G.R. No.

85985 August 13, 1993

PHILIPPINE AIRLINES, INC. (PAL), petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA
and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents.

Solon Garcia for petitioner.

Adolpho M. Guerzon for respondent PALEA.

MELO, J.:

In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation
of a Code of Discipline among employees is a shared responsibility of the employer and the
employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of
Discipline. The Code was circulated among the employees and was immediately implemented, and
some employees were forthwith subjected to the disciplinary measures embodied therein.

Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint
before the National Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-
2051-85) with the following remarks: "ULP with arbitrary implementation of PAL's Code of Discipline
without notice and prior discussion with Union by Management" (Rollo, p. 41). In its position paper,
PALEA contended that PAL, by its unilateral implementation of the Code, was guilty of unfair labor
practice, specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA
alleged that copies of the Code had been circulated in limited numbers; that being penal in nature
the Code must conform with the requirements of sufficient publication, and that the Code was
arbitrary, oppressive, and prejudicial to the rights of the employees. It prayed that implementation of
the Code be held in abeyance; that PAL should discuss the substance of the Code with PALEA; that
employees dismissed under the Code be reinstated and their cases subjected to further hearing; and
that PAL be declared guilty of unfair labor practice and be ordered to pay damages (pp. 7-14,
Record.)

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe
rules and regulations regarding employess' conduct in carrying out their duties and functions, and
alleging that by implementing the Code, it had not violated the collective bargaining agreement
(CBA) or any provision of the Labor Code. Assailing the complaint as unsupported by evidence, PAL
maintained that Article 253 of the Labor Code cited by PALEA reffered to the requirements for
negotiating a CBA which was inapplicable as indeed the current CBA had been negotiated.

In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was
violated when PAL unilaterally implemented the Code, and cited provisions of Articles IV and I of
Chapter II of the Code as defective for, respectively, running counter to the construction of penal
laws and making punishable any offense within PAL's contemplation. These provisions are the
following:
 Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and
regulations of the company. Every employee is bound to comply with all applicable
rules, regulations, policies, procedures and standards, including standards of quality,
productivity and behaviour, as issued and promulgated by the company through its
duly authorized officials. Any violations thereof shall be punishable with a penalty to
be determined by the gravity and/or frequency of the offense.

Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative.

The penalty for an offense shall be determined on the basis of his past record of
offenses of any nature or the absence thereof. The more habitual an offender has
been, the greater shall be the penalty for the latest offense. Thus, an employee may
be dismissed if the number of his past offenses warrants such penalty in the
judgment of management even if each offense considered separately may not
warrant dismissal. Habitual offenders or recidivists have no place in PAL. On the
other hand, due regard shall be given to the length of time between commission of
individual offenses to determine whether the employee's conduct may indicate
occasional lapses (which may nevertheless require sterner disciplinary action) or a
pattern of incorrigibility.

Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed
to appear at the scheduled date. Interpreting such failure as a waiver of the parties' right to present
evidence, the labor arbiter considered the case submitted for decision. On November 7, 1986, a
decision was rendered finding no bad faith on the part of PAL in adopting the Code and ruling that
no unfair labor practice had been committed. However, the arbiter held that PAL was "not totally fault
free" considering that while the issuance of rules and regulations governing the conduct of
employees is a "legitimate management prerogative" such rules and regulations must meet the test
of "reasonableness, propriety and fairness." She found Section 1 of the Code aforequoted as "an all
embracing and all encompassing provision that makes punishable any offense one can think of in
the company"; while Section 7, likewise quoted above, is "objectionable for it violates the rule against
double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp. 38-
39, Rollo.)

The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated."
Noting that PAL's assertion that it had furnished all its employees copies of the Code is unsupported
by documentary evidence, she stated that such "failure" on the part of PAL resulted in the imposition
of penalties on employees who thought all the while that the 1966 Code was still being followed.
Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses no one from compliance
. . . finds application only after it has been conclusively shown that the law was circulated to all the
parties concerned and efforts to disseminate information regarding the new law have been exerted.
(p. 39, Rollo.) She thereupon disposed:

WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:

1. Furnish all employees with the new Code of Discipline;

2. Reconsider the cases of employees meted with penalties under the New Code of
Discipline and remand the same for further hearing; and

3. Discuss with PALEA the objectionable provisions specifically tackled in the body of
the decision.

All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.
 SO ORDERED. (p. 40, Rollo.)

PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion,
with Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no
evidence of unfair labor practice committed by PAL and affirmed the dismissal of PALEA's charge.
Nonetheless, the NLRC made the following observations:

Indeed, failure of management to discuss the provisions of a contemplated code of

discipline which shall govern the conduct of its employees would result in the erosion
and deterioration of an otherwise harmonious and smooth relationship between them
as did happen in the instant case. There is no dispute that adoption of rules of
conduct or discipline is a prerogative of management and is imperative and essential
if an industry, has to survive in a competitive world. But labor climate has
progressed, too. In the Philippine scene, at no time in our contemporary history is the
need for a cooperative, supportive and smooth relationship between labor and
management more keenly felt if we are to survive economically. Management can no
longer exclude labor in the deliberation and adoption of rules and regulations that will
affect them.

The complainant union in this case has the right to feel isolated in the adoption of the
New Code of Discipline. The Code of Discipline involves security of tenure and loss
of employment a property right! It is time that management realizes that to attain
effectiveness in its conduct rules, there should be candidness and openness by
Management and participation by the union, representing its members. In fact, our
Constitution has recognized the principle of "shared responsibility" between
employers and workers and has likewise recognized the right of workers to
participate in "policy and decision-making process affecting their rights . . ." The latter
provision was interpreted by the Constitutional Commissioners to mean participation
in "management"' (Record of the Constitutional Commission, Vol. II).

In a sense, participation by the union in the adoption of the code if conduct could
have accelerated and enhanced their feelings of belonging and would have resulted
in cooperation rather than resistance to the Code. In fact, labor-management
cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.)

Respondent Commission thereupon disposed:

WHEREFORE, premises considered, we modify the appealed decision in the sense

that the New Code of Discipline should be reviewed and discussed with complainant
union, particularly the disputed provisions [.] (T)hereafter, respondent is directed to
furnish each employee with a copy of the appealed Code of Discipline. The pending
cases adverted to in the appealed decision if still in the arbitral level, should be
reconsidered by the respondent Philippine Air Lines. Other dispositions of the Labor
Arbiter are sustained.

SO ORDERED. (p. 5, NLRC Decision.)

PAL then filed the instant petition for certiorari charging public respondents with grave abuse of
discretion in: (a) directing PAL "to share its management prerogative of formulating a Code of
Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative with
the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to reconsider
pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.)
As stated above, the Principal issue submitted for resolution in the instant petition is whether
management may be compelled to share with the union or its employees its prerogative of
formulating a code of discipline.

PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the
sharing of responsibility therefor between employer and employee.

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article
211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure the
participation of workers in decision and policy-making processes affecting the rights, duties and
welfare." However, even in the absence of said clear provision of law, the exercise of management
prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it
was held that management's prerogatives must be without abuse of discretion.

In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the
company's right to implement a new system of distributing its products, but gave the following
caveat:

So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them.
(at p. 28.)

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a collective bargaining agreement, or the general
principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]).
Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be duly
established that the prerogative being invoked is clearly a managerial one.

A close scrutiny of the objectionable provisions of the Code reveals that they are not purely
business-oriented nor do they concern the management aspect of the business of the company as in
the San Miguel case. The provisions of the Code clearly have repercussions on the employee's right
to security of tenure. The implementation of the provisions may result in the deprivation of an
employee's means of livelihood which, as correctly pointed out by the NLRC, is a property right
(Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case
which border on infringement of constitutional rights, we must uphold the constitutional requirements
for the protection of labor and the promotion of social justice, for these factors, according to Justice
Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker" (Employees
Association of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991]
635).

Verily, a line must be drawn between management prerogatives regarding business operations per
se and those which affect the rights of the employees. In treating the latter, management should see
to it that its employees are at least properly informed of its decisions or modes action. PAL asserts
that all its employees have been furnished copies of the Code. Public respondents found to the
contrary, which finding, to say the least is entitled to great respect.

PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27,
1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules and
regulations to carry out the functions of management without having to discuss the same with
PALEA and much less, obtain the latter's conformity thereto" (pp. 11-12, Petitioner's Memorandum;
pp 180-181, Rollo.) Petitioner's view is based on the following provision of the agreement:

The Association recognizes the right of the Company to determine matters of

management it policy and Company operations and to direct its manpower.
Management of the Company includes the right to organize, plan, direct and control
operations, to hire, assign employees to work, transfer employees from one
department, to another, to promote, demote, discipline, suspend or discharge
employees for just cause; to lay-off employees for valid and legal causes, to
introduce new or improved methods or facilities or to change existing methods or
facilities and the right to make and enforce Company rules and regulations to carry
out the functions of management.

The exercise by management of its prerogative shall be done in a just reasonable,

humane and/or lawful manner.

Such provision in the collective bargaining agreement may not be interpreted as cession of
employees' rights to participate in the deliberation of matters which may affect their rights and the
formulation of policies relative thereto. And one such mater is the formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just participation in
the discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D.
442) was amended by Republic Act No. 6715, it was already declared a policy of the State, "(d) To
promote the enlightenment of workers concerning their rights and obligations . . . as employees."
This was, of course, amplified by Republic Act No 6715 when it decreed the "participation of workers
in decision and policy making processes affecting their rights, duties and welfare." PAL's position
that it cannot be saddled with the "obligation" of sharing management prerogatives as during the
formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner's
Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained . While such "obligation" was not yet
founded in law when the Code was formulated, the attainment of a harmonious labor-management
relationship and the then already existing state policy of enlightening workers concerning their rights
as employees demand no less than the observance of transparency in managerial moves affecting
employees' rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the
nature of its business cannot be overemphasized. In fact, its being a local monopoly in the business
demands the most stringent of measures to attain safe travel for its patrons. Nonetheless, whatever
disciplinary measures are adopted cannot be properly implemented in the absence of full
cooperation of the employees. Such cooperation cannot be attained if the employees are restive on
account, of their being left out in the determination of cardinal and fundamental matters affecting
their employment.

WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special
pronouncement is made as to costs.

SO ORDERED.

G.R. No. 116172 October 10, 1996

SAN MIGUEL FOODS, INC. CEBU B-MEG FEED PLANT, petitioner,

vs.
HON. BIENVENIDO E. LAGUESMA, Undersecretary of DOLE and ILAW AT BUKLOD NG
MANGGAGAWA (IBM), respondents.

HERMOSISIMA, JR., J.:p

This is a petition for certiorari under Rule 65 to review and set aside two Resolutions of
Mediator-Arbiter Achilles V. Manit, dated January 5, 1994 and April 6, 1994, and the
affirmation Order on appeal of the public respondent, Undersecretary Bienvenido E.
Laguesma of the Department of Labor and Employment. The petition below was entitled: "In
Re: Petition for Direct Certification as the Sole and Exclusive Bargaining Agent of All Monthly
Paid Employees of SMFI-Cebu B-Meg Feeds Plant," docketed as OS-MA-A-3-51-94 (R0700-
9309-RU-036).

The essential facts are not disputed.

On September 24, 1993, a petition for certification election among the monthly-paid
employees of the San Miguel Food, Inc.-Cebu B-Meg Feeds Plant was filed by private
respondent labor federation Ilaw at Buklod ng Mangagawa (IBM, for brevity) before Med-
Arbiter Achilles V. Manit, alleging, inter alia, that it is a legitimate labor organization duly
registered with the Department of Labor and Employment (DOLE) under Registration
Certificate No. 5369-IP. SMFI-Cebu B-Meg Feeds Plant (SMFI, for brevity), herein petitioner,
is a business entity duly organized and existing under the laws of the Philippines which
employs roughly seventy-five (75) monthly paid employees, almost all of whom support the
present petition. It was submitted in said petition that there has been no certification election
conducted in SMFI to determine the sole and exclusive bargaining agent thereat for the past
two years and that the proposed bargaining unit, which is SMFI's monthly paid employees, is
an unorganized one. It was also stated therein that petitioner IBM (herein private respondent)
has already complied with the mandatory requirements for the creation of its local or affiliate
in SMFI's establishment.

On October 25, 1993, herein petitioner SMFI filed a Motion to Dismiss the aforementioned
petition dated September 24, 1993 on the ground that a similar petition remains pending
between the same parties for the same cause of action before Med-Arbiter Achilles V. Manit.

SMFI was referring to an evidently earlier petition, docketed as CE CASE NO R0700-9304-

RU-016, filed on April 28, 1993 before the office of Med-Arbiter Manit. Indeed, both petitions
involved the same parties, cause of action and relief being prayed for, which is the issuance
of an order by the Med-Arbiter allowing the conduct for a certification election in SMFI's
establishment. The contention is that the judgment that may be rendered in the first petition
would be determinative of the outcome of the second petition, date September 24, 1993.

On December 2, 1993, private respondent IBM filed its Opposition to SMFI's Motion to
Dismiss contending, among others, that the case referred to by SMFI had already been
resolved by Med-Arbiter Manit in his Resolution and Order dated July 26, 19931 and
September 2, 1993,2 respectively, wherein IBM's first petition for certification election was
denied mainly due to IBM's failure to comply with certain mandatory requirements of the law.
This denial was affirmed by the Med-Arbiter in another Order dated November 12,
19933 wherein the Resolutions dated July 26, 1993 and September 2, 1993 were made to
stand. Thus, IBM argues that there having been no similar petition pending before Med-
Arbiter Manit, another petition for certification election may be refiled as soon as the said
requirements are met. These requirements were finally satisfied before the second petition
for certification election was brought on September 24, 1993.

On January 5, 1994, Med-Arbiter Manit, this time, granted the second petition for certification
election of private respondent IBM in this wise:

Let, therefore, a certification election be conducted among the monthly paid rank and
file employees of SMFI-CEBU B-MEG FEEDS PLANT at Lo-oc, Mandaue City. The
choices shall be: YES-for IBM AT SMFI-CEBU B-MEG; and NO for No Union.

The parties are hereby notified of the pre-election conference which will take place
on January 17, 1994 at 3:00 o'clock in the afternoon to set the date and time of the
election and to thresh out the mechanics thereof. On said date and time the
respondent is directed to submit the payroll of its monthly paid rank and file
employees for the month of June 1993 which shall be the basis for the list of the
eligible voters. The petitioner is directed to be ready to submit a list of the monthly
paid rank and file employees of SMFI-CEBU B-MEG FEEDS PLANT when the
respondent fails to submit the required payroll.

SO ORDERED.4

Petitioner SMFI appealed the foregoing Order to the Secretary of Labor and Employment
alleging that the Med-Arbiter erred in directing the conduct of certification election
considering that the local or chapter of IBM at SMFI is still not a legitimate labor organization
with a right to be certified as the exclusive bargaining agent in petitioner's establishment
based on two grounds: (1) the authenticity and due execution of the Charter Certificate
submitted by IBM in favor of its local at SMFI cannot yet be ascertained as it is still not
known who is the legitimate and authorized representative of the IBM Federation who may
validly issue said Charter Certificate; and (2) a group of workers or a local union shall acquire
legal personality only upon the issuance of a Certificate of Registration by the Bureau of
Labor Relations under Article 234 of the Labor Code, which IBM at SMFI did not possess.

In a resolution dated April 6, 1994, public respondent Undersecretary Bienvenido Laguesma,

by authority of the Secretary of Labor and Employment, denied petitioner's appeal, viz.:

WHEREFORE, the appeal is hereby denied for lack of merit and the Order of the
Med-Arbiter is hereby affirmed.

Let the records of this case be forwarded to the Regional Office of origin for the
immediate conduct of certification election subject to the usual pre-election
conference.

SO RESOLVED.5

Thereafter, a Motion for Reconsideration was filed which was also denied by the public
respondent in his Order dated May 24, 1994.6

Hence, the instant petition interposing the following justifications:

 1) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA
GRAVELY ABUSED HIS DISCRETION WHEN HE ARBITRARILY RULED THAT "A
LOCAL OR CHAPTER OF A LABOR FEDERATION, LIKE RESPONDENT IBM,
NEED NOT OBTAIN A CERTIFICATE OF REGISTRATION FROM THE BUREAU
OF LABOR RELATIONS TO ACQUIRE LEGAL PERSONALITY," WHEN ARTICLE
234 OF THE LABOR CODE OF THE PHILIPPINES AND SECTION 3 OF RULE II
OF BOOK V OF THE RULES IMPLEMENTING THE LABOR CODE, AS AMENDED,
CLEARLY PROVIDES THAT A GROUP OF WORKERS OR A LOCAL UNION
SHALL ACQUIRE LEGAL PERSONALITY ONLY UPON THE ISSUANCE OF THE
CERTIFICATE OF REGISTRATION BY THE BUREAU OF LABOR RELATIONS.
AND,

2) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA

GRAVELY ABUSED HIS DISCRETION WHEN HE PREMATURELY AND
ARBITRARILY RULED THAT RESPONDENT IBM IS A LEGITIMATE LABOR
ORGANIZATION WHEN THE AUTHENTICITY AND DUE EXECUTION OF THE
CHARTER CERTIFICATE SUBMITTED BY RESPONDENT IBM CANNOT YET BE
ASCERTAINED BECAUSE IT IS STILL NOT KNOWN WHO ARE THE LEGITIMATE
OFFICERS OF THE IBM FEDERATION WHO MAY VALIDLY ISSUE SAID
CHARTER CERTIFICATE AS THE CASE FILED TO RESOLVE THE ISSUE ON
WHO ARE THE LEGITIMATE OFFICERS OF THE IBM FEDERATION IS STILL
PENDING RESOLUTION BEFORE THIS HONORABLE SUPREME COURT. 7

The petition has no merit.

Petitioner asserts that IBM at SMFI is not a legitimate labor organization notwithstanding the
fact that it is a local or chapter of the IBM Federation. This is so because under Article 234 of
the Labor Code, any labor organization shall acquire legal personality only upon the
issuance of the Certificate of Registration by the Bureau of Labor Relations.

We do not agree.

Article 212(h) of the Labor Code defines a legitimate labor organization as "any labor
organization duly registered with the Department of Labor and Employment, and includes
any branch or local thereof ."

It is important to determine whether or not a particular labor organization is legitimate since

legitimate labor organizations have exclusive rights under the law which cannot be exercised
by non-legitimate unions, one of which is the right to be certified as the exclusive
representative of all the employees in an appropriate collective bargaining unit for purposes
of collective bargaining. These rights are found under Article 242 of the Labor Code, to wit:

Art. 242. Rights of legitimate labor organizations. A legitimate labor organization

shall have the right:

(a) To act as the representative of its members for the purpose of collective
bargaining;

(b) To be certified as the exclusive representative of all the employees in an

appropriate collective bargaining unit for purpose of collective bargaining;
 (c) To be furnished by the employer, upon written request, with his annual audited
financial statement, including the balance sheet and the profit and loss statement,
within thirty (30) calendar days from the date of receipt of the request, after the union
has been duly recognized by the employer or certified as the sole and exclusive
bargaining representative of the employees in the bargaining unit, or within sixty (60)
calendar days before the expiration of the existing collective bargaining agreement,
or during the collective bargaining negotiation;

(d) To own property, real or personal, for the use and benefit of the labor
organization and its members;

(e) To sue and be sued in its registered name; and

(f) To undertake all other activities designed to benefit the organization and its
members, including cooperative, housing welfare and other projects not contrary to
law.

xxx xxx xxx

The pertinent question, therefore, must be asked: When does a labor organization acquire
legitimacy?

Ordinarily, a labor organizations attains the status of legitimacy only upon the issuance in its
name of a Certificate of Registration by the Bureau of Labor Relations pursuant to Articles
234 and 235 of the Labor Code, viz.:

Art. 234. Requirements of registration. Any applicant labor organization,

association or group of unions or workers shall acquire legal personality and shall be
entitled to the rights and privileges granted by law to legitimate labor organizations
upon issuance of the certificate of registration based on the following requirements:

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meetings and the list of the workers
who participated in such meetings;

(c) The names of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies of its
annual financial reports; and

(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes of
its adoption or ratification, and the list of the members who participated in it.

Art. 235. Action on application. The Bureau shall act on all applications for
registration within thirty (30) days from filing.
 All requisite documents and papers shall be certified under oath by the secretary or
the treasurer of the organization, as the case may be, and attested to by its
president.

The foregoing procedure is not the only way by which a labor union may become legitimate,
however. When an unregistered union becomes a branch, local or chapter of a federation,
some of the aforementioned requirements for registration are no longer required.8 Section 3,
Rule II, Book V of the Implementing Rules of the Labor Code governs the procedure for
union affiliation, the relevant portions of which provide:

Sec. 3. Union Affiliation: Direct Membership with National Union. An affiliate of a

labor federation or national union may be a local or chapter thereof or an
independently registered union.

(a) The labor federation or national union concerned shall issue a charter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.

(b) An independently registered union shall be considered an affiliate of a labor

federation or national union after submission to the Bureau of the contract or
agreement of affiliation within thirty (30) days after its execution.

xxx xxx xxx

(e) The local or chapter of a labor federation or national union shall have and
maintain a constitution and by-laws, set of officers and books of accounts. For
reporting purposes, the procedure governing the reporting of independently
registered unions, federations or national unions shall be observed.

Paragraph (a) refers to a local or chapter of a federation which did not undergo the rudiments
of registration while paragraph (b) refers to an independently registered union which affiliated
with a federation. Implicit in the foregoing differentiation is the fact that a local or chapter
need not be independently registered. By force of law (in this case, Article 212 [h]), such
local or chapter becomes a legitimate labor organization upon compliance with the
aforementioned provisions of Section 39 (a) and (e), without having to be issued a Certificate
of Registration in its favor by the BLR.

The cases of Lopez Sugar Corporation v. Secretary of Labor and Employment,10 Phoenix
Iron and Steel Corporation v. Secretary of Labor and Employment 11 and Protection
Technology, Inc. v. Secretary, Department of Labor and Employment,12 all going back to our
landmark holding in Progressive Development Corporation v. Secretary, Department of
Labor and Employment,13 unequivocably laid down the rule, thus:

A local or chapter therefore becomes a legitimate labor organization only upon

submission of the following to the BLR:

1) A charter certificate, within 30 days from its issuance by the labor federation or
national union, and
 2) The constitution and by-laws, a statement on the set of officers, and the books of
accounts all of which are certified under oath by the secretary or treasurer, as the
case may be, of such local or chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does not
become a legitimate labor organization.

Corollarily, the satisfaction of all these requirements by the local or chapter shall vest upon it
the status of legitimacy with all its concomitant statutory privileges, one of which is the right
to be certified as the exclusive representative of all the employees in an appropriate
bargaining unit.

In the case at bench, public respondent Bienvenido E. Laguesma, in affirming the finding of
the Med-Arbiter that IBM at SMFI is a legitimate labor organization,14 made the following
material pronouncement amply supported by the records;

[t]he resolution of the issue raised by the respondent on whether or not petitioner is a
legitimate labor organization will depend on the documents submitted by the
petitioner in the second petition.

A close scrutiny of the records shows that at the time of the filing of the subject
petition on 24 September 1993 by the petitioner Ilaw at Buklod ng Manggagawa, for
and in behalf of its local affiliate IBM at SMFI-CEBU B-MEG, the latter has been
clothed with the status and/or character of a legitimate labor organization. This is so,
because on 19 July 1993, petitioner submitted to the Bureau of Labor Relations
(BLR), this Department, the following documents: charter certificate, constitution and
by-laws, names and addresses of the union officers and certification of the union's
secretary on the non-availability of the union's Books of Accounts. Said documents
(expect the charter certificate) are certified under oath and attested to by the local
union's secretary and President, respectively.15

Petitioner SMFI does not dispute the fact that IBM at SMFI has complied with the second set
or requirements, i.e., constitution, by-laws, et. al. What is controverted is the non-compliance
with the requirement as to the charter certificate which must be submitted to the BLR within
thirty (30) days from its issuance by the labor federation. While the presence of a charter
certificate is conceded, petitioner maintains that the validity and authenticity of the same
cannot yet be ascertained as its is still not known who is the legitimate and authorized
representative of the IBM Federation who may validly issue said charter certificate in favor of
its local, IBM at SMFI. According to petitioner, there are two (2) contending sets of officers of
the IBM Federation at the time the charter certificate was issued in favor of IBM at SMFI, the
faction of Mr. Severino O. Meron and that of Mr. Edilberto B. Galvez.

On this point, public respondent, in upholding the legitimate status of IBM at SMFI, backed
up by the Solicitor General, had this to say:

The contention of the respondent that unless and until the issue on who is the
legitimate national president, of the Ilaw at Buklod ng Mangagawa is resolved, the
petitioner cannot claim that is has a valid charter certificate necessary for it to acquire
legal personality is untenable. We wish to stress that the resolution of the said issue
will not in any way affect the validity of the charter certificate issued by the IBM in
favor of the local union. It must be borne in mind that the said charter certificate was
issued by the IBM in its capacity as a labor organization, a juridical entity which has a
 separate and distinct legal personality from its members. When as in this case, there
is no showing that the Federation acting as a separate entity is questioning the
legality of the issuance of the said charter certificate, the legality of the issuance of
the same in favor of the local union is presumed. This, notwithstanding the alleged
controversy on the leadership of the federation.16

We agree with this position of the public respondent and the Solicitor General. In addition,
private respondent's Comment to this petition indicates that in the election of officers held to
determine the representatives of IBM, the faction of Mr. Meron lost to the group of Mr.
Edilberto Galvez, and the latter was acknowledged as the duly elected IBM National
President.17 Thus, the authority of Mr. Galvez to sign the charter certificate of IBM at SMFI,
as President of the IBM Federation,18 can no longer be successfully questioned. A punctilious
examination of the records presents no evidence to the contrary and petitioner, instead of
squarely refuting this point, skirted the issue by insisting that the mere presence of two
contending factions in the IBM prevents the issuance of a valid and authentic charter
certificate in favor of IBM at SMFI. This averment of petitioner simply does not deserve any
merit.

II

In any case, this Court notes that it is petitioner, the employer, which has offered the most
tenacious resistance to the holding of a certification election among its monthly-paid rank-
and-file employees. This must not be so, for the choice of a collective bargaining agent is the
sole concern of the employees.19 The only exception to this rule is where the employer has to
file the petition for certification election pursuant to Article 25820 of the Labor Code because it
was requested to bargain collectively,21 which exception finds no application in the case
before us. Its role in a certification election has aptly been described in Trade Unions of the
Philippines and Allied Services (TUPAS) v. Trajano,22 as that of a mere by-stander. It has no
legal standing in a certification election as it cannot oppose the petition or appeal the Med-
Arbiter's orders related thereto. An employer that involves itself in a certification election
lends suspicion to the fact it wants to create a company union.23 This Court should be the last
agency to lend support to such an attempt at interference with a purely internal affair of
labor.24

While employers may rightfully be notified or informed of petitions of such nature, they
should not, however, be considered parties thereto with the concomitant right to oppose it.
Sound policy dictates that they should maintain a strictly hands-off policy.25

It bears stressing that no obstacle must be placed to the holding of certification

elections,26 for it is a statutory policy that should not be circumvented.27 The certification
election is the most democratic and expeditious method by which the laborers can freely
determine the union that shall act as their representative in their dealings with the
establishment where they are working.28 It is the appropriate means whereby controversies
and disputes on representation may be laid to rest, by the unequivocal vote of the employees
themselves. 29Indeed, it is the keystone of industrial democracy .30

Petitioner next asseverates that the Charter Certificate submitted by the private respondent
was defective in that it was not certified under oath and attested to by the organization's
secretary and President.

Petitioner is grasping at straws. Under our ruling in the Progressive Development

Corporation31 case, what is required to be certified under oath by the secretary or treasurer
 and attested to by the local's president are the "constitution and by-laws, a statement on the
set of officers, and the books of accounts" of the organization. The charter certificate issued
by the mother union need not be certified under oath by the secretary or treasurer and
attested to by the local's president.

IV

Petitioner, in its Reply to public respondent's Comment, nevertheless calls the attention of
this court to the fact that, contrary to the assertion of private respondent IBM that it is a
legitimate labor federation and therefore has the capacity and authority to create a local or
chapter at SMFI, the Chief of the Labor Organizations Division of the Bureau of Labor
Relations Manila had allegedly issued a certification last January 17, 1995 to the effect
that private respondent is not a legitimate labor federation.32

This is a factual issue which petitioner should have raised before the Med-Arbiter so as to
allow the private respondent ample opportunity to present evidence to the contrary. This
Court is definitely not the proper venue to consider this matter for it is not a trier of facts. It is
noteworthy that petitioner did not challenge the legal personality of the federation in the
proceedings before the Med-Arbiter. Nor was this issue raised in petitioner's appeal to the
Office of the Secretary of Labor and Employment. This matter is being raised for the first time
in this petition. An issue which was neither alleged in the pleadings nor raised during the
proceedings below cannot be ventilated for the first time before this Court. It would be
offensive to the basic rule of fair play, justice and due process.33 Certiorari is a remedy
narrow in its scope and inflexible in character. It is not a general utility tool in the legal
workshop.34 Factual issues are not a proper subject for certiorari, as the power of the
Supreme Court to review labor cases is limited to the issue of jurisdiction and grave abuse of
discretion.35 It is simply unthinkable for the public respondent Undersecretary of Labor to
have committed grave abuse of discretion in this regard when the issue as to the legal
personality of the private respondent IBM Federation was never interposed in the appeal
before said forum.

Finally, the certification election sought to be stopped by petitioner is, as of now, fait
accompli. The monthly paid rank-and-file employees of SMFI have already articulated their
choice as to who their collective bargaining agent should be. In the certification election held
on August 20, 1994,36 the SMFI workers chose IBM at SMFI to be their sole and exclusive
bargaining agent. This democratic decision deserve utmost respect. Again, it bears stressing
that labor legislation seeks in the main to protect the interest of the members of the working
class. It should never be used to subvert their will.3 7

WHEREFORE, the petition is DENIED. Costs again petitioner.

SO ORDERED.

G.R. No. 94754 May 11, 1993

U-SING BUTTON AND BUCKLE INDUSTRY and SY BAN, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER DAISY G. CAUTON-
BARCELONA and CECILIA NAYA, respondents.

Corazon R. Paulino for petitioners.

Remberto Z. Evio for private respondent.

GRIO-AQUINO, J.:

This special civil action for certiorari seeks the reversal of the Resolution dated May 31, 1990 of the
National Labor Relations Commission (NLRC) dismissing the appeal of the petitioners from the
Labor Arbiter's decision in NLRC Case No. 5-3783-86 entitled, "Cecilia Naya vs. U-Sing Button &
Buckle Industry and/or Mr. Sy Ban, Proprietor and General Manager" which ordered the respondents
(now petitioners) to pay the complainant, Cecilia Naya, separation benefits.

In June, 1960, Fortunato Naya was employed as a maintenance worker at U-Sing Button and Buckle
Industry located at 158 4th Street, 7th Avenue, Grace Park, Caloocan City. The establishment, as its
name suggests, is engaged in the manufacture and sale of buttons and buckles. On May 30, 1986,
Naya stopped working on account of illness and died shortly thereafter. His widow, Cecilia Naya,
filed in the Manila Arbitration Branch of the Department of Labor & Employment against U-Sing
Button and Buckle Industry and its proprietor and general manager, Sy Ban, a claim for separation
pay and incentive leave pay due her husband. The claim was docketed as NLRC NCR Case No. 9-
3783-86.

Failing to amicably settle the case, the parties were required to submit their respective position
papers.

The respondents, in order to escape liability, presented evidence of Fortunato Naya's alleged
indebtedness to them in the amount of 116,500.00. They further claimed that they gave him
P4,247.00 during his confinement at the Lung Center of the Philippines and donated 123,500.00 to
his family when he died.

In her reply affidavit, Cecilia Naya denied any debts incurred by her late husband. She alleged that
his signatures acknowledging supposed obligations to the petitioners were forged and that the
documents were fabricated. She further claimed that the hospital bills amounted to only P857.40,
and that she never signed any receipts for any other amount as she never received any money from
the petitioners.

After a hearing conducted by Labor Arbiter Daisy Cauton-Barcelona, who noted significant
differences and dissimilarities in the signatures on the receipts presented in evidence by the
respondents (now petitioners), a decision was rendered on September 21, 1989 dismissing for lack
of factual basis the claim for underpayment but ordered the respondents to pay the complainant
separation benefits owing to her late husband, computed from June 1960 to May 1986 at the rate of
one-half month pay for every year of service.

Respondents appealed the decision to the National Labor Relations Commission. On June 21, 1990,
the Commission dismissed the appeal for failure of the respondents to post a cash or surety bond
from a reputable bonding company, in the amount of P18,369.00 which is equivalent to the monetary
award in favor of the claimant.
Respondents' motion for reconsideration of the decision was denied on June 21, 1990 by the
Commission.

In their petition for certiorari in this Court, they allege that:

1. the NLRC had no jurisdiction over the case, because "the appointments of the
commissioners have not been confirmed by the Commission on Appointments;"

2. the failure of the petitioners to file a surety bond is not a valid ground for the
dismissal of the appeal; and

3. the NLRC erred in not rendering judgment in favor of the petitioners and against
the private respondent, Cecilia Naya.

The petition has no merit.

Non-confirmation by the Commission on Appointments of the new NLRC Commissioners who were
appointed under Republic Act 6715 did not make their appointment null and void. In Calderoti vs.
Carale, 208 SCRA 254, we held that the Chairman and members of the National Labor Relations
Commission are not among the officers mentioned in Section 16, Article VII of the 1987 Constitution
whose appointments require confirmation by the Commission on Appointments. Therefore, their acts
are valid. In any case, the petitioners raised this issue only in their present petition, after their motion
for reconsideration was denied by the Commission. They are estopped from repudiating the
jurisdiction of the NLRC which they had already recognized.

Anent the surety bond which is required for the perfection of an appeal to the NLRC, Article 223 of
the Labor Code, as amended by R.A. No. 6715 (The New Labor Relations Law), as well as Section
7 of the NLRC's Interim Rules, clearly provides that:

Sec. 223. Appeal. . . . .

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

be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to the
monetary award in the judgment appealed from.

Section 7 of the NLRC, Interim Rules provides:

For purposes of the bond required under Article 223 of the Labor Code as amended,
the monetary award computed as of the date of the promulgation of the decision
appealed from shall be the basis of the bond. For this purpose, moral and exemplary
damages shall not be included in fixing the amount of the bond.

Pending the review of the appropriate guidelines for accreditation bonds posted by
bonding companies duly accredited by the regular court shall be acceptable.

In the case of Erectors, Inc. vs. NLRC, 202 SCRA 597, 602-603, this Court ruled that:

. . . The equivalence thus expressly prescribed between the amount of the appeal
bond and the monetary award, less moral and exemplary damages, made in the
decision sought to be appealed not only underscores the fact that the obvious and
 logical purpose of an appeal bond is to insure, during the period of appeal, against
any occurrence that would defeat or diminish recovery under the judgnient if
subsequently affirmed; it also validates and justifies, at least prima facie, an
interpretation that would limit the amount of the bond to the aggregate of the sums
awarded other than in the concept of moral and exemplary damages.

An appeal is a purely statutory right, and whoever would avail of it must strictly comply with the
requisites, particularly as these are clearly spelled out in the Rules (Ozaeta vs. Court of Appeals,
179 SCRA 800).

With respect to the last issue, the records show that at the time Fortunato Naya contracted lung
cancer, he had already worked for 26 years with the petitioners without any derogatory record. No
doubt the company benefitted from his long years of service. At the time of his death, he was already
fifty-five years old.

Pursuant to the Labor Code, he shall be entitled to termination pay due to illness equivalent to
P18,369.00 computed at the rate of one-half month pay for every year of service based on his latest
salary of P54 per day, a fraction of at least six months being considered as one whole year.

All doubts in the interpretation of labor and social laws should be resolved in favor of the worker. The
factual findings of the NLRC and the Labor Arbiter will not be reviewed by this Court in this special
civil action of certiorari, unless they are wildly distorted,or contradicted by the findings of another
administrative body, a situation that does not obtain in this case.

WHEREFORE, finding no grave abuse of discretion in the decision of the National Labor Relations
Commission in NLRC Case No. 5-3783-86 entitled, "Cecilia Naya vs. U-Sing Button & Buckle
Industry, et al.," the petition for certiorari is hereby DISMISSED. Costs against the petitioner.

SO ORDERED.

[G.R. No. 116347. October 3, 1996]

NATIVIDAD PONDOC, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION (Fifth Division, Cagayan de Oro City) and EMILIO
PONDOC, respondents.

DECISION
DAVIDE, JR., J.:

The novel issue that confronts us in this case is whether the Fifth Division
of the National Labor Relations Commission (NLRC) can validly defeat a final
judgment of the labor arbiter in favor of the complainant in a labor case by: (a)
entertaining a petition for injunction and damages, and an appeal from the
Labor Arbiters denial of a claim for set-off based on an alleged indebtedness of
the laborer and order of execution of the final judgment; and, (b) thereafter, by
receiving evidence and adjudging recovery on such indebtedness and
authorizing it to offset the Labor Arbiters final award.
The petitioner takes the negative view. In its Manifestation and Motion in
Lieu of Comment, the Office of the Solicitor General joins her in her plea,
[1]

hence we required the NLRC to file its own comment.

We resolved to give due course to the petition after the filing by the NLRC
and the private respondent of their separate comments.
Petitioner Natividad Pondoc was the legitimate wife of Andres Pondoc. After
her death on 5 December 1994, she was substituted by Hipolito Pondoc, her
only legitimate son. [2]

The Office of the Solicitor General summarized the factual antecedents of

this case in its Manifestation and Motion in Lieu of Comment:

Private respondent Eulalio Pondoc is the owner-proprietor of Melleonor General

Merchandise and hardware Supply located at Poblacion, Sindangan, Zamboanga del
Norte. Respondent is engaged, among others, in the business of buying and selling
copra, rice, corn, binangkol, junk iron and empty bottles. He has in his employ more
than twenty (20) regular workers (Records, pp. 9-11).

Records disclose that Andres Pondoc was employed by Eulalio Pondoc as a laborer
from October 1990 up to December 1991, receiving a wage rate of P20.00 per day. He
was required to work twelve (12) hours a day from 7:00 AM to 8:00 PM, Monday to
Sunday. Despite working on his rest days and holidays, he was not paid his premium
pay as required by law (Ibid).

Consequently, on May 14, 1992, Natividad Pondoc, on behalf of her husband, filed a
complaint for salary differential, overtime pay, 13th month pay, holiday pay and other
money claims before the Sub-Regional Arbitration Branch No. 9 of the NLRC,
docketed as Sub-RAB Case No. 09-05-10102-92 (Records, p. 1).

In his position paper, private respondent questioned, among others, the existence of
[an] employer-employee relationship between them. He further averred that
Melleonor General Merchandise and Hardware Supply is a fictitious establishment
(Records, pp. 64-68).

On June 17, 1993, labor Arbiter Esteban Abecia rendered a Decision finding the
existence of [an] employer-employee relationship between the parties. The dispositive
portion of the Decision reads:
WHEREFORE, judgment is hereby rendered: (a) ordering respondent Eulalio Pondoc
to pay complainant the following claims:

(1) Salary differential for

reason of underpayment P35,776.00;
(2) Regular holiday and
premium pay for holiday
services 902.00;
(3) Premium pay for rest day
services 3,840.00;
(4) 13th month pay 3,600.00

or the total amount of FOURTY-FOUR [sic] THOUSAND AND ONE HUNDRED

EIGHTEEN PESOS (P44,118.00).

Other claims are denied for lack of merit.

SO ORDERED (Records, pp. 323-324).

On his last day to perfect an appeal, private respondent filed a manifestation before
the Labor Arbiter praying that his liabilities be set-off against petitioners alleged
indebtedness to him (Records, pp. 325-327). The Labor Arbiter denied, however, the
compensation, and instead, issued a writ of execution as prayed for by petitioner
(Records, p. 328).

Before the execution order could be implemented, however, private respondent was
able to obtain a restraining order from the NLRC, where he filed a Petition for
"Injunction and Damages, docketed as NLRC Case No. ICM-000065.

On February 28, 1994, public respondent NLRC allowed compensation between

petitioners monetary award and her alleged indebtedness to private respondent. It
disposed:

WHEREFORE, the appealed order is hereby vacated and set aside.A new one is
entered declaring the setting-off of complainants indebtedness which allegedly
amounted to P41,051.35 against the complainants monetary award in the amount
of P44,118.00. The additional amount of P5,000.00 which complainant allegedly got
from respondent on 10 July 1993 could not be credited in view of appellants failure to
submit evidence to prove that complainant was really paid P5,000.00.

Accordingly, respondent Eulalio Pondoc is hereby directed to pay complainant

Natividad Pondoc the amount of P3,066.65.

The Temporary restraining order issued herein is hereby made permanent.

SO ORDERED (Annex D of Petition). [3]

Her motion for reconsideration of the judgment having been denied by the
NLRC, the petitioner instituted this special civil action for certiorari under Rule
65 of the Rules of Court wherein she prays this Court annul the challenged
decision of the NLRC, Fifth Division (Cagayan de Oro City), in NLRC Case No.
IC No. M-000065, and direct the enforcement of the writ of execution in NLRC
Case No. SRAB-09-05-10102-92, on the ground that the NLRC, Fifth Division,
acted without or in excess of jurisdiction or with grave abuse of discretion when
it proceeded to determine the alleged indebtedness of the petitioner and set-off
the same against the liabilities of the private respondent. The petitioner asserts
that the decision of the labor Arbiter in NLRC Case No. SRAB-09-05-10102-92
was already final and executory when the private respondent tried to defeat the
judgment by asserting an alleged indebtedness of Andres Pondoc as a set-off,
a claim not pleaded before the Labor Arbiter at any time before judgment, hence
deemed waived. Moreover, the indebtedness did not evolve out [sic] employer-
employee relationship, hence, purely civil in aspect.
The Office of the solicitor General agreed with the petitioner and stressed
further that the asserted indebtedness was never proven to have arisen out of
or in connection with the employer-employee relationship between the private
respondent and the late Andres Pondoc, or to have any causal connection
thereto. Accordingly, both the Labor Arbiter and the NLRC did not have
jurisdiction over the private respondents claim.
As expected, the private respondent and the NLRC prayed for the dismissal
of this case.
We rule for the petitioner.
The proceedings before the NLRC were fatally flawed.
In the first place, the NLRC should not have entertained the private
respondents separate or independent petition for Injunction and Damages
(NLRC IC No. M-000065). It was obvious that the petition was a scheme to
defeat or obstruct the enforcement of the judgment in NLRC Case No. SRAB-
09-05-10102-92 where, in fact, a writ of execution had been issued. Article
218(e) of the Labor Code does not provide blanket authority to the NLRC or any
of its divisions to issue writs of injunction, while Rule XI of the New Rules of
Procedure of the NLRC makes injunction only an Ancillary remedy in ordinary
labor disputes such as the one brought by the petitioner in NLRC Case No.
SRAB-09-05-10102-92. This is clear from Section 1 of the said Rule which
pertinently provides as follows:
Section 1. Injunction in Ordinary Labor Disputed. -- A preliminary injunction or a
restraining order may be granted by the Commission through its divisions pursuant to
the provisions of paragraph (e) of Article 218 of the Labor Code, as amended, when it
is established on the bases of the sworn allegations in the petition that the acts
complained of, involving or arising from any labor dispute before the Commission,
which, if not restrained or performed forthwith, may cause grave or irreparable
damage to any party or render ineffectual any decision in favor of such party.

xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only as an
incident to the cases pending before them in order to preserve the rights of the parties
during the pendency of the case, but excluding labor disputes involving strike or
lockout.(emphasis supplied)

Hence, a petition or motion for preliminary injunction should have been filed in
the appeal interposed by the private respondent, i.e., in NLRC Case No. SRAB-
09-05-10102-92.This matter, however, became academic when the NLRC
consolidated the two cases as shown by the captions in its challenged decision
of 28 February 1994 and resolution of 6 May 1994.
Secondly, the appeal of the private respondent in NLRC Case No. SRAB-
09-05-10102-92 was not from the decision therein, but from the order of the
Labor Arbiter denying the set-off insisted upon by the private respondent and
directing the execution of the judgment. Therefore, the private respondent
admitted the final and executory character of the judgment.
The Labor Arbiter, in denying the set-off, reasoned [I]t could have been
considered if it was presented before the decision of this case. While this is
[4]

correct, there are stronger reasons why the set-off should, indeed, be denied.As
correctly contended by the Office of the Solicitor General, there is a complete
want of evidence that the indebtedness asserted by the private respondent
against Andres Pondoc arose out of or was incurred in connection with the
employer-employee relationship between them. The Labor Arbiter did not then
have jurisdiction over the claim as under paragraph (a) of Article 217 of the
Labor Code, Labor Arbiters have exclusive and original jurisdiction only in the
following cases:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
 4. Claim 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 accompanies with a claim for
reinstatement.

On the other hand, under paragraph (b) thereof, the NLRC has exclusive
appellate jurisdiction over all cases decided by the Labor Arbiters. This simply
means that the NLRC does not have original jurisdiction over the cases
enumerated in paragraph (a) and that if a claim does not fall within the exclusive
original jurisdiction of the labor Arbiter, the NLRC cannot have appellate
jurisdiction thereon.
The conclusion then is inevitable that the NLRC was without jurisdiction,
either original or appellate, to receive evidence on the alleged indebtedness,
render judgment thereon, and direct that its award be set-off against the final
judgment of the Labor Arbiter.
Finally, even assuming arguendo that the claim for the alleged
indebtedness fell within the exclusive original jurisdiction of the Labor Arbiter, it
was deemed waived for not having been pleaded as an affirmative defense or
barred for not having been set up as a counterclaim before the Labor Arbiter at
any appropriate time prior to the rendition of the decision in NLRC Case No.
SRAB-09-05-10102-92. Under the rules of Court, which is applicable in a
suppletory character in labor cases before the Labor Arbiters or the NLRC
pursuant to Section 3, Rule 1 of the New Rules of Procedure of the NLRC,
defenses which are not raised either in a motion to dismiss or in the answer are
deemed waived and counterclaims not set up in the answer are barred. Set-
[5] [6]

off or compensation is one of the modes of extinguishing obligations and [7]

extinguishment is an affirmative defense and a ground for a motion to dismiss. [8]

We do not then hesitate to rule that the NLRC acted without jurisdiction or
with grave abuse of discretion in entertaining an independent action for
injunction and damages (NLRC IC No. M-000065), in receiving evidence and
rendering judgment on the alleged indebtedness of Andres Pondoc, and in
ordering such judgment to offset the final award of the Labor Arbiter in NLRC
Case No. SRAB-09-05-10102-92.
WHEREFORE, the instant petition is GRANTED and the challenged
decision of 28 February 1994 and resolution of 6 May 1994 of the National labor
Relations Commission in NLRC Case No. IC No. M-000065 and NLRC Case
No. SRAB-09-05-10102-92 are ANNULLED and SET ASIDE. The judgment of
the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92 should forthwith be
enforced without any further delay, the award therein bearing interest at the rate
of twelve percentum (12%) per annum from the finality of such judgment until it
shall have been fully paid.
Costs against the private respondent.
SO ORDERED.

G.R. No. 120506 October 28, 1996

PHILIPPINE AIRLINES, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER CORNELIO
LINSANGAN, UNICORN SECURITY SERVICES, INC., and FRED BAUTISTA, et al., respondents.

DAVIDE, JR., J.:p

This is a petition for certiorari under Rule 65 of the Rules of Court to annul the decision of the Labor Arbiter dated 12 August 1991 in NLRC
Case No. 00-11-06008-90 and the resolutions of public respondent National Labor Relations Commission (NLRC) promulgated on 27
October 1994 and 31 May 1995 dismissing the appeal filed by the petitioner and denying the motion for reconsideration, respectively.

The dispute arose from these antecedents:

On 23 December 1987, private respondent Unicorn Security Services, Inc. (USSI) and petitioner
Philippine Airlines, Inc. (PAL) executed a security service agreement. 1 USSI was designated therein
as the CONTRACTOR. Among the pertinent terms and conditions of the agreement are as follows:

(4) THE CONTRACTOR shall assign to PAL an initial force of EIGHTY ONE
(81) bodies . . . which may be decreased or increased by agreement in writing . . . . It
is, of course, understood that the CONTRACTOR undertakes to pay the wages or
salaries and cost of living allowance of the guards in accordance with the provisions
of the Labor Code, as amended, the different President Decrees, Orders and with the
rules and regulations promulgated by competent authorities implementing said acts,
assuming all responsibilities therefor. . . .

xxx xxx xxx

(6) Without any expense on the part of PAL, CONTRACTOR shall see to it that the
guards assigned to PAL . . . are provided, at the expense of CONTRACTOR, with the
necessary firearms, ammunitions and facilities needed for the rendition of the
security services as aforesaid;

(7) CONTRACTOR shall select, engage and discharge the guards, employees, or
agents, and shall otherwise direct and control their services herein provided or
heretofore to be set forth or prescribed. The determination of wages, salaries and
compensation of the guards or employees of the CONTRACTOR shall be within its
full control but shall in no way contravene existing laws on the matter. It is further
understood that CONTRACTOR as the employer of the security guards agrees to
comply with all relevant laws and regulations, including compulsory coverage under
the Social Security Act, Labor Code, as amended and the Medical Care Act, in its
operations. Although it is understood agreed between parties hereto that
CONTRACTOR in the performance of its obligations under this Agreement, is subject
to the control and direction of PAL merely as to the result as to be accomplished by
the work or services herein specified, and not as to the means and methods for
accomplishing such result, CONTRACTOR hereby warrants that it will perform such
work or services in such manner as will achieve the result herein desired by PAL.

(8) Discipline and administration of the security guards shall be the sole responsibility
of the CONTRACTOR to the end that CONTRACTOR shall be able to render the
desired security service requirements of PAL CONTRACTOR, therefore, shall
conform to such rules and regulations that may be issued by PAL. For this purpose,
Annex "A", which forms part of this Agreement, contains such rules and regulations
and CONTRACTOR is expected to comply with them. At its discretion, PAL may,
however, work out with CONTRACTOR such rules and regulations before their
implementation.

(9) Should PAL at any time have any justifiable objection to the presence in its
premises of any of CONTRACTOR's officer, guard or agent under this Agreement, it
shall send such objection in writing to CONTRACTOR and the latter shall
immediately take proper action.

(10) The security guards employed by CONTRACTOR in performing this Agreement

shall be paid by the CONTRACTOR and it is distinctly understood that there is no
employee-employer relations between CONTRACTOR and/or his guards on the one
hand, and PAL on the other. CONTRACTOR shall have entire charge, control and
supervision of the work and services herein agreed upon, and PAL shall in no
manner be answerable or accountable for any accident or injury of any kind which
may occur to any guard or guards of the CONTRACTOR in the course of, or as a
consequence of, their performance of work and services under this Agreement, or for
any injury, loss or damage arising from the negligence of or carelessness of the
guards of the CONTRACTOR or of anyone of its employ to any person to persons or
to its or their property whether in the premises of PAL or elsewhere; and the
CONTRACTOR hereby covenants and agrees to assume, as it does hereby assume,
any and all liability or on account of any such injury, loss or damage, and shall
indemnify PAL for any liability or expense it may incur by reason thereof and to hold
PAL free and harmless from any such liability.

xxx xxx xxx

(13) For and in consideration of the services to be rendered by CONTRACTOR

under these presents, PAL shall pay CONTRACTOR the amount of PESOS NINE &
40/100 CTVS (P9.40) PER HOUR multiplied by 905 hours equivalent to PESOS
TWO HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED NINE & 58/100
CTVS, Philippine currency, (P275,909.58) the basis of eight (8) working hours per
office/guard a day, Sundays and holidays included, the same to be payable on or
before the 15th of each month for services on the first half of the month and on or
before the end of the month for services for the 2nd half of the month.
 Nothing herein contained shall prevent the parties from meeting for a review of the
rates should circumstances warrant.

xxx xxx xxx

(20) This Agreement shall take effect on 06 December 1987 and shall be in force for
a period of SIX (6) MONTHS 05 JUNE 1988 thereafter it shall continue indefinitely
unless sooner terminated upon thirty (30) days notice served upon by one party to
the other, except as provided for in Articles 16, 17 & 18 hereof.

Sometime in August of 1988, PAL requested 16 additional security guards. USSI provided what was
requested; however, PAL insisted that what USSI did was merely to pick out 16 guards from the 86
already assigned by it and directed them to render overtime duty.

On 16 February 1990, PAL terminated the security service agreement with USSI without giving the
latter the 30-day prior notice required in paragraph 20 thereof. Instead, PAL paid each of the security
guards actually assigned at the time of the termination of the agreement an amount equivalent to
their one-month salary to compensate for the lack of notice.

In November 1990, USSI, allegedly "in its capacity as Trustee for Sixteen or on Security Guards,"
filed with the NLRC Arbitration Branch, National Capital Region, a complaint 2 against PAL for the
recovery of P75,600.00 representing termination pay benefit due the alleged 16 additional security
guards, which PAL failed and refused to pay despite demands. It further asked for an award of not
less than P15,000.00 for each of the 16 guards as damages for the delay in the performance of
PAL's obligation, and also for attorney's fees in an amount equivalent to 10% of whatever might be
recovered. Pertinent portions of the complaint read as follows:

3. By virtue of said contract and upon its effectivity, respondent required eighty-six
(86) security guards whom complaint USSI supplied; on or sometime in August 1989,
respondent asked sixteen (16) security guards to render twelve (12) hours each.

4. In February 1990 and for reasons of its own, respondent caused to terminate not
only the contract but also the services of the security guards; in effecting such
termination, said respondent caused to pay the equivalent of one (1) month's notice
unto all the security guards, except the 16 who, as aforementioned were rendering
12 hours each from date of assignment up to and until their termination.

5. As computed, the termination pay benefits due the 16 security guards amount to
P75,600.00, more or less, which, despite demands, respondent fails, neglects or
refuses to pay, as it continue refusing, failing or neglecting to so do up to the present
time.

6. Respondent has not only incurred in delay in the performance of its obligation but
also contravened the tenor thereof; hence, complainants are, by law, entitled to be
indemnified with damages for no less than P15,000.00 each for all complainants
though the correct amount is left solely to the sound discretion of the Honorable
Labor Arbiter.

7. Complainants are now compelled to litigate their plainly valid, just or demandable
claim on account of which services of counsel have been required and thereby
obligated themselves to pay, for and as attorney's fees, the sum equivalent to ten
percent (10%) of whatever sums or sum may be recovered in the case.
The complaint was docketed as NLRC-NCR Case No. 00-11-06008-90 and assigned to Labor
Arbiter Cornelio L. Linsangan.

PAL filed a motion to dismiss the complaint 3 on the grounds that the Labor Arbiter had no jurisdiction
over the subject matter or nature of the complaint and that USSI had no cause of action against
PAL. In amplification thereof, PAL argued that the case involved the interpretation of the security
service agreement, which is purely civil in character and falls outside of the Labor Arbiter's
jurisdiction. It is clear from Article 217 of the Labor Code that for claims to be within the jurisdiction of
Labor Arbiters, they must arise from an employer-employee relationship. PAL claimed that USSI did
not allege the existence of an employer-employee relationship between PAL and USSI or its guards,
and that in fact, paragraph 10 of the agreement provides that there is no employer-employee
relationship between the CONTRACTOR and/or his guards on the one hand and PAL on the other.

In its Opposition, 4 USSI pointed out that PAL forgot or overlooked the fact that "insofar as labor
standards, benefits, etc. have to be resolved or adjudicated, liability therefor is shifted to, or
assumed by, respondent [herein petitioners] which, in law, has been constituted as an indirect
employer."

PAL filed a supplemental motion to dismiss 5 wherein it cites the following reasons for the dismissal
of the complaint: (1) the clear stipulations in the agreement (paragraphs 4 and 10) that there exists
no employer-employee relationship between PAL on the one hand and USSI and the guards on the
other; (2) there were no 16 additional guards, as the 16 guards who were required to render 12-hour
shifts were picked out from the original 86 guards already assigned and were already given a one-
month salary in lieu of the 30-day notice of termination of the agreement; (3) USSI had no legal
personality to file the case as alleged trustee of the 16 security guards; and (4) the real parties in
interest the 16 security guards never showed any interest in the case either by attending any
hearing or conference, or by following up the status of the case.

Attached to the supplemental motion to dismiss were, among other things, xerox copies of
confirmation letters of USSI to PAL to show that no additional guards were in fact provided. 6

Labor Arbiter Linsangan did not resolved the motion to dismiss and the supplemental motion to
dismiss. On 12 August 1991, he handed down a decision 7 ordering PAL to pay: (1) the sum of
P75,600.00 representing the equivalent of one-month's separation pay due the 16 individual security
guards, plus 10% interest from the date of filing of the case until the whole obligation shall have
been fully settled; (2) the sum of P5,000.00 by way of exemplary damages due each of the 16
security guards; and (3) another sum equivalent to 10% of the total award for and as attorney's fees.

It was in that decision that Labor Arbiter Linsangan mentioned for the first time that the resolution of
the motion to dismiss and supplemental motion to dismiss "was deferred until [the] case is decided
on the merits" considering "the ground not to be indubitable." In holding that he had jurisdiction over
the case, he stated:

As heretofore and invariably held in similar cases, the issue of whether or not Labor
Arbiters have jurisdiction over money claims affecting security guards assigned by
security agencies (like complainant herein) to their client-companies such as PAL is,
more or less, settled, especially since, as the law views such as peculiar relationship,
such money claims insofar as they have to be paid, are the ultimate responsibility of
the client-firms. In effect, the security guards have been constituted
as indirectemployees of the client just as the client becomes the indirect employer of
the guards. Art. 107 and 109 of the Labor Code expressly provide that. . . .
 To justify the awards, Labor Arbiter Linsangan opined:

Evidence adduced clearly show that sometime in December 1987, aforementioned

security service contract was executed, based on which the required number of
security guards were assigned to, or posted at, the various premises of respondent
PAL. Said number of security guards may, as the contract provides, be increased
or reduced at respondent's request, such that the original number of eighty-six (86)
guards, an additional sixteen (16) were needed and, accordingly supplied who,
pursuant to PAL's instructions, were required to render twelve (12) hours each, per
day.

In February 1990, and for reasons of its own, PAL caused to terminate, as it did, the
contract of security service. Unequivocably, it caused to pay the separation pay
benefits of the 86-security guards for the equivalent amount of one (1) month's pay.
As to the additional 16, it failed and refused to grant similar equivalent, without any
valid reasons therefor.

As earlier stated, respondent opted to rely solely on the ground set forth in its Motion
to Dismiss as well as Supplement thereto. It failed to file, despite directive made
thereon, its position paper. Neither did it submit, nor adduce, evidence (documentary
or otherwise) to rebut or contravert complainant's claims especially since the money
equivalent of the one month separation pay due the 16 guards has been duly
quantified as amounting to Seventy Five Thousand Six Hundred (P75,600.00) Pesos.
Thus established, it is clear that there was absolutely no legal/justifiable reason why
said 16 guards applied and who rendered 12 hours each per day had to be
discriminated against.

Following PAL's failure or refusal to pay, demands were made by complainant,

asking at the same time why that was so. Conceivably, respondent has smarted itself
on its mistaken belief that there was, as between the guards and itself, no employer-
employee relationship and, hence, there is no legal basis for it to pay. If that was so,
why did it pay separation pay unto the 86 regular employed guards.

PAL being widely known as a progressively-minded employer, it should be the first to

show good example for emulation. In this instant case, it did not; in fact, its
actuations were not consistent with good faith. It should, therefore, be held liable for
exemplary damages and having required complainant to litigate a plainly valid, just or
demandable claim, an award for attorney's fees must perforce be assessed.

On 3 September 1991, PAL filed its Appeal 8 wherein it indicated that it received a copy of the
decision on 26 August 1991. Attached thereto was a machine copy of the Notice of Judgment/Final
Order, with the date of its receipt, i.e., 26 August 1991, 9 having been stamped on the upper right
hand corner by PAL's Legal Department.

USSI countered this Appeal with a motion foe execution of judgment 10 on the ground that since PAL,
received a copy of the decision on the 23rd, not on the 26th, of August 1991 it had until 2 September
1991 to appeal; hence, the appeal interposed on 3 September was late by one day. The decision
had then become final and executory.

In its opposition 11 to this motion, PAL insisted that it received a copy of the decision on 26 August
1991; thus, it had until 5 September 1991 to file its appeal.
On 30 September 1991, Labor Arbiter Linsangan issued a writ of execution. 12

On 1 October 1991, PAL filed a motion to quash 13 the writ of execution. It tried to explain therein why
it thought all along that it received a copy of the decision on 26 August 1991, thus:

4. Upon investigation the undersigned counsel learned that on 23 August 1991

(Friday) a server-messenger went to PAL Legal Department to serve said decision.
The receiving clerks at that time were all out of the office so that the server
persuaded a secretary, Ms. April Rose del Rosario to receive the same,
notwithstanding the fact that Ms. Del Rosario told him (server) that she was not
authorized to receive documents for and in behalf of PAL. Ms. Del Rosario then
stamped the date of receipt on the service's copy without stamping (the date of
receipt) PAL's copy of the decision which was left by the server. Thereafter, Ms. del
Rosario placed PAL's copy of the Decision on the incoming documents rack of the
receiving clerk.

Attached herewith is the affidavit of Ms. Del Rosario and as Annex "A" hereof.

5. On 26 August 1991 (Monday), the receiving clerk/messenger Mr. Greg Soriano

upon finding the Decision among the documents in the incoming documents rack,
immediately stamped "Received 26 August 1991" thereon, on the honest and sincere
belief that the same just arrived that day (26 August 1991). He then forwarded the
same to the secretary of the undersigned counsel.

Attached herewith is the affidavit of Mr. Greg Soriano marked as Annex "B" hereof.

6. The undersigned counsel believing that the said decision was received on 26
August 1991 reckoned/counted the ten (10) day period for appeal from said date.

7. Considering the foregoing circumstances, the undersigned counsel's innocent

reliance on the date of receipt stamped on the copy of the Decision furnished him
was clearly due to an innocent mistake and/or excusable neglect. Hence, justice and
equity dictates that respondent PAL should be considered to have filed its Appeal
within the reglementary period for Appeal. 14

On 8 October 1991, Labor Arbiter Linsangan issued an order 15 denying the motion to quash.

On 10 October 1991, PAL appealed 16 to the NLRC the aforesaid order of 8 October 1991 on the
ground that it was issued with grave abuse of discretion.

In its resolution of 27 October 1994, 17 the Second Division of the NLRC dismissed PAL's appeal for
having been filed out of time. It sustained the Labor Arbiter's finding that PAL had received a copy of
the decision on 23 August 1991, and hence the last day to appeal was 2 September 1991. It ruled
that whether or not the decision was received by an employee other than the receiving clerk or
messenger was of no moment, as the proper performance of employee's duties was PAL's concern.

On 31 May 1995, the NLRC denied the motion for reconsideration 18 for the reason that it cannot
accept PAL's excuse as it may "open the floodgates to abuse"; and that the lapse of the period to
appeal had already deprived the Commission of jurisdiction over the case. 19
PAL then filed this special civil action for certiorari under Rule 65 of the Rules of Court alleging that
(1) public respondent committed serious and patent error in failing to declare that the Labor Arbiter
had no jurisdiction over the instant case; (2) The Labor Arbiter gravely abused its discretion in
ordering PAL to pay the separation pay of the 16 security guards assigned at PAL's premises by
USSI; and (3) respondent NLRC committed grave abuse of discretion in declaring PAL's appeal to
have been filed out of time.

PAL argues that since USSI's cause of action was founded on the security service agreement, and
that thereunder no employer-employee relationship existed between PAL and the security guards
who were USSI's employees, the Labor Arbiter had no jurisdiction over the complaint. Moreover,
assuming arguendo that the claims of the security guards were valid, USSI had no personality to file
the complaint, for there is nothing whatsoever to show that it was expressly authorized by the
security guards to act as their "trustee."

As to the second assigned error, PAL asserts that it is not liable to pay separation pay because (1) it
was not the employer of the security guards; (2) even as an indirect employer, as held by the Labor
Arbiter, its liability was limited to violations of labor standards law, and non-payment of the
separation pay is not a violation of the said law; (3) the security service agreement with USSI did not
provide for payment of separation pay; (4) the payment made to the 86 security guards upon the
termination of the agreement without the prior 30-day notice was not for separation pay but a benefit
in lieu of the 30-day notice required under paragraph 20 of the agreement; and (5) since PAL was
not employer of the security guards, in no way could it terminate their services.

In its third assigned error, PAL submits that rules of procedure ought not to be applied in a very rigid
technical sense, sense they are used only to help secure and not override substantial justice,
especially in this case where the appeal was meritorious. Moreover, the delay in the perfection of the
appeal, reckoned from the finding of the Labor Arbiter, was only one day; but if reckoned from what
its counsel innocently believed to be PAL's date of receipt of the decision, which was 26 August
1991, the appeal could be said to have been seasonably filed.

In its Comment, USSI points out that the grounds relied upon by PAL are based on factual a issue,
namely, the discrimination made by PAL in paying the 86 and not the 16 security guards. It argues
that the case touched upon the rights of the 16 security guards as employees; thus, the same was
within the jurisdiction of the Labor Arbiter. As regards PAL's plea for the relaxation of the rule on
perfection of appeals, USSI contends that the negligence of PAL's counsel should not be deemed
"compelling reason to warrant relaxation of the rule."

In its Manifestation and Motion in Lieu of Comment, 20 the Office of the Solicitor General agrees with
PAL that the Labor Arbiter did not have jurisdiction over the complaint because there was no
employer-employee relationship between PAL and the 16 security guards; that Article 107 and 109
of the Labor Code which provide for joint and several liability for payment of wages by the direct and
indirect employer find no application in the present case because the 16 security guards employed
by USSI were not after unpaid wags; and that in the interest of justice and considering that the
appeal was filed only one day late, the rule on perfection of appeals should have been relaxed to
prevent a miscarriage of justice.

In view of the stand of the Office of the Solicitor General, we advised public respondents to file their
own comment if they so desired.

In their Comment, the NLRC and Labor Arbiter Linsangan maintain that they had jurisdiction over the
case because of Articles 107 and 109 of the Labor Code which constitute PAL as indirect employer
of the 16 security guards, there being a question involving separation pay due the latter; that the 16
security guards were entitled to separation pay, because PAL paid the other 86 security guards
when the service agreement was terminated; and that for the NLRC to excuse the delay of one day
in filing the appeal would open the floodgates of abuse.

The instant petition is impressed with merit.

We agree with petitioner PAL that the Labor Arbiter was without jurisdiction over the subject matter
of NLRC-NCR Case No. 00-11-06008-90, because no employer-employee relationship existed
between PAL and the security guards provided by USSI under the security service agreement,
including the alleged 16 additional security guards.

We have pronounced in numerous cases 21 that in determining the existence of an employer-

employee relationship, the following elements are generally considered: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power to dismiss; and (4) the power
to control the employee's conduct.

In the instant case, the security service agreement between PAL and USSI provides the key to such
consideration. A careful perusal thereof, especially the terms and conditions embodied in
paragraphs 4, 6, 7, 8, 9, 10, 13 and 20 quoted earlier in this ponencia, demonstrates beyond doubt
that USSI and not PAL was the employer of the security guards. It was USSI which (a)
selected, engaged or hired and discharged the security guards; (b) assigned them to PAL according
to the number agreed upon; (c) provided, at its own expense, the security guards with firearms and
ammunitions; (d) disciplined and supervised them or controlled their conduct; and (e) determined
their wages, salaries, and compensation; and (f) paid them salaries or wages. Even if we disregard
the explicit covenant in said agreement that "there exists no employer-employee relationship
between CONTRACTOR and/or his guards on the one hand, and PAL on the other" all other
considerations confirm the fact that PAL was not the security guards' employer. Analogous to the
instant case is Canlubang Security Agency Corp. vs. NLRC. 22

Considering then that no employer-employee relationship existed between PAL and the security
guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR Case No. 00-11-06008-
90. Article 217 of the Labor Code (P.D. No. 442), as amended, vests upon Labor Arbiters exclusive
original jurisdiction only over the following:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;

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

arising from employer-employee relations;

5. Cases arising from any violation of Article 265 of this Code,

including questions involving legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic
 or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim
for reinstatement.

In all these cases, an employer-employee relationship is an indispensable jurisdictional

requisite.

The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption of jurisdiction on the
pretext that PAL was the indirect employer of the security guards under Article 107 in relation to
Articles 106 and 109 of the Labor Code and, therefore, it is solidarily liable with USSI. We agree with
the Solicitor General that these Articles are inapplicable to PAL under the facts of this case. Article
107 provides:

Art. 107. Indirect employer. The provisions of the immediately preceding Article
shall likewise apply to any person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor for the performance of
any work, task, job or project.

The preceding Article referred to, which is Article 106, partly reads as follows:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a

contract with another person for the performance of the former's work, the employees
of the contractor and of the latter's subcontractor, if any, shall be paid in accordance
with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.

While USSI is an independent contractor under the security service agreement and PAL may
be considered an indirect employer, that status did not make PAL the employer to the
security guards in every respect. As correctly posited by the Office of the Solicitor General,
PAL may be considered an indirect employer only for purposes of unpaid wages since Article
106, which is applicable to the situation contemplated in Section 107, speaks of wages. The
concept of indirect employer only relates or refers to the liability for unpaid wages. Read
together, Articles 106 and 109 simply mean that the party with whom an independent
contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent
and for that purpose that the latter is considered a direct employer. The term "wages" is
defined in Article 97(f) of the Labor Code as "the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece, or commission basis, or other method of calculating the unwritten
contract of employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee."

No valid claim for wages or separation pay can arise from the security service agreement in
question by reason of its termination at the instance of PAL. The agreement contains no
provision for separation pay. A breach thereof could only give rise to damages under the
Civil Code, which is cognizable by the appropriate regular court of justice. Besides, there is
no substantial proof that USSI in fact provided 16 additional guards. On the contrary, PAL
was able to prove in the annexes attached to its supplemental motion to dismiss that the 16
guards were actually picked out from the original group and were just required to render
overtime service.

The Labor Arbiter's lack of jurisdiction was too obvious from the allegations in the complaint
and its annex (the security service agreement) in NLRC-NCR Case No. 00-11-06008-90.
The Labor Arbiter then should have forthwith resolved the motion to dismiss and the
supplemental motion to dismiss. As correctly pointed out by PAL, under Section 15 of Rule V
of the New Rules of Procedure of the NLRC, any motion to dismiss on the ground of lack of
jurisdiction, improper venue, res judicata, or prescription shall be immediately resolved by
the Labor Arbiter by a written order. Yet, the Labor Arbiter did not, and it was only in his
decision that he mentioned that the resolution of the motion to dismiss "was deferred until
this case is decided on the merits" because the ground therefore was not "indubitable." On
this score the Labor Arbiter acted with grave abuse of discretion for disregarding the rules he
was bound to observe.

We shall now turn to the issue of tardiness of the appeal. The record does indeed show that
on the original copy of the Notice of Judgment/Final Order, 23 there is stamped by the PAL
Legal Department the date of its receipt of the decision, viz., "AUG. 23, 1991."

It is not also denied by respondents that on the right upper hand corner of PAL's copy of the
Notice of Judgment/Final Orders, 24 there is stamped the date of receipt thereof by PAL Legal
Department, viz., "AUG. 26, 1991." PAL explained how this discrepancy occurred and how
its counsel was misled into believing that PAL received a copy of the decision only on 26
August 1991. This belief in good faith rendered excusable any negligence it might have
committed. Besides, the delay in the perfection of the appeal was only one day. Considering
that the Labor Arbiter had no jurisdiction over the subject matter of NLRC-NCR Case No. 00-
11-06008-90 and that the 16 security guards are not in fact entitled to separation pay under
the security service agreement, the higher interest of justice favors a relaxation of the rule on
perfection of appeals in labor cases.

While it is an established rule that the perfection of an appeal in the manner and within the
period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an
appeal has the effect of rendering the judgment final and executory, it is equally settled that
the NLRC may disregard the procedural lapse where there is an acceptable reason to
excuse tardiness in the taking of the appeal. 25 Among the acceptable reasons recognized by
this Court are (a) counsel's reliance on the footnote of the notice of the decision of the Labor
Arbiter that "the aggrieved party may appeal . . . within ten (10) working days"; 26 (b)
fundamental consideration of substantial justice; 27 (c) prevention of miscarriage of justice or
of unjust enrichment, as where the tardy appeal is from a decision granting separation pay
which was already granted in an earlier final decision; 28 and (d) special circumstances of the
case combined with its legal merits 29 or the amount and the issue involved. 30 A one-day
delay in the perfection of the appeal was excused in Pacific Asia Overseas Shipping
Corp. vs. NLRC, 31 Insular life Assurance Co. vs. NLRC, 32 and City Fair Corp. vs. NLRC. 33

In the instant case, the Labor Arbiter's lack of jurisdiction so palpably clear on the face of
the complaint and the perpetuation of unjust enrichment if the appeal is disallowed are
enough combination of reasons that warrant a relaxation of the rules on perfection of appeals
in labor cases.
 WHEREFORE, the instant petitioner is hereby GRANTED. The questioned decision of the
Labor Arbiter dated 12 August 1991 and the resolutions of the Second Division of the
National Labor Relations Commission promulgated on 27 October 1994 and 31 May 1995
are hereby SET ASIDE, and NLRC-NCR Case No. 00-11-06008-90 is DISMISSED.

SO ORDERED.

G.R. No. 128003 July 26, 2000

RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG, petitioner,

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

DECISION

PARDO, J.:

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

The facts are as follows:

Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a corporation established in 1965,

was engaged in manufacturing footwear, bags and garments.

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

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

On November 11, 1994, private respondents filed with the National Labor Relations Commission a
complaint2against petitioner for illegal dismissal and non-payment of separation pay.

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

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

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

"Consequently, all pending incidents for preliminary injunctions, writ or attachments, foreclosures
and the like are hereby rendered moot and academic.
"SO ORDERED."4

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

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

"In the light of the foregoing, respondents are hereby declared guilty of ILLEGAL SHUTDOWN and
that respondents are ordered to pay complainants their separation pay equivalent to one (1) month
pay for every year of service.

Considering the malicious act of closing the business precipitately without due regard to the rights of
complainants, moral damages and exemplary damage in the sum of P 50,000.00 and P 30,000.00
respectively is hereby awarded for each of the complainants.

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

SO ORDERED."5

On February 5, 1996, petitioners appealed to the National Labor Relations Commission (NLRC)
alleging abuse of discretion and serious errors in the findings of facts of the labor arbiter.

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

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

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

SO ORDERED."6

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

Hence, this petition.7

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

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

"The justification for the automatic stay of all pending actions for claims is to enable the management
committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or
extra judicial interference that might unduly hinder or prevent the 'rescue' of the debtor company. To
allow such other actions to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its restructuring and rehabilitation."9
Thus, the labor case would defeat the purpose of an automatic stay. To rule otherwise would open
1wphi1

the floodgates to numerous claims and would defeat the rescue efforts of the management
committee.

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

This finds ratiocination in that the power to hear and decide labor disputes is deemed suspended
when the Securities and Exchange Commission puts the corporation under rehabilitation.

Thus, when NLRC proceeded to decide the case despite the SEC suspension order, the NLRC
acted without or in excess of its jurisdiction to hear and decide cases. As a consequence, any
resolution, decision or order that it rendered or issued without jurisdiction is a nullity.

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

No costs.

SO ORDERED.

G.R. No. 114761 January 19, 2000

ALEMAR'S SIBAL & SONS, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, NLM-KATIPUNAN (representing the group of
CHARITO ALIMORONG), respondents.

PARDO, J.:

The petition before the Court is for certiorari1 to set aside the resolutions of the National Labor
Relations Commission2 dismissing the appeal of petitioner and upholding the order of the Labor
Arbiter to proceed with the execution of the decision rendered in favor of private respondent.

On January 30, 1984, private respondent NLM Katipunan, representing the group of Charito
Alimurong, filed with the Department of Labor and Employment a notice of strike,3 raising charges of
unfair labor practice (ULP) and illegal dismissal against petitioner. Thereafter, the charges were
elevated to respondent National Labor Relations Commission (NLRC) for compulsory arbitration.4

On April 29, 1985, Labor Arbiter Emilio V. Pealosa rendered a decision5 ordering petitioner to pay
private respondent separation pay equivalent to one-half (1/2) month pay for every year of service.

On December 23, 1985, the Research and Information Unit of the NLRC submitted its computation
of the separation pay due to private respondent, which amounted to a total of P207,365.33.

On January 4, 1988, private respondent filed with the Labor Arbiter a motion for execution of the
decision of the Labor Arbiter. Petitioner did not file any opposition thereto.

At the hearing held on April 19, 1988, petitioner and private respondent agreed to the computation of
the separation pay. The terms of settlement are as follows:
 As agreed upon by the parties, a downpayment of P20,736.53 will be paid in May 1988
which is equivalent to 10% of the total money judgment. In June 1988, P41,473.06 will be
paid by respondent and the rest covering the initial forty four (44) will be paid July 1988. The
balance of the P207,365.20 will be spread over a fifteen (15) months period.

(Sgd) Counsel (Sgd) Counsel

for Complainant for Respondent6

Thus, Labor Arbiter Jose de Vera directed petitioner to pay the agreed amount of P20,736.53
representing 10% of the total amount of the separation pay due the complainants on May 16, 1988.

On June 10, 1988, the Rehabilitation Receiver of petitioner submitted a Manifestation with
Motion,7 alleging that petitioner was not yet in a position to comply with the directive of Labor Arbiter
de Vera for the reason that it was still under Rehabilitation Receivership by virtue of the order of the
Securities and Exchange Commission (SEC) dated August 1, 1984. Thus, it sought deferment of
such payment until the SEC will issue an order formally approving the rehabilitation of petitioner and
allowing complainants to file their claims with the Rehabilitation Receiver.

Due to the failure of petitioner to comply with its obligation to pay the first batch of complainants their
separation pay, the Labor Arbiter granted the motion for execution of private respondent in an order
dated July 18, 1988.

On August 5, 1988, petitioner filed a motion for reconsideration of the order granting the motion for
execution, contesting the amount computed by the Research Information Unit of the National Labor
Relations Commission.

On September 9, 1988, Labor Arbiter Jose De Vera denied the motion, stating as follows:

. . .respondent failed to manifest any objection or to submit its comment on the computation
made by the Research and Information Unit, this Branch. In fact, on March 17, 1988, it
submitted a proposal as to how the complainants' claim for separation pay would be
satisfied. Further, when the complainants agreed to accept payment of their separation pay
on scheduled basis, the first payment of P20,736.53 scheduled in May 1988, which was
agreed upon by the parties, said respondent failed to comply and instead, it filed a
Manifestation with Motion praying for the deferment of execution until the Securities and
Exchange Commission issues an Order formally approving the rehabilitation of the
respondent.

Besides, the respondent Motion for Reconsideration is filed out of time considering that as
per bailiffs return, respondent received the questioned Order on July 26, 1988 while its
Motion was filed only on August 5, 1988, or more than ten (10) days from receipt of the
Order.8

On September 26, 1988, petitioner filed with the Labor Arbiter a Motion to Suspend Execution,9 citing
as reason therefor the order issued by the Securities and Exchange Commission which states:

All actions for claims against the corporation before any court, tribunal or body are
suspended accordingly.10
On October 27, 1988, petitioner appealed the Labor Arbiter's order11 for the issuance of a writ of
execution to the NLRC. In a decision dated October 13, 1993, the NLRC dismissed the appeal. On
February 2, 1994, the NLRC likewise denied the petitioner's motion for reconsideration.

Hence, this petition.12

Petitioner contends that public respondent should have denied the order of the Labor Arbiter for the
immediate payment of separation pay in favor of private respondent. Petitioner insists that a stay of
execution of monetary award is justified in this case because of the order of the Securities and
Exchange Commission suspending all claims against petitioner pending before any court, tribunal or
body.

The Solicitor General, in his Manifestation,13 recommends that the petition be given due course
without prejudice to the subsequent receipt of separation pay by private respondent in accordance
with the preference and concurrence of credits under the Civil Code, the Insolvency Law and
Article110 of the Labor Code.

Respondent National Labor Relations Commission, on the other hand, contends that petitioner is
bound by its agreement with private respondent as to the computation of separation pay to be paid.
The NLRC emphasizes that the order of execution made by the Labor Arbiter had reached finality
and stresses that petitioner's succeeding motions had been filed out of time.14

We note that at the time this petition had been filed on May 4, 1994, petitioner had been placed
under rehabilitation receivership. Jurisprudence has established that a stay of execution may be
warranted by the fact that a petitioner corporation has been placed under rehabilitation
receivership.15 However, it is undisputed that on March 5, 1997, the Securities and Exchange
Commission issued an order approving the proposed rehabilitation plan of petitioner and placing it
under liquidation pursuant to Presidential Decree 902-A . Subject to the control of the SEC, the
liquidator, Ledesma, Saludo & Associates,16 was ordered to "wind up the affairs of the corporation,
continue to manage the corporation for purposes of liquidation in order to protect the interest of its
creditors and avoid dissipation, loss, wastage, or destruction of the remaining assets and other
properties of the corporation and to ensure orderly payment of claims against such corporation in
accordance with applicable laws."17

Thus, petitioner pointed out that the SEC's order suspending all claims against it pending before any
other court, tribunal or body was pursuant to the rehabilitation receivership proceedings. Such order
was necessary to enable the rehabilitation receiver to effectively exercise its powers free from any
judicial or extra-judicial interference that might unduly hinder the rescue of the distressed
company.18 Since receivership proceedings have ceased and petitioner's rehabilitation receiver and
liquidator, Ledesma Saludo & Associates, has been given the imprimatur to proceed with corporate
liquidation, the cited order of the Securities and Exchange Commission has been renderedfunctus
officio. Thus, there is no legal impediment for the execution of the decision of the Labor Arbiter for
the payment of separation pay.

Considering that petitioner's monetary obligation to private respondent is long overdue and that
petitioner has signified its willingness to comply with such obligation by entering into an agreement
with private respondent as to the amount and manner of payment, petitioner can not delay
satisfaction of private respondent's claim. However, due to events subsequent to the filing of this
petition, private respondent must present its claim with the rehabilitation receiver and liquidator of
petitioner, subject to the rules on preference of credits.
WHEREFORE, the Court hereby DISMISSES the petition and direct private respondent to file its
claim with the rehabilitation receiver/liquidator of petitioner in SEC EB No. 81 entitled "In the Matter
of the Liquidation of Alemar's Sibal & Sons" pending before the Securities and Exchange
Commission. 1w phi 1.nt

No Costs.

SO ORDERED.

G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

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

United Nations Secretary-General Ban Ki-Moon

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

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

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

x x x x (Emphasis and underscoring supplied)

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

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

Duration of contract 12 months

Position Chief Officer

Basic monthly salary US$1,400.00
Hours of work 48.0 hours per week

Overtime US$700.00 per month

Vacation leave with pay 7.00 days per month5

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

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

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

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

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

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

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

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

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

dismissal of the complainant (petitioner) by the respondents in the above-entitled case was
illegal and the respondents are hereby ordered to pay the complainant [petitioner], jointly and
severally, in Philippine Currency, based on the rate of exchange prevailing at the time of
payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS
(US $8,770.00), representing the complainants salary for three (3) months of the
unexpired portion of the aforesaid contract of employment. 1avvphi1

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

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

All other claims are hereby DISMISSED.

SO ORDERED.13 (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on

the salary period of three months only -- rather than the entire unexpired portion of nine
months and 23 days of petitioner's employment contract - applying the subject clause.
However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic
salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month,
vacation leave pay = US$2,590.00/compensation per month."14
 Respondents appealed15 to the National Labor Relations Commission (NLRC) to question
the finding of the LA that petitioner was illegally dismissed.

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

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

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

1. Three (3) months salary

$1,400 x 3 US$4,200.00

2. Salary differential 45.00

US$4,245.00

3. 10% Attorneys fees 424.50

TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.19

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

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

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

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the
applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25

His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this
Court on the following grounds:

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

II

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

III

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

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

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

On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not
disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all
three fora. What remains disputed is only the computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.

Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at
the monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of
nine months and 23 days of his employment contract or a total of US$4,200.00.

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

The Arguments of Petitioner

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

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

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

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

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

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

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

The Arguments of Respondents

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

The Arguments of the Solicitor General

The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its
provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042
having preceded petitioner's contract, the provisions thereof are deemed part of the minimum terms
of petitioner's employment, especially on the matter of money claims, as this was not stipulated upon
by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their
employment, such that their rights to monetary benefits must necessarily be treated differently. The
OSG enumerates the essential elements that distinguish OFWs from local workers: first, while local
workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers,
over whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible
to enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission43 and
Millares v. National Labor Relations Commission,44 OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can become regular employees.
Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not
available to OFWs; that these peculiarities make for a reasonable and valid basis for the
differentiated treatment under the subject clause of the money claims of OFWs who are illegally
dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II
of the Constitution.45

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

The Court's Ruling

The Court sustains petitioner on the first and second issues.

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

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

The constitutional challenge is also timely. It should be borne in mind that the requirement that a
constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the
pleadings before a competent court, such that, if the issue is not raised in the pleadings before that
competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be
considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause
was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial
Reconsideration with said labor tribunal,53 and reiterated in his Petition for Certiorari before the
CA.54Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA
which has the competence to resolve the constitutional issue. The NLRC is a labor tribunal that
merely performs a quasi-judicial function its function in the present case is limited to determining
questions of fact to which the legislative policy of R.A. No. 8042 is to be applied and to resolving
such questions in accordance with the standards laid down by the law itself;55 thus, its foremost
function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its
provisions. The CA, on the other hand, is vested with the power of judicial review or the power to
declare unconstitutional a law or a provision thereof, such as the subject clause.56 Petitioner's
interposition of the constitutional issue before the CA was undoubtedly seasonable. The CA was
therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise
obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired
portion of his 12-month employment contract, and not just for a period of three months, strikes at the
very core of the subject clause.

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

Does the subject clause violate Section 10,

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

The answer is in the negative.

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

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

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

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

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

Does the subject clause violate Section 1,

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

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

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

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

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

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

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

Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based
on race74 or gender75 but not when the classification is drawn along income categories.76

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

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

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

xxxx

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

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

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

xxxx

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

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

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

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present
case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a
suspect classification prejudicial to OFWs.

Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs.
However, a closer examination reveals that the subject clause has a discriminatory intent against,
and an invidious impact on, OFWs at two levels:

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

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

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

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

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

A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an
illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired
portion of his employment contract or three (3) months salary for every year of the unexpired
term, whichever is less, comes into play only when the employment contract concerned has a
term of at least one (1) year or more. This is evident from the words "for every year of the
unexpired term" which follows the words "salaries x x x for three months." To follow
petitioners thinking that private respondent is entitled to three (3) months salary only simply because
it is the lesser amount is to completely disregard and overlook some words used in the statute while
giving effect to some. This is contrary to the well-established rule in legal hermeneutics that in
interpreting a statute, care should be taken that every part or word thereof be given effect since the
law-making body is presumed to know the meaning of the words employed in the statue and to have
used them advisedly. Ut res magis valeat quam pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but
was awarded his salaries for the remaining 8 months and 6 days of his contract.

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

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just,
valid or authorized cause is entitled to his salary for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.

In the case at bar, the unexpired portion of private respondents employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3)
months or a total of SR3,600.82

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

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

Case Title Contract Period of Unexpired Period Applied in

Period Service Period the Computation
of the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia Shipping 9 months 8 months 4 months 4 months

v. Reynaldo
Chua 85

Centennial 9 months 4 months 5 months 5 months

Transmarine v.
dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87

Univan v. CA 88 12 months 3 months 9 months 3 months

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

CA 89 months
 PCL v. NLRC90 12 months more than 2 more or less 9 3 months
months months

Olarte v. 12 months 21 days 11 months and 9 3 months

Nayona91 days
JSS v.Ferrer92 12 months 16 days 11 months and 3 months
24 days
Pentagon v. 12 months 9 months and 2 months and 23 2 months and 23
Adelantar93 7 days days days

Phil. Employ v. 12 months 10 months 2 months Unexpired portion

Paramio, et
al.94

Flourish 2 years 26 days 23 months and 4 6 months or 3

Maritime v. days months for each
Almanzor 95 year of contract
Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3
Manpower v. months and and 28 days months for each
Villanos 96 28 days year of contract

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

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

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

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

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

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

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

Agoy v. 2 years 2 months 22 months 22 months

NLRC101

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

et al.102
Barros v. 12 months 4 months 8 months 8 months
NLRC, et al.103
Philippine 12 months 6 months 5 months and 5 months and 18 days
Transmarine v. and 22 days 18 days
Carilla104

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

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

Among OFWs With Employment Contracts of More Than One Year

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

The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its
ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that
"every year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term
must be at least one year, for if it were any shorter, there would be no occasion for such unexpired
term to be measured by every year; and second, the original term must be more than one year, for
otherwise, whatever would be the unexpired term thereof will not reach even a year. Consequently,
the more decisive factor in the determination of when the subject clause "for three (3) months
for every year of the unexpired term, whichever is less" shall apply is not the length of the original
contract period as held in Marsaman,106 but the length of the unexpired portion of the contract period
-- the subject clause applies in cases when the unexpired portion of the contract period is at least
one year, which arithmetically requires that the original contract period be more than one year.

Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally dismissed with less than one
year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof,
while those who are illegally dismissed with one year or more remaining in their contracts shall be
covered by the subject clause, and their monetary benefits limited to their salaries for three months
only.

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

OFWs vis--vis Local Workers

With Fixed-Period Employment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

There being a suspect classification involving a vulnerable sector protected by the Constitution, the
Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a
compelling state interest through the least restrictive means.

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

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

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

The OSG explained further:

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

This measure redounds to the benefit of the migrant workers whose welfare the government seeks
to promote. The survival of legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent and humane
conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception
of the state interest sought to be served by the subject clause.

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

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

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

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

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

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

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

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

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

(3) Dismissal from the service with disqualification to hold any appointive public office for five
(5) years.

Provided, however, That the penalties herein provided shall be without prejudice to any liability
which any such official may have incurred under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph.

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

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

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

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

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

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

Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right
of petitioner and other OFWs to equal protection. 1avvphi1

Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates
state policy on labor under Section 3,131Article XIII of the Constitution.

While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some
which this Court has declared not judicially enforceable, Article XIII being one,133 particularly
Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor Relations
Commission,134 has described to be not self-actuating:

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

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure to
serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the
provisions on social justice require legislative enactments for their enforceability.135 (Emphasis
added)

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

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

The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central
Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause.
Article XIII, by itself, without the application of the equal protection clause, has no life or force of its
own as elucidated in Agabon.

Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's
right to substantive due process, for it deprives him of property, consisting of monetary benefits,
without any existing valid governmental purpose.136

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

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

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

On the Third Issue

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

Petitioner is mistaken.

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

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

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

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

In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is
unwarranted since the same is given during the actual service of the seamen.

WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every
year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No.
8042 is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005
Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his
salaries for the entire unexpired portion of his employment contract consisting of nine months and 23
days computed at the rate of US$1,400.00 per month.

No costs.

SO ORDERED.

G.R. No. 116347 October 3, 1996

NATIVIDAD PONDOC, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Fifth Division, Cagayan de Oro City) and
EMILIO PONDOC, respondents.

DAVIDE, JR., J.:p

The novel issue that confronts us in this case is whether the Fifth Division of the National Labor Relations Commission (NLRC) can validly
defeat a final judgment of the Labor Arbiter in favor of the complainant in a labor case by: (a) entertaining a petition for injunction and
damages, and an appeal from the Labor Arbiter's denial of a claim for set-off based on an alleged indebtedness of the laborer and order of
execution of the final judgment; and, (b) thereafter, by receiving evidence and adjudging recovery on such indebtedness and authorizing it to
offset the Labor Arbiter's final award.

The petitioner takes the negative view. In its Manifestation and Motion in Lieu of Comment, 1 the
Office of the Solicitor General joins her in her plea, hence we required the NLRC to file its own
comment.

We resolved to give due course to the petition after the filing by the NLRC and the private
respondent of their separate comments.

Petitioner Natividad Pondoc was the legitimate wife of Andres Pondoc. Atter her death on 5
December 1994, she was substituted by Hipolito Pondoc, her only legitimate son. 2

The Office of the Solicitor General summarized the factual antecedents of this case in its
Manifestation and Motion in Lieu of Comment:

Private respondent Eulalio Pondoc is the owner-proprietor of Melleonor General

Merchandise and Hardware Supply located at Poblacion, Sindangan, Zamboanga
del Norte. Respondent is engaged, among others, in the business of buying and
selling copra, rice, corn, "binangkol," junk iron and empty bottles. He has in his
employ more than twenty (20) regular workers (Records, pp. 9-11)

Records disclose that Andres Pondoc was employed by Eulalio Pondoc as a laborer
from October 1990 up to December 1991, receiving a wage rate of P20.00 per day.
He was required to work twelve (12) hours a day from 7:00 AM to 8:00 PM, Monday
to Sunday. Despite working on his rest days and holidays, he was not paid his
premium pay as required by law (Ibid).

Consequently, on May 14, 1992, Natividad Pondoc, on behalf of her husband, filed a
complaint for salary differential, overtime pay, 13th month pay, holiday pay and other
money claims before the Sub-Regional Arbitration Branch No. 9 of the NLRC,
docketed as Sub-RAB Case No. 09-05-10102-92 (Records, p.1).

In his position paper, private respondent questioned, among others, the existence of
[an] employer-employee relationship between them. He further averred that
Melleonor General Merchandise and Hardware Supply is a fictitious establishment
(Records, pp. 64-68).

On June 17, 1993, Labor Arbiter Esteban Abecia rendered a Decision finding the
existence of [an] employer-employee relationship between the parties. The
dispositive portion of the Decision reads:

WHEREFORE, judgment is hereby rendered: (a) ordering respondent Eulalio

Pondoc to pay complainant the following claims:

(1) Salary differential for

reason of underpayment P35,776.00;

 (2) Regular holiday and
premium pay for holiday services 902.00;

(3) Premium pay for rest day

services 3,840.00;

(4) 13th month pay 3,600.00

or the total amount of FORTY-FOUR [sic] THOUSAND AND ONE HUNDRED

EIGHTEEN PESOS (P44,118.00).

Other claims are denied for lack of merit.

SO ORDERED (Records, pp. 323-324).

On his last day to perfect an appeal, private respondent filed a Manifestation before
the Labor Arbiter praying that his liabilities be set-off against petitioner's alleged
indebtedness to him (Records, pp. 325-327). The Labor Arbiter denied, however, the
compensation, and, instead, issued a writ of execution as prayed for by petitioner
(Records, p. 328).

Before the execution order could be implemented, however, private respondent was
able to obtain a restraining order from the NLRC, where he filed a Petition for
"Injunction and Damages," docketed as NLRC Case No. ICM-000065.

On February 28, 1994, public respondent NLRC allowed compensation between

petitioner's monetary award and her alleged indebtedness to private respondent. It
disposed:

WHEREFORE, the appealed order is hereby vacated and set aside.

A new one is entered declaring the setting-off of complainant's
indebtedness which allegedly amounted to P41,051.35 against the
complainant's monetary award in the amount of P44,118.00. The
additional amount of P5,000.00 which complainant allegedly got from
respondent on 10 July 1993 could not be credited in view of
appellant's failure to submit evidence to prove that complainant was
really paid P5,000.00.

Accordingly, respondent Eulalio Pondoc is hereby directed to pay

complainant Natividad Pondoc the amount of P3,066.65.

The Temporary restraining order issued herein is hereby made

permanent.

SO ORDERED (Annex "D" of Petition). 3

Her motion for reconsideration of the judgment having been denied by the NLRC, the petitioner
instituted this special civil action for certiorari under Rule 65 of the Rules of Court wherein she prays
this Court annul the challenged decision of the NLRC, Fifth Division (Cagayan de Oro City), in NLRC
Case No. IC No. M-000065, and direct the enforcement of the writ of execution in NLRC Case No.
SRAB-09-05-10102-92, on the ground that the NLRC, Fifth Division, acted without or in excess of
jurisdiction or with grave abuse of discretion when it proceeded to determine the alleged
indebtedness of the petitioner and set-off the same against the liabilities of the private respondent.
The petitioner asserts that the decision of the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-
92 was already final and executory when the private respondent tried to defeat the judgment by
asserting an alleged indebtedness of Andres Pondoc as a set-off, a claim not pleaded before the
Labor Arbiter at any time before judgment, hence deemed waived. Moreover the indebtedness "did
not evolve out [sic] employer-employee relationship, hence, purely civil in aspect."

The Office of the Solicitor General agreed with the petitioner and stressed further that the asserted
indebtedness was never proven to have arisen out of or in connection with the employer-employee
relationship between the private respondent and the late Andres Pondoc, or to have any causal
connection thereto. Accordingly, both the Labor Arbiter and the NLRC did not have jurisdiction over
the private respondent's claim.

As expected, the private respondent and the NLRC prayed for the dismissal of this case.

We rule for the petitioner.

The proceedings before the NLRC were fatally flawed.

In the first place, the NLRC should not have entertained the private respondent's separate or
independent petition for "Injunction and Damages" (NLRC IC No. M-000065). It was obvious that the
petition was a scheme to defeat or obstruct the enforcement of the judgment in NLRC Case No.
SRAB-09-05-10102-92 where, in fact, a writ of execution had been issued. Article 218(e) of the
Labor Code does not provide blanket authority to the NLRC or any of its divisions to issue writs of
injunction, while Rule XI of the New Rules of Procedure of the NLRC makes injunction only an
ancillary remedy in ordinary labor disputes such as the one brought by the petitioner in NLRC Case
No. SRAB-09-05-10102-92. This is clear from Section 1 of the said Rule which pertinently provides
as follows:

Sec. 1. Injunction in Ordinary Labor Disputed. A preliminary injunction or a

restraining order may be granted by the Commission through its divisions pursuant to
the provisions of paragraph (e) of Article 218 of the Labor Code, as amended, when
it is established on the bases of the sworn allegations in the petition that the acts
complained of, involving or arising from any labor dispute before the Commission,
which, if not restrained or performed forthwith, may cause grave or irreparable
damage to any party or render ineffectual any decision in favor of such party.

xxx xxx xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only as an
incident to the cases pending before them in order to preserve the rights of the
parties during the pendency of the case, but excluding labor disputes involving strike
or lockout. (emphasis supplied).

Hence, a petition or motion for preliminary injunction should have been filed in the appeal
interposed by the private respondent, i.e., in NLRC Case No. SRAB-09-05-10102-92. This
matter, however, became academic when the NLRC consolidated the two cases as shown
by the captions in its challenged decision of 28 February 1994 and resolution of 6 May 1994.
Secondly, the appeal of the private respondent in NLRC Case No. SRAB-09-05-10102-92 was not
from the decision therein, but from the order of the Labor Arbiter denying the set-off insisted upon by
the private respondent and directing the execution of the judgment. Therefore, the private
respondent admitted the final and executory character of the judgment.

The Labor Arbiter, in denying the set-off, reasoned "[i]t could have been considered if it was
presented before the decision of this case." 4 While this is correct, there are stronger reasons why
the set-off should, indeed, be denied. As correctly contended by the Office of the Solicitor General,
there is a complete want of evidence that the indebtedness asserted by the private respondent
against Andres Pondoc arose out of or was incurred in connection with the employer-employee
relationship between them. The Labor Arbiter did not then have jurisdiction over the claim as under
paragraph (a) of Article 217 of the Labor Code, Labor Arbiters have exclusive and original
jurisdiction only in the following cases:

1. Unfair labor practice cases;

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

On the other hand, under paragraph (b) thereof, the NLRC has exclusive appellate
jurisdiction over all cases decided by the Labor Arbiters. This simply means that the NLRC
does not have original jurisdiction over the cases enumerated in paragraph (a) and that if a
claim does not fall within the exclusive original jurisdiction of the Labor Arbiter, the NLRC
cannot have appellate jurisdiction thereon.

The conclusion then is inevitable that the NLRC was without jurisdiction, either original or appellate,
to receive evidence on the alleged indebtedness, render judgment thereon, and direct that its award
be set-off against the final judgment of the Labor Arbiter.

Finally, even assuming arguendo that the claim for the alleged indebtedness fell within the exclusive
original jurisdiction of the Labor Arbiter, it was deemed waived for not having been pleaded as an
affirmative defense or barred for not having been set up as a counterclaim before the Labor Arbiter
at any appropriate time prior to the rendition of the decision in NLRC Case No. SRAB-09-05-10102-
92. Under the Rules of Court, which is applicable in a suppletory character in labor cases before the
Labor Arbiters or the NLRC pursuant to Section 3, Rule I of the New Rules of Procedure of the
NLRC, defenses which are not raised either in a motion to dismiss or in the answer are deemed
waived 5 and counterclaims not set up in the answer are barred. 6 Set-off or compensation is one of
the modes of extinguishing obligations 7 and extinguishment is an affirmative defense and a ground
for a motion to dismiss. 8
We do not then hesitate to rule that the NLRC acted without jurisdiction or with grave abuse of
discretion in entertaining an independent action for injunction and damages (NLRC IC No. M-
000065), in receiving evidence and rendering judgment on the alleged indebtedness of Andres
Pondoc, and in ordering such judgment to offset the final award of the Labor Arbiter in NLRC Case
No. SRAB-09-05-10102-92.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 28 February 1994
and resolution of 6 May 1994 of the National Labor Relations Commission in NLRC Case No. IC No.
M-000065 and NLRC Case No. SRAB-09-05-10102-92 are ANNULLED and SET ASIDE. The
judgment of the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92 should forthwith be
enforced without any further delay, the award therein bearing interest at the rate of twelve per
centum (12%) per annum from the finality of such judgment until it shall have been fully paid.

Costs against the private respondent.

SO ORDERED.

A.M. No. RTJ-93-1099 August 1, 1994

CHIEF PROSECUTOR ZENON L. DE GUIA, complainant,

vs.
JUDGE FRANCISCO MA. GUERRERO, JR., respondent.

PADILLA, J.:

In a letter-complaint, dated 4 October 1993, filed with the Office of the Court Administrator, Chief
State Prosecutor Zenon L. De Guia impugns as arbitrary the act of respondent Judge Francisco Ma.
Guerrero 1 in citing for contempt Macario A. Agosila, 2 and ordering his arrest and detention for five
(5) hours (later reduced to two (2) hours) in the Calamba Police Station Jail. Complainant charges
respondent Judge with gross ignorance of the law, and with acts constituting a direct affront to the
dignity not only of Agosila, but more importantly, to the dignity of the office of the Prosecutor which
Agosila represents.

The incident subject of the present complaint occurred during the trial of Criminal Case No. 2689-90-
C 3 in the sala of respondent Judge. The prosecution was trying to prove that the accused mortgaged
to the complaining witness a falsified and forged document Transfer Certificate of Title No. RT-
164 covering a non-existent property. Three (3) of the documents presented and marked by the
prosecution during the pre-trial were the affidavit of complaining witness Fe Ochoa-Baybay (Exhibit
"A"), TCT No. 164 (Exhibit "C"), and TCT No. RT-164 (2766) (Exhibit "E").

At the trial scheduled on 20 September 1993, Agosila presented TCT No. RT-164 (2766) and had it
re-marked as Exhibit "A". He then requested for a suspension of the trial in order to have the original
of TCT No. RT-164 (2766) photocopied. Instead of acting on Agosila's request, respondent Judge
declared him in direct contempt of court allegedly in order to "teach him (Agosila) a lesson" for
unduly delaying the business of the court on account of his failure to prepare ahead of time the
photocopies of the original of the documents to be presented and marked during the trial; and for his
failure to investigate the pertinent records in the office of the Register of Deeds to ascertain his facts.
Respondent Judge thereupon ordered the arrest and detention of Agosila for five (5) hours in the
Calamba Police Station Jail. After being detained for two (2) hours, however, respondent Judge
ordered the release of Agosila.

In his Comment on the present complaint, respondent Judge maintains that he committed no
arbitrariness in declaring Agosila in direct contempt, and in ordering the latter's arrest and detention
for five (5) hours, later reduced to two (2) hours. Respondent Judge argues that the acts of Agosila
merited a direct contempt citation. And to substantiate this conclusion, respondent Judge posits the
following premises: Agosila's request for a suspension of trial in order to complete the photocopying
of his documentary exhibits betrayed his effort to delay the trial which could have proceeded
continuously had Agosila just been mere assiduous and prudent in his preparation for trial.
Moreover, Agosila's mismarking of duplicitous and immaterial documentary exhibits supposedly
demonstrated his uncooperativeness with the continuous trial of the case. Furthermore, Agosila's
undue attention to and reliance on what the court deemed as irrelevant documentary evidence
TCT No. RT-164 (2766) only proved that Agosila intended to confuse his evidence.

Finally, respondent Judge cites other instances of delaying tactics in various criminal cases handled
by Agosila wherein the latter allegedly sought the resetting of hearings only because he was
unprepared to conduct the examination of witnesses, notwithstanding the constant warnings from
respondent Judge to Agosila and other lawyers for them to abide by the continuous trial system.
Respondent Judge prays that the complaint against him be dismissed.

We find merit in the letter-complaint.

Apparently, what triggered the direct contempt citation of Agosila was the evident impression of
respondent Judge that Agosila was unwilling to cooperate with the court's continuous trial system, as
allegedly shown by a lack of preparation in the presentation of documentary exhibits, thereby
necessitating a request for a suspension of trial to complete the photocopying of said documentary
evidence. Respondent Judge, therefore, interpreted Agosila's request for suspension of trial as not
merely constituting a delaying tactic but, worse, as a subterfuge to cover for his unpreparedness (if
not incompetence) in prosecuting Criminal Case No. 2689-90-C.

In effect, respondent Judge defends his questioned acts as nothing more than a legitimate and
rightful exercise by a court of its contempt powers in the face of what it perceives as not only an
unjustified refusal by an officer of the court to cooperate, but also his unpardonable display of
incompetence.

We are not persuaded by the ratiocinations of respondent Judge as to the correctness of his action.
On the contrary, we question entirely the logic behind respondent Judge's immediate resort to a
direct contempt citation in Agosila's case.

First, we find a lack of impropriety in the conduct of Agosila to merit a direct contempt citation in his
prosecution of Criminal Case No. 2689-90-C. The right to ask the court for adjournment or
postponement, and much less, a mere continuance or suspension of trial, is well within the
prerogative of a counsel handling a case. After all, the request is addressed to the sound discretion
of the court. In People vs. The Honorable Bonifacio Sanz-Maceda, et al., 4 this Court stated:

Although the matter of adjournment and postponement of trial is within the sound
discretion of the court, such discretion should always be predicated on the
consideration that more than the mere convenience of the courts or of the parties in
the case, the ends of justice and fairness should be served thereby. After all,
 postponements and continuances are part and parcel of our procedural system of
dispensing justice.

We further fail to see any contumacious attitude on the part of Agosila to delay the proceedings of
the court. On the contrary, Agosila accorded the court proper respect when he requested for a
suspension of the trial precisely to allow the court to decide on its own whether to permit the delay in
the trial by allowing said request. Far from being a contemner, Agosila dutifully submitted his request
for suspension of trial to the authority and discretion of the court.

Second, and more importantly, we seriously doubt the propriety of respondent Judge's choice of
remedy in disposing of Agosila's request for suspension of trial. Although concededly within its
inherent powers, the exercise of the court's power to cite for contempt was not appropriately done
under the given circumstances.

In treating of a court's power to cite for contempt, the Rules of Court, more specifically Section I,
Rule 71 provides:

Sec. I. Direct contempt punished summarily. A person guilty of misbehavior in the

presence of or so near a court or judge as to obstruct or interrupt the proceedings
before the same, including disrespect toward the court or judge, offensive
personalities toward others, or refusal to be sworn or to answer as a witness, or to
subscribe an affidavit or deposition when lawfully required so to do, may be
summarily adjudged in contempt by such court or judge and punished by fine not
exceeding two hundred pesos or imprisonment not exceeding ten (10) days, or both,
if it be a superior court, or a judge thereof, or by fine not exceeding ten pesos or
imprisonment not exceeding one (1) day, or both, if it be an inferior court.

It is clear from the foregoing provision that the power to declare a person in contempt of court and in
dealing with him accordingly is an inherent power lodged in courts of justice, to be used as a means
to protect and preserve the dignity, of the court, the solemnity of the proceedings therein, and the
administration of justice from callous misbehavior, offensive personalities, and contumacious refusal
to comply with court orders.

And as in all other powers of the court, the contempt power, however plenary it may seem, must be
exercised judiciously and sparingly. In Noe Baja vs. Hon. Judge Antonia Corpuz Macandong, et
al., 5 this Court explained the extent of the exercise of the contempt power of courts:

We have consistently held that the power to punish for contempt should be used
sparingly, so much so that only in cases of clear and contumacious refusal to obey
should the said power be exercised.

xxx xxx xxx

More importantly, the power to punish for contempt should be exercised on the
preservative and not on the vindictive principle; with the corrective rather than the
retaliatory idea of punishment.

xxx xxx xxx

It is propitious to remind our judges that they should not be so thin-skinned or

sensitive as to feel personally hurt or affronted everytime a complaining lawyer
 momentarily loses his "cool" and writes in or utters less than polite language, more
so when the lawyer is merely expressing an honest opinion about them which may
not altogether be flattering. "After all, what matters is that a judge performs his duties
in accordance with the dictates of his conscience and the light that God has given
him. A judge should never allow himself to be moved by pride, prejudice, passion, or
pettiness in the performance of his duties."

Clearly then, judges are enjoined to exercise utmost restraint in the use of their contempt powers.
They are expected to avail of the contempt power only as a last resort when all other alternative
courses of action are exhausted in the pursuit of maintaining respect to the court and its processes.
Thus, when a less harsh remedy presents itself to the judge, he should at all times hesitate to use
his contempt power, and instead opt for the less harsh remedy.

In light of the foregoing propositions, and after carefully examining the circumstances in this case, it
is quite clear that respondent Judge had an alternative to the exercise of the court's contempt power.
We agree with the observations of the OCA in its recommendation, to wit:

From the facts on record, it is very evident that respondent acted rather arbitrarily in
ordering the confinement of Fiscal Agosila in jail for the latter's unpreparedness and
for unduly delaying the trial and wasting the time of the court. The undersigned
cannot entirely disagree with Chief State Prosecutor de Guia's assertion that the
grounds relied upon by respondent in holding Fiscal Agosila liable for direct contempt
of court cannot in any way be considered as constitutive of direct contempt under
Rule 71 of the Rules of Court. If respondent really believes that the purpose of
Prosecutor Agosila in requesting for a continuance of the trial is merely to delay the
proceedings, the former could have easily denied the request instead of ordering
personally the arrest and confinement of the latter in jail along with hardened
criminals. Assuming, without admitting, that Prosecutor Agosila was indeed
unprepared on the day of the hearing, respondent should have taken into
consideration the fact that the former is also an officer of the court who does not
have to be treated the way he was treated and should have been accorded the
appropriate respect from the judge.

WHEREFORE, for improperly citing Agosila for direct contempt and ordering his detention without
sufficient legal basis, a fine in the amount of P2,500.00 is hereby IMPOSED upon respondent Judge
Francisco Ma. Guerrero, Jr. with a STERN WARNING that a repetition of the same or similar acts in
the future will be dealt with more severely.

Let a copy of this decision be entered in the records of respondent Judge.

SO ORDERED.

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.

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, 2006.12Hence, 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.

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 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 63,087.33.

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 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:

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. The CA likewise
1wphi1

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.

G.R. No. 91980 June 27, 1991

ILAW AT BUKLOD NG MANGGAGAWA (IBM), petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), HON. CARMEN TALUSAN and
SAN MIGUEL CORPORATION, respondents.

Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for petitioner.
Jardeleza Law Offices for private respondents.

NARVASA, J.:

The controversy at bar had its origin in the "wage distortions" affecting the employees of respondent
San Miguel Corporation allegedly caused by Republic Act No. 6727, otherwise known as the Wage
Rationalization Act.

Upon the effectivity of the Act on June 5, 1989, the union known as "Ilaw at Buklod Ng Manggagawa
(IBM)" said to represent 4,500 employees of San Miguel Corporation, more or less, "working at
the various plants, offices, and warehouses located at the National Capital Region" presented to
the company a "demand" for correction of the "significant distortion in . . . (the workers') wages." In
that "demand," the Union explicitly invoked Section 4 (d) of RA 6727 which reads as follows:
 xxx xxx xxx

(d) . . .

Where the application of the increases in the wage rates under this Section results in
distortions as defined under existing laws in the wage structure within an establishment and
gives rise to a dispute therein, such dispute shall first be settled voluntarily between the
parties and in the event of a deadlock, the same shall be finally resolved through compulsory
arbitration by the regional branches of the National Labor Relations Commission (NLRC)
having jurisdiction over the workplace.

It shall be mandatory for the NLRC to conduct continuous hearings and decide any dispute
arising under this Section within twenty (20) calendar days from the time said dispute is
formally submitted to it for arbitration. The pendency of a dispute arising from a wage
distortion shall not in any way delay the applicability of the increase in the wage rates
prescribed under this Section.

But the Union claims that "demand was ignored:1

The . . . COMPANY ignored said demand by offering a measly across-the-board wage

increase of P7.00 per day, per employee, as against the proposal of the UNION of P25.00
per day, per employee. Later, the UNION reduced its proposal to P15.00 per day, per
employee by way of amicable settlement.

When the . . . COMPANY rejected the reduced proposal of the UNION the members thereof,
on their own accord, refused to render overtime services, most especially at the Beer Bottling
Plants at Polo, starting October 16, 1989.

In this connection, the workers involved issues a joint notice reading as follows:2

SAMA-SAMANG PAHAYAG: KAMING ARAWANG MANGGAGAWA NG POLO BREWERY

PAWANG KASAPI NG ILAW AT BUKLOD NG MANGGAGAWA (IBM) AY NAGKAISANG
NAGPASYA NA IPATUPAD MUNA ANG EIGHT HOURS WORK SHIFT PANSAMANTALA
HABANG HINDI IPINATUTUPAD NG SMC MANAGEMENT ANG TAMANG WAGE
DISTORTION.

The Union's position (set out in the petition subsequently filed in this Court, infra) was that the
workers' refuse "to work beyond eight (8) hours everyday starting October 16, 1989" as a legitimate
means of compelling SMC to correct "the distortion in their wages brought about by the
implementation of the said laws (R.A. 6640 and R.A. 6727) to newly-hired employees.3 That decision
to observe the "eight hours work shift" was implemented on October 16, 1989 by "some 800 daily-
paid workers at the Polo Plant's production line (of San Miguel Corporation [hereafter, simply SMC])
joined by others at statistical quality control and warehouse, all members of . . . IBM . . . "4 There
ensued thereby a change in the work schedule which had been observed by daily-paid workers at
the Polo Plant for the past five (5) years, i.e., "ten (10) hours for the first shift and ten (10) to fourteen
(14) hours for the second shift, from Mondays to Fridays . . ; (and on) Saturdays, . . eight (8) hours
for both shifts" a work schedule which, SMC says, the workers had "welcomed, and encouraged"
because the automatic overtime built into the schedule "gave them a steady source of extra-income,"
and pursuant to which it (SMC) "planned its production targets and budgets.5

This abandonment of the long-standing schedule of work and the reversion to the eight-hour shift
apparently caused substantial losses to SMC. Its claim is that there ensued "from 16 October 1989
to 30 November 1989 alone . . work disruption and lower efficiency . . (resulting in turn, in) lost
production of 2,004,105 cases of beer . . ; that (i)n "money terms, SMC lost P174,657,598 in sales
and P48,904,311 in revenues . . (and the) Government lost excise tax revenue of P42 million,
computed at the rate of P21 per case collectible at the plant.6 These losses occurred despite such
measures taken by SMC as organizing "a third shift composed of regular employees and some
contractuals," and appeals "to the Union members, through letters and memoranda and dialogues
with their plant delegates and shop stewards," to adhere to the existing work schedule.

Thereafter, on October 18, 1989, SMC filed with the Arbitration Branch of the National Labor
Relations Commission a complaint against the Union and its members "to declare the strike or
slowdown illegal" and to terminate the employment of the union officers and shop stewards. The
complaint was docketed as NLRC-NCR Case No. 00-10-04917.7

Then on December 8, 1989, on the claim that its action in the Arbitration Branch had as yet "yielded
no relief," SMC filed another complaint against the Union and members thereof, this time directly
with the National labor Relations Commission, "to enjoin and restrain illegal slowdown and for
damages, with prayer for the issuance of a cease-and-desist and temporary restraining
order.8 Before acting on the application for restraining order, the NLRC's First Division first directed
SMC to present evidence in support of the application before a commissioner, Labor Arbiter Carmen
Talusan. On December 19, 1989, said First Division promulgated a Resolution on the basis of "the
allegations of the petitioner (SMC) and the evidence adduced ex parte in support of their petition."
The Resolution

1) authorized the issuance of "a Temporary Restraining Order for a period of twenty (20)
days . . upon . . a cash or surety bond in the amount of P50,000.00 . . . DIRECTING the
respondents to CEASE and DESIST from further committing the acts complained about
particularly their not complying with the work schedule established and implemented by the
company through the years or at the least since 1984, which schedule appears to have been
adhered to by the respondents until October 16, 1989 . . .;

2) set the incident on injunction for hearing before Labor Arbiter Carmen Talusan on 27
December 1989 . . .

The Labor Arbiter accordingly scheduled the incident for hearing on various dates: December 27 and
29,1989, January 8, 11, 16, and 19, 1990. The first two settings were cancelled on account of the
unavailability of the Union's counsel. The hearing on January 8, 1990 was postponed also at the
instance of said counsel who declared that the Union refused to recognize the NLRC's jurisdiction.
The hearings set on January 11, 16 and 19, 1990 were taken up with the cross-examination of
SMC's witness on the basis of his affidavit and supplemental affidavits. The Union thereafter asked
the Hearing Officer to schedule other hearings. SMC objected. The Hearing Officer announced she
would submit a report to the Commission relative to the extension of the temporary restraining order
of December 9, 1989, supra, prayed for by SMC. Here the matter rested until February 14, 1990,
when the Union filed the petition which commenced the special civil action of certiorari and
prohibition at bar.9

In its petition, the Union asserted that:

1) the "central issue . . is the application of the Eight-Hour Labor Law . . . (i.e.) (m)ay an
employer force an employee to work everyday beyond eight hours a day?

2) although the work schedule adopted by SMC with built-in automatic

overtime,10 "tremendously increased its production of beer at lesser cost," SMC had been
 paying its workers "wages far below the productivity per employee," and turning a deaf ear to
the Union's demands for wage increases;

3) the NLRC had issued the temporary restraining order of December 19, 1989 "with
indecent haste, based on ex parte evidence of SMC and such an order had the effect of
"forcing the workers to work beyond eight (8) hours a day, everyday!!

4) the members of the NLRC had no authority to act as Commissioners because their
appointments had not been confirmed by the Commission on Appointment; and

5) even assuming the contrary, the NLRC, as an essentially appellate body, had no
jurisdiction to act on the plea for injunction in the first instance.

The petition thus prayed:

1) for judgment (a) annulling the Resolution of December 19, 1990; (b) declaring mandatory
the confirmation by the Commission on Appointments of the appointments of National Labor
Relations Commissioners; and (c) ordering the removal "from the 201 files of employees any
and all memoranda or disciplinary action issued/imposed to the latter by reason of their
refusal to render overtime work;" and

2) pending such judgment restraining(a) the NLR Commissioners "from discharging their
power and authority under R.A. 6715 prior to their re-appointment and/or confirmation;" as
well as (b) Arbiter Talusan and the Commission from acting on the matter or rendering a
decision or issuing a permanent injunction therein, or otherwise implementing said
Resolution of December 19, 1989.

In traverse of the petition, SMC filed a pleading entitled "Comment with Motion to Admit Comment as
Counter-Petition," in which it contended that:

1) the workers' abandonment of the regular work schedule and their deliberate and wilful
reduction of the Polo plant's production efficiency is a slowdown, which is an illegal and
unprotected concerted activity;

2) against such a slowdown, the NLRC has jurisdiction to issue injunctive relief in the first
instance;

3) indeed, the NLRC has "the positive legal duty and statutory obligation to enjoin the
slowdown complained of and to compel the parties to arbitrate . ., (and) to effectuate the
important national policy of peaceful settlement of labor disputes through arbitration;"
accordingly, said NLRC "had no legal choice but to issue injunction to enforce the reciprocal
no lockout-no slowdown and mandatory arbitration agreement of the parties;" and

4) the NLRC "gravely abused its discretion when it refused to decide the application for
injunction within the twenty day period of its temporary restraining order, in violation of its
own rules and the repeated decisions of this . . . Court.

It is SMC's submittal that the coordinated reduction by the Union's members of the work time
theretofore willingly and consistently observed by them, thereby causing financial losses to the
employer in order to compel it to yield to the demand for correction of "wage distortions," is an illegal
and "unprotected" activity. It is, SMC argues, contrary to the law and to the collective bargaining
agreement between it and the Union. The argument is correct and will be sustained.

Among the rights guaranteed to employees by the Labor Code is that of engaging in concerted
activities in order to attain their legitimate objectives. Article 263 of the Labor Code, as amended,
declares that in line with "the policy of the State to encourage free trade unionism and free collective
bargaining, . . (w)orkers shall have the right to engage in concerted activities for purposes of
collective bargaining or for their mutual benefit and protection." A similar right to engage in concerted
activities for mutual benefit and protection is tacitly and traditionally recognized in respect of
employers.

The more common of these concerted activities as far as employees are concerned are: strikes
the temporary stoppage of work as a result of an industrial or labor dispute; picketing the
marching to and fro at the employer's premises, usually accompanied by the display of placards and
other signs making known the facts involved in a labor dispute; and boycotts the concerted
refusal to patronize an employer's goods or services and to persuade others to a like refusal. On the
other hand, the counterpart activity that management may licitly undertake is the lockout the
temporary refusal to furnish work on account of a labor dispute, In this connection, the same Article
263 provides that the "right of legitimate labor organizations to strike and picket and of employer to
lockout, consistent with the national interest, shall continue to be recognized and respected." The
legality of these activities is usually dependent on the legality of the purposes sought to be attained
and the means employed therefor.

It goes without saying that these joint or coordinated activities may be forbidden or restricted by law
or contract. In the particular instance of "distortions of the wage structure within an establishment"
resulting from "the application of any prescribed wage increase by virtue of a law or wage order,"
Section 3 of Republic Act No. 6727 prescribes a specific, detailed and comprehensive procedure for
the correction thereof, thereby implicitly excluding strikes or lockouts or other concerted activities as
modes of settlement of the issue. The provision11 states that

. . . the employer and the union shall negotiate to correct the distort-ions. Any dispute arising
from wage distortions shall be resolved through the grievance procedure under their
collective bargaining agreementand, if it remains unresolved, through voluntary arbitration.
Unless otherwise agreed by the parties in writing, such dispute shall be decided by the
voluntary arbitrator or panel of voluntary arbitrators within ten (10) calendar days from the
time said dispute was referred to voluntary arbitration.

In cases where there are no collective agreements or recognized labor unions, the
employers and workers shall endeavor to correct such distortions. Any dispute arising
therefrom shall be settled through the National Conciliation and Mediation Board and, if it
remains unresolved after ten (10) calendar days of conciliation, shall be referred to the
appropriate branch of the National Labor Relations Commission (NLRC). It shall be
mandatory for the NLRC to conduct continuous hearings and decide the dispute within
twenty (20) calendar days from the time said dispute is submitted for compulsory arbitration.

The pendency of a dispute arising from a wage distortion shall not in any way delay the
applicability of any increase in prescribed wage rates pursuant to the provisions of law or
Wage Order.

xxx xxx xxx

The legislative intent that solution of the problem of wage distortions shall be sought by voluntary
negotiation or abitration, and not by strikes, lockouts, or other concerted activities of the employees
or management, is made clear in the rules implementing RA 6727 issued by the Secretary of Labor
and Employment12 pursuant to the authority granted by Section 13 of the Act.13 Section 16, Chapter I
of these implementing rules, after reiterating the policy that wage distortions be first settled
voluntarily by the parties and eventually by compulsory arbitration, declares that, "Any issue
involving wage distortion shall not be a ground for a strike/lockout."

Moreover, the collective bargaining agreement between the SMC and the Union, relevant provisions
of which are quoted by the former without the latter's demurring to the accuracy of the
quotation,14 also prescribes a similar eschewal of strikes or other similar or related concerted
activities as a mode of resolving disputes or controversies, generally, said agreement clearly stating
that settlement of "all disputes, disagreements or controversies of any kind" should be achieved by
the stipulated grievance procedure and ultimately by arbitration. The provisions are as follows:

Section 1. Any and all disputes, disagreements and controversies of any kind between the
COMPANY and the UNION and/or the workers involving or relating to wages, hours of work,
conditions of employment and/or employer-employee relations arising during the effectivity of
this Agreement or any renewal thereof, shall be settled by arbitration in accordance with the
procedure set out in this Article. No dispute, disagreement or controversy which may be
submitted to the grievance procedure in Article IX shall be presented for arbitration unless all
the steps of the grievance procedure are exhausted (Article V Arbitration).

Section 1. The UNION agrees that there shall be no strikes, walkouts, stoppage or slowdown
of work, boycotts, secondary boycotts, refusal to handle any merchandise, picketing, sit-
down strikes of any kind, sympathetic or general strikes, or any other interference with any of
the operations of the COMPANY during the terms of this agreement (Article VI).

The Union was thus prohibited to declare and hold a strike or otherwise engage in non-peaceful
concerted activities for the settlement of its controversy with SMC in respect of wage distortions, or
for that matter; any other issue "involving or relating to wages, hours of work, conditions of
employment and/or employer-employee relations." The partial strike or concerted refusal by the
Union members to follow the five-year-old work schedule which they had therefore been observing,
resorted to as a means of coercing correction of "wage distortions," was therefore forbidden by law
and contract and, on this account, illegal.

Awareness by the Union of the proscribed character of its members' collective activities, is clearly
connoted by its attempt to justify those activities as a means of protesting and obtaining redress
against said members working overtime every day from Monday to Friday (on an average of 12
hours), and every Saturday (on 8 hour shifts),15rather than as a measure to bring about rectification
of the wage distortions caused by RA 6727 which was the real cause of its differences with SMC.
By concealing the real cause of their dispute with management (alleged failure of correction of wage
distortion), and trying to make it appear that the controversy involved application of the eight-hour
labor law, they obviously hoped to remove their case from the operation of the rules implementing
RA 6727 that "Any issue involving wage distortion shall not be a ground for a strike/lockout." The
stratagem cannot succeed.

In the first place, that it was indeed the wage distortion issue that principally motivated the Union's
partial or limited strike is clear from the facts, The work schedule (with "built-in overtime") had not
been forced upon the workers; it had been agreed upon between SMC and its workers at the Polo
Plant and indeed, had been religiously followed with mutually beneficial results for the past five (5)
years. Hence, it could not be considered a matter of such great prejudice to the workers as to give
rise to a controversy between them and management. Furthermore, the workers never asked, nor
were there ever any negotiations at their instance, for a change in that work schedule prior to the
strike. What really bothered them, and was in fact the subject of talks between their representatives
and management, was the "wage distortion" question, a fact made even more apparent by the joint
notice circulated by them prior to the strike, i.e., that they would adopt the eight-hour work shift in the
meantime pending correction by management of the wage distortion (IPATUPAD MUNA ANG
EIGHT HOURS WORK SHIFT PANSAMANTALA HABANG HINDI IPINATUTUPAD NG SMC
MANAGEMENT ANG TAMANG WAGE DISTORTION).

