G.R. No.
153031 December 14, 2006
PCL SHIPPING PHILIPPINES, INC. and U-MING MARINE TRANSPORT
CORPORATION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and STEVE
RUSEL, respondents.
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules
of Court assailing the Decision1 of the Court of Appeals (CA) dated December
18, 2001 in CA-G.R. SP No. 59976, which affirmed the Decision of the National
Labor Relations Commission (NLRC) dated March 22, 2000 in NLRC NCR CA
No. 018120-99; and the Resolution of the CA dated April 10, 2002, denying
petitioners' motion for reconsideration.2
The facts of the case, as found by the CA, are as follows:
In April 1996, Rusel was employed as GP/AB seaman by manning
agency, PCL Shipping Philippines, Inc. (PCL Shipping) for and in
behalf of its foreign principal, U-Ming Marine Transport Corporation (U-
Ming Marine). Rusel thereby joined the vessel MV Cemtex General
(MV Cemtex) for the contract period of twelve (12) months with a basic
monthly salary of US$400.00, living allowance of US$140.00, fixed
overtime rate of US$120.00 per month, vacation leave with pay of
US$40.00 per month and special allowance of US$175.00.
On July 16, 1996, while Rusel was cleaning the vessel's kitchen, he
slipped, and as a consequence thereof, he suffered a broken and/or
sprained ankle on his left foot. A request for medical examination was
flatly denied by the captain of the vessel. On August 13, 1996, feeling
an unbearable pain in his ankle, Rusel jumped off the vessel using a
life jacket and swam to shore. He was brought to a hospital where he
was confined for eight (8) days.
On August 22, 1996, a vessel's agent fetched Rusel from the hospital
and was required to board a plane bound for the Philippines.
On September 26, 1996, Rusel filed a complaint for illegal dismissal,
non-payment of wages, overtime pay, claim for medical benefits, sick
leave pay and damages against PCL Shipping and U-Ming Marine
before the arbitration branch of the NLRC. In their answer, the latter
alleged that Rusel deserted his employment by jumping off the vessel.
On July 21, 1998, the labor arbiter rendered his decision, the
dispositive portion of which reads as follows:
Wherefore, above premises duly considered we find the
respondent liable for unjust repatriation of the complainant.
Accordingly, the following award is hereby adjudged against
the respondent:
1. The amount of $2,625.00 or its peso equivalent at the time
of payment representing three (3) months salary of the
complainant due to his illegal dismissal.
2. The amount of $1,600.00 or its peso equivalent,
representing sick wage benefits.
3. The amount of $550.00 or its peso equivalent, representing
living allowance, overtime pay and special allowance for two
(2) months.
4. The amount of $641.66 or its peso equivalent, representing
unpaid wages from August 11 to 22, 1996.
5. Attorney's fees equivalent to 10% of the total monetary
award.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.3
Aggrieved by the Decision of the Labor Arbiter, herein petitioners appealed to
the NLRC. In its Decision dated March 22, 2000, the NLRC affirmed the findings
of the Labor Arbiter but modified the appealed Decision, disposing as follows:
WHEREFORE, premises considered, the assailed decision is as it is
hereby ordered MODIFIED in that the amount representing three
 months salary of the complainant due to his illegal dismissal is reduced
to US$1,620.00. Further the award of sick wage benefit is deleted.
All other dispositions are AFFIRMED.
SO ORDERED.4
Petitioners filed a Motion for Reconsideration but the NLRC denied the same in
its Decision of May 3, 2000.5
Petitioners filed a petition for certiorari with the CA.6 In its Decision dated
December 18, 2001, the CA dismissed the petition and affirmed the NLRC
Decision.7
Petitioners filed a Motion for Reconsideration but it was denied by the CA in its
Resolution dated April 10, 2002.8
Hence, the instant petition with the following assignment of errors:
I. The Court of Appeals erred in ruling that private respondent was
illegally dismissed from employment.
xxxx
II. Likewise, the Court of Appeals erred in not upholding petitioners'
right to pre-terminate private respondent's employment.
xxxx
III. The private respondent is not entitled to other money claims,
particularly as to the award of attorney's fees.9
As to their first assigned error, petitioners contend that the CA erred in affirming
the findings of the NLRC that Rusel's act of jumping ship does not establish any
intent on his part to abandon his job and never return. Petitioners argue that
Rusel's very act of jumping from the vessel and swimming to shore is evidence
of highest degree that he has no intention of returning to his job. Petitioners
further contend that if Rusel was indeed suffering from unbearable and
unmitigated pain, it is unlikely that he is able to swim two (2) nautical miles,
which is the distance between their ship and the shore, considering that he
needed to use his limbs in swimming. Petitioners further assert that it is error on
the part of the CA to disregard the entries contained in the logbook and in the
Marine Note Protest evidencing Rusels' offense of desertion because while
these pieces of evidence were belatedly presented, the settled rule is that
additional evidence may be admitted on appeal in labor cases. Petitioners also
contend that Rusel's act of desertion is a grave and serious offense and
considering the nature and situs of employment as well as the nationality of the
employer, the twin requirements of notice and hearing before an employee can
be validly terminated may be dispensed with.
As to their second assigned error, petitioners contend that assuming, for the
sake of argument, that Rusel is not guilty of desertion, they invoked the
alternative defense that the termination of his employment was validly made
pursuant to petitioners' right to exercise their prerogative to pre-terminate such
employment in accordance with Section 19(C) of the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-
Going Vessels, which provision was incorporated in Rusel's Contract of
Employment with petitioners. Petitioners assert that despite the fact that this
issue was raised before the CA, the appellate court failed to resolve the same.
