Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-32953 March 31, 1977

RIZALINO HOLGANZA, LEOCADIO RAMIREZ, ALEGRIA CELIS, LEVY A. RACELIS,

GREGORIO CADIENTE, JR., PEDRO DIONEDA, RAUL LARRACAS, EMILIO
LEONOR, JR., ARISTIDES PARAS, CONRADO YACABA, CELSO DE GUZMAN,
RAFAEL DE LA PEÑA, ROMEO CACHOLA, and RICARDO LUMAWIG, petitioners,
vs.
HON. SERGIO A. F. APOSTOL, as Judge of the Court of First Instance of Rizal,
Quezon City Branch No. XVI, and THE SOCIAL SECURITY SYSTEM, respondents.

Gertrudo G. Aquino for petitioner.

Filemon Q. Almazan, Mauricio M. Rivera, Perlita J. Tria Tirona & Gelacio L. Bayani for
respondent Social Security System.

FERNANDO, J.:têñ.£îhqwâ£

The necessity for this certiorari and prohibition proceeding filed by petitioners precisely
on the ground of lack of jurisdiction could have been obviated, the case against them in
the court of first instance presided by respondent Judge Sergio A.F. Apostol being for
the recovery of damages allegedly arising from picketing carried on during a strike
against private respondent, the Social Security System. There was a motion to dismiss,
but it was denied. That was not in accordance with the authoritative doctrine which
would leave such matters to the labor tribunal. That has been the settled law for some
time. In October of last year, in Goodrich Employees Association v. The Honorable
Delfin B. Flores, 1 it was again reiterated. There is thus merit to this suit for prohibition
and certiorari.

Private respondent Social Security System filed with the lower court a complaint for
damages with writ of preliminary attachment against the defendants named therein,
included among whom are the present petitioners.2 Thereafter, petitioners filed a motion
to dismiss, premised primarily on the ground of lack of jurisdiction, with the added
objection that the action was premature. 3 The motion to dismiss included as annexes
the complaint in Case No. V-41 as well as Case No. 46-IPA, then both pending in the
Court of Industrial Relations, the latter being certified to such tribunal by the
President.4 There was an opposition to such motion. 5 It was sustained by respondent
Judge in these words: "For lack of merit, the motion to dismiss filed by the defendant-
movants is hereby denied. The defendant-movants are directed to file the necessary
answer within the prescribed period provided for in the Rules of Court." 6 There was a
motion for reconsideration, but it was denied. Hence this petition.

The jurisdictional issue, as noted, must be decided in favor of petitioners. There is this
appraisal of the nature of the action instituted against them by private respondent, the
Social Security System: "Clearly, the complaint for damages is deeply rooted from the
labor dispute certified by the President of the Philippines and from which resulted a
collective bargaining agreement that was adopted as the court award. This award, in
turn, branched out to disputes that led to the strike. On the basis of this strike, the SSS
petitioned the CIR to declare the said strike illegal, to dismiss the striking employees,
and to declare the officers in contempt of court. And the claim for damages is the result
of the strike. The SSS alleges that: "19. As a result of the Defendants' strike and
picketing from September 3, 1968 to September 18, 1969, staged as aforesaid, in
violation of the CIR award of August 5, 1966, as well as the orders of the CIR of August
29, 1966 and September 3 and September 5, 1968, plaintiff suffered actual and

1
sequential damages ..." (par. 19, Complaint, Annex "A"; emphasis supplied). Likewise, in
paragraphs 20 and 21 of the complaint the SSS seeks exemplary and moral damages in
view of the defiance of the CIR orders and also because of the strike and picketing as
thus alleged. In fine, the alleged damages, the strike and picketing, the alluded CIR
orders, the petition to declare the said strike illegal, to dismiss the striking employees,
and to declare the officers in contempt of court — are so intertwined and inseparable
from each other. Except for the aspect of damages, all these incidents are embraced in
CIR Case No. 46-IPA and which are all still pending." 7 As far back as Associated Labor
Union v. Gomez, 8 the exclusive jurisdiction of the Court of Industrial Relations in
disputes of this character was upheld. "To hold otherwise," as succinctly stated by
the ponente, Justice Sanchez, "is to sanction split jurisdiction — which is obnoxious to
the orderly administration of Justice." 9 Then inProgressive Labor Association v. Atlas
Consolidated Mining and Development Corporation, 10 decided three years later, Justice
J.B.L. Reyes, speaking for the Court, stressed that to rule that such demand for
damages is to be passed by the regular court of justice, instead of leaving the matter to
the Court of Industrial Relations, "would be to sanction split jurisdiction, which is
prejudicial to the orderly administration of justice." 11 Thereafter, this Court, in the cases
of Leoquenio v. Canada Dry Bottling Co. 12 and Associated Labor Union v. Cruz, 13 with
the opinions coming from the same distinguished jurist, adhered to such a doctrine the
latest case in point, as noted at the outset, is the Goodrich Employees Association
decision. The lack of jurisdiction of respondent Judge is thus manifest.

WHEREFORE, the writ of certiorari is granted, respondent Judge being devoid of

jurisdiction to entertain Civil Case No. Q-12541, entitled, Social Security System v.
Philippine Association of Free Labor Unions (PAFLU), pending in this sala. The writ of
prohibition prayed for is likewise granted, and the lower court restrained from taking any
further action on the aforesaid case except for the purpose of dismissing the same.

Barredo, Antonio, Aquino and Concepcion Jr., JJ., concur.

2
 THIRD DIVISION

[G.R. No. 81490. August 31, 1988.]

HAGONOY WATER DISTRICT represented by its General Manager CELESTINO S.

VENGCO,Petitioner, v. THE HON. NATIONAL LABOR RELATIONS COMMISSION,
EXECUTIVE LABOR ARBITER VLADIMIR P.L. SAMPANG, DEPUTY SHERIFF JOSE
A. CRUZ and DANTE VILLANUEVA,Respondents.

Mario S. Jugco for Petitioner.

Renato C . Guevara for private respondent Villanueva.

SYLLABUS

1. ADMINISTRATIVE LAW; WATER UTILITY DISTRICTS; EMPLOYEES THEREOF

GOVERNED BY THE CIVIL SERVICE LAW. — The Labor Arbiter asserted jurisdiction
over the alleged illegal dismissal of private respondent Villanueva by relying on Section
26 of Presidential Decree No. 198, known as the "Provincial Water Utilities Act of 1973"
which went into effect on 25 May 1973, and which provides as follows: "Exemption from
Civil Service. — The district and its employees, being engaged in a proprietary function,
are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining
shall be available only to personnel below supervisory levels: Provided, however, That
the total of all salaries, wages, emoluments, benefits or other compensation paid to all
employees in any month shall not exceed fifty percent (50%) of average net monthly
revenue, said net revenue representing income from water sales and sewerage service
charges, less pro-rata share of debt service and expenses for fuel or energy for pumping
during the preceding fiscal year." The Labor Arbiter however failed to take into account
the provisions of Presidential Decree No. 1479, which went into effect on 11 June 1978.
P.D. No. 1479 wiped away Section 25 of P.D. 198 quoted above, and Section 26 of P.D.
198 was renumbered as Section 25 in the following manner: "Section 26 of the same
decree [P.D.198] is hereby amended to read as Section 25 as follows: ‘Section 25.
Authorization. — The district may exercise all the powers which are expressly granted by
this Title or which are necessarily implied from or incidental to the powers and purposes
herein stated. For the purpose of carrying out the objectives of this Act, a district is
hereby granted the power of eminent domain, the exercise thereof shall, however, be
subject to review by the Administration.’ Thus, Section 25 of P.D. 198 exempting the
employees of water districts from the application of the Civil Service Law was removed
from the statute books.

2. LABOR LAW; LABOR ARBITER; PROVISIONS OF THE 1987 CONSTITUTION

CONFERRING JURISDICTION OVER CASES PREVIOUSLY OUTSIDE THE SCOPE
OF ITS COMPETENCE; DO NOT OPERATE RETROSPECTIVELY. — We believe and
so hold that the 1987 Constitution did not operate retrospectively so as to confer
jurisdiction upon the Labor Arbiter to render a decision which, under the law applicable
at the time of the rendition of such decision, was clearly outside the scope of
competence of the Labor Arbiter. Thus, the respondent Commission had nothing before
it which it could pass upon in the exercise of its appellate jurisdiction. For it is self-
evident that a decision rendered by the Labor Arbiter without jurisdiction over the case is
a complete nullity, vesting no rights and imposing no liabilities.

DECISION

FELICIANO, J.:

The present petition for certiorari seeks to annul and set aside: a) the decision of the
Labor Arbiter dated 17 March 1987 in NLRC Case No. RAB-III-8-2354-85, entitled

3
"Dante Villanueva versus LWA-Hagonoy Waterworks District Miguel Santos;" and b) the
Resolution of the National Labor Relations Commission dated 20 August 1987 affirming
the mentioned decision.

Private respondent Dante Villanueva was employed as service foreman by petitioner

Hagonoy Water District ("Hagonoy") from 3 January 1977 until 16 May 1985, when he
was indefinitely suspended and thereafter dismissed on 12 July 1985 for abandonment
of work and conflict of interest.

On 14 August 1985, private respondent filed a complaint for illegal dismissal, illegal
suspension and underpayment of wages and emergency cost of living allowance against
petitioner Hagonoy with the then Ministry of Labor and Employment, Regional Arbitration
Branch III, San Fernando, Pampanga.

Petitioner immediately moved for outright dismissal of the complaint on the ground of
lack of jurisdiction. Being a government entity, petitioner claimed, its personnel are
governed by the provisions of the Civil Service Law, not by the Labor Code, and protests
concerning the lawfulness of dismissals from the service fall within the jurisdiction of the
Civil Service Commission, not the Ministry of Labor and Employment. Petitioner cited
Resolution No. 1540 of the Social Security Commission cancelling petitioner’s
compulsory coverage from the system effective 16 May 1979 "considering the rulings
that local water districts are instrumentalities owned and controlled by the government
and that their officers and employees are government employees." In opposing the
motion, private respondent Villanueva contended that local water districts, like petitioner
Hagonoy, though quasi-public corporations, are in the nature of private corporations
since they perform proprietary functions for the government.

The Labor Arbiter proceeded to hear and try the case and, on 17 March 1986, rendered
a Decision in favor of the private respondent and against petitioner Hagonoy. The
dispositive part of the decision read:

"WHEREFORE, premises considered, respondents are hereby ordered to reinstate

petitioner immediately to his former position as Service Foreman, without loss of
seniority rights and privileges, with full backwages, including all benefits provided by law,
from the date he was terminated up to his actual date of reinstatement.

In addition, respondents are hereby ordered to pay the petitioner the amount of
P4,927.50 representing the underpayments of wages from July 1983 to May 16,
1985."cralaw virtua1aw library

SO ORDERED."

On appeal, the National Labor Relations Commission affirmed the decision of the Labor
Arbiter in a Resolution dated 20 August 1987.

The petitioner moved for reconsideration, insisting that public respondents had no
jurisdiction over the case. Meanwhile, a Writ of Execution was issued by the Labor
Arbiter on 16 November 1987. The writ was enforced by garnishing petitioner Hagonoy’s
deposits with the Planters Development Bank of Hagonoy.

Petitioner then filed a Motion to Quash the Writ of Execution with Application for Writ of
Preliminary Injunction arguing that the writ was prematurely issued as its motion for
reconsideration had not yet been resolved. By Resolution dated 10 December 1987,
public respondent Commission denied the application for a preliminary injunction. The
motion to quash was similarly denied by the Commission which directed petitioner to
reinstate immediately private respondent and to pay him the amount of P63,577.75 out
of petitioner’s garnished deposits.

Hence, the instant petition.

The only question here in whether or not local water districts are government owned or
controlled corporations whose employees are subject to the provisions of the Civil

4
Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of
private respondent Villanueva by relying on Section 26 of Presidential Decree No. 198,
known as the "Provincial Water Utilities Act of 1973" which went into effect on 25 May
1973, and which provides as follows:

"Exemption from Civil Service. — The district and its employees, being engaged in a
proprietary function, are hereby exempt from the provisions of the Civil Service Law.
Collective Bargaining shall be available only to personnel below supervisory levels:
Provided, however, That the total of all salaries, wages, emoluments, benefits or other
compensation paid to all employees in any month shall not exceed fifty percent (50%) of
average net monthly revenue, said net revenue representing income from water sales
and sewerage service charges, less pro-rata share of debt service and expenses for fuel
or energy for pumping during the preceding fiscal year."

The Labor Arbiter however failed to take into account the provisions of Presidential
Decree No. 1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away
Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as
Section 25 in the following manner:

"Section 26 of the same decree [P.D.198] is hereby amended to read as Section 25 as

follows:

‘Section 25. Authorization. — The district may exercise all the powers which are
expressly granted by this Title or which are necessarily implied from or incidental to the
powers and purposes herein stated. For the purpose of carrying out the objectives of this
Act, a district is hereby granted the power of eminent domain, the exercise thereof shall,
however, be subject to review by the Administration.’

Thus, Section 25 of P.D. 198 exempting the employees of water districts from the
application of the Civil Service Law was removed from the statute books.

This is not the first time that officials of the Department of Labor and Employment have
taken the position that the Labor Arbiter here adopted. In Baguio Water District v.
Cresenciano B. Trajano, etc. Et. Al., 1 the petitioner Water District sought review of a
decision of the Bureau of Labor Relations which affirmed that of a Med-Arbiter calling for
a certification election among the regular rank-and-file employees of the Baguio Water
District (BWD). In granting the petition, the Court said:

"The Baguio Water District was formed pursuant to Title II-Local Water District Law-of
P.D. No. 198, as amended, The BWD is by Sec. 6 of that decree ‘a quasi-public
corporation performing public service and supplying public wants.’

A part of the public respondent’s decision rendered in September, 1983, reads in part:
‘We find the appeal [of the BWD] to be devoid of merit. The records show that the
operation and administration of BWD is governed and regulated by special laws, that is,
Presidential Decrees Nos. 198 and 1479 which created local water districts throughout
the country. Section 25 of Presidential Decree (PD) 198 clearly provides that the district
and its employee shall be exempt from the provisions of the Civil Service Law and that
its personnel below supervisory level shall have the right to collectively bargain. Contrary
to appellant’s claim, said provision has not been amended much more abrogated
expressly or impliedly by PD 1479 which does not make mention of any matter on Civil
Service Law or collective bargaining.’ (Rollo, p. 590.)

We grant the petition for the following reasons:

1. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Sec. 26 of P.D.
No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory
decree took effect on June 11, 1978.

x x x

5
3. The BWC is a corporation created pursuant to a special law — P.D. No. 198, as
amended. As such its officers and employees are part of the Civil Service. (Sec. 1, Art.
XII-B, [1973] Constitution; P.D. No. 686.)

The broader question of whether employees of government owned or controlled

corporations are governed by the Civil Service Law and Civil Service Rules and
Regulations was addressed by this Court in 1985 in National Housing Corporation v.
Juco. 2 After a review of constitutional, statutory and case law on the matter, the Court,
through Mr. Justice Gutierrez, held:

"There should no longer be any question at this time that employees of government-
owned or controlled corporations are governed by the civil service law and civil service
rules and regulations.

Section 1. Article XII-B of the [1973] Constitution specifically provides:

‘The Civil Service embraces every branch, agency, subdivision, and instrumentality of
the Government, including every government-owned or controlled corporation . . ."

The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:

‘A Civil Service embracing all branches and subdivisions of the Government shall be
provided by law.

The inclusion of ‘government-owned or controlled corporations’ within the embrace of

the civil service shows a deliberate effort of the framers to plug an earlier loophole which
allowed government-owned or controlled corporations to avoid the full consequences of
the all encompassing coverage of the civil service system. The same explicit intent is
shown by the addition of ‘agency’ and ‘instrumentality’ to branches and subdivisions of
the Government. All offices and firms of the government are covered.

The amendments introduced in 1973 are not idle exercises or meaningless gestures.
They carry the strong message that civil service coverage is broad and all-embracing
insofar as employment in the government in any of its governmental or corporate arms is
concerned."

x x x

Section 1 of Article XII-B, [1973] Constitution uses the word ‘every’ to modify the phrase
‘government-owned or controlled corporation.’

‘Every’ means each one of a group, without exception. It means all possible and all,
taken one by one. Of course, our decision in this case refers to a corporation created as
a government-owned or controlled entity. It does not cover cases involving private firms
taken over by the government in foreclosure or similar proceedings. We reserve
judgment on these latter cases when the appropriate controversy is brought to this
Court."

In Juco, the Court spelled out the law on the issue at bar as such law existed under the
1973 Constitution and the Provisional Constitution of 1984, 4 until just before the
effectivity of the 1987 Constitution. Public respondent Commission, in confirming the
Labor Arbiter’s assumption of jurisdiction over this case, apparently relied upon Article IX
(B), Section 2 (1) of the 1987 Constitution, which provides that:

" [T]he Civil Service embraces . . . government owned or controlled corporations with
original charters." (Emphasis supplied)

The NLRC took the position that although petitioner Hagonoy is a government owned or
controlled corporation, it had no original charter having been created simply by
resolution of a local legislative council. The NLRC concluded that therefore petitioner
Hagonoy fell outside the scope of the civil service.

6
At the time the dispute in the case at bar arose, and at the time the Labor Arbiter
rendered his decision (i.e., 17 March 1986), there is no question that the applicable law
was that spelled out in National Housing Corporation v. Juco (supra) and Baguio Water
District v. Cresenciano B. Trajano (supra) and that under such applicable law, the Labor
Arbiter had no jurisdiction to render the decision that he in fact rendered. By the time the
public respondent Commission rendered its decision of 20 August 1987 which is here
assailed, the 1987 Constitution had already come into effect. 5 There is, nonetheless, no
necessity for this Court at the present time and in the present case to pass upon the
question of the effect of the provisions of Article IX (B), Section 2 (1) of the 1987
Constitution upon the pre-existing statutory and case law. For whatever that effect might
be, — and we will deal with that when an appropriate case comes before the Court —
we believe and so hold that the 1987 Constitution did not operate retrospectively so as
to confer jurisdiction upon the Labor Arbiter to render a decision which, under the law
applicable at the time of the rendition of such decision, was clearly outside the scope of
competence of the Labor Arbiter. Thus, the respondent Commission had nothing before
it which it could pass upon in the exercise of its appellate jurisdiction. For it is self-
evident that a decision rendered by the Labor Arbiter without jurisdiction over the case is
a complete nullity, vesting no rights and imposing no liabilities.

ACCORDINGLY, the Petition for Certiorari is GRANTED. The decision of the Labor
Arbiter dated 17 March 1986, and public respondent Commission’s Resolution dated 20
August 1987 and all other Resolutions and Orders issued by the Commission in this
case subsequent thereto, are hereby SET ASIDE. This decision is, however, without
prejudice to the right of private respondent Villanueva to refile, if he so wishes, this
complaint in an appropriate forum. No pronouncement as to costs.

SO ORDERED.

7
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 104389 May 27, 1994

ZAMBOANGA CITY WATER DISTRICT, petitioner,

vs. PRESIDING COMMISSIONER MUSIB M. BUAT, COMMISSIONERS LEON G.
GONZAGA, JR., and OSCAR N. ABELLA, and PRIVATE RESPONDENTS LUIS C.
MARIANO, FELIX G. LAQUIO, FRANCISCO C. OLIVEROS, MARITTA S. DELOS
REYES, FRANCISBELLO D. CRUZ, EXEQUIEL M. DAYOT, JR., ERIC A. DELGADO,
RICARDO M. FERRER, JOVITO DUHAYLUNGSOD, ANTONIO F. ALCANTARA,
RICARDO M. CORTEZ, TEOBALDO M. FLORES, ZOILO J. CAPUY, BERNARDINO
T. ALDINETE, ANGIEL M. ESPINA, WINIFRIDO P. CASIMIRO, ENRIQUE M.
MANUEL, JR., JOSE P. ATILANO, ANTONIO F. DELOS REYES, JR., ELEUTERIO S.
TARROZA, ANTONIO B. DESPALO, ROLANDO B. GARCIA, CESAR P. REYES,
GENEROSO L. CODINO, MARIO E. FERNANDO, BERNARDO B. GEROLAGA,
ANTONIO F. VESAGAS, ANTONIO L. TUBIG, SAILILLA A. ABDULLA, NOEL A.
FERNANDO, SEVERIANO CASIMIRO, RODOLFO DESCALZO, ARTEMIO DE LEON,
and SANTIAGO FERRER, respondents.

Virginia M. Ramos for petitioner.

Abelardo Climaco, Jr. for private respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse
and set aside the Resolutions dated October 24, 1991 and February 19, 1992 of the
National Labor Relations Commission (NLRC) in NLRC CA No. M-000352.

The Zamboanga City Water District, petitioner herein, is a government-owned and

controlled corporation engaged in the business of supplying water in the City of
Zamboanga. Private respondents are all employees of petitioner.

In March 1987, a strike occurred in the company. It was conducted and participated in by
private respondents, for which reason they were separated from their employment.
Petitioner thereafter filed on March 17, 1987 a complaint. before the Labor Arbiter to
declare the said strike illegal (NLRC Case No. RAB-IX-03-0090-87). The following day,
March 18, the Zamboanga Utilities Labor Union (ZULU), to which private respondents
belonged, filed before the Labor Arbiter, a complaint against petitioner for illegal
dismissal and unpaid wages (NLRC Case No. RAB-IX-03-0092-87).

The two cases were consolidated and heard together, and on April 19, 1988, a
consolidated decision was rendered by the Executive Labor Arbiter declaring both the
strike and the dismissal of private respondents illegal and ordering the reinstatement of
private respondents to their former positions, without loss of seniority rights and
privileges, but without back wages.

Petitioner appealed to the NLRC. On July 17, 1990, the NLRC, through respondent
Commissioners, affirmed the decision of the Executive Labor Arbiter, with the sole
modification that the strike leader, respondent Felix Laquio herein, be suspended from

8
work without pay for a period of six months, effective ten days from receipt of the
decision.