In the second place, even if there were no such legal prohibition, and even assuming the
controversy really did not involve the wage distortions caused by RA 6727, the concerted activity in
question would still be illicit because contrary to the workers' explicit contractual commitment "that
there shall be no strikes, walkouts, stoppage or slowdown of work, boycotts, secondary boycotts,
refusal to handle any merchandise, picketing, sit-down strikes of any kind, sympathetic or general
strikes, or any other interference with any of the operations of the COMPANY during the term of . . .
(their collective bargaining) agreement.16

What has just been said makes unnecessary resolution of SMC's argument that the workers'
concerted refusal to adhere to the work schedule in force for the last several years, is
a slowdown, an inherently illegal activity essentially illegal even in the absence of a no-strike clause
in a collective bargaining contract, or statute or rule. The Court is in substantial agreement with the
petitioner's concept of a slowdown as a "strike on the installment plan;" as a wilfull reduction in the
rate of work by concerted action of workers for the purpose of restricting the output of the employer,
in relation to a labor dispute; as an activity by which workers, without a complete stoppage of work,
retard production or their performance of duties and functions to compel management to grant their
demands.17 The Court also agrees that such a slowdown is generally condemned as inherently illicit
and unjustifiable, because while the employees "continue to work and remain at their positions and
accept the wages paid to them," they at the same time "select what part of their allotted tasks they
care to perform of their own volition or refuse openly or secretly, to the employer's damage, to do
other work;" in other words, they "work on their own terms.18 But whether or not the workers' activity
in question their concerted adoption of a different work schedule than that prescribed by
management and adhered to for several years constitutes a slowdown need not, as already
stated, be gone into. Suffice it to say that activity is contrary to the law, RA 6727, and the parties'
collective bargaining agreement.

The Union's claim that the restraining order is void because issued by Commissioners whose
appointments had not been duly confirmed by the Commission on Appointments should be as it is
hereby given short shift, for, as the Solicitor General points out, it is an admitted fact that the
members of the respondent Commission were actually appointed by the President of the Philippines
on November 18, 1989; there is no evidence whatever in support of the Union's bare allegation that
the appointments of said members had not been confirmed; and the familiar presumption of
regularity in appointment and in performance of official duty exists in their favor.19

Also untenable is the Union's other argument that the respondent NLRC Division had no jurisdiction
to issue the temporary restraining order or otherwise grant the preliminary injunction prayed for by
SMC and that, even assuming the contrary, the restraining order had been improperly issued. The
Court finds that the respondent Commission had acted entirely in accord with applicable provisions
of the Labor Code.

Article 254 of the Code provides that "No temporary or permanent injunction or restraining order in
any case involving or growing out of labor disputes shall be issued by any court or other entity,
except as otherwise provided in Articles 218 and 264 . . ." Article 264 lists down specific "prohibited
activities" which may be forbidden or stopped by a restraining order or injunction. Article 218 inter
alia enumerates the powers of the National Labor Relations Commission and lays down the
conditions under which a restraining order or preliminary injunction may issue, and the procedure to
be followed in issuing the same.

Among the powers expressly conferred on the Commission by Article 218 is the power to "enjoin or
restrain any actual or threatened commission of any or all prohibited or unlawful acts or to require
the performance of a particular act in any labor dispute which, if not restrained or performed
forthwith, may cause grave or irreparable damage to any party or render ineffectual any decision in
favor of such party . . ."

As a rule such restraining orders or injunctions do not issue ex parte, but only after compliance with
the following requisites, to wit:

a) a hearing held "after due and personal notice thereof has been served, in such manner as
the Commission shall direct, to all known persons against whom relief is sought, and also to
the Chief Executive and other public officials of the province or city within which the unlawful
acts have been threatened or committed charged with the duty to protect complainant's
property;"

b) reception at the hearing of "testimony of witnesses, with opportunity for cross-

examination, in support of the allegations of a complaint made under oath," as well as
"testimony in opposition thereto, if offered . . .;

c) a finding of fact by the Commission, to the effect:

(1) That prohibited or unlawful acts have been threatened and will be committed and
will be continued unless restrained, but no injunction or temporary restraining order
shall be issued on account of any threat, prohibited or unlawful act, except against
the person or persons, association or organization making the threat or committing
the prohibited or unlawful act or actually authorizing or ratifying the same after actual
knowledge thereof;

(2) That substantial and irreparable injury to complainant's property will follow;

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

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

(5) That the public officers charged with the duty to protect complainant's property
are unable or unwilling to furnish adequate protection.

However, a temporary restraining order may be issued ex parte under the following conditions:

a) the complainant "shall also allege that, unless a temporary restraining order shall be
issued without notice, a substantial and irreparable injury to complainant's property will be
unavoidable;
 b) there is "testimony under oath, sufficient, if sustained, to justify the Commission in issuing
a temporary injunction upon hearing after notice;"

c) the "complainant shall first file an undertaking with adequate security in an amount to be
fixed by the Commission sufficient to recompense those enjoined for any loss, expense or
damage caused by the improvident or erroneous issuance of such order or injunction,
including all reasonable costs, together with a reasonable attorney's fee, and expense of
defense against the order or against the granting of any injunctive relief sought in the same
proceeding and subsequently denied by the Commission;" and

d) the "temporary restraining order shall be effective for no longer than twenty (20) days and
shall become void at the expiration of said twenty (20) days.

The reception of evidence "for the application of a writ of injunction may be delegated by the
Commission to any of its Labor Arbiters who shall conduct such hearings in such places as he may
determine to be accessible to the parties and their witnesses and shall submit thereafter his
recommendation to the Commission."

The record reveals that the Commission exercised the power directly and plainly granted to it by
sub-paragraph (e) Article 217 in relation to Article 254 of the Code, and that it faithfully observed the
procedure and complied with the conditions for the exercise of that power prescribed in said sub-
paragraph (e) It acted on SMC's application for immediate issuance of a temporary restraining
order ex parte on the ground that substantial and irreparable injury to its property would transpire
before the matter could be heard on notice; it, however, first direct SMC Labor Arbiter Carmen
Talusan to receive SMC's testimonial evidence in support of the application and thereafter submit
her recommendation thereon; it found SMC's evidence adequate and issued the temporary
restraining order upon bond. No irregularity may thus be imputed to the respondent Commission in
1w phi 1

the issuance of that order.

In any event, the temporary restraining order had a lifetime of only twenty (20) days and became
void ipso facto at the expired ration of that period.

In view of the foregoing factual and legal considerations, all irresistibly leading to the basic
conclusion that the concerted acts of the members of petitioner Union in question are violative of the
law and their formal agreement with the employer, the latter's submittal, in its counter-petition that
there was, in the premises, a "legal duty and obligation" on the part of the respondent Commission
"to enjoin the unlawful and prohibited acts and omissions of petitioner IBM and the workers
complained of,20 a proposition with which, it must be said, the Office of the Solicitor General
concurs, asserting that the "failure of the respondent commission to resolve the application for a writ
of injunction is an abuse of discretion especially in the light of the fact that the restraining order it
earlier issued had already expired"21 must perforce be conceded.

WHEREFORE, the petition is DENIED, the counter-petition is GRANTED, and the case is
REMANDED to the respondent Commission (First Division) with instructions to immediately take
such action thereon as is indicated by and is otherwise in accord with, the findings and conclusions
herein set forth. Costs against petitioner.

IT IS SO ORDERED.

G.R. No. 152611 August 5, 2003

LAND BANK OF THE PHILIPPINES, petitioner,
vs.
SEVERINO LISTANA, SR., respondent.

YNARES-SANTIAGO, J.:

This is a petition for review of the decision of the Court of Appeals in CA-G.R. SP No. 65276 dated
December 11, 2001,1 which annulled the Orders dated January 29, 2001 and April 2, 2001 of the
Regional Trial Court of Sorsogon, Sorsogon, Branch 51.2

Respondent Severino Listana is the owner of a parcel of land containing an area of 246.0561
hectares, located in Inlagadian, Casiguran, Sorsogon, covered by Transfer Certificate of Title No. T-
20193. He voluntarily offered to sell the said land to the government, through the Department of
Agrarian Reform (DAR),3 under Section 20 of R.A. 6657, also known as the Comprehensive Agrarian
Reform Law of 1988 (CARL). The DAR valued the property at P5,871,689.03, which was however
rejected by the respondent. Hence, the Department of Agrarian Reform Adjudication Board (DARAB)
of Sorsogon commenced summary administrative proceedings to determine the just compensation
of the land.

On October 14, 1998, the DARAB rendered a Decision, the dispositive portion of which reads as
follows:

WHEREFORE, taking into consideration the foregoing computation, the prior valuation made
by the Land Bank of the Philippines is hereby set aside and a new valuation in the amount of
TEN MILLION NINE HUNDRED FIFTY SIX THOUSAND NINE HUNDRED SIXTY THREE
PESOS AND 25 CENTAVOS (P10,956,963.25) for the acquired area of 240.9066 hectares.
The Land Bank of the Philippines is hereby ordered to pay the same to the landowner in the
manner provided for by law.

SO ORDERED.4

Thereafter, a Writ of Execution was issued by the PARAD directing the manager of Land Bank to
pay the respondent the aforesaid amount as just compensation in the manner provided by law.5

On September 2, 1999, respondent filed a Motion for Contempt with the PARAD, alleging that
petitioner Land Bank failed to comply with the Writ of Execution issued on June 18, 1999. He argued
that such failure of the petitioner to comply with the writ of execution constitutes contempt of the
DARAB.

Meanwhile, on September 6, 1999, petitioner Land Bank filed a petition with the Regional Trial Court
of Sorsogon, Branch 52, sitting as a Special Agrarian Court (SAC), for the determination of just
compensation, as provided for in Section 16 (f) of the CARL.6

On August 20, 2000, the PARAD issued an Order granting the Motion for Contempt, as follows:

WHEREFORE, premises considered, the motion for contempt is hereby GRANTED, thus
ALEX A. LORAYES, as Manager of respondent LAND BANK, is cited for indirect contempt
and hereby ordered to be imprisoned until he complies with the Decision of the case dated
October 14, 1998.

SO ORDERED.7
Petitioner Land Bank filed a Motion for Reconsideration of the aforequoted Order,8 which was
however denied by the PARAD on September 20, 2000.9 Thus, petitioner filed a Notice of Appeal
with the PARAD, manifesting its intention to appeal the decision to the DARAB Central, pursuant to
Rule XI, Section 3 of the 1994 DARAB New Rules of Procedure.10

On the other hand, the Special Agrarian Court dismissed the petition for the determination of just
compensation filed by petitioner Land Bank in an Order dated October 25, 2000. Petitioners Motion
for Reconsideration of said dismissal was likewise denied.

In a Resolution dated November 27, 2000, PARAD Capellan denied due course to petitioners
Notice of Appeal and ordered the issuance of an Alias Writ of Execution for the payment of the
adjudged amount of just compensation to respondent.11 On January 3, 2001, he directed the
issuance of an arrest order against Manager Alex A. Lorayes.12

Petitioner Land Bank filed a petition for injunction before the Regional Trial Court of Sorsogon,
Sorsogon, with application for the issuance of a writ of preliminary injunction to restrain PARAD
Capellan from issuing the order of arrest.13 The case was raffled to Branch 51 of said court. On
January 29, 2001, the trial court issued an Order, the dispositive portion of which reads:

WHEREFORE, premises considered, the respondent Provincial Adjudicator of the DARAB or

anyone acting in its stead is enjoined as it is hereby enjoined from enforcing its order of
arrest against Mr. Alex A. Lorayes pending the final termination of the case before RTC
Branch 52, Sorsogon upon the posting of a cash bond by the Land Bank.

SO ORDERED.14

Respondent filed a Motion for Reconsideration of the trial courts order, which was denied in an
Order dated April 2, 2001.15

Thus, respondent filed a special civil action for certiorari with the Court of Appeals,16 docketed as
CA-G.R. SP No. 65276. On December 11, 2001, the Court of Appeals rendered the assailed
decision which nullified the Orders of the Regional Trial Court of Sorsogon, Sorsogon, Branch 51.

Hence, the instant petition for review on the following issues:

I. WHETHER OR NOT THE CA DEPARTED FROM THE ACCEPTED COURSE OF

JUDICIAL PROCEEDINGS IN ENTERTAINING THE RESPONDENTS SPECIAL CIVIL
ACTION FOR CERTIORARI TO QUESTION THE FINAL ORDER OF THE RTC WHICH,
HOWEVER, WAS SUBJECT TO APPEAL UNDER THE 1997 RULES OF CIVIL
PROCEDURE.

II. WHETHER OR NOT THE CA DECIDED IN A WAY NOT IN ACCORD WITH LAW AND
SUBSTANTIAL JUSTICE IN ANNULLING AND SETTING ASIDE THE RTC FINAL ORDER
OF INJUNCTION, CONSIDERING THAT:

A. THE PARAD DID NOT ACQUIRE COMPETENT JURISDICTION OVER THE

CONTEMPT PROCEEDINGS INASMUCH AS IT WAS INITIATED BY MERE MOTION FOR
CONTEMPT AND NOT BY VERIFIED PETITION, IN VIOLATION OF SECTION 2, RULE XI
OF THE NEW DARAB RULES OF PROCEDURE AND OF RULE 71 OF THE REVISED
RULES OF COURT.
 B. THE PARAD CONTEMPT ORDER CANNOT BE CONSIDERED FINAL AND
EXECUTORY, BECAUSE THE PARAD ITSELF DISALLOWED THE PETITIONERS
APPEAL TO THE DARAB CENTRAL OFFICE, IN DISREGARD OF THE BASIC RULE
THAT THE APPELLATE TRIBUNAL DETERMINES THE MERITS OF THE APPEAL.

C. THE PARAD ORDER OF ARREST AGAINST LBP MANAGER ALEX LORAYES WAS IN
GROSS AND PATENT VIOLATION OF HIS PERSONAL, CONSTITUTIONAL AND CIVIL
RIGHTS AGAINST UNJUST ARREST AND IMPRISONMENT, INASMUCH AS, UNDER
THE 1987 CONSTITUTION, ONLY JUDGES CAN ISSUE WARRANTS OF ARREST
AGAINST CITIZENS, AND THE PROPER SUBJECT OF THE CONTEMPT PROCEEDING
WAS THE PETITIONER ITSELF AND NOT THE LBP MANAGER, AND YET THE
CONTEMPT ORDER WAS AGAINST THE LBP MANAGER.

D. THE PARAD ORDER OF CONTEMPT WAS PATENTLY NULL AND VOID, AS IT

ATTEMPTED TO ENFORCE COMPLIANCE WITH THE PARAD DECISION THAT WAS
ADMITTEDLY NOT FINAL AND EXECUTORY, AS THE MATTER OF JUST
COMPENSATION BEFORE THE SPECIAL AGRARIAN COURT WAS ON APPEAL WITH
THE COURT OF APPEALS.17

As regards the first issue, petitioner submits that the special civil action for certiorari filed by
respondent before the Court of Appeals to nullify the injunction issued by the trial court was
improper, considering that the preliminary injunction issued by the trial court was a final order which
is appealable to the Court of Appeals via a notice of appeal.18

Petitioners submission is untenable. Generally, injunction is a preservative remedy for the protection
of ones substantive right or interest. It is not a cause of action in itself but merely a provisional
remedy, an adjunct to a main suit. Thus, it has been held that an order granting a writ of preliminary
injunction is an interlocutory order. As distinguished from a final order which disposes of the subject
matter in its entirety or terminates a particular proceeding or action, leaving nothing else to be done
but to enforce by execution what has been determined by the court, an interlocutory order does not
dispose of a case completely, but leaves something more to be adjudicated upon.19

Clearly, the grant of a writ of preliminary injunction is in the nature of an interlocutory order, hence,
unappealable. Therefore, respondents special civil action for certiorari before the Court of Appeals
was the correct remedy under the circumstances. Certiorari is available where there is no appeal, or
any plain, speedy, and adequate remedy in the ordinary course of law.20

The order granting a writ of preliminary injunction is an interlocutory order; as such, it cannot
by itself be subject of an appeal or a petition for review on certiorari. The proper remedy of a
party aggrieved by such an order is to bring an ordinary appeal from an adverse judgment in
the main case, citing therein the grounds for assailing the interlocutory order. However, the
party concerned may file a petition for certiorari where the assailed order is patently
erroneous and appeal would not afford adequate and expeditious relief.21

On the substantive issue of whether the order for the arrest of petitioners manager, Mr. Alex
Lorayes by the PARAD, was valid, Rule XVIII of the 2003 DARAB Rules reads, in pertinent part:

Section 2. Indirect Contempt. The Board or any of its members or its Adjudicator may also
cite and punish any person for indirect contempt on any of the grounds and in the manner
prescribed under Rule 71 of the Revised Rules of Court.
In this connection, Rule 71, Section 4 of the 1997 Rules of Civil Procedure, which deals with the
commencement of indirect contempt proceedings, provides:

Sec. 4. How proceedings commenced. Proceedings for indirect contempt may be

initiated motu proprio by the court against which the contempt was committed by an order or
any other formal charge requiring the respondent to show cause why he should not be
punished for contempt.

In all other cases, charges for indirect contempt shall be commenced by a verified petition
with supporting particulars and certified true copies of documents or papers involved therein,
and upon full compliance with the requirements for filing initiatory pleadings for civil actions in
the court concerned. If the contempt charges arose out of or are related to a principal action
pending in the court, the petition for contempt shall allege that fact but said petition shall be
docketed, heard and decided separately, unless the court in its discretion orders the
consolidation of the contempt charge and the principal action for joint hearing and decision.

xxx xxx xxx

The requirement of a verified petition is mandatory. Justice Florenz D. Regalado, Vice-Chairman of

the Revision of the Rules of Court Committee that drafted the 1997 Rules of Civil Procedure explains
this requirement:

1. This new provision clarifies with a regulatory norm the proper procedure for commencing
contempt proceedings. While such proceeding has been classified as a special civil action
under the former Rules, the heterogeneous practice, tolerated by the courts, has been for
any party to file a mere motion without paying any docket or lawful fees therefor and without
complying with the requirements for initiatory pleadings, which is now required in the second
paragraph of this amended section.

xxx xxx xxx

Henceforth, except for indirect contempt proceedings initiated motu proprio by order of or a
formal charge by the offended court, all charges shall be commenced by a verified petition
with full compliance with the requirements therefor and shall be disposed of in accordance
with the second paragraph of this section.22

Therefore, there are only two ways a person can be charged with indirect contempt, namely, (1)
through a verified petition; and (2) by order or formal charge initiated by the court motu proprio.

In the case at bar, neither of these modes was adopted in charging Mr. Lorayes with indirect
contempt.

More specifically, Rule 71, Section 12 of the 1997 Rules of Civil Procedure, referring to indirect
contempt against quasi-judicial entities, provides:

Sec. 12. Contempt against quasi-judicial entities. Unless otherwise provided by law, this
Rule shall apply to contempt committed against persons, entities, bodies or agencies
exercising quasi-judicial functions, or shall have suppletory effect to such rules as they may
have adopted pursuant to authority granted to them by law to punish for contempt.
The Regional Trial Court of the place wherein the contempt has been committed shall have
jurisdiction over such charges as may be filed therefore. (emphasis supplied)
The foregoing amended provision puts to rest once and for all the questions regarding the
applicability of these rules to quasi-judicial bodies, to wit:

1. This new section was necessitated by the holdings that the former Rule 71 applied only to
superior and inferior courts and did not comprehend contempt committed against
administrative or quasi-judicial officials or bodies, unless said contempt is clearly considered
and expressly defined as contempt of court, as is done in the second paragraph of Sec. 580,
Revised Administrative Code. The provision referred to contemplates the situation where a
person, without lawful excuse, fails to appear, make oath, give testimony or produce
documents when required to do so by the official or body exercising such powers. For such
violation, said person shall be subject to discipline, as in the case of contempt of court, upon
application of the official or body with the Regional Trial Court for the corresponding
sanctions.23 (emphasis in the original)

Evidently, quasi-judicial agencies that have the power to cite persons for indirect contempt pursuant
to Rule 71 of the Rules of Court can only do so by initiating them in the proper Regional Trial Court.
It is not within their jurisdiction and competence to decide the indirect contempt cases. These
matters are still within the province of the Regional Trial Courts. In the present case, the indirect
contempt charge was filed, not with the Regional Trial Court, but with the PARAD, and it was the
PARAD that cited Mr. Lorayes with indirect contempt.

Hence, the contempt proceedings initiated through an unverified "Motion for Contempt" filed by the
respondent with the PARAD were invalid for the following reasons:24 First, the Rules of Court clearly
require the filing of a verified petition with the Regional Trial Court, which was not complied with in
this case. The charge was not initiated by the PARAD motu proprio; rather, it was by a motion filed
by respondent. Second, neither the PARAD nor the DARAB have jurisdiction to decide the contempt
charge filed by the respondent. The issuance of a warrant of arrest was beyond the power of the
PARAD and the DARAB. Consequently, all the proceedings that stemmed from respondents
"Motion for Contempt," specifically the Orders of the PARAD dated August 20, 2000 and January 3,
2001 for the arrest of Alex A. Lorayes, are null and void.

WHEREFORE, in view of the foregoing, the petition for review is GRANTED. The Decision of the
Court of Appeals in CA-G.R. SP No. 65276, dated December 11, 2001, is REVERSED and SET
ASIDE. The Order of the Regional Trial Court of Sorsogon, Sorsogon, Branch 51, dated January 29,
2001, which enjoined the Provincial Adjudicator of the DARAB or anyone acting in its stead from
enforcing its order of arrest against Mr. Alex A. Lorayes pending the final termination of the case
before Regional Trial Court of Sorsogon, Sorsogon, Branch 52, is REINSTATED.

SO ORDERED.

G.R. Nos. 79690-707 April 27, 1988

ENRIQUE A. ZALDIVAR, petitioner,

vs.
THE HONORABLE SANDIGANBAYAN AND HONORABLE RAUL M. GONZALEZ, CLAIMING TO
BE AND ACTING AS TANODBAYAN-OMBUDSMAN UNDER THE 1987
CONSTITUTION, respondents.

G.R. No. L-80578 April 27, 1988

ENRIQUE A. ZALDIVAR, petitioner,

vs.
HON. RAUL M. GONZALEZ, claiming to be and acting as Tanodbayan-Ombudsman under the
1987 Constitution, respondent.

Francisco Carreon and Nestor C. Lumba for petitioner.

The Solicitor General for respondent.

PER CURIAM:

In G.R. Nos. 79690-707 "Petition for Certiorari, Prohibition, and mandamus under Rule 65,"
petitioner Enrique A. Zaldivar, governor of the province of Antique, sought to restrain the
Sandiganbayan and Tanodbayan Raul Gonzalez from proceeding with the prosecution and hearing
of Criminal Cases Nos. 12159 to 12161 and 12163-12177 on the ground thatsaid cases were filed
by said Tanodbayan without legal and constitutional authority, since under the 1987 Constitution
which took effect on February 2, 1987, it is only the Ombudsman (not the present or incumbent
Tanodbayan) who has the authority to file cases with the Sandiganbayan. The complete prayer of
the petition reads:

WHEREFORE, it is respectfully prayed that pending the final disposition of this

petition or until further orders of the Honorable Court, a writ of preliminary injunction
issue upon the filing of a bond in such amount as may be fixed by the Honorable
Court, restraining the Honorable Sandiganbayan from hearing and trying Criminal
Cases Nos. 12159 to 12161, and 12163 to 12177 insofar as petitioner Enrique A.
Zaldivar is concerned and from hearing and resolving the special prosecutor's motion
to suspend (Annex J) and thereafter, final judgment be rendered:

(1) ordering that the amended informations in the above-mentioned crimininal cases
be or issuing a writ of mandamus commanding and ordering the respondent
Sandiganbayan to do so and, in consequence, prohibiting and restraining the
respondent Sandigan-bayan from proceeding to hear and try the abovementioned
criminal cases or making the temporary preliminary injunction permanent;

(2) declaring the acts of respondent Gonzalez as "Tanodbayan-Ombudsman" after 2

February 1987 relating to these cases as anullity and without legal effect, particularly,
the promulgation of Tanodbayan resolution of 5 February 1987, the filing of the
original informations on 3 March 1987 and the amended ones on 4 June 1987, and
the filing of the Motion for Suspension Pendente Lite.

PETITIONER prays for such other and further relief as may be deemed proper in the
premises, with costs against the respondents.

Manila, Philippines, September 9, 1987.

(pp. 45-47, Rollo)

In G.R. No. 80578, petitioner Enrique A. Zaldivar, on substantially the same ground as the first
petition, prays that Tanodbayan Gonzalez be restrained from conducting preliminary investigations
and similar cases with the Sandiganbayan. The prayer reads:
 WHEREFORE, it is respectfully prayed that pending the final disposition of this
petition or until further orders of this Honorable court, a writ of preliminary injunction
issue restraining the respondent from further acting in TBP CASE NO. 87-01304 and,
particularly, from filing the criminal Information consequent thereof-, and from
conducting preliminary investigations in, and filing criminal informations for, such
other complaints/ cases now pending or which may hereafter be filed against
petitioner with the Office of the respondent.

It is likewise prayed that the present petition be consolidated with G.R.L-Nos. 79690-
79707.

After proper proceedings, it is prayed that final judgment be rendered annulling the
acts of respondent Gonzalez as "Tanodbayan- Ombudsman" after 2 February 1987
relating to the investigation of complaints against petitioner, particularly:

(1) Annulling, for absolute want of jurisdiction, the preliminary investigation

conducted, and the Resolution rendered, by respondent in TBP CASE NO. 87-
01304;

(2) Prohibiting and restraining the respondent from filing any criminal Information as
a consequence of the void preliminary investigation he conducted in TBP CASE NO.
87-01304, or annulling the criminal Information in the said case which may, in the
meantime, have already been filed;

(3) Prohibiting and restraining the respondent from conducting preliminary

investigations in, and filing criminal informations for, such other complaints/cases
now pending or which may hereafter be filed against petitioner with the Office of the
respondent.

PETITIONER further prays for such other and further reliefs as may be deemed
proper in the proper with costs against the respondent.

Manila, Philippines, November 18,1987

(pp. 24-25, Rollo)

We issued the restraining orders prayed for.

After a study of the petitions, We have decided to give due course to the same; to consider the
comments of the Solicitor-General and of Tanodbayan Gonzalez as their Answers thereto; and to
forthwith decide the petitions.

We find the petitions impressed with merit.

Under the 1987 Constitution, the Ombudsman (as distinguished from theincumbent Tanodbayan) is
charged with the duty to:

Investigate on its own, or on complaint by any person, any act or omission of any
public official, employee, office or agency, when such act or commission appears to
be illegal, unjust, improper, or inefficient (Sec. 13, par. 1)
The Constitution likewise provides that:

The existing Tanodbayan shall hereafter be known as the office of the Special
Prosecutor. It shall continue to function and exercise its powers as now or hereafter
may be provided by law, contemptexcept those conferred on the office of the
Ombudsman created under this Constitution. (Art. XI, Section 7) (Emphasis ours).

Now then, inasmuch as the aforementioned duty is given to the Ombudsman, the incumbent
Tanodbayan (caged Special Prosecutor under the 1987 constitution and who is supposed to retain
powers and duties NOT GIVEN to the Ombudsman) is clearly without authority to conduct
preliminary investigations and to direct the filing of criminal cases with the Sandiganbayan, except
upon orders of the Ombudsman. This right to do so was lost effective February 2, 1987. From that
time, he has been divested of such authority.

Under the present Constitution, the Special Prosecutor (Raul Gonzalez) is a mere subordinate of the
Tanodbayan Ombudsman) and can investigate and prosecute cases only upon the latter's authority
or orders. The Special Prosecutor cannot initiate the prosecution of cases but can only conduct the
same if instructed to do so by the Ombudsman. Even his original power to issue subpoena, which he
still claims under Section 10(d) of PD 1630, is now deemed transferred to the Ombudsman, who
may, however, retain it in the Spedal Prosecutor in connection with the cases he is ordered to
investigate.

It is not correct either to suppose that the Special Prosecutor remains the Ombudsman as long as he
has not been replaced, for the fact is that he has never been the Ombudsman. The Office of the
Ombudsman is a new creation under Article XI of the Constitution different from the Office of the
Tanodbayan created under PD 1607 although concededly some of the powers of the two offices are
Identical or similar. The Special Prosecutor cannot plead that he has a right to hold over the position
of Ombudsman as he has never held it in the first place.

WHEREFORE, We hereby:

(1) GRANT the consolidated petitions filed by petitioner Zaldivar and hereby
NULLIFY the criminal informations filed against him in the Sandiganbayan; and

(2) ORDER respondent Raul Gonzalez to cease and desist from conducting
investigations and filing criminal cases with the Sandiganbayan or otherwise
exercising the powers and function of the Ombudsman.

SO ORDERED.

G.R. No. 158971. August 25, 2005

MARIANO Y. SIY, in his personal capacity, as well as in his capacity as owner of PHILIPPINE
AGRI TRADING CENTER, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELENA EMBANG, Respondent.

RESOLUTION

CORONA, J.:
For resolution is private respondent Elena Embangs motion to cite Atty. Frederico P. Quevedo,
counsel of petitioner Mariano Y. Siy, in contempt of court for delaying this case and impeding the
execution of the judgment rendered herein, in violation of Canon 121 and Rule 12.042 of the Code of
Professional Responsibility.

This case originated from a complaint for illegal dismissal and non-payment of holiday pay and
holiday premium pay filed by Embang against petitioner and Philippine Agri Trading Center. The
labor arbiter ruled in favor of Embang. The dispositive portion of his September 29, 2000
decision3 read:

WHEREFORE, judgment is hereby rendered declaring [Embang] to be a regular employee of the

PHIL-AGRI TRADING CENTER and ordering the latter to reinstate her to her former position and
pay her backwages from the date of her dismissal on February 18, 2000 until her reinstatement
which computed as of today amounts to 37,771.50 (5881 x 6.5 months) plus 1/12 thereof or the
amount of 3,147.62 as corresponding 13th month pay for the period.

An additional award of 5% of the total award is also rendered since [,] compelled to litigate [,]
[Embang] had to engage the services of counsel.

All other claims are DISMISSED for lack of merit.

SO ORDERED.

On March 8, 2002, the Third Division of the National Labor Relations Commission (NLRC) denied
petitioners appeal and affirmed the decision of the labor arbiter with modification. Thus:

WHEREFORE, premises considered, the appeal is DENIED for lack of merit and the Decision dated
September 29, 2000 is hereby AFFIRMED with MODIFICATION in [that Mariano Y. Siy] should be
made jointly and severally liable together with Phil. Agri Trading Center and that [Embang] is entitled
only [to] the ten (10%) percent of his awarded 13th month pay as attorneys fees.

SO ORDERED.4

After the NLRC refused to reconsider its March 8, 2002 resolution, petitioner elevated the case to
the Court of Appeals (CA) by way of a petition for certiorari. Finding the petition to be without merit,
the appellate court dismissed the same.5 The motion for reconsideration filed by petitioner was
likewise denied.6

Undaunted, petitioner filed a petition for review on certiorari before this Court questioning the CAs
decision (dismissing his petition) and resolution (denying his motion for reconsideration). Since we
found no reversible error on the part of the appellate court, we denied the petition in our September
22, 2003 resolution. Petitioner sought a reconsideration of our resolution but we resolved to deny the
same with finality. Thereafter, entry of judgment was made on December 30, 2003.

In accordance with the rules of procedure of the NLRC, Embangs counsel filed a motion for the
issuance of a writ of execution dated February 16, 2004 before the labor arbiter. Subsequently, Atty.
Quevedo entered his appearance for the petitioner and filed a comment to the motion for writ of
execution.7 He alleged that Embang rejected the various offers of reinstatement extended to her by
petitioner; hence, she should be entitled to backwages only up to September 29, 2000, the date of
the promulgation of the labor arbiters decision.
This was followed by a protracted exchange of pleadings and motions between the parties.8 Finding
that his office was never informed by petitioner and Philippine Agri Trading Center of any intention
on their part to reinstate Embang to her former position, the labor arbiter issued an order dated July
30, 20049 granting the February 16, 2004 motion and directing that a writ of execution be issued.

Atty. Quevedo refused to be deterred. He filed an appeal with the NLRC on August 12, 2004. He
insisted that the labor arbiter committed grave abuse of discretion in failing to specify in his order
that the backwages should be computed until September 29, 2000 only and that no backwages
should accrue thereafter because of Embangs refusal to be reinstated.

Embangs counsel moved to dismiss the appeal. He contended that the appeal was not perfected
because petitioner and Philippine Agri Trading Center did not post the required cash or surety bond.
Pending the resolution of the appeal, Embang filed the instant motion to cite Atty. Quevedo in
contempt of court.

By way of comment, Atty. Quevedo maintains that he did not delay the execution of the decision but
only sought the consideration of Embangs refusal to be reinstated in any writ of execution that may
be issued. He claims that such refusal on Embangs part constituted a supervening event that
justified the filing of an appeal notwithstanding the finality of the decision. He also asserts that an
appeal was the proper remedy to question the July 30, 2004 order of the labor arbiter.

Meanwhile, the Third Division of the NLRC issued a resolution10 on February 28, 2005 resolving not
to give due course to the appeal and to remand the case to the regional arbitration branch for further
proceedings. The NLRC held that the July 30, 2004 order was not appealable. Despite the denial of
the appeal, however, Atty. Quevedo filed a motion for clarification/partial reconsideration of the
NLRCs February 28, 2005 resolution.

For his obstinacy in refusing to respect a final and executory judgment, we hold Atty. Quevedo in
contempt of court.

Contempt of court is disobedience to the court by acting in opposition to its authority, justice and
dignity. It signifies not only a willful disregard or disobedience of the courts orders but also conduct
tending to bring the authority of the court and the administration of law into disrepute or, in some
manner, to impede the due administration of justice.11Under the Rules of Court, contempt is classified
into either direct or indirect contempt. Direct contempt is committed in the presence of or so near a
court or judge as to obstruct or interrupt the proceedings before the same.12 Indirect contempt is one
not committed in the presence of a court.13 It is an act done at a distance which tends to belittle,
degrade, obstruct or embarrass the court and justice.14

Atty. Quevedo should be sanctioned for indirect contempt. Indirect contempt is committed by a
person who commits the following acts, among others: disobedience or resistance to a lawful writ,
process, order or judgment of a court;15any abuse of or any unlawful interference with the processes
or proceedings of a court not constituting direct contempt;16 and any improper conduct tending,
directly or indirectly, to impede, obstruct or degrade the administration of justice.17

We denied with finality the petitioners petition for review on certiorari almost two years ago. But the
decision of the labor arbiter (affirmed with modification by the NLRC and upheld by the CA and this
Court) remains unsatisfied up to now because of Atty. Quevedos sly maneuvers on behalf of his
client.

Once a case is decided with finality, the controversy is settled and the matter is laid to rest. The
prevailing party is entitled to enjoy the fruits of his victory while the other party is obliged to respect
the courts verdict and to comply with it. We reiterate our pronouncement in Sacdalan v. Court of
Appeals:18

well-settled is the principle that a decision that has acquired finality becomes immutable and
unalterable and may no longer be modified in any respect even if the modification is meant to correct
erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by
the highest court of the land.

The reason for this is that litigation must end and terminate sometime and somewhere, and it is
essential to an effective and efficient administration of justice that, once a judgment has become
final, the winning party be not deprived of the fruits of the verdict. Courts must guard against any
scheme calculated to bring about that result and must frown upon any attempt to prolong the
controversies.

The only exceptions to the general rule are the correction of clerical errors, the so-called nunc pro
tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances
transpire after the finality of the decision rendering its execution unjust and inequitable.

This case does not fall under any of the recognized exceptions. Contrary to Atty. Quevedos
contention, there existed no supervening event that would have brought the case outside the ambit
of the general rule on the immutability of final and executory decisions.

Supervening events refer to facts which transpire after judgment becomes final and executory or to
new circumstances which develop after judgment acquires finality.19 The "refusal" of Embang to be
reinstated happened, assuming it really happened, before the finality of our September 22, 2003
resolution, i.e., before the decision of the labor arbiter as modified by the NLRC became final and
executory.

In fact, the issue of the alleged offer of reinstatement and Embangs rejection of the same was not a
new one and had already been passed upon by the courts. Atty. Quevedo himself admits that
petitioner brought the issue before the CA in his June 6, 2002 petition for certiorari and December 3,
2002 memorandum. The appellate court brushed it aside and found neither factual nor legal merit in
the petition. The matter was again raised in petitioners June 3, 2003 motion for reconsideration
which was denied on the ground that the basic issues had already been previously considered by
the court. Embangs alleged refusal to be reinstated was also alleged in the petition for review
on certiorari filed by petitioner before this Court. We denied it for failing to show that a reversible
error had been committed by the CA.

Atty. Quevedos client was bound by the finality of our affirmance of the modified decision of the
labor arbiter. He should not have tried, under the guise of a flimsy appeal to the NLRC, to reopen a
case already decided with finality. Nor should he have raised anew matters previously considered
and issues already laid to rest.

Atty. Quevedos act of filing a baseless appeal with the NLRC was obviously intended to defeat the
implementation of a final and executory decision. Elementary is the rule that an order granting a
motion for a writ of execution is not appealable.20 Thus, Atty. Quevedos deceptively "innocent"
appeal constituted either a willful disregard or gross ignorance of basic rules of procedure resulting
in the obstruction of justice.

By his acts, Atty. Quevedo has tried to prevent Embang from enjoying the fruits of her hard earned
legal victory. In effect, he has been tying the hands of justice and preventing it from taking its due
course. His conduct has thwarted the due execution of a final and executory decision. By appealing
an order which he knew to be unappealable, he abused court processes and hindered the
dispensation of justice. His dilatory tactics were an affront to the dignity of the Court, clearly
constituting indirect contempt.

We note that the ground cited in the motion to cite Atty. Quevedo in contempt of court was his
violation of Canon 12 and Rule 12.04 of the Code of Professional Responsibility. While a lawyers
violation of his duties as an officer of the court may also constitute contempt, the grounds for holding
a person in contempt and for holding him administratively liable for the violation of his lawyers oath
are distinct and separate from each other. They are specified in Rule 71 of the Rules of Court. A
finding of contempt on the part of a lawyer does not preclude the imposition of disciplinary sanctions
against him for his contravention of the ethics of the legal profession. Thus:

x x x the power to punish for contempt and the power to disbar are separate and distinct, and that
the exercise of one does not exclude the exercise of the other. A contempt proceeding for
misbehavior in court is designed to vindicate the authority of the court; on the other hand, the object
of a disciplinary proceeding is to deal with the fitness of the courts officer to continue in that office, to
preserve and protect the court and the public from the official ministrations of persons unfit or
unworthy to hold such office. The principal purpose of the exercise of the power to cite for contempt
is to safeguard the functions of the court [while that] of the exercise of disciplinary authority by the
Supreme Court is to assure respect for orders of such court by attorneys who, as much as judges,
are responsible for the orderly administration of justice.

Moreover, it has been held that the imposition of a fine as a penalty in a contempt proceeding is not
considered res judicata to a subsequent charge for unprofessional conduct. In the same manner, an
attorneys conviction for contempt was not collaterally estopped by reason of a subsequent
disbarment proceeding in which the court found in his favor on essentially the same facts leading to
conviction. It has likewise been the rule that a notice to a lawyer to show cause why he should not
be punished for contempt cannot be considered as a notice to show cause why he should not be
suspended from the practice of law, considering that they have distinct objects and for each of them
a different procedure is established. Contempt of court is governed by the procedures laid down
under Rule 71 of the Rules of Court, whereas disciplinary actions in the practice of law are governed
by Rules 138 and 139 thereof.

Although apparently different in legal bases, the authority to punish for contempt and to discipline
lawyers are both inherent in the Supreme Court and are equally incidents of the courts basic power
to oversee the proper administration of justice and the orderly discharge of judicial functions. As was
succinctly expounded in Zaldivar v. Sandiganbayan, et al.:

There are, in other words, two (2) related powers which come into play in cases like that before us
here: the Courts inherent power to discipline attorneys and the contempt power. The disciplinary
authority of the Court over members of the Bar is broader [than] the power to punish for contempt.
Contempt of court may be committed both by lawyers and non-lawyers, both in and out of court.
Frequently, where the contemnor is a lawyer, the contumacious conduct also constitutes
professional misconduct which calls into play the disciplinary authority of the Supreme Court. Where
the respondent is a lawyer, however, the Supreme Courts disciplinary authority over lawyers may
come into play whether or not the misconduct with which the respondent is charged also constitutes
contempt of court. The power to punish for contempt of court does not exhaust the scope of
disciplinary authority of the Court over lawyers. The disciplinary authority of the Court over members
of the Bar is but corollary to the Courts exclusive power of admission to the Bar. A lawyer is not
merely a professional but also an officer of the court and as such, he is called upon to share in the
task and responsibility of dispensing justice and resolving disputes in society. Any act on his part
which visibly tends to obstruct, pervert, or impede and degrade the administration of justice
constitutes both professional misconduct calling for the exercise of disciplinary action against him,
and contumacious conduct warranting application of the contempt power.21

We therefore refer the complaint against Atty. Quevedos behavior to the Committee on Bar
Discipline of the Integrated Bar of the Philippines for an investigation of his possible liabilities under
Canon 12 and Rule 12.04 of the Code of Professional Responsibility.

WHEREFORE, Atty. Frederico P. Quevedo is hereby found GUILTY of INDIRECT CONTEMPT for
which a FINE of 30,000 is imposed upon him, payable in full within five days from receipt of this
resolution.

SO ORDERED.

G.R. No. 80918 August 16, 1989

JOSEFINA M. PRINCIPE, petitioner

vs.
PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC. and CHUAN HUP AGENCIES, PTE.
LTD., NATIONAL LABOR RELATIONS COMMISSION AND PHILIPPINE OVERSEAS
EMPLOYEES EMPLOYMENT ADMINISTRATION, respondents.

R. C. Carrera Law Firm for petitioner.

Eladio B. Samson for private respondent.

GANCAYCO, J.:

Once again this Tribunal is faced with the issue of the validity of the quitclaim executed by the
employee's heir in favor of the employer.

Petitioner is the widow of the late Abelardo Principe who was then the Chief Engineer of M/V OSAM
Falcon, a commercial vessel of Singaporean registry owned by Chuan Hup Agencies, Pte. Ltd.
(Chuan Hup for brevity), one of the private respondents herein, who is the principal of Philippine-
Singapore Transport Services, Inc. (PSTSI), also a private respondent herein. The contract of
employment of the deceased with private respondent Chua Hup provides, among others, that
Principe would receive Singapore $2,800.00 a month to commence on September 7, 1982, medical
benefits and insurance coverage through group hospitalization and surgical insurance and group
and personal accident insurance for a capital sum of US$75,000.00. It also provides that the laws of
Singapore shall apply in cases of disputes arising out of the said appointment and that said disputes
are to be resolved by the courts of the Republic of Singapore. 1

On September 15,1982, while Principe was on duty in Malintoc Field, Palawan, Philippines, he
suddenly contracted a serious illness which eventually resulted to his death.2

On July 5, 1983, petitioner filed a complaint 3 against PSTSI with the Workers Assistance and
Adjudication Office of the Philippine Overseas Employment Administration (POEA), seeking the
payment of death compensation benefits and other benefits accruing to her deceased husband.
While the aforesaid case was pending, the parties entered into a compromise agreement. On
December 22, 1983, petitioner executed a release and quitclaim in favor of PSTSI in consideration
of the sum of Seven Thousand Pesos (P7,000.00) together with hospital, burial and other incidental
expenses previously disbursed by PSTSI in favor of petitioner's deceased husband. 4 Consequently,
Atty. Wellington Lachica, counsel for petitioner, with the latter's conformity, filed a motion to dismiss
the case with prejudice against PSTSI and without prejudice as against Chuan Hup 5

On the basis of the compromise agreement and the motion to dismiss dated November 23, 1983,
the POEA issued an order dated December 27, 1983, dismissing petitioner's complaint with
prejudice against PSTSI.

On April 21, 1986, petitioner filed with the POEA another claim for death benefits against PSTSI, this
time including Chuan Hup. The new case was docketed as POEA Case No. (L) 86-04-328. In the
decision dated January 27, 1987, the POEA dismissed the complaint on the ground that there exist
identity of parties, subject matter and cause of action between the previous case, POEA Case No. L-
635-83 and the new case, and that the present case is barred by prior judgment based on a
compromise agreement in the previous case. 6

Petitioner appealed to the National Labor Relations Commission (NLRC). In a resolution dated
lwph1.t

September 25, 1987, the NLRC dismissed the appeal for lack of merit. 7

Hence, the present petition.

It is the position of the petitioner that the release and quitclaim that she signed in favor of private
respondent PSTSI is null and void on the ground that the consideration given in exchange thereof in
the amount of P7,000.00 is extremely low and unconscionable. Petitioner added that she was merely
misled to sign the quitclaim due to the assurance given by PSTSI that it will help her recover the
death compensation and insurance proceeds due her deceased husband. She argued that even on
the assumption that the quitclaim is valid, the release should benefit PSTSI alone and should not
include Chua Hup as the quitclaim was executed only in favor of PSTSI. Further she contended that
notwithstanding the quitclaim executed in favor of PSTSI, the latter may still be held liable since it is
an agent of Chuan Hup here in the Philippines. 8

The Solicitor General supports petitioner's view stating that the principle of res judicata is
inapplicable to the case at bar since petitioner and PSTSI agreed that the dismissal of the suit
against the latter is without prejudice insofar as the principal Chuan Hup is concerned; that the
quitclaim is null and void as the consideration given is unconscionably low as it is not even equal to
one percent (1%) of petitioner's claim; and that the quitclaim is inequitable and incongrous to the
declared policy of the State to afford protection to labor, citing Section 3, Article XIII of the 1987
Constitution. 9

We rule for the petitioner.

The release and quitclaim in question reads as follows:

JOSEFINA M. PRINCIPLE, of legal

age,

widow, and resident at 1287-E, G.

Tuazon

St., Sampaloc, Manila

 in favor of

PHILIPPINE-SINGAPORE TRANS-

PORT SERVICES, INC., a domestic

corpo-

ration domiciled and having its

principal

place of business at 205 Martinez

Bldg.,

Dasmarinas, Manila.

WITNESSETH, that:

WHEREAS, on July 5, 1983, Josefina M. Principe fled a complaint for death benefits
against Philippine-Singapore Transport Services, Inc. as a shipping agency of Chuan
Hup Agencies Pte. Ltd. of the Republic of Singapore for the death of her husband,
Engr. Abelardo D. Principe, on September 15, 1982 in Matinloc Field, Offshore
Palawan, Philippines while in the course of as employment as Chief Engineer of
OSAM Falcon' in POEA Case No. (L) 635-83 of the Philippine Overseas Employment
Administration, entitled Josefina M. Principe vs. Philippine-Singapore Transport
Services, Inc.;'

WHEREAS, the parties have agreed to settle the above- entitled case amicably.

NOW, THEREFORE, for and in consideration of the sum of SEVEN THOUSAND

PESOS (P7,000.00), Philippine currency and of the hospital, burial and other
incidental expenses previously disbursed by Philippine-Singapore Transport
Services, Inc., receipt of which in full is hereby acknowledged to her full and
complete satisfaction, JOSEFINA M. PRINCIPLE have (sic) released and
discharged, as she hereby releases and discharges, Philippine-Singapore Transport
Services, Inc., its directors, officers, employees, principals and agents from any and
all claims, actions obligations and liabilities which she have or might have against
Philippine-Singapore Transport Services, Inc. in connection with the death of her
husband Abelardo D. Principe on September 15, 1982 in Matintoc Field, Offshore
Palawan under the circumstances narrated in the aforementioned case.

That she hereby represents and warrants to Philippine-Singapore Transport

Services, Inc. that she is the surviving spouse legally entitled to claim for
damages/support which may arise from the death of said Abelardo D. Principe, and
further, that she hereby manifests that any and all rights or claims which she, as a
surviving forced heir of the late Abelardo D. Principe might have against Philippine-
Singapore Transport Services, Inc., its directors, employees, principals and agents
arising out of or by reason of the death of said Abelardo D. Principe are hereby
deemed waived and discharged and she have (sic) Philippine-Singapore Transport
Services, Inc., its directors, officers, employees, principals and agents and whoever
may be held liable, completely free and harmless from any claim and/or liabilities that
may arise from the death of said Abelardo D. Principe (sic).
 That in the event that any other person/persons, as surviving spouse of the
deceased Abelardo D. Principe should claim against Philippine-Singapore Transport
Services, Inc. for such damages/support arising from the death of Abelardo D.
Principe, and the claim is held valid, then Josefina M. Principe hereby undertakes
and agrees to reimburse to Philippine-Singapore Transport Services, Inc. the
amounts hereunder received, plus legal interest therein.

That she further states that the foregoing consideration is voluntarily accepted by her
as a full and final compromise, adjustment and settlement of any and all claims that
she may have against Philippine-Singapore Transport Services, Inc., its directors,
officers, employees, principals and agents; and she hereby irrevocably affirm (sic)
that Philippine-Singapore Transport Services, Inc. has made this settlement solely to
buy peace, avoid litigation and on human consideration, and she acknowledges that
the payment of said consideration is not and shall never be construed as an
admission of liability or obligation by Philippine-Singapore Transport Services, Inc.,
its officers, directors, employees, principals and agents. 10

It is true that a compromise agreement once approved by the court has the effect of res
judicata between the parties and should not be disturbed except for vices of consent and forgery.
However, settled is the rule that the NLRC may disregard technical rules of procedure in order to
give life to the constitutional mandate affording protection to labor and to conform to the need of
protecting the working class whose inferiority against the employer has always been earmarked by
disadvantage. 11

The Court finds that the compromise agreement entered into by the petitioner in favor of PSTSI was
not intended to totally foreclose her right over the death benefits of her husband. First, the motion to
dismiss, filed by petitioner through Atty. Lachica before the POEA, which cited the compromise
agreement entered into by the parties, clearly and unequivocally reflects the undertaking that the
release is without prejudice as regards private respondent Chuan Hup. This fact was acknowledged
in the decision of POEA Administrator Tomas D. Achacoso in POEA Case No. (L) 86-04-328. It is
surprising why both the POEA and the NLRC failed to consider this aspect in the resolution of the
second complaint filed by the petitioner against PSTSI and Chuan Hup.

The second complaint was filed by petitioner to enforce the joint and several liability of PSTSI and
Chuan Hup per joint affidavit of responsibility executed by said parties in entering into a principal
agent relationship after PSTSI failed to live up to its commitment to assist petitioner in the recovery
of death compensation. 12 This observation is supported by the provisions of the release signed by
the petitioner wherein the parties referred to therein were only the petitioner and PSTSI. The release
is from any claim against PSTSI. Chuan Hup is not a party thereto. He cannot be considered
covered by the release.

Moreover, the Court sees no reason why petitioner, with the assistance of a counsel would ever
agree to foreclose her right against Chuan Hup over the death benefits of her husband in exchange
for a very measly sum of Seven Thousand Pesos (P7,000.00). They must have been aware that
should she pursue her case, she was assured of getting at least One Hundred Thousand Eight
Hundred Singapore dollars (US$100,800.00). This Court has laid down the rule in similar cases that
applying the Singapore Maritime Laws in case of a seaman's death, the heirs of the seaman should
receive the equivalent of 36 months wages of the deceased seaman. 13

The fact that petitioner received the sum of P7,000.00 only should not be taken to mean as a waiver
of her right. The circumstances she was confronted with during that time left her with no other
alternative but to accept the same as she was in dire need of money due to the sudden death of her
husband. PSTSI contends that it was precisely because of her need for cash that petitioner thereby
totally waived her right over the death benefits of her husband. We do not think so. What is plausible
is the protestation of petitioner that PSTSI took advantage of her financial distress and led her to
signing the release and quitclaim without explaining the consequences to her. While it may be true
that her counsel assisted her in the process, said counsel must have been persuaded by the
assurance of PSTSI that it shall help obtain for her the corresponding benefits from Chuan Hup.

Even assuming for the sake of argument that the quitclaim had foreclosed petitioner's right over the
death benefits of her husband, the fact that the consideration given in exchange thereof was very
much less than the amount petitioner is claiming renders the quitclaim null and void for being
contrary to public policy. 14 The State must be firm in affording protection to labor. The quitclaim
wherein the consideration is scandalously low and inequitable cannot be an obstacle to petitioner's
pursuing her legitimate claim. 15 Equity dictates that the compromise agreement should be voided in
this instance.

Lastly, it must be noted that the first complaint of petitioner was merely an action against PSTSI
whereas in the second complaint Chuan Hup was already included. The POEA ruled that the second
complaint was merely an afterthought, and that it was a product of a pre-conceived mind considering
the interval of time from the issuance of the order of dismissal in the previous case and the institution
of the second complaint. We do not think so. On the contrary, the Court holds that the delay was due
to PSTSI's failure to make good its promise to assist the petitioner in recovering the death benefits of
her husband. We see no other reason thereby. Hence, even if the second action was filed beyond
the three (3) year reglementary period as provided by law for such claims, We cannot buy PSTSI's
argument that the claim is already barred. The blame for the delay, if any, can only be attributed to
PSTSI.

On the other hand, PSTSI argues that it cannot be held responsible on the ground that the aforesaid
affidavit of undertaking with Chua Hup is applicable only to those members of the crew recruited by
PSTSI in the Philippines for and in behalf of its principal Chuan Hup and that since Principe was
directly hired by Chuan Hup, PSTSI cannot be held responsible as it has no privity of contract with
those personnel recruited in Singapore.

The argument is untenable. This is the first time PSTSI raised this defense when it had all the
chance to do so below. Moreover, if PSTSI honestly believed it had no privity of contract with
Principe who was directly recruited by Chuan Hup, then there is no reason why it entered into a
compromise agreement with herein petitioner. From the very start, it should have asked for the
dismissal of the case against it on the ground of lack of cause of action, but it did not do so. What is
obvious is that Principe was actually recruited by PSTSI and that he signed the employment contract
with the principal Chuan Hup. Thus, private respondents stand jointly and severally liable for the
claim of petitioner.

Anent the argument that the Philippine courts are without jurisdiction over the subject matter as
jurisdiction was, by agreement of the parties, vested in the courts of the Republic of Singapore, it is
well-settled that an agreement to deprive a court of jurisdiction conferred on it by law is void and of
no legal effect. 16 In this jurisdiction labor cases, are within the competence of the National Labor
Relations Commission.

With respect to petitioner's monetary claim, since the parties agreed that the laws of Singapore shall
govern their relationship and that any dispute arising from the contract shall be resolved by the law
of that country, then the petitioner is entitled to death benefits equivalent to 36 months salary of her
husband. 17 As the wage of deceased Abelardo Principe was S$2,800.00 a month, then petitioner is
entitled to a total of S$100,800.00.
WHEREFORE, premises considered, the petition is granted. The resolution of the NLRC dated
September 25,1987 is hereby set aside and another decision is hereby rendered ordering private
respondents PSTSI and Chuan Hup Agencies, Pte. Ltd. to jointly and severally pay petitioner the
sum of S$100,800. 00 in its equivalent in Philippine pesos. This decision is immediately executory.

SO ORDERED.

G.R. No. 126625 September 18, 1997

KANLAON CONSTRUCTION ENTERPRISES CO., INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, 5TH DIVISION, and BENJAMIN RELUYA, JR.,
EDGARDO GENAYAS, ERNESTO CANETE, PROTACIO ROSALES, NESTOR BENOYA,
RODOLFO GONGOB, DARIO BINOYA, BENJAMIN BASMAYOR, ABELARDO SACURA,
FLORENCIO SACURA, ISABELO MIRA, NEMESIO LACAR, JOSEPH CABIGKIS, RODRIGO
CILLON, VIRGILIO QUIZON, GUARINO EVANGELISTA, ALEJANDRO GATA, BENEDICTO
CALAGO, NILO GATA, DIONISIO PERMACIO, JUANITO SALUD, ADOR RIMPO, FELIPE
ORAEZ, JULIETO TEJADA, TEOTIMO LACIO, ONOFRE QUIZON, RUDY ALVAREZ,
CRESENCIO FLORES, ALFREDO PERMACIO, CRESENCIO ALVIAR, HERNANI SURILLA,
DIOSDADO SOLON, CENON ALBURO, ZACARIAS ORTIZ, EUSEBIO BUSTILLO, GREGORIO
BAGO, JERRY VARGAS, EDUARDO BUENO, PASCUAL HUDAYA, ROGELIO NIETES, and
REYNALDO NIETES, respondents.

PUNO, J.:

In this petition for certiorari, petitioner Kanlaon Construction Enterprises Co., Inc. seeks to annul the
decision of respondent National Labor Relations Commission, Fifth Division and remand the cases
to the Arbitration Branch for a retrial on the merits.

Petitioner is a domestic corporation engaged in the construction business nationwide with principal
office at No. 11 Yakan St., La Vista Subdivision, Quezon City. In 1988, petitioner was contracted by
the National Steel Corporation to construct residential houses for its plant employees in Steeltown,
Sta. Elena, Iligan City. Private respondents were hired by petitioner as laborers in the project and
worked under the supervision of Engineers Paulino Estacio and Mario Dulatre. In 1989, the project
neared its completion and petitioner started terminating the services of private respondents and its
other employees.

In 1990, private respondents filed separate complaints against petitioner before Sub-Regional
Arbitration Branch XII, Iligan City. Numbering forty-one (41) in all, they claimed that petitioner paid
them wages below the minimum and sought payment of their salary differentials and thirteenth-
month pay. Engineers Estacio and Dulatre were named co-respondents.

Some of the cases were assigned to Labor Arbiter Guardson A. Siao while the others were assigned
to Labor Arbiter Nicodemus G. Palangan. Summonses and notices of preliminary conference were
issued and served on the two engineers and petitioner through Engineer Estacio. The preliminary
conferences before the labor arbiters were attended by Engineers Estacio and Dulatre and private
respondents. At the conference of June 11, 1990 before Arbiter Siao, Engineer Estacio admitted
petitioner's liability to private respondents and agreed to pay their wage differentials and thirteenth-
month pay on June 19, 1990. As a result of this agreement, Engineer Estacio allegedly waived
petitioner's right to file its position paper.1 Private respondents declared that they, too, were
dispensing with their position papers and were adopting their complaints as their position paper.2

On June 19, 1990, Engineer Estacio appeared but requested for another week to settle the claims.
Labor Arbiter Siao denied this request. On June 21, 1990, Arbiter Siao issued an order granting the
complaint and directing petitioner to pay private respondents' claims. Arbiter Siao held:

xxx xxx xxx

Considering the length of time that has elapsed since these cases were filed, and what the
complainants might think as to how this branch operates and/or conducts its proceedings as
they are now restless, this Arbiter has no other alternative or recourse but to order the
respondent to pay the claims of the complainants, subject of course to the computation of the
Fiscal Examiner II of this Branch pursuant to the oral manifestation of respondent. The
Supreme Court ruled: "Contracts though orally made are binding on the parties." (Lao Sok v.
Sabaysabay, 138 SCRA 134).

Similarly, this Branch would present in passing that "a court cannot decide a case without
facts either admitted or agreed upon by the parties or proved by evidence." (Yu Chin Piao v.
Lim Tuaco, 33 Phil. 92; Benedicto v. Yulo, 26 Phil. 160)

WHEREFORE, premises considered, the respondent is hereby ordered to pay the individual
claims of the above-named complainants representing their wage differentials within ten (10)
days from receipt of this order.

The Fiscal Examiner II of this Branch is likewise hereby ordered to compute the individual
claims of the herein complainants.

SO ORDERED.3

On June 29, 1990, Arbiter Palangan issued a similar order, thus:

When the above-entitled cases were called for hearing on June 19, 1990 at 10:00 a.m.
respondent thru their representative manifested that they were willing to pay the claims of the
complainants and promised to pay the same on June 28, 1990 at 10:30 a.m.

However, when these cases were called purposely to materialize the promise of the
respondent, the latter failed to appear without any valid reason.

Considering therefore that the respondent has already admitted the claims of the
complainants, we believe that the issues raised herein have become moot and academic.

WHEREFORE premises considered, the above-entitled cases are hereby ordered Closed
and Terminated, however, the respondent is hereby ordered to pay the complainants their
differential pay and 13th-month pay within a period of ten (10) days from receipt hereof
based on the employment record on file with the respondent.

SO ORDERED.4
Petitioner appealed to respondent National Labor Relations Commission. It alleged that it was
denied due process and that Engineers Estacio and Dulatre had no authority to represent and bind
petitioner. Petitioner's appeal was filed by one Atty. Arthur Abundiente.

In a decision dated April 27, 1992, respondent Commission affirmed the orders of the Arbiters.

Petitioner interposed this petition alleging that the decision of respondent Commission was rendered
without jurisdiction and in grave abuse of discretion. Petitioner claims that:

THE QUESTIONED DECISION RENDERED BY THE HONORABLE COMMISSION IS A

NULLITY, IT HAVING BEEN ISSUED WITHOUT JURISDICTION;

II

PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY

ABUSED ITS DISCRETION IN ARBITRARILY, CAPRICIOUSLY AND WHIMSICALLY
MAKING THE FOLLOWING CONCLUSIONS BASED NOT ON FACTS AND BUT ON
SPECULATION, SURMISE AND EVIDENCE CONJECTURE:

A. Petitioner was deprived of the constitutional right to due process of law

when it was adjudged by the NLRC liable without trial on the merits and
without its knowledge;

B. The NLRC erroneously, patently and unreasonably interpreted the

principle that the NLRC and its Arbitration Branch are not strictly bound by
the rules of evidence;

C. There is no legal nor actual basis in the NLRC's ruling that petitioner is
already in estoppel to disclaim the authority of its alleged representatives.

D. The NLRC committed manifest error in relying merely on private,

respondents' unsubstantiated complaints to hold petitioner liable for
damages.5

In brief, petitioner alleges that the decisions of the labor arbiters and respondent Commission are
void for the following reasons: (1) there was no valid service of summons; (2) Engineers Estacio and
Dulatre and Atty. Abundiente had no authority to appear and represent petitioner at the hearings
before the arbiters and on appeal to respondent Commission; (3) the decisions of the arbiters and
respondent Commission are based on unsubstantiated and self-serving evidence and were rendered
in violation of petitioner's right to due process.

Service of summons in cases filed before the labor arbiters is governed by Sections 4 and 5 of Rule
IV of the New Rules of Procedure of the NLRC. They provide:

Sec. 4. Service of Notices and Resolutions. (a) Notices or summons and copies of orders,
resolutions or decisions shall be served on the parties to the case personally by the bailiff or
duly authorized public officer within three (3) days from receipt thereof or by registered mail;
Provided that where a party is represented by counsel or authorized representative, service
shall be made on such counsel or authorized representative;provided further that in cases of
 decision and final awards, copies thereof shall be served on both the parties and their
counsel; provided finally, that in case where the parties are so numerous, service shall be
made on counsel and upon such number of complainants as may be practicable, which shall
be considered substantial compliance with Article 224 (a) of the Labor Code, as amended.

xxx xxx xxx

Sec. 5. Proof and completeness of service. The return is prima facie proof of the facts
indicated therein. Service by registered mail is complete upon receipt by the addressee or
his agent. . . .

Under the NLRC Rules of Procedure, summons on the respondent shall be served personally or by
registered mail on the party himself. If the party is represented by counsel or any other authorized
representative or agent, summons shall be served on such person.

It has been established that petitioner is a private domestic corporation with principal address in
Quezon City. The complaints against petitioner were filed in Iligan City and summonses therefor
served on Engineer Estacio in Iligan City. The question now is whether Engineer Estacio was an
agent and authorized representative of petitioner.

To determine the scope or meaning of the term "authorized representative" or "agent" of parties on
whom summons may be served, the provisions of the Revised Rules of Court may be resorted to.6

Under the Revised Rules of Court,7 service upon a private domestic corporation or partnership must
be made upon its officers, such as the president, manager, secretary, cashier, agent, or any of its
directors. These persons are deemed so integrated with the corporation that they know their
responsibilities and immediately discern what to do with any legal papers served on them.8

In the case at bar, Engineer Estacio, assisted by Engineer Dulatre, managed and supervised the
construction project.9 According to the Solicitor General and private respondents, Engineer Estacio
attended to the project in Iligan City and supervised the work of the employees thereat. As manager,
he had sufficient responsibility and discretion to realize the importance of the legal papers served on
him and to relay the same to the president or other responsible officer of petitioner. Summons for
petitioner was therefore validly served on him.

Engineer Estacio's appearance before the labor arbiters and his promise to settle the claims of
private respondents is another matter.

The general rule is that only lawyers are allowed to appear before the labor arbiter and respondent
Commission in cases before them. The Labor Code and the New Rules of Procedure of the NLRC,
nonetheless, lists three (3) exceptions to the rule, viz:

Sec. 6. Appearances. . . . .

A non-lawyer may appear before the Commission or any Labor Arbiter only if:

(a) he represents himself as party to the case;

(b) he represents the organization or its members, provided that he shall be made to present
written proof that he is properly authorized; or
 (c) he is a duly-accredited member of any legal aid office duly recognized by the Department
of Justice or the Integrated Bar of the Philippines in cases referred thereto by the latter. . . .10

A non-lawyer may appear before the labor arbiters and the NLRC only if: (a) he represents himself
as a party to the case; (b) he represents an organization or its members, with written authorization
from them: or (c) he is a duly-accredited member of any legal aid office duly recognized by the
Department of Justice or the Integrated Bar of the Philippines in cases referred to by the latter.11

Engineers Estacio and Dulatre were not lawyers. Neither were they duly-accredited members of a
legal aid office. Their appearance before the labor arbiters in their capacity as parties to the cases
was authorized under the first exception to the rule. However, their appearance on behalf of
petitioner required written proof of authorization. It was incumbent upon the arbiters to ascertain this
authority especially since both engineers were named co-respondents in the cases before the
arbiters. Absent this authority, whatever statements and declarations Engineer Estacio made before
the arbiters could not bind petitioner.

The appearance of Atty. Arthur Abundiente in the cases appealed to respondent Commission did not
cure Engineer Estacio's representation. Atty. Abundiente, in the first place, had no authority to
appear before the respondent Commission. The appellants' brief he filed was verified by him, not by
petitioner.12 Moreover, respondent Commission did not delve into the merits of Atty. Abundiente's
appeal and determine whether Engineer Estacio was duly authorized to make such promise. It
dismissed the appeal on the ground that notices were served on petitioner and that the latter was
estopped from denying its promise to pay.

Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente were authorized to appear
as representatives of petitioner, they could bind the latter only in procedural matters before the
arbiters and respondent Commission. Petitioner's liability arose from Engineer Estacio's alleged
promise to pay. A promise to pay amounts to an offer to compromise and requires a special power of
attorney or the express consent of petitioner. The authority to compromise cannot be lightly
presumed and should be duly established by evidence.13 This is explicit from Section 7 of Rule III of
the NLRC Rules of Procedure, viz:

Sec. 7. Authority to bind party. Attorneys and other representatives of parties shall have
authority to bind their clients in all matters of procedure; but they cannot, without a special
power of attorney or express consent, enter into a compromise agreement with the opposing
party in full or partial discharge of a client's claim.

The promise to pay allegedly made by Engineer Estacio was made at the preliminary conference
and constituted an offer to settle the case amicably. The promise to pay could not be presumed to
be a single unilateral act, contrary to the claim of the Solicitor General.14 A defendant's promise to
pay and settle the plaintiff's claims ordinarily requires a reciprocal obligation from the plaintiff to
withdraw the complaint and discharge the defendant from liability.15 In effect, the offer to pay was an
offer to compromise the cases.

In civil cases, an offer to compromise is not an admission of any liability, and is not admissible in
evidence against the offeror.16 If this rule were otherwise, no attempt to settle litigation could safely
be made.17 Settlement of disputes by way of compromise is an accepted and desirable practice in
courts of law and administrative tribunals.18 In fact, the Labor Code mandates the labor arbiter to
exert all efforts to enable the parties to arrive at an amicable settlement of the dispute within his
jurisdiction on or before the first hearing.19
Clearly, respondent Commission gravely abused its discretion in affirming the decisions of the labor
arbiters which were not only based on unauthorized representations, but were also made in violation
of petitioner's right to due process.

Section 3 of Rule V of the NLRC Rules of Procedure provides:

Sec. 3. Submission of Position Papers/Memorandum. Should the parties fail to agree

upon an amicable settlement, in whole or in part, during the conferences, the Labor Arbiter
shall issue an order stating therein the matters taken up and agreed upon during the
conferences and directing the parties to simultaneously file their respective verified position
papers

xxx xxx xxx

After petitioner's alleged representative failed to pay the workers' claims as promised, Labor Arbiters
Siao and Palangan did not order the parties to file their respective position papers. The arbiters
forthwith rendered a decision on the merits without at least requiring private respondents to
substantiate their complaints. The parties may have earlier waived their right to file position papers
but petitioner's waiver was made by Engineer Estacio on the premise that petitioner shall have paid
and settled the claims of private respondents at the scheduled conference. Since petitioner reneged
on its "promise," there was a failure to settle the case amicably. This should have prompted the
arbiters to order the parties to file their position papers.

Article 221 of the Labor Code mandates that in cases before labor arbiters and respondent
Commission, they "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." The rule that respondent Commission and the Labor Arbiters are not bound by
technical rules of evidence and procedure should not be interpreted so as to dispense with the
fundamental and essential right of due process.20 And this right is satisfied, at the very least, 'when
the parties are given the opportunity to submit position papers.21 Labor Arbiters Siao and Palangan
erred in dispensing with this requirement.

Indeed, the labor arbiters and the NLRC must not, at the expense of due process, be the first to
arbitrarily disregard specific provisions of the Rules which are precisely intended to assist the parties
in obtaining the just, expeditious and inexpensive settlement of labor disputes.22

IN VIEW WHEREOF, the petition for certiorari is granted. The decision of the National Labor
Relations Commission, Fifth Division, is annulled and set aside and the case is remanded to the
Regional Arbitration Branch, Iligan City for further proceedings.

SO ORDERED.

G.R. No. 91298 June 22, 1990

CORAZON PERIQUET, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and THE PHIL. NATIONAL CONSTRUCTION
CORPORATION (Formerly Construction Development Corp. of the Phils.), respondents.

Tabaquero, Albano & Associates for petitioner.

The Government Corporate Counsel for private respondent.

CRUZ, J.:

It is said that a woman has the privilege of changing her mind but this is usually allowed only in affairs of the heart where the rules are
permissibly inconstant. In the case before us, Corazon Periquet, the herein petitioner, exercised this privilege in connection with her work,
where the rules are not as fickle.

The petitioner was dismissed as toll collector by the Construction Development Corporation of the
Philippines, private respondent herein, for willful breach of trust and unauthorized possession of
accountable toll tickets allegedly found in her purse during a surprise inspection. Claiming she had
been "framed," she filed a complaint for illegal dismissal and was sustained by the labor arbiter, who
ordered her reinstatement within ten days "without loss of seniority rights and other privileges and
with fun back wages to be computed from the date of her actual dismissal up to date of her actual
reinstatement." 1 On appeal, this order was affirmed in toto by public respondent NLRC on August
29, 1980. 2

On March 11, 1989, almost nine years later, the petitioner filed a motion for the issuance of a writ of
execution of the decision. The motion was granted by the executive labor arbiter in an order dated
June 26, 1989, which required payment to the petitioner of the sum of P205,207.42 "by way of
implementing the balance of the judgment amount" due from the private respondent.3 Pursuant
thereto, the said amount was garnished by the NLRC sheriff on July 12, 1989. 4 On September 11,
1989, however, the NLRC sustained the appeal of the CDCP and set aside the order dated June 20,
1989, the corresponding writ of execution of June 26, 1989, and the notice of garnishment. 5

In its decision, the public respondent held that the motion for execution was time-barred, having
been filed beyond the five-year period prescribed by both the Rules of Court and the Labor Code. It
also rejected the petitioner's claim that she had not been reinstated on time and ruled as valid the
two quitclaims she had signed waiving her right to reinstatement and acknowledging settlement in
full of her back wages and other benefits. The petitioner contends that this decision is tainted with
grave abuse of discretion and asks for its reversal. We shall affirm instead.

Sec. 6, Rule 39 of the Revised Rules of Court, provides:

SEC. 6. Execution by motion or by independent action. A judgment may be

executed on motion within five (5) years from the date of its entry or from the date it
becomes final and executory. After the lapse of such time, and before it is barred by
the statute of limitations, a judgment may be enforced by action.

A similar provision is found in Art. 224 of the Labor Code, as amended by RA 6715, viz.

ART. 224. Execution of decision, orders, awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter or Med-
Arbiter, or the Voluntary Arbitrator may, motu propio, or on motion of any interested
party, issue a writ of execution on a judgment within five (5) years from the date it
becomes final and executory, requiring a sheriff or a duly deputized officer to execute
or enforce a final decision, order or award. ...

The petitioner argues that the above rules are not absolute and cites the exception snowed
in Lancita v. Magbanua, 6 where the Court held:
 Where judgments are for money only and wholly unpaid, and execution has been
previously withheld in the interest of the judgment debtor, which is in financial
difficulties, the court has no discretion to deny motions for leave to issue execution
more than five years after the judgments are entered. (Application of Molnar,
Belinsky, et al. v. Long Is. Amusement Corp., I N.Y.S, 2d 866)

In computing the time limited for suing out of an execution, although there is authority
to the contrary, the general rule is that there should not be included the time when
execution is stayed, either by agreement of the parties for a definite time, by
injunction, by the taking of an appeal or writ of error so as to operate as a
supersedeas, by the death of a party, or otherwise. Any interruption or delay
occasioned by the debtor will extend the time within which the writ may be issued
without scire facias.

xxx xxx xxx

There has been no indication that respondents herein had ever slept on their rights to
have the judgment executed by mere motions, within the reglementary period. The
statute of limitation has not been devised against those who wish to act but cannot
do so, for causes beyond their central.

Periquet insists it was the private respondent that delayed and prevented the execution of the
judgment in her favor, but that is not the way we see it. The record shows it was she who dilly-
dallied.

The original decision called for her reinstatement within ten days from receipt thereof following its
affirmance by the NLRC on August 29, 1980, but there is no evidence that she demanded her
reinstatement or that she complained when her demand was rejected. What appears is that she
entered into a compromise agreement with CDCP where she waived her right to reinstatement and
received from the CDCP the sum of P14,000.00 representing her back wages from the date of her
dismissal to the date of the agreement. 7

Dismissing the compromise agreement, the petitioner now claims she was actually reinstated only
on March 16, 1987, and so should be granted back pay for the period beginning November 28,
1978, date of her dismissal, until the date of her reinstatement. She conveniently omits to mention
several significant developments that transpired during and after this period that seriously cast doubt
on her candor and bona fides.

After accepting the sum of P14,000.00 from the private respondent and waiving her right to
reinstatement in the compromise agreement, the petitioner secured employment as kitchen
dispatcher at the Tito Rey Restaurant, where she worked from October 1982 to March 1987.
According to the certification issued by that business, 8 she received a monthly compensation of
P1,904.00, which was higher than her salary in the CDCP.

For reasons not disclosed by the record, she applied for re-employment with the CDCP and was on
March 16,1987, given the position of xerox machine operator with a basic salary of P1,030.00 plus
P461.33 in allowances, for a total of P1,491.33 monthly. 9

On June 27, 1988; she wrote the new management of the CDCP and asked that the rights granted
her by the decision dated August 29, 1980, be recognized because the waiver she had signed was
invalid. 10
On September 19, 1988, the Corporate Legal Counsel of the private respondent (now Philippine
National Construction Corporation) recommended the payment to the petitioner of the sum of
P9,544.00, representing the balance of her back pay for three years at P654. 00 per month (minus
the P14,000.00 earlier paid). 11

On November 10, 1988, the petitioner accepted this additional amount and signed another Quitclaim
and Release reading as follows:

KNOW ALL MEN BY THESE PRESENTS:

THAT, I CORAZON PERIQUET, of legal age, married and resident of No. 87 Annapolis St., Quezon
City, hereby acknowledged receipt of the sum of PESOS: NINE THOUSAND FIVE HUNDRED
FORTY FOUR PESOS ONLY (P9,544.00) Philippine currency, representing the unpaid balance of
the back wages due me under the judgment award in NLRC Case No. AB-2-864-79 entitled
"Corazon Periquet vs. PNCC- TOLLWAYS" and I further manifest that this payment is in full
satisfaction of all my claims/demands in the aforesaid case. Likewise, I hereby manifest that I had
voluntarily waived reinstatement to my former position as TOLL TELLER and in lieu thereof, I sought
and am satisfied with my present position as XEROX MACHINE OPERATOR in the Central Office.

Finally, I hereby certify that delay in my reinstatement, after finality of the Decision dated 10 May
1979 was due to my own fault and that PNCC is not liable thereto.

I hereby RELEASE AND DISCHARGE the said corporation and its officers from money and all
claims by way of unpaid wages, separation pay, differential pay, company, statutory and other
benefits or otherwise as may be due me in connection with the above-entitled case. I hereby state
further that I have no more claims or right of action of whatever nature, whether past, present, future
or contingent against said corporation and its officers, relative to NLRC Case No. AB-2-864-79.

IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of November 1988 at
Mandaluyong, Metro Manila. (Emphasis supplied.) 12

The petitioner was apparently satisfied with the settlement, for in the memorandum she sent the
PNCC Corporate Legal Counsel on November 24, 1988, 13 she said in part:

Sir, this is indeed my chance to express my gratitude to you and all others who have
helped me and my family enjoy the fruits of my years of stay with PNCC by way of
granting an additional amount of P9,544.00 among others ...

As per your recommendation contained therein in said memo, I am now occupying

the position of xerox machine operator and is (sic) presently receiving a monthly
salary of P2,014.00.

Reacting to her inquiry about her entitlement to longevity pay, yearly company increases and other
statutory benefits, the private respondent adjusted her monthly salary from P2,014.00 to P3,588.00
monthly.

Then the lull. Then the bombshell.

On March 11, 1989, she filed the motion for execution that is now the subject of this petition.
It is difficult to understand the attitude of the petitioner, who has blown hot and cold, as if she does
not know her own mind. First she signed a waiver and then she rejected it; then she signed another
waiver which she also rejected, again on the ground that she had been deceived. In her first waiver,
she acknowledged full settlement of the judgment in her favor, and then in the second waiver, after
accepting additional payment, she again acknowledged fun settlement of the same judgment. But
now she is singing a different tune.

In her petition she is now disowning both acknowledgments and claiming that the earlier payments
both of which she had accepted as sufficient, are insufficient. They were valid before but they are not
valid now. She also claimed she was harassed and cheated by the past management of the CDCP
and sought the help of the new management of the PNCC under its "dynamic leadership." But now
she is denouncing the new management-for also tricking her into signing the second quitclaim.

Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later be
disowned simply because of a change of mind. It is only where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable
on its face, that the law will step in to annul the questionable transaction. But where it is shown that
the person making the waiver did so voluntarily, with full understanding of what he was doing, and
the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as
a valid and binding undertaking. As in this case.

The question may be asked: Why did the petitioner sign the compromise agreement of September
16, 1980, and waive all her rights under the judgment in consideration of the cash settlement she
received? It must be remembered that on that date the decision could still have been elevated
on certiorari before this Court and there was still the possibility of its reversal. The petitioner
obviously decided that a bird in hand was worth two on the wing and so opted for the compromise
agreement. The amount she was then waiving, it is worth noting, had not yet come up to the
exorbitant sum of P205,207.42 that she was later to demand after the lapse of eight years.

The back pay due the petitioner need not detain us. We have held in countless cases that this
should be limited to three years from the date of the illegal dismissal, during which period (but not
beyond) the dismissed employee is deemed unemployed without the necessity of proof. 14 Hence,
the petitioner's contention that she should be paid from 1978 to 1987 must be rejected, and even
without regard to the fact (that would otherwise have been counted against her) that she was
actually employed during most of that period.

Finally, the petitioner's invocation of Article 223 of the Labor Code to question the failure of the
private respondent to file a supersedeas bond is not well-taken. As the Solicitor General correctly
points out, the bond is required only when there is an appeal from the decision with a monetary
award, not an order enforcing the decision, as in the case at bar.

As officers of the court, counsel are under obligation to advise their clients against making untenable
and inconsistent claims like the ones raised in this petition that have only needlessly taken up the
valuable time of this Court, the Solicitor General, the Government Corporate Counsel, and the
respondents. Lawyers are not merely hired employees who must unquestioningly do the bidding of
the client, however unreasonable this may be when tested by their own expert appreciation of the
pertinent facts and the applicable law and jurisprudence. Counsel must counsel.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

G.R. No. 126625 September 18, 1997

KANLAON CONSTRUCTION ENTERPRISES CO., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 5TH DIVISION, and BENJAMIN RELUYA, JR.,
EDGARDO GENAYAS, ERNESTO CANETE, PROTACIO ROSALES, NESTOR BENOYA,
RODOLFO GONGOB, DARIO BINOYA, BENJAMIN BASMAYOR, ABELARDO SACURA,
FLORENCIO SACURA, ISABELO MIRA, NEMESIO LACAR, JOSEPH CABIGKIS, RODRIGO
CILLON, VIRGILIO QUIZON, GUARINO EVANGELISTA, ALEJANDRO GATA, BENEDICTO
CALAGO, NILO GATA, DIONISIO PERMACIO, JUANITO SALUD, ADOR RIMPO, FELIPE
ORAEZ, JULIETO TEJADA, TEOTIMO LACIO, ONOFRE QUIZON, RUDY ALVAREZ,
CRESENCIO FLORES, ALFREDO PERMACIO, CRESENCIO ALVIAR, HERNANI SURILLA,
DIOSDADO SOLON, CENON ALBURO, ZACARIAS ORTIZ, EUSEBIO BUSTILLO, GREGORIO
BAGO, JERRY VARGAS, EDUARDO BUENO, PASCUAL HUDAYA, ROGELIO NIETES, and
REYNALDO NIETES, respondents.

PUNO, J.:

In this petition for certiorari, petitioner Kanlaon Construction Enterprises Co., Inc. seeks to annul the
decision of respondent National Labor Relations Commission, Fifth Division and remand the cases
to the Arbitration Branch for a retrial on the merits.

Petitioner is a domestic corporation engaged in the construction business nationwide with principal
office at No. 11 Yakan St., La Vista Subdivision, Quezon City. In 1988, petitioner was contracted by
the National Steel Corporation to construct residential houses for its plant employees in Steeltown,
Sta. Elena, Iligan City. Private respondents were hired by petitioner as laborers in the project and
worked under the supervision of Engineers Paulino Estacio and Mario Dulatre. In 1989, the project
neared its completion and petitioner started terminating the services of private respondents and its
other employees.

In 1990, private respondents filed separate complaints against petitioner before Sub-Regional
Arbitration Branch XII, Iligan City. Numbering forty-one (41) in all, they claimed that petitioner paid
them wages below the minimum and sought payment of their salary differentials and thirteenth-
month pay. Engineers Estacio and Dulatre were named co-respondents.

Some of the cases were assigned to Labor Arbiter Guardson A. Siao while the others were assigned
to Labor Arbiter Nicodemus G. Palangan. Summonses and notices of preliminary conference were
issued and served on the two engineers and petitioner through Engineer Estacio. The preliminary
conferences before the labor arbiters were attended by Engineers Estacio and Dulatre and private
respondents. At the conference of June 11, 1990 before Arbiter Siao, Engineer Estacio admitted
petitioner's liability to private respondents and agreed to pay their wage differentials and thirteenth-
month pay on June 19, 1990. As a result of this agreement, Engineer Estacio allegedly waived
petitioner's right to file its position paper.1 Private respondents declared that they, too, were
dispensing with their position papers and were adopting their complaints as their position paper.2

On June 19, 1990, Engineer Estacio appeared but requested for another week to settle the claims.
Labor Arbiter Siao denied this request. On June 21, 1990, Arbiter Siao issued an order granting the
complaint and directing petitioner to pay private respondents' claims. Arbiter Siao held:

xxx xxx xxx

 Considering the length of time that has elapsed since these cases were filed, and what the
complainants might think as to how this branch operates and/or conducts its proceedings as
they are now restless, this Arbiter has no other alternative or recourse but to order the
respondent to pay the claims of the complainants, subject of course to the computation of the
Fiscal Examiner II of this Branch pursuant to the oral manifestation of respondent. The
Supreme Court ruled: "Contracts though orally made are binding on the parties." (Lao Sok v.
Sabaysabay, 138 SCRA 134).

Similarly, this Branch would present in passing that "a court cannot decide a case without
facts either admitted or agreed upon by the parties or proved by evidence." (Yu Chin Piao v.
Lim Tuaco, 33 Phil. 92; Benedicto v. Yulo, 26 Phil. 160)

WHEREFORE, premises considered, the respondent is hereby ordered to pay the individual
claims of the above-named complainants representing their wage differentials within ten (10)
days from receipt of this order.

The Fiscal Examiner II of this Branch is likewise hereby ordered to compute the individual
claims of the herein complainants.

SO ORDERED.3

On June 29, 1990, Arbiter Palangan issued a similar order, thus:

When the above-entitled cases were called for hearing on June 19, 1990 at 10:00 a.m.
respondent thru their representative manifested that they were willing to pay the claims of the
complainants and promised to pay the same on June 28, 1990 at 10:30 a.m.

However, when these cases were called purposely to materialize the promise of the
respondent, the latter failed to appear without any valid reason.

Considering therefore that the respondent has already admitted the claims of the
complainants, we believe that the issues raised herein have become moot and academic.

WHEREFORE premises considered, the above-entitled cases are hereby ordered Closed
and Terminated, however, the respondent is hereby ordered to pay the complainants their
differential pay and 13th-month pay within a period of ten (10) days from receipt hereof
based on the employment record on file with the respondent.

SO ORDERED.4

Petitioner appealed to respondent National Labor Relations Commission. It alleged that it was
denied due process and that Engineers Estacio and Dulatre had no authority to represent and bind
petitioner. Petitioner's appeal was filed by one Atty. Arthur Abundiente.

In a decision dated April 27, 1992, respondent Commission affirmed the orders of the Arbiters.

Petitioner interposed this petition alleging that the decision of respondent Commission was rendered
without jurisdiction and in grave abuse of discretion. Petitioner claims that:

I
 THE QUESTIONED DECISION RENDERED BY THE HONORABLE COMMISSION IS A
NULLITY, IT HAVING BEEN ISSUED WITHOUT JURISDICTION;

II

PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY

ABUSED ITS DISCRETION IN ARBITRARILY, CAPRICIOUSLY AND WHIMSICALLY
MAKING THE FOLLOWING CONCLUSIONS BASED NOT ON FACTS AND BUT ON
SPECULATION, SURMISE AND EVIDENCE CONJECTURE:

A. Petitioner was deprived of the constitutional right to due process of law

when it was adjudged by the NLRC liable without trial on the merits and
without its knowledge;

B. The NLRC erroneously, patently and unreasonably interpreted the

principle that the NLRC and its Arbitration Branch are not strictly bound by
the rules of evidence;

C. There is no legal nor actual basis in the NLRC's ruling that petitioner is
already in estoppel to disclaim the authority of its alleged representatives.

D. The NLRC committed manifest error in relying merely on private,

respondents' unsubstantiated complaints to hold petitioner liable for
damages.5

In brief, petitioner alleges that the decisions of the labor arbiters and respondent Commission are
void for the following reasons: (1) there was no valid service of summons; (2) Engineers Estacio and
Dulatre and Atty. Abundiente had no authority to appear and represent petitioner at the hearings
before the arbiters and on appeal to respondent Commission; (3) the decisions of the arbiters and
respondent Commission are based on unsubstantiated and self-serving evidence and were rendered
in violation of petitioner's right to due process.

Service of summons in cases filed before the labor arbiters is governed by Sections 4 and 5 of Rule
IV of the New Rules of Procedure of the NLRC. They provide:

Sec. 4. Service of Notices and Resolutions. (a) Notices or summons and copies of orders,
resolutions or decisions shall be served on the parties to the case personally by the bailiff or
duly authorized public officer within three (3) days from receipt thereof or by registered mail;
Provided that where a party is represented by counsel or authorized representative, service
shall be made on such counsel or authorized representative;provided further that in cases of
decision and final awards, copies thereof shall be served on both the parties and their
counsel; provided finally, that in case where the parties are so numerous, service shall be
made on counsel and upon such number of complainants as may be practicable, which shall
be considered substantial compliance with Article 224 (a) of the Labor Code, as amended.

xxx xxx xxx

Sec. 5. Proof and completeness of service. The return is prima facie proof of the facts
indicated therein. Service by registered mail is complete upon receipt by the addressee or
his agent. . . .
Under the NLRC Rules of Procedure, summons on the respondent shall be served personally or by
registered mail on the party himself. If the party is represented by counsel or any other authorized
representative or agent, summons shall be served on such person.

It has been established that petitioner is a private domestic corporation with principal address in
Quezon City. The complaints against petitioner were filed in Iligan City and summonses therefor
served on Engineer Estacio in Iligan City. The question now is whether Engineer Estacio was an
agent and authorized representative of petitioner.

To determine the scope or meaning of the term "authorized representative" or "agent" of parties on
whom summons may be served, the provisions of the Revised Rules of Court may be resorted to.6

Under the Revised Rules of Court,7 service upon a private domestic corporation or partnership must
be made upon its officers, such as the president, manager, secretary, cashier, agent, or any of its
directors. These persons are deemed so integrated with the corporation that they know their
responsibilities and immediately discern what to do with any legal papers served on them.8

In the case at bar, Engineer Estacio, assisted by Engineer Dulatre, managed and supervised the
construction project.9 According to the Solicitor General and private respondents, Engineer Estacio
attended to the project in Iligan City and supervised the work of the employees thereat. As manager,
he had sufficient responsibility and discretion to realize the importance of the legal papers served on
him and to relay the same to the president or other responsible officer of petitioner. Summons for
petitioner was therefore validly served on him.

Engineer Estacio's appearance before the labor arbiters and his promise to settle the claims of
private respondents is another matter.

The general rule is that only lawyers are allowed to appear before the labor arbiter and respondent
Commission in cases before them. The Labor Code and the New Rules of Procedure of the NLRC,
nonetheless, lists three (3) exceptions to the rule, viz:

Sec. 6. Appearances. . . . .

A non-lawyer may appear before the Commission or any Labor Arbiter only if:

(a) he represents himself as party to the case;

(b) he represents the organization or its members, provided that he shall be made to present
written proof that he is properly authorized; or

(c) he is a duly-accredited member of any legal aid office duly recognized by the Department
of Justice or the Integrated Bar of the Philippines in cases referred thereto by the latter. . . .10

A non-lawyer may appear before the labor arbiters and the NLRC only if: (a) he represents himself
as a party to the case; (b) he represents an organization or its members, with written authorization
from them: or (c) he is a duly-accredited member of any legal aid office duly recognized by the
Department of Justice or the Integrated Bar of the Philippines in cases referred to by the latter.11

Engineers Estacio and Dulatre were not lawyers. Neither were they duly-accredited members of a
legal aid office. Their appearance before the labor arbiters in their capacity as parties to the cases
was authorized under the first exception to the rule. However, their appearance on behalf of
petitioner required written proof of authorization. It was incumbent upon the arbiters to ascertain this
authority especially since both engineers were named co-respondents in the cases before the
arbiters. Absent this authority, whatever statements and declarations Engineer Estacio made before
the arbiters could not bind petitioner.

The appearance of Atty. Arthur Abundiente in the cases appealed to respondent Commission did not
cure Engineer Estacio's representation. Atty. Abundiente, in the first place, had no authority to
appear before the respondent Commission. The appellants' brief he filed was verified by him, not by
petitioner.12 Moreover, respondent Commission did not delve into the merits of Atty. Abundiente's
appeal and determine whether Engineer Estacio was duly authorized to make such promise. It
dismissed the appeal on the ground that notices were served on petitioner and that the latter was
estopped from denying its promise to pay.

Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente were authorized to appear
as representatives of petitioner, they could bind the latter only in procedural matters before the
arbiters and respondent Commission. Petitioner's liability arose from Engineer Estacio's alleged
promise to pay. A promise to pay amounts to an offer to compromise and requires a special power of
attorney or the express consent of petitioner. The authority to compromise cannot be lightly
presumed and should be duly established by evidence.13 This is explicit from Section 7 of Rule III of
the NLRC Rules of Procedure, viz:

Sec. 7. Authority to bind party. Attorneys and other representatives of parties shall have
authority to bind their clients in all matters of procedure; but they cannot, without a special
power of attorney or express consent, enter into a compromise agreement with the opposing
party in full or partial discharge of a client's claim.

The promise to pay allegedly made by Engineer Estacio was made at the preliminary conference
and constituted an offer to settle the case amicably. The promise to pay could not be presumed to
be a single unilateral act, contrary to the claim of the Solicitor General.14 A defendant's promise to
pay and settle the plaintiff's claims ordinarily requires a reciprocal obligation from the plaintiff to
withdraw the complaint and discharge the defendant from liability.15 In effect, the offer to pay was an
offer to compromise the cases.

In civil cases, an offer to compromise is not an admission of any liability, and is not admissible in
evidence against the offeror.16 If this rule were otherwise, no attempt to settle litigation could safely
be made.17 Settlement of disputes by way of compromise is an accepted and desirable practice in
courts of law and administrative tribunals.18 In fact, the Labor Code mandates the labor arbiter to
exert all efforts to enable the parties to arrive at an amicable settlement of the dispute within his
jurisdiction on or before the first hearing.19

Clearly, respondent Commission gravely abused its discretion in affirming the decisions of the labor
arbiters which were not only based on unauthorized representations, but were also made in violation
of petitioner's right to due process.

Section 3 of Rule V of the NLRC Rules of Procedure provides:

Sec. 3. Submission of Position Papers/Memorandum. Should the parties fail to agree

upon an amicable settlement, in whole or in part, during the conferences, the Labor Arbiter
shall issue an order stating therein the matters taken up and agreed upon during the
conferences and directing the parties to simultaneously file their respective verified position
papers
 xxx xxx xxx

After petitioner's alleged representative failed to pay the workers' claims as promised, Labor Arbiters
Siao and Palangan did not order the parties to file their respective position papers. The arbiters
forthwith rendered a decision on the merits without at least requiring private respondents to
substantiate their complaints. The parties may have earlier waived their right to file position papers
but petitioner's waiver was made by Engineer Estacio on the premise that petitioner shall have paid
and settled the claims of private respondents at the scheduled conference. Since petitioner reneged
on its "promise," there was a failure to settle the case amicably. This should have prompted the
arbiters to order the parties to file their position papers.

Article 221 of the Labor Code mandates that in cases before labor arbiters and respondent
Commission, they "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." The rule that respondent Commission and the Labor Arbiters are not bound by
technical rules of evidence and procedure should not be interpreted so as to dispense with the
fundamental and essential right of due process.20 And this right is satisfied, at the very least, 'when
the parties are given the opportunity to submit position papers.21 Labor Arbiters Siao and Palangan
erred in dispensing with this requirement.

Indeed, the labor arbiters and the NLRC must not, at the expense of due process, be the first to
arbitrarily disregard specific provisions of the Rules which are precisely intended to assist the parties
in obtaining the just, expeditious and inexpensive settlement of labor disputes.22

IN VIEW WHEREOF, the petition for certiorari is granted. The decision of the National Labor
Relations Commission, Fifth Division, is annulled and set aside and the case is remanded to the
Regional Arbitration Branch, Iligan City for further proceedings.

SO ORDERED.

G.R. No. 118746 September 7, 1995

ATTY. WILFREDO TAGANAS, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, MELCHOR ESCULTURA, ET AL., respondents.

RESOLUTION

FRANCISCO, J.:

Petitioner Atty. Wilfredo E. Taganas represented herein private respondents in a labor suit for illegal
dismissal, underpayment and non-payment of wages, thirteenth-month pay, attorney's fees and
damages conditioned upon a contingent fee arrangement granting the equivalent of fifty percent of
the judgment award plus three hundred pesos appearance fee per hearing.1 The Labor Arbiter ruled
in favor of private respondents and ordered Ultra Clean Services (Ultra) and the Philippine
Tuberculosis Society, Inc., (PTSI) respondents therein, jointly and severally to reinstate herein
private respondents with full backwages, to pay wage differentials, emergency cost of living
allowance, thirteenth-month pay and attorney's fee, but disallowed the claim for damages for lack of
basis.2 This decision was appealed by Ultra and PTSI to the National Labor Relations Commission
(NLRC), and subsequently by PTSI to the Court but to no avail. During the execution stage of the
decision, petitioner moved to enforce his attorney's charging lien.3 Private respondents, aggrieved for
receiving a reduced award due to the attorney's charging lien, contested the validity of the contingent
fee arrangement they have with petitioner, albeit four of the fourteen private respondents have
expressed their conformity thereto.4

Finding the arrangement excessive, the Labor Arbiter ordered the reduction of petitioner's contingent
fee from fifty percent of the judgment award to ten percent, except for the four private respondents
who earlier expressed their conformity.5 Petitioner appealed to NLRC which affirmed with
modification the Labor Arbiter's order by ruling that the ten percent contingent fee should apply also
to the four respondents even if they earlier agreed to pay a higher percentage.6 Petitioner's motion
for reconsideration was denied, hence this petition for certiorari.

The sole issue in this petition is whether or not the reduction of petitioner's contingent fee is
warranted. Petitioner argues that respondent NLRC failed to apply the pertinent laws and
jurisprudence on the factors to be considered in determining whether or not the stipulated amount of
petitioner's contingent fee is fair and reasonable. Moreover, he contends that the invalidation of the
contingent fee agreement between petitioner and his clients was without any legal justification
especially with respect to the four clients who manifested their conformity thereto. We are not
persuaded.

A contingent fee arrangement is an agreement laid down in an express contract between a lawyer
and a client in which the lawyer's professional fee, usually a fixed percentage of what may be
recovered in the action is made to depend upon the success of the litigation.7 This arrangement is
valid in this jurisdiction.8 It is, however, under the supervision and scrutiny of the court to protect
clients from unjust charges.9 Section 13 of the Canons of Professional Ethics states that "[a] contract
for a contingent fee, where sanctioned by law, should be reasonable under all the circumstances of
the case including the risk and uncertainty of the compensation, but should always be subject to the
supervision of a court, as to its reasonableness". Likewise, Rule 138, Section 24 of the Rules of
Court provides:

Sec. 24. Compensation of attorneys; agreement as to fees. An attorney shall be

entitled to have and recover from his client no more than a reasonable compensation
for his services, with a view to the importance of the subject-matter of the
controversy, the extent of the services rendered, and the professional standing of the
attorney. No court shall be bound by the opinion of attorneys as expert witnesses as
to the proper compensation but may disregard such testimony and base its
conclusion on its own professional knowledge. A written contract for services shall
control the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable.

When it comes, therefore, to the validity of contingent fees, in large measure it depends on
the reasonableness of the stipulated fees under the circumstances of each case. The
reduction of unreasonable attorney's fees is within the regulatory powers of the courts.10

We agree with the NLRC's assessment that fifty percent of the judgment award as attorney's fees is
excessive and unreasonable. The financial capacity and economic status of the client have to be
taken into account in fixing the reasonableness of the fee.11 Noting that petitioner's clients were lowly
janitors who receive miniscule salaries and that they were precisely represented by petitioner in the
labor dispute for reinstatement and claim for backwages, wage differentials, emergency cost of living
allowance, thirteenth-month pay and attorney's fees to acquire what they have not been receiving
under the law and to alleviate their living condition, the reduction of petitioner's contingent fee is
proper. Labor cases, it should be stressed, call for compassionate justice.

Furthermore, petitioner's contingent fee falls within the purview of Article 111 of the Labor Code. This
article fixes the limit on the amount of attorney's fees which a lawyer, like petitioner, may recover in
any judicial or administrative proceedings since the labor suit where he represented private
respondents asked for the claim and recovery of wages. In fact, We are not even precluded from
fixing a lower amount than the ten percent ceiling prescribed by the article when circumstances
warrant it.12 Nonetheless, considering the circumstances and the able handling of the case,
petitioner's fee need not be further reduced.

The manifestation of petitioner's four clients indicating their conformity with the contingent fee
contract did not make the agreement valid. The contingent fee contract being unreasonable and
unconscionable the same was correctly disallowed by public respondent NLRC even with respect to
the four private respondents who agreed to pay higher percentage. Petitioner is reminded that as a
lawyer he is primarily an officer of the court charged with the duty of assisting the court in
administering impartial justice between the parties. When he takes his oath, he submits himself to
the authority of the court and subjects his professional fees to judicial control.13

WHEREFORE, finding no grave abuse of discretion the assailed NLRC decision is hereby
affirmed in toto.

G.R. No. 142049 January 30, 2001

GERMAN MARINE AGENCIES, INC. and LUBECA MARINE MANAGEMENT HK

LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FROILAN S. DE LARA, respondents.

GONZAGA-REYES, J.:

On 17 October 1994, private respondent was hired by petitioners to work as a radio officer on board
its vessel, the M/V T.A. VOYAGER. Sometime in June, 1995, while the vessel was docked at the
port of New Zealand, private respondent was taken ill. His worsening health condition was brought
by his crewmates to the attention of the master of the vessel. However, instead of disembarking
private respondent so that he may receive immediate medical attention at a hospital in New Zealand,
the master of he vessel proceeded to Manila, a voyage of ten days, during which time the health of
private respondent rapidly deteriorated. Upon arrival in Manila, private respondent was not
immediately disembarked but was made to wait for several hours until a vacant slot in the Manila
pier was available for the vessel to dock. Private respondent was confined in the Manila Doctors
Hospital, wherein he was treated by a team of medical specialists from 24 June 1995 to 26 July
1995. 1wphi1.nt

After private respondent was discharged from the hospital, he demanded from petitioners the
payment of his disability benefits and the unpaid balance of his sickness wages, pursuant to the
Standard Employment Contract of the parties. Having been assured by petitioners that all his
benefits would be paid in time, private respondent waited for almost a year, to no avail. Eventually,
petitioners told private respondent that, aside from the sickness wages that he had already received,
no other compensation or benefit was forthcoming.1 Private respondent filed a complaint with the
National Labor Relations Commission (NLRC) for payment of disability benefits and the balance of
his sickness wages. On 31 July 1997, the labor arbiter rendered a decision,2 the pertinent parts of
which are quoted hereunder
In the case at bar, there is no issue on the propriety or illegality of complainant's discharge or
release from employment as Radio Operator. What complainant is pursuing is limited to
compensation benefits due a seaman pursuant to POEA Standard Employment Contract,
Part II, Section C, paragraph 4(c) and paragraph 5, which reads:

"SECTION C. COMPENSATION BENEFIT

xxx xxx xxx

"4. The liabilities of the employer when the seaman suffers injury or illness during the
term of his contract are as follows:

xxx xxx xxx

c. The employer shall pay the seaman his basic wages from the time he
leaves the vessel for medical treatment. After discharge from the vessel, the
seaman is entitled to one hundred percent (100%) of his basic wages until he
is declared fit to work or the degree of permanent disability has been
assessed by the company-designated physician, but is [sic] no case shall this
period exceed one hundred twenty (120) days. For this purpose, the seaman
shall submit himself to a post-employment medical examination by the
company-designated physician within three working days upon his return,
except when he is physically incapacitated to do so, in which case the written
notice to the agency within the same period is deemed as compliance x x x.

"5. In case of permanent total or partial disability of the seamen [sic] [during] the term
of employment caused by either injury or illness, the seamen [sic] shall be
compensated in accordance with the schedule of benefits enumerated in Appendix 1
of this Contract. Computation of his benefits arising from an illness or disease shall
be governed by the rates and the rules of compensation applicable at the time of [sic]
the illness or disease was contracted."

The aforecited provisions of the POEA Standards [sic] Employment Contract is clear and
unmistakable that its literal meaning should be preserved.

Thus, the only question at which the liability of respondents is anchored is whether
complainant was really fit to work in his position as radio operator. If this is so, it could mean
that he is not entitled to disability compensation which respondents vigorously disputed,
citing in support the certification made by Dra. Victoria Forendo [sic] Cayabyab, allegedly
"the officially accredited and designated physician of respondents, which is likewise,
accredited with the Philippine Overseas Employment Administration" where it is stated that
"Nothing [sic] his job description as a radio operator, Mr. De Lara may be allowed to go back
to work." (Annex D & E). Complainant on the other hand disputes respondent's above
posture contending that the more persuasive and authentic evidence for purposes of
deciding his fitness or lack of fitness to work is the certificate issued by Ms. Naneth [sic]
Domingo-Reyes, MD, FPMA where it appears that after submitting himself to another
medical examination by his attending physicians at the Manila Doctors Hospital on
December 4, 1996, to verify possible mistake in his post treatment examination on March 25,
1996, firmly "was classified under partial permanent disability and is not fit to go back to his
previous work due to mental state." (Annex "C", complainant's reply to respondent's position
paper).
We have gone into a judicious study and analysis of the arguments and exhibits particularly
the ones relied upon by the parties and find that of the complainant worthy of consideration.
Looking closely at Annexes "D" and "E" of respondents' position paper, there is hardly any
clear affirmation that complainant was fully fit to resume his work as radio operator. Although
the document alluded to, declares that complainant may be allowed to go back to work, the
tenor of the same seems uncertain that complainant is fit to resume his work, and that
assuming that such was the message, the words "may be" can not be taken as overriding
that coming from the Manila Doctor Hospital which in the beginning handled the medical
case of complainant and to which respondents unconditionally referred him and by reason of
which six or seven medical especialists [sic] of the hospital took turn [s] studying and
reviewing his uncertain ailment after release by respondents. Otherwise stated, unlike the
message of annexes D to E of respondents, annex "C" of complainant is clear and
unmistakable and confirm complainant's partial permanent disability and his definite
unfitness to go back to his previous work due to his mental health. Some pronouncements in
this exhibit mentions also that when complainant was admitted an emerging basis for
drowsiness, behavioral change and off and on fever" and different procedures were resorted
along his case, like emergency CT scan on the brain and his admission in June 24, 1995
was catastropic, whereas, more could be said in three document[s] issued by Dra. Victoria
Florendo Cayabyab.

Finally, respondents contend that the annexes issued by Dr. Domingo-Reyes of the Manila
Doctors Hospital should not be given weight because it is not issued by the hospital or doctor
duly accredited by the POEA. Neither would a close look on the applicable provision for
seamen show that a duly accredited hospital or doctor is needed for purposes of the grant
of compensation benefits to a such [sic] or ailing seamen. We are more persuaded based on
the arguments of the complainant among others, that it is absurd to require an ailing seaman
in high seas or in a foreign land to still wait until the ship where he is working land in the
country to secure treatment in a duly accredited hospital or doctor.

On the basis of the above therefore, and convinced that complainant's "partial permanent
disability" which was contracted in the course or on account of his employment as radio
operator in foreign principal's vessel, he is entitled to disability benefit in accordance with the
schedule of benefits enumerated in Appendix 1 of the Contract, the maximum of which is US
$50,000. But since the amount prayed for is US$25,000.00 which were presume has a more
realistic basis, the same is hereby granted.

Concerning the sickness wage, respondents averred that the same had already been paid.
However, there is no evidence that the same has been paid except the payment to the
complainant of P49,546.00. Since complainant's salary as US$870 and a seaman's sick
wage entitlement is fixed to a maximum of 120 days, his "sickness wages would rest to a
total sum of US$3,480 or its peso equivalent. On this, complainant has been paid only
[P]49,546.00 (US$1,943), thereby leaving for complainant a balance of US$1,537. Finally, it
is also argued that as regards the balance, the same has been paid citing as proof the
Sickness Release and Quitclaim signed by complainant (Annexes "C" & "C-1"). Complainant,
on the other hand denied this, and contended that the quitclaim and release is invalid.
Considering that there is no proof on record that this balance of US$1,537 was paid, unlike
the P49,546.00, the same is granted.

WHEREFORE, premises above-considered, a decision is hereby issued ordering respondent

German Marine Agencies Inc. to pay complainant the following sums:

(a) Disability benefit - - - - - - - - - - - - - - - - - US$25,000.00

 (b) Sickness wage balance - - - - - - - - - - - - - - - - - US $1,137.00

all in the aggregate of Twenty Six Thousand One Hundred Thirty Seven Dollars
(US$26,137.00) or its peso equivalent, the claim for damages being hereby dismissed for
lack of merit, plus ten (10%) percent attorney's fees.

SO ORDERED.

On 29 July 1998, the NLRC3 affirmed the labor arbiter's decision in toto and declared that the latter's
findings and conclusions were supported by substantial evidence.4 After its motion for
reconsideration was denied by the NLRC on 20 May 1999, petitioners repaired to the Court of
Appeals.5 The appellate court's assailed decision was promulgated on 1 December 1999, upholding
the decision of the NLRC, with the modification that petitioners were ordered to pay private
respondent exemplary damages in the amount of P50,000.00. The appellate court reasoned out its
decision,6 thus

The basic issue here is: Whether or not petitioner is liable to pay private respondent's claim
as awarded by the NLRC, and whether or not there was abuse of discretion on the part of
the NLRC in affirming such decision on appeal? To resolve this issue, this Court took time in
looking closely at the pertinent provision of the Standard Employment Contract Governing
the Employment of Filipino Seafarers on Board Ocean-Going Vessels, particularly PART II,
SECTION C, par. no. 4 (c), and par. no. 5, which states as follows:

"SECTION C. COMPENSATION BENEFIT

"4. The liabilities of the employer when the seaman suffers injury or illness during the
term of his contract are as follows:

"xxx xxx xxx

c. The employer shall pay the seaman his basic wages from the time he leaves the
vessel for medical treatment. After discharge from the vessel, the seaman is entitled
to one hundred percent (100%) of his basic wages until he is declared fit to work or
his degree of permanent disability has been assessed by the company-designated
physician, but in no case shall this period exceed one hundred twenty (120) days. x x
x x.

"5. In case of permanent total or partial disability of the seamen during the term of his
employment caused by either injury or illness the seamen shall be compensated in
accordance with the schedule of benefits enumerated in Appendix 1 of his Contract.
Computation of his benefits arising from an illness or disease shall be governed by
the rates and the rules of compensation applicable at the time the illness or disease
was contracted.

xxx xxx xxx. . ."

A cursory reading of these applicable contractual provisions and a thorough evaluation of the
supporting evidence presented by both parties, lends strong credence to the contentions and
arguments presented by private respondent.
The award of disability compensation has a clear and valid basis in the Standard
Employment Contract and the facts as supported by the medical certificate issued by Dr.
Nannette Domingo-Reyes of the Manila Doctors Hospital. Petitioners' contention, that dr.
Domingo-Reyes is not company designated is far from the truth. The designation of the
Manila Doctors Hospital by petitioners as the company doctor for private respondent cannot
be denied. Their very act of committing private respondent for treatment at the Manila
Doctors Hospital under the care of its physician is tantamount to company designation. The
very act of paying the hospital bills by the petitioners constitutes their confirmation of such
designation. Hence, petitioners cannot resort to the convenience of denying this fact just to
evade their obligation to pay private respondent of his claims for disability benefit.

This Court also finds no basis on (sic) the petitioners' contention that the company-
designated [physician] must also be accredited with the POEA before he can engaged in the
medical treatment of a sick seaman. There is nothing in the Standard Employment Contract
that provides this accreditation requirement, and even if there is, this would be absurd and
contrary to public policy as its effect will deny and deprive the ailing seaman of his basic right
to seek immediate medical attention from any competent physician. The lack of POEA
accreditation of a physician who actually treated the ailing seaman does not render the
findings of such physician (declaring the seaman permanently disabled) less authoritative or
credible. To our mind, it is the competence of the attending physician, not the POEA
accreditation, that determines the true health status of the patient-seaman, which in this
instant case, is [sic] the attending physicians from the Manila Doctors Hospital.

As to the award of the balance of wages, this Court is inclined not to disturb the factual
findings of the NLRC. The failure of the petitioners to present a strong and credible evidence
supporting the fact of alleged payment of the balance of sickness justified the award of such
claim. The long standing doctrine in labor cases that "in case of doubt, the doubt is resolved
in favor of labor" applies. For there are indications that the evidence presented by petitioners
appears to be of dubious origin as private respondent challenged the petitioners to present
the original copy of the quitclaim and the vouchers in a motion demanding from petitioners to
produce the original copy of those documents purporting to show that he had received the
alleged sum of P39,803.30, which allegedly shows the payment of the balance of his
sickness wages. This motion was vehemently opposed by petitioners. To our mind, such
opposition only created more doubts and eroded the veracity and credence of petitioners'
documentary evidence.

As to the award of attorney's fees, the same is justified by the fact that private respondent
actually hired the services of a lawyer to vindicate his right to claim for his disability benefit
which is being arbitrarily denied to him by petitioners. Had it not been for the arbitrary denial
of petitioners, private respondent could not have been compelled to hire the services of a
lawyer to pursue his claims in court, for which he is presumed to have incurred costs.

With respect to private respondent's claim for damages, this Court finds that the NLRC
overlooked the attendance of negligence on the part of petitioners in their failure to provide
immediate medical attention to private respondent. It further appears that negligence not only
exists but was deliberately perpetrated by petitioners by its arbitrary refusal to commit the
ailing private respondent to a hospital in New Zealand or at any nearest port deprived of his
right to immediate medical attention by petitioners, which resulted to the serious deterioration
of his health that caused his permanent partial disability. Such deprivation of immediate
medical attention appears deliberate by the clear manifestation from petitioners' own words
which states that, "the proposition of the complainant that respondents should have taken
the complainant to the nearest port of New Zealand is easier said than done. It is worthy to
note that deviation from the route of the vessel will definitely result to loss of a fortune in
 dollars not only to the respondents but likewise to the owners of the cargoes being shipped
by the said vessel."

By petitioners' own statement, they reveal their utter lack of concern for their Filipino crew.
This kind of attitude cannot be taken to pass by this Court without appropriate sanction by
way of payment of exemplary damages, if only to show that the life of a Filipino crew must be
accorded due attention and respect by the petitioners. For after all, had it not been for the
toils of this crew, among others, petitioners would not be doing as good in their business and
making "fortunes in dollars."

In affirming the decision of the Labor Arbiter, this Court finds that the NLRC never abused its
discretion nor exceeded its jurisdiction.

Hence, this Court finds no valid basis to disturb the findings of the NLRC.

WHEREFORE, the decision of the NLRC dated 29 July 1998, and the Order dated 20 May
1999, are hereby AFFIRMED, and in addition thereto, petitioners are ordered to pay
exemplary damages to private respondent in the sum of Fifty Thousand Pesos (P50,000.00).

SO ORDERED.

Petitioners' motion for reconsideration was denied by the Court of Appeals in its Resolution of 11
February 2000. Hence, the present appeal.

Disability Benefits

Petitioners contend that the existence and degree of a seaman's disability must be declared by a
"company-designated physician" who must be accredited with the POEA. Following this line of
reasoning, petitioners claim that private respondent is not entitled to disability benefits because he
was found fit to return to work by Dr. Victoria Florendo Cayabyab, the designated physician of
petitioners, who is also accredited with the POEA.7

Disagreeing with petitioners' stand, the labor arbiter ruled that, for purposes of determining
compensation benefits under the Standard Employment Contract, an ailing seaman need not have
his condition assessed by a doctor or hospital accredited with the POEA. Consequently, the labor
arbiter gave more weight to the opinion of the specialists from the Manila Doctors Hospital who
treated private respondent and declared him as having sustained a partial permanent disability and
unfit to go back to his previous work.8 Meanwhile, the Court of Appeals held that petitioners' act of
committing private respondent for treatment at the Manila Doctors Hospital and of paying his hospital
bills therein is tantamount to "company-designation," and therefore, the certificate issued by Dr.
Nanette Domingo-Reyes of the Manila Doctors Hospital describing private respondent as suffering
from a partial permanent disability should be construed as decisive in the matter of private
respondent's entitlement to disability benefits. The appellate court also declared that nothing in the
Standard Employment Contract requires the company-designated physician or hospital to also be
accredited with the POEA.9

In the case at bar, the parties are at odds as to the proper interpretation of the POEA Standard
Employment Contract Government the Employment of All Filipino Seamen On Board Ocean-Going
Vessels (Standard Employment Contract), particularly Part II, Section C thereof, which provides that

 xxx xxx xxx

4. The liabilities of the employer when the seaman suffers injury or illness during the term of
his contract are as follows:

a. The employer shall continue to pay the seaman his basic wages during the time
he is on board the vessel;

b. If the injury or illness requires medical and/or dental treatment in a foreign port, the
employer shall be liable for the full cost of such medical, dental, surgical and hospital
treatment as well as board and lodging until the seaman is declared fit to work or to
be repatriated.

However, if after repatriation the seaman still requires medical attention arising from
said injury or illness, he shall be so provided at cost to the employer until such time
he is declared fit or the degree of his disability has been established by the company-
designated physician.

c. The employer shall pay the seaman his basic wages from the time he leaves the
vessel for medical treatment. After discharge from the vessel the seaman is entitled
to one hundred percent (100%) of his basic wages until he is declared fit to work or
the degree of permanent disability has been assessed by the company-designated
physician, but in no case shall this period exceed one hundred twenty (120) days.
For this purpose, the seaman shall submit himself to a post-employment medical
examination by the company-designated physician within three working days upon
his return except when he is physically incapacitated to do so, in which case a written
notice to the agency within the same period is deemed as compliance. Failure of the
seaman to comply with the mandatory reporting requirement shall result in his
forfeiture of the right to claim the above benefits.

xxx xxx xxx

5. In case of permanent total or partial disability of the seaman during the term of
employment caused by either injury or illness the seaman shall be compensated in
accordance with the schedule of benefits enumerated in Appendix 1 of his Contract.
Computation of his benefits arising from an illness or disease shall be governed by the rates
and the rules of compensation applicable at the time the illness or disease was contracted.

xxx xxx xxx

Petitioners' contention that the existence and grade of a seaman's disability must be pronounced by
a physician accredited by the POEA does not find any support in the abovecited provision, nor in any
other portion of the Standard Employment Contract. In order to claim disability benefits under the
Standard Employment Contract, it is the "company-designated" physician who must proclaim that
the seaman suffered a permanent disability, whether total or partial, due to either injury or illness,
during the term of the latter's employment. There is no provision requiring accreditation by the POEA
of such physician. In fact, aside from their own gratuitous allegations, petitioners are unable to cite a
single provision in the said contract in support of their assertions or to offer any credible evidence to
substantiate their claim. If accreditation of the company-designated physician was contemplated by
the POEA, it would have expressly provided for such a qualification, by specifically using the term
"accreditation" in the Standard Employment Contract, to denote its intention. For instance, under the
Labor Code it is expressly provided that physicians and hospitals providing medical care to an
injured or sick employee covered by the Social Security System or Government Service Insurance
System must be accredited by the Employees Compensation Commission.10 It is a cardinal rule in
the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control.11 There I no
ambiguity in the wording of the Standard Employment Contract the only qualification prescribed for
the physician entrusted with the task of assessing the seaman's disability is that he be "company-
designated." When the language of the contract is explicit, as in the case at bar, leaving no doubt as
to the intention of the drafters thereof, the courts may not read into it any other intention that would
contradict its plain import.12

The word "designate" means to specify, to mark out and make known, to identify by name, to
indicate, to show, to distinguish by mark or description, or to set apart for a purpose or duty.13 The
Court agrees with the appellate court's ruling that petitioners' act of committing private respondent
for treatment at the Manila Doctors Hospital and paying the hospital bills therein is tantamount to
"company-designation." By such unequivocal acts, petitioners clearly set apart and distinguished the
Manila Doctors Hospital, together with its team of specialists, as the ones qualified to assess the
existence and degree of private respondent's disability and thereby resolve the question of the
latter's entitlement to disability benefits under the Standard Employment Contract.

In addition to their having been effectively designated by petitioners, it was the physicians from the
Manila Doctors Hospital who examined and treated private respondent for a little more than one
month, subjecting the latter to a series of medical procedures, such as medical therapy, neurological
surgical drainage for brain abscess, bilateral thalamic area S/P craniotomy (Burr Hole), and
opthalmological (orbit) surgery for socket revision and reconstruction of his left eye. The extensive
medical attention given to private respondent enabled the Manila Doctors Hospital specialists to
acquire a detailed knowledge and familiarity with private respondent's medical condition.14 No doubt
such specialized knowledge enabled these physicians to arrive at a much more accurate appraisal
of private respondent's condition, including the degree of any disability which he might have
sustained, as compared to another physician not privy to private respondent's case from the very
beginning. Thus, the appellate court was not mistaken in giving more weight to the certificate issued
by Dr. Nanette Domingo-Reyes of the Manila Doctors Hospital dated December 4, 1996, than to the
one issued by Dr. Victoria Florendo Cayabyab.

On the strength of Dr. Domingo-Reyes's medical certificate which stated that private respondent
"can be classified under partial permanent disability and is not fit to go back to his previous work due
to his mental state," the labor arbiter awarded $25,000.00 as disability benefits, which award was
upheld by the NLRC and the appellate court. Petitioners insist that there is no factual basis for the
award of $25,000.00 since there is no finding as to the grade of permanent partial disability
sustained by private respondent, in accordance with Appendix 1 of the Standard Employment
Contract (Schedule of Disability or Impediment For Injuries Suffered and Diseases or Illness
Contracted), and therefore, no means of determining the exact amount of compensation to which
private respondent may be entitled.15

The Court does not agree with petitioners' position. Under the Standard Employment Contract the
grade of disability suffered by the seaman must be ascertained in accordance with Appendix 1 of
such contract, which is partially reproduced herein

Appendix 1
SCHEDULE OF DISABILITY OR IMPEDIMENT
FOR INJURIES SUFFERED AND OR ILLNESS CONTRACTED

HEAD
 Traumatic head injuries that result to:

1. Apperture unfilled with bone not over three (3) inches

without brain injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.......... Gr. 9
2. Apperture unfilled with bone over three (3) inches
without brain injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.................... Gr. 3
3. Severe paralysis of both upper or lower extremities or
one upper and one lower extremity . . . . . . . . . . . . . . . . .
.................. Gr. 1
4. Moderate paralysis of two (2) extremities producing
moderate difficulty in movements with self care activities
........... Gr. 6
5. Slight paralysis affecting one extremity producing slight
difficulty with self-care activities . . . . . . . . . . . . . . . . . . . .
............ Gr. 10
6. Severe mental disorder or Severe Complex Cerebral
function disturbance or post traumatic psychoneurosis
which require regular aid and attendance as to render
worker permanently unable to perform any work . . . . . . .
................... Gr. 1
7. Moderate mental disorder or moderate brain functional
disturbance which limits worker to the activities of daily
living with some directed care or attendance . . . . . . . . . .
......... Gr. 6
8. Slight mental disorder or disturbance that requires little
attendance or aid and which interferes to a slight degree
with the working capacity of the claimant . . . . . . . . . . . .
........ Gr. 10
9. Incurable imbecility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.... Gr. 1

Each grade under Appendix 1 has an equivalent disability allowance or benefit expressed in terms of
a percentage of the maximum amount of $50,000.00. This is specified in Appendix 1-A of the
Standard Employment Contract

APPENDIX 1-A

SCHEDULE OF DISABILITY ALLOWANCES

Impediment Grace Impediment

 1 Maximum Rate x 120.00%

2" x 88.81%

3" x 78.36%

4" x 68.66%

5" x 58.96%

6" x 50.00%

7" x 41.80%

8" x 33.59%

9" x 26.12%

10 " x 20.15%

11 " x 14.93%

12 " x 10.45%

13 " x 6.72%

14 " x 3.74%

Maximum Rate: US$50,000.

To be paid in Philippine Currency equivalent at the exchange rate prevailing during the time of
payment.

Private respondent asked petitioner for disability benefits in the amount of $25,000.00, or fifty
percent (50%) of the maximum rate of $50,000.00, which, under Appendix 1-A, is awarded when the
seaman sustains a grade 6 disability. One of the grade 6 head injuries listed in Appendix 1,
specifically number seven (7), is described as a "moderate mental disorder or moderate brain
functional disturbance which limits worker to the activities of daily living with some directed care or
attendance." This coincides with Dr. Domingo-Reyes' diagnosis of private respondent's condition, as
follows

xxx xxx xxx

Work-ups and Management:

Patient was admitted on an emergency bases for drowsiness, behavioral change and on and
off fever. This started with headaches since the first week of June 1995 while on duty (on
voyage). Patient progressively deteriorated and arrived here already dehydrated with high
grade fever. (emphasis supplied)

Emergency CT Scan of the brain revealed rounded masses in both thalamus on the brain;
the larger mass was situated at the right.
 Burr hole at the right parietal and drainage of the right thalamic abscess was done on June
26, 1995. Repair of shallow fornix of left eye and biopsy was done for culture studies
thereafter.

Mr. De Lara stayed in the hospital for 33 days and was still in bedridden state when
discharge. He became ambulant on mid-August 1996 but his cerebral functions (cognitive
and behavioral) remain impaired.

This is his 18th month of illness. His admission last June 24, 1995 is considered catastrophic.
He now can be classified under partial permanent disability and is not fit to go back to his
previous work due to his mental state.16 (emphasis supplied)

xxx xxx xxx

Thus, the medical certificate of Dr. Domingo-Reyes is more than sufficient basis for the award of
disability benefits in the amount of $25,000.00 in favor of private respondent.

Sickness wages

Petitioners assert that the award of $1,137.00, representing the balance of the sickness wages owed
to private respondent, is erroneous and in absolute disregard of their documentary evidence
particularly the three check vouchers in the total amount of P89,354.80, all issued in 1995 in favor of
either private respondent or his wife, and the "Sickwages Release & Quitclaim" which, according to
petitioners, taken together would prove that they had paid private respondent the total amount of
P89,354.80, or $3,480.00, corresponding to the 120 days sickness wages as required under the
Standard Employment Contract.

Contrary to petitioners' assertions, the labor arbiter held that only P49,546.00 ($1,943.00) was paid
by petitioners and that private respondent is still entitled to the balance of the sickness wages in the
amount of $1,537.00. According to the labor arbiter, petitioners failed to prove that they had paid this
amount to private respondent, notwithstanding the document entitled "Sickness Release &
Quitclaim" introduced by petitioners in evidence, which was not given credence.17 The NLRC and the
Court of Appeals concurred with the labor arbiter on this issue. The appellate court held that the
documentary evidence of petitioners was insufficient to support their contentions.18

The Supreme Court has always accorded respect and finality to the findings of fact of the NLRC,
particularly if they coincide with those of the Labor Arbiter, when supported by substantial evidence.
The reason for this is that a quasi-judicial agency like the NLRC has acquired a unique expertise
because its jurisdiction is confined to specific matters.19 Whether or not petitioners actually paid the
balance of the sickness wages to private respondent is a factual question. In the absence of proof
that the labor arbiter or the NLRC had gravely abused their discretion, the Court shall deem
conclusive and cannot be compelled to overturn this particular factual finding.20

Damages

We affirm the appellate court's finding that petitioners are guilty of negligence in failing to provide
immediate medical attention to private respondent. It has been sufficiently established that, while the
M/V T.A. VOYAGER was docked at the port of New Zealand, private respondent was taken ill,
causing him to lose his memory and rendering him incapable of performing his work as radio officer
of the vessel. The crew immediately notified the master of the vessel of private respondent's
worsening condition. However, instead of disembarking private respondent so that he may receive
immediate medical attention at a hospital in New Zealand or at a nearby port, the master of the
vessel proceeded with the voyage, in total disregard of the urgency of private respondent'' condition.
Private respondent was kept on board without any medical attention whatsoever for the entire
duration of the trip from New Zealand to the Philippines, a voyage of ten days. To make matters
worse, when the vessel finally arrived in Manila, petitioners failed to directly disembark private
respondent for immediate hospitalization. Private respondent was made to suffer a wait of several
more hours until a vacant slot was available at the pier for the vessel to dock. It was only upon the
insistence of private respondent's relatives that petitioners were compelled to disembark private
respondent and finally commit him to a hospital.21 There is no doubt that the failure of petitioners to
provide private respondent with the necessary medical care caused the rapid deterioration and
inevitable worsening of the latter's condition, which eventually resulted in his sustaining a permanent
disability.
1w phi 1.nt

In light of the foregoing, petitioners are liable for moral damages for the physical suffering and
mental anguish caused to private respondent.22 There is no hard and fast rule in the determination of
what would be a fair amount of moral damages, since each case must be governed by its own
peculiar circumstances.23 In the present case, the Court considers the amount of P50,000.00 in
moral damages as proper.24

Meanwhile, exemplary damages are imposed by way of example or correction for the public good,
pursuant to Article 2229 of the Civil Code. They are imposed not to enrich one party or impoverish
another but to serve as a deterrent against or as a negative incentive to curb socially deleterious
actions. While exemplary damages cannot be recovered as a matter of right, they need not be
proved, although plaintiff must show that he is entitled to moral, temperate, or compensatory
damages before the court may consider the question of whether or not exemplary damages should
be awarded.25 In quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.26 Coming now to the case at bar, the appellate court found that

negligence not only exists but was deliberately perpetrated by petitioners by its arbitrary
refusal to commit the ailing private respondent to a hospital in New Zealand or at any nearest
port which resulted to the serious deterioration of his health that caused his permanent
partial disability. Such deprivation of immediate medical attention appears deliberate by the
clear manifestation from petitioners' own words which states that, "the proposition of the
complainant that respondents should have taken the complainant to the nearest port of New
Zealand is easier said than done. It is worthy to note that deviation from the route of the
vessel will definitely result to loss of a fortune in dollars not only to the
respondents [petitioners herein] but likewise to the owners of the cargoes being shipped by
the said vessel."

