with the CA and docketed as CA-G.R. SP No. 110006,
petitioner sought a reversal of the RTC's June 24, 2009 and March 6, 2007 Orders and the
reinstatement of its original October 1, 2003 Order dismissing Civil Case No. 7304, insisting
that the trial court did not have jurisdiction over respondent's claims for "unrealized salary
income" and other damages, which constitute a labor dispute cognizable only by the labor
tribunals. Moreover, it claimed that the assailed Orders of the trial court were issued with
grave abuse of discretion. It argued that the trial court gravely erred in dismissing the case
only as against its co-defendants DBP Service Corporation and SSS Retirees Association and
maintaining the charge against it, considering that its grounds for seeking dismissal are
similar to those raised by the two. It maintained that DBP Service Corporation and SSS
Retirees Association are legitimate independent job contractors engaged by it to provide
manpower services since 2001, which thus makes respondent an employee of these two
entities and not of SSS; and that since it is not the respondent's employer, then there is no
cause of action against it.
On July 29, 2011, the CA issued the assailed Decision containing the following
pronouncement:cralawlawlibrary
Hence, petitioner seeks recourse before this Court via this Petition for Certiorari challenging
the RTC Orders. For the resolution of this Court is the sole issue of:cralawlawlibrary
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 7304.

The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter thereof, as well as, which
court or agency of the government has jurisdiction over the same, are determined by the
material allegations of the complaint in relation to the law involved and the character of the
reliefs prayed for, whether or not the complainant/plaintiff is entitled to any or all of such
reliefs. A prayer or demand for relief is not part of the petition of the cause of action; nor
does it enlarge the cause of action stated or change the legal effect of what is alleged. In
determining which body has jurisdiction over a case, the better policy is to consider not only
the status or relationship of the parties but also the nature of the action that is the subject of
their controversy.
A careful perusal of Ubana's Complaint in Civil Case No. 7304 unveils that Ubana's claim is
rooted on the principle of abuse of right laid in the New Civil Code. She was claiming
damages based on the alleged exploitation [perpetrated] by the defendants depriving her of
her rightful income. In asserting that she is entitled to the damages claimed, [she] invoked
not the provisions of the Labor Code or any other labor laws but the provisions on human
relations under the New Civil Code. Evidently, the determination of the respective rights of
the parties herein, and the ascertainment whether there were abuses of such rights, do not
call for the application of the labor laws but of the New Civil Code. Apropos thereto, the
resolution of the issues raised in the instant complaint does not require the expertise
acquired by labor officials. It is the courts of general jurisdiction, which is the RTC in this
case, which has the authority to hear and decide Civil Case No. 7304.
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. 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.
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.
The pivotal question is whether the Labor Code has any relevance to the principal relief
sought in the complaint. As pointed out earlier, Ubana did not seek refuge from the Labor
Code in asking for the award of damages. It was the transgression of Article[s] 19 and 20 of
16
the New Civil Code that she was insisting in wagering this case. The primary relief sought
herein is for moral and exemplary damages for the abuse of rights. The claims for actual
damages for unrealized income are the natural consequence for abuse of such rights.
While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs
provided by labor laws, but also damages governed by the Civil Code, these reliefs must still
be based on an action that has a reasonable causal connection with the Labor Code, other
labor statutes, or collective bargaining agreements. Claims for damages under paragraph 4
of Article 217 must have a reasonable causal connection with any of the claims provided for
in the article in order to be cognizable by the labor arbiter. Only if there is such a connection
with the other claims can the claim for damages be considered as arising from employer-
employee relations. In the present case, Ubana's claim for damages is not related to any
other claim under Article 217, other labor statutes, or collective bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic] jurisdiction to hear and
decide Civil Case No. 7304. In Tolosa v. NLRC,18 the Supreme Court held that, "[i]t is not the
NLRC but the regular courts that have jurisdiction over action for damages, in which the
employer-employee relations is merely incidental, and in which the cause of action proceeds
from a different source of obligation such as tort. Since petitioner's claim for damages is
predicated on a quasi-delict or tort that has no reasonable causal connection with any of the
claims provided for in Article 217, other labor statutes or collective bargaining agreements,
jurisdiction over the action lies with the regular courts not with the NLRC or the labor
arbiters." The same rule applies in this case.
WHEREFORE, premises considered, the instant petition is DENIED and the Order dated March
6, 2007 of the Regional Trial Court, Branch 39 of Daet, Camarines Norte in Civil Case No.
7304 is hereby AFFIRMED.
SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied the same in its January 10,
2012 Resolution.21 Hence, the present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are contrary to law and
jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that the RTC's October 1, 2003
Order dismissing Civil Case No. 7304 be reinstated, petitioner essentially maintains in its
Petition and Reply22 that respondent's claims arose from and are in fact centered on her
previous employment. It maintains that there is a direct causal connection between
respondent's claims and her employment, which brings the subject matter within the

jurisdiction of the NLRC. Petitioner contends that respondent's other claims are intimately
intertwined with her claim of actual damages which are cognizable by the NLRC. Moreover,
petitioner alleges that its existing manpower services agreements with DBP Service
Corporation and SSS Retirees Association are legitimate; and that some of respondent's
claims may not be entertained since these pertain to benefits enjoyed by government
employees, not by employees contracted via legitimate manpower service providers. Finally,
petitioner avers that the nature and character of the reliefs prayed for by the respondent are
directly within the jurisdiction not of the courts, but of the labor tribunals.
Respondent's Arguments
In her Comment,23 respondent maintains that her case is predicated not on labor laws but
on Articles 19 and 20 of the Civil Code for petitioner's act of exploiting her and enriching
itself at her expense by not paying her the correct salary commensurate to the position she
held within SSS. Also, since there is no employer-employee relationship between her and
petitioner, as the latter itself admits, then her case is not cognizable by the Civil Service
Commission (CSC) either; that since the NLRC and the CSC have no jurisdiction over her
case, then it is only the regular courts which can have jurisdiction over her claims. She
argues that the CA is correct in ruling that her case is rooted in the principle of abuse of
rights under the Civil Code; and that the Petition did not properly raise issues of law.
Our Ruling
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on Audit,24 it was held that while they
performed the work of regular government employees, DBP Service Corporation personnel
are not government personnel, but employees of DBP Service Corporation acting as an
independent contractor. Applying the foregoing pronouncement to the present case, it can
be said that during respondent's stint with petitioner, she never became an SSS employee,
as she remained an employee of DBP Service Corporation and SSS Retirees Association - the
two being independent contractors with legitimate service contracts with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee relation exists between the
principal and the job contractor's employees. The principal is responsible to the job
contractor's employees only for the proper payment of wages."25cralawredcralawrednad
In her Complaint, respondent acknowledges that she is not petitioner's employee, but that
precisely she was promised that she would be absorbed into the SSS plantilla after all her
years of service with SSS; and that as SSS Processor, she was paid only P229.00 daily or
P5,038.00 monthly, while a regular SSS Processor receives a monthly salary of P18,622.00,
or P846.45 daily wage. In its pleadings, petitioner denied the existence of an employer-
employee relationship between it and respondent; in fact, it insists on the validity of its
service agreements with DBP Service Corporation and SSS Retirees Association - meaning
17
that the latter, and not SSS, are respondent's true employers. Since both parties admit that
there is no employment relation between them, then there is no dispute cognizable by the
NLRC. Thus, respondent's case is premised on the claim that in paying her only P229.00
daily - or P5,038.00 monthly - as against a monthly salary of P18,622.00, or P846.45 daily
wage, paid to a regular SSS Processor at the time, petitioner exploited her, treated her
unfairly, and unjustly enriched itself at her expense.
For Article 217 of the Labor Code to apply, and in order for the Labor Arbiter to acquire
jurisdiction over a dispute, there must be an employer-employee relation between the
parties thereto.chanrobleslaw
x x x It is well settled in law and jurisprudence that where no employer-employee
relationship exists between the parties and no issue is involved which may be resolved by
reference to the Labor Code, other labor statutes or any collective bargaining agreement, it
is the Regional Trial Court that has jurisdiction, x x x The action is within the realm of civil
law hence jurisdiction over the case belongs to the regular courts. While the resolution of the
issue involves the application of labor laws, reference to the labor code was only for the
determination of the solidary liability of the petitioner to the respondent where no employer-
employee relation exists. Article 217 of the Labor Code as amended vests upon the labor
arbiters exclusive original jurisdiction only over the following:ChanRoblesvirtualLawlibrary
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from employer-
employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving
legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer- employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable jurisdictional
requisite x x x.26
Since there is no employer-employee relationship between the parties herein, then there is
no labor dispute cognizable by the Labor Arbiters or the NLRC.

There being no employer-employee relation or any other definite or direct contract between
respondent and petitioner, the latter being responsible to the former only for the proper
payment of wages, respondent is thus justified in filing a case against petitioner, based on
Articles 19 and 20 of the Civil Code, to recover the proper salary due her as SSS Processor.
At first glance, it is indeed unfair and unjust that as, Processor who has worked with
petitioner for six long years, she was paid only P5,038.00 monthly, or P229.00 daily, while a
regular SSS employee with the same designation and who performs identical functions is
paid a monthly salary of P18,622.00, or P846.45 daily wage. Petitioner may not hide under
its service contracts to deprive respondent of what is justly due her. As a vital government
entity charged with ensuring social security, it should lead in setting the example by treating
everyone with justice and fairness. If it cannot guarantee the security of those who work for
it, it is doubtful that it can even discharge its directive to promote the social security of its
members in line with the fundamental mandate to promote social justice and to insure the
well-being and economic security of the Filipino people.
In this jurisdiction, the "long honored legal truism of 'equal pay for equal work'" has been
"impregnably institutionalized;" "[p]ersons who work with substantially equal qualifications,
skill, effort and responsibility, under similar conditions, should be paid similar salaries."27
"That public policy abhors inequality and discrimination is beyond contention. Our
Constitution and laws reflect the policy against these evils. The Constitution in the Article on
Social Justice and Human Rights exhorts Congress to 'give highest priority to the enactment
of measures that protect and enhance the right of all people to human dignity, reduce social,
economic, and political inequalities.' The very broad Article 19 of the Civil Code requires
every person, 'in the exercise of his rights and in the performance of his duties, [to] act with
justice, give everyone his due, and observe honesty and good faith'."28cralawrednad
WHEREFORE, the Petition is DENIED. The assailed July 29, 2011 Decision and January 10,
2012 Resolution of the Court of Appeals in CA-G.R. SP No. 110006 are AFFIRMED. The case is
ordered remanded with dispatch to the Regional Trial Court of Daet, Camarines Norte,
Branch 39, for continuation of proceedings.
SO ORDERED.
5. G.R. No. 171212 August 4, 2014
INDOPHIL TEXTILE MILLS, INC., Petitioner,
vs.
ENGR. SALVADOR ADVIENTO, Respondents.
DECISION
PERALTA, J.:
18
Before the Court is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court which seeks to review, reverse and set-aside the Decision1 of the Court of Appeals
(CA), dated May 30, 2005, and its Resolution2 dated January 10, 2006 in the case entitled
Jndophil Textile Mills, Inc. v. Hon. Rolando R. Velasco and Engr. Salvador Adviento, docketed
as CA-G.R. SP No. 83099.
The facts are not disputed.
Petitioner Indophil Textile Mills, Inc. is a domestic corporation engaged in the business of
manufacturing thread for weaving.3 On August 21, 1990, petitioner hired respondent Engr.
Salvador Adviento as Civil Engineer to maintain its facilities in Lambakin, Marilao, Bulacan.4
On August 7, 2002, respondent consulted a physician due to recurring weakness and
dizziness.5 Few days later, he was diagnosed with Chronic Poly Sinusitis, and thereafter, with
moderate, severe and persistent Allergic Rhinitis.6 Accordingly, respondent was advised by
his doctor to totally avoid house dust mite and textile dust as it will transmute into health
problems.7
Distressed, respondent filed a complaint against petitioner with the National Labor Relations
Commission (NLRC), San Fernando, Pampanga, for alleged illegal dismissal and for the
payment of backwages, separation pay, actual damages and attorneys fees. The said case,
docketed as NLRC Case No. RAB-III-05-5834-03, is still pending resolution with the NLRC at
the time the instant petition was filed.8
Subsequently, respondent filed another Complaint9 with the Regional Trial Court (RTC) of
Aparri, Cagayan, alleging that he contracted such occupational disease by reason of the
gross negligence of petitioner to provide him with a safe, healthy and workable environment.
In his Complaint, respondent alleged that as part of his job description, he conductsregular
maintenance check on petitioners facilities including its dye house area, which is very hot
and emits foul chemical odor with no adequate safety measures introduced by petitioner.10
According to respondent, the air washer dampers and all roof exhaust vests are blown into
open air, carrying dust thereto.11 Concerned, respondent recommended to management to
place roof insulation to minimize, if not, eradicate the health hazards attendant in the work
place.12 However, said recommendation was turned down by management due to high
cost.13 Respondent further suggested to petitioners management that the engineering
office be relocated because ofits dent prone location, such that even if the door of the office
is sealed, accumulated dust creeps in outside the office.14 This was further aggravated by
the installation of new filters fronting the office.15 However, no action was taken by
management.16 According to respondent, these healthhazards have been the persistent
complaints of most, if not all, workers of petitioner.17 Nevertheless, said complaints fell on
deaf ears as petitioner callously ignored the health problems of its workers and even tended
to be apathetic to their plight, including respondent.18

Respondent averred that, being the only breadwinner in the family, he made several
attempts to apply for a new job, but to his dismay and frustration, employers who knew ofhis
present health condition discriminated against him and turned down his application.19 By
reason thereof, respondent suffered intense moral suffering, mental anguish, serious anxiety
and wounded feelings, praying for the recovery of the following: (1) Five Million Pesos
(P5,000,000.00) asmoral damages; (2) Two Million Pesos (P2,000,000.00) as exemplary
damages; and (3) Seven Million Three Thousand and Eight Pesos (P7,003,008.00) as
compensatory damages.20 Claiming to be a pauper litigant, respondent was not required to
pay any filing fee.21
In reply, petitioner filed a Motion to Dismiss22 on the ground that: (1) the RTC has no
jurisdiction over the subject matter of the complaint because the same falls under the
original and exclusive jurisdiction of the Labor Arbiter (LA) under Article 217(a)(4) of the
Labor Code; and (2) there is another action pending with the Regional Arbitration Branch III
of the NLRC in San Fernando City, Pampanga, involving the same parties for the same cause.
On December 29, 2003, the RTC issued a Resolution23 denying the aforesaid Motion and
sustaining its jurisdiction over the instant case. It held that petitioners alleged failure to
provide its employees with a safe, healthy and workable environment is an act of
negligence, a case of quasi-delict. As such, it is not within the jurisdiction of the LA under
Article 217 of the Labor Code. On the matter of dismissal based on lis pendencia, the RTC
ruled that the complaint before the NLRC has a different cause of action which is for illegal
dismissal and prayer for backwages, actual damages, attorneys fees and separation pay
due to illegal dismissal while in the present case, the cause of action is for quasi-delict.24
The falloof the Resolution is quoted below:
WHEREFORE, finding the motion to dismiss to be without merit, the Court deniesthe motion
to dismiss.
SO ORDERED.25
On February 9, 2004, petitioner filed a motion for reconsideration thereto, which was
likewise denied in an Order issued on even date.
Expectedly, petitioner then filed a Petition for Certiorariwith the CA on the ground that the
RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in
upholding that it has jurisdiction over the subject matter of the complaint despite the broad
and clear terms of Article 217 of the Labor Code, as amended.26
After the submission by the parties of their respective Memoranda, the CA rendered a
Decision27 dated May 30, 2005 dismissing petitioners Petition for lack of merit, the
dispositive portion of which states:
19
WHEREFORE, premises considered, petition for certiorari is hereby DISMISSEDfor lack of
merit. SO ORDERED.28
From the aforesaid Decision, petitioner filed a Motion for Reconsideration which was
nevertheless denied for lack of merit in the CAs Resolution29 dated January 10, 2006.
Hence, petitioner interposed the instant petition upon the solitary ground that "THE
HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT
IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE HONORABLE SUPREME
COURT."30 Simply, the issue presented before us is whether or not the RTC has jurisdiction
over the subject matter of respondents complaint praying for moral damages,exemplary
damages, compensatory damages, anchored on petitioners alleged gross negligence in
failing to provide a safe and healthy working environment for respondent.
The delineation between the jurisdiction of regular courts and labor courts over cases
involving workers and their employers has always been a matter of dispute.31 It is up to the
Courts to lay the line after careful scrutiny of the factual milieu of each case. Here, we find
that jurisdiction rests on the regular courts.
In its attempt to overturn the assailed Decision and Resolution of the CA, petitioner argues
that respondentsclaim for damages is anchored on the alleged gross negligence of
petitioner as an employer to provide its employees, including herein respondent, with a safe,
healthy and workable environment; hence, it arose from an employer-employee
relationship.32 The fact of respondents employment withpetitioner as a civil engineer is a
necessary element of his cause ofaction because without the same, respondent cannot
claim to have a rightto a safe, healthy and workable environment.33 Thus, exclusive
jurisdiction over the same should be vested in the Labor Arbiter and the NLRC pursuant to
Article 217(a)(4) of the Labor Code of the Philippines (Labor Code), as amended.34
We are not convinced.
The jurisdiction of the LA and the NLRC is outlined in Article 217 of the Labor Code, as
amended by Section 9 of Republic Act (R.A.) No. 6715, 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 nonagricultural:
1. Unfair labor practice cases;
2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involvingwages, rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from employer-
employee relations;
5. Cases arising from any violation of Article 264 of this Code including questions involving
the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare 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.
x x x.35
While we have upheld the present trend to refer worker-employer controversies to labor
courts in light of the aforequoted provision, we have also recognized that not all claims
involving employees can be resolved solely by our labor courts, specifically when the law
provides otherwise.36 For this reason, we have formulated the "reasonable causal
connection rule," wherein if there is a reasonable causal connection between the claim
asserted and the employer-employee relations, then the case is within the jurisdiction of the
labor courts; and in the absence thereof, it is the regular courts that have jurisdiction.37
Such distinction is apt since 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.38
In fact, as early as Medina vs. Hon. Castro-Bartolome,39 in negating the jurisdiction of the
LA, although the parties involved were an employer and two employees, the Court succinctly
held that:
The pivotal question to Our mind iswhether or not the Labor Code has any relevance to the
reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion
concerning the statutes amending it and whether or not they have retroactive effect is
unnecessary.
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice.
Theirs is a simple action for damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is the Civil Code and not the Labor
Code. It results that the orders under revieware based on a wrong premise.40
20
Similarly, we ruled in the recent case of Portillo v. Rudolf Lietz, Inc.41 that not all disputes
between an employer and his employees fall within the jurisdiction of the labor tribunals
suchthat when the claim for damages is grounded on the "wanton failure and refusal"
without just cause of an employee to report for duty despite repeated notices served upon
him of the disapproval of his application for leave ofabsence, the same falls within the
purview of Civil Law, to wit:
As early as Singapore Airlines Limited v. Pao, we established that not all disputes between
an employer and his employee(s) fall within the jurisdiction of the labor tribunals. We
differentiated between abandonment per seand the manner and consequent effects of such
abandonment and ruled that the first, is a labor case, while the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy must be held to
belong to the civil Courts. While seemingly petitioner's claim for damages arises from
employer-employee relations, and the latest amendment to Article 217 of the Labor Code
under PD No. 1691 and BP Blg. 130 provides that all other claimsarising from employer-
employee relationship are cognizable by Labor Arbiters [citation omitted], in essence,
petitioner's claim for damages is grounded on the "wanton failure and refusal"without just
cause of private respondent Cruz to report for duty despite repeated notices served upon
him of the disapproval of his application for leave of absence without pay. This, coupled with
the further averment that Cruz "maliciously and with bad faith" violated the terms and
conditions of the conversion training course agreement to the damage of petitioner removes
the present controversy from the coverage of the Labor Code and brings it within the
purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per seby private respondent
Cruz of his jobas the latter was not required in the Complaint to report back to workbut
on the manner and consequent effects of such abandonmentof work translated in terms of
the damages which petitioner had to suffer. x x x.42
Indeed, jurisprudence has evolved the rule that claims for damages under Article 217(a)(4)
of the Labor Code, to be cognizable by the LA, must have a reasonable causal connection
withany of the claims provided for in that article.43 Only if there is such a connection with
the other claims can a claim for damages be considered as arising from employer-employee
relations.44
In the case at bench, we find that such connection is nil.
True, the maintenance of a safe and healthy workplace is ordinarily a subject of labor cases.
More, the acts complained of appear to constitute matters involving employee-employer
relations since respondent used to be the Civil Engineer of petitioner. However, it should be
stressed that respondents claim for damages is specifically grounded on petitioners gross
negligenceto provide a safe, healthy and workable environment for its employees a case of
quasi-delict. This is easily ascertained from a plain and cursory reading of the Complaint,45

which enumerates the acts and/or omissions of petitioner relative to the conditions in the
workplace, to wit:
1. Petitioners textile mills have excessive flying textile dust and waste in its operations and
no effort was exerted by petitioner to minimize or totally eradicate it;
2. Petitioner failed to provide adequate and sufficient dust suction facilities;
3. Textile machines are cleaned with air compressors aggravating the dusty work place;
4. Petitioner has no physician specializing in respiratoryrelated illness considering it is a
textile company;
5. Petitioner has no device to detectthe presence or density of dust which is airborne;
6. The chemical and color room are not equipped with proper safety chemical nose mask;
and
7. The power and boiler plant emit too much smoke with solid particles blown to the air from
the smoke stack of the power plant emitting a brown rust color which engulfs the entire
compound.46
In addition, respondent alleged that despite his earnest efforts to suggest to management to
place roof insulation to minimize, if not, eradicate the health hazards attendant in the
workplace, the same was not heeded.47
It is a basic tenet that jurisdiction over the subject matter is determined upon the allegations
made in the complaint, irrespective of whether or not the plaintiff is entitled to recover upon
the claim asserted therein, which is a matter resolved only after and as a result of a trial.48
Neither can jurisdiction of a court bemade to depend upon the defenses made by a
defendant in his answer or motion to dismiss.49 In this case, a perusal of the complaint
would reveal that the subject matter is one of claim for damages arising from quasi-delict,
which is within the ambit of the regular court's jurisdiction.
The pertinent provision of Article 2176 of the Civil Code which governs quasi-delictprovides
that: Whoever by act or omissioncauses damageto another, there being fault or negligence,
is obliged to pay for the damagedone. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called quasi-delict.50
Thus, to sustain a claim liability under quasi-delict, the following requisites must concur: (a)
damages suffered by the plaintiff; (b) fault or negligence of the defendant, or someother
person for whose acts he must respond; and (c) the connection of causeand effect between
the fault or negligence of the defendant and the damages incurred by the plaintiff.51
21
In the case at bar, respondent alleges that due to the continued and prolonged exposure to
textile dust seriously inimical to his health, he suffered work-contracted disease which is
now irreversible and incurable, and deprived him of job opportunities.52 Clearly, injury and
damages were allegedly suffered by respondent, an element of quasi-delict. Secondly, the
previous contract of employment between petitioner and respondent cannot be used to
counter the element of "no pre-existing contractual relation" since petitioners alleged gross
negligence in maintaining a hazardous work environment cannot be considered a mere
breach of such contract of employment, but falls squarely within the elements of quasi-
delictunder Article 2176 of the Civil Code since the negligence is direct, substantive and
independent.53 Hence, we ruled in Yusen Air and Sea Services Phils., Inc. v. Villamor54 that:
When, as here, the cause of action is based on a quasi-delictor tort, which has no reasonable
causal connection with any of the claims provided for in Article 217, jurisdiction over the
action is with the regular courts.55
It also bears stressing that respondent is not praying for any relief under the Labor Code of
the Philippines. He neither claims for reinstatement nor backwages or separation pay
resulting from an illegal termination. The cause of action herein pertains to the consequence
of petitioners omission which led to a work-related disease suffered by respondent, causing
harm or damage to his person. Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts.56
Our ruling in Portillo, is instructive, thus:
There is no causal connection between private respondents claim for damages and the
respondent employers claim for damages for the alleged "Goodwill Clause" violation.
Portillos claim for unpaid salaries did not have anything to do with her alleged violation of
the employment contract as, in fact, her separation from employmentis not "rooted" in the
alleged contractual violation. She resigned from her employment. She was not dismissed.
Portillos entitlementto the unpaid salaries is not even contested. Indeed, Lietz Inc.s
argument about legal compensation necessarily admits that it owesthe money claimed by
Portillo.57
Further, it cannot be gainsaid that the claim for damages occurred afterthe employer-
employee relationship of petitioner and respondent has ceased. Given that respondent no
longer demands for any relief under the Labor Code as well as the rules and regulations
pertinent thereto, Article 217(a)(4) of the Labor Code is inapplicable to the instant case, as
emphatically held in Portillo, to wit:
It is clear, therefore, that while Portillos claim for unpaid salaries is a money claim that
arises out ofor in connection with an employeremployee relationship, Lietz Inc.s claim
against Portillo for violation of the goodwill clause is a money claim based on an act done
after the cessation of the employment relationship. And, while the jurisdiction over Portillos

claim is vested in the labor arbiter, the jurisdiction over Lietz Inc.s claim rests on the regular
courts. Thus:
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties' contract of employment as redress for respondent's
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the
controversy belongs to the regular courts. More so must this be in the present case, what
with the reality that the stipulation refers to the post-employment relations of the parties.58
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 the LA and the NLRC.59
Guided by the aforequoted doctrines, we find no reason to reverse the findings of the
CA.1wphi1 The RTC has jurisdiction over the subject matter of respondent's complaint
praying for moral damages, exemplary damages, compensatory damages, anchored on
petitioner's alleged gross negligence in failing to provide a safe and healthy working
environment for respondent. WHEREFORE, the petition is DENIED. The Decision of the Court
of Appeals, dated May 30, 2005, and its Resolution dated January 10, 2006 in CA-G.R. SP No.
83099 are hereby AFFIRMED.
SO ORDERED.
22
6. G.R. No. 202961, February 04, 2015
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO
MATUNDAN, NORA MENDOZA, ET AL., Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION, SOLID MILLS, INC., AND/OR PHILIP ANG, Respondents.
DECISION
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the employees return
of its properties.
Petitioners are respondent Solid Mills, Inc.s (Solid Mills) employees.1 They are represented
by the National Federation of Labor Unions (NAFLU), their collective bargaining
agent.2chanroblesvirtuallawlibrary
As Solid Mills employees, petitioners and their families were allowed to occupy SMI Village,
a property owned by Solid Mills.3 According to Solid Mills, this was [o]ut of liberality and for
the convenience of its employees . . . [and] on the condition that the employees . . . would
vacate the premises anytime the Company deems fit.4chanroblesvirtuallawlibrary
In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills
would cease its operations due to serious business losses.5 NAFLU recognized Solid Mills
closure due to serious business losses in the memorandum of agreement dated September
1, 2003.6 The memorandum of agreement provided for Solid Mills grant of separation pay
less accountabilities, accrued sick leave benefits, vacation leave benefits, and 13th month
pay to the employees.7 Pertinent portions of the agreement
provide:chanRoblesvirtualLawlibrary
WHEREAS, the COMPANY has incurred substantial financial losses and is currently
experiencing further severe financial losses;chanrobleslaw
WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its
operations on October 10, 2003;chanrobleslaw
WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will be
dismissed from employment effective October 10, 2003;chanrobleslaw
In view thereof, the parties agree as follows:chanRoblesvirtualLawlibrary

That UNION acknowledges that the COMPANY is experiencing severe financial losses and as
a consequence of which, management is constrained to cease the companys operations.
The UNION acknowledges that under Article 283 of the Labor Code, separation pay is
granted to employees who are dismissed due to closures or cessation of operations NOT
DUE to serious business losses.
The UNION acknowledges that in view of the serious business losses the Company has been
experiencing as seen in their audited financial statements, employees ARE NOT granted
separation benefits under the law.
The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant financial
assistance less accountabilities to members of the Union based on length of service to be
computed as follows: (Italics in this paragraph supplied)
Number of days - 12.625 for every year of service
In view of the above, the members of the UNION will receive such financial assistance on an
equal monthly installments basis based on the following
schedule:chanRoblesvirtualLawlibrary
First Check due on January 5, 2004 and every 5th of the month thereafter until December 5,
2004.
The COMPANY commits to pay any accrued benefits the Union members are entitled to,
specifically those arising from sick and vacation leave benefits and 13th month pay, less
accountabilities based on the following schedule:chanRoblesvirtualLawlibrary
One Time Cash Payment to be distributed anywhere from. . . .
....
The foregoing agreement is entered into with full knowledge by the parties of their rights
under the law and they hereby bind themselves not to conduct any concerted action of
whatsoever kind, otherwise the grant of financial assistance as discussed above will be
withheld.8 (Emphasis in the original)
Solid Mills filed its Department of Labor and Employment termination report on September 2,
2003.9chanroblesvirtuallawlibrary
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI
Village.10chanroblesvirtuallawlibrary
23
Petitioners were no longer allowed to report for work by October 10, 2003.11 They were
required to sign a memorandum of agreement with release and quitclaim before their
vacation and sick leave benefits, 13th month pay, and separation pay would be released.12
Employees who signed the memorandum of agreement were considered to have agreed to
vacate SMI Village, and to the demolition of the constructed houses inside as condition for
the release of their termination benefits and separation pay.13 Petitioners refused to sign
the documents and demanded to be paid their benefits and separation
pay.14chanroblesvirtuallawlibrary
Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of
separation pay, accrued sick and vacation leaves, and 13th month pay.15 They argued that
their accrued benefits and separation pay should not be withheld because their payment is
based on company policy and practice.16 Moreover, the 13th month pay is based on law,
specifically, Presidential Decree No. 851.17 Their possession of Solid Mills property is not an
accountability that is subject to clearance procedures.18 They had already turned over to
Solid Mills their uniforms and equipment when Solid Mills ceased
operations.19chanroblesvirtuallawlibrary
On the other hand, Solid Mills argued that petitioners complaint was premature because
they had not vacated its property.20chanroblesvirtuallawlibrary
The Labor Arbiter ruled in favor of petitioners.21 According to the Labor Arbiter, Solid Mills
illegally withheld petitioners benefits and separation pay.22 Petitioners right to the
payment of their benefits and separation pay was vested by law and contract.23 The
memorandum of agreement dated September 1, 2003 stated no condition to the effect that
petitioners must vacate Solid Mills property before their benefits could be given to them.24
Petitioners possession should not be construed as petitioners accountabilities that must
be cleared first before the release of benefits.25 Their possession is not by virtue of any
employer-employee relationship.26 It is a civil issue, which is outside the jurisdiction of the
Labor Arbiter.27chanroblesvirtuallawlibrary
The dispositive portion of the Labor Arbiters decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID
MILLS, INC. and/or PHILIP ANG (President), in solido to pay the remaining 21
complainants:chanRoblesvirtualLawlibrary
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO
DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS, RENATO
ESTOLANO, REX S. DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA,
ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA MAHILOM, MARILOU LINGA,
RENATO LINGA their separation pay of 12.625 days pay per year of service, pro-rated 13th
month pay for 2003 and accrued vacation and sick leaves, plus 12% interest p.a. from date
 24

of filing of the lead case/judicial demand on 12/08/03 until actual payment and/or
finality;chanrobleslaw The National Labor Relations Commission ruled that because of petitioners failure to vacate
Solid Mills property, Solid Mills was justified in withholding their benefits and separation
2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received pay.35 Solid Mills granted the petitioners the privilege to occupy its property on account of
on 12/19/03 her accrued 13th month pay for 2003, accrued VL/SL total amount of petitioners employment.36 It had the prerogative to terminate such privilege.37 The
P15,435.16, likewise, complainant Jerry L. Sesma as he already received his accrued 13th termination of Solid Mills and petitioners employer-employee relationship made it
month pay for 2003, SL/VL in the total amount of P10,974.97, shall be paid only their incumbent upon petitioners to turn over the property to Solid
separation pay of 12.625 days pay per year of service but also with 12% interest p.a. from Mills.38chanroblesvirtuallawlibrary
date of filing of the lead case/judicial demand on 12/08/03 until actual payment and/or
finality, which computation as of date, amount to as shown in the attached computation Petitioners filed a motion for partial reconsideration on October 18, 2010,39 but this was
sheet. denied in the November 30, 2010 resolution.40chanroblesvirtuallawlibrary

3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie
Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and
Purificacion Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement,
whereas, that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA
PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE, for lack of interest and/or
failure to prosecute.
Petitioners, thus, filed a petition for certiorari41 before the Court of Appeals to assail the
National Labor Relations Commission decision of August 31, 2010 and resolution of
November 30, 2010.42chanroblesvirtuallawlibrary
On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners
petition,43 thus:chanRoblesvirtualLawlibrary

The Computation and Examination unit is directed to cause the computation of the award in WHEREFORE, the petition is hereby ordered DISMISSED.44
Pars. 2 and 3 above.28 (Emphasis in the original)
The Court of Appeals ruled that Solid Mills act of allowing its employees to make temporary
Solid Mills appealed to the National Labor Relations Commission.29 It prayed for, among dwellings in its property was a liberality on its part. It may be revoked any time at its
others, the dismissal of the complaints against it and the reversal of the Labor Arbiters discretion.45 As a consequence of Solid Mills closure and the resulting termination of
decision.30chanroblesvirtuallawlibrary petitioners, the employer-employee relationship between them ceased to exist. There was
no more reason for them to stay in Solid Mills property.46 Moreover, the memorandum of
The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiters agreement between Solid Mills and the union representing petitioners provided that Solid
dispositive portion, but reversed paragraphs 1 and 2. Thus:chanRoblesvirtualLawlibrary Mills payment of employees benefits should be less
accountabilities.47chanroblesvirtuallawlibrary
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is
AFFIRMED in so far as par. 3 thereof is concerned but modified in that paragraphs 1 and 2 On petitioners claim that there was no evidence that Teodora Mahilom already received her
thereof are REVERSED and SET ASIDE. Accordingly, the following complainants, namely: Emir retirement pay, the Court of Appeals ruled that her complaint filed before the Labor Arbiter
Milan, Ramon Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora Mendoza, did not include a claim for retirement pay. The issue was also raised for the first time on
Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S. Dimaf[e]lix, Maura Milan, Jessica appeal, which is not allowed.48 In any case, she already retired before Solid Mills ceased its
Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias and Jerry L. Sesmas operations.49chanroblesvirtuallawlibrary
monetary claims in the form of separation pay, accrued 13th month pay for 2003, accrued
vacation and sick leave pays are held in abeyance pending compliance of their The Court of Appeals agreed with the National Labor Relations Commissions deletion of
accountabilities to respondent company by turning over the subject lots they respectively interest since it found that Solid Mills act of withholding payment of benefits and separation
occupy at SMI Village Sucat Muntinlupa City, Metro Manila to herein respondent company.31 pay was proper. Petitioners terminal benefits and pay were withheld because of petitioners
failure to vacate Solid Mills property.50chanroblesvirtuallawlibrary
The National Labor Relations Commission noted that complainants Marilou Linga, Renato
Linga, Ismael Mata, and Carlito Damian were already paid their respective separation pays Finally, the Court of Appeals noted that Carlito Damian already received his separation pay
and benefits.32 Meanwhile, Teodora Mahilom already retired long before Solid Mills and benefits.51 Hence, he should no longer be awarded these
closure.33 She was already given her retirement benefits.34chanroblesvirtuallawlibrary claims.52chanroblesvirtuallawlibrary

In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners
motion for reconsideration.53chanroblesvirtuallawlibrary
Petitioners raise in this petition the following errors:chanRoblesvirtualLawlibrary
I issue.61
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT RULED THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE
HELD IN ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI
VILLAGE, SUCAT, MUNTINLUPA CITY.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT UPHELD THE RULING OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM
IMPOSED BY THE HONORABLE LABOR ARBITER HERNANDEZ ON THE AMOUNT DUE FROM
THE DATE OF FILING OF THE LEAD CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL
ACTUAL PAYMENT AND/OR FINALITY.
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT UPHELD THE RULING OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM
FOR PAYMENT OF RETIREMENT BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE
RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS MONETARY BENEFITS
FROM RESPONDENT SOLID MILLS.54
Petitioners argue that respondent Solid Mills and NAFLUs memorandum of agreement has
no provision stating that benefits shall be paid only upon return of the possession of
respondent Solid Mills property.55 It only provides that the benefits shall be less
accountabilities, which should not be interpreted to include such possession.56 The fact
that majority of NAFLUs members were not occupants of respondent Solid Mills property is
evidence that possession of the property was not contemplated in the agreement.57
Accountabilities should be interpreted to refer only to accountabilities that were incurred
by petitioners while they were performing their duties as employees at the worksite.58
Moreover, applicable laws, company practice, or policies do not provide that 13th month
25
pay, and sick and vacation leave pay benefits, may be withheld pending satisfaction of
liabilities by the employee.59chanroblesvirtuallawlibrary
Petitioners also point out that the National Labor Relations Commission and the Court of
Appeals have no jurisdiction to declare that petitioners act of withholding possession of
respondent Solid Mills property is illegal.60 The regular courts have jurisdiction over this
It is independent from the issue of payment of petitioners monetary
benefits.62chanroblesvirtuallawlibrary
For these reasons, and because, according to petitioners, the amount of monetary award is
no longer in question, petitioners are entitled to 12% interest per
annum.63chanroblesvirtuallawlibrary
Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims.
They insist that Teodora Mahilom did not receive her retirement benefits and that Carlito
Damian did not receive his separation benefits.64chanroblesvirtuallawlibrary
Respondents Solid Mills and Philip Ang, in their joint comment, argue that petitioners failure
to turn over respondent Solid Mills property constituted an unsatisfied accountability for
which reason petitioners benefits could rightfully be withheld.65 The term
accountability should be given its natural and ordinary meaning.66 Thus, it should be
interpreted as a state of being liable or responsible, or obligation.67 Petitioners
differentiation between accountabilities incurred while performing jobs at the worksite and
accountabilities incurred outside the worksite is baseless because the agreement with
NAFLU merely stated accountabilities, without qualification.68chanroblesvirtuallawlibrary
On the removal of the award of 12% interest per annum, respondents argue that such
removal was proper since respondent Solid Mills was justified in withholding the monetary
claims.69chanroblesvirtuallawlibrary
Respondents argue that Teodora Mahilom had no more cause of action for retirement
benefits claim.70 She had already retired more than a decade before Solid Mills closure.
She also already received her retirement benefits in 1991.71 Teodora Mahiloms claim was
also not included in the complaint filed before the Labor Arbiter. It was improper to raise this
claim for the first time on appeal. In any case, Teodora Mahiloms claim was asserted long
after the three-year prescriptive period provided in Article 291 of the Labor
Code.72chanroblesvirtuallawlibrary
Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to
receive monetary benefits again, which he, admittedly, already received from Solid
Mills.73chanroblesvirtuallawlibrary
I

The National Labor Relations
Commission may preliminarily
determine issues related to rights
arising from an employer-employee
relationship
The National Labor Relations Commission has jurisdiction to determine, preliminarily, the
parties rights over a property, when it is necessary to determine an issue related to rights
or claims arising from an employer-employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National
Labor Relations Commission, in its appellate jurisdiction, may determine issues involving
claims arising from employer-employee relations. Thus:chanRoblesvirtualLawlibrary
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. (1) 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 workers, whether agricultural or non-
agricultural:chanRoblesvirtualLawlibrary
Unfair labor practice cases;
Termination disputes;
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;
Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;
Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
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.
(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters. (Emphasis supplied)
Petitioners claim that they have the right to the immediate release of their benefits as
employees separated from respondent Solid Mills is a question arising from the employer-
employee relationship between the parties.
Claims arising from an employer-employee relationship are not limited to claims by an
employee. Employers may also have claims against the employee, which arise from the
same relationship.
26
In Baez v. Valdevilla,74 this court ruled that Article 217 of the Labor Code also applies to
employers claim for damages, which arises from or is connected with the labor issue.
Thus:chanRoblesvirtualLawlibrary
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees, we hold that by the designating
clause arising from the employer-employee relations Article 217 should apply with equal
force to the claim of an employer for actual damages against its dismissed employee, where
the basis for the claim arises from or is necessarily connected with the fact of termination,
and should be entered as a counterclaim in the illegal dismissal case.75
Baez was cited in Domondon v. National Labor Relations Commission.76 One of the issues
in Domondon is whether the Labor Arbiter has jurisdiction to decide an issue on the transfer
of ownership of a vehicle assigned to the employee. It was argued that only regular courts
have jurisdiction to decide the issue.77chanroblesvirtuallawlibrary
This court ruled that since the transfer of ownership of the vehicle to the employee was
connected to his separation from the employer and arose from the employer-employee
relationship of the parties, the employers claim fell within the Labor Arbiters
jurisdiction.78chanroblesvirtuallawlibrary
As a general rule, therefore, a claim only needs to be sufficiently connected to the labor
issue raised and must arise from an employer-employee relationship for the labor tribunals
to have jurisdiction.
In this case, respondent Solid Mills claims that its properties are in petitioners possession by
virtue of their status as its employees. Respondent Solid Mills allowed petitioners to use its
property as an act of liberality. Put in other words, it would not have allowed petitioners to
use its property had they not been its employees. The return of its properties in petitioners
possession by virtue of their status as employees is an issue that must be resolved to
determine whether benefits can be released immediately. The issue raised by the employer
is, therefore, connected to petitioners claim for benefits and is sufficiently intertwined with
the parties employer-employee relationship. Thus, it is properly within the labor tribunals
jurisdiction.
II
Institution of clearance procedures
has legal bases
Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. Clearance procedures are instituted
to ensure that the properties, real or personal, belonging to the employer but are in the

possession of the separated employee, are returned to the employer before the employees
departure.
As a general rule, employers are prohibited from withholding wages from employees. The
Labor Code provides:chanRoblesvirtualLawlibrary
Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to
give up any part of his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the workers consent.
The Labor Code also prohibits the elimination or diminution of benefits.
Thus:chanRoblesvirtualLawlibrary
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall
be construed to eliminate or in any way diminish supplements, or other employee benefits
being enjoyed at the time of promulgation of this Code.
However, our law supports the employers institution of clearance procedures before the
release of wages. As an exception to the general rule that wages may not be withheld and
benefits may not be diminished, the Labor Code provides:chanRoblesvirtualLawlibrary
Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except:chanRoblesvirtualLawlibrary
1. In cases where the worker is insured with his consent by the employer, and the deduction
is to recompense the employer for the amount paid by him as premium on the
insurance;chanrobleslaw
2. For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor and Employment. (Emphasis supplied)
The Civil Code provides that the employer is authorized to withhold wages for debts
due:chanRoblesvirtualLawlibrary
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
employer.cralawred
Debt in this case refers to any obligation due from the employee to the employer. It
includes any accountability that the employee may have to the employer. There is no
reason to limit its scope to uniforms and equipment, as petitioners would argue.
27
More importantly, respondent Solid Mills and NAFLU, the union representing petitioners,
agreed that the release of petitioners benefits shall be less accountabilities.
Accountability, in its ordinary sense, means obligation or debt. The ordinary meaning of
the term accountability does not limit the definition of accountability to those incurred in
the worksite. As long as the debt or obligation was incurred by virtue of the employer-
employee relationship, generally, it shall be included in the employees accountabilities that
are subject to clearance procedures.
It may be true that not all employees enjoyed the privilege of staying in respondent Solid
Mills property. However, this alone does not imply that this privilege when enjoyed was not
a result of the employer-employee relationship. Those who did avail of the privilege were
employees of respondent Solid Mills. Petitioners possession should, therefore, be included
in the term accountability.
Accountabilities of employees are personal. They need not be uniform among all employees
in order to be included in accountabilities incurred by virtue of an employer-employee
relationship.
Petitioners do not categorically deny respondent Solid Mills ownership of the property, and
they do not claim superior right to it. What can be gathered from the findings of the Labor
Arbiter, National Labor Relations Commission, and the Court of Appeals is that respondent
Solid Mills allowed the use of its property for the benefit of petitioners as its employees.
Petitioners were merely allowed to possess and use it out of respondent Solid Mills liberality.
The employer may, therefore, demand the property at will.79chanroblesvirtuallawlibrary
The return of the propertys possession became an obligation or liability on the part of the
employees when the employer-employee relationship ceased. Thus, respondent Solid Mills
has the right to withhold petitioners wages and benefits because of this existing debt or
liability. In Solas v. Power and Telephone Supply Phils., Inc., et al., this court recognized this
right of the employer when it ruled that the employee in that case was not constructively
dismissed.80 Thus:chanRoblesvirtualLawlibrary
There was valid reason for respondents withholding of petitioners salary for the month of
February 2000. Petitioner does not deny that he is indebted to his employer in the amount of
around P95,000.00. Respondents explained that petitioners salary for the period of February
1-15, 2000 was applied as partial payment for his debt and for withholding taxes on his
income; while for the period of February 15-28, 2000, petitioner was already on absence
without leave, hence, was not entitled to any pay.81
The law does not sanction a situation where employees who do not even assert any claim
over the employers property are allowed to take all the benefits out of their employment
 28

while they simultaneously withhold possession of their employers property for no rightful
reason.
Withholding of payment by the employer does not mean that the employer may renege on
its obligation to pay employees their wages, termination payments, and due benefits. The
employees benefits are also not being reduced. It is only subjected to the condition that the
employees return properties properly belonging to the employer. This is only consistent with
the equitable principle that no one shall be unjustly enriched or benefited at the expense of
another.82chanroblesvirtuallawlibrary
For these reasons, we cannot hold that petitioners are entitled to interest of their withheld
separation benefits. These benefits were properly withheld by respondent Solid Mills
because of their refusal to return its property.
III
Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical
power of those with capital when they are left to negotiate with their workers without the
standards and protection of law. In cases such as these, the collective bargaining unit of
workers are able to get more benefits and in exchange, the owners are able to continue with
the program of cutting their losses or wind down their operations due to serious business
losses. The company in this case did all that was required by law.
The preferential treatment given by our law to labor, however, is not a license for abuse.84
It is not a signal to commit acts of unfairness that will unreasonably infringe on the property
rights of the company. Both labor and employer have social utility, and the law is not so
biased that it does not find a middle ground to give each their due.
Clearly, in this case, it is for the workers to return their housing in exchange for the release
of their benefits. This is what they agreed upon. It is what is fair in the premises.
WHEREFORE, the petition is DENIED. The Court of Appeals decision is AFFIRMED.

Mahilom and Damian are not

entitled to the benefits claimed

Teodora Mahilom is not entitled to separation benefits.

Both the National Labor Relations Commission and the Court of Appeals found that Teodora
Mahilom already retired long before respondent Solid Mills closure. They found that she
already received her retirement benefits. We have no reason to disturb this finding. This
court is not a trier of facts. Findings of the National Labor Relations Commission, especially
when affirmed by the Court of Appeals, are binding upon this
court.83chanroblesvirtuallawlibrary

Moreover, Teodora Mahiloms claim for retirement benefits was not included in her complaint
filed before the Labor Arbiter. Hence, it may not be raised in the appeal.

Similarly, the National Labor Relations Commission and the Court of Appeals found that
Carlito Damian already received his terminal benefits. Hence, he may no longer claim
terminal benefits.

The fact that respondent Solid Mills has not yet demolished Carlito Damians house in SMI
Village is not evidence that he did not receive his benefits. Both the National Labor
Relations Commission and the Court of Appeals found that he executed an affidavit stating
that he already received the benefits.
7. G.R. Nos. 174941 February 1, 2012
Absent any showing that the National Labor Relations Commission and the Court of Appeals
misconstrued these facts, we will not reverse these findings. ANTONIO P. SALENGA and NATIONAL LABOR RELATIONS COMMISSION, Petitioners,
vs.