Petitioner received a copy of the decision of the NLRC on August 27 (Rollo, p. 32).
Three days later, private respondents filed with the Executive Labor Arbiter a motion for
execution of the said decision. On September 24, the Executive Labor Arbiter granted
the writ of execution and ordered petitioner to reinstate all private respondents.

On September 28, this Court issued a restraining order in G.R. Nos. 95219-20 enjoining,
until further orders, the execution of the NLRC Decision dated July 17, 1990. However,
on March 13, 1991, we dismissed the petition, affirmed the NLRC Decision dated July
17, 1990 and lifted the restraining order granted earlier.

Petitioner received a copy of the decision of the Supreme Court on April 10 and on April
16, it reinstated 27 of the respondent employees. On the same day, petitioner informed
the Executive Labor Arbiter that respondent Laquio would be reinstated on October 16
after the expiration of Laquio's six-month suspension.

On April 17, private respondents filed a motion to compel the immediate reinstatement of
respondent Laquio and the payment of their back wages. According to private
respondents, the decision of the NLRC was executory immediately upon receipt by
petitioner of a copy thereof on August 27, 1990.

On May 17, the Executive Labor Arbiter issued an order denying private respondents'
motion. Private respondents then appealed to the NLRC (NLRC CA No. M-00352). On
October 24, the NLRC set aside the questioned order of the Executive Labor Arbiter and
ordered respondent Laquio's reinstatement, if not yet reinstated, and granted full back
wages to him from March 6, 1991 up to the day prior to his actual reinstatement; and to
the other private respondents from March 21, 1989 up to April 15, 1991, including the
period of effectivity of the temporary restraining order of this Court in G.R. Nos. 95219-
20.

Petitioner moved for a reconsideration, which the NLRC however denied on February
19, 1992.

Hence, this petition.

II

Petitioner contends that the NLRC had no jurisdiction to issue the resolutions in question
because jurisdiction over labor disputes is vested in the Civil Service Commission. It also
argues that the NLRC committed grave abuse of discretion amounting to lack or in
excess of jurisdiction when it ordered the payment of the salaries of private respondent
during the effectivity of the restraining order of this Court in G.R. Nos. 95219-20.

There is no dispute that petitioner, a water district with an original charter, is a

government-owned and controlled corporation. The established rule is that the hiring and
firing of employees of government-owned and controlled corporations are governed by
the provisions of the Civil Service Law and Civil Service Rules and Regulations (Tanjay
Water District v. Gabaton, 172 SCRA 253 [1989]; Hagonoy Water District v. National
Labor Relations Commission, 165 SCRA 272 [1988]; National Housing Corporation v.
Juco, 134 SCRA 172 [1985]; Baguio Water District v. Trajano, 127 SCRA 730 [1984].
Jurisdiction over the strike and the dismissal of private respondents is therefore lodged
not with the NLRC but with the Civil Service Commission.

Nevertheless, petitioner never raised the issue of lack of jurisdiction before the Executive
Labor Arbiter, the NLRC or even this Court in G.R. Nos. 95219-20. In fact, petitioner
itself filed the complaint before the Executive Labor Arbiter in NLRC Case No. RAB-IX-
03-0090-87, sought affirmative relief therefrom and even participated actively in the
proceedings below. It is only now in this case before us, after the NLRC ordered
payment of back wages, that petitioner raises the issue of lack of jurisdiction. Indeed, it

9
is not fair for a party who has voluntarily invoked the jurisdiction of a tribunal in a
particular matter to secure an affirmative relief therefrom, to afterwards repudiate and
deny that very same jurisdiction to escape a penalty (Ocheda v. Court of Appeals, 214
SCRA 629 [1992]; Royales v. Intermediate Appellate Court, 127 SCRA 470 [1984];
Tijam v. Sibonghanoy, 23 SCRA 29 [1968]).

Petitioner is thus estopped from assailing the jurisdiction of the NLRC and is bound to
respect all the proceedings below.

The second issue involves the determination of when private respondents should be
reinstated as ordered by the decision of the Executive Labor Arbiter dated April 19,
1988. Their salaries start to toll from said date.

Petitioner claims that private respondents, except respondent Laquio, were entitled to
reinstatement only after April 10, 1991 when it received a copy of the decision of the
Supreme Court in G.R. Nos. 95219-20. Petitioner reinstated said private respondents on
April 16, 1991. In the case of respondent Laquio, petitioner reinstated him on October
16, 1991 after the expiration of the six-month suspension.

Petitioner argues that the execution of the NLRC decision dated July 17, 1990 was
suspended by the temporary restraining order issued by this Court in G.R. Nos. 95219-
20.

The Executive Labor Arbiter agreed with petitioner's contention.

The NLRC was of the view that private respondents should have been reinstated on
March 21, 1989 and paid their back wages from that date to April 15, 1991 including the
period of effectivity of the temporary restraining order of this Court in G.R. Nos. 95219-
20. Respondent Laquio on the other hand, should have been reinstated on March 6,
1991 and paid his back wages from said date up to the day prior to his actual
reinstatement.

The reckoning date of March 21, 1989 used by the NLRC was the date of effectivity of
R.A. No. 6715, amending the third paragraph of Article 223 of the Labor Code which
provides.

xxx xxx xxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or

separated employee, insofar as the reinstatement aspect is
concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the
option of the employer, merely reinstated in the payroll. The posting of a
bond by the employer shall not stay the execution for reinstatement
provided herein (Emphasis supplied).

xxx xxx xxx

Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed
or separated employee insofar as the reinstatement aspect is concerned, shall be
immediately executory, even pending appeal. The employer shall reinstate the employee
concerned either by: (a) actually admitting him back to work under the same terms and
conditions prevailing prior to his dismissal or separation; or (b) at the option of the
employer, merely reinstating him in the payroll. Immediate reinstatement is mandated
and is not stayed by the fact that the employer has appealed, or has posted a cash or
surety bond pending appeal.

The issuance of the temporary restraining order in G.R. Nos. 95219-20 did not nullify the
rights of private respondents to their reinstatement and to collect their wages during the
period of the effectivity of the order but merely suspended the implementation thereof

10
pending the determination of the validity of the NLRC resolutions subject of the petition.
Naturally, a finding of this Court that private respondents were not entitled to
reinstatement would mean that they had no right to collect any back wages. On the other
hand, where the Court affirmed the decision of the NLRC and recognized the right of
private respondents to reinstatement, as in G.R. Nos. 95219-20, private respondents are
entitled to the wages accruing during the effectivity of the temporary restraining order.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

11
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 80774 May 31, 1988

SAN MIGUEL CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and RUSTICO VEGA, respondents.

Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner.

The Solicitor General for public respondent.

FELICIANO, J.:

In line with an Innovation Program sponsored by petitioner San Miguel Corporation

("Corporation;" "SMC") and under which management undertook to grant cash awards to
"all SMC employees ... except [ED-HO staff, Division Managers and higher-ranked
personnel" who submit to the Corporation Ideas and suggestions found to be beneficial
to the Corporation, private respondent Rustico Vega submitted on 23 September 1980
an innovation proposal. Mr. Vega's proposal was entitled "Modified Grande
Pasteurization Process," and was supposed to eliminate certain alleged defects in the
quality and taste of the product "San Miguel Beer Grande:"

Title of Proposal

Modified Grande Pasteurization Process

Present Condition or Procedure

At the early stage of beer grande production, several cases of beer

grande full goods were received by MB as returned beer fulls (RBF). The
RBF's were found to have sediments and their contents were hazy. These
effects are usually caused by underpasteurization time and the
pasteurzation units for beer grande were almost similar to those of the
steinie.

Proposed lnnovation (Attach necessary information)

In order to minimize if not elienate underpasteurization of beer grande,

reduce the speed of the beer grande pasteurizer thereby, increasing the
pasteurization time and the pasteurization acts for grande beer. In this
way, the self-life (sic) of beer grande will also be increased. 1

Mr. Vega at that time had been in the employ of petitioner Corporation for thirteen (1 3)
years and was then holding the position of "mechanic in the Bottling Department of the
SMC Plant Brewery situated in Tipolo, Mandaue City.

Petitioner Corporation, however, did not find the aforequoted proposal acceptable and
consequently refused Mr. Vega's subsequent demands for a cash award under the
Innovation Program. On 22 February 1983., a Complaint 2 (docketed as Case No. RAB-
VII-0170-83) was filed against petitioner Corporation with Regional Arbitration Branch
No. VII (Cebu City) of the then.", Ministry of Labor and Employment. Frivate respondent
Vega alleged there that his proposal "[had] been accepted by the methods analyst and
implemented by the Corporation [in] October 1980," and that the same "ultimately and

12
finally solved the problem of the Corporation in the production of Beer Grande." Private
respondent thus claimed entitlement to a cash prize of P60,000.00 (the maximum award
per proposal offered under the Innovation Program) and attorney's fees.

In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation alleged that
private respondent had no cause of action. It denied ever having approved or adopted
Mr. Vega's proposal as part of the Corporation's brewing procedure in the production of
San Miguel Beer Grande. Among other things, petitioner stated that Mr. Vega's proposal
was tumed down by the company "for lack of originality" and that the same, "even if
implemented [could not] achieve the desired result." Petitioner further alleged that the
Labor Arbiter had no jurisdiction, Mr. Vega having improperly bypassed the grievance
machinery procedure prescribed under a then existing collective bargaining agreement
between management and employees, and available administrative remedies provided
under the rules of the Innovation Program. A counterclaim for moral and exemplary
damages, attorney's fees, and litigation expenses closed out petitioner's pleading.

In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money claim of
complainant Vega in this case is "not a necessary incident of his employment" and that
said claim is not among those mentioned in Article 217 of the Labor Code, dismissed the
complaint for lack of jurisdiction. However, in a gesture of "compassion and to show the
government's concern for the workingman," the Labor Arbiter also directed petitioner to
pay Mr. Vega the sum of P2,000.00 as "financial assistance."

The Labor Arbiter's order was subsequently appealed by both parties, private
respondent Vega assailing the dismissal of his complaint for lack of jurisdiction and
petitioner Corporation questioning the propriety of the award of "financial assistance" to
Mr. Vega. Acting on the appeals, the public respondent National Labor Relations
Commission, on 4 September 1987, rendered a Decision, 5 the dispositive portion of
which reads:

WHEREFORE, the appealed Order is hereby set aside and another

udgment entered, order the respondent to pay the complainant the
amount of P60,000.00 as explained above.

SO ORDERED.

In the present Petition for certiorari filed on 4 December 1987, petitioner Corporation,
invoking Article 217 of the Labor Code, seeks to annul the Decision of public respondent
Commission in Case No. RAB-VII-01 70-83 upon the ground that the Labor Arbiter and
the Commission have no jurisdiction over the subject matter of the case.

The jurisdiction of Labor Arbiters and the National Labor Relations Commission is
outlined in Article 217 of the Labor Code, as last amended by Batas Pambansa Blg. 227
which took effect on 1 June 1982:

ART. 217. Jurisdiction of Labor Arbiters and the commission. (a) The
Labor Arbiters shall have theoriginal and exclusive jurisdiction to hear and
decide within thirty (30) working days after submission of the case by the
parties for decision, the following cases involving are workers, whether
agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that workers may file involving wages, hours of

work and other terms and conditions of employment;

3. All money claims of workers, including those based on

non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided
by law or appropriate agreement, except claims for

13
 employees' compensation, social security, medicare and
maternity benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this;

Code, including questions involving the legality of strikes
and lockouts.

(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters. (Emphasis supplied)

While paragraph 3 above refers to "all money claims of workers," it is not necessary to
suppose that the entire universe of money claims that might be asserted by workers
against their employers has been absorbed into the original and exclusive jurisdiction of
Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but
rather within the context formed by paragraph 1 related to unfair labor practices),
paragraph 2 (relating to claims concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a particular species of employer-
employee relations), and paragraph 5 (relating to certain activities prohibited to
employees or to employers).<äre||anº•1àw> It is evident that there is a unifying element
which runs through paragraphs 1 to 5 and that is, that they all refer to cases or disputes
arising out of or in connection with an employer-employee relationship. This is, in other
words, a situation where the rule of noscitur a sociis may be usefully invoked in clarifying
the scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as
amended. We reach the above conclusion from an examination of the terms themselves
of Article 217, as last amended by B.P. Blg. 227, and even though earlier versions of
Article 217 of the Labor Code expressly brought within the jurisdiction of the Labor
Arbiters and the NLRC "cases arising from employer employee relations," 6 which clause
was not expressly carried over, in printer's ink, in Article 217 as it exists today. For it
cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall
within the general jurisdiction of the regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and lodged with
Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that
the money claims of workers" referred to in paragraph 3 of Article 217 embraces money
claims which arise out of or in connection with the employer-employee relationship, or
some aspect or incident of such relationship. Put a little differently, that money claims of
workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are
those money claims which have some reasonable causal connection with the employer-
employee relationship.

Applying the foregoing reading to the present case, we note that petitioner's Innovation
Program is an employee incentive scheme offered and open only to employees of
petitioner Corporation, more specifically to employees below the rank of manager.
Without the existing employer-employee relationship between the parties here, there
would have been no occasion to consider the petitioner's Innovation Program or the
submission by Mr. Vega of his proposal concerning beer grande; without that
relationship, private respondent Vega's suit against petitioner Corporation would never
have arisen. The money claim of private respondent Vega in this case, therefore, arose
out of or in connection with his employment relationship with petitioner.

The next issue that must logically be confronted is whether the fact that the money claim
of private respondent Vega arose out of or in connection with his employment relation"
with petitioner Corporation, is enough to bring such money claim within the original and
exclusive jurisdiction of Labor Arbiters.

In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation engaged in the
sale and repair of motor vehicles, while private respondent was the sales Manager of
petitioner. Petitioner had sued private respondent for non-payment of accounts which
had arisen from private respondent's own purchases of vehicles and parts, repair jobs on

14
cars personally owned by him, and cash advances from the corporation. At the pre-trial
in the lower court, private respondent raised the question of lack of jurisdiction of the
court, stating that because petitioner's complaint arose out of the employer-employee
relationship, it fell outside the jurisdiction of the court and consequently should be
dismissed. Respondent Judge did dismiss the case, holding that the sum of money and
damages sued for by the employer arose from the employer-employee relationship and,
hence, fell within the jurisdiction of the Labor Arbiter and the NLRC. In reversing the
order of dismissal and requiring respondent Judge to take cognizance of the case below,
this Court, speaking through Mme. Justice Melencio-Herrera, said:

Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters,

under paragraph 5 of Article 217 of the Labor Code had jurisdiction over"
all other cases arising from employer-employee relation, unless,
expressly excluded by this Code." Even then, the principle followed by
this Court was that, although a controversy is between an employer and
an employee, the Labor Arbiters have no jurisdiction if the Labor Code is
not involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, 604, in
negating jurisdiction of the Labor Arbiter, although the parties were an
employer and two employees, Mr. Justice Abad Santos stated:

The pivotal question to Our mind is whether or not the

Labor Code has any relevance to the reliefs sought by the
plaintiffs. For if the Labor Code has no relevance, any
discussion concerning the statutes amending it and
whether or not they have retroactive effect is unnecessary.

It is obvious from the complaint that the plaintiffs have not

alleged any unfair labor practice. Theirs is a simple action
for damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is
the Civil Code and not the Labor Code. It results that the
orders under review are based on a wrong premise.

And in Singapore Airlines Limited v. Paño, 122 SCRA 671, 677, the
following was said:

Stated differently, petitioner seeks protection under the civil

laws and claims no benefits under the Labor Code. The
primary relief sought is for liquidated damages for breach
of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of
wages, overtime compensation or separation pay. The
items claimed are the natural consequences flowing from
breach of an obligation, intrinsically a civil dispute.

In the case below, PLAINTIFF had sued for monies loaned to

DEFENDANT, the cost of repair jobs made on his personal cars, and for
the purchase price of vehicles and parts sold to him. Those accounts
have no relevance to the Labor Code. The cause of action was one under
the civil laws, and it does not breach any provision of the Labor Code or
the contract of employment of DEFENDANT. Hence the civil courts, not
the Labor Arbiters and the NLRC should have jurisdiction. 8

It seems worth noting that Medina v. Castro-Bartolome, referred to in the above excerpt,
involved a claim for damages by two (2) employees against the employer company and
the General Manager thereof, arising from the use of slanderous language on the
occasion when the General Manager fired the two (2) employees (the Plant General
Manager and the Plant Comptroller). The Court treated the claim for damages as "a
simple action for damages for tortious acts" allegedly committed by private respondents,
clearly if impliedly suggesting that the claim for damages did not necessarily arise out of

15
or in connection with the employer-employee relationship.Singapore Airlines Limited v.
Paño, also cited in Molave, involved a claim for liquidated damages not by a worker but
by the employer company, unlike Medina. The important principle that runs through
these three (3) cases is that where the claim to the principal relief sought 9 is to be
resolved not by reference to the Labor Code or other labor relations statute or a
collective bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the Labor Arbiter and the
NLRC. In such situations, resolution of the dispute requires expertise, not in labor
management relations nor in wage structures and other terms and conditions of
employment, but rather in the application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed to Labor Arbiters and the
NLRC and the rationale for granting jurisdiction over such claims to these agencies
disappears.

Applying the foregoing to the instant case, the Court notes that the SMC Innovation
Program was essentially an invitation from petitioner Corporation to its employees to
submit innovation proposals, and that petitioner Corporation undertook to grant cash
awards to employees who accept such invitation and whose innovation suggestions, in
the judgment of the Corporation's officials, satisfied the standards and requirements of
the Innovation Program 10 and which, therefore, could be translated into some
substantial benefit to the Corporation. Such undertaking, though unilateral in origin,
could nonetheless ripen into an enforceable contractual (facio ut des) 11 obligation on the
part of petitioner Corporation under certain circumstances. Thus, whether or not an
enforceable contract, albeit implied arid innominate, had arisen between petitioner
Corporation and private respondent Vega in the circumstances of this case, and if so,
whether or not it had been breached, are preeminently legal questions, questions not to
be resolved by referring to labor legislation and having nothing to do with wages or other
terms and conditions of employment, but rather having recourse to our law on contracts.

WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4 September
1987 of public respondent National Labor Relations Commission is SET ASIDE and the
complaint in Case No. RAB-VII-0170-83 is hereby DISMISSED, without prejudice to the
right of private respondent Vega to file a suit before the proper court, if he so desires. No
pronouncement as to costs.

SO ORDERED.

16
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-59825 September 11, 1982

ERNESTO MEDINA and JOSE G. ONG, petitioners,

vs.
HON. FLORELIANA CASTRO-BARTOLOME in her capacity as Presiding Judge of
the Court of First Instance Cf Rizal, Branch XV, Makati, Metro Manila, COSME DE
ABOITIZ and PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,
INC., respondents.

ABAD SANTOS, J.:

Civil Case No. 33150 of the Court of First Instance of Rizal Branch XV, was filed in May,
1979, by Ernesto Medina and Jose G. Ong against Cosme de Aboitiz and Pepsi-Cola
Bottling Co. of the Philippines, Inc. Medina was the former Plant General Manager and
Ong was the former Plant Comptroller of the company. Among the averments in the
complaint are the following:

3. That on or about 1:00 o'clock in the afternoon of December 20, 1977,

defendant Cosme de Aboitiz, acting in his capacity as President and
Chief Executive Officer of the defendant Pepsi-Cola Bottling Company of
the Philippines, Inc., went to the Pepsi-Cola Plant in Muntinlupa, Metro
Manila, and without any provocation, shouted and maliciously humiliated
the plaintiffs with the use of the following slanderous language and other
words of similar import uttered in the presence of the plaintiffs'
subordinate employees, thus-

GOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU!
YOU ARE BOTH SHIT TO ME! YOU ARE FIRED (referring to Ernesto
Medina). YOU TOO ARE FIRED! '(referring to Jose Ong )

4. That on January 9, 1978, the herein plaintiffs filed a joint criminal

complaint for oral defamation against the defendant Cosme de Aboitiz
duly supported with respective affidavits and corroborated by the
affidavits of two (2) witnesses: Isagani Hernandez and Jose Ganseco II,
but after conducting a preliminary investigation, Hon. Jose B. Castillo,
dismissed the complaint allegedly because the expression "Fuck you and
"You are both shit to me" were uttered not to slander but to express anger
and displeasure;

5. That on February 8, 1978, plaintiffs filed a Petition for Review with the
office of the Secretary of Justice (now Ministry of Justice) and on June 13,
1978, the Deputy Minister of Justice, Catalino Macaraig, Jr., issued a
resolution sustaining the plaintiff's complaint, reversing the resolution of
the Provincial Fiscal and directing him to file against defendant Cosme de
Aboitiz an information for Grave Slander. ... ;

6. That the employment records of plaintiffs show their track performance

and impeccable qualifications, not to mention their long years of service
to the Company which undoubtedly caused their promotion to the two
highest positions in Muntinlupa Plant having about 700 employees under
them with Ernesto Medina as the Plant General Manager receiving a
monthly salary of P6,600.00 excluding other perquisites accorded only to
top executives and having under his direct supervision other

17
 professionals like himself, including the plaintiff Jose G. Ong, who was
the Plant Comptroller with a basic monthly salary of P4,855.00;

7. That far from taking these matters into consideration, the defendant
corporation, acting through its President, Cosme de Aboitiz, dismissed
and slandered the plaintiffs in the presence of their subordinate
employees although this could have been done in private;

8. That the defendants have evidently enjoyed the act of dismissing the
plaintiffs and such dismissal was planned to make it as humiliating as
possible because instead of allowing a lesser official like the Regional
Vice President to take whatever action was necessary under the
circumstances, Cosme de Aboitiz himself went to the Muntinlupa Plant in
order to publicly upbraid and dismiss the plaintiffs;

9. That the defendants dismissed the plaintiffs because of an alleged

delay in the use of promotional crowns when such delay was true with
respect to the other Plants, which is therefore demonstrative of the fact
that Cosme de Aboitiz did not really have a strong reason for publicly
humiliating the plaintiffs by dismissing them on the spot;

10. That the defendants were moved by evil motives and an anti-social
attitude in dismissing the plaintiffs because the dismissal was effected on
the very day that plaintiffs were awarded rings of loyalty to the Company,
five days before Christmas and on the day when the employees'
Christmas party was held in the Muntinlupa Plant, so that when plaintiffs
went home that day and found their wives and children already dressed
up for the party, they didn't know what to do and so they cried
unashamedly;

xxx xxx xxx

20. That because of the anti-social manner by which the plaintiffs were
dismissed from their employment and the embarrassment and
degradation they experience in the hands of the defendants, the plaintiffs
have suffered and will continue to suffer wounded feelings, sleepless
nights, mental torture, besmirched reputation and other similar injuries, for
which the sum of P150,000.00 for each plaintiff, or the total amount. of
P300,000.00 should be awarded as moral damages;

21. That the defendants have demonstrated their lack of concern for the
rights and dignity of the Filipino worker and their callous disregard of
Philippine labor and social legislation, and to prevent other persons from
following the footsteps of defendants, the amount of P50,000.00 for each
plaintiff, or the total sum of P100,000.00, should be awarded as
exemplary damages;

22. That plaintiffs likewise expect to spend no less than P5,000.00 as

litigation expenses and were constrained to secure the services of
counsel for the protection and enforcement of their rights for which they
agreed to pay the sum of P10,000.00 and P200.00 per appearance as
and for attorney's fees.