Petitioners never denied making this statement. Given the prevailing circumstances, the appellate
court's award of P50,000.00 as exemplary damages is adequate, fair, and reasonable.27

Although the labor arbiter awarded attorney's fees, which award was subsequently affirmed by the
NLRC and the Court of Appeals, the basis for the same was not discussed in his decision nor borne
out by the records of this case, and should therefore be deleted. There must always be a factual
basis for the award of attorney's fees.28 This is consistent with the policy that no premium should be
placed on the right to litigate.29

WHEREFORE, the 1 December 1999 Decision and 11 February 2000 Resolution of the Court of
Appeals are AFFIRMED, with the modification that petitioners must also pay private respondent
P50,000.00 as moral damages and the award of attorney's fees is deleted. SO ORDERED.

G.R. No. 151944 January 20, 2004

ENGR. ERNESTO T. MATUGAS, Petitioner,
vs.
COMMISSION ON ELECTIONS and ROBERT LYNDON S. BARBERS, Respondents.

DECISION

TINGA, J.:

The Local Government Code of 19911 requires that an elective local official be a citizen of the
Philippines.2 Whether the incumbent Governor of Surigao del Norte is a citizen of the Philippines and,
therefore, qualified to hold such office is the issue in this case.

On February 28, 2001, private respondent Robert Lyndon S. Barbers filed his certificate of
candidacy for the position of Governor of Surigao del Norte for the May 14, 2001 elections. On April
10, 2001, petitioner Ernesto T. Matugas, himself a candidate for the same post, filed with the
Commission on Elections (COMELEC) a Petition to Disqualifyprivate respondent as candidate.
The Petition alleged, among other grounds, that private respondent is not a Filipino citizen.

In support of this claim, petitioner offered in evidence a copy of a letter-request dated August 25,
2000 from a certain Jesus Agana, a "confidential agent" of the Bureau of Immigration, addressed to
one George Clarke, purportedly of the United States Embassy. Below the request was the reply of
said George Clarke stating that the "subject" was naturalized as an American citizen on October 11,
1991 in Los Angeles, California. The document3reads:

Dear Mr. Clark [sic]:

Per our phone conversation, may I request for [sic] a certification from your Embassy regarding the
US citizenship of MR. ROBERT LYNDON S. BARBERS who was born on July 15, 1968.

Kindly fax your reply, addressed to the undersigned at Tel. No. (02) 3384456.

Thank you and regards.

Very truly yours,

(Sgd.)
JESUS AGANA
Confidential Agent

Jesus Agana:

SUBJECT was naturalized on October 11, 1991 in Los Angeles, CA.

(Sgd.)
G.R. Clarke, INS/Manila

Petitioner also presented a Certification4 issued by the Bureau of Immigration and Deportation (BID)
dated 1 September 2000 containing Barbers travel records and indicating in certain entries that
private respondent is an American citizen. The Certification states:

CERTIFICATION
THIS IS TO CERTIFY THAT the name BARBERS, ROBERT LYNDON S, American, appears in our
available Computer Database/Passenger manifest/IBM listing on file as of September 1, 2000 10:27
am with the following travel records:

Date of Departure : 01/28/1997

Destination : OSA-Osaka
Flight No. : NWo26-Northwest Airlines
Passport No. : 034354245

Nationality : Filipino
Date of Birth : 07/15/1968

Phil. Address : 6 Hercules St. Bel Air II Makati

Immig. Status : RP
Immig. Officer : not stated

Date of Arrival : 02/12/1998

Origin : LON-London

Flight No. : PR731-Phil. Airlines

Passport No. : 034354245

Nationality : American

Date of Birth : American

Phil. Address : 6 Hercules St. Bel Air II Makati

Immig. Status : BB365

Immig. Officer : REGALA

Date of Arrival : 07/31/1998
Origin : BKK-Bangkok

Flight No. : TG620-Thai Airways

Passport No. : OF006673

Nationality : American
Date of Birth : 07/15/1968

Phil. Address : 16 Hercules St. Bel Air II Makati

Immig. Status : BB365
Immig. Officer : SOR
FURTHER, THIS IS TO CERTIFY THAT the name BARBERS, ROBERT LYNDON
SMITH, American, appears in our Computer Database/Passenger manifest/IBM listing on file with
the following travel records:

Date of Departure : 07/27/1998

Destination : not available

Flight No. : TG621-Thai Airways
Passport No. : not available

Nationality : Filipino
Date of Birth : 07/15/1968

Phil. Address : not available

Immig. Status : not available
Immig. Officer : RACHO

This certification is issued upon request of Mr. Bebot Pomoy for whatever legal purpose it may
serve.

Verified by : Edilberto Orbase Computer Section

Date & Time : September 1, 2000 10:27 am

(Sgd.)
ATTY. FELINO C. QUIRANTE, JR.
Acting Chief, Admin. Division

In addition, petitioner submitted a Certification5 issued by the Special Committee on Naturalization of

the Office of the Solicitor General stating that, based on their records, there is no pending petition by
private respondent for repatriation. Neither has one been granted in his favor.

In the meantime, private respondent garnered the highest number of votes in the gubernatorial race.
On May 17, 2001, petitioner filed a Motion for Suspension/Annulment of Proclamation of private
respondent. The Motion, however, was overtaken by subsequent events when, on the following day,
May 18, 2001, private respondent was proclaimed the duly elected governor of Surigao del Norte.

On July 5, 2001, the Second Division of the COMELEC issued a Resolution dismissing for lack of
merit the Petition to Disqualify. The COMELEC found "little or no probative value" in the notation of
George Clarke to Aganas letter-request.6 While noting that the BID certification involving the travel
records of Robert Lyndon S. Barbers stated that he was an American, the COMELEC held that
"there is no other independent evidence... to justify petitioners claim that respondent has renounced
his allegiance to the Philippines at any time."7

Petitioner filed a Motion for Reconsideration with the COMELEC En Banc, which on January 8, 2002
dismissed the Motion and affirmed the Resolution of the Second Division.
Petitioner thus instituted these proceedings for certiorari, claiming that the COMELEC committed
grave abuse of discretion in denying his Petition to Disqualify.8 He maintains that private respondent
was not a Filipino citizenship at the time of his election.

Basic in the law of evidence is that one who alleges a fact has the burden of proving it.9 In
administrative cases, the quantum of proof required is substantial evidence.10 Petitioner did not
overcome his burden. The documentary evidence he submitted fails to establish that private
respondent is not a Filipino citizen.

The document containing the notation of George Clarke does not prove that private respondent is
indeed a naturalized American citizen. For the purpose of their presentation in evidence, documents
are either public or private. Public documents include the written official acts or records of the official
acts of the sovereign authority, official bodies and tribunals, and public officers, whether of the
Philippines, or of a foreign country.11 The record of such public documents may be evidenced by an
official publication thereof or by a copy attested by the officer having the legal custody of the record.
If the record is not kept in the Philippines, the attested copy should be accompanied by a certificate
that such officer has custody thereof.12

The grant of United States citizenship by naturalization is an official act of the United States. The
document containing the record of this act is, therefore, a public document and, following the rule
cited above, this document can only be evidenced by its official publication or a copy duly attested
by the officer having legal custody thereof.

The notation in the letter-inquiry of Jesus Agana is neither an official publication of the document that
contains the record of private respondents naturalization, nor a copy attested by the officer who has
legal custody of the record. Petitioner did not show if Clarke, the notations alleged author, is the
officer charged with the custody of such record.

Furthermore, Section 7, Rule 130 of the Rules of Court states that when the original of a document
is in the custody of a public officer or is recorded in a public office, as in this case, the contents of
said document may be proved by a certified copy issued by the public officer in custody thereof. The
subject letter-inquiry, which contains the notation, appears to be a mere photocopy, not a certified
copy.

The other document relied upon by petitioner is the Certification dated 1 September 2000 issued by
the BID. Petitioner submits that private respondent has declared that he is an American citizen as
shown by said Certificationand, under Section 26, Rule 130 of the Rules of Court, such declaration
may be given in evidence against him.

The rule cited by petitioner does not apply in this case because the rule pertains to the admissibility
of evidence. There is no issue here as to the admissibility of the BID Certification; the COMELEC did
not hold that the same was inadmissible. In any case, the BID Certification suffers from the same
defect as the notation from the supposed US Embassy official. Said Certification is also a photocopy,
not a certified copy.

Moreover, the certification contains inconsistent entries regarding the "nationality" of private
respondent. While some entries indicate that he is "American," other entries state that he is
"Filipino."

Petitioner also attached in his Memorandum before this Court another document,13 obviously a
photocopy, which reads in full:
 UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

U.S. COURTHOUSE

312 NORTH SPRING STREET, SUITE 329

LOS ANGELES, CALIFORNIA, 90012

August 1, 2001

The official Naturalization the United States District Court of California shows the following:

Name : Robert Lyndon Barbers

Date of Birth : July 15, 1968

Petition No. : 890573

Alien No. : A40 460 660
Certificate No. : 14738741

Date of
Naturalization : October 11, 1991

(Sgd.)
Deputy Clerk Abel Martinez

The above document was attached to an "Authentication,"14 also a photocopy, stating:

CONSULATE GENERAL OF THE PHILIPPINES)

CITY OF LOS ANGELES )S.S.
STATE OF CALIFORNIA, U.S.A.

AUTHENTICATION

TO ALL WHOM THESE PRESENTS SHALL COME, GREETINGS:

I, CRISTINA G. ORTEGA, CONSUL at Los Angeles, California, duly commissioned and qualified, do
hereby certify that ABEL MARTINEZ whose seal/signature appears on the annexed certificate was,
at the time he signed the annexed certificate, A Deputy Clerk of the United States District Court,
Central District of California and verily believe that his seal/signature affixed thereto is genuine.

For the contents of the annexed document, this Consulate General assumes no responsibility.

IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the Consulate
General of the Republic of the Philippines at Los Angeles, California, U.S.A., to affixed this day of 30
August 2001.
(Sgd.)
CRISTINA G. ORTEGA
Consul
of the Republic of the Philippines
The annexed document is an Information
of Naturalization Re: Robert Lyndon
Barbers executed by United States District
Court, Central District of California

Subsequently, petitioner filed a Manifestation with Motion for Leave to Admit Original Documents,
appending thereto the originals15 of the above documents.

These new documents likewise cannot be admitted in evidence. To repeat, Section 24, Rule 132 of
the Rules of Court requires that if the public document or the public record is not kept in the
Philippines, its official publication or its copy duly attested by the officer in charge of the custody of
the same must be accompanied by a certificate that such officer has the custody. Said certificate
may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or
consular agent or by any officer in the foreign service of the Philippines stationed in the foreign
country in which the record is kept and authenticated by the seal of his office. In this case, the
Authentication executed by Cristina G. Ortega, the Philippine Consul in Los Angeles, California
merely states that Abel Martinez is the Deputy Clerk of the United States District Court, Central
District of California. It does not state that said Deputy Clerk has the custody of the above record.

There is another cogent reason that precludes the admission of these documents. Petitioner calls
upon this Court to consider alleged new evidence not presented before the COMELEC, a course of
action clearly beyond the courts certiorari powers. In Lovina and Montila v. Moreno and
Yonzon,16 the Court of First Instance (CFI) conducted a trial de novo even though the Secretary of
Public Works and Communications, in the exercise of his administrative powers, had made his own
independent findings of fact. This Court reversed the decision of the CFI because:

The findings of the Secretary can not be enervated by new evidence not laid before him, for that
would be tantamount to holding a new investigation, and to substitute for the discretion and
judgment of the Secretary the discretion and judgment of the court, to whom the statute had not
entrusted the case. It is immaterial that the present action should be one for prohibition or injunction
and not one for certiorari; in either event the case must be resolved upon the evidence submitted to
the Secretary, since a judicial review of executive decisions does not import a trial de novo, but only
an ascertainment of whether the executive findings are not in violation of the Constitution or of the
laws, and are free from fraud or imposition, and whether they find reasonable support in the
evidence.

Similarly, petitioner in this case cannot "enervate" the COMELECs findings by introducing new
evidence before this Court, which in any case is not a trier of facts, and then ask it to substitute its
own judgment and discretion for that of the COMELEC. 1wphi 1

The rule in appellate procedure is that a factual question may not be raised for the first time on
appeal,17 and documents forming no part of the proofs before the appellate court will not be
considered in disposing of the issues of an action.18 This is true whether the decision elevated for
review originated from a regular court19 or an administrative agency or quasi-judicial body,20 and
whether it was rendered in a civil case,21 a special proceeding,22or a criminal case.23 Piecemeal
presentation of evidence is simply not in accord with orderly justice.24
The same rules apply with greater force in certiorari proceedings. Indeed, it would be absurd to hold
public respondent guilty of grave abuse of discretion for not considering evidence not presented
before it. The patent unfairness of petitioners plea, prejudicing as it would public and private
respondents alike, militates against the admission and consideration of the subject documents.

Finally, petitioner in his Memorandum25 invokes the case of Yu v. Defensor-Santiago,26 holding that a
naturalized Filipino citizen effectively renounces his Filipino citizenship when he applies for and is
issued a Portuguese passport, and declares his nationality as a Portuguese in commercial
documents he signed. That case, however, has no relevance here because the documents
submitted in this case, assuming that they constitute substantial evidence that private respondent
indeed renounced his Filipino citizenship, are inadmissible. In other words, there is no evidence in
this case of any renunciation.

There is grave abuse of discretion amounting to lack of jurisdiction when the respondent board,
tribunal or officer exercising judicial functions exercised its judgment in a capricious, whimsical,
arbitrary or despotic manner, as when the assailed order has no basis both in fact and in law.27 In this
case, the Petition to Disqualify is not supported by substantial evidence. Hence, the COMELEC did
not commit grave abuse of discretion in issuing the assailed Resolutions dismissing the Petition.

WHEREFORE, the Petition is DISMISSED.

SO ORDERED.

G.R. No. 152843 July 20, 2006

INTERCONTINENTAL BROADCASTING CORPORATION, petitioner,

vs.
REYNALDO BENEDICTO, deceased, substituted by his surviving spouse LOURDES V.
BENEDICTO, and children, namely: REYNALDO V. BENEDICTO, SHIRLEY V. BENEDICTO-
TAN, EDGAR V. BENEDICTO and LILIBETH V. BENEDICTO-DE LA VICTORIA,*, respondents.

DECISION

CORONA, J.:

This is a petition for review on certiorari1 of the October 18, 2001 decision2 and March 18, 2002
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 53413 which in turn affirmed the March
5, 1999 decision4 and June 10, 1999 resolution5 of the National Labor Relations Commission (NLRC)
in NLRC NCR CA Case No. 017886-99.

Petitioner alleged that Intercontinental Broadcasting Corporation is a government-owned and

controlled corporation.6 It is engaged in the business of mass media communications including,
among others, the operation of television Channel 13 (IBC 13).7

In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio, the general manager8 then of
petitioner, as marketing manager with a monthly compensation of P20,000 plus 1% commission
from collections of all advertising contracts consummated.9

In a letter dated October 11, 1994 signed by Tomas Gomez III, at that time the president of
petitioner, Benedicto was terminated from his position.10
On December 3, 1996, Benedicto filed a complaint with the NLRC for illegal dismissal and damages.
He alleged that after his appointment, he was able to increase the televiewing, listening and
audience ratings of petitioner which resulted in its improved competitive financial
strength.11 Specifically, in 1994, he claimed that he successfully initiated, pursued and consummated
an advertising contract with VTV Corporation for a period of five years involving the amount of P600
million.12 However, on October 11, 1994, he was terminated from his position without just or
authorized cause.

Labor arbiter Jovencio LL. Mayor, Jr.,13 in a decision dated August 17, 1998, ruled in favor of
Benedicto finding that he was indeed illegally dismissed. Consequently, Mayor: (1) ordered his
reinstatement with full backwages from the time of his dismissal up to his actual reinstatement
(amounting to P920,000 at the time of the promulgation of the decision); (2) directed petitioner to pay
his 1% commission on the contract with VTV Corporation (P645,000), attorneys fees in the amount
of 10% of the total award (P156,500) and (3) dismissed the claim for moral and exemplary
damages.14

Finding the award excessive, petitioner, on October 15, 1998, filed with the NLRC its memorandum
on appeal with motion to re-compute the award on which the appeal bond was to be based.15 This
motion was not acted upon,16hence, on December 10, 1998, petitioner proceeded to file the appeal
bond based on the amounts17 awarded in the judgment appealed from.18

In a decision promulgated on March 5, 1999, the NLRC dismissed the appeal and ruled that
petitioner failed to perfect its appeal since it did not file the appeal bond within the reglementary
period. The CA affirmed the NLRCs decision.

Thus this petition with application for preliminary injunction and/or temporary restraining order
alleging the following assignment of errors:

I. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING THE ASSAILED

DECISION/RESOLUTION OF THE [NLRC] ON MERE TECHNICALITY, FAILING TO
RECOGNIZE THAT PETITIONER HAS IN FACT PERFECTED ITS APPEAL UNDER
EXISTING LAW AND JURISPRUDENCE[;]

II. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION DEPRIVING PETITIONER OF ITS RIGHT TO APPEAL, BY
IGNORING THE MERITS OF THE MOTION TO RECOMPUTE AWARD TO REDUCE
BOND AND ITS SIGNIFICANCE IN RELATION TO THE PERFECTION OF THE APPEAL[;]

III. WITH DUE RESPECT, THE [CA] ERRED IN NOT PASSING UPON THE SUBSTANTIVE
MERITS OF THE CASE, SPECIALLY ON THE VALIDITY OF THE REINSTATEMENT OF
[BENEDICTO] AT AGE SEVENTY TWO (72), CONTRARY TO LAW AND
JURISPRUDENCE, AND THE GRANT OF BACKWAGES BEYOND [THE] AGE FOR
COMPULSORY RETIREMENT AT 65[;]

IV. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION THAT GRANTS 5-YEAR AUTOMATIC INCREASE OF AWARD
[SUCH] AS FROM P1.565M TO 2.711M WITHOUT SETTING [BENEDICTO]S MOTION TO
RECOMPUTE AWARD FOR HEARING AND WITHOUT DUE NOTICE THEREOF
DEPRIVING THE PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS[;]

V. THE [CA] ERRED IN IGNORING THE ISSUE OF JURISDICTION RAISED BY

PETITIONER.19
On June 26, 2002, this Court issued a temporary restraining order enjoining Benedicto and the
NLRC from implementing the decision of labor arbiter Mayor.20

During the pendency of the case, on November 6, 2002, Benedicto passed away.21 He was
substituted by his surviving spouse Lourdes V. Benedicto and their four children.22

After this petition was given due course, Atty. Rodolfo B. Barriga, who claimed to have been hired by
Benedicto as collaborating counsel, filed a motion dated December 17, 2002 praying to be reinstated
as counsel of record of respondents.23 The Court, in a resolution dated March 26, 2003, denied the
motion since any attorney-client relationship between him and Benedicto, if it indeed existed, was
terminated by the latters death. Thereafter, Atty. Barriga filed a motion to determine attorneys fees
and notice and statement of charging lien for attorneys fees dated May 5, 2003 praying, among
others, that we determine and approve his attorneys fees and approve the notice of his charging
lien.24

Now the resolution of the issues.

Petitioner raises the issue of jurisdiction without, however, explaining properly the basis of its
objections.25 Such half-hearted and belated attempt to argue the NLRCs alleged lack of jurisdiction
cannot possibly be taken seriously at this late stage of the proceedings.

The NLRC and the CA dismissed petitioners appeal. Both held that petitioner failed to perfect its
appeal. Petitioner had ten calendar days from its receipt of the labor arbiters decision on October 5,
1998 to appeal. While it filed its memorandum on appeal with motion to re-compute award on
October 15, 1998, the appeal bond was posted after the appeal period.

Under the second paragraph of Article 223 of the Labor Code, when a judgment involving monetary
award is appealed by the employer, the appeal is perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the NLRC in an amount equivalent
to the monetary award in the judgment. This assures the workers that if they finally prevail in the
case, the monetary award will be given to them on dismissal of the employers appeal.26 It is also
meant to discourage employers from using the appeal to delay or evade payment of their obligations
to the employees.27

Nevertheless, such amount of the bond may be reduced by the NLRC in meritorious cases, on
motion of the appellant.28 Indeed, an unreasonable and excessive amount of bond is oppressive and
unjust, and has the effect of depriving a party of his right to appeal.29

The provision of Article 223 of the Labor Code requiring the posting of a bond for the perfection of an
appeal of a monetary award must be given liberal interpretation in line with the desired objective of
resolving controversies on the merits.30 If only to achieve substantial justice, strict observance of the
reglementary periods may be relaxed if warranted.31 However, this liberal interpretation must be
justified by substantial compliance with the rule. As we declared in Buenaobra v. Lim King Guan:32

It is true that the perfection of an appeal in the manner and within the period prescribed by
law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of
making the judgment final and executory. However, technicality should not be allowed to
stand in the way of equitably and completely resolving the rights and obligations of the
parties. We have allowed appeals from the decisions of the labor arbiter to the NLRC, even if
filed beyond the reglementary period, in the interest of justice.33
In this case, petitioner posted the bond when the NLRC did not act on its motion for re-computation
of the award. There was thus substantial compliance that justified a liberal application of the
requirement on the timely filing of the appeal bond. Moreover, petitioner presented a meritorious
ground in questioning the computation of the backwages, as we shall discuss below.

We now proceed to the merits of the case.

The labor arbiter found that Benedicto was an employee (the marketing manager) of petitioner.34 He
also determined that there was no just or authorized cause for Benedictos termination. Neither did
petitioner comply with the two-notice requirement for valid termination under the law. He therefore
concluded that Benedicto was illegally dismissed.35

These factual findings of the NLRC, confirmed by the CA, are binding on us since they are
supported by substantial evidence. Petitioner, aside from merely stating that Benedictos
appointment was unauthorized,36 did not extensively deal with the issue of whether Benedicto was in
fact its employee. Besides, it is estopped from denying such fact considering its admission that its
former President, Tomas Gomez III, wrote him a letter of termination on October 11,
1994.37 Petitioner, furthermore, never contested the finding of illegal dismissal. Accordingly, there are
no strong reasons for us to again delve into the facts.

Instead, the bulk of petitioners arguments focused on the labor arbiters order of reinstatement and
award of backwages. The issue of reinstatement was mooted by Benedictos death in 2002.

As for the award of backwages, petitioner insists that the award should be limited to what Benedicto
was entitled to as of the compulsory retirement age of 65 years. When the labor arbiter promulgated
his decision (wherein he awarded the amount of P920,000 as backwages), Benedicto was already
68 years old. In an order dated August 10, 1999, he further increased the backwages by P180,000.38

We agree with petitioner that Benedicto was entitled to backwages only up to the time he reached 65
years old, the compulsory retirement age under the law.39 When Benedicto was illegally dismissed
on October 11, 1994, he was already 64 years old. He turned 65 years old on December 1, 199440 at
which age he was deemed to have retired. Since backwages are granted on grounds of equity for
earnings lost by an employee due to his illegal dismissal,41Benedicto was entitled to backwages only
for the period he could have worked had he not been illegally dismissed, i.e. from October 11, 1994
to December 1, 1994.42

Petitioner also questions the award by the labor arbiter of Benedictos 1% commission on the
blocktime sale agreement with VTV Corporation in the amount of P645,000.43 The arbiter found that
the agreement was initiated by and consummated through Benedictos efforts and that he was
entitled to the commission.44 This is another factual matter that is binding on us. However, it is
unclear how the labor arbiter arrived at the amount adjudged. We therefore rule that in computing
the amount of the commission Benedicto was entitled to, the following should be considered:

First, because Benedicto was entitled to backwages only from October 11 to December 1,
1994 when he turned 65 years old, petitioner should pay his commission only for this period.

Second, by nature, commissions are given to employees only if the employer receives
income.45 Employees, as a reward, receive a percentage of the earnings of the employer,
which they, through their efforts, helped produce.46 Commissions are also given in the form
of incentives or encouragement so that employees will be inspired to put a little more
industry into their tasks. Commissions can also be considered as direct remunerations for
services rendered.47 All these different concepts of commissions are incongruent with the
 claim that an employee can continue to receive them indefinitely after reaching his
mandatory retirement age.

Benedictos right to the commissions was coterminous with his employment with
petitioner48 and this ended when he reached the compulsory retirement age.

Lastly, the stipulation49 providing for commissions (which did not specify the period of
entitlement) would be too burdensome if interpreted to mean that Benedicto had a right to it
even after his employment with petitioner. Doubts in contracts should be settled in favor of
the greatest reciprocity of interests.50 A lopsided and open-minded construction could not
have been the parties contemplation. Had that been their intent, then they should have
spelled it out in no uncertain terms.

The labor arbiter should therefore re-compute the commission Benedicto was entitled to in
accordance with these guidelines.

Petitioner is also liable for 10% of the total amount for attorneys fees since Benedicto and the
present respondents were compelled to litigate and incur expenses to enforce and protect his
rights.51

With respect to Atty. Barrigas motion, we note that this entails a factual determination and
examination of the evidence. Since Atty. Barriga still has to prove his entitlement to the attorneys
fees he is claiming and the amount thereof (if he is so entitled), this may be taken up in the NLRC
which will execute the judgment.52

In summary, this case shall be remanded to the labor arbiter for re-computation of backwages and
commissions to be paid by petitioner to respondent(s) for the period October 11, 1994 to December
1, 1994 and 10% of the total amount as attorneys fees. The labor arbiter shall also set for further
hearing Atty. Barrigas motion to determine his attorneys fees and thereafter to fix the amount
thereof if he is so entitled.

WHEREFORE, the assailed decision dated October 18, 2001 and resolution dated March 18, 2002
of the Court of Appeals in CA-G.R. SP No. 53413 are hereby REVERSED and SET ASIDE.

Petitioner is ORDERED to pay the deceased respondents backwages and commissions to his heirs
from the time he was illegally dismissed on October 11, 1994 up to the time he reached compulsory
retirement age on December 1, 1994. Likewise, petitioner is ORDERED to pay attorneys fees
equivalent to 10% of the total monetary award (backwages plus commissions). For this purpose, the
case is hereby ordered REMANDED to the labor arbiter for the re-computation of the amounts due.

The labor arbiter is also DIRECTED to set for further hearing Atty. Rodolfo B. Barrigas motion to
determine his attorneys fees and thereafter to fix the amount thereof if due to him.

Our temporary restraining order issued on June 26, 2002 is hereby LIFTED.

Costs against petitioner.

SO ORDERED.

G.R. No. 143215 July 11, 2002

SOLIMAN SECURITY SERVICES, INC. and/or TERESITA L. SOLIMAN, petitioners,
vs.
THE COURT OF APPEALS and EDUARDO VALENZUELA, respondents.

VITUG, J.:

Respondent Eduardo Valenzuela, a security guard, was a regular employee of petitioner Soliman
Security Services assigned at the BPI-Family Bank, Pasay City. On 09 March 1995, he received a
memorandum from petitioners relieving him from his post at the bank, said to be upon the latters
request, and requiring him to report to the security agency for reassignment. The following month, or
on 07 April 1995, respondent filed a complaint for illegal dismissal on the ground that his services
were terminated without a valid cause and that, during his tenure at the bank, he was not paid his
overtime pay, 13th month pay, and premium pay for services rendered during holidays and rest
days. He averred that, after receiving the memorandum of 09 March 1995, he kept on reporting to
the office of petitioners for reassignment but, except for a brief stint in another post lasting for no
more than a week, he was put on a "floating" status.

Petitioners contended that the relief of respondent from his post, made upon request of the client,
was merely temporary and that respondent had been offered a new post but the latter refused to
accept it. Petitioners argued that respondents floating status for barely 29 days did not constitute
constructive dismissal.

On 31 July 1995, the Labor Arbiter, Ariel Cadiente Santos, arrived at a decision holding petitioners
guilty of constructive dismissal and ordering the reinstatement of the complainant to his former
position with full backwages from the date of his "dismissal" until his actual reinstatement; directing
the Research and Information Unit to compute the various monetary benefits awarded to the
complainant; and adjudging the payment, by way of attorneys fees, of ten percent (10%) of all sums
owing to the complainant.

On 16 October 1998, petitioners filed an appeal to the National Labor Relations Commission
(NLRC).

On 11 November 1998, the NLRC issued an order directing petitioners to submit an affidavit to the
effect that their appeal bond was genuine and that it would be in force and effect until the final
disposition of the case. In his reply memorandum, dated 28 November 1998, respondent,
asseverating that petitioners failed to deposit the required bond for the appeal, sought the appeal to
be declared as not having been validly perfected. On 19 January 1999, petitioners submitted a
manifestation and affidavit in compliance with the 11th November 1998 order of the
NLRC.1Apparently satisfied, the NLRC, on 30 April 1999, gave due course to the appeal and
rendered the presently assailed decision, reversing that of the Labor Arbiter, to wit:

WHEREFORE, the decision appealed from is hereby SET ASIDE. However, respondent
[before the NLRC] is hereby ordered to pay complainant separation pay computed at one-
half (1/2) month for every year of service, reckoned from date of employment on October 9,
1990 up to September 9, 1995, the date the complainant should have been redeployed."2

A motion for reconsideration, filed by herein private respondent Valenzuela, was denied by the
NLRC.

Valenzuela forthwith brought the matter up to the Court of Appeals. On the thesis that the only issue
interposed was whether or not the NLRC committed grave abuse of discretion when it took
cognizance of the appeal and reversed the decision of the Labor Arbiter despite the failure of herein
petitioners to validly post the appeal bond, the appellate court responded in the affirmative, set aside
the assailed decision of the NLRC and reinstated that of the Labor Arbiter. A motion to reconsider
the decision was denied.

In the instant recourse before this Court, petitioners claim that the Court of Appeals (Eleventh
Division) has committed grave abuse of discretion amounting to lack or excess of jurisdiction in
declaring petitioners to have failed in perfecting their appeal with the NLRC.

This Court finds merit in the petition.

Private respondent would posit that the appeal of petitioners to the NLRC should be considered to
have been made on 19 January 1999 (when petitioner submitted, pursuant to the NLRC order, a
statement under oath to the effect that the surety bond it had posted was genuine and confirmed it to
be in effect until the final termination of the case) which was beyond the ten-day period for perfecting
an appeal. The records before the Court would show, however, that an appeal bond was posted with
the NLRC at the same time that the appeal memorandum of petitioners was filed on 16 October
1998. A certified true copy of the appeal bond3 would indicate that it was received by the
Commission on 16 October 1998, the date reflected by the stamp-mark thereon. The surety bond
issued by the Philippine Charter Insurance Corporation bore the date of 14 October 1998 or two
days before the appeal memorandum was seasonably filed on 16 October 1998. The Order,4 dated
11 November 1998, of the NLRC categorically stated that "records [would] disclose that the instant
appeal [was] accompanied by a surety bond, as the Decision sought to be appealed involved a
monetary award." The NLRC, in fact, ordered petitioner to submit an affidavit to confirm that its
appeal bond was genuine and would be in force and effect until the final disposition of the case. The
Commissions declaration that the appeal was accompanied by a surety bond indicated that there
had been compliance with Article 2235 of the Labor Code.

An appeal to the NLRC is perfected once an appellant files the memorandum of appeal, pays the
required appeal fee and, where an employer appeals and a monetary award is involved, the latter
posts an appeal bond or submits a surety bond issued by a reputable bonding company.6 In line with
the desired objective of labor laws to have controversies promptly resolved on their merits, the
requirements for perfecting appeals are given liberal interpretation and construction.7

The only issue on the merits of the case is whether or not private respondent should be deemed
constructively dismissed by petitioner for having been placed on "floating status," i.e., with no
reassignment, for a period of 29 days. The question posed is not new. In the case of Superstar
Security Agency, Inc., vs. NLRC,8 this Court, addressing a similar issue, has said:

"x x x The charge of illegal dismissal was prematurely filed. The records show that a month
after Hermosa was placed on a temporary off-detail, she readily filed a complaint against
the petitioners on the presumption that her services were already terminated. Temporary off-
detail is not equivalent to dismissal. In security parlance, it means waiting to be posted. It is
a recognized fact that security guards employed in a security agency may be temporarily
sidelined as their assignments primarily depend on the contracts entered into by the agency
with third parties (Agro Commercial Security Agencies, Inc. vs. NLRC, et al., G.R. Nos.
82823-24, 31 July 1989). However, it must be emphasized that such temporary inactivity
should continue only for six months. Otherwise, the security agency concerned could be
liable for constructive dismissal."9

Constructive dismissal exists when an act of clear discrimination, insensibility or disdain, on the part
of an employer has become so unbearable as to leave an employee with no choice but to forego
continued employment.10 The temporary "off-detail" of respondent Valenzuela is not such a case.
WHEREFORE, the instant petition is GRANTED. The assailed decision and resolution of the Court
of Appeals are SET ASIDE and the decision of the National Labor Relations Commission in NCR
CN. 04-02620-95 is REINSTATED. No costs.

SO ORDERED.

G.R. No. 130866 September 16, 1998

ST. MARTIN FUNERAL HOME, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and BIENVENIDO ARICAYOS, respondents.

REGALADO, J.:

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

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

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

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

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

On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision and
remanding the case to the labor arbiter for immediate appropriate proceedings.5 Petitioner then filed
a motion for reconsideration which was denied by the NLRC in its resolution dated August 18, 1997
for lack of merit,6 hence the present petition alleging that the NLRC committed grave abuse of
discretion.7

Before proceeding further into the merits of the case at bar, the Court feels that it is now exigent and
opportune to reexamine the functional validity and systemic practicability of the mode of judicial
review it has long adopted and still follows with respect to decisions of the NLRC. The increasing
number of labor disputes that find their way to this Court and the legislative changes introduced over
the years into the provisions of Presidential Decree (P.D.) No. 442 (The Labor Code of the
Philippines and Batas Pambansa Blg. (B.P. No.) 129 (The Judiciary Reorganization Act of 1980)
now stridently call for and warrant a reassessment of that procedural aspect.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas

corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;

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

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

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

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

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

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

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

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

The same exceptive clause further confuses the situation by declaring that the Court of Appeals has
no appellate jurisdiction over decisions falling within the appellate jurisdiction of the Supreme Court
in accordance with the Constitution, the provisions of B.P. No. 129, and those specified cases in
Section 17 of the Judiciary Act of 1948. These cases can, of course, be properly excluded from the
exclusive appellate jurisdiction of the Court of Appeals. However, because of the aforementioned
amendment by transposition, also supposedly excluded are cases falling within the appellate
jurisdiction of the Supreme Court in accordance with the Labor Code. This is illogical and
impracticable, and Congress could not have intended that procedural gaffe, since there are no cases
in the Labor Code the decisions, resolutions, orders or awards wherein are within
the appellate jurisdiction of the Supreme Court or of any other court for that matter.

A review of the legislative records on the antecedents of R.A. No. 7902 persuades us that there may
have been an oversight in the course of the deliberations on the said Act or an imprecision in the
terminology used therein. In fine, Congress did intend to provide for judicial review of the
adjudications of the NLRC in labor cases by the Supreme Court, but there was an inaccuracy in the
term used for the intended mode of review. This conclusion which we have reluctantly but prudently
arrived at has been drawn from the considerations extant in the records of Congress, more
particularly on Senate Bill No. 1495 and the Reference Committee Report on S. No. 1495/H. No.
10452. 18

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

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

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

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

xxx xxx xxx

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

In closing, allow me to quote the observations of former Chief Justice Teehankee in

1986 in the Annual Report of the Supreme Court:

. . . Amendatory legislation is suggested so as to relieve the Supreme

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

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

xxx xxx xxx

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

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

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

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

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

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

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

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

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

xxx xxx xxx

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

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

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

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

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

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

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

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

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

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

SO ORDERED.

G.R. No. 82211-12 March 21, 1989

TERESITA MONTOYA, petitioner,

vs.
TERESITA ESCAYO, JOY ESCAYO, AIDA GANANCIAL, MARY ANN CAPE, CECILIA
CORREJADO, ERLINDA PAYPON and ROSALIE VERDE, AND NATIONAL LABOR RELATIONS
COMMISSION, respondents.

Rolando N. Medalla and Segundo Y Chua for petitioner.

The Solicitor General for public respondent.

Archie S. Baribar for private respondents.

SARMIENTO, J.:

This petition for certiorari seeks the annullment and setting aside of the resolution 1 9dated August 20, 1987
of the National Labor Relations Commission (NLRC), Third Division, which reversed and set aside the order dated September 27, 1985 of
Labor Arbiter Ethelwoldo R. Ovejera of the NLRC's Regional Arbitration Branch No. VI, Bacolod City, dismissing the complaint filed by the
private respondents against the petitioner. This petition raises a singular issue, i.e., the applicability of Presidential Decree (P.D.) No. 1508,
more commonly known as the Katarungang Pambarangay Law, to labor disputes.

The chronology of events leading to the present controversy is as follows:

The private respondents were all formerly employed as salesgirls in the petitioner's store, the
"Terry's Dry Goods Store," in Bacolod City. On different dates, they separately filed complaints for
the collection of sums of money against the petitioner for alleged unpaid overtime pay, holiday pay,
13th month pay, ECOLA, and service leave pay: for violation of the minimum wage law, illegal
dismissal, and attorney's fees. The complaints, which were originally treated as separate cases,
were subsequently consolidated on account of the similarity in their nature. On August 1, 1984, the
petitioner-employer moved (Annex "C" of Petition) for the dismissal of the complaints, claiming that
among others, the private respondents failed to refer the dispute to the Lupong Tagapayapa for
possible settlement and to secure the certification required from the Lupon Chairman prior to the
filing of the cases with the Labor Arbiter. These actions were allegedly violative of the provisions of
P.D. No. 1508, which apply to the parties who are all residents of Bacolod City.

Acting favorably on the petitioner's motion, Labor Arbiter Ethelwoldo R. Ovejera, on September 27,
1985, ordered the dismissal of the complaints. The private respondents sought the reversal of the
Labor Arbiter's order before the respondent NLRC. On August 20, 1987, the public respondent
rendered the assailed resolution reversing the order of Ovejera, and remanded the case to the Labor
Arbiter for further proceedings. A motion for reconsideration was filed by the petitioner but this was
denied for lack of merit on October 28, 1987. Hence, this petition.

It is the petitioner's contention that the provisions of the Katarungang Pambarangay Law (P.D. No.
1508) relative to the prior amicable settlement proceedings before the Lupong Tagapayapa as a
jurisdictional requirement at the trial level apply to labor cases. More particularly, the petitioner
insists that the failure of the private respondents to first submit their complaints for possible
conciliation and amicable settlement in the proper barangay court in Bacolod City and to secure a
certification from the Lupon Chairman prior to their filing with the Labor Arbiter, divests the Labor
Arbiter, as well as the respondent Commission itself, of jurisdiction over these labor controversies
and renders their judgments thereon null and void.

On the other hand, the Solicitor General, as counsel for the public respondent NLRC, in his
comment, strongly argues and convincingly against the applicability of P.D. No. 1508 to labor cases.

We dismiss the petition for lack of merit, there being no satisfactory showing of any grave abuse of
discretion committed by the public respondent.

The provisions of P.D. No. 1508 requiring the submission of disputes before the barangay Lupong
Tagapayapa prior to their filing with the court or other government offices are not applicable to labor
cases.

For a better understanding of the issue in this case, the provisions of P.D. No. 1508 invoked by the
petitioner are quoted:

SEC. 6. Conciliation pre-condition to filing of complaint. No complaint, petition, action

or proceeding involving any matter within the authority of the Lupon as provided in
Section 2 hereof shall be filed or instituted in court or any other government office for
adjudication unless there has been a confrontation of the parties before the Lupon
Chairman or the Pangkat and no conciliation or settlement has been reached as
certified by the Lupon Secretary or the Pangkat Secretary, attested by the Lupon or
Pangkat Chairman, or unless the settlement has been repudiated. However, the
parties may go directly to court in the following cases:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of per sonal liberty calling for
habeas corpus proceedings;

(3) Actions coupled with provisional remedies such as preliminary injunction,

attachment, delivery of personal property and support pendente lite; and

(4) Where the action may otherwise be barred by the Statute of Limitations.

As correctly pointed out by the Solicitor General in his comment to the petition, even from the three
"WHEREAS" clauses of P.D. No. 1508 can be gleaned clearly the decree's intended applicability
only to courts of justice, and not to labor relations commissions or labor arbitrators' offices. The
express reference to "judicial resources", to "courts of justice", "court dockets", or simply to "courts"
are significant. On the other band, there is no mention at all of labor relations or controversies and
labor arbiters or commissions in the clauses involved.
These "WHEREAS" clauses state:

WHEREAS, the perpetuation and official recognition of the time-honored tradition of

amicably settling disputes among family and barangay members at the barangay
level without judicial resources would promote the speedy administration of justice
and implement the constitutional mandate to preserve and develop Filipino culture
and to strengthen the family as a basic social institution;

WHEREAS, the indiscriminate filing of cases in the courts of justice contributes

heavily and unjustifiably to the congestion of court dockets, thus causing a
deterioration in the quality of justice;

WHEREAS, in order to help relieve the courts of such docket congestion and thereby
enhance the quality of Justice dispensed by the courts, it is deemed desirable to
formally organize and institutionalize a system of amicably settling disputes at the
barangay level; (Emphasis supplied.)

In addition, Letter of Instructions No. 956 and Letter of Implementation No. 105, both issued on
November 12, 1979 by the former President in connection with the implementation of the
Katarungang Pambarangay Law, affirm this conclusion. These Letters were addressed only to the
following officials: all judges of the Courts of first Instance, Circuit Criminal Courts, Juvenile and
Domestic Relations Courts, Courts of Agrarian Relations, City Courts and Municipal Courts, and all
Fiscals and other Prosecuting Officers. These presidential issuances make clear that the only official
directed to oversee the implementation of the provisions of the Katarungang Pambarangay Law
(P.D. No. 1508) are the then Minister of Justice, the then Minister of Local Governments and
Community Development, and the Chief Justice of the Supreme Court. If the contention of the
petitioner were correct, the then Minister (now Secretary) of Labor and Employment would have
been included in the list, and the two presidential issuances alsowould have been addressed to the
labor relations officers, labor arbiters, and the members of the National Labor Relations
Commission. Expressio unius est exclusio alterius.

Nor can we accept the petitioner's contention that the "other government office" referred to in
Section 6 of P.D. No. 1508 includes the Office of the Labor Arbiter and the Med-Arbiter. The
declared concern of the Katarungan Pambarangay Law is "to help relieve the courts of such docket
congestion and thereby enhance the quality of justice dispensed by the courts." Thus, the" other
government office" mentioned in Section 6 of P.D. No. 1508 refers only to such offices as the
Fiscal's Office or, in localities where there is no fiscal, the Municipal Trial Courts, where complaints
for crimes (such as those punishable by imprisonment of not more than 30 days or a, fine of not
more than P 200.00) falling under the jurisdiction of the barangay court but which are not amicably
settled, are subsequently filed for proper disposition.

But, the opinion of the Honorable Minister of Justice (Opinion No. 59, s. 1983) to the contrary
notwithstanding, all doubts on this score are dispelled by The Labor Code Of The Philippines
(Presidential Decree No. 442, as amended) itself. Article 226 thereof grants original and exclusive
jurisdiction over the conciliation and mediation of disputes, grievances, or problems in the regional
offices of the Department of Labor and Employ- ment. It is the said Bureau and its divisions, and not
the barangay Lupong Tagapayapa, which are vested by law with original and exclusive authority to
conduct conciliation and mediation proceedings on labor controversies before their endorsement to
the appropriate Labor Arbiter for adjudication. Article 226, previously adverted to is clear on this
regard. It provides:
 ART. 226. Bureau of Labor Relations.- The Bureau of Labor Relations and the Labor
relations divisions in the regional officer 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 all labor cases, subject to
extension by agreement of the parties, after which the Bureau shall certify the cases
to the appropriate Labor Arbiters. The 15-working day deadline, however, shall not
apply to cases involving deadlocks in collective bargaining which the Bureau shall
certify to the appropriate Labor Arbiters only after all possibilities of voluntary
settlement shall have been tried.

Requiring conciliation of labor disputes before the barangay courts would defeat the very salutary
purposes of the law. Instead of simplifying labor proceedings designed at expeditious settlement or
referral to the proper court or office to decide it finally, the position taken by the petitioner would only
duplicate the conciliation proceedings and unduly delay the disposition of the labor case. The fallacy
of the petitioner's submission can readily be seen by following it to its logical conclusion. For then, if
the procedure suggested is complied with, the private respondent would have to lodge first their
complaint with the barangay court, and then if not settled there, they would have to go to the labor
relations division at the Regional Office of Region VI of the Department of Labor and Employment, in
Bacolod City, for another round of conciliation proceedings. Failing there, their long travail would
continue to the Office of the Labor Arbiter, then to the NLRC, and finally to us. This suggested
procedure would destroy the salutary purposes of P.D. 1508 and of The Labor Code Of The
Philippines. And labor would then be given another unnecessary obstacle to hurdle. We reject the
petitioner's submission. It does violence to the constitutionally mandated policy of the State to afford
full protection to labor. 2

Finally, it is already well-settled that the ordinary rules on procedure are merely suppletory in
character vis-a-vis labor disputes which are primarily governed by labor laws. 3 And "(A)ll doubts in the
implementation and interpretation of this Code (Labor), including its implementing rules and regulations, shall be resolved in favor of labor. 4

WHEREFORE, the petition is DISMISSED. Costs against the petitioner.

SO ORDERED.

G.R. No. 164772 June 8, 2006

EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI BANK), petitioner,

vs.
RICARDO SADAC, Respondent.

DECISION

CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court En
Banc filed by Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to
reverse the Decision1 and Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004,
respectively, as amended by the Supplemental Decision3 dated 26 October 2004 in CA-G.R. SP No.
75013, which reversed and set aside the Resolutions of the National Labor Relations Commission
(NLRC), dated 28 March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.

The Antecedents

As culled from the records, respondent Sadac was appointed Vice President of the Legal
Department of petitioner Bank effective 1 August 1981, and subsequently General Counsel thereof
on 8 December 1981. On 26 June 1989, nine lawyers of petitioner Banks Legal Department, in a
letter-petition to the Chairman of the Board of Directors, accused respondent Sadac of abusive
conduct, inter alia, and ultimately, petitioned for a change in leadership of the department. On the
ground of lack of confidence in respondent Sadac, under the rules of client and lawyer relationship,
petitioner Bank instructed respondent Sadac to deliver all materials in his custody in all cases in
which the latter was appearing as its counsel of record. In reaction thereto, respondent Sadac
requested for a full hearing and formal investigation but the same remained unheeded. On 9
November 1989, respondent Sadac filed a complaint for illegal dismissal with damages against
petitioner Bank and individual members of the Board of Directors thereof. After learning of the filing
of the complaint, petitioner Bank terminated the services of respondent Sadac. Finally, on 10 August
1989, respondent Sadac was removed from his office and ordered disentitled to any compensation
and other benefits.4

In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the complaint
for lack of merit. On appeal, the NLRC in its Resolution6 of 24 September 1991 reversed the Labor
Arbiter and declared respondent Sadacs dismissal as illegal. The decretal portion thereof reads,
thus:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as
it is hereby, SET ASIDE, and a new one ENTERED declaring the dismissal of the complainant as
illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority rights and other
privileges, and to pay him full backwages and other benefits from the time his compensation was
withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages
of P50,000.00, and attorneys fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents are ordered likewise
jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991
(cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53.7

Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the
NLRC Resolution of 24 September 1991 in Equitable Banking Corporation v. National Labor
Relations Commission, docketed as G.R. No. 102467.8

In our Decision9 of 13 June 1997, we held respondent Sadacs dismissal illegal. We said that the
existence of the employer-employee relationship between petitioner Bank and respondent Sadac
had been duly established bringing the case within the coverage of the Labor Code, hence, we did
not permit petitioner Bank to rely on Sec. 26, Rule 13810 of the Rules of Court, claiming that the
association between the parties was one of a client-lawyer relationship, and, thus, it could terminate
at any time the services of respondent Sadac. Moreover, we did not find that respondent Sadacs
dismissal was grounded on any of the causes stated in Article 282 of the Labor Code. We similarly
found that petitioner Bank disregarded the procedural requirements in terminating respondent
Sadacs employment as so required by Section 2 and Section 5, Rule XIV, Book V of the
Implementing Rules of the Labor Code. We decreed:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability herein pronounced
shall be due from petitioner bank alone, the other petitioners being absolved from solidary liability.
No costs.11

On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and
executory.12

Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution13 thereof.
Likewise, petitioner Bank filed a Manifestation and Motion14 praying that the award in favor of
respondent Sadac be computed and that after payment is made, petitioner Bank be ordered forever
released from liability under said judgment.

Per respondent Sadacs computation, the total amount of the monetary award is P6,030,456.59,
representing his backwages and other benefits, including the general increases which he should
have earned during the period of his illegal termination. Respondent Sadac theorized that he started
with a monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice
President of petitioner Banks Legal Department and later as its General Counsel in December 1981.
As of November 1989, when he was dismissed illegally, his monthly compensation amounted to
P29,365.00 or more than twice his original compensation. The difference, he posited, can be
attributed to the annual salary increases which he received equivalent to 15 percent (15%) of his
monthly salary.

Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines, and cited
as authority the cases of East Asiatic Company, Ltd. v. Court of Industrial Relations,15 St. Louis
College of Tuguegarao v. National Labor Relations Commission,16 and Sigma Personnel Services v.
National Labor Relations Commission.17According to respondent Sadac, the catena of cases
uniformly holds that it is the obligation of the employer to pay an illegally dismissed employee the
whole amount of the salaries or wages, plus all other benefits and bonuses and general increases to
which he would have been normally entitled had he not been dismissed; and therefore, salary
increases should be deemed a component in the computation of backwages. Moreover, respondent
Sadac contended that his check-up benefit, clothing allowance, and cash conversion of vacation
leaves must be included in the computation of his backwages.

Petitioner Bank disputed respondent Sadacs computation. Per its computation, the amount of
monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion of the latters general
salary increases and other claimed benefits which, it maintained, were unsubstantiated. The
jurisprudential precedent relied upon by petitioner Bank in assailing respondent Sadacs computation
is Evangelista v. National Labor Relations Commission,18 citing Paramount Vinyl Products Corp. v.
National Labor Relations Commission,19 holding that an unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal. Furthermore, petitioner Bank
argued before the Labor Arbiter that the award of salary differentials is not allowed, the established
rule being that upon reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other benefits that may have been
received by their co-workers who were not dismissed or did not go on strike.

On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order20 adopting respondent
Sadacs computation. In the main, the Labor Arbiter relying on Millares v. National Labor Relations
Commission21 concluded that respondent Sadac is entitled to the general increases as a component
in the computation of his backwages. Accordingly, he awarded respondent Sadac the amount of
P6,030,456.59 representing his backwages inclusive of allowances and other claimed benefits,
namely check-up benefit, clothing allowance, and cash conversion of vacation leave plus 12 percent
(12%) interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total of
P7,398,047.48. However, considering that respondent Sadac had already received the amount of
P1,055,740.48 by virtue of a Writ of Execution22 earlier issued on 18 January 1999, the Labor Arbiter
directed petitioner Bank to pay respondent Sadac the amount of P6,342,307.00. The Labor Arbiter
also granted an award of attorneys fees equivalent to ten percent (10%) of all monetary awards, and
imposed a 12 percent (12%) interest per annum reckoned from the finality of the judgment until the
satisfaction thereof.

The Labor Arbiter decreed, thus:

WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution be issued
commanding the Sheriff, this Branch, to collect from respondent Bank the amount of Ph6,342,307.00
representing the backwages with 12% interest per annum due complainant.23

Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
Resolution,24promulgated on 28 March 2001. It ratiocinated that the doctrine on general increases as
component in computing backwages in Sigma Personnel Services and St. Louis was merely obiter
dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground that the original
circumstances therein are not only peculiar to the said case but also completely strange to the case
of respondent Sadac. Further, the NLRC disallowed respondent Sadacs claim to check-up benefit
ratiocinating that there was no clear and substantial proof that the same was being granted and
enjoyed by other employees of petitioner Bank. The award of attorneys fees was similarly deleted.

The dispositive portion of the Resolution states:

WHEREFORE, the instant appeal is considered meritorious and accordingly, the computation
prepared by respondent Equitable Banking Corporation on the award of backwages in favor of
complainant Ricardo Sadac under the decision promulgated by the Supreme Court on June 13,
1997 in G.R. No. 102476 in the aggregate amount of P2,981,442.98 is hereby ordered.25

Respondent Sadacs Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,26 promulgated on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking
nullification of the twin resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as
well as praying for the reinstatement of the 2 August 1999 Order of the Labor Arbiter.

For the resolution of the Court of Appeals were the following issues, viz.:

(1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance,
and cash conversion of vacation leave are included in the computation of full backwages for
illegally dismissed employees;
 (2) Whether respondent is entitled to attorneys fees; and

(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all
accounts outstanding until full payment thereof.

Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision on 6
April 2004, the dispositive portion of which is quoted hereunder:

WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002 Resolutions
of the National Labor Relations Commissions (sic) are REVERSED and SET ASIDE and the August
2, 1999 Order of the Labor Arbiter is REVIVED to the effect that private respondent is DIRECTED
TO PAY petitioner the sum of PhP6,342,307.00, representing full back wages (sic) which sum
includes annual general increases in basic salary, check-up benefit, clothing allowance, cash
conversion of vacation leave and other sundry benefits plus 12% per annum interest on outstanding
balance from July 28, 1997 until full payment.

Costs against private respondent.27

The Court of Appeals, citing East Asiatic held that respondent Sadacs general increases should be
added as part of his backwages. According to the appellate court, respondent Sadacs entitlement to
the annual general increases has been duly proven by substantial evidence that the latter, in fact,
enjoyed an annual increase of more or less 15 percent (15%). Respondent Sadacs check-up
benefit, clothing allowance, and cash conversion of vacation leave were similarly ordered added in
the computation of respondent Sadacs basic wage.

Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It ruled that our
Decision28 of 13 June 1997 did not award attorneys fees in respondent Sadacs favor as there was
nothing in the aforesaid Decision, either in the dispositive portion or the body thereof that supported
the grant of attorneys fees. Resolving the final issue, the Court of Appeals imposed a 12 percent
(12%) interest per annum on the total monetary award to be computed from 28 July 1997 or the date
our judgment in G.R. No. 102467 became final and executory until fully paid at which time the
quantification of the amount may be deemed to have been reasonably ascertained.

On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration29 of the 6 April 2004
Court of Appeals Decision insofar as the appellate court did not award him attorneys fees. Similarly,
petitioner Bank filed a Motion for Partial Reconsideration thereon. Following an exchange of
pleadings between the parties, the Court of Appeals rendered a Resolution,30 dated 28 July 2004,
denying petitioner Banks Motion for Partial Reconsideration for lack of merit.

Assignment of Errors

Hence, the instant Petition for Review by petitioner Bank on the following assignment of errors, to
wit:

(a) The Hon. Court of Appeals erred in ruling that general salary increases should be
included in the computation of full backwages.

(b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this case are:
(i) East Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Tuguegarao v.
NLRC, 177 SCRA 151 (1989); (iii) Sigma Personnel Services v. NLRC, 224 SCRA 181
(1993); and (iv) Millares v. NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of the Labor
 Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (1990); (iii) Evangelista v. NLRC,
249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430 (1996).

(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up benefit,
clothing allowance and cash conversion of vacation leaves notwithstanding that respondent
did not present any evidence to prove entitlement to these claims.

(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal
interest even if the principal amount due him has not yet been correctly and finally
determined.31

Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision granting
respondent Sadacs Partial Motion for Reconsideration and amending the dispositive portion of the 6
April 2004 Decision in this wise, viz.:

WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24, 2002
Resolutions of the National Labor Relations Commission are hereby REVERSED and SET ASIDE
and the August 2, 1999 Order of the Labor Arbiter is hereby REVIVED to the effect that private
respondent is hereby DIRECTED TO PAY petitioner the sum of P6,342,307.00, representing full
backwages which sum includes annual general increases in basic salary, check-up benefit, clothing
allowance, cash conversion of vacation leave and other sundry benefits "and attorneys fees equal to
TEN PERCENT (10%) of all the monetary award" plus 12% per annum interest on all outstanding
balance from July 28, 1997 until full payment.

Costs against private respondent.32

On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review33 contending in the
main that the Court of Appeals erred in issuing the Supplemental Decision by directing petitioner
Bank to pay an additional amount to respondent Sadac representing attorneys fees equal to ten
percent (10%) of all the monetary award.

The Courts Ruling

I.

We are called to write finis to a controversy that comes to us for the second time. At the core of the
instant case are the divergent contentions of the parties on the manner of computation of
backwages.

Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not
contemplate the inclusion of salary increases in the definition of "full backwages." It controverts the
reliance by the appellate court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel;
and (iv) Millares. While it is in accord with the pronouncement of the Court of Appeals that Republic
Act No. 6715, in amending Article 279, intends to give more benefits to workers, petitioner Bank
submits that the Court of Appeals was in error in relying on East Asiatic to support its finding that
salary increases should be included in the computation of backwages as nowhere in Article 279, as
amended, are salary increases spoken of. The prevailing rule in the milieu of the East Asiatic
doctrine was to deduct earnings earned elsewhere from the amount of backwages payable to an
illegally dismissed employee.
Petitioner Bank posits that even granting that East Asiatic allowed general salary increases in the
computation of backwages, it was because the inclusion was purposely to cushion the blow of the
deduction of earnings derived elsewhere; with the amendment of Article 279 and the consequent
elimination of the rule on the deduction of earnings derived elsewhere, the rationale for including
salary increases in the computation of backwages no longer exists. On the references of salary
increases in the aforementioned cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares,
petitioner Bank contends that the same were merely obiter dicta. In fine, petitioner Bank anchors its
claim on the cases of (i) Paramount Vinyl Products Corp. v. National Labor Relations
Commission;34 (ii) Evangelista v. National Labor Relations Commission;35 and (iii) Espejo v. National
Labor Relations Commission,36 which ruled that an unqualified award of backwages is exclusive of
general salary increases and the employee is paid at the wage rate at the time of the dismissal.

For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled that his
backwages should include the general increases on the basis of the following cases, to wit: (i) East
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares.

Resolving the protracted litigation between the parties necessitates us to revisit our pronouncements
on the interpretation of the term backwages. We said that backwages in general are granted on
grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal.37 It is
not private compensation or damages but is awarded in furtherance and effectuation of the public
objective of the Labor Code. Nor is it a redress of a private right but rather in the nature of a
command to the employer to make public reparation for dismissing an employee either due to the
formers unlawful act or bad faith.38 The Court, in the landmark case of Bustamante v. National Labor
Relations Commission,39 had the occasion to explicate on the meaning of full backwages as
contemplated by Article 27940 of the Labor Code of the Philippines, as amended by Section 34 of
Rep. Act No. 6715. The Court in Bustamante said, thus:

The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of
backwages as enunciated in said Pines City Educational Center case, by now holding that
conformably with the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted,
backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living to support himself and family, while full backwages
have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing
his employee. The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more
benefits to workers than was previously given them under the Mercury Drug rule or the "deduction of
earnings elsewhere" rule. Thus, a closer adherence to the legislative policy behind Rep. Act No.
6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages the
earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. In
other words, the provision calling for "full backwages" to illegally dismissed employees is clear, plain
and free from ambiguity and, therefore, must be applied without attempted or strained interpretation.
Index animi sermo est.41

Verily, jurisprudence has shown that the definition of full backwages has forcefully evolved. In
Mercury Drug Co., Inc. v. Court of Industrial Relations,42 the rule was that backwages were granted
for a period of three years without qualification and without deduction, meaning, the award of
backwages was not reduced by earnings actually earned by the dismissed employee during the
interim period of the separation. This came to be known as the Mercury Drug rule.43 Prior to the
Mercury Drug ruling in 1974, the total amount of backwages was reduced by earnings obtained by
the employee elsewhere from the time of the dismissal to his reinstatement. The Mercury Drug rule
was subsequently modified in Ferrer v. National Labor Relations Commission44 and Pines City
Educational Center v. National Labor Relations Commission,45 where we allowed the recovery of
backwages for the duration of the illegal dismissal minus the total amount of earnings which the
employee derived elsewhere from the date of dismissal up to the date of reinstatement, if any. In
Ferrer and in Pines, the three-year period was deleted, and instead, the dismissed employee was
paid backwages for the entire period that he was without work subject to the deductions, as
mentioned. Finally came our ruling in Bustamante which superseded Pines City Educational Center
and allowed full recovery of backwages without deduction and without qualification pursuant to the
express provisions of Article 279 of the Labor Code, as amended by Rep. Act No. 6715, i.e., without
any deduction of income the employee may have derived from employment elsewhere from the date
of his dismissal up to his reinstatement, that is, covering the entirety of the period of the dismissal.

The first issue for our resolution involves another aspect in the computation of full backwages,
mainly, the basis of the computation thereof. Otherwise stated, whether general salary increases
should be included in the base figure to be used in the computation of backwages.

In so concluding that general salary increases should be made a component in the computation of
backwages, the Court of Appeals ratiocinated, thus:

The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971)
that "general increases" should be added as a part of full backwages, to wit:

In other words, the just and equitable rule regarding the point under discussion is this: It is the
obligation of the employer to pay an illegally dismissed employee or worker the whole amount of the
salaries or wages, plus all other benefits and bonuses and general increases, to which he would
have been normally entitled had he not been dismissed and had not stopped working, but it is the
right, on the other hand of the employer to deduct from the total of these, the amount equivalent to
the salaries or wages the employee or worker would have earned in his old employment on the
corresponding days he was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned.

The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis College of
Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA 181
(1993) and Millares v. National Labor Relations Commission, 305 SCRA 500 (1999).

Private respondent, in opposing the petitioners contention, alleged in his Memorandum that only the
wage rate at the time of the employees illegal dismissal should be considered private respondent
citing the following decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525
(1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255 SCRA 430 (1996) which
rendered obsolete the ruling in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521
(1971).

We are not convinced.

The Supreme Court had consistently held that payment of full backwages is the price or penalty that
the employer must pay for having illegally dismissed an employee.

In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC and
Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held that the clear legislative intent
in the amendment in Republic Act 6715 was to give more benefits to workers than was previously
given them under the Mercury Drug rule or the "deductions of earnings elsewhere" rule.
The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are inapplicable to
the case at bar. The doctrines therein came about as a result of the old Mercury Drug rule, which
was repealed with the passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255
SCRA 430 (1993) when the Supreme Court returned to the doctrine in East Asiatic, which was soon
supplanted by the case of Bustamante v. NLRC and Evergreen Farms, Inc., which held that the
backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived from him during the period of his illegal dismissal.
Furthermore, the Mercury Drug rule was never meant to prejudice the workers, but merely to speed
the recovery of their backwages.

Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent of the Supreme
Court to increase the backwages due an illegally dismissed employee. In the Mercury Drug case, full
backwages was to be recovered even though a three-year limitation on recovery of full backwages
was imposed in the name of equity. Then in Bustamante, full backwages was interpreted to mean
absolutely no deductions regardless of the duration of the illegal dismissal. In Bustamante, the
Supreme Court no longer regarded equity as a basis when dealing with illegal dismissal cases
because it is not equity at play in illegal dismissals but rather, it is employers obligation to pay full
back wages (sic). It is an obligation of the employer because it is "the price or penalty the employer
has to pay for illegally dismissing his employee."

The applicable modern definition of full backwages is now found in Millares v. National Labor
Relations Commission 305 SCRA 500 (1999), where although the issue in Millares concerned
separation pay separation pay and backwages both have employees wage rate at their
foundation.

x x x The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally
dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general
increases to which he would have been normally entitled had he not been dismissed and had not
stopped working. The same holds true in case of retrenched employees. x x x

xxxx

x x x Annual general increases are akin to "allowances" or "other benefits." 46 (Italics ours.)

We do not agree.

Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by Section
34 of Rep. Act No. 6715. The law provides as follows:

ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. 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 from him up to the
time of his actual reinstatement. (Emphasis supplied.)

Article 279 mandates that an employees full backwages shall be inclusive of allowances and other
benefits or their monetary equivalent. Contrary to the ruling of the Court of Appeals, we do not see
that a salary increase can be interpreted as either an allowance or a benefit. Salary increases are
not akin to allowances or benefits, and cannot be confused with either. The term "allowances" is
sometimes used synonymously with "emoluments," as indirect or contingent remuneration, which
may or may not be earned, but which is sometimes in the nature of compensation, and sometimes in
the nature of reimbursement.47 Allowances and benefits are granted to the employee apart or
separate from, and in addition to the wage or salary. In contrast, salary increases are amounts which
are added to the employees salary as an increment thereto for varied reasons deemed appropriate
by the employer. Salary increases are not separate grants by themselves but once granted, they are
deemed part of the employees salary. To extend the coverage of an allowance or a benefit to
include salary increases would be to strain both the imagination of the Court and the language of
law. As aptly observed by the NLRC, "to otherwise give the meaning other than what the law speaks
for by itself, will open the floodgates to various interpretations."48 Indeed, if the intent were to include
salary increases as basis in the computation of backwages, the same should have been explicitly
stated in the same manner that the law used clear and unambiguous terms in expressly providing for
the inclusion of allowances and other benefits.

Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner East
Asiatic Company, Ltd. was found guilty of unfair labor practices against therein respondent, Soledad
A. Dizon, and the Court ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of the salaries plus all
general increases and bonuses she would have received during the period of her lay-off with the
corresponding right of the employer to deduct from the total amounts, all the earnings earned by the
employee during her lay-off. The emphasis in East Asiatic is the duty of both the employer and the
employee to disclose the material facts and competent evidence within their peculiar knowledge
relative to the proper determination of backwages, especially as the earnings derived by the
employee elsewhere are deductions to which the employer are entitled. However, East Asiatic does
not find relevance in the resolution of the issue before us. First, the material date to consider is 21
March 1989, when the law amending Article 279 of the Labor Code, Rep. Act No. 6715, otherwise
known as the Herrera-Veloso Law, took effect. It is obvious that the backdrop of East Asiatic,
decided by this Court on 31 August 1971 was prior to the current state of the law on the definition of
full backwages. Second, it bears stressing that East Asiatic was decided at a time when even as an
illegally dismissed employee is entitled to the whole amount of the salaries or wages, it was the
recognized right of the employer to deduct from the total of these, the amount equivalent to the
salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned.49 It is for this reason the Court centered its discussion on the
duty of both parties to be candid and open about facts within their knowledge to establish the
amount of the deductions, and not leave the burden on the employee alone to establish his claim, as
well as on the duty of the court to compel the parties to cooperate in disclosing such material facts.
The inapplicability of East Asiatic to respondent Sadac was sufficiently elucidated upon by the
NLRC, viz.:

A full discernment of the pertinent portion of the judgment sought to be executed in East Asiatic Co.,
Ltd. would reveal as follows:

"x x x to reinstate Soledad A. Dizon immediately to her former position with backwages from
September 1, 1958 until actually reinstated with all the rights and privileges acquired and due her,
including seniority and such other terms and conditions of employment AT THE TIME OF HER LAY-
OFF"

The basis on which this doctrine was laid out was summed up by the Supreme Court which
ratiocinated in this light. To quote:

"x x x on the other hand, of the employer to deduct from the total of these, the amount equivalent to
these salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned x x x" (Ibid, pp. 547-548).

But the Supreme Court, in the instant case, pronounced a clear but different judgment from that of
East Asiatic Co. decretal portion, in this wise:

"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: that private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; xxx"

Undisputably (sic), it was decreed in plain and unambiguous language that complainant Sadac "shall
be entitled to backwages." No more, no less.

Thus, this decree for Sadac cannot be considered in any way, substantially in essence, with the
award of backwages as pronounced for Ms. Dizon in the case of East Asiatic Co. Ltd.50

In the same vein, we cannot accept the Court of Appeals reliance on the doctrine as espoused in
Millares. It is evident that Millares concerns itself with the computation of the salary base used in
computing the separation pay of petitioners therein. The distinction between backwages and
separation pay is elementary. Separation pay is granted where reinstatement is no longer advisable
because of strained relations between the employee and the employer. Backwages represent
compensation that should have been earned but were not collected because of the unjust dismissal.
The bases for computing the two are different, the first being usually the length of the employees
service and the second the actual period when he was unlawfully prevented from working.51

The issue that confronted the Court in Millares was whether petitioners housing and transportation
allowances therein which they allegedly received on a monthly basis during their employment should
have been included in the computation of their separation pay. It is plain to see that the reference to
general increases in Millares citing East Asiatic was a mere obiter. The crux in Millares was our
pronouncement that the receipt of an allowance on a monthly basis does not ipso facto characterize
it as regular and forming part of salary because the nature of the grant is a factor worth considering.
Whether salary increases are deemed part of the salary base in the computation of backwages was
not the issue in Millares.

Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was mainly
contentious therein was the inclusion of fringe benefits in the computation of the award of
backwages, in particular additional vacation and sick leaves granted to therein concerned
employees, it evidently appearing that the reference to East Asiatic in a footnote was a mere obiter
dictum. Salary increases are not akin to fringe benefits52 and neither is it logical to conceive of both
as belonging to the same taxonomy.

We must also resolve against the applicability of Sigma Personnel Services to the case at bar. The
basic issue before the Court therein was whether the employee, Susan Sumatre, a domestic helper
in Abu Dhabi, United Arab Emirates, had been illegally dismissed, in light of the contention of Sigma
Personnel Services, a duly licensed recruitment agency, that the former was a mere probationary
employee who was, on top of this status, mentally unsound.53 Even a cursory reading of Sigma
Personnel Services citing St. Louis College of Tuguegarao would readily show that inclusion of
salary increases in the computation of backwages was not at issue. The same was not on all fours
with the instant petition.
What, then, is the basis of computation of backwages? Are annual general increases in basic salary
deemed component in the computation of full backwages? The weight of authority leans in petitioner
Banks favor and against respondent Sadacs claim for the inclusion of general increases in the
computation of his backwages.

We stressed in Paramount that an unqualified award of backwages means that the employee is paid
at the wage rate at the time of his dismissal, thus:

The determination of the salary base for the computation of backwages requires simply an
application of judicial precedents defining the term "backwages". Unfortunately, the Labor Arbiter
erred in this regard. An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal [Davao Free Worker Front v. Court of Industrial Relations,
G.R. No. L-29356, October 27, 1975, 67 SCRA 418; Capital Garments Corporation v. Ople, G.R. No.
53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R.
No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that the base figure to be
used in the computation of backwages due to the employee should include not just the basic salary,
but also the regular allowances that he had been receiving, such as the emergency living allowances
and the 13th month pay mandated under the law [See Pan-Philippine Life Insurance Corporation v.
NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA 866; Santos v. NLRC, G.R. No. 76721,
September 21, 1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. 75510, October 27, 1987, 155
SCRA 124; Insular Life Assurance Co., Ltd. v. NLRC, supra.]54 (Emphasis supplied.)

There is no ambivalence in Paramount, that the base figure to be used in the computation of
backwages is pegged at the wage rate at the time of the employees dismissal, inclusive of regular
allowances that the employee had been receiving such as the emergency living allowances and the
13th month pay mandated under the law.

In Evangelista v. National Labor Relations Commission,55 we addressed the sole issue of whether
the computation of the award of backwages should be based on current wage level or the wage
levels at the time of the dismissal. We resolved that an unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal, thus:

As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the determination of the salary
base for the computation of backwages requires simply an application of judicial precedents defining
the term "backwages." An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal. Furthermore, the award of salary differentials is not allowed,
the established rule being that upon reinstatement, illegally dismissed employees are to be paid their
backwages without deduction and qualification as to any wage increases or other benefits that may
have been received by their co-workers who were not dismissed or did not go on strike.56

The case of Paramount was relied upon by the Court in the latter case of Espejo v. National Labor
Relations Commission,57 where we reiterated that the computation of backwages should be based
on the basic salary at the time of the employees dismissal plus the regular allowances that he had
been receiving. Further, the clarification made by the Court in General Baptist Bible College v.
National Labor Relations Commission,58 settles the issue, thus:

We also want to clarify that when there is an award of backwages this actually refers to backwages
without qualifications and deductions. Thus, We held that:

"The term backwages without qualification and deduction means that the workers are to be paid
their backwages fixed as of the time of the dismissal or strike without deduction for their earnings
elsewhere during their layoff and without qualification of their wages as thus fixed; i.e., unqualified by
any wage increases or other benefits that may have been received by their co-workers who are not
dismissed or did not go on strike. Awards including salary differentials are not allowed. The salary
base properly used should, however, include not only the basic salary but also the emergency cost
of living allowances and also transportation allowances if the workers are entitled thereto."59 (Italics
supplied.)

Indeed, even a cursory reading of the dispositive portion of the Courts Decision of 13 June 1997 in
G.R. No. 102467, awarding backwages to respondent Sadac, readily shows that the award of
backwages therein is unqualified, ergo, without qualification of the wage as thus fixed at the time of
the dismissal and without deduction.

A demarcation line between salary increases and backwages was drawn by the Court in Paguio v.
Philippine Long Distance Telephone Co., Inc.,60 where therein petitioner Paguio, on account of his
illegal transfer sought backwages, including an amount equal to 16 percent (16%) of his monthly
salary representing his salary increases during the period of his demotion, contending that he had
been consistently granted salary increases because of his above average or outstanding
performance. We said:

In several cases, the Court had the opportunity to elucidate on the reason for the grant of
backwages. Backwages are granted on grounds of equity to workers for earnings lost due to their
illegal dismissal from work. They are a reparation for the illegal dismissal of an employee based on
earnings which the employee would have obtained, either by virtue of a lawful decree or order, as in
the case of a wage increase under a wage order, or by rightful expectation, as in the case of ones
salary or wage. The outstanding feature of backwages is thus the degree of assuredness to an
employee that he would have had them as earnings had he not been illegally terminated from his
employment.

Petitioners claim, however, is based simply on expectancy or his assumption that, because in the
past he had been consistently rated for his outstanding performance and his salary correspondingly
increased, it is probable that he would similarly have been given high ratings and salary increases
but for his transfer to another position in the company.

In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this contention is
based merely on speculation. Furthermore, it assumes that in the other position to which he had
been transferred petitioner had not been given any performance evaluation. As held by the Court of
Appeals, however, the mere fact that petitioner had been previously granted salary increases by
reason of his excellent performance does not necessarily guarantee that he would have performed
in the same manner and, therefore, qualify for the said increase later. What is more, his claim is
tantamount to saying that he had a vested right to remain as Head of the Garnet Exchange and
given salary increases simply because he had performed well in such position, and thus he should
not be moved to any other position where management would require his services.61

Applying Paguio to the case at bar, we are not prepared to accept that this degree of assuredness
applies to respondent Sadacs salary increases. There was no lawful decree or order supporting his
claim, such that his salary increases can be made a component in the computation of backwages.
What is evident is that salary increases are a mere expectancy. They are, by its nature volatile and
are dependent on numerous variables, including the companys fiscal situation and even the
employees future performance on the job, or the employees continued stay in a position subject to
management prerogative to transfer him to another position where his services are needed. In short,
there is no vested right to salary increases. That respondent Sadac may have received salary
increases in the past only proves fact of receipt but does not establish a degree of assuredness that
is inherent in backwages. From the foregoing, the plain conclusion is that respondent Sadacs
computation of his full backwages which includes his prospective salary increases cannot be
permitted.

Respondent Sadac cannot take exception by arguing that jurisprudence speaks only of wage and
not salary, and therefore, the rule is inapplicable to him. It is respondent Sadacs stance that he was
not paid at the wage rate nor was he engaged in some form of manual or physical labor as he was
hired as Vice President of petitioner Bank. He cites Gaa v. Court of Appeals62 where the Court
distinguished between wage and salary.

The reliance is misplaced. The distinction between salary and wage in Gaa was for the purpose of
Article 1708 of the Civil Code which mandates that, "[t]he laborers wage shall not be subject to
execution or attachment, except for debts incurred for food, shelter, clothing and medical
attendance." In labor law, however, the distinction appears to be merely semantics. Paramount and
Evangelista may have involved wage earners, but the petitioner in Espejo was a General Manager
with a monthly salary of P9,000.00 plus privileges. That wage and salary are synonymous has been
settled in Songco v. National Labor Relations Commission.63 We said:

Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another mans business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary"
are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins
vs. Cromwell, 85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both words generally refer to one and the same meaning,
that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages"
and "salary" (Blacks Law Dictionary, 5th Ed). x x x64 (Italics supplied.)

II.

Petitioner Bank ascribes as its second assignment of error the Court of Appeals ruling that
respondent Sadac is entitled to check-up benefit, clothing allowance and cash conversion of
vacation leaves notwithstanding that respondent Sadac did not present any evidence to prove
entitlement to these claims.65

The determination of respondent Sadacs entitlement to check-up benefit, clothing allowance, and
cash conversion of vacation leaves involves a question of fact. The well-entrenched rule is that only
errors of law not of facts are reviewable by this Court in a petition for review.66 The jurisdiction of this
Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, is limited to reviewing only errors of law, not of fact, unless the factual findings being
assailed are not supported by evidence on record or the impugned judgment is based on a
misapprehension of facts.67 This Court is also not precluded from delving into and resolving issues of
facts, particularly if the findings of the Labor Arbiter are inconsistent with those of the NLRC and the
Court of Appeals.68 Such is the case in the instant petition. The Labor Arbiter and the Court of
Appeals are in agreement anent the entitlement of respondent Sadac to check-up benefit, clothing
allowance, and cash conversion of vacation leaves, but the findings of the NLRC were to the
contrary. The Labor Arbiter sustained respondent Sadacs entitlement to check-up benefit, clothing
allowance and cash conversion of vacation leaves. He gave weight to petitioner Banks
acknowledgment in its computation that respondent Sadac is entitled to certain benefits, namely, rice
subsidy, tuition fee allowance, and medicine allowance, thus, there exists no reason to deprive
respondent Sadac of his other benefits. The Labor Arbiter also reasoned that the petitioner Bank did
not adduce evidence to support its claim that the benefits sought by respondent Sadac are not
granted to its employees and officers. Similarly, the Court of Appeals ratiocinated that if ordinary
employees are entitled to receive these benefits, so it is with more reason for a Vice President, like
herein respondent Sadac to receive the same.

We find in the records that, per petitioner Banks computation, the benefits to be received by
respondent are monthly rice subsidy, tuition fee allowance per year, and medicine allowance per
year.69 Contained nowhere is an acknowledgment of herein claimed benefits, namely, check-up
benefit, clothing allowance, and cash conversion of vacation leaves. We cannot sustain the
rationalization that the acknowledgment by petitioner Bank in its computation of certain benefits
granted to respondent Sadac means that the latter is also entitled to the other benefits as claimed by
him but not acknowledged by petitioner Bank. The rule is, he who alleges, not he who denies, must
prove. Mere allegations by respondent Sadac does not suffice in the absence of proof supporting the
same.

III.

We come to the third assignment of error raised by petitioner Bank in its Supplement to Petition for
Review, assailing the 26 October 2004 Supplemental Decision of the Court of Appeals which
amended the fallo of its 6 April 2004 Decision to include "attorneys fees equal to TEN PERCENT
(10%) of all the monetary award" granted to respondent Sadac. Petitioner Bank posits that neither
the dispositive portion of our 13 June 1997 Decision in G.R. No. 102467 nor the body thereof awards
attorneys fees to respondent Sadac. It is postulated that the body of the 13 June 1997 Decision
does not contain any findings of facts or conclusions of law relating to attorneys fees, thus, this
Court did not intend to grant to respondent Sadac the same, especially in the light of its finding that
the petitioner Bank was not motivated by malice or bad faith and that it did not act in a wanton,
oppressive, or malevolent manner in terminating the services of respondent Sadac.70

We do not agree.

At the outset it must be emphasized that when a final judgment becomes executory, it thereby
becomes immutable and unalterable. The judgment may no longer be modified in any respect, even
if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law,
and regardless of whether the modification is attempted to be made by the Court rendering it or by
the highest Court of the land. The only recognized exceptions are the correction of clerical errors or
the making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course,
where the judgment is void.71 The Courts 13 June 1997 Decision in G.R. No. 102467 became final
and executory on 28 July 1997. This renders moot whatever argument petitioner Bank raised against
the grant of attorneys fees to respondent Sadac. Of even greater import is the settled rule that it is
the dispositive part of the judgment that actually settles and declares the rights and obligations of the
parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent
statements in the body that may tend to confuse.72

Proceeding therefrom, we make a determination of whether the Court in Equitable Banking

Corporation v. National Labor Relations Commission,73 G.R. No. 102467, dated 13 June 1997,
awarded attorneys fees to respondent Sadac. In recapitulation, the dispositive portion of the
aforesaid Decision is hereunder quoted:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability herein pronounced
shall be due from petitioner bank alone, the other petitioners being absolved from solidary liability.
No costs.74

The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent Sadac
attorneys fees equivalent to ten percent (10%) of the monetary award, viz:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as
it is hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as
illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority rights and other
privileges, and to pay him full backwages and other benefits from the time his compensation was
withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages
of P50,000.00, and attorneys fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents are ordered likewise
jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991
(cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53.75 (Italics Ours.)

As can be gleaned from the foregoing, the Courts Decision of 13 June 1997 AFFIRMED with
MODIFICATION the NLRC Decision of 24 September 1991, which modification did not touch upon
the award of attorneys fees as granted, hence, the award stands. Juxtaposing the decretal portions
of the NLRC Decision of 24 September 1991 with that of the Courts Decision of 13 June 1997, we
find that what was deleted by the Court was "the award of moral and exemplary damages," but not
the award of "attorneys fees equivalent to Ten Percent (10%) of the monetary award." The issue on
the grant of attorneys fees to respondent Sadac has been adequately and definitively threshed out
and settled with finality when petitioner Bank came to us for the first time on a Petition for Certiorari
in Equitable Banking Corporation v. National Labor Relations Commission, docketed as G.R. No.
102467. The Court had spoken in its Decision of 13 June 1997 in the said case which attained
finality on 28 July 1997. It is now immutable.

IV.

We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve percent
(12%) interest per annum on the outstanding balance as of 28 July 1997, the date when our
Decision in G.R. No. 102467 became final and executory.

In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking through the Honorable
Justice Jose C. Vitug, laid down the following rules of thumb:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages.

II. With regard particularly to an award of interest in the concept of actual or compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
 legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Article 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2 above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.77

It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from the
time judgment becomes final and executory, until full satisfaction thereof. Therefore, petitioner Bank
is liable to pay interest from 28 July 1997, the finality of our Decision in G.R. No. 102467.78 The
Court of Appeals was not in error in imposing the same notwithstanding that the parties were at
variance in the computation of respondent Sadacs backwages. What is significant is that the
Decision of 13 June 1997 which awarded backwages to respondent Sadac became final and
executory on 28 July 1997.

V.

Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily be denied as
established in our foregoing discussion. We are not herein modifying or reversing a doctrine or
principle laid down by the Court en banc or in a division. The instant case is not one that should be
heard by the Court en banc.79 1avv phil.net

Fallo

WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the
backwages, respondent Sadacs claimed prospective salary increases, check-up benefit, clothing
allowance, and cash conversion of vacation leaves are excluded. The petition is PARTIALLY
DENIED insofar as we AFFIRMED the grant of attorneys fees equal to ten percent (10%) of all the
monetary award and the imposition of twelve percent (12%) interest per annum on the outstanding
balance as of 28 July 1997. Hence, the Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 75013, dated 6 April 2004 and 28 July 2004, respectively, and the Supplemental Decision
dated 26 October 2004 are MODIFIED in the following manner, to wit:

Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:

 (1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467
with a clarification that the award of backwages EXCLUDES respondent Sadacs claimed
prospective salary increases, check-up benefit, clothing allowance, and cash conversion of
vacation leaves;

(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of all monetary
award; and

(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum
of all monetary award from 28 July 1997, the date of finality of Our Decision in G.R. No.
102467 until full payment of the said monetary award.

The Motion to Refer the Petition to the Court En Banc is DENIED.

No costs.

SO ORDERED.

G.R. No. 152329 April 22, 2003

ALEJANDRO ROQUERO, petitioner,

vs.
PHILIPPINE AIRLINES, INC., respondent.

PUNO, J.:

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

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

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

On March 30, 1994, Roquero and Pabayo received a "notice of administrative charge"3 for violating
the PAL Code of Discipline. They were required to answer the charges and were placed under
preventive suspension.
Roquero and Pabayo, in their "reply to notice of administrative charge,"4 assailed their arrest and
asserted that they were instigated by PAL to take the drugs. They argued that Alipato was not really
a trainee of PAL but was placed in the premises to instigate the commission of the crime. They
based their argument on the fact that Alipato was not arrested. Moreover, Alipato has no record of
employment with PAL.

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

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

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

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

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

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

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

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

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

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

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

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

Serious misconduct is defined as "the transgression of some established and definite rule of action,
a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere
error in judgment."17 For serious misconduct to warrant the dismissal of an employee, it (1) must be
serious; (2) must relate to the performance of the employee's duty; and (3) must show that the
employee has become unit to continue working for the employer.18

It is of public knowledge that drugs can damage the mental faculties of the user. Roquero was
tasked with the repair and maintenance of PAL's airplanes. He cannot discharge that duty if he is a
drug user. His failure to do his job can mean great loss of lives and properties. Hence, even if he
was instigated to take drugs he has no right to be reinstated to his position. He took the drugs fully
knowing that he was on duty and more so that it is prohibited by company rules. Instigation is only a
defense against criminal liability. It cannot be used as a shield against dismissal from employment
especially when the position involves the safety of human lives.

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

II

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

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

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

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

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

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

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

SO ORDERED.

G.R. No. 161305 February 9, 2007

MILAGROS PANUNCILLO, Petitioner,

vs.
CAP PHILIPPINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Assailed via Petition for Review1 are the Decision dated May 16, 20032 and Resolution dated
November 17, 20033of the Court of Appeals in CA-G.R. SP No. 74665 which declared valid the
dismissal of Milagros Panuncillo (petitioner) by CAP Philippines, Inc. (respondent).
Petitioner was hired on August 28, 1980 as Office Senior Clerk by respondent. At the time of her
questioned separation from respondent on April 23, 1999, she was receiving a monthly salary of
16,180.60.

In order to secure the education of her son, petitioner procured an educational plan (the plan) from
respondent which she had fully paid but which she later sold to Josefina Pernes (Josefina) for
37,000. Before the actual transfer of the plan could be effected, however, petitioner pledged it for
50,000 to John Chua who, however, sold it to Benito Bonghanoy. Bonghanoy in turn sold the plan
to Gaudioso R. Uy for 60,000.

Having gotten wind of the transactions subsequent to her purchase of the plan, Josefina, by letter of
February 10, 1999,4 informed respondent that petitioner had "swindled" her but that she was willing
to settle the case amicably as long as petitioner pay the amount involved and the interest. She
expressed her appreciation "if [respondent] could help her in anyway."

Acting on Josefinas letter, the Integrated Internal Audit Operations (IIAO) of respondent required
petitioner to explain in writing why the plan had not been transferred to Josefina and was instead
sold to another. Complying, petitioner proffered the following explanation:

Because of extreme need of money, I was constrained to sell my CAP plan of my son to J. Pernes
last July, 1996, in the amount of Thirty Seven Thousand Pesos (P37,000.) The plan was not
transferred right away because of lacking requirement on the part of the buyer (birth certificate). The
birth certificate came a month later. While waiting for the birth certificate, again because of extreme
need of money, I was tempted to pawned [sic] the plan, believing I can redeemed [sic] it later when
the birth certificate will come.

Last year, I was already pressured by J. Pernes for the transfer of the plan. But before hand, she
already knew the present situation. I was trying to find means to redeemed [sic] the plan but to no
avail. I cannot borrow anymore from my creditors because of outstanding loans which remains
unpaid. As of the present, I am heavily debtladen and I dont know where to run.

I cant blame the person whom I pawned the plan if he had sold it. I cant redeemed [sic] it anymore.
Everybody needs money and besides, I have given them my papers.

I admit, I had defrauded Ms. J. Pernes, but I didnt do it intentionally. At first, I believe I can
redeem the plan hoping I can still borrow from somebody.

With my more than 18 years stay with the company, I dont have the intention of ruining my image as
well as the companys. I think I am just a victim of circumstances.5 (Emphasis and underscoring
supplied)

A show-cause memorandum6 dated February 23, 1999 was thereupon sent to petitioner, giving her
48 hours from receipt thereof to explain why she should not be disciplinarily dealt with. Petitioner did
not comply, however.

The IIAO of respondent thus conducted an investigation on the matter. By Memorandum of April 5,
1999,7 the IIAO recommended that, among other things, administrative action should be taken
against petitioner for violating Section 8.4 of respondents Code of Discipline reading:

Committing or dealing any act or conniving with co-employees or anybody to defraud the company
or customer/sales associates.
In the same memorandum, the IIAO reported other matters bearing on petitioners duties as an
employee, to wit:

OTHERS:

We also received a copy of demand letter of a certain Evelia Casquejo addressed to Ms. Panuncillo
requiring the latter to pay the amount of P54,870.00 for the supposed transfer of the lapsed plan of
Subscriber Corazon Lintag with SFA # 25-67-40-01-00392. Ms. Panuncillo received the payment of
P25,000.00 and P29,870.00 on July 17, 1997 and July 18, 1997 respectively (Exhibits L&M).

Ms. Panuncillo verbally admitted that she was the one who sold the plan to Ms. Casquejo but with
the authorization from Ms. Lintag. However, the transfer was not effected because she
had misappropriated a portion of the moneyuntil the plan was terminated. Ms. Casquejo, however,
did not file a complaint because Ms. Panuncillo executed a Special Power of Attorney authorizing
the former to receive P68,000 of Ms. Panuncillos retirement pay (Exhibit N).8(Emphasis in the
original; underscoring supplied))

On April 7, 1999, another show-cause memorandum was sent to petitioner by Renato M. Daquiz
(Daquiz), First Vice President of respondent, giving her another 48 hours to explain why she should
not be disciplinarily dealt with in connection with the complaints of Josefina and Evelia Casquejo
(Evelia). Complying with the directive, petitioner, by letter of April 10, 1999, on top of reiterating her
admission of having "defrauded" Josefina, admitted having received from Evelia the payment for a
lapsed plan, thus:

With regards to [Evelias] case, yes its [sic] true I had received the payment but it was accordingly
given to the owner or Subscriber Ms. C. Lintag. The plan was not transferred because it was already
forfeited and we, Ms. Lintag, [Evelia] and I already made settlement of the case.

I think I have violated Sec. 8.4 of the companys Code of Discipline. I admit it is my
wrongdoing. I was only forced to do this because of extreme needs to pay for my debts. I am open
for whatever disciplinary action that will be sanctioned againts [sic] me. I hope it is not
termination from my job. How can I pay for obligations if that will happen to me.

As for [Josefina], I have the greatest desire to pay for my indebtedness but my capability at the
moment is nil. (space) I have been planning to retire early just to pay my obligations. That is why I
had written to you last year inquiring tax exemption when retiring. I have been with the company for
almost 19 years already and I never intend [sic] to smear its name as well as mine. I was only forced
by circumstances. Although it hurts to leave CAP, I will be retiring on April 30, 1999.

x x x x9 (Emphasis and underscoring supplied)

Respondent thereupon terminated the services of petitioner by Memorandum dated April 20, 1999.10

Petitioner sought reconsideration of her dismissal, by letter of April 23, 1999 addressed to Daquiz,
imploring as follows:

. . . Please consider my retirement letter I sent to you. I would like to avail [of] the retirement benefit
of the company. The proceeds of my retirement could help me pay some of my obligations as well
as the needs of my family. My husband is jobless and I am the breadwinner of the family. If I will be
terminated, I dont know what will happen to us.
Sir, I am enclosing the affidavit of Ms. Evelia Casquejo proving that we have already settled the
case.

x x x x11 (Underscoring supplied) 1awphi 1.net

Pending resolution of petitioners motion for reconsideration, respondent received a letter dated April
28, 199912from one Gwendolyn N. Dinoro (Gwendolyn) who informed that she had been paying her
"quarterly dues" through petitioner but found out that none had been remitted to respondent, on
account of which she (Gwendolyn) was being penalized with interest charges.

Acting on petitioners motion for reconsideration, Daquiz, by letter-memorandum of May 5, 1999,

denied the same in this wise:

A review of your case was made per your request, and we note that it was not just a single case
but multiple cases, that of Ms. Casquejo, Ms. Pernes, and newly reported Ms. Dinoro.
Furthermore, the cases happened way back in July 1996 and 1997, and were just discovered
recently. In addition, the misappropriation of money/or act to defraud the company or customer was
deliberate and intentional. There were several payments received over a period of time. While you
plead for your retirement benefit to help you pay some of your obligations, as well as the need of
your family (your husband being jobless and being the breadwinner), these thoughts should have
crossed your mind before you committed the violations rather than now. To allow you to retire with
benefits, is to tolerate and encourage others to do the same in the future, as it will be a precedent
that will surely be invoked in similar situations in the future, as it will be a precedent that will surely
be invoked in similar situations in the future. It is also unfair to others who do their jobs faithfully and
honestly. If we let you have your way, it will appear that we let you scot-free and even reward
you with retirement someone who deliberately violated trust and confidence of the
company and customers.

Premises considered, the decision to terminate your services for cause stays and the request for
reconsideration is denied.

x x x x13 (Emphasis and underscoring supplied)

Petitioner thus filed a complaint14 for illegal dismissal, 13th month pay, service incentive leave pay,
damages and attorneys fees against respondent.

The Labor Arbiter, while finding that the dismissal was for a valid cause, found the same too harsh.
He thus ordered the reinstatement of petitioner to a position one rank lower than her previous
position, and disposed as follows:

WHEREFORE, the foregoing considered, judgement [sic] is hereby rendered directing the
respondent to pay complainants 13th Month pay and Service Incentive Leave Pay for 1999 in
proportionate amount computed as follows:

13th Month Pay

January 1, 1999 to April 1, 1999

= 3 months

= P16,180.60/12 mos. x 3 mos. P4,045.14

 Service Incentive Leave

= P16,180.60/26 days

=P622.30 per day x 5 days/12 months. 777.87

TOTAL --------------------------------P4,823.01

Plus P482.30 ten (10%) Attorneys Fees or a total aggregate amount of PESOS: FIVE THOUSAND
THREE HUNDRED FIVE & 31/100 (P5,305.31).

Respondent is likewise, directed to reinstate the complainant to a position one rank lower without
backwages.15(Underscoring supplied)

On appeal, the National Labor Relations Commission (NLRC), by Decision of October 29, 2001,
reversed that of the Labor Arbiter, it finding that petitioners dismissal was illegal and
accordingly ordering her reinstatement to her former position. Thus it disposed:

WHEREFORE, the Decision in the main case dated February 18, 2000 of the Labor Arbiter declaring
the dismissal of the complainant valid, and his Order dated June 26, 2000 declaring the Motion to
Declare Respondent-appellant in Contempt as prematurely filed and ordering the issuance of an
alias writ of execution are hereby SET ASIDE, and a new one is rendered DECLARING the
dismissal of the complainant illegal, and ORDERING the respondent, CAP PHILIPPINES,
INCORPORATED, the following:

1. to reinstate the complainant MILAGROS B. PANUNCILLO to her former position without

loss of seniority rights and with full backwages from the date her compensation was withheld
from her on April 20, 1999 until her actual reinstatement;

2. to pay to the same complainant P4,045.14 as 13th month pay, and P777.89 as service
incentive leave pay;

3. to pay to the same complainant moral damages of FIFTY THOUSAND PESOS

(P50,000.00), and exemplary damages of another FIFTY THOUSAND PESOS (P50,000.00);

4. to pay attorneys fees equivalent to ten percent (10%) of the total award exclusive of moral
and exemplary damages.

Further, the complainants Motion to Declare Respondent in Contempt dated May 3, 2000 is denied
and rendered moot by virtue of this Decision.

All other claims are dismissed for lack of merit.16 (Underscoring supplied)

In so deciding, the NLRC held that the transaction between petitioner and Josefina was private in
character and, therefore, respondent did not suffer any damage, hence, it was error to apply Section
8.4 of respondents Code of Discipline.

Respondent challenged the NLRC Decision before the appellate court via Petition for Certiorari.17 By
Decision of May 16, 2003,18 the appellate court reversed the NLRC Decision and held that the
dismissal was valid and that respondent complied with the procedural requirements of due process
before petitioners services were terminated.
Hence, the present petition, petitioner faulting the appellate court

x x x IN REVIEWING THE FINDINGS OF FACT OF THE LABOR ARBITER AND THE NATIONAL
LABOR RELATIONS COMMISSION THAT RESPONDENT CAP PHILIPPINES, INC., HAS NOT
BEEN DEFRAUDED NOR DAMAGED IN THE TRANSACTION/S ENTERED INTO BY
PETITIONER RELATING TO HER FULLY PAID EDUCATIONAL PLAN.

II

x x x IN HOLDING THAT RESPONDENT CAP PHILIPPINES, INC. IS THE INSURER OF

PETITIONERS FULLY PAID EDUCATIONAL PLAN UNDER THE INSURANCE CODE.

III

x x x IN HOLDING THAT PETITIONER WAS DULY AFFORDED DUE PROCESS BEFORE

DISMISSAL[,]

and maintaining that she

IV

x x x IS ENTITLED TO HER FULL BACKWAGES FROM THE DATE HER COMPENSATION WAS
WITHHELD FROM HER ON APRIL 20, 1999 PURSUANT TO THE DECISION OF THE NLRC
REINSTATING HER TO HER PREVIOUS POSITION WITH FULL BACKWAGES AND SETTING
ASIDE THE DECISION OF THE LABOR ARBITER REINSTATING HER TO A POSITION NEXT
LOWER IN RANK, UNTIL THE REVERSAL OF THE NLRC DECISION BY THE HONORABLE
COURT OF APPEALS.19 (Emphasis and underscoring supplied)

The petition is not meritorious.

Whether respondent did not suffer any damage resulting from the transactions entered into by
petitioner, particularly that with Josefina, is immaterial. As Lopez v. National Labor Relations
Commission instructs:

That the [employer] suffered no damage resulting from the acts of [the employee] is inconsequential.
In Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-DFA (NEW-DFA), we
held that deliberate disregard or disobedience of company rules could not be countenanced, and
any justification that the disobedient employee might put forth would be deemed
inconsequential. The lack of resulting damage was unimportant, because "the heart of the charge is
the crooked and anarchic attitude of the employee towards his employer. Damage aggravates the
charge but its absence does not mitigate nor negate the employees liability." x x x20 (Italics in the
original; underscoring supplied)

The transaction with Josefina aside, there was this case of misappropriation by petitioner of the
amounts given to her by Evelia representing payment for the lapsed plan of Corazon Lintag. While a
settlement of the case between the two may have eventually been forged, that did not obliterate the
misappropriation committed by petitioner against a client of respondent.
Additionally, there was still another complaint lodged before respondent by Gwendolyn against
petitioner for failure to remit the cash payments she had made to her, a complaint she was apprised
of but on which she was silent.

In fine, by petitioners repeated violation of Section 8.4 of respondents Code of Discipline, she
violated the trust and confidence of respondent and its customers. To allow her to continue with her
employment puts respondent under the risk of being embroiled in unnecessary lawsuits from
customers similarly situated as Josefina, et al. Clearly, respondent exercised its management
prerogative when it dismissed petitioner.

. . . [T]ime and again, this Court has upheld a companys management prerogatives so long as they
are exercised in good faith for the advancement of the employers interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid
agreements.

Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever

maybe the justification behind the violations is immaterial at this point, because the fact still remains
that an infraction of the company rules has been committed.

Under the Labor Code, the employer may terminate an employment on the ground
of serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work. Infractions of company rules and regulations have been
declared to belong to this category and thus are valid causes for termination of employment by the
employer.

xxxx

The employer cannot be compelled to continue the employment of a person who was found guilty of
maliciously committing acts which are detrimental to his interests. It will be highly prejudicial to the
interests of the employer to impose on him the charges that warranted his dismissal from
employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable, remain
in the service. It may encourage him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe. This Court was more emphatic in holding that in
protecting the rights of the laborer, it cannot authorize the oppression or self-destruction of the
employer.21 x x x (Underscoring supplied)

Petitioner nevertheless argues that she was not afforded due process before her dismissal as she
was merely required to answer a show-cause memorandum dated April 7, 1999 and there was no
actual investigation conducted in which she could have been heard.

Before terminating the services of an employee, the law requires two written notices: (1) one to
apprise him of the particular acts or omissions for which his dismissal is sought; and (2) the other to
inform him of his employers decision to dismiss him. As to the requirement of a hearing, the
essence of due process lies in an opportunity to be heard, and not always and indispensably in an
actual hearing.22

When respondent received the letter-complaint of Josefina, petitioner was directed to comment and
explain her side thereon. She did comply, by letter of February 22, 1999 wherein she admitted that
she "had defrauded Ms. J. Pernes, but [that she] didnt do it intentionally."

Respondent subsequently sent petitioner a show-cause memorandum giving her 48 hours from
receipt why she should not be disciplinarily sanctioned. Despite the 48-hour deadline, nothing was
heard from her until April 10, 1999 when she complied with the second show-cause memorandum
dated April 7, 1999.

On April 20, 1999, petitioner was informed of the termination of her services to which she filed a
motion for reconsideration.

There can thus be no doubt that petitioner was given ample opportunity to explain her side.
Parenthetically, when an employee admits the acts complained of, as in petitioners case, no formal
hearing is even necessary.23

Finally, petitioner argues that even if the order of reinstatement of the NLRC was reversed on
appeal, it is still obligatory on the part of an employer to reinstate and pay the wages of a dismissed
employee during the period of appeal, citing Roquero v. Philippine Airlines,24 the third paragraph of
Article 22325 of the Labor Code, and the last paragraph of Section 16,26 Rule V of the then 1990 New
Rules of Procedure of the NLRC.

Petitioner adds that respondent made "clever moves to frustrate [her] from enjoying the
reinstatement aspect of the decision starting from that of the Labor Arbiter (although to a next lower
rank), [to that] of the NLRC to her previous position without loss of seniority rights until it was caught
up by the decision of the Honorable Court of Appeals reversing the decision of the NLRC and
declaring the dismissal of petitioner as based on valid grounds."

Respondent, on the other hand, maintains that Roquero and the legal provisions cited by petitioner
are not applicable as they speak of reinstatement on order of the Labor Arbiter and not of the NLRC.

The Labor Arbiter ordered the reinstatement of petitioner to a lower position. The third paragraph of
Article 223 of the Labor Code is clear, however the employee, who is ordered reinstated, must be
accepted back to work under the same terms and conditions prevailing prior to his dismissal or
separation.

Petitioners being demoted to a position one rank lower than her original position is certainly not in
accordance with the said third paragraph provision of Article 223. Besides, the provision
contemplates a finding that the employee was illegally dismissed or there was no just cause for her
dismissal. As priorly stated, in petitioners case, the Labor Arbiter found that there was just cause for
her dismissal, but that dismissal was too harsh, hence, his order for her reinstatement to a lower
position.

The order to reinstate is incompatible with a finding that the dismissal is for a valid cause. Thus this
Court declared in Colgate Palmolive Philippines, Inc. v. Ople:

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on
their part is not in conformity with law. Reinstatement is simply incompatible with a finding of
guilt. Where the totality of the evidence was sufficient to warrant the dismissal of the employees the
law warrants their dismissal without making any distinction between a first offender and a habitual
delinquent. Under the law, respondent Minister is duly mandated to equally protect and respect not
only the labor or workers side but also the management and/or employers side. The law, in
protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the
employer. x x x As stated by Us in the case of San Miguel Brewery vs. National Labor Union, "an
employer cannot legally be compelled to continue with the employment of a person who admittedly
was guilty of misfeasance or malfeasance towards his employer, and whose continuance in the
service of the latter is patently inimical to his interest."27 (Emphasis and underscoring supplied)
The NLRC was thus correct when it ruled that it was erroneous for the Labor Arbiter to order the
reinstatement of petitioner, even to a position one rank lower than that which she formerly held.28

Now, on petitioners argument that, following the third paragraph of Article 223 of the Labor Code,
the order of the NLRC to reinstate her and to pay her wages was immediately executory even while
the case was on appeal before the higher courts: The third paragraph of Article 223 of the Labor
Code directs that "the decision of the LaborArbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending
appeal."

In Roquero, the Labor Arbiter upheld the dismissal of Roquero, along with another employee, albeit
he found both the two and employer Philippine Airlines (PAL) at fault. The Labor Arbiter thus ordered
the payment of separation pay and attorneys fees to the complainant. No order for reinstatement
was issued by the Labor Arbiter, precisely because the dismissal was upheld.

On appeal, the NLRC ruled in favor of Roquero and his co-complainant as it also found PAL guilty of
instigation. The NLRC thus ordered the reinstatement of Roquero and his co-complainant to their
former positions, but without backwages.

PAL appealed the NLRC decision via Petition for Review before this Court. Roquero and his co-
complainant did not. They instead filed before the Labor Arbiter a Motion for Execution of the NLRC
order for their reinstatement which the Labor Arbiter granted.

Acting on PALs Petition for Review, this Court referred it to the Court of Appeals pursuant to St.
Martin Funeral Home v. NLRC.29

The appellate court reversed the NLRC decision and ordered the reinstatement of the decision of the
Labor Arbiter but only insofar as it upheld the dismissal of Roquero.

Back to this Court on Roqueros Petition for Review, the following material issues were raised:

xxxx

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

3. Would the employer who refused to reinstate an employee despite a writ duly issued be
held liable to pay the salary of the subject employee from the time that he was ordered
reinstated up to the time that the reversed decision was handed down?30

Resolving these issues, this Court held in Roquero:

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

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

xxxx

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

xxxx

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

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are
applied only in a suppletory manner and only to effectuate the objectives of the Labor Code and not
to defeat them. Hence, even if the order of reinstatement of the Labor Arbiter is reversed on appeal,
it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee
during the period of appeal until reversal by the higher court. On the other hand, if the employee has
been reinstated during the appeal period and such reinstatement order is reversed with finality,
the employee is not required to reimburse whatever salary he received for he is entitled to such,
more so if he actually rendered services during the period.31 (Italics in the original, emphasis and
underscoring supplied)

In the present case, since the NLRC found petitioners dismissal illegal and ordered her
reinstatement, following the provision of the sixth paragraph of Article 223, viz:

The [National Labor Relations] Commission shall decide all cases within twenty (20) calendar days
from receipt of the answer of the appellee. The decision of the Commission shall be final and
executory after ten (10) calendar days from receipt thereof by the parties. (Emphasis and
underscoring supplied),

the NLRC decision became "final and executory after ten calendar days from receipt of the decision
by the parties" for reinstatement.

In view, however, of Article 224 of the Labor Code which provides:

ART. 224. Execution of decisions, orders or awards. (a) The Secretary of Labor and Employment
or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator
may, motu proprio or on motion of any interested party, issue a writ of execution on a judgment
within five (5) years from the date it becomes final and executory, requiring a sheriff or a duly
deputized officer to execute or enforce final decisions, orders or awards of the Secretary of Labor
and Employment or regional director, the Commission, the Labor Arbiter or med-arbiter, or voluntary
arbitrators. In any case, it shall be the duty of the responsible officer to separately furnish
immediately the counsels of record and the parties with copies of said decisions, orders or awards.
Failure to comply with the duty prescribed herein shall subject such responsible officer to appropriate
administrative sanctions.

x x x x (Emphasis and underscoring supplied),

there was still a need for the issuance of a writ of execution of the NLRC decision.

Unlike then the order for reinstatement of a Labor Arbiter which is self-executory, that of the NLRC is
not. There is still a need for the issuance of a writ of execution. Thus this Court held in Pioneer
Texturizing Corp. v. NLRC:32

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall
be immediately executory even pending appeal and the posting of a bond by the employer shall not
stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and
its issuance could be delayed for numerous reasons. A mere continuance or postponement of a
scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could
easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose
envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of
a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a
reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered
ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible
law, one which operates no further than may be necessary to achieve its specific purpose. Statutes,
as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be
remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under
Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic
exercise. On appeal, however, the appellate tribunal concerned may enjoin or suspend the
reinstatement order in the exercise of its sound discretion.33(Italics in the original, emphasis and
underscoring supplied)

If a Labor Arbiter does not issue a writ of execution of the NLRC order for the reinstatement of an
employee even if there is no restraining order, he could probably be merely observing judicial
courtesy, which is advisable "if there is a strong probability that the issues before the higher court
would be rendered moot and moribund as a result of the continuation of the proceedings in the lower
court."34 In such a case, it is as if a temporary restraining order was issued, the effect of
which Zamboanga City Water District v. Buhat explains:

The issuance of the temporary restraining order did not nullify the rights of private respondents to
their reinstatement and to collect their wages during the period of the effectivity of the order but
merely suspended the implementation thereof pending the determination of the validity of the NLRC
resolutions subject of the petition. Naturally, a finding of this Court that private respondents
were not entitled to reinstatement would mean that they had no right to collect any back wages. On
the other hand, where the Court affirmed the decision of the NLRC and recognized the right of
private respondents to reinstatement, private respondents are entitled to the wages
accruing during the effectivity of the temporary restraining order.35 (Emphasis and underscoring
supplied)

While Zamboanga was decided prior to St. Martin Funeral and, therefore, the NLRC decisions were
at the time passed upon by this Court to the exclusion of the appellate court, it is still applicable.
Since this Court is now affirming the challenged decision of the Court of Appeals finding that
petitioner was validly dismissed and accordingly reversing the NLRC Decision that petitioner was
illegally dismissed and should be reinstated, petitioner is not entitled to collect any backwages from
the time the NLRC decision became final and executory up to the time the Court of Appeals
reversed said decision.

It does not appear that a writ of execution was issued for the implementation of the NLRC order for
reinstatement. Had one been issued, respondent would have been obliged to reinstate petitioner and
pay her salary until the said order of the NLRC for her reinstatement was reversed by the Court of
Appeals, and following Roquero, petitioner would not have been obliged to reimburse respondent for
whatever salary she received in the interim.

In sum, while under the sixth paragraph of Article 223 of the Labor Code, the decision of the NLRC
becomes final and executory after the lapse of ten calendar days from receipt thereof by the parties,
the adverse party is not precluded from assailing it via Petition for Certiorari under Rule 65 before
the Court of Appeals and then to this Court via a Petition for Review under Rule 45. If during the
pendency of the review no order is issued by the courts enjoining the execution of a decision of the
Labor Arbiter or NLRC which is favorable to an employee, the Labor Arbiter or the NLRC must
exercise extreme prudence and observe judicial courtesy when the circumstances so warrant if we
are to heed the injunction of the Court in Philippine Geothermal, Inc v. NLRC:

While it is true that compassion and human consideration should guide the disposition of cases
involving termination of employment since it affects ones source or means of livelihood, it should not
be overlooked that the benefits accorded to labor do not include compelling an employer to retain
the services of an employee who has been shown to be a gross liability to the employer. The law in
protecting the rights of the employees authorizes neither oppression nor self-destruction of the
employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but
a recognition of the inherent economic inequality between labor and management. The intent is to
balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should
the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice
is to be denied to none).36 (Italics in the original; emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED. The assailed Court of Appeals Decision dated May 16, 2003
and Resolution dated November 17, 2003 are AFFIRMED.

SO ORDERED.

G.R. Nos. 142732-33 December 4, 2007

MARILOU S. GENUINO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, CITIBANK, N.A., WILLIAM FERGUSON, and
AZIZ RAJKOTWALA, respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. Nos. 142753-54

CITIBANK, N.A., WILLIAM FERGUSON, and AZIZ RAJKOTWALA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MARILOU GENUINO, respondents.

DECISION

VELASCO, JR., J.:

The Case

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

Citibank is an American banking corporation duly licensed to do business in the Philippines. William
Ferguson was the Manila Country Corporate Officer and Business Head of the Global Finance Bank
of Citibank while Aziz Rajkotwala was the International Business Manager for the Global Consumer
Bank of Citibank.5

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

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

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

a. Confront our client with the factual and legal basis of your charges, and afford her an
opportunity to explain;

b. Substantiate your charge of fraudulent transactions against our client; or if the same
cannot be substantiated;

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

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

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

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

1. Norma T. de Jesus

2. Carmen Intengan/Romeo Neri

3. Mario Mamon

4. Vienna Ochoa/IETI

5. William Samara

6. Roberto Estandarte

7. Rita Browner

8. Ma. Redencion Sumpaico

9. Cesar Bautista

10. Teddy Keng

11. NDC-Guthrie

12. Olivia Sy

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

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

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

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

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

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

Genuino's employment was terminated by Citibank on grounds of (1) serious misconduct, (2) willful
breach of the trust reposed upon her by the bank, and (3) commission of a crime against the bank.13

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

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

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

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

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

SO ORDERED.17

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

The Ruling of the Court of Appeals

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

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

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

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

SO ORDERED.21

Hence, we have this petition.

The Issue

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

ACCORDANCE WITH DUE PROCESS

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

The dismissal was for just cause but lacked due process

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

In a string of cases, 22 we have repeatedly said that the requirement of twin notices must be met. In
the recent case of King of Kings Transport, Inc. v. Mamac, we explained:
 To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees are given
the opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice to
give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.

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

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

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

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

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

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

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

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

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

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

We note also that during the proceedings before the Labor Arbiter, Citibank presented the following
affidavits, with supporting documentary evidence against Genuino:

1) Vic Lim, an officer of Citibank who investigated the anomalies of Genuino and Santos,
concluded that Genuino and Santos realized substantial financial gains out of the transfer of
monies as supported by the following documents:

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

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

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

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

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

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

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

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

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

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

Contrary to the Labor Arbiter's finding, the NLRC found the following facts supported by the records:
 a) Respondent bank has a conflict of interest rule, embodied in Chapter 3 of its Corporate
Policy Manual, prohibiting the officers of the bank from engaging in business activities,
situations or circumstances that are in conflict with the interest of the bank.

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

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

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

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

Art. 282(c) of the Labor Code provides that an employer may terminate an employment for fraud or
willful breach by the employee of the trust reposed in him/her by his/her employer or duly authorized
representative. In order to constitute as just cause for dismissal, loss of confidence should relate to
acts inimical to the interests of the employer.35 Also, the act complained of should have arisen from
the performance of the employee's duties.36 For loss of trust and confidence to be a valid ground for
an employee's dismissal, it must be substantial and not arbitrary, and must be founded on clearly
established facts sufficient to warrant the employee's separation from work.37 We also held that:

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

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

investments, and peso and dollar deposits for, and keep them in Citibank; and to sell and/or push for
the sale of Citibank's financial products, such as the MBS, for the account and benefit of
Citibank.39 She held a position of trust and confidence. There is no way she could deny any
knowledge of the bank's policies nor her understanding of these policies as reflected in the survey
done by the bank. She could not likewise feign ignorance of the businesses of Citibank, and of
Global and Torrance. Assuming that Citibank did not engage in the same securities dealt with by
Global and Torrance; nevertheless, it is to the interests of Citibank to retain its clients and continue
investing in Citibank. Curiously, Genuino did not even dissuade the depositors from withdrawing
their monies from Citibank, and was even instrumental in the transfers of monies from Citibank to a
competing bank through Global and Torrance, the corporations under Genuino's control.
All the pieces of evidence compel us to conclude that Genuino did not have her employer's interest.
The letter of the bank's clients which attested that the withdrawals from Citibank were made upon
their instructions is of no import. It did not explain why they preferred to invest in Global and
Torrance, nor did it mention that Genuino tried to dissuade them from withdrawing their deposits.
Genuino herself admitted her relationship with some of the depositors in her affidavit, to wit:

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

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

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

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

In Agabon, we explained:

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

Thus, the award of PhP 5,000 to Genuino as indemnity for non-observance of due process under the
CA's March 31, 2000 Resolution in CA-G.R. SP No. 51532 is increased to PhP 30,000.

Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay the
salaries due to the complainant from the date it reinstated complainant in the payroll (computed at
P60,000.00 a month, as found by the Labor Arbiter) up to and until the date of this decision," the
Court hereby cancels said award in view of its finding that the dismissal of Genuino is for a legal and
valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal
pursuant to Art. 223, paragraph 3 of the Labor Code, which states:
 In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be executory,
even pending appeal. The employee shall either be admitted back to work under the same
terms and conditions prevailing prior to his dismissal or separation or, at the option of the
employer, merely reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatement provided herein.

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

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

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

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

SO ORDERED.

G.R. No. 164856 January 20, 2009

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

vs.
PHILIPPINE AIRLINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April
16, 2004 Resolution of the Court of Appeals1 in CA-G.R. SP No. 69540 which granted the petition for
certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners Motion for
Reconsideration, respectively. The dispositive portion of the assailed Decision reads:
WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby
GIVEN DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28,
2002 Resolution of public respondent National Labor Relations Commission [NLRC] is hereby
ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to
lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of Garnishment
issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE.

SO ORDERED.2

The case stemmed from the administrative charge filed by PAL against its employees-herein
petitioners3 after they were allegedly caught in the act of sniffing shabu when a team of company
security personnel and law enforcers raided the PAL Technical Centers Toolroom Section on July
24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of
Discipline,4prompting them to file a complaint for illegal dismissal and damages which was, by
Decision of January 11, 1999,5resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter
alia, immediately comply with the reinstatement aspect of the decision.

Prior to the promulgation of the Labor Arbiters decision, the Securities and Exchange Commission
(SEC) placed PAL (hereafter referred to as respondent), which was suffering from severe financial
losses, under an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent
Rehabilitation Receiver on June 7, 1999.

From the Labor Arbiters decision, respondent appealed to the NLRC which, by Resolution of
January 31, 2000, reversed said decision and dismissed petitioners complaint for lack of merit.6

Petitioners Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of
Judgment was issued on July 13, 2000.7

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting
the reinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a
Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the
Notice while petitioners moved to release the garnished amount.

In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by
Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the
Notice issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation
Receiver for appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged Decision
and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a
subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect
of a labor arbiters decision (the first ground), and (2) the impossibility to comply with the
reinstatement order due to corporate rehabilitation provides a reasonable justification for the failure
to exercise the options under Article 223 of the Labor Code (the second ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and
effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings, viz:
Since petitioners claim against PAL is a money claim for their wages during the pendency of PALs
appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings.
The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving
petitioners case for illegal dismissal and should instead have directed them to lodge their claim
before PALs receiver.

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

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

SO ORDERED.8 (Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC,
by Order of September 28, 2007, granted its request to exit from rehabilitation proceedings.9

In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve
the remaining issuefor consideration, which is whether petitioners may collect their wages during the
period between the Labor Arbiters order of reinstatement pending appeal and the NLRC decision
overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid
dismissal removes the basis for implementing the reinstatement aspect of a labor arbiters decision.

On this score, the Courts attention is drawn to seemingly divergent decisions concerning
reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is
the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v.
Zamora,10 while on the other is the recent case of Genuino v. National Labor Relations
Commission.11 At the core of the seeming divergence is the application of paragraph 3 of Article 223
of the Labor Code which reads:

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

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is

obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court. On the other hand, if
the employee has been reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever salary he received for he
is entitled to such, more so if he actually rendered services during the period.12 (Emphasis in the
original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is
entitled to receive wages pending appeal upon reinstatement, which is immediately executory.
Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of
reinstatement and it is mandatory on the employer to comply therewith.13

The opposite view is articulated in Genuino which states:

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

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her
dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3
of the fallo of the September 3, 1994 NLRC Decision.14 (Emphasis, italics and underscoring
supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the
employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena
of cases,15 the Court did not order the refund of salaries garnished or received by payroll-reinstated
employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render
inutile the rationale of reinstatement pending appeal.

x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances
the provisions of the 1987 Constitution on labor and the working man.

xxxx

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

xxxx

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

x x x Then, by and pursuant to the same power (police power), the State may authorize an
immediate implementation, pending appeal, of a decision reinstating a dismissed or separated
employee since that saving act is designed to stop, although temporarily since the appeal may be
decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the
dismissed or separated employee and his family.16

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of
unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The
constitutional and statutory precepts portray the otherwise "unjust" situation as a condition affording
full protection to labor.

Even outside the theoretical trappings of the discussion and into the mundane realities of human
experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter
could harm, more than help, a dismissed employee. The employee, to make both ends meet, would
necessarily have to use up the salaries received during the pendency of the appeal, only to end up
having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading
the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to
refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available.
Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able
and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll
reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll
reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also
institutes a scheme unduly favorable to management. Under such scheme, the salaries
dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the
event of a reversal of the Labor Arbiters decision ordering reinstatement, the employer gets back
the same amount without having to spend ordinarily for bond premiums. This circumvents, if not
directly contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer
shall not stay the execution for reinstatement."17

In playing down the stray posture in Genuino requiring the dismissed employee on payroll
reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the
Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis--vis
the effect of a reversal on appeal.

Respondent insists that with the reversal of the Labor Arbiters Decision, there is no more basis to
enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero
Velasco, Jr. supports this argument and finds the prevailing doctrine in Air Philippines and allied
cases inapplicable because, unlike the present case, the writ of execution therein was secured prior
to the reversal of the Labor Arbiters decision.

The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion
stopped there without considering the cause of the delay. Second, it requires the issuance of a writ
of execution despite the immediately executory nature of the reinstatement aspect of the decision. In
Pioneer Texturing Corp. v. NLRC,18which was cited in Panuncillo v. CAP Philippines, Inc.,19 the Court
observed:
x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall
be immediately executory even pending appeal and the posting of a bond by the employer shall not
stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and
its issuance could be delayed for numerous reasons. A mere continuance or postponement of a
scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could
easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose
envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of
a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a
reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered
ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible
law, one which operates no further than may be necessary to achieve its specific purpose. Statutes,
as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be
remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under
Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic
exercise. x x x20 (Italics in the original; emphasis and underscoring supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the
wages of the dismissed employee during the period of appeal until reversal by the higher court.21 It
settles the view that the Labor Arbiter's order of reinstatement is immediately executory and the
employer has to either re-admit them to work under the same terms and conditions prevailing prior to
their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the
alternative, employer must pay the employees salaries.22

Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground
relied upon by the appellate court in the assailed issuances. The Court sustains the appellate courts
finding that the peculiar predicament of a corporate rehabilitation rendered it impossible for
respondent to exercise its option under the circumstances.

The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor
Arbiter issues the decision containing an order of reinstatement. The immediacy of its execution
needs no further elaboration. Reinstatement pending appeal necessitates its immediate execution
during the pendency of the appeal, if the law is to serve its noble purpose. At the same time, any
attempt on the part of the employer to evade or delay its execution, as observed in Panuncillo and
as what actually transpired in Kimberly,23 Composite,24 Air Philippines,25and Roquero,26 should not be
countenanced.

After the labor arbiters decision is reversed by a higher tribunal, the employee may be barred
from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement
pending appeal was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending
appeal was not executed prior to its reversal; and (2) the delay must not be due to the employers
unjustified act or omission. If the delay is due to the employers unjustified refusal, the employer may
still be required to pay the salaries notwithstanding the reversal of the Labor Arbiters decision.
In Genuino, there was no showing that the employer refused to reinstate the employee, who was the
Treasury Sales Division Head, during the short span of four months or from the promulgation on May
2, 1994 of the Labor Arbiters Decision up to the promulgation on September 3, 1994 of the NLRC
Decision. Notably, the former NLRC Rules of Procedure did not lay down a mechanism to promptly
effectuate the self-executory order of reinstatement, making it difficult to establish that the employer
actually refused to comply.

In a situation like that in International Container Terminal Services, Inc. v. NLRC27 where it was
alleged that the employer was willing to comply with the order and that the employee opted not to
pursue the execution of the order, the Court upheld the self-executory nature of the reinstatement
order and ruled that the salary automatically accrued from notice of the Labor Arbiter's order of
reinstatement until its ultimate reversal by the NLRC. It was later discovered that the employee
indeed moved for the issuance of a writ but was not acted upon by the Labor Arbiter. In that scenario
where the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter
who failed to act upon the employees motion for the issuance of a writ of execution may no longer
adversely affect the cause of the dismissed employee in view of the self-executory nature of the
order of reinstatement.28

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer
to submit a report of compliance within 10 calendar days from receipt of the Labor Arbiters
decision,29 disobedience to which clearly denotes a refusal to reinstate. The employee need not file a
motion for the issuance of the writ of execution since the Labor Arbiter shall thereafter motu
proprio issue the writ. With the new rules in place, there is hardly any difficulty in determining
the employers intransigence in immediately complying with the order.

In the case at bar, petitioners exerted efforts30 to execute the Labor Arbiters order of reinstatement
until they were able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal
by the NLRC of the Labor Arbiters decision. Technically, there was still actual delay which brings to
the question of whether the delay was due to respondents unjustified act or omission.

It is apparent that there was inaction on the part of respondent to reinstate them, but whether such
omission was justified depends on the onset of the exigency of corporate rehabilitation.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims
before any court, tribunal or board against the corporation shall ipso jure be suspended.31 As stated
early on, during the pendency of petitioners complaint before the Labor Arbiter, the SEC placed
respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision,
the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of
reinstatement is ministerial and mandatory.32 This injunction or suspension of claims by legislative
fiat33 partakes of the nature of a restraining order that constitutes a legal justification for respondents
non-compliance with the reinstatement order. Respondents failure to exercise the alternative
options of actual reinstatement and payroll reinstatement was thus justified. Such being the case,
respondents obligation to pay the salaries pending appeal, as the normal effect of the non-exercise
of the options, did not attach.

While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or
even the life of the dismissed employee and his family, it does not contemplate the period when the
employer-corporation itself is similarly in a judicially monitored state of being resuscitated in order to
survive.
The parallelism between a judicial order of corporation rehabilitation as a justification for the non-
exercise of its options, on the one hand, and a claim of actual and imminent substantial losses as
ground for retrenchment, on the other hand, stops at the red line on the financial statements. Beyond
the analogous condition of financial gloom, as discussed by Justice Leonardo Quisumbing in his
Separate Opinion, are more salient distinctions. Unlike the ground of substantial losses
contemplated in a retrenchment case, the state of corporate rehabilitation was judicially pre-
determined by a competent court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a corporation under
rehabilitation. Respondent was, during the period material to the case, effectively deprived of the
alternative choices under Article 223 of the Labor Code, not only by virtue of the statutory injunction
but also in view of the interim relinquishment of management control to give way to the full exercise
of the powers of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may
have opted for actual physical reinstatement pending appeal to optimize the utilization of resources.
Then again, though the management may think this wise, the rehabilitation receiver may decide
otherwise, not to mention the subsistence of the injunction on claims.