COURT OF APPEALS and CLARK DEVELOPMENT CORPORATION, Respondents.
DECISION
SERENO, J.:
The present Petition for Certiorari under Rule 65 assails the Decision1 of the Court of
Appeals (CA) promulgated on 13 September 2005, dismissing the Complaint for illegal
dismissal filed by petitioner Antonio F. Salenga against respondent Clark Development
Corporation (CDC). The dispositive portion of the assailed Decision states:
WHEREFORE, premises considered, the original and supplemental petitions are GRANTED.
The assailed resolutions of the National Labor Relations Commission dated September 10,
2003 and January 21, 2004 are ANNULLED and SET ASIDE. The complaint filed by Antonio B.
Salenga against Clark Development is DISMISSED. Consequently, Antonio B. Salenga is
ordered to restitute to Clark Development Corporation the amount of P3,222,400.00, which
was received by him as a consequence of the immediate execution of said resolutions, plus
interest thereon at the rate of 6% per annum from date of
such receipt until finality of this judgment, after which the interest shall be at the rate of
12% per annum until said amount is fully restituted.
SO ORDERED.2
The undisputed facts are as follows:
On 22 September 1998, President/Chief Executive Officer (CEO) Rufo Colayco issued an
Order informing petitioner that, pursuant to the decision of the board of directors of
respondent CDC, the position of head executive assistant the position held by petitioner
was declared redundant. Petitioner received a copy of the Order on the same day and
immediately went to see Colayco. The latter informed him that the Order had been issued as
part of the reorganization scheme approved by the board of directors. Thus, petitioners
employment was to be terminated thirty (30) days from notice of the Order.
On 17 September 1999, petitioner filed a Complaint for illegal dismissal with a claim for
reinstatement and payment of back wages, benefits, and moral and exemplary damages
against respondent CDC and Colayco. The Complaint was filed with the National Labor
Relations Commission-Regional Arbitration Branch (NLRC-RAB) III in San Fernando,
Pampanga. In defense, respondents, represented by the Office of the Government Corporate
Counsel (OGCC), alleged that the NLRC had no jurisdiction to entertain the case on the
ground that petitioner was a corporate officer and, thus, his dismissal was an intra-corporate
matter falling properly within the jurisdiction of the Securities and Exchange Commission
(SEC).
29
On 29 February 2000, labor arbiter (LA) Florentino R. Darlucio issued a Decision3 in favor of
petitioner Salenga. First, the LA held that the NLRC had jurisdiction over the Complaint,
considering that petitioner was not a corporate officer but a managerial employee. He held
the position of head executive assistant, categorized as a Job Level 12 position, not subject
to election or appointment by the board of directors.
Second, the LA pointed out that respondent CDC and Colayco failed to establish a valid
cause for the termination of petitioners employment. The evidence presented by
respondent CDC failed to show that the position of petitioner was superfluous as to be
classified "redundant." The LA further pointed out that respondent corporation had not
disputed the argument of petitioner Salenga that his position was that of a regular
employee. Moreover, the LA found that petitioner had not been accorded the right to due
process. Instead, the latter was dismissed without the benefit of an explanation of the
grounds for his termination, or an opportunity to be heard and to defend himself.
Finally, considering petitioners reputation and contribution as a government employee for
40 years, the LA awarded moral damages amounting to P2,000,000 and exemplary damages
of P500,000. The dispositive portion of the LAs Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring respondent Clark
Development Corporation and Rufo Colayco guilty of illegal dismissal and for which they are
ordered, as follows:
1. To reinstate complainant to his former or equivalent position without loss of seniority
rights and privileges;
2. To pay complainant his backwages reckoned from the date of his dismissal on September
22, 1998 until actual reinstatement or merely reinstatement in the payroll which as of this
date is in the amount of P722,400.00;
3. To pay complainant moral damages in the amount of P2,000,000.00; and,
4. To pay complainant exemplary damages in the amount of P500,000.00.
SO ORDERED.4
At the time the above Decision was rendered, respondent CDC was already under the
leadership of Sergio T. Naguiat. When he received the Decision on 10 March 2000, he
subsequently instructed Atty. Monina C. Pineda, manager of the Corporate and Legal
Services Department and concurrent corporate board secretary, not to appeal the Decision
and to so inform the OGCC.5
Despite these instructions, two separate appeals were filed before LA Darlucio on 20 March
2000. One appeal6 was from the OGCC on behalf of respondent CDC and Rufo Colayco. The

OGCC reiterated its allegation that petitioner was a corporate officer, and that the
termination of his employment was an intra-corporate matter. The Memorandum of Appeal
was verified and certified by Hilana Timbol-Roman, the executive vice president of
respondent CDC. The Memorandum was accompanied by a UCPB General Insurance Co., Inc.
supersedeas bond covering the amount due to petitioner as adjudged by LA Darlucio.
Timbol-Roman and OGCC lawyer Roy Christian Mallari also executed on 17 March 2000 a
Joint Affidavit of Declaration wherein they swore that they were the "respective authorized
representative and counsel" of respondent corporation. However, the Memorandum of
Appeal and the Joint Affidavit of Declaration were not accompanied by a board resolution
from respondents board of directors authorizing either Timbol-Roman or Atty. Mallari, or
both, to pursue the case or to file the appeal on behalf of respondent.
It is noteworthy that Naguiat, who was president/CEO of respondent CDC from 3 February
2000 to 5 July 2000, executed an Affidavit on 20 March 2002,7 wherein he stated that
without his knowledge, consent or approval, Timbol-Roman and Atty. Mallari filed the above-
mentioned appeal. He further alleged that their statements were false.
The second appeal, meanwhile, was filed by former CDC President/CEO Rufo Colayco.
Colayco alleged that petitioner was dismissed not on 22 September 1998, but twice on 9
March 1999 and 23 March 1999. The dismissal was allegedly approved by respondents CDC
board of directors pursuant to a new organizational structure. Colayco likewise stated that
he had posted a supersedeas bond the same bond taken out by Timbol-Roman issued by
the UCPB General Insurance Co. dated 17 March 2000 in order to secure the monetary
award, exclusive of moral and exemplary damages.
Petitioner thereafter opposed the two appeals on the grounds that both appellants,
respondent CDC as allegedly represented by Timbol-Roman and Atty. Mallari and Rufo
Colayco had failed to observe Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure; and
that appellants had not been authorized by respondents board of directors to represent the
corporation and, thus, they were not the "employer" whom the Rules referred to. Petitioner
also alleged that appellants failed to refute the findings of LA Darlucio in the previous
Decision.
In the meantime, while the appeal was pending, on 19 October 2000, respondents board
chairperson and concurrent President/CEO Rogelio L. Singson ordered the reinstatement of
petitioner to the latters former position as head executive assistant, effective 24 October
2000.8
On 28 May 2001, respondent CDCs new President/CEO Emmanuel Y. Angeles issued a
Memorandum, which offered all managers of respondent corporation an early
separation/redundancy program. Those who wished to avail themselves of the program were
to be given the equivalent of their 1.25-month basic salary for every year of service and
leave credits computed on the basis of the same 1.25-month equivalent of their basic
salary.9
30
In August 2001, respondent CDC offered another retirement plan granting higher benefits to
the managerial employees. Thus, on 12 September 2001, petitioner filed an application for
the early retirement program, which Angeles approved on 3 December 2001.
Meanwhile, in the proceedings of the NLRC, petitioner received on 12 September 2001 its 30
July 2001 Decision10 on the appeal filed by Timbol-Roman and Colayco. It is worthy to note
that the said Decision referred to the reports of reviewer arbiters Cristeta D. Tamayo and
Thelma M. Concepcion, who in turn found that petitioner Salenga was a corporate officer of
CDC. Nevertheless, the First Division of the NLRC upheld LA Darlucios ruling that petitioner
Salenga was indeed a regular employee. It also found that redundancy, as an authorized
cause for dismissal, has not been sufficiently proven, rendering the dismissal illegal.
However, the NLRC held that the award of exemplary and moral damages were
unsubstantiated. Moreover, it also dropped Colayco as a respondent to the case, since LA
Darlucio had failed to provide any ground on which to anchor the formers solidary liability.
Petitioner Salenga thereafter moved for a partial reconsideration of the above-mentioned
Decision. He sought the reinstatement of the award of exemplary and moral damages. He
likewise insisted that the NLRC should not have entertained the appeal on the following
grounds: (1) respondent CDC did not file an appeal and did not post the required cash or
surety bond; (2) both Timbol-Roman and Colayco were admittedly not real parties-in-
interest; (3) they were not the employer or the employers authorized representative and,
thus, had no right to appeal; and (4) both appeals had not been perfected for failure to post
the required cash or surety bond. In other words, petitioners theory revolved on the fact
that neither Timbol-Roman nor Colayco was authorized to represent the corporation, so the
corporation itself did not appeal LA Darlucios Decision. As a result, that Decision should be
considered as final and executory.
For its part, the OGCC also filed a Motion for Reconsideration11 of the NLRCs 30 July 2001
Decision insofar as the finding of illegal dismissal was concerned. It no longer questioned the
commissions finding that petitioner was a regular employee, but instead insisted that he
had been dismissed as a consequence of his redundant position. The motion, however, was
not verified by the duly authorized representative of respondent CDC.
On 5 December 2002, the NLRC denied petitioner Salengas Motion for Partial
Reconsideration and dismissed the Complaint. The dispositive portion of the Resolution12
reads as follows:
WHEREFORE, complainants partial motion for reconsideration is denied. As recommended
by Reviewer Arbiters Cristeta D. Tamayo in her August 2, 2000 report and Thelma M.
Concepcion in her November 25, 2002 report, the decision of Labor Arbiter Florentino R.
Darlucio dated 29 February 2000 is set aside.
The complaint below is dismissed for being without merit.

SO ORDERED.13
Meanwhile, pending the Motions for Reconsideration of the NLRCs 30 July 2001 Decision,
another issue arose with regard to the computation of the retirement benefits of petitioner.
Respondent CDC did not immediately give his requested retirement benefits, pending
clarification of the computation of these benefits. He claimed that the computation of his
retirement benefits should also include the forty (40) years he had been in government
service in accordance with Republic Act No. (R.A.) 8291, or the GSIS Act, and should not be
limited to the length of his employment with respondent corporation only, as the latter
insisted.
In a letter dated 14 March 2003, petitioner Salengas counsel wrote to the board of directors
of respondent to follow up the payment of the retirement benefits allegedly due to
petitioner.14
Pursuant to the NLRCs dismissal of the Complaint of petitioner Salenga, Angeles
subsequently denied the formers request for his retirement benefits, to wit:15
Please be informed that we cannot favorably grant your clients claim for retirement benefits
considering that Clark Development Corporation's dismissal of Mr. Antonio B. Salenga had
been upheld by the National Labor Relations Commission through a Resolution dated
December 5, 2002...
xxx xxx xxx
As it is, the said Resolution dismissed the Complaint filed by Mr. Salenga for being without
merit. Consequently, he is not entitled to receive any retirement pay from the corporation.
Meanwhile, petitioner Salenga filed a second Motion for Reconsideration of the 5 December
2002 Resolution of the NLRC, reiterating his claim that it should not have entertained the
imperfect appeal, absent a proper verification and certification against forum-shopping from
the duly authorized representative of respondent CDC. Without that authority, neither could
the OGCC act on behalf of the corporation.
The OGCC, meanwhile, resurrected its old defense that the NLRC had no jurisdiction over the
case, because petitioner Salenga was a corporate officer.
The parties underwent several hearings before the NLRC First Division. During these times,
petitioner Salenga demanded from the OGCC to present a board resolution authorizing it or
any other person to represent the corporation in the proceedings. This, the OGCC failed to
do.
31
After giving due course to the Motion for Reconsideration filed by petitioner Salenga, the
NLRC issued a Resolution16 on 10 September 2003, partially granting the motion. This time,
the First Division of the NLRC held that, absent a board resolution authorizing Timbol-Roman
to file the appeal on behalf of respondent CDC, the appeal was not perfected and was thus a
mere scrap of paper. In other words, the NLRC had no jurisdiction over the appeal filed
before it.
The NLRC further held that respondent CDC had failed to show that petitioner Salengas
dismissal was pursuant to a valid corporate reorganization or board resolution. It also
deemed respondent estopped from claiming that there was indeed a redundancy,
considering that petitioner Salenga had been reinstated to his position as head executive
assistant. While it granted the award of moral damages, it nevertheless denied exemplary
damages. Thus, the dispositive portion of its Decision reads:
WHEREFORE, premises considered, the complainants Motion for Reconsideration is
GRANTED and We set aside our Resolution of December 5, 2002. The Decision of the Labor
Arbiter dated February 29, 2000 is REINSTATED with the MODIFICATION that:
1.) Being a nominal party, respondent Rufo Colayco is declared to be not jointly and
severally liable with respondent Clark Development Corporation;
2.) Respondent Clark Development Corporation is ordered to pay the complainant his full
backwages and other monetary claims to which he is entitled under the decision of the
Labor Arbiter;
3.) Respondent CDC is likewise ordered to pay the complainant moral and exemplary
damages as provided under the Labor Arbiters Decision; and
4.) All other money claims are DENIED for lack of merit.
In the meantime, respondent CDC is ordered to pay the complainant his retirement benefits
without further delay.
SO ORDERED.17
On 3 October 2003, the OGCC filed a Motion for Reconsideration18 despite the absence of a
verification and the certification against forum shopping.
On 21 January 2004, the motion was denied by the NLRC for lack of merit.19
On 5 February 2004, the executive clerk of the NLRC First Division entered the judgment on
the foregoing case. Thereafter, on 9 February 2004, the NLRC forwarded the entire records
of the case to the NLRC-RAB III Office in San Fernando, Pampanga for appropriate action.

On 4 March 2004, petitioner Salenga filed a Motion for Issuance of Writ of Execution before
the NLRC-RAB III, Office of LA Henry D. Isorena. The OGCC opposed the motion on the
ground that it had filed with the CA a Petition for Certiorari seeking the reversal of the NLRC
Decision dated 30 July 2001 and the Resolutions dated 10 September 2003 and 21 January
2004, respectively. It is noteworthy that, again, there was no board resolution attached to
the Petition authorizing its filing.
Despite the pending Petition with the CA, LA Isorena issued a Writ of Execution enforcing the
10 September 2003 Resolution of the NLRC. On 1 April 2004, the LA issued an Order20 to
the manager of the Philippine National Bank, Clark Branch, Angeles City, Pampanga, to
immediately release in the name of NLRC-RAB III the amount of P3,222,400 representing
partial satisfaction of the judgment award, including the execution fee of P31,720.
Respondent CDC filed with the CA in February 2004 a Petition for Certiorari with a prayer for
the issuance of a temporary restraining order and/or a writ of preliminary injunction.
However, the Petition still lacked a board resolution from the board of directors of
respondent corporation authorizing its then President Angeles to verify and certify the
Petition on behalf of the board. It was only on 16 March 2004 that counsel for respondent
filed a Manifestation/Motion21 with an attached Secretarys Certificate containing the
boards Resolution No. 86, Series of 2001. The Resolution authorized Angeles to represent
respondent corporation in prosecuting, maintaining, or compromising any lawsuit in
connection with its business.
Meanwhile, in the proceedings before LA Isorena, both respondent CDCs legal department
and the OGCC on 6 April 2004 filed their respective Motions to Quash Writ of Execution.22
They both cited the failure to afford to respondent due process in the issuance of the writ.
They claimed that the pre-conference hearing on the execution of the judgment had not
pushed through. They also reiterated that the Petition for Certiorari dated 11 February 2004
was still pending with the CA.
Both motions were denied by LA Isorena for lack of factual and legal bases.
On 6 May 2004, respondent filed with LA Isorena another Motion to Quash Writ of Execution,
again reiterating the pending Petition with the CA.
This active exchange of pleadings and motions and the delay in the payment of his money
claims eventually led petitioner Salenga to file an Omnibus Motion23 before LA Isorena. In
his motion, he recomputed the amount due him representing back wages, other benefits or
allowances, legal interests and attorneys fees. He also prayed for the computation of his
retirement benefits plus interests in accordance with R.A. 829124 and R.A. 1616.25 He
insisted that since respondent CDC was a government-owned and -controlled corporation
(GOCC), his previous government service totalling 40 years must also be credited in the
computation of his retirement pay. Thus, he demanded the payment of the total amount of
P23,920,772.30, broken down as follows:
32
From the illegal dismissal suit: (In Philippine peso)
Recomputed award 3,758,786
Legal interest 5,089,342.58
Attorneys fees 1,196,052.80
Litigation expenses 250,000
Retirement pay
Retirement gratuity 6,987,944
Unused vacation and sick leave 1,440,328
Legal interest 4,050,544.96
Attorneys fees 1,147,781.90
On 11 May 2004, the CA issued a Resolution26 ordering petitioner Salenga to comment on
the Petition and holding in abeyance the issuance of a temporary restraining order.
The parties thereafter filed their respective pleadings.
On 19 July 2004, the CA temporarily restrained the NLRC from enforcing the Decision dated
29 February 2000 for a period of 60 days.27 After the lapse of the 60 days, LA Isorena issued
a Notice of Hearing/Conference scheduled for 1 October 2004 on petitioners Omnibus
Motion dated 7 May 2004.
Meanwhile, on 24 September 2004, the CA issued another Resolution,28 this time denying
the application for the issuance of a writ of preliminary injunction, after finding that the
requisites for the issuance of the writ had not been met.
Respondent CDC subsequently filed a Supplemental Petition29 with the CA, challenging the
computation petitioner Salenga made in his Omnibus Motion filed with the NLRC.
Respondent alleged that the examiner had erred in including the other years of government
service in the computation of retirement benefits. It claimed that, since respondent
corporation was created under the Corporation Code, petitioner Salenga was not covered by
civil service laws. Hence, his retirement benefits should only be limited to the number of
years he had been employed by respondent.
Subsequently, respondent CDC filed an Omnibus Motion30 to admit the Supplemental
Petition and to reconsider the CAs Resolution denying the issuance of a writ of preliminary
injunction. In the motion, respondent alleged that petitioner Salenga had been more than
sufficiently paid the amounts allegedly due him, including the award made by LA Darlucio.
On 12 March 2002, respondent CDC had issued a check amounting to P852,916.29,
representing petitioners retirement pay and terminal pay. Meanwhile, on 2 April 2004,
P3,254,120 representing the initial award was debited from the account of respondent CDC.
On 7 February 2005, respondent CDC filed a Motion31 once again asking the CA to issue a
writ of preliminary injunction in the light of a scheduled 14 February 2005 conference called
by LA Mariano Bactin, who had taken over the case from LA Isorena.

At the 14 February 2005 hearing, the parties failed to reach an amicable settlement and
were thus required to submit their relevant pleadings and documents in support of their
respective cases.
On 16 February 2005, the CA issued a Resolution32 admitting the Supplemental Petition filed
by respondent, but denying the prayer for the issuance of an injunctive writ.
Thereafter, on 8 March 2005, LA Bactin issued an Order33 resolving the Omnibus Motion
filed by petitioner Salenga for the recomputation of the monetary claims due him. In the
Order, LA Bactin denied petitioners Motion for the recomputation of the award of back
wages, benefits, allowances and privileges based on the 29 February 2000 Decision of LA
Darlucio. LA Bactin held that since the Decision had become final and executory, he no
longer had jurisdiction to amend or to alter the judgment.
Anent the second issue of the computation of retirement benefits, LA Bactin also denied the
claim of petitioner Salenga, considering that the latters retirement benefits had already
been paid. The LA, however, did not rule on whether petitioner was entitled to retirement
benefits, either under the Government Service Insurance System (GSIS) or under the Social
Security System (SSS), and held that this issue was beyond the expertise and jurisdiction of
a LA.
Petitioner Salenga thereafter appealed to the NLRC, which granted the appeal in a
Resolution34 dated 22 July 2005. First, it was asked to resolve the issue of the propriety of
having the Laguesma Law Office represent respondent CDC in the proceedings before the
LA. The said law firm entered its appearance as counsel for respondent during the pre-
execution conference/hearing on 1 October 2004. On this issue, the NLRC held that
respondent corporations legal department, which had previously been representing the
corporation, was not validly substituted by the Laguesma Law Office. In addition, the NLRC
held that respondent had failed to comply with Memorandum Circular No. 9, Series of 1998,
which strictly prohibits the hiring of lawyers of private law firms by GOCCs without the prior
written conformity and acquiescence of the Office of Solicitor General, as the case may be,
and the prior written concurrence of the Commission on Audit (COA). Thus, the NLRC held
that all actions and submissions undertaken by the Laguesma Law Office on behalf of
respondent were null and void.
The second issue raised before the NLRC was whether LA Bactin acted without jurisdiction in
annulling and setting aside the formers final and executory judgment contained in its 10
September 2003 Resolution, wherein it held that the appeal had not been perfected, absent
the necessary board resolution allowing or authorizing Timbol-Roman and Atty. Mallari to file
the appeal. On this issue, the NLRC stated:
The final and executory judgment in this case is clearly indicated in the dispositive portion of
Our Resolution promulgated on September 10, 2003 GRANTING complainants motion for
33
reconsideration, SETTING ASIDE Our Resolution of December 5, 2002, and REINSTATING the
Decision of the Labor Arbiter dated February 29, 2000 with the following modification[s]: (1)
declaring respondent Rufo Colayco not jointly and severally liable with respondent Clark
Development Corporation; (2) ordering respondent CDC to pay the complainant his full
backwages and other monetary claims to which he is entitled under the decision of the
Labor Arbiter; (3) ordering respondent CDC to pay complainant moral and exemplary
damages as provided under the Labor Arbiters Decision; and (4) ordering respondent CDC
to pay the complainant his retirement benefits without further delay. This was entered in the
Book of Entry of Judgment as final and executory effective as of February 2, 2004.
Implementing this final and executory judgment, Arbiter Isorena issued an Order dated May
24, 2004, DENYING respondents Motion to Quash the Writ of Execution dated March 22,
2004, correctly stating thusly:
"Let it be stressed that once a decision has become final and executory, it becomes the
ministerial duty of this Office to issue the corresponding writ of execution. The rationale
behind it is based on the fact that the winning party has suffered enough and it is the time
for him to enjoy the fruits of his labor with dispatch. The very purpose of the pre-execution
conference is to explore the possibility for the parties to arrive at an amicable settlement to
satisfy the judgment award speedily, not to delay or prolong its implementation."
Thus, when Arbiter Bactin, who took over from Arbiter Isorena upon the latters filing for
leave of absence due to poor health in January 2005, issued the appealed Order nullifying,
instead of implementing, the final and executory judgment of this Commission, the labor
arbiter a quo acted WITHOUT JURISDICTION.35
xxx xxx xxx
WHEREFORE, premises considered, the appeal of herein complainant is hereby GRANTED,
and We declare NULL AND VOID the appealed Order of March 8, 2005 and SET ASIDE said
Order; We direct the immediate issuance of the corresponding Alias Writ of Execution to
enforce the final and executory judgment of this Commission as contained in Our September
10, 2003 Resolution.
SO ORDERED.36
Unwilling to accept the above Resolution of the NLRC, the Laguesma Law Office filed a
Motion for Reconsideration dated 29 August 2005 with the NLRC. Again, the motion lacked
proper verification and certification against non-forum shopping.
In the meantime, the OGCC also filed with the CA a Motion for the Issuance of a Writ of
Preliminary Injunction dated 30 August 200537 against the NLRCs 22 July 2005 Resolution.
The OGCC alleged that the issues in the Resolution addressed monetary claims that were
raised by petitioner Salenga only in his Omnibus Motion dated 7 May 2004 or after the

issuance of the 10 September 2003 Decision of LA Darlucio. Thus, the OGCC insisted that
the NLRC had no jurisdiction over the issue, for the matter was still pending with the CA.
The OGCC likewise filed another Motion for Reconsideration38 dated 31 August 2005 with
the NLRC. The OGCC maintained that it was only acting in a collaborative manner with the
legal department of respondent CDC, for which the former remained the lead counsel. The
OGCC reiterated that, as the statutory counsel of GOCCs, it did not need authorization from
them to maintain a case, and thus, LA Bactin had jurisdiction over that case. Finally, it
insisted that petitioner Salenga was not covered by civil service laws on retirement, the CDC
having been created under the Corporation Code.
On 13 September 2005, the CA promulgated the assailed Decision. Relying heavily on the
reports of Reviewer Arbiters Cristeta D. Tamayo and Thelma M. Concepcion, it held that
petitioner Salenga was a corporate officer. Thus, the issue before the NLRC was an intra-
corporate dispute, which should have been lodged with the Securities and Exchange
Commission (SEC), which had jurisdiction over the case at the time the issue arose. The CA
likewise held that the NLRC committed grave abuse of discretion when it allowed and
granted petitioner Salengas second Motion for Reconsideration, which was a prohibited
pleading.
Petitioner subsequently filed a Motion for Reconsideration on 7 October 2005, alleging that
the CA committed grave abuse of discretion in reconsidering the findings of fact, which had
already been found to be conclusive against respondent; and in taking cognizance of the
latters Petition which had not been properly verified.
The CA, finding no merit in petitioners allegations, denied the motion in its 17 August 2006
Resolution.
On 4 September 2006, petitioner Salenga filed a Motion for Extension of Time to File a
Petition for Review on Certiorari under Rule 45, praying for an extension of fifteen (15) days
within which to file the Petition. The motion was granted through this Courts Resolution
dated 13 September 2006. The case was docketed as G.R. No. 174159.
On 25 September 2006, however, petitioner filed a Manifestation39 withdrawing the motion.
He manifested before us that he would instead file a Petition for Certiorari under Rule 65,
which was eventually docketed as G.R. No. 174941. On 7 July 2008, this Court, through a
Resolution, considered the Petition for Review in G.R. No. 174159 closed and terminated.
Petitioner raises the following issues for our resolution:
I.
The Court of Appeals acted without jurisdiction in reviving and re-litigating the factual issues
and matters of petitioners illegal dismissal and retirement benefits.
34
II.
The Court of Appeals had no jurisdiction to entertain the original Petition as a remedy for an
appeal that had actually not been filed, absent a board resolution allowing the appeal.
III.
The Court of Appeals acted with grave abuse of discretion when it did the following:
a. It failed to dismiss the original and supplemental Petitions despite the lack of a board
resolution authorizing the filing thereof.
b. It failed to dismiss the Petitions despite the absence of a proper verification and
certification against non-forum shopping.
c. It failed to dismiss the Petitions despite respondents failure to inform it of the pending
proceedings before the NLRC involving the same issues.
d. It failed to dismiss the Petitions on the ground of forum shopping.
e. It did not dismiss the Petition when respondent failed to attach to it certified true copies of
the assailed NLRC 30 July 2001 Decision; 10 September 2003 Resolution; 21 January 2004
Resolution; copies of material portions of the record as are referred to therein; and copies of
pleadings and documents relevant and pertinent thereto.
f. It did not act on respondents failure to serve on the Office of the Solicitor General a copy
of the pleadings, motions and manifestations the latter had filed before the Court of Appeals,
as well as copies of pertinent court resolutions and decisions, despite the NLRC being a party
to the present case.
g. It disregarded the findings of fact and conclusions of law arrived at by LA Darlucio,
subjecting them to a second analysis and evaluation and supplanting them with its own
findings.
h. It granted the Petition despite respondents failure to show that the NLRC committed
grave abuse of discretion in rendering the latters 30 July 2001 Decision, 10 September 2003
Resolution and 21 January 2004 Resolution.
i. It dismissed the complaint for illegal dismissal and ordered the restitution of the
P3,222,400 already awarded to petitioner, plus interest thereon.
In its defense, private respondent insists that the present Petition for Certiorari under Rule
65 is an improper remedy to question the Decision of the CA, and thus, the case should be

dismissed outright. Nevertheless, it reiterates that private petitioner was a corporate officer
whose employment was dependent on board action. As such, private petitioners
employment was an intra-corporate controversy cognizable by the SEC, not the NLRC.
Private respondent also asserts that it has persistently sought the reversal of LA Darlucios
Decision by referring to the letters sent to the OGCC, as well as Verification and Certificate
against forum-shopping. However, these documents were signed only during Angeles time
as private respondents president/CEO, and not of the former presidents. Moreover, private
respondent contends that private petitioner is not covered by civil service laws, thus, his
years in government service are not creditable for the purpose of determining the total
amount of retirement benefits due him. In relation to this, private respondent enumerates
the amounts already paid to private petitioner.
The Courts Ruling
The Petition has merit.
This Court deigns it proper to collapse the issues in this Petition to simplify the matters
raised in what appears to be a convoluted case. First, we need to determine whether the
NLRC and the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction, when they entertained respondents so-called appeal of the 29 February 2000
Decision rendered by LA Darlucio.
Second, because of the turn of events, a second issue the computation of retirement
benefits cropped up while the first case for illegal dismissal was still pending. Although the
second issue may be considered as separate and distinct from the illegal dismissal case, the
issue of the proper computation of the retirement benefits was nevertheless considered by
the relevant administrative bodies, adding more confusion to what should have been a
simple case to begin with.
The NLRC had no jurisdiction
to entertain the appeal filed by
Timbol-Roman and former
CDC CEO Colayco.
To recall, on 29 February 2000, LA Darlucio rendered a Decision in favor of petitioner, stating
as follows:
xxxComplainant cannot be considered as a corporate officer because at the time of his
termination, he was holding the position of Head Executive Assistant which is categorized as
a Job Level 12 position that is not subject to the election or appointment by the Board of
Directors. The approval of Board Resolution Nos. 200 and 214 by the Board of Directors in its
meeting held on February 11, 1998 and March 25, 1998 clearly refers to the New CDC Salary
Structure where the pay adjustment was based and not to complainants relief as Vice-
President, Joint Ventures and Special Projects. While it is true that his previous positions are
35
classified as Job Level 13 which are subject to board confirmation, the status of his
appointment was permanent in nature. In fact, he had undergone a six-month probationary
period before having acquired the permanency of his appointment. However, due to the
refusal of the board under then Chairman Victorino Basco to confirm his appointment, he
was demoted to the position of Head Executive Assistant. Thus, complainant correctly
postulated that he was not elected to his position and his tenure is not dependent upon the
whim of the boardxxx
xxx xxx xxx
Anent the second issue, this Office finds and so holds that respondents have miserably failed
to show or establish the valid cause in terminating the services of complainant.
xxx xxx xxx
In the case at bar, respondents failed to adduce any evidence showing that the position of
Head Executive Assistant is superfluous. In fact, they never disputed the argument
advanced by complainant that the position of Head Executive Assistant was classified as a
regular position in the Position Classification Study which is an essential component of the
Organizational Study that had been approved by the CDC board of directors in 1995 and still
remains intact as of the end of 1998. Likewise, studies made since 1994 by various
management consultancy groups have determined the need for the said position in the
Office of the President/CEO in relation to the vision, mission, plans, programs and overall
corporate goals and objectives of respondent CDC. There is no evidence on record to show
that the position of Head Executive Assistant was abolished by the Board of Directors in its
meeting held in the morning of September 22, 1998. The minutes of the meeting of the
board on said date, as well as its other three meetings held in the month of September 1998
(Annexes "B", "C", "D" and "E", Complainants Reply), clearly reveal that no abolition or
reorganization plan was discussed by the board. Hence, the ground of redundancy is merely
a device made by respondent Colayco in order to ease out the complainant from the
respondent corporation.
Moreover, the other ground for complainants dismissal is unclear and unknown to him as
respondent did not specify nor inform the complainant of the alleged recent
developmentsxxx
This Office is also of the view that complainant was not accorded his right to due process
prior to his termination. The law requires that the employer must furnish the worker sought
to be dismissed with two (2) written notices before termination may be validly effected: first,
a notice apprising the employee of the particular acts or omissions for which his dismissal is
sought and, second, a subsequent notice informing the employee of the decision to dismiss
him. In the case at bar, complainant was not apprised of the grounds of his termination. He
was not given the opportunity to be heard and defend himselfxxx40

The OGCC, representing respondent CDC and former CEO Colayco separately appealed from
the above Decision. Both alleged that they had filed the proper bond to cover the award
granted by LA Darlucio.
It is clear from the NLRC Rules of Procedure that appeals must be verified and certified
against forum-shopping by the parties-in-interest themselves. In the case at bar, the parties-
in-interest are petitioner Salenga, as the employee, and respondent Clark Development
Corporation as the employer.
A corporation can only exercise its powers and transact its business through its board of
directors and through its officers and agents when authorized by a board resolution or its
bylaws. The power of a corporation to sue and be sued is exercised by the board of directors.
The physical acts of the corporation, like the signing of documents, can be performed only
by natural persons duly authorized for the purpose by corporate bylaws or by a specific act
of the board. The purpose of verification is to secure an assurance that the allegations in the
pleading are true and correct and have been filed in good faith.41
Thus, we agree with petitioner that, absent the requisite board resolution, neither Timbol-
Roman nor Atty. Mallari, who signed the Memorandum of Appeal and Joint Affidavit of
Declaration allegedly on behalf of respondent corporation, may be considered as the
"appellant" and "employer" referred to by Rule VI, Sections 4 to 6 of the NLRC Rules of
Procedure, which state:
SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. - (a) The Appeal shall be filed within
the reglementary period as provided in Section 1 of this Rule; shall be verified by appellant
himself in accordance with Section 4, Rule 7 of the Rules of Court, with proof of payment of
the required appeal fee and the posting of a cash or surety bond as provided in Section 6 of
this Rule; shall be accompanied by memorandum of appeal in three (3) legibly typewritten
copies which shall state the grounds relied upon and the arguments in support thereof; the
relief prayed for; and a statement of the date when the appellant received the appealed
decision, resolution or order and a certificate of non-forum shopping with proof of service on
the other party of such appeal. A mere notice of appeal without complying with the other
requisites aforestated shall not stop the running of the period for perfecting an appeal.
(b) The appellee may file with the Regional Arbitration Branch or Regional Office where the
appeal was filed, his answer or reply to appellant's memorandum of appeal, not later than
ten (10) calendar days from receipt thereof. Failure on the part of the appellee who was
properly furnished with a copy of the appeal to file his answer or reply within the said period
may be construed as a waiver on his part to file the same.
(c) Subject to the provisions of Article 218, once the appeal is perfected in accordance with
these Rules, the Commission shall limit itself to reviewing and deciding specific issues that
were elevated on appeal.
36
SECTION 5. APPEAL FEE. -The appellant shall pay an appeal fee of one hundred fifty pesos
(P150.00) to the Regional Arbitration Branch or Regional Office, and the official receipt of
such payment shall be attached to the records of the case.
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 cash or surety bond. The appeal bond shall either be in cash or surety in an
amount equivalent to the monetary award, exclusive of damages and attorneys fees.
In case of surety bond, the same shall be issued by a reputable bonding company duly
accredited by the Commission or the Supreme Court, and shall be accompanied by:
(a) a joint declaration under oath by the employer, his counsel, and the bonding company,
attesting that the bond posted is genuine, and shall be in effect until final disposition of the
case.
(b) a copy of the indemnity agreement between the employer-appellant and bonding
company; and
(c) a copy of security deposit or collateral securing the bond.
A certified true copy of the bond shall be furnished by the appellant to the appellee who
shall verify the regularity and genuineness thereof and immediately report to the
Commission any irregularity.
Upon verification by the Commission that the bond is irregular or not genuine, the
Commission shall cause the immediate dismissal of the appeal.
No motion to reduce bond shall be entertained except on meritorious grounds and upon the
posting of a bond in a reasonable amount in relation to the monetary award.
The filing of the motion to reduce bond without compliance with the requisites in the
preceding paragraph shall not stop the running of the period to perfect an appeal. (Emphasis
supplied)
The OGCC failed to produce any valid authorization from the board of directors despite
petitioner Salengas repeated demands. It had been given more than enough opportunity
and time to produce the appropriate board resolution, and yet it failed to do so. In fact,
many of its pleadings, representations, and submissions lacked board authorization.
We cannot agree with the OGCCs attempt to downplay this procedural flaw by claiming that,
as the statutorily assigned counsel for GOCCs, it does not need such authorization. In
Constantino-David v. Pangandaman-Gania,42 we exhaustively explained why it was
necessary for government agencies or instrumentalities to execute the verification and the

certification against forum-shopping through their duly authorized representatives. We ruled
thereon as follows:
But the rule is different where the OSG is acting as counsel of record for a government
agency. For in such a case it becomes necessary to determine whether the petitioning
government body has authorized the filing of the petition and is espousing the same stand
propounded by the OSG. Verily, it is not improbable for government agencies to adopt a
stand different from the position of the OSG since they weigh not just legal considerations
but policy repercussions as well. They have their respective mandates for which they are to
be held accountable, and the prerogative to determine whether further resort to a higher
court is desirable and indispensable under the circumstances.
The verification of a pleading, if signed by the proper officials of the client agency itself,
would fittingly serve the purpose of attesting that the allegations in the pleading are true
and correct and not the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. Of course, the OSG may opt to file its own petition as a
"People's Tribune" but the representation would not be for a client office but for its own
perceived best interest of the State.
The case of Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., is not also a
precedent that may be invoked at all times to allow the OSG to sign the certificate of non-
forum shopping in place of the real party-in-interest. The ruling therein mentions merely that
the certification of non-forum shopping executed by the OSG constitutes substantial
compliance with the rule since "the OSG is the only lawyer for the petitioner, which is a
government agency mandated under Section 35, Chapter 12, Title III, Book IV, of the 1987
Administrative Code (Reiterated under Memorandum Circular No. 152 dated May 17, 1992)
to be represented only by the Solicitor General."
By its very nature, "substantial compliance" is actually inadequate observance of the
requirements of a rule or regulation which are waived under equitable circumstances to
facilitate the administration of justice there being no damage or injury caused by such
flawed compliance. This concept is expressed in the statement "the rigidity of a previous
doctrine was thus subjected to an inroad under the concept of substantial compliance." In
every inquiry on whether to accept "substantial compliance," the focus is always on the
presence of equitable conditions to administer justice effectively and efficiently without
damage or injury to the spirit of the legal obligation.
xxx xxx xxx
The fact that the OSG under the 1987 Administrative Code is the only lawyer for a
government agency wanting to file a petition, or complaint for that matter, does not operate
per se to vest the OSG with the authority to execute in its name the certificate of non-forum
shopping for a client office. For, in many instances, client agencies of the OSG have legal
departments which at times inadvertently take legal matters requiring court representation
37
into their own hands without the intervention of the OSG. Consequently, the OSG would
have no personal knowledge of the history of a particular case so as to adequately execute
the certificate of non-forum shopping; and even if the OSG does have the relevant
information, the courts on the other hand would have no way of ascertaining the accuracy of
the OSG's assertion without precise references in the record of the case. Thus, unless
equitable circumstances which are manifest from the record of a case prevail, it becomes
necessary for the concerned government agency or its authorized representatives to certify
for non-forum shopping if only to be sure that no other similar case or incident is pending
before any other court.
We recognize the occasions when the OSG has difficulty in securing the attention and
signatures of officials in charge of government offices for the verification and certificate of
non-forum shopping of an initiatory pleading. This predicament is especially true where the
period for filing such pleading is non-extendible or can no longer be further extended for
reasons of public interest such as in applications for the writ of habeas corpus, in election
cases or where sensitive issues are involved. This quandary is more pronounced where
public officials have stations outside Metro Manila.
But this difficult fact of life within the OSG, equitable as it may seem, does not excuse it from
wantonly executing by itself the verification and certificate of non-forum shopping. If the
OSG is compelled by circumstances to verify and certify the pleading in behalf of a client
agency, the OSG should at least endeavor to inform the courts of its reasons for doing so,
beyond instinctively citing City Warden of the Manila City Jail v. Estrella and Commissioner of
Internal Revenue v. S.C. Johnson and Son, Inc.
Henceforth, to be able to verify and certify an initiatory pleading for non-forum shopping
when acting as counsel of record for a client agency, the OSG must (a) allege under oath the
circumstances that make signatures of the concerned officials impossible to obtain within
the period for filing the initiatory pleading; (b) append to the petition or complaint such
authentic document to prove that the party-petitioner or complainant authorized the filing of
the petition or complaint and understood and adopted the allegations set forth therein, and
an affirmation that no action or claim involving the same issues has been filed or
commenced in any court, tribunal or quasi-judicial agency; and, (c) undertake to inform the
court promptly and reasonably of any change in the stance of the client agency.
Anent the document that may be annexed to a petition or complaint under letter (b) hereof,
the letter-endorsement of the client agency to the OSG, or other correspondence to prove
that the subject-matter of the initiatory pleading had been previously discussed between the
OSG and its client, is satisfactory evidence of the facts under letter (b) above. In this
exceptional situation where the OSG signs the verification and certificate of non-forum
shopping, the court reserves the authority to determine the sufficiency of the OSG's action
as measured by the equitable considerations discussed herein. (Emphasis ours, italics
provided)

The ruling cited above may have pertained only to the Office of the Solicitor Generals
representation of government agencies and instrumentalities, but we see no reason why this
doctrine cannot be applied to the case at bar insofar as the OGCC is concerned.
While in previous decisions we have excused transgressions of these rules, it has always
been in the context of upholding justice and fairness under exceptional circumstances. In
this case, though, respondent failed to provide any iota of rhyme or reason to compel us to
relax these requirements. Instead, what is clear to us is that the so-called appeal was done
against the instructions of then President/CEO Naguiat not to file an appeal. Timbol-Roman,
who signed the Verification and the Certification against forum-shopping, was not even an
authorized representative of the corporation. The OGCC was equally remiss in its duty. It
ought to have advised respondent corporation, the proper procedure for pursuing an appeal.
Instead, it maintained the appeal and failed to present any valid authorization from
respondent corporation even after petitioner had questioned OGCCs authority all
throughout the proceedings. Thus, it is evident that the appeal was made in bad faith.
The unauthorized and overzealous acts of officials of respondent CDC and the OGCC have
led to a waste of the governments time and resources. More alarmingly, they have
contributed to the injustice done to petitioner Salenga. By taking matters into their own
hands, these officials let the case drag on for years, depriving him of the enjoyment of
property rightfully his. What should have been a simple case of illegal dismissal became an
endless stream of motions and pleadings.
Time and again, we have said that the perfection of an appeal within the period prescribed
by law is jurisdictional, and the lapse of the appeal period deprives the courts of jurisdiction
to alter the final judgment.43 Thus, there is no other recourse but to respect the findings
and ruling of the labor arbiter. Clearly, therefore, the CA committed grave abuse of
discretion in entertaining the Petition filed before it after the NLRC had dismissed the case
based on lack of jurisdiction. The assailed CA Decision did not even resolve petitioner
Salengas consistent and persistent claim that the NLRC should not have taken cognizance
of the appeal in the first place, absent a board resolution. Thus, LA Darlucios Decision with
respect to the liability of the corporation still stands.
However, we note from that Decision that Rufo Colayco was made solidarily liable with
respondent corporation. Colayco thereafter filed his separate appeal. As to him, the NLRC
correctly held in its 30 July 2001 Decision that he may not be held solidarily responsible to
petitioner. As a result, it dropped him as respondent. Notably, in the case at bar, petitioner
does not question that ruling.
Based on the foregoing, all other subsequent proceedings regarding the issue of petitioners
dismissal are null and void for having been conducted without jurisdiction. Thus, it is no
longer incumbent upon us to rule on the other errors assigned in the matter of petitioner
Salengas dismissal.
38
CDC is not under the civil service laws on retirement.
While the case was still persistently being pursued by the OGCC, a new issue arose when
petitioner Salenga reached retirement age: whether his retirement benefits should be
computed according to civil service laws.
To recall, the issue of how to compute the retirement benefits of petitioner was raised in his
Omnibus Motion dated 7 May 2004 filed before the NLRC after it had reinstated LA Darlucios
original Decision. The issue was not covered by petitioners Complaint for illegal dismissal,
but was a different issue altogether and should have been properly addressed in a separate
Complaint. We cannot fault petitioner, though, for raising the issue while the case was still
pending with the NLRC. If it were not for the "appeal" undertaken by Timbol-Roman and the
OGCC through Atty. Mallari, the issue would have taken its proper course and would have
been raised in a more appropriate time and manner. Thus, we deem it proper to resolve the
matter at hand to put it to rest after a decade of litigation.
Petitioner Salenga contends that respondent CDC is covered by the GSIS Law. Thus, he says,
the computation of his retirement benefits should include all the years of actual government
service, starting from the original appointment forty (40) years ago up to his retirement.
Respondent CDC owes its existence to Executive Order No. 80 issued by then President Fidel
V. Ramos. It was meant to be the implementing and operating arm of the Bases Conversion
and Development Authority (BCDA) tasked to manage the Clark Special Economic Zone
(CSEZ). Expressly, respondent was formed in accordance with Philippine corporation laws
and existing rules and regulations promulgated by the SEC pursuant to Section 16 of
Republic Act (R.A.) 7227.44 CDC, a government-owned or -controlled corporation without an
original charter, was incorporated under the Corporation Code. Pursuant to Article IX-B, Sec.
2(1), the civil service embraces only those government-owned or -controlled corporations
with original charter. As such, respondent CDC and its employees are covered by the Labor
Code and not by the Civil Service Law, consistent with our ruling in NASECO v. NLRC,45 in
which we established this distinction. Thus, in Gamogamo v. PNOC Shipping and Transport
Corp.,46 we held:
Retirement results from a voluntary agreement between the employer and the employee
whereby the latter after reaching a certain age agrees to sever his employment with the
former.
Since the retirement pay solely comes from Respondent's funds, it is but natural that
Respondent shall disregard petitioner's length of service in another company for the
computation of his retirement benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979. Ordinarily, his
creditable service shall be reckoned from such date. However, since Respondent took over
the shipping business of LUSTEVECO and agreed to assume without interruption all the
 39

service credits of petitioner with LUSTEVECO, petitioner's creditable service must start from
9 November 1977 when he started working with LUSTEVECO until his day of retirement on 1
April 1995. Thus, petitioner's creditable service is 17.3333 years.

We cannot uphold petitioner's contention that his fourteen years of service with the DOH
should be considered because his last two employers were government-owned and
controlled corporations, and fall under the Civil Service Law. Article IX(B), Section 2
paragraph 1 of the 1987 Constitution states

Sec. 2. (1)The civil service embraces all branches, subdivisions, instrumentalities, and 8. G.R. No. 168612 December 10, 2014
agencies of the Government, including government-owned or controlled corporations with
original charters. PHILIPPINE ELECTRIC CORPORATION (PHILEC), Petitioner,
vs.
It is not at all disputed that while Respondent and LUSTEVECO are government-owned and COURT OF APPEALS, NATIONAL CONCILIATION AND MEDIATION BOARD (NCMB),
controlled corporations, they have no original charters; hence they are not under the Civil Department of Labor and Employment, RAMON T. JIMENEZ, in his capacity as
Service Law. In Philippine National Oil Company-Energy Development Corporation v. National Voluntary Arbitrator, PHILEC WORKERS' UNION (PWU), ELEODORO V. LIPIO, and
Labor Relations Commission, we ruled: EMERLITO C. IGNACIO, Respondents.

xxx "Thus under the present state of the law, the test in determining whether a government-
DECISION
owned or controlled corporation is subject to the Civil Service Law are [sic] the manner of its
creation, such that government corporations created by special charter(s) are subject to its
provisions while those incorporated under the General Corporation Law are not within its LEONEN, J.:
coverage." (Emphasis supplied)
An appeal to reverse or modify a Voluntary Arbitrator's award or decision must be filed
Hence, petitioner Salenga is entitled to receive only his retirement benefits based only on before the Court of Appeals within 10 calendar days from receipt of the award or decision.
the number of years he was employed with the corporation under the conditions provided
under its retirement plan, as well as other benefits given to him by existing laws.1wphi1 This is a petition1 for review on certiorari of the Court of Appeals decision 2 dated May 25,
2004, dismissing the Philippine Electric Corporations petition for certiorari for lack of merit.
WHEREFORE, in view of the foregoing, the Petition in G.R. No. 174941 is partially GRANTED. Philippine Electric Corporation (PHILEC) is a domestic corporation "engaged in the
The Decision of LA Darlucio is REINSTATED insofar as respondent corporations liability is manufacture and repairs of high voltage transformers." 3 Among its rank-and-file employees
concerned. Considering that petitioner did not maintain the action against Rufo Colayco, the were Eleodoro V. Lipio (Lipio) and Emerlito C. Ignacio, Sr. (Ignacio, Sr.), former members of
latter is not solidarily liable with respondent Clark Development Corporation. the PHILEC Workers Union (PWU). 4 PWU is a legitimate labor organization and the exclusive
bargaining representative of PHILECs rank-and-file employees. 5
The case is REMANDED to the labor arbiter for the computation of petitioners retirement
benefits in accordance with the Social Security Act of 1997 otherwise known as Republic Act From June 1, 1989 to May 31, 1997, PHILEC and its rank-and-file employees were governed
No. 8282, deducting therefrom the sums already paid by respondent CDC. If any, the by collective bargaining agreements providing for the following step increases in an
remaining amount shall be subject to the legal interest of 6% per annum from the filing date employees basic salary in case of promotion:6
of petitioners Omnibus Motion on 11 May 2004 up to the time this judgment becomes final
and executory. Henceforth, the rate of legal interest shall be 12% until the satisfaction of
Rank-and-File (PWU)
judgment. Pay
Grade June 1, 1989 to June 1, 1992 to June 1, 1994 to
May 31, 1992 May 31, 1994 May 31, 1997
SO ORDERED.
I II 50 60 65
 40

II III 60 70 78 August 25, 1997.

III IV 70 80 95 You will be trained as a Foreman I,and shall receive the following training allowance until you
IV V 80 110 120 have completed the training/observation period which shall not exceed four (4) months.

V- VI 100 140 150

First Month ----- 255.00
VI VII 120 170 195
Second month ----- 605.00
VII VIII 170 230 255
Third month ----- 1,070.00
VIII IX 220 290 340
Fourth month ----- 1,070.00
IX X 260 350 455

Please be guided accordingly. 14

On August 18, 1997 and with the previous collective bargaining agreements already expired,
PHILEC selected Lipio for promotion from Machinist under Pay Grade VIII 7 to Foreman I under
On September 17, 1997, PHILEC and PWU entered into a new collective bargaining
Pay Grade B.8 PHILEC served Lipio a memorandum, 9 instructing him to undergo training for
agreement, effective retroactively on June 1, 1997 and expiring on May 31, 1999. 15 Under
the position of Foreman I beginning on August 25, 1997. PHILEC undertook to pay Lipio
Article X, Section 4 of the June 1, 1997 collective bargaining agreement, a rank-and-file
training allowance as provided in the memorandum:
employee promoted shall be entitled to the following step increases in his or her basic
salary:16
This will confirm your selection and that you will undergo training for the position of Foreman
I (PG B) of the Tank Finishing Section, Distribution Transformer Manufacturing and Repair
Section 4. STEP INCREASES. [Philippine Electric Corporation] shall adopt the following step
effective August 25, 1997.
increases on the basic salary in case of promotion effective June 1, 1997. Such increases
shall be based on the scale below or upon the minimum of the new pay grade to which the
You will be trained as a Foreman I,and shall receive the following training allowance until you employee is promoted, whichever is higher:
have completed the training/observation period which shall not exceed four (4) months.

Pay Grade Step Increase

First Month ----- 350.00 I - II P80.00
II - III P105.00
Second month ----- 815.00
III - IV P136.00
Third month ----- 815.00 IV - V P175.00
V - VI P224.00
Fourth month ----- 815.00
VI - VII P285.00
VII - VIII P361.00
Please be guided accordingly. 10 VIII - IX P456.00
IX - X P575.00
Ignacio, Sr., then DT-Assembler with Pay Grade VII, 11 was likewise selected for training for the To be promoted, a rank-and-file employee shall undergo training or observation and shall
position of Foreman I.12 On August 21, 1997, PHILEC served Ignacio, Sr. a receive training allowance as provided in Article IX, Section 1(f) of the June 1, 1997 collective
memorandum,13 instructing him to undergo training with the following schedule of bargaining agreement:17
allowance:
Section 1. JOB POSTING AND BIDDING:
This will confirm your selection and that you will undergo training for the position of Foreman
I (PG B) of the Assembly Section, Distribution Transformer Manufacturing and Repair ....
effective
 41

(f) Allowance for employees under Training or Observation shall be on a graduated basis as Machinist I, Lipios position before he underwent training for Foreman I, fell under Pay Grade
follows: VIII, while Foreman I fell under Pay Grade X. Following the schedule under Article X, Section
4 of the June 1, 1997 collective bargaining agreement and the formula under Article IX,
For the first month of training, the allowance should be equivalent to one step increase of Section 1(f), Lipio should be paid training allowance equal to the step increase for pay grade
the next higher grade. Every month thereafter the corresponding increase shall be bracket VIII-IX for the first month of training. For the succeeding months, Lipio should be
equivalent to the next higher grade until the allowance for the grade applied for is attained. paid an allowance equal to the step increase for pay grade bracket VIII-IX plus the step
increase for pay grade bracket IX-X, thus:25
As an example, if a Grade I employee qualifies for a Grade III position, he will receive the
training allowance for Grade I to Grade II for the first month. On the second month, he will First Month ----- P456.00
receive the training allowance for Grade I to Grade II plus the allowance for Grade II to Grade
III. He will then continue to receive this amount until he finishes his training or observation Second month ----- P1,031.00
period.18 Third month ----- P1,031.00

Fourth month ----- P1,031.00.