The complaint contains the following:

PRAYER

WHEREFORE, in view of all the foregoing. it is most respectfully that after

proper notice and hearing, judgment be rendered for the plaintiffs and
against the defendants ordering them, jointly and solidarily, to pay the
plaintiffs the sums of:

18
1. Unrealized income in such sum as will be established during the trial;

2. P300,000.00 as moral damages;

3. P100,000.00 by way of exemplary damages:

4. P5,000.00 as litigation expenses;

5. P10,000.00 and P200.00 per appearance as and for attorney's fees;

and

6. Costs of this suit.

Plaintiffs also pray for such further reliefs and remedies as may be in
keeping with justice and equity.

On June 4, 1979, a motion to dismiss the complaint on the ground of lack

of jurisdiction was filed by the defendants. The trial court denied the
motion on September 6, 1979, in an order which reads as follows:

Up for resolution by the Court is the defendants' Motion to Dismiss dated

June 4, 1979, which is basically anchored on whether or not this Court
has jurisdiction over the instant petition.

The complaint alleges that the plaintiffs' dismissal was without any
provocation and that defendant Aboitiz shouted and maliciously
humiliated plaintiffs and used the words quoted in paragraph 3 thereof.
The plaintiffs further allege that they were receiving salaries of P6,600.00
and P4,855.00 a month. So the complaint for civil damages is clearly not
based on an employer-employee relationship but on the manner of
plaintiffs' dismissal and the effects flowing therefrom. (Jovito N. Quisaba
vs, Sta. Ines-Melale Veneer & Plywood Co., Inc., et al., No. L-38088, Aug.
30,1974.)

This case was filed on May 10, 1979. The amendatory decree, P.D. 1367,
which took effect on May 1, 1978 and which provides that Regional
Directors shall not indorse and Labor Arbiters shall not entertain claims
for moral or other forms of damages, now expressly confers jurisdiction
on the courts in these cases, specifically under the plaintiff's causes of
action.

Because of the letter dated January 4, 1978 and the statement of plaintiff
Medina that his receipt of the amount from defendant company was done
"under strong protest," it cannot be said that the demands set forth in the
complaint have been paid, waived or other extinguished. In fact, in
defendants' Motion to Dismiss, it is stated that 'in the absence of a
showing that there was fraud, duress or violence attending said
transactions, such Release and Quitclaim Deeds are valid and binding
contracts between them, which in effect admits that plaintiffs can prove
fraud, violence, duress or violence. Hence a cause of action for plaintiffs
exist.

It is noticed that the defamatory remarks standing alone per se had been
made the sole cause under the first cause of action, but it is alleged in
connection with the manner in which the plaintiffs had been dismissed,
and whether the statute of limitations would apply or not would be a
matter of evidence.

IT has been alreadly settled by jurisprudence that mere asking for

reinstatement does not remove from the CFI jurisdiction over the

19
 damages. The case must involve unfair labor practices to bring it within
the jurisdiction of the CIR (now NLRC).

WHEREFORE, the defendants' Motion to Dismiss dated June 4, 1979 is

hereby denied.

The defendants are hereby directed to interpose their answer within ten
(10) days from receipt hereof.

While the trial was underway, the defendants filed a second motion to dismiss the
complaint dated January 23, 1981, because of amendments to the Labor Code
immediately prior thereto. Acting on the motion, the trial court issued on May 23, 1981,
the following order:

Up for resolution by the Court is the defendants' Motion to Dismiss dated

January 23, 1981, on grounds not existing when the first Motion to
Dismiss dated June 4, 1979 was interposed. The ground relied upon is
the promulgation of P.D. No. 1691 amending Art. 217 of the Labor Code
of the Philippines and Batasan Pambansa Bldg. 70 which took effect on
May 1, 1980, amending Art. 248 of the Labor Code.

The Court agrees with defendants that the complaint alleges unfair labor
practices which under Art. 217 of the Labor Code, as amended by P.D.
1691, has vested original and exclusive jurisdiction to Labor Arbiters, and
Art. 248, thereof ... "which may include claims for damages and other
affirmative reliefs." Under the amendment, therefore, jurisdiction over
employee-employer relations and claims of workers have been removed
from the Courts of First Instance. If it is argued that this case did not arise
from employer-employee relation, but it cannot be denied that this case
would not have arisen if the plaintiffs had not been employees of
defendant Pepsi-Cola. Even the alleged defamatory remarks made by
defendant Cosme de Aboitiz were said to plaintiffs in the course of their
employment, and the latter were dismissed from such employment.
Hence, the case arose from such employer-employee relationship which
under the new Presidential Decree 1691 are under the exclusive, original
jurisdiction of the labor arbiters. The ruling of this Court with respect to the
defendants' first motion to dismiss, therefore, no longer holds as the
positive law has been subsequently issued and being a curative law, can
be applied retroactively (Garcia v. Martinez, et al., L-47629, May 28,
1979; 90 SCRA 331-333).

It will also logically follow that plaintiffs can reinterpose the same
complaint with the Ministry of Labor.

WHEREFORE, let this case be, as it is hereby ordered, dismissed,

without pronouncement as to costs.

A motion to reconsider the above order was filed on July 7, 1981, but it was only on
February 8, 1982, or after a lapse of around seven (7) months when the motion was
denied.

Plaintiffs have filed the instant petition pursuant to R. A. No. 5440 alleging that the
respondent court committed the following errors:

IN DIVESTING ITSELF OF ITS JURISDICTION TO HEAR AND DECIDE

CIVIL CASE NO. 33150 DESPITE THE FACT THAT JURISDICTION
HAD ALREADY ATTACHED WHICH WAS NOT OUSTED BY THE
SUBSEQUENT ENACTMENT OF PRESIDENTIAL DECREE 1691;

IN HOLDING THAT PRESIDENTIAL DECREE 1691 SHOULD BE GIVEN

A RETROSPECTIVE EFFECT WHEN PRESIDENTIAL DECREE 1367

20
 WHICH WAS IN FORCE WHEN CIVIL CASE NO. 33150 WAS FILED
AND TRIAL THEREOF HAD COMMENCED, WAS NEVER EXPRESSLY
REPEALED BY PRESIDENTIAL DECREE 1691, AND IF EVER THERE
WAS AN IMPLIED REPEAL, THE SAME IS NOT FAVORED UNDER
PREVAILED JURISPRUDENCE;

IN HOLDING THAT WITH THE REMOVAL BY PRESIDENTIAL DECREE

1691 OF THE PROVISO INSERTED IN ARTICLE 217 OF THE LABOR
CODE BY PRESIDENTIAL DECREE 1367, THE LABOR ARBITERS
HAVE ACQUIRED JURISDICTION OVER CLAIMS FOR DAMAGES
ARISING FROM EMPLOYER-EMPLOYEE RELATIONS TO THE
EXCLUSION OF THE REGULAR COURTS, WHEN A READING OF
ARTICLE 217 WITHOUT THE PROVISO IN QUESTION READILY
REVEALS THAT JURISDICTION OVER DAMAGE CLAIMS IS STILL
VESTED WITH THE REGULAR COURTS;

IN DISMISSING FOR LACK OF JURISDICTION CIVIL CASE NO. 33150

THEREBY VIOLATING THE CONSTITUTIONAL RIGHTS OF THE
PETITIONERS NOTABLY THEIR RIGHT TO DUE PROCESS.

The pivotal question to Our mind is whether or not the Labor Code has any relevance to
the reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any
discussion concerning the statutes amending it and whether or not they have retroactive
effect is unnecessary.

It is obvious from the complaint that the plaintiffs have not alleged any unfair labor
practice. Theirs is a simple action for damages for tortious acts allegedly committed by
the defendants. Such being the case, the governing statute is the Civil Code and not the
Labor Code. It results that the orders under review are based on a wrong premise.

WHEREFORE, the petition is granted; the respondent judge is hereby ordered to

reinstate Civil Case No. 33150 and render a decision on the merits. Costs against the
private respondents.

SO ORDERED.

21
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 109272 August 10, 1994

GEORG GROTJAHN GMBH & CO., petitioner,

vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br.
59; ROMANA R. LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents.

A.M. Sison, Jr. & Associates for petitioner.

Pedro L. Laso for private respondents.

PUNO, J.:

Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent
judge for lack of jurisdiction and lack of capacity to sue.

The records show that petitioner is a multinational company organized and existing
under the laws of the Federal Republic of Germany. On July 6, 1983, petitioner filed an
application, dated July 2, 1983, 1 with the Securities and Exchange Commission (SEC)
for the establishment of a regional or area headquarters in the Philippines, pursuant to
Presidential Decree No. 218. The application was approved by the Board of Investments
(BOI) on September 6, 1983. Consequently, on September 20, 1983, the SEC issued a
Certificate of Registration and License to petitioner. 2

Private respondent Romana R. Lanchinebre was a sales representative of petitioner

from 1983 to mid-1992. On March 12, 1992, she secured a loan of twenty-five thousand
pesos (P25,000.00) from petitioner. On March 26 and June 10, 1992, she made
additional cash advances in the sum of ten thousand pesos (P10,000.00). Of the total
amount, twelve thousand one hundred seventy pesos and thirty-seven centavos
(P12,170.37) remained unpaid. Despite demand, private respondent Romana failed to
settle her obligation with petitioner.

On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration
Branch of the National Labor Relations Commission (NLRC) in Manila, a Complaint for
illegal suspension, dismissal and non-payment of commissions against petitioner. On
August 18, 1992, petitioner in turn filed against private respondent a Complaint for
damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the
NLRC Arbitration Branch (Manila). 3 The two cases were consolidated.

On September 2, 1992, petitioner filed another Complaint for collection of sum of money
against private respondents spouses Romana and Teofilo Lanchinebre which was
docketed as Civil Case No. 92-2486 and raffled to the sala of respondent judge. Instead
of filing their Answer, private respondents moved to dismiss the Complaint. This was
opposed by petitioner.

On December 21, 1992, respondent judge issued the first impugned Order, granting the
motion to dismiss. She held, viz:

Jurisdiction over the subject matter or nature of the action is conferred by

law and not subject to the whims and caprices of the parties.

22
 Under Article 217 of the Labor Code of the Philippines, 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, the following cases involving all workers, whether agricultural
or non-agricultural:

(4) claims for actual, moral, exemplary and other forms of damages
arising from an employer-employee relations.

xxx xxx xxx

(6) Except claims for employees compensation, social security, medicare

and maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether or not accompanied with a claim for reinstatement.

In its complaint, the plaintiff (petitioner herein) seeks to recover alleged

cash advances made by defendant (private respondent herein) Romana
Lanchinebre while the latter was in the employ of the former. Obviously
the said cash advances were made pursuant to the employer-employee
relationship between the (petitioner) and the said (private respondent)
and as such, within the original and exclusive jurisdiction of the National
Labor Relations Commission.

Again, it is not disputed that the Certificate of Registration and License

issued to the (petitioner) by the Securities and Exchange Commission
was merely "for the establishment of a regional or area headquarters in
the Philippines, pursuant to Presidential Decree No. 218 and its
implementing rules and regulations." It does not include a license to do
business in the Philippines. There is no allegation in the complaint
moreover that (petitioner) is suing under an isolated transaction. It must
be considered that under Section 4, Rule 8 of the Revised Rules of Court,
facts showing the capacity of a party to sue or be sued or the authority of
a party to sue or be sued in a representative capacity or the legal
existence of an organized association of persons that is made a party
must be averred. There is no averment in the complaint regarding
(petitioner's) capacity to sue or be sued.

Finally, (petitioner's) claim being clearly incidental to the occupation or

exercise of (respondent) Romana Lanchinebre's profession, (respondent)
husband should not be joined as party defendant. 4

On March 8, 1993, the respondent judge issued a minute Order denying petitioner's
Motion for Reconsideration.

Petitioner now raises the following assignments of errors:

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE

REGULAR COURTS HAVE NO JURISDICTION OVER DISPUTES
BETWEEN AN EMPLOYER AND AN EMPLOYEE INVOLVING THE
APPLICATION PURELY OF THE GENERAL CIVIL LAW.

II

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT

PETITIONER HAS NO CAPACITY TO SUE AND BE SUED IN THE
PHILIPPINES DESPITE THE FACT THAT PETITIONER IS DULY
LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION TO

23
 SET UP AND OPERATE A REGIONAL OR AREA HEADQUARTERS IN
THE COUNTRY AND THAT IT HAS CONTINUOUSLY OPERATED AS
SUCH FOR THE LAST NINE (9) YEARS.

III

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE

ERRONEOUS INCLUSION OF THE HUSBAND IN A COMPLAINT IS A
FATAL DEFECT THAT SHALL RESULT IN THE OUTRIGHT DISMISSAL
OF THE COMPLAINT.

IV

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE

HUSBAND IS NOT REQUIRED BY THE RULES TO BE JOINED AS A
DEFENDANT IN A COMPLAINT AGAINST THE WIFE.

There is merit to the petition.

Firstly, the trial court should not have held itself without jurisdiction over Civil Case No.
92-2486. It is true that the loan and cash advances sought to be recovered by petitioner
were contracted by private respondent Romana Lanchinebre while she was still in the
employ of petitioner. Nonetheless, it does not follow that Article 217 of the Labor Code
covers their relationship.

Not every dispute between an employer and employee involves matters that only labor
arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor
Code is limited to disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes, or their collective
bargaining agreement. In this regard, we held in the earlier case of Molave Motor Sales,
Inc. vs. Laron, 129 SCRA 485 (1984), viz:

Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters,

under paragraph 5 of Article 217 of the Labor Code had jurisdiction over
"all other cases arising from employer-employee relation, unless
expressly excluded by this Code." Even then, the principal followed by
this Court was that, although a controversy is between an employer and
an employee, the Labor Arbiters have no jurisdiction if the Labor Code is
not involved. In Medina vs. Castro-Bartolome, 116 SCRA 597, 604 in
negating jurisdiction of the Labor Arbiter, although the parties were an
employer and two employees, Mr. Justice Abad Santos stated:

The pivotal question to Our mind is whether or not the

Labor Code has any relevance to the reliefs sought by
plaintiffs. For if the Labor Code has no relevance, any
discussion concerning the statutes amending it and
whether or not they have retroactive effect is unnecessary.

xxx xxx xxx

And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677, the
following was said:

Stated differently, petitioner seeks protection under the civil

laws and claims no benefits under the Labor Code. The
primary relief sought is for liquidated damages for breach
of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of
wages, overtime compensation or separation pay. The

24
 items claimed are the natural consequences flowing from
breach of an obligation, intrinsically a civil dispute.

xxx xxx xxx

In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the
doctrines set forth in the Medina, Singapore Airlines, and Molave Motors cases, thus:

. . . The important principle that runs through these three (3) cases is that
where the claim to the principal relief sought is to be resolved not by
reference to the Labor Code or other labor relations statute or a collective
bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the Labor
Arbiter and the NLRC. In such situations, resolutions of the dispute
requires expertise, not in labor management relations nor in wage
structures and other terms and conditions of employment, but rather in
the application of the general civil law. Clearly, such claims fall outside
the area of competence or expertise ordinarily ascribed to Labor Arbiters
and the NLRC and the rationale for granting jurisdiction over such claims
to these agencies disappears.

Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as
creditor, against private respondent Romana Lanchinebre, as debtor. The fact that they
were employer and employee at the time of the transaction does not negate the civil
jurisdiction of the trial court. The case does not involve adjudication of a labor dispute
but recovery of a sum of money based on our civil laws on obligation and contract.

Secondly, the trial court erred in holding that petitioner does not have capacity to sue in
the Philippines. It is clear that petitioner is a foreign corporation doing business in the
Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. Said law
defines "doing business," as follows:

. . . shall include soliciting orders, purchases, service contracts, opening

offices, whether called "liaison" offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or who
in any calendar year stay in the Philippines for a period or periods
totalling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business firm, entity
or corporation in the Philippines, and any other act or acts that imply a
continuity of commercial dealings or arrangements and contemplate to
that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization. 5

There is no general rule or governing principle as to what constitutes "doing" or

"engaging in" or "transacting" business in the Philippines. Each case must be judged in
the light of its peculiar circumstances. 6 In the case at bench, petitioner does not engage
in commercial dealings or activities in the country because it is precluded from doing so
by P.D. No. 218, under which it was established. 7 Nonetheless, it has been
continuously, since 1983, acting as a supervision, communications and coordination
center for its home office's affiliates in Singapore, and in the process has named its local
agent and has employed Philippine nationals like private respondent Romana
Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its
primary purposes and functions as a regional/area headquarters for its home office, it is
clear that petitioner is doing business in the country. Moreover, private respondents are
estopped from assailing the personality of petitioner. So we held in Merrill Lynch
Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837 (1992):

The rule is that a party is estopped to challenge the personality of a

corporation after having acknowledged the same by entering into a

25
 contract with it. And the "doctrine of estoppel to deny corporate existence
applies to foreign as well as to domestic corporations;" "one who has
dealth with a corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity." The principle "will
be applied to prevent a person contracting with a foreign corporation from
later taking advantage of its noncompliance with the statutes chiefly in
cases where such person has received the benefits of the contract, . . .
(Citations omitted.)

Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to
be the misjoinder of private respondent Teofilo Lanchinebre as party defendant. It is a
basic rule that "(m)isjoinder or parties is not ground for dismissal of an
action." 8 Moreover, the Order of the trial court is based on Section 4(h), Rule 3 of the
Revised Rules of Court, which provides:

A married woman may not . . . be sued alone without joining her husband,
except . . . if the litigation is incidental to the profession, occupation or
business in which she is engaged,

Whether or not the subject loan was incurred by private respondent as an incident to her
profession, occupation or business is a question of fact. In the absence of relevant
evidence, the issue cannot be resolved in a motion to dismiss.

IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December
21, 1992 and March 8, 1993, in Civil Case No. 92-2486 are REVERSED AND SET
ASIDE. The RTC of Makati, Br. 59, is hereby ordered to hear the reinstated case on its
merits. No costs.

SO ORDERED.

26
 THIRD DIVISION

[G.R. No. 149578. April 10, 2003]

EVELYN TOLOSA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,

QWANA KAIUN (through its resident-agent, FUMIO NAKAGAWA), ASIA
BULK TRANSPORT PHILS. INC., PEDRO GARATE and MARIO
ASIS, respondents.

DECISION
PANGANIBAN, J.:

As a rule, labor arbiters and the National Labor Relations Commission have no
power or authority to grant reliefs from claims that do not arise from employer-employee
relations. They have no jurisdiction over torts that have no reasonable causal connection
to any of the claims provided for in the Labor Code, other labor statutes, or collective
bargaining agreements.

The Case

The Petition for Review before us assails the April 18, 2001 Decision[1] of the Court
of Appeals (CA) in CA-GR SP No. 57660, as well as the April 17, 2001 CA
Resolution[2] denying petitioners Motion for Reconsideration. The dispositive portion of
the challenged Decision reads as follows:

WHEREFORE, premises considered, the instant petition for certiorari is

hereby DENIED and accordingly DISMISSED, without prejudice to the right of herein
petitioner to file a suit before the proper court, if she so desires. No pronouncement as to
costs.[3]

The Facts

The appellate court narrated the facts of the case in this manner:

Evelyn Tolosa (hereafter EVELYN), was the widow of Captain Virgilio Tolosa (hereafter
CAPT. TOLOSA) who was hired by Qwana-Kaiun, through its manning agent, Asia Bulk
Transport Phils. Inc., (ASIA BULK for brevity), to be the master of the Vessel named M/V
Lady Dona. CAPT. TOLOSA had a monthly compensation of US$1700, plus US$400.00
monthly overtime allowance. His contract officially began on November 1, 1992, as
supported by his contract of employment when he assumed command of the vessel in
Yokohama, Japan. The vessel departed for Long Beach California, passing by Hawaii in
the middle of the voyage. At the time of embarkation, CAPT. TOLOSA was allegedly
shown to be in good health.

During channeling activities upon the vessels departure from Yokohama sometime on
November 6, 1992, CAPT. TOLOSA was drenched with rainwater. The following day,
November 7, 1992, he had a slight fever and in the succeeding twelve (12) days, his
health rapidly deteriorated resulting in his death on November 18, 1992.

According to Pedro Garate, Chief Mate of the Vessel, in his statement submitted to the
U.S. Coast Guard on November 23, 1992 upon arrival in Long Beach, California CAPT.
TOLOSA experienced high fever between November 11-15, 1992 and suffered from
loose bowel movement (LBM) beginning November 9, 1992. By November 11, 1992, his

27
temperature was 39.5 although his LBM had slightly stopped. The next day, his
temperature rose to 39.8 and had lost his appetite. In the evening of that day, November
13, 1992, he slipped in the toilet and suffered scratches at the back of his waist. First aid
was applied and CAPT. TOLOSA was henceforth confined to his quarters with an able
seaman to watch him 24 hours a day until November 15, 1992, when his conditioned
worsened.