In sum, the obligation to pay the employees salaries upon the employers failure to exercise the
alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the
inherent constraints of corporate rehabilitation.

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of
December 5, 2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the
validity of the Writ of Execution and the Notice of Garnishment are concerned, the Court finds no
reversible error.

SO ORDERED.

G.R. No. 118651 October 16, 1997

PIONEER TEXTURIZING CORP. and/or JULIANO LIM, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, PIONEER TEXTURIZING WORKERS UNION
and LOURDES A. DE JESUS, respondents.

FRANCISCO, J.:

The facts are as follows:

Private respondent Lourdes A. de Jesus is petitioners' reviser/trimmer since 1980. As

reviser/trimmer, de Jesus based her assigned work on a paper note posted by petitioners. The
posted paper which contains the corresponding price for the work to be accomplished by a worker is
identified by its P.O. Number. On August 15, 1992, de Jesus worked on P.O. No. 3853 by trimming
the cloths' ribs. She thereafter submitted tickets corresponding to the work done to her supervisor.
Three days later, de Jesus received from petitioners' personnel manager a memorandum requiring
her to explain why no disciplinary action should be taken against her for dishonesty and tampering of
official records and documents with the intention of cheating as P.O. No. 3853 allegedly required no
trimming. The memorandum also placed her under preventive suspension for thirty days starting
from August 19, 1992. In her handwritten explanation, de Jesus maintained that she merely
committed a mistake in trimming P.O. No. 3853 as it has the same style and design as P.O. No.
3824 which has an attached price list for trimming the ribs and admitted that she may have been
negligent in presuming that the same work was to be done with P.O. No. 3853, but not for
dishonesty or tampering. Petitioners' personnel department, nonetheless, terminated her from
employment and sent her a notice of termination dated September 18, 1992.

On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. The
Labor Arbiter who heard the case noted that de Jesus was amply accorded procedural due process
in her termination from service. Nevertheless, after observing that de Jesus made some further
trimming on P.O. No. 3853 and that her dismissal was not justified, the Labor Arbiter held petitioners
guilty of illegal dismissal. Petitioners were accordingly ordered to reinstate de Jesus to her previous
position without loss of seniority rights and with full backwages from the time of her suspension on
August 19, 1992. Dissatisfied with the Labor Arbiter's decision, petitioners appealed to public
respondent National Labor Relations Commission (NLRC). In its July 21, 1994 decision, the
NLRC 1 ruled that de Jesus was negligent in presuming that the ribs of P.O. No. 3853 should
likewise be trimmed for having the same style and design as P.O. No. 3824, thus petitioners cannot
be entirely faulted for dismissing de Jesus. The NLRC declared that the status quo between them
should be maintained and affirmed the Labor Arbiter's order of reinstatement, but without
backwages. The NLRC further "directed petitioner to pay de Jesus her back salaries from the date
she filed her motion for execution on September 21, 1993 up to the date of the promulgation of [the]
decision."2 Petitioners filed their partial motion for reconsideration which the NLRC denied, hence
this petition anchored substantially on the alleged NLRC's error in holding that de Jesus is entitled to
reinstatement and back salaries. On March 6, 1996, petitioners filed its supplement to the petition
amplifying further their arguments. In a resolution dated February 20, 1995, the Court required
respondents to comment thereon. Private respondent de Jesus and the Office of the Solicitor
General, in behalf of public respondent NLRC, subsequently filed their comments. Thereafter,
petitioners filed two rejoinders [should be replies] to respondents' respective comments.
Respondents in due time filed their rejoinders.

There are two interrelated and crucial issues, namely: (1) whether or not de Jesus was illegally
dismissed, and (2) whether or not an order for reinstatement needs a writ of execution.

Petitioners insist that the NLRC gravely abused its discretion in holding that de Jesus is entitled to
reinstatement to her previous position for she was not illegally dismissed in the first place. In support
thereof, petitioners quote portions of the NLRC decision which stated that "respondents [petitioners
herein] cannot be entirely faulted for dismissing the complainant"3 and that there was "no illegal
dismissal to speak of in the case at bar".4 Petitioners further add that de Jesus breached the trust
reposed in her, hence her dismissal from service is proper on the basis of loss of confidence, citing
as authority the cases of Ocean Terminal Services, Inc. v. NLRC, 197 SCRA 491; Coca-Cola
Bottlers Phil., Inc. v. NLRC, 172 SCRA 751, and Piedad v. Lanao del Norte Electric
Cooperative,5 154 SCRA 500.

The arguments lack merit.

The entire paragraph which comprises the gist of the NLRC's decision from where petitioners
derived and isolated the aforequoted portions of the NLRC's observation reads in full as follows:

We cannot fully subscribe to the complainant's claim that she trimmed the ribs of PO3853 in
the light of the sworn statement of her supervisor Rebecca Madarcos (Rollo, p. 64) that no
trimming was necessary because the ribs were already of the proper length. The
complainant herself admitted in her sinumpaang salaysay (Rollo, p. 45) that "Aking napansin
na hindi pantay-pantay ang lapad ng mga ribs PO3853 mas maigsi ang nagupit ko sa
 mga ribs ng PO3853 kaysa sa mga ribs ng mga nakaraang PO's. The complainant being an
experienced reviser/trimmer for almost twelve (12) years should have called the attention of
her supervisor regarding her observation of PO3853. It should be noted that complainant
was trying to claim as production output 447 pieces of trimmed ribs of PO3853 which
respondents insists that complainant did not do any. She was therefore negligent in
presuming that the ribs of PO3853 should likewise be trimmed for having the same style and
design as PO3824. Complainant cannot pass on the blame to her supervisor whom she
claimed checked the said tickets prior to the submission to the Accounting Department. As
explained by respondent, what the supervisor does is merely not the submission of tickets
and do some checking before forwarding the same to the Accounting Department. It was
never disputed that it is the Accounting Department who does the detailed checking and
computation of the tickets as has been the company policy and practice. Based on the
foregoing and considering that respondent cannot be entirely faulted for dismissing
complainant as the complainant herself was also negligent in the performance of her job, We
hereby rule that status quo between them should be maintained as a matter of course. We
thus affirm the decision of Labor Arbiter reinstating the complainant but without backwages.
The award of backwages in general are granted on grounds of equity for earnings which a
worker or employee has lost due to his illegal dismissal. (Indophil Acrylic Mfg. Corporation
vs. NLRC, G.R. No. 96488 September 27, 1993) There being no illegal dismissal to speak in
the case at bar, the award for backwages should necessarily be deleted.6

We note that the NLRC's decision is quite categorical in finding that de Jesus was merely negligent
in the performance of her duty. Such negligence, the Labor Arbiter delineated, was brought about by
the petitioners' plain improvidence. Thus:

After careful assessment of the allegations and documents available on record, we are
convinced that the penalty of dismissal was not justified.

At the outset, it is remarkable that respondents did not deny nor dispute that P.O. 3853 has
the same style and design as P.O. 3824; that P.O. 3824 was made as guide for the work
done on P.O. 3853; and, most importantly, that the notation correction on P.O. 3824 was
made only after the error was discovered by respondents' Accounting Department.

Be that as it may, the factual issue in this case is whether or not complainant trimmed the
ribs of P.O. 3853?

Respondents maintained that she did not because the record in Accounting Department
allegedly indicates that no trimming is to be done on P.O. 3853. Basically, this allegation is
unsubstantiated.

It must be emphasized that in termination cases the burden of proof rests upon the
employer.

In the instant case, respondents' mere allegation that P.O. 3853 need not be trimmed does
not satisfy the proof required to warrant complainant's dismissal.

Now, granting that the Accounting record is correct, we still believe that complainant did
some further trimming on P.O. 3853 based on the following grounds:

Firstly, Supervisor Rebecca Madarcos who ought to know the work to be performed because
she was in-charged of assigning jobs, reported no anomally when the tickets were submitted
to her.
 Incidentally, supervisor Madarcos testimony is suspect because if she could recall what she
ordered the complainant to do seven (7) months ago (to revise the collars and plackets of
shirts) there was no reason for her not to detect the alleged tampering at the time
complainant submitted her tickets, after all, that was part of her job, if not her main job.

Secondly, she did not exceed her quota, otherwise she could have simply asked for more.

That her output was remarkably big granting it is true, is well explained in that the parts she
had trimmed were lesser compared to those which she had cut before.

In this connection, respondents misinterpreted the handwritten explanation of the

complainant dated 20 August 1992, because the letter never admits that she never trimmed
P.O. 3853, on the contrary the following sentence,

Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang inalis

na pala ang presyo ng Sec. 9 P.O. 3853 na ito.

is crystal clear that she did trim the ribs on P.O. 3853.7

Gleaned either from the Labor Arbiter's observations or from the NLRC's assessment, it distinctly
appears that petitioners' accusation of dishonesty and tampering of official records and documents
with intention of cheating against de Jesus was not substantiated by clear and convincing evidence.
Petitioners simply failed, both before the Labor Arbiter and the NLRC, to discharge the burden of
proof and to validly justify de Jesus' dismissal from service. The law, in this light, directs the
employers, such as herein petitioners, not to terminate the services of an employee except for a just
or authorized cause under the Label Code.8 Lack of a just cause in the dismissal from service of an
employee, as in this case, renders the dismissal illegal, despite the employer's observance of
procedural due process.9 And while the NLRC stated that "there was no illegal dismissal to speak of
in the case at bar" and that petitioners cannot be entirely faulted therefor, said statements are
inordinate pronouncements which did not remove the assailed dismissal from the realm of illegality.
Neither can these pronouncements preclude us from holding otherwise.

We also find the imposition of the extreme penalty of dismissal against de Jesus as certainly harsh
and grossly disproportionate to the negligence committed, especially where said employee holds a
faithful and an untarnished twelve-year service record. While an employer has the inherent right to
discipline its employees, we have always held that this right must always be exercised humanely,
and the penalty it must impose should be commensurate to the offense involved and to the degree
of its infraction.10 The employer should bear in mind that, in the exercise of such right, what is at
stake is not only the employee's position but her livelihood as well.

Equally unmeritorious is petitioners' assertion that the dismissal is justified on the basis of loss of
confidence. While loss of confidence, as correctly argued by petitioners, is one of the valid grounds
for termination of employment, the same, however, cannot be used as a pretext to vindicate each
and every instance of unwarranted dismissal. To be a valid ground, it must be shown that the
employee concerned is responsible for the misconduct or infraction and that the nature of his
participation therein rendered him absolutely unworthy of the trust and confidence demanded by his
position.11 In this case, petitioners were unsuccessful in establishing their accusations of dishonesty
and tampering of records with intention of cheating. Indeed, even if petitioners' allegations against de
Jesus were true, they just the same failed to prove that her position needs the continued and
unceasing trust of her employers. The breach of trust must be related to the performance of the
employee's
functions.12 Surely, de Jesus who occupies the position of a reviser/trimmer does not require the
petitioners' perpetual and full confidence. In this regard, petitioners' reliance on the cases of Ocean
Terminal Services, Inc. v. NLRC; Coca-Cola Bottlers Phil., Inc. v. NLRC; and Piedad v. Lanao del
Norte Electric Cooperative, which when perused involve positions that require the employers' full
trust and confidence, is wholly misplaced. In Ocean Terminal Services, for instance, the dismissed
employee was designated as expediter and canvasser whose responsibility is mainly to make
emergency procurements of tools and equipments and was entrusted with the necessary cash for
buying them. The case of Coca-Cola Bottlers, on the other hand, involves a sales agent whose job
exposes him to the everyday financial transactions involving the employer's goods and funds, while
that of Piedad concerns a bill collector who essentially handles the employer's cash collections.
Undoubtedly, the position of a reviser/trimmer could not be equated with that of a canvasser, sales
agent, or a bill collector. Besides, the involved employees in the three aforementioned cases were
clearly proven guilty of infractions unlike private respondent in the case at bar. Thus, petitioners
dependence on these cited cases is inaccurate, to say the least. More, whether or not de Jesus
meets the day's quota of work she, just the same, is paid the daily minimum wage.13

Corollary to our determination that de Jesus was illegally dismissed is her imperative entitlement to
reinstatement and backwages as mandated by
law.14 Whence, we move to the second issue, i.e., whether or not an order for reinstatement needs a
writ of execution.

Petitioners' theory is that an order for reinstatement is not self-executory. They stress that there must
be a writ of execution which may be issued by the NLRC or by the Labor Arbiter motu proprio or on
motion of an interested party. They further maintain that even if a writ of execution was issued, a
timely appeal coupled by the posting of appropriate supersedeas bond, which they did in this case,
effectively forestalled and stayed execution of the reinstatement order of the Labor Arbiter. As
supporting authority, petitioners emphatically cite and bank on the case of Maranaw Hotel Resort
Corporation (Century Park Sheraton Manila) v. NLRC, 238 SCRA 190.

Private respondent de Jesus, for her part, maintains that petitioners should have reinstated her
immediately after the decision of the Labor Arbiter ordering her reinstatement was promulgated
since the law mandates that an order for reinstatement is immediately executory. An appeal, she
says, could not stay the execution of a reinstatement order for she could either be admitted back to
work or merely reinstated in the payroll without need of a writ of execution. De Jesus argues that a
writ of execution is necessary only for the enforcement of decisions, orders, or awards which have
acquired finality. In effect, de Jesus is urging the Court to re-examine the ruling laid down
in Maranaw.

Article 223 of the Labor Code, as amended by R.A. No. 6715 which took effect on March 21, 1989,
pertinently provides:

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

xxx xxx xxx

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

xxx xxx xxx

We initially interpreted the aforequoted provision in Inciong v. NLRC.15 The Court16 made this brief
comment:

The decision of the Labor Arbiter in this case was rendered on December 18, 1988, or three
(3) months before Article 223 of the Labor Code was amended by Republic Act 6715 (which
became law on March 21, 1989), providing that a decision of the Labor Arbiter ordering the
reinstatement of a dismissed or separated employee shall be immediately executory insofar
as the reinstatement aspect is concerned, and the posting of an appeal bond by the
employer shall not stay such execution. Since this new law contains no provision giving it
retroactive effect (Art. 4, Civil Code), the amendment may not be applied to this case.

which the Court adopted and applied in Callanta v. NLRC.17 In Zamboanga City Water District
v. Buat,18 the Court construed Article 223 to mean exactly what it says. We said:

Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed or
separated employee insofar as the reinstatement aspect is concerned, shall be immediately
executory, even pending appeal. The employer shall reinstate the employee concerned
either by: (a) actually admitting him back to work under the same terms and conditions
prevailing prior to his dismissal or separation; or (b) at the option of the employer, merely
reinstating him in the payroll. Immediate reinstatement is mandated and is not stayed by the
fact that the employer has appealed, or has posted a cash or surety bond pending appeal.19

We expressed a similar view a year earlier in Medina v. Consolidated Broadcasting System (CBS)
DZWX20 and laid down the rule that an employer who fails to comply with an order of
reinstatement makes him liable for the employee's salaries. Thus:

Petitioners construe the above paragraph to mean that the refusal of the employer to
reinstate an employee as directed in an executory order of reinstatement would make it liable
to pay the latter's salaries. This interpretation is correct. Under Article 223 of the Labor Code,
as amended, an employer has two options in order for him to comply with an order of
reinstatement, which is immediately executory, even pending appeal. Firstly, he can admit
the dismissed employee back to work under the same terms and conditions prevailing prior
to his dismissal or separation or to a substantially equivalent position if the former position is
already filled up as we have ruled in Union of Supervisors (RB) NATU vs. Sec. of Labor, 128
SCRA 442 [1984]; and Pedroso vs. Castro, 141 SCRA 252 [1986]. Secondly, he can
reinstate the employee merely in the payroll. Failing to exercise any of the above options, the
employer can be compelled under pain of contempt, to pay instead the salary of the
employee. This interpretation is more in consonance with the constitutional protection to
labor (Section 3, Art. XIII, 1987 Constitution). The right of a person to his labor is deemed to
be property within the meaning of the constitutional guaranty that no one shall be deprived of
life, liberty, and property without due process of law. Therefore, he should be protected
against any arbitrary and unjust deprivation of his job (Bondoc vs. People's Bank and Trust
Co., Inc., 103 SCRA 599 [1981]). The employee should not be left without any remedy in
case the employer unreasonably delays reinstatement. Therefore, we hold that the
unjustified refusal of the employer to reinstate an illegally dismissed employee entitles the
employee to payment of his salaries . . . .21
The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting the
import of Article 223 in Maranaw, the Court22 declared that the reinstatement aspect of the Labor
Arbiter's decision needs a writ of execution as it is not self-executory, a declaration the Court
recently reiterated and adopted in Archilles Manufacturing Corp. v. NLRC.23

We note that prior to the enactment of R.A. No. 6715, Article 22324 of the Labor Code contains no
provision dealing with the reinstatement of an illegally dismissed employee. The amendment
introduced by R.A. No. 6715 is an innovation and a far departure from the old law indicating thereby
the legislature's unequivocal intent to insert a new rule that will govern the reinstatement aspect of a
decision or resolution in any given labor dispute. In fact, the law as now worded employs the phrase
"shall immediately be executory" without qualification emphasizing the need for prompt compliance.
As a rule, "shall" in a statute commonly denotes an imperative obligation and is inconsistent with the
idea of discretion25 and that the presumption is that the word "shall", when used in a statute, is
mandatory.26An appeal or posting of bond, by plain mandate of the law, could not even forestall nor
stay the executory nature of an order of reinstatement. The law, moreover, is unambiguous and
clear. Thus, it must be applied according to its plain and obvious meaning, according to its express
terms. In Globe-Mackay Cable and Radio Corporation v. NLRC,27 we held that:

Under the principles of statutory construction, if a statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without attempted interpretation.
This plain-meaning rule or verba legisderived from the maxim index animi sermo est (speech
is the index of intention) rests on the valid presumption that the words employed by the
legislature in a statute correctly express its intent or will and preclude the court from
construing it differently. The legislature is presumed to know the meaning of the words, to
have used words advisedly, and to have expressed its intent by the use of such words as are
found in the statute. Verba legis non est recedendum, or from the words of a statute there
should be no departure.28

And in conformity with the executory nature of the reinstatement order, Rule V, Section 16 (3) of the
New Rules of Procedure of the NLRC strictly requires the Labor Arbiter to direct the employer to
immediately reinstate the dismissed employee. Thus:

In case the decision includes an order of reinstatement, the Labor Arbiter shall direct the
employer to immediately reinstate the dismissed or separated employee even pending
appeal. The order of reinstatement shall indicate that the employee shall either be admitted
back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll.

In declaring that reinstatement order is not self-executory and needs a writ of execution, the Court,
in Maranaw, adverted to the rule provided under Article 224. We said:

It must be stressed, however, that although the reinstatement aspect of the decision
is immediately executory, it does not follow that it is self-executory. There must be a writ of
execution which may be issued motu proprioor on motion of an interested party. Article 224
of the Labor Code provides:

Art. 224. Execution of decision, orders or awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbitter
or voluntary arbitrator may, motu proprio or on motion of any interested party, issue a writ of
execution on a judgment within five (5) years from the date it becomes final and executory . .
. (emphasis supplied)
 The second paragraph of Section 1, Rule VIII of the New Rules of Procedure of the NLRC
also provides:

The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized
hearing officer of origin shall, motu proprio or on motion of any interested party, issue a writ
of execution on a judgment only within five (5) years from the date it becomes final and
executory . . . . No motion for execution shall be entertained nor a writ he issued unless the
Labor Arbiter is in possession of the records of the case which shall include an entry of
judgment. (emphasis supplied)

xxx xxx xxx

In the absence then of an order for the issuance of a writ of execution on the reinstatement
aspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation to
admit back to work the private respondent under the terms and conditions prevailing prior to
her dismissal or, at the petitioner's option, to merely reinstate her in the payroll. An option is
a right of election to exercise a privilege, and the option in Article 223 of the Labor Code is
exclusively granted to the employer. The event that gives rise for its exercise is not the
reinstatement decree of a Labor Arbiter, but the writ for its execution commanding the
employer to reinstate the employee, while the final act which compels the employer to
exercise the option is the service upon it of the writ of execution when, instead of admitting
the employee back to his work, the employer chooses to reinstate the employee in the
payroll only. If the employer does not exercise this option, it must forthwith admit the
employee back to work, otherwise it may be punished for contempt.29

A closer examination, however, shows that the necessity for a writ of execution under Article 224
applies only to final and executory decisions which are not within the coverage of Article 223. For
comparison, we quote the material portions of the subject articles:

Art. 223. Appeal. . . .

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

xxx xxx xxx

Art. 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter
or voluntary arbitrator may, motu propio or on motion of any interested party, issue a writ of
execution on a judgment within five (5) years from the date it becomes final and executory,
requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or
awards of the Secretary of Labor and Employment or regional director, the Commission, the
Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the duty of the
responsible officer to separately furnish immediately the counsels of record and the parties
with copies of said decisions, orders or awards. Failure to comply with the duty prescribed
herein shall subject such responsible officer to appropriate administrative sanctions.
Article 224 states that the need for a writ of execution applies only within five (5) years from the date
a decision, an order or award becomes final and executory. It can not relate to an award or order of
reinstatement still to be appealed or pending appeal which Article 223 contemplates. The provision
of Article 223 is clear that an award for reinstatement shall be immediately executory even pending
appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The
legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable,
even pending appeal. To require the application for and issuance of a writ of execution as
prerequisites for the execution of a reinstatement award would certainly betray and run counter to
the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The
reason is simple. An application for a writ of execution and its issuance could be delayed for
numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an
inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ
thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other
words, if the requirements of Article 224 were to govern, as we so declared in Maranaw, then the
executory nature of a reinstatement order or award contemplated by Article 223 will be unduly
circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have
ordained a valid and sensible law, one which operates no further than may be necessary to achieve
its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be
achieved and the evil sought to be remedied.30 And where the statute is fairly susceptible of two or
more constructions, that construction should be adopted which will most tend to give effect to the
manifest intent of the lawmaker and promote the object for which the statute was enacted, and a
construction should be rejected which would tend to render abortive other provisions of the statute
and to defeat the object which the legislator sought to attain by its enactment.31 In introducing a new
rule on the reinstatement aspect of a labor decision under R.A. No. 6715, Congress should not be
considered to be indulging in mere semantic exercise. On appeal, however, the appellate tribunal
concerned may enjoin or suspend the reinstatement order in the exercise of its sound discretion.

Furthermore, the rule is that all doubts in the interpretation and implementation of labor laws should
be resolved in favor of labor.32 In ruling that an order or award for reinstatement does not require a
writ of execution the Court is simply adhering and giving meaning to this rule. Henceforth, we rule
that an award or order for reinstatement is self-executory. After receipt of the decision or resolution
ordering the employee's reinstatement, the employer has the right to choose whether to re-admit the
employee to work under the same terms and conditions prevailing prior to his dismissal or to
reinstate the employee in the payroll. In either instance, the employer has to inform the employee of
his choice. The notification is based on practical considerations for without notice, the employee has
no way of knowing if he has to report for work or not.

WHEREFORE, the petition is DENIED and the decision of the Labor Arbiter is hereby
REINSTATED.

Costs against petitioner.

SO ORDERED.

G.R. No. 164772 June 8, 2006

EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI BANK), petitioner,

vs.
RICARDO SADAC, Respondent.

DECISION
CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court En
Banc filed by Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to
reverse the Decision1 and Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004,
respectively, as amended by the Supplemental Decision3 dated 26 October 2004 in CA-G.R. SP No.
75013, which reversed and set aside the Resolutions of the National Labor Relations Commission
(NLRC), dated 28 March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.

The Antecedents

As culled from the records, respondent Sadac was appointed Vice President of the Legal
Department of petitioner Bank effective 1 August 1981, and subsequently General Counsel thereof
on 8 December 1981. On 26 June 1989, nine lawyers of petitioner Banks Legal Department, in a
letter-petition to the Chairman of the Board of Directors, accused respondent Sadac of abusive
conduct, inter alia, and ultimately, petitioned for a change in leadership of the department. On the
ground of lack of confidence in respondent Sadac, under the rules of client and lawyer relationship,
petitioner Bank instructed respondent Sadac to deliver all materials in his custody in all cases in
which the latter was appearing as its counsel of record. In reaction thereto, respondent Sadac
requested for a full hearing and formal investigation but the same remained unheeded. On 9
November 1989, respondent Sadac filed a complaint for illegal dismissal with damages against
petitioner Bank and individual members of the Board of Directors thereof. After learning of the filing
of the complaint, petitioner Bank terminated the services of respondent Sadac. Finally, on 10 August
1989, respondent Sadac was removed from his office and ordered disentitled to any compensation
and other benefits.4

In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the complaint
for lack of merit. On appeal, the NLRC in its Resolution6 of 24 September 1991 reversed the Labor
Arbiter and declared respondent Sadacs dismissal as illegal. The decretal portion thereof reads,
thus:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as
it is hereby, SET ASIDE, and a new one ENTERED declaring the dismissal of the complainant as
illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority rights and other
privileges, and to pay him full backwages and other benefits from the time his compensation was
withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages
of P50,000.00, and attorneys fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents are ordered likewise
jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991
(cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53.7

Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the
NLRC Resolution of 24 September 1991 in Equitable Banking Corporation v. National Labor
Relations Commission, docketed as G.R. No. 102467.8

In our Decision9 of 13 June 1997, we held respondent Sadacs dismissal illegal. We said that the
existence of the employer-employee relationship between petitioner Bank and respondent Sadac
had been duly established bringing the case within the coverage of the Labor Code, hence, we did
not permit petitioner Bank to rely on Sec. 26, Rule 13810 of the Rules of Court, claiming that the
association between the parties was one of a client-lawyer relationship, and, thus, it could terminate
at any time the services of respondent Sadac. Moreover, we did not find that respondent Sadacs
dismissal was grounded on any of the causes stated in Article 282 of the Labor Code. We similarly
found that petitioner Bank disregarded the procedural requirements in terminating respondent
Sadacs employment as so required by Section 2 and Section 5, Rule XIV, Book V of the
Implementing Rules of the Labor Code. We decreed:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability herein pronounced
shall be due from petitioner bank alone, the other petitioners being absolved from solidary liability.
No costs.11

On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and
executory.12

Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution13 thereof.
Likewise, petitioner Bank filed a Manifestation and Motion14 praying that the award in favor of
respondent Sadac be computed and that after payment is made, petitioner Bank be ordered forever
released from liability under said judgment.

Per respondent Sadacs computation, the total amount of the monetary award is P6,030,456.59,
representing his backwages and other benefits, including the general increases which he should
have earned during the period of his illegal termination. Respondent Sadac theorized that he started
with a monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice
President of petitioner Banks Legal Department and later as its General Counsel in December 1981.
As of November 1989, when he was dismissed illegally, his monthly compensation amounted to
P29,365.00 or more than twice his original compensation. The difference, he posited, can be
attributed to the annual salary increases which he received equivalent to 15 percent (15%) of his
monthly salary.

Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines, and cited
as authority the cases of East Asiatic Company, Ltd. v. Court of Industrial Relations,15 St. Louis
College of Tuguegarao v. National Labor Relations Commission,16 and Sigma Personnel Services v.
National Labor Relations Commission.17According to respondent Sadac, the catena of cases
uniformly holds that it is the obligation of the employer to pay an illegally dismissed employee the
whole amount of the salaries or wages, plus all other benefits and bonuses and general increases to
which he would have been normally entitled had he not been dismissed; and therefore, salary
increases should be deemed a component in the computation of backwages. Moreover, respondent
Sadac contended that his check-up benefit, clothing allowance, and cash conversion of vacation
leaves must be included in the computation of his backwages.

Petitioner Bank disputed respondent Sadacs computation. Per its computation, the amount of
monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion of the latters general
salary increases and other claimed benefits which, it maintained, were unsubstantiated. The
jurisprudential precedent relied upon by petitioner Bank in assailing respondent Sadacs computation
is Evangelista v. National Labor Relations Commission,18 citing Paramount Vinyl Products Corp. v.
National Labor Relations Commission,19 holding that an unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal. Furthermore, petitioner Bank
argued before the Labor Arbiter that the award of salary differentials is not allowed, the established
rule being that upon reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other benefits that may have been
received by their co-workers who were not dismissed or did not go on strike.

On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order20 adopting respondent
Sadacs computation. In the main, the Labor Arbiter relying on Millares v. National Labor Relations
Commission21 concluded that respondent Sadac is entitled to the general increases as a component
in the computation of his backwages. Accordingly, he awarded respondent Sadac the amount of
P6,030,456.59 representing his backwages inclusive of allowances and other claimed benefits,
namely check-up benefit, clothing allowance, and cash conversion of vacation leave plus 12 percent
(12%) interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total of
P7,398,047.48. However, considering that respondent Sadac had already received the amount of
P1,055,740.48 by virtue of a Writ of Execution22 earlier issued on 18 January 1999, the Labor Arbiter
directed petitioner Bank to pay respondent Sadac the amount of P6,342,307.00. The Labor Arbiter
also granted an award of attorneys fees equivalent to ten percent (10%) of all monetary awards, and
imposed a 12 percent (12%) interest per annum reckoned from the finality of the judgment until the
satisfaction thereof.

The Labor Arbiter decreed, thus:

WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution be issued
commanding the Sheriff, this Branch, to collect from respondent Bank the amount of Ph6,342,307.00
representing the backwages with 12% interest per annum due complainant.23

Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
Resolution,24promulgated on 28 March 2001. It ratiocinated that the doctrine on general increases as
component in computing backwages in Sigma Personnel Services and St. Louis was merely obiter
dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground that the original
circumstances therein are not only peculiar to the said case but also completely strange to the case
of respondent Sadac. Further, the NLRC disallowed respondent Sadacs claim to check-up benefit
ratiocinating that there was no clear and substantial proof that the same was being granted and
enjoyed by other employees of petitioner Bank. The award of attorneys fees was similarly deleted.

The dispositive portion of the Resolution states:

WHEREFORE, the instant appeal is considered meritorious and accordingly, the computation
prepared by respondent Equitable Banking Corporation on the award of backwages in favor of
complainant Ricardo Sadac under the decision promulgated by the Supreme Court on June 13,
1997 in G.R. No. 102476 in the aggregate amount of P2,981,442.98 is hereby ordered.25

Respondent Sadacs Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,26 promulgated on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking
nullification of the twin resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as
well as praying for the reinstatement of the 2 August 1999 Order of the Labor Arbiter.

For the resolution of the Court of Appeals were the following issues, viz.:
 (1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance,
and cash conversion of vacation leave are included in the computation of full backwages for
illegally dismissed employees;

(2) Whether respondent is entitled to attorneys fees; and

(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all
accounts outstanding until full payment thereof.

Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision on 6
April 2004, the dispositive portion of which is quoted hereunder:

WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002 Resolutions
of the National Labor Relations Commissions (sic) are REVERSED and SET ASIDE and the August
2, 1999 Order of the Labor Arbiter is REVIVED to the effect that private respondent is DIRECTED
TO PAY petitioner the sum of PhP6,342,307.00, representing full back wages (sic) which sum
includes annual general increases in basic salary, check-up benefit, clothing allowance, cash
conversion of vacation leave and other sundry benefits plus 12% per annum interest on outstanding
balance from July 28, 1997 until full payment.

Costs against private respondent.27

The Court of Appeals, citing East Asiatic held that respondent Sadacs general increases should be
added as part of his backwages. According to the appellate court, respondent Sadacs entitlement to
the annual general increases has been duly proven by substantial evidence that the latter, in fact,
enjoyed an annual increase of more or less 15 percent (15%). Respondent Sadacs check-up
benefit, clothing allowance, and cash conversion of vacation leave were similarly ordered added in
the computation of respondent Sadacs basic wage.

Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It ruled that our
Decision28 of 13 June 1997 did not award attorneys fees in respondent Sadacs favor as there was
nothing in the aforesaid Decision, either in the dispositive portion or the body thereof that supported
the grant of attorneys fees. Resolving the final issue, the Court of Appeals imposed a 12 percent
(12%) interest per annum on the total monetary award to be computed from 28 July 1997 or the date
our judgment in G.R. No. 102467 became final and executory until fully paid at which time the
quantification of the amount may be deemed to have been reasonably ascertained.

On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration29 of the 6 April 2004
Court of Appeals Decision insofar as the appellate court did not award him attorneys fees. Similarly,
petitioner Bank filed a Motion for Partial Reconsideration thereon. Following an exchange of
pleadings between the parties, the Court of Appeals rendered a Resolution,30 dated 28 July 2004,
denying petitioner Banks Motion for Partial Reconsideration for lack of merit.

Assignment of Errors

Hence, the instant Petition for Review by petitioner Bank on the following assignment of errors, to
wit:

(a) The Hon. Court of Appeals erred in ruling that general salary increases should be
included in the computation of full backwages.
 (b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this case are:
(i) East Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Tuguegarao v.
NLRC, 177 SCRA 151 (1989); (iii) Sigma Personnel Services v. NLRC, 224 SCRA 181
(1993); and (iv) Millares v. NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of the Labor
Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (1990); (iii) Evangelista v. NLRC,
249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430 (1996).

(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up benefit,
clothing allowance and cash conversion of vacation leaves notwithstanding that respondent
did not present any evidence to prove entitlement to these claims.

(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal
interest even if the principal amount due him has not yet been correctly and finally
determined.31

Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision granting
respondent Sadacs Partial Motion for Reconsideration and amending the dispositive portion of the 6
April 2004 Decision in this wise, viz.:

WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24, 2002
Resolutions of the National Labor Relations Commission are hereby REVERSED and SET ASIDE
and the August 2, 1999 Order of the Labor Arbiter is hereby REVIVED to the effect that private
respondent is hereby DIRECTED TO PAY petitioner the sum of P6,342,307.00, representing full
backwages which sum includes annual general increases in basic salary, check-up benefit, clothing
allowance, cash conversion of vacation leave and other sundry benefits "and attorneys fees equal to
TEN PERCENT (10%) of all the monetary award" plus 12% per annum interest on all outstanding
balance from July 28, 1997 until full payment.

Costs against private respondent.32

On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review33 contending in the
main that the Court of Appeals erred in issuing the Supplemental Decision by directing petitioner
Bank to pay an additional amount to respondent Sadac representing attorneys fees equal to ten
percent (10%) of all the monetary award.

The Courts Ruling

I.

We are called to write finis to a controversy that comes to us for the second time. At the core of the
instant case are the divergent contentions of the parties on the manner of computation of
backwages.

Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not
contemplate the inclusion of salary increases in the definition of "full backwages." It controverts the
reliance by the appellate court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel;
and (iv) Millares. While it is in accord with the pronouncement of the Court of Appeals that Republic
Act No. 6715, in amending Article 279, intends to give more benefits to workers, petitioner Bank
submits that the Court of Appeals was in error in relying on East Asiatic to support its finding that
salary increases should be included in the computation of backwages as nowhere in Article 279, as
amended, are salary increases spoken of. The prevailing rule in the milieu of the East Asiatic
doctrine was to deduct earnings earned elsewhere from the amount of backwages payable to an
illegally dismissed employee.

Petitioner Bank posits that even granting that East Asiatic allowed general salary increases in the
computation of backwages, it was because the inclusion was purposely to cushion the blow of the
deduction of earnings derived elsewhere; with the amendment of Article 279 and the consequent
elimination of the rule on the deduction of earnings derived elsewhere, the rationale for including
salary increases in the computation of backwages no longer exists. On the references of salary
increases in the aforementioned cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares,
petitioner Bank contends that the same were merely obiter dicta. In fine, petitioner Bank anchors its
claim on the cases of (i) Paramount Vinyl Products Corp. v. National Labor Relations
Commission;34 (ii) Evangelista v. National Labor Relations Commission;35 and (iii) Espejo v. National
Labor Relations Commission,36 which ruled that an unqualified award of backwages is exclusive of
general salary increases and the employee is paid at the wage rate at the time of the dismissal.

For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled that his
backwages should include the general increases on the basis of the following cases, to wit: (i) East
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares.

Resolving the protracted litigation between the parties necessitates us to revisit our pronouncements
on the interpretation of the term backwages. We said that backwages in general are granted on
grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal.37 It is
not private compensation or damages but is awarded in furtherance and effectuation of the public
objective of the Labor Code. Nor is it a redress of a private right but rather in the nature of a
command to the employer to make public reparation for dismissing an employee either due to the
formers unlawful act or bad faith.38 The Court, in the landmark case of Bustamante v. National Labor
Relations Commission,39 had the occasion to explicate on the meaning of full backwages as
contemplated by Article 27940 of the Labor Code of the Philippines, as amended by Section 34 of
Rep. Act No. 6715. The Court in Bustamante said, thus:

The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of
backwages as enunciated in said Pines City Educational Center case, by now holding that
conformably with the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted,
backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living to support himself and family, while full backwages
have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing
his employee. The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more
benefits to workers than was previously given them under the Mercury Drug rule or the "deduction of
earnings elsewhere" rule. Thus, a closer adherence to the legislative policy behind Rep. Act No.
6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages the
earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. In
other words, the provision calling for "full backwages" to illegally dismissed employees is clear, plain
and free from ambiguity and, therefore, must be applied without attempted or strained interpretation.
Index animi sermo est.41

Verily, jurisprudence has shown that the definition of full backwages has forcefully evolved. In
Mercury Drug Co., Inc. v. Court of Industrial Relations,42 the rule was that backwages were granted
for a period of three years without qualification and without deduction, meaning, the award of
backwages was not reduced by earnings actually earned by the dismissed employee during the
interim period of the separation. This came to be known as the Mercury Drug rule.43 Prior to the
Mercury Drug ruling in 1974, the total amount of backwages was reduced by earnings obtained by
the employee elsewhere from the time of the dismissal to his reinstatement. The Mercury Drug rule
was subsequently modified in Ferrer v. National Labor Relations Commission44 and Pines City
Educational Center v. National Labor Relations Commission,45 where we allowed the recovery of
backwages for the duration of the illegal dismissal minus the total amount of earnings which the
employee derived elsewhere from the date of dismissal up to the date of reinstatement, if any. In
Ferrer and in Pines, the three-year period was deleted, and instead, the dismissed employee was
paid backwages for the entire period that he was without work subject to the deductions, as
mentioned. Finally came our ruling in Bustamante which superseded Pines City Educational Center
and allowed full recovery of backwages without deduction and without qualification pursuant to the
express provisions of Article 279 of the Labor Code, as amended by Rep. Act No. 6715, i.e., without
any deduction of income the employee may have derived from employment elsewhere from the date
of his dismissal up to his reinstatement, that is, covering the entirety of the period of the dismissal.

The first issue for our resolution involves another aspect in the computation of full backwages,
mainly, the basis of the computation thereof. Otherwise stated, whether general salary increases
should be included in the base figure to be used in the computation of backwages.

In so concluding that general salary increases should be made a component in the computation of
backwages, the Court of Appeals ratiocinated, thus:

The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971)
that "general increases" should be added as a part of full backwages, to wit:

In other words, the just and equitable rule regarding the point under discussion is this: It is the
obligation of the employer to pay an illegally dismissed employee or worker the whole amount of the
salaries or wages, plus all other benefits and bonuses and general increases, to which he would
have been normally entitled had he not been dismissed and had not stopped working, but it is the
right, on the other hand of the employer to deduct from the total of these, the amount equivalent to
the salaries or wages the employee or worker would have earned in his old employment on the
corresponding days he was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned.

The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis College of
Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA 181
(1993) and Millares v. National Labor Relations Commission, 305 SCRA 500 (1999).

Private respondent, in opposing the petitioners contention, alleged in his Memorandum that only the
wage rate at the time of the employees illegal dismissal should be considered private respondent
citing the following decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525
(1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255 SCRA 430 (1996) which
rendered obsolete the ruling in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521
(1971).

We are not convinced.

The Supreme Court had consistently held that payment of full backwages is the price or penalty that
the employer must pay for having illegally dismissed an employee.

In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC and
Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held that the clear legislative intent
in the amendment in Republic Act 6715 was to give more benefits to workers than was previously
given them under the Mercury Drug rule or the "deductions of earnings elsewhere" rule.

The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are inapplicable to
the case at bar. The doctrines therein came about as a result of the old Mercury Drug rule, which
was repealed with the passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255
SCRA 430 (1993) when the Supreme Court returned to the doctrine in East Asiatic, which was soon
supplanted by the case of Bustamante v. NLRC and Evergreen Farms, Inc., which held that the
backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived from him during the period of his illegal dismissal.
Furthermore, the Mercury Drug rule was never meant to prejudice the workers, but merely to speed
the recovery of their backwages.

Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent of the Supreme
Court to increase the backwages due an illegally dismissed employee. In the Mercury Drug case, full
backwages was to be recovered even though a three-year limitation on recovery of full backwages
was imposed in the name of equity. Then in Bustamante, full backwages was interpreted to mean
absolutely no deductions regardless of the duration of the illegal dismissal. In Bustamante, the
Supreme Court no longer regarded equity as a basis when dealing with illegal dismissal cases
because it is not equity at play in illegal dismissals but rather, it is employers obligation to pay full
back wages (sic). It is an obligation of the employer because it is "the price or penalty the employer
has to pay for illegally dismissing his employee."

The applicable modern definition of full backwages is now found in Millares v. National Labor
Relations Commission 305 SCRA 500 (1999), where although the issue in Millares concerned
separation pay separation pay and backwages both have employees wage rate at their
foundation.

x x x The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally
dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general
increases to which he would have been normally entitled had he not been dismissed and had not
stopped working. The same holds true in case of retrenched employees. x x x

xxxx

x x x Annual general increases are akin to "allowances" or "other benefits." 46 (Italics ours.)

We do not agree.

Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by Section
34 of Rep. Act No. 6715. The law provides as follows:

ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. 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 from him up to the
time of his actual reinstatement. (Emphasis supplied.)

Article 279 mandates that an employees full backwages shall be inclusive of allowances and other
benefits or their monetary equivalent. Contrary to the ruling of the Court of Appeals, we do not see
that a salary increase can be interpreted as either an allowance or a benefit. Salary increases are
not akin to allowances or benefits, and cannot be confused with either. The term "allowances" is
sometimes used synonymously with "emoluments," as indirect or contingent remuneration, which
may or may not be earned, but which is sometimes in the nature of compensation, and sometimes in
the nature of reimbursement.47 Allowances and benefits are granted to the employee apart or
separate from, and in addition to the wage or salary. In contrast, salary increases are amounts which
are added to the employees salary as an increment thereto for varied reasons deemed appropriate
by the employer. Salary increases are not separate grants by themselves but once granted, they are
deemed part of the employees salary. To extend the coverage of an allowance or a benefit to
include salary increases would be to strain both the imagination of the Court and the language of
law. As aptly observed by the NLRC, "to otherwise give the meaning other than what the law speaks
for by itself, will open the floodgates to various interpretations."48 Indeed, if the intent were to include
salary increases as basis in the computation of backwages, the same should have been explicitly
stated in the same manner that the law used clear and unambiguous terms in expressly providing for
the inclusion of allowances and other benefits.

Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner East
Asiatic Company, Ltd. was found guilty of unfair labor practices against therein respondent, Soledad
A. Dizon, and the Court ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of the salaries plus all
general increases and bonuses she would have received during the period of her lay-off with the
corresponding right of the employer to deduct from the total amounts, all the earnings earned by the
employee during her lay-off. The emphasis in East Asiatic is the duty of both the employer and the
employee to disclose the material facts and competent evidence within their peculiar knowledge
relative to the proper determination of backwages, especially as the earnings derived by the
employee elsewhere are deductions to which the employer are entitled. However, East Asiatic does
not find relevance in the resolution of the issue before us. First, the material date to consider is 21
March 1989, when the law amending Article 279 of the Labor Code, Rep. Act No. 6715, otherwise
known as the Herrera-Veloso Law, took effect. It is obvious that the backdrop of East Asiatic,
decided by this Court on 31 August 1971 was prior to the current state of the law on the definition of
full backwages. Second, it bears stressing that East Asiatic was decided at a time when even as an
illegally dismissed employee is entitled to the whole amount of the salaries or wages, it was the
recognized right of the employer to deduct from the total of these, the amount equivalent to the
salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned.49 It is for this reason the Court centered its discussion on the
duty of both parties to be candid and open about facts within their knowledge to establish the
amount of the deductions, and not leave the burden on the employee alone to establish his claim, as
well as on the duty of the court to compel the parties to cooperate in disclosing such material facts.
The inapplicability of East Asiatic to respondent Sadac was sufficiently elucidated upon by the
NLRC, viz.:

A full discernment of the pertinent portion of the judgment sought to be executed in East Asiatic Co.,
Ltd. would reveal as follows:

"x x x to reinstate Soledad A. Dizon immediately to her former position with backwages from
September 1, 1958 until actually reinstated with all the rights and privileges acquired and due her,
including seniority and such other terms and conditions of employment AT THE TIME OF HER LAY-
OFF"

The basis on which this doctrine was laid out was summed up by the Supreme Court which
ratiocinated in this light. To quote:
"x x x on the other hand, of the employer to deduct from the total of these, the amount equivalent to
these salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned x x x" (Ibid, pp. 547-548).

But the Supreme Court, in the instant case, pronounced a clear but different judgment from that of
East Asiatic Co. decretal portion, in this wise:

"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: that private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; xxx"

Undisputably (sic), it was decreed in plain and unambiguous language that complainant Sadac "shall
be entitled to backwages." No more, no less.

Thus, this decree for Sadac cannot be considered in any way, substantially in essence, with the
award of backwages as pronounced for Ms. Dizon in the case of East Asiatic Co. Ltd.50

In the same vein, we cannot accept the Court of Appeals reliance on the doctrine as espoused in
Millares. It is evident that Millares concerns itself with the computation of the salary base used in
computing the separation pay of petitioners therein. The distinction between backwages and
separation pay is elementary. Separation pay is granted where reinstatement is no longer advisable
because of strained relations between the employee and the employer. Backwages represent
compensation that should have been earned but were not collected because of the unjust dismissal.
The bases for computing the two are different, the first being usually the length of the employees
service and the second the actual period when he was unlawfully prevented from working.51

The issue that confronted the Court in Millares was whether petitioners housing and transportation
allowances therein which they allegedly received on a monthly basis during their employment should
have been included in the computation of their separation pay. It is plain to see that the reference to
general increases in Millares citing East Asiatic was a mere obiter. The crux in Millares was our
pronouncement that the receipt of an allowance on a monthly basis does not ipso facto characterize
it as regular and forming part of salary because the nature of the grant is a factor worth considering.
Whether salary increases are deemed part of the salary base in the computation of backwages was
not the issue in Millares.

Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was mainly
contentious therein was the inclusion of fringe benefits in the computation of the award of
backwages, in particular additional vacation and sick leaves granted to therein concerned
employees, it evidently appearing that the reference to East Asiatic in a footnote was a mere obiter
dictum. Salary increases are not akin to fringe benefits52 and neither is it logical to conceive of both
as belonging to the same taxonomy.

We must also resolve against the applicability of Sigma Personnel Services to the case at bar. The
basic issue before the Court therein was whether the employee, Susan Sumatre, a domestic helper
in Abu Dhabi, United Arab Emirates, had been illegally dismissed, in light of the contention of Sigma
Personnel Services, a duly licensed recruitment agency, that the former was a mere probationary
employee who was, on top of this status, mentally unsound.53 Even a cursory reading of Sigma
Personnel Services citing St. Louis College of Tuguegarao would readily show that inclusion of
salary increases in the computation of backwages was not at issue. The same was not on all fours
with the instant petition.

What, then, is the basis of computation of backwages? Are annual general increases in basic salary
deemed component in the computation of full backwages? The weight of authority leans in petitioner
Banks favor and against respondent Sadacs claim for the inclusion of general increases in the
computation of his backwages.

We stressed in Paramount that an unqualified award of backwages means that the employee is paid
at the wage rate at the time of his dismissal, thus:

The determination of the salary base for the computation of backwages requires simply an
application of judicial precedents defining the term "backwages". Unfortunately, the Labor Arbiter
erred in this regard. An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal [Davao Free Worker Front v. Court of Industrial Relations,
G.R. No. L-29356, October 27, 1975, 67 SCRA 418; Capital Garments Corporation v. Ople, G.R. No.
53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R.
No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that the base figure to be
used in the computation of backwages due to the employee should include not just the basic salary,
but also the regular allowances that he had been receiving, such as the emergency living allowances
and the 13th month pay mandated under the law [See Pan-Philippine Life Insurance Corporation v.
NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA 866; Santos v. NLRC, G.R. No. 76721,
September 21, 1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. 75510, October 27, 1987, 155
SCRA 124; Insular Life Assurance Co., Ltd. v. NLRC, supra.]54 (Emphasis supplied.)

There is no ambivalence in Paramount, that the base figure to be used in the computation of
backwages is pegged at the wage rate at the time of the employees dismissal, inclusive of regular
allowances that the employee had been receiving such as the emergency living allowances and the
13th month pay mandated under the law.

In Evangelista v. National Labor Relations Commission,55 we addressed the sole issue of whether
the computation of the award of backwages should be based on current wage level or the wage
levels at the time of the dismissal. We resolved that an unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal, thus:

As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the determination of the salary
base for the computation of backwages requires simply an application of judicial precedents defining
the term "backwages." An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal. Furthermore, the award of salary differentials is not allowed,
the established rule being that upon reinstatement, illegally dismissed employees are to be paid their
backwages without deduction and qualification as to any wage increases or other benefits that may
have been received by their co-workers who were not dismissed or did not go on strike.56

The case of Paramount was relied upon by the Court in the latter case of Espejo v. National Labor
Relations Commission,57 where we reiterated that the computation of backwages should be based
on the basic salary at the time of the employees dismissal plus the regular allowances that he had
been receiving. Further, the clarification made by the Court in General Baptist Bible College v.
National Labor Relations Commission,58 settles the issue, thus:

We also want to clarify that when there is an award of backwages this actually refers to backwages
without qualifications and deductions. Thus, We held that:
"The term backwages without qualification and deduction means that the workers are to be paid
their backwages fixed as of the time of the dismissal or strike without deduction for their earnings
elsewhere during their layoff and without qualification of their wages as thus fixed; i.e., unqualified by
any wage increases or other benefits that may have been received by their co-workers who are not
dismissed or did not go on strike. Awards including salary differentials are not allowed. The salary
base properly used should, however, include not only the basic salary but also the emergency cost
of living allowances and also transportation allowances if the workers are entitled thereto."59 (Italics
supplied.)

Indeed, even a cursory reading of the dispositive portion of the Courts Decision of 13 June 1997 in
G.R. No. 102467, awarding backwages to respondent Sadac, readily shows that the award of
backwages therein is unqualified, ergo, without qualification of the wage as thus fixed at the time of
the dismissal and without deduction.

A demarcation line between salary increases and backwages was drawn by the Court in Paguio v.
Philippine Long Distance Telephone Co., Inc.,60 where therein petitioner Paguio, on account of his
illegal transfer sought backwages, including an amount equal to 16 percent (16%) of his monthly
salary representing his salary increases during the period of his demotion, contending that he had
been consistently granted salary increases because of his above average or outstanding
performance. We said:

In several cases, the Court had the opportunity to elucidate on the reason for the grant of
backwages. Backwages are granted on grounds of equity to workers for earnings lost due to their
illegal dismissal from work. They are a reparation for the illegal dismissal of an employee based on
earnings which the employee would have obtained, either by virtue of a lawful decree or order, as in
the case of a wage increase under a wage order, or by rightful expectation, as in the case of ones
salary or wage. The outstanding feature of backwages is thus the degree of assuredness to an
employee that he would have had them as earnings had he not been illegally terminated from his
employment.

Petitioners claim, however, is based simply on expectancy or his assumption that, because in the
past he had been consistently rated for his outstanding performance and his salary correspondingly
increased, it is probable that he would similarly have been given high ratings and salary increases
but for his transfer to another position in the company.

In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this contention is
based merely on speculation. Furthermore, it assumes that in the other position to which he had
been transferred petitioner had not been given any performance evaluation. As held by the Court of
Appeals, however, the mere fact that petitioner had been previously granted salary increases by
reason of his excellent performance does not necessarily guarantee that he would have performed
in the same manner and, therefore, qualify for the said increase later. What is more, his claim is
tantamount to saying that he had a vested right to remain as Head of the Garnet Exchange and
given salary increases simply because he had performed well in such position, and thus he should
not be moved to any other position where management would require his services.61

Applying Paguio to the case at bar, we are not prepared to accept that this degree of assuredness
applies to respondent Sadacs salary increases. There was no lawful decree or order supporting his
claim, such that his salary increases can be made a component in the computation of backwages.
What is evident is that salary increases are a mere expectancy. They are, by its nature volatile and
are dependent on numerous variables, including the companys fiscal situation and even the
employees future performance on the job, or the employees continued stay in a position subject to
management prerogative to transfer him to another position where his services are needed. In short,
there is no vested right to salary increases. That respondent Sadac may have received salary
increases in the past only proves fact of receipt but does not establish a degree of assuredness that
is inherent in backwages. From the foregoing, the plain conclusion is that respondent Sadacs
computation of his full backwages which includes his prospective salary increases cannot be
permitted.

Respondent Sadac cannot take exception by arguing that jurisprudence speaks only of wage and
not salary, and therefore, the rule is inapplicable to him. It is respondent Sadacs stance that he was
not paid at the wage rate nor was he engaged in some form of manual or physical labor as he was
hired as Vice President of petitioner Bank. He cites Gaa v. Court of Appeals62 where the Court
distinguished between wage and salary.

The reliance is misplaced. The distinction between salary and wage in Gaa was for the purpose of
Article 1708 of the Civil Code which mandates that, "[t]he laborers wage shall not be subject to
execution or attachment, except for debts incurred for food, shelter, clothing and medical
attendance." In labor law, however, the distinction appears to be merely semantics. Paramount and
Evangelista may have involved wage earners, but the petitioner in Espejo was a General Manager
with a monthly salary of P9,000.00 plus privileges. That wage and salary are synonymous has been
settled in Songco v. National Labor Relations Commission.63 We said:

Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another mans business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary"
are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins
vs. Cromwell, 85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both words generally refer to one and the same meaning,
that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages"
and "salary" (Blacks Law Dictionary, 5th Ed). x x x64 (Italics supplied.)

II.

Petitioner Bank ascribes as its second assignment of error the Court of Appeals ruling that
respondent Sadac is entitled to check-up benefit, clothing allowance and cash conversion of
vacation leaves notwithstanding that respondent Sadac did not present any evidence to prove
entitlement to these claims.65

The determination of respondent Sadacs entitlement to check-up benefit, clothing allowance, and
cash conversion of vacation leaves involves a question of fact. The well-entrenched rule is that only
errors of law not of facts are reviewable by this Court in a petition for review.66 The jurisdiction of this
Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, is limited to reviewing only errors of law, not of fact, unless the factual findings being
assailed are not supported by evidence on record or the impugned judgment is based on a
misapprehension of facts.67 This Court is also not precluded from delving into and resolving issues of
facts, particularly if the findings of the Labor Arbiter are inconsistent with those of the NLRC and the
Court of Appeals.68 Such is the case in the instant petition. The Labor Arbiter and the Court of
Appeals are in agreement anent the entitlement of respondent Sadac to check-up benefit, clothing
allowance, and cash conversion of vacation leaves, but the findings of the NLRC were to the
contrary. The Labor Arbiter sustained respondent Sadacs entitlement to check-up benefit, clothing
allowance and cash conversion of vacation leaves. He gave weight to petitioner Banks
acknowledgment in its computation that respondent Sadac is entitled to certain benefits, namely, rice
subsidy, tuition fee allowance, and medicine allowance, thus, there exists no reason to deprive
respondent Sadac of his other benefits. The Labor Arbiter also reasoned that the petitioner Bank did
not adduce evidence to support its claim that the benefits sought by respondent Sadac are not
granted to its employees and officers. Similarly, the Court of Appeals ratiocinated that if ordinary
employees are entitled to receive these benefits, so it is with more reason for a Vice President, like
herein respondent Sadac to receive the same.

We find in the records that, per petitioner Banks computation, the benefits to be received by
respondent are monthly rice subsidy, tuition fee allowance per year, and medicine allowance per
year.69 Contained nowhere is an acknowledgment of herein claimed benefits, namely, check-up
benefit, clothing allowance, and cash conversion of vacation leaves. We cannot sustain the
rationalization that the acknowledgment by petitioner Bank in its computation of certain benefits
granted to respondent Sadac means that the latter is also entitled to the other benefits as claimed by
him but not acknowledged by petitioner Bank. The rule is, he who alleges, not he who denies, must
prove. Mere allegations by respondent Sadac does not suffice in the absence of proof supporting the
same.

III.

We come to the third assignment of error raised by petitioner Bank in its Supplement to Petition for
Review, assailing the 26 October 2004 Supplemental Decision of the Court of Appeals which
amended the fallo of its 6 April 2004 Decision to include "attorneys fees equal to TEN PERCENT
(10%) of all the monetary award" granted to respondent Sadac. Petitioner Bank posits that neither
the dispositive portion of our 13 June 1997 Decision in G.R. No. 102467 nor the body thereof awards
attorneys fees to respondent Sadac. It is postulated that the body of the 13 June 1997 Decision
does not contain any findings of facts or conclusions of law relating to attorneys fees, thus, this
Court did not intend to grant to respondent Sadac the same, especially in the light of its finding that
the petitioner Bank was not motivated by malice or bad faith and that it did not act in a wanton,
oppressive, or malevolent manner in terminating the services of respondent Sadac.70

We do not agree.

At the outset it must be emphasized that when a final judgment becomes executory, it thereby
becomes immutable and unalterable. The judgment may no longer be modified in any respect, even
if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law,
and regardless of whether the modification is attempted to be made by the Court rendering it or by
the highest Court of the land. The only recognized exceptions are the correction of clerical errors or
the making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course,
where the judgment is void.71 The Courts 13 June 1997 Decision in G.R. No. 102467 became final
and executory on 28 July 1997. This renders moot whatever argument petitioner Bank raised against
the grant of attorneys fees to respondent Sadac. Of even greater import is the settled rule that it is
the dispositive part of the judgment that actually settles and declares the rights and obligations of the
parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent
statements in the body that may tend to confuse.72

Proceeding therefrom, we make a determination of whether the Court in Equitable Banking

Corporation v. National Labor Relations Commission,73 G.R. No. 102467, dated 13 June 1997,
awarded attorneys fees to respondent Sadac. In recapitulation, the dispositive portion of the
aforesaid Decision is hereunder quoted:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability herein pronounced
shall be due from petitioner bank alone, the other petitioners being absolved from solidary liability.
No costs.74

The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent Sadac
attorneys fees equivalent to ten percent (10%) of the monetary award, viz:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as
it is hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as
illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority rights and other
privileges, and to pay him full backwages and other benefits from the time his compensation was
withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages
of P50,000.00, and attorneys fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents are ordered likewise
jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991
(cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53.75 (Italics Ours.)

As can be gleaned from the foregoing, the Courts Decision of 13 June 1997 AFFIRMED with
MODIFICATION the NLRC Decision of 24 September 1991, which modification did not touch upon
the award of attorneys fees as granted, hence, the award stands. Juxtaposing the decretal portions
of the NLRC Decision of 24 September 1991 with that of the Courts Decision of 13 June 1997, we
find that what was deleted by the Court was "the award of moral and exemplary damages," but not
the award of "attorneys fees equivalent to Ten Percent (10%) of the monetary award." The issue on
the grant of attorneys fees to respondent Sadac has been adequately and definitively threshed out
and settled with finality when petitioner Bank came to us for the first time on a Petition for Certiorari
in Equitable Banking Corporation v. National Labor Relations Commission, docketed as G.R. No.
102467. The Court had spoken in its Decision of 13 June 1997 in the said case which attained
finality on 28 July 1997. It is now immutable.

IV.

We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve percent
(12%) interest per annum on the outstanding balance as of 28 July 1997, the date when our
Decision in G.R. No. 102467 became final and executory.

In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking through the Honorable
Justice Jose C. Vitug, laid down the following rules of thumb:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages.

II. With regard particularly to an award of interest in the concept of actual or compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
 1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Article 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2 above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.77

It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from the
time judgment becomes final and executory, until full satisfaction thereof. Therefore, petitioner Bank
is liable to pay interest from 28 July 1997, the finality of our Decision in G.R. No. 102467.78 The
Court of Appeals was not in error in imposing the same notwithstanding that the parties were at
variance in the computation of respondent Sadacs backwages. What is significant is that the
Decision of 13 June 1997 which awarded backwages to respondent Sadac became final and
executory on 28 July 1997.

V.

Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily be denied as
established in our foregoing discussion. We are not herein modifying or reversing a doctrine or
principle laid down by the Court en banc or in a division. The instant case is not one that should be
heard by the Court en banc.79 1avv phil.net

Fallo

WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the
backwages, respondent Sadacs claimed prospective salary increases, check-up benefit, clothing
allowance, and cash conversion of vacation leaves are excluded. The petition is PARTIALLY
DENIED insofar as we AFFIRMED the grant of attorneys fees equal to ten percent (10%) of all the
monetary award and the imposition of twelve percent (12%) interest per annum on the outstanding
balance as of 28 July 1997. Hence, the Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 75013, dated 6 April 2004 and 28 July 2004, respectively, and the Supplemental Decision
dated 26 October 2004 are MODIFIED in the following manner, to wit:
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:

(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467
with a clarification that the award of backwages EXCLUDES respondent Sadacs claimed
prospective salary increases, check-up benefit, clothing allowance, and cash conversion of
vacation leaves;

(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of all monetary
award; and

(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum
of all monetary award from 28 July 1997, the date of finality of Our Decision in G.R. No.
102467 until full payment of the said monetary award.

The Motion to Refer the Petition to the Court En Banc is DENIED.

No costs.

SO ORDERED.

A.M. No. RTJ-97-1382 July 17, 1997

(Formerly OCA I.P.I. No. 95-22-RTJ)

ATTY. REXEL M. PACURIBOT, complainant,

vs.
JUDGE RODRIGO F. LIM, JR., respondent.

RESOLUTION

FRANCISCO, J.:

This is an administrative complaint against Judge Rodrigo F. Lim, Jr., of Branch 21, Regional Trial
Court of Misamis Oriental, Cagayan de Oro City, for gross ignorance of the law, misconduct and
oppression filed by Atty. Rexel M. Pacuribot, counsel for the District Office of the Public Attorney's
Office in Cagayan de Oro City and officially assigned to Branches 17 and 21 of the RTC of Misamis
Oriental, Cagayan de Oro City.

The complaint stemmed from the Orders issued by respondent judge, dated November 23, 1994,
citing complainant in contempt of court and ordering him to pay a fine of P200.00 for failure to
appear as counsel de oficio for the accused in Criminal Case No. 94-822 at the scheduled
arraignment on said date, and subsequently on December 1, 1994, reiterating that complainant pay
the fine imposed on him in the previous order within one day from receipt thereof or face graver
sanctions. Complainant refused to comply with the aforesaid orders and instead filed a Manifestation
alleging that he is not privy to the aforesaid criminal case as he is not the counsel of any of the
accused and assailed the order for being illegal, arbitrary, despotic and not in accordance with Rule
71 of the Rules of Court. Thereafter, complainant proceeded to file the instant administrative
complaint arguing that respondent judge acted arbitrarily in citing him for contempt for the following
reasons: 1) the order was issued without affording him due process because he was not given an
opportunity to show cause why he should not be cited for contempt; 2) he was not privy to the case
as he was not the counsel of any of the accused, and 3) none of the grounds provided in Rule 71 for
direct and indirect contempt are present.

In answer to the complaint, respondent judge filed his Comment and countered that complainant
misled the trial court into believing that he was the counsel for the accused. According to
respondent, complainant himself admitted that he is officially assigned to Branch 21 of the RTC of
Cagayan de Oro City, respondent judge's sala. The accused in Criminal Case No. 94-822 being
detention prisoners, the Notice of Hearing was, as a matter of procedure, sent to the public
prosecutor assigned to Branch 21, one of them being herein complainant. Upon receipt of the Notice
of Hearing on November 10, 1994, complainant even wrote a request on the return of the notice that
the case be called at 10 A.M. because he has other cases already scheduled.1 At the scheduled
hearing however, complainant failed to appear at all despite accommodating his request.
Respondent judge therefore considered this as an affront to the court's dignity as it made a mockery
of the proceedings and thus led him to issue the order of November 23, 1994, citing complainant in
contempt of court outright and ordering him to pay a fine of P200.00 for failing to appear at the
scheduled hearing. Nevertheless, respondent judge contends that even assuming that he committed
an error in issuing the aforesaid order, the same was not enforced despite the absence of any
motion for reconsideration on complainant's part because the court, motu propio, desisted from
imposing the sanctions contained therein. Moreover, respondent judge maintains that he could not
be entirely faulted for issuing the assailed order of November 23, 1994 because he was misled into
believing that complainant was indeed the counsel for the accused in Criminal Case No. 94-822 as
borne by the notations of complainant on the return of the notice of hearing, coupled with the latter's
failure to inform the court that he is not privy to the case despite receiving the notice of hearing as
early as November 10, 1994. Thus, according to respondent judge, this suit may actually be
categorized as "damnum absque injuria". Finally, respondent judge alleged that the filing of this
complaint was intended purely and plainly for purposes of harassment and resentment on the part of
complainant owing to the fact that on previous occasions the latter has been rebuffed by the court in
several cases pending before it where he appeared as counsel. Hence, respondent judge prays for
the dismissal of this complaint.

It is well-settled that the power to punish for contempt is inherent in all courts so as to preserve order
in judicial proceedings and to uphold the due administration of justice.2 Judges, however, should
exercise their contempt powers judiciously and sparingly, with utmost restraint, and with the end in
view of utilizing their contempt powers for correction and preservation, not for retaliation or
vindication.3

Failure to attend a scheduled hearing without a valid cause can be a ground for indirect contempt
under Section 3 of Rule 71. However, the following requisites must be present: 1) a complaint in
writing which may either be a motion for contempt filed by a party or an order issued by the court
requiring a person to appear and explain his conduct, and 2) an opportunity for the person charged
to appear and explain his conduct.4

In the instant suit, the assailed order of respondent judge dated November 23, 1994 citing
complainant in contempt of court was issued outright without affording the complainant any
opportunity to appear and explain his conduct. This was clearly an error on respondent's part.
Respondent's claim that the court, motu propio, desisted from enforcing the sanctions contained in
the order dated November 23, 1994 despite the absence of a motion for reconsideration is
unavailing considering that another order was in fact immediately issued by the respondent judge on
December 1, 1994, reiterating compliance with the previous order within one day from receipt or face
stiffer sanctions.5
Nonetheless, the Court agrees with respondent that complainant is not entirely blameless because
he misled respondent judge into believing that he was the counsel de oficio for the accused in
Criminal Case No. 94-822. Complainant's denial of being privy to the case is belied by the return of
the notice of hearing which contained his signature and written notations requesting that the case be
called at 10 A.M. because he had other cases already scheduled for that day. Complainant failed to
deny or refute this in his Reply to respondent's Comment, perforce, he must be bound by the same.

From the foregoing, it is evident that both the complainant and respondent were guilty of negligence
in the performance of their duties as officers of the court and their actuations must therefore be
censured.

ACCORDINGLY, both parties are hereby REPRIMANDED and ordered to pay a fine of One
thousand Pesos (P1,000.00) each, with a stern warning that a repetition of the same acts will be
severely dealt with in the future.

SO ORDERED.

G.R. No. 123375 February 28, 2005

GENARO BAUTISTA, petitioner,

vs.
HON. COURT OF APPEALS and THE OFFICIALS AND BOARD OF DIRECTORS OF KAISAHAN
AT KAPATIRAN NG MGA MANGGAGAWA AT KAWANI SA METROPOLITAN WATERWORKS
AND SEWERAGE SYSTEM UNION, REPRESENTED BY ITS PRESIDENT, PRUDENCIO
CRUZ, respondents.

DECISION

CHICO-NAZARIO, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
assailing the Decision1 and Resolution2 of the Court of Appeals, dated 09 October 1995 and 08
January 1996, respectively. The court a quo, in said Decision, held that the jurisdiction to determine
the proper representative of employees in the Metropolitan Waterworks and Sewerage System
pertains to the Department of Labor and Employment, more particularly to the Bureau of Labor
Relations.

The Facts

On 07 May 1993, after a petition for election of officers of Kaisahan at Kapatiran ng mga
Manggagawa at Kawani sa Metropolitan Waterworks and Sewerage System (KKMK-MWSS) was
filed by Bonifacio De Guzman, former auditor of KKMK-MWSS, a Resolution was issued by Perlita
Bathan-Velasco, in her capacity as Director of the Bureau of Labor Relations (BLR), the decretal
portion of which states:

Wherefore, the instant petition is hereby granted and the Kaisahan at Kapatiran ng mga
Manggagawa at Kawani sa Metropolitan Waterworks and Sewerage System (KKMK-MWSS) is
hereby directed to immediately conduct an election of the following union officers: 1. President, 2.
1st Vice President, 3. 2nd Vice President, 4. Executive Secretary, 5. Assistant Executive Secretary,
6. Treasurer, 7. Assistant Treasurer, 8. Auditor, 9. Assistant Auditor, 10. Public Relations Officer, 11.
Twenty Three (23) Directors, 12. Four Sergeants at Arms, and 13. Business Manager, after the
usual pre-election conferences.

The Labor Organizations Division, this Bureau, shall supervise the conduct of said election.3

A Motion for Reconsideration was filed by the incumbent officers of KKMK-MWSS, led by its
President, Genaro Bautista, with the BLR, but was denied by Perlita Bathan-Velasco on 08 July
1993.1awphi1.nt

An appeal was filed with the Office of the Secretary of Labor and Employment where the order of the
BLR was assailed as having been issued with grave abuse of discretion and without jurisdiction.4

On 24 August 1993, an Order was issued by the Office of the Secretary of Labor and Employment,
through Undersecretary Bienvenido Laguesma, part of which reads:

Records clearly show that the subject of the present controversy is an intra union conflict involving
an employees organization in the public sector created and registered pursuant to Executive Order
No. 180. Consequently, this office (referring to the Secretary of Labor and Employment) has no other
recourse but to dismiss the appeal for lack of jurisdiction.

...

Wherefore, the instant appeal is hereby dismissed for lack of jurisdiction. Accordingly, let the entire
records of this case be returned to the Bureau of Labor Relations, for appropriate action.5

The then incumbent officers of KKMK-MWSS, represented by its President, Genaro C. Bautista, filed
a special civil action for certiorari which was, however, dismissed. The Court, on 20 September
l^vvphi 1.net

1993, issued the following Resolution:

G.R. No. 111635 (Incumbent Officers of KKMK-MWSS represented by its President Genaro C.
Bautista v. Hon. Bienvenido E. Laguesma, in his capacity as Undersecretary of Labor and
Employment, Hon. Perlita Bathan-Velasco, in her capacity as Officer-In-Charge of the Bureau of
Labor Relations, Bonifacio De Guzman and 544 other members of KKMK-MWSS). Acting on the
special civil action for certiorari, with prayer for the issuance of a temporary restraining order, the
Court Resolved to DISMISS the petition for being insufficient in form and substance, and for want of
a genuine justiciable issue.

Petitioners claim to be incumbent officers of the Kaisahan at Kapatiran ng mga Manggagawa sa

Metropolitan Waterworks and Sewerage System (KKMK-MWSS). However, they are not individually
named in the petition.

In the main, the petition argues that public respondents have no jurisdiction over an intra-union
dispute among government employees, hence, cannot order a new election of officers. A cursory
reading of the Order of 24 August 1993 issued by respondent Undersecretary reveals that he agrees
with this view. Thus

Records clearly show that the subject of the present controversy is an intra-union conflict involving
an employees organization in the public sector created and registered pursuant to Executive Order
No. 180. Consequently, this Office (referring to the Secretary of Labor and Employment) has no
other recourse but to dismiss the appeal for lack of jurisdiction.
There is no valid issue therefore to be resolved in the instant petition.6

This Resolution of the Court became final and executory on 27 October 1994 and was recorded in
the Book of Entries of Judgments.7

Earlier, or on 25 November 1993, a Petition for Prohibition with Prayer for a Temporary Restraining
Order/Injunction8was filed by Genaro Bautista, et al., against Perlita Bathan-Velasco, Director,
Eugenia Fernandez, Med-Arbiter, and Johnny P. Garcia, Chief, Labor Organizations Division, all of
the BLR, before the Regional Trial Court (RTC), Quezon City, Branch 87. The petition sought to
enjoin the herein respondents from proceeding with the election of officers of KKMK-MWSS
scheduled on 02 December 1993, and to permanently prohibit them from exercising jurisdiction over
the conduct of election of the officers of the KKMK-MWSS. 1a\^/phi1.net

On 26 November 1993, the RTC, Quezon City, Branch 87, through Judge Elsie Ligot Telan, issued a
temporary restraining order, quoted as follows:

A verified petition for prohibition with prayer for a temporary restraining order/injunction has been
filed by the plaintiffs. The petition being sufficient in form and substance, and so as not to render the
issues raised moot and academic, the defendants are hereby ordered to temporarily refrain from
proceeding with the election of officers of the KKMK-MWSS scheduled on December 2, 1993, until
further orders from the Court.

Let the prayer for issuance of injunction be set for hearing on December 7, 1993 at 8:30 a.m., at
which date and time, defendants may show cause why the same should not be granted.

Let summons together with copies of the complaint be served upon the defendants.9

Copies of this Order were served upon the defendants therein on 29 November 1993.10

On 02 December 1993, the election of the officers of KKMK-MWSS pushed through despite the
issuance of the temporary restraining order. Another Order was issued by Branch 87 on the same
date, hereunder quoted:

Counsel for petitioners appeared today with an urgent ex-parte manifestation stating that despite the
order of this Court, dated November 26, 1993, restraining the defendants temporarily from
proceeding with the election of officers of the KKMK-MWSS scheduled for today, until further
orders, and that the officials of the MWSS had been served copy of this order, the election is now
being held in utter defiance and disobedience of the said order of this Court.

To substantiate the above manifestation report are affidavits attached thereto executed by Angelito
Ignacio, alleged incumbent Asst. Treasurer of the KKMK-MWSS and Mario Perez, incumbent
assistant auditor, respectively, swearing to the truth that the prohibited elections are now being held
at the compounds of the MWSS, Balara, Quezon City, and at Arroceros, Manila.

The defendants in this case together with Teofilo Asuncion and Gregorio Garcia, who were furnished
copy of the order and such other persons who are involved in conducting [of] the election and/or
sanctioning the same are hereby given up to 4:30 oclock this afternoon to explain why they should
not be punished for contempt in defying the order of this Court dated November 26, 1993. 1awphi1.nt

The Court hereby reiterates its order restraining the defendants, their agents, assigns and
representatives, and any or all persons having to do with such elections, specifically the
management of the MWSS and all others acting in cooperation with them or acting on their behalf or
direction, from conducting or continuing or tolerating the elections scheduled today.11

On 07 December 1993, another Order was issued by the RTC, Quezon City, Branch 87, part of
which reads:

. . . [T]he defendants, as well as all their agents, assigns, representatives and any or all persons
having to do with the elections, scheduled on December 2, 1993, including the BLR officials and the
management of the Metropolitan Waterworks and Sewerage System, and all others cooperating with
them, or acting on their behalf and direction, are hereby restrained from continuing or tolerating the
election process in question at any stage thereof, and if already accomplished in defiance of the
orders of this Court, the said defendants are ordered to refrain from giving effect to the election by
ratifying and registering the same and recognizing the persons supposedly elected. Further, the
persons allegedly elected in said elections are hereby ordered to refrain from assuming office and
acting as officers of the KKMK-MWSS.12

On 28 December 1993, an order for the issuance of a writ of preliminary injunction was issued by
Branch 87.13 A day later, or on 29 December 1993, a Writ of Preliminary Injunction was issued by the
RTC, the pertinent portion of which reads:

NOW THEREFORE, you the respondents, your agents and representatives, particularly the officers
concerned ordering them until further orders of this Court to refrain from giving any effect to the
elections above adverted to by ratifying and registering the same, and recognizing as officers the
persons supposedly elected; and for the latter to refrain from assuming office and acting as officers
of the KKMK-MWSS.14

After the case was re-raffled to Branch 220, RTC, Quezon City,15 presided by Judge Prudencio Altre
Castillo, Jr., the respondents, on 20 June 1994, filed a Reiteration of Motion to Dismiss and Motion
to Lift Writ of Preliminary Injunction,16 on the ground of lack of jurisdiction and that the injunction does
not anymore serve its purpose.17Branch 220 issued an Order dated 01 July 1994, dismissing the
case, the decretal portion of which states:

WHEREFORE, the instant case is dismissed. The Writ is ordered quashed and Petitioners are
hereby ordered to show cause why their injunction bond should not be confiscated in favor of the
respondents.18

A motion for reconsideration was filed by Bautista, et al., dated 16 July 1994, alleging among other
things, that the RTC has jurisdiction considering that the case before it was an action for prohibition,
which was cognizable by it.19As a result of which Branch 220 issued another Order20 dated 27
December 1994 reinstating the Writ of Preliminary Injunction and injunction bond. 1a\^/phi 1.net

A motion for reconsideration was filed by the private respondents but was denied by Branch 220 in
its order dated 27 April 1995.21

On 18 May 1995, a petition for certiorari, prohibition and mandamus with prayer for Preliminary
Injunction and/or Restraining Order was filed before the Court of Appeals by private respondents
herein.22 In it, the orders of Branch 220 dated 27 December 1994 and 27 April 1995 were assailed for
having been issued with grave abuse of discretion.

On 09 October 1995, a Decision was rendered by the Court of Appeals finding for the private
respondents, upholding that the BLR had jurisdiction over an intra-union dispute, the dispositive
portion of which reads:
IN VIEW OF THE FOREGOING PREMISES, the instant petition for certiorari, prohibition
and mandamus is hereby GRANTED. The assailed orders of December 27, 1994 and April 27, 1995
are hereby SET ASIDE and NULLIFIED for reasons above-stated. No costs.23

Petitioner then filed a motion for reconsideration dated 27 October 1995,24 but was denied by the
court a quo in its Resolution dated 08 January 1996, which is quoted hereunder:

This Court hereby resolves the following:

(1) to DENY the motion for the issuance of temporary restraining order of the petitioners,
considering that the instant case has already been decided on October 9, 1995;

(2) to DENY the motion for reconsideration of the respondents, it appearing that there are no
new issues raised which would warrant the reversal or modification of Our decision.25

On 13 February 1996, a petition for review on certiorari was filed before this Court by Genaro
Bautista26 seeking the reversal and setting aside of the Decision and Resolution of the Court of
Appeals cited earlier.

Meanwhile, on 28 May 1996, a petition for mandamus was filed by Genaro Bautista, as President,
and by the other officers27 and members of the board28 of KKMK-MWSS against Angel L. Lazaro III,
Administrator, MWSS, and the Board of Trustees of MWSS, before the RTC, Quezon City, raffled
again to Branch 220, docketed as Sp. Proc. No. Q-96-27586.29 In this petition, it was prayed, among
other things, that Angel Lazaro III and the Board of Trustees of MWSS give due recognition to
Genaro Bautista, et al., as officers of KKMK-MWSS, and that the union dues be released to the
latter.

On 27 June 1996, an Urgent Motion for Issuance of Temporary Restraining Order30 was filed before
this Court by the private respondents praying that Regional Trial Court Judge Prudencio Altre
Castillo be enjoined from hearing the mandamus case.

Then Associate Justice Teodoro R. Padilla, as Chairman of the First Division, issued a Temporary
Restraining Order on 08 July 1996, a portion of which reads:

NOW, THEREFORE, you (respondents), your officers, agents, representatives, and/or persons
acting upon your orders or, in your place or stead, are hereby ENJOINED to desist from hearing the
case in SP Case No. Q-96-27586 entitled "Genaro Bautista, et al. vs. Angel L. Lazaro, Administrator,
Metropolitan Waterworks and Sewerage System (MWSS), Board of Trustees (MWSS)."

A Motion to Lift Temporary Restraining Order31 and a Supplemental Motion32 thereto were later filed by
Genaro Bautista, et al.

Thereafter, petitioner Genaro Bautista filed an urgent motion to declare the administrator, Angel L.
Lazaro III, and manager, Erlich V. Barraquias, of the Legal Department of the MWSS in indirect
contempt of court.33 The petitioner, in this motion, alleged that Lazaro and Barraquias both failed to
follow the opinions rendered by the Office of the Government Corporate Counsel (OGCC) to the
effect that the petitioner and his set of officers are still the rightful parties with whom MWSS
management has to deal with in all union matters as they continue to be the incumbent officers.34 The
Court issued a Resolution35 dated 18 June 1997 requiring the said administrator and manager to
comment on the motion. A joint comment was thereafter filed by Lazaro and Barraquias dated 28
July 1997. In it, they contended that the first two opinions rendered by the OGCC were overtaken by
the Decision and Resolution of the Court of Appeals, now the subjects of this petition for review
on certiorari, wherein it declared that the regular courts have no jurisdiction to prohibit the holding of
the election of the officers and members of the board of KKMK-MWSS, as it is lodged with the BLR.
When they again sought the guidance of the OGCC as to the effect of the aforementioned Decision
of the Court of Appeals, another opinion was issued by the OGCC which, they said, did not resolve
that question but instead merely reiterated its previous opinions deviant to the conclusions of the
Court of Appeals.36

THE ISSUE AND PENDING INCIDENTS

The bombardment of cases filed before several fora notwithstanding, the solitary question raised by
the petitioner is simply whether or not the RTC has jurisdiction over a case involving an intra-union
dispute (election of officers) of an employees organization in the public sector (MWSS).37

Stated in another way, does the BLR have jurisdiction to call for and conduct the election of officers
of an employees association in the public sector?

Pending resolution in the instant case are the motions to lift the temporary restraining order in
the mandamus case before the lower court and to declare the administrator and the manager of the
Legal Department of the MWSS in indirect contempt of court.

THE COURTS RULINGS

The decision of the Court of Appeals relied on our earlier ruling in the case of Association of Court of
Appeals Employees (ACAE) v. Ferrer-Calleja.38 In this case, we held that the BLR has the jurisdiction
to call for and supervise the conduct of certification elections in the public sector, viz:

. . . In the same way that CSC validly conducts competitive examinations to grant requisite
eligibilities to court employees, we see no constitutional objection to DOLE handling the certification
process in the Court of Appeals, considering its expertise, machinery, and experience in this
particular activity. Executive Order No. 180 requires organizations of government employees to
register with both CSC and DOLE. This ambivalence notwithstanding, the CSC has no facilities,
l^vvphi1.net

personnel, or experience in the conduct of certification elections. The BLR has to do the job.

Executive Order No. 180 states that certificates of registration of the legitimate employee
representatives must be jointly approved by the CSC Chairman and the DOLE Secretary. Executive
Order No. 180 is not too helpful in determining whose opinion shall prevail if the CSC Chairman and
the DOLE Secretary arrive at different conclusions. At any rate, we shall deal with that problem when
it occurs. Insofar as power to call for and supervise the conduct of certification elections is
concerned, we rule against the petitioner.39

The petitioner contends that the aforecited case finds no application in the case at bar for the
following reasons.

First, the ACAE case involved a conflict between two government unions in the Court of Appeals, a
situation not obtaining in the instant case because what is involved here is only one and the same
employees organization, the KKMK-MWSS.40

Second, the ACAE case concerned a certification election, i.e., which between the two government
unions should be considered as the bargaining unit before the Court of Appeals, while the present
case embraces the issue of who among the members of the organization shall be elected as officers
and members of the board.41

The petitioner likewise advances the theory that the power of the BLR, as found in Executive Order
No. 180, is limited only to the registration of a union in a government corporation, and to call for a
certification election.42

Moreover, the petitioner assails the ruling of the court a quo to the effect that his group participated
in the questioned elections and submitted themselves to the jurisdiction of the BLR. According to
him, the records will readily show that they did not in any way join in it.43

We disagree in petitioners assertions, hence, the petition must fail.

It may be true that the ACAE case involved a certification election between two unions in a
government entity. However, this does not mean that our previous ruling cannot apply in the instant
case.

The authority of the BLR in assuming jurisdiction over a certification election, or any inter-union or
intra-union conflicts, is found in Article 226 of the Labor Code of the Philippines, which reads:

Art. 226. BUREAU OF LABOR RELATIONS. The Bureau of Labor Relations and the Labor
Relations Division in the regional offices of the Department of Labor shall have original and exclusive
authority to act, at their own initiative or upon request of either or both parties, on all inter-union and
intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-
management relations in all workplaces whether agricultural or nonagricultural, 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.

It is quite clear from this provision that BLR has the original and exclusive jurisdiction on all inter-
union and intra-union conflicts. An intra-union conflict would refer to a conflict within or inside a labor
union, and an inter-union controversy or dispute, one occurring or carried on between or among
unions.44 The subject of the case at bar, which is the election of the officers and members of the
board of KMKK-MWSS, is, clearly, an intra-union conflict, being within or inside a labor union. It is
well within the powers of the BLR to act upon. The petitioner is asking us to make an illogical edict
by declaring that our ruling in the ACAE case, considering that it involved an inter-union conflict,
should not apply to the instant case for the reason that the latter involves an intra-union conflict.
This, we cannot do because the law is very clear on this matter.

Executive Order No. 180 (1987),45 particularly Section 16 thereof, is completely lucid as to the
settlement of disputes involving government employees, viz:

SEC. 16. The Civil Service and labor laws and procedures, whenever applicable, shall be
followed in the resolution of complaints, grievances and cases involving government employees.46

Since Article 226 of the Labor Code has declared that the BLR shall have original and exclusive
authority to act on all inter-union and intra-union conflicts, then there should be no more doubt as to
its jurisdiction.
We likewise find bereft of merit petitioners claim that his group did not in any way participate in the
subject elections, and therefore, the principle of estoppel cannot apply.

In the Order of the RTC dated 01 July 1994, it appears that the petitioner, indeed, participated in the
election. A portion of the Order states:

Candidate Votes
Genaro C. Bautista 288
Prudencio Cruz 1080
Bonifacio De Guzman 1081 47

The petitioner was, undoubtedly, a candidate in the election. The 288 votes for him were counted in
his favor.

Further, the petitioner and his group submitted a list of candidates before the BLR dated 04 October
199348 , which included the name of petitioner himself.

WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of the Court of
Appeals being in accord with law, are hereby AFFIRMED. Accordingly, the Urgent Motion to Declare
the Administrator and Manager, Legal Department, MWSS, in indirect contempt of court is DENIED,
and the temporary restraining order earlier issued is hereby made permanent. Costs against the
petitioner.

SO ORDERED.

G.R. Nos. 89971-75 October 17, 1990

CELIA B. CHUA, MARITES P. MARTINEZ and ARACELI A. ELARDO, For Themselves and in
Their Capacity as Attorneys-In-Fact of 2,345, Former Daily-Paid Employees of Stanford
microsystems. Inc., LUDIVINA L. SABALZA, ADELIZA E. CANTILLO and REMIGIO P.
PESTAO, For Themselves and in Their Capacity As Attorneys-In-Fact of 3,244 Former Daily-
Paid Employees of Stanford Microsystems, Inc., MARIO A. MENTIL, REMIGIO F. SANTOS and
NOEL VILLENA, For Themselves and in Their Capacity As Attorneys-In-Fact of 599 Former
Monthly-Paid Employees of Stanford Microsystems Inc., MAXIMO E. DAQUIL, GEORGE T.
BARTOLOME and ERNESTO L. CONCEPCION, For Themselves and in Their Capacity As
Attorneys-In-Fact of 300 Former Non-Unionized and Confidential Employees of Stanford
Microsystems, Inc., and LIQUIDATION COMMITTEE OF STANFORD MICROSYSTEMS, INC.,
Duly Appointed by the Securities and Exchange Commission, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION LABOR ARBITER DOMINADOR M. CRUZ,
Public Respondents, and FERNANDO R.GUMABON, CARMELITA TOLENTINO, RICARTE
CABASE, TERESITA ALORAN, ENCARNITA JULIANO, ANITA DAILEG, ERNESTO ALARCON,
JOHNNY ARAGON, LEONCIO PIMENTEL, RODOLFO MERCADO, DANIEL ALMAZAN,
ORLANDO DE LEON, EDITHA LIMA, MARILYN INES, LINDA ESTABA, NELIA DE BORJA,
CECILIA CRUZ, FE RAYALA, ADELIZA MOYA, NATY LAMAN, JANET PONCE, ESTELA
ALABASO, MILAGROS CERRA, JOSEPHINE BAYONETA and ANNABELLE SALABIT
private respondents.
Carpio, Villaraza & Cruz; Delos Reyes, Bonifacio, Delos Reyes; Bacungan, Larcia, Bacungan; Maria
Ana C. Sison; and Reynaldo Geronimo for petitioners.

Vicente T. Ocampo Law Offices for movants-intervenors.

GUTIERREZ, JR., J.:

The instant petition questions the jurisdiction of the National Labor Relations Commission (NLRC) in issuing three (3) resolutions dated
October 6, 1988, November 3, 1988 and January 3, 1990 in NLRC Injunction Case No. 1793. The October 6, 1988 resolution denied for lack
of merit the petitioners' petition for writ of prohibition to stay further proceedings in the five (5) consolidated labor cases involving the former
employees of Stanford Microsystems, Inc. pending with respondent Labor Arbiter Dominador M. Cruz. The November 3, 1988 resolution
ordered petitioners' Liquidation Committee of Stanford Microsystems, Inc. to defer the payment of SIX MILLION PESOS (P6,000,000.00) to
the former employees of Stanford Microsystems, Inc. The January 3, 1990 resolution, among others directed petitioner Liquidation
Committee to deposit with the NLRC the deducted attorney's fees representing ten percent (10%) of the amount due and/or to be paid to the
former employees of Stanford Microsystems Inc.

In December, 1985, Stanford Microsystems, Inc. (Stanford) a service conductor corporation filed a
petition for suspension of payments and appointment of rehabilitation receiver (Annex "A", Petition)
with the Securities and Exchange Commission (SEC). The petition was docketed as SEC Case No.
2930. At that time, Stanford had seven (7) secured creditor banks and more or less seven thousand
one hundred twenty-four (7,124) employees.

On February 5, 1986, the SEC declared Stanford to be in a state of suspension of payments. It

issued an order (Annex "B", Petition) appointing Sycip Gorres & Velayo & Co. (SGV) as the
rehabilitation receiver.

In view of these developments, the former employees of Stanford filed with the Department of Labor
and Employment (DOLE) cases for money claims, to wit:

(a) STANFORD TECHNICAL AND OFFICE STAFF EMPLOYEES ASSOCIATION

(STOSEA)-FFW, THROUGH ITS PRESIDENT, NOEL VILLENA AND FOR AND IN
BEHALF OF ITS EIGHT HUNDRED SIXTY SUM (860) MEMBERS, Complainants, v.
STANFORD MICROSYSTEMS, INC. AND CRISTINO CONCEPCION, JR., IN HIS
CAPACITY AS PRESIDENT AND GENERAL MANAGER, Respondents, NLRC-NCR
CASE NOS. 1-106-86 AND 1-117-86, filed by herein Petitioners Mario A. Mentil,
Noel Villena, and Remigio F. Santos, acting for themselves and as the duly
appointed Attorneys-In-Fact of Five Hundred Ninety Nine (599) Monthly-Paid
Employees for Stanford, and assigned to Labor Arbiter Ceferina Diosana-

-for illegal lockout and payment of thirteenth month pay, vacation leave and sick
leave benefits and subsidiary seminar fund and recreational activities fund. This case
has been decided but execution was suspended upon motion of the complainants;

(b) RODOLFO FERNANDEZ, ET AL., Petitioners, v. STANFORD MICROSYSTEMS,

INC., Respondent, NCR CASE NO. 1-294-86, filed by herein Petitioners Rodolfo
Fernandez, for himself, Maximo E. Daquil George T. Bartolome and Ernesto L.
Concepcion, acting for themselves and as the duly appointed Attorneys-In-Fact of
Three Hundred (300) Confidential and Non-Unionized employees of Stanford, and
assigned to Labor Arbiter Raymundo R. Valenzuela-

which case have been archived at the instance of the complainants;

(c) STANFORD MICROSYSTEMS, INC. LABOR UNION-FFW Petitioners, v.
STANFORD MICROSYSTEMS, INC., Respondent, CASE NO. 1-039-86, filed by
herein Petitioners Celia B. Chua, Araceli A. Elardo and Marites P. Martinez, acting
for themselves and as the duly appointed Attorneys-In-Fact of Two Thousand Three
Hundred Forty Five (2,345) Daily-Paid employees of Stanford, and formerly assigned
to Labor Arbiter Benigno C. Villarente, now assigned to Labor Arbiter Alex Arcadio
Lopez

which case has been decided but the execution of the decision and the case
archived at the instance of the complainants;

(d) LUDIVINA L. SABALZA, ADELIZA E. CANTILLO, REMIGIO P. PESTAO, ET

AL., Complainants v. STANFORD MICROSYSTEMS, INC. ET AL., Respondents,
CASE NO. 12-4882-86, filed by herein Petitioners Ludivina L. Ssbalza, Adelina E.
Cantillo, and Remegio P. Pestao, acting for themselves and as the duly appointed
Attorneys-In-Fact of Three Thousand Two Hundred Forty Four (3,244) Daily-Paid
employees of Stanford, and formerly assigned to Labor Arbiter Evangeline
Lubaton

for payment of separation pay, back (strike duration) pay and thirteenth month pay
for 1985, cash conversion of vacation leave and sick leave and other money
claims. The petitioner Stanford Liquidation Committee has intervened in this case
and moved to stay proceedings;

(e) SMI LABOR UNION-FFW ET AL., Petitioners v. STANFORD MICROSYSTEMS,

INC. Respondent, NCR-NS-3-124-85, CASE NO. 3-753-86, filed by herein
Petitioners Ludivina L. Sabalza, Adelina E. Cantillo, and Remigio P. Pestao, acting
for themselves and as the duly appointed Attorneys-In-Fact of Three Thousand Two
Hundred Forty Four (3,244) Daily-Paid employees of Stanford, and assigned to
Labor Arbiter Dominador M. Cruz

for payment of separation pay, back (strike duration) pay and thirteenth month pay
for 1985, cash conversion of vacation leave and sick leave, and other money
claims. The petitioner Stanford Liquidation Committee has intervened in this case
and moved to stay proceedings;

(f) LUDIVINA SABALZA, ET AL., Petitioners v. STANFORD MICROSYSTEMS, INC.,

Respondent, CASE NO. 2-628-86, filed by herein Petitioners Ludivina L. Sabalza,
Adeliza E. Cantillo, and Remigio P. Pestao, acting for themselves and as the duly
appointed Attorneys-In-Fact of Three Thousand Two Hundred Forty Four (3,244)
Daily-Paid employees of Stanford, and assigned to Labor Arbiter Dominador M. Cruz

for payment of separation pay, back (strike duration) pay and thirteenth month pay
for 1985, cash conversion of vacation leave and sick leave, and other money
claims. The petitioner Stanford Liquidation Committee has intervened in this case
and moved to stay proceedings;

(g) LUDIVINA SABALZA, ET AL., FERNANDO R. GUMABON ET

AL., Complainants v. Stanford Microsystems, Inc., Respondent, CASE NO. 11-4543-
86, filed by herein Petitioners Ludivina L. Sabalza, Adeliza E. Cantillo, and Remigio
P. Pestao, acting for themselves and as the duly appointed Attorneys-In-Fact of
 Three Thousand Two Hundred Forty Four (3,244) Daily-Paid employees of Stanford,
and formerly assigned to Labor Arbiter Armando Polintan

for payment of separation pay, back (strike duration) pay and thirteenth month pay
for 1985, cash conversion of vacation and sick leave, and other money
claims. The petitioner Stanford Liquidation Committee has intervened in this case
and moved to stay proceedings; and

(h) FERNANDO R. GUMABON ET AL., Petitioners v. STANFORD

MICROSYSTEMS, INC., Respondent, CASE NO. 3-803-86, filed by herein
Petitioners Mario A. Mentil, Noel Villena, and Remigio F. Santos, acting for
themselves and as the duly appointed Attorneys-In-Fact of Five Hundred Ninety Nine
(599) Monthly-Paid employees of Stanford, and formerly assigned to Labor Arbiter
Martinez

for payment of separation pay, back (strike duration) pay and thirteenth month pay
for 1985, cash conversion of vacation leave and sick leave, and other money
claims. The petitioner Stanford Liquidation Committee has intervened in this case
and moved to stay proceedings. (Petition, pp. 40-43)

Except for cases (a), (b) and (c) which were assigned to different labor arbiters, cases (d) to (h) were
consolidated and as signed to respondent Labor Arbiter Dominador M. Cruz. The petitioners in case
(d) comprise the former daily paid employees of Stanford who were members of the Stanford
Microsystems, Inc., Labor Union ("SMILU"). They formed a "Caretaker Committee", and the
individual members appointed Ludivina L. Sabalza, Adeliza E. Cantillo and Remigio P. Pestano as
Attorneys-In-Fact for the purpose of prosecuting and settling their claims against Stanford, both
before the SEC and the DOLE. The Attorneys-In-Fact engaged the services of private respondent,
Atty. Vicente Ocampo, to act as their legal counsel.

In January, 1987, the SEC disapproved the Rehabilitation Plan submitted by SGV and dismissed
Stanford's Petition for Suspension of Payments and Appointment of a Rehabilitation Receiver.
(Annex "C', Petition) Subsequently, the SEC ordered Stanford's liquidation.

The seven (7) secured creditor banks of Stanford, namely:

(a) Philippine Commercial International Bank;

(b) Far East Bank and Trust Company;

(c) Private Development Corporation of the Philippines;

(d) Equitable Banking Corporation;

(e) Union Bank of the Philippines;

(f) Philippine National Bank; and

(g) City Trust Banking Corporation

which have an aggregate principal exposure of Two Hundred Thirty One Million Six Hundred
Thousand Pesos (P231,600,000.00), and the twelve (12) duly authorized Attorneys-In-Fact of six
thousand three hundred forty one (6,341) former employees of Stanford (89% of the total
employees) with employees' claims of approximately One Hundred Twenty Five Million Seven
Hundred Ten thousand Pesos (P125,710,000.00) reached a mutually acceptable plan for the speedy
and orderly liquidation of Stanford. Hence, representatives of the seven (7) secured banks and the
employees' Attorneys-In- Fact assisted by their respective counsel held marathon meetings and
negotiations in the Office of Director Luna C. Piezas of the DOLE, National Capital Region resulting
in the execution of a Memorandum of Agreement dated March 13, 1987 ("MOA", Annex "D",
Petition). The MOA was signed by all the parties and duly attested by Director Luna C. Piezas.

The principal terms of the MOA are as follows:

(a) The Secured Creditor Banks will foreclose their real estate and chattel
mortgages;

(b) The Secured Creditor Banks will consolidate and retain title to the foreclosed
properties in their respective names and contribute the same to a 'Pool of assets'
under the control and administration of a Liquidation Committee composed of eleven
(11) members, representing the Secured Creditor Banks, and the Six Thousand
Three Hundred Forty One (6,341) former employees of Stanford who authorized the
MOA;

(c) The MOA Liquidation Committee will sell all the foreclosed properties and
distribute the proceeds among the Secured Creditor Banks and the Six Thousand
Three Hundred Forty One (6,341) employees. The share of the remaining Seven
Hundred Eighty Three (783) employees shall be placed in escrow for their benefit
until they claim their share;

(d) The sharing formula for the distribution of the sales proceeds principally took into
account the principal claims of the claimants; and

(e) All suits inconsistent with the MOA shall be withdrawn. (Petition, p. 30)

The eleven (11) members of the MOA Liquidation Committee are the following:

(a) Philippine Commercial International Bank;

(b) Far East Bank and Trust Company;

(c) Private Development Corporation of the Philippines;

(d) Equitable Banking Corporation;

(e) Union Bank of the Philippines;

(f) Philippine National Bank;

(g) Citytrust Banking Corporation;

(h) Celia B. Chua, Araceli A. Elardo and Marites P. Martinez, acting for themselves
and as the duly appointed Attorneys-In-Fact of Two Thousand Three Hundred Forty
Five (2,345) former daily Paid employees of Stanford;
 (i) Ludivina L. Sabalza, Adeliza E. Cantillo, and Remigio P. Pestao, acting for
themselves and as the duly appointed Attorneys In-Fact of Three Thousand Two
Hundred Forty Four (3,244) former Daily-Paid employees of Stanford;

(j) Mario A. Mentil, Noel Villena, and Remigio F. Santos, acting for themselves and
as the duly appointed Attorneys-In-Fact of Five Hundred Ninety Nine (599) former
Monthly-Paid employees of Stanford; and

(k) Rodolfo Fernandez, for himself, Maximo E. Daquil, George T. Bartolome and
Ernesto L. Concepcion, acting for themselves and as the duly appointed Attorneys-
In-Fact of Three Hundred (300) former confidential and Non-Unionized employees of
Stanford. (Petition, pp. 30-31)

Pursuant to the MOA, the secured creditor banks foreclosed their mortgages, consolidated title over
the real properties and contributed the same to the "Pool of Assets." The MOA Liquidation
Committee then proceeded with the sale of the foreclosed properties.

It is to be noted that the group of employees whose attorneys-in-fact are Ludivina L. Sabalza,
Adeliza E. Cantillo and Remigio P. Pestao were represented in the negotiations leading to the
execution of the MOA by new counsel, the Bacungan Larcia Bacungan Law Office. Respondent Atty.
Vicente Ocampo's legal services were terminated by the attorneys-in-fact as early as October and
November 1986 in view of his refusal to represent the group in the negotiations with the other former
Stanford employees and Stanford creditors towards an out-of-court settlement of their claims against
Stanford. This termination was confirmed in a letter dated March 9, 1987 (Annex "K", Petition) which
was received by Atty. Ocampo on March 11, 1987. The pertinent portion of the termination letter
reads:

It is with deep regret that we, the regular daily-paid rank-and-file employees of
Stanford Microsystems, Inc. (SMI), accept your decision not to represent us in our
negotiations, with various creditors of SMI, including former fellow employees,
towards an out-of-court settlement of our claims against the company. . . . We,
therefore, have no recourse but to engage the services of another counsel in
connection with the case now pending before the Ministry of Labor, the Securities
and Exchange Commission and other courts or tribunals including the negotiations
for an out-of- court settlement of our claims. ... (Petition, p. 44)

On October 2, 1987, the SEC en banc issued an order (Annex "E", Petition) appointing the same
eleven (11) members of the MOA Liquidation Committee as the permanent SEC Liquidator of
Stanford pursuant to Presidential Decree No. 902-A, as amended.

Atty. Ocampo claiming to be still the counsel for the group represented by Ludivina L. Sabalza,
Adeliza E. Cantillo and Remigio P. Pestao and other former Stanford employees filed a "class suit"
for the reconsideration of the October 2, 1987 order.

In the hearing en banc held on December 17, 1987, the SEC directed the Stanford Liquidation
Committee and Atty. Ocampo to submit the number and names of the former Stanford employees
represented by them.

On January 22, 1988, the Stanford Liquidation Committee, filed a compliance with the directive
(Annex "F", Petition) together with the following documents:
 (a) Copies of all the Special Powers of Attorney executed by the Six Thousand Three
Hundred Forty One (6,341) former employees of Stanford [Eighty Nine Percent
(89%) of the total employees] in favor of their Attorneys-In-Fact who signed the MOA;

(b) List of the names of all the Six Thousand Three Hundred Forty One (6,341)
former employees of Stanford who executed Special Powers of Attorney, which list
was prepared by Carlos J. Valdes & Co. on the basis of the special powers of
attorney executed (Annex "F-l", but refer to Annex "C-l" of Annex "Q");

(c) Letters-certifications dated 21 January 1988 and 27 January 1988 of Carlos J.

Valdes & Co. that based on their verification, Six Thousand Three Hundred Forty
One (6,341) former Stanford employees actually executed Special Powers of
Attorney in favor of the workers' representatives in the MOA Liquidation Committee
and the Stanford Liquidation Committee (Annexes "F-2" and "F-2-A"). (Petition, p.
32)

On the other hand, Atty. Ocampo failed to comply with the directive.

On October 12, 1988, the SEC en banc denied Atty. Ocampo's motion for reconsideration of the
October 2, 1987 order (Annex "E", Petition) and various other motions. It issued an Omnibus Order
(Annex "H") approving the MOA and confirming the appointment of the members of the MOA
Liquidation Committee as members of the Stanford Liquidation Committee. In the same order, the
SEC clarified that Atty. Ocampo represents only thirty four (34) employees. Actually, Atty. Ocampo
represents only twenty five (25) former Stanford employees who are now the private respondents in
the instant petition.

As regards the money claims filed by the former employees of Stanford, the following events
meanwhile transpired:

On June 30, 1988, the Stanford Liquidation Committee filed a Manifestation (Annex "L", Petition)
with the labor arbiters, including Labor Arbiter Cruz, before whom the labor cases filed against
Stanford were pending, advising said labor arbiters of the October 2, 1987 SEC order appointing the
Stanford Liquidation Committee as the permanent liquidator of Stanford and of the execution of the
MOA among the secured creditor banks and six thousand three hundred forty one (6,341) former
employees of Stanford.

On September 19, 1988, the petitioners, including the complainants in the consolidated labor cases
except the twenty five (25) private respondents represented by Atty. Ocampo, filed a Joint Motion to
Stay Proceedings (Annex "M", Petition) praying that the Labor Arbiters stay proceedings in the labor
cases pending before them. On the other hand, Atty. Ocampo on behalf of the twenty five (25)
private respondents filed an Urgent Petition for Injunction with Prayer for Issuance of a Temporary
Restraining Order in the consolidated labor cases pending before respondent Labor Arbiter Cruz.

In response to these motions, the Labor Arbiters except respondent Labor Arbiter Cruz issued
orders staying proceedings in the cases pending before them. (Annexes, "N", "N-1" and "N-2",
Petition).

For his part, respondent Labor Arbiter Cruz issued an order dated September 2, 1988 (Annex "O",
Petition) the dispositive portion of which reads:

WHEREFORE, pursuant to the provisions of Article 218 (e) of the Labor Code, as
amended, in relation to Rule XIV, Section 1, paragraph 2, of the Revised Rules of the
 National Labor Relations Commission, in order to preserve the rights of the parties
during the pendency of the cases, the intervenor liquidation Committee of Stanford
Microsystems, Inc., its Chairman, Vice-Chairman, members, agents and/or
representatives should be, as they are hereby:

(1) RESTRAINED from implementing the Memorandum of Agreement dated March

13, 1987 marked as Annex "A" and attached to the record, or from delivering/paying
the Six Million Pesos (P6,000,000.00) to the alleged employees/workers
representatives, Ludivina Sabalza, Celia Chua, Mario Mentil, and Maximo Daquil, for
distribution and payment to the employees and workers concerned in the defunct
SMI; and

(2) DIRECTED to deposit the amount of SIX MILLION PESOS (P6,000,000.00) with
the Cashier of the NLRC Main Office at the Phoenix Building, Intramuros, Manila,
immediately upon receipt of this Order, subject to further disposition of the
undersigned Labor Arbiter.

In view of this restraining order, the petitioners, on October 6, 1988, filed with the National Labor
Relations Commission (NLRC) a petition for prohibition/injunction with preliminary injunction and/or
temporary restraining order (NLRC Injunction Case No. 1793; Annex "Q", Petition). Attached to the
petition was the manifestation of the attorneys-in-fact for the 3,097 former Stanford employees who
were not parties to the consolidated labor cases pending before respondent Labor Arbiter Cruz
asserting the lack of jurisdiction of Labor Arbiter Cruz. On this same day, October 6, 1988, the NLRC
en banc issued the first questioned resolution (Annex "R", Petition) the pertinent portion of which
reads:

INJUNCTION CASE NO. 1793 ... Enjoining respondent Labor Arbiter Dominador M.
Cruz, private respondents, their attorneys, representatives, agents and any other
person acting for and in their behalf from implementing the questioned Order dated
September 20, 1988, in NLRC NCR Case No. NS-3-124-85 Case No. 3-753-86,
entitled SMI Labor Union-FFW, LUDIVINA SABALZA, et al. Fernando Gumabon, et
al. Complainants v. Stanford Microsystems, Inc. Respondent, Liquidation Committee
of Stanford Microsystems, Inc., Intervenor, NLRC NCR Case No. 11-4543-86,
entitled Ludivina Sabalza, et al., Fernando R. Gumabon, et al., Complainants v.
Stanford Microsystems, Inc., Respondent, Liquidation Committee of Stanford
Microsystems, Inc., Intervenor, which restrained herein SEC Appointed liquidation
Committee of Stanford Microsystems Inc., from implementing the Memorandum of
Agreement dated March 13, 1987 in the matter of liquidating the property of the said
company and distributing the amount of P6,000,000.00 to the former employees of
the same company pursuant to the provisions of the Agreement and, the said
amount to be deposited to the Cashier of the Commission, said Order being a patent
nullity; and 2) to deny, for lack of merit, the petition for Writ of Prohibition to stay
further proceedings in the five (5) cited labor cases involving the former employees of
the company pending before the respondent Labor Arbiter.

On October 21, 1988, Atty. Ocampo, on behalf of his twenty five (25) clients filed a "Motion For
Partial Reconsideration of Resolution of the Respondent NLRC dated October 6, 1988, etc." (Annex
"S", Petition)

On November 3, 1988, the NLRC issued the second questioned resolution (Annex "T", Petition) the
relevant portion of which reads:
 INJUNCTION CASE NO. 1793 ... However, Petitioner Liquidation Committee of
Stanford Microsystems, Inc. its attorneys, representatives, agents and any other
person acting for and in its behalf is ordered to hold in abeyance and/or defer the
payment of the P6,000,000.00 to the former employees of the said company after the
Commission rules on the said Partial Motion for Reconsideration.

On November 8, 1988, the petitioners filed a joint opposition/motion for reconsideration (Annex "V",
Petition) of the two (2) NLRC resolutions.

On November 28, 1988, Atty. Ocampo filed an "Amended Motion for Partial Reconsideration of
Resolution dated October 6, 1988 with Memorandum of Agreement ...". (Annex "X", Petition)

On December 21, 1988, petitioner Stanford Liquidation Committee filed an "Urgent Motion for Early
Resolution with Opposition to Atty. Vicente T. Ocampo's Amended Motion for Partial
Reconsideration of Resolution dated October 6, 1988 ...".

Atty. Ocampo, in turn filed a "Motion to Cite For Contempt and Urgent Motion To Stop Delivery of
Deducted Attorney's Fees To Any Lawyers and To Deposit The Same With the NLRC." (Annex "Z",
Petition)

On January 3, 1989, the NLRC issued the third questioned resolution (Annex "AA", Petition), to wit:

INJUNCTION CASE NO. 1793 ... After deliberation, the Commission sitting en banc,
RESOLVED: 1) to require the petitioner SEC Liquidation Committee of Stanford
Microsystems, Inc., its Chairman Helen Osias; Co-petitioners Mario A. Mentil; Noel
Villena, Remegio (sic) F. Santos, Rodolfo Fernandez; Maximo F. Daquil, George T.
Bartolome, Ernesto C. Concepcion, Celia B. Chua, Araceli A. Elardo, Marites P.
Martinez, Ludivina L. Sabalza, Adelina E. Cantillo and Remegio (sic) F. Pestao, as
well as their respective counsel of record, to answer the respondents' Motion to Cite
For Contempt and Urgent Motion To Stop Delivery of Deducted Attorney's Fees To
Any Lawyer And To Deposit The Same With The NLRC and to show cause why they
should not be cited in contempt by this Commission within five (5) days from receipt
hereof; 2) to direct, as it hereby directs, the said petitioners to strictly comply with the
Resolution of this Commission dated November 3, 1988 and, 3) to direct said
petitioner SEC Appointed Liquidation Committee and its agents or any person acting
in its behalf to deposit to this Committee within five (5) days from receipt of this
Resolution, the deducted attorney's fees representing 10% of the amount due and/or
to be paid to the former employees of Stanford Microsystems, Inc. (Rollo, p. 54)

On January 18 and 24, 1989, the petitioners filed their respective motions for reconsideration (Annex
"BB", "BB-1", and "BB-3", Petition) of the aforementioned NLRC resolution. Also on February 10,
1989, petitioner Stanford Liquidation Committee filed a Second Urgent Motion for Early Resolution
(Annex "CC", Petition) of the motion and amended motion for partial reconsideration filed by Atty.
Ocampo and the motion for reconsideration filed by petitioner Stanford Liquidation Committee.

On July 11, 1989, petitioner Stanford Liquidation Committee filed a motion to lift restraining order
and/or third urgent motion for early resolution (Annex "DD", Petition).

These motions notwithstanding, the NLRC had not acted upon them nor had it resolved the
injunction case despite the parties' submission of their respective memoranda prompting the
petitioners to file the instant petition.
At the time the three questioned NLRC resolutions were issued, the MOA Liquidation Committee
was already in the process of distributing money claims to the former employees of Stanford. The
petitioners state:

xxx xxx xxx

8. As of June 1989, the MOA Liquidation Committee has realized the amount of
approximately Forty One Million Four Hundred Twenty Eight Thousand Five Hundred
Seventy One and 42/100 Pesos (P41,428,571.42) from net sales proceeds of the
properties in the 'Pool of Assets' out of which Fourteen Million Five Hundred
Thousand Pesos (P14,500,000.00) should have already been distributed to all the
employees of Stanford, whether or not signatories of the MOA.

xxx xxx xxx

11. Out of the Fourteen Million Five Hundred Thousand Pesos (P14,500,000.00)
which is available and approved for distribution to the former Stanford employees,
only Five billion Two Hundred Seventy Two Thousand One Hundred Eighty Six and
17/100 Pesos (P5,272,186.17) has been distributed in the first distribution.

12. The amounts of Seven Hundred Twenty Seven thousand Eight Hundred Thirteen
and 83/100 Pesos (P727,813.83) (balance of first distribution), and Eight billion Five
Hundred thousand Pesos (P8,500,000.00) (amount for second distribution), for a
total of Nine Million Two Hundred Twenty Seven Thousand Eight Hundred Thirteen
and 83/100 Pesos (P9,227,813.83) remain undistributed to all the Stanford
employees due to respondent NLRC's restraining order issued on 03 November
1988 or more than Ten (10) months ago.

13. There is extreme urgency in allowing the distribution of the foregoing amount to
the former Stanford employees considering that:

(a) The former Stanford employees, especially the Six thousand

Three Hundred Forty One (6,341) employees who signed the MOA in
an amicable settlement of their claims, are unjustly prevented from
getting the amounts due them under the MOA, having awaited such
distribution since 1985 when Stanford closed;

(b) A great number of said employees are jobless and/or

underemployed with insufficient incomes; and

(c) The highly probable danger of an outbreak of violent unrest due to

the unjust and unconscionable delay in distribution brought about by
the machinations of Atty. Ocampo.

14. Hence, the instant Petition for certiorari and Prohibition With Prayer for
Preliminary Injunction and/or Temporary Restraining Order under Rule 65 of the
Rules of Court. (Petition, pp. 25-27)

In a resolution dated June 25, 1990 we gave due course to the instant petition.
The petitioners aver that the NLRC acted with grave abuse of discretion amounting to lack of
jurisdiction and/or without or in excess of its jurisdiction in issuing the three (3) questioned
resolutions considering that:

THE SECURITIES AND EXCHANGE COMMISSION HAS ORIGINAL AND EXCLUSIVE

JURISDICTION OVER THE LIQUIDATION OF STANFORD MICROSYSTEMS, INC., INCLUDING
THE PROCEDURES FOR SETTLING THE MONEY CLAIMS OF FORMER WORKERS AND
EMPLOYEES.

xxx xxx xxx

II

THE MEMORANDUM OF AGREEMENT DATED 13 MARCH 1987 IS VALID, FAIR AND

REASONABLE AND IS IN ACCORD WITH LAW, MORALS, PUBLIC POLICY AND ESTABLISHED
JURISPRUDENCE.

xxx xxx xxx

III

REPUBLIC ACT NO. 6715 ONLY TOOK EFFECT ON 21 MARCH 1989 AND HAS NO
RETROACTIVE APPLICATION TO THE INSTANT CASE, SPECIALLY WHERE SUCH
APPLICATION WILL ADVERSELY AFFECT VESTED RIGHTS OF REPUBLIC ACT NO. 6715.

xxx xxx xxx

IV

INDUBITABLY, ATTY. VICENTE T. OCAMPO DOES NOT HAVE THE INTEREST OF LABOR AT
HEART AS HE HAS CONSISTENTLY AND PERSISTENTLY ATTACKED, DELAYED AND
IMPEDED THE LIQUIDATION OF STANFORD MICROSYSTEMS, INC. AND THE DISTRIBUTION
OF THE 'LIQUIDATION' PROCEEDS THEREOF TO THE FORMER EMPLOYEES OF STANFORD
MlCROSYSTEMS, INC. (Petition, pp. 66, 68-69)

xxx xxx xxx

Jurisdiction over liquidation proceedings of insolvent corporations is vested in the Securities and
Exchange Commission (SEC) pursuant to Presidential Decree No. 902-A, as amended. On the other
hand, jurisdiction over money claims of employees against their employers is vested in the Labor
Arbiter whose decision may be appealed to the National Labor Relations Commission (NLRC)
pursuant to Article 217 of the Labor Code.

Following these allocations of jurisdiction, the Solicitor General states that the jurisdiction problems
between the NLRC and the SEC can be reconciled with neither one depriving the other of its
jurisdiction. Thus, the Solicitor General opines that this can be achieved by simply allowing the Labor
Arbiter and the NLRC to continue with their adjudication of the employees' money claims, subject to
the condition that any award they may obtain against Stanford must be filed with the Liquidation
Committee as one of the established claims against the debtor-company." (Rollo, Vol. II, p. 1630)
The petitioners, however, maintain that the SEC jurisdiction over the liquidation of Stanford should
include the money claims, now pending before respondent Labor Arbiter Dominador Cruz because
they refer to claims to be submitted in the course of the liquidation proceedings.

An insolvency proceeding is similar to the settlement of a decedent's estate in that it is a proceeding

in rem and is binding against the whole world. Therefore, all persons which have interest in the
subject matter involved, whether or not they are given notice are equally bound. Thus, "a liquidation
of similar import or other equivalent general liquidation must also necessarily be a proceeding in rem
so that all other interested persons whether known to the parties or not may be bound by such
proceedings." (Philippine Savings Bank v. Lantin, 124 SCRA 476 [1983]; Emphasis supplied)

The rule is that a declaration of bankruptcy or a judicial liquidation must be present before
preferences over various money claims may be enforced. Since a liquidation proceeding is a
proceeding in rem, all claims of creditors whether preferred or non-preferred, the Identification of the
preferred ones and the totality of the employer's asset should be brought into the picture. There can
then be an authoritative, fair and binding adjudication. (See Development Bank of the Philippines v.
Santos, 171 SCRA 138 [1989]).

The money claims of workers pose a special problem of jurisdiction when liquidation proceedings
are on-going because of the highly preferred nature given by law to said claims.

In these cases, however, the problem poses no particular difficulty because the workers themselves
have voluntarily opted to participate in the liquidation proceedings. Their representatives in the MOA
Liquidation Committee participated in the discussions and proceedings which led to the orders to
distribute payments to the various claimants. The workers themselves oppose the orders of the
NLRC which have denied them to speedy receipt of funds they urgently need. It is a grave abuse of
discretion on the part of NLRC to raise a technical question of its own jurisdiction when the workers
over whom it is raised reject the assertion of that jurisdiction. The NLRC has allowed only 25 out of
7,124 employees and a former counsel trying to claim alleged unpaid fees to delay the immediate
payment of the worker's claims.

Consequently, the Solicitor General's submission that the money claims of Stanford's former
employees pending with respondent Labor Arbiter Dominador M. Cruz should be allowed to continue
and that the money awards be later presented to the Stanford Liquidation Committee is not the
correct solution. It would only spawn needless controversy, delays, and confusion. Significantly, the
money claims were presented after Stanford filed a petition for suspension of payments and
appointment of a rehabilitation receiver with the SEC. In other words, the money claims were filed
when Stanford was already experiencing financial difficulties. Apparently, the employees filed the
cases to enforce money claims which they might not collect in view of Stanford's financial crisis and
impending closure. Under these circumstances, and bearing in mind the welfare of the workers and
their voluntary choices as to how their claims may be equitably settled to their satisfaction, we rule
that such money claims were correctly submitted in the course of the liquidation proceedings at the
SEC.

The petitioners themselves (the former employees who were complainants in the money claims
cases pending with the different labor arbiters including those with respondent Labor Arbiter Cruz
except for the twenty-five private respondents represented by Atty. Ocampo) filed the motion to stay
proceedings in the money claim cases with DOLE on the ground that" ... the proceedings in the
instant labor cases which refer to the claims of the Stanford employees against Stanford should be
stayed and the subject claims be submitted in the course of the liquidation proceedings under the
jurisdiction of the SEC." (Petition, p. 77)
Significantly, the petitioners point out that all the other labor arbiters except for the respondent Labor
Arbiter granted the motion to stay proceedings in the money claims pending before them.
Respondent Labor Arbiter Cruz was assigned to handle five (5) consolidated money claims affecting
3,244 former Stanford employees. With this group, were former employees represented by Ludivina
L. Sabalza, Adeliza E. Cantillo and Remigio P. Pestao who initially hired the services of Atty.
Ocampo. However, because of the questioned NLRC resolution, all the other workers, or around
3,097 former employees who were never covered by the jurisdiction of respondent Labor Arbiter
Cruz have also been adversely affected.

This brings us to the other issue regarding the effect of the Memorandum of Agreement dated March
13, 1987 (MOA) executed by the seven (7) secured creditor banks of Stanford and the 6,341 former
Stanford employees.

As earlier stated, at the time Stanford filed a petition for suspension of payments and appointment of
rehabilitation receiver with SEC, Stanford had seven (7) secured creditor banks and approximately
7,124 employees. On March 13, 1987, the seven secured creditor banks of Stanford and 6,341
former employees executed a Memorandum of Agreement to speed up the orderly liquidation of
Stanford. All the creditor banks and the said employees were represented by their respective
counsel in the negotiations which were supervised by Regional Director Luna C. Piezas of the
DOLE, National Capital Region. The SEC approved the MOA. In its en banc omnibus order dated
October 12, 1988 (Annex "H") the SEC said:

The Memorandum of Agreement having been entered into voluntarily and freely by
the parties after taking into consideration all existing conditions appears fair and
reasonable. This is the only available solution to labor's sharing in the proceeds it
appearing that all properties of Stanford had been encumbered by creditor-banks.

xxx xxx xxx

The Memorandum of Agreement (MOA) was executed by the representatives of the

secured creditor-banks and labor on March 13, 1987, prior to the order of dissolution
of SMI by this Commission. The MOA was conceived to pursue extrajudicially money
claims of the Parties thereto to avoid lengthy litigations.

xxx xxx xxx

The purpose of the Commission's directive requiring submission of the special

powers of attorney is precisely to, see for itself if the laborers are given maximum
protection and security in the memorandum of agreement. A reading of its features
shows that the agreement is fair and reasonable and to the best interest of labor
considering that almost all the properties of SMI were mortgaged to and foreclosed
by the secured-creditor banks. Yet under this agreement, the secured-creditor-banks
are willing to share to labor 35% of whatever proceeds can be generated from the
disposition of the foreclosed properties.

xxx xxx xxx

In opposing intervenos's manifesatation opposing submission of alleged updated lists

and special powers of attorney, the liquadation committee denies the allegation of
fraud employed in securing the consent of six thousand three hundred forty (6,340)
employees to represent them in the Memorandum of Agreement. Verily, it is
 incredible for so many employees to have consented to their misrepresentation; if at
all, perhaps a few number can be misled in so doing.

Anyway, as correctly pointed out by the liquidation committee, nobody complained to

the Commission regarding such fraud and misrepresentation. (Annex "H", pp. 332-
341)

It is precisely because of the execution of the MOA that the petitioners filed the motion to stay
proceedings in the money claims pending before the labor arbiters.

Under the scheme of the MOA the following events transpired:

xxx xxx xxx

13. Petitioner Stanford Liquidation Committee regularly files report on its activities, as
well as those of the MOA Liquidation Committee, with the SEC. For the distribution of
the sales proceeds (realized out of the properties contributed to the Pool in
accordance with the MOA) to the former Stanford employees, petitioner Stanford
Liquidation Committee formulated the following guidelines:

(a) The amounts available for distribution under the MOA shall be distributed to:

(i) All Six Thousand Three Hundred Forty One (6,341) former employees of Stanford
who executed Special Powers of Attorney in favor of the employees' Attorneys-In-
Fact who signed the MOA; and

(ii) All former employees of Stanford willing to be bound by the MOA by signing the
Affidavit of Acceptance/Affirmation [Annex "B" of the Trust Agreement (Annex "I")]
upon receipt of his/her 'crossed' cashier's check.

(b) The share of the other Seven Hundred Eighty Three (783) Stanford employees
(who have not yet signed special powers of attorney) shall be held in escrow for their
benefit until they claim the same.

(c) Distribution shall be pro rata on the basis of the General List of Employees and
their claims, duly audited by Carlos J. Valdes & Co.

(d) Authorized deductions for attorney's fees and other expenses shall be deducted
and delivered to the appropriate Attorneys-In-Fact.

(e) Distribution shall be via 'crossed' cashier's checks issused by Philippine

Commercial International Bank, Far East Bank & Trust Company, Equitable Banking
Corporation, Citytrust, and Philippine National Bank, payable directly to the individual
Stanford employees themselves.

(f) The physical distribution of the aforementioned cashier's checks (which shall be
on a uniform but staggered basis) shall be the responsibility of the respective
Attorneys-In-Fact (Trustees). Accordingly, the respective Attorneys-In-Fact
(Trustees) shall announce the venue/s and date/s of actual physical distribution, in
coordination with the appropriate banks.
 (g) Any two (2) of the following Identification documents shall be required to be
presented:

(i) Stanford Id

(ii) Present Employer's Id

(iii) Driver's License

(iv) SSS/GSIS Id

(v) Passport

(vi) Current NBI Id/Certificate

(vii) Other acceptable Ids

(h) A representative from Carlos J. Valdes & Co. will be present at each distribution
center to witness the receipt of the individual 'crossed' cashier's checks and the
signing of the Affidavits/Affirmation, by each Stanford employee.

(i) Any Stanford employee who is not able to claim his/her cashier's check on his/her
designated date may claim the same on the succeeding dates of distribution. Checks
which remain unclaimed for three (3) months shall be returned and kept for
safekeeping by the Stanford Liquidation Committee.

(j) The Attorneys-In-Fact (Trustees) shall submit regular written reports to the
Stanford Liquidation Committee relating to the distribution.

(k) The Notice of Distribution will be published in the Bulletin Today and the People's
Journal, and will be announced over radio and television (DZRH, DZME and DZXL).

(14) Further, the duly appointed Attorneys-In-Fact of the Six Thousand Three
Hundred Forty One (6,341) former Stanford employees [Eighty Nine Percent (89%)
of all Stanford employees], petitioners herein, who authorized the MOA, executed a
Trust Agreement dated 12 October 1988 (Annex "I"), as Trustees for the distribution
of the individual 'crossed' cashier's checks to the former Stanford employees.

15. In September 1988, petitioner Stanford Liquidation Committee approved an initial

distribution of Six Million Pesos (P6,000,000.00) in sales proceeds via 'crossed'
cashier's checks payable directly to the former Stanford employees. The share in the
sales proceeds of each Stanford employees was based on computation audited by
Carlos J. Valdez & Co. (Petition, pp. 36-39)

Considering these circumstances, we rule that NLRC committed grave abuse of discretion in
refusing to stay the proceedings in the money claims pending before respondent Labor Arbiter Cruz
and when it deferred the payment of P6,000,000.00 to the former Stanford employees.