Anent the last assigned error, petitioners argue that it is error on the part of the
CA to affirm the award of living allowance, overtime pay, vacation pay and
special allowance for two months because Rusel failed to submit substantial
evidence to prove that he is entitled to these awards. Petitioners further argue
that these money claims, particularly the claim for living allowance, should not
be granted because they partake of the nature of earned benefits for services
rendered by a seafarer. Petitioners also contend that the balance of Rusel's
wages from August 11-22, 1996 should be applied for the payment of the costs
of his repatriation, considering that under Section 19(E) of the Standard Terms
and Conditions Governing the Employment of Filipino Seafarers On-Board
Ocean-Going Vessels, when a seafarer is discharged for any just cause, the
employer shall have the right to recover the costs of his replacement and
repatriation from the seafarer's wages and other earnings. Lastly, petitioners
argue that the award of attorney's fees should be deleted because there is
nothing in the decision of the Labor Arbiter or the NLRC which states the reason
why attorney's fees are being awarded.
In his Comment, private respondent contends that petitioners are raising issues
of fact which have already been resolved by the Labor Arbiter, NLRC and the
CA. Private respondent argues that, aside from the fact that the issues raised
were already decided by three tribunals against petitioners' favor, it is a settled
rule that only questions of law may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court. While there are exceptions to
this rule, private respondent contends that the instant case does not fall under
any of these exceptions. Private respondent asserts that petitioners failed to
substantiate their claim that the former is guilty of desertion. Private respondent
further contends that the right to due process is available to local and overseas
workers alike, pursuant to the provisions of the Constitution on labor and equal
protection as well as the declared policy contained in the Labor Code. Private
respondent argues that petitioners' act of invoking the provisions of Section
19(C) of the POEA Contract as an alternative defense is misplaced and is
inconsistent with their primary defense that private respondent was dismissed
on the ground of desertion. As to the award of attorney's fees, private
respondent contends that since petitioners' act compelled the former to incur
expenses to protect his interest and enforce his lawful claims, and because
petitioners acted in gross and evident bad faith in refusing to satisfy private
respondent's lawful claims, it is only proper that attorney's fees be awarded in
favor of the latter. Anent the other monetary awards, private respondent argues
that these awards are all premised on the findings of the Labor Arbiter, NLRC
and the CA that private respondent's dismissal was improper and illegal.
The Court finds the petition without merit.
Anent the first assigned error, it is a settled rule that under Rule 45 of the Rules
of Court, only questions of law may be raised in this Court. 10 Judicial review by
this Court does not extend to a re-evaluation of the sufficiency of the evidence
upon which the proper labor tribunal has based its determination.11 Firm is the
doctrine that this Court is not a trier of facts, and this applies with greater force
in labor cases.12 Factual issues may be considered and resolved only when the
findings of facts and conclusions of law of the Labor Arbiter are inconsistent with
those of the NLRC and the CA.13 The reason for this is that the quasi-judicial
agencies, like the Arbitration Board and the NLRC, have acquired a unique
expertise because their jurisdiction are confined to specific matters.14 In the
present case, the question of whether private respondent is guilty of desertion is
factual. The Labor Arbiter, NLRC and the CA are unanimous in their findings
that private respondent is not guilty of desertion and that he has been illegally
terminated from his employment. After a review of the records of the instant
case, this Court finds no cogent reason to depart from the findings of these
tribunals.
Petitioners assert that the entries in the logbook of MV Cemtex General15 and in
the Marine Note Protest16 which they submitted to the NLRC confirm the fact
that private respondent abandoned the vessel in which he was assigned.
However, the genuineness of the Marine Note Protest as well as the entries in
the logbook are put in doubt because aside from the fact that they were
presented only during petitioners' Motion for Reconsideration filed with the
NLRC, both the Marine Note Protest and the entry in the logbook which were
prepared by the officers of the vessel were neither notarized nor authenticated
by the proper authorities. Moreover, a reading of these entries simply shows
that private respondent was presumed to have deserted his post on the sole
basis that he was found missing while the MV Cemtex General was anchored at
the port of Takehara, Japan. Hence, without any corroborative evidence, these
documents cannot be used as bases for concluding that private respondent was
guilty of desertion.
Petitioners also question the findings and conclusion of the Labor Arbiter and
the NLRC that what caused private respondent in jumping overboard was the
unmitigated pain he was suffering which was compounded by the inattention of
the vessel's captain to provide him with the necessary treatment inspite of the
fact that the ship was moored for about two weeks at the anchorage of
Takehara, Japan; and, that private respondent's act was a desperate move to
protect himself and to seek relief for his physical suffering. Petitioners contend
that the findings and conclusions of the Labor Arbiter and the NLRC which were
affirmed by the CA are based on conjecture because there is no evidence to
prove that, at the time he jumped ship, private respondent was really suffering
from an ankle injury.
It is true that no substantial evidence was presented to prove that the cause of
private respondent's confinement in a hospital in Takehara, Japan was his ankle
injury. The Court may not rely on the letter marked as Annex "B" and attached
to private respondent's Position Paper because it was unsigned and it was not
established who executed the same.17 However, the result of the x-ray
examination conducted by the LLN Medical Services, Inc. on August 26, 1996,
right after private respondent was repatriated to the Philippines, clearly showed
that there is a soft-tissue swelling around his ankle joint.18 This evidence is
consistent with private respondent's claim that he was then suffering from an
ankle injury which caused him to jump off the ship.
As to petitioners' contention that private respondent could not have traversed
the distance between the ship and the shore if he was indeed suffering from
unbearable pain by reason of his ankle injury, suffice it to say that private
respondent is an able-bodied seaman and that with the full use of both his arms
and the help of a life jacket, was able to reach the shore.