On the same day, November 15, 1992, the Chief Engineer initiated the move and
contacted ASIA BULK which left CAPT. TOLOSAs fate in the hands of Pedro Garate
and Mario Asis, Second Mate of the same vessel who was in-charge of the primary
medical care of its officers and crew. Contact with the U.S. Coast Guard in Honolulu,
Hawaii (USCGHH) was likewise initiated to seek medical advice.

On November 17, 1992, CAPT. TOLOSA was losing resistance and his condition was
getting serious. At 2215 GMT, a telex was sent to ASIA BULK requesting for the
immediate evacuation of CAPT. TOLOSA and thereafter an airlift was set on November
19, 1992. However, on November 18, 1992, at 0753 GMT, CAPT. TOLOSA was officially
recorded as having breathed his last.

Because of the death of CAPT. TOLOSA, his wife, EVELYN, as petitioner, filed a
Complaint/Position Paper before the POEA (POEA Case No. 93-06-1080) against
Qwana-Kaiun, thru its resident-agent, Mr. Fumio Nakagawa, ASIA BULK, Pedro Garate
and Mario Asis, as respondents.

After initial hearings and submissions of pleadings, the case was however transferred to
the Department of Labor and Employment, National Labor Relations Commission
(NLRC), when the amendatory legislation expanding its jurisdiction, and removing
overseas employment related claims from the ambit of POEA jurisdiction. The case was
then raffled to Labor Arbiter, Vladimir Sampang.

xxxxxxxxx

After considering the pleadings and evidences, on July 8, 1997, the Labor Arbiter
Vladimir P. L. Sampang, in conformity with petitioners plea to hold respondents solidarily
liable, granted all the damages, (plus legal interest), as prayed for by the petitioner. The
dispositive portion of his Decision reads:

WHEREFORE, premises considered, the respondents are hereby ordered to jointly and
solidarily pay complainants the following:

1. US$176,400.00 (US$2,100.00 x 12 months x 7 years)

or P4,586,400.00 (at P26.00 per US$1.00) by way of lost income;

2. interest at the legal rate of six percent (6%) per annum

or P1,238,328.00 (from November 1992 to May 1997 or 4 years);

3. moral damages of P200,000.00;

4. exemplary damages of P100,000.00; and

5. 10% of the total award, or P612,472.80, as attorneys fees.

xxxxxxxxx

On appeal, private respondents raised before the National Labor Relations Commission
(NLRC) the following grounds:

(a) the action before the Arbiter, as he himself concedes, is a complaint

based on torts due to negligence. It is the regular courts of law which
have jurisdiction over the action;

28
 (b) Labor Arbiters have jurisdiction over claims for damages arising from
employer-employee relationship (Art. 217, Section (a) (3));

(c) In this case, gross negligence is imputed to respondents Garate and

Asis, who have no employer-employee relationship with the late Capt.
Virgilio Tolosa;

(d) The labor arbiter has no jurisdiction over the controversy;

xxxxxxxxx

Despite other peripheral issues raised by the parties in their respective pleadings, the
NLRC on September 10, 1998, vacated the appealed decision dated July 8, 1997 of the
Labor Arbiter and dismissed petitioners case for lack of jurisdiction over the subject
matter of the action pursuant to the provisions of the Labor Code, as
amended.[4] (Citations omitted)

Ruling of the Court of Appeals

Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction
over the subject matter of the action filed by petitioner. Her cause did not arise from an
employer-employee relation, but from a quasi delict or tort. Further, there is no
reasonable causal connection between her suit for damages and her claim under Article
217 (a)(4) of the Labor Code, which allows an award of damages incident to an
employer-employee relation.
Hence, this Petition.[5]

Issues

Petitioner raises the following issues for our consideration:

I

Whether or not the NLRC has jurisdiction over the case.

II

Whether or not Evelyn is entitled to the monetary awards granted by the labor arbiter. [6]

After reviewing petitioners Memorandum, we find that we are specifically being

asked to determine 1) whether the labor arbiter and the NLRC had jurisdiction over
petitioners action, and 2) whether the monetary award granted by the labor arbiter has
already reached finality.

The Courts Ruling

The Petition has no merit.

First Issue:
Jurisdiction over the Action

Petitioner argues that her cause of action is not predicated on a quasi delict or tort,
but on the failure of private respondents -- as employers of her husband (Captain

29
Tolosa) -- to provide him with timely, adequate and competent medical services under
Article 161 of the Labor Code:

ART 161. Assistance of employer. -- It shall be the duty of any employer to provide all
the necessary assistance to ensure the adequate and immediate medical and dental
attendance and treatment to an injured or sick employee in case of emergency.

Likewise, she contends that Article 217 (a) (4)[7] of the Labor Code vests labor
arbiters and the NLRC with jurisdiction to award all kinds of damages in cases arising
from employer-employee relations.
Petitioner also alleges that the reasonable causal connection rule should be applied
in her favor. Citing San Miguel Corporation v. Etcuban,[8] she insists that a reasonable
causal connection between the claim asserted and the employer-employee relation
confers jurisdiction upon labor tribunals. She adds that she has satisfied the required
conditions: 1) the dispute arose from an employer-employee relation, considering that
the claim was for damages based on the failure of private respondents to comply with
their obligation under Article 161 of the Labor Code; and 2) the dispute can be resolved
by reference to the Labor Code, because the material issue is whether private
respondents complied with their legal obligation to provide timely, adequate and
competent medical services to guarantee Captain Tolosas occupational safety.[9]
We disagree. We affirm the CAs ruling that the NLRC and the labor arbiter had no
jurisdiction over petitioners claim for damages, because that ruling was based on a quasi
delict or tort per Article 2176 of the Civil Code.[10]
Time and time again, we have held that the allegations in the complaint determine
the nature of the action and, consequently, the jurisdiction of the courts. [11] After carefully
examining the complaint/position paper of petitioner, we are convinced that the
allegations therein are in the nature of an action based on a quasi delict or tort. It is
evident that she sued Pedro Garate and Mario Asis for gross negligence.
Petitioners complaint/position paper refers to and extensively discusses the
negligent acts of shipmates Garate and Asis, who had no employer-employee relation
with Captain Tolosa.Specifically, the paper alleges the following tortious acts:

x x x [R]espondent Asis was the medical officer of the Vessel, who failed to regularly
monitor Capt. Tolosas condition, and who needed the USCG to prod him to take the
latters vital signs. In fact, he failed to keep a medical record, like a patients card or
folder, of Capt. Tolosas illness.[12]

Respondents, however, failed Capt. Tolosa because Garate never initiated actions to
save him. x x x In fact, Garate rarely checked personally on Capt. Tolosas condition, to
wit:[13]

x x x Noticeably, the History (Annex D) fails to mention any instance when Garate
consulted the other officers, much less Capt. Tolosa, regarding the possibility of
deviation. To save Capt. Tolosas life was surely a just cause for the change in course,
which the other officers would have concurred in had they been consulted by respondent
Garate which he grossly neglected to do.

Garates poor judgement, since he was the officer effectively in command of the vessel,
prevented him from undertaking these emergency measures, the neglect of which
resulted in Capt. Tolosas untimely demise.[14]

The labor arbiter himself classified petitioners case as a complaint for damages,
blacklisting and watchlisting (pending inquiry) for gross negligence resulting in the death
of complainants husband, Capt. Virgilio Tolosa.[15]
We stress that the case does not involve the adjudication of a labor dispute, but the
recovery of damages based on a quasi delict. The jurisdiction of labor tribunals is limited
to disputes arising from employer-employee relations, as we ruled in Georg Grotjahn
GMBH & Co. v. Isnani:[16]

30
Not every dispute between an employer and employee involves matters that only labor
arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor
Code is limited to disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes, or their collective
bargaining agreement.[17]

The pivotal question is whether the Labor Code has any relevance to the relief
sought by petitioner. From her paper, it is evident that the primary reliefs she seeks are
as follows: (a) loss of earning capacity denominated therein as actual damages or lost
income and (b) blacklisting. The loss she claims does not refer to the actual earnings of
the deceased, but to his earning capacity based on a life expectancy of 65 years. This
amount is recoverable if the action is based on a quasi delict as provided for in Article
2206 of the Civil Code,[18] but not in the Labor Code.
While it is true that labor arbiters and the NLRC have jurisdiction to award not only
reliefs provided by labor laws, but also damages governed by the Civil Code, [19] these
reliefs must still be based on an action that has a reasonable causal connection with the
Labor Code, other labor statutes, or collective bargaining agreements.[20]
The central issue is determined essentially from the relief sought in the
complaint. In San Miguel Corporation v. NLRC,[21] this Court held:

It is the character of the principal relief sought that appears essential in this
connection. Where such principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case should fall within the jurisdiction of the Labor
Arbiter and the NLRC, even though a claim for damages might be asserted as an
incident to such claim.[22]

The labor arbiter found private respondents to be grossly negligent. He ruled that
Captain Tolosa, who died at age 58, could expect to live up to 65 years and to have an
earning capacity of US$176,400.
It must be noted that a workers loss of earning capacity and blacklisting are not to
be equated with wages, overtime compensation or separation pay, and other labor
benefits that are generally cognized in labor disputes. The loss of earning capacity is a
relief or claim resulting from a quasi delict or a similar cause within the realm of civil law.
Claims for damages under paragraph 4 of Article 217 must have a reasonable
causal connection with any of the claims provided for in the article in order to be
cognizable by the labor arbiter. Only if there is such a connection with the other claims
can the claim for damages be considered as arising from employer-employee
relations.[23] In the present case, petitioners claim for damages is not related to any other
claim under Article 217, other labor statutes, or collective bargaining agreements.
Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code,
which does not grant or specify a claim or relief. This provision is only a safety and
health standard under Book IV of the same Code. The enforcement of this labor
standard rests with the labor secretary.[24] Thus, claims for an employers violation thereof
are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce
the labor standard provided for in Article 161 by suing for damages before the labor
arbiter.
It is not the NLRC but the regular courts that have jurisdiction over actions for
damages, in which the employer-employee relation is merely incidental, and in which the
cause of action proceeds from a different source of obligation such as a tort. [25] Since
petitioners claim for damages is predicated on a quasi delict or tort that has no
reasonable causal connection with any of the claims provided for in Article 217, other
labor statutes, or collective bargaining agreements, jurisdiction over the action lies with
the regular courts[26] -- not with the NLRC or the labor arbiters.

Second Issue:
Finality of the Monetary Award

31
 Petitioner contends that the labor arbiters monetary award has already reached
finality, since private respondents were not able to file a timely appeal before the NLRC.
This argument cannot be passed upon in this appeal, because it was not raised in
the tribunals a quo. Well-settled is the rule that issues not raised below cannot be raised
for the first time on appeal. Thus, points of law, theories, and arguments not brought to
the attention of the Court of Appeals need not -- and ordinarily will not -- be considered
by this Court.[27]Petitioners allegation cannot be accepted by this Court on its face; to do
so would be tantamount to a denial of respondents right to due process.[28]
Furthermore, whether respondents were able to appeal on time is a question of fact
that cannot be entertained in a petition for review under Rule 45 of the Rules of Court. In
general, the jurisdiction of this Court in cases brought before it from the Court of Appeals
is limited to a review of errors of law allegedly committed by the court a quo.[29]
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioner.
SO ORDERED.

32
 SECOND DIVISION

[G.R. No. 152121. July 29, 2003]

EDUARDO G. EVIOTA, petitioner, vs. THE HON. COURT OF APPEALS, THE HON.
JOSE BAUTISTA, Presiding Judge of Branch 136, Regional Trial Court of
Makati, and STANDARD CHARTERED BANK, respondents.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court, of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 60141 denying the
petition for certiorari filed by the petitioner praying the nullification of the Order of the
Regional Trial Court of Makati, Branch 136.[2]
Sometime on January 26, 1998, the respondent Standard Chartered Bank and
petitioner Eduardo G. Eviota executed a contract of employment under which the
petitioner was employed by the respondent bank as Compensation and Benefits
Manager, VP (M21). However, the petitioner abruptly resigned from the respondent bank
barely a month after his employment and rejoined his former employer.
On June 19, 1998, the respondent bank filed a complaint against the petitioner with
the RTC of Makati City. The respondent bank alleged inter alia in its complaint that:

1. It is a foreign banking institution authorized to do business in the Philippines, with

principal offices at the 5th Floor, Bankmer Bldg., 6756 Ayala Avenue, Makati City.

2. Defendant Eduardo Eviota (Eviota) is a former employee of the Bank, and may be
served with summons and other court processes at 8 Maple Street, Cottonwoods,
Antipolo, Metro Manila.

3. On December 22, 1997, Eviota began negotiating with the Bank on his possible
employment with the latter. Taken up during these negotiations were not only his
compensation and benefit package, but also the nature and demands of his prospective
position. The Bank made sure that Eviota was fully aware of all the terms and conditions
of his possible job with the Bank.

4. On January 26, 1998, Eviota indicated his conformity with the Banks Offer of
Employment by signing a written copy of such offer dated January 22, 1998 (the
Employment Contract). A copy of the Employment Contract between Eviota and the
Bank is hereto attached as Annex A.

5. Acting on the Employment Contract and on Eviotas uninhibited display of interest in

assuming his position, the Bank promptly proceeded to carry out the terms of the
Employment Contract as well as to facilitate his integration into the workforce. Among
others, the Bank: (a) renovated and refurbished the room which was to serve as Eviotas
office; (b) purchased a 1998 Honda CR-V (Motor No. PEWED7P101101; Chassis No.
PADRD 1830WV00108) for Eviotas use; (c) purchased a desktop IBM computer for
Eviotas use; (d) arranged the takeout of Eviotas loans with Eviotas former employer; (e)
released Eviotas signing bonus in the net amount of P300,000.00; (f) booked Eviotas
participation in a Singapore conference on Y2K project scheduled on March 10 and 11,
1998; and (g) introduced Eviota to the local and regional staff and officers of the Bank
via personal introductions and electronic mail.

6. The various expenses incurred by the Bank in carrying out the above acts are
itemized below, as follows:

33
a. Signing Bonus P 300,000.00
b. 1 Honda CR-V 800,000.00
c. IBM Desktop Computer 89,995.00
d. Office Reconfiguration 29,815.00
e. 2-Drawer Lateral File
Cabinet 13,200.00
f. 1 Officers Chair 31,539.00
g. 1 Guest Chair 2,200.00
h. 1 Hanging Shelf 2,012.00
i. Staff Loan Processing
Title Verification 375.00
Cost of Appraisal
Housing Loan 3,500.00

TOTAL P1,272,636.00

An itemized schedule of the above expenses incurred by the Bank is hereto attached as
Annex B.

7. On February 25, 1998, Eviota assumed his position as Compensation and Benefits
Manager with the Bank and began to discharge his duties. At one Human Resources
(HR) Committee meeting held on March 3, 1998, Eviota energetically presented to
senior management his projects for the year, thus raising the latters expectations. The
same day, Eviota instructed the Banks HR Administrator to book him a flight for
Singapore, where he was scheduled to participate in a Y2K project on March 10 and 11,
1998. Confident of Eviotas professed commitment to the Bank, the latter made the
aforementioned airline booking for him. In addition, the Bank allowed Eviota access to
certain sensitive and confidential information and documents concerning the Banks
operations.

8. After leading the Bank to believe that he had come to stay, Eviota suddenly resigned
his employment with immediate effect to re-join his previous employer. His resignation,
which did not comply with the 30-day prior notice rule under the law and under the
Employment Contract, was so unexpected that it disrupted plans already in the pipeline
(e.g., the development of a salary/matrix grid and salary structure, and the processing of
merit promotion recommendations), aborted meetings previously scheduled among
Bank officers, and forced the Bank to hire the services of a third party to perform the job
he was hired to do. For the services of this third party, the Bank had to pay a total of
P208,807.50. A copy of a receipt for the above expenses is hereto attached as Annex C
(See also, Annex B).

9. Aside from causing no small degree of chaos within the Bank by reason of his sudden
resignation, Eviota made off with a computer diskette and other papers and documents
containing confidential information on employee compensation and other Bank matters,
such as the salary schedule of all Corporate and Institutional Banking officers and
photocopies of schedules of benefits provided expatriates being employed by the Bank.

10. With the benefit of hindsight, the Bank realizes that it was simply used by Eviota as a
mere leverage for his selfish efforts at negotiating better terms of employment with his
previous employer. Worse, there is evidence to show that in his attempts to justify his
hasty departure from the Bank and conceal the real reason for his move, Eviota has
resorted to falsehoods derogatory to the reputation of the Bank.In particular, he has
been maliciously purveying the canard that he had hurriedly left the Bank because it had
failed to provide him support. His untruthful remarks have falsely depicted the Bank as a
contract violator and an undesirable employer, thus damaging the Banks reputation and
business standing in the highly competitive banking community, and undermining its
ability to recruit and retain the best personnel in the labor market.

11. On March 16, 1998, the Bank made a written demand on Eviota to return the
aforementioned computer diskette and other confidential documents and papers,
reimburse the Bank for the various expenses incurred on his account as a result of his

34
resignation (with legal interest), and pay damages in the amount of at least P500,000.00
for the inconvenience and work/program disruptions suffered by the Bank.

A copy of the Banks demand letter dated March 16, 1998 is hereto attached as Annex D.

12. In partial compliance with said demand, Eviota made arrangements with his previous
employer to reimburse the Bank for the expenses incurred in connection with the Banks
purchase of the Honda CR-V for his use. The Bank informed Eviota that in addition to
the Honda CR-Vs purchase price of P848,000.00 (of which Eviota initially shouldered
P48,000.00), incidental costs in the form of Processing Fees (P1,000.00),
FPD/MCAR/98-155684 (P1,232.53) and Fund Transfer Price (P18,646.84) were
incurred, bringing the total cost of the Honda CR-V to P868,881.38. On April 29, 1998,
the Bank received two managers checks in the aggregate amount of P868,881.38,
representing costs incurred in connection with the purchase of the Honda CR-V,
inclusive of processing fees and other incidental costs. Previously, Eviota had returned
his P300,000.00 signing bonus, less the P48,000.00 he had advanced for the Honda
CR-Vs purchase price.

13. Eviota never complied with the Banks demand that he reimburse the latter for the
other expenses incurred on his account, amounting to P360,562.12 (see, Annex B).[3]

The respondent bank alleged, by way of its causes of action against the petitioner,
the following:

First Cause of Action

14. Eviotas actions constitute a clear violation of Articles 19, 20 and 21 of Republic Act
No. 386, as amended (the Civil Code). Assuming arguendo that Eviota had the right to
terminate his employment with the Bank for no reason, the manner in and circumstances
under which he exercised the same are clearly abusive and contrary to the rules
governing human relations.

14.1. By his actions and representations, Eviota had induced the Bank to believe that he
was committed to fulfilling his obligations under the Employment Contract. As a result,
the Bank incurred expenses in carrying out its part of the contract (see Annexes B and
C). Less reimbursements received from Eviota, the Bank is entitled to actual damages of
P360,562.12. (See, Annex C).

Second Cause of Action

15. Under Article 285 (a) of Presidential Decree No. 442, as amended (the Labor Code),
an employee may terminate without just cause the employer-employee relationship by
serving written notice on the employer at least one (1) month in advance. In addition,
Section 13 of the Employment Contract specifically provides that: Your [i.e., Eviotas]
employment may be terminated by either party giving notice of at least one
month. (Annex A, p. 5.)

15.1. Eviotas failure to comply with the above requirement threw a monkey wrench into
the Banks operations Eviotas sudden resignation aborted meetings previously
scheduled among Bank officers and disrupted plans for a salary/merit review program
and development of a salary structure and merit grid already in the pipeline.

Hence, Eviota is liable to the Bank for damages in the amount of at least P100,000.00.

Third Cause of Action

16. Eviotas false and derogatory statements that the Bank had failed to deliver what it
had purportedly promised have besmirched the Banks reputation and depicted it as a
contract violator and one which does not treat its employees properly. These derogatory
statements have injured the Banks business standing in the banking community, and

35
have undermined the Banks ability to recruit and retain the best personnel. Hence,
plaintiff is entitled to moral damages of at least P2,000,000.00.

17. By way of example or correction for the public good, and to deter other parties from
committing similar acts in the future, defendant should be held liable for exemplary
damages of at least P1,000,000.00

18. Eviotas actions have compelled plaintiff to obtain the services of undersigned
counsel for a fee, in order to protect its interests. Hence, plaintiff is entitled to attorneys
fees of at least P200,000.00.[4]

The respondent bank prayed, that after due proceedings, judgment be rendered in
its favor as follows:

WHEREFORE, it is respectfully prayed that judgment be rendered ordering the

defendant to pay the plaintiff:

1. As actual damages, the amount of P360,562.12, representing expenses referred to in

items c to i of par. 6 and the cost of the third-party services mentioned in par. 8;

2. For violating the 30-day notice requirement under the Labor Code and order (sic) the
Employment Contract, damages in the amount of at least P100,000.00;

3. As moral damages, the amount of P2,000,000.00;

4. As exemplary damages, the amount of P1,000,000.00;

5. As attorneys fees, the amount of P200,000.00; and

6. Costs of the suit.

Other just and equitable reliefs are likewise prayed for.[5]

The respondent bank appended to its complaint a copy of the petitioners

employment contract.
The petitioner filed a motion to dismiss the complaint on the ground that the action
for damages of the respondent bank was within the exclusive jurisdiction of the Labor
Arbiter under paragraph 4, Article 217 of the Labor Code of the Philippines, as
amended. The petitioner averred that the respondent banks claim for damages arose out
of or were in connection with his employer-employee relationship with the respondent
bank or some aspect or incident of such relationship. The respondent bank opposed the
motion, claiming that its action for damages was within the exclusive jurisdiction of the
trial court. Although its claims for damages incidentally involved an employer-employee
relationship, the said claims are actually predicated on the petitioners acts and
omissions which are separately, specifically and distinctly governed by the New Civil
Code.
On November 29, 1999, the trial court issued an order denying the petitioners
motion to dismiss, ratiocinating that the primary relief prayed for by the respondent bank
was grounded on the tortious manner by which the petitioner terminated his employment
with the latter, and as such is governed by the New Civil Code:

The Court holds that here, since the primary relief prayed for by the plaintiff is for
damages, grounded on the tortious manner by which the defendant terminated his
employment with the company, the same are recoverable under the applicable provision
of the Civil Code, the present controversy is removed from the jurisdiction of the Labor
Arbiter and brings in within the purview of the regular courts.[6]

The petitioner filed a motion for reconsideration of the said order, but the court
issued an order denying the same. The petitioner filed a petition for certiorari with the

36
Court of Appeals for the nullification of the orders of the trial court, alleging that the
court a quo committed grave abuse of its discretion amounting to excess or lack of
jurisdiction in issuing the said orders. The petitioner further asserted that contrary to the
ruling of the court, the respondent bank claimed damages in its complaint against the
petitioner based on his employment contract, and not on tortious acts.
On November 15, 2001, the CA promulgated a decision dismissing the petition,
holding that the trial court and not the Labor Arbiter had exclusive jurisdiction over the
action of the respondent bank. It held that the latters claims for damages were grounded
on the petitioners sudden and unceremonious severance of his employment with the
respondent bank barely a month after assuming office.
With his motion for reconsideration of the decision having been denied by the CA,
the petitioner filed his petition with this Court contending that:

Suffice to state immediately that on the basis of the allegations in the complaint, it is the
Labor Arbiter, not the Regional Trial Court, which has jurisdiction of the subject matter of
the complaint in Civil Case No. 98-1397, the principal cause of action being the alleged
omission of petitioner in giving notice to the respondent Bank employer of termination of
their relationship; whereas the claims for other actual/moral/exemplary damages are well
within the competence of the Labor Arbiter.[7]

The petition is barren of merit.