We agree with the petitioners that the Memorandum of Agreement dated March 13, 1987 is valid,
fair and reasonable, and is in accord with law, morals, public policy and established jurisprudence.
Article XIII of the Constitution (paragraph 3, section 3) provides for voluntary modes of settling labor
disputes, to wit:

xxx xxx xxx

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.

This policy is echoed under Article 227 of the Labor Code which provides:

Compromise Agreement.-Any compromise settlement, including those involving labor

standard laws, voluntarily agreed upon by the parties with the assistance of the
Bureau or the regional office of the Department of Labor, shall be final and binding
upon the parties. The National Labor Relations Commission or any court shall not
assume jurisdiction over issues involved therein except in case of non-compliance
thereof or if there is prima facie evidence that the settlement was obtained through
fraud, misrepresentation, or coercion.

Recently, in Republic Act 6715, the promotion of the preferential use of voluntary modes of settling
labor disputes was again reiterated.

In fact, as early as 1963, under the Industrial Peace Act, we have ruled that compromise
agreements executed by workers or employees and their employer to settle their differences if done
in good faith are Valid and binding among the parties. (Dionela v. Court of Industrial Relations, 8
SCRA 832 [1963]; Pampanga Sugar Development Co., Inc. v. Court of Industrial Relations, 114
SCRA 725 [1982]).

Undoubtedly, the MOA was executed in good faith and the employees were duly represented during
the negotiations which were supervised by a Regional Director of the DOLE. More important, the
rights of the employees were safeguarded and protected not only during the negotiations but also at
the implementation of the compromise agreement.

However, may a minority of the employees which is equivalent to less than 1% of the total
employees (25) represented by Atty. Ocampo prevent the enforcement of the Memorandum of
Agreement executed by employees representing about 89% of the total number of employees (6,341
out of a total 7,124 employees; 783 not represented in the negotiations but their shares placed in
escrow for their benefit under the MOA)?

The answer is in the negative. In the case of Dionela vs. Court of Industrial Relations supra, we
ruled:

The main question for determination in this case is whether the compromise
agreement pursuant to which the complaint in Case No. 598-ULP had, inter
alia, been withdrawn and then dismissed is binding upon petitioners herein. The
latter maintains that it is not, but the lower court held otherwise, upon the ground that
it is an accepted rule under our laws that the will of the majority should prevail over
the minority' citing Betting Ushers Union (PLUM) v. Jai-alai, L-9330, June 29, 1957
and Jesalva et al. v. Bautista, L-11928 to L-11930, March 24, 1959-and that the
action taken by petitioners herein as minority members of the Union 'is contrary to
the policy of the Magna Carta of Labor, which promotes the settlement of differences
 between management and labor by mutual agreement,' and that if said action were
tolerated, 'no employer would ever enter into any compromise agreement for the
minority members of the Union will always dishonor the terms of the agreement and
demand for better terms.' The view thus taken by the lower court is correct. Indeed,
otherwise, even collective bargaining agreements would cease to promote industrial
peace and the purpose of Republic Act No. 875 would thus be defeated.

As regards the January 3, 1989 NLRC resolution which directed petitioner Stanford Liquidation
Committee to deposit with the NLRC the deducted attorney's fees representing 10% of the amount
due and/or to be paid to the former employees of Stanford Microsystems, Inc. we agree with the
petitioners that such directive was jurisdictionally defective and premature. Such directive is
premature because the NLRC, in effect, prematurely and unduly disposed of, resolved and
prejudged the contentious issues raised in the Stanford Employees' Injunction case, based on the
bare assertions of Atty. Ocampo and his twenty five (25) clients the private respondents herein. The
Solicitor General, who agrees with the petitioners that the NLRC resolution is premature aptly
observed:

... [A]ny attorney's fee that may be awarded in the aforesaid cases would be
assessed from whatever money award is made in favor of the employees. In other
words, the attorney's fee is not a Stanford obligation but a lien on the employees'
money award. By requiring the Liquidation Committee to make deposit, the NLRC in
effect would shift the obligation from the employees to Stanford. (Public respondent's
Memorandum, p. 1638)

Obviously, the NLRC directive was for the benefit of respondent Atty. Vicente Ocampo who is
claiming attorney's fees as counsel of the group of former Stanford employees headed by Ludivina
L. Sabalza, Adeliza Cantillo and Remigio P. Pestao. But as stated earlier in this decision, the group
terminated the services of Atty. Ocampo when he refused to represent them in the negotiations with
the creditors and other former employees of Stanford. This, notwithstanding, Atty. Ocampo insisted
on acting as counsel of the group by filing pleadings on their behalf with SEC and NLRC. He
opposed the appearance dated June 30, 1988 (Annex "NN", Petition) filed by the Bacungan Larcia
Bacungan law offices in the case pending before the SEC and the respondents Labor Arbiter Cruz
and NLRC, in substitution of Atty. Ocampo, which appearance bears the conformity of the group.

Eventually, however, the SEC found that Atty. Ocampo represented only thirty four (34) employees
which is less than 1% of the total Stanford employees.

The record shows that Atty. Ocampo filed with the SEC a Notice of Attorney's Lien dated November
11, 1987, to wit:

The undersigned counsel, Atty. VICENTE T. OCAMPO LAW OFFICES, hereby file
their Notice of Attorney's Lien in the above entitled case and its incidents on their
claim for attorney's fees on the contingent basis, in the amount equivalent to twenty
five percent (25%) of the back (strike duration) pay or similar benefit, and ten percent
(10%) of the cash conversion of the unused vacation and sick leave with pay and
13th month's pay for 1985, separation pay, and other money pay claims or benefits
which may be due and payable to the workers and employees of SMI involved
herein, and recipients thereof, as a result of the filing and/or prosecution of such
actions as are deemed necessary under the premises and/or judgements which may
be rendered in their favor, pursuant to the constract of legal services by and between
the said attorneys and the said worker and employees represented by the Caretaker
Committee, composed of Ludivina L. Sabalza, Adeliza Cantillo, Remegio Pestao,
 Merian Ocampo, and Leticia Tabora, and Fernando Gumabon. A xerox copy of said
contract of legal services is hereby attached as Annex "A" hereof. (Emphasis
supplied). (Petition, p. 129)

Since the contract for legal services was on. a contingent basis, Atty. Ocampo as counsel can be
paid only if he wins the case for the group. As it turned out, however, Atty. Ocampo's services were
terminated by the group as early as October and November 1986 when he refused to represent the
group in the negotiations with the other creditors of Stanford for an out of court settlement of their
claims resulting in the execution of the Memorandum of Agreement. In an earlier case involving Atty.
Ocampo, entitled Ocampo v. Lerum (162 SCRA 498 [1988]), we ruled:

The record of the case clearly discloses that The private respondent Atty. Lerum was
primarily responsible for negotiating for the PALEA the retroactive wage increases
mentioned earlier, to the exclusion of petitioner Atty. Ocampo. PAL could validly deal
with the Biangco Faction represented by Atty. Lerum because no court order had
been issued restraining PAL from doing so. The record of the case also reveals that
Atty. Ocampo tried his best to enjoin the negotiations initiated by Atty. Lerum by
questioning the same before the Court of Industrial Relations and even this Court.

On the basis of the foregoing observations, We cannot see how Atty. Ocampo could
be entitled to any part of the said attorney's fees. The attorney's fees emanated from
the retroactive wage increases negotiated by Atty. Lerum. Accordingly, and under the
circumstances obtaining in this case, the said attomey's fees should belong to Atty.
Lerum to the exclusion of Atty. Ocampo. We, therefore, find no grave abuse of
discretion on the part of the public respondents in reaching this conclusion. (at p.
502)

Considering that Atty. Ocampo took no part in the negotiations leading to the execution of the
Memorandum of Agreement, a compromise agreement among the creditors and former employees
of Stanford to liquidate Stanford which we rule as valid, we find no plausible reason for Atty. Ocampo
to interfere with its implementation by filing complaints and/or pleadings with the SEC, the Labor
Arbiter and the NLRC in his effort to collect attorney's fees not due him. With the foregoing findings,
we find no need to discuss the other arguments posed by the petitioners.

WHEREFORE, the instant petition is GRANTED. The questioned resolutions dated October 6, 1988,
November 3, 1988 and January 3, 1989 of the National Labor Relations Commission are declared
NULL and VOID and are hereby SET ASIDE. The Court Orders:

1) Respondent Labor Arbiter Dominador M. Cruz to desist from conducting further proceedings in
Case No. 12-4882-86, Case No. 3-753-86; Case No. 2-6280-86; Case No. 11-4543-86 and Case
No. 3-803-86;

2) Respondent National Labor Relations Commission and Labor Arbiter Dominador M. Cruz to desist
from interfering in the implementation of the Memorandum of Agreement dated March 13, 1987 in
the matter of the liquidation Committee under the jurisdiction of the Securities and Exchange
Commission; and

3) Private respondents and Atty. Vicente T. Ocampo and associates, their representatives, agents
and any other person assisting them or acting for them and on their behalf to desist from interfering
with the implementation of the Memorandum of Agreement, the liquidation of the Stanford
Microsystems, Inc., and the exercise by the Stanford Liquidation Committee duly appointed by the
Securities and Exchange Commission of its functions. No costs.
SO ORDERED.

G.R. No. 100133 February 6, 1995

EDGARDO C. MORALES, RAMON S. MANUEL, MARCELINO R. PAGKALINAWAN, EDDIE

ALBERT MERCADO, LEONILO V. CANDELARIA , VALENTINO P. TARQUIAN, ANGEL P.
CARABALLOS, JR., ANGEL M. JUDALENA, MANUEL LLORENTE, JR., VICTOR L. LUCIANO
III, MARTIN C. MIRANDA, JR., CESAR A. REYES, JR., ROMULO M. SANTOS, DANILO J.
TORRES, FORTUNATO S. VILLAROSA, WELYN D. YAUN, LINO BADAGUAS, ROMEO
BENIPAYO, and ANTONIO M. LICAD, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and SAN MIGUEL
CORPORATION, respondents.

G.R. No. 100508 February 6, 1995

SAN MIGUEL CORPORATION, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, JESUS DEL MUNDO, JR., JUSTINO
NUYDA III, WENCESLAO PADOC, MIGUEL RAYOS, LUISITO ESPANILLO, JESUS GARCIA, JR.
and WALDO SANTOS, respondents.

RESOLUTION

VITUG, J.:

These original petitions seek to annul and set aside the resolutions, dated 31 May 1990, 13
December 1990 and 28 May 1991, of the National Labor Relations Commission ("NLRC")
affirming, with modification, the decision of 17 January 1989 of the Labor Arbiter in NLRC
Case. No. 11-3949-85.

Petitioners in G.R. No. 100133 and private respondents in G.R. No. 100508 (hereinafter also
referred to collectively as the "complainants" ) were declared by the Labor Arbiter in its
decision, dated 17 January 1989, to have been illegally dismissed. Accordingly, private
respondent in G.R. No. 100133 and petitioner in G.R. No. 100508 (hereinafter referred to also
as "SMC" [San Miguel Corporation]) was ordered to reinstate all of the complainants without
loss of seniority rights, with full back salaries and benefits in accordance with law.

For the factual backdrop, we shall adopt the findings of the NLRC:

Complainants are salesmen and relief salesman of the respondent company.

They were investigated on irregularities and/or anomalies allegedly committed
from the period January to February 1985, wherein the respondent company
was reportedly to have lost millions of pesos.

It appears that during the last week of January 1985, rumors spread in the
company that the deposits on empty San Miguel Beer bottles would go up. On
 January 31, 1985, the company decided to implement the changes in the rates
of deposits as follows: for beer bottles, from P0.50 to P1.00 per bottle; and for
shells, from P18.00 to P36.00 per shell.

The company noted certain abnormalities in the selling operations in that from
January 25 to 30, 1985, very minimal empties returned were reported, and from
January 31 to February 7, 1985, empties returned were more than the reported
sales. From this, it appears that many salesmen did not return to the
warehouse the containers retrieved from their customers or sold goods to their
customers, but allowed the latter to pay for the deposit value of the empties
instead of requiring the customers to return the equivalent amount of empties
for every full goods purchased, in violation of the "one-to-one" rule being
practiced in the company. An audit conducted revealed that from January 31 to
February 6, 1985, many salesmen returned empties exceeding the empties
actually retrieved from their outlets.

Complainants were among those investigated and required to present their

side. After, the investigation, the company terminated the services of the
complainant on October 3, 1985. 1

The Labor Arbiter, in his disputed decision of 17 January 1989, adjudged:

WHEREFORE, premises considered, complainants are hereby declared to have

been illegally dismissed, and respondent corporation is hereby ordered to reinstate
complainants without loss of seniority rights and with full backwages and benefits in
accordance with law but not to exceed the jurisprudential three (3) year limit, and to
pay ten (10) percent of the total award as attorney's fees.

In the interest of justice and equity complainants who are no longer willing to be
reinstated may opt for separation pay in accordance with
law. 2

Aggrieved by said decision, SMC filed its appeal with the NLRC.

On 15 February 1990, during the pendency of the appeal, the complainants filed an Omnibus Motion
stating that a compromise agreement with SMC3 was entered into some time in June l989 by twelve
of them, namely: Jesus del Mundo, Jr., Justino Nuyda III, Wenceslao Padoc, Miguel Rayos, Welyn
Yaun, Antonio Licad, Victor Luciano III, Eddie Albert Mercado, Cesar Reyes, Jr., Fortunato Villarosa,
Manuel Llorente, Jr., and Edgardo Morales (with an option on the part of four other complainants,
namely: Espanillo, Garcia, Santos and Candelaria, to join the compromise agreement). The
agreement, among other things, provided:

1. That respondent [SMC] would abide by the decision of the Labor Arbiter with
regards to the money claims and attorney's fees in that:

(a) Respondent would immediately pay to the complainants the full

amount of their gross benefits upon their signing of their individual
"Release, Waiver and Quitclaim" in favor of the respondent, "Affidavit
of Desistance" with the assistance of their undersigned counsel and
attached to the Manifestation/Motion prepared and duly signed by
their undersigned counsel; except as regards to complainants Manuel
Llorente, Jr., Jesus del Mundo, Jr., Justiniano G. Nuyda III,
 Wenceslao M. Padoc, Miguel A. Rayos and Welyn Yaun, from whom
certain amounts were to be withheld in trust for a period of only one
(1) month to give time for respondent to file the necessary complaint
against Roberto Halili allegedly to recover their money absconded by
him from the respondent;

(b) Respondent would pay directly to the undersigned counsel his

attorney's fees the equivalent amount of ten 10% per cent of the
gross benefits due to each of the conforming complainants, soon
after the latter's acceptance of their individual claims, in accordance
with the said decision appealed from; and

2. That as a concession, conforming complainants would waive their right to

reinstatement to their former positions under the employ of respondent. 4

Complainants prayed for the approval of the above compromise agreement.

In a "Memorandum," dated 15 March 1990, filed with the NLRC, complainants charged SMC with
bad faith in not complying with the terms of the compromise, particularly in the remittance of benefits
due to six (6) of the complainants, as well as the payment of attorney's fees to counsel, which matter
was explicit in the agreement. The complainants, accordingly, sought the withdrawal of their motion
for the approval of the compromise agreement and, instead, prayed for a decision of the case "on
the merits."

On 31 May 1990, the NLRC promulgated its judgment affirming, with modification, the decision of
the Labor Arbiter. The NLRC held:

We noted that respondent justifies the dismissal of the complainants on account of

their alleged willful violation of the one-to-one rule prescribed in the Beer Marketing
Division (BMD) Manual, but it failed to submit a copy thereof as evidence. Assuming
that such rule exists and the rule is known to the complainants, we agree with the
contention of the complainants that the actual policy or practice is that the empties
whenever practicable should be surrendered by the buyer, but this is not a condition
for the purchase. This is supported by the common practice in neighborhood stores
and in supermarkets that one who buys a case or beer is not required to have the
equivalent number of empty bottles before beer could be sold to him. The customer
could make a deposit for the bottles and the shell. It is further significant to note that
respondent has failed to rebut the claim or the complainants that no salesman yet
has been reprimanded, suspended or penalized for violation of this rule. Moreover,
there is no clear showing that complainants have economically profited or pocketed
the difference of the cash value of the empties returned under the new price rate to
the prejudice of the company.

xxx xxx xxx

Considering the allegations in the Omnibus Motion, the Manifestation/Motions filed

by the withdrawing complainants and in their affidavits of desistance, and in line with
the Commission's policy of encouraging amicable settlement of cases at any stage of
the proceedings, we hereby, grant complainant's prayer that the amicable settlement
entered into between the respondent and the withdrawing complainants be given due
course. For this reason, the latter are dropped from the list of complainants herein.
 Subsequently, on March 7, 1990, complainant Leonilo Candelaria filed a
Manifestation/Motion, praying that he likewise, be discharged as complainant in this
case, attaching thereto an affidavit of desistance wherein he was assisted by
counsel.

For the same reasons earlier mentioned, we hereby grant the motion and Leonilo
Candelaria is considered withdrawn from the list of complainants herein.

With respect to the amounts allegedly to have been withheld from complainant Jesus
del Mundo, Jr., Justino G. Nuyda III, Wenceslao M. Padoc, Miguel A. Rayos and
Welyn D. Yaun, since July 8, 1989, respondent is hereby directed to pay their
withheld claims considering that the complainants are dropped from the list of
complainants herein as a result of the amicable settlement entered into by them with
the respondent.

As to the attorney's fees due to complainants' counsel from the withdrawing

complainants, the same shall be governed by the amicable settlement.

WHEREFORE, premises considered, the appealed decision is affirmed with

modification, as follows:

1. Complainants Antonio Licad, Victor Luciano III, Eddie Albert Mercado, Jesus V.
del Mundo, Jr., Justino G. Nuyda III, Wenceslao M. Padoc, Miguel A. Rayos, Cesar
A. Reyes, Jr., Fortunato S. Villarosa, Welyn D. Yaun, and Leonido Candelaria are
hereby dropped as complainants herein, in view of the amicable settlement entered
into by them with the respondent company;

2. Respondent is hereby directed to release to complainants Jesus del Mundo, Jr.,

Justino Nuyda III, Wenceslao M. Padoc, Miguel A. Rayos and Welyn D. Yaun, the
amounts withheld from them since July 8, 1989 as a result of the amicable settlement
entered into by them with the respondent.

3. Respondent is hereby ordered to reinstate the remaining complainants Luisito J.

Espanillo, Jesus Garcia, Jr., Waldo Santos, without loss of seniority rights and with
full backwages and benefits, but not to exceed three years and to pay ten (10)
percent of the total award as attorney's fees.5

On 14 June 1990, SMC moved to have said resolution reconsidered while complainants, on their
part, opposed and prayed for its affirmance except insofar as Del Mundo, Nuyda, Padoc, and Rayos
were concerned whom they sought to be reinstated. In a separate motion for reconsideration, dated
15 June 1990, complainants explained that as regards Del Mundo, Nuyda, Padoc and Rayos, the
compromise agreement should be declared rescinded because of SMC's failure to remit the
amounts withheld from them under the terms of the agreement.

On 13 December 1990, the NLRC promulgated its other disputed resolution, the dispositive portion
of which provided:

WHEREFORE, premises considered, the appealed decision is hereby modified as

follows:
 1. Complainants Edgardo C. Morales, Manuel Llorente, Jr., and Welyn D. Yaun, are
likewise dropped as complainants in this case in view of the amicable settlement
entered into by them with the respondent company;

2. Respondent is ordered to reinstate complainants Jesus Del Mundo, Jr., Justino

Nuyda III, Wenceslao M. Padoc and Miguel A. Rayos, to their former positions
without loss of seniority rights and with full backwages and benefits, not to exceed
three (3) years, and to pay ten (10%) percent of the total award as attorneys fees.
However, any amounts previously received by the complainants in accordance with
the compromise agreement are to be deducted from the awarded backwages.6

In justifying the partial rescission of the compromise agreement and ordering the reinstatement of
complainants Del Mundo, Nuyda III, Padoc and Rayos, the NLRC said:

It appears that under the compromise agreement the respondent withheld from the
four complainants certain sums of money from the amount due to them for a period
of one month from June 8, 1989, or July 8, 1989, for the purpose of giving time to the
respondent to file the necessary action against their former counsel, Atty. Roberto
Halili, for the recovery of the amounts allegedly absconded by him.

As respondent has not denied the allegation of the four individual complainants nor
has respondent explained its reason why it continued to retain the amounts withheld
from them beyond the stipulated period, we believe it just and proper that the
compromise agreement, insofar as the four mentioned complainants are concerned,
be declared as rescinded as prayed for. As a consequence, we order the
reinstatement of the four complainants to their former positions with backwages but
not to exceed three years in accordance with the prevailing jurisprudence on
payment of backwages. However, whatever amounts complainants may have
received from the respondent under the compromise agreement are to be deducted
from the award of backwages. 7

On 14 January 1991, SMC again filed a motion to have the above resolution reconsidered;
complainants upon the other hand, prayed that a writ of execution be immediately issued for the
satisfaction of the 31st May 1990 decision and 13th December 1990 resolution of the NLRC. On 28
January 1991, complainants filed their comment and opposition to the motion of SMC. This time
complainants likewise assailed the validity of the compromise agreement, as well as the releases,
waivers and quitclaims, for purportedly having been executed without the prior approval of the Labor
Arbiter and being constitutive of unfair labor practice. The complainants thus all sought to be
reinstated to their former positions.

Having failed to get any further reconsideration from the NLRC, the instant petitions
for certiorari (G.R. No. 100133 and No, 100508) were filed by both private parties with this Court
ascribing grave abuse of discretion on the part of the NLRC.

This Court, in its resolution of 24 July 1991 issued a temporary restraining order. On 23 August
1993, following the receipt of comments, the Court resolved to dismiss both petitions after
concluding that no grave abuse of discretion was, in fact, committed by public respondent.

SMC timely filed a motion for reconsideration. Commenting thereon, the complainants argued that
the motion should be denied for having merely raised issues already passed upon by the Court.
Strangely the complainants subsequently also filed their own motion for reconsideration insisting that
the NLRC gravely abused its discretion when it refused to also reinstate Licad, Luciano, Mercado,
Reyes, Jr., Villarosa, Yaun, Morales and Llorente, Jr.

In order to write finis, once and for all, to this prolonged controversy we have decided to render this
extended resolution.

The first issue raised in these petitions is essentially factual. The findings of both the Labor Arbiter
and the NLRC on the illegal dismissal of the complainants concerned are not bereft of substantial
basis. This Court has repeatedly adhered to the time-honored doctrine that such findings should not
only be entitled to great respect but also given the stamp of finality absent any arbitrariness in the
process of their deduction from the evidence adduced (Capitol Industrial Construction Group vs.
NLRC, 221 SCRA 469; A.M. Oreta and Co. Inc. vs. NLRC, 178 SCRA 218; Hydro Resources
Contractors Corp. vs. Labor Arbiter Adrian Pagalilauan, 172 SCRA 399).

The second and third issues, sans the conflicting factual assertion of both parties (into which matter
this Court, not being a trier of facts, will not involve itself further), relate to the validity and
enforceability of the compromise agreement entered into between SMC and the participating
complainants. A compromise entered into in good faith by workers and their employer to resolve a
pending controversy valid and binding on the agreeing parties (Chua vs. NLRC, 190 SCRA 558). In
the case at bench, the compromise agreement was executed by said complainants and SMC in
which mutual concessions were given and mutual benefits were derived. The compromise was
approved and considered by the NLRC when it promulgated its questioned resolutions of 31 May
1990 and 13 December 1990. As a result, the complainants who so agreed to have their cases
amicably settled and compromised were ordered dropped from the complaint. Settlements of this
kind not only are recognized to be proper agreements but so encouraged as well (Art. 2028, Civil
Code; Santiago, IV vs. De Guzman, 177 SCRA 344).

The NLRC likewise ordered the reinstatement of four (4) of the complainants, namely Jesus del
Mundo, Jr., Justino Nuyda III, Wenceslao Padoc and Miguel Rayos due to SMC's failure as to them
to so abide by the terms of the amicable settlement. Under Article 2041 of the Civil Code, should a
party fail or refuse to comply with the terms of a compromise or amicable settlement, the other party
could either (1) enforce the compromise by a writ of execution, or (2) regard it as rescinded and so
insist upon his original demand. The original demand of the four (4) complainants was for them to be
reinstated to their former positions (see Leonor vs. Sycip, 1 SCRA 1215). Certainly, there was
nothing erroneous, let alone grave abuse of discretion, on the part of the NLRC when it accordingly
ordered their reinstatement with three (3) years of backwages. 8

WHEREFORE, the motions for reconsideration filed herein by both parties are DENIED WITH
FINALITY for lack of merit, and the temporary restraining order issued on 24 July 1991 is hereby
LIFTED.

SO ORDERED.

G.R. No. 119649 July 28, 1997

RICKY GALICIA, ANTHONY GALICIA, YOVITO GAN, PRIMO VELEZ, ERBIE GAN, ARTURO
ROSAL, ALIPIO GADON, MAXIMINO PANDO, GINA GAN, RODOLFO GALICIA, JESSIE
GALICIA, JOEL GREGORIO, CHARLIE GAN, MABINI GUYO, JELRY MERANO, ARNULFO
MESANA, ROSENDO GUARDIAN, SOCRATES GALOS, MICHAEL GREGORIO, ROBERTO
PALACIO, ROMEO GALICIA, JOEVIN MELANO, PASCUALITO ABAT, PEPITO DAVID and
JOVENCIO GREGORIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), GLOBE PAPER
MILLS/KENG HUA PAPER PRODUCTS, INC. and ARMOR INDUSTRIAL
CORPORATION, respondents.

ROMERO, J.:

In the instant petition for certiorari assailing the Decision and Resolution of the National Labor
Relations Commission in NLRC NCR Case No. 00-01-0017092, dated November 29, 1994 and
March 3, 1995, respectively, the sole issue pertains to the validity of a compromise agreement and
quitclaims executed by the parties during the pendency of private respondents' appeal to the
respondent Commission.

On January 8, 1992, ninety-five workers, including the twenty-five petitioners herein, were assisted
by a labor federation, the National Organization of Workingmen (NOWM) in their suit against
respondent companies for illegal dismissal, regularization, underpayment of wages, holiday pay,
premium pay etc. After several complainants withdrew from the case, the parties filed their
respective position papers. They alleged that Armor Industrial Corporation, Gibson Contractor
Services, Juner Contractor Services, Libra Manpower Agency and Anjo Contractor, all "labor-only"
contractors, recruited them and supplied them to Globe Paper Mills and Keng Hua Paper Products
where they performed activities directly necessary to the companies' principal business.

On January 15, 1994, Labor Arbiter Ernesto S. Dinopol rendered his decision declaring the thirty
remaining complainants as regular employees of Keng Hua Paper Products, Globe Paper Mills and
Armor Industrial Corporation and ordering their reinstatement. Respondent companies were ordered
to pay backwages from February 15, 1991 up to the date of actual reinstatement, in the total amount
of P3,223,261.00, with P107,380.00 for each complainant as of January 15, 1994.

Respondent companies appealed the case to the NLRC.

On March 1, 1994, the disputed Compromise Agreement was executed by James Yu, the Manager
and Vice President of Globe Paper Mills and Teofilo Rafols, the National President of the National
Organization of Workingmen (NOWM) representing the complainants, when most of the latter were
still in Romblon, their home province. The agreement settled the case for and in consideration of the
total sum of P300,000.00.

Complainants arrived from Romblon on March 7, 1994. The next day, each of the complainants
signed a Quitclaim and Release which confirmed the compromise agreement as well as receipt of
their individual share amounting to P12,000.00 each.1 The standard Quitclaim and Release reads, in
part:

Na, pagsaalang-alang sa halagang LABING DALAWANG LIBONG (P12,000.00) PESOS

bilang kabayaran sa akin ng Globe Paper Mills Corp./Armor Industrial Corporation et. al., sa
pamamagitan ni Bro. Teofilo A. Rafols, presidente ng N.O.W.M. na siyang aking/aming
pinagkatiwalaan ang pakikipag-usap kay G. JAMES YU, President/General Manager ng
nasabing mga Kompanya tungkol sa pakikipag-ayos o "amicable settlement," na ang huling
ALOK ng Kompanya ay aking sinang-ayunan, dala na rin ng aking kahirapan at kawalan ng
pinagkakakitaan sa matagal na panahon;" (Emphasis supplied.)2

On March 9, 1994, petitioners executed a Sama-samang Sinumpaang Salaysay where they stated:
 4. Na, batid namin na ang naturang halaga na aming tinanggap (P12,000.00 each) ay hindi
makatarungan at sapat na kabayaran sa aming mga hinahabol na biyaya sa naturang mga
Kompanya at alinsunod sa desisyon ng Labor Arbiter, ngunit, dala ng aming kahirapan sa
buhay, bunga ng aming matagal nang pagkakatanggal sa aming trabaho mula pa noong
taon 1991 at 1992 ay napag-pasiyahan namin na pansamantalang kunin/tanggapin ang
inalok na halaga ng Kompanya, ngunit aming ipagpapatunay ang nasabing usapin/asunto sa
kadahilanan masyado kaming api at hindi makatarungan ang pagkakatanggap sa aming
trabaho na nagdulot ng labis na kahirapan sa aming mga mahal sa buhay, sa katunayan,
ang aming kinabubuhay ay sa tulong ng aming mga malalapit na kamag-anak at mga
kaibigan, at upang lubusang mabigyan ng katarungan ang aming kalagayan. (Emphasis
added.)3

Private respondents submitted the Compromise Agreement and Joint Motion to Dismiss before the
respondent Commission which was then considering the case on appeal from the decision of the
Labor Arbiter. Herein petitioners later filed an Opposition to the Motion to Dismiss where they
demanded the difference of what they actually received and the judgment award in their favor.

On November 29, 1994, respondent Commission rendered its Decision approving the Compromise
Agreement, setting aside the January 15, 1994 decision of the Labor Arbiter and dismissing the
instant case.4 The NLRC held that the complainants were fully aware of the award in their favor
dated January 15, 1994 when they voluntarily entered into the compromise agreement on March 1,
1994. They thus disregarded the judgment award and opted for the last and sincere offer of
respondent Globe Paper Mills instead of waiting out the appeal filed by respondents. Respondent
NLRC added that it cannot subscribe to complainants' contention that they signed the compromise
agreement under the compulson of "dire necessity" and held that position as a mere afterthought.

Their motion for reconsideration having been denied on March 3, 1995, the instant petition
for certiorari was filed contesting the decision of the NLRC.

A compromise agreement is executed by parties who adjust their difficulties by mutual consent in
order to prevent or to put an end to a lawsuit. Additionally, each of the parties is motivated by "the
hope of gaining, balanced by the danger of losing."5 Under the Labor Code, any compromise
settlement voluntarily agreed upon by the parties with the assistance of the Bureau of Labor
Relations or the regional office of the Department of Labor and Employment shall be final and
binding upon the parties.6 Even if contracted without the assistance of labor officials, compromise
agreements between workers and their employers have been upheld and considered as valid,
accepted and even desirable means of settling disputes.7

This Court takes cognizance of the low grade for quitclaims executed by laborers, which are often
frowned upon as being contrary to public policy.8 In some cases, we have ruled that quitclaims are
ineffective in barring recovery for the full measure of the worker's rights and that acceptance of
benefits therefrom does not amount to estoppel.9 In Lopez Sugar Corporation v. Federation of Free
Workers, the Court explained:

Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer
and employee, obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of money. Because, out of job, he had
to face the harsh necessities of life. He thus found himself in no position to resist money
proffered. His, then, is a case of adherence, not of choice. One thing, sure however, is that
petitioners did not relent their claim. They pressed it. They are deemed not to have waived
any of their rights.10
In the case of Periquet v. NLRC, we set the guidelines and current doctrinal policy regarding
quitclaims and waivers, thus:

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the
questioned transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as a valid and
binding undertaking.11

Hence, quitclaims where the workers voluntarily accept a reasonable amount or consideration as
settlement, are deemed valid and cannot be set aside merely because the parties have
subsequently changed their minds.

For the compromise to be voluntarily entered into, there must be personal and specific individual
consent.12 In the case at bar, petitioners attempt to disavow their consent given to Mr. Teofilo Rafols,
president of the National Organization of Workingmen, by disclaiming any authority accorded by
them to Mr. Rafols to fix and decide the total amount.13 We find no basis for this allegation apart from
their joint affidavit and unsubstantiated claims to that effect.

Although their authorization in favor of Mr. Rafols does not appear to have been recorded in a
written instrument for no such document was submitted to the Court, at the conference between the
parties, they confirmed the veracity of the compromise agreement and the quitclaim. Even granting
that there may have been some question regarding the authority granted to the NOWM President,
the same was waived once petitioners signed the quitclaim evidencing receipt of their individual
shares.

Respondent Commission has ruled that petitioners authorized NOWM to negotiate with
management. It cannot be said to have committed grave abuse of discretion in utilizing facts
presented during the conference, for proceedings held thereat do not constitute privileged
communication.

The more relevant inquiry is whether the consideration for the quitclaims signed by the workers was
reasonable and acceptable. Where it is shown that the person making the waiver did so voluntarily
and with full understanding of what he was doing and the consideration of the quitclaim is
credible, the transaction must be recognized as a valid and binding undertaking.14

We find quite relevant the ruling of the Court in Cruz v. NLRC15 because the amount accepted by
petitioners herein was very much less that the amount awarded by the Labor Arbiter in his January
15, 1994 decision. The consideration for the quitclaim, a measly P12,000.00 per worker and the total
sum of P300,000, are inordinately low and exceedingly unreasonable relative to the P107,380.00 per
worker and total P3,223,261.00 awarded by the Arbiter. Palpably inequitable, the quitclaim cannot
be considered an obstacle to the pursuit of their legitimate claims.16

Petitioners never accepted as full compensation the meagre amount they received when they signed
the quitclaim and release. In the Sinumpaang Salaysay they executed the next day, they expressly
declared their awareness that the amount they received was unjust and insufficient to answer for
their just claims and the award given by the Labor Arbiter, but due to destitution caused by their
protracted unemployment, they decided to accept the P12,000.00 in the meantime.17 The Court also
recognizes "dire necessity" of laborers as ample justification to accept even sufficient sums of money
from their employers. We are not unaware that in some cases, such asOlaybar v. NLRC, this ground
was deemed unacceptable in refuting the agreement in question. The main difference, however, lies
in the existence of a voluntary acceptance of the agreement and the reasonable consideration for it,
making the agreement intrinsically valid and binding, thus rendering the "dire necessity" excuse
immaterial and irrelevant.

Worth noting is the Solicitor General's opinion in favor of granting the petition. The OSG concluded
that "(w)hile petitioners may not have been 'tricked' into accepting the P12,000.00, to repeat, the
undisputed and concurrent circumstances of dire necessity and unconscionability obtaining in the
case at bar constitute more than sufficient ground to invalidate the compromise
agreement."18

WHEREFORE, the instant petition is hereby GRANTED. The assailed resolution and decision of
respondent Commission are hereby SET ASIDE. The case is REMANDED to the Commission for
expeditious resolution on the merits.

SO ORDERED.

G.R. No. 82488 February 28, 1990

VICENTE ATILANO/ROSE SHIPPING LINES, petitioner,

vs.
HON. DIONISIO C. DE LA SERNA, Undersecretary Department of Labor and Employment,
HON. ADRIAN LOMUNTAD, Regional Director, Department of Labor and Employment,
Regional Office No. 7, MAMINTAS O. SANDALAN, CESAR PETALCORIN, JONATHAN
SARADOR, BONIFACIO LASOLA, NILO CLAROS, GODOPREDO GRANADA, CRISTITUTO
DAQUEL, LEONARDO LARGO, TOMAS OTADOY, LUIS GONZALES, PAULINO SIDO, GILBERT
OSABEL, WILLIAM RONDOVIO, RUEL ORGE, NOLASCO P. AUSTERO, WILFREDO FLORES
and BERNARDITO P. MANALO, respondents.

Joaquin G. Chung, Jr. Law Offices and Assarga Law Firm for petitioner.

FELICIANO, J.:

This Petition for certiorari is directed against the order of respondent Undersecretary of Labor and
Employment dated 3 March 1988 which sustained the decision of respondent Regional Director in
LSED Case No. 055-85. That decision awarded salary differentials, allowances, 13th month pay and
overtime pay to the seventeen (17) private respondent employees of petitioner Vicente Atilano who
is doing business under the rubric Rose Shipping Lines.

On 20 May 1985, private respondents filed a letter-complaint in the Regional Office of the then
Ministry of Labor and Employment, Cebu City, against petitioner Rose Shipping Lines and its
Proprietor/Manager Vicente Atilano docketed as LSED Case No. 055-85. The letter-complaint
alleged violations by petitioner of labor standard laws on minimum wages, allowances, 13th month
pay and overtime pay.

Acting on the letter-complaint, the Office of the Regional Director ordered a Labor Standards and
Welfare Officer (LSW officer, hereinafter) to conduct a complaint inspection on 22 July 1985 at the
establishment of petitioner in Cebu City. However, no actual inspection was effected because the
owner, petitioner Mr. Vicente Atilano, was allegedly on a business trip to Manila, and his employees
declined, to allow the inspection in his absence.

Respondent Regional Director subsequently summoned the parties to conciliation conferences the
first of which was held on 5 August 1985 where only the complainants (private respondents herein)
appeared. The conference was then rescheduled to 16 August 1985 and on that meeting both the
parties were represented. Another hearing was held on 21 August 1985 and there the private
respondents submitted their position paper elaborating and documenting their claims. Petitioner did
not file any position paper.

On 16 August 1985, while the above case was in progress, private respondents filed another
complaint against petitioner for unpaid wages covering the month of July 1985 which case was
docketed as LSED Case No. 061-85. On 26 August 1985, the parties were caged to a conference
regarding this second complaint during which petitioner Vicente Atilano appeared and promised to
pay private respondents their unpaid salaries for the month of July not later than 30 August 1985,
and their salaries for the month of August 1985 not later than 2 September 1985. Petitioner,
however, failed to comply with this promise. On 6 September 1985, the Regional Director issued a
Compliance Order requiring petitioner to pay private respondents the aggregate amount of Thirty
Seven Thousand Sixty Five Pesos and Sixty Centavos (P37,065.60) representing the unpaid wages
being claimed under the second complaint LSED Case No. 061-85).

Petitioner filed a motion for reconsideration of the Compliance Order, which was denied for lack of
merit in a Resolution dated 11 October 1985. Counsel for private respondents immediately moved
for the issuance of a writ of execution. The case was later appealed by petitioner to the then Minister
of Labor and Employment which appeal was, however, dismissed on the ground that it was filed out
of time. Petitioner then filed a motion to quash the writ of execution which motion was also denied.
But in an order dated 26 January 1986, LSED Case No. 061-85 was dismissed on the ground that
the claims of all the complaints had been fully settled by the petitioner.

Meanwhile, on 16 January 1986, the Regional Director issued an order in LSED Case No. 055-85
(the earlier case) the dispositive portion of which provided as follows:

WHEREFORE, premises considered, respondent ROSE SHIPPING LINES and the

Manager/Proprietor is (sic) hereby ordered to pay the claims of the complainants in
the aggregate sum of SIX HUNDRED SIXTY THOUSAND FIVE HUNDRED NINETY
FOUR PESOS AND 46/1000 (P660,594.46), Philippine currency, within 15 days from
the receipt thereof, ... .

Petitioner did not file a motion for reconsideration of the above order but instead filed an ex-
parte motion to dismiss dated 24 January 1986 alleging that the case (No. 055-85) had been
rendered moot and academic by the quitclaims and release papers dated 4 January 1986 signed by
complainants in favor of respondents.

Private respondents filed an opposition to the ex-parte motion to dismiss, contending that the quit-
claims and release papers referred to by petitioner (which quitclaims and papers had been prepared
by petitioner) were intended to support the dismissal of LSED Case No. 061-85 (the later case) only.

In his comment on private respondents' opposition to the ex-parte motion to dismiss, petitioner
contended that the two (2) cases involved identical claims and concerned the same parties, and that
the dismissal of LSED Case No. 061-85 was res judicata in respect of LSED Case No. 055-85.
Petitioner added that the dispositive portion of the order dismiss LSED Case No. 061-85 refers not
only to the claims of private respondents in the said case but to allclaims of private respondents
against petitioner including those which are the subject of LSED Case No. 055-85.

Several conciliation conferences on the motion to dismiss were subsequently held and both parties
agreed that they would submit their respective position papers after which petitioner's motion to
dismiss would be deemed submitted for resolution.

On 24 April 1986, public respondent Regional Director denied petitioner's motion to amiss for lack of
merit. A motion for reconsideration or appeal was filed with the Secretary of the Department of Labor
and Employment on 19 May 1986. Petitioner more than a year later filed a Manifestation and Motion
with the Secretary dated 23 July 1987, enclosing therein a different set of quitclaims and/or a also
prepared by petitioner but allegedly signed by private respondents dated 9 July 1986 (i.e., different
from those earlier referred to by petitioner in his ex-parte motion to dismiss filed with the Regional
Director On 3 March 1988, public respondent Under of Labor rendered the questioned order
dismissing petitioner's motion for reconsideration or appeal for lack of merit.

In the instant Petition for Certiorari, petitioner makes the following arguments:

1. Public respondents acted without jurisdiction over the nature and subject matter of
private respondents' purported money claims.

2. Public respondents acted in excess of jurisdiction in not endorsing the matter to

the National Labor Relations Commission for adjudication.

3. Public respondents acted with grave abuse of discretion in not conducting an

actual inspection on the purported charges of labor standards violations.

4. Public respondents acted with grave abuse of discretion amounting to lack of

jurisdiction in summarily granting private respondents' claims.

The main issue to be resolved herein is whether or not the public respondents, Regional Director
and Undersecretary of Labor, have jurisdiction over the subject matter of the case. Petitioner
contends that the power to adjudicate the money claims here involved is vested solely in the Labor
Arbiter.

1. LSED Case No. 055-85 was commenced on 20 May 1985; the order of the
Regional Director in said case, which is here sought to be set aside, was issued on
16 January 1986, while the order of the same official denying petitioner's motion to
dismiss for lack of merit was rendered on 24 April 1986. The order of the
Undersecretary of Labor here assailed was, as already noted, issued on 3 March
1988. At all material times i.e., from 20 May 1985 through to 3 March 1988, the
legal provisions governing the exercise of the visitorial and enforcement powers of
the Regional Directors of Labor were embodied in P.D. No. 850 (promulgated on 16
December 1975) and Executive Order No. 111 (promulgated on 24 December 1986),
amending Article 128 (b) of the Labor Code which, as amended, provided as follows:

ART. 128. Visitorial and enforcement power. ... .

(b) The provisions of Article 217 of this Code to the contrary notwithstanding and in
cases where the relationship of employer-employee still exist, the Minister of Labor
and Employment or his duly authorized representatives shall have the power to order
 and administer, after due notice and hearing, compliance with the labor standards
provisions of this Code and other labor legislation based on the findings of labor
regulation officers or industrial safety engineers made in the course of inspection,
and to 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
regulation officer and raises issues which cannot be resolved without considering
evidentiary matters that are not verifiable in the normal course of inspection.

xxx xxx xxx

In Maternity and Children's Hospital v. the Honorable Secretary of Labor, 1 the Court made clear that
under Article 128 of the Labor Code, as amended, the Regional Director of Labor possessed
"enforcement/adjudication authority" over uncontested money claims where the employer-employee
relationship remained. The Court, through Mr. Justice Medialdea, said:

As seen from the foregoing, EO 111 authorizes a Regional Director to order

compliance by an employer with labor standards provisions of the Labor Code and
other legislation. It is Our considered opinion however, that the inclusion of the
phrase, 'The provisions of Article 217 of this Code to the contrary notwithstanding
and in cases where the relationship of employer-employee still exists ... ' in Article
128 (b), as amended, above-cited, merely confirms/reiterates
the enforcement/adjudication authority of the Regional
Director over uncontested money claims in cases where an employer-employee
relationship still exists.

Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions
Nos. 6, 7 and 37, it is clear that it has always been the intention of our labor
authorities to provide our workers immediate access (when still feasible, as where an
employer-employee relationship still exists) to their rights and benefits without being
inconvenienced by arbitration/litigation processes that prove to be not only nerve-
wracking, bat financially burdensome in the long run.

Note further the second paragraph of Policy Instructions No. 7 indicating that the
transfer of labor standards cases from the arbitration system to the enforcement
system is

".. to assure the workers the rights and benefits due to him under
labor standard laws, without having to go through arbitration. .."

so that

".. the workers would not litigate to get what legally belongs to him. ..
ensuring delivery .. free of charge."

Social justice legislation, to be truly meaningful and rewarding to out-workers, must

not be hampered in its application by long-winded arbitration and litigation. Rights
must be asserted and benefits received with the least inconvenience. Labor laws are
meant to promote, not defeat, social justice.

xxx xxx xxx

 The proceedings before the Regional Director must, perforce, be upheld on the basis
of Article 128 (b) as amended by E.O. No. 111, dated December 24, 1986, this
executive order to be considered in the nature of a curative statute with retrospective
application.' (Progressive Workers' Union, et al. v. Hon. F.P. Aguas, et al. [supra]; M.
Garcia vs. Judge A. Martinez, et al., G.R. No. L- 47629, May 28, 1979, 90 SCRA
331). (Citations omitted; Emphasis supplied)

2. Applying the Maternity and Children's Hospital case to the case at bar, we
consider that petitioner did not effectively controvert the money claims of private
respondents against him, which claims originated from labor standards violations
asserted to have been committed by petitioner.

The records of the present case show that petitioner, for reasons satisfactory to himself,
did not contest the claims of private respondents despite the multiple opportunities therefor afforded
to him. Petitioner did not file any answer to the letter-complaint submitted by private respondents to
the Office of the Regional Director; neither did he file a position paper before that Office to controvert
private respondents' claims. It was only after the Regional Director had already rendered his ruling of
16 January 1986 in LSED Case No. 055-85 that petitioner tried to controvert the said claims by
arguing that private respondents had subsequently executed quitclaims and releases in his favor.
We note that petitioner did not question the correctness of the computations of the amounts due to
each of the private respondents nor that said claims had not theretofore been paid by petitioner.
After rendition of the Regional Director's decision, petitioner attempted to set up a defense
of subsequent compromise of and payment to or waiver by private respondents of their claims and
presented what he contends were quitclaims, releases and waivers signed by private respondents.
On the basis of the submission of such papers, petitioner now pretends that he had controverted the
claims of private respondents and that he had raised issues which could not be resolved without
considering evidentiary matters not verifiable in the normal course of inspection, and that therefore
the present case should go to the Labor Arbiter.

We do not find petitioner's argument persuasive. We believe that the question of the authenticity or
genuineness of the quitclaims, releases and waivers supposedly signed by private respondents, but
vehemently denied by the latter, could be verified by the Regional Director in the course of, and in
connection with, examination of the petitioner's books and records of which such supposed
quitclaims, etc. (if at all genuine) must have fanned part. We note also that after petitioner on 19 May
1986 filed a motion for reconsideration or appeal from the Regional Director's order of 16 January
1986, with the Secretary of Labor, the Secretary of Labor requested the Regional Director to conduct
conferences or hearings for the purpose of verifying the genuineness and authenticity of private
respondents' signatures on the quitclaim papers submitted by petitioner. A report by an LSW officer
of the Regional Director's office showed that:

(a) eight (8) of the private respondents denied the genuineness of their purported
signatures appearing on the quitclaim and release papers shown to them for
Identification and examination;

(b) the same private respondents executed affidavits stating that they had not
executed any document in favor of petitioner; that the quitclaims, etc. submitted by
petitioner were simulated and forged; and that private respondents had not tried to
settle the case LSED Case No. 055-85).2

On the basis of the foregoing report, the Undersecretary of Labor stated in his 3 March 1988 order
that:
 In the face of the foregoing circumstances, we have no alternative but to
deny respondents' motion. Let it be noted that a careful examination of the
signatures appearing in the quitclaims and releases will readily show quite apparent
variance vis-a-vis the signatures affixed in the complaint. This aroused our suspicion
on their due execution and genuineness and prompted us to cause the calling of
concerned parties for verification. Said doubts and suspicion were confirmed and
further strengthened by the outright denial made by complainants during the
conferences called as well as in the sworn statements they subsequently submitted.
We wish to state at this juncture that while it is our policy to encourage voluntary
settlement of disputes, this Office can not approve a compromise agreement or
settlement which is being questioned and in fact being denied by one of the
parties. While it is true that respondents submitted quitclaims and releases and other
documents purportedly executed by complainants to show that they have no more
claims against respondents, said documents could not be given any weight after the
complainants personally appeared during the hearing and declared that their
signatures appearing thereon were simulated and forged and at the same time
denied that any settlement was arrived at. Besides, the fact that those documents
were supposed to be executed as early as July 9, 1986 but were submitted to this
Office after more than a year has lapsed puts serious doubts on their
authenticity. For if indeed there was an amicable settlement reached that early, why
did it take respondent that long to notify us of the same and move for the dismissal
of this case. More importantly, would it not be appropriate and logical for the parties,
assisted by their respective counsels to file a joint motion to dismiss, if really they
have come to terms. 3

The quitclaim papers which petitioner alleges embodied a compromise or settlement agreement
were in any case not duly executed, that is, they were not signed in the presence of the Regional
Director or his duly authorized representative, in disregard of the requirements of Section 8, Rule II
of the Rules on the Disposition of Labor Standards Cases in the Regional Offices, which provide
that:

Section 8. Compromise Agreement. Should the party arrive at an agreement as to

the whole or part of the dispute, said agreement shall be reduced [to] writing and
signed by the parties in the presence of the regional director or his duly authorized
representative. (Emphasis supplied)

Thus, the issue of the authenticity and genuineness of the two (2) sets of supposed quitclaims had
been squarely raised before and passed upon and resolved by the Regional Director and the
Undersecretary of Labor. We note that petitioner did not submit any rebuttal evidence before the
Regional Director or his representatives. We note also that the set of supposed quitclaims
purportedly signed as early as 9 July 1986, were first presented by petitioner in his Manifestation
and Motion filed with the Undersecretary of Labor dated 23 July 1987, that is, more than a year after
execution; and that upon the other hand, the joint affidavits supposedly signed by private
respondents attesting to the genuineness of the purported quitclaims are dated only as of 14
September 1987, or more than a year after the supposed quitclaims were signed.

The record thus strongly suggests that the issue of the genuineness or authenticity of the purported
quitclaim documents was an issue belatedly manufactured by petitioner in the effort to evade the
jurisdiction of the Regional Director and delay payment of the amounts awarded by the Regional
Director.
 3. On 2 March 1989, Republic Act No. 6715 amending certain provisions of the Labor
Code was enacted. In his concurring opinion in the Resolution of the Motion for
Reconsideration in Briad Agro Development Corporation v. de la Cerna, et al., 4 Mr.
Justice Narvasa underscored that Republic Act No. 6715 had left Article 128 (b) of
the Labor Code intact, in the sense that the Regional Director retains his visitorial
and enforcement powers thereunder and could exercise such powers even though
the amount involved was in excess of P5,000.00 provided that the employer had not
contested the findings of the LSW officers by raising issues which can not be
resolved without considering evidentiary matters not verifiable in the course of
normal inspection:

In the resolution, therefore, of any question of jurisdiction over a money claim arising
from employer-employee relations, the first inquiry should be into whether the
employment relation does indeed still exist between the claimant and the respondent.

If the relation no longer exists, and the claimant does not seek reinstatement, the
case is cognizable by the Labor Arbiter, not by the Regional Director. On the other
hand, if the employment relation still exists, or reinstatement is sought, the next
inquiry should be into the amount involved.

If the amount involved does not exceed P5,000.00, the Regional Director undeniably
has jurisdiction. But even if the amount of the claim exceeds P5,000.00, the claim is
not on that account necessarily removed from the Regional Director's competence. In
respect thereof, he may still exercise the visitorial and enforcement powers vested in
him by Article 128 of the Labor Code, as amended, supra; that is to say, he may still
direct his labor regulations officers or industrial safety engineers to inspect the
employer's premises and examine Ms records; and if the officers should find that
there have been violations of labor standards provisions, the Regional Director may,
after due notice and hearing, order compliance by the employer therewith and issue
a writ of execution to the appropriate authority for the enforcement thereof. However,
this power may not, to repeat, be exercised by him where the employer contests the
labor regulations officers' findings and raises issues which cannot be resolved
without considering evidentiary matters not verifiable in the normal course of
inspection. In such an event, the case will have to be referred to the corresponding
Labor Arbiter for adjudication, since it falls within the latter's exclusive original
jurisdiction. (Emphasis supplied)

As already pointed out above, petitioner here did not controvert the findings of the LSW officers and
the decision of the Regional Director, and that the issue he subsequently raised could, in any event,
have been resolved, as it was in fact verified and resolved, in the normal course of inspection and
conferences among petitioner and private respondents.

4. Should it be assumed for purposes of argument merely, that under Article 217 (6)
of the Labor Code as last amended by Republic Act No. 6715, jurisdiction over wage
claims like those involved in LSED Case No. 055-85 was transferred to the Labor
Arbiter, it must still be pointed out that the amendments introduced by Republic Act
No. 6715 cannot be applied retroactively so as to set aside and
nullify earlier, completed exercises of jurisdiction which had resulted in a decision
which had become final and executory long before the enactment of Republic Act
No. 6715. As noted earlier, at the time LSED Case No. 05585 was commenced and
at the time decision thereon was rendered by the Regional Director and aimed by the
Undersecretary of Labor, both officials undeniably had jurisdiction over the subject
 matter of LSED Case No. 055-85. That jurisdiction was not wiped out by the coming
into effect of Republic Act No. 6715. 5

5. Finally, petitioner points to the failure of public respondent Regional Director to

conduct an actual inspection of the establishment owned by petitioner, contending
that the absence of such an inspection nullified the decision rendered by the
Regional Director. This argument fails to take into account two (2) things: firstly, that
the inability of the LSW officers of the Regional Director to conduct an actual
inspection was due to refusal of petitioner's own employees to permit inspection in
the alleged absence of petitioner; secondly, Section 7, Rule II of the Rules on the
Disposition of Labor Standards Cases provides that:

Sec. 2. Complaint inspection. All such complaints shall immediately be forwarded

to the Regional Director who shall refer the case to the appropriate unit in the
Regional office for assignment to a Labor Standards and Welfare Officer (LSWO) for
field inspection. When the field inspection does not produce the desired results, the
Regional Director shall summon the parties for summary investigation to expedite the
disposition of the case. ... . (Emphasis supplied)

Thus, the lack of inspection was cured when the Regional Director called the parties to several
conferences, at which conferences, petitioner could have presented whatever he had in his books
and records to refute the claims of private respondents; petitioner did not do so and his failure must
be deemed a waiver of his right to contest the conclusions of the Regional Director on the basis of
the evidence and records actually made available to him.

WHEREFORE, the Petition is DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

G.R. No. 82488 February 28, 1990

VICENTE ATILANO/ROSE SHIPPING LINES, petitioner,

vs.
HON. DIONISIO C. DE LA SERNA, Undersecretary Department of Labor and Employment,
HON. ADRIAN LOMUNTAD, Regional Director, Department of Labor and Employment,
Regional Office No. 7, MAMINTAS O. SANDALAN, CESAR PETALCORIN, JONATHAN
SARADOR, BONIFACIO LASOLA, NILO CLAROS, GODOPREDO GRANADA, CRISTITUTO
DAQUEL, LEONARDO LARGO, TOMAS OTADOY, LUIS GONZALES, PAULINO SIDO, GILBERT
OSABEL, WILLIAM RONDOVIO, RUEL ORGE, NOLASCO P. AUSTERO, WILFREDO FLORES
and BERNARDITO P. MANALO, respondents.

Joaquin G. Chung, Jr. Law Offices and Assarga Law Firm for petitioner.

FELICIANO, J.:

This Petition for certiorari is directed against the order of respondent Undersecretary of Labor and
Employment dated 3 March 1988 which sustained the decision of respondent Regional Director in
LSED Case No. 055-85. That decision awarded salary differentials, allowances, 13th month pay and
overtime pay to the seventeen (17) private respondent employees of petitioner Vicente Atilano who
is doing business under the rubric Rose Shipping Lines.

On 20 May 1985, private respondents filed a letter-complaint in the Regional Office of the then
Ministry of Labor and Employment, Cebu City, against petitioner Rose Shipping Lines and its
Proprietor/Manager Vicente Atilano docketed as LSED Case No. 055-85. The letter-complaint
alleged violations by petitioner of labor standard laws on minimum wages, allowances, 13th month
pay and overtime pay.

Acting on the letter-complaint, the Office of the Regional Director ordered a Labor Standards and
Welfare Officer (LSW officer, hereinafter) to conduct a complaint inspection on 22 July 1985 at the
establishment of petitioner in Cebu City. However, no actual inspection was effected because the
owner, petitioner Mr. Vicente Atilano, was allegedly on a business trip to Manila, and his employees
declined, to allow the inspection in his absence.

Respondent Regional Director subsequently summoned the parties to conciliation conferences the
first of which was held on 5 August 1985 where only the complainants (private respondents herein)
appeared. The conference was then rescheduled to 16 August 1985 and on that meeting both the
parties were represented. Another hearing was held on 21 August 1985 and there the private
respondents submitted their position paper elaborating and documenting their claims. Petitioner did
not file any position paper.

On 16 August 1985, while the above case was in progress, private respondents filed another
complaint against petitioner for unpaid wages covering the month of July 1985 which case was
docketed as LSED Case No. 061-85. On 26 August 1985, the parties were caged to a conference
regarding this second complaint during which petitioner Vicente Atilano appeared and promised to
pay private respondents their unpaid salaries for the month of July not later than 30 August 1985,
and their salaries for the month of August 1985 not later than 2 September 1985. Petitioner,
however, failed to comply with this promise. On 6 September 1985, the Regional Director issued a
Compliance Order requiring petitioner to pay private respondents the aggregate amount of Thirty
Seven Thousand Sixty Five Pesos and Sixty Centavos (P37,065.60) representing the unpaid wages
being claimed under the second complaint LSED Case No. 061-85).

Petitioner filed a motion for reconsideration of the Compliance Order, which was denied for lack of
merit in a Resolution dated 11 October 1985. Counsel for private respondents immediately moved
for the issuance of a writ of execution. The case was later appealed by petitioner to the then Minister
of Labor and Employment which appeal was, however, dismissed on the ground that it was filed out
of time. Petitioner then filed a motion to quash the writ of execution which motion was also denied.
But in an order dated 26 January 1986, LSED Case No. 061-85 was dismissed on the ground that
the claims of all the complaints had been fully settled by the petitioner.

Meanwhile, on 16 January 1986, the Regional Director issued an order in LSED Case No. 055-85
(the earlier case) the dispositive portion of which provided as follows:

WHEREFORE, premises considered, respondent ROSE SHIPPING LINES and the

Manager/Proprietor is (sic) hereby ordered to pay the claims of the complainants in
the aggregate sum of SIX HUNDRED SIXTY THOUSAND FIVE HUNDRED NINETY
FOUR PESOS AND 46/1000 (P660,594.46), Philippine currency, within 15 days from
the receipt thereof, ... .

Petitioner did not file a motion for reconsideration of the above order but instead filed an ex-
parte motion to dismiss dated 24 January 1986 alleging that the case (No. 055-85) had been
rendered moot and academic by the quitclaims and release papers dated 4 January 1986 signed by
complainants in favor of respondents.

Private respondents filed an opposition to the ex-parte motion to dismiss, contending that the quit-
claims and release papers referred to by petitioner (which quitclaims and papers had been prepared
by petitioner) were intended to support the dismissal of LSED Case No. 061-85 (the later case) only.

In his comment on private respondents' opposition to the ex-parte motion to dismiss, petitioner
contended that the two (2) cases involved identical claims and concerned the same parties, and that
the dismissal of LSED Case No. 061-85 was res judicata in respect of LSED Case No. 055-85.
Petitioner added that the dispositive portion of the order dismiss LSED Case No. 061-85 refers not
only to the claims of private respondents in the said case but to allclaims of private respondents
against petitioner including those which are the subject of LSED Case No. 055-85.

Several conciliation conferences on the motion to dismiss were subsequently held and both parties
agreed that they would submit their respective position papers after which petitioner's motion to
dismiss would be deemed submitted for resolution.

On 24 April 1986, public respondent Regional Director denied petitioner's motion to amiss for lack of
merit. A motion for reconsideration or appeal was filed with the Secretary of the Department of Labor
and Employment on 19 May 1986. Petitioner more than a year later filed a Manifestation and Motion
with the Secretary dated 23 July 1987, enclosing therein a different set of quitclaims and/or a also
prepared by petitioner but allegedly signed by private respondents dated 9 July 1986 (i.e., different
from those earlier referred to by petitioner in his ex-parte motion to dismiss filed with the Regional
Director On 3 March 1988, public respondent Under of Labor rendered the questioned order
dismissing petitioner's motion for reconsideration or appeal for lack of merit.

In the instant Petition for Certiorari, petitioner makes the following arguments:

1. Public respondents acted without jurisdiction over the nature and subject matter of
private respondents' purported money claims.

2. Public respondents acted in excess of jurisdiction in not endorsing the matter to

the National Labor Relations Commission for adjudication.

3. Public respondents acted with grave abuse of discretion in not conducting an

actual inspection on the purported charges of labor standards violations.

4. Public respondents acted with grave abuse of discretion amounting to lack of

jurisdiction in summarily granting private respondents' claims.

The main issue to be resolved herein is whether or not the public respondents, Regional Director
and Undersecretary of Labor, have jurisdiction over the subject matter of the case. Petitioner
contends that the power to adjudicate the money claims here involved is vested solely in the Labor
Arbiter.

1. LSED Case No. 055-85 was commenced on 20 May 1985; the order of the
Regional Director in said case, which is here sought to be set aside, was issued on
16 January 1986, while the order of the same official denying petitioner's motion to
dismiss for lack of merit was rendered on 24 April 1986. The order of the
Undersecretary of Labor here assailed was, as already noted, issued on 3 March
 1988. At all material times i.e., from 20 May 1985 through to 3 March 1988, the
legal provisions governing the exercise of the visitorial and enforcement powers of
the Regional Directors of Labor were embodied in P.D. No. 850 (promulgated on 16
December 1975) and Executive Order No. 111 (promulgated on 24 December 1986),
amending Article 128 (b) of the Labor Code which, as amended, provided as follows:

ART. 128. Visitorial and enforcement power. ... .

(b) The provisions of Article 217 of this Code to the contrary notwithstanding and in
cases where the relationship of employer-employee still exist, the Minister of Labor
and Employment or his duly authorized representatives shall have the power to order
and administer, after due notice and hearing, compliance with the labor standards
provisions of this Code and other labor legislation based on the findings of labor
regulation officers or industrial safety engineers made in the course of inspection,
and to 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
regulation officer and raises issues which cannot be resolved without considering
evidentiary matters that are not verifiable in the normal course of inspection.

xxx xxx xxx

In Maternity and Children's Hospital v. the Honorable Secretary of Labor, 1 the Court made clear that
under Article 128 of the Labor Code, as amended, the Regional Director of Labor possessed
"enforcement/adjudication authority" over uncontested money claims where the employer-employee
relationship remained. The Court, through Mr. Justice Medialdea, said:

As seen from the foregoing, EO 111 authorizes a Regional Director to order

compliance by an employer with labor standards provisions of the Labor Code and
other legislation. It is Our considered opinion however, that the inclusion of the
phrase, 'The provisions of Article 217 of this Code to the contrary notwithstanding
and in cases where the relationship of employer-employee still exists ... ' in Article
128 (b), as amended, above-cited, merely confirms/reiterates
the enforcement/adjudication authority of the Regional
Director over uncontested money claims in cases where an employer-employee
relationship still exists.

Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions
Nos. 6, 7 and 37, it is clear that it has always been the intention of our labor
authorities to provide our workers immediate access (when still feasible, as where an
employer-employee relationship still exists) to their rights and benefits without being
inconvenienced by arbitration/litigation processes that prove to be not only nerve-
wracking, bat financially burdensome in the long run.

Note further the second paragraph of Policy Instructions No. 7 indicating that the
transfer of labor standards cases from the arbitration system to the enforcement
system is

".. to assure the workers the rights and benefits due to him under
labor standard laws, without having to go through arbitration. .."

so that
 ".. the workers would not litigate to get what legally belongs to him. ..
ensuring delivery .. free of charge."

Social justice legislation, to be truly meaningful and rewarding to out-workers, must

not be hampered in its application by long-winded arbitration and litigation. Rights
must be asserted and benefits received with the least inconvenience. Labor laws are
meant to promote, not defeat, social justice.

xxx xxx xxx

The proceedings before the Regional Director must, perforce, be upheld on the basis
of Article 128 (b) as amended by E.O. No. 111, dated December 24, 1986, this
executive order to be considered in the nature of a curative statute with retrospective
application.' (Progressive Workers' Union, et al. v. Hon. F.P. Aguas, et al. [supra]; M.
Garcia vs. Judge A. Martinez, et al., G.R. No. L- 47629, May 28, 1979, 90 SCRA
331). (Citations omitted; Emphasis supplied)

2. Applying the Maternity and Children's Hospital case to the case at bar, we
consider that petitioner did not effectively controvert the money claims of private
respondents against him, which claims originated from labor standards violations
asserted to have been committed by petitioner.

The records of the present case show that petitioner, for reasons satisfactory to himself,
did not contest the claims of private respondents despite the multiple opportunities therefor afforded
to him. Petitioner did not file any answer to the letter-complaint submitted by private respondents to
the Office of the Regional Director; neither did he file a position paper before that Office to controvert
private respondents' claims. It was only after the Regional Director had already rendered his ruling of
16 January 1986 in LSED Case No. 055-85 that petitioner tried to controvert the said claims by
arguing that private respondents had subsequently executed quitclaims and releases in his favor.
We note that petitioner did not question the correctness of the computations of the amounts due to
each of the private respondents nor that said claims had not theretofore been paid by petitioner.
After rendition of the Regional Director's decision, petitioner attempted to set up a defense
of subsequent compromise of and payment to or waiver by private respondents of their claims and
presented what he contends were quitclaims, releases and waivers signed by private respondents.
On the basis of the submission of such papers, petitioner now pretends that he had controverted the
claims of private respondents and that he had raised issues which could not be resolved without
considering evidentiary matters not verifiable in the normal course of inspection, and that therefore
the present case should go to the Labor Arbiter.

We do not find petitioner's argument persuasive. We believe that the question of the authenticity or
genuineness of the quitclaims, releases and waivers supposedly signed by private respondents, but
vehemently denied by the latter, could be verified by the Regional Director in the course of, and in
connection with, examination of the petitioner's books and records of which such supposed
quitclaims, etc. (if at all genuine) must have fanned part. We note also that after petitioner on 19 May
1986 filed a motion for reconsideration or appeal from the Regional Director's order of 16 January
1986, with the Secretary of Labor, the Secretary of Labor requested the Regional Director to conduct
conferences or hearings for the purpose of verifying the genuineness and authenticity of private
respondents' signatures on the quitclaim papers submitted by petitioner. A report by an LSW officer
of the Regional Director's office showed that:
 (a) eight (8) of the private respondents denied the genuineness of their purported
signatures appearing on the quitclaim and release papers shown to them for
Identification and examination;

(b) the same private respondents executed affidavits stating that they had not
executed any document in favor of petitioner; that the quitclaims, etc. submitted by
petitioner were simulated and forged; and that private respondents had not tried to
settle the case LSED Case No. 055-85).2

On the basis of the foregoing report, the Undersecretary of Labor stated in his 3 March 1988 order
that:

In the face of the foregoing circumstances, we have no alternative but to

deny respondents' motion. Let it be noted that a careful examination of the
signatures appearing in the quitclaims and releases will readily show quite apparent
variance vis-a-vis the signatures affixed in the complaint. This aroused our suspicion
on their due execution and genuineness and prompted us to cause the calling of
concerned parties for verification. Said doubts and suspicion were confirmed and
further strengthened by the outright denial made by complainants during the
conferences called as well as in the sworn statements they subsequently submitted.
We wish to state at this juncture that while it is our policy to encourage voluntary
settlement of disputes, this Office can not approve a compromise agreement or
settlement which is being questioned and in fact being denied by one of the
parties. While it is true that respondents submitted quitclaims and releases and other
documents purportedly executed by complainants to show that they have no more
claims against respondents, said documents could not be given any weight after the
complainants personally appeared during the hearing and declared that their
signatures appearing thereon were simulated and forged and at the same time
denied that any settlement was arrived at. Besides, the fact that those documents
were supposed to be executed as early as July 9, 1986 but were submitted to this
Office after more than a year has lapsed puts serious doubts on their
authenticity. For if indeed there was an amicable settlement reached that early, why
did it take respondent that long to notify us of the same and move for the dismissal
of this case. More importantly, would it not be appropriate and logical for the parties,
assisted by their respective counsels to file a joint motion to dismiss, if really they
have come to terms. 3

The quitclaim papers which petitioner alleges embodied a compromise or settlement agreement
were in any case not duly executed, that is, they were not signed in the presence of the Regional
Director or his duly authorized representative, in disregard of the requirements of Section 8, Rule II
of the Rules on the Disposition of Labor Standards Cases in the Regional Offices, which provide
that:

Section 8. Compromise Agreement. Should the party arrive at an agreement as to

the whole or part of the dispute, said agreement shall be reduced [to] writing and
signed by the parties in the presence of the regional director or his duly authorized
representative. (Emphasis supplied)

Thus, the issue of the authenticity and genuineness of the two (2) sets of supposed quitclaims had
been squarely raised before and passed upon and resolved by the Regional Director and the
Undersecretary of Labor. We note that petitioner did not submit any rebuttal evidence before the
Regional Director or his representatives. We note also that the set of supposed quitclaims
purportedly signed as early as 9 July 1986, were first presented by petitioner in his Manifestation
and Motion filed with the Undersecretary of Labor dated 23 July 1987, that is, more than a year after
execution; and that upon the other hand, the joint affidavits supposedly signed by private
respondents attesting to the genuineness of the purported quitclaims are dated only as of 14
September 1987, or more than a year after the supposed quitclaims were signed.

The record thus strongly suggests that the issue of the genuineness or authenticity of the purported
quitclaim documents was an issue belatedly manufactured by petitioner in the effort to evade the
jurisdiction of the Regional Director and delay payment of the amounts awarded by the Regional
Director.

3. On 2 March 1989, Republic Act No. 6715 amending certain provisions of the Labor
Code was enacted. In his concurring opinion in the Resolution of the Motion for
Reconsideration in Briad Agro Development Corporation v. de la Cerna, et al., 4 Mr.
Justice Narvasa underscored that Republic Act No. 6715 had left Article 128 (b) of
the Labor Code intact, in the sense that the Regional Director retains his visitorial
and enforcement powers thereunder and could exercise such powers even though
the amount involved was in excess of P5,000.00 provided that the employer had not
contested the findings of the LSW officers by raising issues which can not be
resolved without considering evidentiary matters not verifiable in the course of
normal inspection:

In the resolution, therefore, of any question of jurisdiction over a money claim arising
from employer-employee relations, the first inquiry should be into whether the
employment relation does indeed still exist between the claimant and the respondent.

If the relation no longer exists, and the claimant does not seek reinstatement, the
case is cognizable by the Labor Arbiter, not by the Regional Director. On the other
hand, if the employment relation still exists, or reinstatement is sought, the next
inquiry should be into the amount involved.

If the amount involved does not exceed P5,000.00, the Regional Director undeniably
has jurisdiction. But even if the amount of the claim exceeds P5,000.00, the claim is
not on that account necessarily removed from the Regional Director's competence. In
respect thereof, he may still exercise the visitorial and enforcement powers vested in
him by Article 128 of the Labor Code, as amended, supra; that is to say, he may still
direct his labor regulations officers or industrial safety engineers to inspect the
employer's premises and examine Ms records; and if the officers should find that
there have been violations of labor standards provisions, the Regional Director may,
after due notice and hearing, order compliance by the employer therewith and issue
a writ of execution to the appropriate authority for the enforcement thereof. However,
this power may not, to repeat, be exercised by him where the employer contests the
labor regulations officers' findings and raises issues which cannot be resolved
without considering evidentiary matters not verifiable in the normal course of
inspection. In such an event, the case will have to be referred to the corresponding
Labor Arbiter for adjudication, since it falls within the latter's exclusive original
jurisdiction. (Emphasis supplied)

As already pointed out above, petitioner here did not controvert the findings of the LSW officers and
the decision of the Regional Director, and that the issue he subsequently raised could, in any event,
have been resolved, as it was in fact verified and resolved, in the normal course of inspection and
conferences among petitioner and private respondents.
 4. Should it be assumed for purposes of argument merely, that under Article 217 (6)
of the Labor Code as last amended by Republic Act No. 6715, jurisdiction over wage
claims like those involved in LSED Case No. 055-85 was transferred to the Labor
Arbiter, it must still be pointed out that the amendments introduced by Republic Act
No. 6715 cannot be applied retroactively so as to set aside and
nullify earlier, completed exercises of jurisdiction which had resulted in a decision
which had become final and executory long before the enactment of Republic Act
No. 6715. As noted earlier, at the time LSED Case No. 05585 was commenced and
at the time decision thereon was rendered by the Regional Director and aimed by the
Undersecretary of Labor, both officials undeniably had jurisdiction over the subject
matter of LSED Case No. 055-85. That jurisdiction was not wiped out by the coming
into effect of Republic Act No. 6715. 5

5. Finally, petitioner points to the failure of public respondent Regional Director to

conduct an actual inspection of the establishment owned by petitioner, contending
that the absence of such an inspection nullified the decision rendered by the
Regional Director. This argument fails to take into account two (2) things: firstly, that
the inability of the LSW officers of the Regional Director to conduct an actual
inspection was due to refusal of petitioner's own employees to permit inspection in
the alleged absence of petitioner; secondly, Section 7, Rule II of the Rules on the
Disposition of Labor Standards Cases provides that:

Sec. 2. Complaint inspection. All such complaints shall immediately be forwarded

to the Regional Director who shall refer the case to the appropriate unit in the
Regional office for assignment to a Labor Standards and Welfare Officer (LSWO) for
field inspection. When the field inspection does not produce the desired results, the
Regional Director shall summon the parties for summary investigation to expedite the
disposition of the case. ... . (Emphasis supplied)

Thus, the lack of inspection was cured when the Regional Director called the parties to several
conferences, at which conferences, petitioner could have presented whatever he had in his books
and records to refute the claims of private respondents; petitioner did not do so and his failure must
be deemed a waiver of his right to contest the conclusions of the Regional Director on the basis of
the evidence and records actually made available to him.

WHEREFORE, the Petition is DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

G.R. No. 90519 March 23, 1992

UNION OF FILIPINO WORKERS (UFW), petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, SIMEX INTERNATIONAL INC., LILIA
SANTANDER, GEORGE SANTANDER and JOSEPH SANTANDER, respondents.

MELENCIO-HERRERA, J.:
This Petition for Certiorari seeks to set aside the Decision of public respondent National Labor
Relations Commission (NLRC), dated 26 August 1989, which reversed the Decision of the Labor
Arbiter, dated 27 June 1988, and sustained the closure of private respondent company, SIMEX
International Inc., as valid.

On 4 September 1987, a Petition for Direct Certification among the rank-and-file workers of SIMEX
was filed before the Med Arbiter, docketed as Case No. 00-09-634-87 (Petition for Direct
Certification), with the hearing thereof set for 18 September 1987. These workers subsequently
affiliated with petitioner Union of Filipino Workers (UFW).

On 19 September 1987, thirty-six (36) workers of the "lumpia" department were not given their usual
working materials and equipment for that day and, instead, were asked to clean their respective
working areas. Since these workers were employed on a "pakiao" basis, they refused. Nevertheless,
they still reported for work on 21 September 1987 but to their surprise, they found out that SIMEX
had removed all materials and equipments from their workplaces. The Union claims that its
members were, therefore, effectively locked out.

From 1 October 1987 to 7 October 1987, sixteen (16) more workers from the other departments
were similarly refused employment. As a consequence, these workers, through UFW, instituted a
Complaint for Unfair Labor Practices and violation of labor standard laws against SIMEX and its
principal officers and stockholders, namely private respondents Lilia, George and Joseph, all
surnamed SANTANDER, docketed as NLRC-NCR-00-09-03329-87 (for Illegal Dismissal/Lockout of
36 "lumpia" department workers and 16 others, etc.).

On 9 October 1987, however, SIMEX had filed a Notice of "Permanent Shutdown/Total Closure of
All Units of Operation in the Establishment" with the Department of Labor and Employment to take
effect on 9 November 1987, allegedly due to business reverses brought about by the enormous
rejection of their products for export to the United States. This notice of closure rendered the Petition
for Direct Certification moot and academic. Notices of Closure were placed in conspicuous places
around the company premises.

Meanwhile, in sympathy with their fifty-two (52) co-workers who were allegedly illegally dismissed by
SIMEX and in "protest to the continued acts of unfair labor practices committed" by SIMEX, thirty-
nine (39) other workers staged a picket outside the company premises from 10 October 1987 to 27
October 1987. By reason thereof, SIMEX's supposed offer of separation pay totalling P280,000.00
was withdrawn. When these workers lifted their picket on 27 October 1987 and voluntarily reported
for work, SIMEX refused to give them their usual work. They were dismissed effective 1 November
1987.

Another Complaint for Unfair Labor Practice was, therefore, filed against the same respondents, this
time involving the thirty-nine (39) workers who picketed the company premises in sympathy with
their other co-workers, docketed as NLRC-NCR-11-03887-87 (for Unfair Labor Practice, Illegal
Dismissal/Lockout of thirty-nine [39]workers). It is this case that is the subject of this Petition
for Certiorari.

On 27 June 1988, the Labor Arbiter rendered his verdict declaring that the closure of SIMEX was a
mere subterfuge in order to discourage the formation of the union. The respondents, SIMEX and the
SANTANDERs, were found guilty of unfair labor practice and were ordered, jointly and solidarily, to
reinstate the 39 workers without loss of seniority rights, benefits and privileges, with full backwages
from 1 November 1987 until such time that these workers are actually reinstated. They were also
ordered to pay ten per cent (10%) of the total awards as attorney's fees.
On appeal, the NLRC, in a Decision dated 28 August 1989, set aside the Labor Arbiter's Decision
when it held that the "determination of the wisdom or expediency to close a department in a
corporation, e.g., the 'lumpia' department in this case, due to financial reverses, is the sole
prerogative of the corporation." It ruled that since SIMEX had filed a Notice of Closure on 9 October
1987 and had complied with the requirements of the applicable rules and regulations when it posted
in their main gate the aforesaid Notice, its failure to accept the workers of UFW did not constitute
unfair labor practice considering that SIMEX had already closed the "lumpia" department. Hence,
SIMEX was merely ordered to pay the workers affected a separation pay equivalent to one (1)
month's salary for every year of service rendered.

Petitioner UFW has thus elevated its cause before us in this Petition for Certiorari, seeking the
reversal of the NLRC Decision, for having been rendered with grave abuse of discretion, and the
reinstatement instead of the Decision of the Labor Arbiter and its affirmance in toto.

The public and private respondents in this case were required to file their respective Comments.
Since the Solicitor General adopted a position contrary to that of the NLRC, the Court required the
latter to file its own Comment, which it has done.

After the Comments, Reply, Rejoinders and the parties' respective Memoranda were submitted,
private respondents SIMEX and the SANTANDERs filed a Manifestation, dated 10 December 1990
(p. 212, Rollo), signed by Atty. Julio F. Andres, Jr., stating that after they had manifested to the Court
on 9 December 1990 that they were adopting their Memorandum, they discovered that an
"Acknowledgment Receipt and Undertaking," dated 9 June 1989, had already been signed between
private respondent George SANTANDER and petitioner's former counsel, Atty. Modesto S.
Mendoza, whereby this case as well as two (2) others had already been settled and compromised.
Thereby, this controversy has become moot and academic. Said Undertaking reads:

I, MODESTO S. MENDOZA, . . ., have today RECEIVED FROM SIMEX

INTERNATIONAL, INC., through its Vice-President, MR. GEORGE SANTANDER,
the following amounts:

P500,000.00 in cash and

P50,000.00 PCIB check No. 496869 dated Sept. 9, 1989
P50,000.00 PCIB check No. 496870 dated Dec. 9, 1989
P50,000.00 PCIB check No. 496871 dated March. 9, 1990
P50,000.00 PCIB check No. 496872 dated June 9, 1990

in full and complete settlement of NLRC-NCR-CASE NOS. 00-09-03329-87, 00-11-

3887-87 and 00-01-00255-88.

I undertake to take charge of obtaining the signatures of the proper officers of the
union to sign the Motion to Dismiss in order to implement the full and final settlement
of said cases between complainant and respondents.

I further undertake and warrant that with this payment by the respondents, the
complainant Union and each of their members, hereby RELEASE AND DISCHARGE
the SIMEX INTERNATIONAL INC., each (sic) Officers, agents and representative
(sic) fro any demands, claims and liabilities from any cause whatsoever, arising out
of their employment with the said respondents (sic) corporation.

UFW maintains, however, that the settlement did not materialize because of its objections as shown
by the fact that it had not filed a Motion to Dismiss and Quitclaim in this case.
The issues for determination then are: 1) whether or not a compromise had been reached by the
parties; and 2) whether or not there was a valid closure of SIMEX that entitled it to terminate the
employment of its thirty-nine (39) employees. A plea is also made that the individual private
respondents SANTANDERs be dropped from the suit since they only acted within the scope of their
authority.

We incline to the view that no valid compromise agreement was arrived at in this case.

The alleged settlement involved three (3) cases, one of which charges alleged violation of labor
standards. Compromise agreements involving labor standards cases must be reduced to writing and
signed in the presence of the Regional Director or his duly authorized representative (Atilano v. De
la Cruz, G.R. No. 82488, 28 February 1990, 182 SCRA 886). Section 8, Rule II of the Rules on the
Disposition of Labor Standards Cases in the Regional Offices provides:

Sec. 8. Compromise Agreement. Should the party arrive at an agreement as to

the whole or part of the dispute, said agreement shall be reduced [to] writing and
signed by the parties in the presence of the regional director or his duly authorized
representative.

The questioned "Acknowledgment Receipt and Undertaking" did not comply with this requisite. It
was not, therefore, duly executed.

Even assuming arguendo that it was, Atty. Modesto Mendoza, counsel for petitioner UFW, whose
services were subsequently terminated, was not duly authorized to enter into a compromise with
SIMEX and the SANTANDERs. As aptly pointed out by the Solicitor General, Article 1878 of the Civil
Code provides that a Special Power of Authority is required before an agent can be authorized to
enter into a compromise. It reads:

Art. 1878. Special powers of attorney are necessary in the following cases:

xxx xxx xxx

(3) To compromise, to submit questions to arbitration, to renounce the right to appeal

from a judgment, to waive objections to the venue of an action or to abandon a
prescription already acquired. (Emphasis ours).

No evidence was adduced that would show that the aforementioned counsel for UFW was
authorized to enter into a compromise. Correspondingly, he cannot release and discharge SIMEX
and the SANTANDERs from their obligation. A perusal of the "Acknowledgment Receipt and
Undertaking" reveals that no representative of UFW signed the alleged settlement.

The fact that said counsel undertook to obtain the signatures of the proper officers of UFW shows
that his action was still subject to ratification by the union members. This confirmation was never
secured as shown by the fact that no motion for the dismissal of the case at bar had been filed by
UFW or on its behalf "in order to implement the full and final settlement of said case," unlike in
NLRC-NCR Case No. 00-01-00255-88 where such a Motion had been filed. In an Affidavit, dated 6
May 1991 (p. 258, Rollo), Atty. Mendoza also declared that respondent George Santander had
stopped the payment of the three (3) postdated checks, which statement has not been refuted by
private respondents.
We now shift to the issue bearing on the legality of the closure of SIMEX. Article 283 (then Article
284) of the Labor Code provides:

Art. 283. Closure of the establishment and reduction of personnel. The employer
may also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment and
undertaking not due to serious business losses or financial losses, the separation
pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months shall
be considered one (1) whole year. (Emphasis in text supplied).

Under this provision, the closure of a business establishment is a ground for the termination of the
services of any employee unless the closing is for the purpose of circumventing the provisions of
law. But, while business reverses can be a just cause for terminating employees, they must be
sufficiently proven by the employer (Indino v. NLRC, G.R. No. 80352, 29 September 1989, 178
SCRA 168).

In the case at bar, SIMEX alleged that it suffered export rejections amounting to $78,959.54 for
1985, $1,654.00 for 1986 and $28,414.11 for 1987, respectively. It alleged that these export
rejections resulted in huge financial losses to the company (Rollo, p. 96) so much so that remedial
measures were instituted as suppliers hesitated to given the company their usual credit terms (ibid,
p. 97).

The audited financial statement of SIMEX, however, clearly depicted that for 1985 and 1986, the
company actually derived retained earnings of P35,593.21 and P73, 241.25, respectively. The
private respondents never refuted this fact. Instead, they merely insisted that these export rejections
resulted in heavy losses for the company. These export rejections may have, indeed, contributed to
a reduction of SIMEX's earnings. The company, however, was not suffering from business losses, as
claimed, at the time of application for closure.

Indeed, there is no question that an employer may reduce its work force to prevent losses. However,
these losses must be serious, actual and real (Lopez Sugar Corporation v. Federation of Free
Workers, G.R. No. 75000-01, 30 August 1990, 189 SCRA 179). Otherwise, this "ground for
termination would be susceptible to abuse by scheming employers who might be merely feigning
business losses or reverses in their business ventures in order to ease out employees (Garcia v.
NLRC, G.R. No. L-67825, 4 September 1987, 153 SCRA 639).

In this regard, then, SIMEX failed to prove its claim. What were submitted as evidence were mere
receipts of export rejections, nothing more. SIMEX never adduced evidence that would reflect the
extent of losses suffered as a result of the export rejections, which failure is fatal to its cause.

The Notice of Closure filed by SIMEX had indicated that it will have a permanent shutdown and/or
total closure of all its units of operation. This was not so. Workers belonging to the Marketing and
Export Divisions were never laid off. A SEC Certification, dated 4 February 1988, shows that SIMEX
never applied for dissolution. The Labor Arbiter also found as a fact that SIMEX continued to export
its products, including "eggroll wrap," long after its target date of closure.

In explaining this discrepancy, SIMEX merely alleged that not all its operations were closed. Even on
this score alone, therefore, private respondents' position must be rejected.

These factors strongly give more credence to the Solicitor General and UFW's contention that the
alleged closure of business of SIMEX was "but a subterfuge to discourage formation of a union" and
that SIMEX was guilty of union busting. To all appearances, the company had filed a Notice of
Closure simply to pre-empt the employees from forming a union within the company.

The SANTANDERs' prayer that they be dropped from this case must also be rejected. They should
have adopted that recourse during the earlier stages. Moreover, UFW has adequately shown that
the individual private respondents were not only officers of the company but its major stockholders
as well (see Carmelcraft Corporation v. NLRC, G.R. Nos. 90634-35, 6 June 1990, 186 SCRA 393).

Lastly, if SIMEX has not yet recovered the balance of the compromise money given to then counsel
for petitioner, its recourse is to file the appropriate civil or criminal case against the latter. After all, in
said counsel's Affidavit, he has stated that he is ready to return the balance of what he had received
after payment of the amount due in NLRC-NCR Case No. 00-01-00255-88.

WHEREFORE, the Petition for Certiorari is GRANTED. The Decision of respondent NLRC, dated 26
August 1989, is hereby SET ASIDE and the Decision of the Labor Arbiter, dated 27 June 1988, is
hereby REINSTATED and AFFIRMED in toto.

Costs against private respondents.

SO ORDERED.

G.R. No. 158753 June 8, 2005

MINDORO LUMBER AND HARDWARE Petitioner,

vs.
EDUARDO D. BACAY, ELMER LANOT, NICANOR MANLISES, JR., FREDERICK MAJABA,
RODEL OBANDO, ROMAN ISINSAO, ELMAR MONTON, JUANITO OSINSAO, CARMELO
OLOYA, ROBERTO SUMO, ROLANDO CASIANO, NICASIO LUZ, LEODEGARIO SAGANG,
RUDY ENTERIA, ELMAR LIM, RAFAEL OBANDO, CRISPIN MANAO, JR., LINO LAQUI, ESMAR
LOTO, SR., LYRINE MAGSICO, MARITES OBANDO, EMMALEN VILLANUEVA, MARILOU LIM,
MARISSA MOTOL, ALLEN MOGOL, CARMENCITA NAPOLITANO, ROLANDO GAMILLA,
ELMER LACSON, REYNALDO MAJABA and FAUSTINO SEO, Respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure assailing the
November 22, 2002 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 66727, as well as its
June 12, 2003 Resolution.

The facts are as follows:

The private respondents are employees of petitioner Mindoro Lumber and Hardware (Mindoro
Lumber). On July 1, 1998, the private respondents, through then union president Eduardo Bacay,
filed a Complaint against Mindoro Lumber before the Region IV Office of the Department of Labor
and Employment (DOLE) for non-payment of overtime pay, legal holiday pay, 13th month pay, non-
payment/underpayment of minimum wage and allowances. The case was docketed as LSED-
RO400-9807-CI-001.2 Pursuant to the said complaint, the DOLE conducted an inspection on July 10,
1998 under Inspection Authority No. RO400-9807-CI-005. It was thereafter determined that Mindoro
Lumber committed several violations, to wit:

1. Underpayment of wages;

2. Non-payment of Regular Holiday pay;

3. Non-payment of 5-days service incentive leave pay;

4. Record Keeping - Payrolls/dtr were not available at the time of inspection and also
production records;

5. Non-submission of the [following]:

a. labor component

b. annual medical report

c. annual acc./illness exposure data report

d. safety committee organization

6. Non-coverage of SSS to affected employees.3

Meanwhile, on August 9, 1998, the private respondents executed several Affidavits (Sinumpaang
Salaysay),4declaring therein that since they each started working on July 1, 1995, they were made to
work for seven days a week starting 7:00 a.m. until 5:00 p.m., with lunch break from 11:30 a.m. to
1:00 p.m. They further declared that their wages were below the rates prescribed by the applicable
wage orders, and that they were not paid overtime pay, holiday pay or premium pay. The private
respondents stated that the total amount each of them were entitled to, aside from what they were
actually receiving by way of salary and other emoluments, ranged from 6,744.20 to 242,626.90.
They further averred that their wages were made compliant with the prevailing regional minimum
wages starting July 16, 1998, and for the first time, payroll and daily time records were being kept.

The counsel for the private respondents then filed a Manifestation before the Regional Office of the
DOLE, praying that an order be issued directing Mindoro Lumber to pay the amounts due to them as
reflected in their respective Sinumpaang Salaysay totaling 3,577,276.10.5

On September 2, 1998, the private respondents executed a Sama-samang Salaysay sa Pag-uurong

ng Sakdal (Joint Affidavit of Withdrawal

of Complaint),6 declaring therein that by virtue of the amount each of them received (which amount
was either 3,000.00 or 6,000.00 per employee), they were withdrawing their claim against
Mindoro Lumber in Case No. LSED-RO400-9807-CI-001. Pursuant thereto, their counsel filed a
motion to dismiss.7
It appears, however, that based on an affidavit executed by Eduardo Bacay, he had resigned from
Mindoro Lumber as of June 6, 1998.8 Relative thereto, he had also filed a complaint for Unfair Labor
Practice and Illegal Dismissal, docketed as NLRC Case No. RAB-IV-7-10167-98-ORM. However, on
September 2, 1998, Bacay executed an Affidavit9 declaring that he was no longer interested in
pursuing the said case and that he had voluntarily resigned from Mindoro Lumber. By virtue of
Bacays affidavit, Labor Arbiter Nieves V. De Castro issued an Order dismissing NLRC Case No.
RAB-IV-7-10167-98-ORM.10

Meanwhile, Elmer Lanot was elected as the new union president.

On June 27, 1999, the private respondents executed a Sama-Samang Salaysay (Joint Affidavit),
declaring therein that before Bacay resigned from Mindoro Lumber, he persuaded them to execute
the Sama-samang Salaysay sa Pag-uurong ng Sakdal, in exchange for receiving the amount of
6,000.00 each. Such amount, however, was grossly disproportionate to their entitlement under the
law; hence, they were withdrawing the said Sama-samang Salaysay sa Pag-uurong ng Sakdal, and
were authorizing Lanot to pursue their claim against Mindoro Lumber.11Pursuant thereto, Lanot filed
a motion before the Regional Office of the DOLE, praying that the employees be paid the amounts
due to each of them, and that the Sama-samang Salaysay sa Pag-uurong ng Sakdal be declared
null and void.12

On November 4, 1999, Regional Director Alex E. Maraan issued an Order13 dismissing Case No.
LSED-RO400-9807-CI-001, and declared that the Sama-samang Salaysay executed by the
employees of Mindoro Lumber was valid.

The private respondents then filed an appeal before the Office of the Secretary of Labor, questioning
the propriety of the November 4, 1999 Order of the Regional Director.

On March 27, 2001, Labor Secretary Patricia A. Sto. Tomas issued an Order14 granting the appeal,
and ordered the entire records of the case remanded to the Regional Office for further proceedings,
without prejudice to the deduction of whatever amount received by the complainant workers. The
Secretary of Labor declared as follows:

The only issue to be resolved in the case at bar is whether or not the Sama-samang Salaysay sa
Pag-uurong ng Sakdal is valid and binding.

Doctrinally, a compromise agreement is binding upon the parties if it is not contrary to law, morals,
good customs, public order and public policy. If the agreement was voluntarily entered into
and represents a reasonable settlement, it is binding upon parties and may not later be disowned
simply because there was a change of mind.

However, in the case at bar, the "Sama-samang Salaysay sa Pag-uurong ng Sakdal" attests that the
complainant-workers who signed the said documents (sic) each received the amount of 3,000.00 to
6,000.00. This is far from the computation of the supposed claims stated in their Sinumpaang
Salaysay ranging from 53,672.60 to as much as 104,359.60 each complainant. The fact that the
amount given in exchange for the waiver is very much less than the amount claimed renders the
waiver null and void. By reason of public policy, quitclaims are ineffective to bar recovery for the full
measure of the workers right (Republic Planters Bank vs. NLRC, et. al., G.R. No. 117460, January
6, 1997).

Further, the Supreme Court in the case of Rolando Malinao and Eduardo Malinao vs. NLRC, et al.,
G.R. No. 119492, November 24, 1999, citing Peftok Integrated Services, Inc. vs. NLRC, 293 SCRA
507, held:
"It is decisively clear that they (guards) affixed their signatures to subject waivers and/or quitclaims
for fear that they would not be paid their salaries on pay day or worse, still, their services would be
terminated if they did not sign those papers. In short, there was no voluntariness in the execution of
the quitclaims or waivers in question. It should be borne in mind that in this jurisdiction, quitclaims,
waivers or releases are looked upon with disfavor. "Necessitous men are not free men. They are
commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure
of the workers legal rights." (Emphasis supplied).15

Mindoro Lumber moved to have the Order of the Secretary of Labor reconsidered, but the same was
denied on July 24, 2001.16

Mindoro Lumber forthwith elevated the matter to the CA by way of a petition for certiorari under Rule
65 of the Rules of Court, arguing that the Sama-samang Salaysay sa Pag-uurong ng Sakdal was
valid and binding, and was in the nature of a compromise agreement executed pursuant to the
provisions of Article 227 of the Labor Code. Mindoro Lumber stressed that the same was voluntarily
executed by its employees.

Meanwhile, on December 21, 2001, Regional Director Ricardo S. Martinez, Sr. issued a Writ of
Execution17 seeking to enforce the March 27, 2001 and July 24, 2001 Orders of the Secretary of
Labor. In the said writ, the Regional Director commanded the Deputy Sheriff to proceed to Mindoro
Lumber and require the latter to pay an aggregate amount of 3,191,663.20 to the complaining
employees. Mindoro Lumber forthwith filed a motion for the issuance of a temporary restraining
order and writ of preliminary injunction. On January 21, 2002, the CA issued a temporary restraining
order.18

On November 22, 2002, the CA rendered its decision dismissing the petition. A motion for
reconsideration proved futile.

Hence, this petition.

Mindoro Lumber, now as the petitioner, raises the following lone error:

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS REVERSIBLE

ERROR IN FINDING THAT THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT DID
NOT COMMIT GRAVE ABUSE OF DISCRETION IN ISSUING HER ASSAILED TWIN ORDERS OF
MARCH 27, 2001 AND JULY 24, 2001.19

The threshold issues raised in this petition are (a) whether or not the Sama-samang Salaysay sa
Pag-uurong ng Sakdal constitutes a valid compromise agreement as defined under Article 227 of the
Labor Code of the Philippines, as amended; and (b) whether or not the acknowledgment of the
respondents that they each received the amount of either 3,000.00 or 6,000.00 embodied in the
said Salaysay constitutes a valid quitclaim.

Anent the first issue, the petitioner posits that the Sama-samang Salaysay sa Pag-uurong ng
Sakdal meets the requirements of Article 227 of the Labor Code on compromise agreements. The
petitioner emphasized that the Sama-samang Salaysay was voluntarily executed by the private
respondents and involves a mutual act of the parties: on the part of the petitioner, by granting the
amounts paid, and on the part of the private respondents, in agreeing to withdraw their claim with the
view of achieving industrial peace in the workplace.

The petitioner points out that while the Sama-samang Salaysay sa Pag-uurong ng Sakdal was
executed without the assistance of the Bureau of Labor Relations (BLR) or the DOLE Regional
Office, the November 4, 1999 Order of the Regional Director in Case No. LSED-RO400-9807-CI-001
nonetheless shows that when Eduardo Bacay appeared before the said office, he was assisted by
counsel.

The petitioners pose is bereft of merit.

Article 227 of the Labor Code, as amended, provides:

Art. 227. Compromise Agreements . Any compromise settlement, including those involving labor
standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the
regional office of the Department of Labor, shall be final and binding upon the parties. The National
Labor Relations Commission or any court shall not assume jurisdiction over issues involved therein
except in case of non-compliance thereof or if there is prima facieevidence that the settlement was
obtained through fraud, misrepresentation, or coercion.

The assistance of the BLR or the regional office of the DOLE in the execution of a compromise
settlement is a basic requirement;20 without it, there can be no valid compromise settlement. In this
case, the petitioner admits that the purported compromise settlement was executed by the private
respondents without such required assistance. The closest form of assistance adverted to by the
petitioner in this case was that of Bacays counsel when the latter appeared before the Office of the
Regional Director to file the following: the Sama-samang Salaysay sa Pag-uurong ng
Sakdal executed by the private respondents; a Sinumpaang Salaysay executed by Bacay
withdrawing the complaint; and the Motion to Dismiss. Such assistance, however, is not the
"assistance" required by Article 227. As such, the Sama-samang Salaysay sa Pag-uurong ng
Sakdal executed by the respondents cannot qualify as a valid compromise settlement.

Anent the second issue, the petitioner points out that the settlement embodied in the said Sama-
samang Salaysay sa Pag-uurong ng Sakdal should be respected as the law between it and its
employees. The petitioner even stressed that while quitclaims are commonly frowned upon, not all
waivers and quitclaims are invalid as against public policy.

The petitioner is correct in saying that there are legitimate waivers that represent a voluntary and
reasonable settlement of a workers claim which should be respected by the courts as the law
between the parties.21 Indeed, not all quitclaims are per se invalid or against public policy, except (1)
where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or
(2) where the terms of settlement are unconscionable on their faces; in these cases, the law will step
in to annul the questionable transactions.22 Such quitclaims are regarded as ineffective to bar the
workers from claiming the full measure of their legal rights.23

In this case, however, it cannot be argued that there is no gross disparity between the amount
actually received by each private respondent as compared to the amount owing him or her, as
shown in the following list:

Amount received24 Amount due25

Elmer Lanot 6,000.00 75,345.60
Nicanor Manlises, Jr. 6,000.00 97,118.60
Frederick Majaba 6,000.00 97,118.60
Rodel Obando 6,000.00 104,359.60
Roman Isinsao 6,000.00 97,118.60
Elmar Monton 6,000.00 88,387.60
Juanito Osinsao 6,000.00 97,118.60
 Carmelo Oloya 6,000.00 82,535.60
Roberto Sumo 6,000.00 75,345.60
Rolando Casiano 6,000.00 75,345.60
Nicasio Luz 6,000.00 53,672.60
Leodegario Sagang 6,000.00 88,387.60
Rudy Enteria 6,000.00 6,744.20
Elmar Lim 6,000.00 73,690.60
Rafael Obando 3,000.00 14,380.60
Crispin Manao, Jr. 3,000.00 20,380.60
Lino Laqui 3,000.00 14,380.60
Esmar Loto, Sr. 3,000.00 20,380.60
Lyrine Magsico 6,000.00 242,626.90
Marites Obando 6,000.00 222,400.00
Emmalen Villanueva 6,000.00 242,626.90
Marilou Lim 6,000.00 222,721.90
Marissa Motol 6,000.00 242,626.90
Allen Mogol 6,000.00 242,626.90
Carmencita Napolitano 6,000.00 242,626.90
Rolando Gamilla 3,000.00 21,164.60
Elmer Lacson 3,000.00 29,164.60
Reynaldo Majaba 6,000.00 97,118.60
Faustino Seo 3,000.00 (no information)

The foregoing clearly illustrates that the private respondents individual claims, ranging from
6,744.20 to 242,626.90, are grossly disproportionate to what each of them actually received
under the Sama-samang Salaysay sa Pag-uurong ng Sakdal. The amount of the settlement is
indubitably unconscionable; hence, ineffective to bar the workers from claiming the full measure of
their legal rights.

IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED for lack of merit. Case No. LSED-
RO400-9807-CI-001 is hereby REMANDED to the Region IV Office of the Department of Labor and
Employment for appropriate proceedings.

SO ORDERED.

G.R. Nos. 75700-01 August 30, 1990

LOPEZ SUGAR CORPORATION, petitioner,

vs.
FEDERATION OF FREE WORKERS, PHILIPPINE LABOR UNION ASSOCIATION (PLUA-
NACUSIP) and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Sicangco, Diaz, Ortiz and Lapak for petitioner.

Reynaldo J. Gulmatico for private respondents.

FELICIANO, J.:
In this Petition, petitioner Lopez Sugar Corporation seeks reversal of the Decision dated 2 July 1986 of public respondent National labor
Relations Commission ("NLRC") which affirmed the decision of the Labor Arbiter dated 30 September 1983. The Labor Arbiter (a) had
denied petitioner's application to retrench some of its employees and (b) had ordered the reinstatement of twenty-seven (27) employees and
to pay them full backwages from the time of termination until actual reinstatement.

Petitioner, allegedly to prevent losses due to major economic problems, and exercising its privilege
under Article XI, Section 2 of its 1975-1977 Collective Bargaining Agreement ("CBA") entered into
between petitioner and private respondent Philippine Labor Union Association ("PLUA-NACUSIP"),
caused the retrenchment and retirement of a number of its employees.

Thus, on 3 January 1980, petitioner filed with the Bacolod District Office of the then Ministry of Labor
and Employment ("MOLE") a combined report on retirement and application for clearance to
retrench, dated 28 December 1979, 1 affecting eighty six (86) of its employees. This was docketed as
NLRC Case Ne. A-217-80. Of these eighty-six (86) employees, fifty-nine (59) were retired effective 1
January 1980 and twenty-eight (27) were to be retrenched effective 16 January 1980 "in order to
prevent losses."

Also, on 3 January 1980, private respondent Federation of Free Workers ("FFW"), as the certified
bargaining agent of the rank-and-file employees of petitioner, filed with the Bacolod District Office of
the MOLE a complaint dated 27 December 1979 for unfair labor practices and recovery of union
dues docketed as NLRC Case No. A-198-80. In said complainant, FFW claimed that the
terminations undertaken by petitioner were violative of the security of tenure of its members and
were intended to "bust" the union and hence constituted an unfair labor practice. FFW claimed that
after the termination of the services of its members, petitioner advised 110 casuals to report to its
personnel office. FFW further argued that to justify retrenchment, serious business reverses must be
"actual, real and amply supported by sufficient and convincing evidence." FFW prayed for
reinstatement of its members who had been retired or retrenched.

Petitioner denied having hired casuals to replace those it had retired or retrenched. It explained that
the announcement calling for 110 workers to report to its personnel office was only for the purpose
of organizing a pool of extra workers which could be tapped whenever there were temporary
vacancies by reason of leaves of absence of regular workers.

On 22 January 1980, another report on retirement affecting an additional twenty-five (25) employees
effective 1 February 1980 was filed by petitioner. 2

On 3 March 1980, petitioner filed its Position Paper in NLRC Case No. A-217-80 contending that
certain economic factors jeopardizing its very existence rendered the dismissals necessary.
Petitioner explained:

As a business firm, the Applicant must earn [a] fair return of (sic) its investment. Its
income is generated from the sales of the Central's shares of sugar and molasses
production. It has however no control of the selling price of both products. It is of
common knowledge that for the past years the price of sugar has been very low. In
order to survive, the Applicant has effected several forms of cost reduction. Now that
there is hope in the price of sugar the applicant is again faced with two major
economic problems, i.e., the stoppage of its railway operation and the spiralling cost
of production.

The Applicant was forced to stop its railway operation because the owners of the
land upon which the Applicant's railway lines traverse are no longer willing to allow
the Applicant to make further use of portions of their lands. . . .
 The other economic problem that confronted the Applicant is the rising cost of labor,
materials, supplies, equipment, etc. These two major economic problems the rising
cost of production and the stoppage of its railway facilities, put together pose a very
serious threat against the economic survival of the Applicant. In view of this, the
Applicant was constrained to touch on the last phase of its cost reduction program
which is the reduction of its workforce.

xxx xxx xxx

The Applicant as a business proposition must be allowed to earn income in order to

survive. This is the essence of private enterprise. Being plagued with two major
economic problems, the applicant is not expected to remain immobile. It has to react
accordingly. As many other business firms have resorted to reduction of force in view
of the present economic crisis obtaining here and abroad, the applicant was likewise
compelled to do the same as a last alternative remedy for survival. 3

In a decision dated 30 September 1983, 4 the Labor Arbiter denied petitioner's application for
clearance to retrench its employees on the ground that for retrenchment to be valid, the employer's
losses must be serious, actual and real and must be amply supported by sufficient and convincing
evidence. The application to retire was also denied on the ground that petitioner's prerogative to so
retire its employees was granted by the 1975-77 collective bargaining agreement which agreement
had long ago expired. Petitioner was, therefore, ordered to reinstate twenty-seven retired or
retrenched employees represented by private respondent Philippine Labor Union Association
("PLUA") and FFW and to pay them full backwages from the time of termination until actual
reinstatement.

Both dissatisfied with the Labor Arbiter's decision, petitioner and respondent FFW appealed the case
to public respondent NLRC. On appeal, the NLRC, finding no justifiable reason for disturbing the
decision of the Labor Arbiter, affirmed that decision on 2 July 1986. 5

Hence, this Petition for certiorari making the following arguments:

1. That portions of the decision of public respondent NLRC dated July 2, 1986
affirming the decision of Labor Arbiter Ethelwoldo Ovejera dated September 30, 1983
are contrary to law and jurisprudence;

2. That said decision subject of this petition are in some respects not supported by
evidence and self-contradictory;

3. That said decision subject of this petition were rendered with grave abuse of
discretion and in excess of jurisdiction;

4. That the dismissals at bar are valid and based on justifiable

grounds. 6

Petitioner contends that the NLRC acted with grave abuse of discretion in denying its combined
report on retirement and application for clearance to retrench. Petitioner argues that under the law, it
has the right to reduce its workforce if made necessary by economic factors which would endanger
its existence, and that for retrenchment to be valid, it is not necessary that losses
be actually sustained. The existence of valid grounds to anticipate or expect losses would be
sufficient justification to enable the employer to take the necessary actions to prevent any threat to
its survival.
Upon the other hand the Solicitor General argued that the Decision rendered by the Labor Arbiter
and affirmed by the NLRC is supported by substantial evidence on record; that, therefore, no grave
abuse of discretion was committed by public respondent NLRC when it rendered that Decision.

Article 283 of the Labor Code provides:

Article 283. Closure of establishment and reduction of personnel. The employer

may also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of cricumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employer at least one (1) month before
the intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled to a se
pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases, of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months shall
be considered one (1) whole year. (Emphasis supplied)

In ts ordinary connotation, he phrase "to revent losses" means hat retrenchment or termination of the
services of some employees is authorized to be undertaken by the employer sometime before the
losses anticipated are actually sustained or realized. It is not, in other words, the intention of the
lawmaker to compel the employer to stay his hand and keep all his employees until sometime after
losses shall have in fact materialized ; 7 if such an intent were expressly written into the law, that law
may well be vulnerable to constitutional attack as taking property from one man to give to another.
This is simple enough.

At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is
sufficient legal warrant for reduction of personnel. In the nature of things, the possibility of incurring
losses is constantly present, in greater or lesser degree, in the carrying on of business operations,
since some, indeed many, of the factors which impact upon the profitability or viability of such
operations may be substantially outside the control of the employer. Thus, the difficult question is
determination of when, or under what circumstances, the employer becomes legally privileged to
retrench and reduce the number of his employees.

We consider it may be useful to sketch the general standards in terms of which the acts of petitioner
employer must be appraised. Firstly, the losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to
be insubstantial and inconsequential in character, the bona fide nature of the retrenchment would
appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably
imminent, as such imminence can be perceived objectively and in good faith by the employer. There
should, in other words, be a certain degree of urgency for the retrenchment, which is after all a
drastic recourse with serious consequences for the livelihood of the employees retired or otherwise
laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably
necessary and likely to effectively prevent the expected losses. The employer should have taken
other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor
costs. An employer who, for instance, lays off substantial numbers of workers while continuing to
dispense fat executive bonuses and perquisites or so-called "golden parachutes", can scarcely claim
to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional
policy of providing "full protection" to labor, the employer's prerogative to bring down labor costs by
retrenching must be exercised essentially as a measure of last resort, after less drastic means
e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time,
improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. have been
tried and found wanting.

Lastly, but certainly not the least important, alleged if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason
for requiring this quantum of proof is readily apparent: any less exacting standard of proof would
render too easy the abuse of this ground for termination of services of employees. In Garcia v.
National Labor Relations Commissions, 8 the Court said:

. . . But it is essentially required that the alleged losses in business operations must be
prove[n] (National Federation of Labor Unions [NAFLU] vs. Ople, 143 SCRA 124 [1986]). Otherwise,
said ground for termination would be susceptible to abuse by scheming employers who might be
merely feigning business losses or reverses in their business ventures in order to ease out
employees. (Emphasis supplied) 9

Whether or not an employer would imminently suffer serious or substantial losses for economic
reasons is essentially a question of fact for the Labor Arbiter and the NLRC to determine. In the
instant case, the Labor Arbiter found no sufficient and convincing evidence to sustain petitioner's
essential contention that it was acting in order to prevent substantial and serious losses. The Labor
Arbiter said:

There is no question that an employer may reduce its work force to prevent losses,
however, these losses must be serious, actual and real. In the instant case, even
assuming arguendo that applicant company was, in fact, surrounded by the major
economic problems stated earlier, the question may be asked will it suffer serious
losses as a result of the said economic problems? We find the answer to be
negative. We have scanned the records but failed to find evidence submitted to show
that applicant company would suffer serious business losses or reverses as a
consequence of the alleged major economic problems. In fact, applicant company
asseverated that these problems only threatens its survival, hence, it had to reduce
its work force. Another thing, while applicant company was retrenching its regular
employees, it also hired the services of casuals. This militated its claim to reduce its
work force to set up cost reduction. It must be stated that settled is the rule that
serious business losses or reverses must be actual, real and amply supported by
sufficient and convincing evidence. 10 (Emphasis supplied)

We are in principle bound by such findings in accordance with well-established jurisprudence

that the factual findings of labor administrative officials, if supported by substantial evidence,
are entitled not only to great respect but even to finality, 11 unless, indeed, petitioner is able to
show that the Labor Arbiter and the NLRC simply and arbitrarily disregarded evidence before
them or had misapprehended evidence of such a nature as to compel a contrary conclusion
if properly appreciated.

The submissions made by petitioner in this respect are basically that from the crop year 1975-1976
to the crop year 1980-981, the amount of cane deliveries made to petitioner Central was declining
and that the degree of utilization of the mill's capacity and the sugar recovery from the cane actually
processed, were similarly declining. 12 Petitioner also argued that the competition among the existing
sugar mills for the limited supply of sugar cane was lively and that such competition resulted in
petitioner having to close approximately thirty-eight (38) of its railroad lines by the end of
1979. 13According to the petitioner, the cost of producing one (1) picul of sugar during the same
period (i.e., from crop year 1976-1977 to crop year 1979-1980) increased from P69.97 to P93.11.

The principal difficulty with petitioner's case as above presented was that no proof of actual declining
gross and net revenues was submitted. No audited financial statements showing the financial
condition of petitioner corporation during the above mentioned crop years were submitted. Since
financial statements audited by independent external auditors constitute the normal method of proof
of the profit and loss performance of a company, it is not easy to understand why petitioner should
have failed to submit such financial statements.

Moreover, while petitioner made passing reference to cost reduction measures it had allegedly
undertaken, it was, once more, a fairly conspicuous failure to specify the cost-reduction measures
actually undertaken in good faith before resorting to retrenchment. Upon the other hand, it appears
from the record that petitioner, after reducing its work force, advised 110 casual workers to register
with the company personnel officer as extra workers. Petitioner, as earlier noted, argued that it did
not actually hire casual workers but that it merely organize(d] a pool of "extra workers" from which
workers could be drawn whenever vacancies occurred by reason of regular workers going on leave
of absence. Both the Labor Arbiter and the NLRC did not accord much credit to petitioner's
explanation but petitioner has not shown that the Labor Arbiter and the NLRC were merely being
arbitrary and capricious in their evaluation. We note also that petitioner did not claim that the
retrenched and retired employees were brought into the "pool of extra workers" rather than new
casual workers.

Petitioner next contends that the NLRC committed grave abuse of discretion in affirming the ruling of
the Labor Arbiter that the retirements effected by petitioner were na valid since the basis therefor,
i.e. Article XI Section 2 of the 1975-1977 CBA, had by then already expired and was thus no longer
enforceable or operative. 14 Article XI, 2 of the CBA provides:

2. Section 2. Any employee may apply for after having rendered the of at least
eighteen (18) year of service to the COMPANY. The COMPANY, as a right , may
retire any employee who has rendered twenty (20) years of service, or has reached
the age of sixty (60) years. Employees who are physically incapacitated to continue
to work in the COMPANY upon certification of the COMPANY Physician, shall be
entitled to a separation pay equivalent to the retirement benefits herein provided for
that may have accrued. The heirs or surviving legally married spouse of the
deceased employee shall be granted by the COMPANY the amount equivalent to the
accrued retirement benefit of the deceased employee at the time of his
death." 15 (Emphasis supplied)

Petitioner argues that the CBA was "extended" not merely by implication, but by reciprocal acts in
the sense that even after the CBA had expired, petitioner continued to give, and the workers
continued to receive, the benefits and exercise the prerogatives provided therein. Under these
circumstances, petitioner urges, the employees are estopped from denying the extended effectivity
of the CBA.

The Solicitor General, as well as private respondents, argue basically that petitioner's right to retire
its employees was coterminous with the life of the CBA.

On this point, we must find for petitioner. Although the CBA expired on 31 December 1977, it
continued to have legal effects as between the parties until a new CBA had been negotiated and
entered into. This proposition finds legal support in Article 253 of the Labor Code, which provides:
 Article 253 Duty to bargain collectively when there exists a collective bargaining
agreement. When there is a collective bargaining agreement, the duty to bargain
collectively shall also mean that neither party shall terminate nor modify such
agreement during its lifetime. However, either party can serve a written notice to
terminate or modify the agreement at least sixty (60) days prior to its expiration
date. It shall be the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement during the 60-day
period and/or until a new agreement is reached by the parties. (Emphasis supplied)

Accordingly, in the instant case, despite the lapse of the formal effectivity of the CBA by virtue of its
own provisions, the law considered the same as continuing in force and effect until a new CBA shall
have been validly executed. Hence, petitioner acted within legal bounds when it decided to retire
several employees in accordance with the CBA. That the employees themselves similarly acted in
accordance with the CBA is plain from the record. Even after the expiration of the CBA, petitioner's
employees continued to receive the benefits and enjoy the privileges granted therein. They
continued to avail of vacation and sick leaves as computed in accordance with Articles VII and VIII of
the CBA. They also continued to avail of medical and dental aid under Article IX, death aid and
bereavement leave under Articles X and XIV, insurance coverage under Article XVI and housing
allowance under Article XVIII. Seventeen (17) employees even availed of Section XI (dealing with
retirement) when they voluntarily retired between 1 January 1978 and 31 December 1980 and
received retirement pay computed on the basis of Section 3 of the same article. If the workers chose
to avail of the CBA despite its expiration, equity if not the law-dictates that the employer should
likewise be able to invoke the CBA.

The fact that several workers signed quitclaims will not by itself bar them from joining in the
complaint. Quitclaims executed by laborers are commonly frowned upon as contrary to public policy
and ineffective to bar claims for the full measure of the worker's legal rights. In AFP Mutual Benefit
Association, Inc. v. AFP-MBAI-EU, 16 the Court held:

In labor jurisprudence, it is well establish that quitclaims and/or complete releases

executed by the employees do not estop them from pursuing their claims arising from
the unfair labor practice of the employer. The basic reason for this is that such
quitclaimants and/or complete releases are against public policy and, therefore, null
and void. The acceptance of termination pay does not divest a laborer of the right to
prosecute his employer for unfair labor practice acts. (Cario vs. ACCFA, L-19808,
September 29, 1966, 18 SCRA 183; Philippine Sugar Institute vs. CIR, L-13475,
September 29, 1960, 109 Phil. 452; Mercury Drug Co. vs. CIR, L-23357, April 30,
1974, 56 SCRA 694, 704)

In the Cario case, supra, the Supreme Court, speaking thru Justice Sanchez, said:

Acceptance of those benefits would not amount to estoppel. The

reason is plain. Employer and employee, obviously, do not stand on
the same footing The employer drove the employee to the wall. The
latter must have to get hold of money. Because, out of job, he had to
face the harsh necessities of life. He thus found himself in no position
to resist money proffered. His, then, is a case of adherence, not of
choice. One thing sure, however, is that petitioners did not relent their
claim. They pressed it. They are deemed not to have waived any of
their rights. Renuntiatio non praesumitur (Emphasis supplied)
We conclude that because the attempted retrenchment on the part of the petitioner was legally
ineffective, all retrenched employees should be reinstated and backwages paid them corresponding
to a period of three (3) years without qualification or deduction, in accordance with the three-year
rule laid down in a long line of cases. 17 In the case of employees who had received payments for
which they had executed quitclaims, the amount of such payments shall be deducted from the
backwages due to them. Where reinstatement is no longer possible because the positions they had
previously filled are no longer in existence, petitioner shall pay backwages plus, in lieu of
reinstatement, separation pay in the amount of one-month's pay for every year of service including
the three (3) year-period of putative service for which backwages will be paid. Upon the other hand,
we find valid the retirement of those employees who were retired by petitioner pursuant to the
applicable provisions of the CBA.

WHEREFORE, the Petition for Certiorari is partially GRANTED due course and the Decision dated 2
July 1986 of the public respondent NLRC is hereby MODIFIED to the extent that it had affirmed that
portion of the Decision of the Labor Arbiter dated 30 September 1983 ordering the reinstatement
judgment of employees who had been retired by petitioner under the applicable provisions of the
CBA. Except as so modified, the Decision of the NLRC is hereby AFFIRMED. No pronouncement as
to costs.

SO ORDERED.

G.R. No. 91298 June 22, 1990

CORAZON PERIQUET, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and THE PHIL. NATIONAL CONSTRUCTION
CORPORATION (Formerly Construction Development Corp. of the Phils.), respondents.

Tabaquero, Albano & Associates for petitioner.

The Government Corporate Counsel for private respondent.

CRUZ, J.:

It is said that a woman has the privilege of changing her mind but this is usually allowed only in affairs of the heart where the rules are
permissibly inconstant. In the case before us, Corazon Periquet, the herein petitioner, exercised this privilege in connection with her work,
where the rules are not as fickle.

The petitioner was dismissed as toll collector by the Construction Development Corporation of the
Philippines, private respondent herein, for willful breach of trust and unauthorized possession of
accountable toll tickets allegedly found in her purse during a surprise inspection. Claiming she had
been "framed," she filed a complaint for illegal dismissal and was sustained by the labor arbiter, who
ordered her reinstatement within ten days "without loss of seniority rights and other privileges and
with fun back wages to be computed from the date of her actual dismissal up to date of her actual
reinstatement." 1 On appeal, this order was affirmed in toto by public respondent NLRC on August
29, 1980. 2

On March 11, 1989, almost nine years later, the petitioner filed a motion for the issuance of a writ of
execution of the decision. The motion was granted by the executive labor arbiter in an order dated
June 26, 1989, which required payment to the petitioner of the sum of P205,207.42 "by way of
implementing the balance of the judgment amount" due from the private respondent.3 Pursuant
thereto, the said amount was garnished by the NLRC sheriff on July 12, 1989. 4 On September 11,
1989, however, the NLRC sustained the appeal of the CDCP and set aside the order dated June 20,
1989, the corresponding writ of execution of June 26, 1989, and the notice of garnishment. 5

In its decision, the public respondent held that the motion for execution was time-barred, having
been filed beyond the five-year period prescribed by both the Rules of Court and the Labor Code. It
also rejected the petitioner's claim that she had not been reinstated on time and ruled as valid the
two quitclaims she had signed waiving her right to reinstatement and acknowledging settlement in
full of her back wages and other benefits. The petitioner contends that this decision is tainted with
grave abuse of discretion and asks for its reversal. We shall affirm instead.

Sec. 6, Rule 39 of the Revised Rules of Court, provides:

SEC. 6. Execution by motion or by independent action. A judgment may be

executed on motion within five (5) years from the date of its entry or from the date it
becomes final and executory. After the lapse of such time, and before it is barred by
the statute of limitations, a judgment may be enforced by action.

A similar provision is found in Art. 224 of the Labor Code, as amended by RA 6715, viz.

ART. 224. Execution of decision, orders, awards. (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter or Med-
Arbiter, or the Voluntary Arbitrator may, motu propio, or on motion of any interested
party, issue a writ of execution on a judgment within five (5) years from the date it
becomes final and executory, requiring a sheriff or a duly deputized officer to execute
or enforce a final decision, order or award. ...

The petitioner argues that the above rules are not absolute and cites the exception snowed
in Lancita v. Magbanua, 6 where the Court held:

Where judgments are for money only and wholly unpaid, and execution has been
previously withheld in the interest of the judgment debtor, which is in financial
difficulties, the court has no discretion to deny motions for leave to issue execution
more than five years after the judgments are entered. (Application of Molnar,
Belinsky, et al. v. Long Is. Amusement Corp., I N.Y.S, 2d 866)

In computing the time limited for suing out of an execution, although there is authority
to the contrary, the general rule is that there should not be included the time when
execution is stayed, either by agreement of the parties for a definite time, by
injunction, by the taking of an appeal or writ of error so as to operate as a
supersedeas, by the death of a party, or otherwise. Any interruption or delay
occasioned by the debtor will extend the time within which the writ may be issued
without scire facias.

xxx xxx xxx

There has been no indication that respondents herein had ever slept on their rights to
have the judgment executed by mere motions, within the reglementary period. The
statute of limitation has not been devised against those who wish to act but cannot
do so, for causes beyond their central.
Periquet insists it was the private respondent that delayed and prevented the execution of the
judgment in her favor, but that is not the way we see it. The record shows it was she who dilly-
dallied.

The original decision called for her reinstatement within ten days from receipt thereof following its
affirmance by the NLRC on August 29, 1980, but there is no evidence that she demanded her
reinstatement or that she complained when her demand was rejected. What appears is that she
entered into a compromise agreement with CDCP where she waived her right to reinstatement and
received from the CDCP the sum of P14,000.00 representing her back wages from the date of her
dismissal to the date of the agreement. 7

Dismissing the compromise agreement, the petitioner now claims she was actually reinstated only
on March 16, 1987, and so should be granted back pay for the period beginning November 28,
1978, date of her dismissal, until the date of her reinstatement. She conveniently omits to mention
several significant developments that transpired during and after this period that seriously cast doubt
on her candor and bona fides.

After accepting the sum of P14,000.00 from the private respondent and waiving her right to
reinstatement in the compromise agreement, the petitioner secured employment as kitchen
dispatcher at the Tito Rey Restaurant, where she worked from October 1982 to March 1987.
According to the certification issued by that business, 8 she received a monthly compensation of
P1,904.00, which was higher than her salary in the CDCP.

For reasons not disclosed by the record, she applied for re-employment with the CDCP and was on
March 16,1987, given the position of xerox machine operator with a basic salary of P1,030.00 plus
P461.33 in allowances, for a total of P1,491.33 monthly. 9

On June 27, 1988; she wrote the new management of the CDCP and asked that the rights granted
her by the decision dated August 29, 1980, be recognized because the waiver she had signed was
invalid. 10

On September 19, 1988, the Corporate Legal Counsel of the private respondent (now Philippine
National Construction Corporation) recommended the payment to the petitioner of the sum of
P9,544.00, representing the balance of her back pay for three years at P654. 00 per month (minus
the P14,000.00 earlier paid). 11

On November 10, 1988, the petitioner accepted this additional amount and signed another Quitclaim
and Release reading as follows:

KNOW ALL MEN BY THESE PRESENTS:

THAT, I CORAZON PERIQUET, of legal age, married and resident of No. 87 Annapolis St., Quezon
City, hereby acknowledged receipt of the sum of PESOS: NINE THOUSAND FIVE HUNDRED
FORTY FOUR PESOS ONLY (P9,544.00) Philippine currency, representing the unpaid balance of
the back wages due me under the judgment award in NLRC Case No. AB-2-864-79 entitled
"Corazon Periquet vs. PNCC- TOLLWAYS" and I further manifest that this payment is in full
satisfaction of all my claims/demands in the aforesaid case. Likewise, I hereby manifest that I had
voluntarily waived reinstatement to my former position as TOLL TELLER and in lieu thereof, I sought
and am satisfied with my present position as XEROX MACHINE OPERATOR in the Central Office.

Finally, I hereby certify that delay in my reinstatement, after finality of the Decision dated 10 May
1979 was due to my own fault and that PNCC is not liable thereto.
I hereby RELEASE AND DISCHARGE the said corporation and its officers from money and all
claims by way of unpaid wages, separation pay, differential pay, company, statutory and other
benefits or otherwise as may be due me in connection with the above-entitled case. I hereby state
further that I have no more claims or right of action of whatever nature, whether past, present, future
or contingent against said corporation and its officers, relative to NLRC Case No. AB-2-864-79.

IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of November 1988 at
Mandaluyong, Metro Manila. (Emphasis supplied.) 12

The petitioner was apparently satisfied with the settlement, for in the memorandum she sent the
PNCC Corporate Legal Counsel on November 24, 1988, 13 she said in part:

Sir, this is indeed my chance to express my gratitude to you and all others who have
helped me and my family enjoy the fruits of my years of stay with PNCC by way of
granting an additional amount of P9,544.00 among others ...

As per your recommendation contained therein in said memo, I am now occupying

the position of xerox machine operator and is (sic) presently receiving a monthly
salary of P2,014.00.

Reacting to her inquiry about her entitlement to longevity pay, yearly company increases and other
statutory benefits, the private respondent adjusted her monthly salary from P2,014.00 to P3,588.00
monthly.