As correctly defined by petitioners, desertion, in maritime law is:
The act by which a seaman deserts and abandons a ship or vessel, in
which he had engaged to perform a voyage, before the expiration of
his time, and without leave. By desertion, in maritime law, is meant, not
a mere unauthorized absence from the ship, without leave, but an
unauthorized absence from the ship with an intention not to return
 to her service; or as it is often expressed, animo non revertendi, that
is, with an intention to desert.19 (emphasis supplied)
Hence, for a seaman to be considered as guilty of desertion, it is essential that
there be evidence to prove that if he leaves the ship or vessel in which he had
engaged to perform a voyage, he has the clear intention of abandoning his duty
and of not returning to the ship or vessel. In the present case, however,
petitioners failed to present clear and convincing proof to show that when
private respondent jumped ship, he no longer had the intention of returning. The
fact alone that he jumped off the ship where he was stationed, swam to shore
and sought medical assistance for the injury he sustained is not a sufficient
basis for petitioners to conclude that he had the intention of deserting his post.
Settled is the rule that in termination cases, the burden of proof rests upon the
employer to show that the dismissal is for a just and valid cause. 20 The case of
the employer must stand or fall on its own merits and not on the weakness of
the employee's defense.21 In the present case, since petitioners failed to
discharge their burden of proving that private respondent is guilty of desertion,
the Court finds no reason to depart from the conclusion of the Labor Arbiter,
NLRC and the CA that private respondent's dismissal is illegal.
In their second assigned error, petitioners cite Section 19(C) of POEA
Memorandum Circular No. 055-9622 known as the Revised Standard
Employment Terms and Conditions Governing the Employment of Filipino
Seafarers On Board Ocean-Going Vessels as their alternative basis in
terminating the employment of private respondent. Said Section provides as
follows:
Section 19. REPATRIATION
xxxx
C. If the vessel arrives at a convenient port within a period of three
months before the expiration of his contract, the master/ employer may
repatriate the seafarer from such port provided that the seafarer shall
be paid all his earned wages. In addition, the seafarer shall also be
paid his leave pay for the entire contract period plus a termination pay
equivalent to one (1) month of his basic pay, provided, however, that
this mode of termination may only be exercised by the
master/employer if the original contract period of the seafarer is at
least ten (10) months; provided, further, that the conditions for this
mode of termination shall not apply to dismissal for cause.
The Court is not persuaded. POEA Memorandum Circular No. 055-96 took
effect on January 1, 1997 while the contract of employment entered into by and
between private respondent and petitioners was executed on April 10, 1996.
Hence, it is wrong for petitioners to cite this particular Memorandum because at
the time of petitioners' and private respondent's execution of their contract of
employment Memorandum Circular No. 055-96 was not yet effective.
What was in effect at the time private respondent's Contract of Employment was
executed was POEA Memorandum Circular No. 41, Series of 1989. It is clearly
provided under the second paragraph of private respondent's Contract of
Employment that the terms and conditions provided under Memorandum
Circular No. 41, Series of 1989 shall be strictly and faithfully observed. Hence, it
is Memorandum Circular No. 41, Series of 1989 which governs private
respondent's contract of employment.
Section H (6), Part I of Memorandum Circular No. 41, which has almost identical
provisions with Section 19 (C) of Memorandum Circular No. 055-96, provides as
follows:
SECTION H. TERMINATION OF EMPLOYMENT
xxxx
6. If the vessel arrives at a convenient port within a period of three (3)
months before the expiration of the Contract, the master/employer may
repatriate the seaman from such port provided that the seaman shall
be paid all his earned wages. In addition, the seaman shall also be
paid his leave pay for the entire contract period plus a termination pay
equivalent to one (1) month of his basic pay, provided, however, that
this mode of termination may only be exercised by the
master/employer if the original contact period of the seaman is at least
ten (10) months; provided, further, that the conditions for this mode of
termination shall not apply to dismissal for cause.
The Court agrees with private respondent's contention that petitioners'
arguments are misplaced. Petitioners may not use the above-quoted provision
as basis for terminating private respondent's employment because it is
incongruent with their primary defense that the latter's dismissal from
employment was for cause. Petitioners may not claim that they ended private
respondent's services because he is guilty of desertion and at the same time
argue that they exercised their option to prematurely terminate his employment,
even without cause, simply because they have the right to do so under their
contract. These grounds for termination are inconsistent with each other such
that the use of one necessarily negates resort to the other. Besides, it appears
from the records that petitioners' alternative defense was pleaded merely as an
afterthought because it was only in their appeal with the NLRC that they raised
this defense. The only defense raised by petitioners in their Answer with
Counterclaim filed with the office of the Labor Arbiter is that private respondent
was dismissed from employment by reason of desertion. 23Under the Rules of
Court,24 which is applicable in a suppletory character in labor cases before the
Labor Arbiter or the NLRC pursuant to Section 3, Rule I of the New Rules of
Procedure of the NLRC25, defenses which are not raised either in a motion to
dismiss or in the answer are deemed waived.26
Granting, for the sake of argument, that petitioners may use Section H (6), Part I
of Memorandum Circular No. 41 or Section 19(C) of Memorandum Circular No.
055-96 as basis for terminating private respondent's employment, it is clear that
one of the conditions before any of these provisions becomes applicable is
when the vessel arrives at a convenient port within a period of three (3) months
before the expiration of the contract of employment. In the present case, private
respondent's contract was executed on April 10, 1996 for a duration of twelve
months. He was deployed aboard MV Cemtex General on June 25, 1996 and
repatriated to the Philippines on August 22, 1996. Hence, it is clear that
petitioners did not meet this condition because private respondent's termination
was not within a period of three months before the expiration of his contract of
employment.