Claiming that the schedule of training allowance stated in the memoranda served on Lipio
and Ignacio,Sr. did not conform to Article X, Section 4 of the June 1, 1997 collective
bargaining agreement, PWU submitted the grievance to the grievance machinery. 19
PWU and PHILEC failed to amicably settle their grievance. Thus, on December 21, 1998, the
parties filed a submission agreement20 with the National Conciliation and Mediation Board,
submitting the following issues to voluntary arbitration:
I
With respect to Ignacio, Sr., he was holding the position of DTAs sembler under Pay Grade VII
when hewas selected to train for the position of Foreman I under Pay Grade X. Thus, for his
first month of training, Ignacio, Sr. should be paid training allowance equal to the step
increase under pay grade bracket VII-VIII. For the second month, he should be paid an
allowance equal to the step increase under pay grade bracket VIIVIII plus the step increase
under pay grade bracket VIII-IX. For the third and fourth months, Ignacio, Sr. should receive
an allowance equal to the amount he received for the second month plus the amount equal
to the step increase under pay grade bracket IX-X, thus: 26

WHETHER OR NOT PHILEC VIOLATED SECTION 4 (Step Increases) ARTICLE X (Wage and
Position Standardization) OF THE EXISTING COLLECTIVE BARGAINING AGREEMENT (CBA) IN First Month ----- P361.00
IMPLEMENTING THE STEP INCREASES RELATIVE TO THE PROMOTION OF INDIVIDUAL Second month ----- P817.00
COMPLAINANTS.
Third month ----- P1,392.00
II Fourth month ----- P1,392.00.

WHETHER OR NOT PHILECs MANNER OF IMPLEMENTING THE STEP INCREASES IN
CONNECTION WITH THE PROMOTION OF INDIVIDUAL COMPLAINANTS IN RELATION TO THE
PROVISIONS OF SECTION 4, ARTICLE X OF THE CBA CONSTITUTES UNFAIR LABOR
PRACTICE.21
In their submission agreement, PWU and PHILEC designated Hon. Ramon T. Jimenez as
Voluntary Arbitrator (Voluntary Arbitrator Jimenez).22
Voluntary Arbitrator Jimenez, in the order 23 dated January 4, 1999, directed the parties to file
their respective position papers.
In its position paper,24 PWU maintained that PHILEC failed to follow the schedule of step
increases under Article X, Section 4 of the June 1, 1997 collective bargaining agreement.
For PHILECs failure to apply the schedule of step increases under Article X of the June 1,
1997 collective bargaining agreement, PWU argued that PHILEC committed an unfair labor
practice under Article 24827 of the Labor Code.28
In its position paper,29 PHILEC emphasized that it promoted Lipio and Ignacio, Sr. while it was
still negotiating a new collective bargaining agreement with PWU. Since PHILEC and PWU
had not yet negotiated a new collective bargaining agreement when PHILEC selected Lipio
and Ignacio, Sr. for training, PHILEC applied the "Modified SGV" pay grade scale in
computing Lipios and Ignacio, Sr.s training allowance. 30
This "Modified SGV" pay grade scale, which PHILEC and PWU allegedly agreed to implement
beginning on May 9, 1997, covered both rank-and-file and supervisory
employees.31 According to PHILEC, its past collective bargaining agreements withthe rank-
 42

and-file and supervisory unions resulted in an overlap of union membership in Pay Grade IX Under the "Modified SGV" pay grade scale, the position of Foreman I fell under Pay Grade B.
of the rank-and-file employees and Pay Grade A of the supervisory employees. 32 Worse, past PHILEC then computed Lipios and Ignacio, Sr.s training allowance accordingly. 36
collective bargaining agreements resulted in rank-and-file employees under Pay Grades IX
and X enjoying higher step increases than supervisory employees under Pay Grades A and PHILEC disputed PWUs claim of unfair labor practice. According to PHILEC, it did not violate
B:33 its collective bargaining agreement with PWU when it implemented the "Modified SGV"
scale. Even assuming that it violated the collective bargaining agreement, PHILEC argued
Pay Grade that its violation was not "gross" or a "flagrant and/or malicious refusal to comply with the
Pay Grade Scale economic provisions of [the collective bargaining agreement]." 37 PHILEC, therefore, was not
Scale under the
Step Increase under the Step Increase guilty of unfair labor practice.38
Rank-and-File
Supervisory CBA
CBA
Voluntary Arbitrator Jimenez held in the decision 39 dated August 13, 1999, that PHILEC
VIII-IX P340.00 A P290.00 violated its collective bargaining agreement with PWU. 40 According to Voluntary Arbitrator
IX-X P455.00 A-B P350.00 Jimenez, the June 1, 1997 collective bargaining agreement governed when PHILEC selected
Lipio and Ignacio, Sr. for promotion on August 18 and 21, 1997. 41 The provisions of the
collective bargaining agreement being the law between the parties, PHILEC should have
To preserve the hierarchical wage structure within PHILECs enterprise, PHILEC and PWU
computed Lipios and Ignacio, Sr.s training allowance based on Article X, Section 4 of the
allegedly agreed to implement the uniform pay grade scale under the "Modified SGV" pay
June 1, 1997 collective bargaining agreement.42
grade system, thus:34

As to PHILECs claim that applying Article X, Section 4 would result in salary distortion within
Pay Grade PHILECs enterprise, Voluntary Arbitrator Jimenez ruled that this was "a concern that PHILEC
Step Increase
Rank-and-File Supervisory could have anticipated and could have taken corrective action" 43 before signing the
collective bargaining agreement.
I II P65.00

II-III P78.00 Voluntary Arbitrator Jimenez dismissed PWUs claim of unfair labor practice. 44 According to
him, PHILECs acts "cannot be considered a gross violation of the [collective bargaining
III-IV P95.00
agreement] nor . . . [a] flagrant and/or malicious refusal to comply withthe economic
IV-V P120.00 provisions of the [agreement]."45

V-VI P150.00
Thus, Voluntary Arbitrator Jimenez ordered PHILEC to pay Lipio and Ignacio, Sr. training
VI-VII P195.00 allowance based on Article X, Section 4 and Article IX, Section 1 of the June 1, 1997
collective bargaining agreement.46
VII-VIII P255.00

VIII-IX A P350.00 PHILEC received a copy of Voluntary Arbitrator Jimenezs decision on August 16, 1999. 47 On
IX-X A-B P465.00 August 26, 1999, PHILEC filed a motion for partial reconsideration 48 of Voluntary Arbitrator
Jimenezs decision.
X-XI B-C P570.00

XI-XII C-D P710.00 In the resolution49 dated July 7, 2000, Voluntary Arbitrator Jimenez denied PHILECs motion
for partial reconsideration for lack of merit. PHILEC received a copy of the July 7, 2000
D-E P870.00
resolution on August 11, 2000.50
E-F P1,055.00
On August 29, 2000, PHILEC filed a petition 51 for certiorari before the Court of Appeals,
Pay grade bracket IIX covered rank-and-file employees, while pay grade bracket AF alleging that Voluntary Arbitrator Jimenez gravely abused his discretion in rendering his
covered supervisory employees.35 decision.52 PHILEC maintained that it did not violate the June 1, 1997 collective bargaining

agreement.53 It applied the "Modified SGV" pay grade rates toavoid salary distortion within
its enterprise.54
In addition, PHILEC argued that Article X, Section 4 of the collective bargaining agreement
did not apply to Lipio and Ignacio, Sr. Considering that Lipio and Ignacio, Sr. were promoted
to a supervisory position, their training allowance should be computed based on the
provisions of PHILECs collective bargaining agreement with ASSET, the exclusive bargaining
representative of PHILECs supervisory employees.55
The Court of Appeals affirmed Voluntary Arbitrator Jimenezs decision. 56 It agreed that
PHILEC was bound to apply Article X, Section 4 of its June 1, 1997 collective bargaining
agreement with PWU in computing Lipios and Ignacio, Sr.s training allowance. 57 In its
decision, the Court of Appeals denied due course and dismissed PHILECs petition for
certiorari for lack of merit.58
PHILEC filed a motion for reconsideration, which the Court of Appeals denied in the
resolution59 dated June 23, 2005.
On August 3, 2005, PHILEC filed its petition for review on certiorari before this
court,60 insisting that it did not violate its collective bargaining agreement with
PWU.61 PHILEC maintains that Lipio and Ignacio, Sr. were promoted to a position covered by
the pay grade scale for supervisory employees. 62 Consequently, the provisions of PHILECs
collective bargaining agreement with its supervisory employees should apply, not its
collective bargaining agreement with PWU. 63 To insist on applying the pay grade scale in
Article X, Section 4, PHILEC argues, would result in a salary distortion within PHILEC. 64
In the resolution65 dated September 21, 2005,this court ordered PWU to comment on
PHILECs petition for review on certiorari.
In its comment,66 PWU argues that Voluntary Arbitrator Jimenez did not gravely abuse his
discretion in rendering his decision. He correctly applied the provisions of the PWU collective
bargaining agreement, the law between PHILEC and its rank-and-file employees, in
computing Lipios and Ignacio, Sr.s training allowance. 67
On September 27, 2006, PHILEC filed its reply, 68 reiterating its arguments in its petition for
review on certiorari.
The issue for our resolution is whether Voluntary Arbitrator Jimenez gravely abused his
discretion in directing PHILEC to pay Lipios and Ignacio, Sr.s training allowance based on
Article X, Section 4 of the June 1, 1997 rank-and-file collective bargaining agreement.
This petition should be denied.
43
I
The Voluntary Arbitrators decision
dated August 13, 1999 is already final and
executory
We note that PHILEC filed before the Court of Appeals a petition for certiorari under Rule 65
of the Rules ofCourt against Voluntary Arbitrator Jimenezs decision. 69
This was not the proper remedy.
Instead, the proper remedy to reverse or modify a Voluntary Arbitrators or a panel of
Voluntary Arbitrators decision or award is to appeal the award or decision before the Court
of Appeals. Rule 43, Sections 1 and 3 of the Rules of Court provide:
Section 1. Scope.
This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals
and from awards, judgments, final orders or resolutions of orauthorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil
Service Commission, Central Board of Assessment Appeals, Securities and Exchange
Commission, Office of the President, Land Registration Authority, Social Security
Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology
Transfer, National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform under Republic Act No.
6657, Government Service Insurance System, Employees Compensation Commission,
Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission,
Board of Investments, Construction Industry Arbitration Commission, and voluntary
arbitrators authorized by law.
....
Sec. 3. Where to appeal.
An appeal under this Rule may be taken to the Court of Appeals within the period and in the
manner herein provided, whether the appeal involves questions of fact, of law, or mixed
questions of fact and law. (Emphasis supplied)
A Voluntary Arbitrator or a panel of Voluntary Arbitrators has the exclusive original
jurisdiction over grievances arising from the interpretation or implementation of collective
bargaining agreements. Should the parties agree, a Voluntary Arbitrator or a panel of
Voluntary Arbitrators shall also resolve the parties other labor disputes, including unfair
labor practices and bargaining deadlocks. Articles 261 and 262 of the Labor Code provide:

ART. 261. JURISDICTION OF VOLUNTARY ARBITRATORS OR PANEL OF VOLUNTARY
ARBITRATORS.
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor practice and shall be
resolved as grievances under the Collective Bargaining Agreement. For purposes of this
article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor
and Employment shall not entertain disputes, grievances, or matters under the exclusive
and original jurisdiction of the Voluntary Arbitrator orpanel of Voluntary Arbitrators and shall
immediately dispose and refer the same to the Grievance Machinery or Voluntary Arbitration
provided in the Collective Bargaining Agreement.
ART. 262. JURISDICTION OVER OTHER LABOR DISPUTES.
The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties,
shall also hear and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.
In Luzon Development Bank v. Association of Luzon Development Bank Employees, 70 this
court ruled that the proper remedy against the award or decision of the Voluntary
Arbitratoris an appeal before the Court of Appeals. This court first characterized the office
ofa Voluntary Arbitrator or a panel of Voluntary Arbitrators as a quasi-judicial agency, citing
Volkschel Labor Union, et al. v. NLRC71 and Oceanic Bic Division (FFW) v. Romero:72
In Volkschel Labor Union, et al. v. NLRC, et al.,on the settled premise that the judgments of
courts and awards of quasi-judicial agencies must become final at some definite time, this
Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence,
their decisions have the same legal effect as judgments of a court. In Oceanic Bic Division
(FFW), et al. v. Romero, et al., this Court ruled that "a voluntary arbitrator by the nature of
her functions acts in a quasi-judicial capacity." Under these rulings, it follows that the
voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a
quasijudicial agency but independent of, and apart from, the NLRC since his decisions are
not appealable to the latter.73 (Citations omitted)
44
This court then stated that the office of a Voluntary Arbitrator or a panel of Voluntary
Arbitrators, even assuming that the office is not strictly a quasi-judicial agency, may be
considered an instrumentality, thus:
Assuming arguendo that the voluntaryarbitrator or the panel of voluntary arbitrators may
not strictly be considered as a quasi-judicial agency, board or commission, still both he and
the panel are comprehended within the concept of a "quasi-judicial instrumentality." It may
even be stated that it was to meet the very situation presented by the quasi-judicial
functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral
tribunal operating under the Construction Industry Arbitration Commission, that the broader
term "instrumentalities" was purposely included in the above-quoted provision.
An "instrumentality" is anything used as a means or agency. Thus, the terms governmental
"agency" or "instrumentality" are synonymous in the sense that either of them is a means
by which a government acts, or by which a certain government act or function is performed.
The word "instrumentality," with respect to a state, contemplates an authority to which the
state delegates governmental power for the performance of a state function. An individual
person, like an administrator or executor, is a judicial instrumentality in the settling of an
estate, in the same manner that a sub-agent appointed by a bankruptcy court is an
instrumentality of the court, and a trustee in bankruptcy of a defunct corporation is an
instrumentality of the state.
The voluntary arbitrator no less performs a state function pursuant to a governmental power
delegated to him under the provisions therefor in the Labor Code and he falls, therefore,
within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P.
129.74 (Citations omitted)
Since the office of a Voluntary Arbitrator or a panel of Voluntary Arbitrators is considered a
quasi-judicial agency, this court concluded that a decision or award rendered by a Voluntary
Arbitrator is appealable before the Court of Appeals. Under Section 9 of the Judiciary
Reorganization Act of 1980, the Court of Appeals has the exclusive original jurisdiction over
decisions or awards of quasi-judicial agencies and instrumentalities:
Section 9. Jurisdiction. The Court of Appeals shall exercise:
....
3. Exclusive appellate jurisdiction over all final judgements, resolutions, orders or awardsof
Regional Trial Courts and quasijudicial agencies, instrumentalities, boards or commission,
including the Securities and Exchange Commission, the Social Security Commission, the
Employees Compensation Commission and the Civil Service Commission, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as

amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph 4 of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis
supplied)
Luzon Development Bankwas decided in 1995 but remains "good law." 75 In the 2002 case of
Alcantara, Jr. v. Court of Appeals, 76 this court rejected petitioner Santiago Alcantara, Jr.s
argument that the Rules of Court, specifically Rule 43, Section 2, superseded the Luzon
Development Bank ruling:
Petitioner argues, however, that Luzon Development Bank is no longer good law because of
Section 2, Rule 43 of the Rules of Court, a new provision introduced by the 1997 revision.
The provision reads:
SEC. 2. Cases not covered. -This Rule shall not apply to judgments or final orders issued
under the Labor Code of the Philippines.
The provisions may be new to the Rules of Court but it is far from being a new law. Section 2,
Rule 42 of the 1997 Rules of Civil Procedure, as presently worded, is nothing more but a
reiteration of the exception to the exclusive appellate jurisdiction of the Court of Appeals, as
provided for in Section 9, Batas Pambansa Blg. 129, 7 as amended by Republic Act No. 7902:8
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission, the Employees
Compensation Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor
Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of
this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.
The Court took into account this exception in Luzon Development Bank but, nevertheless,
held that the decisions of voluntary arbitrators issued pursuant to the Labor Codedo not
come within its ambit:
x x x. The fact that [the voluntary arbitrators] functions and powers are provided for in the
Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-
judicial instrumentality as contemplated therein. It will be noted that, although the
Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-
91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid
down the procedure for the appealability of its decisions to the Court of Appeals under the
foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending
Sec. 9 of B.P. 129.
45
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should
likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised
Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and
commissions enumerated therein.77 (Emphases in the original)
This court has since reiterated the Luzon Development Bankruling in its decisions. 78
Article 262-A of the Labor Code provides that the award or decision of the Voluntary
Arbitrator "shall befinal and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties":
Art. 262-A. PROCEDURES. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall
have the power to hold hearings, receive evidences and take whatever action isnecessary to
resolve the issue or issues subject of the dispute, including efforts to effect a voluntary
settlement between parties.
All parties to the dispute shall beentitled to attend the arbitration proceedings. The
attendance of any third party or the exclusion of any witness from the proceedings shall be
determined by the Voluntary Arbitrator or panel of Voluntary Arbitrators. Hearing may be
adjourned for cause or upon agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the Voluntary Arbitrator or
panel of Voluntary Arbitrators to render an award or decision within twenty (20) calendar
days from the date of submission of the dispute to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall
contain the facts and the law on which it is based. It shall be final and executory after ten
(10) calendar days from receipt of the copy of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary
Arbitrators or the Labor Arbiter in the region where the movant resides, in case of the
absence or incapacity of the Voluntary Arbitrator or panel of Voluntary Arbitrators, for any
reason, may issue a writ of execution requiring either the sheriff of the Commission or
regular courts or any public official whomthe parties may designate in the submission
agreement to execute the final decision, order or award. (Emphasis supplied)
Thus, in Coca-Cola Bottlers Philippines, Inc. Sales Force UnionPTGWO-BALAIS v. Coca Cola-
Bottlers Philippines, Inc.,79 this court declared that the decision of the Voluntary Arbitrator
had become final and executory because it was appealed beyond the 10-day reglementary
period under Article 262-A of the Labor Code.
It is true that Rule 43, Section 4 of the Rules of Court provides for a 15-day reglementary
period for filing an appeal:

Section 4. Period of appeal. The appeal shall be taken within fifteen (15) days from notice
of the award, judgment, final order or resolution, or from the date of its last publication, if
publication is required by law for its effectivity, or of the denial of petitioner's motion for new
trial or reconsideration duly filed in accordance with the governing law of the court or
agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon proper motion
and the payment of the full amount of the docket fee before the expiration of the
reglementary period, the Court of Appeals may grant an additional period of fifteen (15)
days only within which to file the petition for review. No further extension shall be granted
except for the most compelling reason and in no case to exceed fifteen (15) days. (Emphasis
supplied)
The 15-day reglementary period has been upheld by this court in a long line of cases. 80 In
AMA Computer College-Santiago City, Inc. v. Nacino, 81 Nippon Paint Employees Union-OLALIA
v. Court of Appeals,82 Manila Midtown Hotel v. Borromeo, 83 and Sevilla Trading Company v.
Semana,84 this court denied petitioners petitions for review on certiorari since petitioners
failed to appeal the Voluntary Arbitrators decision within the 15-day reglementary period
under Rule43. In these cases, the Court of Appeals had no jurisdiction to entertain the
appeal assailing the Voluntary Arbitrators decision.
Despite Rule 43 providing for a 15-day period to appeal, we rule that the Voluntary
Arbitrators decision mustbe appealed before the Court of Appeals within 10 calendar days
from receipt of the decision as provided in the Labor Code.
Appeal is a "statutory privilege,"85 which may be exercised "only in the manner and in
accordance withthe provisions of the law." 86 "Perfection of an appeal within the reglementary
period is not only mandatory but also jurisdictional so that failure to doso rendered the
decision final and executory, and deprives the appellate court of jurisdiction to alter the final
judgment much less to entertain the appeal." 87
We ruled that Article 262-A of the Labor Code allows the appeal of decisions rendered by
Voluntary Arbitrators.88Statute provides that the Voluntary Arbitrators decision "shall befinal
and executory after ten (10) calendar days from receipt of the copy of the award or decision
by the parties." Being provided in the statute,this 10-day period must be complied with;
otherwise, no appellate court willhave jurisdiction over the appeal. This absurd situation
occurs whenthe decision is appealed on the 11th to 15th day from receipt as allowed under
the Rules, but which decision, under the law, has already become final and executory.
Furthermore, under Article VIII, Section 5(5) of the Constitution, this court "shall not
diminish, increase, or modify substantive rights" in promulgating rules of procedure in
courts.89 The 10-day period to appeal under the Labor Code being a substantive right, this
period cannot be
diminished, increased, or modified through the Rules of Court. 90
46
In Shioji v. Harvey,91 this court held that the "rules of court, promulgated by authority of law,
have the force and effect of law, if not in conflict with positive law." 92 Rules of Court are
"subordinate to the statute."93 In case of conflict between the law and the Rules of Court,
"the statute will prevail."94
The rule, therefore, is that a Voluntary Arbitrators award or decision shall be appealed
before the Court of Appeals within 10 days from receipt of the award or decision. Should the
aggrieved party choose to file a motion for reconsideration with the Voluntary
Arbitrator,95 the motion must be filed within the same 10-day period since a motion for
reconsideration is filed "within the period for taking an appeal."96
A petition for certiorari is a special civil action "adopted to correct errors of jurisdiction
committed by the lower court or quasi-judicial agency, or when there is grave abuse of
discretion on the part of such court or agency amounting to lack or excess of
jurisdiction."97 An extraordinary remedy,98 a petition for certiorari may be filed only if appeal
is not available.99 If appeal is available, an appeal must be taken even if the ground relied
upon is grave abuse of discretion.100
As an exception to the rule, this court has allowed petitions for certiorari to be filed in lieu of
an appeal "(a) when the public welfare and the advancement of public policy dictate; (b)
when the broader interests of justice so require; (c) when the writs issued are null; and (d)
when the questioned order amounts to an oppressive exercise of judicial authority." 101
In Unicraft Industries International Corporation, et al. v. The Hon. Court of
Appeals,102 petitioners filed a petition for certiorari against the Voluntary Arbitrators
decision. Finding that the Voluntary Arbitrator rendered an award without giving petitioners
an opportunity to present evidence, this court allowed petitioners petition for certiorari
despite being the wrong remedy. The Voluntary Arbitrators award, thiscourt said, was null
and void for violation of petitioners right to due process. This court decided the case on the
merits.
In Leyte IV Electric Cooperative, Inc. v. LEYECO IV Employees Union-ALU, 103 petitioner
likewise filed a petition for certiorari against the Voluntary Arbitrators decision, alleging that
the decision lacked basis in fact and in law. Ruling that the petition for certiorari was filed
within the reglementary period for filing an appeal, this court allowed petitioners petition for
certiorari in "the broader interests of justice."104
In Mora v. Avesco Marketing Corporation,105 this court held that petitioner Noel E. Mora erred
in filing a petition for certiorari against the Voluntary Arbitrators decision. Nevertheless, this
court decided the case on the merits "in the interest of substantial justice to arrive at the
proper conclusion that is conformable to the evidentiary facts."106

None of the circumstances similar to Unicraft, Leyte IV Electric Cooperative, and Moraare
present in this case. PHILEC received Voluntary Arbitrator Jimenezs resolution denying its
motion for partial reconsideration on August 11, 2000. 107 PHILEC filed its petition for
certiorari before the Court ofAppeals on August 29, 2000, 108 which was 18 days after its
receipt of Voluntary Arbitrator Jimenezs resolution. The petition for certiorari was filed
beyond the 10-day reglementary period for filing an appeal. We cannot consider PHILECs
petition for certiorari as an appeal.
There being no appeal seasonably filed in this case, Voluntary Arbitrator Jimenezs decision
became final and executory after 10 calendar days from PHILECs receipt of the resolution
denying its motion for partial reconsideration.109 Voluntary Arbitrator Jimenezs decision is
already "beyond the purview of this Court to act upon."110
II
PHILEC must pay training allowance
based on the step increases provided in
the June 1, 1997 collective bargaining
agreement
The insurmountable procedural issue notwithstanding, the case will also fail on its merits.
Voluntary Arbitrator Jimenez correctly awarded both Lipio and Ignacio, Sr. training
allowances based on the amounts and formula provided in the June 1, 1997 collective
bargaining agreement.
A collective bargaining agreement is "a contract executed upon the request of either the
employer or the exclusive bargaining representative of the employees incorporating the
agreement reached after negotiations with respect to wages, hours of work and all other
terms and conditions of employment, including proposals for adjusting any grievances or
questions arising under such agreement."111 A collective bargaining agreement being a
contract, its provisions "constitute the law between the parties" 112 and must be complied
with in good faith.113
PHILEC, as employer, and PWU, as the exclusive bargaining representative of PHILECs rank-
and-file employees, entered into a collective bargaining agreement, which the parties
agreed to make effective from June 1, 1997 to May 31, 1999. Being the law between the
parties, the June 1, 1997 collective bargaining agreement must govern PHILEC and its rank-
and-file employees within the agreed period.
Lipio and Ignacio, Sr. were rank-and-file employees when PHILEC selected them for training
for the position of Foreman I beginning August 25, 1997. Lipio and Ignacio, Sr. were selected
for training during the effectivity of the June 1, 1997 rank-and-file collective bargaining
agreement. Therefore, Lipios and Ignacio, Sr.s training allowance must be computed based
47
on Article X, Section 4 and ArticleIX, Section 1(f) of the June 1, 1997 collective bargaining
agreement.
Contrary to PHILECs claim, Lipio and Ignacio, Sr. were not transferred out of the bargaining
unit when they were selected for training. Lipio and Ignacio, Sr. remained rank-and-file
employees while they trained for the position of Foreman I. Under Article IX, Section 1(e) of
the June 1, 1997 collective bargaining agreement, 114 a trainee who is "unable to demonstrate
his ability to perform the work . . . shall be reverted to his previous
assignment. . . ."115According to the same provision, the trainee "shall hold that job on a trial
or observation basis and . . . subject to prior approval of the authorized management official,
be appointed to the position in a regular capacity." 116
Thus, training is a condition precedent for promotion. Selection for training does not mean
automatic transfer out of the bargaining unit of rankand-file employees.
Moreover, the June 1, 1997 collective bargaining agreement states that the training
allowance of a rank-and-file employee "whose application for a posted job is accepted shall
[be computed] in accordance with Section (f) of [Article IX]."117 Since Lipio and Ignacio, Sr.
were rank-and-file employees when they applied for training for the position of Foreman I,
Lipios and Ignacio, Sr.s training allowance must be computed based on Article IX, Section
1(f) of the June 1, 1997 rank-and-file collective bargaining agreement.
PHILEC allegedly applied the "Modified SGV" pay grade scale to prevent any salary distortion
within PHILECs enterprise. This, however, does not justify PHILECs non-compliance with the
June 1, 1997 collective bargaining agreement. This pay grade scale is not provided in the
collective bargaining agreement. In Samahang Manggagawa sa Top Form Manufacturing
United Workers of the Philippines (SMTFM-UWP) v. NLRC, 118 this court ruled that "only
provisions embodied in the [collective bargaining agreement] should be so interpreted and
complied with. Where a proposal raised by a contracting party does not find print in the
[collective bargaining agreement], it is not part thereof and the proponent has no claim
whatsoever to its implementation."119
Had PHILEC wanted the "Modified SGV" pay grade scale applied within its enterprise, "it
could have requested or demanded that [the Modified SGV scale] be incorporated in the
[collective bargaining agreement]."120 PHILEC had "the means under the law to compel
[PWU] to incorporate this specific economic proposal in the [collective bargaining
agreement]."121 It "could have invoked Article 252 of the Labor Code" 122 to incorporate the
"Modified SGV" pay grade scale in its collective bargaining agreement with PWU. But it did
not. Since this "Modified SGV" pay grade scale does not appear in PHILECs collective
bargaining agreement with PWU, PHILEC cannot insist on the "Modified SGV" pay grade
scales application. We reiterate Voluntary Arbitrator Jimenezs decision dated August 13,
1999 where he said that:
 48

. . . since the signing of the current CBA took place on September 27, 1997, PHILEC, by
oversight, may have overlooked the possibility of a wage distortion occurring among ASSET-
occupied positions. It is surmised that this matter could have been negotiated and settled
with PWU before the actual signing of the CBA on September 27. Instead, PHILEC, again,
allowed the provisions of Art. X, Sec. 4 of the CBA to remain the way it is and is now
suffering the consequences of its laches.123 (Emphasis in the original)
We note that PHILEC did not dispute PWUs contention that it selected several rank-and-file
employees for training and paid them training allowance based on the schedule provided in
the collective bargaining agreement effective at the time of the trainees selection. 124 PHILEC
cannot choose when and to whom to apply the provisions of its collective bargaining
agreement. The provisions of a collective bargaining agreement must be applied uniformly
and complied with in good faith.
Given the foregoing, Lipios and Ignacio, Sr.s training allowance should be computed based
on Article X, Section 4 in relation to Article IX, Section 1(f) of the June 1, 1997 rank-and-file
collective bargaining agreement. Lipio, who held the position of Machinist before selection
for training as Foreman I, should receive training allowance based on the following schedule:
First Month ----- P456.00
Second month ----- P1,031.00
Third month ----- P1,031.00
Fourth month ----- P1,031.00
When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest. . . shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then as equivalent to a forbearance of credit. 126
The 6% legal interest under CircularNo. 799, Series of 2013, of the Bangko Sentral ng
Pilipinas Monetary Board shall not apply, Voluntary Arbitrator Jimenezs decision having
become final and executory prior to the effectivity of the circular on July 1, 2013.1avvphi1 In
Nacar v. Gallery Frames,127 we held that:
. . . with regard to those judgments that have become final and executory prior to July 1,
2013, said judgments shall not be disturbed and shall continue to be implemented applying
the rate of interest fixed therein.128
WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals' decision
dated May 25, 2004 is AFFIRMED.
Petitioner Philippine Electric Corporation is ORDERED to PAY respondent Eleodoro V. Lipio a
total of P3,549.00 for a four (4)-month training for the position of Foreman I with legal
interest of 12% per annum from August 22, 2000 until the amount's full satisfaction.
For respondent Emerlito C. Ignacio, Sr., Philippine Electric Corporation is ORDERED to PAY a
total of P3,962.00 for a four (4)-month training for the position of Foreman I with legal
interest of 12% per annum from August 22, 2000 until the amount's full satisfaction.
SO ORDERED.

Ignacio, Sr., who held the position of DT-Assembler before selection for training as Foreman I,
should receive training allowance based on the following schedule:

First Month ----- P361.00

Second month ----- P817.00

Third month ----- P1,392.00

Fourth month ----- P1,392.00

Considering that Voluntary Arbitrator Jimenezs decision awarded sums of money, Lipio and
Ignacio, Sr. are entitled to legal interest on their training allowances. Voluntary Arbitrator
Jimenezs decision having become final and executory on August 22, 2000, PHILEC is liable
for legal interest equal to 12% per annum from finality of the decision until full payment as
this court ruled in Eastern Shipping Lines, Inc. v. Court of Appeals: 125

9. UNIVERSITY OF SANTO TOMAS FACULTY UNION, Petitioner,
vs. UNIVERSITY OF STO. TOMAS, Respondent.
DECISION
CARPIO, J.:
The Case
G.R. No. 203957 is a petition for review1 assailing the Decision2 promulgated on 13 July
2012 as well as the Resolution3 promulgated on 19 October 2012 by the Court of Appeals
(CA) in CA-G.R. SP No. 120970. The CA set aside the 8 June 2011 Decision4 and 29 July 2011
Resolution5 of the Fourth Division of the National Labor Relations Commission (NLRC) in
NLRC LAC No. 10-003370-08, as well as the 24 September 2010 Decision6 of the Labor
Arbiter (LA) in NLRC-NCR Case No. 09-09745-07.
In its 24 September 2010 decision, the LA ordered the University of Santo Tomas (UST) to
remit P18,000,000.00 to the hospitalization and medical benefits fund (fund) pursuant to the
mandate of the 1996-2001 Collective Bargaining Agreement (CBA).The LA also ordered UST
to pay 10% of the total monetary award as attorneys fees. The other claims were dismissed
for lack of merit. In its 8 June 2011 decision, the NLRC ordered UST to remit to the University
of Santo Tomas Faculty Union (USTFU) the amounts of P80,000,000.00 for the fund pursuant
to the CBA and P8,000,000.00 as attorneys fees equivalent to 10% of the monetary award.
The NLRC denied USTs motion for reconsideration for lack of merit.
In its 13 July 2012 decision, the CA found grave abuse of discretion on the part of NLRC and
granted USTs petition. The CA set aside the decisions of the NLRC and the LA, without
prejudice to the refiling of USTFUs complaint in the proper forum. The CA denied USTFUs
motion for reconsideration for lack of merit.
The Facts
The CA recited the facts as follows:
In a letter dated February 6, 2007, [USTFU] demanded from [UST], through its Rector, Fr.
Ernesto M. Arceo, O.P. ("Fr. Arceo"), remittance of the total amount of P65,000,000.00 plus
legal interest thereon, representing deficiency in its contribution to the medical and
hospitalization fund ("fund") of [USTs] faculty members. [USTFU] also sent [UST] a letter
49
dated February 26, 2007, accompanied by a summary of its claims pursuant to their 1996-
2001 CBA.
On March 2, 2007, Fr. Arceo informed [USTFU] that the aforesaid benefits were not meant to
be given annually but rather as a one-time allocation or contribution to the fund.[USTFU]
then sent [UST] another demand letter dated June 24, 2007 reiterating its position that [UST]
is obliged to remit to the fund, its contributions not only for the years 1996-1997 but also for
the subsequent years, but to no avail.
Thus, on September 5, 2007 [USTFU] filed against [UST], a complaint for unfair labor
practice, as well as for moral and exemplary damages plus attorneys fees before the
arbitration branch of the NLRC.
[UST] sought the dismissal of the complaint on the ground of lack of jurisdiction. It
contended that the case falls within the exclusive jurisdiction of the voluntary arbitratoror
panel of voluntary arbitrators because it involves the interpretation and implementation of
the provisions of the CBA; and the conflict between the herein parties must be resolved as
grievance under the CBA and not as unfair labor practice.
[USTs] motion to dismiss was denied by the LA in its August 8, 2008 order. [UST] appealed
the Order to the NLRC. The NLRC Seventh Division, however, dismissed the appeal on May
12, 2009 and remanded the case to the LA for further proceedings.
The NLRC, in its assailed decision, correctly summarized the issues and submissions of the
hereinparties in their respective position papers, as follows:
According to [UST], the parties had, in the past, concluded several Collective Bargaining
Agreements for the mutual benefit of the union members and [UST], and one of these
agreements was the 1996-2001 CBA. It is undisputed that one of the economic benefits
granted by [UST] under the said CBA was the "Hospitalization Fund," provided under Section
1-A(4) of the Article XIII thereof, the pertinent provisions of which state:
ARTICLE XIII
ECONOMIC BENEFITS
Section 1. ECONOMIC BENEFITUpon ratification and approval and for the term of this
Agreement, the economic benefits to be granted by the UNIVERSITY and the schedule of
such releases are as follows:
A. School Year 1996-97 (June 1, 1996 to May 31, 1997):
xxx
 50

4. Hospitalization Fund: Upon ratification and approval hereof, the UNIVERSITY shall All the economic benefitsherein given and those elsewhere provided under thisagreement,
establish a perpetual hospitalization and medical benefits fund in the sum of TWO MILLION other than retirement benefits and one-half of the signing bonus, are chargeable to the
PESOS (P2,000,000) to be managed conjointly by a hospitalization and medical benefits tuition fee share, if any, of the faculty members.
committee where both management and union are equally represented.
[USTFU] explained that the rationale for the above-quoted provision is that the economic
xxx benefits under the said CBA like the Hospitalization and Medical BenefitsFund, are sourced
from the tuition fee increases and pursuant thereto, [UST] is obligated to remit the amount
B. School Year 1997-98 (June 1, 1997-May 31, 1998); of P2,000,000.00 not only in the first year of the CBA (1996-1997) but also in the subsequent
years because the said amount became an integral part of the current or existing tuition fee.
xxx Furthermore, [UST] is likewise obligated to slide in the amounts allocated for the
Hospitalization and Medical Benefits Fund for the succeeding years to the next CBA year and
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS so on and so forth. [USTFU] claimed that the tuition fee increase once integrated to the old
(P1,000,000) to augment the Hospitalization and Medical Benefits fund. The saidsum shall amount of tuition fee becomes and remains an integral part of the existing tuition fee.
be addedto the remaining balance of theaforementioned fund;
[USTFU] averred that while [UST] remitted the amount of P2,000,000.00 during the first year
xxx of the 1996-2001 CBA, [UST] did not slide-in or remit the said amount in the succeeding year
(1997-1998). [UST] only remitted the amount of P1,000.000,000.00 [sic] for the CBA year
C. School Year 1998-99 (June 1, 1998-May 31, 1999); 1998-1999. Moreover, [UST] remitted only the amount of P1,000,000.00 on the third year of
the CBA instead of P4,000,000.00 (2 Million + 1 Million + 1 Million). And though [UST]
xxx remitted the amount of P4,000,000 during the fourth year (2) [sic] of the 1996-2001 CBA, it
did not remit any amount at all during the fifth year of the said Agreement.
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS
(P1,000,000) to augment the Hospitalization and Medical Benefits Fund. The said sum shall [USTFU] claimed that during the period of the 1996-2001 CBA, [UST] should have remitted
be added to the remaining balance of the aforementioned fund; the total amount of P25,000,000.00 instead of P8,000,000.00 only. Thus, a deficiency of
P17,000,000.00. [USTFUs] assertion is based on the following illustration:
D. Miscellaneous Provisions:
Year 1
xxx 1996-97
Year 2
2. All the economic benefits herein given and those elsewhere provided under this 1997-98 Year 3
agreement, other than retirement benefits and one-half of the signing bonus, are chargeable 1998-99 Year 4
to the tuition fee share, if any, of the faculty members; 1999-00 Year 5
2000-01 Actual
xxx xxx xxx amount
remitted Total
[USTFU] added that the amount offour (4) million pesos was agreed to be paid by the amount to
Universityto the Hospitalization Fund annually for the fourth and fifth year of their CBA, [be]
pursuant to the parties Memorandum of Agreement (MOA) which embodied the remitted
renegotiated economic provisions of the said CBAfor the years 1999-2000 and 2000-2001. 2M
remitted 2M did not
According to [USTFU], Section D(2) of the 1996-2001 CBA provides that: slide 2M did not
slide 2M did not
slide 2M did not
slide 2M 10M
 51

1M that the instance [sic] case may be considered as a money claim, the same already
remitted 1M did not prescribed after three (3) years fromthe time the cause of action accrued.
slide 1M did not
slide 1M did not Finally, [UST] maintained that the present dispute should not be treated as unfair labor
slide 1M 4M practice but should be resolved as a grievance under the CBA and referred to a Voluntary
1M Arbitrator.
remitted 1M did not
slide 1M did not The parties thereafter submitted their respective Replies and Rejoinders amplifying their
slide 1M 3M arguments while refuting those made by the other.7
4M
remitted 4M did not The Labor Arbiters Ruling
slide 4M 8M
Total 8M 25M The LA ruled in favor of USTFU.The LA classified USTFUs complaint as one for "unfair labor
[USTFU] added that after the fifth year of the CBA, i.e. 2001 onwards, [UST] ought to remit practice, claims for sliding in of funds to hospitalization and medical benefits under the CBA,
the amount of P8,000,000.00 ([2]M+1M+1M+4M) annually to the Hospitalization and damages and attorneys fee with prayer for slide-in and restoration of medical benefits
Medical Benefits Fund. Hence, for the school year2001-2002 up to the school year 2005- under the CBA."8 The LA ruled that UST was not able to comply with Article XIII, Section 1A-
2006, an additional amount of P24,000,000.00 (8M x 3) should have been remitted by [UST] (4) of the 1996-2001 CBA. However, despite USTs alleged non-compliance, the LA ruled that
to the aforesaid fund.All in all, the total amount yet to be remitted had ballooned to UST did not commit unfair labor practice.
P81,000,000.00.
The LA interpreted the pertinent CBA provisions to mean that UST bound itself to contribute
Furthermore, [USTFU] averred that [UST] likewise failed and refused to render a proper to the fund P2,000,000.00 every school year, regardless of the appropriated augmentation
accounting ofthe monies it paid or released to the covered faculty as well as the money it amount. The LA computed USTs liability in this manner:
received as tuition fee increase starting from school year 1997-1998 onwards thereby
violating Section D (1), Article XIII of the 1996-2001 CBA which provides that: Considering that the pertinent provision of the [1996-2001] CBA Article XIII, Section 1A(4)
stated that"The University shall establish a perpetual hospitalization and medical benefits
At the end of this agreement, and within three (3) months therefrom, the UNIVERSITY shall fund in the sum of two million pesos (P2,000,000.00) x x x x" it follows that the amount of
render an accounting of the monies it paid or released to the covered faculty in P2M every school year must beslided in regardless of the augmentation amount as may be
consequence hereof. appropriated. The wordshall is mandatory and the word perpetual [is] continuous thus, [UST]
is obligated to remit the actual amount to wit:
On the other hand, [UST] claimed that it religiously complied with the economic provisions of
the 1996-2001CBA particularly its obligation to remit to the Hospitalization and Medical SY 1996-1997 P2M = P2M
Benefits Fund as the renegotiated economic provisions under the MOA by remitting the total SY 1997-1998 P2M + P1M = P3M
amount of P8,000,000.00. [UST] claimed that it was never the intention of the parties to the SY 1998-1999 P2M + P1M = P3M
CBA that the amounts deposited to the Hospitalization fund for each year shall be carried SY 1999-2000 P4M (Renegotiated) = P4M
over to the succeeding years. UST added that the MOA likewise madeno mention that the SY 2000-2001 P4M = P4M
amount of P4,000,000.00 corresponding to the school year 1999-2000 should be carried TOTAL REMITTANCE = P16M
over to the next school year. Thus, it was safe to conclude that the clear intention of the Thus, [UST] therefore has an unremitted fund of Eight Million (P8,000,000.00) pesos.
parties was that the amounts indicated on the CBA should only be remitted once on the
scheduled school year. Accordingly, [UST] averred that it was not guilty of unfair labor Corollarily, the CBA covering the period SY 2001-2006 [UST] is under obligation to remit two
practice. (2) million (P2,000,000.00) [sic] pesos every year or a total of ten million (P10,000,000.00)
pesos in addition to whatever augmented amount stipulated in the CBA.
[UST] further argued that the claim of [USTFU] had already been barred by prescription since
under Article 290 of the Labor Code all unfair labor practice [cases] should be filed within
one (1) year from the accrual thereof otherwise they shall forever be barred. And assuming
 52

In fine, the total unremitted amountto the [hospitalization and medical benefits] fund is The NLRC granted USTFUs appeal and denied USTs appeal for lack of merit. The NLRC
eighteen million (P18,000,000.00) pesos. P8M for SY 1996-2001 and P10M for SY 2001- ordered UST to pay USTFU P80,000,000.00 and attorneys fees equivalent to ten percent of
2006.9 the monetary award.

The LA did not find USTs non-compliance with the 1996-2001 CBA as acts that The NLRC pointed out that USTs refusal to comply, despite repeated demands, with the
constituteunfair labor practice. CBAs economic provisions is tantamount to a gross and flagrant violation. Thus, the present
case properly falls under the LAs original jurisdiction as well as the NLRCs appellate
The failure of [UST] to slide in yearly the P2M hospitalization fund is not violation of the CBA jurisdiction. The issue of prescription also cannot be heldagainst USTFU because the cause
but an error in the interpretation of the provision of the CBA. It could not be said eitherthat of action accrued only when UST refused to comply with USTFUs 6 February 2007 demand
[UST] acted with malice and bad faith in view of the compliance with the other economic letter. The demand letter was sent only after the conduct of proceedings in the Permanent
provision[s] of the CBA. An error in the interpretation of a provision in the CBA, absent any Union-University Committee (PUUC).
malice or bad faith could not be considered as unfair laborpractice as held in the case of
Singapore Airlines Local Employees Association vs. NLRC, et al., 130 SCRA 472.10 The NLRC noted that the subsequent CBAs between UST and USTFU show that the parties
intendedthat the amount appropriated each year to augment the fund shall be carried over
The dispositive portion of the LAs Decision reads: to the succeeding years and is chargeable to the tuition fee increment. The NLRC ruled that
the amounts appropriated for each year during the effectivity of the 1996-2001 CBA should
WHEREFORE, premised on the foregoing considerations, judgment is hereby rendered still be appropriated to the succeeding years. From school year 1997-1998 and onwards, the
ordering [UST] to remit the amount of eighteen million (P18,000,000.00) pesos to [the] basis for suchcarry over is that the amounts were sourced from tuition increases
hospitalization and medical benefits fund pursuant tothe mandate of the Collective corresponding to a given school year. Since any increase in tuition is integrated into the
Bargaining Agreement on economic benefits. subsequent tuition, the amount allocated to the fund because of the tuition increaseshould
be remitted to the fund. The 2001-2006 and 2006-2011 CBAs have express provisions on the
[UST is] likewise directed to pay attorneys fee[s] equivalent to ten (10) percent of the total carry over. The NLRC computed USTs deficiency14 as follows:
monetary award in this case.
For the 1996-2001 CBA:
Other claims dismissed for lack of merit.
Year 1
SO ORDERED.11 1996-97 Year 2
1997-98
USTFU filed a Memorandum of Partial Appeal12 from the LAs Decision. USTFU claimed that Year 3
the LA erred in holding that UST is liable to USTFU in the amount of P18 million only, and in 1998-99 Year 4
not holding that the amounts claimed by USTFU should beremitted by UST to USTFU. USTFU 1999-00 Year 5
claimed that, as of 2011, USTs total liability to the fund is P97 million: P17 million for CBA 2000-01 Total amount
years 1996 to 2001, P40 million for CBA years 2001 to 2006, and P40 million for CBA years that should
2006 to 2011. USTFU also claimed that the amount should be remitted byUST to USTFU for be submitted
proper turnover to the fund. 2M 2M 2M 2M 2M
1M 1M 1M 1M
UST, on the other hand, filed an Appeal Memorandum.13 UST claimed that the LA 1M 1M 1M
committed grave abuse of discretion in taking cognizance over the case because the issue is 4M 4M
within the jurisdiction of the voluntary arbitrator. UST further claimed that the LA committed 2M + 3M + 4M + 8M + 8M = 25M
grave abuse of discretion in finding that UST erred in its interpretation of the CBA and in not Since it is undisputed that [UST] remitted the amount of PhP8,000,000.00 only, there is stilla
finding that USTFUs claims are already barred by prescription. deficiency of PhP17,000,000.00 corresponding to the 1996-2001 CBA.

The NLRCs Ruling xxxx

 53

For the 2001-2006 CBA: On 8 November 2011, USTFU filed a comment before the CA. USTFU claimed that the NLRC
did not commit grave abuse of discretion in finding that USTFU is entitled to its claims for
Year 1 payment of the unremitted benefits. USTFU also claimed that certiorari is not a proper
2001-02 Year 2 remedy for UST because the NLRC did not commit any grave abuse of discretion.16
2002-03 Year 3
2003-04 Year 4 The Court of Appeals Ruling
2005-06 Total amount
that should be The CA, in its decision promulgated on 13 July 2012, disposed of the present case by
submitted agreeing with USTs argument that the LA and the NLRC did not have jurisdiction to hear and
2M 2M 2M 2M decide the present case. The CA stated that since USTFUs ultimateobjective is to clarify the
3M 3M 3M relevant items in the CBA, then USTFUs complaint should have been filed with the voluntary
3M 3M arbitrator or panel of voluntary arbitrators.
2M + 5M + 8M + 8M = 23M
For the 2006-2011 CBA: The dispositive portion of the CAs decision reads:

Year 1 WHEREFORE, finding grave abuse of discretion on the part of public respondent NLRC, the
2006-07 Year 2 petition isGRANTED. Without prejudice to the re-filing of private respondents complaint with
2007-08 Year 3 the proper forum, the assailed NLRC decision dated June 8,2011 and resolution dated July
2008-09 Year 4 29, 2011 in NLRC LAC No. 10-003370-08, as well as the decision dated September 24, 2010
2009-10 Year 5 of the Labor Arbiter in NLRC-NCR Case No. 09-09745-07 are hereby SET ASIDE.
2010-11 Total amount
that should SO ORDERED.17
be submitted
8M + 8M + 8M + 8M + 8M = 40M USTFU filed its motion for reconsideration18 before the CA. USTFU maintained that the LA
The NLRC computed USTs total liability for school years 1996-1997 up to 2010-2011 at and the NLRC had jurisdiction over the subject matter of the complaint.
P80,000,000.00. The records show that UST remitted P8,000,000.00 for 1996-2001 CBA, and
there is absence of proof that the additional contributions to the fund were made for the In a resolution19 promulgated on 19 October 2012, the CA denied USTFUs motion for
2001-2006 and 2006-2011 CBAs. The NLRC also ordered UST to pay USTFU attorneys fees reconsideration for lack of merit.
at 10% of the monetary award.
USTFU filed the present petition for review20 before this Court on 7 December 2012.
UST filed a motion for reconsideration of the NLRC decision.1wphi1 UST again claimed that
the Voluntary Arbitrator, and not LA, had jurisdiction over the interpretation of the CBA; the The Issues
P80,000,000.00 award had no basis; and the fund should be remitted to the Hospital and
Medical Benefits Committee, not to USTFU, as stated in the CBA. USTFU enumerated the following grounds warranting allowance of its petition:

In a Resolution promulgated on 29 July 2011, the NLRC denied USTs motion for
reconsideration for lack of merit.
UST filed a petition for certiorari and prohibition under Rule 65 of the Rules of Court before
the CA. UST still questioned the jurisdiction of the LA, as well as the award of
P80,000,000.00. UST also claimed that USTFUs money claims are barred byprescription, and
that the proper recipient of the award should bethe Hospital and Medical Benefits
Committee. Finally, UST also questioned the award for attorneys fees.15
1. The Honorable Court of Appeals departed from the usual course of judicial proceedings in
holding that the Labor Arbiter and the NLRC have no jurisdiction over the complaint for
unfair labor practice (ULP) filed by USTFU.
2. The Court of Appeals acted in a way not in accord with the applicable decisions of the
Supreme Court in holding that the voluntary arbitrator has jurisdiction over the instant case
despite the fact that Article XIII ("Grievance Machinery") of the CBA is not applicable.

