G.R. Nos.
174941 February 1, 2012 disputed the argument of petitioner Salenga that his position was that of a regular
ANTONIO P. SALENGA and NATIONAL LABOR RELATIONS
COMMISSION, Petitioners,
vs.
COURT OF APPEALS and CLARK DEVELOPMENT
CORPORATION, Respondents.
DECISION
SERENO, J.:
The present Petition for Certiorari under Rule 65 assails the Decision1 of the Court of
Appeals (CA) promulgated on 13 September 2005, dismissing the Complaint for illegal
dismissal filed by petitioner Antonio F. Salenga against respondent Clark Development
Corporation (CDC). The dispositive portion of the assailed Decision states:
WHEREFORE, premises considered, the original and supplemental petitions are
GRANTED. The assailed resolutions of the National Labor Relations Commission dated
September 10, 2003 and January 21, 2004 are ANNULLED and SET ASIDE. The
complaint filed by Antonio B. Salenga against Clark Development is DISMISSED.
Consequently, Antonio B. Salenga is ordered to restitute to Clark Development
Corporation the amount of P3,222,400.00, which was received by him as a consequence
of the immediate execution of said resolutions, plus interest thereon at the rate of 6% per
annum from date of
such receipt until finality of this judgment, after which the interest shall be at the rate of
12% per annum until said amount is fully restituted.
SO ORDERED.2
The undisputed facts are as follows:
On 22 September 1998, President/Chief Executive Officer (CEO) Rufo Colayco issued
an Order informing petitioner that, pursuant to the decision of the board of directors of
respondent CDC, the position of head executive assistant – the position held by petitioner
– was declared redundant. Petitioner received a copy of the Order on the same day and
immediately went to see Colayco. The latter informed him that the Order had been issued
as part of the reorganization scheme approved by the board of directors. Thus,
petitioner’s employment was to be terminated thirty (30) days from notice of the Order.
On 17 September 1999, petitioner filed a Complaint for illegal dismissal with a claim for
reinstatement and payment of back wages, benefits, and moral and exemplary damages
against respondent CDC and Colayco. The Complaint was filed with the National Labor
Relations Commission-Regional Arbitration Branch (NLRC-RAB) III in San Fernando,
Pampanga. In defense, respondents, represented by the Office of the Government
Corporate Counsel (OGCC), alleged that the NLRC had no jurisdiction to entertain the
case on the ground that petitioner was a corporate officer and, thus, his dismissal was an
intra-corporate matter falling properly within the jurisdiction of the Securities and
Exchange Commission (SEC).
On 29 February 2000, labor arbiter (LA) Florentino R. Darlucio issued a Decision 3 in
favor of petitioner Salenga. First, the LA held that the NLRC had jurisdiction over the
Complaint, considering that petitioner was not a corporate officer but a managerial
employee. He held the position of head executive assistant, categorized as a Job Level 12
position, not subject to election or appointment by the board of directors.
Second, the LA pointed out that respondent CDC and Colayco failed to establish a valid
cause for the termination of petitioner’s employment. The evidence presented by
respondent CDC failed to show that the position of petitioner was superfluous as to be
classified "redundant." The LA further pointed out that respondent corporation had not
employee. Moreover, the LA found that petitioner had not been accorded the right to due
process. Instead, the latter was dismissed without the benefit of an explanation of the
grounds for his termination, or an opportunity to be heard and to defend himself.
Finally, considering petitioner’s reputation and contribution as a government employee
for 40 years, the LA awarded moral damages amounting to P2,000,000 and exemplary
damages of P500,000. The dispositive portion of the LA’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring respondent
Clark Development Corporation and Rufo Colayco guilty of illegal dismissal and for
which they are ordered, as follows:
1. To reinstate complainant to his former or equivalent position without loss of
seniority rights and privileges;
2. To pay complainant his backwages reckoned from the date of his dismissal on
September 22, 1998 until actual reinstatement or merely reinstatement in the
payroll which as of this date is in the amount of P722,400.00;
3. To pay complainant moral damages in the amount of P2,000,000.00; and,
4. To pay complainant exemplary damages in the amount of P500,000.00.
SO ORDERED.4
At the time the above Decision was rendered, respondent CDC was already under the
leadership of Sergio T. Naguiat. When he received the Decision on 10 March 2000, he
subsequently instructed Atty. Monina C. Pineda, manager of the Corporate and Legal
Services Department and concurrent corporate board secretary, not to appeal the Decision
and to so inform the OGCC.5
Despite these instructions, two separate appeals were filed before LA Darlucio on 20
March 2000. One appeal6was from the OGCC on behalf of respondent CDC and Rufo
Colayco. The OGCC reiterated its allegation that petitioner was a corporate officer, and
that the termination of his employment was an intra-corporate matter. The Memorandum
of Appeal was verified and certified by Hilana Timbol-Roman, the executive vice
president of respondent CDC. The Memorandum was accompanied by a UCPB General
Insurance Co., Inc. supersedeas bond covering the amount due to petitioner as adjudged
by LA Darlucio. Timbol-Roman and OGCC lawyer Roy Christian Mallari also executed
on 17 March 2000 a Joint Affidavit of Declaration wherein they swore that they were the
"respective authorized representative and counsel" of respondent corporation. However,
the Memorandum of Appeal and the Joint Affidavit of Declaration were not accompanied
by a board resolution from respondent’s board of directors authorizing either Timbol-
Roman or Atty. Mallari, or both, to pursue the case or to file the appeal on behalf of
respondent.
It is noteworthy that Naguiat, who was president/CEO of respondent CDC from 3
February 2000 to 5 July 2000, executed an Affidavit on 20 March 2002, 7 wherein he
stated that without his knowledge, consent or approval, Timbol-Roman and Atty. Mallari
filed the above-mentioned appeal. He further alleged that their statements were false.
The second appeal, meanwhile, was filed by former CDC President/CEO Rufo Colayco.
Colayco alleged that petitioner was dismissed not on 22 September 1998, but twice on 9
March 1999 and 23 March 1999. The dismissal was allegedly approved by respondent’s
CDC board of directors pursuant to a new organizational structure. Colayco likewise
stated that he had posted a supersedeas bond – the same bond taken out by Timbol-
Roman – issued by the UCPB General Insurance Co. dated 17 March 2000 in order to
secure the monetary award, exclusive of moral and exemplary damages.
1
Petitioner thereafter opposed the two appeals on the grounds that both appellants,
respondent CDC – as allegedly represented by Timbol-Roman and Atty. Mallari – and
Rufo Colayco had failed to observe Rule VI, Sections 4 to 6 of the NLRC Rules of
Procedure; and that appellants had not been authorized by respondent’s board of directors
to represent the corporation and, thus, they were not the "employer" whom the Rules
referred to. Petitioner also alleged that appellants failed to refute the findings of LA
Darlucio in the previous Decision.
In the meantime, while the appeal was pending, on 19 October 2000, respondent’s board
chairperson and concurrent President/CEO Rogelio L. Singson ordered the reinstatement
of petitioner to the latter’s former position as head executive assistant, effective 24
October 2000.8
On 28 May 2001, respondent CDC’s new President/CEO Emmanuel Y. Angeles issued a
Memorandum, which offered all managers of respondent corporation an early
separation/redundancy program. Those who wished to avail themselves of the program
were to be given the equivalent of their 1.25-month basic salary for every year of service
and leave credits computed on the basis of the same 1.25-month equivalent of their basic
salary.9
In August 2001, respondent CDC offered another retirement plan granting higher benefits
to the managerial employees. Thus, on 12 September 2001, petitioner filed an application
for the early retirement program, which Angeles approved on 3 December 2001.
Meanwhile, in the proceedings of the NLRC, petitioner received on 12 September 2001
its 30 July 2001 Decision10 on the appeal filed by Timbol-Roman and Colayco. It is
worthy to note that the said Decision referred to the reports of reviewer arbiters Cristeta
D. Tamayo and Thelma M. Concepcion, who in turn found that petitioner Salenga was a
corporate officer of CDC. Nevertheless, the First Division of the NLRC upheld LA
Darlucio’s ruling that petitioner Salenga was indeed a regular employee. It also found
that redundancy, as an authorized cause for dismissal, has not been sufficiently proven,
rendering the dismissal illegal. However, the NLRC held that the award of exemplary and
moral damages were unsubstantiated. Moreover, it also dropped Colayco as a respondent
to the case, since LA Darlucio had failed to provide any ground on which to anchor the
former’s solidary liability.
Petitioner Salenga thereafter moved for a partial reconsideration of the above-mentioned
Decision. He sought the reinstatement of the award of exemplary and moral damages. He
likewise insisted that the NLRC should not have entertained the appeal on the following
grounds: (1) respondent CDC did not file an appeal and did not post the required cash or
surety bond; (2) both Timbol-Roman and Colayco were admittedly not real parties-in-
interest; (3) they were not the employer or the employer’s authorized representative and,
thus, had no right to appeal; and (4) both appeals had not been perfected for failure to
post the required cash or surety bond. In other words, petitioner’s theory revolved on the
fact that neither Timbol-Roman nor Colayco was authorized to represent the corporation,
so the corporation itself did not appeal LA Darlucio’s Decision. As a result, that Decision
should be considered as final and executory.
For its part, the OGCC also filed a Motion for Reconsideration11 of the NLRC’s 30 July
2001 Decision insofar as the finding of illegal dismissal was concerned. It no longer
questioned the commission’s finding that petitioner was a regular employee, but instead
insisted that he had been dismissed as a consequence of his redundant position. The
motion, however, was not verified by the duly authorized representative of respondent
CDC.
On 5 December 2002, the NLRC denied petitioner Salenga’s Motion for Partial
Reconsideration and dismissed the Complaint. The dispositive portion of the
Resolution12 reads as follows:
WHEREFORE, complainant’s partial motion for reconsideration is denied. As
recommended by Reviewer Arbiters Cristeta D. Tamayo in her August 2, 2000 report and
Thelma M. Concepcion in her November 25, 2002 report, the decision of Labor Arbiter
Florentino R. Darlucio dated 29 February 2000 is set aside.
The complaint below is dismissed for being without merit.
SO ORDERED.13
Meanwhile, pending the Motions for Reconsideration of the NLRC’s 30 July 2001
Decision, another issue arose with regard to the computation of the retirement benefits of
petitioner. Respondent CDC did not immediately give his requested retirement benefits,
pending clarification of the computation of these benefits. He claimed that the
computation of his retirement benefits should also include the forty (40) years he had
been in government service in accordance with Republic Act No. (R.A.) 8291, or the
GSIS Act, and should not be limited to the length of his employment with respondent
corporation only, as the latter insisted.
In a letter dated 14 March 2003, petitioner Salenga’s counsel wrote to the board of
directors of respondent to follow up the payment of the retirement benefits allegedly due
to petitioner.14
Pursuant to the NLRC’s dismissal of the Complaint of petitioner Salenga, Angeles
subsequently denied the former’s request for his retirement benefits, to wit: 15
Please be informed that we cannot favorably grant your client’s claim for retirement
benefits considering that Clark Development Corporation's dismissal of Mr. Antonio B.
Salenga had been upheld by the National Labor Relations Commission through a
Resolution dated December 5, 2002...
xxx xxx xxx
As it is, the said Resolution dismissed the Complaint filed by Mr. Salenga for being
without merit. Consequently, he is not entitled to receive any retirement pay from the
corporation.
Meanwhile, petitioner Salenga filed a second Motion for Reconsideration of the 5
December 2002 Resolution of the NLRC, reiterating his claim that it should not have
entertained the imperfect appeal, absent a proper verification and certification against
forum-shopping from the duly authorized representative of respondent CDC. Without
that authority, neither could the OGCC act on behalf of the corporation.
The OGCC, meanwhile, resurrected its old defense that the NLRC had no jurisdiction
over the case, because petitioner Salenga was a corporate officer.
The parties underwent several hearings before the NLRC First Division. During these
times, petitioner Salenga demanded from the OGCC to present a board resolution
authorizing it or any other person to represent the corporation in the proceedings. This,
the OGCC failed to do.
After giving due course to the Motion for Reconsideration filed by petitioner Salenga, the
NLRC issued a Resolution16 on 10 September 2003, partially granting the motion. This
time, the First Division of the NLRC held that, absent a board resolution authorizing
Timbol-Roman to file the appeal on behalf of respondent CDC, the appeal was not
perfected and was thus a mere scrap of paper. In other words, the NLRC had no
jurisdiction over the appeal filed before it.
The NLRC further held that respondent CDC had failed to show that petitioner Salenga’s
dismissal was pursuant to a valid corporate reorganization or board resolution. It also
2
deemed respondent estopped from claiming that there was indeed a redundancy,
considering that petitioner Salenga had been reinstated to his position as head executive
assistant. While it granted the award of moral damages, it nevertheless denied exemplary
damages. Thus, the dispositive portion of its Decision reads:
WHEREFORE, premises considered, the complainant’s Motion for Reconsideration is
GRANTED and We set aside our Resolution of December 5, 2002. The Decision of the
Labor Arbiter dated February 29, 2000 is REINSTATED with the MODIFICATION that:
1.) Being a nominal party, respondent Rufo Colayco is declared to be not jointly
and severally liable with respondent Clark Development Corporation;
2.) Respondent Clark Development Corporation is ordered to pay the
complainant his full backwages and other monetary claims to which he is
entitled under the decision of the Labor Arbiter;
3.) Respondent CDC is likewise ordered to pay the complainant moral and
exemplary damages as provided under the Labor Arbiter’s Decision; and
4.) All other money claims are DENIED for lack of merit.
In the meantime, respondent CDC is ordered to pay the complainant his retirement
benefits without further delay.
SO ORDERED.17
On 3 October 2003, the OGCC filed a Motion for Reconsideration18 despite the absence
of a verification and the certification against forum shopping.
On 21 January 2004, the motion was denied by the NLRC for lack of merit. 19
On 5 February 2004, the executive clerk of the NLRC First Division entered the
judgment on the foregoing case. Thereafter, on 9 February 2004, the NLRC forwarded
the entire records of the case to the NLRC-RAB III Office in San Fernando, Pampanga
for appropriate action.
On 4 March 2004, petitioner Salenga filed a Motion for Issuance of Writ of Execution
before the NLRC-RAB III, Office of LA Henry D. Isorena. The OGCC opposed the
motion on the ground that it had filed with the CA a Petition for Certiorari seeking the
reversal of the NLRC Decision dated 30 July 2001 and the Resolutions dated 10
September 2003 and 21 January 2004, respectively. It is noteworthy that, again, there was
no board resolution attached to the Petition authorizing its filing.
Despite the pending Petition with the CA, LA Isorena issued a Writ of Execution
enforcing the 10 September 2003 Resolution of the NLRC. On 1 April 2004, the LA
issued an Order20 to the manager of the Philippine National Bank, Clark Branch, Angeles
City, Pampanga, to immediately release in the name of NLRC-RAB III the amount
of P3,222,400 representing partial satisfaction of the judgment award, including the
execution fee of P31,720.
Respondent CDC filed with the CA in February 2004 a Petition for Certiorari with a
prayer for the issuance of a temporary restraining order and/or a writ of preliminary
injunction. However, the Petition still lacked a board resolution from the board of
directors of respondent corporation authorizing its then President Angeles to verify and
certify the Petition on behalf of the board. It was only on 16 March 2004 that counsel for
respondent filed a Manifestation/Motion21 with an attached Secretary’s Certificate
containing the board’s Resolution No. 86, Series of 2001. The Resolution authorized
Angeles to represent respondent corporation in prosecuting, maintaining, or
compromising any lawsuit in connection with its business.
Meanwhile, in the proceedings before LA Isorena, both respondent CDC’s legal
department and the OGCC on 6 April 2004 filed their respective Motions to Quash Writ
of Execution.22 They both cited the failure to afford to respondent due process in the
issuance of the writ. They claimed that the pre-conference hearing on the execution of the
judgment had not pushed through. They also reiterated that the Petition for Certiorari
dated 11 February 2004 was still pending with the CA.
Both motions were denied by LA Isorena for lack of factual and legal bases.
On 6 May 2004, respondent filed with LA Isorena another Motion to Quash Writ of
Execution, again reiterating the pending Petition with the CA.
This active exchange of pleadings and motions and the delay in the payment of his
money claims eventually led petitioner Salenga to file an Omnibus Motion23 before LA
Isorena. In his motion, he recomputed the amount due him representing back wages,
other benefits or allowances, legal interests and attorney’s fees. He also prayed for the
computation of his retirement benefits plus interests in accordance with R.A. 8291 24 and
R.A. 1616.25 He insisted that since respondent CDC was a government-owned and -
controlled corporation (GOCC), his previous government service totalling 40 years must
also be credited in the computation of his retirement pay. Thus, he demanded the
payment of the total amount of P23,920,772.30, broken down as follows:
a. From the illegal dismissal suit: (In Philippine peso)
a. Recomputed award 3,758,786
b. Legal interest 5,089,342.58
c. Attorney’s fees 1,196,052.80
d. Litigation expenses 250,000
b. Retirement pay
a. Retirement gratuity 6,987,944
b. Unused vacation and sick leave 1,440,328
c. Legal interest 4,050,544.96
d. Attorney’s fees 1,147,781.90
On 11 May 2004, the CA issued a Resolution 26 ordering petitioner Salenga to comment
on the Petition and holding in abeyance the issuance of a temporary restraining order.
The parties thereafter filed their respective pleadings.
On 19 July 2004, the CA temporarily restrained the NLRC from enforcing the Decision
dated 29 February 2000 for a period of 60 days. 27 After the lapse of the 60 days, LA
Isorena issued a Notice of Hearing/Conference scheduled for 1 October 2004 on
petitioner’s Omnibus Motion dated 7 May 2004.
Meanwhile, on 24 September 2004, the CA issued another Resolution, 28 this time
denying the application for the issuance of a writ of preliminary injunction, after finding
that the requisites for the issuance of the writ had not been met.
Respondent CDC subsequently filed a Supplemental Petition29 with the CA, challenging
the computation petitioner Salenga made in his Omnibus Motion filed with the NLRC.
Respondent alleged that the examiner had erred in including the other years of
government service in the computation of retirement benefits. It claimed that, since
respondent corporation was created under the Corporation Code, petitioner Salenga was
not covered by civil service laws. Hence, his retirement benefits should only be limited to
the number of years he had been employed by respondent.
Subsequently, respondent CDC filed an Omnibus Motion30 to admit the Supplemental
Petition and to reconsider the CA’s Resolution denying the issuance of a writ of
preliminary injunction. In the motion, respondent alleged that petitioner Salenga had been
more than sufficiently paid the amounts allegedly due him, including the award made by
LA Darlucio. On 12 March 2002, respondent CDC had issued a check amounting
to P852,916.29, representing petitioner’s retirement pay and terminal pay. Meanwhile, on
3
2 April 2004, P3,254,120 representing the initial award was debited from the account of
respondent CDC.
On 7 February 2005, respondent CDC filed a Motion31 once again asking the CA to issue
a writ of preliminary injunction in the light of a scheduled 14 February 2005 conference
called by LA Mariano Bactin, who had taken over the case from LA Isorena.
At the 14 February 2005 hearing, the parties failed to reach an amicable settlement and
were thus required to submit their relevant pleadings and documents in support of their
respective cases.
On 16 February 2005, the CA issued a Resolution32 admitting the Supplemental Petition
filed by respondent, but denying the prayer for the issuance of an injunctive writ.
Thereafter, on 8 March 2005, LA Bactin issued an Order 33 resolving the Omnibus Motion
filed by petitioner Salenga for the recomputation of the monetary claims due him. In the
Order, LA Bactin denied petitioner’s Motion for the recomputation of the award of back
wages, benefits, allowances and privileges based on the 29 February 2000 Decision of
LA Darlucio. LA Bactin held that since the Decision had become final and executory, he
no longer had jurisdiction to amend or to alter the judgment.
Anent the second issue of the computation of retirement benefits, LA Bactin also denied
the claim of petitioner Salenga, considering that the latter’s retirement benefits had
already been paid. The LA, however, did not rule on whether petitioner was entitled to
retirement benefits, either under the Government Service Insurance System (GSIS) or
under the Social Security System (SSS), and held that this issue was beyond the expertise
and jurisdiction of a LA.
Petitioner Salenga thereafter appealed to the NLRC, which granted the appeal in a
Resolution34 dated 22 July 2005. First, it was asked to resolve the issue of the propriety of
having the Laguesma Law Office represent respondent CDC in the proceedings before
the LA. The said law firm entered its appearance as counsel for respondent during the
pre-execution conference/hearing on 1 October 2004. On this issue, the NLRC held that
respondent corporation’s legal department, which had previously been representing the
corporation, was not validly substituted by the Laguesma Law Office. In addition, the
NLRC held that respondent had failed to comply with Memorandum Circular No. 9,
Series of 1998, which strictly prohibits the hiring of lawyers of private law firms by
GOCCs without the prior written conformity and acquiescence of the Office of Solicitor
General, as the case may be, and the prior written concurrence of the Commission on
Audit (COA). Thus, the NLRC held that all actions and submissions undertaken by the
Laguesma Law Office on behalf of respondent were null and void.
The second issue raised before the NLRC was whether LA Bactin acted without
jurisdiction in annulling and setting aside the former’s final and executory judgment
contained in its 10 September 2003 Resolution, wherein it held that the appeal had not
been perfected, absent the necessary board resolution allowing or authorizing Timbol-
Roman and Atty. Mallari to file the appeal. On this issue, the NLRC stated:
The final and executory judgment in this case is clearly indicated in the dispositive
portion of Our Resolution promulgated on September 10, 2003 GRANTING
complainant’s motion for reconsideration, SETTING ASIDE Our Resolution of
December 5, 2002, and REINSTATING the Decision of the Labor Arbiter dated
February 29, 2000 with the following modification[s]: (1) declaring respondent Rufo
Colayco not jointly and severally liable with respondent Clark Development Corporation;
(2) ordering respondent CDC to pay the complainant his full backwages and other
monetary claims to which he is entitled under the decision of the Labor Arbiter; (3)
ordering respondent CDC to pay complainant moral and exemplary damages as provided
under the Labor Arbiter’s Decision; and (4) ordering respondent CDC to pay the
complainant his retirement benefits without further delay. This was entered in the Book
of Entry of Judgment as final and executory effective as of February 2, 2004.
Implementing this final and executory judgment, Arbiter Isorena issued an Order dated
May 24, 2004, DENYING respondent’s Motion to Quash the Writ of Execution dated
March 22, 2004, correctly stating thusly:
"Let it be stressed that once a decision has become final and executory, it becomes the
ministerial duty of this Office to issue the corresponding writ of execution. The rationale
behind it is based on the fact that the winning party has suffered enough and it is the time
for him to enjoy the fruits of his labor with dispatch. The very purpose of the pre-
execution conference is to explore the possibility for the parties to arrive at an amicable
settlement to satisfy the judgment award speedily, not to delay or prolong its
implementation."
Thus, when Arbiter Bactin, who took over from Arbiter Isorena upon the latter’s filing
for leave of absence due to poor health in January 2005, issued the appealed Order
nullifying, instead of implementing, the final and executory judgment of this
Commission, the labor arbiter a quo acted WITHOUT JURISDICTION. 35
xxx xxx xxx
WHEREFORE, premises considered, the appeal of herein complainant is hereby
GRANTED, and We declare NULL AND VOID the appealed Order of March 8, 2005
and SET ASIDE said Order; We direct the immediate issuance of the corresponding
Alias Writ of Execution to enforce the final and executory judgment of this Commission
as contained in Our September 10, 2003 Resolution.
SO ORDERED.36
Unwilling to accept the above Resolution of the NLRC, the Laguesma Law Office filed a
Motion for Reconsideration dated 29 August 2005 with the NLRC. Again, the motion
lacked proper verification and certification against non-forum shopping.
In the meantime, the OGCC also filed with the CA a Motion for the Issuance of a Writ of
Preliminary Injunction dated 30 August 2005 37 against the NLRC’s 22 July 2005
Resolution. The OGCC alleged that the issues in the Resolution addressed monetary
claims that were raised by petitioner Salenga only in his Omnibus Motion dated 7 May
2004 or after the issuance of the 10 September 2003 Decision of LA Darlucio. Thus, the
OGCC insisted that the NLRC had no jurisdiction over the issue, for the matter was still
pending with the CA.
The OGCC likewise filed another Motion for Reconsideration38 dated 31 August 2005
with the NLRC. The OGCC maintained that it was only acting in a collaborative manner
with the legal department of respondent CDC, for which the former remained the lead
counsel. The OGCC reiterated that, as the statutory counsel of GOCCs, it did not need
authorization from them to maintain a case, and thus, LA Bactin had jurisdiction over that
case. Finally, it insisted that petitioner Salenga was not covered by civil service laws on
retirement, the CDC having been created under the Corporation Code.
On 13 September 2005, the CA promulgated the assailed Decision. Relying heavily on
the reports of Reviewer Arbiters Cristeta D. Tamayo and Thelma M. Concepcion, it held
that petitioner Salenga was a corporate officer. Thus, the issue before the NLRC was an
intra-corporate dispute, which should have been lodged with the Securities and Exchange
Commission (SEC), which had jurisdiction over the case at the time the issue arose. The
CA likewise held that the NLRC committed grave abuse of discretion when it allowed
and granted petitioner Salenga’s second Motion for Reconsideration, which was a
prohibited pleading.
4
Petitioner subsequently filed a Motion for Reconsideration on 7 October 2005, alleging
that the CA committed grave abuse of discretion in reconsidering the findings of fact,
which had already been found to be conclusive against respondent; and in taking
cognizance of the latter’s Petition which had not been properly verified.
The CA, finding no merit in petitioner’s allegations, denied the motion in its 17 August
2006 Resolution.
On 4 September 2006, petitioner Salenga filed a Motion for Extension of Time to File a
Petition for Review on Certiorari under Rule 45, praying for an extension of fifteen (15)
days within which to file the Petition. The motion was granted through this Court’s
Resolution dated 13 September 2006. The case was docketed as G.R. No. 174159.
On 25 September 2006, however, petitioner filed a Manifestation 39 withdrawing the
motion. He manifested before us that he would instead file a Petition for Certiorari under
Rule 65, which was eventually docketed as G.R. No. 174941. On 7 July 2008, this Court,
through a Resolution, considered the Petition for Review in G.R. No. 174159 closed and
terminated.
Petitioner raises the following issues for our resolution:
I.
The Court of Appeals acted without jurisdiction in reviving and re-litigating the
factual issues and matters of petitioner’s illegal dismissal and retirement
benefits.
II.
The Court of Appeals had no jurisdiction to entertain the original Petition as a
remedy for an appeal that had actually not been filed, absent a board resolution
allowing the appeal.
III.
The Court of Appeals acted with grave abuse of discretion when it did the following:
a. It failed to dismiss the original and supplemental Petitions despite the lack of
a board resolution authorizing the filing thereof.
b. It failed to dismiss the Petitions despite the absence of a proper verification
and certification against non-forum shopping.
c. It failed to dismiss the Petitions despite respondent’s failure to inform it of the
pending proceedings before the NLRC involving the same issues.
d. It failed to dismiss the Petitions on the ground of forum shopping.
e. It did not dismiss the Petition when respondent failed to attach to it certified
true copies of the assailed NLRC 30 July 2001 Decision; 10 September 2003
Resolution; 21 January 2004 Resolution; copies of material portions of the
record as are referred to therein; and copies of pleadings and documents relevant
and pertinent thereto.
f. It did not act on respondent’s failure to serve on the Office of the Solicitor
General a copy of the pleadings, motions and manifestations the latter had filed
before the Court of Appeals, as well as copies of pertinent court resolutions and
decisions, despite the NLRC being a party to the present case.
g. It disregarded the findings of fact and conclusions of law arrived at by LA
Darlucio, subjecting them to a second analysis and evaluation and supplanting
them with its own findings.
h. It granted the Petition despite respondent’s failure to show that the NLRC
committed grave abuse of discretion in rendering the latter’s 30 July 2001
Decision, 10 September 2003 Resolution and 21 January 2004 Resolution.
i. It dismissed the complaint for illegal dismissal and ordered the restitution of
the P3,222,400 already awarded to petitioner, plus interest thereon.
In its defense, private respondent insists that the present Petition for Certiorari under Rule
65 is an improper remedy to question the Decision of the CA, and thus, the case should
be dismissed outright. Nevertheless, it reiterates that private petitioner was a corporate
officer whose employment was dependent on board action. As such, private petitioner’s
employment was an intra-corporate controversy cognizable by the SEC, not the NLRC.
Private respondent also asserts that it has persistently sought the reversal of LA
Darlucio’s Decision by referring to the letters sent to the OGCC, as well as Verification
and Certificate against forum-shopping. However, these documents were signed only
during Angeles’ time as private respondent’s president/CEO, and not of the former
presidents. Moreover, private respondent contends that private petitioner is not covered
by civil service laws, thus, his years in government service are not creditable for the
purpose of determining the total amount of retirement benefits due him. In relation to
this, private respondent enumerates the amounts already paid to private petitioner.
The Court’s Ruling
The Petition has merit.
This Court deigns it proper to collapse the issues in this Petition to simplify the matters
raised in what appears to be a convoluted case. First, we need to determine whether the
NLRC and the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction, when they entertained respondent’s so-called appeal of the 29 February 2000
Decision rendered by LA Darlucio.
Second, because of the turn of events, a second issue – the computation of retirement
benefits – cropped up while the first case for illegal dismissal was still pending. Although
the second issue may be considered as separate and distinct from the illegal dismissal
case, the issue of the proper computation of the retirement benefits was nevertheless
considered by the relevant administrative bodies, adding more confusion to what should
have been a simple case to begin with.
The NLRC had no jurisdiction
to entertain the appeal filed by
Timbol-Roman and former
CDC CEO Colayco.
To recall, on 29 February 2000, LA Darlucio rendered a Decision in favor of petitioner,
stating as follows:
xxxComplainant cannot be considered as a corporate officer because at the time of his
termination, he was holding the position of Head Executive Assistant which is
categorized as a Job Level 12 position that is not subject to the election or appointment
by the Board of Directors. The approval of Board Resolution Nos. 200 and 214 by the
Board of Directors in its meeting held on February 11, 1998 and March 25, 1998 clearly
refers to the New CDC Salary Structure where the pay adjustment was based and not to
complainant’s relief as Vice-President, Joint Ventures and Special Projects. While it is
true that his previous positions are classified as Job Level 13 which are subject to board
confirmation, the status of his appointment was permanent in nature. In fact, he had
undergone a six-month probationary period before having acquired the permanency of his
appointment. However, due to the refusal of the board under then Chairman Victorino
Basco to confirm his appointment, he was demoted to the position of Head Executive
Assistant. Thus, complainant correctly postulated that he was not elected to his position
and his tenure is not dependent upon the whim of the boardxxx
xxx xxx xxx
5
Anent the second issue, this Office finds and so holds that respondents have miserably
failed to show or establish the valid cause in terminating the services of complainant.
xxx xxx xxx
In the case at bar, respondents failed to adduce any evidence showing that the position of
Head Executive Assistant is superfluous. In fact, they never disputed the argument
advanced by complainant that the position of Head Executive Assistant was classified as
a regular position in the Position Classification Study which is an essential component of
the Organizational Study that had been approved by the CDC board of directors in 1995
and still remains intact as of the end of 1998. Likewise, studies made since 1994 by
various management consultancy groups have determined the need for the said position
in the Office of the President/CEO in relation to the vision, mission, plans, programs and
overall corporate goals and objectives of respondent CDC. There is no evidence on
record to show that the position of Head Executive Assistant was abolished by the Board
of Directors in its meeting held in the morning of September 22, 1998. The minutes of the
meeting of the board on said date, as well as its other three meetings held in the month of
September 1998 (Annexes "B", "C", "D" and "E", Complainant’s Reply), clearly reveal
that no abolition or reorganization plan was discussed by the board. Hence, the ground of
redundancy is merely a device made by respondent Colayco in order to ease out the
complainant from the respondent corporation.