Moreover, the Court finds nothing in the records to show that petitioners
complied with the other conditions enumerated therein, such as the payment of
all of private respondent's earned wages together with his leave pay for the
entire contract period as well as termination pay equivalent to his one month
salary.
Petitioners admit that they did not inform private respondent in writing of the
charges against him and that they failed to conduct a formal investigation to
give him opportunity to air his side. However, petitioners contend that the twin
requirements of notice and hearing applies strictly only when the employment is
within the Philippines and that these need not be strictly observed in cases of
international maritime or overseas employment.
The Court does not agree. The provisions of the Constitution as well as the
Labor Code which afford protection to labor apply to Filipino employees whether
working within the Philippines or abroad. Moreover, the principle of lex loci
contractus (the law of the place where the contract is made) governs in this
jurisdiction.27 In the present case, it is not disputed that the Contract of
Employment entered into by and between petitioners and private respondent
was executed here in the Philippines with the approval of the Philippine
Overseas Employment Administration (POEA). Hence, the Labor Code together
with its implementing rules and regulations and other laws affecting labor apply
in this case.28 Accordingly, as to the requirement of notice and hearing in the
case of a seafarer, the Court has already ruled in a number of cases that before
a seaman can be dismissed and discharged from the vessel, it is required that
he be given a written notice regarding the charges against him and that he be
afforded a formal investigation where he could defend himself personally or
through a representative.29 Hence, the employer should strictly comply with the
twin requirements of notice and hearing without regard to the nature and situs of
employment or the nationality of the employer. Petitioners failed to comply with
these twin requirements.
Petitioners also contend that the wages of private respondent from August 11-
22, 1996 were applied to the costs of his repatriation. Petitioners argue that the
off-setting of the costs of his repatriation against his wages for the
aforementioned period is allowed under the provisions of Section 19(E) of
Memorandum Circular No. 055-96 which provides that when the seafarer is
discharged for any just cause, the employer shall have the right to recover the
costs of his replacement and repatriation from the seafarer's wages and other
earnings.
The Court does not agree. Section 19(E) of Memorandum Circular No. 055-96
has its counterpart provision under Section H (2), Part II of Memorandum
Circular No. 41, to wit:
SECTION H. REPATRIATION
xxxx
2. When the seaman is discharged for disciplinary reasons, the
employer shall have the right to recover the costs of maintenance and
repatriation from the seaman's balance of wages and other earnings.
xxxx
It is clear under the above-quoted provision that the employer shall have the
right to recover the cost of repatriation from the seaman's wages and other
earnings only if the concerned seaman is validly discharged for disciplinary
measures. In the present case, since petitioners failed to prove that private
respondent was validly terminated from employment on the ground of desertion,
it only follows that they do not have the right to deduct the costs of private
respondent's repatriation from his wages and other earnings.
Lastly, the Court is not persuaded by petitioners' contention that the private
respondent is not entitled to his money claims representing his living allowance,
overtime pay, vacation pay and special allowance as well as attorney's fees
because he failed to present any proof to show that he is entitled to these
awards.
However, the Court finds that the monetary award representing private
respondent's three months salary as well as the award representing his living
allowance, overtime pay, vacation pay and special allowance should be
modified.
The Court finds no basis in the NLRC's act of including private respondent's
living allowance as part of the three months salary to which he is entitled under
Section 10 of Republic Act (RA) No. 8042, otherwise known as the "Migrant
Workers and Overseas Filipinos Act of 1995." The pertinent provisions of the
said Act provides:
Sec. 10. Money Claims –
xxxx
In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the worker shall be
entitled to the full reimbursement of his placement fee with interest at
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.
xxxx
It is clear from the above-quoted provision that what is included in the
computation of the amount due to the overseas worker are only his salaries.
Allowances are excluded. In the present case, since private respondent
received a basic monthly salary of US$400.00, he is, therefore, entitled to
receive a sum of US$1200.00, representing three months of said salary.
As to the awards of living allowance, overtime pay, vacation pay and special
allowance, it is clearly provided under private respondent's Contract of
Employment that he is entitled to these benefits as follows: living allowance of
US$140.00/month; vacation leave with pay equivalent to US$40.00/month;
overtime rate of US$120.00/month; and, special allowance of
US$175.00/month.30
With respect, however, to the award of overtime pay, the correct criterion in
determining whether or not sailors are entitled to overtime pay is not whether
they were on board and can not leave ship beyond the regular eight working
hours a day, but whether they actually rendered service in excess of said
number of hours.31 In the present case, the Court finds that private respondent
is not entitled to overtime pay because he failed to present any evidence to
prove that he rendered service in excess of the regular eight working hours a
day.
On the basis of the foregoing, the remaining benefits to which the private
respondent is entitled is the living allowance of US$140.00/month, which was
removed in the computation of private respondent's salary, special allowance of
US$175.00/month and vacation leave with pay amounting to US$40.00/month.
Since private respondent rendered service for two months these benefits should
be doubled, giving a total of US$710.00.