Then the lull. Then the bombshell.

On March 11, 1989, she filed the motion for execution that is now the subject of this petition.

It is difficult to understand the attitude of the petitioner, who has blown hot and cold, as if she does
not know her own mind. First she signed a waiver and then she rejected it; then she signed another
waiver which she also rejected, again on the ground that she had been deceived. In her first waiver,
she acknowledged full settlement of the judgment in her favor, and then in the second waiver, after
accepting additional payment, she again acknowledged fun settlement of the same judgment. But
now she is singing a different tune.

In her petition she is now disowning both acknowledgments and claiming that the earlier payments
both of which she had accepted as sufficient, are insufficient. They were valid before but they are not
valid now. She also claimed she was harassed and cheated by the past management of the CDCP
and sought the help of the new management of the PNCC under its "dynamic leadership." But now
she is denouncing the new management-for also tricking her into signing the second quitclaim.

Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later be
disowned simply because of a change of mind. It is only where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable
on its face, that the law will step in to annul the questionable transaction. But where it is shown that
the person making the waiver did so voluntarily, with full understanding of what he was doing, and
the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as
a valid and binding undertaking. As in this case.
The question may be asked: Why did the petitioner sign the compromise agreement of September
16, 1980, and waive all her rights under the judgment in consideration of the cash settlement she
received? It must be remembered that on that date the decision could still have been elevated
on certiorari before this Court and there was still the possibility of its reversal. The petitioner
obviously decided that a bird in hand was worth two on the wing and so opted for the compromise
agreement. The amount she was then waiving, it is worth noting, had not yet come up to the
exorbitant sum of P205,207.42 that she was later to demand after the lapse of eight years.

The back pay due the petitioner need not detain us. We have held in countless cases that this
should be limited to three years from the date of the illegal dismissal, during which period (but not
beyond) the dismissed employee is deemed unemployed without the necessity of proof. 14 Hence,
the petitioner's contention that she should be paid from 1978 to 1987 must be rejected, and even
without regard to the fact (that would otherwise have been counted against her) that she was
actually employed during most of that period.

Finally, the petitioner's invocation of Article 223 of the Labor Code to question the failure of the
private respondent to file a supersedeas bond is not well-taken. As the Solicitor General correctly
points out, the bond is required only when there is an appeal from the decision with a monetary
award, not an order enforcing the decision, as in the case at bar.

As officers of the court, counsel are under obligation to advise their clients against making untenable
and inconsistent claims like the ones raised in this petition that have only needlessly taken up the
valuable time of this Court, the Solicitor General, the Government Corporate Counsel, and the
respondents. Lawyers are not merely hired employees who must unquestioningly do the bidding of
the client, however unreasonable this may be when tested by their own expert appreciation of the
pertinent facts and the applicable law and jurisprudence. Counsel must counsel.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

G.R. No. 119649 July 28, 1997

RICKY GALICIA, ANTHONY GALICIA, YOVITO GAN, PRIMO VELEZ, ERBIE GAN, ARTURO
ROSAL, ALIPIO GADON, MAXIMINO PANDO, GINA GAN, RODOLFO GALICIA, JESSIE
GALICIA, JOEL GREGORIO, CHARLIE GAN, MABINI GUYO, JELRY MERANO, ARNULFO
MESANA, ROSENDO GUARDIAN, SOCRATES GALOS, MICHAEL GREGORIO, ROBERTO
PALACIO, ROMEO GALICIA, JOEVIN MELANO, PASCUALITO ABAT, PEPITO DAVID and
JOVENCIO GREGORIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), GLOBE PAPER
MILLS/KENG HUA PAPER PRODUCTS, INC. and ARMOR INDUSTRIAL
CORPORATION, respondents.

ROMERO, J.:

In the instant petition for certiorari assailing the Decision and Resolution of the National Labor
Relations Commission in NLRC NCR Case No. 00-01-0017092, dated November 29, 1994 and
March 3, 1995, respectively, the sole issue pertains to the validity of a compromise agreement and
quitclaims executed by the parties during the pendency of private respondents' appeal to the
respondent Commission.
On January 8, 1992, ninety-five workers, including the twenty-five petitioners herein, were assisted
by a labor federation, the National Organization of Workingmen (NOWM) in their suit against
respondent companies for illegal dismissal, regularization, underpayment of wages, holiday pay,
premium pay etc. After several complainants withdrew from the case, the parties filed their
respective position papers. They alleged that Armor Industrial Corporation, Gibson Contractor
Services, Juner Contractor Services, Libra Manpower Agency and Anjo Contractor, all "labor-only"
contractors, recruited them and supplied them to Globe Paper Mills and Keng Hua Paper Products
where they performed activities directly necessary to the companies' principal business.

On January 15, 1994, Labor Arbiter Ernesto S. Dinopol rendered his decision declaring the thirty
remaining complainants as regular employees of Keng Hua Paper Products, Globe Paper Mills and
Armor Industrial Corporation and ordering their reinstatement. Respondent companies were ordered
to pay backwages from February 15, 1991 up to the date of actual reinstatement, in the total amount
of P3,223,261.00, with P107,380.00 for each complainant as of January 15, 1994.

Respondent companies appealed the case to the NLRC.

On March 1, 1994, the disputed Compromise Agreement was executed by James Yu, the Manager
and Vice President of Globe Paper Mills and Teofilo Rafols, the National President of the National
Organization of Workingmen (NOWM) representing the complainants, when most of the latter were
still in Romblon, their home province. The agreement settled the case for and in consideration of the
total sum of P300,000.00.

Complainants arrived from Romblon on March 7, 1994. The next day, each of the complainants
signed a Quitclaim and Release which confirmed the compromise agreement as well as receipt of
their individual share amounting to P12,000.00 each.1 The standard Quitclaim and Release reads, in
part:

Na, pagsaalang-alang sa halagang LABING DALAWANG LIBONG (P12,000.00) PESOS

bilang kabayaran sa akin ng Globe Paper Mills Corp./Armor Industrial Corporation et. al., sa
pamamagitan ni Bro. Teofilo A. Rafols, presidente ng N.O.W.M. na siyang aking/aming
pinagkatiwalaan ang pakikipag-usap kay G. JAMES YU, President/General Manager ng
nasabing mga Kompanya tungkol sa pakikipag-ayos o "amicable settlement," na ang huling
ALOK ng Kompanya ay aking sinang-ayunan, dala na rin ng aking kahirapan at kawalan ng
pinagkakakitaan sa matagal na panahon;" (Emphasis supplied.)2

On March 9, 1994, petitioners executed a Sama-samang Sinumpaang Salaysay where they stated:

4. Na, batid namin na ang naturang halaga na aming tinanggap (P12,000.00 each) ay hindi
makatarungan at sapat na kabayaran sa aming mga hinahabol na biyaya sa naturang mga
Kompanya at alinsunod sa desisyon ng Labor Arbiter, ngunit, dala ng aming kahirapan sa
buhay, bunga ng aming matagal nang pagkakatanggal sa aming trabaho mula pa noong
taon 1991 at 1992 ay napag-pasiyahan namin na pansamantalang kunin/tanggapin ang
inalok na halaga ng Kompanya, ngunit aming ipagpapatunay ang nasabing usapin/asunto sa
kadahilanan masyado kaming api at hindi makatarungan ang pagkakatanggap sa aming
trabaho na nagdulot ng labis na kahirapan sa aming mga mahal sa buhay, sa katunayan,
ang aming kinabubuhay ay sa tulong ng aming mga malalapit na kamag-anak at mga
kaibigan, at upang lubusang mabigyan ng katarungan ang aming kalagayan. (Emphasis
added.)3

Private respondents submitted the Compromise Agreement and Joint Motion to Dismiss before the
respondent Commission which was then considering the case on appeal from the decision of the
Labor Arbiter. Herein petitioners later filed an Opposition to the Motion to Dismiss where they
demanded the difference of what they actually received and the judgment award in their favor.

On November 29, 1994, respondent Commission rendered its Decision approving the Compromise
Agreement, setting aside the January 15, 1994 decision of the Labor Arbiter and dismissing the
instant case.4 The NLRC held that the complainants were fully aware of the award in their favor
dated January 15, 1994 when they voluntarily entered into the compromise agreement on March 1,
1994. They thus disregarded the judgment award and opted for the last and sincere offer of
respondent Globe Paper Mills instead of waiting out the appeal filed by respondents. Respondent
NLRC added that it cannot subscribe to complainants' contention that they signed the compromise
agreement under the compulson of "dire necessity" and held that position as a mere afterthought.

Their motion for reconsideration having been denied on March 3, 1995, the instant petition
for certiorari was filed contesting the decision of the NLRC.

A compromise agreement is executed by parties who adjust their difficulties by mutual consent in
order to prevent or to put an end to a lawsuit. Additionally, each of the parties is motivated by "the
hope of gaining, balanced by the danger of losing."5 Under the Labor Code, any compromise
settlement voluntarily agreed upon by the parties with the assistance of the Bureau of Labor
Relations or the regional office of the Department of Labor and Employment shall be final and
binding upon the parties.6 Even if contracted without the assistance of labor officials, compromise
agreements between workers and their employers have been upheld and considered as valid,
accepted and even desirable means of settling disputes.7

This Court takes cognizance of the low grade for quitclaims executed by laborers, which are often
frowned upon as being contrary to public policy.8 In some cases, we have ruled that quitclaims are
ineffective in barring recovery for the full measure of the worker's rights and that acceptance of
benefits therefrom does not amount to estoppel.9 In Lopez Sugar Corporation v. Federation of Free
Workers, the Court explained:

Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer
and employee, obviously do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of money. Because, out of job, he had
to face the harsh necessities of life. He thus found himself in no position to resist money
proffered. His, then, is a case of adherence, not of choice. One thing, sure however, is that
petitioners did not relent their claim. They pressed it. They are deemed not to have waived
any of their rights.10

In the case of Periquet v. NLRC, we set the guidelines and current doctrinal policy regarding
quitclaims and waivers, thus:

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the
questioned transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as a valid and
binding undertaking.11
Hence, quitclaims where the workers voluntarily accept a reasonable amount or consideration as
settlement, are deemed valid and cannot be set aside merely because the parties have
subsequently changed their minds.

For the compromise to be voluntarily entered into, there must be personal and specific individual
consent.12 In the case at bar, petitioners attempt to disavow their consent given to Mr. Teofilo Rafols,
president of the National Organization of Workingmen, by disclaiming any authority accorded by
them to Mr. Rafols to fix and decide the total amount.13 We find no basis for this allegation apart from
their joint affidavit and unsubstantiated claims to that effect.

Although their authorization in favor of Mr. Rafols does not appear to have been recorded in a
written instrument for no such document was submitted to the Court, at the conference between the
parties, they confirmed the veracity of the compromise agreement and the quitclaim. Even granting
that there may have been some question regarding the authority granted to the NOWM President,
the same was waived once petitioners signed the quitclaim evidencing receipt of their individual
shares.

Respondent Commission has ruled that petitioners authorized NOWM to negotiate with
management. It cannot be said to have committed grave abuse of discretion in utilizing facts
presented during the conference, for proceedings held thereat do not constitute privileged
communication.

The more relevant inquiry is whether the consideration for the quitclaims signed by the workers was
reasonable and acceptable. Where it is shown that the person making the waiver did so voluntarily
and with full understanding of what he was doing and the consideration of the quitclaim is
credible, the transaction must be recognized as a valid and binding undertaking.14

We find quite relevant the ruling of the Court in Cruz v. NLRC15 because the amount accepted by
petitioners herein was very much less that the amount awarded by the Labor Arbiter in his January
15, 1994 decision. The consideration for the quitclaim, a measly P12,000.00 per worker and the total
sum of P300,000, are inordinately low and exceedingly unreasonable relative to the P107,380.00 per
worker and total P3,223,261.00 awarded by the Arbiter. Palpably inequitable, the quitclaim cannot
be considered an obstacle to the pursuit of their legitimate claims.16

Petitioners never accepted as full compensation the meagre amount they received when they signed
the quitclaim and release. In the Sinumpaang Salaysay they executed the next day, they expressly
declared their awareness that the amount they received was unjust and insufficient to answer for
their just claims and the award given by the Labor Arbiter, but due to destitution caused by their
protracted unemployment, they decided to accept the P12,000.00 in the meantime.17 The Court also
recognizes "dire necessity" of laborers as ample justification to accept even sufficient sums of money
from their employers. We are not unaware that in some cases, such asOlaybar v. NLRC, this ground
was deemed unacceptable in refuting the agreement in question. The main difference, however, lies
in the existence of a voluntary acceptance of the agreement and the reasonable consideration for it,
making the agreement intrinsically valid and binding, thus rendering the "dire necessity" excuse
immaterial and irrelevant.

Worth noting is the Solicitor General's opinion in favor of granting the petition. The OSG concluded
that "(w)hile petitioners may not have been 'tricked' into accepting the P12,000.00, to repeat, the
undisputed and concurrent circumstances of dire necessity and unconscionability obtaining in the
case at bar constitute more than sufficient ground to invalidate the compromise
agreement."18
WHEREFORE, the instant petition is hereby GRANTED. The assailed resolution and decision of
respondent Commission are hereby SET ASIDE. The case is REMANDED to the Commission for
expeditious resolution on the merits.

SO ORDERED.

G.R. No. 95013 September 21, 1994

TRADE UNIONS OF THE PHILIPPINES/FEBRUARY SIX MOVEMENT TUPAS/FSM), petitioner,

vs.
HON BIENVENIDO LAGUESMA, TRANSUNION CORPORATION-GLASS DIVISION, AND
INTEGRATED LABOR ORGANIZATION (ILO-PHILIPPINES), respondents.

Alar, Comia, Manalo and Associates Law Offices for petitioner.

Arcaya & Associates for Transunion Corp.-Glass Division.

Francisco A. Mercado, Jr. for Integrated Labor Organization (ILO-Phils.)

PUNO, J.:

Petitioner Trade Unions of the Philippines-February Six Movement (TUPAS-FSM) seeks the reversal
of the Resolution, dated July 25, 1990, rendered by then Secretary of Labor and Employment Ruben
D. Torres, In OS-MA-A-5-167-90, which dismissed the petition for certification election filed by
petitioner TUPAS-FSM for being prematurely filed. 1

The controlling facts, as culled from the records, are as follows:

On March 23, 1990 TUPAS-FSM filed a petition for certification election with the Regional Office No.
IV of the Department of Labor and Employment (DOLE), for the purpose of choosing a bargaining
representative for the rank-and-file employees of Transunion Corporation's industrial plant, situated
in Canlubang, Laguna, known as the Transunion Corporation-Glassware Division. Petitioner had
then secured a Certification , dated
March 22, 1990, issued by Tomas B. Bautista, Jr., Director IV of DOLE (Region IV), that "Transunion
Corporation" has no existing collective bargaining agreement with any labor organization. 2

It appears, however, that before the filing of said petition, or on November 15, 1989, Integrated
Labor Organization (ILO-Phils.) was duly certified by DOLE as the sole and exclusive bargaining
agent of the rank-and-file employees of Transunion Corporation-Glassware Division. 3 On November
28, 1989, a collective bargaining agreement (CBA) was the forged between Transunion-Glassware
Division and ILO-Phils. covering the company's rank-and-file employees, The CBA, with a five-year
term from December 1, 1989 to December 1, 1994, was ratified by a great majority of the rank-and -
filers on December 8, 1989. 4 In the meantime, the President of ILO-PHILS died. An inter-union
conflict followed and the subject CBA was filed with DOLE, for registration purposes, only on March
14, 1990,more or less, three (3) months from its execution. Finally, on May 4, 1990, the Certification
of Registration was issued by DOLE through Regional Director Romeo A. Young. 5

ILO-Phils., intervened in the certification election proceedings initiated by TUPAS-FSM. It opposed

the petition in view of the existing CBA between ILO and the Transunion Corporation-Glassware
Division. It stresses that the petition for certification election should be entertained only during the
freedom period, or sixty day before the expiration of the CBA. Med-Arbiter Orlando S. deal Cruz
dismissed the petition on the ground of prematurity.

TUPAS-FSM appealed contending: (1) that pursuant to Article 231 of the Labor Code. CBAs shall be
file with the Regional Office of the DOLE within thirty (30) days from the date of signing thereof; (2)
that said requirement is mandatory, although it would not affect the enforceability of the CBA as
between the parties thereto; and (3) since the CBA was filed outside the 30-day period specified
under Article 231 of the Labor Code, the prohibition against certification election under Article 232 of
the same Code should not apply to third parties such as petitioner.

As stated earlier, the Secretary of Labor and Employment affirmed the impugned Order of the Med-
Arbiter, ruling that the belated submission of the CBA was excusable and that the requirement of the
law was substantially complied with upon the filing of a copy of the CBA prior to the filing of the
petition for certification election. TUPAS-FSM then filed a motion for reconsideration, but it was also
denied, Hence, this petition for certiorari where petitioner alleged:

GRAVE ABUSE OF DISCRETION ON THE PART OF THE PUBLIC

RESPONDENTS AMOUNTING TO LOSS OF JURISDICTION; and

THE RESOLUTION IS CONTRARY TO THE FACTS AND THE LAW.

The petition lacks merit.

Petitioner raises both factual and legal issues in this present petition.

First, the factual issues. Relying on the March 22, 1990 Dole Certification issued by Director
Bautista, Jr., supra, petitioner insists there was no existing CBA between Transunion Corporation
and any labor organization when it filed its petition for certification election on March 23, 1990. To
further strengthen its position, petitioner charges that the filing of the CBA was antedated to march
14, 1990, to make it appear that the same was already existing and filed before the filing of the
petition for certification election. Petitioner also claims that since Article 231 of the Labor Code
mandates DOLE to act on the CBA filed in its office within Five (5) days from date of filing thereof,
the subject CBA was filed on April 30, 1990, or five (5) days before its registration on May 4, 1990.

The argument deserves scant consideration. It is elementary that the special civil action
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to nullify or modify the
proceedings before the concerned tribunal, board, or officer exercising judicial functions who has
acted without or in excess of its jurisdiction or with grave abuse of discretion and there is no appeal,
nor any plain, speedy, and adequate remedy in the ordinary course of law. This Court is not a trier of
facts and it is not its function to examine and evaluate the probative value of all evidence presented
to the concerned tribunal which formed the basis of its impugned decision, resolution or
order. 6Following this hoary rule, it is inappropriate to review the factual findings of the Med-arbiter
and the Secretary of Labor, regarding the date of filing of the CBA on March 14, 1990 prior to the
filing of the petition for certification election; the company's voluntary recognition and DOLE's
certification of ILO-PHILS. as the sole and exclusive bargaining representative of the rank-and-file
employees of Transunion Corporation-Glassware Division; and the subsequent registration of the
CBA. They are binding on this Court as they are supported by substantial evidence. In contrast,
petitioners bare allegation pertaining to the "antedating" of the date of filing of the CBA is
unsubstantiated and based purely on conjectures.
It is crystal clear from the records that the rank-and- file employees of private respondent's
Glassware Division are, at present, represented by ILO-PHILS. Hence, petitioner's reliance on the
March 22, 1990 Certification issued by Director Bautista, Jr., is misplaced. The existence and filing
of their CBA was confirmed in a Certification, dated April 24, 1990, issued by Director Romeo A.
Young of DOLE-Region IV. 7 The Certification of ILO-PHILS. "as the sole and exclusive bargaining
agent of the rank-and-file workers of Transunion-Glassware Division," means it shall remain as such
during the existence of the CBA, to the exclusion of other labor organizations, including petitioner,
and no petition questioning the majority status of the incumbent bargaining agent shall be
entertained, nor shall certification election be conducted, outside of the fifty-day freedom period
immediately before the expiry date of the five-year term of the CBA. 8

We now resolved the legal issue. Petitioner points out that the subject CBA was filed beyond the 30-
day period prescribed under Article 231 of the Labor Code. It also insists that under Article 232 of
the Labor Code, the prohibition on the filing of a petition for certification election applies when the
CBA had been duly registered and, in this case, since the CBA was not registered in accordance
with the Art. 231, the prohibition will not apply. We disagree.

Article 231 an s232 of the Labor Code read:

Art. 231. Registry of unions and file of collective agreements. - . . . .

Within thirty (30) days from the execution of a Collective Bargaining Agreement, the
parties shall submit copies of the same directly to the Bureau or the Regional Office
of the Department of Labor and Employment for registration accompanied with
verified proofs of its posting n two conspicuous places in the place of work and
ratification by the majority of all the workers in the bargaining unit. The Bureau or
Regional Office shall act upon the application for registration of such Collective
Bargaining Agreement within five (5) days from receipts thereof. The Regional Office
shall furnish the Bureau with a copy of the Collective Bargaining agreement within
five (5) days form its submission.

xxx xxx xxx

Art. 232. Prohibition on Certification Election. The Bureau shall not entertain
any petition for certification election or any other action which may disturb the
administration of duly registered existing collective bargaining agreement affecting
the parties except under Articles 253, 253-A and 256 of this Code.

Corollary thereto, Article 253-A of the same Code reads:

Art. 253-A. Any Collective Bargaining Agreement that the parties may enter into
shall, insofar as the representation aspect is concerned, be for a term of five (5)
years. No petition questioning agent shall be entertained and no certification election
shall be conducted by the Department of Labor and Employment outside the sixty-
day period immediately before the date of expiry of such five year term of the
Collective Bargaining Agreement. . . . .

It appears that the procedural requirement of filing the CBA within 30 days from date of execution
under Article 231 was not met. The subject CBA was executed on November 28, 1989. It was
ratified on December 8, 1989, and then filed with DOLE for registration purposes on March 14, 1990.
Be that as it may, the delay in the filing of the CBA was sufficiently explained, i.e., there was an inter-
union conflict on who would succeed to the presidency of ILO-PHILS. The CBA was registered by
the DOLE only on May 4, 1990. It would be injudicious for us to assume, as what petitioner did, that
the said CBA was filed only on April 30, 1990, or five (5) days before its registration, on the
unsupported surmise that it was done to suit the law that enjoins Regional Offices of Dole to act
upon an application for registration of a CBA within five (5) days from its receipt thereof. In the
absence of any substantial evidence that DOLE officials or personnel, in collusion with private
respondent, had antedated the filing date of the CBA, the presumption on regularity in the
performance of official functions hold.

More importantly, non-compliance with the cited procedural requirement should not adversely affect
the substantive validity of the CBA between ILO-PHILS and the Transunion Corporation-Glassware
Division covering the company's rank and file employees. A collective bargaining agreement is more
than a contract. It is highly impressed with public interest for it is an essential instrument to promote
industrial peace. Hence, it bears the blessings not only of the employer and employees concerned
but even the Department of Labor and Employment. To set it aside on technical grounds is not
conducive to the public good.

IN VIEW WHEREOF, the impugned July 25, 1990 Resolution, and August 23, 1990 Order of
Secretary Ruben D. Torres and Undersecretary Bienvenido E. Laguesma. respectively, in OS-MA-A-
5-167-90, is AFFIRMED in toto. Costs against petitioned.

SO ORDERED.

G.R. No. 116172 October 10, 1996

SAN MIGUEL FOODS, INC. CEBU B-MEG FEED PLANT, petitioner,

vs.
HON. BIENVENIDO E. LAGUESMA, Undersecretary of DOLE and ILAW AT BUKLOD NG
MANGGAGAWA (IBM), respondents.

HERMOSISIMA, JR., J.:p

This is a petition for certiorari under Rule 65 to review and set aside two Resolutions of Mediator-Arbiter Achilles V. Manit, dated
January 5, 1994 and April 6, 1994, and the affirmation Order on appeal of the public respondent, Undersecretary Bienvenido E.
Laguesma of the Department of Labor and Employment. The petition below was entitled: "In Re: Petition for Direct Certification as
the Sole and Exclusive Bargaining Agent of All Monthly Paid Employees of SMFI-Cebu B-Meg Feeds Plant," docketed as OS-MA-
A-3-51-94 (R0700-9309-RU-036).

The essential facts are not disputed.

On September 24, 1993, a petition for certification election among the monthly-paid
employees of the San Miguel Food, Inc.-Cebu B-Meg Feeds Plant was filed by private
respondent labor federation Ilaw at Buklod ng Mangagawa (IBM, for brevity) before Med-
Arbiter Achilles V. Manit, alleging, inter alia, that it is a legitimate labor organization duly
registered with the Department of Labor and Employment (DOLE) under Registration
Certificate No. 5369-IP. SMFI-Cebu B-Meg Feeds Plant (SMFI, for brevity), herein petitioner,
is a business entity duly organized and existing under the laws of the Philippines which
employs roughly seventy-five (75) monthly paid employees, almost all of whom support the
present petition. It was submitted in said petition that there has been no certification election
conducted in SMFI to determine the sole and exclusive bargaining agent thereat for the past
two years and that the proposed bargaining unit, which is SMFI's monthly paid employees, is
an unorganized one. It was also stated therein that petitioner IBM (herein private respondent)
has already complied with the mandatory requirements for the creation of its local or affiliate
in SMFI's establishment.

On October 25, 1993, herein petitioner SMFI filed a Motion to Dismiss the aforementioned
petition dated September 24, 1993 on the ground that a similar petition remains pending
between the same parties for the same cause of action before Med-Arbiter Achilles V. Manit.

SMFI was referring to an evidently earlier petition, docketed as CE CASE NO R0700-9304-

RU-016, filed on April 28, 1993 before the office of Med-Arbiter Manit. Indeed, both petitions
involved the same parties, cause of action and relief being prayed for, which is the issuance
of an order by the Med-Arbiter allowing the conduct for a certification election in SMFI's
establishment. The contention is that the judgment that may be rendered in the first petition
would be determinative of the outcome of the second petition, date September 24, 1993.

On December 2, 1993, private respondent IBM filed its Opposition to SMFI's Motion to
Dismiss contending, among others, that the case referred to by SMFI had already been
resolved by Med-Arbiter Manit in his Resolution and Order dated July 26, 19931 and
September 2, 1993,2 respectively, wherein IBM's first petition for certification election was
denied mainly due to IBM's failure to comply with certain mandatory requirements of the law.
This denial was affirmed by the Med-Arbiter in another Order dated November 12,
19933 wherein the Resolutions dated July 26, 1993 and September 2, 1993 were made to
stand. Thus, IBM argues that there having been no similar petition pending before Med-
Arbiter Manit, another petition for certification election may be refiled as soon as the said
requirements are met. These requirements were finally satisfied before the second petition
for certification election was brought on September 24, 1993.

On January 5, 1994, Med-Arbiter Manit, this time, granted the second petition for certification
election of private respondent IBM in this wise:

Let, therefore, a certification election be conducted among the monthly paid rank and
file employees of SMFI-CEBU B-MEG FEEDS PLANT at Lo-oc, Mandaue City. The
choices shall be: YES-for IBM AT SMFI-CEBU B-MEG; and NO for No Union.

The parties are hereby notified of the pre-election conference which will take place
on January 17, 1994 at 3:00 o'clock in the afternoon to set the date and time of the
election and to thresh out the mechanics thereof. On said date and time the
respondent is directed to submit the payroll of its monthly paid rank and file
employees for the month of June 1993 which shall be the basis for the list of the
eligible voters. The petitioner is directed to be ready to submit a list of the monthly
paid rank and file employees of SMFI-CEBU B-MEG FEEDS PLANT when the
respondent fails to submit the required payroll.

SO ORDERED.4

Petitioner SMFI appealed the foregoing Order to the Secretary of Labor and Employment
alleging that the Med-Arbiter erred in directing the conduct of certification election
considering that the local or chapter of IBM at SMFI is still not a legitimate labor organization
with a right to be certified as the exclusive bargaining agent in petitioner's establishment
based on two grounds: (1) the authenticity and due execution of the Charter Certificate
submitted by IBM in favor of its local at SMFI cannot yet be ascertained as it is still not
known who is the legitimate and authorized representative of the IBM Federation who may
validly issue said Charter Certificate; and (2) a group of workers or a local union shall acquire
legal personality only upon the issuance of a Certificate of Registration by the Bureau of
Labor Relations under Article 234 of the Labor Code, which IBM at SMFI did not possess.

In a resolution dated April 6, 1994, public respondent Undersecretary Bienvenido Laguesma,

by authority of the Secretary of Labor and Employment, denied petitioner's appeal, viz.:

WHEREFORE, the appeal is hereby denied for lack of merit and the Order of the
Med-Arbiter is hereby affirmed.

Let the records of this case be forwarded to the Regional Office of origin for the
immediate conduct of certification election subject to the usual pre-election
conference.

SO RESOLVED.5

Thereafter, a Motion for Reconsideration was filed which was also denied by the public
respondent in his Order dated May 24, 1994.6

Hence, the instant petition interposing the following justifications:

1) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA

GRAVELY ABUSED HIS DISCRETION WHEN HE ARBITRARILY RULED THAT "A
LOCAL OR CHAPTER OF A LABOR FEDERATION, LIKE RESPONDENT IBM,
NEED NOT OBTAIN A CERTIFICATE OF REGISTRATION FROM THE BUREAU
OF LABOR RELATIONS TO ACQUIRE LEGAL PERSONALITY," WHEN ARTICLE
234 OF THE LABOR CODE OF THE PHILIPPINES AND SECTION 3 OF RULE II
OF BOOK V OF THE RULES IMPLEMENTING THE LABOR CODE, AS AMENDED,
CLEARLY PROVIDES THAT A GROUP OF WORKERS OR A LOCAL UNION
SHALL ACQUIRE LEGAL PERSONALITY ONLY UPON THE ISSUANCE OF THE
CERTIFICATE OF REGISTRATION BY THE BUREAU OF LABOR RELATIONS.
AND,

2) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA

GRAVELY ABUSED HIS DISCRETION WHEN HE PREMATURELY AND
ARBITRARILY RULED THAT RESPONDENT IBM IS A LEGITIMATE LABOR
ORGANIZATION WHEN THE AUTHENTICITY AND DUE EXECUTION OF THE
CHARTER CERTIFICATE SUBMITTED BY RESPONDENT IBM CANNOT YET BE
ASCERTAINED BECAUSE IT IS STILL NOT KNOWN WHO ARE THE LEGITIMATE
OFFICERS OF THE IBM FEDERATION WHO MAY VALIDLY ISSUE SAID
CHARTER CERTIFICATE AS THE CASE FILED TO RESOLVE THE ISSUE ON
WHO ARE THE LEGITIMATE OFFICERS OF THE IBM FEDERATION IS STILL
PENDING RESOLUTION BEFORE THIS HONORABLE SUPREME COURT. 7

The petition has no merit.

Petitioner asserts that IBM at SMFI is not a legitimate labor organization notwithstanding the
fact that it is a local or chapter of the IBM Federation. This is so because under Article 234 of
the Labor Code, any labor organization shall acquire legal personality only upon the
issuance of the Certificate of Registration by the Bureau of Labor Relations.
We do not agree.

Article 212(h) of the Labor Code defines a legitimate labor organization as "any labor
organization duly registered with the Department of Labor and Employment, and includes
any branch or local thereof ."

It is important to determine whether or not a particular labor organization is legitimate since

legitimate labor organizations have exclusive rights under the law which cannot be exercised
by non-legitimate unions, one of which is the right to be certified as the exclusive
representative of all the employees in an appropriate collective bargaining unit for purposes
of collective bargaining. These rights are found under Article 242 of the Labor Code, to wit:

Art. 242. Rights of legitimate labor organizations. A legitimate labor organization

shall have the right:

(a) To act as the representative of its members for the purpose of collective
bargaining;

(b) To be certified as the exclusive representative of all the employees in an

appropriate collective bargaining unit for purpose of collective bargaining;

(c) To be furnished by the employer, upon written request, with his annual audited
financial statement, including the balance sheet and the profit and loss statement,
within thirty (30) calendar days from the date of receipt of the request, after the union
has been duly recognized by the employer or certified as the sole and exclusive
bargaining representative of the employees in the bargaining unit, or within sixty (60)
calendar days before the expiration of the existing collective bargaining agreement,
or during the collective bargaining negotiation;

(d) To own property, real or personal, for the use and benefit of the labor
organization and its members;

(e) To sue and be sued in its registered name; and

(f) To undertake all other activities designed to benefit the organization and its
members, including cooperative, housing welfare and other projects not contrary to
law.

xxx xxx xxx

The pertinent question, therefore, must be asked: When does a labor organization acquire
legitimacy?

Ordinarily, a labor organizations attains the status of legitimacy only upon the issuance in its
name of a Certificate of Registration by the Bureau of Labor Relations pursuant to Articles
234 and 235 of the Labor Code, viz.:

Art. 234. Requirements of registration. Any applicant labor organization,

association or group of unions or workers shall acquire legal personality and shall be
 entitled to the rights and privileges granted by law to legitimate labor organizations
upon issuance of the certificate of registration based on the following requirements:

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meetings and the list of the workers
who participated in such meetings;

(c) The names of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies of its
annual financial reports; and

(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes of
its adoption or ratification, and the list of the members who participated in it.

Art. 235. Action on application. The Bureau shall act on all applications for
registration within thirty (30) days from filing.

All requisite documents and papers shall be certified under oath by the secretary or
the treasurer of the organization, as the case may be, and attested to by its
president.

The foregoing procedure is not the only way by which a labor union may become legitimate,
however. When an unregistered union becomes a branch, local or chapter of a federation,
some of the aforementioned requirements for registration are no longer required.8 Section 3,
Rule II, Book V of the Implementing Rules of the Labor Code governs the procedure for
union affiliation, the relevant portions of which provide:

Sec. 3. Union Affiliation: Direct Membership with National Union. An affiliate of a

labor federation or national union may be a local or chapter thereof or an
independently registered union.

(a) The labor federation or national union concerned shall issue a charter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.

(b) An independently registered union shall be considered an affiliate of a labor

federation or national union after submission to the Bureau of the contract or
agreement of affiliation within thirty (30) days after its execution.

xxx xxx xxx

(e) The local or chapter of a labor federation or national union shall have and
maintain a constitution and by-laws, set of officers and books of accounts. For
reporting purposes, the procedure governing the reporting of independently
registered unions, federations or national unions shall be observed.
Paragraph (a) refers to a local or chapter of a federation which did not undergo the rudiments
of registration while paragraph (b) refers to an independently registered union which affiliated
with a federation. Implicit in the foregoing differentiation is the fact that a local or chapter
need not be independently registered. By force of law (in this case, Article 212 [h]), such
local or chapter becomes a legitimate labor organization upon compliance with the
aforementioned provisions of Section 39 (a) and (e), without having to be issued a Certificate
of Registration in its favor by the BLR.

The cases of Lopez Sugar Corporation v. Secretary of Labor and Employment,10 Phoenix
Iron and Steel Corporation v. Secretary of Labor and Employment 11 and Protection Technology,
Inc. v. Secretary, Department of Labor and Employment,12 all going back to our landmark holding in Progressive Development
Corporation v. Secretary, Department of Labor and
Employment,13 unequivocably laid down the rule, thus:

A local or chapter therefore becomes a legitimate labor organization only upon

submission of the following to the BLR:

1) A charter certificate, within 30 days from its issuance by the labor federation or
national union, and

2) The constitution and by-laws, a statement on the set of officers, and the books of
accounts all of which are certified under oath by the secretary or treasurer, as the
case may be, of such local or chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does not
become a legitimate labor organization.

Corollarily, the satisfaction of all these requirements by the local or chapter shall vest upon it
the status of legitimacy with all its concomitant statutory privileges, one of which is the right
to be certified as the exclusive representative of all the employees in an appropriate
bargaining unit.

In the case at bench, public respondent Bienvenido E. Laguesma, in affirming the finding of
the Med-Arbiter that IBM at SMFI is a legitimate labor organization,14 made the following
material pronouncement amply supported by the records;

[t]he resolution of the issue raised by the respondent on whether or not petitioner is a
legitimate labor organization will depend on the documents submitted by the
petitioner in the second petition.

A close scrutiny of the records shows that at the time of the filing of the subject
petition on 24 September 1993 by the petitioner Ilaw at Buklod ng Manggagawa, for
and in behalf of its local affiliate IBM at SMFI-CEBU B-MEG, the latter has been
clothed with the status and/or character of a legitimate labor organization. This is so,
because on 19 July 1993, petitioner submitted to the Bureau of Labor Relations
(BLR), this Department, the following documents: charter certificate, constitution and
by-laws, names and addresses of the union officers and certification of the union's
secretary on the non-availability of the union's Books of Accounts. Said documents
(expect the charter certificate) are certified under oath and attested to by the local
union's secretary and President, respectively.15
Petitioner SMFI does not dispute the fact that IBM at SMFI has complied with the second set
or requirements, i.e., constitution, by-laws, et. al. What is controverted is the non-compliance
with the requirement as to the charter certificate which must be submitted to the BLR within
thirty (30) days from its issuance by the labor federation. While the presence of a charter
certificate is conceded, petitioner maintains that the validity and authenticity of the same
cannot yet be ascertained as its is still not known who is the legitimate and authorized
representative of the IBM Federation who may validly issue said charter certificate in favor of
its local, IBM at SMFI. According to petitioner, there are two (2) contending sets of officers of
the IBM Federation at the time the charter certificate was issued in favor of IBM at SMFI, the
faction of Mr. Severino O. Meron and that of Mr. Edilberto B. Galvez.

On this point, public respondent, in upholding the legitimate status of IBM at SMFI, backed
up by the Solicitor General, had this to say:

The contention of the respondent that unless and until the issue on who is the
legitimate national president, of the Ilaw at Buklod ng Mangagawa is resolved, the
petitioner cannot claim that is has a valid charter certificate necessary for it to acquire
legal personality is untenable. We wish to stress that the resolution of the said issue
will not in any way affect the validity of the charter certificate issued by the IBM in
favor of the local union. It must be borne in mind that the said charter certificate was
issued by the IBM in its capacity as a labor organization, a juridical entity which has a
separate and distinct legal personality from its members. When as in this case, there
is no showing that the Federation acting as a separate entity is questioning the
legality of the issuance of the said charter certificate, the legality of the issuance of
the same in favor of the local union is presumed. This, notwithstanding the alleged
controversy on the leadership of the federation.16

We agree with this position of the public respondent and the Solicitor General. In addition,
private respondent's Comment to this petition indicates that in the election of officers held to
determine the representatives of IBM, the faction of Mr. Meron lost to the group of Mr.
Edilberto Galvez, and the latter was acknowledged as the duly elected IBM National
President.17 Thus, the authority of Mr. Galvez to sign the charter certificate of IBM at SMFI,
as President of the IBM Federation,18 can no longer be successfully questioned. A punctilious
examination of the records presents no evidence to the contrary and petitioner, instead of
squarely refuting this point, skirted the issue by insisting that the mere presence of two
contending factions in the IBM prevents the issuance of a valid and authentic charter
certificate in favor of IBM at SMFI. This averment of petitioner simply does not deserve any
merit.

II

In any case, this Court notes that it is petitioner, the employer, which has offered the most
tenacious resistance to the holding of a certification election among its monthly-paid rank-
and-file employees. This must not be so, for the choice of a collective bargaining agent is the
sole concern of the employees.19 The only exception to this rule is where the employer has to
file the petition for certification election pursuant to Article 25820 of the Labor Code because it
was requested to bargain collectively,21 which exception finds no application in the case
before us. Its role in a certification election has aptly been described in Trade Unions of the
Philippines and Allied Services (TUPAS) v. Trajano,22 as that of a mere by-stander. It has no
legal standing in a certification election as it cannot oppose the petition or appeal the Med-
Arbiter's orders related thereto. An employer that involves itself in a certification election
lends suspicion to the fact it wants to create a company union.23 This Court should be the last
agency to lend support to such an attempt at interference with a purely internal affair of
labor.24

While employers may rightfully be notified or informed of petitions of such nature, they
should not, however, be considered parties thereto with the concomitant right to oppose it.
Sound policy dictates that they should maintain a strictly hands-off policy.25

It bears stressing that no obstacle must be placed to the holding of certification

elections,26 for it is a statutory policy that should not be circumvented.27 The certification
election is the most democratic and expeditious method by which the laborers can freely
determine the union that shall act as their representative in their dealings with the
establishment where they are working.28 It is the appropriate means whereby controversies
and disputes on representation may be laid to rest, by the unequivocal vote of the employees
themselves. 29Indeed, it is the keystone of industrial democracy.30

Petitioner next asseverates that the Charter Certificate submitted by the private respondent
was defective in that it was not certified under oath and attested to by the organization's
secretary and President.

Petitioner is grasping at straws. Under our ruling in the Progressive Development

Corporation31 case, what is required to be certified under oath by the secretary or treasurer
and attested to by the local's president are the "constitution and by-laws, a statement on the
set of officers, and the books of accounts" of the organization. The charter certificate issued
by the mother union need not be certified under oath by the secretary or treasurer and
attested to by the local's president.

IV

Petitioner, in its Reply to public respondent's Comment, nevertheless calls the attention of
this court to the fact that, contrary to the assertion of private respondent IBM that it is a
legitimate labor federation and therefore has the capacity and authority to create a local or
chapter at SMFI, the Chief of the Labor Organizations Division of the Bureau of Labor
Relations Manila had allegedly issued a certification last January 17, 1995 to the effect
that private respondent is not a legitimate labor federation.32

This is a factual issue which petitioner should have raised before the Med-Arbiter so as to
allow the private respondent ample opportunity to present evidence to the contrary. This
Court is definitely not the proper venue to consider this matter for it is not a trier of facts. It is
noteworthy that petitioner did not challenge the legal personality of the federation in the
proceedings before the Med-Arbiter. Nor was this issue raised in petitioner's appeal to the
Office of the Secretary of Labor and Employment. This matter is being raised for the first time
in this petition. An issue which was neither alleged in the pleadings nor raised during the
proceedings below cannot be ventilated for the first time before this Court. It would be
offensive to the basic rule of fair play, justice and due process.33 Certiorari is a remedy
narrow in its scope and inflexible in character. It is not a general utility tool in the legal
workshop.34 Factual issues are not a proper subject for certiorari, as the power of the
Supreme Court to review labor cases is limited to the issue of jurisdiction and grave abuse of
discretion.35 It is simply unthinkable for the public respondent Undersecretary of Labor to
have committed grave abuse of discretion in this regard when the issue as to the legal
personality of the private respondent IBM Federation was never interposed in the appeal
before said forum.
 V

Finally, the certification election sought to be stopped by petitioner is, as of now, fait
accompli. The monthly paid rank-and-file employees of SMFI have already articulated their
choice as to who their collective bargaining agent should be. In the certification election held
on August 20, 1994,36 the SMFI workers chose IBM at SMFI to be their sole and exclusive
bargaining agent. This democratic decision deserve utmost respect. Again, it bears stressing
that labor legislation seeks in the main to protect the interest of the members of the working
class. It should never be used to subvert their will.3 7

WHEREFORE, the petition is DENIED. Costs again petitioner.

SO ORDERED.

G.R. Nos. L-5664 and L-5698 September 17, 1953

PHILIPPINE LAND-AIR-SEA LABOR (PLASLU). INC., petitioner,

vs.
THE COURT OF INDUSTRIAL RELATIONS AND PEPSI-COLA BOTTLING COMPANY (Cebu
Branch),respondents.

Emilio Lumontad and Alfredo G. Baguia for petitioner.

Vicente J. Francisco for respondent.

BAUTISTA ANGELO, J.:

This is a petition for review of the resolution of the Court of Industrial Relations dated march 1, 1952
wherein it held that petitioner, whose permit had been withdrawn, lost its personality to prosecute the
present case and, consequently, in pursuance of Sections 4 and 7 of Commonwealth Act No. 103,
as amended, it should be substituted for its individual members with the warning that, upon failure to
do so, the case should be dismissed.

Petitioner was a labor union which was registered in accordance with law and was granted permit to
act as such by the Department of Labor on February 12, 1948.

On November 29, 2949, petitioner filed a petition with the Court of Industrial Relations, docketed as
Case No. 390-v, wherein it submitted several grievances and demand against respondent, a
corporation organized under the law of the Philippines, for arbitration and settlement.

On March 3, 1950. petitioner filed an incidental motion against the same respondent, which was
docketed as case No. 390-V-(1), complaining about the separation from the service without
justifiable cause of sixteen (16) of its laborers and employees and praying that they reinstated.

On March 23, 1950, respondent filed a motion to dismiss on two grounds: (1) that petitioner does not
represent respondent's workers; and (2) less than thirty-one (31) workers are involved in the case.
This motion was opposed in writing by petitioner and, after proper hearing during which both parties
presented pertinent evidence the court denied the motion because it found that at least eighty-two
(82) of the members of petitioning union were actually employed by respondent and were affected
by the dispute. The Court found further that petitioner was a legitimate labor organization registered
under the provisions of Commonwealth Act No. 213.
On February 28, 2950, petitioner paid the fee for the renewal of its permit to the Bureau of labor with
the requests that said permit be renewed, but because of its failure to meet certain requirement
relative to the inspection of its book of accounts, on August 25, 1950, the Secretary of Labor advised
petitioner that its name as labor union had been dropped from the lists of registered labor
organizations.

On January 16, 1951, instead of pressing for action on its request for renewal of the permit,
petitioner took steps to organize itself, as it did, as a non-stock corporation under the Corporation
law by filing the necessary papers with the Securities and Exchange Commission with the result that
Certificate of Corporation No. 5754 was issued to it on January 20, 1951.

On August 8, 1951, respondent filed a new motion to dismiss this time based on the ground that
petitioner, not being a registered union has no capacity to sue under Commonwealth Act No. 213,
and therefore this case should be dismissed.

On October 18, 1951, the court maintained its former stand denying the motion for lack of merit; but,
on motion for reconsideration by respondent, the court reversed its stand holding that petitioner
lacks capacity to sue and ordering that petitioner be substituted for its individual members, as
otherwise the case would be dismissed. Not agreeable to this ruling, petitioner brought this petition
for review.

We are of the opinion that petitioner has lost its capacity to sue in the present case as a labor union
entitled "to all the rights and privileges granted by law" when on August 25, 1950, the Secretary of
Labor dropped its name from the lists of registered labor organizations in view of its failure to comply
with certain requirement relative to the inspection of its books of accounts.

Commonwealth Act No. 213 has been enacted in order to allow a labor union to organize itself and
acquire a personality and separate from its members and to serve as an instrumentality to conclude
collective bargaining agreements and enjoy all the rights and privileges granted by law to a labor
organization. But in order that it may acquire such personality, it is necessary that it first comply with
certain requirements, one of them being that it must register and secure a permit to operate as such
from the Department of labor. The Procedure to secure this permit is well laid down in the law. An
application shall be filed with the Secretary of labor, who shall conduct an investigation of the
activities of the applying labor organization and if, on such investigation, it shall appear that the
applicant is entitled to registration fee of five pesos. (Section 3, Commonwealth Act No. 213.

That such is clear implication of the law is evident. A labor organization is not considered legitimate
in contemplation of law unless that requirement has been complied with. Thus, the law postulates
that "a legitimate labor organization is an organization, association or union of laborers duly
registered and permitted to operate by the Department of labor", and that "the registration of, and the
issuance of a permit to, any legitimate labor organization shall entitled it to all the rights and
privileges granted by law." (Sections 1 and 2, Commonwealth Act No. 213.) To be considered a
legitimate labor organization with the right to enjoy all the rights and privileges recognized by law, it
is therefore necessary that it be registered and permitted to operate as required by law. these rights
and privileges are none other than those accorded by Commonwealth Act No. 213, among them, the
right to conclude collective bargaining agreements and to appear in behalf of its members before the
Court of Industrial Relations "for the purpose of seeking better working and living conditions, fair
wages, and shorter working hours for laborers, and, in general, to promote the material, social and
moral well-being of its members." (Section 2, Commonwealth Act No. 213.).

The fact that petitioner has organized itself under the Corporation Law as a non-stock corporation
has only the effect of no moment, for such incorporation has only the effect of giving to it juridical
personality before regular courts of justice. Such incorporation cannot be availed of it by to enjoy the
rights and privileges granted by law to a legitimate labor organization..

The foregoing observations notwithstanding, we are of the opinion that the failure of petitioner to
secure the renewal of its permit from the Labor Department will not operate as a dismissal of this
case, it appearing that when it filed the present petition it had juridicial personality and respondent
court had acquired jurisdiction over the case. In previous cases where a similar question was raised
this Court denied the motion to dismiss upon the theory that jurisdiction once required is not lost until
the case is completely decided. Thus, in a recent case this Court held:

The second point raised by petitioner is likewise without merit. In the first place, there being
more than 30 laborers involved and the Secretary of Labor having certified the dispute to the
Court of Industrial Relations, that Court duly acquired jurisdiction over the case (International
Oil Factory vs. NLU, Inc., Phil. 401; Section 4, C.A. 103). This jurisdiction was not lost when
the Department of labor suspended the permit of the respondent Kaisahan as a labor
organization. For once jurisdiction is acquired by the Court of Industrial Relations it is
retained until the case is completely decided. (Manila Hotel Employees Association vs.
Manila Hotel Co. et al., 73 Phil. 374.) (La Campana [KKH], et al., supra, p. 160.)

In conclusion, we hold that the present case can be continued without need of any substitution of
parties subject however to the understanding that whatever decision may be rendered therein will
only be binding upon those members of petitioning union who have not signified their desire to
withdraw from the case before its trial and decision on the merits. 1wphl.nt

Wherefore, the resolution appealed from is hereby modified in the sense above indicated and it is
ordered that this case be remanded to the respondent court for further proceedings, without
pronouncement as to costs.

G.R. No. 96425 February 4, 1992

PROGRESSIVE DEVELOPMENT CORPORATION, petitioner,

vs.
THE HONORABLE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, MED-
ARBITER EDGARDO DELA CRUZ and PAMBANSANG KILUSAN NG PAGGAWA (KILUSAN)-
TUCP, respondents.

Beltran, Bacungan & Candoy for petitioner.

Jimenez & Associates co-counsel for petitioner.

GUTIERREZ, JR., J.:

The controversy in this case centers on the requirements before a local or chapter of a federation
may file a petition for certification election and be certified as the sole and exclusive bargaining
agent of the petitioner's employees.

Petitioner Progressive Development Corporation (PDC) filed this petition for certiorari to set aside
the following:
1) Resolution dated September 5, 1990, issued by respondent Med-Arbiter Edgardo dela Cruz,
directing the holding of the certification election among the regular rank-and-file employees of PDC:

2) Order dated October 12, 1990, issued by the respondent Secretary of Labor and Employment,
denying PDC's appeal; and

3) Order dated November 12, 1990, also issued by the respondent Secretary, denying the
petitioner's Motion for Reconsideration.

On June 19, 1990, respondent Pambansang Kilusan ng Paggawa (KILUSAN) -TUCP (hereinafter
referred to as Kilusan) filed with the Department of Labor and Employment (DOLE) a petition for
certification election among the rank-and-file employees of the petitioner alleging that it is a
legitimate labor federation and its local chapter, Progressive Development Employees Union, was
issued charter certificate No. 90-6-1-153. Kilusan claimed that there was no existing collective
bargaining agreement and that no other legitimate labor organization existed in the bargaining unit.

Petitioner PDC filed its motion to dismiss dated July 11, 1990 contending that the local union failed
to comply with Rule II Section 3, Book V of the Rules Implementing the Labor Code, as amended,
which requires the submission of: (a) the constitution and by-laws; (b) names, addresses and list of
officers and/or members; and (c) books of accounts.

On July 16 , 1990, respondent Kilusan submitted a rejoinder to PDC's motion to dismiss claiming
that it had submitted the necessary documentary requirements for registration, such as the
constitution and by-laws of the local union, and the list of officers/members with their addresses.
Kilusan further averred that no books of accounts could be submitted as the local union was only
recently organized.

In its "Supplemental Position Paper" dated September 3, 1990, the petitioner insisted that upon
verification with the Bureau of Labor Relations (BLR), it found that the alleged minutes of the
organizational meeting was unauthenticated, the list of members did not bear the corresponding
signatures of the purported members, and the constitution and by-laws did not bear the signature of
the members and was not duly subscribed. It argued that the private respondent therefore failed to
substantially comply with the registration requirements provided by the rules. Additionally, it prayed
that Med-Arbiter Edgardo dela Cruz inhibit himself from handling the case for the reason that he
allegedly had prejudged the same.

In his September 5, 1990 resolution, Med Arbiter dela Cruz held that there was substantial
compliance with the requirements for the formation of the chapter. He further stated that mere
issuance of the charter certificate by the federation was sufficient compliance with the rules.
Considering that the establishment was unorganized, he maintained that a certification election
should be conducted to resolve the question of representation.

Treating the motion for reconsideration filed by the PDC as an appeal to the Office of the Secretary,
Undersecretary Laguesma held that the same was merely a "reiteration of the issues already
ventilated in the proceedings before the Med-Arbiter, specifically, the matter involving the formal
organization of the chapter." (Rollo, p. 20) PDC's motion for reconsideration from the aforementioned
ruling was likewise denied. Hence, this petition.

In an order dated February 25, 1991, the Court resolved to issue a temporary restraining order
enjoining the public respondents from carrying out the assailed resolution and orders or from
proceeding with the certification election. (Rollo, pp. 37-39)
It is the petitioner's contention that a labor organization (such as the Kilusan) may not validly invest
the status of legitimacy upon a local or chapter through the mere expedient of issuing a charter
certificate and submitting such certificate to the BLR (Rollo, p. 85) Petitioner PDC posits that such
local or chapter must at the same time comply with the requirement of submission of duly
subscribed constitution and by-laws, list of officers and books of accounts. (Rollo, p. 35) PDC points
out that the constitution and by-laws and list of officers submitted were not duly subscribed.
Likewise, the petitioner claims that the mere filing of the aforementioned documents is insufficient;
that there must be due recognition or acknowledgment accorded to the local or chapter by BLR
through a certificate of registration or any communication emanating from it. (Rollo, p. 86)

The Solicitor General, in behalf of the public respondent, avers that there was a substantial
compliance with the requirements for the formation of a chapter. Moreover, he invokes Article 257 of
the Labor Code which mandates the automatic conduct by the Med-Arbiter of a certification election
in any establishment where there is no certified bargaining agreement.

The Court has repeatedly stressed that the holding of a certification election is based on a statutory
policy that cannot be circumvented. (Airtime Specialists, Inc. v. Ferrer-Calleja, 180 SCRA 749
[1989]; Belyca Corporation v. Ferrer-Calleja, 168 SCRA 184 [1988]; George and Peter Lines, Inc. v.
Associated Labor Unions, 134 SCRA 82 [1986]). The workers must be allowed to freely express
their choice in a determination where everything is open to their sound judgment and the possibility
of fraud and misrepresentation is eliminated.

But while Article 257 cited by the Solicitor General directs the automatic conduct of a certification
election in an unorganized establishment, it also requires that the petition for certification election
must be filed by a legitimate labor organization. Article 242 enumerates the exclusive rights of a
legitimate labor organization among which is the right to be certified as the exclusive representative
of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining.

Meanwhile, Article 212(h) defines a legitimate labor organization as "any labor organization duly
registered with the DOLE and includes any branch or local thereof." (Emphasis supplied) Rule I,
Section 1 (j), Book V of the Implementing Rules likewise defines a legitimate labor organization as
"any labor organization duly registered with the DOLE and includes any branch, local or affiliate
thereof. (Emphasis supplied)

The question that now arises is: when does a branch, local or affiliate of a federation become a
legitimate labor organization?

Ordinarily, a labor organization acquires legitimacy only upon registration with the BLR. Under Article
234 (Requirements of Registration):

Any applicant labor organization, association or group of unions or workers shall

acquire legal personality and shall be entitled to the rights and privileges granted by
law to legitimate labor organizations upon issuance of the certificate of registration
based on the following requirements:

(a) Fifty-pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meeting and the list of the workers
who participated in such meetings;
 (c) The names of all its members comprising at least twenty 20% percent of all the
employees in the bargaining unit where it seek to operate;

(d) If the applicant has been in existence for one or more years, copies , of its annual
financial reports; and

(e) Four copies of the constitution and by-laws of the applicant union, the minutes of
its adoption or ratification and the list of the members who participated in it.

And under Article 235 (Action on Application)

The Bureau shall act on all applications for registration within thirty (30) days from
filing.

All requisite documents and papers shall be certified under oath by the secretary or
the treasurer of the organization, as the case may be, and attested to by its
president.

Moreover, section 4 of Rule II, Book V of the Implementing Rules requires that the application should
be signed by at least twenty percent (20%) of the employees in the appropriate bargaining unit and
be accompanied by a sworn statement of the applicant union that there is no certified bargaining
agent or, where there is an existing collective bargaining agreement duly submitted to the DOLE,
that the application is filed during the last sixty (60) days of the agreement.

The respondent Kilusan questions the requirements as too stringent in their application but the
purpose of the law in prescribing these requisites must be underscored. Thus, in Philippine
Association of Free Labor Unions v. Secretary of Labor, 27 SCRA 40 (1969), the Court declared:

The theory to the effect that Section 23 of Republic Act No. 875 unduly curtails the
freedom of assembly and association guaranteed in the Bill of Rights is devoid of
factual basis. The registration prescribed in Paragraph (b) of said section is not a
limitation to the right of assembly or association, which may be exercised with or
without said registration. The latter is merely a condition sine qua nonfor the
acquisition of legal personality by the labor organizations, associations or unions and
the possession of the "rights and privileges granted by law to legitimate labor
organizations." The Constitution does not guarantee these rights and the privileges,
much less said personality, which are mere statutory creations, for the possession
and exercise of which registration is required to protect both labor and the public
against abuses, fraud or impostors who pose as organizers, although not truly
accredited agents of the union they purport to represent. Such requirement is a valid
exercise of the police power, because the activities in which labor organizations,
associations and unions of workers are engaged affect public interest, which should
be protected. Furthermore, the obligation to submit financial statements, as a
condition for the non-cancellation of a certificate of registration, is a reasonable
regulation for the benefit of the members of the organization, considering that the
same generally solicits funds or membership, as well as oftentimes collects, on
behalf of its members, huge amounts of money due to them or to the organization.
(Emphasis supplied)

But when an unregistered union becomes a branch, local or chapter of a federation, some of the
aforementioned requirements for registration are no longer required. The provisions governing union
affiliation are found in Rule II, Section 3, Book V of the Implementing Rules, the relevant portions of
which are cited below:

Sec. 3. Union affiliation; direct membership with national union. An affiliate of a

labor federation or national union may be a local or chapter thereof or an
independently registered union.

a) The labor federation or national union concerned shall issue a charter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.

b) An independently registered union shall be considered an affiliate of a labor

federation or national union after submission to the Bureau of the contract or
agreement of affiliation within thirty (30) days after its execution.

xxx xxx xxx

e) The local or chapter of a labor federation or national union shall have and maintain
a constitution and by laws, set of officers and books and accounts. For reporting
purposes, the procedure governing the reporting of independently registered unions,
federations or national unions shall be observed.

Paragraph (a) refers to the local or chapter of a federation which did not undergo the rudiments of
registration while paragraph (b) refers to an independently registered union which affiliated with a
federation. Implicit in the foregoing differentiation is the fact that a local or chapter need not be
independently registered. By force of law (in this case, Article 212[h]); such local or chapter becomes
a legitimate labor organization upon compliance with the aforementioned provisions of Section 3.

Thus, several requirements that are otherwise required for union registration are omitted, to wit:

(1) The requirement that the application for registration must be signed by at least 20% of the
employees in the appropriate bargaining unit;

2) The submission of officers' addresses, principal address of the labor organization, the minutes of
organizational meetings and the list of the workers who participated in such meetings;

3) The submission of the minutes of the adoption or ratification of the constitution and by the laws
and the list of the members who participated in it.

Undoubtedly, the intent of the law in imposing lesser requirements in the case of the branch or local
of a registered federation or national union is to encourage the affiliation of a local union with the
federation or national union in order to increase the local union's bargaining powers respecting terms
and conditions of labor.

The petitioner maintains that the documentary requirements prescribed in Section 3(c), namely: the
constitution and by-laws, set of officers and books of accounts, must follow the requirements of law.
Petitioner PDC calls for the similar application of the requirement for registration in Article 235 that
all requisite documents and papers be certified under oath by the secretary or the treasurer of the
organization and attested to by the president.
In the case at bar, the constitution and by-laws and list of officers submitted in the BLR, while
attested to by the chapter's president, were not certified under oath by the secretary. Does such
defect warrant the withholding of the status of legitimacy to the local or chapter?

In the case of union registration, the rationale for requiring that the submitted documents and papers
be certified under oath by the secretary or treasurer, as the case may be, and attested to by
president is apparent. The submission of the required documents (and payment of P50.00
registration fee) becomes the Bureau's basis for approval of the application for registration. Upon
approval, the labor union acquires legal personality and is entitled to all the rights and privileges
granted by law to a legitimate labor organization. The employer naturally needs assurance that the
union it is dealing with is a bona fide organization, one which has not submitted false statements or
misrepresentations to the Bureau. The inclusion of the certification and attestation requirements will
in a marked degree allay these apprehensions of management. Not only is the issuance of any false
statement and misrepresentation a ground for cancellation of registration (see Article 239 (a), (c) and
(d)); it is also a ground for a criminal charge of perjury.

The certification and attestation requirements are preventive measures against the commission of
fraud. They likewise afford a measure of protection to unsuspecting employees who may be lured
into joining unscrupulous or fly-by-night unions whose sole purpose is to control union funds or to
use the union for dubious ends.

In the case of the union affiliation with a federation, the documentary requirements are found in Rule
II, Section 3(e), Book V of the Implementing Rules, which we again quote as follows:

(c) The local chapter of a labor federation or national union shall have and maintain a
constitution and by-laws, set of officers and books of accounts. For reporting
purposes, the procedure governing the reporting of independently registered unions,
federations or national unions shall be observed.(Emphasis supplied)

Since the "procedure governing the reporting of independently registered unions" refers to the
certification and attestation requirements contained in Article 235, paragraph 2, it follows that the
constitution and by-laws, set of officers and books of accounts submitted by the local and chapter
must likewise comply with these requirements. The same rationale for requiring the submission of
duly subscribed documents upon union registration exists in the case of union affiliation. Moreover,
there is greater reason to exact compliance with the certification and attestation requirements
because, as previously mentioned, several requirements applicable to independent union
registration are no longer required in the case of formation of a local or chapter. The policy of the law
in conferring greater bargaining power upon labor unions must be balanced with the policy of
providing preventive measures against the commission of fraud.

A local or chapter therefore becomes a legitimate labor organization only upon submission of the
following to the BLR:

1) A charter certificate, within 30 days from its issuance by the labor federation or national union,
and

2) The constitution and by-laws, a statement on the set of officers, and the books of accounts all of
which are certified under oath by the secretary or treasurer, as the case may be, of such local or
chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does not become a
legitimate labor organization.
In the case at bar, the failure of the secretary of PDEU-Kilusan to certify the required
documents under oath is fatal to its acquisition of a legitimate status.

We observe that, as borne out by the facts in this case, the formation of a local or chapter becomes
a handy tool for the circumvention of union registration requirements. Absent the institution of
safeguards, it becomes a convenient device for a small group of employees to foist a not-so-
desirable federation or union on unsuspecting co-workers and pare the need for wholehearted
voluntariness which is basic to free unionism. The records show that on June 16, 1990, Kilusan met
with several employees of the petitioner. Excerpts of the "Minutes of the Organizational/General
Membership Meeting of Progressive Development Employees Union (PDEU) Kilusan," are quoted
below:

The meeting was formally called to order by Bro. Jose V. Parungao, KILUSAN
secretary for organization by explaining to the general membership the importance of
joining the union. He explained to the membership why they should join a union, and
briefly explained the ideology of the Pambansang Kilusan ng Paggawa-TUCP as a
democratically based organization and then read the proposed Constitution and By-
Laws, after which said Constitution and By-Laws was duly and unanimously ratified
after some clarification.

Bro. Jose Parungao was also unanimously voted by the group to act as the chairman
of the COMELEC in holding the organizational election of officers of the union.

Bro. Jose Parungao, officially opened the table for nomination of candidates after
which the election of officers followed by secret balloting and the following were the
duly elected officers. (Original Record, p. 25)

The foregoing shows that Kilusan took the initiative and encouraged the formation of a union which
automatically became its chapter. On June 18, 1990, Kilusan issued a charter certificate in favor of
PDEU-KILUSAN (Records, page 1). It can be seen that Kilusan was moving very fast.

On June 19, 1990, or just three days after the organizational meeting, Kilusan filed a petition for
certification election (Records, pages 2 and 3) accompanied by a copy each of the charter
certificate, constitution and by-laws and minutes of the organizational meeting. Had the local union
filed an application for registration, the petition for certification election could not have been
immediately filed. The applicant union must firstly comply with the "20% signature" requirement and
all the other requisites enumerated in Article 234. Moreover, since under Article 235 the BLR shall
act on any application for registration within thirty (30) days from its filing, the likelihood is remote
that, assuming the union complied with all the requirements, the application would be approved on
the same day it was filed.

We are not saying that the scheme used by the respondents is per se illegal for precisely, the law
allows such strategy. It is not this Court's function to augment the requirements prescribed by law in
order to make them wiser or to allow greater protection to the workers and even their employer. Our
only recourse is, as earlier discussed, to exact strict compliance with what the law provides as
requisites for local or chapter formation.

It may likewise be argued that it was Kilusan (the mother union) and not the local union which filed
the petition for certification election and, being a legitimate labor organization, Kilusan has the
personality to file such petition.
At this juncture, it is important to clarify the relationship between the mother union and the local
union. In the case of Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., 66 SCRA 512
[1975]), the Court held that the mother union, acting for and in behalf of its affiliate, had the status of
an agent while the local union remained the basic unit of the association, free to serve the common
interest of all its members subject only to the restraints imposed by the constitution and by-laws of
the association. Thus, where as in this case the petition for certification election was filed by the
federation which is merely an agent, the petition is deemed to be filed by the chapter, the principal,
which must be a legitimate labor organization. The chapter cannot merely rely on the legitimate
status of the mother union.

The Court's conclusion should not be misconstrued as impairing the local union's right to be certified
as the employees' bargaining agent in the petitioner's establishment. We are merely saying that the
local union must first comply with the statutory requirements in order to exercise this right. Big
federations and national unions of workers should take the lead in requiring their locals and chapters
to faithfully comply with the law and the rules instead of merely snapping union after union into their
folds in a furious bid with rival federations to get the most number of members.

WHEREFORE, the petition is GRANTED. The assailed resolution and orders of respondent Med-
Arbiter and Secretary of Labor and Employment, respectively, are hereby SET ASIDE. The
temporary restraining order dated February 25, 1991 is made permanent.

SO ORDERED.

G.R. No. 116172 October 10, 1996

SAN MIGUEL FOODS, INC. CEBU B-MEG FEED PLANT, petitioner,

vs.
HON. BIENVENIDO E. LAGUESMA, Undersecretary of DOLE and ILAW AT BUKLOD NG
MANGGAGAWA (IBM), respondents.

HERMOSISIMA, JR., J.:p

This is a petition for certiorari under Rule 65 to review and set aside two Resolutions of Mediator-Arbiter Achilles V. Manit, dated
January 5, 1994 and April 6, 1994, and the affirmation Order on appeal of the public respondent, Undersecretary Bienvenido E.
Laguesma of the Department of Labor and Employment. The petition below was entitled: "In Re: Petition for Direct Certification as
the Sole and Exclusive Bargaining Agent of All Monthly Paid Employees of SMFI-Cebu B-Meg Feeds Plant," docketed as OS-MA-
A-3-51-94 (R0700-9309-RU-036).

The essential facts are not disputed.

On September 24, 1993, a petition for certification election among the monthly-paid
employees of the San Miguel Food, Inc.-Cebu B-Meg Feeds Plant was filed by private
respondent labor federation Ilaw at Buklod ng Mangagawa (IBM, for brevity) before Med-
Arbiter Achilles V. Manit, alleging, inter alia, that it is a legitimate labor organization duly
registered with the Department of Labor and Employment (DOLE) under Registration
Certificate No. 5369-IP. SMFI-Cebu B-Meg Feeds Plant (SMFI, for brevity), herein petitioner,
is a business entity duly organized and existing under the laws of the Philippines which
employs roughly seventy-five (75) monthly paid employees, almost all of whom support the
present petition. It was submitted in said petition that there has been no certification election
conducted in SMFI to determine the sole and exclusive bargaining agent thereat for the past
two years and that the proposed bargaining unit, which is SMFI's monthly paid employees, is
an unorganized one. It was also stated therein that petitioner IBM (herein private respondent)
has already complied with the mandatory requirements for the creation of its local or affiliate
in SMFI's establishment.

On October 25, 1993, herein petitioner SMFI filed a Motion to Dismiss the aforementioned
petition dated September 24, 1993 on the ground that a similar petition remains pending
between the same parties for the same cause of action before Med-Arbiter Achilles V. Manit.

SMFI was referring to an evidently earlier petition, docketed as CE CASE NO R0700-9304-

RU-016, filed on April 28, 1993 before the office of Med-Arbiter Manit. Indeed, both petitions
involved the same parties, cause of action and relief being prayed for, which is the issuance
of an order by the Med-Arbiter allowing the conduct for a certification election in SMFI's
establishment. The contention is that the judgment that may be rendered in the first petition
would be determinative of the outcome of the second petition, date September 24, 1993.

On December 2, 1993, private respondent IBM filed its Opposition to SMFI's Motion to
Dismiss contending, among others, that the case referred to by SMFI had already been
resolved by Med-Arbiter Manit in his Resolution and Order dated July 26, 19931 and
September 2, 1993,2 respectively, wherein IBM's first petition for certification election was
denied mainly due to IBM's failure to comply with certain mandatory requirements of the law.
This denial was affirmed by the Med-Arbiter in another Order dated November 12,
19933 wherein the Resolutions dated July 26, 1993 and September 2, 1993 were made to
stand. Thus, IBM argues that there having been no similar petition pending before Med-
Arbiter Manit, another petition for certification election may be refiled as soon as the said
requirements are met. These requirements were finally satisfied before the second petition
for certification election was brought on September 24, 1993.

On January 5, 1994, Med-Arbiter Manit, this time, granted the second petition for certification
election of private respondent IBM in this wise:

Let, therefore, a certification election be conducted among the monthly paid rank and
file employees of SMFI-CEBU B-MEG FEEDS PLANT at Lo-oc, Mandaue City. The
choices shall be: YES-for IBM AT SMFI-CEBU B-MEG; and NO for No Union.

The parties are hereby notified of the pre-election conference which will take place
on January 17, 1994 at 3:00 o'clock in the afternoon to set the date and time of the
election and to thresh out the mechanics thereof. On said date and time the
respondent is directed to submit the payroll of its monthly paid rank and file
employees for the month of June 1993 which shall be the basis for the list of the
eligible voters. The petitioner is directed to be ready to submit a list of the monthly
paid rank and file employees of SMFI-CEBU B-MEG FEEDS PLANT when the
respondent fails to submit the required payroll.

SO ORDERED.4

Petitioner SMFI appealed the foregoing Order to the Secretary of Labor and Employment
alleging that the Med-Arbiter erred in directing the conduct of certification election
considering that the local or chapter of IBM at SMFI is still not a legitimate labor organization
with a right to be certified as the exclusive bargaining agent in petitioner's establishment
based on two grounds: (1) the authenticity and due execution of the Charter Certificate
submitted by IBM in favor of its local at SMFI cannot yet be ascertained as it is still not
known who is the legitimate and authorized representative of the IBM Federation who may
validly issue said Charter Certificate; and (2) a group of workers or a local union shall acquire
legal personality only upon the issuance of a Certificate of Registration by the Bureau of
Labor Relations under Article 234 of the Labor Code, which IBM at SMFI did not possess.

In a resolution dated April 6, 1994, public respondent Undersecretary Bienvenido Laguesma,

by authority of the Secretary of Labor and Employment, denied petitioner's appeal, viz.:

WHEREFORE, the appeal is hereby denied for lack of merit and the Order of the
Med-Arbiter is hereby affirmed.

Let the records of this case be forwarded to the Regional Office of origin for the
immediate conduct of certification election subject to the usual pre-election
conference.

SO RESOLVED.5

Thereafter, a Motion for Reconsideration was filed which was also denied by the public
respondent in his Order dated May 24, 1994.6

Hence, the instant petition interposing the following justifications:

1) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA

GRAVELY ABUSED HIS DISCRETION WHEN HE ARBITRARILY RULED THAT "A
LOCAL OR CHAPTER OF A LABOR FEDERATION, LIKE RESPONDENT IBM,
NEED NOT OBTAIN A CERTIFICATE OF REGISTRATION FROM THE BUREAU
OF LABOR RELATIONS TO ACQUIRE LEGAL PERSONALITY," WHEN ARTICLE
234 OF THE LABOR CODE OF THE PHILIPPINES AND SECTION 3 OF RULE II
OF BOOK V OF THE RULES IMPLEMENTING THE LABOR CODE, AS AMENDED,
CLEARLY PROVIDES THAT A GROUP OF WORKERS OR A LOCAL UNION
SHALL ACQUIRE LEGAL PERSONALITY ONLY UPON THE ISSUANCE OF THE
CERTIFICATE OF REGISTRATION BY THE BUREAU OF LABOR RELATIONS.
AND,

2) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA

GRAVELY ABUSED HIS DISCRETION WHEN HE PREMATURELY AND
ARBITRARILY RULED THAT RESPONDENT IBM IS A LEGITIMATE LABOR
ORGANIZATION WHEN THE AUTHENTICITY AND DUE EXECUTION OF THE
CHARTER CERTIFICATE SUBMITTED BY RESPONDENT IBM CANNOT YET BE
ASCERTAINED BECAUSE IT IS STILL NOT KNOWN WHO ARE THE LEGITIMATE
OFFICERS OF THE IBM FEDERATION WHO MAY VALIDLY ISSUE SAID
CHARTER CERTIFICATE AS THE CASE FILED TO RESOLVE THE ISSUE ON
WHO ARE THE LEGITIMATE OFFICERS OF THE IBM FEDERATION IS STILL
PENDING RESOLUTION BEFORE THIS HONORABLE SUPREME COURT. 7

The petition has no merit.

Petitioner asserts that IBM at SMFI is not a legitimate labor organization notwithstanding the
fact that it is a local or chapter of the IBM Federation. This is so because under Article 234 of
the Labor Code, any labor organization shall acquire legal personality only upon the
issuance of the Certificate of Registration by the Bureau of Labor Relations.
We do not agree.

Article 212(h) of the Labor Code defines a legitimate labor organization as "any labor
organization duly registered with the Department of Labor and Employment, and includes
any branch or local thereof ."

It is important to determine whether or not a particular labor organization is legitimate since

legitimate labor organizations have exclusive rights under the law which cannot be exercised
by non-legitimate unions, one of which is the right to be certified as the exclusive
representative of all the employees in an appropriate collective bargaining unit for purposes
of collective bargaining. These rights are found under Article 242 of the Labor Code, to wit:

Art. 242. Rights of legitimate labor organizations. A legitimate labor organization

shall have the right:

(a) To act as the representative of its members for the purpose of collective
bargaining;

(b) To be certified as the exclusive representative of all the employees in an

appropriate collective bargaining unit for purpose of collective bargaining;

(c) To be furnished by the employer, upon written request, with his annual audited
financial statement, including the balance sheet and the profit and loss statement,
within thirty (30) calendar days from the date of receipt of the request, after the union
has been duly recognized by the employer or certified as the sole and exclusive
bargaining representative of the employees in the bargaining unit, or within sixty (60)
calendar days before the expiration of the existing collective bargaining agreement,
or during the collective bargaining negotiation;

(d) To own property, real or personal, for the use and benefit of the labor
organization and its members;

(e) To sue and be sued in its registered name; and

(f) To undertake all other activities designed to benefit the organization and its
members, including cooperative, housing welfare and other projects not contrary to
law.

xxx xxx xxx

The pertinent question, therefore, must be asked: When does a labor organization acquire
legitimacy?

Ordinarily, a labor organizations attains the status of legitimacy only upon the issuance in its
name of a Certificate of Registration by the Bureau of Labor Relations pursuant to Articles
234 and 235 of the Labor Code, viz.:

Art. 234. Requirements of registration. Any applicant labor organization,

association or group of unions or workers shall acquire legal personality and shall be
 entitled to the rights and privileges granted by law to legitimate labor organizations
upon issuance of the certificate of registration based on the following requirements:

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meetings and the list of the workers
who participated in such meetings;

(c) The names of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies of its
annual financial reports; and

(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes of
its adoption or ratification, and the list of the members who participated in it.

Art. 235. Action on application. The Bureau shall act on all applications for
registration within thirty (30) days from filing.

All requisite documents and papers shall be certified under oath by the secretary or
the treasurer of the organization, as the case may be, and attested to by its
president.

The foregoing procedure is not the only way by which a labor union may become legitimate,
however. When an unregistered union becomes a branch, local or chapter of a federation,
some of the aforementioned requirements for registration are no longer required.8 Section 3,
Rule II, Book V of the Implementing Rules of the Labor Code governs the procedure for
union affiliation, the relevant portions of which provide:

Sec. 3. Union Affiliation: Direct Membership with National Union. An affiliate of a

labor federation or national union may be a local or chapter thereof or an
independently registered union.

(a) The labor federation or national union concerned shall issue a charter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.

(b) An independently registered union shall be considered an affiliate of a labor

federation or national union after submission to the Bureau of the contract or
agreement of affiliation within thirty (30) days after its execution.

xxx xxx xxx

(e) The local or chapter of a labor federation or national union shall have and
maintain a constitution and by-laws, set of officers and books of accounts. For
reporting purposes, the procedure governing the reporting of independently
registered unions, federations or national unions shall be observed.
Paragraph (a) refers to a local or chapter of a federation which did not undergo the rudiments
of registration while paragraph (b) refers to an independently registered union which affiliated
with a federation. Implicit in the foregoing differentiation is the fact that a local or chapter
need not be independently registered. By force of law (in this case, Article 212 [h]), such
local or chapter becomes a legitimate labor organization upon compliance with the
aforementioned provisions of Section 39 (a) and (e), without having to be issued a Certificate
of Registration in its favor by the BLR.

The cases of Lopez Sugar Corporation v. Secretary of Labor and Employment,10 Phoenix
Iron and Steel Corporation v. Secretary of Labor and Employment 11 and Protection Technology,
Inc. v. Secretary, Department of Labor and Employment,12 all going back to our landmark holding in Progressive Development
Corporation v. Secretary, Department of Labor and
Employment,13 unequivocably laid down the rule, thus:

A local or chapter therefore becomes a legitimate labor organization only upon

submission of the following to the BLR:

1) A charter certificate, within 30 days from its issuance by the labor federation or
national union, and

2) The constitution and by-laws, a statement on the set of officers, and the books of
accounts all of which are certified under oath by the secretary or treasurer, as the
case may be, of such local or chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does not
become a legitimate labor organization.

Corollarily, the satisfaction of all these requirements by the local or chapter shall vest upon it
the status of legitimacy with all its concomitant statutory privileges, one of which is the right
to be certified as the exclusive representative of all the employees in an appropriate
bargaining unit.

In the case at bench, public respondent Bienvenido E. Laguesma, in affirming the finding of
the Med-Arbiter that IBM at SMFI is a legitimate labor organization,14 made the following
material pronouncement amply supported by the records;

[t]he resolution of the issue raised by the respondent on whether or not petitioner is a
legitimate labor organization will depend on the documents submitted by the
petitioner in the second petition.

A close scrutiny of the records shows that at the time of the filing of the subject
petition on 24 September 1993 by the petitioner Ilaw at Buklod ng Manggagawa, for
and in behalf of its local affiliate IBM at SMFI-CEBU B-MEG, the latter has been
clothed with the status and/or character of a legitimate labor organization. This is so,
because on 19 July 1993, petitioner submitted to the Bureau of Labor Relations
(BLR), this Department, the following documents: charter certificate, constitution and
by-laws, names and addresses of the union officers and certification of the union's
secretary on the non-availability of the union's Books of Accounts. Said documents
(expect the charter certificate) are certified under oath and attested to by the local
union's secretary and President, respectively.15
Petitioner SMFI does not dispute the fact that IBM at SMFI has complied with the second set
or requirements, i.e., constitution, by-laws, et. al. What is controverted is the non-compliance
with the requirement as to the charter certificate which must be submitted to the BLR within
thirty (30) days from its issuance by the labor federation. While the presence of a charter
certificate is conceded, petitioner maintains that the validity and authenticity of the same
cannot yet be ascertained as its is still not known who is the legitimate and authorized
representative of the IBM Federation who may validly issue said charter certificate in favor of
its local, IBM at SMFI. According to petitioner, there are two (2) contending sets of officers of
the IBM Federation at the time the charter certificate was issued in favor of IBM at SMFI, the
faction of Mr. Severino O. Meron and that of Mr. Edilberto B. Galvez.

On this point, public respondent, in upholding the legitimate status of IBM at SMFI, backed
up by the Solicitor General, had this to say:

The contention of the respondent that unless and until the issue on who is the
legitimate national president, of the Ilaw at Buklod ng Mangagawa is resolved, the
petitioner cannot claim that is has a valid charter certificate necessary for it to acquire
legal personality is untenable. We wish to stress that the resolution of the said issue
will not in any way affect the validity of the charter certificate issued by the IBM in
favor of the local union. It must be borne in mind that the said charter certificate was
issued by the IBM in its capacity as a labor organization, a juridical entity which has a
separate and distinct legal personality from its members. When as in this case, there
is no showing that the Federation acting as a separate entity is questioning the
legality of the issuance of the said charter certificate, the legality of the issuance of
the same in favor of the local union is presumed. This, notwithstanding the alleged
controversy on the leadership of the federation.16

We agree with this position of the public respondent and the Solicitor General. In addition,
private respondent's Comment to this petition indicates that in the election of officers held to
determine the representatives of IBM, the faction of Mr. Meron lost to the group of Mr.
Edilberto Galvez, and the latter was acknowledged as the duly elected IBM National
President.17 Thus, the authority of Mr. Galvez to sign the charter certificate of IBM at SMFI,
as President of the IBM Federation,18 can no longer be successfully questioned. A punctilious
examination of the records presents no evidence to the contrary and petitioner, instead of
squarely refuting this point, skirted the issue by insisting that the mere presence of two
contending factions in the IBM prevents the issuance of a valid and authentic charter
certificate in favor of IBM at SMFI. This averment of petitioner simply does not deserve any
merit.

II

In any case, this Court notes that it is petitioner, the employer, which has offered the most
tenacious resistance to the holding of a certification election among its monthly-paid rank-
and-file employees. This must not be so, for the choice of a collective bargaining agent is the
sole concern of the employees.19 The only exception to this rule is where the employer has to
file the petition for certification election pursuant to Article 25820 of the Labor Code because it
was requested to bargain collectively,21 which exception finds no application in the case
before us. Its role in a certification election has aptly been described in Trade Unions of the
Philippines and Allied Services (TUPAS) v. Trajano,22 as that of a mere by-stander. It has no
legal standing in a certification election as it cannot oppose the petition or appeal the Med-
Arbiter's orders related thereto. An employer that involves itself in a certification election
lends suspicion to the fact it wants to create a company union.23 This Court should be the last
agency to lend support to such an attempt at interference with a purely internal affair of
labor.24

While employers may rightfully be notified or informed of petitions of such nature, they
should not, however, be considered parties thereto with the concomitant right to oppose it.
Sound policy dictates that they should maintain a strictly hands-off policy.25

It bears stressing that no obstacle must be placed to the holding of certification

elections,26 for it is a statutory policy that should not be circumvented.27 The certification
election is the most democratic and expeditious method by which the laborers can freely
determine the union that shall act as their representative in their dealings with the
establishment where they are working.28 It is the appropriate means whereby controversies
and disputes on representation may be laid to rest, by the unequivocal vote of the employees
themselves. 29Indeed, it is the keystone of industrial democracy.30

Petitioner next asseverates that the Charter Certificate submitted by the private respondent
was defective in that it was not certified under oath and attested to by the organization's
secretary and President.

Petitioner is grasping at straws. Under our ruling in the Progressive Development

Corporation31 case, what is required to be certified under oath by the secretary or treasurer
and attested to by the local's president are the "constitution and by-laws, a statement on the
set of officers, and the books of accounts" of the organization. The charter certificate issued
by the mother union need not be certified under oath by the secretary or treasurer and
attested to by the local's president.

IV

Petitioner, in its Reply to public respondent's Comment, nevertheless calls the attention of
this court to the fact that, contrary to the assertion of private respondent IBM that it is a
legitimate labor federation and therefore has the capacity and authority to create a local or
chapter at SMFI, the Chief of the Labor Organizations Division of the Bureau of Labor
Relations Manila had allegedly issued a certification last January 17, 1995 to the effect
that private respondent is not a legitimate labor federation.32

This is a factual issue which petitioner should have raised before the Med-Arbiter so as to
allow the private respondent ample opportunity to present evidence to the contrary. This
Court is definitely not the proper venue to consider this matter for it is not a trier of facts. It is
noteworthy that petitioner did not challenge the legal personality of the federation in the
proceedings before the Med-Arbiter. Nor was this issue raised in petitioner's appeal to the
Office of the Secretary of Labor and Employment. This matter is being raised for the first time
in this petition. An issue which was neither alleged in the pleadings nor raised during the
proceedings below cannot be ventilated for the first time before this Court. It would be
offensive to the basic rule of fair play, justice and due process.33 Certiorari is a remedy
narrow in its scope and inflexible in character. It is not a general utility tool in the legal
workshop.34 Factual issues are not a proper subject for certiorari, as the power of the
Supreme Court to review labor cases is limited to the issue of jurisdiction and grave abuse of
discretion.35 It is simply unthinkable for the public respondent Undersecretary of Labor to
have committed grave abuse of discretion in this regard when the issue as to the legal
personality of the private respondent IBM Federation was never interposed in the appeal
before said forum.
 V

Finally, the certification election sought to be stopped by petitioner is, as of now, fait
accompli. The monthly paid rank-and-file employees of SMFI have already articulated their
choice as to who their collective bargaining agent should be. In the certification election held
on August 20, 1994,36 the SMFI workers chose IBM at SMFI to be their sole and exclusive
bargaining agent. This democratic decision deserve utmost respect. Again, it bears stressing
that labor legislation seeks in the main to protect the interest of the members of the working
class. It should never be used to subvert their will.3 7

WHEREFORE, the petition is DENIED. Costs again petitioner.

SO ORDERED.

G.R. No. 142000 January 22, 2003

TAGAYTAY HIGHLANDS INTERNATIONAL GOLF CLUB INCORPORATED, petitioner,

vs.
TAGAYTAY HIGHLANDS EMPLOYEES UNION-PGTWO, respondent.

CARPIO-MORALES, J.:

Before this Court on certiorari under Rule 45 is the petition of the Tagaytay Highlands International
Golf Club Incorporated (THIGCI) assailing the February 15, 2002 decision of the Court of Appeals
denying its petition to annul the Department of Labor and Employment (DOLE) Resolutions of
November 12, 1998 and December 29, 1998.

On October 16, 1997, the Tagaytay Highlands Employees Union (THEU)Philippine Transport and
General Workers Organization (PTGWO), Local Chapter No. 776, a legitimate labor organization
said to represent majority of the rank-and-file employees of THIGCI, filed a petition for certification
election before the DOLE Mediation-Arbitration Unit, Regional Branch No. IV.

THIGCI, in its Comment1 filed on November 27, 1997, opposed THEUs petition for certification
election on the ground that the list of union members submitted by it was defective and fatally flawed
as it included the names and signatures of supervisors, resigned, terminated and absent without
leave (AWOL) employees, as well as employees of The Country Club, Inc., a corporation distinct
and separate from THIGCI; and that out of the 192 signatories to the petition, only 71 were actual
rank-and-file employees of THIGCI.

THIGCI thus submitted a list of the names of its 71 actual rank-and-file employees which it
annexed2 to its Comment to the petition for certification election. And it therein incorporated the
following tabulation3 showing the number of signatories to said petition whose membership in the
union was being questioned as disqualified and the reasons for disqualification:

# of
Reasons for Disqualification
Signatures
13 Supervisors of THIGCI
6 Resigned employees of THIGCI
2 AWOL employees of THIGCI
 53 Rank-and-file employees of The Country Club at Tagaytay
Highlands, Inc.
14 Supervisors of The Country Club at Tagaytay Highlands, Inc.
6 Resigned employees of The Country Club at Tagaytay Highlands,
Inc.
3 Terminated employees of The Country Club at Tagaytay
Highlands, Inc.
1 AWOL employees of The Country Club at Tagaytay Highlands,
Inc.
4 Signatures that cannot be deciphered
16 Names in list that were erased
2 Names with first names only

THIGCI also alleged that some of the signatures in the list of union members were secured through
fraudulent and deceitful means, and submitted copies of the handwritten denial and withdrawal of
some of its employees from participating in the petition.4Replying to THIGCIs Comment, THEU
asserted that it had complied with all the requirements for valid affiliation and inclusion in the roster
of legitimate labor organizations pursuant to DOLE Department Order No. 9, series of 1997,5 on
account of which it was duly granted a Certification of Affiliation by DOLE on October 10, 1997;6 and
that Section 5, Rule V of said Department Order provides that the legitimacy of its registration cannot
be subject to collateral attack, and for as long as there is no final order of cancellation, it continues to
enjoy the rights accorded to a legitimate organization.

THEU thus concluded in its Reply7 that under the circumstances, the Med-Arbiter should, pursuant to
Article 257 of the Labor Code and Section 11, Rule XI of DOLE Department Order No. 09,
automatically order the conduct of a certification election.

By Order of January 28, 1998, 8 DOLE Med-Arbiter Anastacio Bactin ordered the holding of a
certification election among the rank-and-file employees of THIGCI in this wise, quoted verbatim:

We evaluated carefully this instant petition and we are of the opinion that it is complete in
form and substance. In addition thereto, the accompanying documents show that indeed
petitioner union is a legitimate labor federation and its local/chapter was duly reported
to this Office as one of its affiliate local/chapter. Its due reporting through the submission
of all the requirements for registration of a local/chapter is a clear showing that it was already
included in the roster of legitimate labor organizations in this Office pursuant to Department
Order No. 9 Series of 1997 with all the legal right and personality to institute this instant
petition. Pursuant therefore to the provisions of Article 257 of the Labor Code, as amended,
and its Implementing Rules as amended by Department Order No. 9, since the respondents
establishment is unorganized, the holding of a certification election is mandatory for it was
clearly established that petitioner is a legitimate labor organization. Giving due course to this
petition is therefore proper and appropriate.9 (Emphasis supplied)

Passing on THIGCIs allegation that some of the union members are supervisory, resigned and
AWOL employees or employees of a separate and distinct corporation, the Med-Arbiter held that the
same should be properly raised in the exclusion-inclusion proceedings at the pre-election
conference. As for the allegation that some of the signatures were secured through fraudulent and
deceitful means, he held that it should be coursed through an independent petition for cancellation of
union registration which is within the jurisdiction of the DOLE Regional Director. In any event, the
Med-Arbiter held that THIGCI failed to submit the job descriptions of the questioned employees
and other supporting documents to bolster its claim that they are disqualified from joining
THEU.

THIGCI appealed to the Office of the DOLE Secretary which, by Resolution of June 4, 1998, set
aside the said Med-Arbiters Order and accordingly dismissed the petition for certification election on
the ground that there is a "clear absence of community or mutuality of interests," it finding that THEU
sought to represent two separate bargaining units (supervisory employees and rank-and-file
employees) as well as employees of two separate and distinct corporate entities.

Upon Motion for Reconsideration by THEU, DOLE Undersecretary Rosalinda Dimalipis-Baldoz, by

authority of the DOLE Secretary, issued DOLE Resolution of November 12, 199810 setting aside the
June 4, 1998 Resolution dismissing the petition for certification election. In the November 12, 1998
Resolution, Undersecretary Dimapilis-Baldoz held that since THEU is a local chapter, the twenty
percent (20%) membership requirement is not necessary for it to acquire legitimate status, hence,
"the alleged retraction and withdrawal of support by 45 of the 70 remaining rank-and-file members . .
. cannot negate the legitimacy it has already acquired before the petition;" that rather than disregard
the legitimate status already conferred on THEU by the Bureau of Labor Relations, the names of
alleged disqualified supervisory employees and employees of the Country Club, Inc., a separate and
distinct corporation, should simply be removed from the THEUs roster of membership; and that
regarding the participation of alleged resigned and AWOL employees and those whose signatures
are illegible, the issue can be resolved during the inclusion-exclusion proceedings at the pre-election
stage.

The records of the case were thus ordered remanded to the Office of the Med-Arbiter for the conduct
of certification election.

THIGCIs Motion for Reconsideration of the November 12, 1998 Resolution having been denied by
the DOLE Undersecretary by Resolution of December 29, 1998,11 it filed a petition for certiorari
before this Court which, by Resolution of April 14, 1999,12 referred it to the Court of Appeals in line
with its pronouncement in National Federation of Labor (NFL) v. Hon. Bienvenido E. Laguesma, et
al.,13 and in strict observance of the hierarchy of courts, as emphasized in the case of St. Martin
Funeral Home v. National Labor Relations Commission.14

By Decision of February 15, 2000,15 the Court of Appeals denied THIGCIs Petition for Certiorari and
affirmed the DOLE Resolution dated November 12, 1998. It held that while a petition for certification
election is an exception to the innocent bystander rule, hence, the employer may pray for the
dismissal of such petition on the basis of lack of mutuality of interests of the members of the union
as well as lack of employer-employee relationship following this Courts ruling in Toyota Motor
Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union et al.16and Dunlop
Slazenger [Phils.] v. Hon. Secretary of Labor and Employment et al,17 petitioner failed to adduce
substantial evidence to support its allegations.

Hence, the present petition for certiorari, raising the following

"ISSUES/ASSIGNMENT OF ERRORS:

THE COURT OF APPEALS GRIEVOUSLY ERRED IN AFFIRMING THE RESOLUTION

DATED 12 NOVEMER 1998 HOLDING THAT SUPERVISORY EMPLOYEES AND NON-
EMPLOYEES COULD SIMPLYBE REMOVED FROM APPELLEES ROSTER OF RANK-
AND-FILE MEMBERSHIP INSTEAD OF RESOLVING THE LEGITIMACY OF
RESPONDENT UNIONS STATUS
 THE COURT OF APPEALS GRIEVOUSLY ERRED IN AFFIRMING THE RESOLUTION
DATED 12 NOVEMBER 1998 HOLDING THAT THE DISQUALIFIED EMPLOYEES
STATUS COULD READILY BE RESOLVED DURING THE INCLUSION AND EXCLUSION
PROCEEDINGS

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT HOLDING THAT THE

ALLEGATIONS OF PETITIONER HAD BEEN DULY PROVEN BY FAILURE OF
RESPONDENT UNION TO DENY THE SAME AND BY THE SHEER WEIGHT OF
EVIDENCE INTRODUCED BY PETITIONER AND CONTAINED IN THE RECORDS OF
THE CASE"18

The statutory authority for the exclusion of supervisory employees in a rank-and-file union, and vice-
versa, is Article 245 of the Labor Code, to wit:

Article 245. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees. Managerial employees are not eligible to join, assist or form any
labor organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.

While above-quoted Article 245 expressly prohibits supervisory employees from joining a rank-and-
file union, it does not provide what would be the effect if a rank-and-file union counts supervisory
employees among its members, or vice-versa.

Citing Toyota19 which held that "a labor organization composed of both rank-and-file and supervisory
employees is no labor organization at all," and the subsequent case of Progressive Development
Corp. Pizza Hut v. Ledesma20which held that:

"The Labor Code requires that in organized and unorganized establishments, a petition for
certification election must be filed by a legitimate labor organization. The acquisition of rights
by any union or labor organization, particularly the right to file a petition for certification
election, first and foremost, depends on whether or not the labor organization has attained
the status of a legitimate labor organization.

In the case before us, the Med-Arbiter summarily disregarded the petitioners prayer that the
former look into the legitimacy of the respondent Union by a sweeping declaration that the
union was in the possession of a charter certificate so that for all intents and purposes,
Sumasaklaw sa Manggagawa sa Pizza Hut (was) a legitimate organization,"21 (Underscoring
and emphasis supplied),

petitioner contends that, quoting Toyota, "[i]t becomes necessary . . ., anterior to the granting of an
order allowing a certification election, to inquire into the composition of any labor organization
whenever the status of the labor organization is challenged on the basis of Article 245 of the Labor
Code."22

Continuing, petitioner argues that without resolving the status of THEU, the DOLE Undersecretary
"conveniently deferred the resolution on the serious infirmity in the membership of [THEU] and
ordered the holding of the certification election" which is frowned upon as the following ruling of this
Court shows:

We also do not agree with the ruling of the respondent Secretary of Labor that the infirmity
in the membership of the respondent union can be remedied in "the pre-election
 conference thru the exclusion-inclusion proceedings wherein those employees who are
occupying rank-and-file positions will be excluded from the list of eligible voters." Public
respondent gravely misappreciated the basic antipathy between the interest of supervisors
and the interest of rank-and-file employees. Due to the irreconcilability of their interest we
held in Toyota Motor Philippines v. Toyota Motors Philippines Corporation Labor Union, viz:

x x x

"Clearly, based on this provision [Article 245], a labor organization composed of both
rank-and-file and supervisory employees is no labor organization at all. It cannot, for
any guise or purpose, be a legitimate labor organization. Not being one, an
organization which carries a mixture of rank-and-file and supervisory employees
cannot posses any of the rights of a legitimate labor organization, including the right
to file a petition for certification election for the purpose of collective bargaining. It
becomes necessary, therefore, anterior to the granting of an order allowing a
certification election, to inquire into the composition of any labor organization
whenever the status of the labor organization is challenged on the basis of Article
245 of the Labor Code." (Emphasis by petitioner) (Dunlop Slazenger (Phils.), v.
Secretary of Labor, 300 SCRA 120 [1998]; Underscoring and emphasis supplied by
petitioner.)

The petition fails. After a certificate of registration is issued to a union, its legal personality cannot be
subject to collateral attack. It may be questioned only in an independent petition for cancellation in
accordance with Section 5 of Rule V, Book IV of the "Rules to Implement the Labor Code"
(Implementing Rules) which section reads:

Sec. 5. Effect of registration. The labor organization or workers association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of
registration. Such legal personality cannot thereafter be subject to collateral attack, but may
be questioned only in an independent petition for cancellation in accordance with these
Rules. (Emphasis supplied)

The grounds for cancellation of union registration are provided for under Article 239 of the Labor
Code, as follows:

Art. 239. Grounds for cancellation of union registration. The following shall constitute
grounds for cancellation of union registration:

(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification
of the constitution and by-laws or amendments thereto, the minutes of ratification, and the list
of members who took part in the ratification;

(b) Failure to submit the documents mentioned in the preceding paragraph within thirty (30)
days from adoption or ratification of the constitution and by-laws or amendments thereto;

(c) Misrepresentation, false statements or fraud in connection with the election of officers,
minutes of the election of officers, the list of voters, or failure to subject these documents
together with the list of the newly elected/appointed officers and their postal addresses within
thirty (30) days from election;
 (d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the
losing of every fiscal year and misrepresentation, false entries or fraud in the preparation of
the financial report itself;

(e) Acting as a labor contractor or engaging in the "cabo" system, or otherwise engaging in
any activity prohibited by law;

(f) Entering into collective bargaining agreements which provide terms and conditions of
employment below minimum standards established by law;

(g) Asking for or accepting attorneys fees or negotiation fees from employers;

(h) Other than for mandatory activities under this Code, checking off special assessments or
any other fees without duly signed individual written authorizations of the members;

(i) Failure to submit list of individual members to the Bureau once a year or whenever
required by the Bureau; and

(j) Failure to comply with the requirements under Articles 237 and 238, (Emphasis supplied),

while the procedure for cancellation of registration is provided for in Rule VIII, Book V of the
Implementing Rules.

The inclusion in a union of disqualified employees is not among the grounds for cancellation, unless
such inclusion is due to misrepresentation, false statement or fraud under the circumstances
enumerated in Sections (a) and (c) of Article 239 of above-quoted Article 239 of the Labor
Code.

THEU, having been validly issued a certificate of registration, should be considered to have already
acquired juridical personality which may not be assailed collaterally.

As for petitioners allegation that some of the signatures in the petition for certification election were
obtained through fraud, false statement and misrepresentation, the proper procedure is, as reflected
above, for it to file a petition for cancellation of the certificate of registration, and not to intervene in a
petition for certification election.

Regarding the alleged withdrawal of union members from participating in the certification election,
this Courts following ruling is instructive:

"[T]he best forum for determining whether there were indeed retractions from some of the
laborers is in the certification election itself wherein the workers can freely express their
choice in a secret ballot. Suffice it to say that the will of the rank-and-file employees should
in every possible instance be determined by secret ballot rather than by administrative or
quasi-judicial inquiry. Such representation and certification election cases are not to be taken
as contentious litigations for suits but as mere investigations of a non-adversary, fact-finding
character as to which of the competing unions represents the genuine choice of the workers
to be their sole and exclusive collective bargaining representative with their employer."23

As for the lack of mutuality of interest argument of petitioner, it, at all events, does not lie given, as
found by the court a quo, its failure to present substantial evidence that the assailed employees are
actually occupying supervisory positions.
While petitioner submitted a list of its employees with their corresponding job titles and ranks,24 there
is nothing mentioned about the supervisors respective duties, powers and prerogatives that would
show that they can effectively recommend managerial actions which require the use of independent
judgment.25

As this Court put it in Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor:26

Designation should be reconciled with the actual job description of subject employees x x x
The mere fact that an employee is designated manager does not necessarily make him one.
Otherwise, there would be an absurd situation where one can be given the title just to be
deprived of the right to be a member of a union. In the case of National Steel Corporation vs.
Laguesma (G. R. No. 103743, January 29, 1996), it was stressed that:

What is essential is the nature of the employees function and not the
nomenclature or title given to the job which determines whether the employee has
rank-and-file or managerial status or whether he is a supervisory employee.
(Emphasis supplied).27

WHEREFORE, the petition is hereby DENIED. Let the records of the case be remanded to the office
of origin, the Mediation-Arbitration Unit, Regional Branch No. IV, for the immediate conduct of a
certification election subject to the usual pre-election conference.

SO ORDERED.

G.R. No. 157146. April 29, 2005

LAGUNA AUTOPARTS MANUFACTURING CORPORATION, Petitioners,

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

DECISION

CALLEJO, SR., J.:

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

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

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

a) Proof of payment of registration fee;

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

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

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

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

f) Copies of petitioners constitution and by-laws, minutes of its adoption or ratification, and list of
members who participated in it.3

The petitioner company further asserted in the said motion that even if the respondent union was
issued a certificate of registration, it could not file a petition for certification election since its legal
personality was at question.4

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

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

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

1. Obrero Pilipino LAMCOR Chapter; and

2. No Union

Pursuant to Section 11.1, Rule XI of the New Implementing Rules, the employer is hereby directed
to submit to the regional office of origin the certified list of current employees in the bargaining unit
for the last three months prior to the issuance of this decision.
SO DECIDED.6

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

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

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

PRIVATE RESPONDENT HAS COMPLIED WITH ALL REQUIREMENTS FOR REGISTRATION;

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

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

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

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

SO ORDERED.9

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

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

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

Hence, this petition for review wherein the petitioner relies on the sole ground

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

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

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

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

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

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

The petition is unmeritorious.

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

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

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

accordance with Section 1 of this Rule shall acquire legal personality from the date of filing of the
complete documents enumerated therein. Upon compliance with all documentary requirements, the
Regional Office or Bureau shall issue in favor of the local/chapter a certificate indicating that it is
included in the roster of legitimate labor organizations.19
As gleaned from the said provision, the task of determining whether the local or chapter has
submitted the complete documentary requirements is lodged with the Regional Office or the BLR, as
the case may be. The records of the case show that the respondent union submitted the said
documents to Regional Office No. IV and was subsequently issued the following certificate:

CERTIFICATE OF CREATION OF LOCAL/ CHAPTER NO.

This certifies that as of July 16, 1998 the OBRERO PILIPINO-LAMCOR submitted to this Office
Charter Certificate No. 07-98 issued by OBRERO PILIPINO with complete supporting documents.
From said date, it has acquired legal personality as a labor organization. It shall have the right to
represent its members for all purposes not contrary to law or applicable regulations and to its
constitution and by-laws.

The legitimate personality of OBRERO PILIPINO-LAMCOR CHAPTER is without prejudice to

whatever grounds for revocation or cancellation as may be prescribed by applicable laws and
regulations.

March 23, 1999

Date

By:

(SGD.)

RAYMUNDO G. AGRAVANTE

Labor Relations Division Chief20

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

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

SEC. 5. Effect of registration. The labor organization or workers association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of
registration. Such legal personality cannot thereafter be subject to collateral attack but may be
questioned only in an independent petition for cancellation in accordance with these Rules.21

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

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

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

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

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

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

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

SO ORDERED.

159-A Phil. 370

FERNANDO, J.:
The main thrust in this appeal by certiorari against the then existing Court
of Industrial Relations is its alleged lack of jurisdiction over money claims
for overtime services on Sundays and legal holidays by employees still
forming part of the labor force of petitioner firm, La Carlota Sugar
Central. At the time the proceedings were had before respondent Court,
leading to the challenged awards for overtime pay, there was some lurking
doubt as to whether ordinary judicial tribunals or respondent Court had the
competence to pass upon the matter. Since then, however, as will
subsequently be made clear, the definitive ruling is that respondent Court
was vested with the requisite power. As a matter of fact, this very petition
yielded the impression that its stand was not too strongly entrenched in
law. For there were indications even then that respondent Court was the
proper agency to decide such issue. Petitioner would raise another point,
the alleged lack of procedural process. Its effort in that direction is equally
unavailing. We affirm.

In the main resolution challenged, respondent Court after stating that a

previous order was already final and executory ruled that the employees
named in the Examiner's Report were entitled to the additional
compensation.[1] Further: "The contention of the respondent that the
overtime pay due the petitioners are already included in their salary as
agreed upon by them is without foundation for any agreement to waive
one's overtime pay is null and void as the same is contrary to law."[2] It was
therein likewise stated: "Concerning the last issue, the Court believes that
the workers are entitled to the amount paid to them during the entire
period stated in the report. Concerning the period prior to 1956 it appears
that there are no records existing in the company for such periods. It,
therefore, behooves on the petitioning Union to prove by secondary
evidence the matter of services rendered on Sundays and legal holidays so
as to enable the Court on the basis of such evidence to determine and
compute the additional compensation in favor of the petitioners."[3] There
was a motion for reconsideration by petitioner firm, and respondent Court
in its resolution of May 21, 1962 excluded certain employees, but otherwise
found "no sufficient justification for altering [its] Order * * *."[4]

As mentioned at the outset, there is no valid ground for reversal.

1. The authoritative precedent on the pivotal question of jurisdiction is

supplied by Price Stabilization Corporation vs. Court of Industrial
Relations.[5] In that case, this Court, through Justice Barrera, categorically
affirmed the underlying principle to be "that where the employer-employee
relationship is still existing or is sought to be reestablished because of its
wrongful severance (as where the employees seeks reinstatement), the
Court of Industrial Relations has jurisdiction over all claims arising out of,
or in connection with employment, such as those related to the Minimum
Wage Law and the Eight-Hour Labor Law. After the termination of the
relationship and no reinstatement is sought, such claims become mere
money claims, and come within the jurisdiction of the regular
courts."[6] Since then, up to the time the Court of Industrial Relations was
abolished, that ruling had been adhered to.[7] There is thus futility in the
attempt of petitioner to impress on this Tribunal that respondent Court was
devoid of jurisdiction.

2. Petitioner firm would make much of the due process claim. This plea it
would support by the allegation that only respondent National Sugar
Workers Union and respondent Jose Villanueva were named as parties. It
is its contention then that those employees whose statutory rights for
overtime pay as found in the challenged orders were not respected had to
file the action as individuals. Again there is misapprehension of the law on
the part of petitioner firm. Only lately, in Liberty Manufacturing Workers
Union vs. Court of First Instance,[8] this Court reiterated the view that a
labor union has the requisite personality to sue on behalf of its members for
their individual money claims. It would be an unwarranted impairment of
the right to self-organization through formation of labor associations if
thereafter such collective entities would be barred from instituting action in
their representative capacity. So marked is the respect under the
Constitution and the statutes to such a right to self-organization as a result
of which it may enter into collective bargaining agreements that in another
decision, Mactan Workers Union vs. Aboitiz,[9] it was held by this Court
that once such a collective contract is entered into, its benefits extend to all
the laborers and employees in the collective bargaining unit. That would
include those who do not belong to the labor organization that was chosen
to represent the employees. This doctrine goes back to Leyte Land
Transportation vs. Leyte Farmers' and Laborers' Union,[10] a 1948
decision. Under the peculiar circumstances on this case where the
controversy as to the right to overtime pay for work performed on Sundays
and holidays dated back to September 24, 1956, with respondent Court
having held a number of hearings with petitioner firm having at all stages
resisting, as it ought to, what it considered to be unwarranted demands,
there is an air of implausibility to any allegation that it was denied
procedural due process. It was not only duly informed as to the claims it
had to meet, but also was thereon fully heard.

WHEREFORE, this appeal by certiorari is dismissed for lack of merit and

the challenged orders of respondent Court affirmed. The preliminary
injunction issued by this Court is hereby lifted and set aside. Costs against
petitioner La Carlota Sugar Central.

G.R. No. 112141 May 16, 1995

PHOENIX IRON AND STEEL CORPORATION, petitioner,

vs.
SECRETARY OF LABOR AND EMPLOYMENT and PISCOR WORKERS UNION ALLIANCE
OF NATIONALIST AND GENUINE LABOR ORGANIZATIONS (PISCOR-ANGLO), respondents.

BELLOSILLO, J.:

Disputed here is the applicability of our ruling in Progressive Development Corporation v. Secretary,
Department of Labor and
Employment. 1

Private respondent PISCOR Workers Union Alliance of Nationalist and Genuine Labor
Organizations (PISCOR-ANGLO) asserting to be a legitimate labor organization filed on 13 October
1992 a petition for certification election with the Med-Arbiter. On 3 December 1992 petitioner
Phoenix Iron and Steel Corporation (PHOENIX) sought clarification of the legal personality of
PISCOR-ANGLO (UNION). On 19 January 1993, finding that the UNION had not complied with the
requisites of law, Med-Arbiter Napoleon v. Fernando dismissed the petition holding that

A careful scrutiny of the record reveals that the principal party petitioner herein, the
Piscor Workers Union, is not a duly registered labor organization . . . . (The) record
undisputably shows that for purposes of registering Piscor Workers Union as an
affiliate of ANGLO no books of account was filed before the BLR. And that the
constitution and by-laws as well as the list of members who ratified the same were
not attested to by the union president. The constitution and by-laws was not likewise
verified under oath. In view thereof and in the light of the above-quoted Supreme
Court ruling (Progressive Development Corporation vs. Secretary of Labor, G.R. No.
96425, February 4, 1992), petitioner Piscor Workers Union failed to attain the status
of legitimate labor organization . . . . (The) authority to file petition (for certification
election) which is dated September 6, 1992, is without force and effect . . .
considering that it was only on September 27, 1992, that Piscor Workers Union was
established. Thus, in (the) absence of legal personality Piscor Workers Union may
not validly authorize ANGLO to file the present petition.

It is further observed that there is much to be desired in the matter of notarization of

the supporting documents submitted for the petitioner's union registration and on the
matter of the notarization of this very petition. In the first place it should be noted that
the requirement of due notarization of supporting documents for union registration
and that of the petition for certification election is mandatory.
 In Progressive case, the Supreme Court declares that: "In the case at bar, the failure
of the secretary of PDEU-KILUSAN to certify the required documents under oath is
fatal to its acquisition of a legitimate status."

While Section 1, Rule V, Book V of the Rules and Regulations Implementing the New
Labor Code provides that: "Section 1 Where to file A petition for certification
election . . . . The petition shall be in writing and under oath." (emphasis supplied)

When the rule requires a document to be under oath, it goes with it the requirement
that the said document must properly be under oath. Improper notarization is no
compliance at all . . . . In the case at bar, the inconsistence in the dates of execution
of the petition as contained in the body of the petition which shows that it was
executed on October 13, 1992, and the date of alleged notarization which is October
8, 1992, really impart some serious cloud as to whether or not this petition was
properly notarized.2

On appeal to the Office of Secretary of Labor, Undersecretary Bienvenido E. Laguesma, acting by

authority of the Secretary of Labor, issued on 8 June 1993 a resolution "calling for the immediate
conduct of a certification election . . . . with PISCOR Workers Union-Anglo and No Union as the
choices." 3 He ruled that

Petitioner-appellant has complied with the requirements of the law on organization of

a local after it was shown that it has submitted duly certified copies of its constitution
and by-laws, list of officers and charter certificate . . . .

Anent the minutes of organizational meeting, it is obvious that the same is not
required to be submitted by the union to establish its legitimacy. Questions are,
however, being raised on the veracity of its contents and doubts on its due execution
are expressed for the purpose of putting across the message that in truth and in fact
there was no organizational meeting that took place.

Suffice it to say that said doubts should be resolved in favor of its regularity and not
as adversely affecting the legal standing of petitioner. For as earlier stated, having
complied with all the requirements aforementioned, technicalities may not be allowed
to stand in the way of certification election. After all, respondent's reservations will
definitely be resolved thru the certification election where the workers could freely
express their will.

As to the alleged inconsistency in the date of the execution of the petition as

contained in the body thereof, in relation to the notarization of the said pleading, we
are convinced that the same was the result of oversight which likewise could not be
used to defeat the petition for certification election and petitioner's right to choose its
representative for collective bargaining purposes. 4

In this recourse the Solicitor General filed a Manifestation and Motion in Lieu of
Comment 5 supporting petitioner's stand that private respondent PISCOR-ANGLO has no personality
to file a petition for certification election it not being a legitimate labor organization; that said Union
failed to comply with the attestation and certification requirements for the attainment of a legitimate
status with respect to certain documents submitted with the Bureau of Labor Relations (BLR); and,
that the dismissal of such requirements as mere technicalities by Undersecretary of Labor
Bienvenido E. Laguesma, acting in behalf of the Secretary of Labor, directly contradicts the
categorical pronouncement in Progressive Development Corporation v. Secretary of Labor 6 that the
failure of a labor union to certify under oath the required documents submitted with the BLR
is fatal to the attainment of a legitimate status. Hence, the Solicitor General recommends that the
assailed Resolution dated 8 June 1993 of respondent Secretary of Labor, acting through
Undersecretary Laguesma, be reversed and set aside.

Thereafter, public respondent Secretary of Labor through the Legal Service of the Department of
Labor and Employment, Legal Representation Division, filed his comment on 16 March 1994, while
private respondent PISCOR-ANGLO filed its own on 23 November 1994.

On 10 August 1994 we gave due course to the petition and required the parties to file their
memoranda. On 24 August 1994 we issued a temporary restraining order to enjoin the enforcement
of the assailed resolution.

We agree with petitioner Phoenix Iron and Steel Corporation and the Solicitor General that our ruling
in Progressive applies in this case, to wit:

A local or chapter . . . becomes a legitimate labor organization only upon submission

of the following to the BLR:

1) A charter certificate, within 30 days from its issuance by the labor federation or
national union, and

2) The constitution and by-laws, a statement on the set of officers, and the books of
accounts all of which are certified under oath by the secretary or treasurer, as the
case may be, of such local or chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does not
become a legitimate labor organization.

In the case at bar, the failure of the secretary of PDEU-Kilusan to certify the required
documents under oath is fatal to its acquisition of a legitimate status.

The mandatory nature of the requirement is also exhaustively explained in the same case

In the case of union registration, the rationale for requiring that the submitted
documents and papers be certified under oath by the secretary or treasurer, as the
case may be, and attested to by the president is apparent. The submission of the
required documents (and payment of P50.00 registration fee) becomes the Bureau's
basis for approval of the application for registration. Upon approval, the labor union
acquires legal personality and is entitled to all the rights and privileges granted by the
law to a legitimate labor organization. The employer naturally needs assurance that
the union it is dealing with is a bona-fide organization, one which has not submitted
false statements or misrepresentations to the Bureau. The inclusion of the
certification and attestation requirements will in a marked degree allay these
apprehensions of management. Not only is the issuance of any false statement and
misrepresentation a ground for cancellation of registration (see Article 239 (a), (c)
and (d)); it is also a ground for a criminal charge of perjury.

The certification and attestation requirements are preventive measures against the
commission of fraud. They likewise afford a measure of protection to unsuspecting
 employees who may be lured into joining unscrupulous or fly-by-night unions whose
sole purpose is to control union funds or to use the union for dubious ends.

In the case of union affiliation with a federation, the documentary requirements are
found in Rule II, Section 3 (e), Book V of the Implementing Rules, which we again
quote as follows: "(c) The local or chapter of a labor federation or national union shall
have and maintain a constitution and by-laws, set of officers and books of
accounts. For reporting purposes, the procedure governing the reporting of
independently registered unions, federations or national unions shall be observed"
(emphasis supplied).

Since the "procedure governing the reporting of independently registered unions"

refers to the certification and attestation requirements contained in Article 235,
paragraph 2, it follows that the constitution and by-laws, set of officers and books of
accounts submitted by the local and chapter must likewise comply with these
requirements. The same rationale for requiring the submission of duly subscribed
documents upon union registration exists in the case of union affiliation. Moreover,
there is greater reason to exact compliance with the certification and attestation
requirements because, as previously mentioned, several requirements applicable to
independent union registration are no longer required in the case of the formation of
a local or chapter. The policy of the law in conferring greater bargaining power upon
labor unions must be balanced with the policy of providing preventive measures
against the commission of fraud.7

Compared with what happened in the Progressive case, this situation before us now is even worse.
There are no books of account filed before the BLR, the constitution, by-laws and the list of
members who supposedly ratified the same were not attested to by the union president, and the
constitution and by-laws were not verified under oath.

WHEREFORE, the instant petition is GRANTED and the assailed resolution dated 8 June 1993 of
public respondent Secretary of Labor acting through Undersecretary Bienvenido E. Laguesma is
SET ASIDE. The decision of the Med-Arbiter dated 19 January 1993 dismissing the petition for
certification election is REINSTATED and the restraining order we issued on 24 August 1994 is
made permanent.

SO ORDERED.

G.R. No. 96425 February 4, 1992

PROGRESSIVE DEVELOPMENT CORPORATION, petitioner,

vs.
THE HONORABLE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, MED-
ARBITER EDGARDO DELA CRUZ and PAMBANSANG KILUSAN NG PAGGAWA (KILUSAN)-
TUCP, respondents.

Beltran, Bacungan & Candoy for petitioner.

Jimenez & Associates co-counsel for petitioner.

GUTIERREZ, JR., J.:

The controversy in this case centers on the requirements before a local or chapter of a federation
may file a petition for certification election and be certified as the sole and exclusive bargaining
agent of the petitioner's employees.

Petitioner Progressive Development Corporation (PDC) filed this petition for certiorari to set aside
the following:

1) Resolution dated September 5, 1990, issued by respondent Med-Arbiter Edgardo dela Cruz,
directing the holding of the certification election among the regular rank-and-file employees of PDC:

2) Order dated October 12, 1990, issued by the respondent Secretary of Labor and Employment,
denying PDC's appeal; and

3) Order dated November 12, 1990, also issued by the respondent Secretary, denying the
petitioner's Motion for Reconsideration.

On June 19, 1990, respondent Pambansang Kilusan ng Paggawa (KILUSAN) -TUCP (hereinafter
referred to as Kilusan) filed with the Department of Labor and Employment (DOLE) a petition for
certification election among the rank-and-file employees of the petitioner alleging that it is a
legitimate labor federation and its local chapter, Progressive Development Employees Union, was
issued charter certificate No. 90-6-1-153. Kilusan claimed that there was no existing collective
bargaining agreement and that no other legitimate labor organization existed in the bargaining unit.

Petitioner PDC filed its motion to dismiss dated July 11, 1990 contending that the local union failed
to comply with Rule II Section 3, Book V of the Rules Implementing the Labor Code, as amended,
which requires the submission of: (a) the constitution and by-laws; (b) names, addresses and list of
officers and/or members; and (c) books of accounts.

On July 16 , 1990, respondent Kilusan submitted a rejoinder to PDC's motion to dismiss claiming
that it had submitted the necessary documentary requirements for registration, such as the
constitution and by-laws of the local union, and the list of officers/members with their addresses.
Kilusan further averred that no books of accounts could be submitted as the local union was only
recently organized.

In its "Supplemental Position Paper" dated September 3, 1990, the petitioner insisted that upon
verification with the Bureau of Labor Relations (BLR), it found that the alleged minutes of the
organizational meeting was unauthenticated, the list of members did not bear the corresponding
signatures of the purported members, and the constitution and by-laws did not bear the signature of
the members and was not duly subscribed. It argued that the private respondent therefore failed to
substantially comply with the registration requirements provided by the rules. Additionally, it prayed
that Med-Arbiter Edgardo dela Cruz inhibit himself from handling the case for the reason that he
allegedly had prejudged the same.

In his September 5, 1990 resolution, Med Arbiter dela Cruz held that there was substantial
compliance with the requirements for the formation of the chapter. He further stated that mere
issuance of the charter certificate by the federation was sufficient compliance with the rules.
Considering that the establishment was unorganized, he maintained that a certification election
should be conducted to resolve the question of representation.
Treating the motion for reconsideration filed by the PDC as an appeal to the Office of the Secretary,
Undersecretary Laguesma held that the same was merely a "reiteration of the issues already
ventilated in the proceedings before the Med-Arbiter, specifically, the matter involving the formal
organization of the chapter." (Rollo, p. 20) PDC's motion for reconsideration from the aforementioned
ruling was likewise denied. Hence, this petition.

In an order dated February 25, 1991, the Court resolved to issue a temporary restraining order
enjoining the public respondents from carrying out the assailed resolution and orders or from
proceeding with the certification election. (Rollo, pp. 37-39)

It is the petitioner's contention that a labor organization (such as the Kilusan) may not validly invest
the status of legitimacy upon a local or chapter through the mere expedient of issuing a charter
certificate and submitting such certificate to the BLR (Rollo, p. 85) Petitioner PDC posits that such
local or chapter must at the same time comply with the requirement of submission of duly
subscribed constitution and by-laws, list of officers and books of accounts. (Rollo, p. 35) PDC points
out that the constitution and by-laws and list of officers submitted were not duly subscribed.
Likewise, the petitioner claims that the mere filing of the aforementioned documents is insufficient;
that there must be due recognition or acknowledgment accorded to the local or chapter by BLR
through a certificate of registration or any communication emanating from it. (Rollo, p. 86)

The Solicitor General, in behalf of the public respondent, avers that there was a substantial
compliance with the requirements for the formation of a chapter. Moreover, he invokes Article 257 of
the Labor Code which mandates the automatic conduct by the Med-Arbiter of a certification election
in any establishment where there is no certified bargaining agreement.

The Court has repeatedly stressed that the holding of a certification election is based on a statutory
policy that cannot be circumvented. (Airtime Specialists, Inc. v. Ferrer-Calleja, 180 SCRA 749
[1989]; Belyca Corporation v. Ferrer-Calleja, 168 SCRA 184 [1988]; George and Peter Lines, Inc. v.
Associated Labor Unions, 134 SCRA 82 [1986]). The workers must be allowed to freely express
their choice in a determination where everything is open to their sound judgment and the possibility
of fraud and misrepresentation is eliminated.

But while Article 257 cited by the Solicitor General directs the automatic conduct of a certification
election in an unorganized establishment, it also requires that the petition for certification election
must be filed by a legitimate labor organization. Article 242 enumerates the exclusive rights of a
legitimate labor organization among which is the right to be certified as the exclusive representative
of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining.

Meanwhile, Article 212(h) defines a legitimate labor organization as "any labor organization duly
registered with the DOLE and includes any branch or local thereof." (Emphasis supplied) Rule I,
Section 1 (j), Book V of the Implementing Rules likewise defines a legitimate labor organization as
"any labor organization duly registered with the DOLE and includes any branch, local or affiliate
thereof. (Emphasis supplied)

The question that now arises is: when does a branch, local or affiliate of a federation become a
legitimate labor organization?

Ordinarily, a labor organization acquires legitimacy only upon registration with the BLR. Under Article
234 (Requirements of Registration):

Any applicant labor organization, association or group of unions or workers shall

acquire legal personality and shall be entitled to the rights and privileges granted by
 law to legitimate labor organizations upon issuance of the certificate of registration
based on the following requirements:

(a) Fifty-pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meeting and the list of the workers
who participated in such meetings;

(c) The names of all its members comprising at least twenty 20% percent of all the
employees in the bargaining unit where it seek to operate;

(d) If the applicant has been in existence for one or more years, copies , of its annual
financial reports; and

(e) Four copies of the constitution and by-laws of the applicant union, the minutes of
its adoption or ratification and the list of the members who participated in it.

And under Article 235 (Action on Application)

The Bureau shall act on all applications for registration within thirty (30) days from
filing.

All requisite documents and papers shall be certified under oath by the secretary or
the treasurer of the organization, as the case may be, and attested to by its
president.

Moreover, section 4 of Rule II, Book V of the Implementing Rules requires that the application should
be signed by at least twenty percent (20%) of the employees in the appropriate bargaining unit and
be accompanied by a sworn statement of the applicant union that there is no certified bargaining
agent or, where there is an existing collective bargaining agreement duly submitted to the DOLE,
that the application is filed during the last sixty (60) days of the agreement.

The respondent Kilusan questions the requirements as too stringent in their application but the
purpose of the law in prescribing these requisites must be underscored. Thus, in Philippine
Association of Free Labor Unions v. Secretary of Labor, 27 SCRA 40 (1969), the Court declared:

The theory to the effect that Section 23 of Republic Act No. 875 unduly curtails the
freedom of assembly and association guaranteed in the Bill of Rights is devoid of
factual basis. The registration prescribed in Paragraph (b) of said section is not a
limitation to the right of assembly or association, which may be exercised with or
without said registration. The latter is merely a condition sine qua nonfor the
acquisition of legal personality by the labor organizations, associations or unions and
the possession of the "rights and privileges granted by law to legitimate labor
organizations." The Constitution does not guarantee these rights and the privileges,
much less said personality, which are mere statutory creations, for the possession
and exercise of which registration is required to protect both labor and the public
against abuses, fraud or impostors who pose as organizers, although not truly
accredited agents of the union they purport to represent. Such requirement is a valid
exercise of the police power, because the activities in which labor organizations,
associations and unions of workers are engaged affect public interest, which should
 be protected. Furthermore, the obligation to submit financial statements, as a
condition for the non-cancellation of a certificate of registration, is a reasonable
regulation for the benefit of the members of the organization, considering that the
same generally solicits funds or membership, as well as oftentimes collects, on
behalf of its members, huge amounts of money due to them or to the organization.
(Emphasis supplied)

But when an unregistered union becomes a branch, local or chapter of a federation, some of the
aforementioned requirements for registration are no longer required. The provisions governing union
affiliation are found in Rule II, Section 3, Book V of the Implementing Rules, the relevant portions of
which are cited below:

Sec. 3. Union affiliation; direct membership with national union. An affiliate of a

labor federation or national union may be a local or chapter thereof or an
independently registered union.

a) The labor federation or national union concerned shall issue a charter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.

b) An independently registered union shall be considered an affiliate of a labor

federation or national union after submission to the Bureau of the contract or
agreement of affiliation within thirty (30) days after its execution.

xxx xxx xxx

e) The local or chapter of a labor federation or national union shall have and maintain
a constitution and by laws, set of officers and books and accounts. For reporting
purposes, the procedure governing the reporting of independently registered unions,
federations or national unions shall be observed.

Paragraph (a) refers to the local or chapter of a federation which did not undergo the rudiments of
registration while paragraph (b) refers to an independently registered union which affiliated with a
federation. Implicit in the foregoing differentiation is the fact that a local or chapter need not be
independently registered. By force of law (in this case, Article 212[h]); such local or chapter becomes
a legitimate labor organization upon compliance with the aforementioned provisions of Section 3.