Moreover, the other ground for complainant’s dismissal is unclear and unknown to him
as respondent did not specify nor inform the complainant of the alleged recent
developmentsxxx
This Office is also of the view that complainant was not accorded his right to due process
prior to his termination. The law requires that the employer must furnish the worker
sought to be dismissed with two (2) written notices before termination may be validly
effected: first, a notice apprising the employee of the particular acts or omissions for
which his dismissal is sought and, second, a subsequent notice informing the employee of
the decision to dismiss him. In the case at bar, complainant was not apprised of the
grounds of his termination. He was not given the opportunity to be heard and defend
himselfxxx40
The OGCC, representing respondent CDC and former CEO Colayco separately appealed
from the above Decision. Both alleged that they had filed the proper bond to cover the
award granted by LA Darlucio.
It is clear from the NLRC Rules of Procedure that appeals must be verified and certified
against forum-shopping by the parties-in-interest themselves. In the case at bar, the
parties-in-interest are petitioner Salenga, as the employee, and respondent Clark
Development Corporation as the employer.
A corporation can only exercise its powers and transact its business through its board of
directors and through its officers and agents when authorized by a board resolution or its
bylaws. The power of a corporation to sue and be sued is exercised by the board of
directors. The physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate bylaws
or by a specific act of the board. The purpose of verification is to secure an assurance that
the allegations in the pleading are true and correct and have been filed in good faith. 41
Thus, we agree with petitioner that, absent the requisite board resolution, neither Timbol-
Roman nor Atty. Mallari, who signed the Memorandum of Appeal and Joint Affidavit of
Declaration allegedly on behalf of respondent corporation, may be considered as the
"appellant" and "employer" referred to by Rule VI, Sections 4 to 6 of the NLRC Rules of
Procedure, which state:
SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. - (a) The Appeal shall be
filed within the reglementary period as provided in Section 1 of this Rule; shall be
verified by appellant himself in accordance with Section 4, Rule 7 of the Rules of Court,
with proof of payment of the required appeal fee and the posting of a cash or surety bond
as provided in Section 6 of this Rule; shall be accompanied by memorandum of appeal in
three (3) legibly typewritten copies which shall state the grounds relied upon and the
arguments in support thereof; the relief prayed for; and a statement of the date when the
appellant received the appealed decision, resolution or order and a certificate of non-
forum shopping with proof of service on the other party of such appeal. A mere notice of
appeal without complying with the other requisites aforestated shall not stop the running
of the period for perfecting an appeal.
(b) The appellee may file with the Regional Arbitration Branch or Regional
Office where the appeal was filed, his answer or reply to appellant's
memorandum of appeal, not later than ten (10) calendar days from receipt
thereof. Failure on the part of the appellee who was properly furnished with a
copy of the appeal to file his answer or reply within the said period may be
construed as a waiver on his part to file the same.
(c) Subject to the provisions of Article 218, once the appeal is perfected in
accordance with these Rules, the Commission shall limit itself to reviewing and
deciding specific issues that were elevated on appeal.
SECTION 5. APPEAL FEE. -The appellant shall pay an appeal fee of one hundred fifty
pesos (P150.00) to the Regional Arbitration Branch or Regional Office, and the official
receipt of such payment shall be attached to the records of the case.
SECTION 6. BOND. - In case the decision of the Labor Arbiter or the Regional Director
involves a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond. The appeal bond shall either be in cash or surety in an
amount equivalent to the monetary award, exclusive of damages and attorney’s fees.
In case of surety bond, the same shall be issued by a reputable bonding company duly
accredited by the Commission or the Supreme Court, and shall be accompanied by:
(a) a joint declaration under oath by the employer, his counsel, and the bonding
company, attesting that the bond posted is genuine, and shall be in effect until
final disposition of the case.
(b) a copy of the indemnity agreement between the employer-appellant and
bonding company; and
(c) a copy of security deposit or collateral securing the bond.
A certified true copy of the bond shall be furnished by the appellant to the appellee who
shall verify the regularity and genuineness thereof and immediately report to the
Commission any irregularity.
Upon verification by the Commission that the bond is irregular or not genuine, the
Commission shall cause the immediate dismissal of the appeal.
No motion to reduce bond shall be entertained except on meritorious grounds and upon
the posting of a bond in a reasonable amount in relation to the monetary award.
The filing of the motion to reduce bond without compliance with the requisites in the
preceding paragraph shall not stop the running of the period to perfect an appeal.
(Emphasis supplied)
The OGCC failed to produce any valid authorization from the board of directors despite
petitioner Salenga’s repeated demands. It had been given more than enough opportunity
and time to produce the appropriate board resolution, and yet it failed to do so. In fact,
many of its pleadings, representations, and submissions lacked board authorization.
6
We cannot agree with the OGCC’s attempt to downplay this procedural flaw by claiming
that, as the statutorily assigned counsel for GOCCs, it does not need such authorization.
In Constantino-David v. Pangandaman-Gania,42 we exhaustively explained why it was
necessary for government agencies or instrumentalities to execute the verification and the
certification against forum-shopping through their duly authorized representatives. We
ruled thereon as follows:
But the rule is different where the OSG is acting as counsel of record for a government
agency. For in such a case it becomes necessary to determine whether the petitioning
government body has authorized the filing of the petition and is espousing the same stand
propounded by the OSG. Verily, it is not improbable for government agencies to adopt a
stand different from the position of the OSG since they weigh not just legal
considerations but policy repercussions as well. They have their respective mandates for
which they are to be held accountable, and the prerogative to determine whether further
resort to a higher court is desirable and indispensable under the circumstances.
The verification of a pleading, if signed by the proper officials of the client agency itself,
would fittingly serve the purpose of attesting that the allegations in the pleading are true
and correct and not the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. Of course, the OSG may opt to file its own petition as a
"People's Tribune" but the representation would not be for a client office but for its own
perceived best interest of the State.
The case of Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., is not also a
precedent that may be invoked at all times to allow the OSG to sign the certificate of non-
forum shopping in place of the real party-in-interest. The ruling therein mentions merely
that the certification of non-forum shopping executed by the OSG constitutes substantial
compliance with the rule since "the OSG is the only lawyer for the petitioner, which is a
government agency mandated under Section 35, Chapter 12, Title III, Book IV, of the
1987 Administrative Code (Reiterated under Memorandum Circular No. 152 dated May
17, 1992) to be represented only by the Solicitor General."
By its very nature, "substantial compliance" is actually inadequate observance of the
requirements of a rule or regulation which are waived under equitable circumstances to
facilitate the administration of justice there being no damage or injury caused by such
flawed compliance. This concept is expressed in the statement "the rigidity of a previous
doctrine was thus subjected to an inroad under the concept of substantial compliance." In
every inquiry on whether to accept "substantial compliance," the focus is always on the
presence of equitable conditions to administer justice effectively and efficiently without
damage or injury to the spirit of the legal obligation.
xxx xxx xxx
The fact that the OSG under the 1987 Administrative Code is the only lawyer for a
government agency wanting to file a petition, or complaint for that matter, does not
operate per se to vest the OSG with the authority to execute in its name the certificate of
non-forum shopping for a client office. For, in many instances, client agencies of the
OSG have legal departments which at times inadvertently take legal matters requiring
court representation into their own hands without the intervention of the OSG.
Consequently, the OSG would have no personal knowledge of the history of a particular
case so as to adequately execute the certificate of non-forum shopping; and even if the
OSG does have the relevant information, the courts on the other hand would have no way
of ascertaining the accuracy of the OSG's assertion without precise references in the
record of the case. Thus, unless equitable circumstances which are manifest from the
record of a case prevail, it becomes necessary for the concerned government agency or
its authorized representatives to certify for non-forum shopping if only to be sure that no
other similar case or incident is pending before any other court.
We recognize the occasions when the OSG has difficulty in securing the attention and
signatures of officials in charge of government offices for the verification and certificate
of non-forum shopping of an initiatory pleading. This predicament is especially true
where the period for filing such pleading is non-extendible or can no longer be further
extended for reasons of public interest such as in applications for the writ of habeas
corpus, in election cases or where sensitive issues are involved. This quandary is more
pronounced where public officials have stations outside Metro Manila.
But this difficult fact of life within the OSG, equitable as it may seem, does not excuse it
from wantonly executing by itself the verification and certificate of non-forum shopping.
If the OSG is compelled by circumstances to verify and certify the pleading in behalf of a
client agency, the OSG should at least endeavor to inform the courts of its reasons for
doing so, beyond instinctively citing City Warden of the Manila City Jail v.
Estrella and Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc.
Henceforth, to be able to verify and certify an initiatory pleading for non-forum shopping
when acting as counsel of record for a client agency, the OSG must (a) allege under oath
the circumstances that make signatures of the concerned officials impossible to obtain
within the period for filing the initiatory pleading; (b) append to the petition or complaint
such authentic document to prove that the party-petitioner or complainant authorized the
filing of the petition or complaint and understood and adopted the allegations set forth
therein, and an affirmation that no action or claim involving the same issues has been
filed or commenced in any court, tribunal or quasi-judicial agency; and, (c) undertake to
inform the court promptly and reasonably of any change in the stance of the client
agency.
Anent the document that may be annexed to a petition or complaint under letter (b)
hereof, the letter-endorsement of the client agency to the OSG, or other correspondence
to prove that the subject-matter of the initiatory pleading had been previously discussed
between the OSG and its client, is satisfactory evidence of the facts under letter (b)
above. In this exceptional situation where the OSG signs the verification and certificate
of non-forum shopping, the court reserves the authority to determine the sufficiency of
the OSG's action as measured by the equitable considerations discussed herein.
(Emphasis ours, italics provided)
The ruling cited above may have pertained only to the Office of the Solicitor General’s
representation of government agencies and instrumentalities, but we see no reason why
this doctrine cannot be applied to the case at bar insofar as the OGCC is concerned.
While in previous decisions we have excused transgressions of these rules, it has always
been in the context of upholding justice and fairness under exceptional circumstances. In
this case, though, respondent failed to provide any iota of rhyme or reason to compel us
to relax these requirements. Instead, what is clear to us is that the so-called appeal was
done against the instructions of then President/CEO Naguiat not to file an appeal.
Timbol-Roman, who signed the Verification and the Certification against forum-
shopping, was not even an authorized representative of the corporation. The OGCC was
equally remiss in its duty. It ought to have advised respondent corporation, the proper
procedure for pursuing an appeal. Instead, it maintained the appeal and failed to present
any valid authorization from respondent corporation even after petitioner had questioned
OGCC’s authority all throughout the proceedings. Thus, it is evident that the appeal was
made in bad faith.
7
The unauthorized and overzealous acts of officials of respondent CDC and the OGCC
have led to a waste of the government’s time and resources. More alarmingly, they have
contributed to the injustice done to petitioner Salenga. By taking matters into their own
hands, these officials let the case drag on for years, depriving him of the enjoyment of
property rightfully his. What should have been a simple case of illegal dismissal became
an endless stream of motions and pleadings.
Time and again, we have said that the perfection of an appeal within the period
prescribed by law is jurisdictional, and the lapse of the appeal period deprives the courts
of jurisdiction to alter the final judgment.43 Thus, there is no other recourse but to respect
the findings and ruling of the labor arbiter. Clearly, therefore, the CA committed grave
abuse of discretion in entertaining the Petition filed before it after the NLRC had
dismissed the case based on lack of jurisdiction. The assailed CA Decision did not even
resolve petitioner Salenga’s consistent and persistent claim that the NLRC should not
have taken cognizance of the appeal in the first place, absent a board resolution. Thus,
LA Darlucio’s Decision with respect to the liability of the corporation still stands.
However, we note from that Decision that Rufo Colayco was made solidarily liable with
respondent corporation. Colayco thereafter filed his separate appeal. As to him, the
NLRC correctly held in its 30 July 2001 Decision that he may not be held solidarily
responsible to petitioner. As a result, it dropped him as respondent. Notably, in the case at
bar, petitioner does not question that ruling.
Based on the foregoing, all other subsequent proceedings regarding the issue of
petitioner’s dismissal are null and void for having been conducted without jurisdiction.
Thus, it is no longer incumbent upon us to rule on the other errors assigned in the matter
of petitioner Salenga’s dismissal.
CDC is not under the civil service laws on retirement.
While the case was still persistently being pursued by the OGCC, a new issue arose when
petitioner Salenga reached retirement age: whether his retirement benefits should be
computed according to civil service laws.
To recall, the issue of how to compute the retirement benefits of petitioner was raised in
his Omnibus Motion dated 7 May 2004 filed before the NLRC after it had reinstated LA
Darlucio’s original Decision. The issue was not covered by petitioner’s Complaint for
illegal dismissal, but was a different issue altogether and should have been properly
addressed in a separate Complaint. We cannot fault petitioner, though, for raising the
issue while the case was still pending with the NLRC. If it were not for the "appeal"
undertaken by Timbol-Roman and the OGCC through Atty. Mallari, the issue would have
taken its proper course and would have been raised in a more appropriate time and
manner. Thus, we deem it proper to resolve the matter at hand to put it to rest after a
decade of litigation.
Petitioner Salenga contends that respondent CDC is covered by the GSIS Law. Thus, he
says, the computation of his retirement benefits should include all the years of actual
government service, starting from the original appointment forty (40) years ago up to his
retirement.
Respondent CDC owes its existence to Executive Order No. 80 issued by then President
Fidel V. Ramos. It was meant to be the implementing and operating arm of the Bases
Conversion and Development Authority (BCDA) tasked to manage the Clark Special
Economic Zone (CSEZ). Expressly, respondent was formed in accordance with
Philippine corporation laws and existing rules and regulations promulgated by the SEC
pursuant to Section 16 of Republic Act (R.A.) 7227. 44 CDC, a government-owned or -
controlled corporation without an original charter, was incorporated under the
Corporation Code. Pursuant to Article IX-B, Sec. 2(1), the civil service embraces only
those government-owned or -controlled corporations with original charter. As such,
respondent CDC and its employees are covered by the Labor Code and not by the Civil
Service Law, consistent with our ruling in NASECO v. NLRC, 45 in which we established
this distinction. Thus, in Gamogamo v. PNOC Shipping and Transport Corp., 46 we held:
Retirement results from a voluntary agreement between the employer and the employee
whereby the latter after reaching a certain age agrees to sever his employment with the
former.
Since the retirement pay solely comes from Respondent's funds, it is but natural that
Respondent shall disregard petitioner's length of service in another company for the
computation of his retirement benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979.
Ordinarily, his creditable service shall be reckoned from such date. However, since
Respondent took over the shipping business of LUSTEVECO and agreed to assume
without interruption all the service credits of petitioner with LUSTEVECO, petitioner's
creditable service must start from 9 November 1977 when he started working with
LUSTEVECO until his day of retirement on 1 April 1995. Thus, petitioner's creditable
service is 17.3333 years.
We cannot uphold petitioner's contention that his fourteen years of service with the DOH
should be considered because his last two employers were government-owned and
controlled corporations, and fall under the Civil Service Law. Article IX(B), Section 2
paragraph 1 of the 1987 Constitution states —
Sec. 2. (1)The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled corporations
with original charters.
It is not at all disputed that while Respondent and LUSTEVECO are government-owned
and controlled corporations, they have no original charters; hence they are not under the
Civil Service Law. In Philippine National Oil Company-Energy Development
Corporation v. National Labor Relations Commission, we ruled:
xxx "Thus under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service Law
are [sic] the manner of its creation, such that government corporations created by special
charter(s) are subject to its provisions while those incorporated under the General
Corporation Law are not within its coverage." (Emphasis supplied)
Hence, petitioner Salenga is entitled to receive only his retirement benefits based only on
the number of years he was employed with the corporation under the conditions provided
under its retirement plan, as well as other benefits given to him by existing laws.1âwphi1
WHEREFORE, in view of the foregoing, the Petition in G.R. No. 174941 is partially
GRANTED. The Decision of LA Darlucio is REINSTATED insofar as respondent
corporation’s liability is concerned. Considering that petitioner did not maintain the
action against Rufo Colayco, the latter is not solidarily liable with respondent Clark
Development Corporation.
The case is REMANDED to the labor arbiter for the computation of petitioner’s
retirement benefits in accordance with the Social Security Act of 1997 otherwise known
as Republic Act No. 8282, deducting therefrom the sums already paid by respondent
CDC. If any, the remaining amount shall be subject to the legal interest of 6% per annum
from the filing date of petitioner’s Omnibus Motion on 11 May 2004 up to the time this
judgment becomes final and executory. Henceforth, the rate of legal interest shall be 12%
until the satisfaction of judgment.
8
SO ORDERED.
G.R. No. 203957 July 30, 2014
UNIVERSITY OF SANTO TOMAS FACULTY UNION, Petitioner,
vs.
UNIVERSITY OF STO. TOMAS, Respondent.
DECISION
CARPIO, J.:
The Case
G.R. No. 203957 is a petition for review1 assailing the Decision2 promulgated on 13 July
2012 as well as the Resolution3 promulgated on 19 October 2012 by the Court of Appeals
(CA) in CA-G.R. SP No. 120970. The CA set aside the 8 June 2011 Decision4 and 29
July 2011 Resolution5 of the Fourth Division of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 10-003370-08, as well as the 24 September
2010 Decision6 of the Labor Arbiter (LA) in NLRC-NCR Case No. 09-09745-07.
In its 24 September 2010 decision, the LA ordered the University of Santo Tomas (UST)
to remit P18,000,000.00 to the hospitalization and medical benefits fund (fund) pursuant
to the mandate of the 1996-2001 Collective Bargaining Agreement (CBA).The LA also
ordered UST to pay 10% of the total monetary award as attorney’s fees. The other claims
were dismissed for lack of merit. In its 8 June 2011 decision, the NLRC ordered UST to
remit to the University of Santo Tomas Faculty Union (USTFU) the amounts
of P80,000,000.00 for the fund pursuant to the CBA and P8,000,000.00 as attorney’s fees
equivalent to 10% of the monetary award. The NLRC denied UST’s motion for
reconsideration for lack of merit.
In its 13 July 2012 decision, the CA found grave abuse of discretion on the part of NLRC
and granted UST’s petition. The CA set aside the decisions of the NLRC and the LA,
without prejudice to the refiling of USTFU’s complaint in the proper forum. The CA
denied USTFU’s motion for reconsideration for lack of merit.
The Facts
The CA recited the facts as follows:
In a letter dated February 6, 2007, [USTFU] demanded from [UST], through its Rector,
Fr. Ernesto M. Arceo, O.P. ("Fr. Arceo"), remittance of the total amount
of P65,000,000.00 plus legal interest thereon, representing deficiency in its contribution
to the medical and hospitalization fund ("fund") of [UST’s] faculty members. [USTFU]
also sent [UST] a letter dated February 26, 2007, accompanied by a summary of its
claims pursuant to their 1996-2001 CBA.
On March 2, 2007, Fr. Arceo informed [USTFU] that the aforesaid benefits were not
meant to be given annually but rather as a one-time allocation or contribution to the
fund.[USTFU] then sent [UST] another demand letter dated June 24, 2007 reiterating its
position that [UST] is obliged to remit to the fund, its contributions not only for the years
1996-1997 but also for the subsequent years, but to no avail.
Thus, on September 5, 2007 [USTFU] filed against [UST], a complaint for unfair labor
practice, as well as for moral and exemplary damages plus attorney’s fees before the
arbitration branch of the NLRC.
[UST] sought the dismissal of the complaint on the ground of lack of jurisdiction. It
contended that the case falls within the exclusive jurisdiction of the voluntary arbitratoror
panel of voluntary arbitrators because it involves the interpretation and implementation of
the provisions of the CBA; and the conflict between the herein parties must be resolved
as grievance under the CBA and not as unfair labor practice.
[UST’s] motion to dismiss was denied by the LA in its August 8, 2008 order. [UST]
appealed the Order to the NLRC. The NLRC Seventh Division, however, dismissed the
appeal on May 12, 2009 and remanded the case to the LA for further proceedings.
The NLRC, in its assailed decision, correctly summarized the issues and submissions of
the hereinparties in their respective position papers, as follows:
According to [UST], the parties had, in the past, concluded several Collective Bargaining
Agreements for the mutual benefit of the union members and [UST], and one of these
agreements was the 1996-2001 CBA. It is undisputed that one of the economic benefits
granted by [UST] under the said CBA was the "Hospitalization Fund," provided under
Section 1-A(4) of the Article XIII thereof, the pertinent provisions of which state:
ARTICLE XIII
ECONOMIC BENEFITS
Section 1. ECONOMIC BENEFITUpon ratification and approval and for the term of this
Agreement, the economic benefits to be granted by the UNIVERSITY and the schedule
of such releases are as follows:
A. School Year 1996-97 (June 1, 1996 to May 31, 1997):
xxx
4. Hospitalization Fund: Upon ratification and approval hereof, the UNIVERSITY shall
establish a perpetual hospitalization and medical benefits fund in the sum of TWO
MILLION PESOS (P2,000,000) to be managed conjointly by a hospitalization and
medical benefits committee where both management and union are equally represented.
xxx
B. School Year 1997-98 (June 1, 1997-May 31, 1998);
xxx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION
PESOS (P1,000,000) to augment the Hospitalization and Medical Benefits fund. The
saidsum shall be addedto the remaining balance of theaforementioned fund;
xxx
C. School Year 1998-99 (June 1, 1998-May 31, 1999);
xxx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE MILLION
PESOS (P1,000,000) to augment the Hospitalization and Medical Benefits Fund. The
said sum shall be added to the remaining balance of the aforementioned fund;
D. Miscellaneous Provisions:
xxx
2. All the economic benefits herein given and those elsewhere provided under this
agreement, other than retirement benefits and one-half of the signing bonus, are
chargeable to the tuition fee share, if any, of the faculty members;
xxx xxx xxx
[USTFU] added that the amount offour (4) million pesos was agreed to be paid by the
Universityto the Hospitalization Fund annually for the fourth and fifth year of their CBA,
pursuant to the parties’ Memorandum of Agreement (MOA) which embodied the
renegotiated economic provisions of the said CBAfor the years 1999-2000 and 2000-
2001.
According to [USTFU], Section D(2) of the 1996-2001 CBA provides that:
‘All the economic benefitsherein given and those elsewhere provided under
thisagreement, other than retirement benefits and one-half of the signing bonus, are
chargeable to the tuition fee share, if any, of the faculty members.’
9
 [USTFU] explained that the rationale for the above-quoted provision is that the economic ‘At the end of this agreement, and within three (3) months therefrom, the UNIVERSITY
benefits under the said CBA like the Hospitalization and Medical BenefitsFund, are shall render an accounting of the monies it paid or released to the covered faculty in
sourced from the tuition fee increases and pursuant thereto, [UST] is obligated to remit consequence hereof.’
the amount of P2,000,000.00 not only in the first year of the CBA (1996-1997) but also On the other hand, [UST] claimed that it religiously complied with the economic
in the subsequent years because the said amount became an integral part of the current or provisions of the 1996-2001CBA particularly its obligation to remit to the Hospitalization
existing tuition fee. Furthermore, [UST] is likewise obligated to slide in the amounts and Medical Benefits Fund as the renegotiated economic provisions under the MOA by
allocated for the Hospitalization and Medical Benefits Fund for the succeeding years to remitting the total amount of P8,000,000.00. [UST] claimed that it was never the
the next CBA year and so on and so forth. [USTFU] claimed that the tuition fee increase intention of the parties to the CBA that the amounts deposited to the Hospitalization fund
once integrated to the old amount of tuition fee becomes and remains an integral part of for each year shall be carried over to the succeeding years. UST added that the MOA
the existing tuition fee. likewise madeno mention that the amount of P4,000,000.00 corresponding to the school
[USTFU] averred that while [UST] remitted the amount of P2,000,000.00 during the first year 1999-2000 should be carried over to the next school year. Thus, it was safe to
year of the 1996-2001 CBA, [UST] did not slide-in or remit the said amount in the conclude that the clear intention of the parties was that the amounts indicated on the CBA
succeeding year (1997-1998). [UST] only remitted the amount of P1,000.000,000.00 [sic] should only be remitted once on the scheduled school year. Accordingly, [UST] averred
for the CBA year 1998-1999. Moreover, [UST] remitted only the amount that it was not guilty of unfair labor practice.
of P1,000,000.00 on the third year of the CBA instead of P4,000,000.00 (2 Million + 1 [UST] further argued that the claim of [USTFU] had already been barred by prescription
Million + 1 Million). And though [UST] remitted the amount of P4,000,000 during the since under Article 290 of the Labor Code all unfair labor practice [cases] should be filed
fourth year (2) [sic] of the 1996-2001 CBA, it did not remit any amount at all during the within one (1) year from the accrual thereof otherwise they shall forever be barred. And
fifth year of the said Agreement. assuming that the instance [sic] case may be considered as a money claim, the same
[USTFU] claimed that during the period of the 1996-2001 CBA, [UST] should have already prescribed after three (3) years fromthe time the cause of action accrued.
remitted the total amount of P25,000,000.00 instead of P8,000,000.00 only. Thus, a Finally, [UST] maintained that the present dispute should not be treated as unfair labor
deficiency of P17,000,000.00. [USTFU’s] assertion is based on the following illustration: practice but should be resolved as a grievance under the CBA and referred to a Voluntary
Arbitrator.
ar 1 Year 2 Year 3 Year 4 Year 5 Actual Total
The parties thereafter submitted their respective Replies and Rejoinders amplifying their
6-97 1997-98 1998-99 1999-00 2000-01 amount amount to
arguments while refuting those made by the other.7
remitted [be]
The Labor Arbiter’s Ruling
remitted
The LA ruled in favor of USTFU.The LA classified USTFU’s complaint as one for
M 2M did not 2M did not 2M did not 2M did not 2M 10M "unfair labor practice, claims for sliding in of funds to hospitalization and medical
itted slide slide slide slide benefits under the CBA, damages and attorney’s fee with prayer for slide-in and
restoration of medical benefits under the CBA." 8 The LA ruled that UST was not able to
1M 1M did not 1M did not 1M did not 1M 4M comply with Article XIII, Section 1A-(4) of the 1996-2001 CBA. However, despite
remitted slide slide slide UST’s alleged non-compliance, the LA ruled that UST did not commit unfair labor
practice.
1M 1M did not 1M did not 1M 3M The LA interpreted the pertinent CBA provisions to mean that UST bound itself to
remitted slide slide contribute to the fund P2,000,000.00 every school year, regardless of the appropriated
augmentation amount. The LA computed UST’s liability in this manner:
4M 4M did not 4M 8M Considering that the pertinent provision of the [1996-2001] CBA Article XIII, Section
remitted slide 1A(4) stated that"The University shall establish a perpetual hospitalization and medical
Total 8M 25M benefits fund in the sum of two million pesos (P2,000,000.00) x x x x" it follows that the
amount of P2M every school year must beslided in regardless of the augmentation
[USTFU] added that after the fifth year of the CBA, i.e. 2001 onwards, [UST] ought to amount as may be appropriated. The wordshall is mandatory and the word perpetual [is]
remit the amount of P8,000,000.00 ([2]M+1M+1M+4M) annually to the Hospitalization continuous thus, [UST] is obligated to remit the actual amount to wit:
and Medical Benefits Fund. Hence, for the school year2001-2002 up to the school year
2005-2006, an additional amount of P24,000,000.00 (8M x 3) should have been remitted SY 1996-1997 – P2M = P2M
by [UST] to the aforesaid fund.All in all, the total amount yet to be remitted had SY 1997-1998 – P2M + P1M = P3M
ballooned to P81,000,000.00.
Furthermore, [USTFU] averred that [UST] likewise failed and refused to render a proper SY 1998-1999 – P2M + P1M = P3M
accounting ofthe monies it paid or released to the covered faculty as well as the money it
received as tuition fee increase starting from school year 1997-1998 onwards thereby SY 1999-2000 – P4M (Renegotiated) = P4M
violating Section D (1), Article XIII of the 1996-2001 CBA which provides that:
10
 SY 2000-2001 – P4M = P4M appellate jurisdiction. The issue of prescription also cannot be heldagainst USTFU
because the cause of action accrued only when UST refused to comply with USTFU’s 6
TOTAL REMITTANCE = P16M February 2007 demand letter. The demand letter was sent only after the conduct of
proceedings in the Permanent Union-University Committee (PUUC).
Thus, [UST] therefore has an unremitted fund of Eight Million (P8,000,000.00) pesos. The NLRC noted that the subsequent CBAs between UST and USTFU show that the
Corollarily, the CBA covering the period SY 2001-2006 [UST] is under obligation to parties intendedthat the amount appropriated each year to augment the fund shall be
remit two (2) million (P2,000,000.00) [sic] pesos every year or a total of ten million carried over to the succeeding years and is chargeable to the tuition fee increment. The
(P10,000,000.00) pesos in addition to whatever augmented amount stipulated in the NLRC ruled that the amounts appropriated for each year during the effectivity of the
CBA. 1996-2001 CBA should still be appropriated to the succeeding years. From school year
In fine, the total unremitted amountto the [hospitalization and medical benefits] fund is 1997-1998 and onwards, the basis for suchcarry over is that the amounts were sourced
eighteen million (P18,000,000.00) pesos. P8M for SY 1996-2001 and P10M for SY from tuition increases corresponding to a given school year. Since any increase in tuition
2001-2006.9 is integrated into the subsequent tuition, the amount allocated to the fund because of the
The LA did not find UST’s non-compliance with the 1996-2001 CBA as acts that tuition increaseshould be remitted to the fund. The 2001-2006 and 2006-2011 CBAs have
constituteunfair labor practice. express provisions on the carry over. The NLRC computed UST’s deficiency14 as
The failure of [UST] to slide in yearly the P2M hospitalization fund is not violation of the follows:
CBA but an error in the interpretation of the provision of the CBA. It could not be said For the 1996-2001 CBA:
eitherthat [UST] acted with malice and bad faith in view of the compliance with the other
economic provision[s] of the CBA. An error in the interpretation of a provision in the Year 1 Year 2 Year 3 Year 4 Year 5 Total amount
CBA, absent any malice or bad faith could not be considered as unfair laborpractice as 1996-97 1997-98 1998-99 1999-00 2000-01 that should
held in the case of Singapore Airlines Local Employees Association vs. NLRC, et al., 130 be submitted
10
SCRA 472.
The dispositive portion of the LA’s Decision reads: 2M 2M 2M 2M 2M
WHEREFORE, premised on the foregoing considerations, judgment is hereby rendered 1M 1M 1M 1M
ordering [UST] to remit the amount of eighteen million (P18,000,000.00) pesos to [the]
hospitalization and medical benefits fund pursuant tothe mandate of the Collective 1M 1M 1M
Bargaining Agreement on economic benefits.
[UST is] likewise directed to pay attorney’s fee[s] equivalent to ten (10) percent of the 4M 4M
total monetary award in this case.
Other claims dismissed for lack of merit. 2M + 3M + 4M + 8M + 8M = 25M
11
SO ORDERED. Since it is undisputed that [UST] remitted the amount of PhP8,000,000.00 only, there is
USTFU filed a Memorandum of Partial Appeal12 from the LA’s Decision. USTFU stilla deficiency of PhP17,000,000.00 corresponding to the 1996-2001 CBA.
claimed that the LA erred in holding that UST is liable to USTFU in the amount of P18 xxxx
million only, and in not holding that the amounts claimed by USTFU should beremitted For the 2001-2006 CBA:
by UST to USTFU. USTFU claimed that, as of 2011, UST’s total liability to the fund
is P97 million: P17 million for CBA years 1996 to 2001, P40 million for CBA years 2001 Year 1 Year 2 Year 3 Year 4 Total amount
to 2006, and P40 million for CBA years 2006 to 2011. USTFU also claimed that the 2001-02 2002-03 2003-04 2005-06 that should be
amount should be remitted byUST to USTFU for proper turnover to the fund. submitted
UST, on the other hand, filed an Appeal Memorandum.13 UST claimed that the LA
2M 2M 2M 2M
committed grave abuse of discretion in taking cognizance over the case because the issue
is within the jurisdiction of the voluntary arbitrator. UST further claimed that the LA 3M 3M 3M
committed grave abuse of discretion in finding that UST erred in its interpretation of the
CBA and in not finding that USTFU’s claims are already barred by prescription. 3M 3M
The NLRC’s Ruling
The NLRC granted USTFU’s appeal and denied UST’s appeal for lack of merit. The 2M + 5M + 8M + 8M = 23M
NLRC ordered UST to pay USTFU P80,000,000.00 and attorney’s fees equivalent to ten For the 2006-2011 CBA:
percent of the monetary award.