3. The Court of Appeals committed grave abuse of discretion in the appreciation of facts in
not finding that under Art. XXII of the CBA, the Permanent University-Union Committee
(PUUC) is the proper forum to resolve the dispute betweenUST and USTFU. However, Art.
XXII does not provide for a "voluntary arbitration" clause and therefore, USTFU validly filed
the complaint for ULP before the Labor Arbiter.
4. The Honorable Court of Appeals committed grave abuse of discretion in its appreciation of
evidence in not finding that the parties agreed to have the dispute resolved by the labor
tribunals and UST had actively participated in the proceedings before the Labor Arbiter and
the NLRC which is tantamount to a recognitionof the jurisdiction of the said bodies.
5. The Court of Appeals departed from the usual course of proceedings in referring back the
case to voluntary arbitration despite the fact that the parties already fully and exhaustively
litigated the case before the Labor Arbiter and the NLRC which both correctly found in favor
of USTFU. Moreover, referral to voluntary arbitration would result in waste of precious time in
relitigating the case all over again.21
UST, for its part, enumerated the following grounds for opposing USTFUs petition:
1. The Court of Appeals correctly ruled that it is the Voluntary Arbitrator which has
jurisdiction over the instant case.
2. Assuming arguendo that NLRC has jurisdiction over the instant case, it clearly erred when
it made an award not prayed for in petitioner USTFUs complaint, in effect mandating double
payment.
3. Assuming arguendo that NLRC has jurisdiction over the instant case, it erred in ruling that
respondent UST is still liable to pay the amount of P17,000,000.00 for the period 1996-2001
under the 1996-2001 CBA considering that:
a. There is no slide-in provision in the 1996-2001 CBA.
b. The amounts allocated for the Hospitalization Fund during SYs 1996-2001 were not
sourced from the 70% share of the teaching and non-teaching personnel in the tuition fee
increases.
4. The complaint for money claims ofpetitioner USTFU arising from the interpretation of the
1996-2001 CBA isalready barred by prescription.
5. Assuming arguendo that NLRC has jurisdiction over the instant case, it unjustly and
erroneously ordered respondent UST to pay the subject amount to petitioner USTFU and
notto the Hospital and Medical Benefits Committee under the CBA.22
The Courts Ruling
54
The petition has no merit. We shall address the issues raised by the parties one by one.
Jurisdiction over the Present Case
On the issue of jurisdiction, we affirm with modification the ruling of the CA. The Labor
Arbiter has no jurisdiction over the present case; however, despite the lack of jurisdiction,
we rule on the issues presented. We recognize that a remand to the voluntary arbitration
stage will give rise to the possibility that this case will still reach this Court through the
parties appeals. Furthermore, it does not serve the cause of justice if we allow this case to
go unresolved for aninordinate amount of time.
We quote the pertinent Articles of the Labor Code of the Philippines below:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise
provided underthis 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, x x x:
1. Unfair labor practices cases;
xxxx
(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 beprovided in said agreements.
Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. The
Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor practice and shall be
resolved as grievances under the Collective Bargaining Agreement. For purposes of this
article, gross violations of Collective Bargaining Agreement shall mean flagrant
and/ormalicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor
and Employment shall not entertain disputes, grievances or matters under the exclusive and

original jurisdiction of the Voluntary Arbitrator or panel ofVoluntary Arbitrators and shall
immediately dispose and refer the same to the Grievance Machinery or Voluntary Arbitration
provided in the Collective Bargaining Agreement.
Art. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks.
Art. 262-A. Procedures. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have
the power to hold hearings, receive evidences and take whatever action isnecessary to
resolve the issue or issues subject to the dispute, including efforts to effect a voluntary
settlement between the parties.
All parties to the dispute shall be entitled to attend the arbitration proceedings. The
attendance of any third party to the exclusion of any witness from the proceedings shall be
determined by the Voluntary Arbitrator or panel of Voluntary Arbitrators. Hearing may be
adjourned for cause or upon agreement by the parties.
Unless the parties agree otherwise,it shall be mandatory for the Voluntary Arbitrator or panel
of Voluntary Arbitrators to render an award or decision within twenty (20) calendar days
from the date of submission of the dispute to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall
contain the facts and the law on which it is based. It shall be final and executory after ten
(10) calendar days from receipt of the copy of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary
Arbitrators or the Labor Arbiter in the region where the movant resides, in case of the
absence or incapacity of the Voluntary Arbitrator or panel of Voluntary Arbitrators for any
reason, may issue a writ of execution requiring either the sheriff of the Commission or
regular courts or any public official whom the parties may designate in the submission
agreement to execute the final decision, order or award.
On the other hand, the pertinent provisions in the 1996-2001 CBA between UST and USTFU
provide:
ARTICLE X
GRIEVANCE MACHINERY
Section 1. Grievance. Any misunderstanding concerning policies and practices directly
affecting faculty members covered by this [collective bargaining] agreement ortheir working
conditions in the UNIVERSITY or any dispute arising as to the meaning, application or
violation of any provisions of thisAgreement or any complaint that a covered faculty member
may haveagainst the UNIVERSITY shall be considered a grievance.
55
Section 2. Exclusion. Termination of employment and preventive suspension shall be
exempted from the provisions of this Article as the same shall be governed by the procedure
in the Labor Code and its Implementing Rules.
Section 3. Procedure. A grievance shall be settled as expeditiously as possible in
accordance with the following procedure:
STEP I. Upon presentation of a grievance in writing by the aggrieved faculty member, to the
FACULTY UNION Grievance Officer, the said officer shall present the same to the Dean or
school/department head concerned who shall render his decision on the matter within five
(5) school days from the date of the presentation. If the aggrieved party is not satisfied with
the decision, or if the Dean or school/department head fails toact within the five-schoolday
period, appeal may be made to Step II within five (5) school days from receipt of the
decision or, in the absence of a decision, the expiration ofthe period for its rendition. If no
appeal is made within the period of appeal, the grievance shall be deemed settled on the
basis of Step I.
STEP II. All appeals from StepI shall be presented to and considered by an Adjudication
Committee which shall be composed of two (2) representatives chosen by the UNIVERSITY
and two (2) representatives chosen by the FACULTY UNION. The Committee shall meet within
ten (10) school days after the elevation to this step and and try to settle the grievance to
the satisfaction of all concerned. It shall render its decision within twenty (20) school days
following the presentation of the grievance to the Adjudication Committee. A quorum for any
meeting of the Committee shall consist of a majority of its entire membership. The
affirmative vote of at least three (3) members of the Committee shall be necessary to reach
a decision. If the Committee renders a decision, the grievance shall be deemed settled
accordingly. If the Committee fails to make a decision within the period of twenty (20) days
above stated, the FACULTY UNION President may, within ten (10)days thereafter elevate the
grievance to Step III.
STEP III. The grievance appealed to this step shall be handled by the FACULTY UNION
President who shall take it up with the Rector of the UNIVERSITY who, in turn, shall settle the
grievance within ten (10) days. If no settlement is arrived at within the aforementioned
period, the grievance will automatically be referred to voluntary arbitration.
STEP IV. The mechanics of arbitration shall be as follows:
(a) The UNIVERSITY and the FACULTY UNION shall select within three (3) days, by raffle or
process of elimination, an arbitrator mutually agreeable to them preferably from the list
provided by the Bureau of Labor Relations.
(b) The voluntary arbitrator shall render an award within ten (10) days after the issue in
dispute is submitted for decision and his award shall be final and binding upon all parties to

the grievance. (c) Arbitration costs shall be shared equally by the UNIVERSITY and the
FACULTY UNION.23
ARTICLE XXII
PERMANENT UNIVERSITY-UNION COMMITTEE (PUUC)
Permanent UNION-UNIVERSITY Committee (PUUC). The UNIVERSITY and the FACULTY
UNION realize that notwithstanding this CBA, there will remain problems and irritants which
will require the continuing attention of both parties. Symbolic of the mutual good faith of the
parties, they have agreed to establish a permanent committee, where the UNIVERSITY and
the FACULTY UNION are equally represented, to address these problems as they arise.
a. Within thirty (30) days from signing of this Agreement, the Committee shall meet. The
members of the Committee are the following:
1) For the ADMINISTRATION:
a) Rector or his representative;
b) Vice Rector for Academic Affairs or his representative;
c) Vice Rector for Finance or his representative; and d) Appointee of the Rector.
2) For the FACULTY UNION:
a) President of the UNION;
b) Executive Vice President of the UNION or his representative;
c) Secretary General orhis representative; and
d) Appointee of the UNION President.
b. The regular meetings of this Committee shall be held at least bimonthly or as the need
arises. c. The decision reached in the PUUCMeetings shall be binding to all UNIVERSITY
functionaries.24
Jurisdiction is determined by the allegations of the complaint. In the present case, USTFU
alleged that UST committed unfair labor practice in its blatant violation of the economic
provisions of the 1996-2001 CBA, and subsequently, the 2001-2006 and 2006-2011 CBAs.
UST, meanwhile, has consistently questioned USTFUs act of bringing the case before the LA,
and of not submitting the present case to voluntary arbitration. The LA assumed jurisdiction,
but ruled that UST did not commit any unfair labor practice in USTs interpretation of the
economic provisions of the 1996-2001 CBA. The NLRC, on the other hand, ruled that there
56
was indeed unfair labor practice. The CA ruled that the LA and the NLRC did not have
jurisdiction as there was no unfair labor practice. Reading the pertinent portions of the 1996-
2001 CBA along with those of the Labor Code, we see that UST and USTFUs
misunderstanding arose solely from their differing interpretations of the CBAs provisions on
economic benefits, specifically those concerning the fund. Therefore, it was clearly error for
the LA to assume jurisdiction over the present case. The case should have been resolved
through the voluntary arbitrator or panel of voluntary arbitrators.
Article 217(c) of the Labor Code provides that the Labor Arbiter shall refer to the grievance
machinery and voluntary arbitration as provided in the CBA those cases that involve the
interpretation of said agreements. Article 261 of the Labor Code further provides that all
unresolved grievances arising from the interpretation or implementation of the CBA,
including violations of said agreement, are under the original and exclusive jurisdiction of
the voluntary arbitrator or panel of voluntary arbitrators. Excluded from this original and
exclusive jurisdiction is gross violation of the CBA, which is defined in Article 261 as "flagrant
and/or malicious refusal to comply with the economic provisions" of the CBA. San Jose v.
NLRC25 provides guidelines for understanding Articles 217, 261, and 262:
1. The jurisdiction of the Labor Arbiter and Voluntary Arbitrator or Panel of Voluntary
Arbitrators over the cases enumerated in Articles 217, 261, and 262 can possibly include
money claims in one form or another.
2. The cases where the Labor Arbiters have original and exclusive jurisdiction are
enumerated in Article 217, and that of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators in Article 261.
3. The original and exclusive jurisdiction of Labor Arbiters is qualified by an exception as
indicated in the introductory sentence of Article 217 (a), to wit:
"Art. 217. Jurisdiction of Labor Arbiters ... (a) Except as otherwise provided under this Code
the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide ... the
following cases involving all workers..."
The phrase "Except as otherwise provided under this Code" refers to the following
exceptions:
A. Art. 217. Jurisdiction of Labor Arbiters...
xxx
(c) Cases arising from the interpretation or implementation of collective bargaining
agreement and those arising from the interpretation or enforcement of company
procedure/policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitrator as may be provided in said agreement.

B. Art. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks.
Parenthetically, the original and exclusive jurisdiction of the Labor Arbiter under Article 217
(c), for money claims is limited only to those arising from statutes or contracts other than a
Collective Bargaining Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators
will have original and exclusive jurisdiction over money claims "arising from the
interpretation or implementation of the Collective Bargaining Agreement and, those arising
fromthe interpretation or enforcement of company personnel policies," under Article 261.
4. The jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is provided for in
Arts. 261 and 262 of the Labor Code as indicated above.
1. A close reading of Article 261 indicates that the original and exclusive jurisdiction of
Voluntary Arbitrator or Panel of Voluntary Arbitrators is limited only to:
"... unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company
personnel policies... Accordingly, violations of a collective bargaining agreement, except
those which are gross in character, shall no longer be treated as unfair labor practice and
shall be resolved asgrievances under the Collective Bargaining Agreement. x x x."
2. Voluntary Arbitrators or Panel of Voluntary Arbitrators, however, can exercise jurisdiction
over any and all disputes between an employer and a union and/or individual worker as
provided for in Article 262.
"Art. 262. Jurisdiction over other labor disputes. - The voluntary arbitrator or panel of
voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks."
It must be emphasized that the jurisdiction of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators under Article 262 must be voluntarily conferred upon by bothlabor and
management. The labor disputes referred to in the same Article 262 can include all those
disputes mentioned in Article 217 over which the Labor Arbiter has original and exclusive
jurisdiction.
As shown in the above contextual and wholistic analysis of Articles 217, 261, and 262 of the
Labor Code, the National Labor Relations Commission correctly ruled that the Labor Arbiter
had no jurisdiction to hear and decide petitioners money-claim underpayment of retirement
benefits, as the controversy between the parties involved an issue "arising from the
interpretationor implementation" of a provision of the collective bargaining agreement. The
57
Voluntary Arbitrator or Panel of Voluntary Arbitrators has original and exclusive jurisdiction
over the controversy under Article 261 of the Labor Code, and not the Labor Arbiter.
Despite the allegation that UST refused to comply with the economic provisions of the 1996-
2001 CBA, we cannot characterize USTs refusal as "flagrant and/or malicious." Indeed,
USTs literal interpretation of the CBA was, in fact, what led USTFU to fileits complaint. To our
mind, USTFU actually went beyond the text of the 1996-2001 CBA when it claimed that the
integrated tuition fee increase as described in Section 1D(2) is the basis for USTs alleged
deficiency.
We cannot subscribe to USTFUs view that the 1996-2001 CBAs Article X: Grievance
Machinery is not applicable to the present case. When the issue is about the grievance
procedure, USTFU insists on a literal interpretation of the 1996-2001 CBA. Indeed, the
present case falls under Section 1s definition of grievance:"[a]ny misunderstanding
concerning policies and practices directly affecting faculty members covered by this
[collective bargaining] agreement ortheir working conditions in the UNIVERSITY or any
dispute arising as to the meaning, application or violation of any provisions of this
Agreement or any complaint that a covered faculty member may have against the
UNIVERSITY." Section 2 excludes only termination and preventive suspension from the
grievance procedure.
USTFUs focus is on the 1996-2001 CBAs provisions about the grievance process rather than
the provision about the subject matters covered by the grievance process. Despite USTs
alleged violation of the economic provisions of the CBA by its insufficient remittances to the
fund, a dispute arising as to the meaning, application or violation of the CBA, USTFU used
Step I in Section 3, and ignored Steps III and IV, to rule out any referral to voluntary
arbitration. USTFU concludes that the 1996-2001 CBAs provisions on grievance machinery
only refer to a grievance of a faculty member against UST, and that said provisions do not
contemplate a situation where USTFU itself has a grievance against UST.
USTFU argues that the PUUC is the proper forum to resolve the issue, and that the filing of a
complaint beforethe LA is proper inthe absence of a voluntary arbitration clause in the 1996-
2001 CBAs Article XXII: Permanent University-Union Committee. However, as provided in
the 1996-2001 CBA, PUUC is established for "continuing problems and irritants which will
require the continuing attention" of UST and USTFU. Clearly, the PUUC addresses mattersnot
covered by the CBA.
USTFUs adamant refusal to considervoluntary arbitration ignores Articles 261 to 262-A of
the Labor Code, as well as Steps III and IV of Section 3 of the 1996-2001 CBA.
Accrual of Cause of Action and
Prescription of Claims
 58

USTFUs claims arose from USTs alleged failure to contribute the correct amounts to the
fund during the 1996-2001 CBA. However, USTFU did not complain of any violation by UST USTFUs claims28 USTs remittances29 USTs alleged
during the lifetime of the 1996-2001 CBA. Neither did USTFU complain of any violation by Balances
UST during the lifetime of the succeeding 2001-2006 CBA. It was only on 6 February 2007 1996 to 2001 CBA
that USTFU sent a demand letter to UST Rector Fr. Ernesto M. Arceo, O.P., for the claimed SY 1996-1997 P2,000,000.00 P2,000,000.00 0
hospitalization and medical benefits under the 1996-2001 CBA. On 2 March 2007, UST, SY 1997-1998 P3,000,000.00 P1,000,000.00 P2,000,000.00
through its Rector, Fr. Ernesto M. Arceo, O.P., informed USTFU, through its President, Dr. Gil SY 1998-199 P4,000,000.00 P1,000,000.00 P3,000,000.00
Gamilla, that "the hospitalization and medical benefits contained in [the 1996-2001 CBA] 1999 Memorandum
were a one-time give, and therefore not meant to slide." USTFU notified UST on 24 June of Agreement
2007 about its intent to file the necessary complaint. On 6 September 2007, USTFU filed a SY 1999-2000 P8,000,000.00 P4,000,000.00 P4,000,000.00
complaint against UST before the LA. SY 2000-2001 P8,000,000.00 - P8,000,000.00
2001 to 2006 CBA
The 1996-2001 CBA, as well as the applicable laws, is silent as to when USTs alleged SY 2001-2002 P8,000,000.00 P2,000,000.00 P6,000,000.00
violation becomes actionable. Thus, we apply Article 1150 of the Civil Code of the SY 2002-2003 P8,000,000.00 P5,000,000.00 P3,000,000.00
Philippines: "The time for prescription for all kinds of actions, when there is no special SY 2003-2004 P8,000,000.00 P8,000,000.00 0
provision which ordains otherwise, shall be counted from the day they may be brought."26 SY 2004-2005 P8,000,000.00 P8,000,000.00 0
Prescription of an action is counted from the time the action may be brought.27 SY 2005-2006 P8,000,000.00 P8,000,000.00 0
2006-2011 CBA
It is error to state that USTFUs cause of action accrued only upon USTs categorical denial of SY 2006-2007 P8,000,000.00 P8,000,000.00 0
its claims on 2 March 2007. USTFUs cause of action accrued when UST allegedly failed to SY 2007-2008 P8,000,000.00 P8,000,000.00 0
comply with the economic provisions of the 1996-2001 CBA. Upon such failure by UST, SY 2008-2009 P8,000,000.00 P8,000,000.00 0
USTFU could have brought an action against UST. SY 2009-2010 P8,000,000.00 P8,000,000.00 0
SY 2010-2011 P8,000,000.00 P8,000,000.00 0
Article 290 of the Labor Code provides that unfair labor practices prescribe within one year Total P105,000,000.00 P79,000,000.00P26,000,000.00
"from accrual of such unfair labor practice; otherwise, they shall be forever barred." Article We restate the following provisions inthe pertinent CBAs to establish what USTFU claims as
291 of the same Code provides that money claims arising from employer-employee relations its bases for additional funds:
prescribe "within three (3) years from the time the cause of action accrued; otherwise they
shall be forever barred." USTFUs claims under the 1996-2001 CBA, whether characterized 1996-2001 CBA
as one for unfair labor practice or for money claims from employer-employee relations, have
already prescribed when USTFU filed a complaint before the LA. ARTICLE XIII
ECONOMIC BENEFITS
USTFU filed its complaint under the theory of unfairlabor practice. Thus, USTFU had one year
from USTs alleged failure to contribute, or "slide in," the correct amount to the fund to file Section 1. ECONOMIC BENEFIT- Upon ratification and approval and for the term of this
its complaint. USTFU had one year for every alleged breach by UST: school year (SY) 1997- Agreement. the economic benefitsto be granted by the UNIVERSITY and the schedule ofsuch
1998, SY 1998-1999, SY 1999-2000, SY 2000-2001, SY 2001-2002, and SY 2002-2003. releases are as follows:
USTFU did not file any complaint within the respective one-year prescriptive periods. USTFU
decided to file its complaint only in 2007, several years after the accrual of its several A. School Year 1996-97 (June 1, 1996 to May 31, 1997):
possible causes of action. Even if USTFU filed its complaint under the theory of money
claims from employer-employee relations, its cause of action still has prescribed. xxxx

Determination of the Benefits Due 4. Hospitalization Fund: Upon ratification and approval hereof, the UNIVERSITY shall
establish a perpetual hospitalization and medical benefits fund in the sum of TWO MILLION
We consolidate USTFUs claims, USTs remittances, and USTs alleged balances in the table PESOS (P2,000,000) to be managed conjointly by a hospitalization and medical benefits
below: committee where both management and union are equally represented.

The joint committee shall promulgate its internal rules and regulations, and on the second
year of this agreement, i.e., SY 1997-98, may allocate such amount as required, but not to
exceed ten per cent (10%) of the gross income of the fund,for administrative expenses. For
the duration of the first year of operation of the fund, the UNIVERSITY and the FACULTY
UNION shall equally subsidize the operations of the fund.
The hospitalization costs and medical benefits of the members of the faculty as provided in
Article XVIof this agreement shall be taken from this fund.
This fund is independently managed by the aforementioned joint committee, subject to
independent audit. The yearly state of finances of the fund shall be reported, appended to
the FACULTY UNIONs own annual report, to all members of the university faculty.
B. School Year 1997-98 (June 1, 1997-May 31, 1998):
xxxx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS
(P1,000,000) to augment the Hospitalization and Medical Benefits fund.The said sum shall
be added to the remaining balance of the aforementioned fund;
xxxx
C. School Year 1998-99 (June 1, 1998-May 31, 1999):
xxxx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION PESOS
(P1,000,000) to augment the Hospitalization and Medical Benefits fund.The said sum shall
be added to the remaining balance of the aforementioned fund;
D. Miscellaneous Provisions:
1. At the end of this agreement, and within three months therefrom, the UNIVERSITY shall
render an accounting of the monies it paid or released to the covered faculty in
consequence thereof;
2. All the economic benefits herein given and those elsewhere provided under this
agreement, other than retirement benefits and one-half of the signing bonus, are chargeable
to the tuition fee share, if any, of the faculty members;
3. In the event that the tuition fee benefits of the faculty for any of the three years covered
by this part of this agreement i.e., the University decides to raise tuition fees in the coming
59
two school years, exceed those provided herein, the same may be allocated for salaries and
other benefits as determined by the FACULTY UNION and the matter duly communicated to
the UNIVERSITY; and,
4. None of the benefits provided herein, both distributable immediately after ratification and
those to be given during the term hereof, other than the amounts checked-off and the
Hospitalization and Medical Benefits are to be directly distributed to the faculty members by
the University.30 1999 Memorandum of Agreement
1.0 The University hereby agrees to grant increase in salary and fringe benefits as provided
for by the tuition fee increase of school year 1999-2000 according to the following scheme:
xxxx
6.0 If there is any tuition fee increase for school year 2000-2001, there will be an additional
increase in salary/fringe benefitsto be agreed upon by both parties.
7.0An additional amount of four million pesos will be deposited in the hospitalization fund of
the faculty.31
2001-2006 CBA
Article XX
HOSPITALIZATION AND MEDICAL BENEFITS
Section 1. Hospitalization and Medical Benefits Fund. The UNION and the UNIVERSITY shall
buildup and maintain the perpetual Hospitalization and Medical Benefits Fund. For this
purpose, the UNIVERSITY agrees to appropriate for AY 2001-2002 two million pesos
(PhP2,000,000.00); for AY 2002-2003 three million pesos (PhP3,000,000.00); and for AY
2003-2004 another three million pesos (PhP3,000,000.00). It is understood that the amount
appropriated for each year is carried over to the succeeding years and is chargeable to the
tuition fee increment. x x x32 2006-2011 CBA
Article XX
HOSPITALIZATION AND MEDICAL BENEFITS
Section 5. Miscellaneous Provisions. a. The UNIVERSITY will continue to slide in the amounts
set aside in the 2001-2006 CBA to augment the fund. Fifty percent of the amount due shall
be remitted within a month from the start of the first semester and the other fifty percent
within a month from the start of the second semester of the academic year. These sums of
money shall be remitted without necessity of demand on the part of the union and may not
 60

be garnished or held by the university on account of disputesin hospital billings between the WHEREFORE, we DENY the petition. We DECLARE that the claims of the University of Santo
University and the Union. Tomas Faculty Union have prescribed and that there is no carry-over provision for the
Hospitalization and Medical Benefits Fund in the 1996-2001 Collective Bargaining Agreement
and in the 1999 Memorandum of Agreement. The carry-over provision for the Hospitalization
and Medical Benefits Fund is found only in the 2001-2006 and 2006-2011 Collective
x x x x33 Bargaining Agreements.

USTFU claims that USTs contributions should have been cumulative, with the amount No costs.
appropriated for each year carried over to the succeeding years and is chargeable to the
tuitionfee increment. However, USTFUs claims are not supported by the economic
provisions of the 1996-2001 CBA and the 1999 Memorandum of Agreement reproduced
above. SO ORDERED.

We wholly agree with USTs interpretation of the economic provisions of the 1996-2001 CBA,
the 1999 Memorandumof Agreement, and the 2001-2006 and 2006-2011 CBAs, as well as its
remittances to the fund for the covered periods. UST faithfully followed the clear provisions
of these agreements.

The 1996-2001 CBA established the fund, with an initial remittance of P2, 000, 000. 00 for
school year 1996-1997. UST bound itself to augment the fund by contributing P1,000,000.00
per year for school years 1997-1998 and 1998-1999. The 1999 Memorandum of Agreement
merely stated that UST will deposit P4,000,000.00 to the fund. Express mention of the
carryover is found onlv in Section 1, Article XX of the 2001-2006 CBA: "It is understood that
the amount appropriated for each year is carried over to the succeeding years xx x." The
1996-2001 CBA does not have this carry-over provision. During the lifetime of the 1996-
2001 CBA, the 1999 Memorandum of Agreement, and the 2001-2006 CBA, USTFU never
questioned the non-compliance by UST with an alleged carry-over agreement applicable to
the 1996-2001 CBA. This Court is well aware of Article 1702 of the Civil Code, which provides
that "[i]n case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer." This Court is also well aware that when
the provisions of the CBA are clear and unambiguous, the literal meaning of the stipulations
shall govern.34 In the present case, the CBA provisions pertaining to the fund are clear and
should be interpreted according to their literal meaning.

10. ACE NAVIGATION CO., INC., VELA INTERNATIONAL MARINE LTD., and/or
RODOLFO PAMINTUAN,Petitioners,
vs.
TEODORICO FERNANDEZ, assisted by GLENITA FERNANDEZ, Respondent.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari1 which seeks to nullify the
decision2 dated September 22, 2010 and the resolution 3 dated May 26,2011 ofthe Court of
Appeals (CA) in CA-G.R. SP No. 112081.
The Antecedents
On October 9, 2008, seaman Teodorico Fernandez (Fernandez), assisted by his wife, Glenita
Fernandez, filed with the National Labor Relations Commission (NLRC) a complaint for
disability benefits, with prayer for moral and exemplary damages, plus attorneys fees,
against Ace Navigation Co., Inc., Vela International Marine Ltd., and/or Rodolfo Pamintuan
(petitioners).
The petitioners moved to dismiss the complaint, 4 contending that the labor arbiter had no
jurisdiction over the dispute. They argued that exclusive original jurisdiction is with the
voluntary arbitrator or panel of voluntary arbitrators, pursuant to Section 29 of the POEA
Standard Employment Contract (POEA-SEC), since the parties are covered by the AMOSUP-
TCC or AMOSUP-VELA (as later cited by the petitioners) collective bargaining agreement
(CBA). Under Section 14 of the CBA, a dispute between a seafarer and the company shall be
settled through the grievance machinery and mandatory voluntary arbitration.
Fernandez opposed the motion.5 He argued that inasmuch as his complaint involves a
money claim, original and exclusive jurisdiction over the case is vested with the labor
arbiter.
The Compulsory Arbitration Rulings
On December 9, 2008, Labor Arbiter Romelita N. Rioflorido denied the motion to dismiss,
holding that under Section 10 of Republic Act (R.A.) No. 8042, the Migrant Workers and
Overseas Filipinos Act of 1995, the labor arbiter has original and exclusive jurisdiction over
money claims arising out of an employer-employee relationship or by virtue of any law or
contract, notwithstanding any provision of law to the contrary. 6
The petitioners appealed to the NLRC, but the labor agency denied the appeal. It agreed
with the labor arbiter that the case involves a money claim and is within the jurisdiction of
61
the labor arbiter, in accordance with Section 10 of R.A. No. 8042. Additionally, it declared
that the denial of the motion to dismiss is an interlocutory order which is not appealable.
Accordingly, it remanded the case to the labor arbiter for further proceedings. The
petitioners moved for reconsideration, but the NLRC denied the motion, prompting the
petitioners to elevate the case to the CA through a petition for certiorari under Rule 65 of the
Rules of Court.
The CA Decision
Through its decision of September 22, 2010, 7 the CA denied the petition on procedural and
substantive grounds.
Procedurally, it found the petitioners to have availed of the wrong remedy when they
challenged the labor arbiters denial of their motion to dismiss by way of an appeal to the
NLRC. It stressed that pursuant to the NLRC rules, 8an order denying a motion to dismiss is
interlocutory and is not subject to appeal.
On the merits of the case, the CA believed that the petition cannot also prosper. It rejected
the petitioners submission that the grievance and voluntary arbitration procedure of the
parties CBA has jurisdiction over the case, to the exclusion of the labor arbiter and the
NLRC. As the labor arbiter and the NLRC did, it opined that under Section 10 of R.A. No.
8042, the labor arbiter has the original and exclusive jurisdiction to hear Fernandezs money
claims.
Further, the CA clarified that while the law 9 allows parties to submit to voluntary arbitration
other labor disputes, including matters falling within the original and exclusive jurisdiction of
the labor arbiters under Article 217 of the Labor Code as this Court recognized in Vivero v.
Court of Appeals,10 the parties submission agreement must be expressed in unequivocal
language. It found no such unequivocal language in the AMOSUP/TCC CBA that the parties
agreed to submit money claims or, more specifically, claims for disability benefits to
voluntary arbitration.
The CA also took note of the POEA-SEC 11 which provides in its Section 29 that in cases of
claims and disputes arising from a Filipino seafarers employment, the parties covered by a
CBA shall submit the claim or dispute to the original and exclusive jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators. The CA explained that the relevant
POEA-SEC provisions should likewise be qualified by the ruling in the Vivero case, the Labor
Code, and other applicable laws and jurisprudence.
In sum, the CA stressed that the jurisdiction of voluntary arbitrators is limited to the
seafarers claims which do not fall within the labor arbiters original and exclusive
jurisdiction or even in cases where the labor arbiter has jurisdiction, the parties have agreed
in unmistakable terms (through their CBA) to submit the case to voluntary arbitration.

The petitioners moved for reconsideration of the CA decision, but the appellate court denied
the motion, reiterating its earlier pronouncement that on the ground alone of the petitioners
wrong choice of remedy, the petition must fail.
The Petition
The petitioners are now before this Court praying for a reversal of the CA judgment on the
following grounds:
1. The CA committed a reversible error in disregarding the Omnibus Implementing Rules and
Regulations (IRR) of the Migrant Workers and Overseas Filipinos Act of 1995, 12 as amended
by R.A. No. 10022,13 mandating that "For OFWs with collective bargaining agreements, the
caseshall be submitted for voluntary arbitration in accordance with Articles 261 and 262 of
the Labor Code."14
The petitioners bewail the CAs rejection of the above argument for the reason that the
remedy they pursued was inconsistent with the 2005 Revised Rules of Procedure of the
NLRC. Citing Municipality of Sta. Fe v. Municipality of Aritao,15 they argue that the "dismissal
of a case for lack of jurisdiction may be raised at any stage of the proceedings."
In any event, they posit that the IRR of R.A. No. 10022 is in the nature of an adjective or
procedural law which must be given retroactive effect and which should have been applied
by the CA in resolving the present case.
2. The CA committed a reversible error in ruling that the AMOSUP-VELA CBA does not contain
unequivocal wordings for the mandatory referral of Fernandezs claim to voluntary
arbitration.
The petitioners assail the CAs failure to explain the basis "for ruling that no explicit or
unequivocal wordings appeared on said CBA for the mandatory referral of the disability claim
to arbitration."16They surmise that the CA construed the phrase "either party may refer the
case to a MANDATORY ARBITRATION COMMITTEE" under Section 14.7(a) of the CBA as
merely permissive and not mandatory because of the use of the word "may." They contend
that notwithstanding the use of the word "may," the parties unequivocally and unmistakably
agreed to refer the present disability claim to mandatory arbitration.
3. The CA committed a reversible error in disregarding the NLRC memorandum prescribing
the appropriate action for complaints and/or proceedings which were initially processed in
the grievance machinery of existing CBAs. In their motion for reconsideration with the CA,
the petitioners manifested that the appellate courts assailed decision had been modified by
the following directive of the NLRC:
62
As one of the measures being adopted by our agency in response to the Platform and Policy
Pronouncements on Labor Employment, you are hereby directed to immediately dismiss the
complaint and/or terminate proceedings which were initially processed in the grievance
machinery as provided in the existing Collective Bargaining Agreements (CBAs) between
parties, through the issuance of an Order of Dismissal and referral of the disputes to the
National Conciliation Mediation Board (NCMB) for voluntary arbitration.
FOR STRICT COMPLIANCE.17
4. On July 31, 2012, 18 the petitioners manifested before the Court that on June 13, 2012, the
Courts Second Division issued a ruling in G.R. No. 172642, entitled Estate of Nelson R.
Dulay, represented by his wife Merridy Jane P. Dulay v. Aboitiz Jebsen Maritime,
Inc., and General Charterers, Inc., upholding the jurisdiction of the voluntary arbitrator or
panel of voluntary arbitrators over a seafarers money claim. They implore the Court that
since the factual backdrop and the issues involved in the case are similar to the present
dispute, the Dulay ruling should be applied to this case and which should accordingly be
referred to the National Conciliation and Mediation Board for voluntary arbitration.
The Case for Fernandez
In compliance with the Courts directive,19 Fernandez filed on October 7, 2011 his
Comment20 (on the Petition) with the plea that the petition be dismissed for lack of merit.
Fernandez presents the following arguments:
1. The IRR of the Migrant Workers and Overseas Filipinos Act of 1995 (R.A. No. 8042),
as amended by R.A. No. 10022,21 did not divest the labor arbiters of their original
and exclusive jurisdiction over money claims arising from employment, for nowhere
in said IRR is there such a divestment.
2. The voluntary arbitrators do not have jurisdiction over the present controversy as
can be deduced from Articles 261 and 262 of the Labor Code. Fernandez explains
that his complaint does not involve any "unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement [nor] from
the interpretation or enforcement of company personnel policies[.]" 22 As he never
referred his claim to the grievance machinery, there is no "unresolved grievance" to
speak of. His complaint involves a claim for compensation and damages which is
outside the voluntary arbitrators jurisdiction under Article 261. Further, only
disputes involving the union and the company shall be referred to the grievance
machinery and to voluntary arbitration, as the Court held in Sanyo Philippines
Workers Union-PSSLU v. Caizares23 and Silva v. CA.24
3. The CA correctly ruled that no unequivocal wordings appear in the CBA for the
mandatory referral of Fernandezs disability claim to a voluntary arbitrator.

The Courts Ruling
We first rule on the procedural question arising from the labor arbiters denial of the
petitioners motion to dismiss the complaint. On this point, Section 6, Rule V of The 2005
Revised Rules of Procedure of the NLRC provides:
On or before the date set for the mandatory conciliation and mediation conference, the
respondent may file a motion to dismiss. Any motion to dismiss on the ground of lack of
jurisdiction, improper venue, or that the cause of action is barred by prior judgment,
prescription, or forum shopping, shall be immediately resolved by the Labor Arbiter through
a written order. An order denying the motion to dismiss, or suspending its resolution until the
final determination of the case, is not appealable. [underscoring ours]
Corollarily, Section 10, Rule VI of the same Rules states:
Frivolous or Dilatory Appeals. No appeal from an interlocutory order shall be entertained.
To discourage frivolous or dilatory appeals, including those taken from interlocutory orders,
the Commission may censure or cite in contempt the erring parties and their counsels, or
subject them to reasonable fine or penalty.
In Indiana Aerospace University v. Comm. on Higher Educ.,25 the Court declared that "[a]n
order denying a motion to dismiss is interlocutory"; the proper remedy in this situation is to
appeal after a decision has been rendered. Clearly, the denial of the petitioners motion to
dismiss in the present case was an interlocutory order and, therefore, not subject to appeal
as the CA aptly noted.
The petitions procedural lapse notwithstanding, the CA proceeded to review the merits of
the case and adjudged the petition unmeritorious. We find the CAs action in order. The
Labor Code itself declares that "it is the spirit and intention of this Code that the Commission
and its members and the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to technicalities
of law or procedure, all in the interest of due process."26
We now address the focal question of who has the original and exclusive jurisdiction over
Fernandezs disability claim the labor arbiter under Section 10 of R.A. No. 8042, as
amended, or the voluntary arbitration mechanism as prescribed in the parties CBA and the
POEA-SEC?
The answer lies in the States labor relations policy laid down in the Constitution and fleshed
out in the enabling statute, the Labor Code. Section 3, Article XIII (on Social Justice and
Human Rights) of the Constitution declares:
xxxx
63
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.
Article 260 of the Labor Code (Grievance machinery and voluntary arbitration) states:
The 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.
Article 261 of the Labor Code (Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators), on the other hand, reads in part:
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[.]
Article 262 of the Labor Code (Jurisdiction over other labor disputes) declares:
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.
Further, the POEA-SEC, which governs the employment of Filipino seafarers, provides in its
Section 29 on Dispute Settlement Procedures:
In cases of claims and disputes arising from this employment, the parties covered
by a collective bargaining agreement shall submit the claim or dispute to the
original and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary
arbitrators. If the parties are not covered by a collective bargaining agreement, the parties
may at their option submit the claim or dispute to either the original and exclusive
jurisdiction of the National Labor Relations Commission (NLRC), pursuant to Republic Act
(RA) 8042 otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995 or to
the original and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary
arbitrators. If there is no provision as to the voluntary arbitrators to be appointed by the
parties, the same shall be appointed from the accredited voluntary arbitrators of the
National Conciliation and Mediation Board of the Department of Labor and Employment.
[emphasis ours]
We find merit in the petition.

Under the above-quoted constitutional and legal provisions, the voluntary arbitrator or panel
of voluntary arbitrators has original and exclusive jurisdiction over Fernandezs disability
claim. There is no dispute that the claim arose out of Fernandezs employment with the
petitioners and that their relationship is covered by a CBA the AMOSUP/TCC or the
AMOSUP-VELA CBA. The CBA provides for a grievance procedure for the resolution of
grievances or disputes which occur during the employment relationship and, like the
grievance machinery created under Article 261 of the Labor Code, it is a two-tiered
mechanism, with voluntary arbitration as the last step.1wphi1
Contrary to the CAs reading of the CBAs Article 14, there is unequivocal or unmistakable
language in the agreement which mandatorily requires the parties to submit to the
grievance procedure any dispute or cause of action they may have against each other. The
relevant provisions of the CBA state:
14.6 Any Dispute, grievance, or misunderstanding concerning any ruling, practice,
wages or working conditions in the COMPANY or any breach of the Contract of
Employment, or any dispute arising from the meaning or application of the
provisions of this Agreement or a claim of violation thereof or any complaint or
cause of action that any such Seaman may have against the COMPANY, as well as
complaints which the COMPANY may have against such Seaman shall be brought
to the attention of the GRIEVANCE RESOLUTION COMMITTEE before either party
takes any action, legal or otherwise. Bringing such a dispute to the Grievance
Resolution Committee shall be unwaivable prerequisite or condition precedent for
bringing any action, legal or otherwise, in any forum and the failure to so refer
the dispute shall bar any and all legal or other actions.
14.7a) If by reason of the nature of the Dispute, the parties are unable to amicably
settle the dispute, either party may refer the case to a MANDATORY ARBITRATION
COMMITTEE. The MANDATORY ARBITRATION COMMITTEE shall consist of one representative
to be designated by the UNION, and one representative to be designated by the COMPANY
and a third member who shall act as Chairman and shall be nominated by mutual choice of
the parties. xxx
h) Referral of all unresolved disputes from the Grievance Resolution Committee to
the Mandatory Arbitration Committee shall be unwaivable prerequisite or
condition precedent for bringing any action, claim, or cause of action, legal or
otherwise, before any court, tribunal, or panel in any jurisdiction. The failure by a
party or seaman to so refer and avail oneself to the dispute resolution mechanism
contained in this action shall bar any legal or other action. All parties expressly
agree that the orderly resolution of all claims in the prescribed manner served the
interests of reaching settlements or claims in an orderly and uniform manner, as
well as preserving peaceful and harmonious labor relations between seaman, the
Union, and the Company.27 (emphases ours)
64
What might have caused the CA to miss the clear intent of the parties in prescribing a
grievance procedure in their CBA is, as the petitioners have intimated, the use of the
auxiliary verb "may" in Article 14.7(a) of the CBA which, to reiterate, provides that "if by
reason of the nature of the Dispute, the parties are unable to amicably settle the
dispute, either party may refer the case to a MANDATORY ARBITRATION
COMMITTEE."28
While the CA did not qualify its reading of the subject provision of the CBA, it is reasonable
to conclude that it viewed as optional the referral of a dispute to the mandatory arbitration
committee when the parties are unable to amicably settle the dispute.
We find this a strained interpretation of the CBA provision. The CA read the provision
separately, or in isolation of the other sections of Article 14, especially 14.7(h), which, in
clear, explicit language, states that the "referral of all unresolved disputes from the
Grievance Resolution Committee to the Mandatory Arbitration Committee shall be
unwaivable prerequisite or condition precedent for bringing any action, claim, or
cause of action, legal or otherwise, before any court, tribunal, or panel in any
jurisdiction"29 and that the failure by a party or seaman to so refer the dispute to
the prescribed dispute resolution mechanism shall bar any legal or other action.
Read in its entirety, the CBAs Article 14 (Grievance Procedure) unmistakably reflects the
parties agreement to submit any unresolved dispute at the grievance resolution stage to
mandatory voluntary arbitration under Article 14.7(h) of the CBA. And, it should be added
that, in compliance with Section 29 of the POEA-SEC which requires that in cases of claims
and disputes arising from a seafarers employment, the parties covered by a CBA shall
submit the claim or dispute to the original and exclusive jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators.
Since the parties used unequivocal language in their CBA for the submission of their
disputes to voluntary arbitration (a condition laid down in Vivero for the recognition of the
submission to voluntary arbitration of matters within the original and exclusive jurisdiction of
labor arbiters), we find that the CA committed a reversible error in its ruling; it disregarded
the clear mandate of the CBA between the parties and the POEA-SEC for submission of the
present dispute to voluntary arbitration.
Consistent with this finding, Fernandezs contention that his complaint for disability
benefits is a money claim that falls within the original and exclusive jurisdiction of the labor
arbiter under Section 10 of R.A. No. 8042 is untenable. We likewise reject his argument
that he never referred his claim to the grievance machinery (so that no unresolved
grievance exists as required under Article 261 of the Labor Code), and that the parties to the
case are not the union and the employer. 30 Needless to state, no such distinction exists in
the parties CBA and the POEA-SEC.