As to the award of attorney's fees, this Court ruled in Reyes v. Court of
Appeals,32 as follows:
x x x [T]here are two commonly accepted concepts of attorney's fees,
the so-called ordinary and extraordinary. In its ordinary concept, an
attorney's fee is the reasonable compensation paid to a lawyer by his
client for the legal services he has rendered to the latter. The basis of
this compensation is the fact of his employment by and his agreement
with the client. In its extraordinary concept, attorney's fees are deemed
indemnity for damages ordered by the court to be paid by the losing
party in a litigation. The instances where these may be awarded are
those enumerated in Article 2208 of the Civil Code, specifically par. 7
thereof which pertains to actions for recovery of wages, and is payable
not to the lawyer but to the client, unless they have agreed that the
award shall pertain to the lawyer as additional compensation or as part
thereof. The extraordinary concept of attorney's fees is the one
contemplated in Article 111 of the Labor Code, which provides:
Art. 111. Attorney's fees. – (a) In cases of unlawful
withholding of wages, the culpable party may be assessed
attorney's fees equivalent to ten percent of the amount of
wages recovered x x x
 The afore-quoted Article 111 is an exception to the declared
policy of strict construction in the awarding of attorney's fees.
Although an express finding of facts and law is still necessary to
prove the merit of the award, there need not be any showing that
the employer acted maliciously or in bad faith when it withheld
the wages. There need only be a showing that the lawful wages
were not paid accordingly, as in this case.

In carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the employee's welfare should be the
primordial and paramount consideration. This kind of interpretation
gives meaning and substance to the liberal and compassionate spirit of
the law as provided in Article 4 of the Labor Code which states that
"[a]ll doubts in the implementation and interpretation of the provisions
of [the Labor] Code including its implementing rules and regulations,
shall be resolved in favor of labor", and Article 1702 of the Civil Code
which provides that "[i]n case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living for
the laborer."33 (Emphasis supplied)

In the present case, it is true that the Labor Arbiter and the NLRC failed to state
the reasons why attorney's fees are being awarded. However, it is clear that
private respondent was illegally terminated from his employment and that his
wages and other benefits were withheld from him without any valid and legal
basis. As a consequence, he is compelled to file an action for the recovery of
his lawful wages and other benefits and, in the process, incurred expenses. On
these bases, the Court finds that he is entitled to attorney's fees.

WHEREFORE, the petition is PARTLY GRANTED. The Court of Appeals'

Decision dated December 18, 2001 and Resolution dated April 10, 2002
are AFFIRMED with MODIFICATION to the effect that the award of
US$1620.00 representing private respondent's three months salary is reduced
to US$1200.00. The award of US$550.00 representing private respondent's
living allowance, overtime pay, vacation pay and special allowance for two
months is deleted and in lieu thereof, an award of US$710.00 is granted
representing private respondent's living allowance, special allowance and
vacation leave with pay for the same period.

No costs.

SO ORDERED.
G.R. No. 153882 January 29, 2007
LINGKOD MANGGAGAWA SA RUBBERWORLD, ADIDAS-ANGLO, its
officers and members as represented by SONIA ESPERANZA, Petitioners,
vs.
RUBBERWORLD (PHILS.) INC. and ANTONIO YANG, LAYA MANANGHAYA
SALGADO & CO., CPA’s (In its capacity as liquidator of Rubberworld
(Phils., Inc.), Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review under Rule 45 of
the Rules of Court is the Decision 1dated January 18, 2002 of the Court of
Appeals (CA) in CA-G.R. SP No. 53356, as reiterated in its Resolution 2 of June
5, 2002, denying the petitioners’ motion for reconsideration. The assailed CA
decision annulled and set aside an earlier decision of the Labor Arbiter, as well
as the resolution/order and writ of execution issued by the National Labor
Relations Commission (NLRC) in a labor dispute between the petitioners and
the respondents over which a suspension order had been issued by the
Securities and Exchange Commission (SEC).
Petitioner Lingkod Manggagawa sa Rubberworld, Adidas-Anglo is a legitimate
labor union whose members were employees of the principal respondent,
Rubberworld Philippines, Inc.(Rubberworld, for short), a domestic corporation
engaged in the manufacture of footwear, bags and garments.
The facts:
On August 26, 1994, Rubberworld filed with the Department of Labor and
Employment (DOLE) a Notice of Temporary Partial Shutdown due to severe
financial crisis, therein announcing the formal actual company shutdown to take
effect on September 26, 1994. A copy of said notice was served on the
recognized labor union of Rubberworld, the Bisig Pagkakaisa-NAFLU, the union
with which the corporation had a collective bargaining agreement.
On September 1, 1994, Bisig Pagkakaisa-NAFLU staged a strike. It set up a
picket line in front of the premises of Rubberworld and even welded its gate. As
a result, Rubberworld's premises closed prematurely even before the date set
for the start of its temporary partial shutdown.
On September 9, 1994, herein petitioner union, the Lingkod Manggagawa Sa
Rubberworld, Adidas-Anglo (Lingkod, for brevity), represented by its President,
Sonia Esperanza, filed a complaint against Rubberworld and its Vice
Chairperson, Mr. Antonio Yang, for unfair labor practice (ULP), illegal shutdown,
and non-payment of salaries and separation pay. In its complaint, docketed as
NLRC-NCR-Case No. 00-09-06637 (hereinafter referred to as ULP Case, for
brevity), petitioner union alleged that it had filed a petition for certification
election during the freedom period, which petition was granted by the DOLE
Regional Director. In the same complaint, petitioner union claimed that the strike
staged by Bisig Pagkakaisa-NAFLU was company-instigated/supported. The
said complaint was referred to Labor Arbiter Ernesto Dinopol for appropriate
action.
On November 22, 1994, while the aforementioned complaint was pending with
Labor Arbiter Dinopol, Rubberworld filed with the SEC a Petition for Declaration
of a State of Suspension of Payments with Proposed Rehabilitation Plan. The
petition, docketed as SEC Case No. 11-94-4920, was granted by the SEC in its
Order 3 dated December 28, 1994, to wit:
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 of
attachments, foreclosures and the like are hereby rendered moot and academic.