The NLRC pointed out that UST’s refusal to comply, despite repeated demands, with the Year 1 Year 2 Year 3 Year 4 Year 5 Total amount
CBA’s economic provisions is tantamount to a gross and flagrant violation. Thus, the 2006-07 2007-08 2008-09 2009-10 2010-11 that should
present case properly falls under the LA’s original jurisdiction as well as the NLRC’s be submitted

11

8M + 8M + 8M + 8M + 8M = 40M
The NLRC computed UST’s total liability for school years 1996-1997 up to 2010-2011
at P80,000,000.00. The records show that UST remitted P8,000,000.00 for 1996-2001
CBA, and there is absence of proof that the additional contributions to the fund were
made for the 2001-2006 and 2006-2011 CBAs. The NLRC also ordered UST to pay
USTFU attorney’s fees at 10% of the monetary award.
UST filed a motion for reconsideration of the NLRC decision.1âwphi1 UST again
claimed that the Voluntary Arbitrator, and not LA, had jurisdiction over the interpretation
of the CBA; the P80,000,000.00 award had no basis; and the fund should be remitted to
the Hospital and Medical Benefits Committee, not to USTFU, as stated in the CBA.
In a Resolution promulgated on 29 July 2011, the NLRC denied UST’s motion for
reconsideration for lack of merit.
UST filed a petition for certiorari and prohibition under Rule 65 of the Rules of Court
before the CA. UST still questioned the jurisdiction of the LA, as well as the award
of P80,000,000.00. UST also claimed that USTFU’s money claims are barred
byprescription, and that the proper recipient of the award should bethe Hospital and
Medical Benefits Committee. Finally, UST also questioned the award for attorney’s
fees.15
On 8 November 2011, USTFU filed a comment before the CA. USTFU claimed that the
NLRC did not commit grave abuse of discretion in finding that USTFU is entitled to its
claims for payment of the unremitted benefits. USTFU also claimed that certiorari is not
a proper remedy for UST because the NLRC did not commit any grave abuse of
discretion.16
The Court of Appeals’ Ruling
The CA, in its decision promulgated on 13 July 2012, disposed of the present case by
agreeing with UST’s argument that the LA and the NLRC did not have jurisdiction to
hear and decide the present case. The CA stated that since USTFU’s ultimateobjective is
to clarify the relevant items in the CBA, then USTFU’s complaint should have been filed
with the voluntary arbitrator or panel of voluntary arbitrators.
The dispositive portion of the CA’s decision reads:
WHEREFORE, finding grave abuse of discretion on the part of public respondent NLRC,
the petition isGRANTED. Without prejudice to the re-filing of private respondent’s
complaint with the proper forum, the assailed NLRC decision dated June 8,2011 and
resolution dated July 29, 2011 in NLRC LAC No. 10-003370-08, as well as the decision
dated September 24, 2010 of the Labor Arbiter in NLRC-NCR Case No. 09-09745-07 are
hereby SET ASIDE.
SO ORDERED.17
USTFU filed its motion for reconsideration18 before the CA. USTFU maintained that the
LA and the NLRC had jurisdiction over the subject matter of the complaint.
In a resolution19 promulgated on 19 October 2012, the CA denied USTFU’s motion for
reconsideration for lack of merit.
USTFU filed the present petition for review20 before this Court on 7 December 2012.
The Issues
USTFU enumerated the following grounds warranting allowance of its petition:
1. The Honorable Court of Appeals departed from the usual course of judicial
proceedings in holding that the Labor Arbiter and the NLRC have no
jurisdiction over the complaint for unfair labor practice (ULP) filed by USTFU.
2. The Court of Appeals acted in a way not in accord with the applicable
decisions of the Supreme Court in holding that the voluntary arbitrator has
jurisdiction over the instant case despite the fact that Article XIII ("Grievance
Machinery") of the CBA is not applicable.
3. The Court of Appeals committed grave abuse of discretion in the appreciation
of facts in not finding that under Art. XXII of the CBA, the Permanent
University-Union Committee (PUUC) is the proper forum to resolve the dispute
betweenUST and USTFU. However, Art. XXII does not provide for a
"voluntary arbitration" clause and therefore, USTFU validly filed the complaint
for ULP before the Labor Arbiter.
4. The Honorable Court of Appeals committed grave abuse of discretion in its
appreciation of evidence in not finding that the parties agreed to have the dispute
resolved by the labor tribunals and UST had actively participated in the
proceedings before the Labor Arbiter and the NLRC which is tantamount to a
recognitionof the jurisdiction of the said bodies.
5. The Court of Appeals departed from the usual course of proceedings in
referring back the case to voluntary arbitration despite the fact that the parties
already fully and exhaustively litigated the case before the Labor Arbiter and the
NLRC which both correctly found in favor of USTFU. Moreover, referral to
voluntary arbitration would result in waste of precious time in relitigating the
case all over again.21
UST, for its part, enumerated the following grounds for opposing USTFU’s petition:
1. The Court of Appeals correctly ruled that it is the Voluntary Arbitrator which
has jurisdiction over the instant case.
2. Assuming arguendo that NLRC has jurisdiction over the instant case, it
clearly erred when it made an award not prayed for in petitioner USTFU’s
complaint, in effect mandating double payment.
3. Assuming arguendo that NLRC has jurisdiction over the instant case, it erred
in ruling that respondent UST is still liable to pay the amount of P17,000,000.00
for the period 1996-2001 under the 1996-2001 CBA considering that:
a. There is no slide-in provision in the 1996-2001 CBA.
b. The amounts allocated for the Hospitalization Fund during SYs
1996-2001 were not sourced from the 70% share of the teaching and
non-teaching personnel in the tuition fee increases.
4. The complaint for money claims ofpetitioner USTFU arising from the
interpretation of the 1996-2001 CBA isalready barred by prescription.
5. Assuming arguendo that NLRC has jurisdiction over the instant case, it
unjustly and erroneously ordered respondent UST to pay the subject amount to
petitioner USTFU and notto the Hospital and Medical Benefits Committee under
the CBA.22
The Court’s Ruling
The petition has no merit. We shall address the issues raised by the parties one by one.
Jurisdiction over the Present Case
On the issue of jurisdiction, we affirm with modification the ruling of the CA. The Labor
Arbiter has no jurisdiction over the present case; however, despite the lack of jurisdiction,
we rule on the issues presented. We recognize that a remand to the voluntary arbitration
stage will give rise to the possibility that this case will still reach this Court through the
parties’ appeals. Furthermore, it does not serve the cause of justice if we allow this case
to go unresolved for aninordinate amount of time.
12
We quote the pertinent Articles of the Labor Code of the Philippines below:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise
provided underthis Code, the Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide, within thirty (30) calendar days after the submission of the case by the
parties for decision without extension, x x x:
1. Unfair labor practices cases;
xxxx
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective
bargaining agreements and those arising from the interpretation or enforcement
of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may
beprovided in said agreements.
Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. – The
Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies referred to in the
immediately preceding article. Accordingly, violations of a Collective Bargaining
Agreement, except those which are gross in character, shall no longer be treated as unfair
labor practice and shall be resolved as grievances under the Collective Bargaining
Agreement. For purposes of this article, gross violations of Collective Bargaining
Agreement shall mean flagrant and/ormalicious refusal to comply with the economic
provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of
Labor and Employment shall not entertain disputes, grievances or matters under the
exclusive and original jurisdiction of the Voluntary Arbitrator or panel ofVoluntary
Arbitrators and shall immediately dispose and refer the same to the Grievance Machinery
or Voluntary Arbitration provided in the Collective Bargaining Agreement.
Art. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks.
Art. 262-A. Procedures. – The Voluntary Arbitrator or panel of Voluntary Arbitrators
shall have the power to hold hearings, receive evidences and take whatever action
isnecessary to resolve the issue or issues subject to the dispute, including efforts to effect
a voluntary settlement between the parties.
All parties to the dispute shall be entitled to attend the arbitration proceedings. The
attendance of any third party to the exclusion of any witness from the proceedings shall
be determined by the Voluntary Arbitrator or panel of Voluntary Arbitrators. Hearing
may be adjourned for cause or upon agreement by the parties.
Unless the parties agree otherwise,it shall be mandatory for the Voluntary Arbitrator or
panel of Voluntary Arbitrators to render an award or decision within twenty (20) calendar
days from the date of submission of the dispute to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall
contain the facts and the law on which it is based. It shall be final and executory after ten
(10) calendar days from receipt of the copy of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary
Arbitrators or the Labor Arbiter in the region where the movant resides, in case of the
absence or incapacity of the Voluntary Arbitrator or panel of Voluntary Arbitrators for
any reason, may issue a writ of execution requiring either the sheriff of the Commission
or regular courts or any public official whom the parties may designate in the submission
agreement to execute the final decision, order or award.
On the other hand, the pertinent provisions in the 1996-2001 CBA between UST and
USTFU provide:
ARTICLE X
GRIEVANCE MACHINERY
Section 1. Grievance.– Any misunderstanding concerning policies and practices directly
affecting faculty members covered by this [collective bargaining] agreement ortheir
working conditions in the UNIVERSITY or any dispute arising as to the meaning,
application or violation of any provisions of thisAgreement or any complaint that a
covered faculty member may haveagainst the UNIVERSITY shall be considered a
grievance.
Section 2. Exclusion. – Termination of employment and preventive suspension shall be
exempted from the provisions of this Article as the same shall be governed by the
procedure in the Labor Code and its Implementing Rules.
Section 3. Procedure. – A grievance shall be settled as expeditiously as possible in
accordance with the following procedure:
STEP I. Upon presentation of a grievance in writing by the aggrieved faculty member, to
the FACULTY UNION Grievance Officer, the said officer shall present the same to the
Dean or school/department head concerned who shall render his decision on the matter
within five (5) school days from the date of the presentation. If the aggrieved party is not
satisfied with the decision, or if the Dean or school/department head fails toact within the
five-schoolday period, appeal may be made to Step II within five (5) school days from
receipt of the decision or, in the absence of a decision, the expiration ofthe period for its
rendition. If no appeal is made within the period of appeal, the grievance shall be deemed
settled on the basis of Step I.
STEP II. All appeals from StepI shall be presented to and considered by an Adjudication
Committee which shall be composed of two (2) representatives chosen by the
UNIVERSITY and two (2) representatives chosen by the FACULTY UNION. The
Committee shall meet within ten (10) school days after the elevation to this step and and
try to settle the grievance to the satisfaction of all concerned. It shall render its decision
within twenty (20) school days following the presentation of the grievance to the
Adjudication Committee. A quorum for any meeting of the Committee shall consist of a
majority of its entire membership. The affirmative vote of at least three (3) members of
the Committee shall be necessary to reach a decision. If the Committee renders a
decision, the grievance shall be deemed settled accordingly. If the Committee fails to
make a decision within the period of twenty (20) days above stated, the FACULTY
UNION President may, within ten (10)days thereafter elevate the grievance to Step III.
STEP III. The grievance appealed to this step shall be handled by the FACULTY UNION
President who shall take it up with the Rector of the UNIVERSITY who, in turn, shall
settle the grievance within ten (10) days. If no settlement is arrived at within the
aforementioned period, the grievance will automatically be referred to voluntary
arbitration.
STEP IV. The mechanics of arbitration shall be as follows:
(a) The UNIVERSITY and the FACULTY UNION shall select within
three (3) days, by raffle or process of elimination, an arbitrator
13
 mutually agreeable to them preferably from the list provided by the
Bureau of Labor Relations.
(b) The voluntary arbitrator shall render an award within ten (10) days
after the issue in dispute is submitted for decision and his award shall
be final and binding upon all parties to the grievance. (c) Arbitration
costs shall be shared equally by the UNIVERSITY and the FACULTY
UNION.23
ARTICLE XXII
PERMANENT UNIVERSITY-UNION COMMITTEE (PUUC)
Permanent UNION-UNIVERSITY Committee (PUUC). – The UNIVERSITY and the
FACULTY UNION realize that notwithstanding this CBA, there will remain problems
and irritants which will require the continuing attention of both parties. Symbolic of the
mutual good faith of the parties, they have agreed to establish a permanent committee,
where the UNIVERSITY and the FACULTY UNION are equally represented, to address
these problems as they arise.
a. Within thirty (30) days from signing of this Agreement, the
Committee shall meet. The members of the Committee are the
following:
1) For the ADMINISTRATION:
a) Rector or his representative;
b) Vice Rector for Academic Affairs or his
representative;
c) Vice Rector for Finance or his representative; and
d) Appointee of the Rector.
2) For the FACULTY UNION:
a) President of the UNION;
b) Executive Vice President of the UNION or his
representative;
c) Secretary General orhis representative; and
d) Appointee of the UNION President.
b. The regular meetings of this Committee shall be held at
least bimonthly or as the need arises. c. The decision reached
in the PUUCMeetings shall be binding to all UNIVERSITY
functionaries.24
Jurisdiction is determined by the allegations of the complaint. In the present case,
USTFU alleged that UST committed unfair labor practice in its blatant violation of the
economic provisions of the 1996-2001 CBA, and subsequently, the 2001-2006 and 2006-
2011 CBAs. UST, meanwhile, has consistently questioned USTFU’s act of bringing the
case before the LA, and of not submitting the present case to voluntary arbitration. The
LA assumed jurisdiction, but ruled that UST did not commit any unfair labor practice in
UST’s interpretation of the economic provisions of the 1996-2001 CBA. The NLRC, on
the other hand, ruled that there was indeed unfair labor practice. The CA ruled that the
LA and the NLRC did not have jurisdiction as there was no unfair labor practice. Reading
the pertinent portions of the 1996-2001 CBA along with those of the Labor Code, we see
that UST and USTFU’s misunderstanding arose solely from their differing interpretations
of the CBA’s provisions on economic benefits, specifically those concerning the fund.
Therefore, it was clearly error for the LA to assume jurisdiction over the present case.
The case should have been resolved through the voluntary arbitrator or panel of voluntary
arbitrators.
Article 217(c) of the Labor Code provides that the Labor Arbiter shall refer to the
grievance machinery and voluntary arbitration as provided in the CBA those cases that
involve the interpretation of said agreements. Article 261 of the Labor Code further
provides that all unresolved grievances arising from the interpretation or implementation
of the CBA, including violations of said agreement, are under the original and exclusive
jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators. Excluded from
this original and exclusive jurisdiction is gross violation of the CBA, which is defined in
Article 261 as "flagrant and/or malicious refusal to comply with the economic
provisions" of the CBA. San Jose v. NLRC25 provides guidelines for understanding
Articles 217, 261, and 262:
1. The jurisdiction of the Labor Arbiter and Voluntary Arbitrator or
Panel of Voluntary Arbitrators over the cases enumerated in Articles
217, 261, and 262 can possibly include money claims in one form or
another.
2. The cases where the Labor Arbiters have original and exclusive
jurisdiction are enumerated in Article 217, and that of the Voluntary
Arbitrator or Panel of Voluntary Arbitrators in Article 261.
3. The original and exclusive jurisdiction of Labor Arbiters is qualified
by an exception as indicated in the introductory sentence of Article 217
(a), to wit:
"Art. 217. Jurisdiction of Labor Arbiters ... (a) Except as
otherwise provided under this Code the Labor Arbiter shall
have original and exclusive jurisdiction to hear and decide ...
the following cases involving all workers..."
The phrase "Except as otherwise provided under this Code"
refers to the following exceptions:
A. Art. 217. Jurisdiction of Labor Arbiters...
xxx
(c) Cases arising from the interpretation or implementation of
collective bargaining agreement and those arising from the
interpretation or enforcement of company procedure/policies
shall be disposed of by the Labor Arbiter by referring the same
to the grievance machinery and voluntary arbitrator as may be
provided in said agreement.
B. Art. 262. Jurisdiction over other labor disputes. – The
Voluntary Arbitrator or panel of Voluntary Arbitrators, upon
agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining
deadlocks.
Parenthetically, the original and exclusive jurisdiction of the
Labor Arbiter under Article 217 (c), for money claims is
limited only to those arising from statutes or contracts other
than a Collective Bargaining Agreement. The Voluntary
Arbitrator or Panel of Voluntary Arbitrators will have original
and exclusive jurisdiction over money claims "arising from the
interpretation or implementation of the Collective Bargaining
Agreement and, those arising fromthe interpretation or
enforcement of company personnel policies," under Article
261.
14
 4. The jurisdiction of Voluntary Arbitrator or Panel of Voluntary
Arbitrators is provided for in Arts. 261 and 262 of the Labor Code as
indicated above.
1. A close reading of Article 261 indicates that the original
and exclusive jurisdiction of Voluntary Arbitrator or Panel of
Voluntary Arbitrators is limited only to:
"... unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and
those arising from the interpretation or enforcement of
company personnel policies... Accordingly, violations of a
collective bargaining agreement, except those which are gross
in character, shall no longer be treated as unfair labor practice
and shall be resolved asgrievances under the Collective
Bargaining Agreement. x x x."
2. Voluntary Arbitrators or Panel of Voluntary Arbitrators,
however, can exercise jurisdiction over any and all disputes
between an employer and a union and/or individual worker as
provided for in Article 262.
"Art. 262. Jurisdiction over other labor disputes. - The
voluntary arbitrator or panel of voluntary arbitrators, upon
agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining
deadlocks."
It must be emphasized that the jurisdiction of the Voluntary Arbitrator or Panel of
Voluntary Arbitrators under Article 262 must be voluntarily conferred upon by bothlabor
and management. The labor disputes referred to in the same Article 262 can include all
those disputes mentioned in Article 217 over which the Labor Arbiter has original and
exclusive jurisdiction.
As shown in the above contextual and wholistic analysis of Articles 217, 261, and 262 of
the Labor Code, the National Labor Relations Commission correctly ruled that the Labor
Arbiter had no jurisdiction to hear and decide petitioner’s money-claim underpayment of
retirement benefits, as the controversy between the parties involved an issue "arising
from the interpretationor implementation" of a provision of the collective bargaining
agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators has original and
exclusive jurisdiction over the controversy under Article 261 of the Labor Code, and not
the Labor Arbiter.
Despite the allegation that UST refused to comply with the economic provisions of the
1996-2001 CBA, we cannot characterize UST’s refusal as "flagrant and/or malicious."
Indeed, UST’s literal interpretation of the CBA was, in fact, what led USTFU to fileits
complaint. To our mind, USTFU actually went beyond the text of the 1996-2001 CBA
when it claimed that the integrated tuition fee increase as described in Section 1D(2) is
the basis for UST’s alleged deficiency.
We cannot subscribe to USTFU’s view that the 1996-2001 CBA’s Article X: Grievance
Machinery is not applicable to the present case. When the issue is about the grievance
procedure, USTFU insists on a literal interpretation of the 1996-2001 CBA. Indeed, the
present case falls under Section 1’s definition of grievance:"[a]ny misunderstanding
concerning policies and practices directly affecting faculty members covered by this
[collective bargaining] agreement ortheir working conditions in the UNIVERSITY or any
dispute arising as to the meaning, application or violation of any provisions of this
Agreement or any complaint that a covered faculty member may have against the
UNIVERSITY." Section 2 excludes only termination and preventive suspension from the
grievance procedure.
USTFU’s focus is on the 1996-2001 CBA’s provisions about the grievance process rather
than the provision about the subject matters covered by the grievance process. Despite
UST’s alleged violation of the economic provisions of the CBA by its insufficient
remittances to the fund, a dispute arising as to the meaning, application or violation of the
CBA, USTFU used Step I in Section 3, and ignored Steps III and IV, to rule out any
referral to voluntary arbitration. USTFU concludes that the 1996-2001 CBA’s provisions
on grievance machinery only refer to a grievance of a faculty member against UST, and
that said provisions do not contemplate a situation where USTFU itself has a grievance
against UST.
USTFU argues that the PUUC is the proper forum to resolve the issue, and that the filing
of a complaint beforethe LA is proper inthe absence of a voluntary arbitration clause in
the 1996-2001 CBA’s Article XXII: Permanent University-Union Committee. However,
as provided in the 1996-2001 CBA, PUUC is established for "continuing problems and
irritants which will require the continuing attention" of UST and USTFU. Clearly, the
PUUC addresses mattersnot covered by the CBA.
USTFU’s adamant refusal to considervoluntary arbitration ignores Articles 261 to 262-A
of the Labor Code, as well as Steps III and IV of Section 3 of the 1996-2001 CBA.
Accrual of Cause of Action and
Prescription of Claims
USTFU’s claims arose from UST’s alleged failure to contribute the correct amounts to
the fund during the 1996-2001 CBA. However, USTFU did not complain of any violation
by UST during the lifetime of the 1996-2001 CBA. Neither did USTFU complain of any
violation by UST during the lifetime of the succeeding 2001-2006 CBA. It was only on 6
February 2007 that USTFU sent a demand letter to UST Rector Fr. Ernesto M. Arceo,
O.P., for the claimed hospitalization and medical benefits under the 1996-2001 CBA. On
2 March 2007, UST, through its Rector, Fr. Ernesto M. Arceo, O.P., informed USTFU,
through its President, Dr. Gil Gamilla, that "the hospitalization and medical benefits
contained in [the 1996-2001 CBA] were a one-time give, and therefore not meant to
slide." USTFU notified UST on 24 June 2007 about its intent to file the necessary
complaint. On 6 September 2007, USTFU filed a complaint against UST before the LA.
The 1996-2001 CBA, as well as the applicable laws, is silent as to when UST’s alleged
violation becomes actionable. Thus, we apply Article 1150 of the Civil Code of the
Philippines: "The time for prescription for all kinds of actions, when there is no special
provision which ordains otherwise, shall be counted from the day they may be
brought."26 Prescription of an action is counted from the time the action may be
brought.27
It is error to state that USTFU’s cause of action accrued only upon UST’s categorical
denial of its claims on 2 March 2007. USTFU’s cause of action accrued when UST
allegedly failed to comply with the economic provisions of the 1996-2001 CBA. Upon
such failure by UST, USTFU could have brought an action against UST.
Article 290 of the Labor Code provides that unfair labor practices prescribe within one
year "from accrual of such unfair labor practice; otherwise, they shall be forever barred."
Article 291 of the same Code provides that money claims arising from employer-
employee relations prescribe "within three (3) years from the time the cause of action
accrued; otherwise they shall be forever barred." USTFU’s claims under the 1996-2001
CBA, whether characterized as one for unfair labor practice or for money claims from
15
 employer-employee relations, have already prescribed when USTFU filed a complaint
SY 2009-2010 P8,000,000.00 P8,000,000.00
before the LA.
USTFU filed its complaint under the theory of unfairlabor practice. Thus, USTFU had SY 2010-2011 P8,000,000.00 P8,000,000.00
one year from UST’s alleged failure to contribute, or "slide in," the correct amount to the
fund to file its complaint. USTFU had one year for every alleged breach by UST: school Total P105,000,000.00 P79,000,000.00 P26,000,00
year (SY) 1997-1998, SY 1998-1999, SY 1999-2000, SY 2000-2001, SY 2001-2002, and
We restate the following provisions inthe pertinent CBAs to establish what USTFU
SY 2002-2003. USTFU did not file any complaint within the respective one-year
claims as its bases for additional funds:
prescriptive periods. USTFU decided to file its complaint only in 2007, several years
1996-2001 CBA
after the accrual of its several possible causes of action. Even if USTFU filed its
ARTICLE XIII
complaint under the theory of money claims from employer-employee relations, its cause
ECONOMIC BENEFITS
of action still has prescribed.
Section 1. ECONOMIC BENEFIT- Upon ratification and approval and for the term of
Determination of the Benefits Due
this Agreement. the economic benefitsto be granted by the UNIVERSITY and the
We consolidate USTFU’s claims, UST’s remittances, and UST’s alleged balances in the
schedule ofsuch releases are as follows:
table below:
A. School Year 1996-97 (June 1, 1996 to May 31, 1997):
UST’s alleged xxxx
USTFU’s claims 28
UST’s remittances 29
Balances 4. Hospitalization Fund: Upon ratification and approval
hereof, the UNIVERSITY shall establish a perpetual
to 2001 CBA hospitalization and medical benefits fund in the sum of TWO
MILLION PESOS (P2,000,000) to be managed conjointly by
996-1997 P2,000,000.00 P2,000,000.00 0
a hospitalization and medical benefits committee where both
997-1998 P3,000,000.00 P1,000,000.00 P2,000,000.00 management and union are equally represented.
The joint committee shall promulgate its internal rules and
998-199 P4,000,000.00 P1,000,000.00 P3,000,000.00 regulations, and on the second year of this agreement, i.e., SY
1997-98, may allocate such amount as required, but not to
Memorandum exceed ten per cent (10%) of the gross income of the fund,for
greement administrative expenses. For the duration of the first year of
operation of the fund, the UNIVERSITY and the FACULTY
999-2000 P8,000,000.00 P4,000,000.00 P4,000,000.00 UNION shall equally subsidize the operations of the fund.
The hospitalization costs and medical benefits of the members
000-2001 P8,000,000.00 - P8,000,000.00
of the faculty as provided in Article XVIof this agreement
to 2006 CBA shall be taken from this fund.
This fund is independently managed by the aforementioned
001-2002 P8,000,000.00 P2,000,000.00 P6,000,000.00 joint committee, subject to independent audit. The yearly state
of finances of the fund shall be reported, appended to the
002-2003 P8,000,000.00 P5,000,000.00 P3,000,000.00 FACULTY UNION’s own annual report, to all members of
the university faculty.
003-2004 P8,000,000.00 P8,000,000.00 0 B. School Year 1997-98 (June 1, 1997-May 31, 1998):
004-2005 P8,000,000.00 P8,000,000.00 0 xxxx
2. Hospitalization Fund: The UNIVERSITY shall contribute
005-2006 P8,000,000.00 P8,000,000.00 0 the sum of ONE MILLION PESOS (P1,000,000) to augment
the Hospitalization and Medical Benefits fund.The said sum
-2011 CBA shall be added to the remaining balance of the aforementioned
fund;
006-2007 P8,000,000.00 P8,000,000.00 0 xxxx
C. School Year 1998-99 (June 1, 1998-May 31, 1999):
007-2008 P8,000,000.00 P8,000,000.00 0
xxxx
008-2009 P8,000,000.00 P8,000,000.00 0 2. Hospitalization Fund: The UNIVERSITY shall contribute
the sum of ONE MILLION PESOS (P1,000,000) to augment

16
 the Hospitalization and Medical Benefits fund.The said sum
shall be added to the remaining balance of the aforementioned
fund;
D. Miscellaneous Provisions:
1. At the end of this agreement, and within three months
therefrom, the UNIVERSITY shall render an accounting of
the monies it paid or released to the covered faculty in
consequence thereof;
2. All the economic benefits herein given and those elsewhere
provided under this agreement, other than retirement benefits
and one-half of the signing bonus, are chargeable to the tuition
fee share, if any, of the faculty members;
3. In the event that the tuition fee benefits of the faculty for
any of the three years covered by this part of this agreement
i.e., the University decides to raise tuition fees in the coming
two school years, exceed those provided herein, the same may
be allocated for salaries and other benefits as determined by
the FACULTY UNION and the matter duly communicated to
the UNIVERSITY; and,
4. None of the benefits provided herein, both distributable
immediately after ratification and those to be given during the
term hereof, other than the amounts checked-off and the
Hospitalization and Medical Benefits are to be directly
distributed to the faculty members by the University.30 1999
Memorandum of Agreement
1.0 The University hereby agrees to grant increase in
salary and fringe benefits as provided for by the
tuition fee increase of school year 1999-2000
according to the following scheme:
xxxx
6.0 If there is any tuition fee increase for school year
2000-2001, there will be an additional increase in
salary/fringe benefitsto be agreed upon by both
parties.
7.0An additional amount of four million pesos will be
deposited in the hospitalization fund of the faculty.31
2001-2006 CBA
Article XX
HOSPITALIZATION AND MEDICAL BENEFITS
Section 1. Hospitalization and Medical Benefits Fund. – The UNION and the
UNIVERSITY shall buildup and maintain the perpetual Hospitalization and Medical
Benefits Fund. For this purpose, the UNIVERSITY agrees to appropriate for AY 2001-
2002 two million pesos (PhP2,000,000.00); for AY 2002-2003 three million pesos
(PhP3,000,000.00); and for AY 2003-2004 another three million pesos
(PhP3,000,000.00). It is understood that the amount appropriated for each year is carried
over to the succeeding years and is chargeable to the tuition fee increment. x x x 32 2006-
2011 CBA
Article XX
HOSPITALIZATION AND MEDICAL BENEFITS
Section 5. Miscellaneous Provisions. a. The UNIVERSITY will continue to slide in the
amounts set aside in the 2001-2006 CBA to augment the fund. Fifty percent of the
amount due shall be remitted within a month from the start of the first semester and the
other fifty percent within a month from the start of the second semester of the academic
year. These sums of money shall be remitted without necessity of demand on the part of
the union and may not be garnished or held by the university on account of disputesin
hospital billings between the University and the Union.
x x x x33
USTFU claims that UST’s contributions should have been cumulative, with the amount
appropriated for each year carried over to the succeeding years and is chargeable to the
tuitionfee increment. However, USTFU’s claims are not supported by the economic
provisions of the 1996-2001 CBA and the 1999 Memorandum of Agreement reproduced
above.
We wholly agree with UST’s interpretation of the economic provisions of the 1996-2001
CBA, the 1999 Memorandumof Agreement, and the 2001-2006 and 2006-2011 CBAs, as
well as its remittances to the fund for the covered periods. UST faithfully followed the
clear provisions of these agreements.
The 1996-2001 CBA established the fund, with an initial remittance of P2, 000, 000. 00
for school year 1996-1997. UST bound itself to augment the fund by
contributing P1,000,000.00 per year for school years 1997-1998 and 1998-1999. The
1999 Memorandum of Agreement merely stated that UST will deposit P4,000,000.00 to
the fund. Express mention of the carryover is found onlv in Section 1, Article XX of the
2001-2006 CBA: "It is understood that the amount appropriated for each year is carried
over to the succeeding years xx x." The 1996-2001 CBA does not have this carry-over
provision. During the lifetime of the 1996-2001 CBA, the 1999 Memorandum of
Agreement, and the 2001-2006 CBA, USTFU never questioned the non-compliance by
UST with an alleged carry-over agreement applicable to the 1996-2001 CBA. This Court
is well aware of Article 1702 of the Civil Code, which provides that "[i]n case of doubt,
all labor legislation and all labor contracts shall be construed in favor of the safety and
decent living for the laborer." This Court is also well aware that when the provisions of
the CBA are clear and unambiguous, the literal meaning of the stipulations shall
govern.34 In the present case, the CBA provisions pertaining to the fund are clear and
should be interpreted according to their literal meaning.
WHEREFORE, we DENY the petition. We DECLARE that the claims of the University
of Santo Tomas Faculty Union have prescribed and that there is no carry-over provision
for the Hospitalization and Medical Benefits Fund in the 1996-2001 Collective
Bargaining Agreement and in the 1999 Memorandum of Agreement. The carry-over
provision for the Hospitalization and Medical Benefits Fund is found only in the 2001-
2006 and 2006-2011 Collective Bargaining Agreements.
No costs.
SO ORDERED.
G.R. No. 197309 October 10, 2012
ACE NAVIGATION CO., INC., VELA INTERNATIONAL MARINE LTD., and/or
RODOLFO PAMINTUAN,Petitioners,
vs.
TEODORICO FERNANDEZ, assisted by GLENITA FERNANDEZ, Respondent.
DECISION
BRION, J.:
17
For resolution is the petition for review on certiorari1 which seeks to nullify the
decision2 dated September 22, 2010 and the resolution3 dated May 26,2011 ofthe Court
of Appeals (CA) in CA-G.R. SP No. 112081.
The Antecedents
On October 9, 2008, seaman Teodorico Fernandez (Fernandez), assisted by his wife,
Glenita Fernandez, filed with the National Labor Relations Commission (NLRC) a
complaint for disability benefits, with prayer for moral and exemplary damages, plus
attorney’s fees, against Ace Navigation Co., Inc., Vela International Marine Ltd., and/or
Rodolfo Pamintuan (petitioners).
The petitioners moved to dismiss the complaint,4 contending that the labor arbiter had no
jurisdiction over the dispute. They argued that exclusive original jurisdiction is with the
voluntary arbitrator or panel of voluntary arbitrators, pursuant to Section 29 of the POEA
Standard Employment Contract (POEA-SEC), since the parties are covered by the
AMOSUP-TCC or AMOSUP-VELA (as later cited by the petitioners) collective
bargaining agreement (CBA). Under Section 14 of the CBA, a dispute between a seafarer
and the company shall be settled through the grievance machinery and mandatory
voluntary arbitration.