It bears stressing at this point that we are upholding the jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators over the present dispute, not only because of the
clear language of the parties CBA on the matter; more importantly, we so uphold the
voluntary arbitrators jurisdiction, in recognition of the States express preference for
voluntary modes of dispute settlement, such as conciliation and voluntary arbitration as
expressed in the Constitution, the law and the rules.
In this light, we see no need to further consider the petitioners submission regarding the IRR
of the Migrant Workers and Overseas Filipinos Act of 1995, as amended by R.A. No. 10022,
except to note that the IRR lends further support to our ruling.
In closing, we quote with approval a most recent Court pronouncement on the same issue,
thus
It is settled that when the parties have validly agreed on a procedure for
resolving grievances and to submit a dispute to voluntary arbitration then that
procedure should be strictly observed.31 (emphasis ours)
WHEREFORE, premises considered, the petition is GRANTED. The assailed decision and
resolution of the Court of Appeals are SET ASIDE. Teodorico Fernandez's disability claim
is REFERRED to the Grievance Resolution Committee of the parties' collective bargaining
agreement and/or the Mandatory Arbitration Committee, if warranted.
SO ORDERED.
65
11.
G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner, vs. BROADCOM ASIA, INC. and DANTE AREVALO,
Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court,
which assails the Decision2 dated November 24, 2011 and Resolution3 dated March 26,
2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the CA ruled that the
Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the jurisdiction over petitioner
Raul C. Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia, Inc.
(Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and
monetary claims filed with the National Capital Region Arbitration Branch of the National
Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television networks
and production houses. In December 2000, Arevalo set up the company Broadcom, still to
continue the business of trading communication and broadcast equipment. Cosare was
named an incorporator of Broadcom, having been assigned 100 shares of stock with par
value of P1.00 per share.5 In October 2001, Cosare was promoted to the position of
Assistant Vice President for Sales (AVP for Sales) and Head of the Technical Coordination,
having a monthly basic net salary and average commissions of P18,000.00 and P37,000.00,
respectively.6

Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcoms Vice President for
Sales and thus, became Cosares immediate superior. On March 23, 2009, Cosare sent a
confidential memo7 to Arevalo to inform him of the following anomalies which were
allegedly being committed by Abiog against the company: (a) he failed to report to work on
time, and would immediately leave the office on the pretext of client visits; (b) he advised
the clients of Broadcom to purchase camera units from its competitors, and received
commissions therefor; (c) he shared in the "under the-table dealings" or "confidential
commissions" which Broadcom extended to its clients personnel and engineers; and (d) he
expressed his complaints and disgust over Broadcoms uncompetitive salaries and wages
and delay in the payment of other benefits, even in the presence of office staff. Cosare
ended his memo by clarifying that he was not interested in Abiogs position, but only wanted
Arevalo to know of the irregularities for the corporations sake.
Apparently, Arevalo failed to act on Cosares accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to tender
his resignation in exchange for "financial assistance" in the amount of P300,000.00.8 Cosare
refused to comply with the directive, as signified in a letter9 dated March 26, 2009 which he
sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcoms Manager
for Finance and Administration, a memo10 signed by Arevalo, charging him of serious
misconduct and willful breach of trust, and providing in part:
1. A confidential memo was received from the VP for Sales informing me that you had
directed, or at the very least tried to persuade, a customer to purchase a camera from
another supplier. Clearly, this action is a gross and willful violation of the trust and
confidence this company has given to you being its AVP for Sales and is an attempt to
deprive the company of income from which you, along with the other employees of this
company, derive your salaries and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in
another place outside of the office without proper turnover from you to this office which had
assigned said vehicle to you. The vehicle was found to be inoperable and in very bad
condition, which required that the vehicle be towed to a nearby auto repair shop for
extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the company of your
activities within and outside of company premises despite repeated reminders. However, it
has been observed that you have been both frequently absent and/or tardy without proper
information to this office or your direct supervisor, the VP for Sales Mr. Alex Abiog, of your
whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as evidenced by
the fact that you have not recorded any sales for the past immediate twelve (12) months.
66
This was inspite of the fact that my office decided to relieve you of your duties as technical
coordinator between Engineering and Sales since June last year so that you could focus and
concentrate [on] your activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to present
his explanation on the charges. He was also "suspended from having access to any and all
company files/records and use of company assets effective immediately."12 Thus, Cosare
claimed that he was precluded from reporting for work on March 31, 2009, and was instead
instructed to wait at the offices receiving section. Upon the specific instructions of Arevalo,
he was also prevented by Villareal from retrieving even his personal belongings from the
office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and was
told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the
officials of Barangay San Antonio, Pasig City, and had the incident reported in the barangay
blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he
addressed and denied the accusations cited in Arevalos memo dated March 30, 2009. The
respondents refused to receive the memo on the ground of late filing, prompting Cosare to
serve a copy thereof by registered mail. The following day, April 3, 2009, Cosare filed the
subject labor complaint, claiming that he was constructively dismissed from employment by
the respondents. He further argued that he was illegally suspended, as he placed no serious
and imminent threat to the life or property of his employer and co-employees.15
In refuting Cosares complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed
the following acts inimical to the interests of Broadcom: (a) he failed to sell any broadcast
equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera
which was to be sourced from a competitor; and (c) he made an unauthorized request in
Broadcoms name for its principal, Panasonic USA, to issue an invitation for Cosares friend,
one Alex Paredes, to attend the National Association of Broadcasters Conference in Las
Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job17 by continually
failing to report for work beginning April 1, 2009, prompting them to issue on April 14, 2009
a memorandum18 accusing Cosare of absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19
dismissing the complaint on the ground of Cosares failure to establish that he was
dismissed, constructively or otherwise, from his employment. For the LA, what transpired on
March 30, 2009 was merely the respondents issuance to Cosare of a show-cause memo,
giving him a chance to present his side on the charges against him. He explained:

It is obvious that [Cosare] DID NOT wait for respondents action regarding the charges
leveled against him in the show-cause memo. What he did was to pre-empt that action by
filing this complaint just a day after he submitted his written explanation. Moreover, by
specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosares] motive
for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations
of illegal suspension and non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese.
The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are
found guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA, INC. and Dante
Arevalo are ordered to pay [Cosares] backwages, and separation pay, as well as damages,
in the total amount of P1,915,458.33, per attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded
to [Cosares] contention that he was constructively dismissed by Respondent Arevalo when
he was asked to resign from his employment."23 The fact that Cosare was suspended from
using the assets of Broadcom was also inconsistent with the respondents claim that Cosare
opted to abandon his employment.
Exemplary damages in the amount of P100,000.00 was awarded, given the NLRCs finding
that the termination of Cosares employment was effected by the respondents in bad faith
and in a wanton, oppressive and malevolent manner. The claim for unpaid commissions was
denied on the ground of the failure to include it in the prayer of pleadings filed with the LA
and in the appeal.
The respondents motion for reconsideration was denied.24 Dissatisfied, they filed a petition
for certiorari with the CA founded on the following arguments: (1) the respondents did not
have to prove just cause for terminating the employment of Cosare because the latters
complaint was based on an alleged constructive dismissal; (2) Cosare resigned and was thus
not dismissed from employment; (3) the respondents should not be declared liable for the
67
payment of Cosares monetary claims; and (4) Arevalo should not be held solidarily liable for
the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they
raised a new argument, i.e., the case involved an intra-corporate controversy which was
within the jurisdiction of the RTC, instead of the LA.25 They argued that the case involved a
complaint against a corporation filed by a stockholder, who, at the same time, was a
corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents
petition. It agreed with the respondents contention that the case involved an intra-corporate
controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the
exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed
as one of its directors. Moreover, he held the position of [AVP] for Sales which is listed as a
corporate office. Generally, the president, vice-president, secretary or treasurer are
commonly regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation. However, it
bears mentioning that under Section 25 of the Corporation Code, the Board of Directors of
[Broadcom] is allowed to appoint such other officers as it may deem necessary. Indeed,
[Broadcoms] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be
necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare]
indeed held a corporate office, as evidenced by the General Information Sheet which was
submitted to the Securities and Exchange Commission (SEC) on October 22, 2009.27
(Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one
dismissing the labor complaint on the ground of lack of jurisdiction, finding it unnecessary to
resolve the main issues that were raised in the petition. Cosare filed a motion for

reconsideration, but this was denied by the CA via the Resolution28 dated March 26, 2012.
Hence, this petition.
The Present Petition
The pivotal issues for the petitions full resolution are as follows: (1) whether or not the case
instituted by Cosare was an intra-corporate dispute that was within the original jurisdiction
of the RTC, and not of the LAs; and (2) whether or not Cosare was constructively and illegally
dismissed from employment by the respondents.
The Courts Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of
the CA, it is the LA, and not the regular courts, which has the original jurisdiction over the
subject controversy. An intra-corporate controversy, which falls within the jurisdiction of
regular courts, has been regarded in its broad sense to pertain to disputes that involve any
of the following relationships: (1) between the corporation, partnership or association and
the public; (2) between the corporation, partnership or association and the state in so far as
its franchise, permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers; and (4)
among the stockholders, partners or associates, themselves.29 Settled jurisprudence,
however, qualifies that when the dispute involves a charge of illegal dismissal, the action
may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination
disputes and claims for damages arising from employer-employee relations as provided in
Article 217 of the Labor Code. Consistent with this jurisprudence, the mere fact that Cosare
was a stockholder and an officer of Broadcom at the time the subject controversy developed
failed to necessarily make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished
between a "regular employee" and a "corporate officer" for purposes of establishing the true
nature of a dispute or complaint for illegal dismissal and determining which body has
jurisdiction over it. Succinctly, it was explained that "[t]he determination of whether the
dismissed officer was a regular employee or corporate officer unravels the conundrum" of
whether a complaint for illegal dismissal is cognizable by the LA or by the RTC. "In case of
the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal
authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for being its
AVP for Sales, was not a "corporate officer" as the term is defined by law. We emphasized in
68
Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the purpose of
identifying an intra-corporate controversy. Citing Garcia v. Eastern Telecommunications
Philippines, Inc.,33 we held:
" Corporate officers in the context of Presidential Decree No. 902-A are those officers of the
corporation who are given that character by the Corporation Code or by the corporations
by-laws. There are three specific officers whom a corporation must have under Section 25 of
the Corporation Code. These are the president, secretary and the treasurer. The number of
officers is not limited to these three. A corporation may have such other officers as may be
provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or
general manager. The number of corporate officers is thus limited by law and by the
corporations by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of
corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer is
elected by the directors and stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by action of the directors or stockholders
but by the managing officer of the corporation who also determines the compensation to be
paid to such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur in
order for an individual to be considered a corporate officer, as against an ordinary employee
or officer, namely: (1) the creation of the position is under the corporations charter or by-
laws; and (2) the election of the officer is by the directors or stockholders. It is only when the
officer claiming to have been illegally dismissed is classified as such corporate officer that
the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial
courts.
To support their argument that Cosare was a corporate officer, the respondents referred to
Section 1, Article IV of Broadcoms by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper. Any two (2) or more compatible positions may be held concurrently by
the same person, except that no one shall act as President and Treasurer or Secretary at the
same time.37 (Emphasis ours)

This was also the CAs main basis in ruling that the matter was an intra-corporate dispute
that was within the trial courts jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices that
are created under Broadcoms by-laws are the following: the President, Vice-President,
Treasurer and Secretary. Although a blanket authority provides for the Boards appointment
of such other officers as it may deem necessary and proper, the respondents failed to
sufficiently establish that the position of AVP for Sales was created by virtue of an act of
Broadcoms board, and that Cosare was specifically elected or appointed to such position by
the directors. No board resolutions to establish such facts form part of the case records.
Further, it was held in Marc II Marketing, Inc. v. Joson38 that an enabling clause in a
corporations by-laws empowering its board of directors to create additional officers, even
with the subsequent passage of a board resolution to that effect, cannot make such position
a corporate office. The board of directors has no power to create other corporate offices
without first amending the corporate by-laws so as to include therein the newly created
corporate office.39 "To allow the creation of a corporate officer position by a simple inclusion
in the corporate by-laws of an enabling clause empowering the board of directors to do so
can result in the circumvention of that constitutionally well-protected right [of every
employee to security of tenure]."40
The CAs heavy reliance on the contents of the General Information Sheets41, which were
submitted by the respondents during the appeal proceedings and which plainly provided
that Cosare was an "officer" of Broadcom, was clearly misplaced. The said documents could
neither govern nor establish the nature of the office held by Cosare and his appointment
thereto. Furthermore, although Cosare could indeed be classified as an officer as provided in
the General Information Sheets, his position could only be deemed a regular office, and not
a corporate office as it is defined under the Corporation Code. Incidentally, the Court noticed
that although the Corporate Secretary of Broadcom, Atty. Efren L. Cordero, declared under
oath the truth of the matters set forth in the General Information Sheets, the respondents
failed to explain why the General Information Sheet officially filed with the Securities and
Exchange Commission in 2011 and submitted to the CA by the respondents still indicated
Cosare as an AVP for Sales, when among their defenses in the charge of illegal dismissal,
they asserted that Cosare had severed his relationship with the corporation since the year
2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the cases
filing did not necessarily make the action an intra- corporate controversy. "Not all conflicts
between the stockholders and the corporation are classified as intra-corporate. There are
other facts to consider in determining whether the dispute involves corporate matters as to
consider them as intra-corporate controversies."42 Time and again, the Court has ruled that
in determining the existence of an intra-corporate dispute, the status or relationship of the
parties and the nature of the question that is the subject of the controversy must be taken
69
into account.43 Considering that the pending dispute particularly relates to Cosares rights
and obligations as a regular officer of Broadcom, instead of as a stockholder of the
corporation, the controversy cannot be deemed intra-corporate. This is consistent with the
"controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an intra-corporate relationship,
but must as well pertain to the enforcement of the parties correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory rules of the
corporation. If the relationship and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist, then no intra-corporate
controversy exists.45 (Citation omitted)
It bears mentioning that even the CAs finding46 that Cosare was a director of Broadcom
when the dispute commenced was unsupported by the case records, as even the General
Information Sheet of 2009 referred to in the CA decision to support such finding failed to
provide such detail.
All told, it is then evident that the CA erred in reversing the NLRCs ruling that favored
Cosare solely on the ground that the dispute was an intra-corporate controversy within the
jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the
correctness of the NLRCs ruling finding Cosare to have been illegally dismissed from
employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing
among other circumstances the charges that were hurled and the suspension that was
imposed against him via Arevalos memo dated March 30, 2009. Even prior to such charge,
he claimed to have been subjected to mental torture, having been locked out of his files and
records and disallowed use of his office computer and access to personal belongings.47
While Cosare attempted to furnish the respondents with his reply to the charges, the latter
refused to accept the same on the ground that it was filed beyond the 48-hour period which
they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the
service of the memo, particularly the continued refusal of the respondents to allow Cosares
entry into the companys premises. These incidents were cited in the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could
retrieve his personal belongings, but the latter said that x x x Arevalo directed her to deny

his request, so [Cosare] again waited at the receiving section of the office. On April 1, 2009,
[Cosare] was not allowed to enter the office premises. He was asked to just wait outside of
the Tektite (PSE) Towers, where [Broadcom] had its offices, for further instructions on how
and when he could get his personal belongings. [Cosare] waited until 8 p.m. for instructions
but none were given. Thus, [Cosare] sought the assistance of the officials of Barangay San
Antonio, Pasig who advised him to file a labor or replevin case to recover his personal
belongings. x x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March 30,
2009, Cosare was allegedly summoned to Arevalos office and was asked to tender his
immediate resignation from the company, in exchange for a financial assistance of
P300,000.00.49 The directive was said to be founded on Arevalos choice to retain Abiogs
employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosares claim of constructive and illegal
dismissal. "[C]onstructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility, or disdain
by an employer becomes unbearable to the employee leaving the latter with no other option
but to quit."51 In Dimagan v. Dacworks United, Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employees position
would have felt compelled to give up his position under the circumstances. It is an act
amounting to dismissal but is made to appear as if it were not. Constructive dismissal is
therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the
employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosares
continued involvement with the company. Even their refusal to accept the explanation which
Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny Cosare of the
opportunity to be heard prior to any decision on the termination of his employment. The
respondents allegedly refused acceptance of the explanation as it was filed beyond the mere
48-hour period which they granted to Cosare under the memo dated March 30, 2009.
However, even this limitation was a flaw in the memo or notice to explain which only further
signified the respondents discrimination, disdain and insensibility towards Cosare,
apparently resorted to by the respondents in order to deny their employee of the
opportunity to fully explain his defenses and ultimately, retain his employment. The Court
emphasized in King of Kings Transport, Inc. v. Mamac54 the standards to be observed by
employers in complying with the service of notices prior to termination:
[T]he first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
70
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice
to give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.55 (Citation omitted, underscoring ours, and emphasis
supplied)
In sum, the respondents were already resolute on a severance of their working relationship
with Cosare, notwithstanding the facts which could have been established by his
explanations and the respondents full investigation on the matter. In addition to this, the
fact that no further investigation and final disposition appeared to have been made by the
respondents on Cosares case only negated the claim that they actually intended to first look
into the matter before making a final determination as to the guilt or innocence of their
employee. This also manifested from the fact that even before Cosare was required to
present his side on the charges of serious misconduct and willful breach of trust, he was
summoned to Arevalos office and was asked to tender his immediate resignation in
exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their
persistent accusation that Cosare abandoned his post, allegedly signified by his failure to
report to work or file a leave of absence beginning April 1, 2009. This was even the subject
of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to explain his
absence within 48 hours from the date of the memo. As the records clearly indicated,
however, Arevalo placed Cosare under suspension beginning March 30, 2009. The
suspension covered access to any and all company files/records and the use of the assets of
the company, with warning that his failure to comply with the memo would be dealt with
drastic management action. The charge of abandonment was inconsistent with this imposed
suspension. "Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment. To constitute abandonment of work, two elements must concur:
(1) the employee must have failed to report for work or must have been absent without
valid or justifiable reason; and (2) there must have been a clear intention on the part of the
employee to sever the employer- employee relationship manifested by some overt act."57
Cosares failure to report to work beginning April 1, 2009 was neither voluntary nor
indicative of an intention to sever his employment with Broadcom. It was illogical to be
requiring him to report for work, and imputing fault when he failed to do so after he was
specifically denied access to all of the companys assets. As correctly observed by the NLRC:
 71

[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April
1, 2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid)
suspended [Cosare] from using not only the equipment but the "assets" of Respondent
[Broadcom]. This insults rational thinking because the Respondents tried to mislead us and
make [it appear] that [Cosare] failed to report for work when they had in fact had [sic]
placed him on suspension. x x x.58

Following a finding of constructive dismissal, the Court finds no cogent reason to modify the
NLRC's monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons Supermarket
Corporation v. Ranchez,59 the Court reiterated that an illegally or constructively dismissed
employee is entitled to: (1) either reinstatement, if viable, or separation pay, if
reinstatement is no longer viable; and (2) backwages.60 The award of exemplary damages
was also justified given the NLRC's finding that the respondents acted in bad faith and in a
wanton, oppressive and malevolent manner when they dismissed Cosare. It is also by reason
of such bad faith that Arevalo was correctly declared solidarily liable for the monetary
awards.
12. G.R. No. 198587, January 14, 2015
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are SET SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA, Petitioners, v. MA.
ASIDE. The Decision dated August 24, 2010 of the National Labor Relations Commission in JOPETTE M. REBESENCIO, MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A.
favor of petitioner Raul C. Cosare is AFFIRMED. CRISTOBAL AND LORAINE S. SCHNEIDER-CRUZ, Respondents.

SO ORDERED. DECISION

LEONEN, J.:

All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.

This is a Petition for Review on Certiorari with application for the issuance of a temporary
restraining order and/or writ of preliminary injunction under Rule 45 of the 1997 Rules of
Civil Procedure praying that judgment be rendered reversing and setting aside the June 16,
2011 Decision1 and September 13, 2011 Resolution2 of the Court of Appeals in CA-G.R. SP.
No. 113006.

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and existing
under the laws of Jeddah, Kingdom of Saudi Arabia. It has a Philippine office located at 4/F,
Metro House Building, Sen. Gil J. Puyat Avenue, Makati City. 3 In its Petition filed with this
court, Saudia identified itself as follows:chanroblesvirtuallawlibrary

1. Petitioner SAUDIA is a foreign corporation established and existing under the Royal Decree
No. M/24 of 18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its
Philippine Office is located at 4/F Metro House Building, Sen, Gil J. Puyat Avenue, Makati City
(Philippine Office). It may be served with orders of this Honorable Court through undersigned
 72

counsel at 4th and 6th Floors, Citibank Center Bldg., 8741 Paseo de Roxas, Makati of passengers, and since she will not be able to maintain the required medical fitness while
City.4 (Emphasis supplied) at work in case of pregnancy, accordingly, if the Air Hostess becomes pregnant at any
time during the term of this contract, this shall render her employment contract
Respondents (complainants before the Labor Arbiter) were recruited and hired by Saudia as
as void and she will be terminated due to lack of medical fitness.18 (Emphasis
Temporary Flight Attendants with the accreditation and approval of the Philippine Overseas
supplied)
Employment Administration.5 After undergoing seminars required by the Philippine Overseas
In their Comment on the present Petition, 19 respondents emphasized that the Unified
Employment Administration for deployment overseas, as well as training modules offered by
Contract took effect on September 23, 2006 (the first day of Ramadan), 20 well after they had
Saudia (e.g., initial flight attendant/training course and transition training), and after working
filed and had their maternity leaves approved. Ma. Jopette filed her maternity leave
as Temporary Flight Attendants, respondents became Permanent Flight Attendants. They
application on September 5, 2006.21Montassah filed her maternity leave application on
then entered into Cabin Attendant contracts with Saudia: Ma. Jopette M. Rebesencio (Ma.
August 29, 2006, and its approval was already indicated in Saudia's computer system by
Jopette) on May 16, 1990;6Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth A.
August 30, 2006.22 Rouen Ruth filed her maternity leave application on September 13,
Cristobal (Rouen Ruth) on May 22, 1993;7and Loraine Schneider-Cruz (Loraine) on August 27,
2006,23 and Loraine filed her maternity leave application on August 22, 2006. 24
1995.8

Rather than comply and tender resignation letters, respondents filed separate appeal letters
Respondents continued their employment with Saudia until they were separated from
that were all rejected.25
service on various dates in 2006.9

Despite these initial rejections, respondents each received calls on the morning of November
Respondents contended that the termination of their employment was illegal. They alleged
6, 2006 from Saudia's office secretary informing them that their maternity leaves had been
that the termination was made solely because they were pregnant. 10
approved. Saudia, however, was quick to renege on its approval. On the evening of
November 6, 2006, respondents again received calls informing them that it had received
As respondents alleged, they had informed Saudia of their respective pregnancies and had
notification from Jeddah, Saudi Arabia that their maternity leaves had been disapproved. 26
gone through the necessary procedures to process their maternity leaves. Initially, Saudia
had given its approval but later on informed respondents that its management in Jeddah,
Faced with the dilemma of resigning or totally losing their benefits, respondents executed
Saudi Arabia had disapproved their maternity leaves. In addition, it required respondents to
handwritten resignation letters. In Montassah's and Rouen Ruth's cases, their resignations
file their resignation letters.11
were executed on Saudia's blank letterheads that Saudia had provided. These letterheads
already had the word "RESIGNATION" typed on the subject portions of their headings when
Respondents were told that if they did not resign, Saudia would terminate them all the
these were handed to respondents.27
same. The threat of termination entailed the loss of benefits, such as separation pay and
ticket discount entitlements.12
On November 8, 2007, respondents filed a Complaint against Saudia and its officers for
illegal dismissal and for underpayment of salary, overtime pay, premium pay for holiday,
Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base Manager,
rest day, premium, service incentive leave pay, 13th month pay, separation pay, night shift
Abdulmalik Saddik (Abdulmalik).13 Montassah was informed personally by Abdulmalik and a
differentials, medical expense reimbursements, retirement benefits, illegal deduction, lay-
certain Faisal Hussein on October 20, 2006 after being required to report to the office one (1)
over expense and allowances, moral and exemplary damages, and attorney's fees. 28 The
month into her maternity leave.14 Rouen Ruth was also personally informed by Abdulmalik on
case was initially assigned to Labor Arbiter Hermino V. Suelo and docketed as NLRC NCR
October 17, 2006 after being required to report to the office by her Group
Case No. 00-11-12342-07.
Supervisor.15 Loraine received a call on October 12, 2006 from her Group Supervisor, Dakila
Salvador.16
Saudia assailed the jurisdiction of the Labor Arbiter. 29 It claimed that all the determining
points of contact referred to foreign law and insisted that the Complaint ought to be
Saudia anchored its disapproval of respondents' maternity leaves and demand for their
dismissed on the ground of forum non conveniens.30 It added that respondents had no cause
resignation on its "Unified Employment Contract for Female Cabin Attendants" (Unified
of action as they resigned voluntarily.31
Contract).17 Under the Unified Contract, the employment of a Flight Attendant who becomes
pregnant is rendered void. It provides:chanroblesvirtuallawlibrary
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the
(H) Due to the essential nature of the Air Hostess functions to be physically fit on board to
Decision32dismissing respondents' Complaint. The dispositive portion of this Decision
provide various services required in normal or emergency cases on both
reads:chanroblesvirtuallawlibrary
domestic/international flights beside her role in maintaining continuous safety and security

WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the instant
complaint for lack of jurisdiction/merit.33cralawlawlibrary
On respondents' appeal, the National Labor Relations Commission's Sixth Division reversed
the ruling of Executive Labor Arbiter Jambaro-Franco. It explained that "[considering that
complainants-appellants are OFWs, the Labor Arbiters and the NLRC has [sic] jurisdiction to
hear and decide their complaint for illegal termination."34 On the matter of forum non
conveniens, it noted that there were no special circumstances that warranted its abstention
from exercising jurisdiction.35 On the issue of whether respondents were validly dismissed, it
held that there was nothing on record to support Saudia's claim that respondents resigned
voluntarily.
The dispositive portion of the November 19, 2009 National Labor Relations Commission
Decision36reads:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding the appeal
impressed with merit. The respondents-appellees are hereby directed to pay complainants-
appellants the aggregate amount of SR614,001.24 corresponding to their backwages and
separation pay plus ten (10%) percent thereof as attorney's fees. The decision of the Labor
Arbiter dated December 12, 2008 is hereby VACATED and SET ASIDE. Attached is the
computation prepared by this Commission and made an integral part of this
Decision.37cralawlawlibrary
In the Resolution dated February 11, 2010,38 the National Labor Relations Commission
denied petitioners' Motion for Reconsideration.
In the June 16, 2011 Decision, 39 the Court of Appeals denied petitioners' Rule 65 Petition and
modified the Decision of the National Labor Relations Commission with respect to the award
of separation pay and backwages.
The dispositive portion of the Court of Appeals Decision reads:chanroblesvirtuallawlibrary
WHEREFORE, the instant petition is hereby DENIED. The Decision dated November 19,
2009 issued by public respondent, Sixth Division of the National Labor Relations Commission
- National Capital Region is MODIFIED only insofar as the computation of the award of
separation pay and backwages. For greater clarity, petitioners are ordered to pay private
respondents separation pay which shall be computed from private respondents' first day of
employment up to the finality of this decision, at the rate of one month per year of service
and backwages which shall be computed from the date the private respondents were
illegally terminated until finality of this decision. Consequently, the ten percent (10%)
attorney's fees shall be based on the total amount of the award. The assailed Decision is
affirmed in all other respects.
The labor arbiter is hereby DIRECTED to make a recomputation based on the
foregoing.40cralawlawlibrary
In the Resolution dated September 13, 2011, 41 the Court of Appeals denied petitioners'
Motion for Reconsideration.
73
Hence, this Appeal was filed.
The issues for resolution are the following:
First, whether the Labor Arbiter and the National Labor Relations Commission may exercise
jurisdiction over Saudi Arabian Airlines and apply Philippine law in adjudicating the present
dispute;
Second, whether respondents' voluntarily resigned or were illegally terminated; and
Lastly, whether Brenda J. Betia may be held personally liable along with Saudi Arabian
Airlines.chanRoblesvirtualLawlibrary
I
Summons were validly served on Saudia and jurisdiction over it validly acquired.
There is no doubt that the pleadings and summons were served on Saudia through its
counsel.42Saudia, however, claims that the Labor Arbiter and the National Labor Relations
Commission had no jurisdiction over it because summons were never served on it but on
"Saudia Manila."43 Referring to itself as "Saudia Jeddah," it claims that "Saudia Jeddah" and
not "Saudia Manila" was the employer of respondents because:
First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into by
respondents;
Second, it was "Saudia Jeddah" that provided the funds to pay for respondents' salaries and
benefits; and
Lastly, it was with "Saudia Jeddah" that respondents filed their resignations. 44
Saudia posits that respondents' Complaint was brought against the wrong party because
"Saudia Manila," upon which summons was served, was never the employer of
respondents.45
Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its bare
allegation, there is no basis for concluding that "Saudia Jeddah" is distinct from "Saudia
Manila."
What is clear is Saudia's statement in its own Petition that what it has is a "Philippine Office .
. . located at 4/F Metro House Building, Sen. Gil J. Puyat Avenue, Makati City." 46 Even in the
position paper that Saudia submitted to the Labor Arbiter, 47 what Saudia now refers to as
"Saudia Jeddah" was then only referred to as "Saudia Head Office at Jeddah, KSA," 48 while
what Saudia now refers to as "Saudia Manila" was then only referred to as "Saudia's office in

Manila."49
By its own admission, Saudia, while a foreign corporation, has a Philippine office.
Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments Act of
1991, provides the following:chanroblesvirtuallawlibrary
The phrase "doing business" shall include . . . opening offices, whether called
"liaison" offices or branches; . . . and any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of commercial gain or of the purpose and object of the business
organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other
conclusion than that Saudia is a foreign corporation doing business in the Philippines. As
such, Saudia may be sued in the Philippines and is subject to the jurisdiction of Philippine
tribunals.
Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia Manila"
the latter being nothing more than Saudia's local office service of summons to Saudia's
office in Manila sufficed to vest jurisdiction over Saudia's person in Philippine
tribunals.chanRoblesvirtualLawlibrary
II
Saudia asserts that Philippine courts and/or tribunals are not in a position to make an
intelligent decision as to the law and the facts. This is because respondents' Cabin Attendant
contracts require the application of the laws of Saudi Arabia, rather than those of the
Philippines.50 It claims that the difficulty of ascertaining foreign law calls into operation the
principle of forum non conveniens, thereby rendering improper the exercise of jurisdiction by
Philippine tribunals.51
A choice of law governing the validity of contracts or the interpretation of its provisions dees
not necessarily imply forum non conveniens. Choice of law and forum non conveniens are
entirely different matters.
Choice of law provisions are an offshoot of the fundamental principle of autonomy of
contracts. Article 1306 of the Civil Code firmly ensconces this:chanroblesvirtuallawlibrary
Article 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against forum shopping. It is
designed to frustrate illicit means for securing advantages and vexing litigants that would
otherwise be possible if the venue of litigation (or dispute resolution) were left entirely to the
whim of either party.
74
Contractual choice of law provisions factor into transnational litigation and dispute resolution
in one of or in a combination of four ways: (1) procedures for settling disputes, e.g.,
arbitration; (2) forum, i.e., venue; (3) governing law; and (4) basis for interpretation. Forum
non conveniens relates to, but is not subsumed by, the second of these.
Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on the
laws of a given jurisdiction as the governing law of a contract does not preclude the exercise
of jurisdiction by tribunals elsewhere. The reverse is equally true: The assumption of
jurisdiction by tribunals does not ipso facto mean that it cannot apply and rule on the basis
of the parties' stipulation. In Hasegawa v. Kitamura:52ChanRoblesVirtualawlibrary
Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law V'hich will determine the merits of the
case is fair to both parties. The power to exercise jurisdiction does not automatically give a
state constitutional authority to apply forum law. While jurisdiction and the choice of the lex
fori will often, coincide, the "minimum contacts" for one do not always provide the necessary
"significant contacts" for the other. The question of whether the law of a state can be applied
to a transaction is different from the question of whether the courts of that state have
jurisdiction to enter a judgment. 53cralawlawlibrary
As various dealings, commercial or otherwise, are facilitated by the progressive ease of
communication and travel, persons from various jurisdictions find themselves transacting
with each other. Contracts involving foreign elements are, however, nothing new. Conflict of
laws situations precipitated by disputes and litigation anchored on these contracts are not
totally novel.
Transnational transactions entail differing laws on the requirements Q for the validity of the
formalities and substantive provisions of contracts and their interpretation. These
transactions inevitably lend themselves to the possibility of various fora for litigation and
dispute resolution. As observed by an eminent expert on transnational
law:chanroblesvirtuallawlibrary
The more jurisdictions having an interest in, or merely even a point of contact with, a
transaction or relationship, the greater the number of potential fora for the resolution of
disputes arising out of or related to that transaction or relationship. In a world of increased
mobility, where business and personal transactions transcend national boundaries, the
jurisdiction of a number of different fora may easily be invoked in a single or a set of related
disputes.54cralawlawlibrary
Philippine law is definite as to what governs the formal or extrinsic validity of contracts. The
first paragraph of Article 17 of the Civil Code provides that "[t]he forms and solemnities of
contracts . . . shall be governed by the laws of the country in which they are
executed"55 (i.e., lex loci celebrationis).
In contrast, there is no statutorily established mode of settling conflict of laws situations on
matters pertaining to substantive content of contracts. It has been noted that three (3)

modes have emerged: (1) lex loci contractus or the law of the place of the making; (2) lex
loci solutionis or the law of the place of performance; and (3) lex loci intentionis or the law
intended by the parties.56
Given Saudia's assertions, of particular relevance to resolving the present dispute is lex loci
intentionis.
An author observed that Spanish jurists and commentators "favor lex loci
intentionis."57 These jurists and commentators proceed from the Civil Code of Spain, which,
like our Civil Code, is silent on what governs the intrinsic validity of contracts, and the same
civil law traditions from which we draw ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P. Eusebio
Construction, Inc.,58 manifested preference for allowing the parties to select the law
applicable to their contract":chanroblesvirtuallawlibrary
No conflicts rule on essential validity of contracts is expressly provided for in our laws. The
rule followed by most legal systems, however, is that the intrinsic validity of a contract must
be governed by the lex contractus or "proper law of the contract." This is the law voluntarily
agreed upon by the parties (the lex loci voluntatis) or the law intended by them either
expressly or implicitly (the lex loci intentionis). The law selected may be implied from such
factors as substantial connection with the transaction, or the nationality or domicile of the
parties. Philippine courts would do well to adopt the first and most basic rule in most legal
systems, namely, to allow the parties to select the law applicable to their contract, subject
to the limitation that it is not against the law, morals, or public policy of the forum and that
the chosen law must bear a substantive relationship to the transaction.59 (Emphasis in the
original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the application
of the laws of Saudi Arabia. It insists that the need to comply with these stipulations calls
into operation the doctrine of forum non conveniens and, in turn, makes it necessary for
Philippine tribunals to refrain from exercising jurisdiction.
As mentioned, contractual choice of laws factors into transnational litigation in any or a
combination of four (4) ways. Moreover, forum non conveniens relates to one of these:
choosing between multiple possible fora.
Nevertheless, the possibility of parallel litigation in multiple fora along with the host of
difficulties it poses is not unique to transnational litigation. It is a difficulty that similarly
arises in disputes well within the bounds of a singe jurisdiction.
When parallel litigation arises strictly within the context of a single jurisdiction, such rules as
those on forum shopping, litis pendentia, and res judicata come into operation. Thus, in the
Philippines, the 1997 Rules on Civil Procedure provide for willful and deliberate forum
shopping as a ground not only for summary dismissal with prejudice but also for citing
parties and counsels in direct contempt, as well as for the imposition of administrative
75
sanctions.60 Likewise, the same rules expressly provide that a party may seek the dismissal
of a Complaint or another pleading asserting a claim on the ground "[t]hat there is another
action pending between the same parties for the same cause," i.e., litis pendentia, or "[t]hat
the cause of action is barred by a prior judgment," 61 i.e., res judicata.
Forum non conveniens, like the rules of forum shopping, litis pendentia, and res judicata, is a
means of addressing the problem of parallel litigation. While the rules of forum
shopping, litis pendentia, and res judicata are designed to address the problem of parallel
litigation within a single jurisdiction, forum non conveniens is a means devised to address
parallel litigation arising in multiple jurisdictions.
Forum non conveniens literally translates to "the forum is inconvenient." 62 It is a concept in
private international law and was devised to combat the "less than honorable" reasons and
excuses that litigants use to secure procedural advantages, annoy and harass defendants,
avoid overcrowded dockets, and select a "friendlier" venue. 63 Thus, the doctrine of forum
non conveniens addresses the same rationale that the rule against forum shopping does,
albeit on a multijurisdictional scale.
Forum non conveniens, like res judicata,64 is a concept originating in common
law.65 However, unlike the rule on res judicata, as well as those on litis pendentia and forum
shopping, forum non conveniens finds no textual anchor, whether in statute or in procedural
rules, in our civil law system. Nevertheless, jurisprudence has applied forum non
conveniens as basis for a court to decline its exercise of jurisdiction. 66
Forum non conveniens is soundly applied not only to address parallel litigation and
undermine a litigant's capacity to vex and secure undue advantages by engaging in forum
shopping on an international scale. It is also grounded on principles of comity and judicial
efficiency.
Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction on
account of forum non conveniens is a deferential gesture to the tribunals of another
sovereign. It is a measure that prevents the former's having to interfere in affairs which are
better and more competently addressed by the latter. Further, forum non conveniens entails
a recognition not only that tribunals elsewhere are better suited to rule on and resolve a
controversy, but also, that these tribunals are better positioned to enforce judgments and,
ultimately, to dispense justice. Forum non conveniens prevents the embarrassment of an
awkward situation where a tribunal is rendered incompetent in the face of the greater
capability both analytical and practical of a tribunal in another jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is as much a matter of
efficiency and economy as it is a matter of international courtesy. A court would effectively
be neutering itself if it insists on adjudicating a controversy when it knows full well that it is
in no position to enforce its judgment. Doing so is not only an exercise in futility; it is an act
of frivolity. It clogs the dockets of a.tribunal and leaves it to waste its efforts on affairs,

which, given transnational exigencies, will be reduced to mere academic, if not trivial,
exercises.
Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law
cases, may refuse impositions on its jurisdiction where it is not the most 'convenient' or
available forum and the parties are not precluded from seeking remedies
elsewhere."67 In Puyat v. Zabarte,68 this court recognized the following situations as among
those that may warrant a court's desistance from exercising
jurisdiction:chanroblesvirtuallawlibrary
1) The belief that the matter can be better tried and decided elsewhere, either because
the main aspects of the case transpired in a foreign jurisdiction or the material
witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum
shopping[,] merely to secure procedural advantages or to convey or harass the
defendant;
3) The unwillingness to extend local judicial facilities to non residents or aliens when the
docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to be
maintained; and
5) The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,70 this
court underscored that a Philippine court may properly assume jurisdiction over a case if it
chooses to do so to the extent: "(1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and (3) that the Philippine Court has or is likely to have
power to enforce its decision."71
The use of the word "may" (i.e., "may refuse impositions on its jurisdiction"72) in the
decisions shows that the matter of jurisdiction rests on the sound discretion of a court.
Neither the mere invocation of forum non conveniens nor the averment of foreign elements
operates to automatically divest a court of jurisdiction. Rather, a court should renounce
jurisdiction only "after 'vital facts are established, to determine whether special
circumstances' require the court's desistance."73 As the propriety of applying forum non
conveniens is contingent on a factual determination, it is, therefore, a matter of defense. 74
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure is exclusive in
its recital of the grounds for dismissal that are exempt from the omnibus motion rule: (1)
lack of jurisdiction over the subject matter; (2) litis pendentia; (3) res judicata; and (4)
prescription. Moreover, dismissal on account offorum non conveniens is a fundamentally
discretionary matter. It is, therefore, not a matter for a defendant to foist upon the court at
his or her own convenience; rather, it must be pleaded at the earliest possible opportunity.
76
On the matter of pleading forum non conveniens, we state the rule, thus: Forum non
conveniens must not only be clearly pleaded as a ground for dismissal; it must be pleaded
as such at the earliest possible opportunity. Otherwise, it shall be deemed waived.
This court notes that in Hasegawa,76 this court stated that forum non conveniens is not a
ground for a motion to dismiss. The factual ambience of this case however does not squarely
raise the viability of this doctrine. Until the opportunity comes to review the use of motions
to dismiss for parallel litigation, Hasegawa remains existing doctrine.
Consistent with forum non conveniens as fundamentally a factual matter, it is imperative
that it proceed from & factually established basis. It would be improper to dismiss an action
pursuant to forum non conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show that a prior suit has, in fact,
been brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered by duplicitous litigation,
the embarrassment of intruding into the affairs of another sovereign, and the squandering of
judicial efforts in resolving a dispute already lodged and better resolved elsewhere. As has
been noted:chanroblesvirtuallawlibrary
A case will not be stayed o dismissed on [forum] non conveniens grounds unless the plaintiff
is shown to have an available alternative forum elsewhere. On this, the moving party bears
the burden of proof.
A number of factors affect the assessment of an alternative forum's adequacy. The statute of
limitations abroad may have run, of the foreign court may lack either subject matter or
personal jurisdiction over the defendant. . . . Occasionally, doubts will be raised as to the
integrity or impartiality of the foreign court (based, for example, on suspicions of corruption
or bias in favor of local nationals), as to the fairness of its judicial procedures, or as to is
operational efficiency (due, for example, to lack of resources, congestion and delay, or
interfering circumstances such as a civil unrest). In one noted case, [it was found] that
delays of 'up to a quarter of a century' rendered the foreign forum... inadequate for these
purposes.77cralawlawlibrary
We deem it more appropriate and in the greater interest of prudence that a defendant not
only allege supposed dangerous tendencies in litigating in this jurisdiction; the defendant
must also show that such danger is real and present in that litigation or dispute resolution
has commenced in another jurisdiction and that a foreign tribunal has chosen to exercise
jurisdiction.
III
Forum non conveniens finds no application and does not operate to divest Philippine
tribunals of jurisdiction and to require the application of foreign law.
Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the Cabin

Attendant contracts that require the application of the laws of Saudi Arabia.
Forum non conveniens relates to forum, not to the choice of governing law. Thai forum non
conveniens may ultimately result in the application of foreign law is merely an incident of its
application. In this strict sense, forum non conveniens is not applicable. It is not the primarily
pivotal consideration in this case.
In any case, even a further consideration of the applicability of forum non conveniens on the
incidental matter of the law governing respondents' relation with Saudia leads to the
conclusion that it is improper for Philippine tribunals to divest themselves of jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents
must grapple with two (2) considerations: first, the availability and adequacy of recourse to
a foreign tribunal; and second, the question of where, as between the forum court and a
foreign court, the balance of interests inhering in a dispute weighs more heavily.
The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign
tribunal and can be resolved by juxtaposing the competencies and practical circumstances
of the tribunals in alternative fora. Exigencies, like the statute of limitations, capacity to
enforce orders and judgments, access to records, requirements for the acquisition of
jurisdiction, and even questions relating to the integrity of foreign courts, may render
undesirable or even totally unfeasible recourse to a foreign court. As mentioned, we
consider it in the greater interest of prudence that a defendant show, in pleading forum non
conveniens, that litigation has commenced in another jurisdiction and that a foieign tribunal
has, in fact, chosen to exercise jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a
dispute: first, the vinculum which the parties and their relation have to a given jurisdiction;
and second, the public interest that must animate a tribunal, in its capacity as an agent of
the sovereign, in choosing to assume or decline jurisdiction. The first is more concerned with
the parties, their personal circumstances, and private interests; the second concerns itself
with the state and the greater social order.
In considering the vinculum, a court must look into the preponderance of linkages which the
parties and their transaction may have to either jurisdiction. In this respect, factors, such as
the parties' respective nationalities and places of negotiation, execution, performance,
engagement or deployment, come into play.
In considering public interest, a court proceeds with a consciousness that it is an organ of
the state. It must, thus, determine if the interests of the sovereign (which acts through it)
are outweighed by those of the alternative jurisdiction. In this respect, the court delves into
a consideration of public policy. Should it find that public interest weighs more heavily in
favor of its assumption of jurisdiction, it should proceed in adjudicating the dispute, any
doubt or .contrary view arising from the preponderance of linkages notwithstanding.
77
Our law on contracts recognizes the validity of contractual choice of law provisions. Where
such provisions exist, Philippine tribunals, acting as the forum court, generally defer to the
parties' articulated choice.
This is consistent with the fundamental principle of autonomy of contracts. Article 1306 of
the Civ:l Code expressly provides that "[t]he contracting parties may establish 'such
stipulations, clauses, terms and conditions as they may deem convenient." 78 Nevertheless,
while a Philippine tribunal (acting as the forum court) is called upon to respect the parties'
choice of governing law, such respect must not be so permissive as to lose sight of
considerations of law, morals, good customs, public order, or public policy that underlie the
contract central to the controversy.
Specifically with respect to public policy, in Pakistan International Airlines Corporation v.
Ople,79 this court explained that:chanroblesvirtuallawlibrary
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 inta 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.80 (Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure the
fundamental equality before the law of women and men." Contrasted with Article II, Section
1 of the 1987 Constitution's statement that "[n]o person shall ... be denied the equal
protection of the laws," Article II, Section 14 exhorts the State to "ensure." This does not only
mean that the Philippines shall not countenance nor lend legal recognition and approbation
to measures that discriminate on the basis of one's being male or female. It imposes an
obligation to actively engage in securing the fundamental equality of men and women.
The Convention on the Elimination of all Forms of Discrimination against Women (CEDAW),
signed and ratified by the Philippines on July 15, 1980, and on August 5, 1981,
respectively,81 is part of the law of the land. In view of the widespread signing and
ratification of, as well as adherence (in practice) to it by states, it may even be said that
many provisions of the CEDAW may have become customary international law. The CEDAW
gives effect to the Constitution's policy statement in Article II, Section 14. Article I of the
CEDAW defines "discrimination against women" as:chanroblesvirtuallawlibrary
any distinction, exclusion or restriction made on the basis of sex which has the effect or
purpose of impairing or nullifying the recognition, enjoyment or exercise by women,
irrespective of their marital status, on a basis of equality of men and women, of human
rights and fundamental freedoms in the political, economic, social, cultural, civil or any other
field.82cralawlawlibrary
The constitutional exhortation to ensure fundamental equality, as illumined by its enabling
law, the CEDAW, must inform and animate all the actions of all personalities acting on behalf
of the State. It is, therefore, the bounden duty of this court, in rendering judgment on the

disputes brought before it, to ensure that no discrimination is heaped upon women on the
mere basis of their being women. This is a point so basic and central that all our discussions
and pronouncements regardless of whatever averments there may be of foreign law
must proceed from this premise.
So informed and animated, we emphasize the glaringly discriminatory nature of Saudia's
policy. As argued by respondents, Saudia's policy entails the termination of employment of
flight attendants who become pregnant. At the risk of stating the obvious, pregnancy is an
occurrence that pertains specifically to women. Saudia's policy excludes from and restricts
employment on the basis of no other consideration but sex.
We do not lose sight of the reality that pregnancy does present physical limitations that may
render difficult the performance of functions associated with being a flight attendant.
Nevertheless, it would be the height of iniquity to view pregnancy as a disability so
permanent and immutable that, it must entail the termination of one's employment. It is
clear to us that any individual, regardless of gender, may be subject to exigencies that limit
the performance of functions. However, we fail to appreciate how pregnancy could be such
an impairing occurrence that it leaves no other recourse but the complete termination of the
means through which a woman earns a living.
Apart from the constitutional policy on the fundamental equality before the law of men and
women, it is settled that contracts relating to labor and employment are impressed with
public interest. Article 1700 of the Civil Code provides that "[t]he relation between capital
and labor are not merely contractual. They are so impressed with public interest that labor
contracts must yield to the common good."
Consistent with this, this court's pronouncements in Pakistan International Airlines
Corporation83 are clear and unmistakable:chanroblesvirtuallawlibrary
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which
specifies, firstly, the law of Pakistan as the applicable law of the agreement, and, secondly,
lays the venue for settlement of any dispute arising out of or in connection with the
agreement "only [in] courts of Karachi, Pakistan". The first clause of paragraph 10 cannot be
invoked to prevent the application of Philippine labor laws and'regulations to the subject
matter of this case, i.e., the employer-employee relationship between petitioner PIA and
private respondents. We have already pointed out that the relationship is much affected
with public interest and that the otherwise applicable Philippine laws and regulations cannot
be rendered illusory by the parties agreeing upon some other law to govern their
relationship. . . . Under these circumstances, paragraph 10 of the employment agreement
cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested
upon them by Philippine law.84 (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the illegal termination
of respondents' employment, this case is immutably a matter of public interest and public
policy. Consistent with clear pronouncements in law and jurisprudence, Philippine laws
properly find application in and govern this case. 'Moreover, as this premise for Saudia's
78
insistence on the application forum non conveniens has been shattered, it follows that
Philippine tribunals may properly assume jurisdiction over the present controversy. Philippine
jurisprudence provides ample illustrations of when a court's renunciation of jurisdiction on
account of forum non conveniens is proper or improper.'
In Philsec Investment Corporation v. Court of Appeals,85 this court noted that the trial court
failed to consider that one of the plaintiffs was a domestic corporation, that one of the
defendants was a Filipino, and that it was the extinguishment of the latter's debt that was
the object of the transaction subject of the litigation. Thus, this court held, among others,
that the trial court's refusal to assume jurisdiction was not justified by forum non
conveniens and remanded the case to the trial court.
In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained the trial court's
assumption of jurisdiction considering that the trial court could properly enforce judgment
on the petitioner which was a foreign corporation licensed to do business in the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no reason to disturb the trial
court's assumption of jurisdiction over a case in which, as noted by the trial court, "it is more
convenient to hear and decide the case in the Philippines because Todaro [the plaintiff]
resides in the Philippines and the contract allegedly breached involve[d] employment in the
Philippines."88
In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this court held that the fact that
the complainant in an illegal dismissal case was a Canadian citizen and a repatriate did not
warrant the application of forum non conveniens considering that: (1) the Labor Code does
not include forum non conveniens as a ground for the dismissal of a complaint for illegal
dismissal; (2) the propriety of dismissing a case based on forum non conveniens requires a
factual determination; and (3) the requisites for assumption of jurisdiction as laid out
in Bank of America, NT&SA90 were all satisfied.
In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations
Commission91 that the National Labor Relations Q Commission was a seriously inconvenient
forum. In that case, private respondent Marcelo G. Santos was working in the Sultanate of
Oman when he received a letter from Palace Hotel recruiting him for employment in Beijing,
China. Santos accepted the offer. Subsequently, however, he was released from employment
supposedly due to business reverses arising from political upheavals in China (i.e., the
Tiananmen Square incidents of 1989). Santos later filed a Complaint for illegal dismissal
impleading Palace Hotel's General Manager, Mr. Gerhard Schmidt, the Manila Hotel
International Company Ltd. (which was, responsible for training Palace Hotel's personnel and
staff), and the Manila Hotel Corporation (which owned 50% of Manila Hotel International
Company Ltd.'s capital stock).
In ruling against the National Labor Relations Commission's exercise of jurisdiction, this court
noted that the main aspects of the case transpired in two (2) foreign jurisdictions, Oman and

China, and that the case involved purely foreign elements. Specifically, Santos was directly
hired by a foreign employer through correspondence sent to Oman. Also, the proper
defendants were neither Philippine nationals nor engaged in business in the Philippines,
while the main witnesses were not residents of the Philippines. Likewise, this court noted
that the National Labor Relations Commission was in no position to conduct the following:
first, determine the law governing the employment contract, as it was entered into in foreign
soil; second, determine the facts, as Santos' employment was terminated in Beijing; and
third, enforce its judgment, since Santos' employer, Palace Hotel, was incorporated under
the laws of China and was not even served with summons.
Contrary to Manila Hotel, the case now before us does not entail a preponderance of
linkages that favor a foreign jurisdiction.
Here, the circumstances of the parties and their relation do not approximate the
circumstances enumerated in Puyat,92 which this court recognized as possibly justifying the
desistance of Philippine tribunals from exercising jurisdiction.
First, there is no basis for concluding that the case can be more conveniently tried
elsewhere. As established earlier, Saudia is doing business in the Philippines. For their part,
all four (4) respondents are Filipino citizens maintaining residence in the Philippines and,
apart from their previous employment with Saudia, have no other connection to the
Kingdom of Saudi Arabia. It would even be to respondents' inconvenience if this case were to
be tried elsewhere.
Second, the records are bereft of any indication that respondents filed their Complaint in an
effort to engage in forum shopping or to vex and inconvenience Saudia.
Third, there is no indication of "unwillingness to extend local judicial facilities to non-
residents or aliens."93 That Saudia has managed to bring the present controversy all the way
to this court proves this.
Fourth, it cannot be said that the local judicial machinery is inadequate for effectuating the
right sought to be maintained. Summons was properly served on Saudia and jurisdiction
over its person was validly acquired.
Lastly, there is not even room for considering foreign law. Philippine law properly governs
the present dispute.
As the question of applicable law has been settled, the supposed difficulty of ascertaining
foreign law (which requires the application of forum non conveniens) provides no
insurmountable inconvenience or special circumstance that will justify depriving Philippine
tribunals of jurisdiction.
Even if we were to assume, for the sake of discussion, that it is the laws of Saudi Arabia
79
which should apply, it does not follow that Philippine tribunals should refrain from exercising
jurisdiction. To. recall our pronouncements in Puyat,94 as well as in Bank of America,
NT&SA,95 it is not so much the mere applicability of foreign law which calls into
operation forum non conveniens. Rather, what justifies a court's desistance from exercising
jurisdiction is "[t]he difficulty of ascertaining foreign law"96 or the inability of a "Philippine
Court to make an intelligent decision as to the law[.]" 97
Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e., "to
make an intelligent decision"98), Philippine tribunals may apply the foreign law selected by
the parties. In fact, (albeit without meaning to make a pronouncement on the accuracy and
reliability of respondents' citation) in this case, respondents themselves have made
averments as to the laws of Saudi Arabia. In their Comment, respondents
write:chanroblesvirtuallawlibrary
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful to
terminate the employment of any woman by virtue of pregnancy. The law in Saudi Arabia is
even more harsh and strict [sic] in that no employer can terminate the employment of a
female worker or give her a warning of the same while on Maternity Leave, the specific
provision of Saudi Labor Laws on the matter is hereto quoted as
follows:chanroblesvirtuallawlibrary
"An employer may not terminate the employment of a female worker or give her a warning
of the same while on maternity leave." (Article 155, Labor Law of the Kingdom of Saudi
Arabia, Royal Decree No. M/51.)99cralawlawlibrary
All told, the considerations for assumption of jurisdiction by Philippine tribunals as outlined
in Bank of America, NT&SA100 have been satisfied. First, all the parties are based in the
Philippines and all the material incidents transpired in this jurisdiction. Thus, the parties may
conveniently seek relief from Philippine tribunals. Second, Philippine tribunals are in a
position to make an intelligent decision as to the law and the facts. Third, Philippine tribunals
are in a position to enforce their decisions. There is no compelling basis for ceding
jurisdiction to a foreign tribunal. Quite the contrary, the immense public policy
considerations attendant to this case behoove Philippine tribunals to not shy away from their
duty to rule on the case.chanRoblesvirtualLawlibrary
IV
Respondents were illegally terminated.
In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary resignation as "the
voluntary act of an employee who is in a situation where one believes that personal reasons
cannot be sacrificed in favor of the exigency of the service, and one has no other choice but
to dissociate oneself from employment. It is a formal pronouncement or relinquishment of an
office, with the intention of relinquishing the office accompanied by the act of
relinquishment."102 Thus, essential to the act of resignation is voluntariness. It must be the
result of an employee's exercise of his or her own will.