SO ORDERED.
Notwithstanding the SEC's aforementioned suspension order and despite
Rubberworld's submission on January 10, 1995 of a Motion to Suspend
Proceedings, 4 Labor Arbiter Dinopol went ahead with the ULP case and
rendered his decision 5 thereon on August 16, 1995, saying in part, thus:
x x x [I]t is crystal clear that the SEC Order notwithstanding, Labor Arbiters and
the National Labor Relations Commission should not abdicate the jurisdiction
which Article 217 of the Labor Code has conferred upon them subject to the
condition that awards, if any, should be presented to the Management
Committee for processing and payment,
and disposing as follows:
WHEREFORE, decision is hereby rendered:
 1) denying respondents motion to suspend proceedings;
2) declaring respondent Rubberworld Phils., Inc. to have committed
unfair labor practice;
3) declaring the temporary shutdown to have been officially ended as
of March 26, 1995;
4) ordering respondent Rubberworld Phils., Inc. to reinstate
complainant-Union's members who indicate their intention to be so
reinstated within one month from the receipt of this decision by
complainants' counsel;
5) ordering respondent Rubberworld Phils., Inc. to pay the members of
the complainant-Union their backwages computed from April 26, 1995
and separation pay if reinstatement is no longer possible plus 10% of
the total award of attorney's.
For purposes of quantifying the backwages and separation pay, and identifying
the recipients thereof, Mr. Ricardo Atienza of the Research and Information Unit
of this Commission is hereby directed to proceed to the office of the respondent
Rubberworld whose responsible officers are ordered to allow Mr. Atienza or his
representative access to such records as may be necessary and render a report
thereon within 30 days from his receipt of this Decision.
For purposes of any appeal, the appeal bond is tentatively set at P500,000.00.
SO ORDERED.
On September 21, 1995, Rubberworld went on appeal to the NLRC, posting
therefor a temporary appeal bond in the amount of P500,000.00 as tentatively
fixed by the Labor Arbiter. Meanwhile, on October 10, 1995, Ricardo Atienza of
the NLRC’s Research and Information Unit submitted his report on the
computation of the monetary awards, as ordered by the Labor Arbiter. He came
out with the total amount of Twenty Seven Million Five Hundred Six Thousand
and Two Hundred Fifty-Five Pesos and 70/100 (P27,506,255.70). Despite
Rubberworld’s vigorous opposition, the First Division of the NLRC, in its
Order 6 of January 22, 1996, required the corporation to post an appeal bond in
an amount equivalent to Mr. Atienza’s computation, with a warning that failure to
do so shall result in the dismissal of its appeal for non-perfection, thus:
Accordingly, respondents-appellants are hereby directed to upgrade or
complete their Appeal Bond in the amount equivalent to Twenty Seven Million
Five Hundred Six Thousand Two Hundred Fifty-Five Pesos and 70/100
(P27,506,255.70) pursuant to the award as computed by Ricardo O. Atienza
within ten (10) days from receipt of this Order.
Failure of the respondents-appellants to comply with this directive will give this
Commission no choice but to dismiss their appeal for non-perfection thereof.
Its motion for reconsideration of the same Order having been denied by the
NLRC in its Resolution 7 of March 29, 1996, Rubberworld directly went to this
Court on a Petition for Certiorari, 8 interposing the sole issue of whether or not
the NLRC acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction in requiring the corporation
to post the upgraded appeal bond of P27,506,255.70 based on the computation
of Mr. Atienza.
Meanwhile, on account of Rubberworld’s failure to upgrade or complete its
appeal bond as indicated in the NLRC’s January 22, 1996 Order, the
Commission, in a decision 9 dated June 28, 1996, did dismiss Rubberworld’s
appeal. Owing to this development, Rubberworld filed with the Court a
Supplemental Petition for Certiorari, 10 therein incorporating its challenge to the
said dismissal order of the NLRC, contending that the labor tribunal acted
without or in excess of jurisdiction.
On April 22, 1998, the SEC issued an Order 11 declaring Rubberworld as
dissolved and lifting its earlier suspension order, to wit:
Finding that the continuance in business [of Rubberworld] would neither be
feasible/profitable nor work to the best of interest of the stockholders, parties-
litigants, creditors, or the general public, xxx Rubberworld Philippines, Inc. is
hereby DISSOLVED under Section 6(d) of P.D. 902-A. Accordingly, the
suspension Order is LIFTED.
The Laya Mananghaya Salgado & Co., CPA’s is hereby appointed as liquidator
to effect the dissolution of the petitioner.
SO ORDERED.
On August 18, 1995, a writ of execution 12 was issued by the NLRC in favor of
the petitioner union with a copy thereof served on the respondent corporation.
Faced with this dilemma, Rubberworld filed with the Court an Urgent Omnibus
Motion to declare null and void the execution/garnishment made pursuant to the
same writ. The motion, however, was denied by the Court in its Resolution of
November 18, 1998.
On February 8, 1999, Rubberworld filed with the Court a Motion to Admit its
Amended Petition for Certiorari 13 and its Supplement, 14 alleging therein that
pursuant to the SEC Order dated December 28, 1994, supra, the proceedings
before the Labor Arbiter should have been suspended. Hence, since the Labor
Arbiter disregarded the SEC’s suspension order, the subsequent proceedings
before it were null and void.
Consistent with its ruling in St. Martin Funeral Homes v. NLRC, 15 the Court, in
its Resolution of February 29, 1999, referred Rubberworld’s amended petition
for certiorari and its supplement to the CA for appropriate action, whereat it was
docketed as CA- G.R. SP No. 53356.