Fernandez opposed the motion.5 He argued that inasmuch as his complaint involves a
money claim, original and exclusive jurisdiction over the case is vested with the labor
arbiter.
The Compulsory Arbitration Rulings
On December 9, 2008, Labor Arbiter Romelita N. Rioflorido denied the motion to
dismiss, holding that under Section 10 of Republic Act (R.A.) No. 8042, the Migrant
Workers and Overseas Filipinos Act of 1995, the labor arbiter has original and exclusive
jurisdiction over money claims arising out of an employer-employee relationship or by
virtue of any law or contract, notwithstanding any provision of law to the contrary. 6
The petitioners appealed to the NLRC, but the labor agency denied the appeal. It agreed
with the labor arbiter that the case involves a money claim and is within the jurisdiction
of the labor arbiter, in accordance with Section 10 of R.A. No. 8042. Additionally, it
declared that the denial of the motion to dismiss is an interlocutory order which is not
appealable. Accordingly, it remanded the case to the labor arbiter for further proceedings.
The petitioners moved for reconsideration, but the NLRC denied the motion, prompting
the petitioners to elevate the case to the CA through a petition for certiorari under Rule
65 of the Rules of Court.
The CA Decision
Through its decision of September 22, 2010,7 the CA denied the petition on procedural
and substantive grounds.
Procedurally, it found the petitioners to have availed of the wrong remedy when they
challenged the labor arbiter’s denial of their motion to dismiss by way of an appeal to the
NLRC. It stressed that pursuant to the NLRC rules,8an order denying a motion to dismiss
is interlocutory and is not subject to appeal.
On the merits of the case, the CA believed that the petition cannot also prosper. It
rejected the petitioners’ submission that the grievance and voluntary arbitration procedure
of the parties’ CBA has jurisdiction over the case, to the exclusion of the labor arbiter and
the NLRC. As the labor arbiter and the NLRC did, it opined that under Section 10 of
R.A. No. 8042, the labor arbiter has the original and exclusive jurisdiction to hear
Fernandez’s money claims.
Further, the CA clarified that while the law9 allows parties to submit to voluntary
arbitration other labor disputes, including matters falling within the original and exclusive
jurisdiction of the labor arbiters under Article 217 of the Labor Code as this Court
recognized in Vivero v. Court of Appeals,10 the parties’ submission agreement must be
expressed in unequivocal language. It found no such unequivocal language in the
AMOSUP/TCC CBA that the parties agreed to submit money claims or, more
specifically, claims for disability benefits to voluntary arbitration.
The CA also took note of the POEA-SEC11 which provides in its Section 29 that in cases
of claims and disputes arising from a Filipino seafarer’s employment, the parties covered
by a CBA shall submit the claim or dispute to the original and exclusive jurisdiction of
the voluntary arbitrator or panel of voluntary arbitrators. The CA explained that the
relevant POEA-SEC provisions should likewise be qualified by the ruling in
the Vivero case, the Labor Code, and other applicable laws and jurisprudence.
In sum, the CA stressed that the jurisdiction of voluntary arbitrators is limited to the
seafarers’ claims which do not fall within the labor arbiter’s original and exclusive
jurisdiction or even in cases where the labor arbiter has jurisdiction, the parties have
agreed in unmistakable terms (through their CBA) to submit the case to voluntary
arbitration.
The petitioners moved for reconsideration of the CA decision, but the appellate court
denied the motion, reiterating its earlier pronouncement that on the ground alone of the
petitioners’ wrong choice of remedy, the petition must fail.
The Petition
The petitioners are now before this Court praying for a reversal of the CA judgment on
the following grounds:
1. The CA committed a reversible error in disregarding the Omnibus Implementing Rules
and Regulations (IRR) of the Migrant Workers and Overseas Filipinos Act of 1995, 12 as
amended by R.A. No. 10022,13 mandating that "For OFWs with collective bargaining
agreements, the caseshall be submitted for voluntary arbitration in accordance with
Articles 261 and 262 of the Labor Code." 14
The petitioners bewail the CA’s rejection of the above argument for the reason that the
remedy they pursued was inconsistent with the 2005 Revised Rules of Procedure of the
NLRC. Citing Municipality of Sta. Fe v. Municipality of Aritao,15 they argue that the
"dismissal of a case for lack of jurisdiction may be raised at any stage of the
proceedings."
In any event, they posit that the IRR of R.A. No. 10022 is in the nature of an adjective or
procedural law which must be given retroactive effect and which should have been
applied by the CA in resolving the present case.
2. The CA committed a reversible error in ruling that the AMOSUP-VELA CBA does
not contain unequivocal wordings for the mandatory referral of Fernandez’s claim to
voluntary arbitration.
The petitioners assail the CA’s failure to explain the basis "for ruling that no explicit or
unequivocal wordings appeared on said CBA for the mandatory referral of the disability
claim to arbitration."16They surmise that the CA construed the phrase "either
party may refer the case to a MANDATORY ARBITRATION COMMITTEE" under
Section 14.7(a) of the CBA as merely permissive and not mandatory because of the use
of the word "may." They contend that notwithstanding the use of the word "may," the
parties unequivocally and unmistakably agreed to refer the present disability claim to
mandatory arbitration.
3. The CA committed a reversible error in disregarding the NLRC memorandum
prescribing the appropriate action for complaints and/or proceedings which were initially
processed in the grievance machinery of existing CBAs. In their motion for
18
reconsideration with the CA, the petitioners manifested that the appellate court’s assailed
decision had been modified by the following directive of the NLRC:
As one of the measures being adopted by our agency in response to the Platform and
Policy Pronouncements on Labor Employment, you are hereby directed to immediately
dismiss the complaint and/or terminate proceedings which were initially processed in the
grievance machinery as provided in the existing Collective Bargaining Agreements
(CBAs) between parties, through the issuance of an Order of Dismissal and referral of the
disputes to the National Conciliation Mediation Board (NCMB) for voluntary arbitration.
FOR STRICT COMPLIANCE.17
4. On July 31, 2012,18 the petitioners manifested before the Court that on June 13, 2012,
the Court’s Second Division issued a ruling in G.R. No. 172642, entitled Estate of Nelson
R. Dulay, represented by his wife Merridy Jane P. Dulay v. Aboitiz Jebsen Maritime,
Inc., and General Charterers, Inc., upholding the jurisdiction of the voluntary arbitrator
or panel of voluntary arbitrators over a seafarer’s money claim. They implore the Court
that since the factual backdrop and the issues involved in the case are similar to the
present dispute, the Dulay ruling should be applied to this case and which should
accordingly be referred to the National Conciliation and Mediation Board for voluntary
arbitration.
The Case for Fernandez
In compliance with the Court’s directive,19 Fernandez filed on October 7, 2011 his
Comment20 (on the Petition) with the plea that the petition be dismissed for lack of merit.
Fernandez presents the following arguments:
1. The IRR of the Migrant Workers and Overseas Filipinos Act of 1995 (R.A.
No. 8042), as amended by R.A. No. 10022, 21 did not divest the labor arbiters of
their original and exclusive jurisdiction over money claims arising from
employment, for nowhere in said IRR is there such a divestment.
2. The voluntary arbitrators do not have jurisdiction over the present controversy
as can be deduced from Articles 261 and 262 of the Labor Code. Fernandez
explains that his complaint does not involve any "unresolved grievances arising
from the interpretation or implementation of the Collective Bargaining
Agreement [nor] from the interpretation or enforcement of company personnel
policies[.]"22 As he never referred his claim to the grievance machinery, there is
no "unresolved grievance" to speak of. His complaint involves a claim for
compensation and damages which is outside the voluntary arbitrator’s
jurisdiction under Article 261. Further, only disputes involving the union and the
company shall be referred to the grievance machinery and to voluntary
arbitration, as the Court held in Sanyo Philippines Workers Union-PSSLU v.
Cañizares23 and Silva v. CA.24
3. The CA correctly ruled that no unequivocal wordings appear in the CBA for
the mandatory referral of Fernandez’s disability claim to a voluntary arbitrator.
The Court’s Ruling
We first rule on the procedural question arising from the labor arbiter’s denial of the
petitioners’ motion to dismiss the complaint. On this point, Section 6, Rule V of The
2005 Revised Rules of Procedure of the NLRC provides:
On or before the date set for the mandatory conciliation and mediation conference, the
respondent may file a motion to dismiss. Any motion to dismiss on the ground of lack of
jurisdiction, improper venue, or that the cause of action is barred by prior judgment,
prescription, or forum shopping, shall be immediately resolved by the Labor Arbiter
through a written order. An order denying the motion to dismiss, or suspending its
resolution until the final determination of the case, is not appealable. [underscoring ours]
Corollarily, Section 10, Rule VI of the same Rules states:
Frivolous or Dilatory Appeals. – No appeal from an interlocutory order shall be
entertained. To discourage frivolous or dilatory appeals, including those taken from
interlocutory orders, the Commission may censure or cite in contempt the erring parties
and their counsels, or subject them to reasonable fine or penalty.
In Indiana Aerospace University v. Comm. on Higher Educ.,25 the Court declared that
"[a]n order denying a motion to dismiss is interlocutory"; the proper remedy in this
situation is to appeal after a decision has been rendered. Clearly, the denial of the
petitioners’ motion to dismiss in the present case was an interlocutory order and,
therefore, not subject to appeal as the CA aptly noted.
The petition’s procedural lapse notwithstanding, the CA proceeded to review the merits
of the case and adjudged the petition unmeritorious. We find the CA’s action in order.
The Labor Code itself declares that "it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and all reasonable
means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process." 26
We now address the focal question of who has the original and exclusive jurisdiction over
Fernandez’s disability claim — the labor arbiter under Section 10 of R.A. No. 8042, as
amended, or the voluntary arbitration mechanism as prescribed in the parties’ CBA and
the POEA-SEC?
The answer lies in the State’s labor relations policy laid down in the Constitution and
fleshed out in the enabling statute, the Labor Code. Section 3, Article XIII (on Social
Justice and Human Rights) of the Constitution declares:
xxxx
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
Article 260 of the Labor Code (Grievance machinery and voluntary arbitration) states:
The parties to a Collective Bargaining Agreement shall include therein provisions that
will ensure the mutual observance of its terms and conditions. They shall establish a
machinery for the adjustment and resolution of grievances arising from the interpretation
or implementation of their Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies.
Article 261 of the Labor Code (Jurisdiction of Voluntary Arbitrators or panel of
Voluntary Arbitrators), on the other hand, reads in part:
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and
exclusive jurisdiction to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies[.]
Article 262 of the Labor Code (Jurisdiction over other labor disputes) declares:
The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the
parties, shall also hear and decide all other labor disputes including unfair labor practices
and bargaining deadlocks.
Further, the POEA-SEC, which governs the employment of Filipino seafarers, provides
in its Section 29 on Dispute Settlement Procedures:
19
In cases of claims and disputes arising from this employment, the parties covered by
a collective bargaining agreement shall submit the claim or dispute to the original
and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary
arbitrators. If the parties are not covered by a collective bargaining agreement, the
parties may at their option submit the claim or dispute to either the original and exclusive
jurisdiction of the National Labor Relations Commission (NLRC), pursuant to Republic
Act (RA) 8042 otherwise known as the Migrant Workers and Overseas Filipinos Act of
1995 or to the original and exclusive jurisdiction of the voluntary arbitrator or panel of
voluntary arbitrators. If there is no provision as to the voluntary arbitrators to be
appointed by the parties, the same shall be appointed from the accredited voluntary
arbitrators of the National Conciliation and Mediation Board of the Department of Labor
and Employment. [emphasis ours]
We find merit in the petition.
Under the above-quoted constitutional and legal provisions, the voluntary arbitrator or
panel of voluntary arbitrators has original and exclusive jurisdiction over Fernandez’s
disability claim. There is no dispute that the claim arose out of Fernandez’s employment
with the petitioners and that their relationship is covered by a CBA — the
AMOSUP/TCC or the AMOSUP-VELA CBA. The CBA provides for a grievance
procedure for the resolution of grievances or disputes which occur during the
employment relationship and, like the grievance machinery created under Article 261 of
the Labor Code, it is a two-tiered mechanism, with voluntary arbitration as the last
step.1âwphi1
Contrary to the CA’s reading of the CBA’s Article 14, there is unequivocal or
unmistakable language in the agreement which mandatorily requires the parties to submit
to the grievance procedure any dispute or cause of action they may have against each
other. The relevant provisions of the CBA state:
14.6 Any Dispute, grievance, or misunderstanding concerning any ruling, practice,
wages or working conditions in the COMPANY or any breach of the Contract of
Employment, or any dispute arising from the meaning or application of the
provisions of this Agreement or a claim of violation thereof or any complaint or
cause of action that any such Seaman may have against the COMPANY, as well as
complaints which the COMPANY may have against such Seaman shall be brought
to the attention of the GRIEVANCE RESOLUTION COMMITTEE before either
party takes any action, legal or otherwise. Bringing such a dispute to the Grievance
Resolution Committee shall be unwaivable prerequisite or condition precedent for
bringing any action, legal or otherwise, in any forum and the failure to so refer the
dispute shall bar any and all legal or other actions.
14.7a) If by reason of the nature of the Dispute, the parties are unable to amicably
settle the dispute, either party may refer the case to a MANDATORY
ARBITRATION COMMITTEE. The MANDATORY ARBITRATION COMMITTEE
shall consist of one representative to be designated by the UNION, and one representative
to be designated by the COMPANY and a third member who shall act as Chairman and
shall be nominated by mutual choice of the parties. xxx
h) Referral of all unresolved disputes from the Grievance Resolution Committee to
the Mandatory Arbitration Committee shall be unwaivable prerequisite or
condition precedent for bringing any action, claim, or cause of action, legal or
otherwise, before any court, tribunal, or panel in any jurisdiction. The failure by a
party or seaman to so refer and avail oneself to the dispute resolution mechanism
contained in this action shall bar any legal or other action. All parties expressly
agree that the orderly resolution of all claims in the prescribed manner served the
interests of reaching settlements or claims in an orderly and uniform manner, as
well as preserving peaceful and harmonious labor relations between seaman, the
Union, and the Company.27 (emphases ours)
What might have caused the CA to miss the clear intent of the parties in prescribing a
grievance procedure in their CBA is, as the petitioners’ have intimated, the use of the
auxiliary verb "may" in Article 14.7(a) of the CBA which, to reiterate, provides that "if
by reason of the nature of the Dispute, the parties are unable to amicably settle the
dispute, either party may refer the case to a MANDATORY ARBITRATION
COMMITTEE."28
While the CA did not qualify its reading of the subject provision of the CBA, it is
reasonable to conclude that it viewed as optional the referral of a dispute to the
mandatory arbitration committee when the parties are unable to amicably settle the
dispute.
We find this a strained interpretation of the CBA provision. The CA read the provision
separately, or in isolation of the other sections of Article 14, especially 14.7(h), which, in
clear, explicit language, states that the "referral of all unresolved disputes from the
Grievance Resolution Committee to the Mandatory Arbitration Committee shall be
unwaivable prerequisite or condition precedent for bringing any action, claim, or
cause of action, legal or otherwise, before any court, tribunal, or panel in any
jurisdiction"29 and that the failure by a party or seaman to so refer the dispute to
the prescribed dispute resolution mechanism shall bar any legal or other action.
Read in its entirety, the CBA’s Article 14 (Grievance Procedure) unmistakably reflects
the parties’ agreement to submit any unresolved dispute at the grievance resolution stage
to mandatory voluntary arbitration under Article 14.7(h) of the CBA. And, it should be
added that, in compliance with Section 29 of the POEA-SEC which requires that in cases
of claims and disputes arising from a seafarer’s employment, the parties covered by a
CBA shall submit the claim or dispute to the original and exclusive jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators.
Since the parties used unequivocal language in their CBA for the submission of their
disputes to voluntary arbitration (a condition laid down in Vivero for the recognition of
the submission to voluntary arbitration of matters within the original and exclusive
jurisdiction of labor arbiters), we find that the CA committed a reversible error in its
ruling; it disregarded the clear mandate of the CBA between the parties and the POEA-
SEC for submission of the present dispute to voluntary arbitration.
Consistent with this finding, Fernandez’s contention — that his complaint for disability
benefits is a money claim that falls within the original and exclusive jurisdiction of the
labor arbiter under Section 10 of R.A. No. 8042 — is untenable. We likewise reject his
argument that he never referred his claim to the grievance machinery (so that no
unresolved grievance exists as required under Article 261 of the Labor Code), and that
the parties to the case are not the union and the employer.30 Needless to state, no such
distinction exists in the parties’ CBA and the POEA-SEC.
It bears stressing at this point that we are upholding the jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators over the present dispute, not only because of
the clear language of the parties’ CBA on the matter; more importantly, we so uphold the
voluntary arbitrator’s jurisdiction, in recognition of the State’s express preference for
voluntary modes of dispute settlement, such as conciliation and voluntary arbitration as
expressed in the Constitution, the law and the rules.
20
In this light, we see no need to further consider the petitioners’ submission regarding the
IRR of the Migrant Workers and Overseas Filipinos Act of 1995, as amended by R.A.
No. 10022, except to note that the IRR lends further support to our ruling.
In closing, we quote with approval a most recent Court pronouncement on the same issue,
thus –
It is settled that when the parties have validly agreed on a procedure for resolving
grievances and to submit a dispute to voluntary arbitration then that procedure
should be strictly observed.31 (emphasis ours)
WHEREFORE, premises considered, the petition is GRANTED. The assailed decision
and resolution of the Court of Appeals are SET ASIDE. Teodorico Fernandez's disability
claim is REFERRED to the Grievance Resolution Committee of the parties' collective
bargaining agreement and/or the Mandatory Arbitration Committee, if warranted.
SO ORDERED.
G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of
Court, which assails the Decision2 dated November 24, 2011 and Resolution3 dated
March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the
CA ruled that the Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the
jurisdiction over petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal
against Broadcom Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo), the President of
Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and
monetary claims filed with the National Capital Region Arbitration Branch of the
National Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television
networks and production houses. In December 2000, Arevalo set up the company
Broadcom, still to continue the business of trading communication and broadcast
equipment. Cosare was named an incorporator of Broadcom, having been assigned 100
shares of stock with par value of P1.00 per share.5 In October 2001, Cosare was promoted
to the position of Assistant Vice President for Sales (AVP for Sales) and Head of the
Technical Coordination, having a monthly basic net salary and average commissions
of P18,000.00 and P37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President
for Sales and thus, became Cosare’s immediate superior. On March 23, 2009, Cosare sent
a confidential memo7 to Arevalo to inform him of the following anomalies which were
allegedly being committed by Abiog against the company: (a) he failed to report to work
on time, and would immediately leave the office on the pretext of client visits; (b) he
advised the clients of Broadcom to purchase camera units from its competitors, and
received commissions therefor; (c) he shared in the "under the-table dealings" or
"confidential commissions" which Broadcom extended to its clients’ personnel and
engineers; and (d) he expressed his complaints and disgust over Broadcom’s
uncompetitive salaries and wages and delay in the payment of other benefits, even in the
presence of office staff. Cosare ended his memo by clarifying that he was not interested
in Abiog’s position, but only wanted Arevalo to know of the irregularities for the
corporation’s sake.
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to
tender his resignation in exchange for "financial assistance" in the amount
of P300,000.00.8 Cosare refused to comply with the directive, as signified in a
letter9dated March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s
Manager for Finance and Administration, a memo10 signed by Arevalo, charging him of
serious misconduct and willful breach of trust, and providing in part:
1. A confidential memo was received from the VP for Sales informing me that
you had directed, or at the very least tried to persuade, a customer to purchase a
camera from another supplier. Clearly, this action is a gross and willful violation
of the trust and confidence this company has given to you being its AVP for
Sales and is an attempt to deprive the company of income from which you,
along with the other employees of this company, derive your salaries and other
benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found
abandoned in another place outside of the office without proper turnover from
you to this office which had assigned said vehicle to you. The vehicle was found
to be inoperable and in very bad condition, which required that the vehicle be
towed to a nearby auto repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the
company of your activities within and outside of company premises despite
repeated reminders. However, it has been observed that you have been both
frequently absent and/or tardy without proper information to this office or your
direct supervisor, the VP for Sales Mr. Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as
evidenced by the fact that you have not recorded any sales for the past
immediate twelve (12) months. This was inspite of the fact that my office
decided to relieve you of your duties as technical coordinator between
Engineering and Sales since June last year so that you could focus and
concentrate [on] your activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to
present his explanation on the charges. He was also "suspended from having access to
any and all company files/records and use of company assets effective
immediately."12 Thus, Cosare claimed that he was precluded from reporting for work on
March 31, 2009, and was instead instructed to wait at the office’s receiving section. Upon
the specific instructions of Arevalo, he was also prevented by Villareal from retrieving
even his personal belongings from the office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and
was told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the
officials of Barangay San Antonio, Pasig City, and had the incident reported in the
barangay blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo 14 by which he
addressed and denied the accusations cited in Arevalo’s memo dated March 30, 2009.
The respondents refused to receive the memo on the ground of late filing, prompting
21
Cosare to serve a copy thereof by registered mail. The following day, April 3, 2009,
Cosare filed the subject labor complaint, claiming that he was constructively dismissed
from employment by the respondents. He further argued that he was illegally suspended,
as he placed no serious and imminent threat to the life or property of his employer and
co-employees.15
In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed
the following acts inimical to the interests of Broadcom: (a) he failed to sell any
broadcast equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150
Camera which was to be sourced from a competitor; and (c) he made an unauthorized
request in Broadcom’s name for its principal, Panasonic USA, to issue an invitation for
Cosare’s friend, one Alex Paredes, to attend the National Association of Broadcasters’
Conference in Las Vegas, USA.16 Furthermore, they contended that Cosare abandoned
his job17 by continually failing to report for work beginning April 1, 2009, prompting
them to issue on April 14, 2009 a memorandum18 accusing Cosare of absence without
leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his
Decision19 dismissing the complaint on the ground of Cosare’s failure to establish that he
was dismissed, constructively or otherwise, from his employment. For the LA, what
transpired on March 30, 2009 was merely the respondents’ issuance to Cosare of a show-
cause memo, giving him a chance to present his side on the charges against him. He
explained:
It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges
leveled against him in the show-cause memo. What he did was to pre-empt that action by
filing this complaint just a day after he submitted his written explanation. Moreover, by
specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosare’s]
motive for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his
allegations of illegal suspension and non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA
Menese. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the
Respondents are found guilty of Illegal Constructive Dismissal. Respondents
BROADCOM ASIA, INC. and Dante Arevalo are ordered to pay [Cosare’s] backwages,
and separation pay, as well as damages, in the total amount of P1,915,458.33, per
attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is
accorded to [Cosare’s] contention that he was constructively dismissed by Respondent
Arevalo when he was asked to resign from his employment." 23 The fact that Cosare was
suspended from using the assets of Broadcom was also inconsistent with the respondents’
claim that Cosare opted to abandon his employment.
Exemplary damages in the amount of P100,000.00 was awarded, given the NLRC’s
finding that the termination of Cosare’s employment was effected by the respondents in
bad faith and in a wanton, oppressive and malevolent manner. The claim for unpaid
commissions was denied on the ground of the failure to include it in the prayer of
pleadings filed with the LA and in the appeal.
The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a
petition for certiorari with the CA founded on the following arguments: (1) the
respondents did not have to prove just cause for terminating the employment of Cosare
because the latter’s complaint was based on an alleged constructive dismissal; (2) Cosare
resigned and was thus not dismissed from employment; (3) the respondents should not be
declared liable for the payment of Cosare’s monetary claims; and (4) Arevalo should not
be held solidarily liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they
raised a new argument, i.e., the case involved an intra-corporate controversy which was
within the jurisdiction of the RTC, instead of the LA. 25 They argued that the case
involved a complaint against a corporation filed by a stockholder, who, at the same time,
was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the
respondents’ petition. It agreed with the respondents’ contention that the case involved an
intra-corporate controversy which, pursuant to Presidential Decree No. 902-A, as
amended, was within the exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was
listed as one of its directors. Moreover, he held the position of [AVP] for Sales which is
listed as a corporate office. Generally, the president, vice-president, secretary or treasurer
are commonly regarded as the principal or executive officers of a corporation, and
modern corporation statutes usually designate them as the officers of the corporation.
However, it bears mentioning that under Section 25 of the Corporation Code, the Board
of Directors of [Broadcom] is allowed to appoint such other officers as it may deem
necessary. Indeed, [Broadcom’s] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment – Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be
necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare]
indeed held a corporate office, as evidenced by the General Information Sheet which was
submitted to the Securities and Exchange Commission (SEC) on October 22,
2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one
dismissing the labor complaint on the ground of lack of jurisdiction, finding it
unnecessary to resolve the main issues that were raised in the petition. Cosare filed a
motion for reconsideration, but this was denied by the CA via the Resolution 28 dated
March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the
case instituted by Cosare was an intra-corporate dispute that was within the original
jurisdiction of the RTC, and not of the LAs; and (2) whether or not Cosare was
constructively and illegally dismissed from employment by the respondents.
The Court’s Ruling
22
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling
of the CA, it is the LA, and not the regular courts, which has the original jurisdiction over
the subject controversy. An intra-corporate controversy, which falls within the
jurisdiction of regular courts, has been regarded in its broad sense to pertain to disputes
that involve any of the following relationships: (1) between the corporation, partnership
or association and the public; (2) between the corporation, partnership or association and
the state in so far as its franchise, permit or license to operate is concerned; (3) between
the corporation, partnership or association and its stockholders, partners, members or
officers; and (4) among the stockholders, partners or associates, themselves. 29 Settled
jurisprudence, however, qualifies that when the dispute involves a charge of illegal
dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction,
as a rule, falls termination disputes and claims for damages arising from employer-
employee relations as provided in Article 217 of the Labor Code. Consistent with this
jurisprudence, the mere fact that Cosare was a stockholder and an officer of Broadcom at
the time the subject controversy developed failed to necessarily make the case an intra-
corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros, 30 the Court distinguished
between a "regular employee" and a "corporate officer" for purposes of establishing the
true nature of a dispute or complaint for illegal dismissal and determining which body has
jurisdiction over it. Succinctly, it was explained that "[t]he determination of whether the
dismissed officer was a regular employee or corporate officer unravels the conundrum"
of whether a complaint for illegal dismissal is cognizable by the LA or by the RTC. "In
case of the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the
legal authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for
being its AVP for Sales, was not a "corporate officer" as the term is defined by law. We
emphasized in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the
purpose of identifying an intra-corporate controversy. Citing Garcia v. Eastern
Telecommunications Philippines, Inc.,33 we held:
" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers
of the corporation who are given that character by the Corporation Code or by the
corporation’s by-laws. There are three specific officers whom a corporation must have
under Section 25 of the Corporation Code. These are the president, secretary and the
treasurer. The number of officers is not limited to these three. A corporation may have
such other officers as may be provided for by its by-laws like, but not limited to, the vice-
president, cashier, auditor or general manager. The number of corporate officers is thus
limited by law and by the corporation’s by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of
corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer
is elected by the directors and stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur
in order for an individual to be considered a corporate officer, as against an ordinary
employee or officer, namely: (1) the creation of the position is under the corporation’s
charter or by-laws; and (2) the election of the officer is by the directors or stockholders. It
is only when the officer claiming to have been illegally dismissed is classified as such
corporate officer that the issue is deemed an intra-corporate dispute which falls within the
jurisdiction of the trial courts.
To support their argument that Cosare was a corporate officer, the respondents referred to
Section 1, Article IV of Broadcom’s by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment – Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper. Any two (2) or more compatible positions may be held concurrently
by the same person, except that no one shall act as President and Treasurer or Secretary at
the same time.37 (Emphasis ours)
This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute
that was within the trial courts’ jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices
that are created under Broadcom’s by-laws are the following: the President, Vice-
President, Treasurer and Secretary. Although a blanket authority provides for the Board’s
appointment of such other officers as it may deem necessary and proper, the respondents
failed to sufficiently establish that the position of AVP for Sales was created by virtue of
an act of Broadcom’s board, and that Cosare was specifically elected or appointed to such
position by the directors. No board resolutions to establish such facts form part of the
case records. Further, it was held in Marc II Marketing, Inc. v. Joson 38 that an enabling
clause in a corporation’s by-laws empowering its board of directors to create additional
officers, even with the subsequent passage of a board resolution to that effect, cannot
make such position a corporate office. The board of directors has no power to create other
corporate offices without first amending the corporate by-laws so as to include therein the
newly created corporate office.39 "To allow the creation of a corporate officer position by
a simple inclusion in the corporate by-laws of an enabling clause empowering the board
of directors to do so can result in the circumvention of that constitutionally well-protected
right [of every employee to security of tenure]." 40
The CA’s heavy reliance on the contents of the General Information Sheets41, which were
submitted by the respondents during the appeal proceedings and which plainly provided
that Cosare was an "officer" of Broadcom, was clearly misplaced. The said documents
could neither govern nor establish the nature of the office held by Cosare and his
appointment thereto. Furthermore, although Cosare could indeed be classified as an
officer as provided in the General Information Sheets, his position could only be deemed
a regular office, and not a corporate office as it is defined under the Corporation Code.
Incidentally, the Court noticed that although the Corporate Secretary of Broadcom, Atty.
Efren L. Cordero, declared under oath the truth of the matters set forth in the General
Information Sheets, the respondents failed to explain why the General Information Sheet
officially filed with the Securities and Exchange Commission in 2011 and submitted to
the CA by the respondents still indicated Cosare as an AVP for Sales, when among their
defenses in the charge of illegal dismissal, they asserted that Cosare had severed his
relationship with the corporation since the year 2009.
23
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s
filing did not necessarily make the action an intra- corporate controversy. "Not all
conflicts between the stockholders and the corporation are classified as intra-corporate.
There are other facts to consider in determining whether the dispute involves corporate
matters as to consider them as intra-corporate controversies."42 Time and again, the Court
has ruled that in determining the existence of an intra-corporate dispute, the status or
relationship of the parties and the nature of the question that is the subject of the
controversy must be taken into account.43 Considering that the pending dispute
particularly relates to Cosare’s rights and obligations as a regular officer of Broadcom,
instead of as a stockholder of the corporation, the controversy cannot be deemed intra-
corporate. This is consistent with the "controversy test" explained by the Court in Reyes
v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-
corporate. The controversy must not only be rooted in the existence of an intra-corporate
relationship, but must as well pertain to the enforcement of the parties’ correlative rights
and obligations under the Corporation Code and the internal and intra-corporate
regulatory rules of the corporation. If the relationship and its incidents are merely
incidental to the controversy or if there will still be conflict even if the relationship does
not exist, then no intra-corporate controversy exists.45 (Citation omitted)
It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom
when the dispute commenced was unsupported by the case records, as even the General
Information Sheet of 2009 referred to in the CA decision to support such finding failed to
provide such detail.