Thus, several requirements that are otherwise required for union registration are omitted, to wit:

(1) The requirement that the application for registration must be signed by at least 20% of the
employees in the appropriate bargaining unit;

2) The submission of officers' addresses, principal address of the labor organization, the minutes of
organizational meetings and the list of the workers who participated in such meetings;

3) The submission of the minutes of the adoption or ratification of the constitution and by the laws
and the list of the members who participated in it.

Undoubtedly, the intent of the law in imposing lesser requirements in the case of the branch or local
of a registered federation or national union is to encourage the affiliation of a local union with the
federation or national union in order to increase the local union's bargaining powers respecting terms
and conditions of labor.

The petitioner maintains that the documentary requirements prescribed in Section 3(c), namely: the
constitution and by-laws, set of officers and books of accounts, must follow the requirements of law.
Petitioner PDC calls for the similar application of the requirement for registration in Article 235 that
all requisite documents and papers be certified under oath by the secretary or the treasurer of the
organization and attested to by the president.

In the case at bar, the constitution and by-laws and list of officers submitted in the BLR, while
attested to by the chapter's president, were not certified under oath by the secretary. Does such
defect warrant the withholding of the status of legitimacy to the local or chapter?

In the case of union registration, the rationale for requiring that the submitted documents and papers
be certified under oath by the secretary or treasurer, as the case may be, and attested to by
president is apparent. The submission of the required documents (and payment of P50.00
registration fee) becomes the Bureau's basis for approval of the application for registration. Upon
approval, the labor union acquires legal personality and is entitled to all the rights and privileges
granted by law to a legitimate labor organization. The employer naturally needs assurance that the
union it is dealing with is a bona fide organization, one which has not submitted false statements or
misrepresentations to the Bureau. The inclusion of the certification and attestation requirements will
in a marked degree allay these apprehensions of management. Not only is the issuance of any false
statement and misrepresentation a ground for cancellation of registration (see Article 239 (a), (c) and
(d)); it is also a ground for a criminal charge of perjury.

The certification and attestation requirements are preventive measures against the commission of
fraud. They likewise afford a measure of protection to unsuspecting employees who may be lured
into joining unscrupulous or fly-by-night unions whose sole purpose is to control union funds or to
use the union for dubious ends.

In the case of the union affiliation with a federation, the documentary requirements are found in Rule
II, Section 3(e), Book V of the Implementing Rules, which we again quote as follows:

(c) The local chapter of a labor federation or national union shall have and maintain a
constitution and by-laws, set of officers and books of accounts. For reporting
purposes, the procedure governing the reporting of independently registered unions,
federations or national unions shall be observed.(Emphasis supplied)

Since the "procedure governing the reporting of independently registered unions" refers to the
certification and attestation requirements contained in Article 235, paragraph 2, it follows that the
constitution and by-laws, set of officers and books of accounts submitted by the local and chapter
must likewise comply with these requirements. The same rationale for requiring the submission of
duly subscribed documents upon union registration exists in the case of union affiliation. Moreover,
there is greater reason to exact compliance with the certification and attestation requirements
because, as previously mentioned, several requirements applicable to independent union
registration are no longer required in the case of formation of a local or chapter. The policy of the law
in conferring greater bargaining power upon labor unions must be balanced with the policy of
providing preventive measures against the commission of fraud.

A local or chapter therefore becomes a legitimate labor organization only upon submission of the
following to the BLR:
1) A charter certificate, within 30 days from its issuance by the labor federation or national union,
and

2) The constitution and by-laws, a statement on the set of officers, and the books of accounts all of
which are certified under oath by the secretary or treasurer, as the case may be, of such local or
chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does not become a
legitimate labor organization.

In the case at bar, the failure of the secretary of PDEU-Kilusan to certify the required
documents under oath is fatal to its acquisition of a legitimate status.

We observe that, as borne out by the facts in this case, the formation of a local or chapter becomes
a handy tool for the circumvention of union registration requirements. Absent the institution of
safeguards, it becomes a convenient device for a small group of employees to foist a not-so-
desirable federation or union on unsuspecting co-workers and pare the need for wholehearted
voluntariness which is basic to free unionism. The records show that on June 16, 1990, Kilusan met
with several employees of the petitioner. Excerpts of the "Minutes of the Organizational/General
Membership Meeting of Progressive Development Employees Union (PDEU) Kilusan," are quoted
below:

The meeting was formally called to order by Bro. Jose V. Parungao, KILUSAN
secretary for organization by explaining to the general membership the importance of
joining the union. He explained to the membership why they should join a union, and
briefly explained the ideology of the Pambansang Kilusan ng Paggawa-TUCP as a
democratically based organization and then read the proposed Constitution and By-
Laws, after which said Constitution and By-Laws was duly and unanimously ratified
after some clarification.

Bro. Jose Parungao was also unanimously voted by the group to act as the chairman
of the COMELEC in holding the organizational election of officers of the union.

Bro. Jose Parungao, officially opened the table for nomination of candidates after
which the election of officers followed by secret balloting and the following were the
duly elected officers. (Original Record, p. 25)

The foregoing shows that Kilusan took the initiative and encouraged the formation of a union which
automatically became its chapter. On June 18, 1990, Kilusan issued a charter certificate in favor of
PDEU-KILUSAN (Records, page 1). It can be seen that Kilusan was moving very fast.

On June 19, 1990, or just three days after the organizational meeting, Kilusan filed a petition for
certification election (Records, pages 2 and 3) accompanied by a copy each of the charter
certificate, constitution and by-laws and minutes of the organizational meeting. Had the local union
filed an application for registration, the petition for certification election could not have been
immediately filed. The applicant union must firstly comply with the "20% signature" requirement and
all the other requisites enumerated in Article 234. Moreover, since under Article 235 the BLR shall
act on any application for registration within thirty (30) days from its filing, the likelihood is remote
that, assuming the union complied with all the requirements, the application would be approved on
the same day it was filed.
We are not saying that the scheme used by the respondents is per se illegal for precisely, the law
allows such strategy. It is not this Court's function to augment the requirements prescribed by law in
order to make them wiser or to allow greater protection to the workers and even their employer. Our
only recourse is, as earlier discussed, to exact strict compliance with what the law provides as
requisites for local or chapter formation.

It may likewise be argued that it was Kilusan (the mother union) and not the local union which filed
the petition for certification election and, being a legitimate labor organization, Kilusan has the
personality to file such petition.

At this juncture, it is important to clarify the relationship between the mother union and the local
union. In the case of Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., 66 SCRA 512
[1975]), the Court held that the mother union, acting for and in behalf of its affiliate, had the status of
an agent while the local union remained the basic unit of the association, free to serve the common
interest of all its members subject only to the restraints imposed by the constitution and by-laws of
the association. Thus, where as in this case the petition for certification election was filed by the
federation which is merely an agent, the petition is deemed to be filed by the chapter, the principal,
which must be a legitimate labor organization. The chapter cannot merely rely on the legitimate
status of the mother union.

The Court's conclusion should not be misconstrued as impairing the local union's right to be certified
as the employees' bargaining agent in the petitioner's establishment. We are merely saying that the
local union must first comply with the statutory requirements in order to exercise this right. Big
federations and national unions of workers should take the lead in requiring their locals and chapters
to faithfully comply with the law and the rules instead of merely snapping union after union into their
folds in a furious bid with rival federations to get the most number of members.

WHEREFORE, the petition is GRANTED. The assailed resolution and orders of respondent Med-
Arbiter and Secretary of Labor and Employment, respectively, are hereby SET ASIDE. The
temporary restraining order dated February 25, 1991 is made permanent.

SO ORDERED.

G.R. No. 152356. August 16, 2005

SAN MIGUEL CORPORATION (MANDAUE PACKAGING PRODUCTS PLANTS), Petitioners,

vs.
MANDAUE PACKING PRODUCTS PLANTS-SAN PACKAGING PRODUCTS SAN MIGUEL
CORPORATION MONTHLIES RANK-AND-FILE UNION FFW (MPPP-SMPP-SMAMRFU-
FFW), Respondent.

DECISION

TINGA, J.:

The central question in this Petition for Review is on what date did respondent Mandaue
Packing Products Plants-San Miguel Packaging ProductsSan Miguel Corporation Monthlies Rank-
And-File UnionFFW acquire legal personality in accordance with the Implementing Rules of the
Labor Code. The matter is crucial since respondent filed a petition for certification election at a date
when, it is argued, it had yet to acquire the requisite legal personality. The Department of Labor and
Employment (DOLE) and the Court of Appeals both ruled that respondent had acquired legal
personality on the same day it filed the petition for certification election. The procedure employed by
the respondent did not strictly conform with the relevant provisions of law. But rather than insist on
an overly literal reading of the law that senselessly suffocates the constitutionally guaranteed right to
self-organization, we uphold the assailed decisions and the liberal spirit that animates them.

Antecedent Facts

The present petition assailed the Decision dated 7 June 2001 rendered by the Court of Appeals
Eighth Division1which in turn affirmed a Decision dated 22 Feburary 1999 by the DOLE
Undersecretary for Labor Relations, Rosalinda Dimapilis-Baldoz, ordering the immediate conduct of
a certification election among the petitioners rank-and-file employees, as prayed for by respondent.
The following facts are culled from the records.

On 15 June 1998, respondent, identifying itself as an affiliate of Federation of Free Workers (FFW),
filed a petition for certification election with the DOLE Regional Office No. VII. In the petition,
respondent stated that it sought to be certified and to represent the permanent rank-and-file monthly
paid employees of the petitioner.2 The following documents were attached to the petition: (1) a
Charter Certificate issued by FFW on 5 June 1998 certifying that respondent as of that date was duly
certified as a local or chapter of FFW; (2) a copy of the constitution of respondent prepared by its
Secretary, Noel T. Bathan and attested by its President, Wilfred V. Sagun; (3) a list of respondents
officers and their respective addresses, again prepared by Bathan and attested by Sagun; (4) a
certification signifying that respondent had just been organized and no amount had yet been
collected from its members, signed by respondents treasurer Chita D. Rodriguez and attested by
Sagun; and (5) a list of all the rank-and-file monthly paid employees of the Mandaue Packaging
Products Plants and Mandaue Glass Plant prepared by Bathan and attested by Sagun.3

The petition was assigned to Mediator-Arbiter Achilles V. Manit of the DOLE Regional Office No. VII,
and docketed as Case No. R0700-9806-RU-013.4

On 27 July 1998, petitioner filed a motion to dismiss the petition for certification election on the sole
ground that herein respondent is not listed or included in the roster of legitimate labor organizations
based on the certification issued by the Officer-In-Charge, Regional Director of the DOLE Regional
Office No. VII, Atty. Jesus B. Gabor, on 24 July 1998.

On 29 July 1998, respondent submitted to the Bureau of Labor Relations the same documents
earlier attached to its petition for certification. The accompanying letter, signed by respondents
president Sagun, stated that such documents were submitted in compliance with the requirements
for the creation of a local/chapter pursuant to the Labor Code and its Implementing Rules; and it was
hoped that the submissions would facilitate the listing of respondent under the roster of legitimate
labor organizations.5 On 3 August 1998, the Chief of Labor Relations Division of DOLE Regional
Office No. VII issued a Certificate of Creation of Local/Chapter No. ITD. I-ARFBT-058/98, certifying
that from 30 July 1998, respondent has acquired legal personality as a labor organization/workers
association, it having submitted all the required documents.6

Opting not to file a comment on the Motion to Dismiss,7 respondent instead filed a Position
Paper wherein it asserted that it had complied with all the necessary requirements for the conduct of
a certification election, and that the ground relied upon in the Motion to Dismiss was a mere
technicality.8

In turn, petitioner filed a Comment, wherein it reiterated that respondent was not a legitimate labor
organization at the time of the filing of the petition. Petitioner also propounded that contrary to
respondents objectives of establishing an organization representing rank-and-file employees, two of
respondents officers, namely Vice-President Emannuel L. Rosell and Secretary Bathan, were
actually supervisory employees. In support of this allegation, petitioner attached various documents
evidencing the designation of these two officers in supervisory roles, as well as their exercise of
various supervisory functions.9 Petitioner cited Article 245 of the Labor Code, which provides that
supervisory employees shall not be eligible for membership in a labor organization of the rank-and-
file employees.10

On 20 August 1998, petitioner filed a petition to cancel the union registration of respondent.
However, this petition was denied, and such denial was subsequently affirmed by the Court of
Appeals in a decision that has since become final.11

In the meantime, on 15 September 1998, Med-Arbiter Manit issued an Order dismissing

respondents petition for certification election. The sole ground relied upon for the dismissal was the
Med-Arbiters Opinion that as of the date of filing of the petition on 15 June 1998, respondent did not
have the legal personality to file the said petition for certification election.12 No discussion was
adduced on petitioners claims that some of respondents officers were actually supervisory
employees.

Respondent promptly appealed the 15 September 1998 Order to the DOLE. On 22 February 1999,
DOLE Undersecretary Rosalinda Dimapilis-Baldoz rendered a Decision reversing the Order.
Undersecretary Baldoz concluded that respondent acquired legal personality as early as 15 June
1998, the date it submitted the required documents, citing Section 3, Rule VI of the New Rules
Implementing the Labor Code (Implementing Rules) which deems that a local/chapter acquires legal
personality from the date of filing of the complete documentary requirements as mandated in the
Implementing Rules. The DOLE also ruled that the contention that two of respondents officers were
actually supervisors can be threshed out in the pre-election conferences where the list of qualified
voters is to be determined. The dispositive portion of the DOLE Decision stated:

WHEREFORE, the appeal is GRANTED. The order dated 15 September 1999 of the Med-Arbiter is
REVERSED and SET ASIDE. Accordingly, let the records of the case be remanded to the office of
origin for the immediate conduct of certification election, subject to the usual pre-election
conference, among the monthly-paid rank-and-file employees of the Mandaue Packaging Products
Plant San Miguel Corporation, with the following choices:

1. MANDAUE PACKAGING PRODUCT PLANT SAN MIGUEL PACKAGING PRODUCTS SAN

MIGUEL CORPORATION MONTHLIES RANK AND FILE UNIONFFW (MPPP-SMPP-
SMCMRFUFFW),

2. NO UNION.

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

SO DECIDED.13

These two conclusions of the DOLE were affirmed in the assailed Decision of the Court of Appeals.
It is now our task to review whether these conclusions are warranted under law and jurisprudence.
First, we shall discuss the aspect of respondents legal personality in filing the petition for
certification election.
First Issue: On the Acquisition of

Legal Personality by Respondent

Statutory Provisions for Registration Of

Local/Chapter of Federation or National Union

Before we proceed to evaluate the particular facts of this case, it would be useful to review the
statutory paradigm that governs the establishment and acquisition of legal personality by a
local/chapter of a labor organization. The applicable rules have undergone significant amendments
in the last decade, thus a recapitulation of the framework is in order.

The Labor Code defines a labor organization as any union or association of employees which exists
in whole or in part for the purpose of collective bargaining or of dealing with employers concerning
terms and conditions of employment,14 and a "legitimate labor organization" as any labor organization
duly registered with the DOLE, including any branch or local thereof.15 Only legitimate labor
organizations may file a petition for certification election.16

Article 234 of the Labor Code enumerates the requirements for registration of an applicant labor
organization, association, or group of unions or workers in order that such entity could acquire legal
personality and entitlement to the rights and privileges granted by law to legitimate labor
organizations. These include a registration fee of fifty pesos (50.00); a list of the names of the
members and officers, and copies of the constitution and by-laws of the applicant union.17

However, the Labor Code itself does not lay down the procedure for the registration of a local or
chapter of a labor organization. Such has been traditionally provided instead in the Implementing
Rules, particularly in Book V thereof. However, in the last decade or so, significant amendments
have been introduced to Book V, first by Department Order No. 9 which took effect on 21 June 1997,
and again by Department Order No. 40 dated 17 February 2003. The differences in the procedures
laid down in these various versions are significant. However, since the instant petition for certification
was filed in 1998, the Implementing Rules, as amended by Department Order No. 9, should govern
the resolution of this petition.18

Preliminarily, we should note that a less stringent procedure obtains in the registration of a local or
chapter than that of a labor organization. Undoubtedly, the intent of the law in imposing lesser
requirements in the case of a branch or local of a registered federation or national union is to
encourage the affiliation of a local union with a federation or national union in order to increase the
local union's bargaining powers respecting terms and conditions of labor.19This policy has remained
consistent despite the succeeding amendments to Book V of the Omnibus Implementing Rules, as
contained in Department Orders Nos. 9 and 40.

The case of Progressive Development Corp. v. Secretary of Labor,20 applying Section 3, Rule II, Book
V of the Implementing Rules, in force before 1997, ruled that "a local or chapter therefore becomes a
legitimate labor organization only upon submission of the following to the BLR: (1) a charter
certificate, within thirty (30) days from its issuance by the labor federation or national union; and (2)
The constitution and by-laws, a statement of the set of officers, and the books of accounts all of
which are certified under oath by the secretary or treasurer, as the case may be, of such local or
chapter, and attested to by its president."21 The submission by the local/chapter of duly certified
books of accounts as a prerequisite for registration of the local/chapter was dropped in Department
Order No. 9,22 a development noted by the Court in Pagpalain Haulers v. Hon. Trajano,23 wherein it
was held that the previous doctrines requiring the submission of books of accounts as a prerequisite
for the registration of a local/chapter "are already pass and therefore, no longer applicable."24

Department Order No. 40, now in effect, has eased the requirements by which a local/chapter may
acquire legal personality. Interestingly, Department Order No. 40 no longer uses the term
"local/chapter," utilizing instead "chartered local," which is defined as a "labor organization in the
private sector operating at the enterprise level that acquired legal personality through the issuance of
a charter certificate by a duly registered federation or national union, and reported to the Regional
Office."25 Clearly under the present rules, the first step to be undertaken in the creation of a chartered
local is the issuance of a charter certificate by the duly registered federation or national union. Said
federation or national union is then obligated to report to the Regional Office the creation of such
chartered local, attaching thereto the charter certificate it had earlier issued.26

But as stated earlier, it is Department Order No. 9 that governs in this case. Section 1, Rule VI
thereof prescribes the documentary requirements for the creation of a local/chapter. It states:

Section 1. Chartering and creation of a local chapter A duly registered federation or national union
may directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2)
copies of the following:

a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;

(b) The names of the local/chapter's officers, their addresses, and the principal office of the
local/chapter;

(c) The local/chapter's constitution and by-laws; provided that where the local/chapter's constitution
and by-laws is the same as that of the federation or national union, this fact shall be indicated
accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or Treasurer
of the local/chapter and attested by its President.

In contrast, an independent union seeking registration is further required under Dept. Order No. 90
to submit the number and names of the members, and annual financial reports.27

Section 3, Rule VI of Department Order No. 9 provides when the local/chapter acquires legal
personality.

Section 3. Acquisition of legal personality by local chapter. A local/chapter constituted in

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

It is evident based on this rule that the local/chapter acquires legal personality from the date of the
filing of the complete documentary requirements, and not from the issuance of a certification to such
effect by the Regional Office or Bureau. On the other hand, a labor organization is deemed to have
acquired legal personality only on the date of issuance of its certificate of registration,28 which takes
place only after the Bureau of Labor Relations or its Regional Offices has undertaken an evaluation
process lasting up until thirty (30) days, within which period it approves or denies the application.29 In
contrast, no such period of evaluation is provided in Department Order No. 9 for the application of a
local/chapter, and more importantly, under it such local/chapter is deemed to acquire legal
personality "from the date of filing" of the documents enumerated under Section 1, Rule VI, Book V.

Apart from promoting a policy of affiliation of local unions with national unions,30 there is a practical
reason for sanctioning a less onerous procedure for the registration of a local/chapter, as compared
to the national union. The local/chapter relies in part on the legal personality of the federation or
national union, which in turn, had already undergone evaluation and approval from the Bureau of
Legal Relations or Regional Office. In fact, a federation or national union is required, upon
registration, to establish proof of affiliation of at least ten (10) locals or chapters which are duly
recognized as the collective bargaining agent in the establishment or industry in which they operate;
and the names and addresses of the companies where the locals or chapters operate and the list of
all the members in each of the companies.31 Once the national union or federation acquires legal
personality upon the issuance of its certificate or registration,32 its legal personality cannot be subject
to collateral attack.33

The fact that the local/chapter acquires legal personality from the moment the complete
documentary requirements are submitted seems to imply that the duty of the Bureau or Regional
Office to register the local/chapter is merely ministerial. However, in Progressive
Development Corporation v. Laguesma,34 the Court, in ruling against a petition for certification filed by
a chapter, held that the mere submission of the documentary requirements does not render
ministerial the function of the Bureau of Labor Relations in according due recognition to the labor
organization.35Still, that case was decided before the enactment of Department Order No. 9,
including the aforestated Section 3. Should we consider the said 1997 amendments as having
obviated our characterization in Progressive of the Bureaus duty as non-ministerial?

Notwithstanding the amendments, it still is good policy to maintain that per Department Order No. 9,
the duty of the Bureau of Labor Relations to recognize the local/chapter upon the submission of the
documentary requirements is not ministerial, insofar as the Bureau is obliged to adjudge the
authenticity of the documents required to be submitted. For example, the Bureau is not mandated to
accept just any purported charter certificate matter how spurious it is in appearance. It is empowered
to ascertain whether the submitted charter certificate is genuine, and if finding that said certificate is
fake, deny recognition to the local/chapter.

However, in ascertaining whether or not to recognize and register the local/chapter, the Bureau or
Regional Office should not look beyond the authenticity and due execution of the documentary
requirements for the creation of the local/chapter as enumerated under Section 1, Rule VI, Book V of
Department Order No. 9. Since the proper submission of these documentary requirements is all that
is necessary to recognize a local/chapter, it is beyond the province of the Bureau or Regional Offices
to resort to other grounds as basis for denying legal recognition of the local/chapter. For example,
Department Order No. 9 does not require the local/chapter to submit the names of its members as a
condition precedent to its registration.36 It therefore would be improper to deny legal recognition to a
local/chapter owing to questions pertaining to its individual members since the local/chapter is not
even obliged to submit the names of its individual members prior to registration.

Certainly, when a local/chapter applies for registration, matters raised against the personality of the
federation or national union itself should not be acted upon by the Bureau or Regional Office, owing
to the preclusion of collateral attack. Instead, the proper matter for evaluation by the Bureau or
Regional Office should be limited to whether the local/chapter is indeed a duly created affiliate of the
national union or federation.
Parenthetically, under the present Implementing Rules as amended by Department Order No. 40, it
appears that the local/chapter (or now, "chartered local") acquires legal personality upon the
issuance of the charter certificate by the duly registered federation or national union.37 This might
signify that the creation of the chartered local is within the sole discretion of the federation or national
union and thus beyond the review or interference of the Bureau of Labor Relations or its Regional
Offices. However, Department Order No. 40 also requires that the federation or national union report
the creation of the chartered local to the Regional Office.

Acquisition by Respondent of Legal Personality

We now proceed to determine if and when the respondent acquired legal personality under the
procedure laid down by the rules then in effect, Department Order No. 9, that is.

At the onset, the arguments raised by petitioner on this point are plainly erroneous. Petitioner cites
the case of Toyota Motor Philippines v. Toyota Motor Philippines Corporation Labor Union,38 and the
purported holding therein that "[if] it is true that at the time of the filing of the petition, the said
registration certificate has not been approved yet, then, petitioner lacks the legal personality to file
the petition."39 However, an examination of the case actually reveals that the cited portion was lifted
from one of the antecedent rulings of the Med-Arbiter in that case which had not even been affirmed
or reinstated by the Court on review.40 Moreover, such pronouncement made prior to the enactment
of Department Order No. 9 squarely contradicts Section 3, Rule VI thereof, which provides that legal
personality of the local/chapter is vested upon the submission of the complete documentary
requirements.

It is also worth noting that petitioner union in Toyota was an independent labor union, and not a
local/chapter, and under Department Order No. 9, independent labor unions, unlike local/chapters,
acquire legal personality only upon issuance of the certificate of registration by the Bureau or
Regional Office. Still, petitioner cites in its favor Section 5, Rule V of Dept. Order No. 9, which states
that "the labor organization or workers association shall be deemed registered and vested with legal
personality on the date of issuance of its certificate of registration." Again, the citation is obviously
misplaced, as respondent herein is a local/chapter, the acquisition of its legal personality being
governed instead by Section 3, Rule VI.

It is thus very clear that the issuance of the certificate of registration by the Bureau or Regional
Office is not the operative act that vests legal personality upon a local/chapter under Department
Order No. 9. Such legal personality is acquired from the filing of the complete documentary
requirements enumerated in Section 1, Rule VI. Admittedly, the manner by which respondent was
deemed to have acquired legal personality by the DOLE and the Court of Appeals was not in strict
conformity with the provisions of Department Order No. 9. Nonetheless, are the deviations significant
enough for the Court to achieve a different conclusion from that made by the DOLE and the Court of
Appeals?

In regular order, it is the federation or national union, already in possession of legal personality,
which initiates the creation of the local/chapter. It issues a charter certificate indicating the creation
or establishment of the local/chapter. It then submits this charter certificate, along with the names of
the local/chapters officers, constitution and by-laws to the Regional Office or Bureau. It is the
submission of these documents, certified under oath by the Secretary or Treasurer of the
local/chapter and attested by the President, which vests legal personality in the local/chapter, which
is then free to file on its own a petition for certification election.

In this case, the federation in question, the FFW, did not submit any of these documentary
requirements to the Regional Office or Bureau. It did however issue a charter certificate to the
putative local/chapter (herein respondent). Respondent then submitted the charter certificate along
with the other documentary requirements to the Regional Office, but not for the specific purpose of
creating the local/chapter, but for filing the petition for certification election.

It could be properly said that at the exact moment respondent was filing the petition for certification,
it did not yet possess any legal personality, since the requisites for acquisition of legal personality
under Section 3, Rule VI of Department Order No. 9 had not yet been complied with. It could also be
discerned that the intention of the Labor Code and its Implementing Rules that only those labor
organizations that have acquired legal personality are capacitated to file petitions for certification
elections. Such is the general rule.

Yet there are peculiar circumstances in this case that allow the Court to rule that respondent
acquired the requisite legal personality at the same time it filed the petition for certification election.
In doing so, the Court acknowledges that the strict letter of the procedural rule was not complied
with. However, labor laws are generally construed liberally in favor of labor, especially if doing so
affirms the constitutionally guaranteed right to self-organization.

True enough, there was no attempt made by the national federation, or the local/chapter for that
matter, to submit the enumerated documentary requirements to the Regional Office or Bureau for
the specific purpose of creating the local/chapter. However, these same documents were submitted
by the local/chapter to the Regional Office as attachments to its petition for certification election.
Under Section 3, Rule VI of Department Order No. 9, it is the submission of these same documents
to the Regional Office or Bureau that operates to vest legal personality on the local/chapter.

Thus, in order to ascertain when respondent acquired legal personality, we only need to determine
on what date the Regional Office or Bureau received the complete documentary requirements
enumerated under Section 1, Rule VI of Department Order No. 9. There is no doubt that on 15 June
1998, or the date respondent filed its petition for certification election, attached thereto were
respondents constitution, the names and addresses of its officers, and the charter certificate issued
by the national union FFW. The first two of these documents were duly certified under oath by
respondents secretary Bathan and attested to by president Sagun.41

It may be noted though that respondent never submitted a separate by-laws, nor does it appear that
respondent ever intended to prepare a set thereof. Section 1(c), Rule VI, Book V of Department
Order No. 9 provides that the submission of both a constitution and a set of by-laws is required, or at
least an indication that the local/chapter is adopting the constitution and by-laws of the federation or
national union. A literal reading of the provision might indicate that the failure to submit a specific set
of by-laws is fatal to the recognition of the local/chapter. A more critical analysis of this requirement
though is in order, especially as it should apply to this petition.

By-laws has traditionally been defined as regulations, ordinances, rules or laws adopted by an
association or corporation or the like for its internal governance, including rules for routine matters
such as calling meetings and the like.42 The importance of by-laws to a labor organization cannot be
gainsaid. Without such provisions governing the internal governance of the organization, such as
rules on meetings and quorum requirements, there would be no apparent basis on how the union
could operate. Without a set of by-laws which provides how the local/chapter arrives at its decisions
or otherwise wields its attributes of legal personality, then every action of the local/chapter may be
put into legal controversy.

However, if those key by-law provisions on matters such as quorum requirements, meetings, or on
the internal governance of the local/chapter are themselves already provided for in the constitution,
then it would be feasible to overlook the requirement for by-laws. Indeed in such an event, to insist
on the submission of a separate document denominated as "By-Laws" would be an undue
technicality, as well as a redundancy.

An examination of respondents constitution reveals it sufficiently comprehensive in establishing the

necessary rules for its operation. Article IV establishes the requisites for membership in the
local/chapter. Articles V and VI name the various officers and what their respective functions are.
The procedure for election of these officers, including the necessary vote requirements, is provided
for in Article IX, while Article XV delineates the procedure for the impeachment of these officers.
Article VII establishes the standing committees of the local/chapter and how their members are
appointed. Article VIII lays down the rules for meetings of the union, including the notice and quorum
requirements thereof. Article X enumerates with particularity the rules for union dues, special
assessments, fines, and other payments. Article XII provides the general rule for quorum in meetings
of the Board of Directors and of the members of the local/chapter, and cites the applicability of the
Roberts Rules of Order43 in its meetings. And finally, Article XVI governs and institutes the requisites
for the amendment of the constitution.

Indeed, it is difficult to see in this case what a set of by-laws separate from the constitution for
respondent could provide that is not already provided for by the Constitution. These premises
considered, there is clearly no need for a separate set of by-laws to be submitted by respondent.

The Court likewise sees no impediment in deeming respondent as having acquired legal personality
as of 15 June 1998, the fact that it was the local/chapter itself, and not the FFW, which submitted the
documents required under Section 1, Rule VI of Department Order No. 9. The evident rationale why
the rule states that it is the federation or national union that submits said documents to the Bureau or
Regional Office is that the creation of the local/chapter is the sole prerogative of the federation or
national union, and not of any other entity. Certainly, a putative local/chapter cannot, without the
imprimatur of the federation or national union, claim affiliation with the larger unit or source its legal
personality therefrom.

In the ordinary course, it should have been FFW, and not respondent, which should have submitted
the subject documents to the Regional Office. Nonetheless, there is no good reason to deny legal
personality or defer its conferral to the local/chapter if it is evident at the onset that the federation or
national union itself has already through its own means established the local/chapter. In this case,
such is evidenced by the Charter Certificate dated 9 June 1998, issued by FFW, and attached to the
petition for certification election. The Charter Certificate expressly states that respondent has been
issued the said certificate "to operate as a local or chapter of the [FFW]". The Charter Certificate
expressly acknowledges FFWs intent to establish respondent as of 9 June 1998.44 This being the
case, we consider it permissible for respondent to have submitted the required documents itself to
the Regional Office, and proper that respondents legal personality be deemed existent as of 15
June 1998, the date the complete documents were submitted.

Second Issue: On the Alleged Presence

Of Supervisory Employees as

Officers of the Respondent

The second issue hinges on a point of some controversy and frequent discussion in recent years.
Petitioner claims error in the common pronouncement in the assailed decisions that the matter
concerning the two officers who are allegedly supervisory employees may be threshed out during
pre-election conferences. Petitioner cites the cases of Toyota Motors and Progressive Development
Corporation-Pizza Hut v. Ledesma45 wherein the Court ruled that the question of prohibited
membership of both supervisory and rank-and-file employees in the same union must be inquired
into anterior to the granting of an order allowing a certification election; and that a union composed
of both of these kinds of employees does not possess the requisite personality to file for recognition
as a legitimate labor organization. It should be noted though that in the more recent case
of Tagaytay Highlands International Golf Club v. Tagaytay Highlands Employees Union,46 the Court,
notwithstanding Toyota and Progressive, ruled that after a certificate of registration is issued to a
union, its legal personality cannot be subject to collateral attack, but questioned only in an
independent petition for cancellation.47

There is no need to apply any of the above cases at present because the question raised by
petitioner on this point is already settled law, as a result of the denial of the independent petition for
cancellation filed by petitioner against respondent on 20 August 1998. The ground relied upon
therein was the alleged fraud, misrepresentation and false statement in describing itself as a union
of rank and file employees when in fact, two of its officers, Emmanuel Rosell and Noel Bathan, were
occupying supervisory positions.48 Said petition was denied by the Regional Director, this action was
affirmed by the DOLE, the Court of Appeals, and the Supreme Court.49 The denial made by the Court
of Appeals and the Supreme Court may have been based on procedural grounds,50 but the prior
decisions of the Regional Director and the DOLE ruled squarely on the same issue now raised by
the petitioner. We quote from the Resolution of the DOLE dated 29 December 1998:

. . . . [The] substantive issue that is now before us is whether or not the inclusion of the two alleged
supervisory employees in appellee unions membership amounts to fraud, misrepresentation, or
false statement within the meaning of Article 239(a) and (c) of the Labor Code.

We rule in the negative.

Under the law, a managerial employee is "one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, layoff, recall, discharge,
assign or discipline employees." A supervisory employee is "one who, in the interest of the employer,
effectively recommends managerial actions if the exercise of such recommendatory authority is not
merely routinary or clerical in nature but requires the use of independent judgment." Finally, "all
employees not falling within the definition of managerial or supervisory employee are considered
rank-and-file employees". It is also well-settled that the actual functions of an employee, not merely
his job title, are determinative in classifying such employee as managerial, supervisory or rank and
file.

In the case of Emmanuel Rossell, appellants evidence shows that he undertakes the filling out of
evaluation reports on the performance of mechanics, which in turn are used as basis for
reclassification. Given a ready and standard form to accomplish, coupled with the nature of the
evaluation, it would appear that his functions are more routinary than recommendatory and hardly
leave room for independent judgment. In the case of Noel Bathan, appellants evidence does not
show his job title although it shows that his recommendations on disciplinary actions appear to have
carried some weight on higher management. On this limited point, he may qualify as a supervisory
employee within the meaning of the law. This may, however, be outweighed by his other functions
which are not specified in the evidence.

Assuming that Bathan is a supervisory employee, this does not prove the existence of fraud, false
statement or misrepresentation. Because good faith is presumed in all representations, an essential
element of fraud, false statement and misrepresentation in order for these to be actionable is intent
to mislead by the party making the representation. In this case, there is no proof to show that
Bathan, or appellee union for that matter, intended to mislead anyone. If this was appellee unions
intention, it would have refrained from using a more precise description of the organization instead of
declaring that the organization is composed of rank and file monthlies. Hence, the charge of fraud,
false statement or misrepresentation cannot be sustained.

Appellants reliance on the Toyota case must be tempered by the peculiar circumstances of the
case. Even assuming that Bathan, or Rossel for that matter, are supervisory employees,
the Toyota case cannot certainly be given an interpretation that emasculates the right to self-
organization and the promotion of free trade unionism. We take administrative notice of the realities
in union organizing, during which the organizers must take their chances, oftentimes unaware of the
fine distinctions between managerial, supervisory and rank and file employees. The grounds for
cancellation of union registration are not meant to be applied automatically, but indeed with utmost
discretion. Where a remedy short of cancellation is available, that remedy should be preferred. In
this case, no party will be prejudiced if Bathan were to be excluded from membership in the union.
The vacancy he will thus create can then be easily filled up through the succession provision of
appellee unions constitution and by-laws. What is important is that there is an unmistakeable intent
of the members of appellee union to exercise their right to organize. We cannot impose rigorous
restraints on such right if we are to give meaning to the protection to labor and social justice clauses
of the Constitution.51

The above-cited pronouncement by Bureau of Labor Relations Director Benedicto Ernesto R.

Bitonio, Jr. in BLR-A-C-41-11-11-98 was affirmed by the Court of Appeals and the Supreme Court.
Hence, its pronouncement affirming, notwithstanding the questions on the employment status of
Rossell and Bathan, the legitimacy of the respondent, stands as a final ruling beyond the ambit of
review, thus warranting the Courts respect. There may be a difference between this case, which
involves a petition for certification election, and the other case, which concerns a petition for
cancellation. However, petitioner opposes the petition for certification election on the ground of the
illegitimacy of respondent, owing to the alleged supervisory nature of the duties of Rossell and
Bathan. That matter has already been settled in the final disposition of the petition for cancellation,
and thus cannot be unsettled by reason of this present petition.

Effect of Respondents Manifestation

Of Subsequent Developments

A final note. In its Memorandum, petitioner alleges that the bargaining unit that respondent sought to
represent is no longer the same because of the dynamic nature of petitioners business, a lot of
changes having occurred in the work environment, and that four of respondents officers are no
longer connected with petitioner.52 Assuming that these manifestations are true, they have no effect
on the Courts ruling that a certification election should be immediately conducted with respondent
as one of the available choices. Petitioners bare manifestations adduce no reason why the
certification election should not be conducted forthwith. If there are matters that have arisen since
the filing of the petition that serve to delay or cancel the election, these can be threshed out during
the pre-election conferences. Neither is the fact that some of respondents officers have since
resigned from petitioner of any moment. The local/chapter retains a separate legal personality from
that of its officers or members that remains viable notwithstanding any turnover in its officers or
members.

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.

G.R. No. 157117 November 20, 2006

COASTAL SUBIC BAY TERMINAL, INC., Petitioner,
vs.
DEPARTMENT OF LABOR and EMPLOYMENT OFFICE OF THE SECRETARY, COASTAL
SUBIC BAY TERMINAL, INC. SUPERVISORY UNION-APSOTEU, and COASTAL SUBIC BAY
TERMINAL, INC. RANK-AND-FILE UNION-ALU-TUCP, Respondents.

DECISION

QUISUMBING, J.:

For review on certiorari is the Court of Appeals Decision1 dated August 31, 2001, in CA-G.R. SP No.
54128 and the Resolution2 dated February 5, 2003, denying petitioners motion for reconsideration.
The Court of Appeals had affirmed the Decision3 dated March 15, 1999 of the Secretary of the
Department of Labor and Employment (DOLE) reversing the Mediator Arbiters dismissal of private
respondents petitions for certification election.

The facts are as follows:

On July 8, 1998, private respondents Coastal Subic Bay Terminal, Inc. Rank-and-File Union (CSBTI-
RFU) and Coastal Subic Bay Terminal, Inc. Supervisory Union (CSBTI-SU) filed separate petitions
for certification election before Med-Arbiter Eladio de Jesus of the Regional Office No. III. The rank-
and-file union insists that it is a legitimate labor organization having been issued a charter certificate
by the Associated Labor Union (ALU), and the supervisory union by the Associated Professional,
Supervisory, Office and Technical Employees Union (APSOTEU). Private respondents also alleged
that the establishment in which they sought to operate was unorganized.

Petitioner Coastal Subic Bay Terminal, Inc. (CSBTI) opposed both petitions for certification election
alleging that the rank-and-file union and supervisory union were not legitimate labor organizations,
and that the proposed bargaining units were not particularly described.

Without ruling on the legitimacy of the respondent unions, the Med-Arbiter dismissed, without
prejudice to refiling, both petitions which had been consolidated. The Med-Arbiter held that the ALU
and APSOTEU are one and the same federation having a common set of officers. Thus, the
supervisory and the rank-and-file unions were in effect affiliated with only one federation.4

The Med-Arbiter ruled as follows:

Viewed in the light of all the foregoing, this Office finds the simultaneous filing of the instant petitions
to be invalid and unwarranted. Consequently, this Office has no recourse but to dismiss both
petitions without prejudice to the refiling of either.

WHEREFORE, PREMISES CONSIDERED, let the instant petitions be, as they are hereby
DISMISSED.

SO ORDERED.5

Both parties appealed to the Secretary of Labor and Employment, who reversed the decision of the
Med-Arbiter. The Secretary thru Undersecretary R. Baldoz, ruled that CSBTI-SU and CSBTI-RFU
have separate legal personalities to file their separate petitions for certification election. The
Secretary held that APSOTEU is a legitimate labor organization because it was properly registered
pursuant to the 1989 Revised Rules and Regulations implementing Republic Act No. 6715, the rule
applicable at the time of its registration. It further ruled that ALU and APSOTEU are separate and
distinct labor unions having separate certificates of registration from the DOLE. They also have
different sets of locals. The Secretary declared CSBTI-RFU and CSBTI-SU as legitimate labor
organizations having been chartered respectively by ALU and APSOTEU after submitting all the
requirements with the Bureau of Labor Relations (BLR). Accordingly, the Secretary ordered the
holding of separate certification election, viz:

WHEREFORE, the decision of the Med-Arbiter, Regional Office No. III is hereby REVERSED. Let
separate certification elections be conducted immediately among the appropriate employees of
CSBTI, after the usual pre-election conference, with the following choices:

I. For all rank and file employees of CSBTI:

1. COASTAL SUBIC BAY TERMINAL, INC. RANK-AND-FILE UNION-ALU-TUCP;

and

2. NO UNION.

II. For all supervisory employees of CSBTI:

1. COASTAL SUBIC BAY TERMINAL, INC. SUPERVISORY EMPLOYEES UNION-

APSOTEU; and

2. NO UNION.

The latest payroll of the employer, including its payrolls for the last three months immediately
preceding the issuance of this decision, shall be the basis for determining the qualified list of voters.

SO DECIDED.6

The motion for reconsideration was also denied.7

On appeal, the Court of Appeals affirmed the decision of the Secretary.8 It held that there was no
grave abuse of discretion on the part of the Secretary; its findings are supported by evidence on
record; and thus should be accorded with respect and finality.9

The motion for reconsideration was likewise denied.10 Hence, the instant petition by the company
anchored on the following grounds:

THE HONORABLE COURT OF APPEALS ERRED IN RELYING ON THE "1989 REVISED

RULES AND REGULATIONS IMPLEMENTING RA 6715" AS BASIS TO RECOGNIZE
PRIVATE RESPONDENT APSOTEUS REGISTRATION BY THE DOLE REGIONAL
DIRECTOR.

II

THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED PUBLIC

RESPONDENTS APPLICATION OF THE PRINCIPLE OF STARE DECISIS TO HASTILY
DISPOSE OF THE LEGAL PERSONALITY ISSUE OF APSOTEU.
 III

THE HONORABLE COURT OF APPEALS DID NOT DECIDE IN ACCORD WITH LAW AND
JURISPRUDENCE WHEN IT AFFIRMED PUBLIC RESPONDENTS APPLICATION OF
THE "UNION AUTONOMY" THEORY.

IV

IN AFFIRMING PUBLIC RESPONDENTS FINDING THAT PRIVATE RESPONDENTS ARE

"SEPARATE FEDERATIONS," THE HONORABLE COURT OF APPEALS:

(1) IGNORED JURISPRUDENCE RECOGNIZING THE BINDING NATURE OF A

MED-ARBITERS FACTUAL FINDINGS; AND

(2) DISREGARDED EVIDENCE ON RECORD OF "ILLEGAL COMMINGLING."11

Plainly, the issues are (1) Can the supervisory and the rank-and-file unions file separate petitions for
certification election?; (2) Was the Secretarys decision based on stare decisis correct?; and (3)
Were private respondents engaged in commingling?

The issue on the status of the supervisory union CSBTI-SU depends on the status of APSOTEU, its
mother federation.

Petitioner argues that APSOTEU improperly secured its registration from the DOLE Regional
Director and not from the BLR; that it is the BLR that is authorized to process applications and issue
certificates of registration in accordance with our ruling in Phil. Association of Free Labor Unions v.
Secretary of Labor;12 that the certificates of registration issued by the DOLE Regional Director
pursuant to the rules are questionable, and possibly even void ab initio for being ultra vires; and that
the Court of Appeals erred when it ruled that the law applicable at the time of APSOTEUs
registration was the 1989 Revised Implementing Rules and Regulations of Rep. Act No. 6715.

Petitioner insists that APSOTEU lacks legal personality, and its chartered affiliate CSBTI-SU cannot
attain the status of a legitimate labor organization to file a petition for certification election. It relies
on Villar v. Inciong,13 where we held therein that Amigo Employees Union was not a duly registered
independent union absent any record of its registration with the Bureau.

Pertinent is Article 23514 of the Labor Code which provides that applications for registration shall be
acted upon by the Bureau. "Bureau" as defined under the Labor Code means the BLR and/or the
Labor Relations Division in the Regional Offices of the Department of Labor.15 Further, Section 2,
Rule II, Book V of the 1989 Revised Implementing Rules of the Labor Code (Implementing Rules)
provides that:

Section 2. Where to file application; procedure Any national labor organization or labor federation
or local union may file an application for registration with the Bureau or the Regional Office where
the applicants principal offices is located. The Bureau or the Regional Office shall immediately
process and approve or deny the application. In case of approval, the Bureau or the Regional Office
shall issue the registration certificate within thirty (30) calendar days from receipt of the application,
together with all the requirements for registration as hereinafter provided. 16

The Implementing Rules specifically Section 1, Rule III of Book V, as amended by Department Order
No. 9, thus:
SECTION 1. Where to file applications. The application for registration of any federation,
national or industry union or trade union center shall be filed with the Bureau. Where the application
is filed with the Regional Office, the same shall be immediately forwarded to the Bureau within forty-
eight (48) hours from filing thereof, together with all the documents supporting the registration.

The applications for registration of an independent union shall be filed with and acted upon by the
Regional Office where the applicants principal office is located .

xxxx

The DOLE issued Department Order No. 40-03, which took effect on March 15, 2003, further
amending Book V of the above implementing rules. The new implementing rules explicitly provide
that applications for registration of labor organizations shall be filed either with the Regional Office or
with the BLR.17

Even after the amendments, the rules did not divest the Regional Office and the BLR of their
jurisdiction over applications for registration by labor organizations. The amendments to the
implementing rules merely specified that when the application was filed with the Regional Office, the
application would be acted upon by the BLR.

The records in this case showed that APSOTEU was registered on March 1, 1991. Accordingly, the
law applicable at that time was Section 2, Rule II, Book V of the Implementing Rules, and not
Department Order No. 9 which took effect only on June 21, 1997. Thus, considering further that
APSOTEUs principal office is located in Diliman, Quezon City, and its registration was filed with the
NCR Regional Office, the certificate of registration is valid.

The petitioner misapplied Villar v. Inciong.18 In said case, there was no record in the BLR that Amigo
Employees Union was registered.19

Did the Court of Appeals err in its application of stare decisis when it upheld the Secretarys ruling
that APSOTEU is a legitimate labor organization and its personality cannot be assailed unless in an
independent action for cancellation of registration certificate?20

We think not.

Section 5, Rule V, Book V of the Implementing Rules states:

Section 5. Effect of registration The labor organization or workers association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of registration.
Such legal personality cannot thereafter be subject to collateral attack, but maybe questioned only in
an independent petition for cancellation in accordance with these Rules.21

Thus, APSOTEU is a legitimate labor organization and has authority to issue charter to its
affiliates.22 It may issue a local charter certificate to CSBTI-SU and correspondingly, CSBTI-SU is
legitimate.

Are ALU, a rank-and-file union and APSOTEU, a supervisory union one and the same because of
the commonalities between them? Are they commingled?

The petitioner contends that applying by analogy, the doctrine of piercing the veil of corporate fiction,
APSOTEU and ALU are the same federation. Private respondents disagree.
First, as earlier discoursed, once a labor union attains the status of a legitimate labor organization, it
continues as such until its certificate of registration is cancelled or revoked in an independent action
for cancellation.23 In addition, the legal personality of a labor organization cannot be collaterally
attacked.24 Thus, when the personality of the labor organization is questioned in the same manner
the veil of corporate fiction is pierced, the action partakes the nature of a collateral attack. Hence, in
the absence of any independent action for cancellation of registration against either APSOTEU or
ALU, and unless and until their registrations are cancelled, each continues to possess a separate
legal personality. The CSBTI-RFU and CSBTI-SU are therefore affiliated with distinct and separate
federations, despite the commonalities of APSOTEU and ALU.

Under the rules implementing the Labor Code, a chartered local union acquires legal personality
through the charter certificate issued by a duly registered federation or national union, and reported
to the Regional Office in accordance with the rules implementing the Labor Code.25 A local union
does not owe its existence to the federation with which it is affiliated. It is a separate and distinct
voluntary association owing its creation to the will of its members. Mere affiliation does not divest the
local union of its own personality, neither does it give the mother federation the license to act
independently of the local union. It only gives rise to a contract of agency, where the former acts in
representation of the latter.26 Hence, local unions are considered principals while the federation is
deemed to be merely their agent.27 As such principals, the unions are entitled to exercise the rights
and privileges of a legitimate labor organization, including the right to seek certification as the sole
and exclusive bargaining agent in the appropriate employer unit. 1w phi1

A word of caution though, under Article 245 of the Labor Code,28 supervisory employees are not
eligible for membership in a labor union of rank-and-file employees. The supervisory employees are
allowed to form their own union but they are not allowed to join the rank-and-file union because of
potential conflicts of interest.29 Further, to avoid a situation where supervisors would merge with the
rank-and-file or where the supervisors labor union would represent conflicting interests, a local
supervisors union should not be allowed to affiliate with the national federation of unions of rank-
and-file employees where that federation actively participates in the union activity within the
company.30 Thus, the limitation is not confined to a case of supervisors wanting to join a rank-and-file
union. The prohibition extends to a supervisors local union applying for membership in a national
federation the members of which include local unions of rank-and-file employees.31 In De La Salle
University Medical Center and College of Medicine v. Laguesma, we reiterated the rule that for the
prohibition to apply, it is not enough that the supervisory union and the rank-and-file union are
affiliated with a single federation. In addition, the supervisors must have direct authority over the
rank-and-file employees.32

In the instant case, the national federations that exist as separate entities to which the rank-and-file
and supervisory unions are separately affiliated with, do have a common set of officers. In addition,
APSOTEU, the supervisory federation, actively participates in the CSBTI-SU while ALU, the rank-
and-file federation, actively participates in the CSBTI-RFU, giving occasion to possible conflicts of
interest among the common officers of the federation of rank-and-file and the federation of
supervisory unions. For as long as they are affiliated with the APSOTEU and ALU, the supervisory
and rank-and-file unions both do not meet the criteria to attain the status of legitimate labor
organizations, and thus could not separately petition for certification elections.1wphi1

The purpose of affiliation of the local unions into a common enterprise is to increase the collective
bargaining power in respect of the terms and conditions of labor.33 When there is commingling of
officers of a rank-and-file union with a supervisory union, the constitutional policy on labor is
circumvented. Labor organizations should ensure the freedom of employees to organize themselves
for the purpose of leveling the bargaining process but also to ensure the freedom of workingmen and
to keep open the corridor of opportunity to enable them to do it for themselves.
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision dated August 31, 2001, in
CA-G.R. SP No. 54128 and the Resolution dated February 5, 2003 are SET ASIDE. The decision of
the Med-Arbiter is hereby AFFIRMED.

SO ORDERED.

G.R. No. L-33987 September 4, 1975

LIBERTY COTTON MILLS WORKERS UNION, RAFAEL NEPOMUCENO, MARIANO CASTILLO,

NELLY ACEVEDO, RIZALINO CASTILLO and RAFAEL COMBALICER, petitioners,
vs.
LIBERTY COTTON MILLS, INC., PHILIPPINE ASSOCIATION OF FREE LABOR UNION (PAFLU)
and the COURT OF INDUSTRIAL RELATIONS, respondents.

Carlos E. Santiago for petitioners.

Paredes, Poblador, Nazareno, Azada, Tomacuz & Paredes for respondent Liberty Cotton Mills, Inc.
Ernesto D. Llaguno for respondent Union.

Jose K. Manguiat, Jr. for respondent Court.

ESGUERRA, J.:

Petition for Certiorari to review the decision dated March 30, 1971 of the Court of Industrial Relations
in Case No. 4216, dismissing petitioners' complaint for unfair labor practice.

The factual background of this case is as follows:

The Liberty Cotton Mills Workers Union, hereinafter referred to as the Union, adopted its Constitution
and By-laws on January 1, 1959.1 Among other things, the said Constitution provided:

ARTICLE I NAME AND DOMICILE.

Section 1. The name of this organization shall be Liberty Cotton Mills Workers Union-
PAFLU.

Section 2. This Union shall have its office at l233 Tecson, Tindalo, Tondo, Manila.

xxx xxx xxx

ARTICLE X UNION AFFILIATION

Section 1. The Liberty Cotton Mills Workers Union-Paflu shall be affiliated with the
Philippine Association of Free Labor Unions, otherwise known as PAFLU, and shall
remain an affiliate as long as ten or more of its members evidence their desire to
continue the said local union's affiliation, in accordance with the Paflu Constitution,
Article XI-Paragraph 11:15 thereof;
 ARTICLE XIII CHARGES, TRIALS, AND IMPEACHMENT OF OFFICERS
AND MEMBERS: APPEALS.

Section 1. Any member or officer of the Liberty Cotton Mills Workers Union-Paflu
may be charged, tried or impeached if an officer, in accordance with this and the
PAFLU CONSTITUTION.

On October 1, 1959, a Collective Bargaining Agreement2 was entered into by and between the
Company and the Union represented by PAFLU. Said Agreement contained these clear and
unequivocal provisions:

This Agreement, made and entered into this 1st day of October, 1959, in the City of
Manila, by and between

The LIBERTY COTTON MILLS INC., a corporation duly organized

and existing under the laws of the Philippines, with principal office at
549 San Francisco Street, Karuhatan, Polo, Bulacan, hereinafter
referred to as the COMPANY, represented in this Act by its President,
Mr. RAFAEL GOSINGCO:

AND

THE PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS, a

legitimate labor organization existing and operating under the laws of
the Philippines, with postal address at 1233 Tecson, Tindalo, Tondo,
Manila, hereinafter referred to as the UNION, represented in this Act
by its National Treasurer and duly authorized representative, Mr.
CATALINO G. LUZANO, herein acting for and in behalf of its affiliate
the LIBERTY COTTON MILLS WORKERS UNION-PAFLU, and the
employees of the Company in the appropriate bargaining unit
hereinafter defined:

WITNESSETH:

I. UNION RECOGNITION

The COMPANY recognizes the UNION as the sole bargaining agent

for all of its employees, other than supervisors ... consonant with the
certification of the said UNION by the Court of Industrial Relations in
Case No. 627-MC, entitled" In re Petition for Certification Election,
Liberty Cotton Mills, Inc., petitioner."

III. UNION SECURITY

All employees who, at the time of the signing of this Agreement are
members of the UNION, or who, at any time during the effectivity of
this Agreement, may join the UNION, shall as a condition for
continued employment, remain members of the UNION while this
agreement remains in force; any employee, who, at any time during
the life of this agreement shall resign from the UNION or be expelled,
therefrom in accordance with its Constitution and By-Laws for non-
 payment of union dues or other duly approved union assessments or
for disloyalty to the UNION shall be dismissed from employment by
the COMPANY upon request in writing by the UNION which shall
hold the COMPANY free from any liability arising from or caused by
such dismissal.

XI. TERM

This Agreement shall be effective from October 1, 1959 to September

30, 1961, during which time it shall be binding upon the parties hereto
and all the employees of COMPANY comprised within the
appropriate bargaining unit defined above, and may not be modified
by court action, by concerted activities or by any other means. ...
Should, either party fail to give written notice to the other of its desire
to amend or discontinue this Agreement at least thirty (30) days from
the expiry date set forth above, this Agreement shall be continued in
force for one (1) year, and thereafter for yearly terms unless written
notice is given at least thirty (30) days from the expiration of the
contract.

The above Collective Bargaining Agreement was amended on February 28, 1964, thus:3

Article III. UNION SECURITY

Additional Clause

The Company agrees to encourage casual workers and non-union

members to join the Union which is the sole and exclusive agent for
all the employees covered by this Agreement.

Article XI. DURATION

The Duration of this Agreement shall be for two (2) years, that is from
November 2, 1963 up to November, 1965.

The Agreements aforementioned bore the signatures of representatives of both the Company and
the PAFLU, and the incumbent President of the local union.

On March 13, 1964, while the Collective Bargaining Agreement was in full force, Marciano Castillo
and Rafael Nepomuceno, President and Vice-President, respectively, of the local union, wrote
PAFLU, its mother federation, complaining about the legal counsel assigned by the PAFLU to assist
them in a ULP case (Case No. 4001) they filed against the Company. In said letter, the local union
expressed its dissatisfaction and loss of confidence in the PAFLU lawyers, claiming that PAFLU
never lifted a finger regarding this particular complaint.

On May 17, 1964, thirty two (32) out of the 36 members of the local union disaffiliated themselves
from respondent PAFLU pursuant to their local union's Constitution and By-Laws, specifically Article
X thereof, supra (p. 12 Record). A copy of the signed resolution of disaffiliation was furnished the
Company as well as the Bureau of Labor Relations. The following day, the local union wrote the
Company and required the turn-over of the checked-off dues directly to its Treasurer.
On May 27, 1964, PAFLU, thru its National Secretary wrote the Company this letter:

This is to inform your good office that sometime last May 25, 1964, our federation
was in receipt of a letter signed by 32 persons and informing us of their desire to
disaffiliate the local union from the mother federation PAFLU. The members and
officers who made the letter have no right to do the same under our existing contract
and under the PAFLUs Constitution and By-Laws.

We wish to make it clear with the management that the contractural union in our
contract which was signed a few months ago is the Philippine Association of Free
Labor Union (PAFLU). The actuation made by the supposed union members is
inconsistent with the present contract we have and under the provisions of
"Maintenance of Union Membership" they can an be dismissed. Under the PAFLUs
Constitution that is null and void. And in view of the disloyalty shown by those
members, the mother federation will take over the administration of the Union in
dealing with the management especially.

We inform your goodself that the mother federation is not honoring the said letter and
we request you do the same under the circumstances.

Hence, all the communications pertaining to union business and other relative
matters be coursed to the mother federation for prompt action.

And on May 29,1964, PAFLU wrote the Company again, this time quoting en toto Article III of the
Collective Bargaining Agreement on "Union Security" and requesting the termination of the
employment of Rafael Nepomuceno, Marciano Castillo, Nelly Acevedo, Enrique Managan, Rizalino
Castillo and Rafael Combalicer, all petitioners herein. PAFLU at the same time expelled the
aforementioned workers from their' union membership in the mother federation for allegedly
"instigating union disaffiliation.".

On May 30,1964, the Company terminated the employment of the members expelled by the PAFLU
(Exhs. "D", "D-1" to "D-3" pp. 14-17 Record). On the last day of May, 1964, counsel for the ousted
workers wrote the Company requesting their reinstatement. This was denied by the Company;
hence the complaint for unfair labor practice filed with the Court of Industrial Relations.

After due hearing, the Court rendered its decision dismissing the complaint, but with a strong'
recommendation for the reinstatement of complainant workers in respondent Company. The workers
(petitioners herein) being unsatisfied with the decision, appealed to this Court and raised the
following questions:

1. Under the Collective Bargaining Agreement, who between the PAFLU and the
local union is the sole bargaining agent of the workers of the Company?

2. Was the disaffiliation of the local union from the PAFLU valid and justified under
the Constitution and By-laws of the Union?

3. Was the disaffiliation of the Union from the PAFLU an act of disloyalty of the
petitioners (workers) which could be a valid ground for their expulsion from their own
union and their dismissal from the Company?
 4. Does the PAFLU as the mother federation of the union possess the power to expel
the officers and members of the union under the Constitution and By-Laws? And
assuming it has such powers, were the petitioner workers validly expelled from the
Union in accordance with the Constitution and By-Laws?

5. May the workers be summarily dismissed by the Company under the Collective
Bargaining Agreement even without valid proof of their valid expulsion from their own
union?

6. Did not the dismissal of only the five (5) petitioner workers constitute
discrimination, considering that the disaffiliation was signed by more than the
majority of the union members?

All these questions boil down to the single issue of whether or not the dismissal of the complaining
employees, petitioners herein, was justified or not. The resolution of this question hinges on a
precise and careful analysis of the Collective Bargaining Agreements. (Exhs. "H' and "I") In these
contracts it appears that PAFLU has been recognized as the sole bargaining agent for all the
employees of the Company other than its supervisors and security guards. Moreover it likewise
appears that "PAFLU, represented in this Act by its National Treasurer, and duly authorized
representative, ... (was) acting for and in behalf of its affiliate, the Liberty Cotton Mills Workers Union
and the employees of the Company, etc.' In other words, the PAFLU, acting for and in behalf of its
affiliate, had the status of an agent while the local union remained the basic unit of the association
free to serve the common interest of all its members including the freedom to disaffiliate when the
circumstances warrant. This is clearly provided in its Constitution and By-Laws, specifically Article X
on Union Affiliation, supra. At this point, relevant is the ruling in an American case:4

The locals are separate and distinct units primarily designed to secure and maintain
an equality of bargaining power between the employer and their employee-members
in the economic struggle for the fruits of the joint productive effort of labor and
capital; and the association of the locals into the national union (as PAFLU) was in
furtherance of the same end. These associations are consensual entities capable of
entering into such legal relations with their members. The essential purpose was the
affiliation of the local unions into a common enterprise to increase by collective action
the common bargaining power in respect of the terms and conditions of labor. Yet the
locals remained the basic units of association, free to serve their own and the
common interest of all, subject to the restraints imposed by the Constitution and By-
Laws of the Association, and also to renounce the affiliation for mutual welfare upon
the terms laid down in the agreement which brought it into existence. (Emphasis
supplied)

This brings Us to the question of disaffiliation which was the root cause of the dismissal. It is claimed
by PAFLU that the local union could not have validly disaffiliated from it as the Union Security
Clause so provided. We have meticulously read the provision of the supposed union security clause
and We cannot agree with both the stand of PAFLU and the respondent court. For while it is correct
to say that a union security clause did exist, this clause was limited by the provision in the Unions'
Constitution and By-Laws, which states:

That the Liberty Cotton Mills Workers Union-PAFLU shall be affiliated with the
PAFLU, and shall remain an affiliate as long as ten (10) or more of its members
evidence their desire to continue the said local unions affiliation.
Record shows that only four (4) out of its members remained for 32 out of the 36 members of the
Union signed the resolution of disaffiliation on May 17, 1964, triggered by the alleged negligence of
PAFLU in attending to the needs of its local union, particularly its failure to assign a conscientious
lawyer to the local to attend to the ULP case they filed against the Company. The disaffiliation was,
therefore, valid under the local's Constitution and By-Laws which, taken together with the Collective
Bargaining Agreement, is controlling. The Court of Industrial Relations likewise held in its decision
that the act of disaffiliation did not have any effect as the workers retracted from such act. As stated
by the respondent court

... it is believed that the effect of their retraction obliterates their participation in the
resolution. Hence, under Article X of the said Constitution and By-Laws, complainant
union remained affiliated with respondent union at the time termination of the
services of complainant workers was requested and when they were dismissed by
the Company on May 30, 1964.

Although the fact of retraction is true, We find that the respondent court failed to notice the fact that
not all signatories to the resolution of disaffiliation dated May 17, 1964, took part in the retraction.
Only a number of employees, 16 to be exact, retracted. Also, and this is a significant factor, the
retraction is dated June 3, 1964, or four days after the petitioners herein had been dismissed. There
is no use in saying that the retraction obliterated the act of disaffiliation when they were already out
of the service when it was done. The disaffiliation, coming as it did from the greater majority of its
members, is more than enough to show the collective desire of the members of the Liberty Cotton
Mills Workers Union to sever their relations from the mother federation. The right of disaffiliation is
inherent in the compact and such act should not have been branded as an act of disloyalty,
especially considering the cause which impelled the union to take such a step.

Lastly, we will take up the process by which the workers were dismissed. We find that it was hastily
and summarily done. The PAFLU received the resolution to disaffiliate on or about May 25, 1964,
after which it wrote the Company about its stand, first on the 27th of May followed by its letter of the
29th requesting for the termination of petitioners herein for 'disloyalty in having instigated
disaffiliation'. The Company the acting on the request of the mother federation sent notices of
termination to the officers of the local union immediately on the day following, or on May 30, 1964,
heavily relying on the Collective Bargaining Agreement, viz:

... for disloyalty to the union shall be dismissed from employment by the Company
upon request in writing by the Union, which shall hold the COMPANY free from any
liability arising from or caused by such dismissal.

While the above quoted provision may have been the basis for the Company's actuation, as in fact it
was alleged by the Company in its Brief, We are of the opinion that such stipulation does not bind
the courts much less released the Company from liability should a finding for unfair labor practice be
positive. In the case at bar, however, considering that the dispute revolved around the mother
federation and its local, with the company dismissing the workers at the instance of the mother
federation, We believe that the Company's liability should be limited to the immediate reinstatement
of the workers.

Considering, however, that their dismissal was effected without previous hearing, and at the instance
of PAFLU, this mother federation should be, as it is hereby, held liable to the petitioners for the
payment of their back wages. Following the precedent of Mercury Drug Co. vs. CIR,5 of fixing an
amount of net backwages and doing away with the protracted process of determining the
complainants-workers' earnings elsewhere during the period of their illegal dismissal, the Court fixes
the amount of backwages to be paid under this decision to the complainants-workers at three (3)
years backwages without deduction or qualification.

WHEREFORE, the decision appealed from is reversed and set aside and the company is hereby
ordered to immediately reinstate complainant workers, within thirty (30) days from notice of this
decision and failure to so reinstate the workers without valid and just cause shall make respondent
company liable to the workers for the payment of their wages from and after the expiration of such
thirty-day period. The mother federation respondent PAFLU is sentenced to pay complainants-
workers the equivalent of three (3) years backwages without deduction or qualification.

In view of the length of time that this dispute has been pending, this decision shall be immediately
executory upon promulgation and notice to the parties. Without pronouncement as to costs.

G.R. No. 127374 January 31, 2002

PHILIPPINE SKYLANDERS, INC., MARILES C. ROMULO and FRANCISCO DAKILA, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER EMERSON TUMANON,
PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS (PAFLU) SEPTEMBER (now UNIFIED
PAFLU) and SERAFIN AYROSO, respondents.

x---------------------------------------------------------x

G.R. No. 127431 January 31, 2002

PHILIPPINE SKYLANDERS AND WORKERS ASSOCIATION-NCW, MACARIO CABANIAS,

PEPITO RODILLAS, SHARON CASTILLO, DANILO CARBONEL, MANUEL EDA, ROLANDO
FELIX, JOCELYN FRONDA, RICARDO LUMBA, JOSEPH MARISOL, NERISA MORTEL,
TEOFILO QUIRONG, LEONARDO REYES, MANUEL CADIENTE and HERMINIA
RIOSA, petitioners,
vs.
PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS (PAFLU) SEPTEMBER (now UNIFIED
PAFLU) and NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION, respondents.

BELLOSILLO, J.:

This is a petition for certiorari1 seeking to set aside the 31 July 1996 Decision2 of the National Labor
Relations Commission affirming the 30 June 1995 Decision of the Labor Arbiter holding petitioners
Philippine Skylanders, Inc., Mariles C. Romulo3 and Francisco Dakila as well as the elected officers
of the Philippine Skylanders Employees and Workers Association-PAFLU4 guilty of unfair labor
practice and ordering them to pay private respondent Philippine Association of Free Labor Union
(PAFLU) September5 150,000.00 as damages. Petitioners likewise seek the reversal of the 31
October 1996 Resolution of the NLRC denying their Motion for Reconsideration.

In November 1993 the Philippine Skylanders Employees Association (PSEA), a local labor union
affiliated with the Philippine Association of Free Labor Unions (PAFLU) September (PAFLU), won in
the certification election conducted among the rank and file employees of Philippine Skylanders, Inc.
(PSI). Its rival union, Philippine Skylanders Employees Association-WATU (PSEA-WATU)
immediately protested the result of the election before the Secretary of Labor.
Several months later, pending settlement of the controversy, PSEA sent PAFLU a notice of
disaffiliation citing as reason PAFLU's supposed deliberate and habitual dereliction of duty toward its
members. Attached to the notice was a copy of the resolution adopted and signed by the officers
and members of PSEA authorizing their local union to disaffiliate from its mother federation.

PSEA subsequently affiliated itself with the National Congress of Workers (NCW), changed its name
to Philippine Skylanders Employees Association - National Congress of Workers (PSEA-NCW), and
to maintain continuity within the organization, allowed the former officers of PSEA-PAFLU to
continue occupying their positions as elected officers in the newly-forged PSEA-NCW.

On 17 March 1994 PSEA-NCW entered into a collective bargaining agreement with PSI which was
immediately registered with the Department of Labor and Employment.

Meanwhile, apparently oblivious to PSEA's shift of allegiance, PAFLU Secretary General Serafin
Ayroso wrote Mariles C. Romulo requesting a copy of PSI's audited financial statement. Ayroso
explained that with the dismissal of PSEA-WATU's election protest the time was ripe for the parties
to enter into a collective bargaining agreement.

On 30 July 1994 PSI through its personnel manager Francisco Dakila denied the request citing as
reason PSEA's disaffiliation from PAFLU and its subsequent affiliation with NCW.

Agitated by PSI's recognition of PSEA-NCW, PAFLU through Serafin Ayroso filed a complaint for
unfair labor practice against PSI, its president Mariles Romulo and personnel manager Francisco
Dakila. PAFLU alleged that aside from PSI's refusal to bargain collectively with its workers, the
company through its president and personnel manager, was also liable for interfering with its
employees' union activities.6

Two (2) days later or on 6 October 1994 Ayroso filed another complaint in behalf of PAFLU for unfair
labor practice against Francisco Dakila. Through Ayroso PAFLU claimed that Dakila was present in
PSEA's organizational meeting thereby confirming his illicit participation in union activities. Ayroso
added that the members of the local union had unwittingly fallen into the manipulative machinations
of PSI and were lured into endorsing a collective bargaining agreement which was detrimental to
their interests.7 The two (2) complaints were thereafter consolidated.

On 1 February 1995 PAFLU amended its complaint by including the elected officers of PSEA-
PAFLU as additional party respondents. PAFLU averred that the local officers of PSEA-PAFLU,
namely Macario Cabanias, Pepito Rodillas, Sharon Castillo, Danilo Carbonel, Manuel Eda, Rolando
Felix, Jocelyn Fronda, Ricardo Lumba, Joseph Mirasol, Nerisa Mortel, Teofilo Quirong, Leonardo
Reyes, Manuel Cadiente, and Herminia Riosa, were equally guilty of unfair labor practice since they
brazenly allowed themselves to be manipulated and influenced by petitioner Francisco Dakila.8

PSI, its president Mariles C. Romulo, and its personnel manager Dakila moved for the dismissal of
the complaint on the ground that the issue of disaffiliation was an inter-union conflict which lay
beyond the jurisdiction of the Labor Arbiter. On the other hand, PSEA-NCW took the cudgels for its
officers who were being sued in their capacities as former officers of PSEA-PAFLU and asserted
that since PSEA was no longer affiliated with PAFLU, Ayroso or PAFLU for that matter had no
personality to file the instant complaint. In support of this assertion, PSEA-NCW submitted in
evidence a Katunayan signed by 111 out of 120 rank and file employees of PSI disauthorizing
Ayroso or PAFLU from instituting any action in their behalf.9

In a Decision rendered on 30 June 1995 the Labor Arbiter declared PSEA's disaffiliation from PAFLU
invalid and held PSI, PSEA-PAFLU and their respective officers guilty of unfair labor practice. The
Decision explained that despite PSEA-PAFLU's status as the sole and exclusive bargaining agent of
PSI's rank and file employees, the company knowingly sanctioned and confederated with Dakila in
actively assisting a rival union. This, according to the Labor Arbiter, was a classic case of
interference for which PSI could be held responsible. As PSEA-NCW's personality was not accorded
recognition, its collective bargaining agreement with PSI was struck down for being invalid. Ayroso's
legal personality to file the complaint was sustained on the ratiocination that under the Labor Code
no petition questioning the majority status of the incumbent bargaining agent shall be entertained
outside of the sixty (60)-day period immediately before the expiry date of such five (5)-year term of
the collective bargaining agreement that the parties may enter into. Accordingly, judgment was
rendered ordering PSI, PSEA-PAFLU and their officers to pay PAFLU 150,000.00 in damages.10

PSI, PSEA and their respective officers appealed to the National Labor Relations Commission
(NLRC). But the NLRC upheld the Decision of the Labor Arbiter and conjectured that since an
election protest questioning PSEA-PAFLU's certification as the sole and exclusive bargaining agent
was pending resolution before the Secretary of Labor, PSEA could not validly separate from PAFLU,
join another national federation and subsequently enter into a collective bargaining agreement with
its employer-company.11

Petitioners separately moved for reconsideration but both motions were denied. Hence, these
petitions for certiorari filed by PSI and PSEA-NCW together with their respective officers pleading for
a reversal of the NLRC's Decision which they claimed to have been rendered in excess of
jurisdiction. In due time, both petitions were consolidated.

In these petitions, petitioner PSEA together with its officers argued that by virtue of their disaffiliation
PAFLU as a mere agent had no authority to represent them before any proceedings. They further
asserted that being an independent labor union PSEA may freely serve the interest of all its
members and readily disaffiliate from its mother federation when circumstances so warrant. This
right, they averred, was consistent with the constitutional guarantee of freedom of association.12

For their part, petitioners PSI, Romulo and Dakila alleged that their decision to bargain collectively
with PSEA-NCW was actuated, to a large extent, by PAFLU's behavior. Having heard no objections
or protestations from PAFLU relative to PSEA's disaffiliation, they reckoned that PSEA's subsequent
association with NSW was done bona fide.13

The Solicitor General filed a Manifestation in Lieu of Comment recommending that both petitions be
granted. In his Manifestation, the Solicitor General argued against the Labor Arbiter's assumption of
jurisdiction citing the following as reasons: first, there was no employer-employee relationship
between complainant Ayroso and PSI over which the Labor Arbiter could rightfully assert his
jurisdiction; second, since the case involved a dispute between PAFLU as mother federation and
PSEA as local union, the controversy fell within the jurisdiction of the Bureau of Labor Relations;
and lastly, the relationship of principal-agent between PAFLU and PSEA had been severed by the
local union through the lawful exercise of its right of disaffiliation.14

Stripped of non-essentials, the fundamental issue tapers down to the legitimacy of PSEA's
disaffiliation. To be more precise, may PSEA, which is an independent and separate local union,
validly disaffiliate from PAFLU pending the settlement of an election protest questioning its status as
the sole and exclusive bargaining agent of PSI's rank and file employees?

At the outset, let it be noted that the issue of disaffiliation is an inter-union conflict the jurisdiction of
which properly lies with the Bureau of Labor Relations (BLR) and not with the Labor
Arbiter.15 Nonetheless, with due recognition of this fact, we deem it proper to settle the controversy at
this instance since to remand the case to the BLR would only mean intolerable delay for the parties.
The right of a local union to disaffiliate from its mother federation is not a novel thesis unillumined by
case law. In the landmark case of Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills,
Inc.16 we upheld the right of local unions to separate from their mother federation on the ground that
as separate and voluntary associations, local unions do not owe their creation and existence to the
national federation to which they are affiliated but, instead, to the will of their members. The sole
essence of affiliation is to increase, by collective action, the common bargaining power of local
unions for the effective enhancement and protection of their interests. Admittedly, there are times
when without succor and support local unions may find it hard, unaided by other support groups, to
secure justice for themselves.

Yet the local unions remain the basic units of association, free to serve their own interests subject to
the restraints imposed by the constitution and by-laws of the national federation, and free also to
renounce the affiliation upon the terms laid down in the agreement which brought such affiliation into
existence.

Such dictum has been punctiliously followed since then.17

Upon an application of the aforecited principle to the issue at hand, the impropriety of the questioned
Decisions becomes clearly apparent. There is nothing shown in the records nor is it claimed by
PAFLU that the local union was expressly forbidden to disaffiliate from the federation nor were there
any conditions imposed for a valid breakaway. As such, the pendency of an election protest
involving both the mother federation and the local union did not constitute a bar to a valid
disaffiliation. Neither was it disputed by PAFLU that 111 signatories out of the 120 members of the
local union, or an equivalent of 92.5% of the total union membership supported the claim of
disaffiliation and had in fact disauthorized PAFLU from instituting any complaint in their behalf.
Surely, this is not a case where one (1) or two (2) members of the local union decided to disaffiliate
from the mother federation, but it is a case where almost all local union members decided to
disaffiliate.

It was entirely reasonable then for PSI to enter into a collective bargaining agreement with PSEA-
NCW. As PSEA had validly severed itself from PAFLU, there would be no restrictions which could
validly hinder it from subsequently affiliating with NCW and entering into a collective bargaining
agreement in behalf of its members.

There is a further consideration that likewise argues for the granting of the petitions. It stands
unchallenged that PAFLU instituted the complaint for unfair labor practice against the wishes of
workers whose interests it was supposedly protecting. The mere act of disaffiliation did not divest
PSEA of its own personality; neither did it give PAFLU the license to act independently of the local
union. Recreant to its mission, PAFLU cannot simply ignore the demands of the local chapter and
decide for its welfare. PAFLU might have forgotten that as an agent it could only act in
representation of and in accordance with the interests of the local union. The complaint then for
unfair labor practice lodged by PAFLU against PSI, PSEA and their respective officers, having been
filed by a party which has no legal personality to institute the complaint, should have been dismissed
at the first instance for failure to state a cause of action.

Policy considerations dictate that in weighing the claims of a local union as against those of a
national federation, those of the former must be preferred. Parenthetically though, the desires of the
mother federation to protect its locals are not altogether to be shunned. It will however be to err
greatly against the Constitution if the desires of the federation would be favored over those of its
members. That, at any rate, is the policy of the law. For if it were otherwise, instead of protection,
there would be disregard and neglect of the lowly workingmen.
WHEREFORE, the petitions of Philippine Skylanders, Inc. and of Philippine Skylanders and Workers
Association-NCW, together with their respective officers, are GRANTED. The Decision of the
National Labor Relations Commission of 31 July 1996 affirming the Decision of the Labor Arbiter of
30 June 1995 holding petitioners Philippine Skylanders and Workers Association-NCW, Philippine
Skylanders, Inc. and their respective officers, guilty of unfair labor practice and ordering them to pay
damages to private respondent Philippine Association of Free Labor Unions (PAFLU) September
(now UNIFIED PAFLU) as well as the Resolution of 31 October 1996 denying reconsideration
is REVERSED and SET ASIDE. No costs.

SO ORDERED.

G.R. No. 157117 November 20, 2006

COASTAL SUBIC BAY TERMINAL, INC., Petitioner,

vs.
DEPARTMENT OF LABOR and EMPLOYMENT OFFICE OF THE SECRETARY, COASTAL
SUBIC BAY TERMINAL, INC. SUPERVISORY UNION-APSOTEU, and COASTAL SUBIC BAY
TERMINAL, INC. RANK-AND-FILE UNION-ALU-TUCP, Respondents.

DECISION

QUISUMBING, J.:

For review on certiorari is the Court of Appeals Decision1 dated August 31, 2001, in CA-G.R. SP No.
54128 and the Resolution2 dated February 5, 2003, denying petitioners motion for reconsideration.
The Court of Appeals had affirmed the Decision3 dated March 15, 1999 of the Secretary of the
Department of Labor and Employment (DOLE) reversing the Mediator Arbiters dismissal of private
respondents petitions for certification election.

The facts are as follows:

On July 8, 1998, private respondents Coastal Subic Bay Terminal, Inc. Rank-and-File Union (CSBTI-
RFU) and Coastal Subic Bay Terminal, Inc. Supervisory Union (CSBTI-SU) filed separate petitions
for certification election before Med-Arbiter Eladio de Jesus of the Regional Office No. III. The rank-
and-file union insists that it is a legitimate labor organization having been issued a charter certificate
by the Associated Labor Union (ALU), and the supervisory union by the Associated Professional,
Supervisory, Office and Technical Employees Union (APSOTEU). Private respondents also alleged
that the establishment in which they sought to operate was unorganized.

Petitioner Coastal Subic Bay Terminal, Inc. (CSBTI) opposed both petitions for certification election
alleging that the rank-and-file union and supervisory union were not legitimate labor organizations,
and that the proposed bargaining units were not particularly described.

Without ruling on the legitimacy of the respondent unions, the Med-Arbiter dismissed, without
prejudice to refiling, both petitions which had been consolidated. The Med-Arbiter held that the ALU
and APSOTEU are one and the same federation having a common set of officers. Thus, the
supervisory and the rank-and-file unions were in effect affiliated with only one federation.4

The Med-Arbiter ruled as follows:

Viewed in the light of all the foregoing, this Office finds the simultaneous filing of the instant petitions
to be invalid and unwarranted. Consequently, this Office has no recourse but to dismiss both
petitions without prejudice to the refiling of either.

WHEREFORE, PREMISES CONSIDERED, let the instant petitions be, as they are hereby
DISMISSED.

SO ORDERED.5

Both parties appealed to the Secretary of Labor and Employment, who reversed the decision of the
Med-Arbiter. The Secretary thru Undersecretary R. Baldoz, ruled that CSBTI-SU and CSBTI-RFU
have separate legal personalities to file their separate petitions for certification election. The
Secretary held that APSOTEU is a legitimate labor organization because it was properly registered
pursuant to the 1989 Revised Rules and Regulations implementing Republic Act No. 6715, the rule
applicable at the time of its registration. It further ruled that ALU and APSOTEU are separate and
distinct labor unions having separate certificates of registration from the DOLE. They also have
different sets of locals. The Secretary declared CSBTI-RFU and CSBTI-SU as legitimate labor
organizations having been chartered respectively by ALU and APSOTEU after submitting all the
requirements with the Bureau of Labor Relations (BLR). Accordingly, the Secretary ordered the
holding of separate certification election, viz:

WHEREFORE, the decision of the Med-Arbiter, Regional Office No. III is hereby REVERSED. Let
separate certification elections be conducted immediately among the appropriate employees of
CSBTI, after the usual pre-election conference, with the following choices:

I. For all rank and file employees of CSBTI:

1. COASTAL SUBIC BAY TERMINAL, INC. RANK-AND-FILE UNION-ALU-TUCP;

and

2. NO UNION.

II. For all supervisory employees of CSBTI:

1. COASTAL SUBIC BAY TERMINAL, INC. SUPERVISORY EMPLOYEES UNION-

APSOTEU; and

2. NO UNION.

The latest payroll of the employer, including its payrolls for the last three months immediately
preceding the issuance of this decision, shall be the basis for determining the qualified list of voters.

SO DECIDED.6

The motion for reconsideration was also denied.7

On appeal, the Court of Appeals affirmed the decision of the Secretary.8 It held that there was no
grave abuse of discretion on the part of the Secretary; its findings are supported by evidence on
record; and thus should be accorded with respect and finality.9
The motion for reconsideration was likewise denied.10 Hence, the instant petition by the company
anchored on the following grounds:

THE HONORABLE COURT OF APPEALS ERRED IN RELYING ON THE "1989 REVISED

RULES AND REGULATIONS IMPLEMENTING RA 6715" AS BASIS TO RECOGNIZE
PRIVATE RESPONDENT APSOTEUS REGISTRATION BY THE DOLE REGIONAL
DIRECTOR.

II

THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED PUBLIC

RESPONDENTS APPLICATION OF THE PRINCIPLE OF STARE DECISIS TO HASTILY
DISPOSE OF THE LEGAL PERSONALITY ISSUE OF APSOTEU.

III

THE HONORABLE COURT OF APPEALS DID NOT DECIDE IN ACCORD WITH LAW AND
JURISPRUDENCE WHEN IT AFFIRMED PUBLIC RESPONDENTS APPLICATION OF
THE "UNION AUTONOMY" THEORY.

IV

IN AFFIRMING PUBLIC RESPONDENTS FINDING THAT PRIVATE RESPONDENTS ARE

"SEPARATE FEDERATIONS," THE HONORABLE COURT OF APPEALS:

(1) IGNORED JURISPRUDENCE RECOGNIZING THE BINDING NATURE OF A

MED-ARBITERS FACTUAL FINDINGS; AND

(2) DISREGARDED EVIDENCE ON RECORD OF "ILLEGAL COMMINGLING."11

Plainly, the issues are (1) Can the supervisory and the rank-and-file unions file separate petitions for
certification election?; (2) Was the Secretarys decision based on stare decisis correct?; and (3)
Were private respondents engaged in commingling?

The issue on the status of the supervisory union CSBTI-SU depends on the status of APSOTEU, its
mother federation.

Petitioner argues that APSOTEU improperly secured its registration from the DOLE Regional
Director and not from the BLR; that it is the BLR that is authorized to process applications and issue
certificates of registration in accordance with our ruling in Phil. Association of Free Labor Unions v.
Secretary of Labor;12 that the certificates of registration issued by the DOLE Regional Director
pursuant to the rules are questionable, and possibly even void ab initio for being ultra vires; and that
the Court of Appeals erred when it ruled that the law applicable at the time of APSOTEUs
registration was the 1989 Revised Implementing Rules and Regulations of Rep. Act No. 6715.

Petitioner insists that APSOTEU lacks legal personality, and its chartered affiliate CSBTI-SU cannot
attain the status of a legitimate labor organization to file a petition for certification election. It relies
on Villar v. Inciong,13 where we held therein that Amigo Employees Union was not a duly registered
independent union absent any record of its registration with the Bureau.
Pertinent is Article 23514 of the Labor Code which provides that applications for registration shall be
acted upon by the Bureau. "Bureau" as defined under the Labor Code means the BLR and/or the
Labor Relations Division in the Regional Offices of the Department of Labor.15 Further, Section 2,
Rule II, Book V of the 1989 Revised Implementing Rules of the Labor Code (Implementing Rules)
provides that:

Section 2. Where to file application; procedure Any national labor organization or labor federation
or local union may file an application for registration with the Bureau or the Regional Office where
the applicants principal offices is located. The Bureau or the Regional Office shall immediately
process and approve or deny the application. In case of approval, the Bureau or the Regional Office
shall issue the registration certificate within thirty (30) calendar days from receipt of the application,
together with all the requirements for registration as hereinafter provided. 16

The Implementing Rules specifically Section 1, Rule III of Book V, as amended by Department Order
No. 9, thus:

SECTION 1. Where to file applications. The application for registration of any federation,
national or industry union or trade union center shall be filed with the Bureau. Where the application
is filed with the Regional Office, the same shall be immediately forwarded to the Bureau within forty-
eight (48) hours from filing thereof, together with all the documents supporting the registration.

The applications for registration of an independent union shall be filed with and acted upon by the
Regional Office where the applicants principal office is located .

xxxx

The DOLE issued Department Order No. 40-03, which took effect on March 15, 2003, further
amending Book V of the above implementing rules. The new implementing rules explicitly provide
that applications for registration of labor organizations shall be filed either with the Regional Office or
with the BLR.17

Even after the amendments, the rules did not divest the Regional Office and the BLR of their
jurisdiction over applications for registration by labor organizations. The amendments to the
implementing rules merely specified that when the application was filed with the Regional Office, the
application would be acted upon by the BLR.

The records in this case showed that APSOTEU was registered on March 1, 1991. Accordingly, the
law applicable at that time was Section 2, Rule II, Book V of the Implementing Rules, and not
Department Order No. 9 which took effect only on June 21, 1997. Thus, considering further that
APSOTEUs principal office is located in Diliman, Quezon City, and its registration was filed with the
NCR Regional Office, the certificate of registration is valid.

The petitioner misapplied Villar v. Inciong.18 In said case, there was no record in the BLR that Amigo
Employees Union was registered.19

Did the Court of Appeals err in its application of stare decisis when it upheld the Secretarys ruling
that APSOTEU is a legitimate labor organization and its personality cannot be assailed unless in an
independent action for cancellation of registration certificate?20

We think not.
Section 5, Rule V, Book V of the Implementing Rules states:

Section 5. Effect of registration The labor organization or workers association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of registration.
Such legal personality cannot thereafter be subject to collateral attack, but maybe questioned only in
an independent petition for cancellation in accordance with these Rules.21

Thus, APSOTEU is a legitimate labor organization and has authority to issue charter to its
affiliates.22 It may issue a local charter certificate to CSBTI-SU and correspondingly, CSBTI-SU is
legitimate.

Are ALU, a rank-and-file union and APSOTEU, a supervisory union one and the same because of
the commonalities between them? Are they commingled?

The petitioner contends that applying by analogy, the doctrine of piercing the veil of corporate fiction,
APSOTEU and ALU are the same federation. Private respondents disagree.

First, as earlier discoursed, once a labor union attains the status of a legitimate labor organization, it
continues as such until its certificate of registration is cancelled or revoked in an independent action
for cancellation.23 In addition, the legal personality of a labor organization cannot be collaterally
attacked.24 Thus, when the personality of the labor organization is questioned in the same manner
the veil of corporate fiction is pierced, the action partakes the nature of a collateral attack. Hence, in
the absence of any independent action for cancellation of registration against either APSOTEU or
ALU, and unless and until their registrations are cancelled, each continues to possess a separate
legal personality. The CSBTI-RFU and CSBTI-SU are therefore affiliated with distinct and separate
federations, despite the commonalities of APSOTEU and ALU.

Under the rules implementing the Labor Code, a chartered local union acquires legal personality
through the charter certificate issued by a duly registered federation or national union, and reported
to the Regional Office in accordance with the rules implementing the Labor Code.25 A local union
does not owe its existence to the federation with which it is affiliated. It is a separate and distinct
voluntary association owing its creation to the will of its members. Mere affiliation does not divest the
local union of its own personality, neither does it give the mother federation the license to act
independently of the local union. It only gives rise to a contract of agency, where the former acts in
representation of the latter.26 Hence, local unions are considered principals while the federation is
deemed to be merely their agent.27 As such principals, the unions are entitled to exercise the rights
and privileges of a legitimate labor organization, including the right to seek certification as the sole
and exclusive bargaining agent in the appropriate employer unit. 1w phi1

A word of caution though, under Article 245 of the Labor Code,28 supervisory employees are not
eligible for membership in a labor union of rank-and-file employees. The supervisory employees are
allowed to form their own union but they are not allowed to join the rank-and-file union because of
potential conflicts of interest.29 Further, to avoid a situation where supervisors would merge with the
rank-and-file or where the supervisors labor union would represent conflicting interests, a local
supervisors union should not be allowed to affiliate with the national federation of unions of rank-
and-file employees where that federation actively participates in the union activity within the
company.30 Thus, the limitation is not confined to a case of supervisors wanting to join a rank-and-file
union. The prohibition extends to a supervisors local union applying for membership in a national
federation the members of which include local unions of rank-and-file employees.31 In De La Salle
University Medical Center and College of Medicine v. Laguesma, we reiterated the rule that for the
prohibition to apply, it is not enough that the supervisory union and the rank-and-file union are
affiliated with a single federation. In addition, the supervisors must have direct authority over the
rank-and-file employees.32

In the instant case, the national federations that exist as separate entities to which the rank-and-file
and supervisory unions are separately affiliated with, do have a common set of officers. In addition,
APSOTEU, the supervisory federation, actively participates in the CSBTI-SU while ALU, the rank-
and-file federation, actively participates in the CSBTI-RFU, giving occasion to possible conflicts of
interest among the common officers of the federation of rank-and-file and the federation of
supervisory unions. For as long as they are affiliated with the APSOTEU and ALU, the supervisory
and rank-and-file unions both do not meet the criteria to attain the status of legitimate labor
organizations, and thus could not separately petition for certification elections.
1wphi1

The purpose of affiliation of the local unions into a common enterprise is to increase the collective
bargaining power in respect of the terms and conditions of labor.33 When there is commingling of
officers of a rank-and-file union with a supervisory union, the constitutional policy on labor is
circumvented. Labor organizations should ensure the freedom of employees to organize themselves
for the purpose of leveling the bargaining process but also to ensure the freedom of workingmen and
to keep open the corridor of opportunity to enable them to do it for themselves.

WHEREFORE, the petition is GRANTED. The Court of Appeals Decision dated August 31, 2001, in
CA-G.R. SP No. 54128 and the Resolution dated February 5, 2003 are SET ASIDE. The decision of
the Med-Arbiter is hereby AFFIRMED.

SO ORDERED.

G.R. No. 96425 February 4, 1992

PROGRESSIVE DEVELOPMENT CORPORATION, petitioner,

vs.
THE HONORABLE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, MED-
ARBITER EDGARDO DELA CRUZ and PAMBANSANG KILUSAN NG PAGGAWA (KILUSAN)-
TUCP, respondents.

Beltran, Bacungan & Candoy for petitioner.

Jimenez & Associates co-counsel for petitioner.

GUTIERREZ, JR., J.:

The controversy in this case centers on the requirements before a local or chapter of a federation
may file a petition for certification election and be certified as the sole and exclusive bargaining
agent of the petitioner's employees.

Petitioner Progressive Development Corporation (PDC) filed this petition for certiorari to set aside
the following:

1) Resolution dated September 5, 1990, issued by respondent Med-Arbiter Edgardo dela Cruz,
directing the holding of the certification election among the regular rank-and-file employees of PDC:
2) Order dated October 12, 1990, issued by the respondent Secretary of Labor and Employment,
denying PDC's appeal; and

3) Order dated November 12, 1990, also issued by the respondent Secretary, denying the
petitioner's Motion for Reconsideration.

On June 19, 1990, respondent Pambansang Kilusan ng Paggawa (KILUSAN) -TUCP (hereinafter
referred to as Kilusan) filed with the Department of Labor and Employment (DOLE) a petition for
certification election among the rank-and-file employees of the petitioner alleging that it is a
legitimate labor federation and its local chapter, Progressive Development Employees Union, was
issued charter certificate No. 90-6-1-153. Kilusan claimed that there was no existing collective
bargaining agreement and that no other legitimate labor organization existed in the bargaining unit.

Petitioner PDC filed its motion to dismiss dated July 11, 1990 contending that the local union failed
to comply with Rule II Section 3, Book V of the Rules Implementing the Labor Code, as amended,
which requires the submission of: (a) the constitution and by-laws; (b) names, addresses and list of
officers and/or members; and (c) books of accounts.

On July 16 , 1990, respondent Kilusan submitted a rejoinder to PDC's motion to dismiss claiming
that it had submitted the necessary documentary requirements for registration, such as the
constitution and by-laws of the local union, and the list of officers/members with their addresses.
Kilusan further averred that no books of accounts could be submitted as the local union was only
recently organized.

In its "Supplemental Position Paper" dated September 3, 1990, the petitioner insisted that upon
verification with the Bureau of Labor Relations (BLR), it found that the alleged minutes of the
organizational meeting was unauthenticated, the list of members did not bear the corresponding
signatures of the purported members, and the constitution and by-laws did not bear the signature of
the members and was not duly subscribed. It argued that the private respondent therefore failed to
substantially comply with the registration requirements provided by the rules. Additionally, it prayed
that Med-Arbiter Edgardo dela Cruz inhibit himself from handling the case for the reason that he
allegedly had prejudged the same.

In his September 5, 1990 resolution, Med Arbiter dela Cruz held that there was substantial
compliance with the requirements for the formation of the chapter. He further stated that mere
issuance of the charter certificate by the federation was sufficient compliance with the rules.
Considering that the establishment was unorganized, he maintained that a certification election
should be conducted to resolve the question of representation.

Treating the motion for reconsideration filed by the PDC as an appeal to the Office of the Secretary,
Undersecretary Laguesma held that the same was merely a "reiteration of the issues already
ventilated in the proceedings before the Med-Arbiter, specifically, the matter involving the formal
organization of the chapter." (Rollo, p. 20) PDC's motion for reconsideration from the aforementioned
ruling was likewise denied. Hence, this petition.

In an order dated February 25, 1991, the Court resolved to issue a temporary restraining order
enjoining the public respondents from carrying out the assailed resolution and orders or from
proceeding with the certification election. (Rollo, pp. 37-39)

It is the petitioner's contention that a labor organization (such as the Kilusan) may not validly invest
the status of legitimacy upon a local or chapter through the mere expedient of issuing a charter
certificate and submitting such certificate to the BLR (Rollo, p. 85) Petitioner PDC posits that such
local or chapter must at the same time comply with the requirement of submission of duly
subscribed constitution and by-laws, list of officers and books of accounts. (Rollo, p. 35) PDC points
out that the constitution and by-laws and list of officers submitted were not duly subscribed.
Likewise, the petitioner claims that the mere filing of the aforementioned documents is insufficient;
that there must be due recognition or acknowledgment accorded to the local or chapter by BLR
through a certificate of registration or any communication emanating from it. (Rollo, p. 86)

The Solicitor General, in behalf of the public respondent, avers that there was a substantial
compliance with the requirements for the formation of a chapter. Moreover, he invokes Article 257 of
the Labor Code which mandates the automatic conduct by the Med-Arbiter of a certification election
in any establishment where there is no certified bargaining agreement.

The Court has repeatedly stressed that the holding of a certification election is based on a statutory
policy that cannot be circumvented. (Airtime Specialists, Inc. v. Ferrer-Calleja, 180 SCRA 749
[1989]; Belyca Corporation v. Ferrer-Calleja, 168 SCRA 184 [1988]; George and Peter Lines, Inc. v.
Associated Labor Unions, 134 SCRA 82 [1986]). The workers must be allowed to freely express
their choice in a determination where everything is open to their sound judgment and the possibility
of fraud and misrepresentation is eliminated.

But while Article 257 cited by the Solicitor General directs the automatic conduct of a certification
election in an unorganized establishment, it also requires that the petition for certification election
must be filed by a legitimate labor organization. Article 242 enumerates the exclusive rights of a
legitimate labor organization among which is the right to be certified as the exclusive representative
of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining.

Meanwhile, Article 212(h) defines a legitimate labor organization as "any labor organization duly
registered with the DOLE and includes any branch or local thereof." (Emphasis supplied) Rule I,
Section 1 (j), Book V of the Implementing Rules likewise defines a legitimate labor organization as
"any labor organization duly registered with the DOLE and includes any branch, local or affiliate
thereof. (Emphasis supplied)

The question that now arises is: when does a branch, local or affiliate of a federation become a
legitimate labor organization?

Ordinarily, a labor organization acquires legitimacy only upon registration with the BLR. Under Article
234 (Requirements of Registration):

Any applicant labor organization, association or group of unions or workers shall

acquire legal personality and shall be entitled to the rights and privileges granted by
law to legitimate labor organizations upon issuance of the certificate of registration
based on the following requirements:

(a) Fifty-pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meeting and the list of the workers
who participated in such meetings;

(c) The names of all its members comprising at least twenty 20% percent of all the
employees in the bargaining unit where it seek to operate;
 (d) If the applicant has been in existence for one or more years, copies , of its annual
financial reports; and

(e) Four copies of the constitution and by-laws of the applicant union, the minutes of
its adoption or ratification and the list of the members who participated in it.

And under Article 235 (Action on Application)

The Bureau shall act on all applications for registration within thirty (30) days from
filing.

All requisite documents and papers shall be certified under oath by the secretary or
the treasurer of the organization, as the case may be, and attested to by its
president.

Moreover, section 4 of Rule II, Book V of the Implementing Rules requires that the application should
be signed by at least twenty percent (20%) of the employees in the appropriate bargaining unit and
be accompanied by a sworn statement of the applicant union that there is no certified bargaining
agent or, where there is an existing collective bargaining agreement duly submitted to the DOLE,
that the application is filed during the last sixty (60) days of the agreement.

The respondent Kilusan questions the requirements as too stringent in their application but the
purpose of the law in prescribing these requisites must be underscored. Thus, in Philippine
Association of Free Labor Unions v. Secretary of Labor, 27 SCRA 40 (1969), the Court declared:

The theory to the effect that Section 23 of Republic Act No. 875 unduly curtails the
freedom of assembly and association guaranteed in the Bill of Rights is devoid of
factual basis. The registration prescribed in Paragraph (b) of said section is not a
limitation to the right of assembly or association, which may be exercised with or
without said registration. The latter is merely a condition sine qua nonfor the
acquisition of legal personality by the labor organizations, associations or unions and
the possession of the "rights and privileges granted by law to legitimate labor
organizations." The Constitution does not guarantee these rights and the privileges,
much less said personality, which are mere statutory creations, for the possession
and exercise of which registration is required to protect both labor and the public
against abuses, fraud or impostors who pose as organizers, although not truly
accredited agents of the union they purport to represent. Such requirement is a valid
exercise of the police power, because the activities in which labor organizations,
associations and unions of workers are engaged affect public interest, which should
be protected. Furthermore, the obligation to submit financial statements, as a
condition for the non-cancellation of a certificate of registration, is a reasonable
regulation for the benefit of the members of the organization, considering that the
same generally solicits funds or membership, as well as oftentimes collects, on
behalf of its members, huge amounts of money due to them or to the organization.
(Emphasis supplied)

But when an unregistered union becomes a branch, local or chapter of a federation, some of the
aforementioned requirements for registration are no longer required. The provisions governing union
affiliation are found in Rule II, Section 3, Book V of the Implementing Rules, the relevant portions of
which are cited below:
 Sec. 3. Union affiliation; direct membership with national union. An affiliate of a
labor federation or national union may be a local or chapter thereof or an
independently registered union.

a) The labor federation or national union concerned shall issue a charter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.

b) An independently registered union shall be considered an affiliate of a labor

federation or national union after submission to the Bureau of the contract or
agreement of affiliation within thirty (30) days after its execution.

xxx xxx xxx

e) The local or chapter of a labor federation or national union shall have and maintain
a constitution and by laws, set of officers and books and accounts. For reporting
purposes, the procedure governing the reporting of independently registered unions,
federations or national unions shall be observed.

Paragraph (a) refers to the local or chapter of a federation which did not undergo the rudiments of
registration while paragraph (b) refers to an independently registered union which affiliated with a
federation. Implicit in the foregoing differentiation is the fact that a local or chapter need not be
independently registered. By force of law (in this case, Article 212[h]); such local or chapter becomes
a legitimate labor organization upon compliance with the aforementioned provisions of Section 3.

Thus, several requirements that are otherwise required for union registration are omitted, to wit:

(1) The requirement that the application for registration must be signed by at least 20% of the
employees in the appropriate bargaining unit;

2) The submission of officers' addresses, principal address of the labor organization, the minutes of
organizational meetings and the list of the workers who participated in such meetings;

3) The submission of the minutes of the adoption or ratification of the constitution and by the laws
and the list of the members who participated in it.

Undoubtedly, the intent of the law in imposing lesser requirements in the case of the branch or local
of a registered federation or national union is to encourage the affiliation of a local union with the
federation or national union in order to increase the local union's bargaining powers respecting terms
and conditions of labor.

The petitioner maintains that the documentary requirements prescribed in Section 3(c), namely: the
constitution and by-laws, set of officers and books of accounts, must follow the requirements of law.
Petitioner PDC calls for the similar application of the requirement for registration in Article 235 that
all requisite documents and papers be certified under oath by the secretary or the treasurer of the
organization and attested to by the president.

In the case at bar, the constitution and by-laws and list of officers submitted in the BLR, while
attested to by the chapter's president, were not certified under oath by the secretary. Does such
defect warrant the withholding of the status of legitimacy to the local or chapter?
In the case of union registration, the rationale for requiring that the submitted documents and papers
be certified under oath by the secretary or treasurer, as the case may be, and attested to by
president is apparent. The submission of the required documents (and payment of P50.00
registration fee) becomes the Bureau's basis for approval of the application for registration. Upon
approval, the labor union acquires legal personality and is entitled to all the rights and privileges
granted by law to a legitimate labor organization. The employer naturally needs assurance that the
union it is dealing with is a bona fide organization, one which has not submitted false statements or
misrepresentations to the Bureau. The inclusion of the certification and attestation requirements will
in a marked degree allay these apprehensions of management. Not only is the issuance of any false
statement and misrepresentation a ground for cancellation of registration (see Article 239 (a), (c) and
(d)); it is also a ground for a criminal charge of perjury.

The certification and attestation requirements are preventive measures against the commission of
fraud. They likewise afford a measure of protection to unsuspecting employees who may be lured
into joining unscrupulous or fly-by-night unions whose sole purpose is to control union funds or to
use the union for dubious ends.

In the case of the union affiliation with a federation, the documentary requirements are found in Rule
II, Section 3(e), Book V of the Implementing Rules, which we again quote as follows:

(c) The local chapter of a labor federation or national union shall have and maintain a
constitution and by-laws, set of officers and books of accounts. For reporting
purposes, the procedure governing the reporting of independently registered unions,
federations or national unions shall be observed.(Emphasis supplied)

Since the "procedure governing the reporting of independently registered unions" refers to the
certification and attestation requirements contained in Article 235, paragraph 2, it follows that the
constitution and by-laws, set of officers and books of accounts submitted by the local and chapter
must likewise comply with these requirements. The same rationale for requiring the submission of
duly subscribed documents upon union registration exists in the case of union affiliation. Moreover,
there is greater reason to exact compliance with the certification and attestation requirements
because, as previously mentioned, several requirements applicable to independent union
registration are no longer required in the case of formation of a local or chapter. The policy of the law
in conferring greater bargaining power upon labor unions must be balanced with the policy of
providing preventive measures against the commission of fraud.

A local or chapter therefore becomes a legitimate labor organization only upon submission of the
following to the BLR:

1) A charter certificate, within 30 days from its issuance by the labor federation or national union,
and

2) The constitution and by-laws, a statement on the set of officers, and the books of accounts all of
which are certified under oath by the secretary or treasurer, as the case may be, of such local or
chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does not become a
legitimate labor organization.

In the case at bar, the failure of the secretary of PDEU-Kilusan to certify the required
documents under oath is fatal to its acquisition of a legitimate status.
We observe that, as borne out by the facts in this case, the formation of a local or chapter becomes
a handy tool for the circumvention of union registration requirements. Absent the institution of
safeguards, it becomes a convenient device for a small group of employees to foist a not-so-
desirable federation or union on unsuspecting co-workers and pare the need for wholehearted
voluntariness which is basic to free unionism. The records show that on June 16, 1990, Kilusan met
with several employees of the petitioner. Excerpts of the "Minutes of the Organizational/General
Membership Meeting of Progressive Development Employees Union (PDEU) Kilusan," are quoted
below:

The meeting was formally called to order by Bro. Jose V. Parungao, KILUSAN
secretary for organization by explaining to the general membership the importance of
joining the union. He explained to the membership why they should join a union, and
briefly explained the ideology of the Pambansang Kilusan ng Paggawa-TUCP as a
democratically based organization and then read the proposed Constitution and By-
Laws, after which said Constitution and By-Laws was duly and unanimously ratified
after some clarification.

Bro. Jose Parungao was also unanimously voted by the group to act as the chairman
of the COMELEC in holding the organizational election of officers of the union.

Bro. Jose Parungao, officially opened the table for nomination of candidates after
which the election of officers followed by secret balloting and the following were the
duly elected officers. (Original Record, p. 25)

The foregoing shows that Kilusan took the initiative and encouraged the formation of a union which
automatically became its chapter. On June 18, 1990, Kilusan issued a charter certificate in favor of
PDEU-KILUSAN (Records, page 1). It can be seen that Kilusan was moving very fast.

On June 19, 1990, or just three days after the organizational meeting, Kilusan filed a petition for
certification election (Records, pages 2 and 3) accompanied by a copy each of the charter
certificate, constitution and by-laws and minutes of the organizational meeting. Had the local union
filed an application for registration, the petition for certification election could not have been
immediately filed. The applicant union must firstly comply with the "20% signature" requirement and
all the other requisites enumerated in Article 234. Moreover, since under Article 235 the BLR shall
act on any application for registration within thirty (30) days from its filing, the likelihood is remote
that, assuming the union complied with all the requirements, the application would be approved on
the same day it was filed.

We are not saying that the scheme used by the respondents is per se illegal for precisely, the law
allows such strategy. It is not this Court's function to augment the requirements prescribed by law in
order to make them wiser or to allow greater protection to the workers and even their employer. Our
only recourse is, as earlier discussed, to exact strict compliance with what the law provides as
requisites for local or chapter formation.

It may likewise be argued that it was Kilusan (the mother union) and not the local union which filed
the petition for certification election and, being a legitimate labor organization, Kilusan has the
personality to file such petition.

At this juncture, it is important to clarify the relationship between the mother union and the local
union. In the case of Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., 66 SCRA 512
[1975]), the Court held that the mother union, acting for and in behalf of its affiliate, had the status of
an agent while the local union remained the basic unit of the association, free to serve the common
interest of all its members subject only to the restraints imposed by the constitution and by-laws of
the association. Thus, where as in this case the petition for certification election was filed by the
federation which is merely an agent, the petition is deemed to be filed by the chapter, the principal,
which must be a legitimate labor organization. The chapter cannot merely rely on the legitimate
status of the mother union.

The Court's conclusion should not be misconstrued as impairing the local union's right to be certified
as the employees' bargaining agent in the petitioner's establishment. We are merely saying that the
local union must first comply with the statutory requirements in order to exercise this right. Big
federations and national unions of workers should take the lead in requiring their locals and chapters
to faithfully comply with the law and the rules instead of merely snapping union after union into their
folds in a furious bid with rival federations to get the most number of members.

WHEREFORE, the petition is GRANTED. The assailed resolution and orders of respondent Med-
Arbiter and Secretary of Labor and Employment, respectively, are hereby SET ASIDE. The
temporary restraining order dated February 25, 1991 is made permanent.

SO ORDERED.

G.R. No. 123426 March 10, 1999

NATIONAL FEDERATION OF LABOR (NFL), petitioner,

vs.
HON. BIENVENIDO E. LAGUESMA, UNDERSECRETARY OF THE DEPARTMENT OF LABOR
AND EMPLOYMENT, AND ALLIANCE OF NATIONALIST GENUINE LABOR ORGANIZATION-
KILUSANG MAYO UNO (ANGLO-KMU), respondents.

KAPUNAN, J.:

Before us is a petition for certiorari under Rule 65 assailing the Resolution in OS-A-7-142-93
(RO700-9412-RU-037) dated August 8, 1995 of Undersecretary Bienvenido E. Laguesma, by
authority of the Secretary of Labor and Employment, setting aside the Resolution of the Med-Arbiter
dated March 13, 1995.

The antecedents are summarized in the assailed Resolution of Undersecretary Laguesma as

follows:

Records show that on 27 December 1994, a petition for certification election among
the rank and file employees of Cebu Shipyard and Engineering Work, Inc. was filed
by the Alliance of Nationalist and Genuine Labor Organization (ANGLO-KMU),
alleging among others, that it is a legitimate labor organization; that respondent Cebu
Shipyard and Engineering Work, Inc. is a company engaged in the business of
shipbuilding and repair with more or less, four hundred (400) rank and file
employees; that the Nagkahiusang Mamumuo sa Baradero National Federation of
Labor is the incumbent bargaining agent of the rank and file employees of the
respondent company; that the petition is supported by more than twenty-five percent
(25%) of all the employees in the bargaining unit; that the petition is filed within the
sixty (60) day period prior to the expiry date of the collective bargaining agreement
(CBA) entered into by and between the Nagkahiusang Mamumuo sa Baradero-NFL
 and Cebu Shipyard Engineering Work, Inc. which is due to expire on 31 December
1994; and, that there is no bar to its bid to be certified as the sole and exclusive
bargaining agent of all the rank and file employees of the respondent company.

On 2 January 1995, the Med-Arbiter issued an Order, the pertinent portion of which reads as follows:

The petitioner is given five days from receipt of this Order to present proofs that it
has created a local in the appropriate bargaining unit where it seeks to operate as
the bargaining agent and that, relative thereto, it has submitted to the Bureau of
Labor Relations or the Industrial Relations Division of this Office the following: 1) A
charter certificate; 2) the constitution and by-laws, a statement on the set of officers,
and the books of accounts all of which are certified under oath by the Secretary or
Treasurer, as the case may be, of such local or chapter and attested to by its
President, OTHERWISE, this case will be dismissed.

SO ORDERED.

On 9 January 1995, forced-intervenor National Federation of Labor (NFL) moved for

the dismissal of the petition on grounds that petitioner has no legal personality to file
the present petition for certification election and that it failed to comply with the
twenty-five percent (25%) consent requirement. It averred among others, that settled
is the rule that when a petition for certification election is filed by the federation which
is merely an agent, the petition is deemed to be filed by the local/chapter, the
principal, which must be a legitimate labor organization; that for a local to be vested
with the status a legitimate labor organization, it must submit to the Bureau of Labor
Relations (BLR) or the Industrial Relations Division of the Regional Office of the
Department of Labor and Employment the following: a) charter certificate, indicating
the creation or establishment of a local or chapter; b) constitution and by-laws; c) set
of officers, and d) books of accounts; that petitioner failed to submit the aforesaid
requirements necessary for its acquisition of legal personality; that compliance with
the aforesaid requirements must be made at the time of the filing of the petition within
the freedom period; that the submission of the aforesaid requirements beyond the
freedom period will not operate to allow the defective petition to prosper; that
contrary to the allegation of the petitioner, the number of workers in the subject
bargaining unit is 486, twenty-five percent (25%) of which is 122; that the consent
signatures submitted by the petitioner is 120 which is below the required 25%
consent requirement; that of the 120 employees who allegedly supported the petition,
one (1) executed a certification stating that the signature, Margarito Cabalhug, does
not belong to him, 15 retracted, 9 of which were made before the filing of the petition
while 6 were made after the filing of the petition; and, that the remaining 104
signatures are way below the 25% consent requirement.

On 16 January 1995, forced-intervenor filed an Addendum/Supplement to its Motion

to Dismiss, together with the certification issued by the Regional Office No. VII, this
Department, attesting to the fact that the mandatory requirements necessary for the
petitioner to acquire the requisite legal personality were submitted only on 6 January
1995 and the certification issued by the BLR, this Department, stating that as of 11
January 1995, the ANGLO-Cebu Shipyard and Engineering Work has not been
reported as one of the affiliates of the Alliance of Nationalist and Genuine Labor
Organization (ANGLO). Forced intervenor alleged that it is clear from the said
certification that when the present petition was filed on 27 December 1994, petitioner
and its alleged local/chapter have no legal personality to file the same. It claimed that
 the fatal defect in the instant petition cannot be cured with the submission of the
requirements in question as the local/chapter may be accorded the status of a
legitimate labor organization only on 6 January 1995 which is after the freedom
period expired on 31 December 1994. Forced intervenor further claimed that the
documents submitted by the petitioner were procured thru misrepresentation, and
fraud, as there was no meeting on 13 November 1994 for the purpose of ratifying a
constitution and by-laws and there was no election of officers that actually took place.

On 15 February 1995, petitioner filed its opposition to the respondent's motion to

dismiss. It averred among others, that in compliance with the order of the Med-
Arbiter, it submitted to the Regional Office No. VII, this Department, the following
documents; charter certificate, constitution and by-laws; statement on the set of
officers and treasurer's affidavit in lieu of the books of accounts; that the submission
of the aforesaid document, as ordered, has cured whatever defect the petition may
have at the time of the filing of the petition, that at the time of the filing of petition, the
total number of rank and file employees in the respondent company was about 400
and that the petition was supported by 120 signatures which are more than the 25%
required by law; that granting without admitting that it was not able to secure the
signatures of at least 25% of the rank and file employees in the bargaining unit, the
Med-Arbiter is still empowered to order for the conduct of a certification election
precisely for the purpose of ascertaining which of the contending unions shall be the
exclusive bargaining agent pursuant to the ruling of the Supreme Court in the case
of California Manufacturing Corporation vs.Hon. Undersecretary of Labor, et al., G.R.
No. 97020, June 8, 1992.

On 20 February 1995, forced-intervenor filed its reply, reiterating all its arguments
and allegations contained in its previous pleadings. It stressed that petitioner is not a
legitimate labor organization at the time of the filing of the petition and that the
petitioner's submission of the mandatory requirements after the freedom period
would not cure the defect of the petition.

On 13 March 1995, the Med-Arbiter issued the assailed Resolution dismissing the
petition, after finding that the submission of the required documents evidencing the
due creation of a local was made after the lapse of the freedom period. 1

The Alliance of Nationalist Genuine Labor Organization-Kilusang Mayo Uno (ANGLO-KMU) filed an
appeal from the March 13, 1995 Med-Arbiter's resolution insisting that it is a legitimate labor
organization at the time of the filing of the petition for certification election, and claiming that
whatever defect the petition may have had was cured by the subsequent submission of the
mandatory requirements.

In a Resolution dated August 8, 1995, respondent Undersecretary Bienvenido E. Laguesma, by

authority of the Secretary of Labor and Employment, set aside the Med-Arbiter's resolution and
entered in lieu thereof a new order "finding petitioner [ANGLO-KMU] as having complied with the
requirements of registration at the time of filing of the petition and remanding the records of this case
to the Regional Office of origin . . . ." 2

The National Federation of Labor thus filed this special civil action for certiorari under Rule 65 of the
Rules of Court raising the following grounds:

A. RESOLUTION OF PUBLIC RESPONDENT HON.

BIENVENIDO E. LAGUESMA DATED 8 AUGUST
 1995 AND HIS ORDER DATED 14 SEPTEMBER
1995 WERE ISSUED IN DISREGARD OF EXISTING
LAWS AND JURISPRUDENCE; AND

B. GRAVELY ABUSED HIS DISCRETION IN

APPLYING THE RULING IN THE CASE OF FUR V.
LAGUESMA, G.R. NO. 109251, MAY 26, 1993, IN
THE PRESENT CASE.

We will not rule on the merits of the petition. Instead, we will take this opportunity to lay the rules on
the procedure for review of decisions or rulings of the Secretary of Labor and Employment under the
Labor Code and its Implementing Rules. (P.D. No. 442 as amended)

In St. Martin Funeral Homes v. National Labor Relations Commission and Bienvenido Aricayos, G.R.
No. 130866, September 16, 1998, the Court re-examined the mode of judicial review with respect to
decisions of the National Labor Relations Commission.

The course taken by decisions of the NLRC and those of the Secretary of Labor and Employment
are tangent, but all are within the umbra of the Labor Code of the Philippines and its implementing
rules. On this premise, we find that the very same rationale in St. Martin Funeral Homes
v. NLRC finds application here, leading ultimately to the same disposition as in that leading case.

We have always emphatically asserted our power to pass upon the decisions and discretionary acts
of the NLRC well as the Secretary of Labor in the face of the contention that no judicial review is
provided by the Labor Code. We stated in San Miguel Corporation v. Secretary of Labor 3 thus:

. . . It is generally understood that as to a administrative agencies exercising quasi-

judicial or legislative power there is an underlying power in the courts to scrutinize
the acts of such agencies on questions of law and jurisdiction even though no right of
review is given by statute (73 C.J.S. 506, note 56).

The purpose of judicial review is to keep the administrative agency within its
jurisdiction and protect substantial rights of parties affected by its decision (73 C.J.S.
507, Sec. 165). It is part of the system of checks and balances which restricts the
separation of powers and forestalls arbitrary and unjust adjudications.

Considering the above dictum and as affirmed by decisions of this Court, St. Martin Funeral Homes
v. NLRC succinctly pointed out, the remedy of an aggrieved party is to timely file a motion for
reconsideration as a precondition for any further or subsequent remedy, and then seasonably file a
special civil action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.

The propriety of Rule 65 as a remedy was highlighted in St. Martin Funeral Homes v. NLRC, where
the legislative history of the pertinent statutes on judicial review of cases decided under the Labor
Code was traced, leading to and supporting the thesis that "since appeals from the NLRC to the
Supreme Court were eliminated, the legislative intendment was that the special civil action
of certiorari was and still is the proper vehicle for judicial review of decision of the NLRC" 4 and
consequently "all references in the amended Section 9 of B.P. No. 129 to supposed appeals from
the NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to petitions
for certiorari under Rule 65."5

Proceeding therefrom and particularly considering that the special civil action of certiorari under Rule
65 is within the concurrent original jurisdiction of the Supreme Court and the Court of
Appeals, St. Martin Funeral Homes v. NLRC concluded and directed that all such petitions should be
initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of courts.

In the original rendering of the Labor Code, Art. 222 thereof provided that the decisions of the NLRC
are appealable to the Secretary of Labor on specified grounds. 6 The decisions of the Secretary of
Labor may be appealed to the President of the Philippines subject to such conditions or limitations
as the President may direct.

Thus under the state of the law then, this Court had ruled that original actions for certiorari and
prohibition filed with this Court against the decision of the Secretary of Labor passing upon the
decision of the NLRC were unavailing for mere error of judgment as there was a plain, speedy and
adequate remedy in the ordinary course of law, which was an appeal to the President. We said in
the 1975 case, Scott v. Inciong, 7quoting Nation Multi Service Labor Union v.Acgoaili:8 "It is also a
matter of significance that there was an appeal to the President. So it is explicitly provided by the
Decree. That was a remedy both adequate and appropriate. It was in line with the executive
determination, after the proclamation of martial law, to leave the solution of labor disputes as much
as possible to administrative agencies and correspondingly to limit judicial participation."9

Significantly, we also asserted in Scott v. Inciong that while appeal did not lie, the corrective power
of this Court by a writ of certiorari was available whenever a jurisdictional issue was raised or one of
grave abuse of discretion amounting to a lack or excess thereof, citing San Miguel Corporation v.
Secretary of Labor.10

P.D. No. 1367 11 amending certain provisions of the Labor Code eliminated appeals to the President,
but gave the President the power to assume jurisdiction over any cases which he considered
national interest cases. The subsequent P.D. No. 1391, 12 enacted "to insure speedy labor justice
and further stabilize industrial peace", further eliminated appeals from the NLRC to the Secretary of
Labor but the President still continued to exercise his power to assume jurisdiction over any cases
which he considered national interest
cases. 13

Though appeals from the NLRC to the Secretary of Labor were eliminated, presently there are
several instances in the Labor Code and its implementing and related rules where an appeal can be
filed with the Office of the Secretary of Labor or the Secretary of Labor issues a ruling, to wit:

(1) Under the Rules and Regulations Governing Recruitment and Placement
Agencies for Local Employment 14 dated June 5, 1997 superseding certain provisions
of Book I (Pre-Employment) of the implementing rules, the decision of the Regional
Director on complaints against agencies is appealable to the Secretary of Labor
within ten (10) working days from receipt of a copy of the order, on specified
grounds, whose decision shall be final and inappealable.

(2) Art. 128 of the Labor Code provides that an order issued by the duly authorized
representative of the Secretary of Labor in labor standards cases pursuant to his
visitorial and enforcement power under said article may be appealed to the Secretary
of Labor.

Sec. 2 in relation to Section 3 (a), Rule X, Book III (Conditions of Employment) of the
implementing rules gives the Regional Director the power to order and administer
compliance with the labor standards provisions of the Code and other labor
legislation. Section 4 gives the Secretary the power to review the order of the
Regional Director, and the Secretary's decision shall be final and executory.
Sec. 1, Rule IV (Appeals) of the Rules on the Disposition of Labor Standards Cases
in the Regional Offices dated September 16, 1987 15 provides that the order of the
Regional Director in labor standards cases shall be final and executory unless
appealed to the Secretary of Labor.

Sec. 5, Rule V (Execution) provides that the decisions, orders or resolutions of the
Secretary of Labor and Employment shall become final and executory after ten (10)
calendar days from receipt of the case records. The filing of a petition
for certiorari before the Supreme Court shall not stay the execution of the order or
decision unless the aggrieved party secures a temporary restraining order from the
Court within fifteen (15) calendar days from the date of finality of the order or
decision or posts a supersedeas bond.

Sec. 6 of Rule VI (Health and Safety Cases) provides that the Secretary of Labor at
his own initiative or upon the request of the employer and/or employee may review
the order of the Regional Director in occupational health and safety cases. The
Secretary's order shall be final and executory.

(2) Art. 236 provides that the decision of the Labor Relations Division in the regional
office denying an applicant labor organization, association or group of unions or
workers' application for registration may be appealed by the applicant union to the
Bureau of Labor Relations within ten (10) days from receipt of notice thereof.

Sec. 4, Rule V, Book V (Labor Relations), as amended by Department Order No. 9

dated May 1, 1997 16 provides that the decision of the Regional Office denying the
application for registration of a workers association whose place of operation is
confined to one regional jurisdiction, or the Bureau of Labor Relations denying the
registration of a federation, national or industry union or trade union center may be
appealed to the Bureau or the Secretary as the case may be who shall decide the
appeal within twenty (20) calendar days from receipt of the records of the case.

(3) Art. 238 provides that the certificate of registration of any legitimate organization
shall be canceled by the Bureau of Labor Relations if it has reason to believe, after
due hearing, that the said labor organization no longer meets one or more of the
requirements prescribed by law.

Sec. 4, Rule VIII, Book V provides that the decision of the Regional Office or the
Director of the Bureau of Labor Relations may be appealed within ten (10) days from
receipt thereof by the aggrieved party tothe Director of the Bureau or the Secretary of
Labor, as the case may be, whose decision shall be final and executory.

(4) Art. 259 provides that any party to a certification election may appeal the order or
results of the election as determined by the Med-Arbiter directly to the Secretary of
Labor who shall decide the same within fifteen (15) calendar days.

Sec. 12, Rule XI, Book V provides that the decision of the Med-Arbiter on the petition
for certification election may be appealed to the Secretary.

Sec. 15, Rule XI, Book V provides that the decision of the Secretary of Labor on an
appeal from the Med-Arbiter's decision on a petition for certification election shall be
final and executory. The implementation of the decision of the Secretary affirming the
 decision to conduct a certification election shall not be stayed unless restrained by
the appropriate court.

Sec. 15, Rule XII, Book V provides that the decision of the Med-Arbiter on the results
of the certification election may be appealed to the Secretary within ten (10) days
from receipt by the parties of a copy thereof, whose decision shall be final and
executory.

Sec. 7, Rule XVIII (Administration of Trade Union Funds and Actions Arising
Therefrom), Book V provides that the decision of the Bureau in complaints filed
directly with said office pertaining to administration of trade union funds may be
appealed to the Secretary of Labor within ten (10) days from receipt of the parties of
a copy thereof.

Sec. 1, Rule XXIV (Execution of Decisions, Awards, or Orders), Book V provides that
the decision of the Secretary of Labor shall be final and executory after ten (10)
calendar days from receipt thereof by the parties unless otherwise specifically
provided for in Book V.

(5) Art. 263 provides that the Secretary of Labor shall decide or resolve the labor
dispute over which he assumed jurisdiction within thirty (30) days from the date of the
assumption of jurisdiction. His decision shall be final and executory ten (10) calendar
days after receipt thereof by the parties.

From the foregoing we see that the Labor Code and its implementing and related rules generally do
not provide for any mode for reviewing the decision of the Secretary of Labor. It is further generally
provided that the decision of the Secretary of Labor shall be final and executory after ten (10) days
from notice. Yet, like decisions of the NLRC which under Art. 223 of the Labor Code become final
after ten (10) days, 17 decisions of the Secretary of Labor come to this Court by way of a petition
for certiorari even beyond the ten-day period provided in the Labor Code and the implementing rules
but within the reglementary period set for Rule 65 petitions under the 1997 Rules of Civil Procedure.
For example, in M. Ramirez Industries v. Secretary of Labor, 18 assailed was respondent's order
affirming the Regional Director's having taken cognizance of a case filed pursuant to his visitorial
powers under Art. 128 (a) of the Labor Code; in Samahang Manggagawa sa Permex v. Secretary of
Labor, 19 assailed was respondent's order setting aside the Med-Arbiter's dismissal a petition for
certification election; Samahan ng Manggagawa sa Pacific Plastic v. Laguesma, 20 assailed was
respondent's order affirming the Med-Arbiter's decision on the results of a certification election;
in Philtread Workers Union v. Confessor, 21 assailed was respondent's order issued under Art. 263
certifying a labor dispute to the NLRC for compulsory arbitration.

In two instances, however, there is specific mention of a remedy from the decision of the Secretary
of Labor, thus:

(1) Section 15, Rule XI, Book V of the amended implementing rules provides that the decision of the
Secretary of Labor on appeal from the Med-Arbiter's decision on a petition for certification election
shall be final and executory, but that the implementation of the Secretary's decision affirming the
Med-Arbiter's decision to conduct a certification election "shall not be stayed unless restrained by the
appropriate court."