Article 217 of the Labor Code of the Philippines, as amended by Rep. Act No. 6715
which took effect on March 21, 1989 reads:

ART. 217. Jurisdiction of Labor Arbiters and the Commission.(a) Except as otherwise
provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide within thirty (30) calendar days after the submission of the case by
the parties for decision without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

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

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations.

Case law has it that the nature of an action and the subject matter thereof, as well
as which court has jurisdiction over the same, are determined by the material allegations
of the complaint and the reliefs prayed for in relation to the law involved.
Not every controversy or money claim by an employee against the employer or vice-
versa is within the exclusive jurisdiction of the labor arbiter. A money claim by a worker
against the employer or vice-versa is within the exclusive jurisdiction of the labor arbiter
only if there is a reasonable causal connection between the claim asserted and
employee-employer relation.Absent such a link, the complaint will be cognizable by the
regular courts of justice.[8]
Actions between employees and employer where the employer-employee
relationship is merely incidental and the cause of action precedes from a different source
of obligation is within the exclusive jurisdiction of the regular court. [9] In Georg Grotjahn
GMBH & Co. v. Isnani,[10] we held that the jurisdiction of the Labor Arbiter under Article
217 of the Labor Code, as amended, is limited to disputes arising from an employer-
employee relationship which can only be resolved by reference to the Labor Code of the
Philippines, other labor laws or their collective bargaining agreements. In Singapore
Airlines Limited v. Pao,[11] the complaint of the employer against the employee for

37
damages for wanton justice and refusal without just cause to report for duty, and for
having maliciously and with bad faith violated the terms and conditions of their
agreement for a course of conversion training at the expense of the employer, we ruled
that jurisdiction over the action belongs to the civil court:

On appeal to this court, we held that jurisdiction over the controversy belongs to the civil
courts. We stated that the action was for breach of a contractual obligation, which is
intrinsically a civil dispute. We further stated that while seemingly the cause of action
arose from employer-employee relations, the employers claim for damages is grounded
on wanton failure and refusal without just cause to report to duty coupled with the
averment that the employee maliciously and with bad faith violated the terms and
conditions of the contract to the damage of the employer. Such averments removed the
controversy from the coverage of the Labor Code of the Philippines and brought it within
the purview of the Civil Law.

Jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article
217, to be cognizable by the Labor Arbiter, must have a reasonable causal connection
with any of the claims provided for in that article. Only if there is such a connection with
the other claims can the claim for damages be considered as arising from employer-
employee relations.[12]

The claims were the natural consequences flowing from a breach of an obligation,
intrinsically civil in nature.
In Medina v. Castro-Bartolome,[13] we held that a complaint of an employee for
damages against the employer for slanderous remarks made against him was within the
exclusive jurisdiction of the regular courts of justice because the cause of action of the
plaintiff was for damages for tortious acts allegedly committed by the employer. The fact
that there was between the parties an employer-employee relationship does not negate
the jurisdiction of the trial court.
In Singapore Airlines Ltd. v. Pao,[14] we held that:

Stated differently, petitioner seeks protection under the civil laws and claims no benefits
under the Labor Code. The primary relief sought is for liquidated damages for breach of
a contractual obligation. The other items demanded are not labor benefits demanded by
workers generally taken cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are the natural
consequences flowing from breach of an obligation, intrinsically a civil dispute.

In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,[15] the petitioner

sued its employee Adonis Limjuco for breach of contract which reads:

That for a period of two (2) years after termination of service from EMPLOYER,
EMPLOYEE shall not in any manner be connected, and/or employed, be a consultant
and/or be an informative body directly or indirectly, with any business firm, entity or
undertaking engaged in a business similar to or in competition with that of the
EMPLOYER.[16]

The petitioner alleged in its complaint with the trial court that:

Petitioner claimed that private respondent became an employee of Angel Sound

Philippines Corporation, a corporation engaged in the same line of business as that of
petitioner, within two years from January 30, 1992, the date of private respondents
resignation from petitioners employ. Petitioner further alleged that private respondent is
holding the position of Head of the Material Management Control Department, the same
position he held while in the employ of petitioner.[17]

The trial court dismissed the case for lack of jurisdiction over the subject matter because
the cause of action for damages arose out of the parties employer-employee
relationship. We reversed the order of the trial court and held, thus:

38
Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to
recover damages agreed upon in the contract as redress for private respondents breach
of his contractual obligation to its damage and prejudice (Rollo, p. 57). Such cause of
action is within the realm of Civil Law, and jurisdiction over the controversy belongs to
the regular courts. More so when we consider that the stipulation refers to the post-
employment relations of the parties.[18]

In this case, the private respondents first cause of action for damages is anchored
on the petitioners employment of deceit and of making the private respondent believe
that he would fulfill his obligation under the employment contract with assiduousness
and earnestness. The petitioner volte face when, without the requisite thirty-day notice
under the contract and the Labor Code of the Philippines, as amended, he abandoned
his office and rejoined his former employer; thus, forcing the private respondent to hire a
replacement. The private respondent was left in a lurch, and its corporate plans and
program in jeopardy and disarray. Moreover, the petitioner took off with the private
respondents computer diskette, papers and documents containing confidential
information on employee compensation and other bank matters. On its second cause of
action, the petitioner simply walked away from his employment with the private
respondent sans any written notice, to the prejudice of the private respondent, its
banking operations and the conduct of its business. Anent its third cause of action, the
petitioner made false and derogatory statements that the private respondent reneged on
its obligations under their contract of employment; thus, depicting the private respondent
as unworthy of trust.
It is evident that the causes of action of the private respondent against the petitioner
do not involve the provisions of the Labor Code of the Philippines and other labor laws
but the New Civil Code. Thus, the said causes of action are intrinsically civil. There is no
causal relationship between the causes of action of the private respondents causes of
action against the petitioner and their employer-employee relationship. The fact that the
private respondent was the erstwhile employer of the petitioner under an existing
employment contract before the latter abandoned his employment is merely
incidental. In fact, the petitioner had already been replaced by the private respondent
before the action was filed against the petitioner.
IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED. The Decision of the
Court of Appeals dismissing the petition of the petitioner is AFFIRMED.
SO ORDERED.

39
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 101619 July 8, 1992

SANYO PHILIPPINES WORKERS UNION-PSSLU LOCAL CHAPTER NO. 109

AND/OR ANTONIO DIAZ, PSSLU NATIONAL PRESIDENT, petitioners,
vs.
HON. POTENCIANO S. CANIZARES, in his capacity as Labor Arbiter, BERNARDO
YAP, RENATO BAYBON, SALVADOR SOLIBEL, ALLAN MISTERIO, EDGARDO
TANGKAY, LEONARDO DIONISIO, ARNEL SALVO, REYNALDO RICOHERMOSO,
BENITO VALENCIA, GERARDO LASALA AND ALEXANDER
ATANASIO, respondents.

MEDIALDEA, J.:

This petition seeks to nullify: 1) the order of respondent Labor Arbiter Potenciano
Cañizares dated August 6, 1991 deferring the resolution of the motion to dismiss the
complaint of private respondents filed by petitioner Sanyo Philippines Workers Union-
PSSLU Local Chapter No. 109 (PSSLU, for brevity) on the ground that the labor arbiter
had no jurisdiction over said complaint and 2) the order of the same respondent
clarifying its previous order and ruling that it had jurisdiction over the case.

The facts of the case are as follows:

PSSLU had an existing CBA with Sanyo Philippines Inc. (Sanyo, for short) effective July
1, 1989 to June 30, 1994. The same CBA contained a union security clause which
provided:

Sec. 2. All members of the union covered by this agreement must retain
their membership in good standing in the union as condition of his/her
continued employment with the company. The union shall have the right
to demand from the company the dismissal of the members of the union
by reason of their voluntary resignation from membership or willful refusal
to pay the Union Dues or by reasons of their having formed, organized,
joined, affiliated, supported and/or aided directly or indirectly another
labor organization, and the union thus hereby guarantees and holds the
company free and harmless from any liability whatsoever that may arise
consequent to the implementation of the provision of this article. (pp. 5-
6, Rollo)

In a letter dated February 7, 1990, PSSLU, through its national president, informed the
management of Sanyo that the following employees were notified that their membership
with PSSLU were cancelled for anti-union, activities, economic sabotage, threats,
coercion and intimidation, disloyalty and for joining another union: Benito Valencia,
Bernardo Yap, Arnel Salvo, Renato Baybon, Eduardo Porlaje, Salvador Solibel, Conrado
Sarol, Angelito Manzano, Allan Misterio, Reynaldo Ricohermoso, Mario Ensay and
Froilan Plamenco. The same letter informed Sanyo that the same employees refused to
submit themselves to the union's grievance investigation committee (p. 53, Rollo). It
appears that many of these employees were not members of PSSLU but of another
union, KAMAO.

On February 14, 1990, some officers of KAMAO, which included Yap, Salvo, Baybon,
Solibel, Valencia, Misterio and Ricohermoso, executed a pledged of cooperation with

40
PSSLU promising cooperation with the latter union and among others, respecting,
accepting and honoring the CBA between Sanyo and specifically:

1. That we shall remain officers and members of KAMAO until we finally

decide to rejoin Sanyo Phil. Workers Union-PSSLU;

2. That henceforth, we support and cooperate with the duly elected union
officers of Sanyo Phil. Workers Union-PSSLU in any and all its activities
and programs to insure industrial peace and harmony;

3. That we collectively accept, honor, and respect the Collective

Bargaining Agreement entered into between Sanyo Phil. Inc. and Sanyo
Phil. Workers Union-PSSLU dated February 7, 1990;

4 That we collectively promise not to engage in any activities inside

company premises contrary to law, the CBA and existing policies;

5 That we are willing to pay our individual agency fee in accordance with
the provision of the Labor Code, as amended;

6 That we collectively promise not to violate this pledge of cooperation.

(p. 55, Rollo)

On March 4, 1991, PSSLU through its national and local presidents, wrote another letter
to Sanyo recommending the dismissal of the following non-union workers: Bernardo
Yap, Arnel Salvo, Renato Baybon, Reynaldo Ricohermoso, Salvador Solibel, Benito
Valencia, and Allan Misterio, allegedly because: 1) they were engaged and were still
engaging in anti-union activities; 2) they willfully violated the pledge of cooperation with
PSSLU which they signed and executed on February 14, 1990; and 3) they threatened
and were still threatening with bodily harm and even death the officers of the union (pp.
37-38, Rollo).

Also recommended for dismissal were the following union members who allegedly
joined, supported and sympathized with a minority union, KAMAO: Gerardo Lasala,
Legardo Tangkay, Alexander Atanacio, and Leonardo Dionisio.

The last part of the said letter provided:

The dismissal of the above-named union members is without prejudice to

receive (sic) their termination pay if management decide (sic) to grant
them benefits in accordance with law. The union hereby holds the
company free and harmless from any liability that may arise consequent
to the implementation by the company of our recommendations for the
dismissal of the above-mentioned workers.

It is however suggested that the Grievance Machinery be convened

pursuant to Section 3, Article XV of the Collective Bargaining Agreement
(CBA) before their actual dismissal from the company. (p. 38, Rollo)

Pursuant to the above letter of the union, the company sent a memorandum to the same
workers advising them that:

As per the attached letter from the local union President SPWU and the
federation President, PSSLU, requesting management to put the herein
mentioned employees on preventive suspension, effective immediately,
preliminary to their subsequent dismissal, please be informed that the
following employees are under preventive suspension effective March 13,
1991 to wit:

1. Bernardo Yap

41
 2. Renato Baybon

3. Salvador Solibel

4. Allan Misterio

5. Edgardo Tangkay

6. Leonardo Dionisio

7. Arnel Salvo

8. Reynaldo Ricohermoso

9. Benito Valencia

10. Gerardo Lasala

11. Alexander Atanacio

The above listed employees shall not be allowed within company

premises without the permission of management.

As per request of the union's letter to management, should the listed

employees fail to appeal the decision of the union for dismissal, then
effective March 23, 1991, said listed employees shall be considered
dismissed from the company. (p 39, Rollo)

The company received no information on whether or not said employees appealed to

PSSLU. Hence, it considered them dismissed as of March 23, 1991 (p. 40, Rollo).

On May 20, 1991, the dismissed employees filed a complaint (pp. 32-35, Rollo) with the
NLRC for illegal dismissal. Named respondent were PSSLU and Sanyo.

On June 20, 1991, PSSLU filed a motion to dismiss the complaint alleging that the Labor
Arbiter was without jurisdiction over the case, relying on Article 217 (c) of P.D. 442, as
amended by Section 9 of Republic Act No. 6715 which provides that cases arising from
the interpretation or implementation of the collective bargaining agreements shall be
disposed of by the labor arbiter by referring the same to the grievance machinery and
voluntary arbitration.

The complainants opposed the motion to dismiss complaint on these grounds: 1) the
series of conferences before the National Conciliation and Mediation Board had been
terminated; 2) the NLRC Labor Arbiter had jurisdiction over the case which was a
termination dispute pursuant to Article 217 (2) of the Labor Code; and 3) there was
nothing in the CBA which needs interpretation or implementation (pp. 44-46, Rollo).

On August 7, 1991, the respondent Labor Arbiter issued the first questioned order. It
held that:

xxx xxx xxx

While there are seemingly contradictory provisions in the aforecited article

of the Labor Code, the better interpretation will be to give effect to both,
and termination dispute being clearly spelled as falling under the
jurisdiction of the Labor Arbiter, the same shall be respected. The
jurisdiction of the grievance machinery and voluntary arbitration shall
cover other controversies.

42
 However, the resolution of the instant issue shall be suspended until both
parties have fully presented their respective positions and the said issue
shall be included in the final determination of the above-captioned case.

WHEREFORE, the instant Motions to Dismiss are hereby held pending.

Consequently, the parties are hereby directed to submit their position

papers and supporting documents pursuant to Section 2, Rule VII of the
Rules of the Commission on or before the hearing on the merit of this
case scheduled on August 29, 1991 at 11:00 a.m. (p. 23, Rollo)

On August 27, 1991, PSSLU filed another motion to resolve motion to dismiss complaint
with a prayer that the Labor Arbiter resolve the issue of jurisdiction.

On September 4, 1991, the respondent Labor Arbiter issued the second questioned
order which held that it was assuming jurisdiction over the complaint of private
respondents, in effect, holding that it had jurisdiction over the case.

On September 19, 1991, PSSLU filed this petition alleging that public respondent Labor
Arbiter cannot assume jurisdiction over the complaint of public respondents because it
had no jurisdiction over the dispute subject of said complaint. It is their submission that
under Article 217 (c) of the Labor Code, in relation to Article 261 thereof, as well as
Policy Instruction No. 6 of the Secretary of Labor, respondent Arbiter has no jurisdiction
and authority to take cognizance of the complaint brought by private respondents which
involves the implementation of the union security clause of the CBA. The function of the
Labor Arbiter under the same law and rule is to refer this case to the grievance
machinery and voluntary arbitration.

In its comment, private respondents argue that Article 217(a) 2 and 4 of the Labor Code
is explicit, to wit:

Art. 217. Jurisdiction of the Labor Arbiters and the Commission.

a) Except as otherwise provided under this Code, the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide . . . the
following cases involving all workers, . . . :

xxx xxx xxx

2) Termination disputes,

xxx xxx xxx

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

arising from the employer-employee relations.

The private respondents also claimed that insofar as Salvo, Baybon, Ricohermoso,
Solibel, Valencia, Misterio and Lasala were concerned, they joined another union,
KAMAO during the freedom period which commenced on May 1, 1989 up to June 30,
1989 or before the effectivity of the July 1, 1989 CBA. Hence, they are not covered by
the provisions of the CBA between Sanyo and PSSLU. Private respondents Tangkay,
Atanacio and Dionisio admit that in September 1989, they resigned from KAMAO and
rejoined PSSLU (pp.
66(a)-68, Rollo).

For its part, public respondent, through the Office of the Solicitor General, is of the view
that a distinction should be made between a case involving "interpretation or
implementation of collective bargaining agreement or "interpretation" or "enforcement" of
company personnel policies, on the one hand and a case involving termination, on the
other hand. It argued that the case at bar does not involve an "interpretation or
implementation" of a collective bargaining agreement or "interpretation or enforcement"

43
of company policies but involves a "termination." Where the dispute is just in the
interpretation, implementation or enforcement stage, it may be referred to the grievance
machinery set up in the CBA or by voluntary arbitration. Where there was already actual
termination, i.e., violation of rights, it is already cognizable by the Labor Arbiter.

Article 217 of the Labor Code defines the jurisdiction of the Labor Arbiter.

Art. 217. Jurisdiction of Labor Arbiters and the Commission. a) Except as

otherwise provided under this Code the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide within thirty (30) calendar
days after the submission of the case by the parties for decision without
extension even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

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

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

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

arising from the employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare

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

(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective

bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements.

It is clear from the above article that termination cases fall under the jurisdiction of the
Labor Arbiter. It should be noted however that said article at the outset excepted from
the said provision cases otherwise provided for in other provisions of the same Code,
thus the phrase "Except as otherwise provided under this Code . . . ." Under paragraph
(c) of the same article, it is expressly provided that "cases arising from the interpretation
or implementation of collective bargaining agreements and those arising from the
interpretation and enforcement of company personnel policies shall be disposed of by
the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements.

It was provided in the CBA executed between PSSLU and Sanyo that a member's
voluntary resignation from membership, willful refusal to pay union dues and his/her
forming, organizing, joining, supporting, affiliating or aiding directly or indirectly another
labor union shall be a cause for it to demand his/her dismissal from the company. The
demand for the dismissal and the actual dismissal by the company on any of these
grounds is an enforcement of the union security clause in the CBA. This act is
authorized by law provided that enforcement should not be characterized by
arbitrariness (Manila Mandarin Employee Union v. NLRC, G.R. No. 76989, 29 Sept.

44
1987, 154 SCRA 368) and always with due process (Tropical Hut Employees Union v.
Tropical Food Market, Inc., L-43495-99, Jan. 20, 1990).

The reference to a Grievance Machinery and Voluntary Arbitrators for the adjustment or
resolution of grievances arising from the interpretation or implementation of their CBA
and those arising from the interpretation or enforcement of company personnel policies
is mandatory. The law grants to voluntary arbitrators 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 (Art. 261, Labor Code).

In its order of September 4, 1991, respondent Labor Arbiter explained its decision to
assume jurisdiction over the complaint, thus:

The movants failed to show (1) the provisions of the CBA to be

implemented, and (2) the grievance machinery and voluntary arbitrator
already formed and properly named. What self-respecting judge would
refer a case from his responsibility to a shadow? To whom really and
specifically shall the case be indorsed or referred? In brief, they could
have shown the (1) existence of the grievance machinery and (2) its
being effective.

Furthermore, the aforecited law merely directs the "referral" cases. It does
not expressly confer jurisdiction on the grievance machinery or voluntary
arbitration panel, created or to be created. Article 260 of the Labor Code
describes the formation of the grievance and voluntary arbitration. All this
of course shall be on voluntary basis. Is there another meaning of
voluntary arbitration? (The herein complainant have strongly opposed the
motion to dismiss. Would they go willingly to the grievance machinery and
voluntary arbitration which are installed by their opponents if directed to
do so?) (p. 26, Rollo)

The failure of the parties to the CBA to establish the grievance machinery and its
unavailability is not an excuse for the Labor Arbiter to assume jurisdiction over disputes
arising from the implementation and enforcement of a provision in the CBA. In the
existing CBA between PSSLU and Sanyo, the procedure and mechanics of its
establishment had been clearly laid out as follows:

ARTICLE XV — GRIEVANCE MACHINERY

Sec. 1. Whenever any controversy should arise between the company

and the union as to the interpretation or application of the provision of this
agreement, or whenever any difference shall exist between said parties
relative to the terms and conditions of employment, an earnest effort shall
be made to settle such controversy in substantially the following manner:

First step. (Thru Grievance) The dispute shall initially be resolved by

conference between the management to be represented by the
Management's authorized representatives on the one hand, and the
Union to be represented by a committee composed of the local union
president and one of the local union officer appointed by the local union
president, on the other hand within three days from date of concurrence
of grievance action. In the absence of the local union president, he (shall)
appoint another local union officer to take over in his behalf. Where a
controversy personally affects an employee, he shall not be allowed to be
a member of the committee represented by the union.

Second step. (Thru Arbitrator mutually chosen) Should such dispute

remain unsettled after twenty (20) days from the first conference or after
such period as the parties may agree upon in specified cases, it shall be
referred to an arbitrator chosen by the consent of the company and the

45
 union. In the event of failure to agree on the choice of voluntary arbitrator,
the National Conciliation and Mediation Board, Department of Labor and
Employment shall be requested to choose an Arbitrator in accordance
with voluntary arbitration procedures.