All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored
Cosare solely on the ground that the dispute was an intra-corporate controversy within
the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the
correctness of the NLRC’s ruling finding Cosare to have been illegally dismissed from
employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed,
citing among other circumstances the charges that were hurled and the suspension that
was imposed against him via Arevalo’s memo dated March 30, 2009. Even prior to such
charge, he claimed to have been subjected to mental torture, having been locked out of
his files and records and disallowed use of his office computer and access to personal
belongings.47 While Cosare attempted to furnish the respondents with his reply to the
charges, the latter refused to accept the same on the ground that it was filed beyond the
48-hour period which they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the
service of the memo, particularly the continued refusal of the respondents to allow
Cosare’s entry into the company’s premises. These incidents were cited in the CA
decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could
retrieve his personal belongings, but the latter said that x x x Arevalo directed her to deny
his request, so [Cosare] again waited at the receiving section of the office. On April 1,
2009, [Cosare] was not allowed to enter the office premises. He was asked to just wait
outside of the Tektite (PSE) Towers, where [Broadcom] had its offices, for further
instructions on how and when he could get his personal belongings. [Cosare] waited until
8 p.m. for instructions but none were given. Thus, [Cosare] sought the assistance of the
officials of Barangay San Antonio, Pasig who advised him to file a labor or replevin case
to recover his personal belongings. x x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March
30, 2009, Cosare was allegedly summoned to Arevalo’s office and was asked to tender
his immediate resignation from the company, in exchange for a financial assistance
of P300,000.00.49 The directive was said to be founded on Arevalo’s choice to retain
Abiog’s employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal
dismissal. "[C]onstructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely as when there is
a demotion in rank or diminution in pay or when a clear discrimination, insensibility, or
disdain by an employer becomes unbearable to the employee leaving the latter with no
other option but to quit."51 In Dimagan v. Dacworks United, Incorporated,52 it was
explained:
The test of constructive dismissal is whether a reasonable person in the employee’s
position would have felt compelled to give up his position under the circumstances. It is
an act amounting to dismissal but is made to appear as if it were not. Constructive
dismissal is therefore a dismissal in disguise. The law recognizes and resolves this
situation in favor of employees in order to protect their rights and interests from the
coercive acts of the employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosare’s
continued involvement with the company. Even their refusal to accept the explanation
which Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny
Cosare of the opportunity to be heard prior to any decision on the termination of his
employment. The respondents allegedly refused acceptance of the explanation as it was
filed beyond the mere 48-hour period which they granted to Cosare under the memo
dated March 30, 2009. However, even this limitation was a flaw in the memo or notice to
explain which only further signified the respondents’ discrimination, disdain and
insensibility towards Cosare, apparently resorted to by the respondents in order to deny
their employee of the opportunity to fully explain his defenses and ultimately, retain his
employment. The Court emphasized in King of Kings Transport, Inc. v. Mamac 54 the
standards to be observed by employers in complying with the service of notices prior to
termination:
[T]he first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the
notice to give the employees an opportunity to study the accusation against them, consult
a union official or lawyer, gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the employees to intelligently
prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees.
A general description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the grounds
under Art. 282 is being charged against the employees.55 (Citation omitted, underscoring
ours, and emphasis supplied)
24
In sum, the respondents were already resolute on a severance of their working
relationship with Cosare, notwithstanding the facts which could have been established by
his explanations and the respondents’ full investigation on the matter. In addition to this,
the fact that no further investigation and final disposition appeared to have been made by
the respondents on Cosare’s case only negated the claim that they actually intended to
first look into the matter before making a final determination as to the guilt or innocence
of their employee. This also manifested from the fact that even before Cosare was
required to present his side on the charges of serious misconduct and willful breach of
trust, he was summoned to Arevalo’s office and was asked to tender his immediate
resignation in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their
persistent accusation that Cosare abandoned his post, allegedly signified by his failure to
report to work or file a leave of absence beginning April 1, 2009. This was even the
subject of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to
explain his absence within 48 hours from the date of the memo. As the records clearly
indicated, however, Arevalo placed Cosare under suspension beginning March 30, 2009.
The suspension covered access to any and all company files/records and the use of the
assets of the company, with warning that his failure to comply with the memo would be
dealt with drastic management action. The charge of abandonment was inconsistent with
this imposed suspension. "Abandonment is the deliberate and unjustified refusal of an
employee to resume his employment. To constitute abandonment of work, two elements
must concur: ‘(1) the employee must have failed to report for work or must have been
absent without valid or justifiable reason; and (2) there must have been a clear intention
on the part of the employee to sever the employer- employee relationship manifested by
some overt act.’"57 Cosare’s failure to report to work beginning April 1, 2009 was neither
voluntary nor indicative of an intention to sever his employment with Broadcom. It was
illogical to be requiring him to report for work, and imputing fault when he failed to do
so after he was specifically denied access to all of the company’s assets. As correctly
observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on
April 1, 2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F",
ibid) suspended [Cosare] from using not only the equipment but the "assets" of
Respondent [Broadcom]. This insults rational thinking because the Respondents tried to
mislead us and make [it appear] that [Cosare] failed to report for work when they had in
fact had [sic] placed him on suspension. x x x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify
the NLRC's monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons
Supermarket Corporation v. Ranchez,59 the Court reiterated that an illegally or
constructively dismissed employee is entitled to: (1) either reinstatement, if viable, or
separation pay, if reinstatement is no longer viable; and (2) backwages. 60 The award of
exemplary damages was also justified given the NLRC's finding that the respondents
acted in bad faith and in a wanton, oppressive and malevolent manner when they
dismissed Cosare. It is also by reason of such bad faith that Arevalo was correctly
declared solidarily liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are
SET ASIDE. The Decision dated August 24, 2010 of the National Labor Relations
Commission in favor of petitioner Raul C. Cosare is AFFIRMED.
SO ORDERED.
G.R. Nos. 178382-83, September 23, 2015
CONTINENTAL MICRONESIA, INC., Petitioner, v. JOSEPH BASSO, Respondent.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the levised Rules of Court
assailing the Decision2 dated May 23, 2006 and Resolution3 dated June 19, 2007 of the
Court of Appeals in the consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No.
84281. These assailed Decision and Resolution set aside the Decision4 dated November
28, 2003 of the National Labor Relations Commission (NLRC) declaring Joseph Basso's
(Basso) dismissal illegal, and ordering the payment of separation pay as alternative to
reinstatement and full backwages until the date of the Decision.
The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation organized and
existing under the laws of and domiciled in the United States of America (US). It is
licensed to do business in the Philippines.5 Basso, a US citizen, resided in the Philippines
prior to his death.6
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden), Managing
Director-Asia of Continental Airlines, Inc. (Continental), offered Basso the position of
General Manager of the Philippine Branch of Continental. Basso accepted the offer. 7
It was not until much later that Mr. Braden, who had since returned to the US, sent Basso
the employment contract8 dated February 1, 1991, which Mr. Braden had already signed.
Basso then signed the employment contract and returned it to Mr. Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of Continental, with
Basso retaining his position as General Manager.9
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr. Schulz), who
was then CMI's Vice President of Marketing and Sales, informing Basso that he has
agreed to work in CMI as a consultant on an "as needed basis" effective February 1, 1996
to July 31, 1996. The letter also informed Basso that: (1) he will not receive any
monetary compensation but will continue being covered by the insurance provided by
CMI; (2) he will enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for
the payment of housing lease for 12 months.10
On January 11, 1996, Basso wrote a counter-proposal11 to Mr. Schulz regarding his
employment status in CMI. On March 14, 1996, Basso wrote another letter addressed to
Ms. Marty Woodward (Ms. Woodward) of CMI's Human Resources Department
inquiring about the status of his employment.12On the same day, Ms. Woodward
responded that pursuant to the employment contract dated February 1, 1991, Basso could
be terminated at will upon a thirty-day notice. This notice was allegedly the letter Basso
received from Mr. Schulz on December 20, 1995. Ms. Woodward also reminded Basso of
the telephone conversation between him, Mr. Schulz and Ms. Woodward on December
19, 1995, where they informed him of the company's decision to relieve him as General
Manager. Basso, instead, was offered the position of consultant to CMI. Ms. Woodward
also informed Basso that CMI rejected his counter-proposal and, thus, terminated his
employment effective January 31, 1996. CMI offered Basso a severance pay, in
25
consideration of the Php1,140,000.00 housing advance that CMI promised him.13
Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary Damages
against CMI on December 19, 1996.14 Alleging the presence of foreign elements, CMI
filed a Motion to Dismiss15dated February 10, 1997 on the ground of lack of jurisdiction
over the person of CMI and the subject matter of the controversy. In an Order 16 dated
August 27, 1997, the Labor Arbiter granted the Motion to Dismiss. Applying the doctrine
of lex loci contractus, the Labor Arbiter held that the terms and provisions of the
employment contract show that the parties did not intend to apply our Labor Code
(Presidential Decree No. 442). The Labor Arbiter also held that no employer-employee
relationship existed between Basso and the branch office of CMI in the Philippines, but
between Basso and the foreign corporation itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the determination of
certain facts to settle the issue on jurisdiction. NLRC ruled that the issue on whether the
principle of lex loci contractus or lex loci celebrationis should apply has to be further
threshed out.17
Labor Arbiter's Ruling
Labor Arbiter Madjayran H. Ajan in his Decision18 dated September 24, 1999 dismissed
the case for lack of merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was xecuted in the US
"since the letter-offer was under the Texas letterhead and the acceptance of Complainant
was returned there."19 Thus, applying the doctrine of lex loci celebrationis, US laws
apply. Also, applying lex loci contractus, the Labor Arbiter ruled that the parties did not
intend to apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that Philippine
laws were not written into it. More specifically, the Philippine law on taxes and the Labor
Code were not intended by the parties to apply, otherwise Par. 7 on the payment by
Complainant U.S. Federal and Home State income taxes, and Pars. 22/23 on termination
by 30-day prior notice, will not be there. The contract was prepared in contemplation of
Texas or U.S. laws where Par. 7 is required and Pars. 22/23 is allowed. 20
The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the
allegations of CMI that Basso committed a series of acts that constitute breach of trust
and loss of confidence.21
The Labor Arbiter, however, found CMI to have voluntarily submitted to his office's
jurisdiction. CMI participated in the proceedings, submitted evidence on the merits of the
case, and sought affirmative relief through a motion to dismiss. 22
NLRC's Ruling
On appeal, the NLRC Third Division promulgated its Decision23 dated November 28,
2003, the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET ASIDE.
Respondent CMI is ordered to pay complainant the amount of US$5,416.00 for failure to
comply with the due notice requirement. The other claims are dismissed.
SO ORDERED.24
The NLRC did not agree with the pronouncement of the Labor Arbiter that his office has
no jurisdiction over the controversy. It ruled that the Labor Arbiter acquired jurisdiction
over the case when CMI voluntarily submitted to his office's jurisdiction by presenting
evidence, advancing arguments in support of the legality of its acts, and praying for
reliefs on the merits of the case.25cralawred
On the merits, the NLRC agreed with the Labor Arbiter that Basso was dismissed for just
and valid causes on the ground of breach of trust and loss of confidence. The NLRC ruled
that under the applicable rules on loss of trust and confidence of a managerial employee,
such as Basso, mere existence of a basis for believing that such employee has breached
the trust of his employer suffices. However, the NLRC found that CMI denied Basso the
required due process notice in his dismissal.26
Both CMI and Basso filed their respective Motions for Reconsideration dated January 15,
200427 and January 8, 2004.28 Both motions were dismissed in separate Resolutions dated
March 15, 200429 and February 27, 2004,30 respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals
docketed as CA-G.R. SP No. 83938.31 Basso imputed grave abuse of discretion on the
part of the NLRC in ruling that he was validiy dismissed. CMI filed its own Petition
for Certiorari dated May 13, 2004 docketed as CA-G.R. SP No. 84281,32 alleging that
the NLRC gravely abused its discretion when it assumed jurisdiction over the person of
CMI and the subject matter of the case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two
cases33 and ordered the parties to file their respective Memoranda.
The Court of Appeal's Decision
The Court of Appeals promulgated the now assailed Decision34 dated May 23, 2006, the
relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281
is DENIED DUE COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN
DUE COURSE and GRANTED, and accordingly, the assailed Decision dated
November 28, 2003 and Resolution dated February 27, 2004 of the NLRC are SET
ASIDE and VACATED. Instead judgment is rendered hereby declaring the dismissal of
Basso illegal and ordering Continental to pay him separation pay equivalent to one (1)
month pay for every year of service as an alternative to reinstatement. Further, ordering
Continental to pay Basso his full backwages from the date of his said illegal dismissal
until date of this decision. The claim for moral and exemplary damages as well as
attorney's fees are dismissed.35
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over
the subject matter of the case and over the parties. The Court of Appeals explained that
jurisdiction over the subject matter of the action is determined by the allegations of the
complaint and the law. Since the case filed by Basso is a termination dispute that is
"undoubtedly cognizable by the labor tribunals", the Labor Arbiter and the NLRC had
jurisdiction to rule on the merits of the case. On the issue of jurisdiction over he person of
the parties, who are foreigners, the Court of Appeals ruled that jurisdiction over the
26
person of Basso was acquired when he filed the complaint for illegal dismissal, while
jurisdiction over the person of CMI was acquired through coercive process of service of
summons to its agent in the Philippines. The Court of Appeals also agreed that the active
participation of CMI in the case rendered moot the issue on jurisdiction.
On the merits of the case, the Court of Appeals declared that CMI illegally dismissed
Basso. The Court of Appeals found that CMI's allegations of loss of trust and confidence
were not established. CMI "failed to prove its claim of the incidents which were its
alleged bases for loss of trust or confidence." 36 While managerial employees can be
dismissed for loss of trust and confidence, there must be a basis for such loss, beyond
mere whim or caprice.
After the parties filed their Motions for Reconsideration,37 the Court of Appeals
promulgated Resolution38 dated June 19, 2007 denying CMI's motion, while partially
granting Basso's as to the computation of backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE
FACTUAL FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY INTO
WHETHER OR NOT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE
LABOR ARBITER AND THE NLRC HAD JURISDICTION TO HEAR AND TRY
THE ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT
BASSO WAS NOT VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST
OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC in
the illegal dismissal case. The first and third issues will be discussed jointly.
The labor tribunals had jurisdiction over the parties and the subject matter of the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to determine
proper jurisdiction over the parties and the subject matter of the case. It also alleges that
the existence of foreign elements calls or the application of US laws and the doctrines
of lex loci celebrationis (the law of the place of the ceremony), lex loci contractus (law of
the place where a contract is executed), and lex loci intentionis (the intention of the
parties as to the law that should govern their agreement). CMI also invokes the
application of the rule of forum non conveniens to determine the propriety of the
assumption of jurisdiction by the labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first.
Where the facts establish the existence of foreign elements, he case presents a conflict-of-
laws issue.39 The foreign element in a case nay appear in different forms, such as in this
case, where one of the parties s an alien and the other is domiciled in another state.
In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of conflict-of-laws
problems, three consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. In resolving the conflicts problem, courts
should ask the following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the parties to this
case?
2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?
3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and
proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one of the
basic exceptions to the application of foreign law? In short, is there any strong policy or
vital interest of the forum that is at stake in this case and which should preclude the
application of foreign law?41
Jurisdiction is defined as the power and authority of the courts to hear, try and decide
cases. Jurisdiction over the subject matter is conferred by the Constitution or by law and
by the material allegations in the complaint, regardless of whether or not the plaintiff is
entitled to recover all or some of the claims or reliefs sought therein. 42 It cannot be
acquired through a waiver or enlarged by the omission of the parties or conferred by the
acquiescence of the court.43 That the employment contract of Basso was replete with
references to US laws, and that it originated from and was returned to the US, do not
automatically preclude our labor tribunals from exercising jurisdiction to hear and try this
case.
This case stemmed from an illegal dismissal complaint. The Labor Code, under Article
217, clearly vests original and exclusive jurisdiction to hear and decide cases involving
termination disputes to the Labor Arbiter. Hence, the Labor Arbiter and the NLRC have
jurisdiction over the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals that the
Labor Arbiter acquired jurisdiction over the person of Basso, notwithstanding his
citizenship, when he filed his complaint against CMI. On the other hand, jurisdiction over
the person of CMI was acquired through the coercive process of service of summons. We
note that CMI never denied that it was served with summons. CMI has, in fact,
voluntarily appeared and participated in the proceedings before the courts. Though a
foreign corporation, CMI is licensed to do business in the Philippines and has a local
business address here. The purpose of the law in requiring that foreign corporations doing
business in the country be licensed to do so, is to subject the foreign corporations to the
jurisdiction of our courts.44
Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties and
the subject matter of this case, these tribunals may proceed to try the case even if the
rules of conflict-of-laws or the convenience of the parties point to a foreign forum, this
27
being an exercise of sovereign prerogative of the country where the case is filed.45
The next question is whether the local forum is the convenient forum in light of the facts
of the case. CMI contends that a Philippine court is an inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws case
may assume jurisdiction if it chooses to do so, provided, that the following requisites are
met: (1) that the Philippine Court is one to which the parties may conveniently resort to;
(2) that the Philippine Court is in a position to make an intelligent decision as to the law
and the facts; and (3) that the Philippine Court has or is likely to have power to enforce
its decision.46 All these requisites are present here.
Basso may conveniently resort to our labor tribunals as he and CMI lad physical presence
in the Philippines during the duration of the trial. CMI has a Philippine branch, while
Basso, before his death, was residing here. Thus, it could be reasonably expected that no
extraordinary measures were needed for the parties to make arrangements in advocating
their respective cases.
The labor tribunals can make an intelligent decision as to the law and facts. The incident
subject of this case (i.e. dismissal of Basso) happened in the Philippines, the surrounding
circumstances of which can be ascertained without having to leave the Philippines. The
acts that allegedly led to loss of trust and confidence and Basso's eventual dismissal were
committed in the Philippines. As to the law, we hold that Philippine law is the proper law
of he forum, as we shall discuss shortly. Also, the labor tribunals have the power to
enforce their judgments because they acquired jurisdiction over the persons of both
parties.
Our labor tribunals being the convenient fora, the next question is what law should apply
in resolving this case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the following
important questions: (1) What legal system should control a given situation where some
of the significant facts occurred in two or more states; and (2) to what extent should the
chosen legal system regulate the situation.47These questions are entirely different from
the question of jurisdiction that only seeks to answer whether the courts of a state where
the case is initiated have jurisdiction to enter a judgment. 48 As such, the power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum
law.49
CMI insists that US law is the applicable choice-of-law under the principles of lex loci
celebrationis and lex loci contractus. It argues that the contract of employment originated
from and was returned to the US after Basso signed it, and hence, was perfected there.
CMI further claims that the references to US law in the employment contract show the
parties' intention to apply US law and not ours. These references are:
a. Foreign station allowance of forty percent (40%) using the "U.S. State
Department Index, the base being Washington, D.C."
b. Tax equalization that made Basso responsible for "federal and any home state
income taxes."
c. Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S.
Department of State Indexes of living costs abroad."
d. The employment arrangement is "one at will, terminable by either party without
any further liability on thirty days prior written notice." 50
CMI asserts that the US law on labor relations particularly, the US Railway Labor Act
sanctions termination-at-will provisions in an employment contract. Thus, CMI
concludes that if such laws were applied, there would have been no illegal dismissal to
speak of because the termination-at-will provision in Basso's employment contract would
have been perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an essential element
of conflict rules is the indication of a "test" or "connecting factor" or "point of contact".
Choice-of-law rules invariably consist of a factual relationship (such as property right,
contract claim) and a connecting fact or point of contact, such as the situs of the res, the
place of celebration, the place of performance, or the place of wrongdoing. Pursuant
to Saudi Arabian Airlines, we hold that the "test factors," "points of contact" or
"connecting factors" in this case are the following:chanRoblesvirtualLawlibrary
(1) The nationality, domicile or residence of Basso;ChanRoblesVirtualawlibrary
(2) The seat of CMI;ChanRoblesVirtualawlibrary
(3) The place where the employment contract has been made, the locus
actus;ChanRoblesVirtualawlibrary
(4) The place where the act is intended to come into effect, e.g., the place of performance
of contractual duties;ChanRoblesVirtualawlibrary
(5) The intention of the contracting parties as to the law that should govern their
agreement, the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or done. 52
Applying the foregoing in this case, we conclude that Philippine law the applicable law.
Basso, though a US citizen, was a resident here from he time he was hired by CMI until
his death during the pendency of the case. CMI, while a foreign corporation, has a license
to do business in the Philippines and maintains a branch here, where Basso was hired to
work. The contract of employment was negotiated in the Philippines. A purely
consensual contract, it was also perfected in the Philippines when Basso accepted the
terms and conditions of his employment as offered by CMI. The place of performance
relative to Biasso's contractual duties was in the Philippines. The alleged prohibited acts
of Basso that warranted his dismissal were committed in the Philippines.
Clearly, the Philippines is the state with the most significant relationship to the problem.
Thus, we hold that CMI and Basso intended Philippine law to govern, notwithstanding
28
some references made to US laws and the fact that this intention was not expressly stated
in the contract. We explained in Philippine Export and Foreign Loan Guarantee
Corporation v. V. P. Eusebio Construction, Inc.53 that the law selected may be implied
from such factors as substantial connection with the transaction, or the nationality or
domicile of the parties.54 We cautioned, however, that while Philippine courts would do
well to adopt the first and most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, the selection is subject to the
limitation that it is not against the law, morals, or public policy of the forum. 55
Similarly, in Bank of America, NT&SA v. American Realty Corporation,56 we ruled that a
foreign law, judgment or contract contrary to a sound and established public policy of the
forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.57
Termination-at-will is anathema to the public policies on labor protection espoused by
our laws and Constitution, which dictates that no worker shall be dismissed except for
just and authorized causes provided by law and after due process having been complied
with.58 Hence, the US Railway Labor Act, which sanctions termination-at-will, should
not be applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As any other
fact, it must be alleged and proved.59 If the foreign law is not properly pleaded or proved,
the presumption of identity or similarity of the foreign law to our own laws, otherwise
known as processual presumption, applies. Here, US law may have been properly
pleaded but it was not proved in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third issues.
The Court of Appeals may review the factual findings of the NLRC in a Rule 65
petition.
CMI submits that the Court of Appeals overstepped the boundaries of the limited scope
of its certiorari jurisdiction when instead of ruling on the existence of grave abuse of
discretion, it proceeded to pass upon the legality and propriety of Basso's dismissal.
Moreover, CMI asserts that it was error on the part of the Court of Appeals to re-evaluate
the evidence and circumstances surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a Petition
for Certiorari under Rule 65 of the Revised Rules of Court was settled in our decision
in St. Martin Funeral Home v. NLRC.60 The general rule is that certiorari does not lie to
review errors of judgment of the trial court, as well as that of a quasi-judicial tribunal.
In certiorari proceedings, judicial review does not go as far as to examine and assess the
evidence of the parties and to weigh their probative value. 61 However, this rule admits of
exceptions. In Globe Telecom, Inc. v. Florendo-Flores,62 we stated:
In the review of an NLRC decision through a special civil action for certiorari, resolution
is confined only to issues of jurisdiction and grave abuse of discretion on the part of the
labor tribunal. Hence, the Court refrains from reviewing factual assessments of lower
courts and agencies exercising adjudicative functions, such as the NLRC. Occasionally,
however, the Court is constrained to delve into factual matters where, as in the instant
case, the findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings. As a corollary, this Court is
clothed with ample authority to review matters, even if they are not assigned as errors in
their appeal, if it finds that their consideration is necessary to arrive at a just decision of
the case. The same principles are now necessarily adhered to and are applied by the Court
of Appeals in its expanded jurisdiction over labor cases elevated through a petition
for certiorari; thus, we see no error on its part when it made anew a factual determination
of the matters and on that basis reversed the ruling of the NLRC. 63 (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual hidings complained of
are not supported by the evidence on record; when its necessary to prevent a substantial
wrong or to do substantial justice; when the findings of the NLRC contradict those of the
Labor Arbiter; and when necessary to arrive at a just decision of the case. 64 To make
these findings, the Court of Appeals necessarily has to look at the evidence and make its
own factual determination.65
Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the
Court of Appeals correctly exercised its power to review the evidence and the records of
the illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI Managerial employees
enjoy security of tenure and the right of the management to dismiss must be balanced
against the managerial employee's right to security of tenure, which is not one of the
guaranties he gives up.66
In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to validly
dismiss an employee on the ground of loss of trust and confidence under Article 282 (c)
of the Labor Code, the employer must observe the following guidelines: 1) loss of
confidence should not be simulated; 2) it should not be used as subterfuge for causes
which are improper, illegal or unjustified; 3) it may not be arbitrarily asserted in the face
of overwhelming evidence to the contrary; and 4) it must be genuine, not a mere
afterthought to justify earlier action taken in bad faith. More importantly, it must be based
on a willful breach of trust and founded on clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was not founded on
clearly established facts and evidence sufficient to warrant dismissal from employment.
While proof beyond reasonable doubt is not required to establish loss of trust and
confidence, substantial evidence is required and on the employer rests the burden to
establish it.68 There must be some basis for the loss of trust, or that the employer has
reasonable ground to believe that the employee is responsible for misconduct, which
renders him unworthy of the trust and confidence demanded by his position. 69
29

CMI alleges that Basso committed the following:chanRoblesvirtualLawlibrary
(1) Basso delegated too much responsibility to the General Sales Agent and relied
heavily on its judgments.70
(2) Basso excessively issued promotional tickets to his friends who had no direct
business with CMI.71
(3) The advertising agency that CMI contracted had to deal directly with Guam because
Basso was hardly available.72 Mr. Schulz discovered that Basso exceeded the
advertising budget by $76,000.00 in 1994 and by $20,000.00 in 1995. 73
(4) Basso spent more time and attention to his personal businesses and was reputed to
own nightclubs in the Philippines.74
(5) Basso used free tickets and advertising money to promote his personal
business,75 such as a brochure that jointly advertised one of Basso's nightclubs with
CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI merely
submitted affidavits of its officers, without any other corroborating evidence. Basso, on
the other hand, had adequately explained his side. On the advertising agency and budget
issues raised by CMI, he explained that these were blatant lies as the advertising needs of
CMI were centralized in its Guam office and the Philippine office was not authorized to
deal with CMI's advertising agency, except on minor issues. 76 Basso further stated that
under CMI's existing policy, ninety percent (90%) of the advertising decisions were
delegated to the advertising firm of McCann-Ericsson in Japan and only ten percent
(10%) were left to the Philippine office.77 Basso also denied the allegations of owning
nightclubs and promoting his personal businesses and explained that it was illegal for
foreigners in the Philippines to engage in retail trade in the first place.
Apart from these accusations, CMI likewise presented the findings of the audit team
headed by Mr. Stephen D. Goepfert, showing that "for the period of 1995 and 1996,
personal passes for Continental and other airline employees were noted (sic) to be issued
for which no service charge was collected." 78 The audit cited the trip pass log of a total of
10 months. The trip log does not show, however, that Basso caused all the ticket
issuances. More, half of the trips in the log occurred from March to July of 1996, 79 a
period beyond the tenure of Basso. Basso was terminated effectively on January 31, 1996
as indicated in the letter of Ms. Woodward.80
CMI also accused Basso of making "questionable overseas phone calls". Basso, however,
adequately explained in his Reply81 that the phone calls to Italy and Portland, USA were
made for the purpose of looking for a technical maintenance personnel with US Federal
Aviation Authority qualifications, which CMI needed at that time. The calls to the US
were also made in connection with his functions as General Manager, such as inquiries
on his tax returns filed in Nevada. Biasso also explained that the phone lines 82 were open
direct lines that all personnel were free to use to make direct long distance calls. 83
Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover the
transfer fee of the Manila Polo Club share from Mr. Kenneth Glover, the previous
General Manager, to him. CMI claimed that "nowhere in the said contract was it likewise
indicated that the Manila Polo Club share was part of the compensation package given by
CMI to Basso."84 CMI's claims are not credible. Basso explained that the Manila Polo
Club share was offered to him as a bonus to entice him to leave his then employer, United
Airlines. A letter from Mr. Paul J. Casey, former president of Continental, supports
Basso.85 In the letter, Mr. Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he was
given the Manila Polo Club share and authorized to have the share re-issued in his name.
In addition to giving Mr. Basso the Manila Polo Club share, Continental agreed to pay
the dues for a period of three years and this was embodied in his contract with
Continental. This was all clone with my knowledge and approval.86
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for membership in a club
in Manila that your immediate supervisor and I agree is of at least that value to
Continental through you in your role as our General Manager for the Philippines. 87
Taken together, the above pieces of evidence suggest that the Manila Polo Club share
was part of Basso's compensation package and thus he validly used company funds to
pay for the transfer fees. If doubts exist between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter. 88
Finally, CMI violated procedural due process in terminating Basso. In King of Kings
Transport, Inc. v. Mamac89 we detailed the procedural due process steps in termination of
employment:
To clarify, the following should be considered in terminating the services of
employees:chanRoblesvirtualLawlibrary
(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 conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence in
support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance to
defend themselves personally, with the assistance of a representative or counsel of their
choice. Moreover, this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall
serve the employees a written notice of termination indicating that: (1) all
30
circumstances involving the charge against the employees have been considered; and (2)
grounds have been established to justify the severance of their employment. (Emphasis in
original.)
Here, Mr. Schulz's and Ms. Woodward's letters dated December 19, 1995 and March 14,
1996, respectively, are not one of the valid twin notices. Neither identified the alleged
acts that CMI now claims as bases for Basso's termination. Ms. Woodward's letter even
stressed that the original plan was to remove Basso as General Manager but with an offer
to make him consultant. It was inconsistent of CMI to declare Basso as unworthy of its
trust and confidence and, in the same breath, offer him the position of consultant. As the
Court of Appeals pointed out:
But mark well that Basso was clearly notified that the sole ground for his dismissal was
the exercise of the termination at will clause in the employment contract. The alleged loss
of trust and confidence claimed by Continental appears to be a mere afterthought
belatedly trotted out to save the day.90
Basso is entitled to separation pay and full backwages.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of eniority rights and other privileges,
and to his full backwages, inclusive of allowances and to his other benefits or their
monetary equivalent omputed from the time his compensation was withheld up to the
time of actual reinstatement.
Where reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative. The payment
of separation pay is in addition to payment of backwages. 91 In the case of Basso,
reinstatement is no longer possible since he has already passed away. Thus, Basso's
separation pay with full backwages shall be paid to his heirs.
As to the computation of backwages, we agree with CMI that Basso was entitled to
backwages only up to the time he reached 65 years old, the compulsory retirement age
under the law.92 This is our consistent ruling.93 When Basso was illegally dismissed on
January 31, 1996, he was already 58 years old. 94 He turned 65 years old on October 2,
2002. Since backwages are granted on grounds of equity for earnings lost by an employee
due to his illegal dismissal,95 Basso was entitled to backwages only for the period he
could have worked had he not been illegally dismissed, i.e. from January 31, 1996 to
October 2, 2002.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated May
23, 2006 and Resolution dated June 19, 2007 in the consolidated cases CA-G.R. SP No.
83938 and CA-G.R. SP No. 84281 are AFFIRMED, with MODIFICATION as to the
award of backwages. Petitioner Continental Micronesia, Inc. is hereby ordered to pay
Respondent Joseph Basso's heirs: 1) separation pay equivalent to one (1) month pay for
every year of service, and 2) full backwages from January 31, 1996, the date of his illegal
dismissal, to October 2, 2002, the date of his compulsory retirement age.
SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 205703, March 07, 2016
INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS),
SNC LAVALIN ENGINEERS & CONTRACTORS, INC. AND ANGELITO C.
HERNANDEZ, Petitioners, v. JOSE G. DE VERA AND ALBERTO B.
ARRIOLA, Respondents.
DECISION
MENDOZA, J.:
When can a foreign law govern an overseas employment contract? This is the fervent
question that the Court shall resolve, once and for all.
This petition for review on certiorari seeks to reverse and set aside the January 24, 2013
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 118869, which modified the
November 30, 2010 Decision2 of the National Labor Relations Commission (NLRC) and
its February 2, 2011 Resolution,3 in NLRC LAC Case No. 08-000572-10/NLRC Case
No. NCR 09-13563-09, a case for illegal termination of an Overseas Filipino Worker
(OFW).
The Facts
Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local
placement agency duly organized and existing under Philippine laws, with petitioner
Angelito C. Hernandez as its president and managing director. Petitioner SNC Lavalin
Engineers & Contractors, Inc. (SNC-Lavalin) is the principal of IPAMS, a Canadian
company with business interests in several countries. On the other hand, respondent
Alberto Arriola (Arriola) is a licensed general surgeon in the Philippines.4
Employee's Position
Arriola was offered by SNC-Lavalin, through its letter,5 dated May 1, 2008, the position
of Safety Officer in its Ambatovy Project site in Madagascar. The position offered had a
rate of CA$32.00 per hour for forty (40) hours a week with overtime pay in excess of
forty (40) hours. It was for a period of nineteen (19) months starting from June 9, 2008 to
December 31, 2009.
Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and
his overseas employment contract was processed with the Philippine Overseas
Employment Agency (POEA)6 In a letter of understanding,7 dated June 5, 2008, SNC-
Lavalin confirmed Arriola's assignment in the Ambatovy Project. According to Arriola,
he signed the contract of employment in the Philippines.8 On June 9, 2008, Arriola
started working in Madagascar.