In the same case of Bilbao, this court advanced a means for determining whether an
employee resigned voluntarily:chanroblesvirtuallawlibrary
As the intent to relinquish must concur with the overt act of relinquishment, the acts of the
employee before and after the alleged resignation must be considered in determining
whether he or she, in fact, intended, to sever his or her employment.103(Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of work because
'continued employment is rendered impossible, unreasonable or unlikely, as an offer
involving a demotion in rank or a diminution in pay' and other benefits." 104
In Penaflor v. Outdoor Clothing Manufacturing Corporation,105 constructive dismissal has
been described as tantamount to "involuntarily [sic] resignation due to the harsh, hostile,
and unfavorable conditions set by the employer."106 In the same case, it was noted that
"[t]he gauge for constructive dismissal is whether a reasonable person in the employee's
position would feel compelled to give up his employment under the prevailing
circumstances."107
Applying the cited standards on resignation and constructive dismissal, it is clear that
respondents were constructively dismissed. Hence, their termination was illegal.
The termination of respondents' employment happened when they were pregnant and
expecting to incur costs on account of child delivery and infant rearing. As noted by the
Court of Appeals, pregnancy is a time when they need employment to sustain their
families.108 Indeed, it goes against normal and reasonable human behavior to abandon one's
livelihood in a time of great financial need.
It is clear that respondents intended to remain employed with Saudia. All they did was avail
of their maternity leaves. Evidently, the very nature of a maternity leave means that a
pregnant employee will not report for work only temporarily and that she will resume the
performance of her duties as soon as the leave allowance expires.
It is also clear that respondents exerted all efforts to' remain employed with Saudia. Each of
them repeatedly filed appeal letters (as much as five [5] letters in the case of Rebesencio 109)
asking Saudia to reconsider the ultimatum that they resign or be terminated along with the
forfeiture of their benefits. Some of them even went to Saudia's office to personally seek
reconsideration.110
Respondents also adduced a copy of the "Unified Employment Contract for Female Cabin
Attendants."111 This contract deemed void the employment of a flight attendant who
becomes pregnant and threatened termination due to lack of medical fitness. 112 The threat
of termination (and the forfeiture of benefits that it entailed) is enough to compel a
reasonable person in respondents' position to give up his or her employment.
Saudia draws attention to how respondents' resignation letters were supposedly made in
their own handwriting. This minutia fails to surmount all the other indications negating any
80
voluntariness on respondents' part. If at all, these same resignation letters are proof of how
any supposed resignation did not arise from respondents' own initiative. As earlier pointed
out, respondents' resignations were executed on Saudia's blank letterheads that Saudia had
provided. These letterheads already had the word "RESIGNATION" typed on the subject
portion of their respective headings when these were handed to
respondents.113ChanRoblesVirtualawlibrary
"In termination cases, the burden of proving just or valid cause for dismissing an employee
rests on the employer."114 In this case, Saudia makes much of how respondents supposedly
completed their exit interviews, executed quitclaims, received their separation pay, and took
more than a year to file their Complaint.115 If at all, however, these circumstances prove only
the fact of their occurrence, nothing more. The voluntariness of respondents' departure from
Saudia is non sequitur.
Mere compliance with standard procedures or processes, such as the completion of their exit
interviews, neither negates compulsion nor indicates voluntariness.
As with respondent's resignation letters, their exit interview forms even support their claim
of illegal dismissal and militates against Saudia's arguments. These exit interview forms, as
reproduced by Saudia in its own Petition, confirms the unfavorable conditions as regards
respondents' maternity leaves. Ma. Jopette's and Loraine's exit interview forms are
particularly telling:chanroblesvirtuallawlibrary
a. From Ma. Jopette's exit interview form:
3. In what respects has the job met or failed to meet your expectations?
THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE. 116
b. From Loraine's exit interview form:
1. What are your main reasons for leaving Saudia? What company are you joining?
xxx xxx xxx
Others
CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY) 117
As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v. Paramio,118 this
court noted that "[i]f (a) there is clear proof that the waiver was wangled from an
unsuspecting or gullible person; or (b) the terms of the settlement are unconscionable, and
on their face invalid, such quitclaims must be struck down as invalid or
illegal."119 Respondents executed their quitclaims after having been unfairly given an
ultimatum to resign or be terminated (and forfeit their benefits).chanRoblesvirtualLawlibrary

V respondents are likewise entitled to attorney's fees in the amount of 10% of the total
Having been illegally and unjustly dismissed, respondents are entitled to full backwages and
benefits from the time of their termination until the finality of this Decision. They are likewise
entitled to separation pay in the amount of one (1) month's salary for every year of service
until the fmality of this Decision, with a fraction of a year of at least six (6) months being
counted as one (1) whole year.
Moreover, "[m]oral damages are awarded in termination cases where the employee's
dismissal was attended by bad faith, malice or fraud, or where it constitutes an act
oppressive to labor, or where it was done in a manner contrary to morals, good customs or
public policy."120 In this case, Saudia terminated respondents' employment in a manner that
is patently discriminatory and running afoul of the public interest that underlies employer-
employee relationships. As such, respondents are entitled to moral damages.
To provide an "example or correction for the public good" 121 as against such discriminatory
and callous schemes, respondents are likewise entitled to exemplary damages.
In a long line of cases, this court awarded exemplary damages to illegally dismissed
employees whose "dismissal[s were] effected in a wanton, oppressive or malevolent
manner."122 This court has awarded exemplary damages to employees who were terminated
on such frivolous, arbitrary, and unjust grounds as membership in or involvement with labor
unions,123 injuries sustained in the course of employment,124 development of a medical
condition due to the employer's own violation of the employment contract, 125 and lodging of
a Complaint against the employer. 126 Exemplary damages were also awarded to employees
who were deemed illegally dismissed by an employer in an attempt to evade compliance
with statutorily established employee benefits.127 Likewise, employees dismissed for
supposedly just causes, but in violation of due process requirements, were awarded
exemplary damages.128
These examples pale in comparison to the present controversy. Stripped of all unnecessary
complexities, respondents were dismissed for no other reason than simply that they were
pregnant. This is as wanton, oppressive, and tainted with bad faith as any reason for
termination of employment can be. This is no ordinary case of illegal dismissal. This is a case
of manifest gender discrimination. It is an affront not only to our statutes and policies on
employees' security of tenure, but more so, to the Constitution's dictum of fundamental
equality between men and women.129
The award of exemplary damages is, therefore, warranted, not only to remind employers of
the need to adhere to the requirements of procedural and substantive due process in
termination of employment, but more importantly, to demonstrate that gender
discrimination should in no case be countenanced.
Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal,
81
monetary award.130
VI
Petitioner Brenda J. Betia may not be held liable.
A corporation has a personality separate and distinct from those of the persons composing
it. Thus, as a rule, corporate directors and officers are not liable for the illegal termination of
a corporation's employees. It is only when they acted in bad faith or with malice that they
become solidarity liable with the corporation.131
In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever
Electrical,132 this court clarified that "[b]ad faith does not connote bad judgment or
negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of
wrong; it means breach of a known duty through some motive or interest or ill will; it
partakes of the nature of fraud."133
Respondents have not produced proof to show that Brenda J. Betia acted in bad faith or with
malice as regards their termination. Thus, she may not be held solidarity liable with
Saudia.cralawred
WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not
solidarity liable with petitioner Saudi Arabian Airlines, and second, that petitioner Saudi
Arabian Airlines is liable for moral and exemplary damages. The June 16, 2011 Decision and
the September 13, 2011 Resolution of the Court of Appeals in CA-G.R. SP. No. 113006 are
hereby AFFIRMED in all other respects. Accordingly, petitioner Saudi Arabian Airlines is
ordered to pay respondents:
(1) Full backwages and all other benefits computed from the respective dates in which each
of the respondents were illegally terminated until the finality of this Decision;
(2) Separation pay computed from the respective dates in which each of the respondents
commenced employment until the finality of this Decision at the rate of one (1) month's
salary for every year of service, with a fraction of a year of at least six (6) months being
counted as one (1) whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;
(4) Exemplary damages in the amount of P200,000.00 per respondent; and
(5) Attorney's fees equivalent to 10% of the total award.
Interest of 6% per annum shall likewise be imposed on the total judgment award from the
finality of this Decision until full satisfaction thereof.

This case is REMANDED to the Labor Arbiter to make a detailed computation of the
amounts due to respondents which petitioner Saudi Arabian Airlines should pay without
delay.
SO ORDERED.
13. G.R. NOS. 178382-83
CONTINENTAL MICRONESIA, INC., Petitioner,
vs. JOSEPH BASSO, Respondent.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court
assailing the Decision2 dated May 23, 2006 and Resolution3 dated June 19, 2007 of the
Court of Appeals in the consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281.
These assailed Decision and Resolution set aside the Decision4 dated November 28, 2003 of
the National Labor Relations Commission (NLRC) declaring Joseph Basso's (Basso) dismissal
illegal, and ordering the payment of separation pay as alternative to reinstatement and full
backwages until the date of the Decision.
The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation organized and e:xisting
under the laws of and domiciled in the United States of America (US). It is licensed to do
business in the Philippines.5 Basso, a US citizen, resided in the Philippines prior to his
death.6
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden), Managing Director-Asia of
Continental Airlines, Inc. (Continental), offered Basso the position of General Manager of the
Philippine Branch of Continental. Basso accepted the offer.7
82
It was not until much later that Mr. Braden, who had since returned to the US, sent Basso the
employment contract8 dated February 1, 1991, which Mr. Braden had already signed. Basso
then signed the employment contract and returned it to Mr. Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of Continental, with Basso
retaining his position as General Manager.9
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr. Schulz), who was
then CMIs Vice President of Marketing and Sales, informing Basso that he has agreed to
work in CMI as a consultant on an "as needed basis" effective February 1, 1996 to July 31,
1996. The letter also informed Basso that: (1) he will not receive any monetary
compensation but will continue being covered by the insurance provided by CMI; (2) he will
enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for the payment of
housing lease for 12 months.10
On January 11, 1996, Basso wrote a counter-proposal11 to Mr. Schulz regarding his
employment status in CMI. On March 14, 1996, Basso wrote another letter addressed to Ms.
Marty Woodward (Ms. Woodward) of CMIs Human Resources Department inquiring about the
status of his employment.12 On the same day, Ms. Woodward responded that pursuant to
the employment contract dated February 1, 1991, Basso could be terminated at will upon a
thirty-day notice. This notice was allegedly the letter Basso received from Mr. Schulz on
December 20, 1995. Ms. Woodward also reminded Basso of the telephone conversation
between him, Mr. Schulz and Ms. Woodward on December 19, 1995, where they informed
him of the companys decision to relieve him as General Manager. Basso, instead, was
offered the position of consultant to CMI. Ms. Woodward also informed Basso that CMI
rejected his counter-proposal and, thus, terminated his employment effective January 31,
1996. CMI offered Basso a severance pay, in consideration of the Php1,140,000.00 housing
advance that CMI promised him13 Basso filed a Complaint for Illegal Dismissal with Moral
and Exemplary Damages against CMI on December 19, 1996.14 Alleging the presence of
foreign elements, CMI filed a Motion to Dismiss15 dated February 10, 1997 on the ground of
lack of jurisdiction over the person of CMI and the subject matter of the controversy. In an
Order16 dated August 27, 1997, the Labor Arbiter granted the Motion to Dismiss. Applying
the doctrine of lex loci contractus, the Labor Arbiter held that the terms and provisions of
the employment contract show that the parties did not intend to apply our Labor Code
(Presidential Decree No. 442). The Labor Arbiter also held that no employer-employee
relationship existed between Basso and the branch office of CMI in the Philippines, but
between Basso and the foreign corporation itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the determination of certain
facts to settle the issue on jurisdiction. NLRC ruled that the issue on whether the principle of
lex loci contractus or lex loci celebrationis should apply has to be further threshed out.17
Labor Arbiters Ruling

Labor Arbiter Madjayran H. Ajan in his Decision18 dated September 24, 1999 dismissed the
case for lack of merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was executed in the US
"since the letter-offer was under the Texas letterhead and the acceptance of Complainant
was returned there."19 Thus, applying the doctrine of lex loci celebrationis, US laws apply.
Also, applying lex loci contractus, the Labor Arbiter ruled that the parties did not intend to
apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that Philippine laws
were not written into it. More specifically, the Philippine law on taxes and the Labor Code
were not intended by the parties to apply, otherwise Par. 7 on the payment by Complainant
U.S. Federal and Home State income taxes, and Pars. 22/23 on termination by 30-day prior
notice, will not be there. The contract was prepared in contemplation of Texas or U.S. laws
where Par. 7 is required and Pars. 22/23 is allowed.20
The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the
allegations of CMI that Basso committed a series of acts that constitute breach of trust and
loss of confidence.21
The Labor Arbiter, however, found CMI to have voluntarily submitted to his offices
jurisdiction. CMI participated in the proceedings, submitted evidence on the merits of the
case, and sought affirmative relief through a motion to dismiss.22
NLRCs Ruling
On appeal, the NLRC Third Division promulgated its Decision23 dated November 28, 2003,
the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET ASIDE.
Respondent CMI is ordered to pay complainant the amount of US$5,416.00 for failure to
comply with the due notice requirement. The other claims are dismissed.
SO ORDERED.24
The NLRC did not agree with the pronouncement of the Labor Arbiter that his office has no
jurisdiction over the controversy. It ruled that the Labor Arbiter acquired jurisdiction over the
case when CMI voluntarily submitted to his offices jurisdiction by presenting evidence,
advancing arguments in support of the legality of its acts, and praying for reliefs on the
merits of the case.25
On the merits, the NLRC agreed with the Labor Arbiter that Basso was dismissed for just and
valid causes on the ground of breach of trust and loss of confidence. The NLRC ruled that
under the applicable rules on loss of trust and confidence of a managerial employee, such as
83
Basso, mere existence of a basis for believing that such employee has breached the trust of
his employer suffices. However, the NLRC found that CMI denied Basso the required due
process notice in his dismissal.26
Both CMI and Basso filed their respective Motions for Reconsideration dated January 15,
200427 and January 8, 2004.28 Both motions were dismissed in separate Resolutions dated
March 15, 200429 and February 27, 2004,30 respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals docketed
as CA-G.R. SP No. 83938.31 Basso imputed grave abuse of discretion on the part of the NLRC
in ruling that he was validly dismissed. CMI filed its own Petition for Certiorari dated May 13,
2004 docketed as CA-G.R. SP No. 84281,32 alleging that the NLRC gravely abused its
discretion when it assumed jurisdiction over the person of CMI and the subject matter of the
case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two cases33
and ordered the parties to file their respective Memoranda.
The Court of Appeals Decision
The Court of Appeals promulgated the now assailed Decision34 dated May 23, 2006, the
relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281 is DENIED DUE
COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN DUE
COURSE and GRANTED, and accordingly, the assailed Decision dated November 28, 2003
and Resolution dated February 27, 2004 of the NLRC are SET ASIDE and VACATED. Instead
judgment is rendered hereby declaring the dismissal of Basso illegal and ordering
Continental to pay him separation pay equivalent to one (1) month pay for every year of
service as an alternative to reinstatement. Further, ordering Continental to pay Basso his full
backwages from the date of his said illegal dismissal until date of this decision. The claim for
moral and exemplary damages as well as attorneys fees are dismissed.35
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over the
subject matter of the case and over the parties. The Court of Appeals explained that
jurisdiction over the subject matter of the action is determined by the allegations of the
complaint and the law. Since the case filed by Basso is a termination dispute that is
"undoubtedly cognizable by the labor tribunals", the Labor Arbiter and the NLRC had
jurisdiction to rule on the merits of the case. On the issue of jurisdiction over the person of
the parties, who are foreigners, the Court of Appeals ruled that jurisdiction over the person
of Basso was acquired when he filed the complaint for illegal dismissal, while jurisdiction
over the person of CMI was acquired through coercive process of service of summons to its

agent in the Philippines. The Court of Appeals also agreed that the active participation of
CMI in the case rendered moot the issue on jurisdiction.
On the merits of the case, the Court of Appeals declared that CMI illegally dismissed Basso.
The Court of Appeals found that CMIs allegations of loss of trust and confidence were not
established. CMI "failed to prove its claim of the incidents which were its alleged bases for
loss of trust or confidence."36 While managerial employees can be dismissed for loss of
trust and confidence, there must be a basis for such loss, beyond mere whim or caprice.
After the parties filed their Motions for Reconsideration,37 the Court of Appeals promulgated
Resolution38 dated June 19, 2007 denying CMIs motion, while partially granting Bassos as
to the computation of backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE FACTUAL FINDINGS
OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY INTO WHETHER OR NOT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE LABOR ARBITER
AND THE NLRC HAD JURISDICTION TO HEAR AND TRY THE ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT BASSO WAS NOT
VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC in the
illegal dismissal case. The first and third issues will be discussed jointly.
The labor tribunals had jurisdiction
over the parties and the subject
matter of the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to determine proper
jurisdiction over the parties and the subject matter of the case. It also alleges that the
existence of foreign elements calls for the application of US laws and the doctrines of lex loci
celebrationis (the law of the place of the ceremony), lex loci contractus (law of the place
where a contract is executed), and lex loci intentionis (the intention of the parties as to the
law that should govern their agreement). CMI also invokes the application of the rule of
84
forum non conveniens to determine the propriety of the assumption of jurisdiction by the
labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first. Where
the facts establish the existence of foreign elements, the case presents a conflict-of-laws
issue.39 The foreign element in a case may appear in different forms, such as in this case,
where one of the parties is an alien and the other is domiciled in another state.
In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of conflict-of-laws
problems, three consecutive phases are involved: jurisdiction, choice of law, and recognition
and enforcement of judgments. In resolving the conflicts problem, courts should ask the
following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the parties to this case?
2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?
3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and
proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one of the basic
exceptions to the application of foreign law? In short, is there any strong policy or vital
interest of the forum that is at stake in this case and which should preclude the application
of foreign law?41
Jurisdiction is defined as the power and authority of the courts to hear, try and decide cases.
Jurisdiction over the subject matter is conferred by the Constitution or by law and by the
material allegations in the complaint, regardless of whether or not the plaintiff is entitled to
recover all or some of the claims or reliefs sought therein.42 It cannot be acquired through a
waiver or enlarged by the omission of the parties or conferred by the acquiescence of the
court.43 That the employment contract of Basso was replete with references to US laws, and
that it originated from and was returned to the US, do not automatically preclude our labor
tribunals from exercising jurisdiction to hear and try this case.
This case stemmed from an illegal dismissal complaint. The Labor Code, under Article 217,
clearly vests original and exclusive jurisdiction to hear and decide cases involving
termination disputes to the Labor Arbiter.
Hence, the Labor Arbiter and the NLRC have jurisdiction over the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals that the Labor
Arbiter acquired jurisdiction over the person of Basso, notwithstanding his citizenship, when

he filed his complaint against CMI. On the other hand, jurisdiction over the person of CMI
was acquired through the coercive process of service of summons. We note that CMI never
denied that it was served with summons. CMI has, in fact, voluntarily appeared and
participated in the proceedings before the courts. Though a foreign corporation, CMI is
licensed to do business in the Philippines and has a local business address here. The
purpose of the law in requiring that foreign corporations doing business in the country be
licensed to do so, is to subject the foreign corporations to the jurisdiction of our courts.44
Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties and the
subject matter of this case, these tribunals may proceed to try the case even if the rules of
conflict-of-laws or the convenience of the parties point to a foreign forum, this being an
exercise of sovereign prerogative of the country where the case is filed.45
The next question is whether the local forum is the convenient forum in light of the facts of
the case. CMI contends that a Philippine court is an inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws case may
assume jurisdiction if it chooses to do so, provided, that the following requisites are met: (1)
that the Philippine Court is one to which the parties may conveniently resort to; (2) that the
Philippine Court is in a position to make an intelligent decision as to the law and the facts;
and (3) that the Philippine Court has or is likely to have power to enforce its decision.46 All
these requisites are present here.
Basso may conveniently resort to our labor tribunals as he and CMI had physical presence in
the Philippines during the duration of the trial. CMI has a Philippine branch, while Basso,
before his death, was residing here.
Thus, it could be reasonably expected that no extraordinary measures were needed for the
parties to make arrangements in advocating their respective cases.
The labor tribunals can make an intelligent decision as to the law and facts. The incident
subject of this case (i.e. dismissal of Basso) happened in the Philippines, the surrounding
circumstances of which can be ascertained without having to leave the Philippines. The acts
that allegedly led to loss of trust and confidence and Bassos eventual dismissal were
committed in the Philippines. As to the law, we hold that Philippine law is the proper law of
the forum, as we shall discuss shortly. Also, the labor tribunals have the power to enforce
their judgments because they acquired jurisdiction over the persons of both parties.
Our labor tribunals being the convenient fora, the next question is what law should apply in
resolving this case.
85
The choice-of-law issue in a conflict-of-laws case seeks to answer the following important
questions: (1) What legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what extent should the chosen
legal system regulate the situation.47 These questions are entirely different from the
question of jurisdiction that only seeks to answer whether the courts of a state where the
case is initiated have jurisdiction to enter a judgment.48 As such, the power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum law.49
CMI insists that US law is the applicable choice-of-law under the principles of lex loci
celebrationis and lex loci contractus. It argues that the contract of employment originated
from and was returned to the US after Basso signed it, and hence, was perfected there. CMI
further claims that the references to US law in the employment contract show the parties
intention to apply US law and not ours. These references are:
a. Foreign station allowance of forty percent (40%) using the "U.S. State Department Index,
the base being Washington, D.C."
b. Tax equalization that made Basso responsible for "federal and any home state income
taxes."
c. Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S. Department
of State Indexes of living costs abroad."
d. The employment arrangement is "one at will, terminable by either party without any
further liability on thirty days prior written notice."50
CMI asserts that the US law on labor relations particularly, the US Railway Labor Act
sanctions termination-at-will provisions in an employment contract. Thus, CMI concludes that
if such laws were applied, there would have been no illegal dismissal to speak of because
the termination-at-will provision in Bassos employment contract would have been perfectly
valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an essential element of
conflict rules is the indication of a "test" or "connecting factor" or "point of contact". Choice-
of-law rules invariably consist of a factual relationship (such as property right, contract
claim) and a connecting fact or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of wrongdoing. Pursuant to Saudi Arabian
Airlines, we hold that the "test factors," "points of contact" or "connecting factors" in this
case are the following:
(1) The nationality, domicile or residence of Basso;

(2) The seat of CMI;
(3) The place where the employment contract has been made, the locus actus;
(4) The place where the act is intended to come into effect, e.g., the place of performance of
contractual duties;
(5) The intention of the contracting parties as to the law that should govern their agreement,
the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or done.52
Applying the foregoing in this case, we conclude that Philippine law is the applicable law.
Basso, though a US citizen, was a resident here from the time he was hired by CMI until his
death during the pendency of the case. CMI, while a foreign corporation, has a license to do
business in the Philippines and maintains a branch here, where Basso was hired to work. The
contract of employment was negotiated in the Philippines. A purely consensual contract, it
was also perfected in the Philippines when Basso accepted the terms and conditions of his
employment as offered by CMI. The place of performance relative to Bassos contractual
duties was in the Philippines. The alleged prohibited acts of Basso that warranted his
dismissal were committed in the Philippines.
Clearly, the Philippines is the state with the most significant relationship to the problem.
Thus, we hold that CMI and Basso intended Philippine law to govern, notwithstanding some
references made to US laws and the fact that this intention was not expressly stated in the
contract. We explained in Philippine Export and Foreign Loan Guarantee Corporation v. V. P.
Eusebio Construction, Inc.53 that the law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or domicile of the parties.54
We cautioned, however, that while Philippine courts would do well to adopt the first and
most basic rule in most legal systems, namely, to allow the parties to select the law
applicable to their contract, the selection is subject to the limitation that it is not against the
law, morals, or public policy of the forum.55
Similarly, in Bank of America, NT & SA v. American Realty Corporation,56 we ruled that a
foreign law, judgment or contract contrary to a sound and established public policy of the
forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.57
Termination-at-will is anathema to the public policies on labor protection espoused by our
laws and Constitution, which dictates that no worker shall be dismissed except for just and
86
authorized causes provided by law and after due process having been complied with.58
Hence, the US Railway Labor Act, which sanctions termination-at-will, should not be applied
in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As any other fact, it
must be alleged and proved.59 If the foreign law is not properly pleaded or proved, the
presumption of identity or similarity of the foreign law to our own laws, otherwise known as
processual presumption, applies. Here, US law may have been properly pleaded but it was
not proved in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third issues.
The Court of Appeals may review the
factual findings of the NLRC in a
Rule 65 petition.
CMI submits that the Court of Appeals overstepped the boundaries of the limited scope of its
certiorari jurisdiction when instead of ruling on the existence of grave abuse of discretion, it
proceeded to pass upon the legality and propriety of Bassos dismissal. Moreover, CMI
asserts that it was error on the part of the Court of Appeals to re-evaluate the evidence and
circumstances surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a Petition for Certiorari
under Rule 65 of the Revised Rules of Court was settled in our decision in St. Martin Funeral
Home v. NLRC.60 The general rule is that certiorari does not lie to review errors of judgment
of the trial court, as well as that of a quasi-judicial tribunal. In certiorari proceedings, judicial
review does not go as far as to examine and assess the evidence of the parties and to weigh
their probative value.61 However, this rule admits of exceptions. In Globe Telecom, Inc. v.
Florendo-Flores,62 we stated:
In the review of an NLRC decision through a special civil action for certiorari, resolution is
confined only to issues of jurisdiction and grave abuse of discretion on the part of the labor
tribunal. Hence, the Court refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC.
Occasionally, however, the Court is constrained to delve into factual matters where, as in
the instant case, the findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the records
of the case and reexamine the questioned findings. As a corollary, this Court is clothed with
ample authority to review matters, even if they are not assigned as errors in their appeal, if
it finds that their consideration is necessary to arrive at a just decision of the case. The same

principles are now necessarily adhered to and are applied by the Court of Appeals in its
expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we
see no error on its part when it made anew a factual determination of the matters and on
that basis reversed the ruling of the NLRC.63 (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual findings complained of
are not supported by the evidence on record; when it is necessary to prevent a substantial
wrong or to do substantial justice; when the findings of the NLRC contradict those of the
Labor Arbiter; and when necessary to arrive at a just decision of the case.64 To make these
findings, the Court of Appeals necessarily has to look at the evidence and make its own
factual determination.65
Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the Court of
Appeals correctly exercised its power to review the evidence and the records of the illegal
dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI. Managerial employees
enjoy security of tenure and the right of the management to dismiss must be balanced
against the managerial employees right to security of tenure, which is not one of the
guaranties he gives up.66
In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to validly dismiss
an employee on the ground of loss of trust and confidence under Article 282 (c) of the Labor
Code, the employer must observe the following guidelines: 1) loss of confidence should not
be simulated; 2) it should not be used as subterfuge for causes which are improper, illegal or
unjustified; 3) it may not be arbitrarily asserted in the face of overwhelming evidence to the
contrary; and 4) it must be genuine, not a mere afterthought to justify earlier action taken in
bad faith. More importantly, it must be based on a willful breach of trust and founded on
clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was not founded on clearly
established facts and evidence sufficient to warrant dismissal from employment. While proof
beyond reasonable doubt is not required to establish loss of trust and confidence,
substantial evidence is required and on the employer rests the burden to establish it.68
There must be some basis for the loss of trust, or that the employer has reasonable ground
to believe that the employee is responsible for misconduct, which renders him unworthy of
the trust and confidence demanded by his position.69
CMI alleges that Basso committed the following:
(1) Basso delegated too much responsibility to the General Sales Agent and relied heavily on
its judgments.70
87
(2) Basso excessively issued promotional tickets to his friends who had no direct business
with CMI.71
(3) The advertising agency that CMI contracted had to deal directly with Guam because
Basso was hardly available.72 Mr. Schulz discovered that Basso exceeded the advertising
budget by $76,000.00 in 1994 and by $20,000.00 in 1995.73
(4) Basso spent more time and attention to his personal businesses and was reputed to own
nightclubs in the Philippines.74
(5) Basso used free tickets and advertising money to promote his personal business,75 such
as a brochure that jointly advertised one of Bassos nightclubs with CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI merely
submitted affidavits of its officers, without any other corroborating evidence. Basso, on the
other hand, had adequately explained his side. On the advertising agency and budget issues
raised by CMI, he explained that these were blatant lies as the advertising needs of CMI
were centralized in its Guam office and the Philippine office was not authorized to deal with
CMIs advertising agency, except on minor issues.76 Basso further stated that under CMIs
existing policy, ninety percent (90%) of the advertising decisions were delegated to the
advertising firm of McCann- Ericsson in Japan and only ten percent (10%) were left to the
Philippine office.77 Basso also denied the allegations of owning nightclubs and promoting his
personal businesses and explained that it was illegal for foreigners in the Philippines to
engage in retail trade in the first place.
Apart from these accusations, CMI likewise presented the findings of the audit team headed
by Mr. Stephen D. Goepfert, showing that "for the period of 1995 and 1996, personal passes
for Continental and other airline employees were noted (sic) to be issued for which no
service charge was collected."78 The audit cited the trip pass log of a total of 10 months.
The trip log does not show, however, that Basso caused all the ticket issuances.
More, half of the trips in the log occurred from March to July of 1996,79 a period beyond the
tenure of Basso. Basso was terminated effectively on January 31, 1996 as indicated in the
letter of Ms. Woodward.80
CMI also accused Basso of making "questionable overseas phone calls". Basso, however,
adequately explained in his Reply81 that the phone calls to Italy and Portland, USA were
made for the purpose of looking for a technical maintenance personnel with US Federal
Aviation Authority qualifications, which CMI needed at that time. The calls to the US were
also made in connection with his functions as General Manager, such as inquiries on his tax
returns filed in Nevada. Basso also explained that the phone lines82 were open direct lines
that all personnel were free to use to make direct long distance calls.83

Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover the
transfer fee of the Manila Polo Club share from Mr. Kenneth Glover, the previous General
Manager, to him. CMI claimed that "nowhere in the said contract was it likewise indicated
that the Manila Polo Club share was part of the compensation package given by CMI to
Basso."84 CMIs claims are not credible. Basso explained that the Manila Polo Club share was
offered to him as a bonus to entice him to leave his then employer, United Airlines. A letter
from Mr. Paul J. Casey, former president of Continental, supports Basso.85 In the letter, Mr.
Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he was given
the Manila Polo Club share and authorized to have the share re-issued in his name. In
addition to giving Mr. Basso the Manila Polo Club share, Continental agreed to pay the dues
for a period of three years and this was embodied in his contract with Continental. This was
all done with my knowledge and approval.86
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for membership in a club in
Manila that your immediate supervisor and I agree is of at least that value to Continental
through you in your role as our General Manager for the Philippines.87
Taken together, the above pieces of evidence suggest that the Manila Polo Club share was
part of Bassos compensation package and thus he validly used company funds to pay for
the transfer fees. If doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter.88
Finally, CMI violated procedural due process in terminating Basso. In King of Kings Transport,
Inc. v. Mamac89 we detailed the procedural due process steps in termination of
employment:
To clarify, the following should be considered in terminating the services of employees:
(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice
to give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
88
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management.
During the hearing or conference, the employees are given the chance to defend
themselves personally, with the assistance of a representative or counsel of their choice.
Moreover, this conference or hearing could be used by the parties as an opportunity to come
to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances involving
the charge against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment. (Emphasis in original.)
Here, Mr. Schulzs and Ms. Woodwards letters dated December 19, 1995 and March 14,
1996, respectively, are not one of the valid twin notices. Neither identified the alleged acts
that CMI now claims as bases for Bassos termination. Ms. Woodwards letter even stressed
that the original plan was to remove Basso as General Manager but with an offer to make
him consultant. It was inconsistent of CMI to declare Basso as unworthy of its trust and
confidence and, in the same breath, offer him the position of consultant. As the Court of
Appeals pointed out:
But mark well that Basso was clearly notified that the sole ground for his dismissal was the
exercise of the termination at will clause in the employment contract. The alleged loss of
trust and confidence claimed by Continental appears to be a mere afterthought belatedly
trotted out to save the day.90
Basso is entitled to separation pay and full backwages.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges, and to his
full backwages, inclusive of allowances and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld up to the time of actual
reinstatement.
Where reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative.1wphi1 The
payment of separation pay is in addition to payment of backwages.91 In the case of Basso,
reinstatement is no longer possible since he has already passed away. Thus, Bassos
separation pay with full backwages shall be paid to his heirs.

As to the computation of backwages, we agree with CMI that Basso was entitled to
backwages only up to the time he reached 65 years old, the compulsory retirement age
under the law.92 This is our consistent ruling.93
When Basso was illegally dismissed on January 31, 1996, he was already 58 years old.94 He
turned 65 years old on October 2, 2002. Since backwages are granted on grounds of equity
for earnings lost by an employee due to his illegal dismissal,95 Basso was entitled to
backwages only for the period he could have worked had he not been illegally dismissed, i.e.
from January 31, 1996 to October 2, 2002.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated May 23, 2006
and Resolution dated June 19, 2007 in the consolidated cases CA-G.R. SP No. 83938 and CA-
G.R. SP No. 84281 are
AFFIRMED, with MODIFICATION as to the award of backwages. Petitioner Continental
Micronesia, Inc. is hereby ordered to pay Respondent Joseph Bassos heirs: 1) separation pay
equivalent to one (1) month pay for every year of service, and 2) full backwages from
January 31, 1996, the date of his illegal dismissal, to October 2, 2002, the date of his
compulsory retirement age.
SO ORDERED.
14. G.R. No. 205703, March 07, 2016
INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS), SNC LAVALIN ENGINEERS
& CONTRACTORS, INC. AND ANGELITO C. HERNANDEZ, Petitioners, v. JOSE G. DE VERA AND
ALBERTO B. ARRIOLA, Respondents.
DECISION
MENDOZA, J.:
When can a foreign law govern an overseas employment contract? This is the fervent
question that the Court shall resolve, once and for all.
This petition for review on certiorari seeks to reverse and set aside the January 24, 2013
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 118869, which modified the
November 30, 2010 Decision2 of the National Labor Relations Commission (NLRC) and its
February 2, 2011 Resolution,3 in NLRC LAC Case No. 08-000572-10/NLRC Case No. NCR 09-
13563-09, a case for illegal termination of an Overseas Filipino Worker (OFW).
The Facts
89
Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local placement
agency duly organized and existing under Philippine laws, with petitioner Angelito C.
Hernandez as its president and managing director. Petitioner SNC Lavalin Engineers &
Contractors, Inc. (SNC-Lavalin) is the principal of IPAMS, a Canadian company with business
interests in several countries. On the other hand, respondent Alberto Arriola (Arriola) is a
licensed general surgeon in the Philippines.4
Employee's Position
Arriola was offered by SNC-Lavalin, through its letter,5 dated May 1, 2008, the position of
Safety Officer in its Ambatovy Project site in Madagascar. The position offered had a rate of
CA$32.00 per hour for forty (40) hours a week with overtime pay in excess of forty (40)
hours. It was for a period of nineteen (19) months starting from June 9, 2008 to December
31, 2009.
Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and his
overseas employment contract was processed with the Philippine Overseas Employment
Agency (POEA)6 In a letter of understanding,7 dated June 5, 2008, SNC-Lavalin confirmed
Arriola's assignment in the Ambatovy Project. According to Arriola, he signed the contract of
employment in the Philippines.8 On June 9, 2008, Arriola started working in Madagascar.
After three months, Arriola received a notice of pre-termination of employment,9 dated
September 9, 2009, from SNC-Lavalin. It stated that his employment would be pre-
terminated effective September 11, 2009 due to diminishing workload in the area of his
expertise and the unavailability of alternative assignments. Consequently, on September 15,
2009, Arriola was repatriated. SNC-Lavalin deposited in Arriola's bank account his pay
amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight Centavos
(CA$2,636.80), based on Canadian labor law.
Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-
payment of overtime pay, vacation leave and sick leave pay before the Labor Arbiter (LA).
He claimed that SNC-Lavalin still owed him unpaid salaries equivalent to the three-month
unexpired portion of his contract, amounting to, more or less, One Million Sixty-Two
Thousand Nine Hundred Thirty-Six Pesos (P1,062,936.00). He asserted that SNC-Lavalin
never offered any valid reason for his early termination and that he was not given sufficient
notice regarding the same. Arriola also insisted that the petitioners must prove the
applicability of Canadian law before the same could be applied to his employment contract.
Employer's Position
The petitioners denied the charge of illegal dismissal against them. They claimed that SNC-
Lavalin was greatly affected by the global financial crises during the latter part of 2008. The
economy of Madagascar, where SNC-Lavalin had business sites, also slowed down. As proof
of its looming financial standing, SNC-Lavalin presented a copy of a news item in the

Financial Post,10 dated March 5, 2009, showing the decline of the value of its stocks. Thus, it
had no choice but to minimize its expenditures and operational expenses. It re-organized its
Health and Safety Department at the Ambatovy Project site and Arriola was one of those
affected.11
The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC12 (EDI-
Staffbuilders), pointing out that particular labor laws of a foreign country incorporated in a
contract freely entered into between an OFW and a foreign employer through the latter's
agent was valid. In the present case, as all of Arriola's employment documents were
processed in Canada, not to mention that SNC-Lavalin's office was in Ontario, the principle of
lex loci celebrationis was applicable. Thus, the petitioners insisted that Canadian laws
governed the contract.
The petitioners continued that the pre-termination of Arriola's contract was valid for being
consistent with the provisions of both the Expatriate Policy and laws of Canada. The said
foreign law did not require any ground for early termination of employment, and the only
requirement was the written notice of termination. Even assuming that Philippine laws
should apply, Arriola would still be validly dismissed because domestic law recognized
retrenchment and redundancy as legal grounds for termination.
In their Rejoinder,13 the petitioners presented a copy of the Employment Standards Act
(ESA) of Ontario, which was duly authenticated by the Canadian authorities and certified by
the Philippine Embassy.
The LA Ruling
In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for lack of merit.
The LA ruled that the rights and obligations among and between the OFW, the local
recruiter/agent, and the foreign employer/principal were governed by the employment
contract pursuant to the EDI-Staffbuilders case. Thus, the provisions on termination of
employment found in the ESA, a foreign law which governed Arriola's employment contract,
were applied. Given that SNC-Lavalin was able to produce the duly authenticated ESA, the
LA opined that there was no other conclusion but to uphold the validity of Arriola's dismissal
based on Canadian law. The fallo of the LA decision reads:
chanRoblesvirtualLawlibrary
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
dismissing the complaint for lack of merit.
SO ORDERED.15ChanRoblesVirtualawlibrary
Aggrieved, Arriola elevated the LA decision before the NLRC.
The NLRC Ruling
90
In its decision, dated November 30, 2010, the NLRC reversed the LA decision and ruled that
Arriola was illegally dismissed by the petitioners. Citing PNB v. Cabansag,16 the NLRC stated
that whether employed locally or overseas, all Filipino workers enjoyed the protective mantle
of Philippine labor and social legislation, contract stipulations to the contrary
notwithstanding. Thus, the Labor Code of the Philippines and Republic Act (R.A.) No. 8042, or
the Migrant Workers Act, as amended, should be applied. Moreover, the NLRC added that the
overseas employment contract of Arriola was processed in the POEA.
Applying the Philippine laws, the NLRC found that there was no substantial evidence
presented by the petitioners to show any just or authorized cause to terminate Arriola. The
ground of financial losses by SNC-Lavalin was not supported by sufficient and credible
evidence. The NLRC concluded that, for being illegally dismissed, Arriola should be awarded
CA$81,920.00 representing sixteen (16) months of Arriola's purported unpaid salary,
pursuant to the Serrano v. Gallant17 doctrine. The decretal portion of the NLRC decision
states:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding complainant-
appellant to have been illegally dismissed. Respondents-appellees are hereby ordered to pay
complainant-appellant the amount of CA$81,920.00, or its Philippine Peso equivalent
prevailing at the time of payment. Accordingly, the decision of the Labor Arbiter dated May
31, 2010 is hereby VACATED and SET ASIDE.
SO ORDERED.18ChanRoblesVirtualawlibrary
The petitioners moved for reconsideration, but their motion was denied by the NLRC in its
resolution, dated February 2, 2011.
Undaunted, the petitioners filed a petition for certiorari before the CA arguing that it should
be the ESA, or the Ontario labor law, that should be applied in Arriola's employment
contract. No temporary restraining order, however, was issued by the CA.
The Execution Proceedings
In the meantime, execution proceedings were commenced before the LA by Arriola. The LA
granted the motion for execution in the Order,19 dated August 8, 2011.
The petitioners appealed the execution order to the NLRC. In its Decision,20 dated May 31,
2012, the NLRC corrected the decretal portion of its November 30, 2010 decision. It
decreased the award of backpay in the amount of CA$26,880.00 or equivalent only to three
(3) months and three (3) weeks pay based on 70-hours per week workload. The NLRC found
that when Arriola was dismissed on September 9, 2009, he only had three (3) months and
three (3) weeks or until December 31, 2009 remaining under his employment contract.
Still not satisfied with the decreased award, IPAMS filed a separate petition for certiorari
before the CA. In its decision, dated July 25, 2013, the CA affirmed the decrease in Arriola's

backpay because the unpaid period in his contract was just three (3) months and three (3)
weeks.
Unperturbed, IPAMS appealed before the Court and the case was docketed as G.R. No.
212031. The appeal, however, was dismissed outright by the Court in its resolution, dated
August 8, 2014, because it was belatedly filed and it did not comply with Sections 4 and 5 of
Rule 7 of the Rules of Court. Hence, it was settled in the execution proceedings that the
award of backpay to Arriola should only amount to three (3) months and three (3) weeks of
his pay.
The CA Ruling
Returning to the principal case of illegal dismissal, in its assailed January 24, 2013 decision,
the CA affirmed that Arriola was illegally dismissed by the petitioners. The CA explained that
even though an authenticated copy of the ESA was submitted, it did not mean that the said
foreign law automatically applied in this case. Although parties were free to establish
stipulations in their contracts, the same must remain consistent with law, morals, good
custom, public order or public policy. The appellate court wrote that the ESA allowed an
employer to disregard the required notice of termination by simply giving the employee a
severance pay. The ESA could not be made to apply in this case for being contrary to our
Constitution, specifically on the right of due process. Thus, the CA opined that our labor laws
should find application.
As the petitioners neither complied with the twin notice-rule nor offered any just or
authorized cause for his termination under the Labor Code, the CA held that Arriola's
dismissal was illegal. Accordingly, it pronounced that Arriola was entitled to his salary for the
unexpired portion of his contract which is three (3) months and three (3) weeks salary. It,
however, decreased the award of backpay to Arriola because the NLRC made a wrong
calculation. Based on his employment contract, the backpay of Arriola should only be
computed on a 40-hour per week workload, or in the amount of CA$19,200.00. The CA
disposed the case in this wise:
chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY GRANTED. The
assailed Order of the National Labor Relations Commission in NLRC LAC No. 08-000572-
10/NLRC Case No. NCR 09-13563-09 is MODIFIED in that private respondent is only entitled
to a monetary judgment equivalent to his unpaid salaries in the amount of CA$19,200.00 or
its Philippine Peso equivalent.
SO ORDERED.21ChanRoblesVirtualawlibrary
Hence, this petition, anchored on the following
ISSUES
I not substantiated by evidence.
91
WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED PURSUANT TO THE
EMPLOYMENT CONTRACT.
II
GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT BAR, WHETHER OR NOT
THE SIX-WEEK ON, TWO-WEEK OFF SCHEDULE SHOULD BE USED IN THE COMPUTATION OF
ANY MONETARY AWARD.
III
GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT THE AMOUNT BEING
CLAIMED BY RESPONDENTS HAD ALREADY BEEN SATISFIED, OR AT THE VERY LEAST,
WHETHER OR NOT THE AMOUNT OF CA$2,636.80 SHOULD BE DEDUCTED FROM THE
MONETARY AWARD.22ChanRoblesVirtualawlibrary
The petitioners argue that the rights and obligations of the OFW, the local recruiter, and the
foreign employer are governed by the employment contract, citing EDI-Staffbuilders; that
the terms and conditions of Arriola's employment are embodied in the Expatriate Policy,
Ambatovy Project - Site, Long Term, hence, the laws of Canada must be applied; that the
ESA, or the Ontario labor law, does not require any ground for the early termination of
employment and it permits the termination without any notice provided that a severance
pay is given; that the ESA was duly authenticated by the Canadian authorities and certified
by the Philippine Embassy; that the NLRC Sixth Division exhibited bias and bad faith when it
made a wrong computation on the award of backpay; and that, assuming there was illegal
dismissal, the CA$2,636.80, earlier paid to Arriola, and his home leaves should be deducted
from the award of backpay.
In his Comment,23 Arriola countered that foreign laws could not apply to employment
contracts if they were contrary to law, morals, good customs, public order or public policy,
invoking Pakistan International Airlines Corporation v. Ople (Pakistan International);24 that
the ESA was not applicable because it was contrary to his constitutional right to due process;
that the petitioners failed to substantiate an authorized cause to justify his dismissal under
Philippine labor law; and that the petitioners could not anymore claim a deduction of
CA$2,636.80 from the award of backpay because it was raised for the first time on appeal.
In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the applicability of
foreign laws on labor contracts; that the Pakistan International case was superseded by EDI-
Staffbuilders and other subsequent cases; and that SNC-Lavalin suffering financial losses
was an authorized cause to terminate Arriola's employment.
In his Memorandum,26 Arriola asserted that his employment contract was executed in the
Philippines and that the alleged authorized cause of financial losses by the petitioners was