For its part, the CA, in its Resolution 16 of May 11, 2000, over the vehement
opposition of the petitioner union, resolved to admit Rubberworld’s
aforementioned amended petition and the supplement thereto "in the interest of
justice."
Eventually, in the herein assailed Decision 17 dated January 18, 2002, the CA
granted Rubberworld’s petition in CA–G.R. SP. No. 53356 on the finding that
the Labor Arbiter had indeed committed grave abuse of discretion when it
proceeded with the ULP case despite the SEC’s suspension order of December
28, 1994, and accordingly declared the proceedings before it, including the
subsequent orders by the NLRC dismissing Rubberworld’s appeal and the writ
of execution, null and void.
With their motion for reconsideration having been denied in the CA in its
Resolution 18 of June 5, 2002, petitioners are now with the Court via the instant
recourse, raising the following issues:
1) Whether the CA had committed grave abuse of discretion
amounting to lack of jurisdiction or an excess in the exercise thereof
when it gave due course to the petition filed by Rubberworld (Phils.),
Inc. and annulled and set aside the decisions rendered by the labor
arbiter a quo and the NLRC, when the said decisions had become final
and executory warranting the outright dismissal of the aforesaid
petition;
2) Whether the CA had committed grave abuse of discretion and
reversible error when it applied Section 5(d) and Section 6 (c) of P.D.
No. 902-A, as amended, to the case at bar;
3) Whether the CA had committed reversible error when it adopted and
applied the rulings in the cases of Rubberworld (Phils.), Inc., or Julie
Yap Ong v. NLRC, Marilyn F. Arellano, et. al. 19 and Rubberworld
(Phils.), Inc. and Julie Y. Ong v. NLRC, Aquino Magsalin, et. al. 20 to
the case at bar.
We DENY.
It is the petitioners’ submission that the decision of the Labor Arbiter, the
affirmatory decision of the NLRC and the latter’s dismissal of Rubberworld’s
appeal, as well the writ of execution subsequently issued, can no longer be
annulled and set aside, the same having all become final and executory.
Additionally, petitioners argue that no appeal from the decision of the Labor
Arbiter was ever perfected due to Rubberworld's failure to upgrade or post
additional bond as ordered by the NLRC. Hence, they submit that the CA acted
in grave abuse of discretion in even giving due course to Rubberworld’s petition
in CA-G.R. SP No. 53356, let alone rendering a decision thereon annulling and
setting aside the proceedings before the Labor Arbiter and the NLRC’s
dismissal of Rubberworld’s appeal and the writ of execution issued following the
dismissal of said appeal.
The Court disagrees.
While posting an appeal bond is indeed a requirement for the perfection of an
appeal from the decision of the Labor Arbiter to the NLRC, Rubberworld’s failure
to upgrade its appeal bond cannot bar, in this particular instance, the review by
the CA of the lower court proceedings.
Given the factual milieu obtaining in this case, it cannot be said that the decision
of the Labor Arbiter, or the decision/dismissal order and writ of execution issued
by the NLRC, could ever attain final and executory status. The Labor Arbiter
completely disregarded and violated Section 6(c) of Presidential Decree 902-A,
as amended, which categorically mandates the suspension of all actions for
claims against a corporation placed under a management committee by the
SEC. Thus, the proceedings before the Labor Arbiter and the order and writ
subsequently issued by the NLRC are all null and void for having been
undertaken or issued in violation of the SEC suspension Order dated December
28, 1994. As such, the Labor Arbiter’s decision, including the dismissal by the
NLRC of Rubberworl’s appeal, could not have achieved a final and executory
status.
Acts executed against the provisions of mandatory or prohibitory laws shall be
void, except when the law itself authorizes their validity. 21 The Labor Arbiter's
decision in this case is void ab initio, and therefore, non-existent. 22 A void
judgment is in effect no judgment at all. No rights are divested by it nor obtained
from it. Being worthless in itself, all proceedings upon which the judgment is
founded are equally worthless. It neither binds nor bars anyone. All acts
performed under it and all claims flowing out of it are void. 23 In other words, a
void judgment is regarded as a nullity, and the situation is the same as it would
be if there were no judgment. It accordingly leaves the party-litigants in the
same position they were in before the trial. 24
In fact, it is immaterial whether an appeal from the Labor Arbiter's decision was
perfected or not, since a judgment void ab initio is non-existent and cannot
acquire finality. 25 The judgment is vulnerable to attack even when no appeal
has been taken. Hence, such judgment does not become final in the sense of
depriving a party of his right to question its validity. 26 Hence, no grave abuse of
discretion attended the CA's taking cognizance of the petition in CA-G.R. SP
No. 53356.
Besides, the Labor Arbiter, by simultaneously ruling in his decision of August
16, 1995 on both the merits of the ULP case and the motion of Rubberworld to
suspend the proceedings thereon, effectively required the respondent
corporation to post a surety bond before the same respondent could have
questioned the arbiter’s action in not suspending the proceedings before him.
A bond is only mandatory from an appeal of the decision itself on the merits
ofthe laborers' money claims to ensure payment thereof. Had the Labor Arbiter
taken heed of Rubberworld’s motion to suspend proceedings when that motion
was filed, and ruled upon it separately, no bond would have been required for a
review of his resolution thereon. As it were, the Labor Arbiter chose to continue
to decide the main case, then to incorporate in his decision the denial of
Rubberworld’s motion to suspend proceedings, thereby effectively requiring a
bond on a question which would not have ordinarily required one.