After three months, Arriola received a notice of pre-termination of employment,9 dated
September 9, 2009, from SNC-Lavalin. It stated that his employment would be pre-
terminated effective September 11, 2009 due to diminishing workload in the area of his
expertise and the unavailability of alternative assignments. Consequently, on September
15, 2009, Arriola was repatriated. SNC-Lavalin deposited in Arriola's bank account his
pay amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight Centavos
(CA$2,636.80), based on Canadian labor law.
Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-
payment of overtime pay, vacation leave and sick leave pay before the Labor Arbiter
(LA). He claimed that SNC-Lavalin still owed him unpaid salaries equivalent to the three-
31
month unexpired portion of his contract, amounting to, more or less, One Million Sixty-
Two Thousand Nine Hundred Thirty-Six Pesos (P1,062,936.00). He asserted that SNC-
Lavalin never offered any valid reason for his early termination and that he was not given
sufficient notice regarding the same. Arriola also insisted that the petitioners must prove
the applicability of Canadian law before the same could be applied to his employment
contract.
Employer's Position
The petitioners denied the charge of illegal dismissal against them. They claimed that
SNC-Lavalin was greatly affected by the global financial crises during the latter part of
2008. The economy of Madagascar, where SNC-Lavalin had business sites, also slowed
down. As proof of its looming financial standing, SNC-Lavalin presented a copy of a
news item in the Financial Post,10 dated March 5, 2009, showing the decline of the value
of its stocks. Thus, it had no choice but to minimize its expenditures and operational
expenses. It re-organized its Health and Safety Department at the Ambatovy Project site
and Arriola was one of those affected.11
The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC12 (EDI-
Staffbuilders), pointing out that particular labor laws of a foreign country incorporated in
a contract freely entered into between an OFW and a foreign employer through the latter's
agent was valid. In the present case, as all of Arriola's employment documents were
processed in Canada, not to mention that SNC-Lavalin's office was in Ontario, the
principle of lex loci celebrationis was applicable. Thus, the petitioners insisted that
Canadian laws governed the contract.
The petitioners continued that the pre-termination of Arriola's contract was valid for
being consistent with the provisions of both the Expatriate Policy and laws of Canada.
The said foreign law did not require any ground for early termination of employment, and
the only requirement was the written notice of termination. Even assuming that
Philippine laws should apply, Arriola would still be validly dismissed because domestic
law recognized retrenchment and redundancy as legal grounds for termination.
In their Rejoinder,13 the petitioners presented a copy of the Employment Standards Act
(ESA) of Ontario, which was duly authenticated by the Canadian authorities and certified
by the Philippine Embassy.
The LA Ruling
In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for lack of
merit. The LA ruled that the rights and obligations among and between the OFW, the
local recruiter/agent, and the foreign employer/principal were governed by the
employment contract pursuant to the EDI-Staffbuilders case. Thus, the provisions on
termination of employment found in the ESA, a foreign law which governed Arriola's
employment contract, were applied. Given that SNC-Lavalin was able to produce the
duly authenticated ESA, the LA opined that there was no other conclusion but to uphold
the validity of Arriola's dismissal based on Canadian law. The fallo of the LA decision
reads:
chanRoblesvirtualLawlibrary
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
dismissing the complaint for lack of merit.
SO ORDERED.15ChanRoblesVirtualawlibrary
Aggrieved, Arriola elevated the LA decision before the NLRC.
The NLRC Ruling
In its decision, dated November 30, 2010, the NLRC reversed the LA decision and ruled
that Arriola was illegally dismissed by the petitioners. Citing PNB v. Cabansag,16 the
NLRC stated that whether employed locally or overseas, all Filipino workers enjoyed the
protective mantle of Philippine labor and social legislation, contract stipulations to the
contrary notwithstanding. Thus, the Labor Code of the Philippines and Republic Act
(R.A.) No. 8042, or the Migrant Workers Act, as amended, should be applied. Moreover,
the NLRC added that the overseas employment contract of Arriola was processed in the
POEA.
Applying the Philippine laws, the NLRC found that there was no substantial evidence
presented by the petitioners to show any just or authorized cause to terminate Arriola.
The ground of financial losses by SNC-Lavalin was not supported by sufficient and
credible evidence. The NLRC concluded that, for being illegally dismissed, Arriola
should be awarded CA$81,920.00 representing sixteen (16) months of Arriola's purported
unpaid salary, pursuant to the Serrano v. Gallant17 doctrine. The decretal portion of the
NLRC decision states:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding complainant-
appellant to have been illegally dismissed. Respondents-appellees are hereby ordered to
pay complainant-appellant the amount of CA$81,920.00, or its Philippine Peso
equivalent prevailing at the time of payment. Accordingly, the decision of the Labor
Arbiter dated May 31, 2010 is hereby VACATED and SET ASIDE.
SO ORDERED.18ChanRoblesVirtualawlibrary
The petitioners moved for reconsideration, but their motion was denied by the NLRC in
its resolution, dated February 2, 2011.
Undaunted, the petitioners filed a petition for certiorari before the CA arguing that it
should be the ESA, or the Ontario labor law, that should be applied in Arriola's
employment contract. No temporary restraining order, however, was issued by the CA.
The Execution Proceedings
In the meantime, execution proceedings were commenced before the LA by Arriola. The
LA granted the motion for execution in the Order,19 dated August 8, 2011.
The petitioners appealed the execution order to the NLRC. In its Decision, 20 dated May
31, 2012, the NLRC corrected the decretal portion of its November 30, 2010 decision. It
decreased the award of backpay in the amount of CA$26,880.00 or equivalent only to
three (3) months and three (3) weeks pay based on 70-hours per week workload. The
NLRC found that when Arriola was dismissed on September 9, 2009, he only had three
32
(3) months and three (3) weeks or until December 31, 2009 remaining under his
employment contract.
Still not satisfied with the decreased award, IPAMS filed a separate petition
for certiorari before the CA. In its decision, dated July 25, 2013, the CA affirmed the
decrease in Arriola's backpay because the unpaid period in his contract was just three (3)
months and three (3) weeks.
Unperturbed, IPAMS appealed before the Court and the case was docketed as G.R. No.
212031. The appeal, however, was dismissed outright by the Court in its resolution, dated
August 8, 2014, because it was belatedly filed and it did not comply with Sections 4 and
5 of Rule 7 of the Rules of Court. Hence, it was settled in the execution proceedings that
the award of backpay to Arriola should only amount to three (3) months and three (3)
weeks of his pay.
The CA Ruling
Returning to the principal case of illegal dismissal, in its assailed January 24, 2013
decision, the CA affirmed that Arriola was illegally dismissed by the petitioners. The CA
explained that even though an authenticated copy of the ESA was submitted, it did not
mean that the said foreign law automatically applied in this case. Although parties were
free to establish stipulations in their contracts, the same must remain consistent with law,
morals, good custom, public order or public policy. The appellate court wrote that the
ESA allowed an employer to disregard the required notice of termination by simply
giving the employee a severance pay. The ESA could not be made to apply in this case
for being contrary to our Constitution, specifically on the right of due process. Thus, the
CA opined that our labor laws should find application.
As the petitioners neither complied with the twin notice-rule nor offered any just or
authorized cause for his termination under the Labor Code, the CA held that Arriola's
dismissal was illegal. Accordingly, it pronounced that Arriola was entitled to his salary
for the unexpired portion of his contract which is three (3) months and three (3) weeks
salary. It, however, decreased the award of backpay to Arriola because the NLRC made a
wrong calculation. Based on his employment contract, the backpay of Arriola should only
be computed on a 40-hour per week workload, or in the amount of CA$19,200.00. The
CA disposed the case in this wise:
chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY
GRANTED. The assailed Order of the National Labor Relations Commission in NLRC
LAC No. 08-000572-10/NLRC Case No. NCR 09-13563-09 is MODIFIED in that
private respondent is only entitled to a monetary judgment equivalent to his unpaid
salaries in the amount of CA$19,200.00 or its Philippine Peso equivalent.
SO ORDERED.21ChanRoblesVirtualawlibrary
Hence, this petition, anchored on the following
ISSUES
I could agree on the applicability of foreign laws in their labor contracts.
WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED
PURSUANT TO THE EMPLOYMENT CONTRACT.
II
GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT
BAR, WHETHER OR NOT THE SIX-WEEK ON, TWO-WEEK OFF SCHEDULE
SHOULD BE USED IN THE COMPUTATION OF ANY MONETARY AWARD.
III
GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT
THE AMOUNT BEING CLAIMED BY RESPONDENTS HAD ALREADY BEEN
SATISFIED, OR AT THE VERY LEAST, WHETHER OR NOT THE AMOUNT
OF CA$2,636.80 SHOULD BE DEDUCTED FROM THE MONETARY
AWARD.22ChanRoblesVirtualawlibrary
The petitioners argue that the rights and obligations of the OFW, the local recruiter, and
the foreign employer are governed by the employment contract, citing EDI-Staffbuilders;
that the terms and conditions of Arriola's employment are embodied in the Expatriate
Policy, Ambatovy Project - Site, Long Term, hence, the laws of Canada must be applied;
that the ESA, or the Ontario labor law, does not require any ground for the early
termination of employment and it permits the termination without any notice provided
that a severance pay is given; that the ESA was duly authenticated by the Canadian
authorities and certified by the Philippine Embassy; that the NLRC Sixth Division
exhibited bias and bad faith when it made a wrong computation on the award of backpay;
and that, assuming there was illegal dismissal, the CA$2,636.80, earlier paid to Arriola,
and his home leaves should be deducted from the award of backpay.
In his Comment,23 Arriola countered that foreign laws could not apply to employment
contracts if they were contrary to law, morals, good customs, public order or public
policy, invoking Pakistan International Airlines Corporation v. Ople (Pakistan
International);24 that the ESA was not applicable because it was contrary to his
constitutional right to due process; that the petitioners failed to substantiate an authorized
cause to justify his dismissal under Philippine labor law; and that the petitioners could not
anymore claim a deduction of CA$2,636.80 from the award of backpay because it was
raised for the first time on appeal.
In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the applicability
of foreign laws on labor contracts; that the Pakistan International case was superseded
by EDI-Staffbuilders and other subsequent cases; and that SNC-Lavalin suffering
financial losses was an authorized cause to terminate Arriola's employment.
In his Memorandum,26 Arriola asserted that his employment contract was executed in the
Philippines and that the alleged authorized cause of financial losses by the petitioners was
not substantiated by evidence.
In their Consolidated Memorandum,27 the petitioners reiterated that the ESA was
applicable in the present case and that recent jurisprudence recognized that the parties
The Court's Ruling
33

The petition lacks merit.
Application of foreign laws with labor contracts
At present, Filipino laborers, whether skilled or professional, are enticed to depart from
the motherland in search of greener pastures. There is a distressing reality that the offers
of employment abroad are more lucrative than those found in our own soils. To reap the
promises of the foreign dream, our unsung heroes must endure homesickness, solitude,
discrimination, mental and emotional struggle, at times, physical turmoil, and, worse,
death. On the other side of the table is the growing number of foreign employers attracted
in hiring Filipino workers because of their reasonable compensations and globally-
competitive skills and qualifications. Between the dominant foreign employers and the
vulnerable and desperate OFWs, however, there is an inescapable truth that the latter are
in need of greater safeguard and protection.
In order to afford the full protection of labor to our OFWs, the State has vigorously
enacted laws, adopted regulations and policies, and established agencies to ensure that
their needs are satisfied and that they continue to work in a humane living environment
outside of the country. Despite these efforts, there are still issues left unsolved in the
realm of overseas employment. One existing question is posed before the Court -when
should an overseas labor contract be governed by a foreign law? To answer this burning
query, a review of the relevant laws and jurisprudence is warranted.
R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the policies on
overseas employment and to establish a higher standard of protection and promotion of
the welfare of migrant workers.28 It emphasized that while recognizing the significant
contribution of Filipino migrant workers to the national economy through their foreign
exchange remittances, the State does not promote overseas employment as a means to
sustain economic growth and achieve national development. 29 Although it acknowledged
claims arising out of law or contract involving Filipino workers, 30 it does not
categorically provide that foreign laws are absolutely and automatically applicable in
overseas employment contracts.
The issue of applying foreign laws to labor contracts was initially raised before the Court
in Pakistan International. It was stated in the labor contract therein (1) that it would be
governed by the laws of Pakistan, (2) that the employer have the right to terminate the
employee at any time, and (3) that the one-month advance notice in terminating the
employment could be dispensed with by paying the employee an equivalent one-month
salary. Therein, the Court elaborated on the parties' right to stipulate in labor contracts, to
wit:
chanRoblesvirtualLawlibrary
A contract freely entered into should, of course, be respected, as PIA argues, since a
contract is the law between the parties. The principle of party autonomy in contracts is
not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they may deem convenient,
"provided they are not contrary to law, morals, good customs, public order or
public policy." Thus, counterbalancing the principle of autonomy of contracting parties
is the equally general rule that provisions of applicable law, especially provisions relating
to matters affected with public policy, are deemed written into the contract. Put a little
differently, the governing principle is that parties may not contract away applicable
provisions of law especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and employment is clearly
such an area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting
with each other. x x x31
[Emphases Supplied]
In that case, the Court held that the labor relationship between OFW and the foreign
employer is "much affected with public interest and that the otherwise applicable
Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon
some other law to govern their relationship." 32 Thus, the Court applied the Philippine
laws, instead of the Pakistan laws. It was also held that the provision in the employment
contract, where the employer could terminate the employee at any time for any ground
and it could even disregard the notice of termination, violates the employee's right to
security of tenure under Articles 280 and 281 of the Labor Code.
In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was reiterated that,
"[i]n formulating the contract, the parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy." 33 In that case, the overseas contract
specifically stated that Saudi Labor Laws would govern matters not provided for in the
contract. The employer, however, failed to prove the said foreign law, hence, the doctrine
of processual presumption came into play and the Philippine labor laws were applied.
Consequently, the Court did not discuss any longer whether the Saudi labor laws were
contrary to Philippine labor laws.
The case of Becmen Service Exporter and Promotion, Inc. v. Spouses
Cuaresma,34 though not an illegal termination case, elucidated on the effect of foreign
laws on employment. It involved a complaint for insurance benefits and damages arising
from the death of a Filipina nurse from Saudi Arabia. It was initially found therein that
there was no law in Saudi Arabia that provided for insurance arising from labor
accidents. Nevertheless, the Court concluded that the employer and the recruiter in that
case abandoned their legal, moral and social obligation to assist the victim's family in
obtaining justice for her death, and so her family was awarded P5,000,000.00 for moral
and exemplary damages.
In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private recruitment
agency invoked the defense that the foreign employer was immune from suit and that it
did not sign any document agreeing to be held jointly and solidarily liable. Such defense,
however, was rejected because R.A. No. 8042 precisely afforded the OFWs with a
recourse against the local agency and the foreign employer to assure them of an
immediate and sufficient payment of what was due. Similar to EDI-Staffbuilders, the
local agency therein failed to prove the Kuwaiti law specified in the labor contract,
pursuant to Sections 24 and 25 of Rule 132 of the Revised Rules of Court.
Also, in the recent case of Sameer Overseas Placement Agency, Inc. v. Cabiles36 (Sameer
Overseas), it was declared that the security of tenure for labor was guaranteed by our
Constitution and employees were not stripped of the same when they moved to work in
34
other jurisdictions. Citing PCL Shipping Phils., Inc. v. NLRC37 (PCL Shipping), the Court
held that the principle of lex loci contractus (the law of the place where the contract is
made) governed in this jurisdiction. As it was established therein that the overseas labor
contract was executed in the Philippines, the Labor Code and the fundamental procedural
rights were observed. It must be noted that no foreign law was specified in the
employment contracts in both cases.
Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer therein asserted
the doctrine of forum non conveniens because the overseas employment contracts
required the application of the laws of Saudi Arabia, and so, the Philippine courts were
not in a position to hear the case. In striking down such argument, the Court held that
while a Philippine tribunal was called upon to respect the parties' choice of governing
law, such respect must not be so permissive as to lose sight of considerations of law,
morals, good customs, public order, or public policy that underlie the contract central to
the controversy. As the dispute in that case related to the illegal termination of the
employees due to their pregnancy, then it involved a matter of public interest and public
policy. Thus, it was ruled that Philippine laws properly found application and that
Philippine tribunals could assume jurisdiction.
Based on the foregoing, the general rule is that Philippine laws apply even to overseas
employment contracts. This rule is rooted in the constitutional provision of Section 3,
Article XIII that the State shall afford full protection to labor, whether local or overseas.
Hence, even if the OFW has his employment abroad, it does not strip him of his rights to
security of tenure, humane conditions of work and a living wage under our
Constitution.39
As an exception, the parties may agree that a foreign law shall govern the employment
contract. A synthesis of the existing laws and jurisprudence reveals that this exception is
subject to the following requisites:
chanRoblesvirtualLawlibrary
1. That it is expressly stipulated in the overseas employment contract that a
specific foreign law shall govern;
2. That the foreign law invoked must be proven before the courts pursuant to the
Philippine rules on evidence;
3. That the foreign law stipulated in the overseas employment contract must not be
contrary to law, morals, good customs, public order, or public policy of the
Philippines; and
4. That the overseas employment contract must be processed through the POEA.
The Court is of the view that these four (4) requisites must be complied with before the
employer could invoke the applicability of a foreign law to an overseas employment
contract. With these requisites, the State would be able to abide by its constitutional
obligation to ensure that the rights and well-being of our OFWs are fully protected. These
conditions would also invigorate the policy under R.A. No. 8042 that the State shall, at
all times, uphold the dignity of its citizens whether in country or overseas, in general, and
the Filipino migrant workers, in particular.40 Further, these strict terms are pursuant to the
jurisprudential doctrine that "parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed with public
interest,"41 such as laws relating to labor. At the same time, foreign employers are not at
all helpless to apply their own laws to overseas employment contracts provided that they
faithfully comply with these requisites.
If the first requisite is absent, or that no foreign law was expressly stipulated in the
employment contract which was executed in the Philippines, then the domestic labor laws
shall apply in accordance with the principle of lex loci contractus. This is based on the
cases of Sameer Overseas and PCL Shipping.
If the second requisite is lacking, or that the foreign law was not proven pursuant to
Sections 24 and 25 of Rule 132 of the Revised Rules of Court, then the international law
doctrine of processual presumption operates. The said doctrine declares that "[w]here a
foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that
foreign law is the same as ours."42 This was observed in the cases of EDI-
Staffbuilders and ATCI Overseas.
If the third requisite is not met, or that the foreign law stipulated is contrary to law,
morals, good customs, public order or public policy, then Philippine laws govern. This
finds legal bases in the Civil Code, specifically: (1) Article 17, which provides that laws
which have, for their object, public order, public policy and good customs shall not be
rendered ineffective by laws of a foreign country; and (2) Article 1306, which states that
the stipulations, clauses, terms and conditions in a contract must not be contrary to law,
morals, good customs, public order, or public policy. The said doctrine was applied in the
case of Pakistan International.
Finally, if the fourth requisite is missing, or that the overseas employment contract was
not processed through the POEA, then Article 18 of the Labor Code is violated. Article
18 provides that no employer may hire a Filipino worker for overseas employment except
through the boards and entities authorized by the Secretary of Labor. In relation thereto,
Section 4 of R.A. No. 8042, as amended, declares that the State shall only allow the
deployment of overseas Filipino workers in countries where the rights of Filipino migrant
workers are protected. Thus, the POEA, through the assistance of the Department of
Foreign Affairs, reviews and checks whether the countries have existing labor and social
laws protecting the rights of workers, including migrant workers. 43 Unless processed
through the POEA, the State has no effective means of assessing the suitability of the
foreign laws to our migrant workers. Thus, an overseas employment contract that was not
scrutinized by the POEA definitely cannot be invoked as it is an unexamined foreign law.
In other words, lacking any one of the four requisites would invalidate the application of
the foreign law, and the Philippine law shall govern the overseas employment contract.
As the requisites of the applicability of foreign laws in overseas labor contract have been
settled, the Court can now discuss the merits of the case at bench.
A judicious scrutiny of the records of the case demonstrates that the petitioners were able
to observe the second requisite, or that the foreign law must be proven before the court
pursuant to the Philippine rules on evidence. The petitioners were able to present the
ESA, duly authenticated by the Canadian authorities and certified by the Philippine
Embassy, before the LA. The fourth requisite was also followed because Arriola's
employment contract was processed through the POEA.44
35
Unfortunately for the petitioners, those were the only requisites that they complied with.
As correctly held by the CA, even though an authenticated copy of the ESA was
submitted, it did not mean that said foreign law could be automatically applied to this
case. The petitioners miserably failed to adhere to the two other requisites, which shall be
discussed in seratim.
The foreign law was not expressly specified in the employment contract
The petitioners failed to comply with the first requisite because no foreign law was
expressly stipulated in the overseas employment contract with Arriola. In its pleadings,
the petitioners did not directly cite any specific provision or stipulation in the said labor
contract which indicated the applicability of the Canadian labor laws or the ESA. They
failed to show on the face of the contract that a foreign law was agreed upon by the
parties. Rather, they simply asserted that the terms and conditions of Arriola's
employment were embodied in the Expatriate Policy, Ambatovy Project - Site, Long
Term.45 Then, they emphasized provision 8.20 therein, regarding interpretation of the
contract, which provides that said policy would be governed and construed with the laws
of the country where the applicable SNC-Lavalin, Inc. office was located.46 Because of
this provision, the petitioners insisted that the laws of Canada, not of Madagascar or the
Philippines, should apply. Then, they finally referred to the ESA.
It is apparent that the petitioners were simply attempting to stretch the overseas
employment contract of Arriola, by implication, in order that the alleged foreign law
would apply. To sustain such argument would allow any foreign employer to improperly
invoke a foreign law even if it is not anymore reasonably contemplated by the parties to
control the overseas employment. The OFW, who is susceptible by his desire and
desperation to work abroad, would blindly sign the labor contract even though it is not
clearly established on its face which state law shall apply. Thus, a better rule would be to
obligate the foreign employer to expressly declare at the onset of the labor contract that a
foreign law shall govern it. In that manner, the OFW would be informed of the applicable
law before signing the contract.
Further, it was shown that the overseas labor contract was executed by Arriola at his
residence in Batangas and it was processed at the POEA on May 26, 2008. 47 Considering
that no foreign law was specified in the contract and the same was executed in the
Philippines, the doctrine of lex loci celebrationis applies and the Philippine laws shall
govern the overseas employment of Arriola.
The foreign law invoked is contrary to the Constitution and the Labor Code
Granting arguendo that the labor contract expressly stipulated the applicability of
Canadian law, still, Arriola's employment cannot be governed by such foreign law
because the third requisite is not satisfied. A perusal of the ESA will show that some of
its provisions are contrary to the Constitution and the labor laws of the Philippines.
First, the ESA does not require any ground for the early termination of
employment.48 Article 54 thereof only provides that no employer should terminate the
employment of an employee unless a written notice had been given in
advance.49 Necessarily, the employer can dismiss any employee for any ground it so
desired. At its own pleasure, the foreign employer is endowed with the absolute power to
end the employment of an employee even on the most whimsical grounds.
Second, the ESA allows the employer to dispense with the prior notice of termination to
an employee. Article 65(4) thereof indicated that the employer could terminate the
employment without notice by simply paying the employee a severance pay computed on
the basis of the period within which the notice should have been given.50 The employee
under the ESA could be immediately dismissed without giving him the opportunity to
explain and defend himself.
The provisions of the ESA are patently inconsistent with the right to security of tenure.
Both the Constitution51 and the Labor Code52 provide that this right is available to any
employee. In a host of cases, the Court has upheld the employee's right to security of
tenure in the face of oppressive management behavior and management prerogative.
Security of tenure is a right which cannot be denied on mere speculation of any unclear
and nebulous basis.53
Not only do these provisions collide with the right to security of tenure, but they also
deprive the employee of his constitutional right to due process by denying him of any
notice of termination and the opportunity to be heard. 54 Glaringly, these disadvantageous
provisions under the ESA produce the same evils which the Court vigorously sought to
prevent in the cases of Pakistan International and Sameer Overseas. Thus, the Court
concurs with the CA that the ESA is not applicable in this case as it is against our
fundamental and statutory laws.
In fine, as the petitioners failed to meet all the four (4) requisites on the applicability of a
foreign law, then the Philippine labor laws must govern the overseas employment
contract of Arriola.
No authorized cause for dismissal was proven
Article 279 of our Labor Code has construed security of tenure to mean that the employer
shall not terminate the services of an employee except for a just cause or when authorized
by law.55Concomitant to the employer's right to freely select and engage an employee is
the employer's right to discharge the employee for just and/or authorized causes. To
validly effect terminations of employment, the discharge must be for a valid cause in the
manner required by law. The purpose of these two-pronged qualifications is to protect the
working class from the employer's arbitrary and unreasonable exercise of its right to
dismiss.56
Some of the authorized causes to terminate employment under the Labor Code would be
installation of labor-saving devices, redundancy, retrenchment to prevent losses and the
closing or cessation of operation of the establishment or undertaking. 57 Each authorized
cause has specific requisites that must be proven by the employer with substantial
evidence before a dismissal may be considered valid.
Here, the petitioners assert that the economy of Madagascar weakened due to the global
financial crisis. Consequently, SNC-Lavalin's business also slowed down. To prove its
sagging financial standing, SNC-Lavalin presented a copy of a news item in the Financial
36
Post, dated March 5, 2009. They insist that SNC-Lavalin had no choice but to minimize
its expenditures and operational expenses.58 In addition, the petitioners argued that the
government of Madagascar prioritized the employment of its citizens, and not foreigners.
Thus, Arriola was terminated because there was no more job available for him. 59
The Court finds that Arriola was not validly dismissed. The petitioners simply argued that
they were suffering from financial losses and Arriola had to be dismissed. It was not even
clear what specific authorized cause, whether retrenchment or redundancy, was used to
justify Arriola's dismissal. Worse, the petitioners did not even present a single credible
evidence to support their claim of financial loss. They simply offered an unreliable news
article which deserves scant consideration as it is undoubtedly hearsay. Time and again
the Court has ruled that in illegal dismissal cases like the present one, the onus of proving
that the employee was dismissed and that the dismissal was not illegal rests on the
employer, and failure to discharge the same would mean that the dismissal is not justified
and, therefore, illegal.60
As to the amount of backpay awarded, the Court finds that the computation of the CA
was valid and proper based on the employment contract of Arriola. Also, the issue of
whether the petitioners had made partial payments on the backpay is a matter best
addressed during the execution process.chanrobleslaw
WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the Court of
Appeals in CA-G.R. SP No. 118869 is AFFIRMED in toto.
SO ORDERED.
G.R. No. 217575, June 15, 2016
SOUTH COTABATO COMMUNICATIONS CORPORATION AND GAUVAIN J.
BENZONAN, Petitioners, v. HON. PATRICIA STO. TOMAS, SECRETARY OF
LABOR AND EMPLOYMENT, ROLANDO FABRIGAR, MERLYN VELARDE,
VINCE LAMBOC, FELIPE GALINDO, LEONARDO MIGUEL, JULIUS RUBIN,
EDEL RODEROS, MERLYN COLIAO, AND EDGAR JOPSON, Respondents.
DECISION
VELASCO JR., J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking
to reverse and set aside the Decision1 dated November 28, 2014 and Resolution dated
March 5, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 00179-MIN, affirming
the Orders dated November 8, 2004 and February 24, 2005 issued by the Secretary of
Labor and Employment.
Factual Antecedents
On January 19, 2004, the Department of Labor and Employment Region-XII (DOLE)
conducted a Complaint Inspection2 at the premises of DXCP Radio Station, which is
owned by petitioner South Cotabato Communications Corporation. The inspection
yielded a finding of violation of labor standards provisions of the Labor Code involving
the nine (9) private respondents, such as:chanRoblesvirtualLawlibrary
1. Underpayment of Wages
2. Underpayment of 13th Month Pay
3. Non-payment of the five (5) days Service Incentive Leave Pay
4. Non-payment of Rest Day Premium Pay
5. Non-payment of the Holiday Premium Pay
6. Non-remittance of SSS Contributions
7. Some employees are paid on commission basis aside from their allowance[s] 3
Consequently, the DOLE issued a Notice of Inspection Result directing petitioner
corporation and/or its president, petitioner Gauvain J. Benzonan (Benzonan), to effect
restitution and/or correction of the alleged violations within five (5) days from notice.
Due to petitioners' failure to comply with its directive, the DOLE scheduled on March 3,
2004 a Summary Investigation at its Regional Office No. XII, Provincial Extension
Office, in General Santos City. However, petitioners failed to appear despite due notice.
Another hearing was scheduled on April 1, 2004 wherein petitioners' counsel, Atty.
Thomas Jacobo (Atty. Jacobo), failed to attend due to an alleged conflict in schedule.
Instead, his secretary, Nona Gido, appeared on his behalf to request a resetting, which the
DOLE Hearing Officer denied.4 Thus, in an Order dated May 20, 2004, the DOLE
Region-XII OIC Regional Director (DOLE Regional Director) directed petitioners to pay
private respondents the total amount of P759,752, representing private respondents' claim
for wage differentials, 13th month pay differentials, service incentive leave pay, holiday
premium pay, and rest day premium Pay-Therefrom, petitioners appealed to the Secretary
of Labor, raising two grounds: (1) denial of due process; and (2) lack of factual and legal
basis of the assailed Order.
The denial of due process was predicated on the refusal of the Hearing Officer to reset the
hearing set on April 1, 2004, which thus allegedly deprived petitioners the opportunity to
present their evidence. Likewise, petitioners asserted that the Order of the Regional
37
Director does not state that an employer-employee relationship exists between petitioners
and private respondents, which is necessary to confer jurisdiction to the DOLE over the
alleged violations.
In an Order5 dated November 8, 2004, the Secretary of Labor affirmed the findings of the
DOLE Regional Director on the postulate that petitioners failed to question, despite
notice of hearing, the noted violations or to submit any proof of compliance therewith.
And in view of petitioners' failure to present their evidence before the Regional Director,
the Secretary of Labor adopted the findings of the Labor Inspector and considered the
interviews conducted as substantial evidence. The Secretary of Labor likewise sustained
what is considered as the straight computation method adopted by the Regional Office as
regards the monetary claims of private respondents,6 thus:chanRoblesvirtualLawlibrary
WHEREFORE, presmises considered, the appeal by DXCP Radio Station and Engr.
Gauvain Benzonan is hereby DISMISSED for lack of merit. The Order dated May [20],
2004 of the Regional Director, directing appellants to pay the nine (9) appellees the
aggregate amount of Seven Hundred Fifty Nine Thousand Seven Hundred Fifty Two
Pesos (Php759,752.00), representing their claims for wage differentials, 13th month pay
differentials, service incentive leave pay, holiday pay premium and rest day premium,
is AFFIRMED.
SO ORDERED.cralawred
Petitioners moved for, but was denied, reconsideration of the Secretary of Labor's Order.
Petitioners elevated the case to the Court of Appeals (CA) via a Petition for Certiorari
under Rule 65 of the Rules of Court. By a Resolution7 dated July 20, 2005, the CA
dismissed the petition owing to procedural infirmities because petitioners failed to attach
a Secretary's Certificate evidencing the authority of petitioner Benzonan, as President, to
sign the petition. On appeal,8 this Court remanded the case back to the CA for
determination on the merits.9ChanRoblesVirtualawlibrary
Ruling of the Court of Appeals
In its Decision dated November 28, 2014 in CA-G.R. SP No. 00179-MIN, the CA upheld
the Secretary of Labor, holding that petitioners cannot claim denial of due process, their
failure to present evidence being attributed to their negligence.
Petitioners moved for the reconsideration of the Decision, grounded on similar arguments
raised before the Secretary of Labor, citing in addition, the pronouncement of the
National Labor Relations Commission (NLRC) in the related case of NLRC No. MAC-
01-010053-2008 entitled Rolando Fabrigar, et. al. v. DXCP Radio Station, et. al. There,
the NLRC held that no employer-employee relationship exists between petitioners and
private respondents Rolando Fabrigar (Fabrigar), Edgar Jopson (Jopson), and Merlyn
Velarde (Velarde). For clarity, two separate actions were instituted by private
respondents Fabrigar, Jopson, and Velarde against petitioners: the first, for violation of
labor standards provisions with the DOLE; and the second, for illegal dismissal filed with
the NLRC. The latter case arose from the three respondents' claim of constructive
dismissal effected by petitioners following the inspection by the DOLE. In ruling for
petitioners, the NLRC, in its Resolution10 dated April 30, 2008, declared that there is no
employer-employee relationship between the parties, thus negating the notion of
constructive dismissal.