(2) Section 5, Rule V (Execution) of the Rules on the Disposition of Labor Standards Cases in
Regional Offices provides that "the filing of a petition for certiorari before the Supreme Court shall
not stay the execution of the [appealed] order or decision unless the aggrieved party secures a
temporary restraining order from the Court."

We perceive no conflict with our pronouncements on the proper remedy which is Rule 65 and which
should be initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of
courts. Accordingly, we read "the appropriate court" in Section 15, Rule XI, Book V of the
Implementing Rules to refer to the Court of Appeals.

Sec. 5, Rule V of the Rules on the Disposition of Labor Standards Cases in Regional Offices
specifying the Supreme Court as the forum for filing the petition for certiorari is not infirm in like
manner or similarly as is the statute involved in Fabian v. Desierto.22 And Section 5 cannot be read to
mean that the petition for certiorari can only be filed exclusively and solely with this Court, as the
provision must invariably be read in relation to the pertinent laws on the concurrent original
jurisdiction of this Court and the Court of Appeals in Rule 65 petitions.

In fine, we find that it is procedurally feasible as well as practicable that petitions for certiorari under
Rule 65 against the decision of the Secretary of Labor rendered under the Labor Code and its
implementing and related rules be filed initially in the Court of Appeals. Paramount consideration is
strict observance of the doctrine on the hierarchy of the courts, emphasized in St. Martin Funeral
Homes v. NLRC, on "the judicial policy that this Court will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate courts or where exceptional and compelling
circumstances justify availment of a remedy within and calling for the exercise of our preliminary
jurisdiction." 23

WHEREFORE, in view of the foregoing, certiorari, together with all pertinent records REFERRED to
the Court of Appeals for disposition.

SO ORDERED.

G.R. No. 152356. August 16, 2005

SAN MIGUEL CORPORATION (MANDAUE PACKAGING PRODUCTS PLANTS), Petitioners,

vs.
MANDAUE PACKING PRODUCTS PLANTS-SAN PACKAGING PRODUCTS SAN MIGUEL
CORPORATION MONTHLIES RANK-AND-FILE UNION FFW (MPPP-SMPP-SMAMRFU-
FFW), Respondent.

DECISION

TINGA, J.:

The central question in this Petition for Review is on what date did respondent Mandaue
Packing Products Plants-San Miguel Packaging ProductsSan Miguel Corporation Monthlies Rank-
And-File UnionFFW acquire legal personality in accordance with the Implementing Rules of the
Labor Code. The matter is crucial since respondent filed a petition for certification election at a date
when, it is argued, it had yet to acquire the requisite legal personality. The Department of Labor and
Employment (DOLE) and the Court of Appeals both ruled that respondent had acquired legal
personality on the same day it filed the petition for certification election. The procedure employed by
the respondent did not strictly conform with the relevant provisions of law. But rather than insist on
an overly literal reading of the law that senselessly suffocates the constitutionally guaranteed right to
self-organization, we uphold the assailed decisions and the liberal spirit that animates them.
Antecedent Facts

The present petition assailed the Decision dated 7 June 2001 rendered by the Court of Appeals
Eighth Division1which in turn affirmed a Decision dated 22 Feburary 1999 by the DOLE
Undersecretary for Labor Relations, Rosalinda Dimapilis-Baldoz, ordering the immediate conduct of
a certification election among the petitioners rank-and-file employees, as prayed for by respondent.
The following facts are culled from the records.

On 15 June 1998, respondent, identifying itself as an affiliate of Federation of Free Workers (FFW),
filed a petition for certification election with the DOLE Regional Office No. VII. In the petition,
respondent stated that it sought to be certified and to represent the permanent rank-and-file monthly
paid employees of the petitioner.2 The following documents were attached to the petition: (1) a
Charter Certificate issued by FFW on 5 June 1998 certifying that respondent as of that date was duly
certified as a local or chapter of FFW; (2) a copy of the constitution of respondent prepared by its
Secretary, Noel T. Bathan and attested by its President, Wilfred V. Sagun; (3) a list of respondents
officers and their respective addresses, again prepared by Bathan and attested by Sagun; (4) a
certification signifying that respondent had just been organized and no amount had yet been
collected from its members, signed by respondents treasurer Chita D. Rodriguez and attested by
Sagun; and (5) a list of all the rank-and-file monthly paid employees of the Mandaue Packaging
Products Plants and Mandaue Glass Plant prepared by Bathan and attested by Sagun.3

The petition was assigned to Mediator-Arbiter Achilles V. Manit of the DOLE Regional Office No. VII,
and docketed as Case No. R0700-9806-RU-013.4

On 27 July 1998, petitioner filed a motion to dismiss the petition for certification election on the sole
ground that herein respondent is not listed or included in the roster of legitimate labor organizations
based on the certification issued by the Officer-In-Charge, Regional Director of the DOLE Regional
Office No. VII, Atty. Jesus B. Gabor, on 24 July 1998.

On 29 July 1998, respondent submitted to the Bureau of Labor Relations the same documents
earlier attached to its petition for certification. The accompanying letter, signed by respondents
president Sagun, stated that such documents were submitted in compliance with the requirements
for the creation of a local/chapter pursuant to the Labor Code and its Implementing Rules; and it was
hoped that the submissions would facilitate the listing of respondent under the roster of legitimate
labor organizations.5 On 3 August 1998, the Chief of Labor Relations Division of DOLE Regional
Office No. VII issued a Certificate of Creation of Local/Chapter No. ITD. I-ARFBT-058/98, certifying
that from 30 July 1998, respondent has acquired legal personality as a labor organization/workers
association, it having submitted all the required documents.6

Opting not to file a comment on the Motion to Dismiss,7 respondent instead filed a Position
Paper wherein it asserted that it had complied with all the necessary requirements for the conduct of
a certification election, and that the ground relied upon in the Motion to Dismiss was a mere
technicality.8

In turn, petitioner filed a Comment, wherein it reiterated that respondent was not a legitimate labor
organization at the time of the filing of the petition. Petitioner also propounded that contrary to
respondents objectives of establishing an organization representing rank-and-file employees, two of
respondents officers, namely Vice-President Emannuel L. Rosell and Secretary Bathan, were
actually supervisory employees. In support of this allegation, petitioner attached various documents
evidencing the designation of these two officers in supervisory roles, as well as their exercise of
various supervisory functions.9 Petitioner cited Article 245 of the Labor Code, which provides that
supervisory employees shall not be eligible for membership in a labor organization of the rank-and-
file employees.10

On 20 August 1998, petitioner filed a petition to cancel the union registration of respondent.
However, this petition was denied, and such denial was subsequently affirmed by the Court of
Appeals in a decision that has since become final.11

In the meantime, on 15 September 1998, Med-Arbiter Manit issued an Order dismissing

respondents petition for certification election. The sole ground relied upon for the dismissal was the
Med-Arbiters Opinion that as of the date of filing of the petition on 15 June 1998, respondent did not
have the legal personality to file the said petition for certification election.12 No discussion was
adduced on petitioners claims that some of respondents officers were actually supervisory
employees.

Respondent promptly appealed the 15 September 1998 Order to the DOLE. On 22 February 1999,
DOLE Undersecretary Rosalinda Dimapilis-Baldoz rendered a Decision reversing the Order.
Undersecretary Baldoz concluded that respondent acquired legal personality as early as 15 June
1998, the date it submitted the required documents, citing Section 3, Rule VI of the New Rules
Implementing the Labor Code (Implementing Rules) which deems that a local/chapter acquires legal
personality from the date of filing of the complete documentary requirements as mandated in the
Implementing Rules. The DOLE also ruled that the contention that two of respondents officers were
actually supervisors can be threshed out in the pre-election conferences where the list of qualified
voters is to be determined. The dispositive portion of the DOLE Decision stated:

WHEREFORE, the appeal is GRANTED. The order dated 15 September 1999 of the Med-Arbiter is
REVERSED and SET ASIDE. Accordingly, let the records of the case be remanded to the office of
origin for the immediate conduct of certification election, subject to the usual pre-election
conference, among the monthly-paid rank-and-file employees of the Mandaue Packaging Products
Plant San Miguel Corporation, with the following choices:

1. MANDAUE PACKAGING PRODUCT PLANT SAN MIGUEL PACKAGING PRODUCTS SAN

MIGUEL CORPORATION MONTHLIES RANK AND FILE UNIONFFW (MPPP-SMPP-
SMCMRFUFFW),

2. NO UNION.

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

SO DECIDED.13

These two conclusions of the DOLE were affirmed in the assailed Decision of the Court of Appeals.
It is now our task to review whether these conclusions are warranted under law and jurisprudence.
First, we shall discuss the aspect of respondents legal personality in filing the petition for
certification election.

First Issue: On the Acquisition of

Legal Personality by Respondent

Statutory Provisions for Registration Of

Local/Chapter of Federation or National Union

Before we proceed to evaluate the particular facts of this case, it would be useful to review the
statutory paradigm that governs the establishment and acquisition of legal personality by a
local/chapter of a labor organization. The applicable rules have undergone significant amendments
in the last decade, thus a recapitulation of the framework is in order.

The Labor Code defines a labor organization as any union or association of employees which exists
in whole or in part for the purpose of collective bargaining or of dealing with employers concerning
terms and conditions of employment,14 and a "legitimate labor organization" as any labor organization
duly registered with the DOLE, including any branch or local thereof.15 Only legitimate labor
organizations may file a petition for certification election.16

Article 234 of the Labor Code enumerates the requirements for registration of an applicant labor
organization, association, or group of unions or workers in order that such entity could acquire legal
personality and entitlement to the rights and privileges granted by law to legitimate labor
organizations. These include a registration fee of fifty pesos (50.00); a list of the names of the
members and officers, and copies of the constitution and by-laws of the applicant union.17

However, the Labor Code itself does not lay down the procedure for the registration of a local or
chapter of a labor organization. Such has been traditionally provided instead in the Implementing
Rules, particularly in Book V thereof. However, in the last decade or so, significant amendments
have been introduced to Book V, first by Department Order No. 9 which took effect on 21 June 1997,
and again by Department Order No. 40 dated 17 February 2003. The differences in the procedures
laid down in these various versions are significant. However, since the instant petition for certification
was filed in 1998, the Implementing Rules, as amended by Department Order No. 9, should govern
the resolution of this petition.18

Preliminarily, we should note that a less stringent procedure obtains in the registration of a local or
chapter than that of a labor organization. Undoubtedly, the intent of the law in imposing lesser
requirements in the case of a branch or local of a registered federation or national union is to
encourage the affiliation of a local union with a federation or national union in order to increase the
local union's bargaining powers respecting terms and conditions of labor.19This policy has remained
consistent despite the succeeding amendments to Book V of the Omnibus Implementing Rules, as
contained in Department Orders Nos. 9 and 40.

The case of Progressive Development Corp. v. Secretary of Labor,20 applying Section 3, Rule II, Book
V of the Implementing Rules, in force before 1997, ruled that "a local or chapter therefore becomes a
legitimate labor organization only upon submission of the following to the BLR: (1) a charter
certificate, within thirty (30) days from its issuance by the labor federation or national union; and (2)
The constitution and by-laws, a statement of the set of officers, and the books of accounts all of
which are certified under oath by the secretary or treasurer, as the case may be, of such local or
chapter, and attested to by its president."21 The submission by the local/chapter of duly certified
books of accounts as a prerequisite for registration of the local/chapter was dropped in Department
Order No. 9,22 a development noted by the Court in Pagpalain Haulers v. Hon. Trajano,23 wherein it
was held that the previous doctrines requiring the submission of books of accounts as a prerequisite
for the registration of a local/chapter "are already pass and therefore, no longer applicable."24

Department Order No. 40, now in effect, has eased the requirements by which a local/chapter may
acquire legal personality. Interestingly, Department Order No. 40 no longer uses the term
"local/chapter," utilizing instead "chartered local," which is defined as a "labor organization in the
private sector operating at the enterprise level that acquired legal personality through the issuance of
a charter certificate by a duly registered federation or national union, and reported to the Regional
Office."25 Clearly under the present rules, the first step to be undertaken in the creation of a chartered
local is the issuance of a charter certificate by the duly registered federation or national union. Said
federation or national union is then obligated to report to the Regional Office the creation of such
chartered local, attaching thereto the charter certificate it had earlier issued.26

But as stated earlier, it is Department Order No. 9 that governs in this case. Section 1, Rule VI
thereof prescribes the documentary requirements for the creation of a local/chapter. It states:

Section 1. Chartering and creation of a local chapter A duly registered federation or national union
may directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2)
copies of the following:

a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;

(b) The names of the local/chapter's officers, their addresses, and the principal office of the
local/chapter;

(c) The local/chapter's constitution and by-laws; provided that where the local/chapter's constitution
and by-laws is the same as that of the federation or national union, this fact shall be indicated
accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or Treasurer
of the local/chapter and attested by its President.

In contrast, an independent union seeking registration is further required under Dept. Order No. 90
to submit the number and names of the members, and annual financial reports.27

Section 3, Rule VI of Department Order No. 9 provides when the local/chapter acquires legal
personality.

Section 3. Acquisition of legal personality by local chapter. A local/chapter constituted in

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

It is evident based on this rule that the local/chapter acquires legal personality from the date of the
filing of the complete documentary requirements, and not from the issuance of a certification to such
effect by the Regional Office or Bureau. On the other hand, a labor organization is deemed to have
acquired legal personality only on the date of issuance of its certificate of registration,28 which takes
place only after the Bureau of Labor Relations or its Regional Offices has undertaken an evaluation
process lasting up until thirty (30) days, within which period it approves or denies the application.29 In
contrast, no such period of evaluation is provided in Department Order No. 9 for the application of a
local/chapter, and more importantly, under it such local/chapter is deemed to acquire legal
personality "from the date of filing" of the documents enumerated under Section 1, Rule VI, Book V.
Apart from promoting a policy of affiliation of local unions with national unions,30 there is a practical
reason for sanctioning a less onerous procedure for the registration of a local/chapter, as compared
to the national union. The local/chapter relies in part on the legal personality of the federation or
national union, which in turn, had already undergone evaluation and approval from the Bureau of
Legal Relations or Regional Office. In fact, a federation or national union is required, upon
registration, to establish proof of affiliation of at least ten (10) locals or chapters which are duly
recognized as the collective bargaining agent in the establishment or industry in which they operate;
and the names and addresses of the companies where the locals or chapters operate and the list of
all the members in each of the companies.31 Once the national union or federation acquires legal
personality upon the issuance of its certificate or registration,32 its legal personality cannot be subject
to collateral attack.33

The fact that the local/chapter acquires legal personality from the moment the complete
documentary requirements are submitted seems to imply that the duty of the Bureau or Regional
Office to register the local/chapter is merely ministerial. However, in Progressive
Development Corporation v. Laguesma,34 the Court, in ruling against a petition for certification filed by
a chapter, held that the mere submission of the documentary requirements does not render
ministerial the function of the Bureau of Labor Relations in according due recognition to the labor
organization.35Still, that case was decided before the enactment of Department Order No. 9,
including the aforestated Section 3. Should we consider the said 1997 amendments as having
obviated our characterization in Progressive of the Bureaus duty as non-ministerial?

Notwithstanding the amendments, it still is good policy to maintain that per Department Order No. 9,
the duty of the Bureau of Labor Relations to recognize the local/chapter upon the submission of the
documentary requirements is not ministerial, insofar as the Bureau is obliged to adjudge the
authenticity of the documents required to be submitted. For example, the Bureau is not mandated to
accept just any purported charter certificate matter how spurious it is in appearance. It is empowered
to ascertain whether the submitted charter certificate is genuine, and if finding that said certificate is
fake, deny recognition to the local/chapter.

However, in ascertaining whether or not to recognize and register the local/chapter, the Bureau or
Regional Office should not look beyond the authenticity and due execution of the documentary
requirements for the creation of the local/chapter as enumerated under Section 1, Rule VI, Book V of
Department Order No. 9. Since the proper submission of these documentary requirements is all that
is necessary to recognize a local/chapter, it is beyond the province of the Bureau or Regional Offices
to resort to other grounds as basis for denying legal recognition of the local/chapter. For example,
Department Order No. 9 does not require the local/chapter to submit the names of its members as a
condition precedent to its registration.36 It therefore would be improper to deny legal recognition to a
local/chapter owing to questions pertaining to its individual members since the local/chapter is not
even obliged to submit the names of its individual members prior to registration.

Certainly, when a local/chapter applies for registration, matters raised against the personality of the
federation or national union itself should not be acted upon by the Bureau or Regional Office, owing
to the preclusion of collateral attack. Instead, the proper matter for evaluation by the Bureau or
Regional Office should be limited to whether the local/chapter is indeed a duly created affiliate of the
national union or federation.

Parenthetically, under the present Implementing Rules as amended by Department Order No. 40, it
appears that the local/chapter (or now, "chartered local") acquires legal personality upon the
issuance of the charter certificate by the duly registered federation or national union.37 This might
signify that the creation of the chartered local is within the sole discretion of the federation or national
union and thus beyond the review or interference of the Bureau of Labor Relations or its Regional
Offices. However, Department Order No. 40 also requires that the federation or national union report
the creation of the chartered local to the Regional Office.

Acquisition by Respondent of Legal Personality

We now proceed to determine if and when the respondent acquired legal personality under the
procedure laid down by the rules then in effect, Department Order No. 9, that is.

At the onset, the arguments raised by petitioner on this point are plainly erroneous. Petitioner cites
the case of Toyota Motor Philippines v. Toyota Motor Philippines Corporation Labor Union,38 and the
purported holding therein that "[if] it is true that at the time of the filing of the petition, the said
registration certificate has not been approved yet, then, petitioner lacks the legal personality to file
the petition."39 However, an examination of the case actually reveals that the cited portion was lifted
from one of the antecedent rulings of the Med-Arbiter in that case which had not even been affirmed
or reinstated by the Court on review.40 Moreover, such pronouncement made prior to the enactment
of Department Order No. 9 squarely contradicts Section 3, Rule VI thereof, which provides that legal
personality of the local/chapter is vested upon the submission of the complete documentary
requirements.

It is also worth noting that petitioner union in Toyota was an independent labor union, and not a
local/chapter, and under Department Order No. 9, independent labor unions, unlike local/chapters,
acquire legal personality only upon issuance of the certificate of registration by the Bureau or
Regional Office. Still, petitioner cites in its favor Section 5, Rule V of Dept. Order No. 9, which states
that "the labor organization or workers association shall be deemed registered and vested with legal
personality on the date of issuance of its certificate of registration." Again, the citation is obviously
misplaced, as respondent herein is a local/chapter, the acquisition of its legal personality being
governed instead by Section 3, Rule VI.

It is thus very clear that the issuance of the certificate of registration by the Bureau or Regional
Office is not the operative act that vests legal personality upon a local/chapter under Department
Order No. 9. Such legal personality is acquired from the filing of the complete documentary
requirements enumerated in Section 1, Rule VI. Admittedly, the manner by which respondent was
deemed to have acquired legal personality by the DOLE and the Court of Appeals was not in strict
conformity with the provisions of Department Order No. 9. Nonetheless, are the deviations significant
enough for the Court to achieve a different conclusion from that made by the DOLE and the Court of
Appeals?

In regular order, it is the federation or national union, already in possession of legal personality,
which initiates the creation of the local/chapter. It issues a charter certificate indicating the creation
or establishment of the local/chapter. It then submits this charter certificate, along with the names of
the local/chapters officers, constitution and by-laws to the Regional Office or Bureau. It is the
submission of these documents, certified under oath by the Secretary or Treasurer of the
local/chapter and attested by the President, which vests legal personality in the local/chapter, which
is then free to file on its own a petition for certification election.

In this case, the federation in question, the FFW, did not submit any of these documentary
requirements to the Regional Office or Bureau. It did however issue a charter certificate to the
putative local/chapter (herein respondent). Respondent then submitted the charter certificate along
with the other documentary requirements to the Regional Office, but not for the specific purpose of
creating the local/chapter, but for filing the petition for certification election.
It could be properly said that at the exact moment respondent was filing the petition for certification,
it did not yet possess any legal personality, since the requisites for acquisition of legal personality
under Section 3, Rule VI of Department Order No. 9 had not yet been complied with. It could also be
discerned that the intention of the Labor Code and its Implementing Rules that only those labor
organizations that have acquired legal personality are capacitated to file petitions for certification
elections. Such is the general rule.

Yet there are peculiar circumstances in this case that allow the Court to rule that respondent
acquired the requisite legal personality at the same time it filed the petition for certification election.
In doing so, the Court acknowledges that the strict letter of the procedural rule was not complied
with. However, labor laws are generally construed liberally in favor of labor, especially if doing so
affirms the constitutionally guaranteed right to self-organization.

True enough, there was no attempt made by the national federation, or the local/chapter for that
matter, to submit the enumerated documentary requirements to the Regional Office or Bureau for
the specific purpose of creating the local/chapter. However, these same documents were submitted
by the local/chapter to the Regional Office as attachments to its petition for certification election.
Under Section 3, Rule VI of Department Order No. 9, it is the submission of these same documents
to the Regional Office or Bureau that operates to vest legal personality on the local/chapter.

Thus, in order to ascertain when respondent acquired legal personality, we only need to determine
on what date the Regional Office or Bureau received the complete documentary requirements
enumerated under Section 1, Rule VI of Department Order No. 9. There is no doubt that on 15 June
1998, or the date respondent filed its petition for certification election, attached thereto were
respondents constitution, the names and addresses of its officers, and the charter certificate issued
by the national union FFW. The first two of these documents were duly certified under oath by
respondents secretary Bathan and attested to by president Sagun.41

It may be noted though that respondent never submitted a separate by-laws, nor does it appear that
respondent ever intended to prepare a set thereof. Section 1(c), Rule VI, Book V of Department
Order No. 9 provides that the submission of both a constitution and a set of by-laws is required, or at
least an indication that the local/chapter is adopting the constitution and by-laws of the federation or
national union. A literal reading of the provision might indicate that the failure to submit a specific set
of by-laws is fatal to the recognition of the local/chapter. A more critical analysis of this requirement
though is in order, especially as it should apply to this petition.

By-laws has traditionally been defined as regulations, ordinances, rules or laws adopted by an
association or corporation or the like for its internal governance, including rules for routine matters
such as calling meetings and the like.42 The importance of by-laws to a labor organization cannot be
gainsaid. Without such provisions governing the internal governance of the organization, such as
rules on meetings and quorum requirements, there would be no apparent basis on how the union
could operate. Without a set of by-laws which provides how the local/chapter arrives at its decisions
or otherwise wields its attributes of legal personality, then every action of the local/chapter may be
put into legal controversy.

However, if those key by-law provisions on matters such as quorum requirements, meetings, or on
the internal governance of the local/chapter are themselves already provided for in the constitution,
then it would be feasible to overlook the requirement for by-laws. Indeed in such an event, to insist
on the submission of a separate document denominated as "By-Laws" would be an undue
technicality, as well as a redundancy.
An examination of respondents constitution reveals it sufficiently comprehensive in establishing the
necessary rules for its operation. Article IV establishes the requisites for membership in the
local/chapter. Articles V and VI name the various officers and what their respective functions are.
The procedure for election of these officers, including the necessary vote requirements, is provided
for in Article IX, while Article XV delineates the procedure for the impeachment of these officers.
Article VII establishes the standing committees of the local/chapter and how their members are
appointed. Article VIII lays down the rules for meetings of the union, including the notice and quorum
requirements thereof. Article X enumerates with particularity the rules for union dues, special
assessments, fines, and other payments. Article XII provides the general rule for quorum in meetings
of the Board of Directors and of the members of the local/chapter, and cites the applicability of the
Roberts Rules of Order43 in its meetings. And finally, Article XVI governs and institutes the requisites
for the amendment of the constitution.

Indeed, it is difficult to see in this case what a set of by-laws separate from the constitution for
respondent could provide that is not already provided for by the Constitution. These premises
considered, there is clearly no need for a separate set of by-laws to be submitted by respondent.

The Court likewise sees no impediment in deeming respondent as having acquired legal personality
as of 15 June 1998, the fact that it was the local/chapter itself, and not the FFW, which submitted the
documents required under Section 1, Rule VI of Department Order No. 9. The evident rationale why
the rule states that it is the federation or national union that submits said documents to the Bureau or
Regional Office is that the creation of the local/chapter is the sole prerogative of the federation or
national union, and not of any other entity. Certainly, a putative local/chapter cannot, without the
imprimatur of the federation or national union, claim affiliation with the larger unit or source its legal
personality therefrom.

In the ordinary course, it should have been FFW, and not respondent, which should have submitted
the subject documents to the Regional Office. Nonetheless, there is no good reason to deny legal
personality or defer its conferral to the local/chapter if it is evident at the onset that the federation or
national union itself has already through its own means established the local/chapter. In this case,
such is evidenced by the Charter Certificate dated 9 June 1998, issued by FFW, and attached to the
petition for certification election. The Charter Certificate expressly states that respondent has been
issued the said certificate "to operate as a local or chapter of the [FFW]". The Charter Certificate
expressly acknowledges FFWs intent to establish respondent as of 9 June 1998.44 This being the
case, we consider it permissible for respondent to have submitted the required documents itself to
the Regional Office, and proper that respondents legal personality be deemed existent as of 15
June 1998, the date the complete documents were submitted.

Second Issue: On the Alleged Presence

Of Supervisory Employees as

Officers of the Respondent

The second issue hinges on a point of some controversy and frequent discussion in recent years.
Petitioner claims error in the common pronouncement in the assailed decisions that the matter
concerning the two officers who are allegedly supervisory employees may be threshed out during
pre-election conferences. Petitioner cites the cases of Toyota Motors and Progressive Development
Corporation-Pizza Hut v. Ledesma45 wherein the Court ruled that the question of prohibited
membership of both supervisory and rank-and-file employees in the same union must be inquired
into anterior to the granting of an order allowing a certification election; and that a union composed
of both of these kinds of employees does not possess the requisite personality to file for recognition
as a legitimate labor organization. It should be noted though that in the more recent case
of Tagaytay Highlands International Golf Club v. Tagaytay Highlands Employees Union,46 the Court,
notwithstanding Toyota and Progressive, ruled that after a certificate of registration is issued to a
union, its legal personality cannot be subject to collateral attack, but questioned only in an
independent petition for cancellation.47

There is no need to apply any of the above cases at present because the question raised by
petitioner on this point is already settled law, as a result of the denial of the independent petition for
cancellation filed by petitioner against respondent on 20 August 1998. The ground relied upon
therein was the alleged fraud, misrepresentation and false statement in describing itself as a union
of rank and file employees when in fact, two of its officers, Emmanuel Rosell and Noel Bathan, were
occupying supervisory positions.48 Said petition was denied by the Regional Director, this action was
affirmed by the DOLE, the Court of Appeals, and the Supreme Court.49 The denial made by the Court
of Appeals and the Supreme Court may have been based on procedural grounds,50 but the prior
decisions of the Regional Director and the DOLE ruled squarely on the same issue now raised by
the petitioner. We quote from the Resolution of the DOLE dated 29 December 1998:

. . . . [The] substantive issue that is now before us is whether or not the inclusion of the two alleged
supervisory employees in appellee unions membership amounts to fraud, misrepresentation, or
false statement within the meaning of Article 239(a) and (c) of the Labor Code.

We rule in the negative.

Under the law, a managerial employee is "one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, layoff, recall, discharge,
assign or discipline employees." A supervisory employee is "one who, in the interest of the employer,
effectively recommends managerial actions if the exercise of such recommendatory authority is not
merely routinary or clerical in nature but requires the use of independent judgment." Finally, "all
employees not falling within the definition of managerial or supervisory employee are considered
rank-and-file employees". It is also well-settled that the actual functions of an employee, not merely
his job title, are determinative in classifying such employee as managerial, supervisory or rank and
file.

In the case of Emmanuel Rossell, appellants evidence shows that he undertakes the filling out of
evaluation reports on the performance of mechanics, which in turn are used as basis for
reclassification. Given a ready and standard form to accomplish, coupled with the nature of the
evaluation, it would appear that his functions are more routinary than recommendatory and hardly
leave room for independent judgment. In the case of Noel Bathan, appellants evidence does not
show his job title although it shows that his recommendations on disciplinary actions appear to have
carried some weight on higher management. On this limited point, he may qualify as a supervisory
employee within the meaning of the law. This may, however, be outweighed by his other functions
which are not specified in the evidence.

Assuming that Bathan is a supervisory employee, this does not prove the existence of fraud, false
statement or misrepresentation. Because good faith is presumed in all representations, an essential
element of fraud, false statement and misrepresentation in order for these to be actionable is intent
to mislead by the party making the representation. In this case, there is no proof to show that
Bathan, or appellee union for that matter, intended to mislead anyone. If this was appellee unions
intention, it would have refrained from using a more precise description of the organization instead of
declaring that the organization is composed of rank and file monthlies. Hence, the charge of fraud,
false statement or misrepresentation cannot be sustained.
Appellants reliance on the Toyota case must be tempered by the peculiar circumstances of the
case. Even assuming that Bathan, or Rossel for that matter, are supervisory employees,
the Toyota case cannot certainly be given an interpretation that emasculates the right to self-
organization and the promotion of free trade unionism. We take administrative notice of the realities
in union organizing, during which the organizers must take their chances, oftentimes unaware of the
fine distinctions between managerial, supervisory and rank and file employees. The grounds for
cancellation of union registration are not meant to be applied automatically, but indeed with utmost
discretion. Where a remedy short of cancellation is available, that remedy should be preferred. In
this case, no party will be prejudiced if Bathan were to be excluded from membership in the union.
The vacancy he will thus create can then be easily filled up through the succession provision of
appellee unions constitution and by-laws. What is important is that there is an unmistakeable intent
of the members of appellee union to exercise their right to organize. We cannot impose rigorous
restraints on such right if we are to give meaning to the protection to labor and social justice clauses
of the Constitution.51

The above-cited pronouncement by Bureau of Labor Relations Director Benedicto Ernesto R.

Bitonio, Jr. in BLR-A-C-41-11-11-98 was affirmed by the Court of Appeals and the Supreme Court.
Hence, its pronouncement affirming, notwithstanding the questions on the employment status of
Rossell and Bathan, the legitimacy of the respondent, stands as a final ruling beyond the ambit of
review, thus warranting the Courts respect. There may be a difference between this case, which
involves a petition for certification election, and the other case, which concerns a petition for
cancellation. However, petitioner opposes the petition for certification election on the ground of the
illegitimacy of respondent, owing to the alleged supervisory nature of the duties of Rossell and
Bathan. That matter has already been settled in the final disposition of the petition for cancellation,
and thus cannot be unsettled by reason of this present petition.

Effect of Respondents Manifestation

Of Subsequent Developments

A final note. In its Memorandum, petitioner alleges that the bargaining unit that respondent sought to
represent is no longer the same because of the dynamic nature of petitioners business, a lot of
changes having occurred in the work environment, and that four of respondents officers are no
longer connected with petitioner.52 Assuming that these manifestations are true, they have no effect
on the Courts ruling that a certification election should be immediately conducted with respondent
as one of the available choices. Petitioners bare manifestations adduce no reason why the
certification election should not be conducted forthwith. If there are matters that have arisen since
the filing of the petition that serve to delay or cancel the election, these can be threshed out during
the pre-election conferences. Neither is the fact that some of respondents officers have since
resigned from petitioner of any moment. The local/chapter retains a separate legal personality from
that of its officers or members that remains viable notwithstanding any turnover in its officers or
members.

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.

G.R. No. 131374 January 26, 2000

ABBOTT LABORATORIES PHILIPPINES, INC., petitioner,

vs.
ABBOTT LABORATORIES EMPLOYEES UNION, MR. CRESENCIANO TRAJANO, in his
capacity as Acting Secretary of The Department Labor and of Employment and MR.
BENEDICTO ERNESTO BITONIO, JR., in his capacity as Director IV of the Bureau of Labor
Relations, respondents.

DAVIDE, JR., C.J.:

This special civil action for certiorari mandamus assails the action of the then Acting Secretary of
Labor and Employment Creseciano B. Trajano contained in its letter dated 19 September
1997,1 informing petitioner Abbott Laboratories Philippines, Inc. (hereafter ABBOTT), thru its counsel
that the Office of the Secretary of Labor cannot act on ABBOTT's appeal from the decision of 31
March 19972 and the Order of 9 July 19973 of the Bureau of Labor Relations, for lack of appellate
jurisdiction.

ABBOTT is a corporation engaged in the manufacture and distribution of pharmaceutical drugs. On

22 February 1996,4 the Abbott Laboratories Employees Union (hereafter ALEU) represented by its
president, Alvin B. Buerano, filed an application for union registration in the Department of Labor and
Employment. ALEU alleged in the application that it is a labor organization with members consisting
of 30 rank-and-file employees in the manufacturing unit of ABBOTT and that there was no certified
bargaining agent in the unit it sought to represent, namely, the manufacturing unit.

On 28 February 1996,5 application was approved by the Bureau of Labor Relations, which in due
course issued Certificate of Registration No. NCR-UR-2-1638-96. Consequently, ALEU became a
legitimate labor organization.

On 2 April 1996,6 ABBOTT filed a petition for cancellation of the Certificate of Registration No. NCR-
UR-2-1638-96 in the Regional Office of the Bureau of Labor Relations. This case was docketed as
Case No. OD-M-9604-006. ABBOTT assailed the certificate of registration since ALEU's application
was not signed by at least 20% of the total 286 rank-and-file employees of the entire employer unit;
and that it omitted to submit copies of its books of account.

On 21 June 1996,7 the Regional Director of the Bureau of Labor Relations decreed the cancellation
of ALEU's registration certificate No. NCR-UR-11-1585-95.8 In its decision, the Regional Director
adopted the 13 June 19969findings and recommendations of the Med-Arbiter. It ruled that the union
has failed to show that the rank-and-file employees in the manufacturing unit of ABBOTT were
bound by a common interest to justify the formation of a bargaining unit separate from those
belonging to the sales and office staff units. There was, therefore, sufficient reason to assume that
the entire membership of the rank-and-file consisting of 286 employees or the "employer unit" make
up the appropriate bargaining unit. However, it was clear on the record that the union's application
for registration was supported by 30 signatures of its members or barely constituting 10% of the
entire rank-and-file employees of ABBOTT. Thus the Regional Director found that for ALEU's failure
to satisfy the requirements of union registration under Article 234 of the Labor Code, the cancellation
of its certificate of registration was in order.

Forthwith, on 19 August 1996,10 ALEU appealed said cancellation to the Office of the Secretary of
Labor and Employment, which referred the same to the Director of the Bureau of the Labor
Relations. The said appeal was docketed as Case No. BLR-A-10-25-96.

On 31 March 1997,11 The Bureau of Labor Relations rendered judgment reversing the 21 June 1996
decision of the Regional Director, thus:

WHEREFORE, the appeal is GRANTED and the decision of the Regional Director dated 21
June 1996 is hereby REVERSED. Abbott Laboratories Employees Union shall remain in the
 roster of legitimate labor organizations, with all the rights, privilege and obligations
appurtenant thereto.12

It gave the following reasons to justify the reversal: (1) Article 234 of the Labor Code does not
require an applicant union to show proof of the "desirability of more than one bargaining unit within
an employer unit," and the absence of such proof is not a ground for the cancellation of a union's
registration pursuant to Article 239 of Book V, Rule II of the implementing rules of the Labor Code;
(2) the issue pertaining to the appropriateness of a bargaining unit cannot be raised in a cancellation
proceeding but may be treshed out in the exclusion-inclusion process during a certification election;
and (3) the "one-bargaining unit, one-employer unit policy" must not be interpreted in a manner that
shall derogate the right of the employees to self-organization and freedom of association as
guaranteed by Article III, Section 8 of the 1987 Constitution and Article II of the International Labor
Organization's Convention No. 87.

Its motion to reconsider the 31 March 1997 decision of the Bureau of Labor Relations having been
denied for lack of merit in the Order13 of 9 July 1997, ABBOTT appealed to the Secretary of Labor
and Employment. However, in its letter dated 19 September 1997,14 addressed to ABBOTT's
counsel, the Secretary of Labor and Employment refused to act on ABBOTT's appeal on the ground
that it has no jurisdiction to review the decision of the Bureau of Labor Relations on appeals in
cancellation cases emanating from the Regional Offices. The decision of the Bureau of Labor
Relations therein is final and executory under Section 4, Rule III, Book V of the Rules and
Regulations Implementing the Labor Code, as amended by Department Order No. 09, s. of 1997.
Finally, the Secretary stated:

It has always been the policy of this Office that pleadings denominated as appeal thereto
over decisions of the BLR in cancellation cases coming from the Regional offices are
referred back to the BLR, so that the same may be treated as motions for reconsideration
and disposed of accordingly. However, since your office has already filed a motion for
reconsideration with the BLR which has been denied in its Order dated 09 July 1997, your
recourse should have been a special civil action for certiorari with the Supreme Court.

In view of the foregoing, please be informed that the Office of the Secretary cannot act upon
your Appeal, except to cause the BLR to include it in the records of the case.

Hence, this petition. ABBOTT, premised its argument on the authority of the Secretary of Labor and
Employment to review the decision of the Bureau of Labor Relations and at the same time raised the
issue on the validity of ALEU's certificate of registration.

We find no merit in this petition.

At the outset, it is worthy to note that the present petition assails only the letter of the then Secretary
of Labor & Employment refusing to take cognizance of ABBOTT's appeal for lack of appellate
jurisdiction. Hence, in the resolution of the present petition, it is just appropriate to limit the issue on
the power of the Secretary of Labor and Employment to review the decisions of the Bureau of Labor
Relations rendered in the exercise of its appellate jurisdiction over decisions of the Regional Director
in cases involving cancellations of certificates of registration of labor unions. The issue anent the
validity of ALEU's certificate of registration is subject of the Bureau of Labor Relations decision dated
31 March 1997. However, said decision is not being assailed in the present petition; hence, we are
not at liberty to review the same. 1wphi1.nt

Contrary to ABBOTT's contention, there has been no grave abuse of discretion on the part of the
Secretary of Labor and Employment. Its refusal to take cognizance of ALEU's appeal from the
decision of the Bureau of Labor Relations is in accordance with the provisions of Rule VIII, Book V of
the Omnibus Rules Implementing the Labor Code as amended by Department Order No. 09.15 The
rule governing petitions for cancellation of registration of any legitimate labor organization or worker
association, as it now stands, provides:

Sec. 1. Venue of Action. If the respondent to the petition is a local/chapter, affiliate, or a

workers' association with operations limited to one region, the petition shall be filed with the
Regional Office having jurisdiction over the place where the respondent principally operates.
Petitions filed against federations, national or industry unions, trade union centers, or
workers' associations operating in more than one regional jurisdiction, shall be filed with the
Bureau.

Sec. 3. Cancellation of registration; nature and grounds. Subject to the requirements of

notice and due process, the registration of any legitimate labor organization or worker's
association may be cancelled by the Bureau or the Regional Office upon the filing of an
independent petition for cancellation based on any of the following grounds:

(a) Failure to comply with any of the requirements prescribed under Articles 234, 237
and 238 of the Code;

(b) Violation of any of the provisions of Article 239 of the Code;

(b) Commission of any of the acts enumerated under Article 241 of the Code;
provided, that no petition for cancellation based on this ground may be granted
unless supported by at least thirty percent (30%) of all the members of the
respondent labor organization or workers' association.

Sec. 4. Action on the petition; appeals. The Regional or Bureau Director, as the case may
be, shall have thirty (30) days from submission of the case for resolution within which to
resolve the petition. The decision of the Regional or Bureau Director may be appealed to the
Bureau or the Secretary, as the case may be, within ten (10) days from receipt thereof by the
aggrieved party on the ground of grave abuse of discretion or any violation of these Rules.

The Bureau or the Secretary shall have fifteen (15) days from receipt of the records of the
case within which to decide the appeal. The decision of the Bureau or the Secretary shall be
final and executory.

Clearly, the Secretary of Labor and Employment has no jurisdiction to entertain the appeal of
ABBOTT. The appellate jurisdiction of the Secretary of Labor and Employment is limited only to a
review of cancellation proceedings decided by the Bureau of labor Relations in the exercise of its
exclusive and original jurisdiction. The Secretary of Labor and Employment has no jurisdiction over
decisions of the Bureau of Labor Relations rendered in the exercise of its appellate power to review
the decision of the Regional Director in a petition to cancel the union's certificate of registration, said
decisions being final and inappealable.16 We sustain the analysis and interpretation of the OSG on
this matter, to wit:

From the foregoing, the Office of the Secretary correctly maintained that it cannot take
cognizance of petitioner's appeal from the decision of BLR Director Bitonio. Sections 7 to
917 [of the implementing Rules of the Labor Code] thus provide for two situations:

(1) The first situation involves a petition for cancellation of union registration which is
filed with a Regional Office. A decision of a Regional Office cancelling a union's
 certificate of registration may be appealed to the BLR whose decision on the matter
shall be final and inappealable.

(2) The second situation involves a petition for cancellation of certificate of union
registration which is filed directly with the BLR. A decision of the BLR cancelling a
union's certificate of registration may be appealed to the Secretary of Labor whose
decision on the mater shall be final and inappealable.

Respondent Acting Labor Secretary's ruling that the BLR's decision upholding the validity
of respondent union's certificate of registration is final and inappealable is thus in
accordance with aforequoted Omnibus Rules because the petition for cancellation of union
registration was filed by petitioner with a Regional Office, specifically, with the Regional
Office of the BLR, National Capital Region (vide pp. 1-2, Annex 2, Petition). The cancellation
proceedings initiated by petitioner before the Regional Office is covered by the first
situationcontemplated by Sections 7 to 9 of the Omnibus Rules. Hence, an appeal from the
decision of the Regional Office may be brought to the BLR whose decision on the matter is
final and inappealable.

In the instant case, upon the cancellation of respondent union's registration by the Regional
Office, respondent union incorrectly appealed said decision to the Office of the Secretary.
Nevertheless, this situation was immediately rectified when the Office of the Secretary motu
propio referred the appeal to the BLR. However, upon reversal by the BLR of the decision of
the Regional Office cancelling registration, petitioner should have immediately elevated the
BLR decision to the Supreme Court in a special civil action for certiorariunder Rule 65 of the
Rules of Court.

Under Sections 3 and 4, Rule VIII of Book V of the Rules and Regulations implementing the
Labor Code, as amended by Department Order No. 09, petitions for cancellation of union
registration may be filed with a Regional office, or directly, with the Bureau of Labor
Relations. Appeals from the decision of a Regional Director may be filed with the BLR
Director whose decision shall be final and executory. On the other hand, appeals from the
decisions of the BLR may be filed with the Secretary of Labor whose decision shall be final
and executory.

Thus, under Sections 7 to 9 of the Omnibus Rules and under Sections 3 and 4 of the
Implementing Rules (as amended by Department Order No. 09), the finality of the BLR
decision is dependent on whether or not the petition for cancellation was filed with the BLR
directly. Under said Rules, if the petition for cancellation is directly filed with the BLR, its
decision cancelling union registration is not yet final and executory as it may still be appealed
to the Office of the Secretary. However, if the petition for cancellation was filed with the
Regional Office, the decision of the BLR resolving an appeal of the decision of said Regional
Office is final and executory.18

It is clear then that the Secretary of Labor and Employment did not commit grave abuse of discretion
in not acting an ABBOTT's appeal. The decisions of the Bureau of Labor Relations on cases brought
before it on appeal from the Regional Director are final and executory. Hence, the remedy of the
aggrieved party is to seasonably avail of the special civil action of certiorari under Rule 65 of the
Rules of Court.19

Even if we relaxed the rule and consider the present petition as a petition for certiorari not only of the
letter of the Secretary of Labor and Employment but also of the decision of the Bureau of the Labor
Relations which overruled the order of cancellation of ALEU's certificate registration, the same would
still be dismissable for being time-barred. Under Sec. 4 of Rule 65 of the 1997 Revised Rules of
Court the special civil action for certiorari should be instituted within a period of sixty (60) days from
notice of the judgment, order or resolution sought to be assailed. ABBOTT received the decision of
the Bureau of Labor Relations on 14 April 1997 and the order denying its motion for reconsideration
of the said decision on 16 July 1997. The present petition was only filed on 28 November 1997, after
the lapse of more than four months. Thus, for failure to avail of the correct remedy within the period
provided by law, the decision of the Bureau of Labor Relations has become final and executory.

WHEREFORE, the petition is DENIED. The challenged order in BLR-A-10-25-96 of the Secretary of
Labor and Employment embodied in its 19 September letter is hereby AFFIRMED.

SO ORDERED.

G.R. No. 135806 August 8, 2002

TOYOTA MOTORS PHILIPPINES CORPORATION LABOR UNION, petitioner,

vs.
TOYOTA MOTOR PHILIPPINES CORPORATION EMPLOYEES AND WORKERS UNION,
TOYOTA MOTOR PHILIPPINES CORPORATION, and THE SECRETARY OF LABOR AND
EMPLOYMENT, respondents.

BELLOSILLO, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court, as amended, seeking to set aside
the Resolution of 5 June 1998 and the Order of 10 August 1998 both issued by respondent
Secretary of Labor and Employment in OS-A-5-58-98 (NCR-OD-M-9704-0311) which affirmed the
decision of the Med-Arbiter dated 24 February 1998. The assailed decision dismissed both
the Petition for Certification Election filed by respondent Toyota Motor Philippines Corp. Employees
and Workers Union (TMPCEWU) and the Petition-in-Intervention filed by petitioner Toyota Motor
Philippines Corp. Labor Union (TMPCLU). 1wphi1.nt

On 24 April 1997 respondent TMPCEWU filed a Petition for Certification Election before the Med-
Arbitration Unit of the DOLE-National Capital Region (DOLE-NCR) seeking to represent the rank-
and-file employees of the manufacturing division from Levels 1 to 4 of Toyota Motor Philippines
Corp. (TMPC).

On 13 May 1997, while the case was pending hearing, petitioner TMPCLU claiming to be the
legitimate labor organization, filed a Motion to Intervene with Opposition to the Certification
Election praying that it be allowed to intervene and, thereafter, the petition by TMPCEWU be denied
for lack of merit. It claimed that the petition was premature due to an earlier resolution by the
Secretary of Labor ordering the conduct of a certification election among the rank-and-file
employees of TMPC represented by petitioner which was the subject of certiorari proceedings before
the Supreme Court and still awaiting final resolution at the time; and, that the collective bargaining
unit which respondent TMPCEWU sought to represent violated the "single or employer" unit policy
since it excluded the rank-and-file employees in the other divisions and departments in respondent
TMPC.1

In its motion petitioner TMPCLU outlined the antecedent events prior to the TMPCEWU's filing of
its Petition for Certification Election on 24 April 1997 thus -
 1. On 26 November 1992 it (TMPCLU) filed a petition for certification election before Med-
Arbiter Paterno D. Adap, docketed as NCR-OD-M-9211-053;

2. On 8 March 1993 Med-Arbiter Adap dismissed TMPCLU's petition on the ground that the
labor organization's membership was composed of supervisory and rank-and-file employees
in violation of Art. 245 of the Labor Code, and that at the time of the filing of its petition,
TMCPLU had not even acquired legal personality yet;

3. On appeal, the Secretary of Labor, in a Resolution dated 9 November 1993 signed by

Undersecretary Bienvenido E. Laguesma, set aside the Med-Arbiter's Order and directed the
holding of a certification election among the regular rank-and-file employees of TMPC. In
setting aside the assailed order, the Office of the Secretary argued that:

Contrary to the allegation of herein respondent-appellee, petitioner-appellant was

already a legitimate labor organization at the time of the filing of the petition on 26
November 1992. Records show that on 24 November 1992 or two (2) days before
the filing of the said petition, it was issued a certificate of registration.

4. Acting on TMPC's motion for reconsideration the Secretary of Labor set aside his earlier
resolution and ordered the remand of the case to the Med-Arbiter concluding that the issues
raised by TMPC both on appeal and its motion for reconsideration were factual issues
requiring further hearing and production of evidence;

5. Pursuant to the order above-mentioned, the Med-Arbiter on 28 September 1994 dismissed

TMPCLU's petition for certification election for failure of petitioner to acquire legal personality
at the time of the filing of the said petition;

6. The motion for reconsideration filed by TMPCLU before the Secretary of Labor, which was
treated as an appeal from the order of the Med-Arbiter dated 28 September 1994, was
granted and the said order was set aside. In lieu thereof, a new order was issued giving due
course to the petition and directing the conduct of a certification election among the rank-
and-file employees of TMPC;

7. The Secretary of Labor, in his order dated 14 July 1995, denied for lack of merit the
motion for reconsideration filed by TMPC;

8. On 20 April 1996 the Secretary of Labor issued a new resolution directing the conduct of a
certification election among the rank-and-file employees of TMPC; and

9. TMPC lodged a special civil action for certiorari before the Supreme Court assailing the 20
April 1996 Resolution of the Secretary of Labor; and on 19 February 1997, the Supreme
Court2 set aside the assailed Resolution of the Secretary of Labor and reinstated the Order
of the Med-Arbiter dated 28 September 1994. In its decision, the Supreme Court ruled that
since TMPCLU's membership list contained the names of at least twenty-seven (27)
supervisory employees in Level Five positions, "the union could not, prior to purging itself of
its supervisory employee members, attain the status of a legitimate labor organization. Not
being one, it cannot possess the requisite personality to file a petition for certification
election."

At the time respondent TMPCEWU filed its Petition for Certification Election on 24 April 1997 the
decision of the Supreme Court had not ripened into a final and executory judgment. Thus petitioner
invoked as among the grounds for opposition thereto in its Motion to Intervene with Opposition to the
Petition for Certification Election that the "pending proceeding before the Supreme Court may be
said to be a pre-judicial question which should be resolved first before the instant petition can
prosper."3

TMPC also filed a similar comment on 9 June 1997. Hence, on 2 July 1997, the Med-Arbiter ordered
the provisional dismissal of TMPCEWU's Petition for Certification Election pending a final ruling by
the Supreme Court on the Petition for Certification Election.

On 3 June 1997 the decision of the Supreme Court dated 19 February 1997 became final and
executory.

In view of respondent TMPCEWU's revival of its Petition for Certification Election, petitioner also filed
on 30 October 1997 its Petition-in-Intervention4 alleging that (a) it was representing only the rank-
and-file employees; (b) it enjoys the support of the regular rank-and-file workers at large in TMPC,
an unorganized establishment, and not only among the rank-and-file employees in the
manufacturing division thereof; (c) while respondent TMPCEWU professed itself as a legitimate
labor organization, there was serious doubt on such claim inasmuch as there was a pending petition
for the cancellation of its certification of registration on the ground of fraud; (d) respondent
TMPCEWU's representation of the rank-and-file employees, Levels 1 to 4, within the manufacturing
division only to the exclusion of those in the other departments and divisions violated the "single or
employer" unit policy; and, (e) the establishment of the proposed bargaining unit in the
manufacturing division composed of employees from Levels 1 to 4, should respondent's petition be
allowed, would induce the proliferation of unions in a single employer.5

On 24 February 1998 the Med-Arbiter rendered a decision dismissing for lack of merit
TMPCEWU's Petition for Certification Election, since it failed to include all rank-and-file employees
from Levels 1 to 4 in other departments of TMPC in violation of the "one-union in one-company"
policy and likewise dismissing TMPCLU's Petition-in-Intervention for lack of legal personality.6 Anent
the issue on whether TMPCLU has the legal personality to file the Petition-in-Intervention, the Med-
Arbiter explained thus -

The uncontroverted fact in this case is that at the time intervenor TMPCLU filed its
application for registration and subsequently thereafter was issued a certificate of registration
on November 24, 1992 (Annex "A," Intervenor's petition-in-intervention), its union
membership is (sic) composed of supervisory and rank-and-file employees.

From this we could infer that the registration certificate issued by the Department of Labor
and Employment is void ab initio because at the time of the issuance the constitution of
intervenor union TMPCLU is (sic) a mixture of supervisory and rank-and-file employees as
per finding of fact of Med-Arbiter Paterno Adap in his Order dated March 8, 1993 (Annex "A,"
respondent's Answer to Petition-in-Intervention).

On 14 March 1998, dissatisfied with the unfavorable decision, petitioner appealed to the Secretary of
Labor contending that contrary to the finding of the Med-Arbiter it had the legal personality to
intervene in the certification election proceedings as shown by its Certificate of Registration No.
NCR-UR-11-996-92.

In a Resolution dated 5 June 1998, the Secretary of Labor justified his affirmance of the Med-
Arbiter's decision in this wise -7

On the first ground raised on appeal, it is true that the employer is a mere by-stander during
the conduct of a certification election. Prior to the election, however, the employer is not
 precluded from ascertaining the legitimacy of the union in order that it can be assured that
the union it will be dealing with is a duly registered labor organization which legally
represents the bargaining unit sought to be represented. There is therefore no error in
allowing the employer to question the status of appellant as in the case at bar.

On the second issue, it had earlier been finally ruled by the Supreme Court (G.R. No
121084) involving herein employer and appellant that since the bargaining unit of the rank-in-
file which TMPCLU is seeking to represent is a mixture of supervisory employees which is
prohibited under Article 245 of the Labor Code, as amended, the union prior to purging itself
of supervisory employees-members, had not attained the status of a legitimate labor
organization. Appellant now simply asserts that it has purged its membership of supervisory
employees and therefore is now a legitimate labor organization of the rank-and-file
employees. Appellant has not however shown that it registered anew because admittedly
some of its officers are supervisory employees. The need to register anew is necessary and
the purging by itself of its officers who are holding supervisory position is imperative. One of
the requirements for registration is the submission of the list of officers. Under the
circumstances obtaining, appellant has not as yet attained the status of a legitimate labor
organization. It has therefore no legal authority to oppose the instant petition.

On 10 August 1998 the Secretary issued an Order denying petitioner's motion for reconsideration;
hence, petitioner now comes to us assailing the aforementioned Resolution and Order of the
Secretary of Labor arguing that -

First. At the time it filed its Petition-in-Intervention on 30 October 1997 it was clothed with legal
personality as a bona fide labor union. Petitioner contended that when it filed the Motion to Intervene
with Opposition to the Petition for Certification Election filed by TMPCEWU and its Petition-in-
Intervention, it did have a Certificate of Registration No. NCR-UR-1199692 which was based on its
compliance with the requisites for union registration. Hence, it had the legal personality when it filed
the Petition-in-Intervention and had all the rights as well as obligations of a legitimate labor
organization. There was therefore no necessity for petitioner to register anew when it was already a
registered labor organization.

Second. The Med-Arbiter had no authority to declare that petitioner's certificate of registration
was void ab initio in a certification election proceeding; neither was the representation proceedings
before the Med-Arbiter the appropriate remedy to ventilate such issue.

To buttress its stance, petitioner drew attention to the fact that the Implementing Rules of the Labor
Code of the Philippines, particularly Book V, Rule 1, Sec. 1 (kk) thereof, and the Med-Arbiter's
authority were limited to hearing, conciliating, mediating and deciding representation cases, internal
union and intra-union disputes. Considering that the case before the Med-Arbiter was a Petition for
Certification Election by respondent TMPCEWU, the only task of the Med-Arbiter was to determine
the employees' choice of their bargaining representative, and nothing more.

Third. The Supreme Court in Toyota Motor Philippines v. Toyota Motor Corporation Philippines
Labor Union and Secretary of Labor,8 limited the finding of petitioner's lack of personality only to the
time when it filed its Petition for Certification Election.

In this regard, petitioner decries the decision of the Secretary of Labor affirming that of the Med-
Arbiter on the basis of the ruling in the aforecited case. It must be stressed, according to petitioner,
that contrary to the interpretation given by the Med-Arbiter as affirmed by the Secretary of Labor, the
Supreme Court's ruling that it did not have legal personality was limited to the time when it filed
its Petition for Certification Election on 26 November 1992. Neither did the Supreme Court, in that
case, rule on the validity of the certificate of registration.

More importantly, according to petitioner, it was erroneous for the Secretary to assume that
inasmuch as petitioner failed to purge itself of its supervisory employee-members when it filed its
previous Petition for Certification Electionon 26 November 1992, it could not have possessed the
appropriate legal personality when it filed its Petition-in-Intervention on 30 October 1997. The truth of
the matter is that with the purging completed, absent any finding of the Supreme Court or any other
court or tribunal declaring the invalidity of the certificate of registration, petitioner possessed the legal
personality when it filed its Petition-in-Intervention.

This Court is called upon to resolve the issue of whether petitioner had legal personality on 30
October 1997 when it filed its Petition-in-Intervention. Corollary thereto, should petitioner register
anew despite its alleged purging of the supervisory employee-members as directed by this Court
in Toyota Motor Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union9 and
the issuance in its favor of a certificate of registration after it was found to have violated Art. 245 of
the Labor Code?

To find solution to the question in the instant case, we need only refer to the earlier case of Toyota
Motor Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union and the
Secretary of Labor and Employment,10which sprang from a Petition for Certification Election filed by
TMPCLU among the rank-and-file employees of TMPC. On 8 March 1993, however, its petition was
dismissed by the Med-Arbiter for the reason that the labor organization's membership was
composed of supervisory and rank-and-file employee-members. On appeal, the Secretary of Labor
remanded the case to the Med-Arbiter upon his finding that factual issues remained unresolved.
Pursuant to the order of the Secretary of Labor, the Med-Arbiter, in his decision dated 28 September
1994, dismissed TMPCLU's Petition for Certification Election on the basis of the following factual
findings:

(T)he (in)controvertible fact is that petitioner could not have been issued its Certificate of
Registration on November 24, 1992 when it applied for registration only on November 23,
1992 as shown by the official receipt of payment of filing fee. As Enrique Nalus, Chief LEO,
this office, would attest in his letter dated September 8, 1994 addressed to Mr. Porfirio T.
Reyes, Industrial Relations Officer of Respondent company, in response to a query posed by
the latter, "it is unlikely that an application for registration is approved on the date that it is
filed or the day thereafter as the processing course had to pass through routing, screening,
and assignment, evaluation, review and initialing, and approval/disapproval procedure,
among others, that a 30-day period is provided for under the Labor Code for this purpose, let
alone opposition thereto by interested parties which must be also given due course."

Another evidence which petitioner presented is the "Union Registration 1992 Logbook of IRD" and
the entry date 25 November 1992 as allegedly the date of the release of its registration certificate.
On the other hand, respondent company presented a certified true copy of an entry on page 265 of
the Union Registration Logbook showing the pertinent facts about petitioner but which did not show
that petitioner's registration was issued on or before 26 November 1992.

The Med-Arbiter also found that TMPCLU had not acquired legal personality for the reason that its
composition, being a mixture of supervisory and rank-and-file employees, was in direct violation of
Art. 245 of the Labor Code.11

Although there is a divergence of factual backdrops between Toyota Motor Philippines Corporation
v. Toyota Motor Philippines Corporation Labor Union and the Secretary of Labor and
Employment12 and the instant petition in the sense that in the former the filing of a Petition for
Certification Election by petitioner gave rise to the controversy while the present case arose from the
filing of a Petition-in-Intervention, the bottom-line issue in both cases nonetheless involves the
legitimacy of petitioner TMPCLU to file petitions.

We recall that in the first Toyota case, although there was no categorical pronouncement on the
validity of petitioner's certificate of registration considering that we deemed it entirely irrelevant in the
light of the finding that petitioner was not entirely a rank-and-file labor organization, we sustained
however in the same decision the entire factual findings of the Med-Arbiter when we observed -

The foregoing discussion, therefore, renders entirely irrelevant the technical issue raised as
to whether or not respondent union was in possession of the status of a legitimate labor
organization at the time of filing, when, as petitioner vigorously claims, the former was still at
the stage of processing of its application for recognition as a legitimate labor organization.
The union's composition being in violation of the Labor Code's prohibition of unions
composed of supervisory and rank-and-file employees, it could not possess the requisite
personality to file for recognition as a legitimate labor organization. In any case, the factual
issue, albeit ignored by the public respondents assailed Resolution, was adequately
threshed out in the Med-Arbiters September 28, 1994 Order (underscoring supplied).

In effect therefore, we already impressed our stamp of approval on the factual findings of the Med-
Arbiter in his 28 September 1994 decision, i.e., that petitioner had no valid certificate of registration
and therefore no legal personality to file the Petition for Certification Election and in the absence of
any attempt on its part to rectify the legal infirmity, likewise the disputed Petition-in-Intervention.

It is thus fatuous on petitioner's part to resurrect the issue of legitimacy in the instant case
notwithstanding our earlier ruling sustaining the factual findings of the Med-Arbiter.

We cannot also accede to petitioner's submission that the issuance of a certificate of registration in
its favor is an adequate and unassailable proof that it possesses the requisite legal personality to file
a Petition for Certification Election. Not necessarily. As we emphasized in Progressive Development
Corp. - Pizza Hut v. Laguesma,13 if a labor organizations application for registration is vitiated by
falsification and serious irregularities, a labor organization should be denied recognition as a
legitimate labor organization. And if a certificate of registration has been issued, the propriety of its
registration could be assailed directly through cancellation of registration proceedings in accordance
with Arts. 238 and 239 of the Labor Code, or indirectly, by challenging its petition for the issuance of
an order for certification election. We believe the procedural requirements to impugn the registration
by petitioner were more than adequately complied with as shown in the 1997 case of Toyota Motor
Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union.14

There is no reason to belabor the primordial importance of strictly complying with the registration
requirements of the Labor Code. As we have explained in a long line of cases, the activities of labor
organizations, associations and unions are impressed with public interest, hence, must be protected.

WHEREFORE the petition is DISMISSED for lack of merit. Accordingly, the assailed Resolution
dated 5 June 1998 and Order dated 10 August 1998 of the Secretary of Labor and Employment
affirming the decision of the Med-Arbiter dated 24 February 1998 which dismissed both the Petition
for Certification Election filed by respondent Toyota Motor Philippines Corp. Employees and Workers
Union (TMPCEWU) and the Petition-in-Intervention of petitioner Toyota Motor Philippines Corp.
Labor Union (TMPCLU) are AFFIRMED. 1wphi1.nt

SO ORDERED.
G.R. No. 155395 June 22, 2006

IN RE: PETITION FOR CANCELLATION OF THE UNION REGISTRATION OF AIR PHILIPPINES

FLIGHT ATTENDANTS ASSOCIATION, AIR PHILIPPINES CORPORATION, Petitioners,
vs.
BUREAU OF LABOR RELATIONS and AIR PHILIPPINES FLIGHT ATTENDANTS
ASSOCIATION, Respondents.

DECISION

TINGA, J.:

For resolution is a Petition for Review under Rule 45, filed by petitioner Air Philippines Corporation
(APC), assailing the Resolutions of the Court of Appeals dated 10 January 2002 and 13 September
2002.1

The case initially centered on the union registration of respondent Air Philippines Flight Attendants
Association (APFLAA), which was issued a Certificate of Registration No. NCR-UR-3-2067-99 by the
Department of Labor and Employment (DOLE). APFLAA filed on 17 March 1999 a petition for
certification election as the collective bargaining representative of the flight attendants of APC. After
the Med-Arbiter rendered a ruling ordering the holding of a certification election, such election was
held on 5 August 1999, with majority of the votes cast in favor of APFLAA.2

On 25 November 1999, APC filed a Petition for De-Certification and Cancellation of Union
Registration against APFLAA with the DOLE. APC alleged that APFLAA could not be registered as a
labor organization, as its composition consisted of "a mixture of supervisory and rank-and-file flight
attendants." Particularly, APC alleged that flight attendants holding the position of "Lead Cabin
Attendant," which according to it is supervisory in character, were among those who comprised
APFLAA.

On 18 July 2001, the DOLE-National Capital Region (NCR) Regional Director Alex E. Maraan
rendered a Decision dismissing the petition. The DOLE-NCR held that Article 245 of the Labor Code,
which states that supervisory employees are not eligible for membership in labor organizations of
rank-and-file employees, does not provide a ground for cancellation of union registration, which is
instead governed by Article 239 of the Labor Code.3

APC filed a Motion for Reconsideration/Appeal regarding this Decision of the DOLE-NCR. In a
Resolution dated 18 July 2001, the Bureau of Labor Relations (BLR) denied the appeal, affirming the
rationale of the DOLE-NCR.4

APC then immediately filed a Petition for Certiorari dated 12 December 2001 with the Court of
Appeals, imputing grave abuse of discretion on the part of the BLR in denying its appeal. However,
the petition was dismissed outright by the Court of Appeals in a Resolution dated 10 January 2002,
on the ground that APC had "failed to avail of the remedy of a prior Motion for Reconsideration"
before the filing of the certiorari petition, which step, it stressed, is a "condition sine qua non to the
filing of a petition for certiorari."5

APC filed a Motion for Reconsideration dated 5 February 2002, but this too was denied by the Court
of Appeals in a Resolution dated 13 September 2002. This time, the appellate court ruled that the
Motion for Reconsideration was "totally defective," for failing to contain the proof of service or
registry return receipts to the respondents. The Court of Appeals even noted that the Affidavit of
Service attached to the Motion for Reconsideration "failed to indicate the registry return receipts of
the registered mails to the respondents."6

Hence, the present petition.

APC argues that its petition before the Court of Appeals involved mere questions of law, among
which is whether APFLAAs union registration may be cancelled considering that the union is
allegedly composed of a mixture of supervisory and rank-and-file employees. It is posited that
questions of law may be raised directly in a petition for certiorari without need of a prior motion for
reconsideration.7

However, it is clear from the petition filed by APC before the Court of Appeals that the issues
involved do not consist of questions of law only. It is insisted therein that employees holding the
position of Lead Cabin Attendants are supervisory employees and hence disallowed from joining a
union of rank-and-file employees.8 On the other hand, APFLAA countered before the DOLE-NCR
and the BLR that only rank-and-file flight attendants comprised its membership.9 Thus, the very
question of whether Lead Cabin Attendants are indeed supervisory employees appears to be factual
in nature, the proper resolution of which necessitates a factual determination of the actual duties of
Lead Cabin Attendants. Indeed, APC made reference therein to such documents as an employees
manual in support of its argument,10 documents that would evidently require factual evaluation before
accorded proper evidentiary value.

There is admittedly some leeway for the Court of Appeals if it was so minded to give due course to
APCs petition, notwithstanding the failure to file a motion for reconsideration. Yet ultimately, the
determination of whether or not to admit a petition attended with such defect falls within the sound
discretion of the Court of Appeals.

Should the Court of Appeals decide, as it did, to dismiss the petition outright on such ground, it
would commit no reversible error of law nor any grave abuse of discretion, considering that the rule
requiring the filing of a motion for reconsideration before resorting to the special civil action of
certiorari is well entrenched in jurisprudence.

It also does not escape the attention of the Court that the Motion for Reconsideration filed by APC
before the Court of Appeals was itself fatally defective, allowing the appellate court to deny the same
without having to evaluate its substantial arguments. The action of the appellate court relative to
APCs missteps is consistent with procedural rules.

Still, the Court has deigned to give a close look at the substantial arguments raised in APCs petition
before the Court of Appeals.

The DOLE-NCR Regional Director, in dismissing the petition for cancellation, cited our minute
resolution in SPI Technologies Incorporated v. DOLE11 wherein the Court observed that Article
24512 of the Labor Code, the legal basis for the petition for cancellation, merely prescribed the
requirements for eligibility in joining a union and did not prescribe the grounds for cancellation of
union registration.13 Since the filing of this petition, the Court has had occasion to rule, in Tagaytay
Highlands International Golf Club v. Tagaytay Highlands Employees Union-PGTWO,14that "[t]he
inclusion in a union of disqualified employees is not among the grounds for cancellation, unless such
inclusion is due to misrepresentation, false statement or fraud under the circumstances enumerated
in Sections (a) and (c) of Article 23915 of the Labor Code."16

Clearly then, for the purpose of de-certifying a union, it is not enough to establish that the rank-and-
file union includes ineligible employees in its membership. Pursuant to Article 239 (a) and (c) of the
Labor Code, it must be shown that there was misrepresentation, false statement or fraud in
connection with the adoption or ratification of the constitution and by-laws or amendments thereto,
the minutes of ratification, or in connection with the election of officers, minutes of the election of
officers, the list of voters, or failure to submit these documents together with the list of the newly
elected-appointed officers and their postal addresses to the BLR.17

In its Petition for De-certification and Cancellation of Union Registration, APC did not impute on
APFLAA such misrepresentation of the character necessitated under Article 239 (a) and (c) of the
Labor Code. APC merely argued that APFLAA was not qualified to become a legitimate labor
organization by reason of its mixed composition of rank-and-file and supervisory employees; and
that APFLAA committed misrepresentation by making it appear that its composition was composed
purely of rank-and-file employees. Such misrepresentation (if it can be called as such) as alleged by
APC, is not conformable to Article 239 (a) and (c) of the Labor Code. Indeed, it appears from the
record that APC instead devoted the bulk of its arguments in establishing that supervisory
employees comprised part of the membership of APFLAA, a ground which is not sufficient to cause
the cancellation of union registration. And this is of course all under the assumption that Lead Cabin
Attendants are indeed supervisory employees, a claim consistently denied by APFLAA and which
was not confirmed by either the DOLE-NCR or the BLR.

There may be remedies available to enforce the proscription set forth in Article 245 of the Labor
Code on supervisory employees joining the union of rank-and-file employees. But consistent with
jurisprudence, the rule under Article 245 barring supervisory employees from joining the union of
rank-and-file employees is not a ground for cancellation of union registration. Accordingly, we see no
error on the part of the DOLE-NCR and the BLR in having dismissed APCs petition, and thus no
cause to compel the Court of Appeals to disregard APCs procedural errors and accept the petition
for certiorari.

WHEREFORE, the petition is DENIED. Costs against petitioner.

SO ORDERED.

G.R. No. L-22456 September 27, 1967

FRANCISCO SALUNGA, petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS; SAN MIGUEL BREWERY, INC. and MIGUEL NOEL;
NATIONAL BREWERY & ALLIED INDUSTRIES LABOR UNION OF THE PHILIPPINES
(NABAILUP-PAFLU); JOHN DE CATILLO and CIPRIANO CID, respondents.

C. Magat & Associates for petitioner.

Cipriano Cid & Associates and Ponce Enrile, S. Reyna, Montecillo & Belo for respondents.

CONCEPCION, C.J.:

Appeal by petitioner Francisco Salunga from a resolution of the Court of Industrial Relations,
sitting en banc, dismissing unfair labor practice charges against the National Brewery and Allied
Industries Labor Union of the Philippines (PAFLU) hereinafter referred to as the Union John de
Castillo, Cipriano Cid, San Miguel Brewery, Inc. hereinafter referred to as the Company and
Miguel Noel.

Petitioner had, since 1948, been an employee of the Company, which, on October 2, 1959, entered
with the Union, of which respondent John de Castillo is the president, into a collective bargaining
agreement, effective up to June 30, 1962. Section 3 thereof reads:

The company agrees to require as a condition of employment of those workers covered by

this agreement who either are members of the UNION on the date of the signing of this
agreement, or may join the UNION during the effectivity of this agreement, that they shall not
voluntarily resign from the UNION earlier than thirty (30) days before the expiry date of this
agreement as provided in Article XIII hereof, provided, however, that nothing herein
contained shall be construed to require the company to enforce any sanction whatsoever
against any employee or worker who fails to retain his membership in the UNION as
hereinbefore stated, for any cause other than voluntary resignation or non-payment of
regular union dues on the part of said employee or worker. (Exh. 4-A-Union.) .

Petitioner was a member of the Union since 1953. For reasons later to be stated, on August 18,
1961, he tendered his resignation from the Union, which accepted it on August 26, 1961, and
transmitted it to the Company on August 29, 1961, with a request for the immediate implementation
of said section 3. The Company having informed him that his aforementioned resignation would
result in the termination of his employment, in view of said section, petitioner wrote to the Union, on
August 31, 1961, a letter withdrawing or revoking his resignation and advising the Union to continue
deducting his monthly union dues. He, moreover, furnished a copy of this communication to the
Company. The latter, in turn, notified the Union of the receipt of said copy and that "in view thereof,
we shall not take any action on this case and shall consider Mr. Francisco Salunga still a member of
your union and continue deducting his union dues." On September 8, 1961, the Union told the
Company that petitioner's membership could not be reinstated and insisted on his separation from
the service, conformably with the stipulation above-quoted. The Company replied, on September 12,
1961, stating:

. . . We asked Mr. Salunga if he realized that by resigning from the Union he would in effect
be forfeiting his position in the company. When he answered in the negative, we showed him
a copy of our Collective Bargaining Agreement and called his attention to Sec. 3, Art. II
thereof. He then told us that he did not realize that he would be losing his job if he were to
resign from the Union. We did not at any time ask or urge him to withdraw his resignation;
neither are we now asking or insisting that you readmit him into your membership. We
thought that informing him of the consequences of his resignation from the Union, was the
only humane thing to do under the circumstances.

Nevertheless, if notwithstanding our foregoing clarification you still consider him as having
actually resigned from your organization, and you insist that we dismiss him from the service
in accordance with Sec. 3, Article II of our agreement, we will have no alternative but to do
so. (Exh. E)

In a letter to the Company, dated September 20, 1961, the Union reiterated its request for
implementation of said section 3, for which reason, on September 22, 1961, the Company notified
petitioner that, in view of said letter and the aforementioned section, "we regret we have to terminate
your employment for cause. You are, therefore, hereby notified of your dismissal from the service
effective as of the close of business hours, September 30, 1961."
Meanwhile, petitioner had sought the intervention of PAFLU's National President, respondent
Cipriano Cid, to which the Union was affiliated, for a review of the latter's action. The PAFLU gave
due course to petitioner's request for review and asked the Company, on September 29, 1961, to
defer his dismissal, for at least two (2) weeks, so that its (PAFLU's) Executive Board could act on his
appeal. On October 6, 1961, respondent Cid advised petitioner that the PAFLU had found no ground
to review the action taken by the Union and that, on the expiration of the 15-day grace granted to
him by the Company, the decision thereof to terminate his services would take effect.

Thereupon, or on October 11, 1961, petitioner notified the PAFLU that he was appealing to its
supreme authority the PAFLU National Convention and requested that action on his case be
deferred until such time as the Convention shall have acted on his appeal. A letter of the same date
and tenor was sent, also, by the petitioner to the Union. Furthermore, he asked the Company to
maintain the status quo, in the meantime. This notwithstanding, at the close of the business hours,
on October 15, 1961, petitioner was discharged from the employment of the Company, through its
assistant-secretary and vice-president, herein respondent Miguel Noel.

At petitioner's behest, on or about December 7, 1961, a prosecutor of the Court of Industrial

Relations commenced, therefore, the present proceedings, for unfair labor practice, against the
Union, its president, respondent John de Castillo, respondent Cipriano Cid, as PAFLU president, the
Company, and its aforementioned Vice-President Miguel Noel. In due course, thereafter, the trial
Judge rendered a decision the dispositive part of which reads:

IN VIEW OF ALL THE FOREGOING, the San Miguel Brewery, Inc. and Miguel Noel and
National Brewery & Allied Industrial Labor Union of the Philippines (PAFLU), John de
Castillo, and Cipriano Cid, are hereby declared guilty of unfair labor practices as charged,
and ordered to cease and desist from further committing such unfair labor practice acts
complained of; and as affirmative reliefs:

(a) The National Brewery & Allied Industries Labor Union of the Philippines (PAFLU), John
de Castillo and Cipriano Cid, their officers and agents, are hereby directed to readmit and to
continue the membership of Francisco Salunga in the membership rolls of the union after
paying all union dues, with all the rights and privileges being enjoyed by bonafide members;

(b) The San Miguel Brewery, Inc., and Miguel Noel, their officers and agents are hereby
directed to immediately reinstate Francisco Salunga to his former or substantially equivalent
position with one-half back wages, without prejudice, however, to his seniority and/or other
rights and privileges; and

(c) Respondents Union and Company, their respective officers and agents, are likewise
directed to post two copies of this decision in conspicuous places in their respective offices
or plants for a period of one month, furnishing this Court with certificate of compliance after
the expiration of said period.

On motion for reconsideration of the respondents, this decision was reversed by the Court of
Industrial Relations sitting en banc with two (2) judges concurring in the result and the trial judge
dissenting which dismissed the case. Hence, this appeal by the petitioner.

The appeal is well taken, for, although petitioner had resigned from the Union and the latter had
accepted the resignation, the former had, soon later upon learning that his withdrawal from the
Union would result in his separation from the Company, owing to the closed-shop provision above
referred to revoked or withdrawn said resignation, and the Union refused to consent thereto
without any just cause therefor. The Union had not only acted arbitrarily in not allowing petitioner to
continue his membership. The trial Judge found said refusal of the Union officers to be due to his
critical attitude towards certain measures taken or sanctioned by them. As set forth in the decision of
the trial Judge:

. . . Prior to August, 1961, he had been criticizing and objecting to what he believed were
illegal or irregular disbursements of union funds, i.e., allowing Florencio Tirad, a union
official, to receive six months advanced salaries when Tirad went to the United States, which
objection he openly manifested in a meeting of the board of directors and stewards, but
instead of receiving favorable response, he (Salunga) was twitted and felt insulted by the
laughter of those present that he would be the next man to be sent to America; second,
granting Ricardo Garcia, union secretary, two months advanced salaries when preparing for
the bar examinations, which objection he broached to union officer Efren Meneses; third, the
union's additional monthly expense for the salary of a counsel when the PAFLU, their mother
union is well staffed with a number of lawyers who could attend to and handle their cases
and other legal matters, and to which mother union the NABAILUP has been paying a
monthly assessment of more than P1,000.00; and fourth, giving salary to Charles Mitschek
who was dismissed by the company but denying the same privilege to other similarly situated
member-employees. Salunga was later removed by the union from his position as steward
without his knowledge. It also appears that the power of attorney executed in his favor by co-
worker Alejandro Miranda for the collection of Miranda's indebtedness of P60.00 to him (the
latter has certain amount in possession of the Union) was not honored by the union. 1awphl.nt

xxx xxx xxx

The record is clear that feeling dejected by the inaction of the union officials on his
grievances and objections to what he believed were illegal disbursements of union funds,
coupled with the fact that he was later removed from his position as a union steward without
his knowledge, as well as the fact that the union did not honor the power of attorney
executed in his favor by Alejandro Miranda, a co-worker, for the collection of Miranda's
indebtedness of P60.00 to him, he submitted his letter of resignation from the union on
August 18, 1961. It must be stated here that no evidence was adduced by the respondent
union to overcome complainant's testimonies about his objections to the disbursements of
union funds but only tried to elicit from him, on cross examination, that the funds of the union
are only disbursed upon authority of the Executive Board of the union. . . .

It should be noted that the Court of Industrial Relations en banc did not reverse these findings of fact
or even question the accuracy thereof. What is more, the officers of the Union have, in effect,
confirmed the fact that their refusal to allow the withdrawal of petitioner's resignation had been due
to his aforementioned criticisms. Indeed said officers tried to justify themselves by characterizing
said criticisms as acts of disloyalty to the Union, which, of course, is not true, not only because the
criticism assailed, not the Union, but certain acts of its officers, and, indirectly, the officers
themselves, but also because the constitution and by-laws of the Union explicitly recognize the right
of its members to give their views on "all transactions made by the Union." As a consequence, the
resolution appealed from cannot be affirmed without, in effect, nullifying said right which,
independently of the constitution and by-laws of the Union, is part and parcel of the freedom of
speech guaranteed in the Constitution of our Republic, as a condition sine qua non to the sound
growth and development of labor organizations and democratic institutions.

Although, generally, a state may not compel ordinary voluntary associations to admit thereto any
given individual, because membership therein may be accorded or withheld as a matter of
privilege,1 the rule is qualified in respect of labor unions holding a monopoly in the supply of labor,
either in a given locality, or as regards a particular employer with which it has a closed-shop
agreement.2 The reason is that

. . . The closed shop and the union shop cause the admission requirements of trade union to
become affected with the public interest. Likewise, a closed shop, a union shop, or
maintenance of membership clauses cause the administration of discipline by unions to be
affected with the public interest.3

Consequently, it is well settled that such unions are not entitled to arbitrarily exclude qualified
applicants for membership, and a closed-shop provision would not justify the employer in
discharging, or a union in insisting upon the discharge of, an employee whom the union thus refuses
to admit to membership, without any reasonable ground therefor.4 Needless to say, if said unions
may be compelled to admit new members, who have the requisite qualifications, with more reason
may the law and the courts exercise the coercive power when the employee involved is a long
standing union member, who, owing to provocations of union officers, was impelled to tender his
resignation, which he forthwith withdrew or revoked. Surely, he may, at least, invoke the rights of
those who seek admission for the first time, and can not arbitrarily he denied readmission.

We cannot agree, however, with the finding of the trial Judge to the effect that the Company was
guilty of unfair labor practice. The Company was reluctant if not unwilling to discharge the
petitioner. When the Union first informed the Company of petitioner's resignation and urged
implementation of section 3 of the bargaining contract, the Company advised petitioner of the
provision thereof, thereby intimating that he had to withdraw his resignation in order to keep his
employment. Besides, the Company notified the Union that it (the Company) would not take any
action on the case and would consider the petitioner, "still a member" of the Union. When the latter,
thereafter, insisted on petitioner's discharge, the Company still demurred and explained it was not
taking sides and that its stand was prompted merely by "humane" considerations, springing from the
belief that petitioner had resigned from the Union without realizing its effect upon his employment.
And, as the Union reiterated its demand, the Company notified petitioner that it had no other
alternative but to terminate his employment, and dismissed him from the service, although with
"regret".

Under these circumstances, the Company was not "unfair" to the petitioner. On the contrary, it did
not merely show a commendable understanding of and sympathy for his plight. It even tried to help
him, although to such extent only as was consistent with its obligation to refrain from interfering in
purely internal affairs of the Union. At the same time, the Company could not safely inquire into the
motives of the Union officers, in refusing to allow the petitioner to withdraw his resignation. Inasmuch
as the true motives were not manifest, without such inquiry, and petitioner had concededly tendered
his resignation of his own free will, the arbitrary nature of the decision of said officers was not such
as to be apparent and to justify the company in regarding said decision unreasonable. Upon the
other hand, the Company can not be blamed for assuming the contrary, for petitioner had appealed
to the National Officers of the PAFLU and the latter had sustained the Union. The Company was
justified in presuming that the PAFLU had inquired into all relevant circumstances, including the
motives of the Union Officers.

In finding, this notwithstanding, that the Company is guilty of unfair labor practice, the trial Judge
seemed to have been unduly influenced by the fact that the former had dismissed the petitioner
despite his announced intention to appeal from the decision of the Union and that of the Officers of
PAFLU to its "Supreme authority", namely, the PAFLU's "National Convention". In other words, said
Judge felt that the Company should have waited for the action of the national convention before
issuing the notice of dismissal.
There is no evidence, however, that petitioner had really brought this matter to said "Convention".
Much less is there any proof that the latter had sustained him and reversed the PAFLU officers and
the Union. Thus, the record does not show that petitioner was prejudiced by the Company's failure to
maintain the status quo, after the Union had been sustained by said officers. In fact, petitioner did
not even try to establish that he had submitted to the Company as he has not introduced in the
lower court satisfactory proof that an appeal had really been taken by him to the aforementioned
Convention. In short, it was error to hold the Company guilty of unfair labor practice.

Just the same, having been denied readmission into the Union and having been dismissed from the
service owing to an unfair labor practice on the part of the Union, petitioner is entitled to
reinstatement as member of the Union and to his former or substantially equivalent position in the
Company, without prejudice to his seniority and/or rights and privileges, and with back pay, which
back pay shall be borne exclusively by the Union. In the exercise of its sound judgment and
discretion, the lower court may, however, take such measures as it may deem best, including the
power to authorize the Company to make deductions, for petitioner's benefit, from the sums due to
the Union, by way of check off or otherwise, with a view to executing this decision, and, at the same
time, effectuating the purposes of the Industrial Peace Act.

With this modification, the aforementioned decision of the trial Judge is hereby affirmed in all other
respects, and the appealed resolution of the Court of Industrial Relations en banc is reversed, with
costs against respondents, except the Company.

G.R. No. L-48100 June 20, 1941

FLORENCIO PELOBELLO, petitioner-appellant,

vs.
GREGORIO PALATINO, respondent-appellee.

Rodriguez & Aclaro for appellant.

Cecilio Maneja for appellee.

LAUREL, J.:

The petitioner-appellant, Florencio Pelobello, instituted quo warranto proceedings in the Court of
First Instance of Tayabas against the respondent-appellee, Gregorio Palatino, the mayor-elect of the
municipality of Torrijos, Province of Marinduque. The proceedings were had pursuant to the
provisions of section 167, in relation with section 94 (a), of the Election Code (Commonwealth Act
No. 357). It was alleged that the respondent-appellee, having been convicted by final judgment in
1912 of atendado contra la autoridad y sus agentes and sentenced to imprisonment for two years,
four months and one day of prision correccional, was disqualified from voting and being voted upon
for the contested municipal office, such disqualification not having been removed by plenary pardon.

The fact of conviction as above set forth is admitted; so is the election and consequent proclamation
of the respondent-appellee for the office of municipal mayor. It is also admitted that the respondent-
appellee was granted by the Governor-General a conditional pardon back in 1915; and it has been
proven (Vide Exhibit 1, admitted by the lower court, rec. of ap., p. 20) that on December 25, 1940,
His Excellency, the President of the Philippines, granted the respondent-appellee absolute pardon
and restored him to the enjoyment of full civil and political rights.

The question presented is whether or not the absolute pardon had the effect of removing the
disqualification incident to criminal conviction under paragraph (a) of section 94 of the Election Code,
the pardon having been granted after the election but before the date fixed by law for assuming
office (sec. 4, Election Code). Without the necessity of inquiring into the historical background of the
benign prerogative of mercy, we adopt the broad view expressed in Cristobal vs. Labrador, G. R. No.
47941, promulgated December 7, 1940, that subject to the limitations imposed by the Constitution,
the pardoning power cannot be restricted or controlled by legislative action; that an absolute pardon
not only blots out the crime committed but removes all disabilities resulting from the conviction, and
that when granted after the term of imprisonment has expired, absolute pardon removes all that is
left of the consequences of conviction, While there may be force in the argument which finds support
in well considered cases that the effect of absolute pardon should not be extended to cases of this
kind, we are of the opinion that the better view in the light of the constitutional grant in this
jurisdiction is not to unnecessarily restrict or impair the power of the Chief Executive who, after
inquiry into the environmental facts, should be at liberty to atone the rigidity of the law to the extent
of relieving completely the party or parties concerned from the accessory and resultant disabilities of
criminal conviction. In the case at bar, it is admitted that the respondent mayor-elect committed the
offense more than 25 years ago; that he had already merited conditional pardon from the Governor-
General in 1915; that thereafter he had exercised the right of suffrage, was elected councilor of
Torrijos, Marinduque, for the period 1918 to 1921; was elected municipal president of that
municipality three times in succession (1922-1931); and finally elected mayor of the municipality in
the election for local officials in December, 1940. Under these circumstances, it is evident that the
purpose in granting him absolute pardon was to enable him to assume the position in deference to
the popular will; and the pardon was thus extended on the date mentioned hereinabove and before
the date fixed in section 4 of the Election Code for assuming office. We see no reason for defeating
this wholesome purpose by a restrictive judicial interpretation of the constitutional grant to the Chief
Executive. We, therefore, give efficacy to executive action and disregard what at bottom is a
technical objection.

The judgment of the lower court is affirmed, with costs against the petitioner-appellant, So ordered.

G.R. No. L-19745 January 31, 1964

ELISEO FLORA, ET AL., petitioners,

vs.
VICENTE OXIMANA, ET AL., respondents.

Cipriano Cid and Associates for petitioners.

Salonga, Ordoez, Sicat and Associates for respondent.

BAUTISTA ANGELO, J.:

Vicente Oximana is the president of the Benguet-Balatoc Workers Union (BBWU) having been
elected to said position on June 20, 1960, pursuant to the provisions of constitution and by-laws of
said union. Since 1948, when the union was organized, Oximana has been elected continuously as
such president and has performed the duties and functions of said office without interruption in
accordance with the provisions of said constitution and by-laws.

In 1926, Oximana was convicted of the crime of abusos deshonestos for which he was sentenced to
3 years 6 months and 25 days imprisonment which he served until December 4, 1930. As a
consequence, a complaint was lodged against him before the Court of Industrial Relations on
February 2, 1961 by a prosecutor of said court seeking as president of the union on the strength of
the previous of Section 17(e) of Republic Act 875. In this complaint, the union was made party
respondent because of complainant's desire to restrain Oximana from performing the duties and
functions of his office as president and to have a new election held for the purpose of electing a new
qualified president.
In answer to the complaint, respondents alleged that it fails to state cause of action for it does not
show that it bears the sanction of at least 10% of the entire membership of the union of which
Oximana was president, and that assuming that it does and Oximana was convicted of the offense
which involves moral turpitude, the same is not however one of the offenses contemplated by
Section 17(e) of Republic Act 875. In any event, respondents contend that the aforesaid legal
provision, being penal in character, does not apply to Oximana for he has been an official of good
standing long before the effectivity of Republic Act 875.

When the case was called for hearing, the parties submitted a stipulation of facts wherein, among
other things, it was agreed that on April 1, 1961 the President of the Philippines granted Oximana
full, absolute and plenary pardon for the crime he had committed in 1926, thereby restoring him to
the full enjoyment of his civil and political rights, one of which is the holding of the position now
disputed by complainants.

On November 29, 1961, Judge Amado C. Bugayong, who heard the case, issued an order
dismissing the complaint for lack of merit. He said that were it not for the absolute pardon granted to
Oximana he would have been disqualified. But said pardon has erased all the ill effects of his
conviction and had restored to him all his rights and privileges as a citizen as if he had not
committed the crime at all. One of such rights is to hold an office in any labor organization as the one
now being held by respondent Oximana.

This Order was affirmed by the court en banc. Hence, the present petition for review. 1w ph1.t

Section 17(e) of Republic Act 875 provides as follows:

No person who has been convicted of a crime involving moral turpitude shall be eligible for
election to any office in a legitimate labor organization or for appointment to any position
involving the collection, custody, management, control or disbursement of its funds, and any
such person shall be disqualified from continuing to hold any office or such position in the
organization.

If the case of respondent Oximana should be considered in the light of what is provided for in the
section abovequoted there would be no doubt that he would be disqualified from holding the position
of president which is now being disputed by complainants for the crime for which he was convicted
in 1926 is one which involves moral turpitude because the purpose of the law is indeed to disqualify
one who, because of gross misconduct, has rendered himself unfit to hold any office in a legitimate
labor organization. But here the situation of respondent Oximana has changed since his conviction.
It appears that since the time of his conviction in 1926 up to the time the complaint for
disqualification was lodged against him in 1961, a long period of time has passed, and, in the
meantime, he may have reformed himself and become new and repentant man. In fact, when he
organized the Benguet-Balatoc Workers' Union in 1948, he became its president and had been
reelected as such continuously up to the present time without any indication that through his
actuation as such official he has ever committed any misconduct or act unbecoming his office that
may disqualify him to continue deserving the confidence of the union and its members. It is perhaps
for this reason that on April 1, 1961 the President of the Philippines grant him full, absolute and
plenary pardon which restored to him the full enjoyment of his civil and political rights one of which is
the right to hold any office in any legitimate labor organization. We believe that the effect of this
pardon is as the President of the Philippines has stated, the restoration in full of Oximana's civil and
political rights, the effect of which is to blot out any evil consequences of the crime he has
committed. Authorities abound supporting this view.
Thus, it has been held that "A full and complete pardon, granted after conviction, removes all
penalties and legal disabilities, and restores the defendant to all his civil rights." Continuing, the court
went on to say that "pardon completely destroys the effect of the judgment ... (and) 'obliterates, in
legal contemplation, the offense itself; and hence its effect is to make the offender a new man'"
(Stephens v. State of ex rel. Goldsberry, 11 Okl. 262, 239 P. 450). In a similar vein, this Court, thru
Mr. Justice Laurel, stated that "an absolute pardon not only blots out the crime committed but
removes all disabilities resulting from the conviction; and that when granted after the term of
imprisonment has expired, absolute pardon removes all that is left of the consequences of the
conviction;" (Pelobello v. Palatino, 72 Phil. 441). And in an earlier case, this Court, thru the same
Justice also stated:

... An absolute pardon not only blots out the crime committed, but removes all disabilities
resulting from the conviction. In the present case, the disability is the result of conviction
without which there would be no basis for disqualification from voting. Imprisonment is not
the only punishment which the law imposes upon those who violate its command. There are
accessory and resultant disabilities, and the pardoning power likewise extends to such
disabilities. When granted after the term of imprisonment has expired, absolute pardon
removes all that is left of the consequences of conviction. In the present case, while the
pardon, extended to respondent Santos is conditional in the sense that "he will be eligible for
appointment only to positions which are clerical or manual in nature involving no money or
property responsibility," it is absolute insofar as it "restores the respondent to full civil and
political rights." (Cristobal v. Labrador, et al., 71 Phil. 34, 38).

We are, therefore, persuaded to affirm the view expressed by the court a quo in its order of
November 29, 1961.

WHEREFORE, the order appealed from is affirmed. No costs.

G.R. No. 78131 January 20, 1988

EDUARDO TANCINCO, OSCAR E. BARTOLO, DANIEL DE LEON, EDDIE POE, VIRGILIO SAN
PEDRO, MA. LUISA QUIBIN, FE MUDLONG and HENRY MADRIAGA, petitioners,
vs.
DIRECTOR PURA FERRER-CALLEJA, EDWIN LACANILAO, BOYET DALMACIO, JOSEFINO
ESGUERRA, TESSIE GATCHALIAN, LITO CUDIA and DING PAGAYON, respondents.

GANCAYCO, J.:

This special civil action for certiorari seeks to annul the Resolution of February 12, 1987 and the Decision of December 10, 1986 of the
Bureau of Labor Relations *in BLR Case No. A922186, setting aside the order of July 25, 1986 which decreed the inclusion and counting of
the 56 segregated votes for the determination of the results of the election of officers of Imperial Textile Mills Inc. Monthly Employees
Association (ITM-MEA).

Private respondents are the prime organizers of ITM-MEA. While said respondents were preparing
to file a petition for direct certification of the Union as the sole and exclusive bargaining agent of
ITM's bargaining unit, the union's Vice-President, Carlos Dalmacio was promoted to the position of
Department Head, thereby disqualifying him for union membership. Said incident, among others led
to a strike spearheaded by Lacanilao group, respondents herein. Another group however, led by
herein petitioners staged a strike inside the company premises. After four (4) days the strike was
settled. On May 10, 1986 an agreement was entered into by the representatives of the management,
Lacanilao group and the Tancinco group the relevant terms of which are as follows:
 "1. That all monthly-paid employees shall be United under one union, the ITM
Monthly Employees Association (ITM-MEA), to be affiliated with ANGLO;

2. That the management of ITM recognizes ANGLO as the sole and exclusive
bargaining agent of all the monthly-paid employees;

3. That an election of union officers shall be held on 26 May l986, from 8:00 a.m. to
5:00 p.m.;

4. That the last day of filing of candidacy shall be on l9 May l986 at 4:00 p.m.;

5. That a final pre-election conference to finalize the list of qualified voters shall be
held on 19 May 1986, at 5:00 p.m.;" 1

On May 19, 1986, a pre-election conference was held, but the parties failed to agree on the list of
voters. During the May 21, 1986 pre-election conference attended by MOLE officers, ANGLO
through its National Secretary, a certain Mr. Cornelio A. Sy made a unilateral ruling excluding some
56 employees consisting of the Manila office employees, members of Iglesia ni Kristo, non-time card
employees, drivers of Mrs. Salazar and the cooperative employees of Mrs. Salazar. Prior to the
holding of the election of union officers petitioners, 2 through a letter addressed to the Election
Supervisor, MOLE San Fernando Pampanga, protested said ruling but no action was taken. On May
26, 1986, the election of officers was conducted under the supervision of MOLE wherein the 56
employees in question participated but whose votes were segregated without being counted.
Lacanilao's group won. Lacanilao garnered 119 votes with a margin of three (3) votes over Tancinco
prompting petitioners to make a protest. Thereafter, petitioners filed a formal protest with the Ministry
of Labor Regional Office in San Fernando, Pampanga 3 claiming that the determination of the
qualification of the 56 votes is beyond the competence of ANGLO. Private respondents maintain the
contrary on the premise that definition of union's membership is solely within their jurisdiction.

On the basis of the position papers submitted by the parties MOLE's Med Arbiter 4 issued an order
dated July 25, 1986 directing the opening and counting of the segregated votes. 5 From the said
order private respondents appealed to the Bureau of Labor Relations (BLR) justifying the
disenfranchisement of the 56 votes. Private respondents categorized the challenged voters into four
groups namely, the Manila Employees, that they are personal employees of Mr. Lee; the Iglesia ni
Kristo, that allowing them to vote will be anomalous since it is their policy not to participate in any
form of union activities; the non-time card employees, that they are managerial employees; and the
employees of the cooperative as non-ITM employees. 6 On December 10, 1986, BLR rendered a
decision 7 holding the exclusion of the 56 employees as arbitrary, whimsical, and wanting in legal
basis 8 but set aside the challenged order of July 26, 1986 on the ground that 51 ** of 56 challenged voters
were not yet union members at the time of the election per April 24, 1986 list submitted before the Bureau. 9 The decision directed among
others the proclamation of Lacanilao's group as the duly elected officers and for ITM-MEA to absorb in the bargaining unit the challenged
voters unless proven to be managerial employees. 10 Petitioners' motion for reconsideration was likewise denied.

Dissatisfied with the turn of events narrated above petitioners elevated the case to this Court by way
of the instant petition for certiorari under Rule 65 of the Rules of Court. Petitioners allege that public
respondent director of Labor Relations committed grave abuse of discretion in ordering the Med-
Arbiter to disregard the 56 segregated votes and proclaim private respondents as the duly elected
officers of ITM-MEA whereas said respondent ruled that the grounds relied upon by ANGLO for the
exclusion of voters are arbitrary, whimsical and without legal basis.

The petition is impressed with merit. The record of the case shows that public respondent
categorically declared as arbitrary, whimsical and without legal basis the grounds 11 relied upon by
ANGLO in disenfranchising the 56 voters in question. However, despite said finding public
respondent ruled to set aside the Resolution of July 25, 1986 of the Med-Arbiter based on its own
findings 12 that 51 of the 56 disenfranchised voters were not yet union members at the time of the
election of union officers on May 26, 1986 on the ground that their names do not appear in the
records of the Union submitted to the Labor Organization Division of the Bureau of Labor on April 24,
1986.

The finding does not have a leg to stand on. Submission of the employees names with the BLR as
qualified members of the union is not a condition sine qua non to enable said members to vote in the
election of union's officers. It finds no support in fact and in law. Per public respondent's findings, the
April 24, 1986 list consists of 158 union members only 13 wherein 51 of the 56 challenged voters'
names do not appear. Adopting however a rough estimate of a total number of union members who
cast their votes of some 333 14 and excluding therefrom the 56 challenged votes, if the list is to be the
basis as to who the union members are then public respondent should have also disqualified some
175 of the 333 voters. It is true that under article 242(c) of the Labor Code, as amended, only
members of the union can participate in the election of union officers. The question however of
eligibility to vote may be determined through the use of the applicable payroll period and employee's
status during the applicable payroll period. The payroll of the month next preceding the labor dispute
in case of regular employees 15 and the payroll period at or near the peak of operations in case of
employees in seasonal industries. 16

In the case before Us, considering that none of the parties insisted on the use of the payroll period-
list as voting list and considering further that the 51 remaining employees were correctly ruled to be
qualified for membership, their act of joining the election by casting their votes on May 26, 1986 after
the May 10, 1986 agreement is a clear manifestation of their intention to join the union. They must
therefore be considered ipso facto members thereof Said employees having exercised their right to
unionism by joining ITM-MEA their decision is paramount. Their names could not have been
included in the list of employee submitted on April 24, 1986 to the Bureau of Labor for the agreement
to join the union was entered into only on May 10, 1986. Indeed the election was supervised by the
Department of Labor where said 56 members were allowed to vote. Private respondents never
challenged their right to vote then.

The Solicitor General in his manifestation agreed with petitioners that public respondent committed a
grave abuse of discretion in deciding the issue on the basis of the records of membership of the
union as of April 24, 1986 when this issue was not put forward in the appeal.

It is however the position of private respondents that since a collective bargaining agreement (CBA)
has been concluded between the local union and ITM management the determination of the legal
question raised herein may not serve the purpose which the union envisions and may destroy the
cordial relations existing between the management and the union.

We do not agree. Existence of a CBA and cordial relationship developed between the union and the
management should not be a justification to frustrate the decision of the union members as to who
should properly represent them in the bargaining unit. Neither may the inclusion and counting of the
56 segregated votes serve to disturb the existing relationship with management as feared by herein
private respondents. Respondents themselves pointed out that petitioners joined the negotiating
panel in the recently concluded CBA. This fact alone is conclusive against herein petitioners and
hence will estop them later if ever, from questioning the CBA which petitioners concurred with.
Furthermore, the inclusion and counting of the 56 segregated votes would not necessarily mean
success in favor of herein petitioners as feared by private respondents herein. Otherwise, could this
be the very reason behind their fears why they made it a point to nullify said votes?
WHEREFORE, premises considered, the petition for certiorari is GRANTED. The temporary
restraining order issued by this Court on May 13, 1987 is hereby made permanent. The questioned
Resolution of February 12, 1987 and the Decision of December 10, 1986 are hereby set aside for
being null and void and the Order of July 25, 1986 of the Mediator Arbiter is hereby declared
immediately executory.

Cost against private respondents.

SO ORDERED.

G.R. No. 110007 October 18, 1996

HOLY CROSS OF DAVAO COLLEGE, INC., petitioner,

vs.
HON. JEROME JOAQUIN, in his capacity as Voluntary Arbitrator, and HOLY CROSS OF
DAVAO COLLEGE UNION-KALIPUNAN NG MANGGAGAWANG PILIPINO
(KAMAPI), respondents.

NARVASA, C.J.:p

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

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

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

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

In the meantime, there ensued between the two unions a full-blown action on the basic issue of
representation, which was to last for some two years. It began with the filing by the new union
(headed by Gallera) of a petition for certification election in the Office of the Med-Arbiter. 5 KAMAPI
responded by filing a motion asking the Med-Arbiter to dismiss the petition. On August 31, 1989,
KAMAPI also advised Holy Cross of the election of a new set officers who would also comprise its
negotiating panel. 6
The Med-Arbiter denied KAMAPI's motion to dismiss, and ordered the holding of a certification
election. On appeal, however, the Secretary of Labor reversed the Med-Arbiter's ruling and ordered
the dismissal of the petition for certification election, which action was eventually sustained by this
Court in appropriate proceedings.

After its success in the certification election case KAMAPI presented, on April 11, 1991, revised
bargaining proposals to Holy Cross; 7 and on July 11, 1991, it sent a letter to the School asking for its
counter-proposals. The School replied, that it did not know if the Supreme Court had in fact affirmed
the Labor Secretary's decision in favor of KAMAPI as the exclusive bargaining representative of the
School employees, whereupon KAMAPI's counsel furnished it with a copy of the Court's resolution to
that effect; and on September 7, 1991, KAMAPI again wrote to Holy Cross asking for its counter-
proposals as regards the terms of a new CBA.

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

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

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

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

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

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

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

1. sit down, negotiate and conclude (an agreement) with the Holy Cross of Davao
College Faculty Union-KAMAPI, which, by Resolution of the Supreme Court, remains
the collective bargaining agent of the permanent and regular teachers of said
educational institution; (and)

2. pay to the Union the amount equivalent to the uncollected union dues from August
1989 up to the time respondent shall have concluded a new CBA with the Union, it
appearing that respondent stopped complying with the CBA's check-off provisions as
of said date.12

The Voluntary Arbitrator also requested the Fiscal Examiner of the NLRC, Region XI, Davao
City, to make the proper computation of the union dues to be paid by management to the
complainant union.

Dissatisfied, Holy Cross filed the petition at bar, challenging the Voluntary Arbitrator's decision on the
following grounds, viz.: 13

1. That the voluntary arbitrator erred and acted in grave abuse of discretion
amounting to lack or excess of jurisdiction in ordering petitioner to pay the union the
uncollected union dues to private respondent which was not even an issue submitted
for voluntary arbitration, resulting in serious violation of due process.

2. That the voluntary arbitrator erred in considering that petitioner refused to

negotiate with (the) Union, contrary to the records and evidence presented in the
case.

The Voluntary Arbitrator's conclusion that petitioner Holy Cross had, in light of the evidence on
record, failed to negotiate with KAMAPI, adjudged as the collective bargaining agent of the school's
permanent and regular
teachers is a conclusion of fact that the Court will not review, the inquiry at bar being limited to the
issue of whether or not said Voluntary Arbitrator had acted without or in excess of his jurisdiction, or
with grave abuse of discretion; nor does the Court see its way clear, after analyzing the record, to
pronouncing that reasoned conclusion to have been made so whimsically, capriciously,
oppressively, or unjustifiably in other words, attended by grave abuse of discretion amounting to
lack or excess of jurisdiction as to call for extension of the Court's correcting hand through the
extraordinary writ of certiorari. Said finding should therefore be, and is hereby, sustained.

Now, concerning its alleged failure to observe the check-off provisions of the collective bargaining
agreement, Holy Cross contends that this was not one of the issues raised in the arbitration
proceedings; that said issue was therefore extraneous and improper; and that even assuming the
contrary, it (Holy Cross) had not in truth violated the CBA.

Holy Cross asserts that it could not comply with the check-off provision because contrary to
established practice prior to August, 1989, KAMAPI failed to submit to the college comptroller every
8th day of the month, a list of employees from whom union dues and the corresponding agency fees
were to be deducted; further, that there was an uncertainty as to the recognized bargaining agent
with whom it would deal a matter settled only upon its receipt of a copy of this Court's Resolution
on July 18, 1991 and in any case, the Voluntary Arbitrator's order for it to pay to the union the
uncollected employees' dues or agency fees would amount to the union's unjust enrichment. 14

KAMAPI maintains, on the other hand, that the check-off issue was raised in the position paper it
submitted in the voluntary arbitration proceedings; and that in any case, the issue was intimately
connected with those submitted for resolution and necessary for complete adjudication of the rights
and obligations of the parties; 15 and that said position paper had alleged the manifest bad faith of
management in not providing information as to who were regular employees, thereby precluding
determination of teachers eligible for union membership.

Disregarding the objection of failure to seasonably set up the check-off question the factual
premises thereof not being indisputable, and technical objections of this sort being generally
inconsequential in quasi-judicial proceedings the issues here ultimately boil down to whether or
not an employer is liable to pay to the union of its employees, the amounts it failed to deduct from
their salaries as union dues (with respect to union members) or agency fees(as regards those not
union members) in accordance with the check-off provisions of the collective bargaining contract
(CBA) which it claims to have been automatically extended.

A check-off is a process or device whereby the employer, on agreement with the union recognized
as the proper bargaining representative, or on prior authorization from its employees, deducts union
dues or agency fees from the latter's wages and remits them directly to the union. 16 Its desirability to
a labor organization is quite evident; by it, it is assured of continuous funding. Indeed, this Court has
acknowledged that the system of check-off is primarily for the benefit of the union and, only
indirectly, of the individual laborers. 17 When so stipulated in a collective bargaining agreement, or
authorized in writing by the employees concerned the Labor Code and its Implementing Rules
recognize it to be the duty of the employer to deduct sums equivalent to the amount of union dues
from the employees' wages for direct remittance to the union, in order to facilitate the collection of
funds vital to the role of the union as representative of employees in a bargaining unit if not, indeed,
to its very existence. And it may be mentioned in this connection that the right to union dues
deducted pursuant to a check-off, pertains to the local union which continues to represent the
employees under the terms of a CBA, and not to the parent association from which it has
disaffiliated. 18

The legal basis of check-off is thus found in statute or in contract. 19 Statutory limitations on check-
offs generally require written authorization from each employee to deduct wages; however, a
resolution approved and adopted by a majority to the union members at a general meeting will
suffice when the right to check-off has been recognized by the employer, including collection of
reasonable assessments in connection with mandatory activities of the union, or other special
assessments and extraordinary fees. 20

Authorization to effect a check-off of union dues is co-terminous with the union affiliation or
membership of employees. 21 On the other hand, the collection of agency fees in an amount
equivalent to union dues and fees, from employees who are not union members, is recognized by
Article 248 (e) of the Labor Code. No requirement of written authorization from the non-union
employee is imposed. The employee's acceptance of benefits resulting from a collective bargaining
agreement justifies the deduction of agency fees from his pay and the union's entitlement thereto. In
this aspect, the legal basis of the union's right to agency fees is neither contractual nor statutory, but
quasi-contractual, deriving from the established principle that non-union employees may not unjustly
enrich themselves by benefiting from employment conditions negotiated by the bargaining union. 22

No provision of law makes the employer directly liable for the payment to the labor organization of
union dues and assessments that the former fails to deduct from its employees' salaries and wages
pursuant to a check-off stipulation. The employer's failure to make the requisite deductions may
constitute a violation of a contractual commitment for which it may incur liability for unfair labor
practice. 23 But it does not by that omission, incur liability to the union for the aggregate of dues or
assessments uncollected from the union members, or agency fees for non-union employees.

Check-offs in truth impose an extra burden on the employer in the form of additional administrative
and bookkeeping costs. It is a burden assumed by management at the instance of the union and for
its benefit, in order to facilitate the collection of dues necessary for the latter's life and sustenance.
But the obligation to pay union dues and agency fees obviously devolves not upon the employer, but
the individual employee. It is a personal obligation not demandable from the employer upon default
or refusal of the employee to consent to a check-off. The only obligation of the employer under a
check-off is to effect the deductions and remit the collections to the union. The principle of unjust
enrichment necessarily precludes recovery of union dues or agency fees from the employer,
these being, to repeat, obligations pertaining to the individual worker in favor of the bargaining union.
Where the employer fails or refuses to implement a check-off agreement, logic and prudence dictate
that the union itself undertake the collection of union dues and assessments from its members (and
agency fees from non-union employees); this, of course, without prejudice to suing the employer for
unfair labor practice.

There was thus no basis for the Voluntary Arbitrator to require Holy Cross to assume liability for the
union dues and assessments, and agency fees that it had failed to deduct from its employees'
salaries on the proffered plea that contrary to established practice, KAMAPI had failed to submit to
the college comptroller every 8th day of the month, a list of employees from whose pay union dues
and the corresponding agency fees were to be deducted.

WHEREFORE, the requirement imposed on petitioner Holy Cross by the challenged decision of the
Voluntary Arbitrator, to pay respondent KAMAPI the amount equivalent to the uncollected union
dues and agency fees from August 1989 up to the time a new collective bargaining agreement is
concluded, is NULLIFIED and SET ASIDE; but in all other respects, the decision of the Voluntary
Arbitrator is hereby AFFIRMED.

SO ORDERED.

G.R. No. 132400 January 31, 2005

EDUARDO J. MARIO, JR., MA. MELVYN P. ALAMIS and UST FACULTY UNION, petitioners,
vs.
GIL GAMILLA, DUPONT ASERON and JUSTINO CARDENAS, respondents.

DECISION

TINGA, J.:

This is a petition for review under Rule 45 assailing the Decision1 of the Court of Appeals in CA-G.R.
SP No. 43701,2 setting aside the order and the writ of preliminary mandatory injunction issued by the
lower court.

The facts of the case are as follows:

Sometime in May 1986, the UST Faculty Union (USTFU) entered into an initial collective bargaining
agreement with the University of Santo Tomas (UST) wherein UST undertook to provide USTFU
with a free office space at Room 302 of its Health Center Building.3

On 21 September 1996, the officers and directors of USTFU scheduled a general membership
meeting on 5 October 1996 for the election of the union officers. However, respondent Gamilla and
some faculty members filed a Petition4 with the Med-Arbitration Unit of the Department of Labor and
Employment (DOLE) seeking to stop the holding of the USTFU election.5

Meanwhile, on 2 October 1996, Rev. Fr. Rodel Aligan, O.P., Secretary General of the UST, issued a
Memorandum to the Deans, Regents, Principals and Heads of Departments regarding the holding of
a faculty convocation on 4 October 1996.6

On 4 October 1996, Med-Arbiter Tomas Falconitin issued a temporary restraining order (TRO) in
Case No. NCR-OD-M-9610-001, enjoining the holding of the election of the USTFU officers and
directors. However, denying the TRO they themselves sought, Gamilla and some of the faculty
members present in the 4 October 1996 faculty convocation proceeded with the election of the
USTFU officers. On the other hand, the scheduled election for 5 October 1996 did not push through
by virtue of the TRO.7

In the succeeding week, on 11 October 1996, petitioners filed with the DOLE a petition for
prohibition, injunction, with prayer for preliminary injunction and temporary restraining order,8 seeking
to invalidate the election held on 4 October 1996.

Two months later, on 4 December 1996, UST and USTFU, represented by Gamilla and his co-
officers, entered into a collective bargaining agreement (CBA) for a period of five (5) years from 1
June 1996 up to 31 May 2001. The CBA was ratified on 12 December 1996.9

In another front, the Med-Arbiter issued a TRO dated 11 December 1996, enjoining Gamilla and his
fellow officers to "cease and desist from performing any and all acts pertaining to the duties and
functions of the officers and directors" of USTFU.10

On 27 January 1997, at around eleven in the morning (11:00 a.m.), respondents Gamilla, Cardenas
and Aseron, with some other persons, served a letter of even date on petitioners Mario and Alamis,
demanding that the latter vacate the premises located at Room 302, Health Center Building, UST
the Office of USTFU. However, only the office messenger was in the office at the time. After
coercing the office messenger to step out of the office, Gamilla and company padlocked the door
leading to the unions office.11

On 5 February 1997, petitioners filed with the Regional Trial Court (RTC) of Manila a Complaint12 for
injunction and damages with a prayer for preliminary injunction and temporary restraining order over
the use of the USTFU office.

At the 11 February 1997 hearing on the application for TRO before the trial court, respondents
through a consolidated motion to dismiss sought the dismissal of the complaint on the ground of
forum-shopping and prayed that the trial court suspend the application for injunctive relief until it
shall have resolved the motion to dismiss.13 l^vvphi1.net

On the same date, Med-Arbiter Falconitin rendered a decision,14 declaring the 4 October 1996
election and its results null and void ab initio. The decision was appealed to the Bureau of Labor
Relations which affirmed the same.15 Respondents brought the matter to this Court via a special civil
action for certiorari.16 The Court promulgated its decision,17 dismissing the petition on 16 November
1999.

On 3 March 1997, the RTC issued the assailed order,18 to wit:

WHEREFORE, upon plaintiffs filing a bond in the amount of 50,000.00, let a writ of preliminary
mandatory injunction issue requiring defendants their representatives and agents or other persons
acting in their behalf to remove the padlocks on the door of the UST Faculty Union office located at
Room 302, Health Center Bldg., UST, Espaa, Manila and to refrain from preventing/disturbing in
any manner whatsoever the plaintiffs in entering the said premises.

In the meantime, defendants are hereby ordered to submit their answer to the complaint within
fifteen (15) days from receipt hereof.

On 5 March 1997, after petitioners as plaintiffs therein had posted the requisite bond, the RTC
issued a writ of preliminary mandatory injunction.19

On 19 March 1997, respondents filed a Petition for Certiorari20 before the Court of Appeals, claiming
that the orders dated 3 and 5 March 1997 were void ab initio for lack of jurisdiction and on the
ground that they were issued in violation of due process of law.21 The Court of Appeals stated that
the basic issue of the case was whether the RTC of Manila had jurisdiction over the subject matter of
Civil Case No. 97-81928.22 It agreed with respondents disquisition that petitioners cause of action in
the complaint before the trial court is inextricably linked and intertwined with the issue of who are the
legitimate officers of the USTFU, which issue was then being litigated before the DOLE. The
appellate court held that Civil Case No. 97-81928 and Case No. NCR-OD-M-9610-016 appear to be
the same, with the observation that the civil case merely "grew out" from the labor case. It also cited
the prohibition against the issuance of injunction in any case involving or growing out of a labor
dispute, unless otherwise provided by law.23 It added that it would have been more appropriate for
the RTC to determine whether it had jurisdiction over the subject case before issuing the assailed
orders.24 The dispositive portion of the decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTEDand the assailed order
(dated March 3, 1997) and the writ of preliminary mandatory injunction (dated March 5, 1997) SET
ASIDEand the respondent judge ordered to DISMISS Civil Case No. 97-81928.

SO ORDERED.25 (Emphasis in the original.)

Petitioners Motion for Reconsideration26 was denied. Hence, this petition.

Petitioners assert that the RTC has jurisdiction to decide Civil Case No. 97-81928, as the
determination of the legality and propriety of padlocking the doors of the USTFU office and
preventing the free and unhampered ingress to and egress from the said premises, as alleged in the
complaint, are matters incapable of pecuniary estimation.27Moreover, they claim that the civil case
was premised on causes of action belonging to the USTFU which are to be resolved not by
reference to the Labor Code or other labor relations statutes. They stress that the causes of action
involve a tortious act and the corresponding claim for damages that are both governed by the civil
law and fall under the jurisdiction of regular courts.28

Petitioners add that not all controversies involving members of the same union are to be decided by
the labor tribunal. They add that in the instant case, the pendency of the labor case should not
militate against the civil case they filed since the criminal and civil aspects of a violation of Article
241 of the Labor Code29 can be litigated separately and independently from the administrative aspect
of a breach of the rights and conditions of membership.30

Anent the ruling of the Court of Appeals on the writ of injunction issued by the trial court, petitioners
state that Art. 254 of the Labor Code31 on prohibition against injunctions is not applicable to the
instant case since the controversy cannot be categorized as a labor dispute. They argue that the
injunction was called for considering that they "have rights to be protected and preserved," which
however, "were violated, invaded and trampled upon" by respondents through the acts complained
of.32

Petitioners claim that respondents were not denied their day in court when the trial court did not
resolve the issue of jurisdiction before proceeding with the hearing on the application for injunctive
order. According to them, respondents were given the chance to present their evidence in support of
their opposition to the injunction and TRO, but respondents chose not to avail of this opportunity.33

Lastly, they add that respondents Gamilla, Cardenas and Aseron had no right to act for and in behalf
of the USTFU for the following reasons, to wit: Gamillas claim to the USTFU presidency was
declared non-existent by the labor tribunals; Cardenas was the chief of the security force in the
university and not a faculty member; and, Aseron was a Barangay Chairman and not a member of
the UST faculty.34 Thus, petitioners claim that USTFU was improperly included as petitioner in the
petition35 before the Court of Appeals.

Accordingly, petitioners assert that the Court of Appeals erred and gravely abused its discretion
when:

I. It ruled that the regional trial court had no jurisdiction over Civil Case No. 97-81928;

II. It ruled that Civil Case No. 97-81928 is a labor dispute cognizable by the DOLE;

III. It granted the petition for certiorari in CA-G.R. SP No. 43701, set aside the orders issued by the
trial court, and ordered the dismissal of the civil case;

IV. It ruled that Art. 254 of the Labor Code is applicable to the matters involved in Civil Case No. 97-
81928;

V. It ruled that respondents were denied their day in court; and

VI. It ruled that the Motion for Reconsideration filed in CA-G.R. SP No. 43701 was pro-forma.36

On the other hand, respondents maintain that the regional trial court had no jurisdiction over the
issue as to who has the right to use the union office because the same is inextricably linked and
intertwined with the issue as to who are the legitimate and duly elected officers of the USTFU, which
was then the subject of another case before the DOLE.37 Furthermore, respondents insist that the
trial court violated their right to due process when it refused to determine the issue of jurisdiction
before issuing its assailed orders.38 Respondents submit that the only issue in the instant petition is
whether the RTC has jurisdiction over Civil Case No. 97-81928.39

There is merit in the petition but only in part.

Jurisdiction over a subject matter is conferred by law and determined by the allegations in the
complaint40 and the character of the relief sought, irrespective of whether the plaintiff is entitled to all
or some of the claims asserted therein.41

Central to the assailed decision of the Court of Appeals is its adoption of respondents argument that
the issue in Civil Case No. 97-81928 is "inextricably linked and intertwined with the issue as to who
are the lawful officers of the USTFU," which is within the exclusive jurisdiction of the Secretary of
Labor; and that "the use of the union office is a mere incident of the labor dispute." 42 Specifically, the
Court of Appeals held:

. . . .The two cases (Civil Case No. 97-81928 and Case No. NCR-OD-M-9610-016) appear the
same. While ostensibly, the complaint filed with the trial court was branded injunction and damages,
the action challenged the legitimacy of petitioners election as officers of the UST Faculty Union, with
the plaintiff therein (respondent herein) seeking to enjoin them (petitioners herein) from claiming and
acting as such (elected officers of the union) and to have the election proceedings of October 4,
1996 invalidated and declared null and void. Taking note of plaintiffs (private respondents) previous
moves before the Department of Labor, Civil Case No. 97-81928 appear (sic) to have grown out
therefromhence, said case clearly falls outside of the competence of the trial court.43

Another reason that militates against the trial courts assumption of jurisdiction over the case is
Article 254 of the Labor Code that states:

Art. 254. Injunction prohibited.No temporary or permanent injunction or restraining order in any
case involving or growing out of labor disputes shall be issued by any court or other entity, except as
otherwise provided in Articles 218 and 264 of this Code.44 1awphi 1.nt

As pointed out by petitioners, the Court of Appeals erroneously categorized the instant matter as a
labor dispute. Such labor dispute includes any controversy or matter concerning terms or conditions
of employment or the association or representation of persons in negotiating, fixing, maintaining,
changing or arranging the terms and conditions of employment, regardless of whether the disputants
stand in the proximate relation of employer and employee.45 Jurisdiction over labor disputes,
including claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations is vested in Labor Arbiters and the National Labor Relations Commission
(NLRC).46

On the other hand, an intra-union dispute refers to any conflict between and among union members.
It encompasses all disputes or grievances arising from any violation of or disagreement over any
provision of the constitution and by-laws of a union, not excepting cases arising from chartering or
affiliation of labor organizations or from any violation of the rights and conditions of union
membership provided for in the Labor Code.47 In contrast, an inter-union dispute refers to any conflict
between and among legitimate labor organizations involving questions of representation for
purposes of collective bargaining; it includes all other conflicts which legitimate labor organizations
may have against each other based on any violations of their rights as labor organizations.48 Like
labor disputes, jurisdiction over intra-union and inter-union disputes does not pertain to the regular
courts. It is vested in the Bureau of Labor Relations Divisions in the regional offices of the
Department of Labor.

Case No. NCR-OD-M-9610-016 entitled "Eduardo J. Mario, Jr., et al. v. Gil Gamilla, et al." before
the BLR is neither a labor nor an inter-union dispute. It is clearly an intra-union dispute.

The case before the trial court, Civil Case No. 97-81928 entitled Eduardo J. Mario, Jr. et al. v. Gil
Gamilla, et al.,49on the other hand, is a simple case for damages, with an accompanying application
for injunction. The complaint essentially bears the following allegations: that despite an outstanding
temporary restraining order prohibiting the holding of an election of officers, respondent Gamilla and
others proceeded to hold a purported election; that there was a case pending before the DOLE
questioning the validity of the supposed election; and, that respondent Gamilla with two other
persons (later learned to be respondents Aseron and Cardenas) compelled the office messenger to
vacate the premises of the USTFU office, and thereafter padlocked the room. Petitioners alleged
respondents act of padlocking the office was without lawful basis, and had prevented them from
entering the office premises, thereby denying them access to personal effects, documents and
records needed in the on-going cases both in the DOLE and in the complaint a quo, and ultimately
precluding the union from serving its members.

Fundamentally, the civil case a quo seeks two reliefsone is for the removal of the padlocks on the
office door and restraining respondents from blocking petitioners access to the premises, while the
other is for the recovery of moral and exemplary damages.

Prior to the institution of the civil case, petitioners filed before the Med-Arbitration Unit of the DOLE-
NCR a petition for prohibition, injunction with a prayer for preliminary injunction and temporary
restraining order against herein respondents for the latters assumption of office as elected USTFU
officers. Specifically, they prayed that respondents be enjoined from claiming to be the duly elected
officers of the union and from performing acts for and in behalf of the union.

The propriety of padlocking the unions office, the relief sought by the petitioner in the civil case, is
interwoven with the issue of legitimacy of the assumption of office by the respondents in light of the
violation of the unions constitution and by-laws, which was then pending before the Med-Arbiter.
Necessarily, therefore, the trial court has no jurisdiction over the case insofar as the prayer for the
removal of the padlocks and the issuance of an injunctive writ is concerned.

It is a settled rule that jurisdiction, once acquired, continues until the case is finally terminated.50 The
petition with the Med-Arbiter was filed ahead of the complaint in the civil case before the RTC. As
such, when the petitioners filed their complaint a quo, jurisdiction over the injunction and restraining
order prayed for had already been lodged with the Med-Arbiter. The removal of padlocks and the
access to the office premises is necessarily included in petitioners prayer to enjoin respondents
from performing acts pertaining to union officers and on behalf of the union. In observance of the
principle of adherence of jurisdiction, it is clear that the RTC should not have exercised jurisdiction
over the provisional reliefs prayed for in the complaint. A review of the complaint shows that
petitioners disclosed the existence of the petition pending before the Med-Arbiter and even attached
a copy thereof.51 The trial court was also aware of the decision of the Med-Arbiter dated 11 February
1997, declaring the supposed union officers election void ab initio and ordering respondents to
cease and desist from discharging the duties and functions of the legitimate officers of the USTFU.
The trial court even obtained a copy of the said decision two (2) days after its promulgation.52 Still, it
continued the hearing on the application for injunction and eventually issued the assailed orders.

At this juncture, the Court notes that a key question in this case has already been settled by the
Court in its decision in UST Faculty Union, et al. v. Bitonio, Jr., et al.53 In that case, it was ruled that
the 04 October 1996 election was void for having been conducted in violation of the unions
constitution and by-laws. Nevertheless, the complaint a quo could not have validly proceeded at the
time of its filing of the said case due to petitioners lack of cause of action.

As to the alleged inclusion of the USTFU as petitioner in the petition before the Court of Appeals,
suffice it to say that the right to use the unions name as well as to represent it has been settled by
our decision in UST Faculty Union, et al. v. Bitonio, Jr., et al. Petitioners, as the rightful officers of the
USTFU, and not respondents, have the right to represent USTFU in the proceedings.
Let us go back to the claim for damages before the lower court. Art. 226 of the Labor Code provides,
thus:

The Bureau of Labor Relations and the Labor Relations Divisions 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.

Thus, unlike the NLRC which is explicitly vested with the jurisdiction over claims for actual, moral,
exemplary and other forms of damages,54 the BLR is not specifically empowered to adjudicate claims
of such nature arising from intra-union or inter-union disputes. In fact, Art. 241 of the Labor Code
ordains the separate institution before the regular courts of criminal and civil liabilities arising from
violations of the rights and conditions of union membership. The Court has consistently held that
where no employer-employee 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.55
1awphi1.nt

Administrative agencies are tribunals of limited jurisdiction and as such, can exercise only those
powers which are specifically granted to them by their enabling statutes. Consequently, matters over
which they are not granted authority are beyond their competence.56 While the trend is towards
vesting administrative bodies with the power to adjudicate matters coming under their particular
specialization, to ensure a more knowledgeable solution of the problems submitted to them, this
should not deprive the courts of justice their power to decide ordinary cases in accordance with the
general laws that do not require any particular expertise or training to interpret and apply.57 In their
complaint in the civil case, petitioners do not seek any relief under the Labor Code but the payment
of a sum of money as damages on account of respondents alleged tortuous conduct. The action is
within the realm of civil law and, hence, jurisdiction over the case belongs to the regular courts.58

WHEREFORE, the Petition is hereby GRANTED IN PART. The Decision of the Court of Appeals
setting aside the Order dated 3 March 1997 and the writ of preliminary mandatory injunction dated 5
March 1997 is hereby AFFIRMED. The case is REMANDED to the trial court for further proceedings
in accordance with this Decision. No costs.

SO ORDERED.