We shall now address the more substantial issue in this case, namely, the
applicability of the provisions of Section 5 (d) and Section 6 (c) of P.D. No. 902-
A, as amended, reorganizing the SEC, vesting it with additional powers and
placing it under the Office of the President, which respectively read:
Section 5. In addition to the regulatory adjudicative functions of the Securities
and Exchange Commission over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to hear and decide
cases involving:
xxx xxx xxx
d) Petitions of corporations, partnerships or associations to be declared in the
state of suspension of payments in cases where the corporation, partnership or
association possesses sufficient property to cover all its debts but foresees the
impossibility of meeting them when they respectively fall due or in cases where
the corporation, partnership or association has no sufficient assets to cover its
liabilities, but is under the management of a rehabilitation receiver or
management committee created pursuant to this Decree.
Section 6. In order to effectively exercise such jurisdiction, the Commission shall
possess the following powers:
xxx xxx xxx
c) To appoint one or more receivers of the property, real or personal, which is
the subject of the action pending before the Commission in accordance with the
pertinent provisions of the Rules of Court in such other cases whenever
necessary in order to preserve the rights of the parties-litigants and/or protect
the interest of the investing public and creditors: x x x Provided,
finally, That upon appointment of a management committee, the
rehabilitation receiver, board or body, pursuant to this Decree, all actions
for claims against corporations, partnerships, or associations under
management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly. [Emphasis supplied]
As correctly ruled by the CA, the issue of applicability in labor cases of the
aforequoted provisions of PD 902-A, as amended, had already been resolved
by this Court in its earlier decisions in Rubberworld (Phils.), Inc., or Julie Yap
Ong v. NLRC, Marilyn F. Arellano, et. al. 27 and Rubberworld (Phils.), Inc. and
Julie Y. Ong v. NLRC, Aquino, Magsalin, et. al, 28 supra.
In the first Rubberworld case, the Court upheld the applicability of PD 902-A to
labor cases pursuant to Section 5(d) and Section 6(c) thereof, with the following
pronouncements:
It is plain from the foregoing provisions of the law that "upon the appointment
[by the SEC] of a management committee or a rehabilitation receiver," all
actions for claims against the corporation pending before any court, tribunal or
board shall ipso jure be suspended. 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." 29
xxx xxx xxx
x x x The law is clear: upon the creation of a management committee or
the appointment of a rehabilitation receiver, all claims for actions "shall be
suspended accordingly." No exception in favor of labor claims is
mentioned in the law. Since the law makes no distinction or exemptions,
neither should this Court. Ubi lex non distinguit nec nos distinguere
debemos. Allowing labor cases to proceed clearly defeats the purpose of the
automatic stay and severely encumbers the management committee's time and
resources. The said committee would need to defend against these suits, to the
detriment of its primary and urgent duty to work towards rehabilitating the
corporation and making it viable again. To rule otherwise would open the
floodgates to other similarly situated claimants and forestall if not defeat the
rescue efforts. Besides, even if the NLRC awards the claims of private
respondents, its ruling could not be enforced as long as the petitioner is under
the management committee. 30
In Chua v. National Labor Relations Commission, we ruled that labor claims
cannot proceed independently of a bankruptcy liquidation proceeding, since
these claims "would spawn needless controversy, delays, and
confusion."31 With more reason, allowing labor claims to continue in spite of a
SEC suspension order in a rehabilitation case would merely lead to such
results.
xxx xxx xxx
Article 217 of the Labor Code should be construed not in isolation but in
harmony with PD 902-A, according to the basic rule in statutory construction
that implied repeals are not favored. 32 Indeed, it is axiomatic that each and
every statute must be construed in a way that would avoid conflict with existing
laws. True, the NLRC has the power to hear and decide labor disputes, but
such authority is deemed suspended when PD 902-A is put into effect by
the Securities and Exchange Commission. [Emphasis supplied]
The second Rubberworld case reiterates the above pronouncements of the
Court:
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.
xxx xxx xxx
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. [Emphasis
supplied]
Petitioners argue, however, that the doctrines laid down in the two aforecited
cases cannot be made to apply to the instant controversy because the SEC
order therein only mandates that all pending cases against Rubberworld
Philippines, Inc. should be deemed suspended. Petitioners contend that the
decision of the Labor Arbiter in the present case, as well the order of dismissal
and writ of execution issued by NLRC, have become final and executory by
reason of Rubberworld’s failure to perfect its appeal by not upgrading or
completing the required cash or surety bond as ordained by the NLRC.
Petitioners thus conclude that the doctrine of stare decisis cannot apply to the
instant case.
Petitioners are in error.
It is incontrovertible that the denial of Rubberworld’s motion to suspend
proceedings in the principal case was incorporated in the decision of the Labor
Arbiter. Obviously, then, the Labor Arbiter’s decision of August 16, 1995 was
rendered at a time when Lingkod’s complaint against Rubberworld in NLRC-
NCR-Case No. 00-09-06637-94 ought to have been suspended.
In short, at the time the SEC issued its suspension Order of December 28,
1994, the proceedings before the Labor Arbiter were still very much pending. As
such, no final and executory decision could have validly emanated therefrom.
Like the CA, we do not see any reason why the doctrine of stare decisis will not
apply to this case.

For being well-grounded in fact and law, the assailed CA decision and
resolution in CA-G.R. SP No. 53356 cannot be said to have been tainted with
grave abuse of discretion or issued in excess or want of jurisdiction. We find no
reason to overturn such rulings.

WHEREFORE, the instant petition is DENIED and the assailed decision and
resolution of the CA are AFFIRMED.

Costs against the petitioner.

SO ORDERED.