The CA denied petitioners' motion for reconsideration in its Resolution dated March 5,
2014. Hence, this petition.
Petitioners presently seek the reversal of the CA's Decision and Resolution and ascribe
the following errors to the court a quo:chanRoblesvirtualLawlibrary
I. The [CA] did not completely and properly dispose of the case pending before it
as it never resolved all justiciable issues raised x x x, particularly, that the
determination of presence or absence of employer-employee relationship is
indispensable in the resolution of this case as jurisdiction is dependent upon it.
II. There is [no] single basis, either factual or legal, for the issuance of the May 20,
2004 Order of the Regional Director x x x against the petitioners as it was issued
relying merely on pure allegations and without any substantial proof on the part
of the claimants, contrary to law and jurisprudence.
III. The [CA] gravely erred in ruling that the Secretary of Labor x x x did not act in
a whimsical and capricious manner or with grave abuse of discretion tantamount
to lack or excess of jurisdiction in affirming the Order of the [Regional Director]
despite the glaring fact that no evidence were submitted by private respondents
as to the basis of [their] claim and nature of their employment.
IV. The [CA] erred in ruling that the Secretary of Labor x x x did not deny
[petitioners their] right to due process in affirming the x x x Order of [the]
Regional Director x x x notwithstanding [the evidence] submitted before her
[that there] exist no employer- employee relation [ship] among the parties and
that the [DOLE] has no jurisdiction over the case.11
In the matter of denial of due process, petitioners maintain that they were prevented from
presenting evidence to prove that private respondents are not their employees when the
Regional Director submitted the case for resolution without affording them an
opportunity to ventilate their case or rebut the findings of the inspection. In addition,
petitioners assail the Order of the Regional Director for want of factual and legal basis,
particularly the lack of categorical finding on the existence of an employer-employee
relationship between the parties—an element which petitioners insist is a prerequisite for
the exercise of the DOLE'S jurisdiction,12 following People's Broadcasting (Bombo
Radyo, Phils., Inc.) v. The Secretary of Labor and Employment, et al. 13 Petitioners
likewise note that the November 8, 2004 Order of the DOLE Secretary denying
petitioner's appeal, as well as the Decision of the CA, is silent on the employer-employee
relationship issue, which further suggests that no real and proper determination of the
existence of such relationship was ever made by these tribunals.
In its Comment, the DOLE counters that the results of the interviews conducted in the
premises of DXCP in the course of its inspection constitute substantial evidence that
served as basis for the monetary awards to private
respondents.14ChanRoblesVirtualawlibrary
From the foregoing, the issue for the resolution can be reduced into the question of
whether the CA erred in upholding the November 8, 2004 Order of the Secretary of
Labor, which in turn affirmed the May 20, 2004 Order of the Regional Director.
Inextricably linked to the resolution of the said issue is a determination of whether an
employer-employee relationship had sufficiently been established between the parties as
38
to warrant the assumption of jurisdiction by the DOLE and issuance of the said May 20,
2004 and November 8, 2004 Orders.
The Court's Ruling
Petitioners were not denied due process
Petitioners' claim of denial of due process deserves scant consideration. The essence of
due process, jurisprudence teaches, is simply an opportunity to be heard, or, as applied to
administrative proceedings, an opportunity to explain one's side or an opportunity to seek
a reconsideration of the action or ruling complained of. 15 As long as the parties are, in
fine, given the opportunity to be heard before judgment is rendered, the demands of due
process are sufficiently met.16ChanRoblesVirtualawlibrary
That petitioners were given ample opportunity to present their evidence before the
Regional Director is indisputable. They were notified of the summary investigations
conducted on March 3, 2004 and April 1, 2004, both of which they failed to attend. To
justify their non-appearance, petitioners claim they requested a resetting of the April 1,
2004 hearing due to the unavailability of their counsel. 17However, no such explanation
was proffered as to why they failed to attend the first hearing. At any rate, it behooved
the petitioners to ensure that they, as well as their counsel, would be available on the
dates set for the summary investigation as this would enable them to prove their claim of
non-existence of an employer-employee relationship. Clearly, their own negligence did
them in. Their lament that they have been deprived of due process is specious.
This thus brings to the fore the issues of whether the Orders of the Regional Director and
Secretary of Labor are supported by factual and legal basis, and, concomitantly, whether
an employer-employee relationship was sufficiently established between petitioners and
private respondents as to warrant the exercise by the DOLE of jurisdiction.
At the outset, the determination as to whether such employer-employee relationship was,
indeed, established requires an examination of facts. It is a well-settled rule that findings
of fact of quasi-judicial agencies are accorded great respect, even finality, by this Court.
This proceeds from the general rule that this Court is not a trier of facts, as questions of
fact are contextually for the labor tribunals to resolve, and only errors of law are
generally reviewed in petitions for review on certiorari criticizing the decisions of the
CA.18ChanRoblesVirtualawlibrary
The findings of fact should, however, be supported by substantial evidence from which
the said tribunals can make their own independent evaluation of the facts. In labor cases,
as in other administrative and quasi-judicial proceedings, the quantum of proof necessary
is substantial evidence, or such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion.19 Although no particular form of
evidence is required to prove the existence of an employer-employee relationship, and
any competent and relevant evidence to prove the relationship may be admitted, 20 a
finding that the relationship exists must nonetheless rest on substantial
evidence.21ChanRoblesVirtualawlibrary
In addition, the findings of fact tainted with grave abuse of discretion will not be upheld.
This Court will not hesitate to set aside the labor tribunal's findings of fact when it is
clearly shown that they were arrived at arbitrarily or in disregard of the evidence on
record or when there is showing of fraud or error of law. 22ChanRoblesVirtualawlibrary
This case clearly falls under the exception. After a careful review of this case, the Court
finds that the DOLE failed to establish its jurisdiction over the case.
The assailed May 20, 2004 Order of the Regional Director and November 8, 2004 Order
of the Secretary of Labor were issued pursuant to Article 128 of the Labor Code, to
wit:chanRoblesvirtualLawlibrary
ART. 128. Visitorial and enforcement power. - (a) The Secretary of Labor and
Employment or his duly authorized representatives, including labor regulation officers,
shall have access to employer's records and premises at any time of the day or night
whenever work is being undertaken therein, and the right to copy therefrom, to question
any employee and investigate any fact, condition or matter which may be necessary to
determine violations or which may aid in the enforcement of this Code and of any labor
law, wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to
issue compliance orders to give effect to the labor standards provisions of this Code and
other labor legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The Secretary or
his duly authorized representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases where the employer contests
the findings of the labor employment and enforcement officer and raises issues supported
by documentary proofs which were not considered in the course of inspection. (As
amended by Republic Act No. 7730, June 2, 1994). x x xcralawred
Under the aforequoted provision, the Secretary of Labor, or any of his or her authorized
representatives, is granted visitorial and enforcement powers for the purpose of
determining violations of, and enforcing, the Labor Code and any labor law, wage order,
or rules and regulations issued pursuant thereto. Indispensable to the DOLE'S exercise of
such power is the existence of an actual employer-employee relationship between the
parties.
The power of the DOLE to determine the existence of an employer-employee relationship
between petitioners and private respondents in order to carry out its mandate under
Article 128 has been established beyond cavil in Bombo
Radyo,23 thus:chanRoblesvirtualLawlibrary
It can be assumed that the DOLE in the exercise of its visitorial and enforcement
power somehow has to make a determination of the existence of an employer-
employee relationship. Such prerogatival determination, however, cannot be
coextensive with the visitorial and enforcement power itself. Indeed, such determination
is merely preliminary, incidental and collateral to the DOLE'S primary function of
enforcing labor standards provisions. The determination of the existence of employer-
employee relationship is still primarily lodged with the NLRC. This is the meaning of the
clause "in cases where the relationship of employer-employee still exists" in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article 128, two important
39
questions must be resolved: (1) Does the employer-employee relationship still exist, or
alternatively, was there ever an employer-employee relationship to speak of; and (2) Are
there violations of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to
and a limitation on the power of the Secretary of Labor, one which the legislative
branch is entitled to impose. The rationale underlying this limitation is to eliminate the
prospect of competing conclusions of the Secretary of Labor and the NLR.C, on a matter
fraught with questions of fact and law, which is best resolved by the quasi-judicial body,
which is the NRLC, rather than an administrative official of the executive branch of the
government. If the Secretary of Labor proceeds to exercise his visitorial and enforcement
powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on
itself which it cannot otherwise acquire. (emphasis ours)cralawred
The foregoing ruling was further reiterated and clarified in the resolution of the
reconsideration of the same case, wherein the jurisdiction of the DOLE was delineated
vis-a-vis the NLRC where the employer-employee relationship between the parties is at
issue:chanRoblesvirtualLawlibrary
No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship. No procedure was laid down where the
DOLE would only make a preliminary finding, that the power was primarily held by the
NLRC. The law did not say that the DOLE would first seek the NLRC's determination of
the existence of an employer-employee relationship, or that should the existence of the
employer-employee relationship be disputed, the DOLE would refer the matter to the
NLRC. The DOLE must have the power to determine whether or not an employer-
employee relationship exists, and from there to decide whether or not to issue
compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by
RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has
a ready set of guidelines to follow, the same guide the courts themselves use. The
elements to determine the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; (4) the employer's power to control the employee's conduct. The use of
this test is not solely limited to the NLRC. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in the course of inspection, making use of
the same evidence that would have been presented before the NLRC. (emphasis
ours)cralawred
Like the NLRC, the DOLE has the authority to rule on the existence of an employer-
employee relationship between the parties, considering that the existence of an employer-
employee relationship is a condition sine qua non for the exercise of its visitorial power.
Nevertheless, it must be emphasized that without an employer-employee relationship, or
if one has already been terminated, the Secretary of Labor is without jurisdiction to
determine if violations of labor standards provision had in fact been committed, 24 and to
direct employers to comply with their alleged violations of labor standards.
The Orders of the Regional Director and the Secretary of Labor do not contain
clear and distinct factual basis necessary to establish the jurisdiction of the DOLE
and to justify the monetary awards to private respondents
For expediency, the May 20, 2004 Order of the Regional Director is pertinently
reproduced hereunder:chanRoblesvirtualLawlibrary
ORDER
This refers to the Complaint Inspection conducted at DXCP Radio Station and/or Engr.
Gauvain Benzonan, President, located at NH Lagao Road, General Santos City on
January 19, 2004 pursuant to Inspection Authority No. R1201-0401-CI-052 which
resulted to the discovery of the Labor Standards violations,
namely:chanRoblesvirtualLawlibrary
1. Underpayment of Wages
2. Underpayment of 13th Month Pay
3. Non-payment of the five (5) days Service Incentive Leave Pay
4. Non-payment of Rest Day Premium Pay
5. Non-payment of the Holiday Premium Pay
6. Non-remittance of SSS Contributions
7. Some employees are paid on commission basis aside from their allowance[s]cralawred
Proceeding from the conduct of such inspection was the issuance of the Notice of
Inspection Result requiring the respondent DXCP Radio Station and/or Engr. Gauvain
Benzonan, President, to effect restitution and/or correction of the noted violations at the
plant/company level within five (5) calendar days from notice thereof. But, Engr.
Gauvain Benzonan failed to do so.
On March 3, 2004, a summary investigation was conducted at the [DOLE], Regional
Office No. XII, Provincial Extension Office, General Santos City. In that scheduled
Summary Investigation, only complainants appeared, assisted by Mr. Fred Huervana,
National President of the Philippine Organization of Labor Unions, x x x while
respondent failed to appear despite due notice.
On April 1, 2004, another Summary Investigation was conducted x x x [There]
complainants appeared, x x x while respondent was represented by Ms. Nona Gido,
Secretary of Atty. Thomas Jacobo, counsel for the respondent. During the deliberation,
Ms. Nona Gido manifested that her presence in that scheduled summary investigation
was to request for the re-scheduling of such hearing, however, such request was denied.
Mr. Fred Huervana declared that as he gleaned from the Notice of Inspection Result
issued by the labor inspector, the Non-payment of the Provisional Emergency Relief
Allowance (PERA) was not included from among the discovered violations, hence he
requested that it should be included in the computation. Such request was denied x x x.
Further, Mr. Fred Huervana, declared that this case be submitted for decision based on
the merit of the case.
Failure of the parties to reach a final settlement prompted this Office to compute the
entitlements of the seven (7) affected workers for their salary differential, underpayment
of 13th month pay, non-payment of the five (5) days service incentive leave pay, non-
payment of holiday premium pay and non-payment of rest day premium pay in the total
amount of SEVEN HUNDRED FIFTY NINE THOUSAND SEVEN HUNDRED FIFTY
TWO PESOS (P759,752.00) x x x.25cralawred
In determining the existence of an employer-employee relationship, Bombo
Radyo specifies the guidelines or indicators used by courts, i.e. (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and
40
(4) the employer's power to control the employee's conduct. The DOLE Secretary, or his
or her representatives, can utilize the same test, even in the course of inspection, making
use of the same evidence that would have been presented before the
NLRC.26ChanRoblesVirtualawlibrary
As can be gleaned from the above-quoted Order, the Regional Director merely noted the
discovery of violations of labor standards provisions in the course of inspection of the
DXCP premises. No such categorical determination was made on the existence of an
employer-employee relationship utilizing any of the guidelines set forth. In a word, the
Regional Director had presumed, not demonstrated, the existence of the relationship. Of
particular note is the DOLE'S failure to show that petitioners, thus, exercised control over
private respondents' conduct in the workplace. The power of the employee to control the
work of the employee, or the control test, is considered the most significant determinant
of the existence of an employer-employee relationship.27ChanRoblesVirtualawlibrary
Neither did the Orders of the Regional Director and Secretary of Labor state nor make
reference to any concrete evidence to support a finding of an employer-employee
relationship and justify the monetary awards to private respondents. Substantial evidence,
such as proofs of employment, clear exercise of control, and the power to dismiss that
prove such relationship and that petitioners committed the labor laws violations they were
adjudged to have committed, are grossly absent in this case. Furthermore, the Orders
dated May 20, 2004 and November 8, 2004 do not even allude to the substance of the
interviews during the inspection that became the basis of the finding of an employer-
employee relationship.
The Secretary of Labor adverts to private respondents' allegation in their Reply 28 to
justify their status as employees of petitioners. The proffered justification falls below the
quantum of proof necessary to establish such fact as allegations can easily be concocted
and manufactured. Private respondents' allegations are inadequate to support a conclusion
absent other concrete proof that would support or corroborate the same. Mere allegation,
without more, is not evidence and is not equivalent to proof. 29 Hence, private
respondents' allegations, essentially self-serving statements as they are and devoid under
the premises of any evidentiary weight, can hardly be taken as the substantial evidence
contemplated for the DOLE'S conclusion that they are employees of petitioners.
In a similar vein, the use of the straight computation method in awarding the sum of
P759,752 to private respondents, without reference to any other evidence other than the
interviews conducted during the inspection, is highly telling that the DOLE failed to
consider evidence in arriving at its award and leads this Court to conclude that such
amount was arrived at arbitrarily.
It is quite implausible for the nine (9) private respondents to be entitled to uniform
amounts of Service Incentive Leave (SIL) pay, holiday pay premium, and rest day
premium pay for three (3) years, without any disparity in the amounts due them since
entitlement to said benefits would largely depend on the actual rest days and holidays
worked and amount of remaining leave credits in a year. Whoever claims entitlement to
the benefits provided by law should establish his or her right thereto.30 The burden of
proving entitlement to overtime pay and premium pay for holidays and rest days lies with
the employee because these are not incurred in the normal course of business. 31 In the
case at bar, evidence pointing not only to the existence of an employer-employee
relationship between the petitioners and private respondents but also to the latter's
entitlement to these benefits are miserably lacking.
It may be that petitioners have failed to refute the allegation that private respondents were
employees of DXCP. Nevertheless, it was incumbent upon private respondents to prove
their allegation that they were, indeed, under petitioners' employ and that the latter
violated their labor rights. A person who alleges a fact has the onus of proving it and the
proof should be clear, positive and convincing.32 Regrettably, private respondents failed
to discharge this burden. The pronouncement in Bombyo Radyo that the determination by
the DOLE of the existence of an employer-employee relationship must be respected
should not be construed so as to dispense with the evidentiary requirement when called
for.
It cannot be stressed enough that the existence of an employer-employee relationship
between the parties is essential to confer jurisdiction of the case to the DOLE. Without
such express finding, the DOLE cannot assume to have jurisdiction to resolve the
complaints of private respondents as jurisdiction in that instance lies with the
NLRC.33ChanRoblesVirtualawlibrary
The Orders of the Regional Director and Secretary of Labor do not comply with
Article VIII, Section 16 of the Constitution
As a necessary corollary to the foregoing considerations, another well-grounded reason
exists to set aside the May 20, 2004 Order of the Regional Director and November 8,
2004 Order of the Secretary of Labor. The said Orders contravene Article VIII, Section
14 of the Constitution, which requires courts to express clearly and distinctly the facts
and law on which decisions are based, to wit:chanRoblesvirtualLawlibrary
Section 14. No decision shall be rendered by any court without expressing therein clearly
and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall be
refused due course or denied without stating the legal basis therefor.cralawred
As stressed by this Court in San Jose v. NLRC,34 faithful compliance by the courts and
quasi-judicial bodies, such as the DOLE, with Art. VIII, Sec. 14 is a vital element of due
process as it enables the parties to know how decisions are arrived at as well as the legal
reasoning behind them. Thus:chanRoblesvirtualLawlibrary
This Court has previously held that judges and arbiters should draw up their decisions
and resolutions with due care, and make certain that they truly and accurately reflect their
conclusions and their final dispositions. A decision should faithfully comply with Section
14, Article VIII of the Constitution which provides that no decision shall be rendered by
any court without expressing therein clearly and distinctly the facts of the case and the
law on which it is based. If such decision had to be completely overturned or set aside,
upon the modified decision, such resolution or decision should likewise state the factual
and legal foundation relied upon. The reason for this is obvious: aside from being
required by the Constitution, the court should be able to justify such a sudden change of
course; it must be able to convincingly explain the taking back of its solemn conclusions
and pronouncements in the earl indecision. The same thing goes for the findings of fact
made by the NLRC, as it is a settled rule that such findings are entitled to great respect
41
and even finality when supported by substantial evidence; otherwise, they shall be struck
down for being whimsical and capricious and arrived at with grave abuse of discretion. It
is a requirement of due process and fair play that the parties to a litigation be informed of
how it was decided, with an explanation of the factual and legal reasons that led to the
conclusions of the court. A decision that does not clearly and distinctly state the facts and
the law on which it is based leaves the parties in the dark as to how it was reached and is
especially prejudicial to the losing party, who is unable to pinpoint the possible errors of
the court for review by a higher tribunal. x x xcralawred
To this end, University of the Philippines v. Hon. Dizon35 instructs that the Constitution
and the Rules of Court require not only that a decision should state the ultimate facts but
also that it should specify the supporting evidentiary facts, for they are what are called the
findings of fact. A decision that does not clearly and distinctly state the facts and the law
on which it is based leaves the parties in the dark as to how it was reached and is
especially prejudicial to the losing party, who is unable to pinpoint the possible errors of
the court (or quasi-judicial body) for review by a higher
tribunal.36ChanRoblesVirtualawlibrary
Accordingly, this Court will not hesitate to strike down decisions rendered not hewing to
the Constitutional directive, as it did to a Decision rendered by the NLRC in Anino, et al.
v. Hinatuan Mining Corporation37 for non-observance of the said
requirement:chanRoblesvirtualLawlibrary
In the present case, the NLRC was definitely wanting in the observance of the aforesaid
constitutional requirement. Its assailed five-page Decision consisted of about three pages
of quotation from the labor arbiter's decision, including the dispositive portion, and
barely a page (two short paragraphs of two sentences each) of its own discussion of its
reasons for reversing the arbiter's findings. It merely raised a doubt on the motive of the
complaining employees and took "judicial notice that in one area of Mindanao, the
mining industry suffered economic difficulties." In affirming peremptorily the validity of
private respondents' retrenchment program, it surmised that "[i]f small mining
cooperatives experienced the same fate, what more with those highly mechanized
establishments."cralawred
The Court is not unmindful of the State's policy to zealously safeguard the rights of our
workers, as no less than the Constitution itself mandates the State to afford full protection
to labor. Nevertheless, it is equally true that the law, in protecting the rights of the
laborer, authorizes neither oppression nor self-destruction of the employer.38 The
constitutional policy to provide full protection to labor is not meant to be a sword to
oppress employers.39 Certainly, an employer cannot be made to answer for claims that
have neither been sufficiently proved nor substantiated.
WHEREFORE, the petition is GRANTED. The Decision dated November 28, 2014 and
Resolution dated March 5, 2015 of the Court of Appeals in CA-G.R. SP No. 00179-MIN
are accordingly REVERSED and SET ASIDE. The Order of the then Secretary of Labor
and Employment dated November 8, 2004 denying petitioners' appeal and the Order of
the Regional Director, DOLE Regional Office No. XII, dated May 20, 2004,
are ANNULLED, without prejudice to whatever right or cause of action private
respondents may have against petitioners.
SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 208986
HIJO RESOURCES CORPORATION, Petitioner,
vs.
EPIFANIO P. MEJARES, REMEGIO C. BAL URAN, JR., DANTE SAYCON, and
CECILIO CUCHARO, represented by NAMABDJERA-HRC, Respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 29 August 2012 Decision2 and the 13 August 2013
Resolution3 of the Court of Appeals in CA-G.R. SP No. 04058-MIN. The Court of
Appeals reversed and set aside the Resolutions dated 29 June 2009 and 16 December
2009 of the National Labor Relations Commission (NLRC) in NLRC No. MIC-03-
000229-08 (RAB XI-09-00774-2007), and remanded the case to the Regional Arbitration
Branch, Region XI, Davao City for further proceedings.
The Facts
Respondents Epifanio P. Mejares, Remegio C. Baluran, Jr., Dante Saycon, and Cecilio
Cucharo (respondents) were among the complainants, represented by their labor union
named "Nagkahiusang Mamumuo ng Bit, Djevon, at Raquilla Farms sa Hijo Resources
Corporation" (NAMABDJERA-HRC), who filed with the NLRC an illegal dismissal case
against petitioner Hijo Resources Corporation (HRC).
Complainants (which include the respondents herein) alleged that petitioner HRC,
formerly known as Hijo Plantation Incorporated (HPI), is the owner of agricultural lands
in Madum, Tagum, Davao del Norte, which were planted primarily with Cavendish
bananas. In 2000, HPI was renamed as HRC. In December 2003, HRC’s application for
the conversion of its agricultural lands into agri-industrial use was approved. The
machineries and equipment formerly used by HPI continued to be utilized by HRC.
Complainants claimed that they were employed by HPI as farm workers in HPI’s
plantations occupying various positions as area harvesters, packing house workers,
loaders, or labelers. In 2001, complainants were absorbed by HRC, but they were
working under the contractor-growers: Buenaventura Tano (Bit Farm); Djerame Pausa
(Djevon Farm); and Ramon Q. Laurente (Raquilla Farm). Complainants asserted that
these contractor-growers received compensation from HRC and were under the control of
HRC. They further alleged that the contractor-growers did not have their own
capitalization, farm machineries, and equipment.
On 1 July 2007, complainants formed their union NAMABDJERA-HRC, which was later
registered with the Department of Labor and Employment (DOLE). On 24 August 2007,
NAMABDJERA-HRC filed a petition for certification election before the DOLE.
When HRC learned that complainants formed a union, the three contractor-growers filed
with the DOLE a notice of cessation of business operations. In September 2007,
complainants were terminated from their employment on the ground of cessation of
business operations by the contractor-growers of HRC. On 19 September 2007,
complainants, represented by NAMABDJERA-HRC, filed a case for unfair labor
practices, illegal dismissal, and illegal deductions with prayer for moral and exemplary
damages and attorney’s fees before the NLRC.
On 19 November 2007, DOLE Med-Arbiter Lito A. Jasa issued an Order,4 dismissing
NAMABDJERA-HRC’s petition for certification election on the ground that there was
no employer-employee relationship between complainants (members of
NAMABDJERA-HRC) and HRC. Complainants did not appeal the Order of Med-Arbiter
Jasa but pursued the illegal dismissal case they filed.
42
On 4 January 2008, HRC filed a motion to inhibit Labor Arbiter Maria Christina S.
Sagmit and moved to dismiss the complaint for illegal dismissal. The motion to dismiss
was anchored on the following arguments: (1) Lack of jurisdiction under the principle
of res judicata; and (2) The Order of the Med-Arbiter finding that complainants were not
employees of HRC, which complainants did not appeal, had become final and executory.
The Labor Arbiter’s Ruling
On 5 February 2008, Labor Arbiter Sagmit denied the motion to inhibit. Labor Arbiter
Sagmit likewise denied the motion to dismiss in an Order dated 12 February 2008. Labor
Arbiter Sagmit held that res judicata does not apply. Citing the cases of Manila Golf &
Country Club, Inc. v. IAC5 and Sandoval Shipyards, Inc. v. Pepito,6 the Labor Arbiter
ruled that the decision of the Med-Arbiter in a certification election case, by the nature of
that proceedings, does not foreclose further dispute between the parties as to the existence
or non-existence of employer-employee relationship between them. Thus, the finding of
Med-Arbiter Jasa that no employment relationship exists between HRC and complainants
does not bar the Labor Arbiter from making his own independent finding on the same
issue. The non-litigious nature of the proceedings before the Med-Arbiter does not
prevent the Labor Arbiter from hearing and deciding the case. Thus, Labor Arbiter
Sagmit denied the motion to dismiss and ordered the parties to file their position papers.
HRC filed with the NLRC a petition for certiorari with a prayer for temporary restraining
order, seeking to nullify the 5 February 2008 and 12 February 2008 Orders of Labor
Arbiter Sagmit.
The Ruling of the NLRC
The NLRC granted the petition, holding that Labor Arbiter Sagmit gravely abused her
discretion in denying HRC’s motion to dismiss. The NLRC held that the Med-Arbiter
Order dated 19 November 2007 dismissing the certification election case on the ground
of lack of employer-employee relationship between HRC and complainants (members of
NAMABDJERA-HRC) constitutes res judicata under the concept of conclusiveness of
judgment, and thus, warrants the dismissal of the case. The NLRC ruled that the Med-
Arbiter exercises quasi-judicial power and the Med-Arbiter’s decisions and orders have,
upon their finality, the force and effect of a final judgment within the purview of the
doctrine of res judicata.
On the issue of inhibition, the NLRC found it moot and academic in view of Labor
Arbiter Sagmit’s voluntary inhibition from the case as per Order dated 11 March 2009.
The Ruling of the Court of Appeals
The Court of Appeals found the ruling in the Sandoval case more applicable in this case.
The Court of Appeals noted that the Sandoval case, which also involved a petition for
certification election and an illegal dismissal case filed by the union members against the
alleged employer, is on all fours with this case. The issue in Sandoval on the effect of the
Med-Arbiter’s findings as to the existence of employer-employee relationship is the very
same issue raised in this case. On the other hand, the case of Chris Garments Corp. v.
Hon. Sto. Tomas7 cited by the NLRC, which involved three petitions for certification
election filed by the same union, is of a different factual milieu.
The Court of Appeals held that the certification proceedings before the Med-Arbiter are
non-adversarial and merely investigative. On the other hand, under Article 217 of the
Labor Code, the Labor Arbiter has original and exclusive jurisdiction over illegal
dismissal cases. Although the proceedings before the Labor Arbiter are also described as
non-litigious, the Court of Appeals noted that the Labor Arbiter is given wide latitude in
ascertaining the existence of employment relationship. Thus, unlike the Med-Artbiter, the
Labor Arbiter may conduct clarificatory hearings and even avail of ocular inspection to
ascertain facts speedily.
Hence, the Court of Appeals concluded that the decision in a certification election case
does not foreclose further dispute as to the existence or non-existence of an employer-
employee relationship between HRC and the complainants.
On 29 August 2012, the Court of Appeals promulgated its Decision, the dispositive
portion of which reads:
WHEREFORE, the petition is hereby GRANTED and the assailed Resolutions dated
June 29, 2009 and December 16, 2009 of the National Labor Relations Commission are
hereby REVERSED AND SET ASIDE. Let NLRC CASE No. RAB-XI-09-00774-0707
be remanded to the Regional Arbitration Branch, Region XI, Davao City for further
proceedings.
SO ORDERED.8
The Issue
Whether the Court of Appeals erred in setting aside the NLRC ruling and remanding the
case to the Labor Arbiter for further proceedings.
The Ruling of the Court
We find the petition without merit.
There is no question that the Med-Arbiter has the authority to determine the existence of
an employer-employee relationship between the parties in a petition for certification
election. As held in M.Y. San Biscuits, Inc. v. Acting Sec. Laguesma:9
Under Article 226 of the Labor Code, as amended, the Bureau of Labor Relations (BLR),
of which the med-arbiter is an officer, has the following jurisdiction –
"ART. 226. Bureau of Labor Relations. – The Bureau of Labor Relations and the Labor
Relations Division[s] in the regional offices of the Department of Labor shall have
original and exclusive authority to act, at their own initiative or upon request of either or
both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or
problems arising from or affecting labor-management relations in all workplaces
whether agricultural or non-agricultural, except those arising from the implementation
or interpretation of collective bargaining agreements which shall be the subject of
grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on labor cases before it, subject to
extension by agreement of the parties." (Italics supplied)
From the foregoing, the BLR has the original and exclusive jurisdiction to inter alia,
decide all disputes, grievances or problems arising from or affecting labor-management
relations in all workplaces whether agricultural or non-agricultural. Necessarily, in the
exercise of this jurisdiction over labor-management relations, the med-arbiter has the
authority, original and exclusive, to determine the existence of an employer-employee
relationship between the parties.
Apropos to the present case, once there is a determination as to the existence of such a
relationship, the med-arbiter can then decide the certification election case.1âwphi1 As
the authority to determine the employer-employee relationship is necessary and
indispensable in the exercise of jurisdiction by the med-arbiter, his finding thereon may
only be reviewed and reversed by the Secretary of Labor who exercises appellate
jurisdiction under Article 259 of the Labor Code, as amended, which provides –
"ART. 259. Appeal from certification election orders. – Any party to an election may
appeal the order or results of the election as determined by the Med-Arbiter directly to
the Secretary of Labor and Employment on the ground that the rules and regulations or
parts thereof established by the Secretary of Labor and Employment for the conduct of
43
the election have been violated. Such appeal shall be decided within fifteen (15) calendar
days."10
In this case, the Med-Arbiter issued an Order dated 19 November 2007, dismissing the
certification election case because of lack of employer-employee relationship between
HRC and the members of the respondent union. The order dismissing the petition was
issued after the members of the respondent union were terminated from their employment
in September 2007, which led to the filing of the illegal dismissal case before the NLRC
on 19 September 2007. Considering their termination from work, it would have been
futile for the members of the respondent union to appeal the Med-Arbiter’s order in the
certification election case to the DOLE Secretary. Instead, they pursued the illegal
dismissal case filed before the NLRC.
The Court is tasked to resolve the issue of whether the Labor Arbiter, in the illegal
dismissal case, is bound by the ruling of the Med-Arbiter regarding the existence or non-
existence of employer-employee relationship between the parties in the certification
election case.
The Court rules in the negative. As found by the Court of Appeals, the facts in this case
are very similar to those in the Sandoval case, which also involved the issue of whether
the ruling in a certification election case on the existence or non-existence of an
employer-employee relationship operates as res judicata in the illegal dismissal case filed
before the NLRC. In Sandoval, the DOLE Undersecretary reversed the finding of the
Med-Arbiter in a certification election case and ruled that there was no employer-
employee relationship between the members of the petitioner union and Sandoval
Shipyards, Inc. (SSI), since the former were employees of the subcontractors.