In their Consolidated Memorandum,27 the petitioners reiterated that the ESA was applicable
in the present case and that recent jurisprudence recognized that the parties could agree on
the applicability of foreign laws in their labor contracts.
The Court's Ruling
The petition lacks merit.
Application of foreign laws with labor contracts
At present, Filipino laborers, whether skilled or professional, are enticed to depart from the
motherland in search of greener pastures. There is a distressing reality that the offers of
employment abroad are more lucrative than those found in our own soils. To reap the
promises of the foreign dream, our unsung heroes must endure homesickness, solitude,
discrimination, mental and emotional struggle, at times, physical turmoil, and, worse, death.
On the other side of the table is the growing number of foreign employers attracted in hiring
Filipino workers because of their reasonable compensations and globally-competitive skills
and qualifications. Between the dominant foreign employers and the vulnerable and
desperate OFWs, however, there is an inescapable truth that the latter are in need of greater
safeguard and protection.
In order to afford the full protection of labor to our OFWs, the State has vigorously enacted
laws, adopted regulations and policies, and established agencies to ensure that their needs
are satisfied and that they continue to work in a humane living environment outside of the
country. Despite these efforts, there are still issues left unsolved in the realm of overseas
employment. One existing question is posed before the Court -when should an overseas
labor contract be governed by a foreign law? To answer this burning query, a review of the
relevant laws and jurisprudence is warranted.
R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the policies on overseas
employment and to establish a higher standard of protection and promotion of the welfare of
migrant workers.28 It emphasized that while recognizing the significant contribution of
Filipino migrant workers to the national economy through their foreign exchange
remittances, the State does not promote overseas employment as a means to sustain
economic growth and achieve national development.29 Although it acknowledged claims
arising out of law or contract involving Filipino workers,30 it does not categorically provide
that foreign laws are absolutely and automatically applicable in overseas employment
contracts.
The issue of applying foreign laws to labor contracts was initially raised before the Court in
Pakistan International. It was stated in the labor contract therein (1) that it would be
governed by the laws of Pakistan, (2) that the employer have the right to terminate the
employee at any time, and (3) that the one-month advance notice in terminating the
employment could be dispensed with by paying the employee an equivalent one-month
92
salary. Therein, the Court elaborated on the parties' right to stipulate in labor contracts, to
wit:
chanRoblesvirtualLawlibrary
A contract freely entered into should, of course, be respected, as PIA argues, since a
contract is the law between the parties. 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,
counterbalancing 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. x x x31
[Emphases Supplied]
In that case, the Court held that the labor relationship between OFW and the foreign
employer is "much affected with public interest and that the otherwise applicable Philippine
laws and regulations cannot be rendered illusory by the parties agreeing upon some other
law to govern their relationship."32 Thus, the Court applied the Philippine laws, instead of
the Pakistan laws. It was also held that the provision in the employment contract, where the
employer could terminate the employee at any time for any ground and it could even
disregard the notice of termination, violates the employee's right to security of tenure under
Articles 280 and 281 of the Labor Code.
In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was reiterated that, "[i]n
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."33 In that case, the overseas contract
specifically stated that Saudi Labor Laws would govern matters not provided for in the
contract. The employer, however, failed to prove the said foreign law, hence, the doctrine of
processual presumption came into play and the Philippine labor laws were applied.
Consequently, the Court did not discuss any longer whether the Saudi labor laws were
contrary to Philippine labor laws.
The case of Becmen Service Exporter and Promotion, Inc. v. Spouses Cuaresma,34 though
not an illegal termination case, elucidated on the effect of foreign laws on employment. It
involved a complaint for insurance benefits and damages arising from the death of a Filipina
nurse from Saudi Arabia. It was initially found therein that there was no law in Saudi Arabia
that provided for insurance arising from labor accidents. Nevertheless, the Court concluded
that the employer and the recruiter in that case abandoned their legal, moral and social

obligation to assist the victim's family in obtaining justice for her death, and so her family
was awarded P5,000,000.00 for moral and exemplary damages.
In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private recruitment agency
invoked the defense that the foreign employer was immune from suit and that it did not sign
any document agreeing to be held jointly and solidarily liable. Such defense, however, was
rejected because R.A. No. 8042 precisely afforded the OFWs with a recourse against the local
agency and the foreign employer to assure them of an immediate and sufficient payment of
what was due. Similar to EDI-Staffbuilders, the local agency therein failed to prove the
Kuwaiti law specified in the labor contract, pursuant to Sections 24 and 25 of Rule 132 of the
Revised Rules of Court.
Also, in the recent case of Sameer Overseas Placement Agency, Inc. v. Cabiles36 (Sameer
Overseas), it was declared that the security of tenure for labor was guaranteed by our
Constitution and employees were not stripped of the same when they moved to work in
other jurisdictions. Citing PCL Shipping Phils., Inc. v. NLRC37 (PCL Shipping), the Court held
that the principle of lex loci contractus (the law of the place where the contract is made)
governed in this jurisdiction. As it was established therein that the overseas labor contract
was executed in the Philippines, the Labor Code and the fundamental procedural rights were
observed. It must be noted that no foreign law was specified in the employment contracts in
both cases.
Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer therein asserted the
doctrine of forum non conveniens because the overseas employment contracts required the
application of the laws of Saudi Arabia, and so, the Philippine courts were not in a position to
hear the case. In striking down such argument, the Court held that while a Philippine tribunal
was called upon to respect the parties' choice of governing law, such respect must not be so
permissive as to lose sight of considerations of law, morals, good customs, public order, or
public policy that underlie the contract central to the controversy. As the dispute in that case
related to the illegal termination of the employees due to their pregnancy, then it involved a
matter of public interest and public policy. Thus, it was ruled that Philippine laws properly
found application and that Philippine tribunals could assume jurisdiction.
Based on the foregoing, the general rule is that Philippine laws apply even to overseas
employment contracts. This rule is rooted in the constitutional provision of Section 3, Article
XIII that the State shall afford full protection to labor, whether local or overseas. Hence, even
if the OFW has his employment abroad, it does not strip him of his rights to security of
tenure, humane conditions of work and a living wage under our Constitution.39
As an exception, the parties may agree that a foreign law shall govern the employment
contract. A synthesis of the existing laws and jurisprudence reveals that this exception is
subject to the following requisites:
chanRoblesvirtualLawlibrary
93
That it is expressly stipulated in the overseas employment contract that a specific foreign
law shall govern;
That the foreign law invoked must be proven before the courts pursuant to the Philippine
rules on evidence;
That the foreign law stipulated in the overseas employment contract must not be contrary to
law, morals, good customs, public order, or public policy of the Philippines; and
That the overseas employment contract must be processed through the POEA.
The Court is of the view that these four (4) requisites must be complied with before the
employer could invoke the applicability of a foreign law to an overseas employment
contract. With these requisites, the State would be able to abide by its constitutional
obligation to ensure that the rights and well-being of our OFWs are fully protected. These
conditions would also invigorate the policy under R.A. No. 8042 that the State shall, at all
times, uphold the dignity of its citizens whether in country or overseas, in general, and the
Filipino migrant workers, in particular.40 Further, these strict terms are pursuant to the
jurisprudential doctrine that "parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed with public
interest,"41 such as laws relating to labor. At the same time, foreign employers are not at all
helpless to apply their own laws to overseas employment contracts provided that they
faithfully comply with these requisites.
If the first requisite is absent, or that no foreign law was expressly stipulated in the
employment contract which was executed in the Philippines, then the domestic labor laws
shall apply in accordance with the principle of lex loci contractus. This is based on the cases
of Sameer Overseas and PCL Shipping.
If the second requisite is lacking, or that the foreign law was not proven pursuant to Sections
24 and 25 of Rule 132 of the Revised Rules of Court, then the international law doctrine of
processual presumption operates. The said doctrine declares that "[w]here a foreign law is
not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the
same as ours."42 This was observed in the cases of EDI-Staffbuilders and ATCI Overseas.
If the third requisite is not met, or that the foreign law stipulated is contrary to law, morals,
good customs, public order or public policy, then Philippine laws govern. This finds legal
bases in the Civil Code, specifically: (1) Article 17, which provides that laws which have, for
their object, public order, public policy and good customs shall not be rendered ineffective
by laws of a foreign country; and (2) Article 1306, which states that the stipulations, clauses,
terms and conditions in a contract must not be contrary to law, morals, good customs, public
order, or public policy. The said doctrine was applied in the case of Pakistan International.
Finally, if the fourth requisite is missing, or that the overseas employment contract was not
processed through the POEA, then Article 18 of the Labor Code is violated. Article 18

provides that no employer may hire a Filipino worker for overseas employment except
through the boards and entities authorized by the Secretary of Labor. In relation thereto,
Section 4 of R.A. No. 8042, as amended, declares that the State shall only allow the
deployment of overseas Filipino workers in countries where the rights of Filipino migrant
workers are protected. Thus, the POEA, through the assistance of the Department of Foreign
Affairs, reviews and checks whether the countries have existing labor and social laws
protecting the rights of workers, including migrant workers.43 Unless processed through the
POEA, the State has no effective means of assessing the suitability of the foreign laws to our
migrant workers. Thus, an overseas employment contract that was not scrutinized by the
POEA definitely cannot be invoked as it is an unexamined foreign law.
In other words, lacking any one of the four requisites would invalidate the application of the
foreign law, and the Philippine law shall govern the overseas employment contract.
As the requisites of the applicability of foreign laws in overseas labor contract have been
settled, the Court can now discuss the merits of the case at bench.
A judicious scrutiny of the records of the case demonstrates that the petitioners were able to
observe the second requisite, or that the foreign law must be proven before the court
pursuant to the Philippine rules on evidence. The petitioners were able to present the ESA,
duly authenticated by the Canadian authorities and certified by the Philippine Embassy,
before the LA. The fourth requisite was also followed because Arriola's employment contract
was processed through the POEA.44
Unfortunately for the petitioners, those were the only requisites that they complied with. As
correctly held by the CA, even though an authenticated copy of the ESA was submitted, it
did not mean that said foreign law could be automatically applied to this case. The
petitioners miserably failed to adhere to the two other requisites, which shall be discussed in
seratim.
The foreign law was not expressly specified in the employment contract
The petitioners failed to comply with the first requisite because no foreign law was expressly
stipulated in the overseas employment contract with Arriola. In its pleadings, the petitioners
did not directly cite any specific provision or stipulation in the said labor contract which
indicated the applicability of the Canadian labor laws or the ESA. They failed to show on the
face of the contract that a foreign law was agreed upon by the parties. Rather, they simply
asserted that the terms and conditions of Arriola's employment were embodied in the
Expatriate Policy, Ambatovy Project - Site, Long Term.45 Then, they emphasized provision
8.20 therein, regarding interpretation of the contract, which provides that said policy would
be governed and construed with the laws of the country where the applicable SNC-Lavalin,
Inc. office was located.46 Because of this provision, the petitioners insisted that the laws of
Canada, not of Madagascar or the Philippines, should apply. Then, they finally referred to the
ESA.
94
It is apparent that the petitioners were simply attempting to stretch the overseas
employment contract of Arriola, by implication, in order that the alleged foreign law would
apply. To sustain such argument would allow any foreign employer to improperly invoke a
foreign law even if it is not anymore reasonably contemplated by the parties to control the
overseas employment. The OFW, who is susceptible by his desire and desperation to work
abroad, would blindly sign the labor contract even though it is not clearly established on its
face which state law shall apply. Thus, a better rule would be to obligate the foreign
employer to expressly declare at the onset of the labor contract that a foreign law shall
govern it. In that manner, the OFW would be informed of the applicable law before signing
the contract.
Further, it was shown that the overseas labor contract was executed by Arriola at his
residence in Batangas and it was processed at the POEA on May 26, 2008.47 Considering
that no foreign law was specified in the contract and the same was executed in the
Philippines, the doctrine of lex loci celebrationis applies and the Philippine laws shall govern
the overseas employment of Arriola.
The foreign law invoked is contrary to the Constitution and the Labor Code
Granting arguendo that the labor contract expressly stipulated the applicability of Canadian
law, still, Arriola's employment cannot be governed by such foreign law because the third
requisite is not satisfied. A perusal of the ESA will show that some of its provisions are
contrary to the Constitution and the labor laws of the Philippines.
First, the ESA does not require any ground for the early termination of employment.48
Article 54 thereof only provides that no employer should terminate the employment of an
employee unless a written notice had been given in advance.49 Necessarily, the employer
can dismiss any employee for any ground it so desired. At its own pleasure, the foreign
employer is endowed with the absolute power to end the employment of an employee even
on the most whimsical grounds.
Second, the ESA allows the employer to dispense with the prior notice of termination to an
employee. Article 65(4) thereof indicated that the employer could terminate the
employment without notice by simply paying the employee a severance pay computed on
the basis of the period within which the notice should have been given.50 The employee
under the ESA could be immediately dismissed without giving him the opportunity to explain
and defend himself.
The provisions of the ESA are patently inconsistent with the right to security of tenure. Both
the Constitution51 and the Labor Code52 provide that this right is available to any
employee. In a host of cases, the Court has upheld the employee's right to security of tenure
in the face of oppressive management behavior and management prerogative. Security of
 95

tenure is a right which cannot be denied on mere speculation of any unclear and nebulous
basis.53
Not only do these provisions collide with the right to security of tenure, but they also deprive
the employee of his constitutional right to due process by denying him of any notice of
termination and the opportunity to be heard.54 Glaringly, these disadvantageous provisions
under the ESA produce the same evils which the Court vigorously sought to prevent in the
cases of Pakistan International and Sameer Overseas. Thus, the Court concurs with the CA
that the ESA is not applicable in this case as it is against our fundamental and statutory
laws.
article which deserves scant consideration as it is undoubtedly hearsay. Time and again the
Court has ruled that in illegal dismissal cases like the present one, the onus of proving that
the employee was dismissed and that the dismissal was not illegal rests on the employer,
and failure to discharge the same would mean that the dismissal is not justified and,
therefore, illegal.60
As to the amount of backpay awarded, the Court finds that the computation of the CA was
valid and proper based on the employment contract of Arriola. Also, the issue of whether the
petitioners had made partial payments on the backpay is a matter best addressed during
the execution process.chanrobleslaw

In fine, as the petitioners failed to meet all the four (4) requisites on the applicability of a WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the Court of Appeals
foreign law, then the Philippine labor laws must govern the overseas employment contract in CA-G.R. SP No. 118869 is AFFIRMED in toto.
of Arriola.
SO ORDERED.
No authorized cause for dismissal was proven

Article 279 of our Labor Code has construed security of tenure to mean that the employer 15. G.R. No. 217575, June 15, 2016
shall not terminate the services of an employee except for a just cause or when authorized
by law.55 Concomitant to the employer's right to freely select and engage an employee is
the employer's right to discharge the employee for just and/or authorized causes. To validly
effect terminations of employment, the discharge must be for a valid cause in the manner
SOUTH COTABATO COMMUNICATIONS CORPORATION AND GAUVAIN J. BENZONAN,
required by law. The purpose of these two-pronged qualifications is to protect the working
Petitioners, v. HON. PATRICIA STO. TOMAS, SECRETARY OF LABOR AND EMPLOYMENT,
class from the employer's arbitrary and unreasonable exercise of its right to dismiss.56
ROLANDO FABRIGAR, MERLYN VELARDE, VINCE LAMBOC, FELIPE GALINDO, LEONARDO
MIGUEL, JULIUS RUBIN, EDEL RODEROS, MERLYN COLIAO, AND EDGAR JOPSON, Respondents.
Some of the authorized causes to terminate employment under the Labor Code would be
installation of labor-saving devices, redundancy, retrenchment to prevent losses and the
closing or cessation of operation of the establishment or undertaking.57 Each authorized
cause has specific requisites that must be proven by the employer with substantial evidence
before a dismissal may be considered valid. DECISION

Here, the petitioners assert that the economy of Madagascar weakened due to the global
financial crisis. Consequently, SNC-Lavalin's business also slowed down. To prove its sagging
financial standing, SNC-Lavalin presented a copy of a news item in the Financial Post, dated VELASCO JR., J.:
March 5, 2009. They insist that SNC-Lavalin had no choice but to minimize its expenditures
and operational expenses.58 In addition, the petitioners argued that the government of
Madagascar prioritized the employment of its citizens, and not foreigners. Thus, Arriola was
terminated because there was no more job available for him.59
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to
reverse and set aside the Decision1 dated November 28, 2014 and Resolution dated March
The Court finds that Arriola was not validly dismissed. The petitioners simply argued that
5, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 00179-MIN, affirming the Orders
they were suffering from financial losses and Arriola had to be dismissed. It was not even
dated November 8, 2004 and February 24, 2005 issued by the Secretary of Labor and
clear what specific authorized cause, whether retrenchment or redundancy, was used to
Employment.
justify Arriola's dismissal. Worse, the petitioners did not even present a single credible
evidence to support their claim of financial loss. They simply offered an unreliable news

Factual Antecedents
On January 19, 2004, the Department of Labor and Employment Region-XII (DOLE)
conducted a Complaint Inspection2 at the premises of DXCP Radio Station, which is owned
by petitioner South Cotabato Communications Corporation. The inspection yielded a finding
of violation of labor standards provisions of the Labor Code involving the nine (9) private
respondents, such as:chanRoblesvirtualLawlibrary
Underpayment of Wages
Underpayment of 13th Month Pay
Non-payment of the five (5) days Service Incentive Leave Pay
Non-payment of Rest Day Premium Pay
Non-payment of the Holiday Premium Pay
Non-remittance of SSS Contributions
Some employees are paid on commission basis aside from their allowance[s]3
Consequently, the DOLE issued a Notice of Inspection Result directing petitioner corporation
and/or its president, petitioner Gauvain J. Benzonan (Benzonan), to effect restitution and/or
correction of the alleged violations within five (5) days from notice. Due to petitioners' failure
to comply with its directive, the DOLE scheduled on March 3, 2004 a Summary Investigation
at its Regional Office No. XII, Provincial Extension Office, in General Santos City. However,
petitioners failed to appear despite due notice. Another hearing was scheduled on April 1,
2004 wherein petitioners' counsel, Atty. Thomas Jacobo (Atty. Jacobo), failed to attend due to
an alleged conflict in schedule. Instead, his secretary, Nona Gido, appeared on his behalf to
request a resetting, which the DOLE Hearing Officer denied.4 Thus, in an Order dated May
20, 2004, the DOLE Region-XII OIC Regional Director (DOLE Regional Director) directed
petitioners to pay private respondents the total amount of P759,752, representing private
respondents' claim for wage differentials, 13th month pay differentials, service incentive
leave pay, holiday premium pay, and rest day premium Pay-Therefrom, petitioners appealed
to the Secretary of Labor, raising two grounds: (1) denial of due process; and (2) lack of
factual and legal basis of the assailed Order.
96
The denial of due process was predicated on the refusal of the Hearing Officer to reset the
hearing set on April 1, 2004, which thus allegedly deprived petitioners the opportunity to
present their evidence. Likewise, petitioners asserted that the Order of the Regional Director
does not state that an employer-employee relationship exists between petitioners and
private respondents, which is necessary to confer jurisdiction to the DOLE over the alleged
violations.
In an Order5 dated November 8, 2004, the Secretary of Labor affirmed the findings of the
DOLE Regional Director on the postulate that petitioners failed to question, despite notice of
hearing, the noted violations or to submit any proof of compliance therewith. And in view of
petitioners' failure to present their evidence before the Regional Director, the Secretary of
Labor adopted the findings of the Labor Inspector and considered the interviews conducted
as substantial evidence. The Secretary of Labor likewise sustained what is considered as the
straight computation method adopted by the Regional Office as regards the monetary claims
of private respondents,6 thus:chanRoblesvirtualLawlibrary
WHEREFORE, presmises considered, the appeal by DXCP Radio Station and Engr. Gauvain
Benzonan is hereby DISMISSED for lack of merit. The Order dated May [20], 2004 of the
Regional Director, directing appellants to pay the nine (9) appellees the aggregate amount
of Seven Hundred Fifty Nine Thousand Seven Hundred Fifty Two Pesos (Php759,752.00),
representing their claims for wage differentials, 13th month pay differentials, service
incentive leave pay, holiday pay premium and rest day premium, is AFFIRMED.
SO ORDERED.cralawred
Petitioners moved for, but was denied, reconsideration of the Secretary of Labor's Order.
Petitioners elevated the case to the Court of Appeals (CA) via a Petition for Certiorari under
Rule 65 of the Rules of Court. By a Resolution7 dated July 20, 2005, the CA dismissed the
petition owing to procedural infirmities because petitioners failed to attach a Secretary's
Certificate evidencing the authority of petitioner Benzonan, as President, to sign the petition.
On appeal,8 this Court remanded the case back to the CA for determination on the
merits.9ChanRoblesVirtualawlibrary
Ruling of the Court of Appeals

In its Decision dated November 28, 2014 in CA-G.R. SP No. 00179-MIN, the CA upheld the
Secretary of Labor, holding that petitioners cannot claim denial of due process, their failure
to present evidence being attributed to their negligence.
Petitioners moved for the reconsideration of the Decision, grounded on similar arguments
raised before the Secretary of Labor, citing in addition, the pronouncement of the National
Labor Relations Commission (NLRC) in the related case of NLRC No. MAC-01-010053-2008
entitled Rolando Fabrigar, et. al. v. DXCP Radio Station, et. al. There, the NLRC held that no
employer-employee relationship exists between petitioners and private respondents Rolando
Fabrigar (Fabrigar), Edgar Jopson (Jopson), and Merlyn Velarde (Velarde). For clarity, two
separate actions were instituted by private respondents Fabrigar, Jopson, and Velarde
against petitioners: the first, for violation of labor standards provisions with the DOLE; and
the second, for illegal dismissal filed with the NLRC. The latter case arose from the three
respondents' claim of constructive dismissal effected by petitioners following the inspection
by the DOLE. In ruling for petitioners, the NLRC, in its Resolution10 dated April 30, 2008,
declared that there is no employer-employee relationship between the parties, thus negating
the notion of constructive dismissal.
The CA denied petitioners' motion for reconsideration in its Resolution dated March 5, 2014.
Hence, this petition.
Petitioners presently seek the reversal of the CA's Decision and Resolution and ascribe the
following errors to the court a quo:chanRoblesvirtualLawlibrary
The [CA] did not completely and properly dispose of the case pending before it as it never
resolved all justiciable issues raised x x x, particularly, that the determination of presence or
absence of employer-employee relationship is indispensable in the resolution of this case as
jurisdiction is dependent upon it.
There is [no] single basis, either factual or legal, for the issuance of the May 20, 2004 Order
of the Regional Director x x x against the petitioners as it was issued relying merely on pure
allegations and without any substantial proof on the part of the claimants, contrary to law
and jurisprudence.
97
The [CA] gravely erred in ruling that the Secretary of Labor x x x did not act in a whimsical
and capricious manner or with grave abuse of discretion tantamount to lack or excess of
jurisdiction in affirming the Order of the [Regional Director] despite the glaring fact that no
evidence were submitted by private respondents as to the basis of [their] claim and nature
of their employment.
The [CA] erred in ruling that the Secretary of Labor x x x did not deny [petitioners their] right
to due process in affirming the x x x Order of [the] Regional Director x x x notwithstanding
[the evidence] submitted before her [that there] exist no employer- employee relation [ship]
among the parties and that the [DOLE] has no jurisdiction over the case.11
In the matter of denial of due process, petitioners maintain that they were prevented from
presenting evidence to prove that private respondents are not their employees when the
Regional Director submitted the case for resolution without affording them an opportunity to
ventilate their case or rebut the findings of the inspection. In addition, petitioners assail the
Order of the Regional Director for want of factual and legal basis, particularly the lack of
categorical finding on the existence of an employer-employee relationship between the
partiesan element which petitioners insist is a prerequisite for the exercise of the DOLE'S
jurisdiction,12 following People's Broadcasting (Bombo Radyo, Phils., Inc.) v. The Secretary of
Labor and Employment, et al.13 Petitioners likewise note that the November 8, 2004 Order
of the DOLE Secretary denying petitioner's appeal, as well as the Decision of the CA, is silent
on the employer-employee relationship issue, which further suggests that no real and proper
determination of the existence of such relationship was ever made by these tribunals.
In its Comment, the DOLE counters that the results of the interviews conducted in the
premises of DXCP in the course of its inspection constitute substantial evidence that served
as basis for the monetary awards to private respondents.14ChanRoblesVirtualawlibrary
From the foregoing, the issue for the resolution can be reduced into the question of whether
the CA erred in upholding the November 8, 2004 Order of the Secretary of Labor, which in
turn affirmed the May 20, 2004 Order of the Regional Director. Inextricably linked to the
resolution of the said issue is a determination of whether an employer-employee relationship
had sufficiently been established between the parties as to warrant the assumption of
jurisdiction by the DOLE and issuance of the said May 20, 2004 and November 8, 2004
Orders.

The Court's Ruling
Petitioners were not denied due process
Petitioners' claim of denial of due process deserves scant consideration. The essence of due
process, jurisprudence teaches, is simply an opportunity to be heard, or, as applied to
administrative proceedings, an opportunity to explain one's side or an opportunity to seek a
reconsideration of the action or ruling complained of.15 As long as the parties are, in fine,
given the opportunity to be heard before judgment is rendered, the demands of due process
are sufficiently met.16ChanRoblesVirtualawlibrary
That petitioners were given ample opportunity to present their evidence before the Regional
Director is indisputable. They were notified of the summary investigations conducted on
March 3, 2004 and April 1, 2004, both of which they failed to attend. To justify their non-
appearance, petitioners claim they requested a resetting of the April 1, 2004 hearing due to
the unavailability of their counsel.17 However, no such explanation was proffered as to why
they failed to attend the first hearing. At any rate, it behooved the petitioners to ensure that
they, as well as their counsel, would be available on the dates set for the summary
investigation as this would enable them to prove their claim of non-existence of an
employer-employee relationship. Clearly, their own negligence did them in. Their lament
that they have been deprived of due process is specious.
This thus brings to the fore the issues of whether the Orders of the Regional Director and
Secretary of Labor are supported by factual and legal basis, and, concomitantly, whether an
employer-employee relationship was sufficiently established between petitioners and private
respondents as to warrant the exercise by the DOLE of jurisdiction.
At the outset, the determination as to whether such employer-employee relationship was,
indeed, established requires an examination of facts. It is a well-settled rule that findings of
fact of quasi-judicial agencies are accorded great respect, even finality, by this Court. This
proceeds from the general rule that this Court is not a trier of facts, as questions of fact are
98
contextually for the labor tribunals to resolve, and only errors of law are generally reviewed
in petitions for review on certiorari criticizing the decisions of the
CA.18ChanRoblesVirtualawlibrary
The findings of fact should, however, be supported by substantial evidence from which the
said tribunals can make their own independent evaluation of the facts. In labor cases, as in
other administrative and quasi-judicial proceedings, 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.19 Although no particular form of evidence is
required to prove the existence of an employer-employee relationship, and any competent
and relevant evidence to prove the relationship may be admitted,20 a finding that the
relationship exists must nonetheless rest on substantial
evidence.21ChanRoblesVirtualawlibrary
In addition, the findings of fact tainted with grave abuse of discretion will not be upheld. This
Court will not hesitate to set aside the labor tribunal's findings of fact when it is clearly
shown that they were arrived at arbitrarily or in disregard of the evidence on record or when
there is showing of fraud or error of law.22ChanRoblesVirtualawlibrary
This case clearly falls under the exception. After a careful review of this case, the Court finds
that the DOLE failed to establish its jurisdiction over the case.
The assailed May 20, 2004 Order of the Regional Director and November 8, 2004 Order of
the Secretary of Labor were issued pursuant to Article 128 of the Labor Code, to
wit:chanRoblesvirtualLawlibrary
ART. 128. Visitorial and enforcement power. - (a) The Secretary of Labor and Employment or
his duly authorized representatives, including labor regulation officers, shall have access to
employer's records and premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to determine violations or
which may aid in the enforcement of this Code and of any labor law, wage order or rules and
regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and
in cases where the relationship of employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the power to issue compliance
orders to give effect to the labor standards provisions of this Code and other labor legislation
based on the findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the
labor employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection. (As amended by Republic Act
No. 7730, June 2, 1994). x x xcralawred
Under the aforequoted provision, the Secretary of Labor, or any of his or her authorized
representatives, is granted visitorial and enforcement powers for the purpose of determining
violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and
regulations issued pursuant thereto. Indispensable to the DOLE'S exercise of such power is
the existence of an actual employer-employee relationship between the parties.
The power of the DOLE to determine the existence of an employer-employee relationship
between petitioners and private respondents in order to carry out its mandate under Article
128 has been established beyond cavil in Bombo Radyo,23 thus:chanRoblesvirtualLawlibrary
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power
somehow has to make a determination of the existence of an employer-employee
relationship. Such prerogatival determination, however, cannot be coextensive with the
visitorial and enforcement power itself. Indeed, such determination is merely preliminary,
incidental and collateral to the DOLE'S primary function of enforcing labor standards
provisions. The determination of the existence of employer-employee relationship is still
primarily lodged with the NLRC. This is the meaning of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article 128, two important questions
must be resolved: (1) Does the employer-employee relationship still exist, or alternatively,
was there ever an employer-employee relationship to speak of; and (2) Are there violations
of the Labor Code or of any labor law?
99
The existence of an employer-employee relationship is a statutory prerequisite to and a
limitation on the power of the Secretary of Labor, one which the legislative branch is entitled
to impose. The rationale underlying this limitation is to eliminate the prospect of competing
conclusions of the Secretary of Labor and the NLR.C, on a matter fraught with questions of
fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather
than an administrative official of the executive branch of the government. If the Secretary of
Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite,
as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise
acquire. (emphasis ours)cralawred
The foregoing ruling was further reiterated and clarified in the resolution of the
reconsideration of the same case, wherein the jurisdiction of the DOLE was delineated vis-a-
vis the NLRC where the employer-employee relationship between the parties is at
issue:chanRoblesvirtualLawlibrary
No limitation in the law was placed upon the power of the DOLE to determine the existence
of an employer-employee relationship. No procedure was laid down where the DOLE would
only make a preliminary finding, that the power was primarily held by the NLRC. The law did
not say that the DOLE would first seek the NLRC's determination of the existence of an
employer-employee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have
the power to determine whether or not an employer-employee relationship exists, and from
there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of
the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a ready
set of guidelines to follow, the same guide the courts themselves use. The elements to
determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the
employer's power to control the employee's conduct. The use of this test is not solely limited
to the NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test,
even in the course of inspection, making use of the same evidence that would have been
presented before the NLRC. (emphasis ours)cralawred
Like the NLRC, the DOLE has the authority to rule on the existence of an employer-employee
relationship between the parties, considering that the existence of an employer-employee
relationship is a condition sine qua non for the exercise of its visitorial power. Nevertheless,
it must be emphasized that without an employer-employee relationship, or if one has
already been terminated, the Secretary of Labor is without jurisdiction to determine if
violations of labor standards provision had in fact been committed,24 and to direct
employers to comply with their alleged violations of labor standards.

The Orders of the Regional Director and the Secretary of Labor do not contain clear and
distinct factual basis necessary to establish the jurisdiction of the DOLE and to justify the
monetary awards to private respondents
For expediency, the May 20, 2004 Order of the Regional Director is pertinently reproduced
hereunder:chanRoblesvirtualLawlibrary
ORDER
This refers to the Complaint Inspection conducted at DXCP Radio Station and/or Engr.
Gauvain Benzonan, President, located at NH Lagao Road, General Santos City on January 19,
2004 pursuant to Inspection Authority No. R1201-0401-CI-052 which resulted to the
discovery of the Labor Standards violations, namely:chanRoblesvirtualLawlibrary
1. Underpayment of Wages
2. Underpayment of 13th Month Pay
3. Non-payment of the five (5) days Service Incentive Leave Pay
4. Non-payment of Rest Day Premium Pay
5. Non-payment of the Holiday Premium Pay
6. Non-remittance of SSS Contributions
7. Some employees are paid on commission basis aside from their allowance[s]cralawred
Proceeding from the conduct of such inspection was the issuance of the Notice of Inspection
Result requiring the respondent DXCP Radio Station and/or Engr. Gauvain Benzonan,
President, to effect restitution and/or correction of the noted violations at the plant/company
level within five (5) calendar days from notice thereof. But, Engr. Gauvain Benzonan failed to
do so.
100
On March 3, 2004, a summary investigation was conducted at the [DOLE], Regional Office
No. XII, Provincial Extension Office, General Santos City. In that scheduled Summary
Investigation, only complainants appeared, assisted by Mr. Fred Huervana, National
President of the Philippine Organization of Labor Unions, x x x while respondent failed to
appear despite due notice.
On April 1, 2004, another Summary Investigation was conducted x x x [There] complainants
appeared, x x x while respondent was represented by Ms. Nona Gido, Secretary of Atty.
Thomas Jacobo, counsel for the respondent. During the deliberation, Ms. Nona Gido
manifested that her presence in that scheduled summary investigation was to request for
the re-scheduling of such hearing, however, such request was denied. Mr. Fred Huervana
declared that as he gleaned from the Notice of Inspection Result issued by the labor
inspector, the Non-payment of the Provisional Emergency Relief Allowance (PERA) was not
included from among the discovered violations, hence he requested that it should be
included in the computation. Such request was denied x x x. Further, Mr. Fred Huervana,
declared that this case be submitted for decision based on the merit of the case.
Failure of the parties to reach a final settlement prompted this Office to compute the
entitlements of the seven (7) affected workers for their salary differential, underpayment of
13th month pay, non-payment of the five (5) days service incentive leave pay, non-payment
of holiday premium pay and non-payment of rest day premium pay in the total amount of
SEVEN HUNDRED FIFTY NINE THOUSAND SEVEN HUNDRED FIFTY TWO PESOS (P759,752.00)
x x x.25cralawred
In determining the existence of an employer-employee relationship, Bombo Radyo specifies
the guidelines or indicators used by courts, i.e. (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer's
power to control the employee's conduct. The DOLE Secretary, or his or her representatives,
can utilize the same test, even in the course of inspection, making use of the same evidence
that would have been presented before the NLRC.26ChanRoblesVirtualawlibrary
As can be gleaned from the above-quoted Order, the Regional Director merely noted the
discovery of violations of labor standards provisions in the course of inspection of the DXCP
premises. No such categorical determination was made on the existence of an employer-
employee relationship utilizing any of the guidelines set forth. In a word, the Regional
Director had presumed, not demonstrated, the existence of the relationship. Of particular
note is the DOLE'S failure to show that petitioners, thus, exercised control over private

respondents' conduct in the workplace. The power of the employee to control the work of
the employee, or the control test, is considered the most significant determinant of the
existence of an employer-employee relationship.27ChanRoblesVirtualawlibrary
Neither did the Orders of the Regional Director and Secretary of Labor state nor make
reference to any concrete evidence to support a finding of an employer-employee
relationship and justify the monetary awards to private respondents. Substantial evidence,
such as proofs of employment, clear exercise of control, and the power to dismiss that prove
such relationship and that petitioners committed the labor laws violations they were
adjudged to have committed, are grossly absent in this case. Furthermore, the Orders dated
May 20, 2004 and November 8, 2004 do not even allude to the substance of the interviews
during the inspection that became the basis of the finding of an employer-employee
relationship.
The Secretary of Labor adverts to private respondents' allegation in their Reply28 to justify
their status as employees of petitioners. The proffered justification falls below the quantum
of proof necessary to establish such fact as allegations can easily be concocted and
manufactured. Private respondents' allegations are inadequate to support a conclusion
absent other concrete proof that would support or corroborate the same. Mere allegation,
without more, is not evidence and is not equivalent to proof.29 Hence, private respondents'
allegations, essentially self-serving statements as they are and devoid under the premises of
any evidentiary weight, can hardly be taken as the substantial evidence contemplated for
the DOLE'S conclusion that they are employees of petitioners.
In a similar vein, the use of the straight computation method in awarding the sum of
P759,752 to private respondents, without reference to any other evidence other than the
interviews conducted during the inspection, is highly telling that the DOLE failed to consider
evidence in arriving at its award and leads this Court to conclude that such amount was
arrived at arbitrarily.
It is quite implausible for the nine (9) private respondents to be entitled to uniform amounts
of Service Incentive Leave (SIL) pay, holiday pay premium, and rest day premium pay for
three (3) years, without any disparity in the amounts due them since entitlement to said
benefits would largely depend on the actual rest days and holidays worked and amount of
remaining leave credits in a year. Whoever claims entitlement to the benefits provided by
101
law should establish his or her right thereto.30 The burden of proving entitlement to
overtime pay and premium pay for holidays and rest days lies with the employee because
these are not incurred in the normal course of business.31 In the case at bar, evidence
pointing not only to the existence of an employer-employee relationship between the
petitioners and private respondents but also to the latter's entitlement to these benefits are
miserably lacking.
It may be that petitioners have failed to refute the allegation that private respondents were
employees of DXCP. Nevertheless, it was incumbent upon private respondents to prove their
allegation that they were, indeed, under petitioners' employ and that the latter violated their
labor rights. A person who alleges a fact has the onus of proving it and the proof should be
clear, positive and convincing.32 Regrettably, private respondents failed to discharge this
burden. The pronouncement in Bombyo Radyo that the determination by the DOLE of the
existence of an employer-employee relationship must be respected should not be construed
so as to dispense with the evidentiary requirement when called for.
It cannot be stressed enough that the existence of an employer-employee relationship
between the parties is essential to confer jurisdiction of the case to the DOLE. Without such
express finding, the DOLE cannot assume to have jurisdiction to resolve the complaints of
private respondents as jurisdiction in that instance lies with the
NLRC.33ChanRoblesVirtualawlibrary
The Orders of the Regional Director and Secretary of Labor do not comply with Article VIII,
Section 16 of the Constitution
As a necessary corollary to the foregoing considerations, another well-grounded reason
exists to set aside the May 20, 2004 Order of the Regional Director and November 8, 2004
Order of the Secretary of Labor. The said Orders contravene Article VIII, Section 14 of the
Constitution, which requires courts to express clearly and distinctly the facts and law on
which decisions are based, to wit:chanRoblesvirtualLawlibrary
Section 14. No decision shall be rendered by any court without expressing therein clearly
and distinctly the facts and the law on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be
refused due course or denied without stating the legal basis therefor.cralawred
As stressed by this Court in San Jose v. NLRC,34 faithful compliance by the courts and quasi-
judicial bodies, such as the DOLE, with Art. VIII, Sec. 14 is a vital element of due process as it
enables the parties to know how decisions are arrived at as well as the legal reasoning
behind them. Thus:chanRoblesvirtualLawlibrary
This Court has previously held that judges and arbiters should draw up their decisions and
resolutions with due care, and make certain that they truly and accurately reflect their
conclusions and their final dispositions. A decision should faithfully comply with Section 14,
Article VIII of the Constitution which provides that no decision shall be rendered by any court
without expressing therein clearly and distinctly the facts of the case and the law on which it
is based. If such decision had to be completely overturned or set aside, upon the modified
decision, such resolution or decision should likewise state the factual and legal foundation
relied upon. The reason for this is obvious: aside from being required by the Constitution, the
court should be able to justify such a sudden change of course; it must be able to
convincingly explain the taking back of its solemn conclusions and pronouncements in the
earl indecision. The same thing goes for the findings of fact made by the NLRC, as it is a
settled rule that such findings are entitled to great respect and even finality when supported
by substantial evidence; otherwise, they shall be struck down for being whimsical and
capricious and arrived at with grave abuse of discretion. It is a requirement of due process
and fair play that the parties to a litigation be informed of how it was decided, with an
explanation of the factual and legal reasons that led to the conclusions of the court. A
decision that does not clearly and distinctly state the facts and the law on which it is based
leaves the parties in the dark as to how it was reached and is especially prejudicial to the
losing party, who is unable to pinpoint the possible errors of the court for review by a higher
tribunal. x x xcralawred
To this end, University of the Philippines v. Hon. Dizon35 instructs that the Constitution and
the Rules of Court require not only that a decision should state the ultimate facts but also
that it should specify the supporting evidentiary facts, for they are what are called the
findings of fact. A decision that does not clearly and distinctly state the facts and the law on
which it is based leaves the parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible errors of the court (or
quasi-judicial body) for review by a higher tribunal.36ChanRoblesVirtualawlibrary
Accordingly, this Court will not hesitate to strike down decisions rendered not hewing to the
Constitutional directive, as it did to a Decision rendered by the NLRC in Anino, et al. v.
Hinatuan Mining Corporation37 for non-observance of the said
requirement:chanRoblesvirtualLawlibrary
102
In the present case, the NLRC was definitely wanting in the observance of the aforesaid
constitutional requirement. Its assailed five-page Decision consisted of about three pages of
quotation from the labor arbiter's decision, including the dispositive portion, and barely a
page (two short paragraphs of two sentences each) of its own discussion of its reasons for
reversing the arbiter's findings. It merely raised a doubt on the motive of the complaining
employees and took "judicial notice that in one area of Mindanao, the mining industry
suffered economic difficulties." In affirming peremptorily the validity of private respondents'
retrenchment program, it surmised that "[i]f small mining cooperatives experienced the
same fate, what more with those highly mechanized establishments."cralawred
The Court is not unmindful of the State's policy to zealously safeguard the rights of our
workers, as no less than the Constitution itself mandates the State to afford full protection to
labor. Nevertheless, it is equally true that the law, in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction of the employer.38 The constitutional
policy to provide full protection to labor is not meant to be a sword to oppress employers.39
Certainly, an employer cannot be made to answer for claims that have neither been
sufficiently proved nor substantiated.
WHEREFORE, the petition is GRANTED. The Decision dated November 28, 2014 and
Resolution dated March 5, 2015 of the Court of Appeals in CA-G.R. SP No. 00179-MIN are
accordingly REVERSED and SET ASIDE. The Order of the then Secretary of Labor and
Employment dated November 8, 2004 denying petitioners' appeal and the Order of the
Regional Director, DOLE Regional Office No. XII, dated May 20, 2004, are ANNULLED, without
prejudice to whatever right or cause of action private respondents may have against
petitioners.
SO ORDERED.
 103

agricultural lands into agri-industrial use was approved. The machineries and equipment
formerly used by HPI continued to be utilized by HRC.

16. G.R. No. 208986, January 13, 2016

Complainants claimed that they were employed by HPI as farm workers in HPI's plantations
HIJO RESOURCES CORPORATION, Petitioner, v. EPIFANIO P. MEJARES, REMEGIO C. occupying various positions as area harvesters, packing house workers, loaders, or labelers.
BALURAN, JR., DANTE SAYCON, AND CECILIO CUCHARO, REPRESENTED BY In 2001, complainants were absorbed by HRC, but they were working under the contractor-
NAMABDJERA-HRC, Respondents. growers: Buenaventura Tano (Bit Farm); Djerame Pausa (Djevon Farm); and Ramon Q.
Laurente (Raquilla Farm). Complainants asserted that these contractor-growers received
compensation from HRC and were under the control of HRC. They further alleged that the
contractor-growers did not have their own capitalization, farm machineries, and equipment.
DECISION

On 1 July 2007, complainants formed their union NAMABDJERA-HRC, which was later
registered with the Department of Labor and Employment (DOLE). On 24 August 2007,
CARPIO, J.:
NAMABDJERA-HRC filed a petition for certification election before the DOLE.

The Case

This petition for review1 assails the 29 August 2012 Decision2 and the 13 August 2013
When HRC learned that complainants formed a union, the three contractor-growers filed with
Resolution3 of the Court of Appeals in CA-G.R. SP No. 04058-MIN. The Court of Appeals
the DOLE a notice of cessation of business operations. In September 2007, complainants
reversed and set aside the Resolutions dated 29 June 2009 and 16 December 2009 of the
were terminated from their employment on the ground of cessation of business operations
National Labor Relations Commission (NLRC) in NLRC No. MIC-03-000229-08 (RAB XI-09-
by the contractor-growers of HRC. On 19 September 2007, complainants, represented by
00774-2007), and remanded the case to the Regional Arbitration Branch, Region XI, Davao
NAMABDJERA-HRC, filed a case for unfair labor practices, illegal dismissal, and illegal
City for further proceedings.
deductions with prayer for moral and exemplary damages and attorney's fees before the
NLRC.
The Facts

Respondents Epifanio P. Mejares, Remegio C. Baluran, Jr., Dante Saycon, and Cecilio Cucharo
(respondents) were among the complainants, represented by their labor union named
On 19 November 2007, DOLE Med-Arbiter Lito A. Jasa issued an Order,4 dismissing
"Nagkahiusang Mamumuo ng Bit, Djevon, at Raquilla Farms sa Hijo Resources Corporation"
NAMABDJERA-HRC's petition for certification election on the ground that there was no
(NAMABDJERA-HRC), who filed with the NLRC an illegal dismissal case against petitioner Hijo
employer-employee relationship between complainants (members of NAMABDJERA-HRC) and
Resources Corporation (HRC).
HRC. Complainants did not appeal the Order of Med-Arbiter Jasa but pursued the illegal
dismissal case they filed.

Complainants (which include the respondents herein) alleged that petitioner HRC, formerly
known as Hijo Plantation Incorporated (HPI), is the owner of agricultural lands in Madum,
On 4 January 2008, HRC filed a motion to inhibit Labor Arbiter Maria Christina S. Sagmit and
Tagum, Davao del Norte, which were planted primarily with Cavendish bananas. In 2000, HPI
moved to dismiss the complaint for illegal dismissal. The motion to dismiss was anchored on
was renamed as HRC. In December 2003, HRC's application for the conversion of its
the following arguments: (1) Lack of jurisdiction under the principle of res judicata; and (2)

The Order of the Med-Arbiter finding that complainants were not employees of HRC, which
complainants did not appeal, had become final and executory.
The Labor Arbiter's Ruling
On 5 February 2008, Labor Arbiter Sagmit denied the motion to inhibit. Labor Arbiter Sagmit
likewise denied the motion to dismiss in an Order dated 12 February 2008. Labor Arbiter
Sagmit held that res judicata does not apply. Citing the cases of Manila Golf & Country Club,
Inc. v. IAC5 and Sandoval Shipyards, Inc. v. Pepito,6 the Labor Arbiter ruled that the decision
of the Med-Arbiter in a certification election case, by the nature of that proceedings, does
not foreclose further dispute between the parties as to the existence or non-existence of
employer-employee relationship between them. Thus, the finding of Med-Arbiter Jasa that no
employment relationship exists between HRC and complainants does not bar the Labor
Arbiter from making his own independent finding on the same issue. The non-litigious nature
of the proceedings before the Med-Arbiter does not prevent the Labor Arbiter from hearing
and deciding the case. Thus, Labor Arbiter Sagmit denied the motion to dismiss and ordered
the parties to file their position papers.
HRC filed with the NLRC a petition for certiorari with a prayer for temporary restraining
order, seeking to nullify the 5 February 2008 and 12 February 2008 Orders of Labor Arbiter
Sagmit.
The Ruling of the NLRC
The NLRC granted the petition, holding that Labor Arbiter Sagmit gravely abused her
discretion in denying HRC's motion to dismiss. The NLRC held that the Med-Arbiter Order
dated 19 November 2007 dismissing the certification election case on the ground of lack of
employer-employee relationship between HRC and complainants (members of NAMABDJERA-
HRC) constitutes res judicata under the concept of conclusiveness of judgment, and thus,
warrants the dismissal of the case. The NLRC ruled that the Med-Arbiter exercises quasi-
judicial power and the Med-Arbiter's decisions and orders have, upon their finality, the force
and effect of a final judgment within the purview of the doctrine of res judicata.
104
On the issue of inhibition, the NLRC found it moot and academic in view of Labor Arbiter
Sagmit's voluntary inhibition from the case as per Order dated 11 March 2009.
The Ruling of the Court of Appeals
The Court of Appeals found the ruling in the Sandoval case more applicable in this case. The
Court of Appeals noted that the Sandoval case, which also involved a petition for
certification election and an illegal dismissal case filed by the union members against the
alleged employer, is on all fours with this case. The issue in Sandoval on the effect of the
Med-Arbiter's findings as to the existence of employer-employee relationship is the very
same issue raised in this case. On the other hand, the case of Chris Garments Corp. v. Hon.
Sto. Tomas7 cited by the NLRC, which involved three petitions for certification election filed
by the same union, is of a different factual milieu.
The Court of Appeals held that the certification proceedings before the Med-Arbiter are non-
adversarial and merely investigative. On the other hand, under Article 217 of the Labor
Code, the Labor Arbiter has original and exclusive jurisdiction over illegal dismissal cases.
Although the proceedings before the Labor Arbiter are also described as non-litigious, the
Court of Appeals noted that the Labor Arbiter is given wide latitude in ascertaining the
existence of employment relationship. Thus, unlike the Med-Artbiter, the Labor Arbiter may
conduct clarificatory hearings and even avail of ocular inspection to ascertain facts speedily.
Hence, the Court of Appeals concluded that the decision in a certification election case does
not foreclose further dispute as to the existence or non-existence of an employer-employee
relationship between HRC and the complainants.
On 29 August 2012, the Court of Appeals promulgated its Decision, the dispositive portion of
which reads:chanRoblesvirtualLawlibrary

WHEREFORE, the petition is hereby GRANTED and the assailed Resolutions dated June 29,
2009 and December 16, 2009 of the National Labor Relations Commission are hereby
REVERSED AND SET ASIDE. Let NLRC CASE No. RAB-XI-09-00774-0707 be remanded to the
Regional Arbitration Branch, Region XI, Davao City for further proceedings.
SO ORDERED.8ChanRoblesVirtualawlibrary
cralawlawlibrary
The Issue
Whether the Court of Appeals erred in setting aside the NLRC ruling and remanding the case
to the Labor Arbiter for further proceedings.
The Ruling of the Court
We find the petition without merit.
There is no question that the Med-Arbiter has the authority to determine the existence of an
employer-employee relationship between the parties in a petition for certification election.
As held in M. Y. San Biscuits, Inc. v. Acting Sec. Laguesma:9chanroblesvirtuallawlibrary
Under Article 226 of the Labor Code, as amended, the Bureau of Labor Relations (BLR), of
which the med-arbiter is an officer, has the following jurisdiction -
"ART. 226. Bureau of Labor Relations. - The Bureau of Labor Relations and the Labor
Relations Divisionfs] in the regional offices of the Department of Labor shall have original
and exclusive authority to act, at their own initiative or upon request of either or both
parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems
arising from or affecting labor-management relations in all workplaces whether agricultural
or non-agricultural, except those arising from the implementation or interpretation of
collective bargaining agreements which shall be the subject of grievance procedure and/or
voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on labor cases before it, subject to
extension by agreement of the parties." (Italics supplied)
105
From the foregoing, the BLR has the original and exclusive jurisdiction to inter alia, decide all
disputes, grievances or problems arising from or affecting labor-management relations in all
workplaces whether agricultural or non-agricultural. Necessarily, in the exercise of this
jurisdiction over labor-management relations, the med-arbiter has the authority, original and
exclusive, to determine the existence of an employer-employee relationship between the
parties.
Apropos to the present case, once there is a determination as to the existence of such a
relationship, the med-arbiter can then decide the certification election case. As the authority
to determine the employer-employee relationship is necessary and indispensable in the
exercise of jurisdiction by the med-arbiter, his finding thereon may only be reviewed and
reversed by the Secretary of Labor who exercises appellate jurisdiction under Article 259 of
the Labor Code, as amended, which provides -
"ART. 259. Appeal from certification election orders. - Any party to an election may appeal
the order or results of the election as determined by the Med-Arbiter directly to the
Secretary of Labor and Employment on the ground that the rules and regulations or parts
thereof established by the Secretary of Labor and Employment for the conduct of the
election have been violated. Such appeal shall be decided within fifteen (15) calendar
days."10
cralawlawlibrary
In this case, the Med-Arbiter issued an Order dated 19 November 2007, dismissing the
certification election case because of lack of employer-employee relationship between HRC
and the members of the respondent union. The order dismissing the petition was issued
after the members of the respondent union were terminated from their employment in
September 2007, which led to the filing of the illegal dismissal case before the NLRC on 19
September 2007. Considering their termination from work, it would have been futile for the
members of the respondent union to appeal the Med-Arbiter' s order in the certification
election case to the DOLE Secretary. Instead, they pursued the illegal dismissal case filed
before the NLRC.
The Court is tasked to resolve the issue of whether the Labor Arbiter, in the illegal dismissal
case, is bound by the ruling of the Med-Arbiter regarding the existence or non-existence of
employer-employee relationship between the parties in the certification election case.
The Court rules in the negative. As found by the Court of Appeals, the facts in this case are
very similar to those in the Sandoval case, which also involved the issue of whether the
ruling in a certification election case on the existence or non-existence of an employer-
employee relationship operates as res judicata in the illegal dismissal case filed before the
NLRC. In Sandoval, the DOLE Undersecretary reversed the finding of the Med-Arbiter in a
certification election case and ruled that there was no employer-employee relationship
between the members of the petitioner union and Sandoval Shipyards, Inc. (SSI), since the
former were employees of the subcontractors. Subsequently, several illegal dismissal cases
were filed by some members of the petitioner union against SSI. Both the Labor Arbiter and

the NLRC ruled that there was no employer-employee relationship between the parties,
citing the resolution of the DOLE Undersecretary in the certification election case. The Court
of Appeals reversed the NLRC ruling and held that the members of the petitioner union were
employees of SSI. On appeal, this Court affirmed the appellate court's decision and ruled
that the Labor Arbiter and the NLRC erred in relying on the pronouncement of the DOLE
Undersecretary that there was no employer-employee relationship between the parties. The
Court cited the ruling in the Manila Golf11 case that the decision in a certification election
case, by the very nature of that proceeding, does not foreclose all further dispute between
the parties as to the existence or non-existence of an employer-employee relationship
between them.
This case is different from the Chris Garments case cited by the NLRC where the Court held
that the matter of employer-employee relationship has been resolved with finality by the
DOLE Secretary, whose factual findings were not appealed by the losing party. As mentioned
earlier, the Med-Arbiter's order in this case dismissing the petition for certification election
on the basis of non-existence of employer-employee relationship was issued after the
members of the respondent union were dismissed from their employment. The purpose of a
petition for certification election is to determine which organization will represent the
employees in their collective bargaining with the employer.12The respondent union, without
its member-employees, was thus stripped of its personality to challenge the Med-Arbiter's
decision in the certification election case. Thus, the members of the respondent union were
left with no option but to pursue their illegal dismissal case filed before the Labor Arbiter. To
dismiss the illegal dismissal case filed before the Labor Arbiter on the basis of the
pronouncement of the Med-Arbiter in the certification election case that there was no
employer-employee relationship between the parties, which the respondent union could not
even appeal to the DOLE Secretary because of the dismissal of its members, would be
tantamount to denying due process to the complainants in the illegal dismissal case. This,
we cannot allow.
WHEREFORE, we DENY the petition. We AFFIRM the 29 August 2012 Decision and the 13
August 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 04058-MIN.
SO ORDERED
106
17. G.R. No. 201595
ALLAN M. MENDOZA, Petitioner,
vs.
OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU), namely, EDUARDO B.
BORELA, BUENAVENTURA QUEBRAL, ELIZABETH COMETA, ALEJANDRO TORRES,
AMORSOLO TIERRA, SOLEDAD YEBAN, LUIS RENDON, VIRGINIA APILADO, TERESITA
BOLO, ROGELIO BARBERO, JOSE CASAAS, ALFREDO MAGA, EMILIO FERNANDEZ,
ROSITA BUENA VENTURA, ALMENIO CANCINO, ADELA IMANA, MARIO MANCENIDO,
WILFREDO MANDILAG, ROLANDO MANLAP AZ, EFREN MONTEMAYOR, NELSON
PAGULAYAN, CARLOS VILLA, RIC BRIONES, and CHITO BERNARDO, Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the April 24, 2012 Decision2 of the Court of
Appeals (CA) which dismissed the Petition for Certiorari3 in CA-G.R. SP No. 115639.
Factual Antecedents
Petitioner was a member of the Manila Water Employees Union (MWEU), a Department of
Labor and Employment (DOLE)-registered labor organization consisting of rank-and-file
employees within Manila Water Company (MWC). The respondents herein named Eduardo
B. Borela (Borela), Buenaventura Quebral (Quebral), Elizabeth Cometa (Cometa), Alejandro
Torres (Torres), Amorsolo Tierra (Tierra), Soledad Yeban (Yeban), Luis Rendon (Rendon),
Virginia Apilado (Apilado), Teresita Bolo (Bolo), Rogelio Barbero (Barbero), Jose Casaas
(Casaas), Alfredo Maga (Maga), Emilio Fernandez (Fernandez), Rosita Buenaventura
(Buenaventura), Almenio Cancino (Cancino), Adela Imana, Mario Mancenido (Mancenido),
Wilfredo Mandilag (Mandilag), Rolando Manlapaz (Manlapaz), Efren Montemayor
(Montemayor), Nelson Pagulayan, Carlos Villa, Ric Briones, and Chito Bernardo were MWEU
officers during the period material to this Petition, with Borela as President and Chairman of
the MWEU Executive Board, Quebral as First Vice-President and Treasurer, and Cometa as
Secretary.4
In an April 11, 2007 letter,5 MWEU through Cometa informed petitioner that the union was
unable to fully deduct the increased P200.00 union dues from his salary due to lack of the
required December 2006 check-off authorization from him. Petitioner was warned that his
failure to pay the union dues would result in sanctions upon him. Quebral informed Borela,
through a May 2, 2007 letter,6 that for such failure to pay the union dues, petitioner and
several others violated Section 1(g), Article IX of the MWEUs Constitution and By-Laws.7 In
turn, Borela referred the charge to the MWEU grievance committee for investigation.