Sec. 2. The voluntary Arbitrator shall have thirty (30) days to decide the
issue presented to him and his decision shall be final, binding and
executory upon the parties. He shall have no authority to add or subtract
from and alter any provision of this agreement. The expenses of voluntary
arbitration including the fee of the arbitrator shall be shared equally by the
company and the union. In the event the arbitrator chosen either by the
mutual agreement of the company and the union by (the) way of voluntary
arbitration or by the National Conciliation and Mediation Board (NCMB)
failed to assume his position, died, become disabled or any other manner
failed to function and or reach a decision, the company and the union
shall by mutual agreement choose another arbitrator; in the event of
failure to agree on the choice of a new voluntary arbitrator, the matter
shall again be referred back to the NCMB who shall be requested again
to choose a new arbitrator as above provided. Any grievance not elevated
or processed as above provided within the stipulated period shall be
deemed settled and terminated.

Sec. 3. It is hereby agreed that decisions of the union relative to their

members, for implementation by the COMPANY, should be resolved for
review thru the Grievance Machinery; and management be invited to
participate in the Grievance procedure to be undertaken by the union
relative to (the) case of the union against members. (pp. 134-135, Rollo)

All that needs to be done to set the machinery into motion is to call for the convening
thereof. If the parties to the CBA had not designated their representatives yet, they
should be ordered to do so.

The procedure introduced in RA 6715 of referring certain grievances originally and

exclusively to the grievance machinery and when not settled at this level, to a panel of
voluntary arbitrators outlined in CBA's does not only include grievances arising from the
interpretation or implementation of the CBA but applies as well to those arising from the
implementation of company personnel policies. No other body shall take cognizance of
these cases. The last paragraph of Article 261 enjoins other bodies from assuming
jurisdiction thereof:

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 of voluntary arbitrators and shall immediately
dispose and refer the same to the grievance machinery or voluntary
arbitration provided in the Collective Bargaining Agreement.

In the instant case, however, We hold that the Labor Arbiter and not the Grievance
Machinery provided for in the CBA has the jurisdiction to hear and decide the complaints
of the private respondents. While it appears that the dismissal of the private respondents
was made upon the recommendation of PSSLU pursuant to the union security clause
provided in the CBA, We are of the opinion that these facts do not come within the
phrase "grievances arising from the interpretation or implementation of (their) Collective
Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies," the jurisdiction of which pertains to the Grievance
Machinery or thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. Article
260 of the Labor Code on grievance machinery and voluntary arbitrator states that
"(t)he parties to a Collective Bargaining Agreement shall include therein provisions that
will ensure the mutual observance of its terms and conditions. They shall establish a
machinery for the adjustment and resolution of grievances arising from the interpretation
or implementation of their Collective Bargaining Agreement and those arising from the

46
interpretation or enforcement of company personnel policies." It is further provided in
said article that the parties to a CBA shall name or designate their respective
representatives to the grievance machinery and if the grievance is not settled in that
level, it shall automatically be referred to voluntary arbitrators (or panel of voluntary
arbitrators) designated in advance by the parties. It need not be mentioned that the
parties to a CBA are the union and the company. Hence, only disputes involving the
union and the company shall be referred to the grievance machinery or voluntary
arbitrators.

In the instant case, both the union and the company are united or have come to an
agreement regarding the dismissal of private respondents. No grievance between them
exists which could be brought to a grievance machinery. The problem or dispute in the
present case is between the union and the company on the one hand and some union
and non-union members who were dismissed, on the other hand. The dispute has to be
settled before an impartial body. The grievance machinery with members designated by
the union and the company cannot be expected to be impartial against the dismissed
employees. Due process demands that the dismissed workers grievances be ventilated
before an impartial body. Since there has already been an actual termination, the matter
falls within the jurisdiction of the Labor Arbiter.

ACCORDINGLY, the petition is DISMISSED. Public respondent Labor Arbiter is directed

to resolve the complaints of private respondents immediately.

SO ORDERED.

47
 THIRD DIVISION

[G.R. No. 128024. May 9, 2000.]

BEBIANO M. BAÑEZ, Petitioner, v. HON. DOWNEY C. VALDEVILLA and ORO

MARKETING, INC.,Respondents.

DECISION

GONZAGA-REYES, J.:

The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking
jurisdiction over an action for damages filed by an employer against its dismissed
employee, are assailed in this petition for certiorari under Rule 65 of the Rules of Court
for having been issued in grave abuse of discretion.

Petitioner was the sales operations manager of private respondent in its branch in Iligan
City. In 1993, private respondent "indefinitely suspended" petitioner and the latter filed a
complaint for illegal dismissal with the National Labor Relations Commission ("NLRC") in
Iligan City. In a decision dated July 7, 1994, Labor Arbiter Nicodemus G. Palangan found
petitioner to have been illegally dismissed and ordered the payment of separation pay in
lieu of reinstatement, and of backwages and attorney’s fees. The decision was appealed
to the NLRC, which dismissed the same for having been filed out of time. 2 Elevated by
petition for certiorari before this Court, the case was dismissed on technical grounds 3;
however, the Court also pointed out that even if all the procedural requirements for the
filing of the petition were met, it would still be dismissed for failure to show grave abuse
of discretion on the part of the NLRC.chanrobles virtua| |aw |ibrary

On November 13, 1995, private respondent filed a complaint for damages before the
Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554,
which prayed for the payment of the following:chanrob1es virtual 1aw library

a. P709,217.97 plus 12% interest as loss of profit and/or unearned income of three
years;

b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties,

space, etc. for three years;

c. P5,000.00 as initial expenses of litigation; and

d. P25,000.00 as attorney’s fees. 4

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He
interposed in the court below that the action for damages, having arisen from an
employer-employee relationship, was squarely under the exclusive original jurisdiction of
the NLRC under Article 217(a), paragraph 4 of the Labor Code and is barred by reason
of the final judgment in the labor case. He accused private respondent of splitting causes
of action, stating that the latter could very well have included the instant claim for
damages in its counterclaim before the Labor Arbiter. He also pointed out that the civil
action of private respondent is an act of forum-shopping and was merely resorted to
after a failure to obtain a favorable decision with the NLRC.

Ruling upon the motion to dismiss, respondent judge issued the herein questioned
Order, which summarized the basis for private respondent’s action for damages in this
manner:chanrob1es virtual 1aw library

Paragraph 5 of the complaint alleged that the defendant violated the plaintiff’s policy re:
His business in his branch at Iligan City wherein defendant was the Sales Operations
Manager, and paragraph 7 of the same complaint briefly narrated the modus operandi of
defendant, quoted herein: Defendant canvassed customers personally or through

48
salesmen of plaintiff which were hired or recruited by him. If said customer decided to
buy items from plaintiff on installment basis, defendant, without the knowledge of said
customer and plaintiff, would buy the items on cash basis at ex-factory price, a privilege
not given to customers, and thereafter required the customer to sign promissory notes
and other documents using the name and property of plaintiff, purporting that said
customer purchased the items from plaintiff on installment basis. Thereafter, defendant
collected the installment payments either personally or through Venus Lozano, a Group
Sales Manager of plaintiff but also utilized by him as secretary in his own business for
collecting and receiving of installments, purportedly for the plaintiff but in reality on his
own account or business. The collection and receipt of payments were made inside the
Iligan City branch using plaintiff’s facilities, property and manpower. That accordingly
plaintiff’s sales decreased and reduced to a considerable extent the profits which it
would have earned. 5

In declaring itself as having jurisdiction over the subject matter of the instant controversy,
respondent court stated:chanrob1es virtual 1aw library

A perusal of the complaint which is for damages does not ask for any relief under the
Labor Code of the Philippines. It seeks to recover damages as redress for defendant’s
breach of his contractual obligation to plaintiff who was damaged and prejudiced. The
Court believes such cause of action is within the realm of civil law, and jurisdiction over
the controversy belongs to the regular courts.

While seemingly the cause of action arose from employer- employee relations, the
employer’s claim for damages is grounded on the nefarious activities of defendant
causing damage and prejudice to plaintiff as alleged in paragraph 7 of the complaint.
The Court believes that there was a breach of a contractual obligation, which is
intrinsically a civil dispute. The averments in the complaint removed the controversy from
the coverage of the Labor Code of the Philippines and brought it within the purview of
civil law. (Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.) . . . 6

Petitioner’s motion for reconsideration of the above Order was denied for lack of merit on
October 16, 1996. Hence, this petition.

Acting on petitioner’s prayer, the Second Division of this Court issued a Temporary
Restraining Order ("TRO") on March 5, 1997, enjoining respondents from further
proceeding with Civil Case No. 95-554 until further orders from the Court.

By way of assignment of errors, the petition reiterates the grounds raised in the Motion
to Dismiss dated January 30, 1996, namely, lack of jurisdiction over the subject matter of
the action, res judicata, splitting of causes of action, and forum-shopping. The
determining issue, however, is the issue of jurisdiction.

Article 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of
the filing of this case, reads:chanrobles.com.ph:red

ARTICLE 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or
non-agricultural:chanrob1es virtual 1aw library

x x x

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

x x x

The above provisions are a result of the amendment by Section 9 of Republic Act
("R.A.") No. 6715, which took effect on March 21, 1989, and which put to rest the earlier

49
confusion as to who between Labor Arbiters and regular courts had jurisdiction over
claims for damages as between employers and employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of
workers, including claims for damages, was originally lodged with the Labor Arbiters and
the NLRC by Article 217 of the Labor Code. 7 On May 1, 1979, however, Presidential
Decree ("P.D.") No. 1367 amended said Article 217 to the effect that "Regional Directors
shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of
damages." 8 This limitation in jurisdiction, however, lasted only briefly since on May 1,
1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code
almost to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of
Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims
for all forms of damages "arising from the employer-employee relations" .

Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees, 9 we hold that by the designating
clause "arising from the employer-employee relations" Article 217 should apply with
equal force to the claim of an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is necessarily connected with the
fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely
superseded by the Labor Code), jurisprudence was settled that where the plaintiff’s
cause of action for damages arose out of, or was necessarily intertwined with, an alleged
unfair labor practice committed by the union, the jurisdiction is exclusively with the (now
defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular courts
over the same is a nullity. 10 To allow otherwise would be "to sanction split jurisdiction,
which is prejudicial to the orderly administration of justice." 11 Thus, even after the
enactment of the Labor Code, where the damages separately claimed by the employer
were allegedly incurred as a consequence of strike or picketing of the union, such
complaint for damages is deeply rooted from the labor dispute between the parties, and
should be dismissed by ordinary courts for lack of jurisdiction. As held by this Court in
National Federation of Labor v. Eisma, 127 SCRA 419:chanrob1es virtual 1aw library

Certainly, the present Labor Code is even more committed to the view that on policy
grounds, and equally so in the interest of greater promptness in the disposition of labor
matters, a court is spared the often onerous task of determining what essentially is a
factual matter, namely, the damages that may be incurred by either labor or
management as a result of disputes or controversies arising from employer-employee
relations.

There is no mistaking the fact that in the case before us, private respondent’s claim
against petitioner for actual damages arose from a prior employer-employee
relationship. In the first place, private respondent would not have taken issue with
petitioner’s "doing business of his own" had the latter not been concurrently its
employee. Thus, the damages alleged in the complaint below are: first, those amounting
to lost profits and earnings due to petitioner’s abandonment or neglect of his duties as
sales manager, having been otherwise preoccupied by his unauthorized installment sale
scheme; and second, those equivalent to the value of private respondent’s property and
supplies which petitioner used in conducting his "business" .

Second, and more importantly, to allow respondent court to proceed with the instant
action for damages would be to open anew the factual issue of whether petitioner’s
installment sale scheme resulted in business losses and the dissipation of private
respondent’s property. This issue has been duly raised and ruled upon in the illegal
dismissal case, where private respondent brought up as a defense the same allegations
now embodied in his complaint, and presented evidence in support thereof. The Labor
Arbiter, however, found to the contrary — that no business losses may be attributed to
petitioner as in fact, it was by reason of petitioner’s installment plan that the sales of the
Iligan branch of private respondent (where petitioner was employed) reached its highest
record level to the extent that petitioner was awarded the 1989 Field Sales Achievement
Award in recognition of his exceptional sales performance, and that the installment

50
scheme was in fact with the knowledge of the management of the Iligan branch of
private Respondent. 12 In other words, the issue of actual damages has been settled in
the labor case, which is now final and executory.

Still on the prospect of re-opening factual issues already resolved by the labor court, it
may help to refer to that period from 1979 to 1980 when jurisdiction over employment-
predicated actions for damages vacillated from labor tribunals to regular courts, and
back to labor tribunals. In Ebon v. de Guzman, 113 SCRA 52, 13 this Court
discussed:chanrob1es virtual 1aw library

The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award
moral and other forms of damages in labor cases could have assumed that the Labor
Arbiters’ position-paper procedure of ascertaining the facts in dispute might not be an
adequate tool for arriving at a just and accurate assessment of damages, as
distinguished from backwages and separation pay, and that the trial procedure in the
Court of First Instance would be a more effective means of determining such damages. .
.

Evidently, the lawmaking authority had second thoughts about depriving the Labor
Arbiters and the NLRC of the jurisdiction to award damages in labor cases because that
setup would mean duplicity of suits, splitting the cause of action and possible conflicting
findings and conclusions by two tribunals on one and the same claim.chanrobles.com :
virtual law library

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article
217 in its original form) nullified Presidential Decree No. 1367 and restored to the Labor
Arbiter and the NLRC their jurisdiction to award all kinds of damages in cases arising
from employer-employee relations . . . (Emphasis supplied)

Clearly, respondent court’s taking jurisdiction over the instant case would bring about
precisely the harm that the lawmakers sought to avoid in amending the Labor Code to
restore jurisdiction over claims for damages of this nature to the NLRC.

This is, of course, to distinguish from cases of actions for damages where the employer-
employee relationship is merely incidental and the cause of action proceeds from a
different source of obligation. Thus, the jurisdiction of regular courts was upheld where
the damages, claimed for were based on tort 14 , malicious prosecution 15 , or breach of
contract, as when the claimant seeks to recover a debt from a former employee 16 or
seeks liquidated damages in enforcement of a prior employment contract. 17

Neither can we uphold the reasoning of respondent court that because the resolution of
the issues presented by the complaint does not entail application of the Labor Code or
other labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as
amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over
claims for damages arising from employer-employee relations — in other words, the
Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but
also damages governed by the Civil Code. 18

Thus, it is obvious that private respondent’s remedy is not in the filing of this separate
action for damages, but in properly perfecting an appeal from the Labor Arbiter’s
decision. Having lost the right to appeal on grounds of untimeliness, the decision in the
labor case stands as a final judgment on the merits, and the instant action for damages
cannot take the place of such lost appeal.

Respondent court clearly having no jurisdiction over private respondent’s complaint for
damages, we will no longer pass upon petitioner’s other assignments of error.

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554
before Branch 39 of the Regional Trial Court of Misamis Oriental is hereby DISMISSED.
No pronouncement as to costs.

SO ORDERED.

51
 SECOND DIVISION

[G.R. No. 120567. March 20, 1998]

PHILIPPINE AIRLINES, INC., petitioner, vs., NATIONAL LABOR RELATIONS

COMMISSION, FERDINAND PINEDA and GODOFREDO
CABLING,respondents.

DECISION
MARTINEZ, J.:

Can the National Labor Relations Commission (NLRC), even without a complaint for
illegal dismissal filed before the labor arbiter, entertain an action for injunction and issue
such writ enjoining petitioner Philippine Airlines, Inc. from enforcing its Orders of
dismissal against private respondents, and ordering petitioner to reinstate the private
respondents to their previous positions?
This is the pivotal issue presented before us in this petition for certiorari under Rule
65 of the Revised Rules of Court which seeks the nullification of the injunctive writ dated
April 3,1995 issued by the NLRC and the Order denying petitioner's motion for
reconsideration on the ground that the said Orders were issued in excess of jurisdiction.
Private respondents are flight stewards of the petitioner. Both were dismissed from
the service for their alleged involvement in the April 3, 1993 currency smuggling in Hong
Kong.
Aggrieved by said dismissal, private respondents filed with the NLRC a petition[1] for
injunction praying that:

"I. Upon filing of this Petition, a temporary restraining order be issued, prohibiting
respondents (petitioner herein) from effecting or enforcing the Decision dated Feb. 22,
1995, or to reinstate petitioners temporarily while a hearing on the propriety of the
issuance of a writ of preliminary injunction is being undertaken;

"II. After hearing, a writ of preliminary mandatory injunction be issued ordering

respondent to reinstate petitioners to their former positions pending the hearing of this
case, or, prohibiting respondent from enforcing its Decision dated February 22,1995
while this case is pending adjudication;

"III. After hearing, that the writ of preliminary injunction as to the reliefs sought for be
made permanent, that petitioners be awarded full backwages, moral damages of PHP
500,000.00 each and exemplary damages of PHP 500,000.00 each, attorneys fees
equivalent to ten percent of whatever amount is awarded, and the costs of suit."

On April 3, 1995, the NLRC issued a temporary mandatory injunction[2] enjoining

petitioner to cease and desist from enforcing its February 22, 1995 Memorandum of
dismissal. In granting the writ, the NLRC considered the following facts, to wit:

x x x that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were instructed
to attend an investigation by respondents Security and Fraud Prevention Sub-
Department regarding an April 3, 1993 incident in Hongkong at which Joseph Abaca,
respondents Avionics Mechanic in Hongkong was intercepted by the Hongkong Airport
Police at Gate 05 xxx the ramp area of the Kai Tak International Airport while xxx about
to exit said gate carrying a xxx bag said to contain some 2.5 million pesos in Philippine
Currencies. That at the Police Station, Mr. Abaca claimed that he just found said plastic
bag at the Skybed Section of the arrival flight PR300/03 April 93, where petitioners
served as flight stewards of said flight PR300; x x the petitioners sought a more detailed
account of what this HKG incident is all about; but instead, the petitioners were

52
administratively charged, a hearing on which did not push through until almost two (2)
years after, i.e. on January 20, 1995 xxx where a confrontation between Mr. Abaca and
petitioners herein was compulsorily arranged by the respondents disciplinary board at
which hearing, Abaca was made to identify petitioners as co-conspirators; that despite
the fact that the procedure of identification adopted by respondents Disciplinary Board
was anomalous as there was no one else in the line-up (which could not be called one)
but petitioners xxx Joseph Abaca still had difficulty in identifying petitioner Pineda as his
co-conspirator, and as to petitioner Cabling, he was implicated and pointed by Abaca
only after respondents Atty. Cabatuando pressed the former to identify petitioner Cabling
as co-conspirator; that with the hearing reset to January 25, 1995, Mr. Joseph Abaca
finally gave exculpating statements to the board in that he cleared petitioners from any
participation or from being the owners of the currencies, and at which hearing Mr.
Joseph Abaca volunteered the information that the real owner of said money was one
who frequented his headquarters in Hongkong to which information, the Disciplinary
Board Chairman, Mr. Ismael Khan, opined for the need for another hearing to go to the
bottom of the incident; that from said statement, it appeared that Mr. Joseph Abaca was
the courier, and had another mechanic in Manila who hid the currency at the planes
skybed for Abaca to retrieve in Hongkong, which findings of how the money was found
was previously confirmed by Mr. Joseph Abaca himself when he was first investigated
by the Hongkong authorities; that just as petitioners thought that they were already fully
cleared of the charges, as they no longer received any summons/notices on the
intended additional hearings mandated by the Disciplinary Board, they were surprised to
receive on February 23, 1995 xxx a Memorandum dated February 22, 1995 terminating
their services for alleged violation of respondents Code of Discipline effective
immediately; that sometime xxx first week of March, 1995, petitioner Pineda received
another Memorandum from respondent Mr. Juan Paraiso, advising him of his termination
effective February 3, 1995, likewise for violation of respondents Code of Discipline; x x x"

In support of the issuance of the writ of temporary injunction, the NLRC adopted the
view that: (1) private respondents cannot be validly dismissed on the strength of
petitioner's Code of Discipline which was declared illegal by this Court in the case of
PAL, Inc. vs. NLRC, (G.R. No. 85985), promulgated August 13, 1993, for the reason that
it was formulated by the petitioner without the participation of its employees as required
in R.A. 6715, amending Article 211 of the Labor Code; (2) the whimsical, baseless and
premature dismissals of private respondents which "caused them grave and irreparable
injury" is enjoinable as private respondents are left "with no speedy and adequate
remedy at law'"except the issuance of a temporary mandatory injunction; (3) the NLRC
is empowered under Article 218 (e) of the Labor Code not only to restrain any actual or
threatened commission of any or all prohibited or unlawful acts but also to require the
performance of a particular act in any labor dispute, which, if not restrained or performed
forthwith, may cause grave or irreparable damage to any party; and (4) the temporary
mandatory power of the NLRC was recognized by this Court in the case of Chemo-
Technicshe Mfg., Inc. Employees Union,DFA, et.al. vs. Chemo-Technische Mfg., Inc.
[G.R. No. 107031, January 25,1993].
On May 4,1995, petitioner moved for reconsideration[3] arguing that the NLRC erred:

1. in granting a temporary injunction order when it has no jurisdiction to issue an

injunction or restraining order since this may be issued only under Article 218 of
the Labor Code if the case involves or arises from labor disputes;

2. in granting a temporary injunction order when the termination of private respondents

have long been carried out;

3. ..in ordering the reinstatement of private respondents on the basis of their mere
allegations, in violation of PAL's right to due process;

4. ..in arrogating unto itself management prerogative to discipline its employees

and divesting the labor arbiter of its original and exclusive jurisdiction over illegal
dismissal cases;

53
5. ..in suspending the effects of termination when such action is exclusively within the
jurisdiction of the Secretary of Labor;

6. ..in issuing the temporary injunction in the absence of any irreparable or

substantial injury to both private respondents.