Subsequently, several illegal dismissal cases were filed by some members of the
petitioner union against SSI. Both the Labor Arbiter and the NLRC ruled that there was
no employer-employee relationship between the parties, citing the resolution of the
DOLE Undersecretary in the certification election case. The Court of Appeals reversed
the NLRC ruling and held that the members of the petitioner union were employees of
SSI. On appeal, this Court affirmed the appellate court’s decision and ruled that the Labor
Arbiter and the NLRC erred in relying on the pronouncement of the DOLE
Undersecretary that there was no employer-employee relationship between the parties.
The Court cited the ruling in the Manila Golf11 case that the decision in a certification
election case, by the very nature of that proceeding, does not foreclose all further dispute
between the parties as to the existence or non-existence of an employer-employee
relationship between them.
This case is different from the Chris Garments case cited by the NLRC where the Court
held that the matter of employer-employee relationship has been resolved with finality by
the DOLE Secretary, whose factual findings were not appealed by the losing party. As
mentioned earlier, the Med-Arbiter’s order in this case dismissing the petition for
certification election on the basis of non-existence of employer-employee
relationship was issued after the members of the respondent union were dismissed
from their employment. The purpose of a petition for certification election is to
determine which organization will represent the employees in their collective bargaining
with the employer.12 The respondent union, without its member-employees, was thus
stripped of its personality to challenge the Med-Arbiter’s decision in the
certification election case. Thus, the members of the respondent union were left with
no option but to pursue their illegal dismissal case filed before the Labor Arbiter. To
dismiss the illegal dismissal case filed before the Labor Arbiter on the basis of the
pronouncement of the Med-Arbiter in the certification election case that there was no
employer-employee relationship between the parties, which the respondent union could
not even appeal to the DOLE Secretary because of the dismissal of its members, would
be tantamount to denying due process to the complainants in the illegal dismissal case.
This, we cannot allow.
WHEREFORE, we DENY the petition. We AFFIRM the 29 August 2012 Decision and
the 13 August 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 04058-MIN.
SO ORDERED.
January 25, 2016
G.R. No. 201595
ALLAN M. MENDOZA, Petitioner,
vs.
OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU), namely,
EDUARDO B. BORELA, BUENAVENTURA QUEBRAL, ELIZABETH
COMETA, ALEJANDRO TORRES, AMORSOLO TIERRA, SOLEDAD YEBAN,
LUIS RENDON, VIRGINIA APILADO, TERESITA BOLO, ROGELIO
BARBERO, JOSE CASAÑAS, ALFREDO MAGA, EMILIO FERNANDEZ,
ROSITA BUENA VENTURA, ALMENIO CANCINO, ADELA IMANA, MARIO
MANCENIDO, WILFREDO MANDILAG, ROLANDO MANLAP AZ, EFREN
MONTEMAYOR, NELSON PAGULAYAN, CARLOS VILLA, RIC BRIONES,
and CHITO BERNARDO, Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the April 24, 2012 Decision2 of the Court
of Appeals (CA) which dismissed the Petition for Certiorari3 in CA-G.R. SP No. 115639.
Factual Antecedents
Petitioner was a member of the Manila Water Employees Union (MWEU), a Department
of Labor and Employment (DOLE)-registered labor organization consisting of rank-and-
file employees within Manila Water Company (MWC). The respondents herein named –
Eduardo B. Borela (Borela), Buenaventura Quebral (Quebral), Elizabeth Cometa
(Cometa), Alejandro Torres (Torres), Amorsolo Tierra (Tierra), Soledad Yeban (Yeban),
Luis Rendon (Rendon), Virginia Apilado (Apilado), Teresita Bolo (Bolo), Rogelio
Barbero (Barbero), Jose Casañas (Casañas), Alfredo Maga (Maga), Emilio Fernandez
(Fernandez), Rosita Buenaventura (Buenaventura), Almenio Cancino (Cancino), Adela
Imana, Mario Mancenido (Mancenido), Wilfredo Mandilag (Mandilag), Rolando
Manlapaz (Manlapaz), Efren Montemayor (Montemayor), Nelson Pagulayan, Carlos
Villa, Ric Briones, and Chito Bernardo – were MWEU officers during the period material
to this Petition, with Borela as President and Chairman of the MWEU Executive Board,
Quebral as First Vice-President and Treasurer, and Cometa as Secretary.4
In an April 11, 2007 letter,5 MWEU through Cometa informed petitioner that the union
was unable to fully deduct the increased P200.00 union dues from his salary due to lack
of the required December 2006 check-off authorization from him. Petitioner was warned
that his failure to pay the union dues would result in sanctions upon him. Quebral
informed Borela, through a May 2, 2007 letter, 6 that for such failure to pay the union
dues, petitioner and several others violated Section 1(g), Article IX of the MWEU’s
Constitution and By-Laws.7 In turn, Borela referred the charge to the MWEU grievance
committee for investigation.
44
On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled
hearing. On June 6, 2007, the MWEU grievance committee recommended that petitioner
be suspended for 30 days.
In a June 20, 2007 letter,8 Borela informed petitioner and his corespondents of the
MWEU Executive Board’s "unanimous approval" 9 of the grievance committee’s
recommendation and imposition upon them of a penalty of 30 days suspension, effective
June 25, 2007.
In a June 26, 2007 letter10 to Borela, petitioner and his co-respondents took exception to
the imposition and indicated their intention to appeal the same to the General
Membership Assembly in accordance with Section 2(g), Article V of the union’s
Constitution and By-Laws,11 which grants them the right to appeal any arbitrary
resolution, policy and rule promulgated by the Executive Board to the General
Membership Assembly. In a June 28, 2007 reply, 12 Borela denied petitioner’s appeal,
stating that the prescribed period for appeal had expired.
Petitioner and his co-respondents sent another letter13 on July 4, 2007, reiterating their
arguments and demanding that the General Membership Assembly be convened in order
that their appeal could be taken up. The letter was not acted upon.
Petitioner was once more charged with non-payment of union dues, and was required to
attend an August 3, 2007 hearing.14 Thereafter, petitioner was again penalized with a 30-
day suspension through an August 21, 2007 letter15 by Borela informing petitioner of the
Executive Board’s "unanimous approval" 16 of the grievance committee recommendation
to suspend him effective August 24, 2007, to which he submitted a written
reply,17 invoking his right to appeal through the convening of the General Membership
Assembly. However, the respondents did not act on petitioner’s plea.
Meanwhile, MWEU scheduled an election of officers on September 14, 2007. Petitioner
filed his certificate of candidacy for Vice-President, but he was disqualified for not being
a member in good standing on account of his suspension.
On October 2, 2007, petitioner was charged with non-payment of union dues for the third
time. He did not attend the scheduled hearing. This time, he was meted the penalty of
expulsion from the union, per "unanimous approval" 18 of the members of the Executive
Board. His pleas for an appeal to the General Membership Assembly were once more
unheeded.19
In 2008, during the freedom period and negotiations for a new collective bargaining
agreement (CBA) with MWC, petitioner joined another union, the Workers Association
for Transparency, Empowerment and Reform, All-Filipino Workers Confederation
(WATER-AFWC). He was elected union President. Other MWEU members were
inclined to join WATER-AFWC, but MWEU director Torres threatened that they would
not get benefits from the new CBA.20
The MWEU leadership submitted a proposed CBA which contained provisions to the
effect that in the event of retrenchment, non-MWEU members shall be removed first, and
that upon the signing of the CBA, only MWEU members shall receive a signing bonus. 21
Ruling of the Labor Arbiter
On October 13, 2008, petitioner filed a Complaint22 against respondents for unfair labor
practices, damages, and attorney’s fees before the National Labor Relations Commission
(NLRC), Quezon City, docketed as NLRC Case No. NCR-10-14255-08. In his Position
Paper and other written submissions,23 petitioner accused the respondents of illegal
termination from MWEU in connection with the events relative to his non-payment of
union dues; unlawful interference, coercion, and violation of the rights of MWC
employees to self-organization – in connection with the proposed CBA submitted by
MWEU leadership, which petitioner claims contained provisions that discriminated
against non-MWEU members. Petitioner prayed in his Supplemental Position Paper that
respondents be held guilty of unfair labor practices and ordered to indemnify him moral
damages in the amount of P100,000.00, exemplary damages amounting to P50,000.00,
and 10% attorney’s fees.
In their joint Position Paper and other pleadings,24 respondents claimed that the Labor
Arbiter had no jurisdiction over the dispute, which is intra-union in nature; that the
Bureau of Labor Relations (BLR) was the proper venue, in accordance with Article 226
of the Labor Code25 and Section 1, Rule XI of Department Order 40-03, series of 2003,
of the DOLE;26 and that they were not guilty of unfair labor practices, discrimination,
coercion or restraint.
On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision27 which
decreed as follows:
Indeed the filing of the instant case is still premature. Section 5, Article X-Investigation
Procedures and Appeal Process of the Union Constitution and By-Laws provides that:
Section 5. Any dismissed and/or expelled member shall have the rights to appeal to the
Executive Board within seven (7) days from the date of notice of the said dismissal
and/or expulsion, which in [turn] shall be referred to the General Membership Assembly.
In case of an appeal, a simple majority of the decision of the Executive Board is
imperative. The same shall be approved/disapproved by a majority vote of the general
membership assembly in a meeting duly called for the purpose.
On the basis of the foregoing, the parties shall exhaust first all the administrative
remedies before resorting to compulsory arbitration. Thus, instant case is referred back to
the Union for the General Assembly to act or deliberate complainant’s appeal on the
decision of the Executive Board.
WHEREFORE PREMISES CONSIDERED, instant case is referred back to the Union
level for the General Assembly to act on complainant’s appeal.
SO ORDERED.28
Ruling of the National Labor Relations Commission
Petitioner appealed before the NLRC, where the case was docketed as NLRC LAC No.
07-001913-09. On March 15, 2010, the NLRC issued its Decision, 29 declaring as follows:
Complainant30 imputes serious error to the Labor Arbiter when she decided as follows:
a. Referring back the subject case to the Union level for the General Assembly
to act on his appeal.
b. Not ruling that respondents are guilty of ULP as charged.
c. Not granting to complainant moral and exemplary damages and attorney’s
fees.
Complainant, in support of his charges, claims that respondents restrained or coerced him
in the exercise of his right as a union member in violation of paragraph "a", Article 249
of the Labor Code,31particularly, in denying him the explanation as to whether there was
observance of the proper procedure in the increase of the membership dues from P100.00
to P200.00 per month. Further, complainant avers that he was denied the right to appeal
his suspension and expulsion in accordance with the provisions of the Union’s
Constitution and By-Laws. In addition, complainant claims that respondents attempted to
cause the management to discriminate against the members of WATER-AFWC thru the
proposed CBA.
Pertinent to the issue then on hand, the Labor Arbiter ordered that the case be referred
back to the Union level for the General Assembly to act on complainant’s appeal. Hence,
these appeals.
45
After a careful look at all the documents submitted and a meticulous review of the facts,
We find that this Commission lacks the jurisdictional competence to act on this case.
Article 217 of the Labor Code,32 as amended, specifically enumerates the cases over
which the Labor Arbiters and the Commission have original and exclusive jurisdiction. A
perusal of the record reveals that the causes of action invoked by complainant do not fall
under any of the enumerations therein. Clearly, We have no jurisdiction over the same.
Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department Order No. 40-
03 in particular, Item A, paragraphs (h) and (j) and Item B, paragraph (a)(3), respectively,
provide:
"A. Inter-Intra-Union disputes shall include:
"(h) violation of or disagreements over any provision of the Constitution and
By-Laws of a Union or workers’ association.
"(j) violation of the rights and conditions of membership in a Union or workers’
association.
"B. Other Labor Relations disputes, not otherwise covered by Article 217 of the Labor
Code, shall include –
"3. a labor union and an individual who is not a member of said union."
Clearly, the above-mentioned disputes and conflict fall under the jurisdiction of the
Bureau of Labor Relations, as these are inter/intra-union disputes.
WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is hereby
declared NULL and VOID for being rendered without jurisdiction and the instant
complaint is DISMISSED.
SO ORDERED.33
Petitioner moved for reconsideration,34 but in a June 16, 2010 Resolution,35 the motion
was denied and the NLRC sustained its Decision.
Ruling of the Court of Appeals
In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP No. 115639,
petitioner sought to reverse the NLRC Decision and be awarded his claim for damages
and attorney’s fees on account of respondents’ unfair labor practices, arguing among
others that his charge of unfair labor practices is cognizable by the Labor Arbiter; that the
fact that the dispute is inter- or intra-union in nature cannot erase the fact that respondents
were guilty of unfair labor practices in interfering and restraining him in the exercise of
his right to self-organization as member of both MWEU and WATER-AFWC, and in
discriminating against him and other members through the provisions of the proposed
2008 CBA which they drafted; that his failure to pay the increased union dues was proper
since the approval of said increase was arrived at without observing the prescribed voting
procedure laid down in the Labor Code; that he is entitled to an award of damages and
attorney’s fees as a result of respondents’ illegal acts in discriminating against him; and
that in ruling the way it did, the NLRC committed grave abuse of discretion.
On April 24, 2012, the CA issued the assailed Decision containing the following
pronouncement:
The petition lacks merit.
Petitioner’s causes of action against MWEU are inter/intra-union disputes cognizable by
the BLR whose functions and jurisdiction are largely confined to union matters,
collective bargaining registry, and labor education. Section 1, Rule XI of Department
Order (D.O.) No. 40-03, Series of 2003, of the Department of Labor and Employment
enumerates instances of inter/intra-union disputes, viz:
Section 1. Coverage. – Inter/intra-union disputes shall include:
xxxx
(b) conduct of election of union and workers’ association officers/nullification of election
of union and workers’ association officers;
(c) audit/accounts examination of union or workers’ association funds;
xxxx
(g) validity/invalidity of impeachment/ expulsion of union and workers’ association
officers and members;
xxxx
(j) violations of or disagreements over any provision in a union or workers’ association
constitution and by-laws;
xxxx
(l) violations of the rights and conditions of union or workers’ association membership;
xxxx
(n) such other disputes or conflicts involving the rights to self-organization, union
membership and collective bargaining –
(1) between and among legitimate labor organizations;
(2) between and among members of a union or workers’ association.
In brief, "Inter-Union Dispute" refers to any conflict between and among legitimate labor
unions involving representation questions for purposes of collective bargaining or to any
other conflict or dispute between legitimate labor unions. "Intra-Union Dispute" refers to
any conflict between and among union members, including grievances arising from any
violation of the rights and conditions of membership, violation of or disagreement over
any provision of the union’s constitution and by-laws, or disputes arising from chartering
or affiliation of union. On the other hand, the circumstances of unfair labor practices
(ULP) of a labor organization are stated in Article 249 of the Labor Code, to wit:
Article 249. Unfair labor practices of labor organizations. It shall be unlawful for labor
organization, its officers, agents, or representatives to commit any of the following unfair
labor practices:
(a) To restrain or coerce employees in the exercise of their right to self-
organization; Provided, That the labor organization shall have the right to
prescribe its own rules with respect to the acquisition or retention of
membership;
(b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with respect to whom
membership in such organization has been denied or terminated on any ground
other than the usual terms and conditions under which membership or
continuation of membership is made available to other members;
xxxx
Applying the aforementioned rules, We find that the issues arising from petitioner’s right
to information on the increased membership dues, right to appeal his suspension and
expulsion according to CBL provisions, and right to vote and be voted on are essentially
intra-union disputes; these involve violations of rights and conditions of union
membership. But his claim that a director of MWEU warned that non-MWEU members
would not receive CBA benefits is an inter-union dispute. It is more of an "interference"
by a rival union to ensure the loyalty of its members and to persuade non-members to join
their union. This is not an actionable wrong because interfering in the exercise of the
right to organize is itself a function of self-organizing.37 As long as it does not amount to
restraint or coercion, a labor organization may interfere in the employees’ right to self-
organization.38Consequently, a determination of validity or illegality of the alleged acts
46
necessarily touches on union matters, not ULPs, and are outside the scope of the labor
arbiter’s jurisdiction.
As regards petitioner’s other accusations, i.e., discrimination in terms of meting out the
penalty of expulsion against him alone, and attempt to cause the employer, MWC, to
discriminate against non-MWEU members in terms of retrenchment or reduction of
personnel, and signing bonus, while We may consider them as falling within the concept
of ULP under Article 249(a) and (b), still, petitioner’s complaint cannot prosper for lack
of substantial evidence. Other than his bare allegation, petitioner offered no proof that
MWEU did not penalize some union members who failed to pay the increased dues. On
the proposed discriminatory CBA provisions, petitioner merely attached the pages
containing the questioned provisions without bothering to reveal the MWEU
representatives responsible for the said proposal. Article 249 mandates that "x x x only
the officers, members of the governing boards, representatives or agents or members of
labor associations or organizations who have actually participated in, authorized or
ratified unfair labor practices shall be held criminally liable." Plain accusations against
all MWEU officers, without specifying their actual participation, do not suffice. Thus, the
ULP charges must necessarily fail.
In administrative and quasi-judicial proceedings, only substantial evidence is necessary to
establish the case for or against a party. Substantial evidence is that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion.
Petitioner failed to discharge the burden of proving, by substantial evidence, the
allegations of ULP in his complaint. The NLRC, therefore, properly dismissed the case.
FOR THESE REASONS, the petition is DISMISSED.
SO ORDERED.39
Thus, the instant Petition.
Issue
In an August 28, 2013 Resolution,40 this Court resolved to give due course to the Petition,
which claims that the CA erred:
A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION CONFLICTS
NEGATES THE COMPLAINT FOR UNFAIR LABOR PRACTICES AGAINST A
LABOR ORGANIZATION AND ITS OFFICERS, AND IN AFFIRMING THAT THE
NLRC PROPERLY DISMISSED THE CASE FOR ALLEGED LACK OF
JURISDICTION.
B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR LABOR
PRACTICES UNDER ARTICLE 249(a) AND (b) OF THE LABOR CODE.
C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER
AGAINST MEMBERS OF A RIVAL UNION IS (sic) MERELY AN
"INTERFERENCE" AND DO NOT AMOUNT TO "RESTRAINT" OR "COERCION".
D. IN DECLARING THAT PETITIONER FAILED TO PRESENT SUBSTANTIAL
EVIDENCE IN PROVING RESPONDENTS’ SPECIFIC ACTS OF UNFAIR LABOR
PRACTICES.
E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO
PETITIONER FOR MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY’S
FEES.41
Petitioner’s Arguments
Praying that the assailed CA dispositions be set aside and that respondents be declared
guilty of unfair labor practices under Article 249(a) and (b) and adjudged liable for
damages and attorney’s fees as prayed for in his complaint, petitioner maintains in his
Petition and Reply42 that respondents are guilty of unfair labor practices which he clearly
enumerated and laid out in his pleadings below; that these unfair labor practices
committed by respondents fall within the jurisdiction of the Labor Arbiter; that the Labor
Arbiter, the NLRC, and the CA failed to rule on his accusation of unfair labor practices
and simply dismissed his complaint on the ground that his causes of action are intra- or
inter-union in nature; that admittedly, some of his causes of action involved intra- or
inter-union disputes, but other acts of respondents constitute unfair labor practices; that
he presented substantial evidence to prove that respondents are guilty of unfair labor
practices by failing to observe the proper procedure in the imposition of the increased
monthly union dues, and in unduly imposing the penalties of suspension and expulsion
against him; that under the union’s constitution and by-laws, he is given the right to
appeal his suspension and expulsion to the general membership assembly; that in denying
him his rights as a union member and expelling him, respondents are guilty of malice and
evident bad faith; that respondents are equally guilty for violating and curtailing his rights
to vote and be voted to a position within the union, and for discriminating against non-
MWEU members; and that the totality of respondents’ conduct shows that they are guilty
of unfair labor practices.
Respondent’s Arguments
In their joint Comment,43 respondents maintain that petitioner raises issues of fact which
are beyond the purview of a petition for review on certiorari; that the findings of fact of
the CA are final and conclusive; that the Labor Arbiter, NLRC, and CA are one in
declaring that there is no unfair labor practices committed against petitioner; that
petitioner’s other allegations fall within the jurisdiction of the BLR, as they refer to intra-
or inter-union disputes between the parties; that the issues arising from petitioner’s right
to information on the increased dues, right to appeal his suspension and expulsion, and
right to vote and be voted upon are essentially intra-union in nature; that his allegations
regarding supposed coercion and restraint relative to benefits in the proposed CBA do not
constitute an actionable wrong; that all of the acts questioned by petitioner are covered by
Section 1, Rule XI of Department Order 40-03, series of 2003 as intra-/inter-union
disputes which do not fall within the jurisdiction of the Labor Arbiter; that in not paying
his union dues, petitioner is guilty of insubordination and deserved the penalty of
expulsion; that petitioner failed to petition to convene the general assembly through the
required signature of 30% of the union membership in good standing pursuant to Article
VI, Section 2(a) of MWEU’s Constitution and By-Laws or by a petition of the majority
of the general membership in good standing under Article VI, Section 3; and that for his
failure to resort to said remedies, petitioner can no longer question his suspension or
expulsion and avail of his right to appeal.
Our Ruling
The Court partly grants the Petition.
In labor cases, issues of fact are for the labor tribunals and the CA to resolve, as this
Court is not a trier of facts. However, when the conclusion arrived at by them is
erroneous in certain respects, and would result in injustice as to the parties, this Court
must intervene to correct the error. While the Labor Arbiter, NLRC, and CA are one in
their conclusion in this case, they erred in failing to resolve petitioner’s charge of unfair
labor practices against respondents.
It is true that some of petitioner’s causes of action constitute intra-union cases cognizable
by the BLR under Article 226 of the Labor Code.
An intra-union dispute refers to any conflict between and among union members,
including grievances arising from any violation of the rights and conditions of
membership, violation of or disagreement over any provision of the union’s constitution
47
and by-laws, or disputes arising from chartering or disaffiliation of the union. Sections 1
and 2, Rule XI of Department Order No. 40-03, Series of 2003 of the DOLE enumerate
the following circumstances as inter/intra-union disputes x x x.44
However, petitioner’s charge of unfair labor practices falls within
the original and exclusive jurisdiction of the Labor Arbiters, pursuant to Article 217 of
the Labor Code. In addition, Article 247 of the same Code provides that "the civil aspects
of all cases involving unfair labor practices, which may include claims for actual, moral,
exemplary and other forms of damages, attorney’s fees and other affirmative relief, shall
be under the jurisdiction of the Labor Arbiters."
Unfair labor practices may be committed both by the employer under Article 248 and by
labor organizations under Article 249 of the Labor Code,45 which provides as follows:
ART. 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice
for a labor organization, its officers, agents or representatives:
(a) To restrain or coerce employees in the exercise of their right to self-
organization. However, a labor organization shall have the right to prescribe its
own rules with respect to the acquisition or retention of membership;
(b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with respect to whom
membership in such organization has been denied or to terminate an employee
on any ground other than the usual terms and conditions under which
membership or continuation of membership is made available to other members;
(c) To violate the duty, or refuse to bargain collectively with the employer,
provided it is the representative of the employees;
(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or
deliver any money or other things of value, in the nature of an exaction, for
services which are not performed or not to be performed, including the demand
for fee for union negotiations;
(e) To ask for or accept negotiation or attorney’s fees from employers as part of
the settlement of any issue in collective bargaining or any other dispute; or
(f) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the officers, members of
governing boards, representatives or agents or members of labor associations or
organizations who have actually participated in, authorized or ratified unfair labor
practices shall be held criminally liable. (As amended by Batas Pambansa Bilang 130,
August 21, 1981).
Petitioner contends that respondents committed acts constituting unfair labor practices –
which charge was particularly laid out in his pleadings, but that the Labor Arbiter, the
NLRC, and the CA ignored it and simply dismissed his complaint on the ground that his
causes of action were intra- or inter-union in nature. Specifically, petitioner claims that he
was suspended and expelled from MWEU illegally as a result of the denial of his right to
appeal his case to the general membership assembly in accordance with the union’s
constitution and by-laws. On the other hand, respondents counter that such charge is
intra-union in nature, and that petitioner lost his right to appeal when he failed to petition
to convene the general assembly through the required signature of 30% of the union
membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s
Constitution and By-Laws or by a petition of the majority of the general membership in
good standing under Article VI, Section 3.
Under Article VI, Section 2(a) of MWEU’s Constitution and By-Laws, the general
membership assembly has the power to "review revise modify affirm or repeal [sic]
resolution and decision of the Executive Board and/or committees upon petition of thirty
percent (30%) of the Union in good standing," 46 and under Section 2(d), to "revise,
modify, affirm or reverse all expulsion cases." 47 Under Section 3 of the same Article,
"[t]he decision of the Executive Board may be appealed to the General Membership
which by a simple majority vote reverse the decision of said body. If the general
Assembly is not in session the decision of the Executive Board may be reversed by a
petition of the majority of the general membership in good standing." 48 And, in Article X,
Section 5, "[a]ny dismissed and/or expelled member shall have the right to appeal to the
Executive Board within seven days from notice of said dismissal and/or expulsion which,
in [turn] shall be referred to the General membership assembly. In case of an appeal, a
simple majority of the decision of the Executive Board is imperative. The same shall be
approved/disapproved by a majority vote of the general membership assembly in a
meeting duly called for the purpose." 49
In regard to suspension of a union member, MWEU’s Constitution and By-Laws
provides under Article X, Section 4 thereof that "[a]ny suspended member shall have the
right to appeal within three (3) working days from the date of notice of said suspension.
In case of an appeal a simple majority of vote of the Executive Board shall be necessary
to nullify the suspension."
Thus, when an MWEU member is suspended, he is given the right to appeal such
suspension within three working days from the date of notice of said suspension, which
appeal the MWEU Executive Board is obligated to act upon by a simple majority vote.
When the penalty imposed is expulsion, the expelled member is given seven days from
notice of said dismissal and/or expulsion to appeal to the Executive Board, which is
required to act by a simple majority vote of its members. The Board’s decision shall then
be approved/ disapproved by a majority vote of the general membership assembly in a
meeting duly called for the purpose.1avvphi1
The documentary evidence is clear that when petitioner received Borela’s August 21,
2007 letter informing him of the Executive Board’s unanimous approval of the grievance
committee recommendation to suspend him for the second time effective August 24,
2007, he immediately and timely filed a written appeal. However, the Executive Board –
then consisting of respondents Borela, Tierra, Bolo, Casañas, Fernandez, Rendon,
Montemayor, Torres, Quebral, Pagulayan, Cancino, Maga, Cometa, Mancenido, and two
others who are not respondents herein – did not act thereon. Then again, when petitioner
was charged for the third time and meted the penalty of expulsion from MWEU by the
unanimous vote of the Executive Board, his timely appeal was again not acted upon by
said board – this time consisting of respondents Borela, Quebral, Tierra, Imana, Rendon,
Yeban, Cancino, Torres, Montemayor, Mancenido, Mandilag, Fernandez, Buenaventura,
Apilado, Maga, Barbero, Cometa, Bolo, and Manlapaz.
Thus, contrary to respondents’ argument that petitioner lost his right to appeal when he
failed to petition to convene the general assembly through the required signature of 30%
of the union membership in good standing pursuant to Article VI, Section 2(a) of
MWEU’s Constitution and By-Laws or by a petition of the majority of the general
membership in good standing under Article VI, Section 3, this Court finds that petitioner
was illegally suspended for the second time and thereafter unlawfully expelled from
MWEU due to respondents’ failure to act on his written appeals. The required petition to
convene the general assembly through the required signature of 30% (under Article VI,
Section 2[a]) or majority (under Article VI, Section 3) of the union membership does not
apply in petitioner’s case; the Executive Board must first act on his two appeals before
the matter could properly be referred to the general membership. Because respondents
48
did not act on his two appeals, petitioner was unceremoniously suspended, disqualified
and deprived of his right to run for the position of MWEU Vice-President in the
September 14, 2007 election of officers, expelled from MWEU, and forced to join
another union, WATER-AFWC. For these, respondents are guilty of unfair labor
practices under Article 249 (a) and (b) – that is, violation of petitioner’s right to self-
organization, unlawful discrimination, and illegal termination of his union membership –
which case falls within the original and exclusive jurisdiction of the Labor Arbiters, in
accordance with Article 217 of the Labor Code.
The primary concept of unfair labor practices is stated in Article 247 of the Labor Code,
which states:
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. ––
Unfair labor practices violate the constitutional right of workers and employees to self-
organization, are inimical to the legitimate interests of both labor and management,
including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the
promotion of healthy and stable labor-management relations.
"In essence, [unfair labor practice] relates to the commission of acts that transgress the
workers’ right to organize."50 "[A]ll the prohibited acts constituting unfair labor practice
in essence relate to the workers’ right to self-organization."51 "[T]he term unfair labor
practice refers to that gamut of offenses defined in the Labor Code which, at their core,
violates the constitutional right of workers and employees to self-organization."52
Guaranteed to all employees or workers is the ‘right to self-organization and to form,
join, or assist labor organizations of their own choosing for purposes of collective
bargaining.’ This is made plain by no less than three provisions of the Labor Code of the
Philippines. Article 243 of the Code provides as follows:
ART. 243. Coverage and employees’ right to self-organization. — All persons employed
in commercial, industrial and agricultural enterprises and in religious, charitable, medical,
or educational institutions whether operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing for
purposes or collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.
Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to
‘interfere with, restrain or coerce employees in the exercise of their right to self-
organization.’ Similarly, Article 249 (a) makes it an unfair labor practice for a labor
organization to ‘restrain or coerce employees in the exercise of their rights to self-
organization . . .’
xxxx
The right of self-organization includes the right to organize or affiliate with a labor union
or determine which of two or more unions in an establishment to join, and to engage in
concerted activities with co-workers for purposes of collective bargaining through
representatives of their own choosing, or for their mutual aid and protection, i.e., the
protection, promotion, or enhancement of their rights and interests. 53
As members of the governing board of MWEU, respondents are presumed to know,
observe, and apply the union’s constitution and by-laws. Thus, their repeated violations
thereof and their disregard of petitioner’s rights as a union member – their inaction on his
two appeals which resulted in his suspension, disqualification from running as MWEU
officer, and subsequent expulsion without being accorded the full benefits of due process
– connote willfulness and bad faith, a gross disregard of his rights thus causing untold
suffering, oppression and, ultimately, ostracism from MWEU. "Bad faith implies breach
of faith and willful failure to respond to plain and well understood obligation." 54 This
warrants an award of moral damages in the amount of P100,000.00. Moreover, the Civil
Code provides:
Art. 32. Any public officer or employee, or any private individual, who directly or
indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the
following rights and liberties of another person shall be liable to the latter for damages:
xxxx
(12) The right to become a member of associations or societies for purposes not contrary
to law;
In Vital-Gozon v. Court of Appeals,55 this Court declared, as follows:
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. They may be recovered if they are the proximate result of the defendant’s
wrongful act or omission. The instances when moral damages may be recovered are, inter
alia, ‘acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the
Civil Code,’ which, in turn, are found in the Chapter on Human Relations of the
Preliminary Title of the Civil Code. x x x
Under the circumstances, an award of exemplary damages in the amount of P50,000.00,
as prayed for, is likewise proper. "Exemplary damages are designed to permit the courts
to mould behavior that has socially deleterious consequences, and their imposition is
required by public policy to suppress the wanton acts of the offender."56 This should
prevent respondents from repeating their mistakes, which proved costly for
petitioner.1âwphi1
Under Article 2229 of the Civil Code, ‘[e]xemplary or corrective damages are imposed,
by way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.’ As this court has stated in the past: ‘Exemplary
damages are designed by our civil law to permit the courts to reshape behaviour that is
socially deleterious in its consequence by creating negative incentives or deterrents
against such behaviour.’57
Finally, petitioner is also entitled to attorney’s fees equivalent to 10 per cent (10%) of the
total award. The unjustified acts of respondents clearly compelled him to institute an
action primarily to vindicate his rights and protect his interest. Indeed, when an employee
is forced to litigate and incur expenses to protect his rights and interest, he is entitled to
an award of attorney’s fees.58
WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April 24, 2012
Decision of the Court of Appeals in CA-G.R. SP No. 115639 is hereby MODIFIED, in
that all of the respondents - except for Carlos Villa, Ric Briones, and Chito Bernardo - are
declared guilty of unfair labor practices and ORDERED TO INDEMNIFY petitioner
Allan M. Mendoza the amounts of Pl00,000.00 as and by way of moral damages,
PS0,000.00 as exemplary damages, and attorney's fees equivalent to 10 per cent (10%) of
the total award.
SO ORDERED.
49