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled
hearing. On June 6, 2007, the MWEU grievance committee recommended that petitioner be
suspended for 30 days.
In a June 20, 2007 letter,8 Borela informed petitioner and his corespondents of the MWEU
Executive Boards "unanimous approval"9 of the grievance committees recommendation
and imposition upon them of a penalty of 30 days suspension, effective June 25, 2007.
In a June 26, 2007 letter10 to Borela, petitioner and his co-respondents took exception to the
imposition and indicated their intention to appeal the same to the General Membership
Assembly in accordance with Section 2(g), Article V of the unions Constitution and By-
Laws,11 which grants them the right to appeal any arbitrary resolution, policy and rule
promulgated by the Executive Board to the General Membership Assembly. In a June 28,
2007 reply,12 Borela denied petitioners appeal, stating that the prescribed period for
appeal had expired.
Petitioner and his co-respondents sent another letter13 on July 4, 2007, reiterating their
arguments and demanding that the General Membership Assembly be convened in order
that their appeal could be taken up. The letter was not acted upon.
Petitioner was once more charged with non-payment of union dues, and was required to
attend an August 3, 2007 hearing.14 Thereafter, petitioner was again penalized with a 30-
day suspension through an August 21, 2007 letter15 by Borela informing petitioner of the
Executive Boards "unanimous approval"16 of the grievance committee recommendation to
suspend him effective August 24, 2007, to which he submitted a written reply,17 invoking
his right to appeal through the convening of the General Membership Assembly. However,
the respondents did not act on petitioners plea.
Meanwhile, MWEU scheduled an election of officers on September 14, 2007. Petitioner filed
his certificate of candidacy for Vice-President, but he was disqualified for not being a
member in good standing on account of his suspension.
On October 2, 2007, petitioner was charged with non-payment of union dues for the third
time. He did not attend the scheduled hearing. This time, he was meted the penalty of
expulsion from the union, per "unanimous approval"18 of the members of the Executive
Board. His pleas for an appeal to the General Membership Assembly were once more
unheeded.19
In 2008, during the freedom period and negotiations for a new collective bargaining
agreement (CBA) with MWC, petitioner joined another union, the Workers Association for
Transparency, Empowerment and Reform, All-Filipino Workers Confederation (WATER-AFWC).
He was elected union President. Other MWEU members were inclined to join WATER-AFWC,
but MWEU director Torres threatened that they would not get benefits from the new CBA.20
107
The MWEU leadership submitted a proposed CBA which contained provisions to the effect
that in the event of retrenchment, non-MWEU members shall be removed first, and that
upon the signing of the CBA, only MWEU members shall receive a signing bonus.21
Ruling of the Labor Arbiter
On October 13, 2008, petitioner filed a Complaint22 against respondents for unfair labor
practices, damages, and attorneys fees before the National Labor Relations Commission
(NLRC), Quezon City, docketed as NLRC Case No. NCR-10-14255-08. In his Position Paper and
other written submissions,23 petitioner accused the respondents of illegal termination from
MWEU in connection with the events relative to his non-payment of union dues; unlawful
interference, coercion, and violation of the rights of MWC employees to self-organization in
connection with the proposed CBA submitted by MWEU leadership, which petitioner claims
contained provisions that discriminated against non-MWEU members. Petitioner prayed in
his Supplemental Position Paper that respondents be held guilty of unfair labor practices and
ordered to indemnify him moral damages in the amount of P100,000.00, exemplary
damages amounting to P50,000.00, and 10% attorneys fees.
In their joint Position Paper and other pleadings,24 respondents claimed that the Labor
Arbiter had no jurisdiction over the dispute, which is intra-union in nature; that the Bureau of
Labor Relations (BLR) was the proper venue, in accordance with Article 226 of the Labor
Code25 and Section 1, Rule XI of Department Order 40-03, series of 2003, of the DOLE;26
and that they were not guilty of unfair labor practices, discrimination, coercion or restraint.
On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision27 which
decreed as follows:
Indeed the filing of the instant case is still premature. Section 5, Article X-Investigation
Procedures and Appeal Process of the Union Constitution and By-Laws provides that:
Section 5. Any dismissed and/or expelled member shall have the rights to appeal to the
Executive Board within seven (7) days from the date of notice of the said dismissal and/or
expulsion, which in [turn] shall be referred to the General Membership Assembly. In case of
an appeal, a simple majority of the decision of the Executive Board is imperative. The same
shall be approved/disapproved by a majority vote of the general membership assembly in a
meeting duly called for the purpose.
On the basis of the foregoing, the parties shall exhaust first all the administrative remedies
before resorting to compulsory arbitration. Thus, instant case is referred back to the Union
for the General Assembly to act or deliberate complainants appeal on the decision of the
Executive Board.

WHEREFORE PREMISES CONSIDERED, instant case is referred back to the Union level for the
General Assembly to act on complainants appeal.
SO ORDERED.28
Ruling of the National Labor Relations Commission
Petitioner appealed before the NLRC, where the case was docketed as NLRC LAC No. 07-
001913-09. On March 15, 2010, the NLRC issued its Decision,29 declaring as follows:
Complainant30 imputes serious error to the Labor Arbiter when she decided as follows:
a. Referring back the subject case to the Union level for the General Assembly to act on his
appeal.
b. Not ruling that respondents are guilty of ULP as charged.
c. Not granting to complainant moral and exemplary damages and attorneys fees.
Complainant, in support of his charges, claims that respondents restrained or coerced him in
the exercise of his right as a union member in violation of paragraph "a", Article 249 of the
Labor Code,31 particularly, in denying him the explanation as to whether there was
observance of the proper procedure in the increase of the membership dues from P100.00 to
P200.00 per month. Further, complainant avers that he was denied the right to appeal his
suspension and expulsion in accordance with the provisions of the Unions Constitution and
By-Laws. In addition, complainant claims that respondents attempted to cause the
management to discriminate against the members of WATER-AFWC thru the proposed CBA.
Pertinent to the issue then on hand, the Labor Arbiter ordered that the case be referred back
to the Union level for the General Assembly to act on complainants appeal. Hence, these
appeals.
After a careful look at all the documents submitted and a meticulous review of the facts, We
find that this Commission lacks the jurisdictional competence to act on this case.
Article 217 of the Labor Code,32 as amended, specifically enumerates the cases over which
the Labor Arbiters and the Commission have original and exclusive jurisdiction. A perusal of
the record reveals that the causes of action invoked by complainant do not fall under any of
the enumerations therein. Clearly, We have no jurisdiction over the same.
Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department Order No. 40-03 in
particular, Item A, paragraphs (h) and (j) and Item B, paragraph (a)(3), respectively, provide:
"A. Inter-Intra-Union disputes shall include:
108
"(h) violation of or disagreements over any provision of the Constitution and By-Laws of a
Union or workers association.
"(j) violation of the rights and conditions of membership in a Union or workers association.
"B. Other Labor Relations disputes, not otherwise covered by Article 217 of the Labor Code,
shall include
"3. a labor union and an individual who is not a member of said union."
Clearly, the above-mentioned disputes and conflict fall under the jurisdiction of the Bureau
of Labor Relations, as these are inter/intra-union disputes.
WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is hereby declared
NULL and VOID for being rendered without jurisdiction and the instant complaint is
DISMISSED.
SO ORDERED.33
Petitioner moved for reconsideration,34 but in a June 16, 2010 Resolution,35 the motion was
denied and the NLRC sustained its Decision.
Ruling of the Court of Appeals
In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP No. 115639,
petitioner sought to reverse the NLRC Decision and be awarded his claim for damages and
attorneys fees on account of respondents unfair labor practices, arguing among others that
his charge of unfair labor practices is cognizable by the Labor Arbiter; that the fact that the
dispute is inter- or intra-union in nature cannot erase the fact that respondents were guilty of
unfair labor practices in interfering and restraining him in the exercise of his right to self-
organization as member of both MWEU and WATER-AFWC, and in discriminating against him
and other members through the provisions of the proposed 2008 CBA which they drafted;
that his failure to pay the increased union dues was proper since the approval of said
increase was arrived at without observing the prescribed voting procedure laid down in the
Labor Code; that he is entitled to an award of damages and attorneys fees as a result of
respondents illegal acts in discriminating against him; and that in ruling the way it did, the
NLRC committed grave abuse of discretion.
On April 24, 2012, the CA issued the assailed Decision containing the following
pronouncement:
The petition lacks merit.

Petitioners causes of action against MWEU are inter/intra-union disputes cognizable by the
BLR whose functions and jurisdiction are largely confined to union matters, collective
bargaining registry, and labor education. Section 1, Rule XI of Department Order (D.O.) No.
40-03, Series of 2003, of the Department of Labor and Employment enumerates instances of
inter/intra-union disputes, viz:
Section 1. Coverage. Inter/intra-union disputes shall include:
xxxx
(b) conduct of election of union and workers association officers/nullification of election of
union and workers association officers;
(c) audit/accounts examination of union or workers association funds;
xxxx
(g) validity/invalidity of impeachment/ expulsion of union and workers association officers
and members;
xxxx
(j) violations of or disagreements over any provision in a union or workers association
constitution and by-laws;
xxxx
(l) violations of the rights and conditions of union or workers association membership;
xxxx
(n) such other disputes or conflicts involving the rights to self-organization, union
membership and collective bargaining
(1) between and among legitimate labor organizations;
(2) between and among members of a union or workers association.
In brief, "Inter-Union Dispute" refers to any conflict between and among legitimate labor
unions involving representation questions for purposes of collective bargaining or to any
other conflict or dispute between legitimate labor unions. "Intra-Union Dispute" refers to any
conflict between and among union members, including grievances arising from any violation
of the rights and conditions of membership, violation of or disagreement over any provision
of the unions constitution and by-laws, or disputes arising from chartering or affiliation of
109
union. On the other hand, the circumstances of unfair labor practices (ULP) of a labor
organization are stated in Article 249 of the Labor Code, to wit:
Article 249. Unfair labor practices of labor organizations. It shall be unlawful for labor
organization, its officers, agents, or representatives to commit any of the following unfair
labor practices:
(a) To restrain or coerce employees in the exercise of their right to self-organization;
Provided, That the labor organization shall have the right to prescribe its own rules with
respect to the acquisition or retention of membership;
(b) To cause or attempt to cause an employer to discriminate against an employee, including
discrimination against an employee with respect to whom membership in such organization
has been denied or terminated on any ground other than the usual terms and conditions
under which membership or continuation of membership is made available to other
members;
xxxx
Applying the aforementioned rules, We find that the issues arising from petitioners right to
information on the increased membership dues, right to appeal his suspension and expulsion
according to CBL provisions, and right to vote and be voted on are essentially intra-union
disputes; these involve violations of rights and conditions of union membership. But his
claim that a director of MWEU warned that non-MWEU members would not receive CBA
benefits is an inter-union dispute. It is more of an "interference" by a rival union to ensure
the loyalty of its members and to persuade non-members to join their union. This is not an
actionable wrong because interfering in the exercise of the right to organize is itself a
function of self-organizing.37 As long as it does not amount to restraint or coercion, a labor
organization may interfere in the employees right to self-organization.38 Consequently, a
determination of validity or illegality of the alleged acts necessarily touches on union
matters, not ULPs, and are outside the scope of the labor arbiters jurisdiction.
As regards petitioners other accusations, i.e., discrimination in terms of meting out the
penalty of expulsion against him alone, and attempt to cause the employer, MWC, to
discriminate against non-MWEU members in terms of retrenchment or reduction of
personnel, and signing bonus, while We may consider them as falling within the concept of
ULP under Article 249(a) and (b), still, petitioners complaint cannot prosper for lack of
substantial evidence. Other than his bare allegation, petitioner offered no proof that MWEU
did not penalize some union members who failed to pay the increased dues. On the
proposed discriminatory CBA provisions, petitioner merely attached the pages containing the
questioned provisions without bothering to reveal the MWEU representatives responsible for
the said proposal. Article 249 mandates that "x x x only the officers, members of the
governing boards, representatives or agents or members of labor associations or
organizations who have actually participated in, authorized or ratified unfair labor practices

shall be held criminally liable." Plain accusations against all MWEU officers, without
specifying their actual participation, do not suffice. Thus, the ULP charges must necessarily
fail.
In administrative and quasi-judicial proceedings, only substantial evidence is necessary to
establish the case for or against a party. Substantial evidence is that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion.
Petitioner failed to discharge the burden of proving, by substantial evidence, the allegations
of ULP in his complaint. The NLRC, therefore, properly dismissed the case.
FOR THESE REASONS, the petition is DISMISSED.
SO ORDERED.39
Thus, the instant Petition.
Issue
In an August 28, 2013 Resolution,40 this Court resolved to give due course to the Petition,
which claims that the CA erred:
A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION CONFLICTS NEGATES THE
COMPLAINT FOR UNFAIR LABOR PRACTICES AGAINST A LABOR ORGANIZATION AND ITS
OFFICERS, AND IN AFFIRMING THAT THE NLRC PROPERLY DISMISSED THE CASE FOR
ALLEGED LACK OF JURISDICTION.
B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR LABOR PRACTICES UNDER
ARTICLE 249(a) AND (b) OF THE LABOR CODE.
C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER AGAINST MEMBERS OF A
RIVAL UNION IS (sic) MERELY AN "INTERFERENCE" AND DO NOT AMOUNT TO "RESTRAINT"
OR "COERCION".
D. IN DECLARING THAT PETITIONER FAILED TO PRESENT SUBSTANTIAL EVIDENCE IN
PROVING RESPONDENTS SPECIFIC ACTS OF UNFAIR LABOR PRACTICES.
E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO PETITIONER FOR MORAL
AND EXEMPLARY DAMAGES, AND ATTORNEYS FEES.41
Petitioners Arguments
Praying that the assailed CA dispositions be set aside and that respondents be declared
guilty of unfair labor practices under Article 249(a) and (b) and adjudged liable for damages
and attorneys fees as prayed for in his complaint, petitioner maintains in his Petition and
110
Reply42 that respondents are guilty of unfair labor practices which he clearly enumerated
and laid out in his pleadings below; that these unfair labor practices committed by
respondents fall within the jurisdiction of the Labor Arbiter; that the Labor Arbiter, the NLRC,
and the CA failed to rule on his accusation of unfair labor practices and simply dismissed his
complaint on the ground that his causes of action are intra- or inter-union in nature; that
admittedly, some of his causes of action involved intra- or inter-union disputes, but other
acts of respondents constitute unfair labor practices; that he presented substantial evidence
to prove that respondents are guilty of unfair labor practices by failing to observe the proper
procedure in the imposition of the increased monthly union dues, and in unduly imposing the
penalties of suspension and expulsion against him; that under the unions constitution and
by-laws, he is given the right to appeal his suspension and expulsion to the general
membership assembly; that in denying him his rights as a union member and expelling him,
respondents are guilty of malice and evident bad faith; that respondents are equally guilty
for violating and curtailing his rights to vote and be voted to a position within the union, and
for discriminating against non-MWEU members; and that the totality of respondents conduct
shows that they are guilty of unfair labor practices.
Respondents Arguments
In their joint Comment,43 respondents maintain that petitioner raises issues of fact which
are beyond the purview of a petition for review on certiorari; that the findings of fact of the
CA are final and conclusive; that the Labor Arbiter, NLRC, and CA are one in declaring that
there is no unfair labor practices committed against petitioner; that petitioners other
allegations fall within the jurisdiction of the BLR, as they refer to intra- or inter-union
disputes between the parties; that the issues arising from petitioners right to information on
the increased dues, right to appeal his suspension and expulsion, and right to vote and be
voted upon are essentially intra-union in nature; that his allegations regarding supposed
coercion and restraint relative to benefits in the proposed CBA do not constitute an
actionable wrong; that all of the acts questioned by petitioner are covered by Section 1, Rule
XI of Department Order 40-03, series of 2003 as intra-/inter-union disputes which do not fall
within the jurisdiction of the Labor Arbiter; that in not paying his union dues, petitioner is
guilty of insubordination and deserved the penalty of expulsion; that petitioner failed to
petition to convene the general assembly through the required signature of 30% of the union
membership in good standing pursuant to Article VI, Section 2(a) of MWEUs Constitution
and By-Laws or by a petition of the majority of the general membership in good standing
under Article VI, Section 3; and that for his failure to resort to said remedies, petitioner can
no longer question his suspension or expulsion and avail of his right to appeal.
Our Ruling
The Court partly grants the Petition.
In labor cases, issues of fact are for the labor tribunals and the CA to resolve, as this Court is
not a trier of facts. However, when the conclusion arrived at by them is erroneous in certain

respects, and would result in injustice as to the parties, this Court must intervene to correct
the error. While the Labor Arbiter, NLRC, and CA are one in their conclusion in this case, they
erred in failing to resolve petitioners charge of unfair labor practices against respondents.
It is true that some of petitioners causes of action constitute intra-union cases cognizable
by the BLR under Article 226 of the Labor Code.
An intra-union dispute refers to any conflict between and among union members, including
grievances arising from any violation of the rights and conditions of membership, violation of
or disagreement over any provision of the unions constitution and by-laws, or disputes
arising from chartering or disaffiliation of the union. Sections 1 and 2, Rule XI of Department
Order No. 40-03, Series of 2003 of the DOLE enumerate the following circumstances as
inter/intra-union disputes x x x.44
However, petitioners charge of unfair labor practices falls within the original and exclusive
jurisdiction of the Labor Arbiters, pursuant to Article 217 of the Labor Code. In addition,
Article 247 of the same Code provides that "the civil aspects of all cases involving unfair
labor practices, which may include claims for actual, moral, exemplary and other forms of
damages, attorneys fees and other affirmative relief, shall be under the jurisdiction of the
Labor Arbiters."
Unfair labor practices may be committed both by the employer under Article 248 and by
labor organizations under Article 249 of the Labor Code,45 which provides as follows:
ART. 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice for a
labor organization, its officers, agents or representatives:
(a) To restrain or coerce employees in the exercise of their right to self-organization.
However, a labor organization shall have the right to prescribe its own rules with respect to
the acquisition or retention of membership;
(b) To cause or attempt to cause an employer to discriminate against an employee, including
discrimination against an employee with respect to whom membership in such organization
has been denied or to terminate an employee on any ground other than the usual terms and
conditions under which membership or continuation of membership is made available to
other members;
(c) To violate the duty, or refuse to bargain collectively with the employer, provided it is the
representative of the employees;
(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any
money or other things of value, in the nature of an exaction, for services which are not
performed or not to be performed, including the demand for fee for union negotiations;
111
(e) To ask for or accept negotiation or attorneys fees from employers as part of the
settlement of any issue in collective bargaining or any other dispute; or
(f) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the officers, members of
governing boards, representatives or agents or members of labor associations or
organizations who have actually participated in, authorized or ratified unfair labor practices
shall be held criminally liable. (As amended by Batas Pambansa Bilang 130, August 21,
1981).
Petitioner contends that respondents committed acts constituting unfair labor practices
which charge was particularly laid out in his pleadings, but that the Labor Arbiter, the NLRC,
and the CA ignored it and simply dismissed his complaint on the ground that his causes of
action were intra- or inter-union in nature. Specifically, petitioner claims that he was
suspended and expelled from MWEU illegally as a result of the denial of his right to appeal
his case to the general membership assembly in accordance with the unions constitution
and by-laws. On the other hand, respondents counter that such charge is intra-union in
nature, and that petitioner lost his right to appeal when he failed to petition to convene the
general assembly through the required signature of 30% of the union membership in good
standing pursuant to Article VI, Section 2(a) of MWEUs Constitution and By-Laws or by a
petition of the majority of the general membership in good standing under Article VI, Section
3.
Under Article VI, Section 2(a) of MWEUs Constitution and By-Laws, the general membership
assembly has the power to "review revise modify affirm or repeal [sic] resolution and
decision of the Executive Board and/or committees upon petition of thirty percent (30%) of
the Union in good standing,"46 and under Section 2(d), to "revise, modify, affirm or reverse
all expulsion cases."47 Under Section 3 of the same Article, "[t]he decision of the Executive
Board may be appealed to the General Membership which by a simple majority vote reverse
the decision of said body. If the general Assembly is not in session the decision of the
Executive Board may be reversed by a petition of the majority of the general membership in
good standing."48 And, in Article X, Section 5, "[a]ny dismissed and/or expelled member
shall have the right to appeal to the Executive Board within seven days from notice of said
dismissal and/or expulsion which, in [turn] shall be referred to the General membership
assembly. In case of an appeal, a simple majority of the decision of the Executive Board is
imperative. The same shall be approved/disapproved by a majority vote of the general
membership assembly in a meeting duly called for the purpose."49
In regard to suspension of a union member, MWEUs Constitution and By-Laws provides
under Article X, Section 4 thereof that "[a]ny suspended member shall have the right to
appeal within three (3) working days from the date of notice of said suspension. In case of
an appeal a simple majority of vote of the Executive Board shall be necessary to nullify the
suspension."

Thus, when an MWEU member is suspended, he is given the right to appeal such suspension
within three working days from the date of notice of said suspension, which appeal the
MWEU Executive Board is obligated to act upon by a simple majority vote. When the penalty
imposed is expulsion, the expelled member is given seven days from notice of said dismissal
and/or expulsion to appeal to the Executive Board, which is required to act by a simple
majority vote of its members. The Boards decision shall then be approved/ disapproved by a
majority vote of the general membership assembly in a meeting duly called for the
purpose.1avvphi1
The documentary evidence is clear that when petitioner received Borelas August 21, 2007
letter informing him of the Executive Boards unanimous approval of the grievance
committee recommendation to suspend him for the second time effective August 24, 2007,
he immediately and timely filed a written appeal. However, the Executive Board then
consisting of respondents Borela, Tierra, Bolo, Casaas, Fernandez, Rendon, Montemayor,
Torres, Quebral, Pagulayan, Cancino, Maga, Cometa, Mancenido, and two others who are not
respondents herein did not act thereon. Then again, when petitioner was charged for the
third time and meted the penalty of expulsion from MWEU by the unanimous vote of the
Executive Board, his timely appeal was again not acted upon by said board this time
consisting of respondents Borela, Quebral, Tierra, Imana, Rendon, Yeban, Cancino, Torres,
Montemayor, Mancenido, Mandilag, Fernandez, Buenaventura, Apilado, Maga, Barbero,
Cometa, Bolo, and Manlapaz.
Thus, contrary to respondents argument that petitioner lost his right to appeal when he
failed to petition to convene the general assembly through the required signature of 30% of
the union membership in good standing pursuant to Article VI, Section 2(a) of MWEUs
Constitution and By-Laws or by a petition of the majority of the general membership in good
standing under Article VI, Section 3, this Court finds that petitioner was illegally suspended
for the second time and thereafter unlawfully expelled from MWEU due to respondents
failure to act on his written appeals. The required petition to convene the general assembly
through the required signature of 30% (under Article VI, Section 2[a]) or majority (under
Article VI, Section 3) of the union membership does not apply in petitioners case; the
Executive Board must first act on his two appeals before the matter could properly be
referred to the general membership. Because respondents did not act on his two appeals,
petitioner was unceremoniously suspended, disqualified and deprived of his right to run for
the position of MWEU Vice-President in the September 14, 2007 election of officers, expelled
from MWEU, and forced to join another union, WATER-AFWC. For these, respondents are
guilty of unfair labor practices under Article 249 (a) and (b) that is, violation of petitioners
right to self-organization, unlawful discrimination, and illegal termination of his union
membership which case falls within the original and exclusive jurisdiction of the Labor
Arbiters, in accordance with Article 217 of the Labor Code.
The primary concept of unfair labor practices is stated in Article 247 of the Labor Code,
which states:
112
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. Unfair
labor practices violate the constitutional right of workers and employees to self-organization,
are inimical to the legitimate interests of both labor and management, including their right
to bargain collectively and otherwise deal with each other in an atmosphere of freedom and
mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable
labor-management relations.
"In essence, [unfair labor practice] relates to the commission of acts that transgress the
workers right to organize."50 "[A]ll the prohibited acts constituting unfair labor practice in
essence relate to the workers right to self-organization."51 "[T]he term unfair labor practice
refers to that gamut of offenses defined in the Labor Code which, at their core, violates the
constitutional right of workers and employees to self-organization."52
Guaranteed to all employees or workers is the right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective bargaining. This is
made plain by no less than three provisions of the Labor Code of the Philippines. Article 243
of the Code provides as follows:
ART. 243. Coverage and employees right to self-organization. All persons employed in
commercial, industrial and agricultural enterprises and in religious, charitable, medical, or
educational institutions whether operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing for
purposes or collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.
Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to
interfere with, restrain or coerce employees in the exercise of their right to self-
organization. Similarly, Article 249 (a) makes it an unfair labor practice for a labor
organization to restrain or coerce employees in the exercise of their rights to self-
organization . . .
xxxx
The right of self-organization includes the right to organize or affiliate with a labor union or
determine which of two or more unions in an establishment to join, and to engage in
concerted activities with co-workers for purposes of collective bargaining through
representatives of their own choosing, or for their mutual aid and protection, i.e., the
protection, promotion, or enhancement of their rights and interests.53
As members of the governing board of MWEU, respondents are presumed to know, observe,
and apply the unions constitution and by-laws. Thus, their repeated violations thereof and
their disregard of petitioners rights as a union member their inaction on his two appeals
 113

which resulted in his suspension, disqualification from running as MWEU officer, and
subsequent expulsion without being accorded the full benefits of due process connote
willfulness and bad faith, a gross disregard of his rights thus causing untold suffering,
oppression and, ultimately, ostracism from MWEU. "Bad faith implies breach of faith and
willful failure to respond to plain and well understood obligation."54 This warrants an award
of moral damages in the amount of P100,000.00. Moreover, the Civil Code provides:
Art. 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs any of the following rights
and liberties of another person shall be liable to the latter for damages:
WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April 24, 2012 Decision of the
Court of Appeals in CA-G.R. SP No. 115639 is hereby MODIFIED, in that all of the respondents
- except for Carlos Villa, Ric Briones, and Chito Bernardo - are declared guilty of unfair labor
practices and ORDERED TO INDEMNIFY petitioner Allan M. Mendoza the amounts of
Pl00,000.00 as and by way of moral damages, PS0,000.00 as exemplary damages, and
attorney's fees equivalent to 10 per cent (10%) of the total award.
SO ORDERED.

xxxx

(12) The right to become a member of associations or societies for purposes not contrary to
law;

In Vital-Gozon v. Court of Appeals,55 this Court declared, as follows:

Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.
They may be recovered if they are the proximate result of the defendants wrongful act or
omission. The instances when moral damages may be recovered are, inter alia, acts and
actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code, which,
in turn, are found in the Chapter on Human Relations of the Preliminary Title of the Civil
Code. x x x

Under the circumstances, an award of exemplary damages in the amount of P50,000.00, as

prayed for, is likewise proper. "Exemplary damages are designed to permit the courts to
mould behavior that has socially deleterious consequences, and their imposition is required
by public policy to suppress the wanton acts of the offender."56 This should prevent
respondents from repeating their mistakes, which proved costly for petitioner.1wphi1

Under Article 2229 of the Civil Code, [e]xemplary or corrective damages are imposed, by
way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages. As this court has stated in the past: Exemplary
damages are designed by our civil law to permit the courts to reshape behaviour that is
socially deleterious in its consequence by creating negative incentives or deterrents against
such behaviour.57

Finally, petitioner is also entitled to attorneys fees equivalent to 10 per cent (10%) of the
total award. The unjustified acts of respondents clearly compelled him to institute an action
primarily to vindicate his rights and protect his interest. Indeed, when an employee is forced
to litigate and incur expenses to protect his rights and interest, he is entitled to an award of
attorneys fees.58

G.R. No. 176085 February 8, 2012
FEDERICO S. ROBOSA, ROLANDO E. PANDY, NOEL D. ROXAS, ALEXANDER ANGELES,
VERONICA GUTIERREZ, FERNANDO EMBAT, and NANETTE H. PINTO, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), CHEMO-TECHNISCHE
MANUFACTURING, INC. and its responsible officials led by FRANKLIN R. DE
LUZURIAGA, and PROCTER & GAMBLE PHILIPPINES, INC., Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 seeking the reversal of the resolutions of the
Court of Appeals (CA) rendered on February 24, 20062 and December 14, 20063 in CA-G.R.
SP No. 80436.
Factual Background
Federico S. Robosa, Rolando E. Pandy, Noel D. Roxas, Alexander Angeles, Veronica Gutierrez,
Fernando Embat and Nanette H. Pinto (petitioners) were rank-and-file employees of
respondent Chemo-Technische Manufacturing, Inc. (CTMI), the manufacturer and distributor
of "Wella" products. They were officers and members of the CTMI Employees Union-DFA
(union). Respondent Procter and Gamble Philippines, Inc. (P & GPI) acquired all the interests,
franchises and goodwill of CTMI during the pendency of the dispute.
Sometime in the first semester of 1991, the union filed a petition for certification election at
CTMI. On June 10, 1991, Med-Arbiter Rasidali Abdullah of the Office of the Department of
Labor and Employment in the National Capital Region (DOLE-NCR) granted the petition. The
DOLE-NCR conducted a consent election on July 5, 1991, but the union failed to garner the
votes required to be certified as the exclusive bargaining agent of the company.
On July 15, 1991, CTMI, through its President and General Manager Franklin R. de Luzuriaga,
issued a memorandum4 announcing that effective that day: (1) all sales territories were
demobilized; (2) all vehicles assigned to sales representatives should be returned to the
company and would be sold; (3) sales representatives would continue to service their
customers through public transportation and would be given transportation allowance; (4)
deliveries of customers orders would be undertaken by the warehouses; and (5) revolving
funds for ex-truck selling held by sales representatives should be surrendered to the cashier
(for Metro Manila) or to the supervisor (for Visayas and Mindanao), and truck stocks should
immediately be surrendered to the warehouse.
114
On the same day, CTMI issued another memorandum5 informing the companys sales
representatives and sales drivers of the new system in the Salon Business Groups selling
operations.
The union asked for the withdrawal and deferment of CTMIs directives, branding them as
union busting acts constituting unfair labor practice. CTMI ignored the request. Instead, it
issued on July 23, 1991 a notice of termination of employment to the sales drivers, due to
the abolition of the sales driver positions.6
On August 1, 1991, the union and its affected members filed a complaint for illegal dismissal
and unfair labor practice, with a claim for damages, against CTMI, De Luzuriaga and other
CTMI officers. The union also moved for the issuance of a writ of preliminary injunction
and/or temporary restraining order (TRO).
The Compulsory Arbitration Proceedings
The labor arbiter handling the case denied the unions motion for a stay order on the ground
that the issues raised by the petitioners can best be ventilated during the trial on the merits
of the case. This prompted the union to file on August 16, 1991 with the National Labor
Relations Commission (NLRC), a petition for the issuance of a preliminary mandatory
injunction and/or TRO.7
On August 23, 1991, the NLRC issued a TRO.8 It directed CTMI, De Luzuriaga and other
company executives to (1) cease and desist from dismissing any member of the union and
from implementing the July 23, 1991 memorandum terminating the services of the sales
drivers, and to immediately reinstate them if the dismissals have been effected; (2) cease
and desist from implementing the July 15, 1991 memorandum grounding the sales
personnel; and (3) restore the status quo ante prior to the formation of the union and the
conduct of the consent election.
Allegedly, the respondents did not comply with the NLRCs August 23, 1991 resolution. They
instead moved to dissolve the TRO and opposed the unions petition for preliminary
injunction.
On September 12, 1991, the NLRC upgraded the TRO to a writ of preliminary injunction.9
The respondents moved for reconsideration. The union opposed the motion and urgently
moved to cite the responsible CTMI officers in contempt of court.
On August 25, 1993, the NLRC denied the respondents motion for reconsideration and
directed Labor Arbiter Cristeta Tamayo to hear the motion for contempt. In reaction, the
respondents questioned the NLRC orders before this Court through a petition for certiorari
and prohibition with preliminary injunction. The Court dismissed the petition for being
premature. It also denied the respondents motion for reconsideration, as well as a second
motion for reconsideration, with finality. This notwithstanding, the respondents allegedly

refused to obey the NLRC directives. The respondents defiance, according to the petitioners,
resulted in the loss of their employment.
Meanwhile, the NLRC heard the contempt charge. On October 31, 2000, it issued a
resolution10 dismissing the charge. It ordered the labor arbiter to proceed hearing the main
case on the merits.
The petitioners moved for, but failed to secure, a reconsideration from the NLRC on the
dismissal of the contempt charge. They then sought relief from the CA by way of a petition
for certiorari under Rule 65.
The CA Decision
The CA saw no need to dwell on the issues raised by the petitioners as the question it
deemed appropriate for resolution is whether the NLRCs dismissal of the contempt charge
against the respondents may be the proper subject of an appeal. It opined that the dismissal
is not subject to review by an appellate court. Accordingly, the CA Special Sixth Division
dismissed the petition in its resolution of February 24, 2006.11
The CA considered the prayer of P & GPI to be dropped as party-respondent moot and
academic.
The petitioners sought a reconsideration, but the CA denied the motion in its resolution of
December 14, 2006.12 Hence, the present Rule 45 petition.
The Petition
The petitioners charge the CA with grave abuse of discretion in upholding the NLRC
resolutions, despite the reversible errors the labor tribunal committed in dismissing the
contempt charge against the respondents. They contend that the respondents were guilty of
contempt for their failure (1) to observe strictly the NLRC status quo order; and (2) to
reinstate the dismissed petitioners and to pay them their lost wages, sales commissions, per
diems, allowances and other employee benefits. They also claim that the NLRC, in effect,
overturned this Courts affirmation of the TRO and of the preliminary injunction.
The petitioners assail the CAs reliance on the Courts ruling that a contempt charge
partakes of a criminal proceeding where an acquittal is not subject to appeal. They argue
that the facts obtaining in the present case are different from the facts of the cases where
the Courts ruling was made. They further argue that by the nature of this case, the Labor
Code and its implementing rules and regulations should apply, but in any event, the
appellate court is not prevented from reviewing the factual basis of the acquittal of the
respondents from the contempt charges.
115
The petitioners lament that the NLRC, in issuing the challenged resolutions, had
unconstitutionally applied the law. They maintain that not only did the NLRC unconscionably
delay the disposition of the case for more than twelve (12) years; it also rendered an unjust,
unkind and dubious judgment. They bewail that "[f]or some strange reason, the respondent
NLRC made a queer [somersault] from its earlier rulings which favor the petitioners."13
The Case for the Respondents
Franklin K. De Luzuriaga
De Luzuriaga filed a Comment14 on May 17, 2007 and a Memorandum on December 4,
2008,15 praying for a dismissal of the petition.
De Luzuriaga argues that the CA committed no error when it dismissed the petition for
certiorari since the dismissal of the contempt charge against the respondents amounted to
an acquittal where review by an appellate court will not lie. In any event, he submits, the
respondents were charged with indirect contempt which may be initiated only in the
appropriate regional trial court, pursuant to Section 12, Rule 71 of the Rules of Court. He
posits that the NLRC has no jurisdiction over an indirect contempt charge. He thus argues
that the petitioners improperly brought the contempt charge before the NLRC.
Additionally, De Luzuriaga points out that the petition raises only questions of facts which,
procedurally, is not allowed in a petition for review on certiorari. Be this as it may, he
submits that pursuant to Philippine Long Distance Telephone Company, Inc. v. Tiamson,16
factual findings of labor officials, who are deemed to have acquired expertise in matters
within their respective jurisdictions, are generally accorded not only respect but even finality.
He stresses that the CA committed no reversible error in not reviewing the NLRCs factual
findings.
Further, De Luzuriaga contends that the petitioners verification and certification against
forum shopping is defective because it was only Robosa and Pandy who executed the
document. There was no indication that they were authorized by Roxas, Angeles, Gutierrez,
Embat and Pinto to execute the required verification and certification.
Lastly, De Luzuriaga maintains that the petitioners are guilty of forum shopping as the reliefs
prayed for in the petition before the CA, as well as in the present petition, are the same
reliefs that the petitioners may be entitled to in the complaint before the labor arbiter.17
P & GPI
As it did with the CA when it was asked to comment on the petitioners motion for
reconsideration,18 P & GPI prays in its Comment19 and Memorandum20 that it be dropped
as a party-respondent, and that it be excused from further participating in the proceedings.
It argues that inasmuch as the NLRC resolved the contempt charge on the merits, an appeal

from its dismissal through a petition for certiorari is barred. Especially in its case, the
dismissal of the petition for certiorari is correct because it was never made a party to the
contempt proceedings and, thus, it was never afforded the opportunity to be heard. It adds
that it is an entity separate from CTMI. It submits that it cannot be made to assume any or
all of CTMIs liabilities, absent an agreement to that effect but even if it may be liable, the
present proceedings are not the proper venue to determine its liability, if any.
On December 16, 2008, the petitioners filed a Memorandum21 raising essentially the same
issues and arguments laid down in the petition.
The Courts Ruling
Issues
The parties submissions raise the following issues:
(1) whether the NLRC has contempt powers;
(2) whether the dismissal of a contempt charge is appealable; and
(3) whether the NLRC committed grave abuse of discretion in dismissing the contempt
charge against the respondents.
On the first issue, we stress that under Article 21822 of the Labor Code, the NLRC (and the
labor arbiters) may hold any offending party in contempt, directly or indirectly, and impose
appropriate penalties in accordance with law. The penalty for direct contempt consists of
either imprisonment or fine, the degree or amount depends on whether the contempt is
against the Commission or the labor arbiter. The Labor Code, however, requires the labor
arbiter or the Commission to deal with indirect contempt in the manner prescribed under
Rule 71 of the Rules of Court.23
Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to initiate
indirect contempt proceedings before the trial court. This mode is to be observed only when
there is no law granting them contempt powers.24 As is clear under Article 218(d) of the
Labor Code, the labor arbiter or the Commission is empowered or has jurisdiction to hold the
offending party or parties in direct or indirect contempt. The petitioners, therefore, have not
improperly brought the indirect contempt charges against the respondents before the NLRC.
The second issue pertains to the nature of contempt proceedings, especially with respect to
the remedy available to the party adjudged to have committed indirect contempt or has
been absolved of indirect contempt charges. In this regard, Section 11, Rule 71 of the Rules
of Court states that the judgment or final order of a court in a case of indirect contempt may
be appealed to the proper court as in a criminal case. This is not the point at issue, however,
in this petition. It is rather the question of whether the dismissal of a contempt charge, as in
116
the present case, is appealable. The CA held that the NLRCs dismissal of the contempt
charges against the respondents amounts to an acquittal in a criminal case and is not
subject to appeal.
The CA ruling is grounded on prevailing jurisprudence.
In Yasay, Jr. v. Recto,25 the Court declared:
A distinction is made between a civil and [a] criminal contempt. Civil contempt is the failure
to do something ordered by a court to be done for the benefit of a party. A criminal contempt
is any conduct directed against the authority or dignity of the court.26
The Court further explained in Remman Enterprises, Inc. v. Court of Appeals27 and People v.
Godoy28 the character of contempt proceedings, thus
The real character of the proceedings in contempt cases is to be determined by the relief
sought or by the dominant purpose. The proceedings are to be regarded as criminal when
the purpose is primarily punishment and civil when the purpose is primarily compensatory or
remedial.
Still further, the Court held in Santiago v. Anunciacion, Jr.29 that:
But whether the first or the second, contempt is still a criminal proceeding in which
acquittal, for instance, is a bar to a second prosecution. The distinction is for the purpose
only of determining the character of punishment to be administered.
In the earlier case of The Insurance Commissioner v. Globe Assurance Co., Inc.,30 the Court
dismissed the appeal from the ruling of the lower court denying a petition to punish the
respondent therein from contempt for lack of evidence. The Court said in that case:
It is not the sole reason for dismissing this appeal. In the leading case of In re Mison, Jr. v.
Subido, it was stressed by Justice J.B.L. Reyes as ponente, that the contempt proceeding far
from being a civil action is "of a criminal nature and of summary character in which the court
exercises but limited jurisdiction." It was then explicitly held: "Hence, as in criminal
proceedings, an appeal would not lie from the order of dismissal of, or an exoneration from,
a charge of contempt of court." [footnote omitted]
Is the NLRCs dismissal of the contempt charges against the respondents beyond review by
this Court? On this important question, we note that the petitioners, in assailing the CA main
decision, claim that the appellate court committed grave abuse of discretion in not ruling on
the dismissal by the NLRC of the contempt charges.31 They also charge the NLRC of having
gravely abused its discretion and having committed reversible errors in:

(1) setting aside its earlier resolutions and orders, including the writ of preliminary injunction
it issued, with its dismissal of the petition to cite the respondents in contempt of court;
(2) overturning this Courts resolutions upholding the TRO and the writ of preliminary
injunction;
(3) failing to impose administrative fines upon the respondents for violation of the TRO and
the writ of preliminary injunction; and
(4) failing to order the reinstatement of the dismissed petitioners and the payment of their
accrued wages and other benefits.
In view of the grave abuse of discretion allegation in this case, we deem it necessary to look
into the NLRCs dismissal of the contempt charges against the respondents. As the charges
were rooted into the respondents alleged non-compliance with the NLRC directives
contained in the TRO32 and the writ of preliminary injunction,33 we first inquire into what
really happened to these directives.
The assailed NLRC resolution of October 31, 200034 gave us the following account on the
matter -
On the first directive, x x x We find that there was no violation of the said order. A perusal of
the records would show that in compliance with the temporary restraining order (TRO),
respondents reinstated back to work the sales drivers who complained of illegal dismissal
(Memorandum of Respondents, page 4).
Petitioners allegation that there was only payroll reinstatement does not make the
respondents guilty of contempt of court. Even if the drivers were just in the garage doing
nothing, the same does not make respondents guilty of contempt nor does it make them
violators of the injunction order. What is important is that they were reinstated and receiving
their salaries.
As for petitioners Danilo Real, Roberto Sedano and Rolando Manalo, they have resigned from
their jobs and were paid their separation pay xxx (Exhibits "6," "6-A," "7," "7-A," "8," "8-A,"
Respondents Memorandum dated August 12, 1996). The issue of whether they were
illegally dismissed should be threshed out before the Labor Arbiter in whose sala the case of
unfair labor practice and illegal dismissal were (sic) filed. Records also show that petitioner
Antonio Desquitado during the pendency of the case executed an affidavit of desistance
asking that he be dropped as party complainant in as much as he has already accepted
separation benefits totaling to P63,087.33.
With respect to the second directive ordering respondents to cease and desist from
implementing the memoranda dated July 15, 1991 designed to ground sales personnel who
are members of the union, respondents alleged that they can no longer be restrained or
117
enjoined and that the status quo can no longer be restored, for implementation of the
memorandum was already consummated or was a fait accompli. x x x
All sales vehicles were ordered to be turned over to management and the same were
already sold[.] xxx [I]t would be hard to undo the sales transactions, the same being valid
and binding. The memorandum of July 15, 1991 authorized still all sales representatives to
continue servicing their customers using public transportation and a transportation
allowance would be issued.
xxxx
The third directive of the Commission is to preserve the "status quo ante" between the
parties.
Records reveal that WELLA AG of Germany terminated its Licensing Agreement with
respondent company effective December 31, 1991 (Exhibit "11," Respondents
Memorandum).
On January 31, 1992, individual petitioners together with the other employees were
terminated xxx. In fact, this event resulted to the closure of the respondent company. The
manufacturing and marketing operations ceased. This is evidenced by the testimony of
Rosalito del Rosario and her affidavit (Exh. "9," memorandum of Respondents) as well as
Employers Monthly Report on Employees Termination/dismissals/suspension xxx (Exhibits
"12-A" to "12-F," ibid) as well as the report that there is a permanent shutdown/total closure
of all units of operations in the establishment (Ibid). A letter was likewise sent to the
Department of Labor and Employment (Exh. "12," Ibid) in compliance with Article 283 of the
Labor Code, serving notice that it will cease business operations effective January 31, 1992.
The petitioners strongly dispute the above account. They maintain that the NLRC failed to
consider the following:
1. CTMI violated the status quo ante order when it did not restore to their former work
assignments the dismissed sales drivers. They lament that their being "garaged" deprived
them of benefits, and they were subjected to ridicule and psychological abuse. They assail
the NLRC for considering the payroll reinstatement of the drivers as compliance with its stay
order.
They also bewail the NLRCs recognition of the resignation of Danilo Real, Roberto Sedano,
Rolando Manalo and Antonio Desquitado as they were just compelled by economic necessity
to resign from their employment. The quitclaims they executed were contrary to public
policy and should not bar them from claiming the full measure of their rights, including their
counsel who was unduly deprived of his right to collect attorneys fees.

2. It was error for the NLRC to rule that the memorandum, grounding the sales drivers, could
no longer be restrained or enjoined because all sales vehicles were already sold. No
substantial evidence was presented by the respondents to prove their allegation, but even if
there was a valid sale of the vehicles, it did not relieve the respondents of responsibility
under the stay order.
3. The alleged termination of the licensing agreement between CTMI and WELLA AG of
Germany, which allegedly resulted in the closure of CTMIs manufacturing and marketing
operations, occurred after the NLRCs issuance of the injunctive reliefs. CTMI failed to
present substantial evidence to support its contention that it folded up its operations when
the licensing agreement was terminated. Even assuming that there was a valid closure of
CTMIs business operations, they should have been paid their lost wages, allowances,
incentives, sales commissions, per diems and other employee benefits from August 23, 1991
up to the date of the alleged termination of CTMIs marketing operations.
Did the NLRC commit grave abuse of discretion in dismissing the contempt charges against
the respondents? An act of a court or tribunal may only be considered as committed in grave
abuse of discretion when it was performed in a capricious or whimsical exercise of judgment
which is equivalent to lack of jurisdiction. The abuse of discretion must be so patent and
gross as to amount to an evasion of a positive duty enjoined by law, or to act at all in
contemplation of law, as where the power is exercised in an arbitrary and despotic manner
by reason of passion or personal hostility.35
The petitioners insist that the respondents violated the NLRC directives, especially the status
quo ante order, for their failure to reinstate the dismissed petitioners and to pay them their
benefits. In light of the facts of the case as drawn above, we cannot see how the status quo
ante or the employer-employee situation before the formation of the union and the conduct
of the consent election can be maintained. As the NLRC explained, CTMI closed its
manufacturing and marketing operations after the termination of its licensing agreement
with WELLA AG of Germany. In fact, the closure resulted in the termination of CTMIs
remaining employees on January 31, 1992, aside from the sales drivers who were earlier
dismissed but reinstated in the payroll, in compliance with the NLRC injunction. The
petitioners termination of employment, as well as all of their money claims, was the subject
of the illegal dismissal and unfair labor practice complaint before the labor arbiter. The latter
was ordered by the NLRC on October 31, 2000 to proceed hearing the case.36 The NLRC
thus subsumed all other issues into the main illegal dismissal and unfair labor practice case
pending with the labor arbiter. On this point, the NLRC declared:
118
Note that when the injunction order was issued, WELLA AG of Germany was still under
licensing agreement with respondent company. However, the situation has changed when
WELLA AG of Germany terminated its licensing agreement with the respondent, causing the
latter to close its business.
Respondents could no longer be ordered to restore the status quo as far as the individual
petitioners are concerned as these matters regarding the termination of the employees are
now pending litigation with the Arbitration Branch of the Commission. To resolve the incident
now regarding the closure of the respondent company and the matters alleged by
petitioners such as the creations of three (3) new corporations xxx as successor-corporations
are matters best left to the Labor Arbiter hearing the merits of the unfair labor practice and
illegal dismissal cases.37
We find no grave abuse of discretion in the assailed NLRC ruling. It rightly avoided delving
into issues which would clearly be in excess of its jurisdiction for they are issues involving
the merits of the case which are by law within the original and exclusive jurisdiction of the
labor arbiter.38 To be sure, whether payroll reinstatement of some of the petitioners is
proper; whether the resignation of some of them was compelled by dire economic necessity;
whether the petitioners are entitled to their money claims; and whether quitclaims are
contrary to law or public policy are issues that should be heard by the labor arbiter in the
first instance. The NLRC can inquire into them only on appeal after the merits of the case
shall have been adjudicated by the labor arbiter.
The NLRC correctly dismissed the contempt charges against the respondents.1wphi1 The
CA likewise committed no grave abuse of discretion in not disturbing the NLRC resolution.
In light of the above discussion, we find no need to dwell into the other issues the parties
raised.
WHEREFORE, premises considered, we hereby DENY the petition for lack of merit and
AFFIRM the assailed resolutions of the Court of Appeals.
SO ORDERED.