On May 31,1995, the NLRC denied petitioner's motion for reconsideration, ruling:

The respondent (now petitioner), for one, cannot validly claim that we cannot
exercise our injunctive power under Article 218 (e) of the Labor Code on the
pretext that what we have here is not a labor dispute as long as it concedes that
as defined by law, a(l) Labor Dispute includes any controversy or matter
concerning terms or conditions of employment. . If security of tenure, which has
been breached by respondent and which, precisely, is sought to be protected by our
temporary mandatory injunction (the core of controversy in this case) is not a term or
condition of employment, what then is?

xxxxxxxxx

Anent respondents second argument x x x, Article 218 (e) of the Labor Code x x
x empowered the Commission not only to issue a prohibitory injunction, but a
mandatory (to require the performance) one as well. Besides, as earlier discussed,
we already exercised (on August 23,1991) this temporary mandatory injunctive
power in the case of Chemo-Technische Mfg., Inc. Employees Union-DFA et.al. vs.
Chemo-Technishe Mfg., Inc., et. al. (supra) and effectively enjoined one (1) month
old dismissals by Chemo-Technische and that our aforesaid mandatory exercise
of injunctive power, when questioned through a petition for certiorari, was
sustained by the Third Division of the Supreme court per its Resolution dated
January 25,1993.

xxxxxxxxx

Respondents fourth argument that petitioner's remedy for their dismissals is 'to
file an illegal dismissal case against PAL which cases are within the original and
exclusive jurisdiction of the Labor Arbiter' is ignorant. In requiring as a condition for
the issuance of a 'temporary or permanent injunction'- '(4) That complainant has no
adequate remedy at law;' Article 218 (e) of the Labor Code clearly
envisioned adequacy , and not plain availability of a remedy at law as an
alternative bar to the issuance of an injunction. An illegal dismissal suit (which
takes, on its expeditious side, three (3) years before it can be disposed of) while
available as a remedy under Article 217 (a) of the Labor Code, is certainly not an
'adequate; remedy at law. Ergo, it cannot, as an alternative remedy, bar our
exercise of that injunctive power given us by Article 218 (e) of the Code.

xxx xxx xxx

Thus, Article 218 (e), as earlier discussed [which empowers this Commission 'to require
the performance of a particular act' (such as our requiring respondent 'to cease and
desist from enforcing' its whimsical memoranda of dismissals and 'instead to reinstate
petitioners to their respective position held prior to their subject dismissals') in 'any labor
dispute which, if not xxx performed forthwith, may cause grave and irreparable damage
to any party'] stands as the sole 'adequate remedy at law' for petitioners here.

Finally, the respondent, in its sixth argument claims that even if its acts of
dismissing petitioners 'may be great, still the same is capable of compensation', and that
consequently, 'injunction need not be issued where adequate compensation at law could
be obtained'. Actually, what respondent PAL argues here is that we need not interfere in
its whimsical dismissals of petitioners as, after all, it can pay the latter its backwages. x x
x

54
But just the same, we have to stress that Article 279 does not speak alone of backwages
as an obtainable relief for illegal dismissal; that reinstatement as well is the concern of
said law, enforceable when necessary, through Article 218 (e) of the Labor Code
(without need of an illegal dismissal suit under Article 217 (a) of the Code) if such
whimsical and capricious act of illegal dismissal will 'cause grave or irreparable injury to
a party'. x x x " [4]

Hence, the present recourse.

Generally, injunction is a preservative remedy for the protection of one's substantive
rights or interest. It is not a cause of action in itself but merely a provisional remedy, an
adjunct to a main suit. It is resorted to only when there is a pressing necessity to avoid
injurious consequences which cannot be remedied under any standard of compensation.
The application of the injunctive writ rests upon the existence of an emergency or of a
special reason before the main case be regularly heard. The essential conditions for
granting such temporary injunctive relief are that the complaint alleges facts which
appear to be sufficient to constitute a proper basis for injunction and that on the entire
showing from the contending parties, the injunction is reasonably necessary to protect
the legal rights of the plaintiff pending the litigation.[5] Injunction is also a special
equitable relief granted only in cases where there is no plain, adequate and complete
remedy at law.[6]
In labor cases, Article 218 of the Labor Code empowers the NLRC-

"(e) To enjoin or restrain any actual or threatened commission of any or all prohibited or
unlawful acts or to require the performance of a particular act in any labor
dispute which, if not restrained or performed forthwith, may cause grave or irreparable
damage to any party or render ineffectual any decision in favor of such party; x x
x." (Emphasis Ours)

Complementing the above-quoted provision, Sec. 1, Rule XI of the New Rules of

Procedure of the NLRC, pertinently provides as follows:

"Section 1. Injunction in Ordinary Labor Dispute.-A preliminary injunction or a restraining

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

xxx xxx xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only as an
incident to the cases pending before them in order to preserve the rights of the parties
during the pendency of the case, but excluding labor disputes involving strikes or
lockout. [7] (Emphasis Ours)
From the foregoing provisions of law, the power of the NLRC to issue an injunctive
writ originates from "any labor dispute" upon application by a party thereof, which
application if not granted "may cause grave or irreparable damage to any party or render
ineffectual any decision in favor of such party."
The term "labor dispute" is defined as "any controversy or matter concerning terms
and conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing, or arranging the terms and conditions of
employment regardless of whether or not the disputants stand in the proximate relation
of employers and employees."[8]
The term "controversy" is likewise defined as "a litigated question; adversary
proceeding in a court of law; a civil action or suit, either at law or in equity; a
justiciable dispute."[9]

55
 A "justiciable controversy" is "one involving an active antagonistic assertion of a
legal right on one side and a denial thereof on the other concerning a real, and not a
mere theoretical question or issue."[10]
Taking into account the foregoing definitions, it is an essential requirement that
there must first be a labor dispute between the contending parties before the labor
arbiter. In the present case, there is no labor dispute between the petitioner and private
respondents as there has yet been no complaint for illegal dismissal filed with the labor
arbiter by the private respondents against the petitioner.
The petition for injunction directly filed before the NLRC is in reality
an action for illegal dismissal. This is clear from the allegations in the petition which
prays for: reinstatement of private respondents; award of full backwages, moral and
exemplary damages; and attorney's fees. As such, the petition should have been filed
with the labor arbiter who has the original and exclusive jurisdiction to hear and decide
the following cases involving all workers, whether agricultural or non-agricultural:

(1) Unfair labor practice;

(2) Termination disputes;

(3) If accompanied with a claim for reinstatement, those cases that workers may
file involving wages, rates of pay, hours of work and other terms and conditions of
employment;

(4) Claims for actual, moral, exemplary and other forms of damages arising from
the employer-employee relations;

(5) Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and

(6) Except claims for employees compensation, social security, medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P 5,000.00), whether or not accompanied with a claim for reinstatement.[11]

The jurisdiction conferred by the foregoing legal provision to the labor arbiter is
both original and exclusive, meaning, no other officer or tribunal can take cognizance
of, hear and decide any of the cases therein enumerated. The only exceptions are where
the Secretary of Labor and Employment or the NLRC exercises the power of compulsory
arbitration, or the parties agree to submit the matter to voluntary arbitration pursuant to
Article 263 (g) of the Labor Code, the pertinent portions of which reads:

"(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike
or lockout in an industry indispensable to the national interest, the Secretary of Labor
and Employment may assume jurisdiction over the dispute and decide it or certify the
same to the Commission for compulsory arbitration. Such assumption or certification
shall have the effect of automatically enjoining the intended or impending strike or
lockout as specified in the assumption or certification order. If one has already taken
place at the time of assumption or certification, all striking or locked out employees shall
immediately resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The Secretary of Labor and
Employment or the Commission may seek the assistance of law enforcement agencies
to ensure compliance with this provision as well as with such orders as he may issue to
enforce the same.

xxxxxxxxx"

On the other hand, the NLRC shall have exclusive appellate jurisdiction over all
cases decided by labor arbiters as provided in Article 217(b) of the Labor Code. In short,
the jurisdiction of the NLRC in illegal dismissal cases is appellate in nature and,
therefore, it cannot entertain the private respondents' petition for injunction which

56
challenges the dismissal orders of petitioner. Article 218(e) of the Labor Code does not
provide blanket authority to the NLRC or any of its divisions to issue writs of injunction,
considering that Section 1 of Rule XI of the New Rules of Procedure of the NLRC makes
injunction only an ancillary remedy in ordinary labor disputes"[12]
Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order granting
private respondents' petition for injunction and ordering the petitioner to reinstate private
respondents.
The argument of the NLRC in its assailed Order that to file an illegal dismissal suit
with the labor arbiter is not an "adequate" remedy since it takes three (3) years before it
can be disposed of, is patently erroneous. An "adequate" remedy at law has been
defined as one "that affords relief with reference to the matter in controversy, and which
is appropriate to the particular circumstances of the case."[13] It is a remedy which is
equally beneficial, speedy and sufficient which will promptly relieve the petitioner from
the injurious effects of the acts complained of.[14]
Under the Labor Code, the ordinary and proper recourse of an illegally dismissed
employee is to file a complaint for illegal dismissal with the labor arbiter. [15] In the case at
bar, private respondents disregarded this rule and directly went to the
NLRC through a petition for injunction praying that petitioner be enjoined from enforcing
its dismissal orders. In Lamb vs. Phipps,[16] we ruled that if the remedy is specifically
provided by law, it is presumed to be adequate. Moreover, the preliminary mandatory
injunction prayed for by the private respondents in their petition before the NLRC can
also be entertained by the labor arbiter who, as shown earlier, has the ancillary power to
issue preliminary injunctions or restraining orders as an incident in the cases pending
before him in order to preserve the rights of the parties during the pendency of the
case.[17]
Furthermore, an examination of private respondents' petition for injunction reveals
that it has no basis since there is no showing of any urgency or irreparable injury
which the private respondents might suffer. An injury is considered irreparable if it is of
such constant and frequent recurrence that no fair and reasonable redress can be had
therefor in a court of law,[18] or where there is no standard by which their amount can be
measured with reasonable accuracy, that is, it is not susceptible of mathematical
computation. It is considered irreparable injury when it cannot be adequately
compensated in damages due to the nature of the injury itself or the nature of the right or
property injured or when there exists no certain pecuniary standard for the measurement
of damages.[19]
In the case at bar, the alleged injury which private respondents stand to suffer by
reason of their alleged illegal dismissal can be adequately compensated and therefore,
there exists no "irreparable injury," as defined above which would necessitate the
issuance of the injunction sought for. Article 279 of the Labor Code provides that an
employee who is unjustly dismissed from employment shall be entitled to reinstatement,
without loss of seniority rights and other privileges, and to the payment of full
backwages, inclusive of allowances, and to other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.
The ruling of the NLRC that the Supreme Court upheld its power to issue temporary
mandatory injunction orders in the case of Chemo-Technische Mfg., Inc. Employees
Union-DFA, et.al. vs. Chemo-Technische Mfg., Inc. et.al., docketed as G.R. No. 107031,
is misleading. As correctly argued by the petitioner, no such pronouncement was made
by this Court in said case. On January 25,1993, we issued a Minute Resolution in the
subject case stating as follows:

"Considering the allegations contained, the issues raised and the arguments adduced in
the petition for certiorari , as well as the comments of both public and private
respondents thereon, and the reply of the petitioners to private respondent's motion to
dismiss the petition, the Court Resolved to DENY the same for being premature."

It is clear from the above resolution that we did not in anyway sustain the action of
the NLRC in issuing such temporary mandatory injunction but rather we dismissed the

57
petition as the NLRC had yet to rule upon the motion for reconsideration filed by
peitioner. Thus, the minute resolution denying the petition for being prematurely filed.
Finally, an injunction, as an extraordinary remedy, is not favored in labor law
considering that it generally has not proved to be an effective means of settling labor
disputes.[20] It has been the policy of the State to encourage the parties to use the non-
judicial process of negotiation and compromise, mediation and arbitration.[21] Thus,
injunctions may be issued only in cases of extreme necessity based on legal grounds
clearly established, after due consultations or hearing and when all efforts at conciliation
are exhausted which factors, however, are clearly absent in the present case.
WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated April
3,1995 and May 31,1995, issued by the National Labor Relations Commission (First
Division), in NLRC NCR IC No. 000563-95, are hereby REVERSED and SET ASIDE.
SO ORDERED.

58
 SECOND DIVISION

[G.R. No. 125298. February 11, 1999.]

CMP FEDERAL SECURITY AGENCY, INC., Petitioner, v. NATIONAL LABOR

RELATIONS COMMISSION, LABOR ARBITER CRESENCIANO R. INIEGO, and
FERNANDO CARANTO, RESTY REMITTERE, REYNALDO ROSALES, ANTONIO
TAPAR, NARCISO CLARO, SIONY MANOS, BALDO VIODOR and DAWAY
WAHAB, Respondents.

DECISION

BELLOSILLO, J.:

CMP FEDERAL SECURITY AGENCY INC. seeks in this petition for certiorari to annul,
for having been rendered with grave abuse of discretion amounting to lack or excess of
jurisdiction, the 26 October 1995 Decision of the National Labor Relations Commission
in NLRC NCR CA 007480-94, Fernando Caranto, Et. Al. v. CMP Federal Security
Agency, Inc., Et Al., 1 affirming with modifications the decision of the Labor Arbiter and
ordering herein petitioner to pay private respondents wage differentials, 13th month pay,
holiday pay and service incentive leave pay; and, its Resolution of 29 November 1995
denying reconsideration.chanroblesvirtuallawlibrary

CMP Federal Security Agency Inc. (CMP hereon) is in the business of providing
detective and security services. Among its employees were herein private respondent
security guards Fernando Caranto, Resty Remittere, Reynaldo Rosales, Antonio Tapar,
Narciso Claro, Siony Manos, Baldo Viodor and Daway Wahab, 2 all assigned at the
Maalikaya Health Complex in Quezon City.

On 10 March 1994 private respondents filed complaints for illegal deduction,

underpayment and/or non-payment of wages, premium pay for holiday, rest day and
night shift differential pay, 13th month pay, service incentive leave pay, separation pay,
allowance and unfair labor practice against CMP, 3 Carolina Mabanta Piao and
Ponciano Mabanta Sr. Private respondent Fernando Caranto later amended his
complaint to include illegal dismissal 4 after he was relieved from his post at the
Maalikaya Health Complex by CMP, allegedly upon request of the client.

The case was initially set for mandatory conference or conciliation on 29 March 1994. It
was reset to 11 April 1994 by agreement of the parties to give them adequate time to
explore the possibility of amicable settlement. Thereafter the hearing was reset several
times with Labor Arbiter Cresencio R. Iniego directing the parties each time to submit
their respective position papers and other documentary evidence. Efforts at settlement
failed.

When the case was finally called for hearing on 23 May 1994 private respondents filed
their position paper and other documentary evidence in compliance with the Labor
Arbiter’s orders. On the other hand, CMP moved for another postponement which the
Labor Arbiter denied. Thereafter, the case was deemed submitted for decision. It was
only on 13 June 1994 that CMP presented its position paper.

On 22 July 1994 the Labor Arbiter rendered a decision in favor of private respondents
ordering CMP to reinstate Fernando Caranto with full back wages, pay salary
differentials to all private respondents, plus attorney’s fees.

Both parties appealed to the NLRC. Private respondents, in their Partial Appeal, alleged
that the Labor Arbiter erred in excluding the awards for service incentive leave pay,
holiday pay, overtime pay and illegal deductions. CMP for its part argued that the Labor
Arbiter erred in holding that CMP did not submit any position paper despite his repeated
orders; in ruling that the non-filing of the position paper amounted to an admission of

59
liability by CMP; and, in deciding the case solely on the basis of the position paper and
evidence submitted by complainants.

In its assailed Decision of 26 October 1995 the NLRC denied CMP’s appeal, granted
private respondents’ Partial Appeal and modified the decision of the Labor Arbiter by
including in the computation of monetary awards holiday pay, service incentive leave
pay, 13th month pay, overtime pay and reimbursement for illegal deductions. The
dispositive portion reads —

WHEREFORE . . . the appealed decision is . . . modified. Respondent CMP Federal

Security Agency is . . . directed to pay complainants the following:chanrob1es virtual
1aw library

1. Pay all complainants wage differential(s) in the amount of One Hundred Twenty Eight
Thousand Nine Hundred Eighty Nine and 70/100 (P128,989.70) as well as holiday pay,
13th month pay and service incentive leave pay, as follows:chanrob1es virtual 1aw
library

FERNANDO CARANTO

13th Month Pay P3,792.75

Holiday Pay P1,760.00

Service Incentive Leave Pay P590.00

————

P6,142.75

RESTY REMITTERE

13th Month Pay P9,195.49

Holiday Pay P3,318.00

Service Incentive Leave Pay P1,770.00

————

P14,283.49

REYNALDO ROSALES

13th Month Pay P11,280.17

Holiday Pay P4,026.00

Service Incentive Leave Pay P1,770.00

————

P17,076.17

ANTONIO TAPAR

13th Month Pay P10,253.91

Holiday Pay P3,355.00

Service Incentive Leave Pay P1,770.00

60
————

* P17,076.17

CLARO NARCISO

13th Month Pay P6,186.50

Holiday Pay P2,138.00

Service Incentive Leave Pay P1,180.00

————

P9,504.50

SIONY MANOS

13th Month Pay P4,101.83

Holiday Pay P1,666.00

Service Incentive Leave Pay P1,770.00

————

P7,537.83

BALDO VIODOR

13th Month Pay P11,280.16

Holiday Pay P4,026.00

Service Incentive Leave Pay P1,770.00

————

P17,076.16

DAWAY WAHAB

13th Month Pay P362.50

Holiday Pay P430.00

————

P797.50

GRAND TOTAL P87,797.31

=========

2. The individual respondents Carolina Mabanta Piad and Ponciano Mabanta are held
liable in their official capacity.

3. The other findings stand affirmed.

Its motion for reconsideration having been denied by the NLRC through its Resolution of
29 November 1995, petitioner CMP now comes to us through the present petition
imputing grave abuse of discretion on the NLRC: (a) in holding that private respondent

61
Caranto was illegally dismissed, basing its findings solely on surmises and baseless
conclusion that petitioner resorted to retaliatory acts; and, (b) in granting the money
claims of private respondents on the unfounded presumption that since petitioner failed
to submit its position paper it is deemed to have admitted the charges in the complaint.

The issues are: (a) whether the NLRC committed grave abuse of discretion amounting to
lack or excess of jurisdiction in holding that private respondent Fernando Caranto was
illegally dismissed by CMP; and, (b) whether in granting all the money claims of private
respondents CMP was denied due process.

Well-settled is the rule that the findings of the NLRC, except when there is grave abuse
of discretion, are practically conclusive on this Court. It is only when the NLRC’s findings
are bereft of any substantial support from the records that the Court may step in and
proceed to make its own independent evaluation of the facts. 5 We see no cogent
reason to deviate from this rule.

On the legality of Caranto’s dismissal, the NLRC held —

On the other hand, respondent’s [CMP] contention that complainant Fernando Caranto
abandoned his work is without sufficient basis. The plea of abandonment is inconsistent
with his immediate filing of a complaint for illegal dismissal with prayer for reinstatement.
It is illogical for an employee to abandon his work and then immediately seek
reinstatement. (Judric Canning Corp. v. Inciong, 115 SCRA 887). Moreover,
respondents failed to prove by evidence that Caranto was indeed absent without leave.
6

CMP insists that Caranto was never really dismissed but was merely relieved from his
post at Maalikaya Health Complex upon request of the Manager, and transferred by
CMP to SM-Feati; that two (2) special orders were allegedly sent by CMP to Caranto
informing him of his relief from guard duties at Maalikaya and his assignment at SM-
Feati but despite receipt of these orders he failed to report at CMP office; that a follow-
up letter was likewise addressed to him requiring him to show cause why he should not
be dismissed, which he never answered; and, that his refusal to accept a new
assignment and his prolonged absence justify the presumption that he voluntarily
abandoned his job.cralawnad

In termination cases like the one before us, the burden of proving that the dismissal of
the employee was for a valid or authorized cause rests on the employer 7 and failure to
discharge that duty would mean that the dismissal is not justified and therefore illegal. 8
The same principle was reiterated by this Court in Golden Donuts Inc. v. NLRC 9 when it
ruled that the employer carries the burden of proof in showing just cause for terminating
the services of an employee.

In the instant case, CMP failed to present evidence to justify Caranto’s dismissal. We
have scoured the records but could not find any letter, memorandum or correspondence
between CMP and the management of Maalikaya Health Complex dealing with the
latter’s alleged request for Caranto’s relief from guard duties at Maalikaya Health
Complex, nor the two (2) special orders supposedly sent by CMP to Caranto: the first
order, informing him of his relief from his post at Maalikaya Health Complex, and the
other, reassigning him to SM-Feati; neither the follow-up letter by CMP requiring Caranto
to explain and show cause why his services should not be terminated. We could not find
any evidence, for that matter, which would clearly and convincingly show that Caranto
was absent without any valid reason and with no intention of returning to work.

Apparently, CMP failed to discharge its burden of proof. Its allegation that Caranto was
merely relieved and reassigned is empty and self-serving, too insufficient to establish a
just and valid cause for his dismissal as employee. To allow an employer to terminate
the employment of his worker based merely on allegations without proof places the latter
in an uncertain situation. He is at the sole mercy of his employer who, in this case, has
emasculated his right to a security of tenure.

Contrariwise, when Caranto was relieved from his post on 6 May 1994 he immediately

62
pursued his claim against CMP by amending his complaint six (6) days after to include
illegal dismissal among his charges. This can hardly be expected from one who has
voluntarily "abandoned" his job, as claimed by CMP. The immediate filing of a complaint
for illegal dismissal against the employer is a clear indication that the employee has not
given up on his work. 10

As already stated above, CMP failed to justify Caranto’s dismissal thereby rendering it
illegal. Consequently, no grave abuse of discretion was committed by the NLRC in
upholding the decision of the Labor Arbiter ordering Caranto’s reinstatement.

On the second issue, CMP maintains that both the Labor Arbiter and the NLRC gravely
abused their discretion in granting the money claims of private respondents, alleging that
a reading of the Labor Arbiter’s decision and that of the NLRC clearly shows that only
the pleadings and evidence submitted by private respondents were taken into
consideration while those presented by CMP were completely ignored, in clear violation
of its constitutional right to due process.

Before resolving the merit of the argument, it may be worth to mention the nature of the
proceedings before labor courts in relation to the requirements of due process. Under
Art. 221 of the Labor Code, technical rules of evidence prevailing in courts of law or
equity are not controlling in any proceeding before the NLRC or the Labor Arbiter. Both
are mandated to 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. 11

While administrative tribunals exercising quasi-judicial powers, like the NLRC and Labor
Arbiters, are free from the rigidity of certain procedural requirements, they are
nonetheless bound by law and practice to observe the fundamental and essential
requirements of due process. The standard of due process that must be met in
administrative tribunals allows a certain degree of latitude as long as fairness is not
ignored. 12 Hence, it is not legally objectionable, for being violative of due process, for
the Labor Arbiter to resolve a case based solely on the position papers, affidavits or
documentary evidence submitted by the parties. The affidavits of witnesses in such case
may take the place of their direct testimony. 13

Set against the records of this case, CMP’s claim that it was deprived of its right to be
heard readily collapses. The earlier narration of facts clearly demonstrates that the
parties were repeatedly ordered by the Labor Arbiter to submit their position papers
together with the affidavits of their witnesses and other evidence in support thereof —
first on 11 April 1994, then on 22 April 1994, and finally on 6 May 1994. During the 23
May 1994 conference CMP, instead of complying with the order requiring it to submit its
position paper, moved for another postponement which was denied. It was only on 13
June 1994, after the case was submitted for resolution, that CMP finally presented its
position paper. Having been given ample opportunity to put forth its case, CMP has only
itself to blame or, better still, its counsel who was then present, for its failure to do so
within the extended period.

A party before the Labor Arbiter which had a chance to present its side during a period
of more than one (1) month, and despite repeated extensions of time given to enable it
to present its position paper still failed to meet its final deadline, cannot claim denial of
due process 14 if subsequently the Labor Arbiter disregarded its position paper belatedly
filed.

Moreover, CMP had all the chances to ventilate its arguments in its appeal to the NLRC
where, in fact, it submitted a memorandum, presented its position paper and supporting
documents allegedly ignored by the Labor Arbiter, as well as a motion for
reconsideration — which documents were considered by that Labor Tribunal in the
course of resolving the case. 15 Consequently, the alleged defect in the proceedings
before the Labor Arbiter, if there be any, was deemed cured.

The fact that the NLRC in its decision made no reference to the position paper and
evidence of petitioner does not mean that they were not considered. It is simply that the

63
NLRC agreed with the Labor Arbiter’s findings and conclusions and found nothing
substantial in petitioner’s position paper and documentary evidence to warrant a reversal
of those findings and conclusions.

The essence of due process 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 reconsideration of the action or ruling complained of. 16 Where, as in this case, the
party has had ample opportunity to present its side of the controversy not only before the
Labor Arbiter but also the NLRC on appeal, it cannot thereafter interpose lack of due
process for what the fundamental law abhors is simply the absolute absence of
opportunity to be heard.

Finally, while it may be true that in labor cases stringent rules of procedure may be
dispensed with in the interest of justice, it does not mean that a party litigant is at liberty
to completely disregard or ignore the rules, particularly those relating to the periods for
filing of pleadings. In this connection, if we are to sustain petitioner’s argument that it
was denied due process when its position paper and documentary evidence were not
considered by the Labor Arbiter in deciding the case, we will in effect put a premium on
the undesirable practice of filing position papers late and only after the case has already
been submitted for decision.

WHEREFORE, the petition is DISMISSED. The Decision of the National Labor Relations
Commission dated 26 October 1995 affirming with modifications the Decision of the
Labor Arbiter and ordering petitioner CMP FEDERAL SECURITY AGENCY, INC., to pay
private respondents FERNANDO CARANTO, RESTY REMITTERE, REYNALDO
ROSALES, ANTONIO TAPAR, NARCISO CLARO, SIONY MANOS, BALDO VIODOR
and DAWAY WAHAB wage differentials, 13th month pay, holiday pay and service
incentive leave pay as earlier quoted in this Decision, and its Resolution of 29 November
1995 denying petitioner’s Motion for Reconsideration, are AFFIRMED. Costs against
petitioner.chanroblesvirtuallawlibrary:red

SO ORDERED.

64
 SECOND DIVISION

[G.R. No. 153660. June 10, 2003]

PRUDENCIO BANTOLINO, NESTOR ROMERO, NILO ESPINA, EDDIE LADICA,

ARMAN QUELING, ROLANDO NIETO, RICARDO BARTOLOME, ELUVER
GARCIA, EDUARDO GARCIA and NELSON MANALASTAS, petitioners, vs.
COCA-COLA BOTTLERS PHILS., INC., respondent.

DECISION
BELLOSILLO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision of the Court of Appeals[1] dated 21 December 2001 which affirmed
with modification the decision of the National Labor Relations Commission promulgated
30 March 2001.[2]
On 15 February 1995 sixty-two (62) employees of respondent Coca-Cola Bottlers,
Inc., and its officers, Lipercon Services, Inc., Peoples Specialist Services, Inc., and
Interim Services, Inc., filed a complaint against respondents for unfair labor practice
through illegal dismissal, violation of their security of tenure and the perpetuation of the
Cabo System. They thus prayed for reinstatement with full back wages, and the
declaration of their regular employment status.
For failure to prosecute as they failed to either attend the scheduled mandatory
conferences or submit their respective affidavits, the claims of fifty-two (52) complainant-
employees were dismissed. Thereafter, Labor Arbiter Jose De Vera conducted
clarificatory hearings to elicit information from the ten (10) remaining complainants
(petitioners herein) relative to their alleged employment with respondent firm.
In substance, the complainants averred that in the performance of their duties as
route helpers, bottle segregators, and others, they were employees of respondent Coca-
Cola Bottlers, Inc. They further maintained that when respondent company replaced
them and prevented them from entering the company premises, they were deemed to
have been illegally dismissed.
In lieu of a position paper, respondent company filed a motion to dismiss complaint
for lack of jurisdiction and cause of action, there being no employer-employee
relationship between complainants and Coca-Cola Bottlers, Inc., and that respondents
Lipercon Services, Peoples Specialist Services and Interim Services being bona
fide independent contractors, were the real employers of the complainants. [3] As regards
the corporate officers, respondent insisted that they could not be faulted and be held
liable for damages as they only acted in their official capacities while performing their
respective duties.
On 29 May 1998 Labor Arbiter Jose De Vera rendered a decision ordering
respondent company to reinstate complainants to their former positions with all the
rights, privileges and benefits due regular employees, and to pay their full back wages
which, with the exception of Prudencio Bantolino whose back wages must be computed
upon proof of his dismissal as of 31 May 1998, already amounted to an aggregate of
P1,810,244.00.[4]
In finding for the complainants, the Labor Arbiter ruled that in contrast with the
negative declarations of respondent companys witnesses who, as district sales
supervisors of respondent company denied knowing the complainants personally, the
testimonies of the complainants were more credible as they sufficiently supplied every
detail of their employment, specifically identifying who their salesmen/drivers were, their
places of assignment, aside from their dates of engagement and dismissal.

65
 On appeal, the NLRC sustained the finding of the Labor Arbiter that there was
indeed an employer-employee relationship between the complainants and respondent
company when it affirmed in toto the latters decision.
In a resolution dated 17 July 2001 the NLRC subsequently denied for lack of merit
respondents motion for consideration.
Respondent Coca-Cola Bottlers appealed to the Court of Appeals which, although
affirming the finding of the NLRC that an employer-employee relationship existed
between the contending parties, nonetheless agreed with respondent that the affidavits
of some of the complainants, namely, Prudencio Bantolino, Nestor Romero, Nilo Espina,
Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and Nelson Manalastas, should not
have been given probative value for their failure to affirm the contents thereof and to
undergo cross-examination. As a consequence, the appellate court dismissed their
complaints for lack of sufficient evidence. In the same Decision however, complainants
Eddie Ladica, Arman Queling and Rolando Nieto were declared regular employees since
they were the only ones subjected to cross-examination.[5] Thus -

x x x (T)he labor arbiter conducted clarificatory hearings to ferret out the truth between
the opposing claims of the parties thereto. He did not submit the case based on position
papers and their accompanying documentary evidence as a full-blown trial was
imperative to establish the parties claims. As their allegations were poles apart, it was
necessary to give them ample opportunity to rebut each others statements through
cross-examination. In fact, private respondents Ladica, Quelling and Nieto were
subjected to rigid cross-examination by petitioners counsel. However, the testimonies of
private respondents Romero, Espina, and Bantolino were not subjected to cross-
examination, as should have been the case, and no explanation was offered by them or
by the labor arbiter as to why this was dispensed with. Since they were represented by
counsel, the latter should have taken steps so as not to squander their testimonies. But
nothing was done by their counsel to that effect.[6]

Petitioners now pray for relief from the adverse Decision of the Court of Appeals;
that, instead, the favorable judgment of the NLRC be reinstated.
In essence, petitioners argue that the Court of Appeals should not have given
weight to respondents claim of failure to cross-examine them. They insist that, unlike
regular courts, labor cases are decided based merely on the parties position papers and
affidavits in support of their allegations and subsequent pleadings that may be filed
thereto. As such, according to petitioners, the Rules of Court should not be strictly
applied in this case specifically by putting them on the witness stand to be cross-
examined because the NLRC has its own rules of procedure which were applied by the
Labor Arbiter in coming up with a decision in their favor.
In its disavowal of liability, respondent commented that since the other alleged
affiants were not presented in court to affirm their statements, much less to be cross-
examined, their affidavits should, as the Court of Appeals rightly held, be stricken off the
records for being self-serving, hearsay and inadmissible in evidence. With respect to
Nestor Romero, respondent points out that he should not have been impleaded in the
instant petition since he already voluntarily executed a Compromise Agreement, Waiver
and Quitclaim in consideration of P450,000.00. Finally, respondent argues that the
instant petition should be dismissed in view of the failure of petitioners[7] to sign the
petition as well as the verification and certification of non-forum shopping, in clear
violation of the principle laid down in Loquias v. Office of the Ombudsman.[8]
The crux of the controversy revolves around the propriety of giving evidentiary value
to the affidavits despite the failure of the affiants to affirm their contents and undergo the
test of cross-examination.
The petition is impressed with merit. The issue confronting the Court is not without
precedent in jurisprudence. The oft-cited case of Rabago v. NLRC[9] squarely grapples a
similar challenge involving the propriety of the use of affidavits without the presentation
of affiants for cross-examination. In that case, we held that the argument that the
affidavit is hearsay because the affiants were not presented for cross-examination is not
persuasive because the rules of evidence are not strictly observed in proceedings before

66
administrative bodies like the NLRC where decisions may be reached on the basis of
position papers only.
In Rase v. NLRC,[10] this Court likewise sidelined a similar challenge when it ruled
that it was not necessary for the affiants to appear and testify and be cross-examined by
counsel for the adverse party. To require otherwise would be to negate the rationale and
purpose of the summary nature of the proceedings mandated by the Rules and to make
mandatory the application of the technical rules of evidence.
Southern Cotabato Dev. and Construction Co. v. NLRC[11] succinctly states that
under Art. 221 of the Labor Code, the rules of evidence prevailing in courts of law do not
control proceedings before the Labor Arbiter and the NLRC. Further, it notes that the
Labor Arbiter and the NLRC are authorized to adopt reasonable means to ascertain the
facts in each case speedily and objectively and without regard to technicalities of law
and procedure, all in the interest of due process. We find no compelling reason to
deviate therefrom.
To reiterate, administrative bodies like the NLRC are not bound by the technical
niceties of law and procedure and the rules obtaining in courts of law. Indeed, the
Revised Rules of Court and prevailing jurisprudence may be given only stringent
application, i.e., by analogy or in a suppletory character and effect. The submission by
respondent, citing People v. Sorrel,[12]that an affidavit not testified to in a trial, is mere
hearsay evidence and has no real evidentiary value, cannot find relevance in the present
case considering that a criminal prosecution requires a quantum of evidence different
from that of an administrative proceeding. Under the Rules of the Commission, the Labor
Arbiter is given the discretion to determine the necessity of a formal trial or hearing.
Hence, trial-type hearings are not even required as the cases may be decided based on
verified position papers, with supporting documents and their affidavits.
As to whether petitioner Nestor Romero should be properly impleaded in the instant
case, we only need to follow the doctrinal guidance set by Periquet v. NLRC[13] which
outlines the parameters for valid compromise agreements, waivers and quitclaims -

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a change of mind. It is only
where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its face, that the law will step
in to annul the questionable transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the transaction must be
recognized as a valid and binding undertaking.

In closely examining the subject agreements, we find that on their face

the Compromise Agreement[14] and Release, Waiver and Quitclaim[15] are devoid of any
palpable inequity as the terms of settlement therein are fair and just. Neither can we
glean from the records any attempt by the parties to renege on their contractual
agreements, or to disavow or disown their due execution. Consequently, the same must
be recognized as valid and binding transactions and, accordingly, the instant case
should be dismissed and finally terminated insofar as concerns petitioner Nestor
Romero.
We cannot likewise accommodate respondents contention that the failure of all the
petitioners to sign the petition as well as the Verification and Certification of Non-Forum
Shopping in contravention of Sec. 5, Rule 7, of the Rules of Court will cause the
dismissal of the present appeal. While the Loquias case requires the strict observance of
the Rules, it however provides an escape hatch for the transgressor to avoid the harsh
consequences of non-observance. Thus -

x x x x We find that substantial compliance will not suffice in a matter involving strict
observance of the rules. The attestation contained in the certification on non-forum
shopping requires personal knowledge by the party who executed the same. Petitioners
must show reasonable cause for failure to personally sign the certification. Utter

67
disregard of the rules cannot justly be rationalized by harking on the policy of liberal
construction (underscoring supplied).

In their Ex Parte Motion to Litigate as Pauper Litigants, petitioners made a request

for a fifteen (15)-day extension, i.e., from 24 April 2002 to 8 May 2002, within which to
file their petition for review in view of the absence of a counsel to represent them. [16] The
records also reveal that it was only on 10 July 2002 that Atty. Arnold Cacho, through the
UST Legal Aid Clinic, made his formal entry of appearance as counsel for herein
petitioners. Clearly, at the time the instant petition was filed on 7 May 2002 petitioners
were not yet represented by counsel. Surely, petitioners who are non-lawyers could not
be faulted for the procedural lapse since they could not be expected to be conversant
with the nuances of the law, much less knowledgeable with the esoteric technicalities of
procedure. For this reason alone, the procedural infirmity in the filing of the present
petition may be overlooked and should not be taken against petitioners.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is
REVERSED and SET ASIDE and the decision of the NLRC dated 30 March 2001 which
affirmed in toto the decision of the Labor Arbiter dated 29 May 1998 ordering respondent
Coca-Cola Bottlers Phils., Inc., to reinstate Prudencio Bantolino, Nilo Espina, Eddie
Ladica, Arman Queling, Rolando Nieto, Ricardo Bartolome, Eluver Garcia, Eduardo
Garcia and Nelson Manalastas to their former positions as regular employees, and to
pay them their full back wages, with the exception of Prudencio Bantolino whose back
wages are yet to be computed upon proof of his dismissal, is REINSTATED, with the
MODIFICATION that herein petition is DENIED insofar as it concerns Nestor Romero
who entered into a valid and binding Compromise Agreement and Release, Waiver and
Quitclaim with respondent company.
SO ORDERED.

68
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 75347 December 11, 1987

FORD PHILIPPINES SALARIED EMPLOYEES ASSOCIATION; ENSITE LIMITED

SALARIED EMPLOYEES UNION; FORD PHILIPPINES WORKERS UNION; FORD
ENSITE WORKERS UNION; and FORD PHILIPPINES PARTS DEPOT WORKERS
UNION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (En Banc) LABOR ARBITER
VIRGINIA G. SON, FORD PHILIPPINES, INC. ENSITE LTD. (Phil. Branch-Ford
Stamping Plant), JOHN SAGOVAC (President and Managing Director), ARMANDO
DAVID (Finance Director), and BANK OF THE PHILIPPINE ISLANDS,respondents.

No. 75628 December 11, 1987

FORD PHILIPPINES, INC., ENSITE LTD. (Phil. Branch) and RICARDO J.

ROMULO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FORD PHILIPPINES SALARIED
EMPLOYEES ASSOCIATION, ENSITE Ltd. SALARIED EMPLOYEES UNION, FORD
PHILIPPINES WORKERS UNION, INC., FORD PHILIPPINES PARTS DEPOT
WORKERS UNION and ENSITE LTD. WORKERS UNION, respondents.

PADILLA, J.:

These two (2) cases are considered jointly because they involve related issues.

In G.R. No. 75347, the petition for certiorari seeks to set aside the Resolution of the
NLRC en banc, dated 19 June 1986, in NLRC Case No. 11-4073-84, together with
NLRC Resolutions, dated 28 January 1986, and 4 December 1985, and the Decision of
Labor Arbiter Virginia Son, dated 25 June 1985, insofar as said Resolutions and
Decision upheld the validity of the deduction of P13,000,000.00 from the Retirement
Fund, for payment of separation benefits to the Ford and Ensite Unions, for the benefit of
their members.

On the other hand, in G.R. No. 75628, the petition for certiorari, with a prayer for
issuance of restraining order and preliminary injunction, seeks to set aside the
Resolutions dated 20 May 1986 and 19 June 1986, issued by the NLRC en banc also in
NLRC Case No. 11-4073-84, insofar as said Resolutions authorized the issuance of a
writ of execution in favor of the Ford and Ensite Unions, against their respective
employer-companies, for the amount of P10,117,016.20.

The facts are as follows:

In 1971 and 1978, Ford Philippines, Inc. (Ford, for short) and Ensite Ltd. [Phil. Branch]
Ensite for short), established their respective Employees' Retirement Plans (Plans or
Plan, for short), 1 exclusively funded from the companies' own contributions, and for
which, the Bank of the Philippine Islands (BPI) was appointed as irrevocable
trustee. 2 Both Plans contain an "integration provision," which authorizes the companies
to integrate the employees' retirement, death and disability benefits under the Plans, with
and in lieu of statutory benefits under the provisions on termination pay and retirement
benefits in the Labor Code as wen as other similar laws, and analogous benefits granted
under present or future collective bargaining agreements and other employees' benefit

69
plans. The "integration provision" is found in Article XI I 1, Section 5 of the two (2) Plans,
to wit:

To the fullest extent, the retirement, death, and disability benefits

accorded participants under the terms of this Plan shall be
deemed integrated with and in lieu of, statutory benefits in the New Labor
Code, as well as other similar laws, as now or hereafter amended,
analogous benefits granted under present or future Collective Bargaining
Agreements, and other employee benefit plans providing analogous
benefits which may be imposed by future legislations. In the event private
benefits due under the plan are less than those due and demandable
under the provisions of the termination pay law and/or present or future
Collective Bargaining Agreement and/or future plans of similar nature
imposed by law, the company shall respond for the difference.
(Retirement/Pension Plan as amended, August 1, 1983)

Since the establishment and effectivity of the Retirement Plans, the employees'
termination, retirement and other analogous benefits have been paid out of the
Retirement Fund, pursuant to the "integration provision." 3

In 1984, Ford and Ensite ceased operations in the Philippines, resulting in the
termination of all their employees. The employees were correspondingly paid their full
separation benefits totalling about P50,000,000.00 or an average of around P45,454.00
for each employee. Of the P50,000,000.00, an estimated amount of P37,000,000.00 was
drawn from the companies' operating funds and the sum of about P13,000,000.00 was
deducted from and paid out of the accumulated P25,000,000.00 (more or less)
Retirement Fund. After the amount of P13,000,000.00 was withdrawn from the
Retirement Fund, there remained a balance of around P10,000,000.00, which under the
Plan should be distributed among all the employees. 4

However, before the actual distribution of the Fund residue, the different labor unions,
Ford Salaried Union, Ford Workers Union and Ensite Salaried Union, filed a complaint
dated 19 November 1984 before the Ministry of Labor and Employment (now
Department of Labor and Employment, National Capital Region), assailing the validity of
the deduction of P13,000.000.00 from the Retirement Fund, which were used for
separation benefits. 5

For their part, Ford and Ensite maintained that the deduction of the P13,000,000.00 from
the Retirement Fund is in accord with the "integration provision" of the Plans as well as
the various CBAs entered into between management and the different unions involved.

After due hearing, Labor Arbiter Virginia Son rendered a Decision dated 25 June
1985: 6 1) upholding the validity of the deduction of P13,000,000.00 from the Retirement
Fund; 2) ordering Ford and Ensite to distribute among the unions their respective shares
in the remaining assets of the Fund, including investments in real estate and stocks,
after liquidation of the Fund, ten percent (10%) of which shag be paid to the unions'
counsel as attorney's fees.

On 8 July 1985, the unions appealed to the NLRC from the abovecited decision of the
Labor Arbiter, insofar as it sustained the validity of the deduction by the companies from
the Retirement Fund of said P13,000,000.00 for employees' separation benefits. But,
pending the appeal, the unions filed with the Labor Arbiter on 20 August 1985 a "Motion
for Clarification." The unions informed the Labor Arbiter that there is reportedly a Fund
residue of P8,300,000.00 (later clarified 'by the companies to be P10,117,016.20) which,
according to the unions, may be distributed, even pending their appeal before the NLRC,
as said appeal allegedly involved only the deduction of P13,000,000.00. In the same
Motion, the unions prayed for the issuance of an order directing the immediate
distribution of the P8,300,000.00 Pl0,l17,016.20) among an the employees. 7

Without acting on the Motion, Labor Arbiter Son called both parties to a series of
conferences. During one such conference, Labor Arbiter Son proposed the immediate

70
distribution of the Fund residue by the companies, preferably before Christmas of 1985,
provided the unions would agree to withdraw their appeal then pending before the NLRC
in the matter of the amount deducted from the Fund. Ford and Ensite agreed to the
proposal. However, the unions reserved their final decision on whether or not to agree
with the proposal until they had an exact quantification by the companies of the Fund
residue. Hence, Ford and Ensite, through counsel, disclosed that the Fund residue is
actually P10,117,016.20, not P8,300,000.00. 8

But, eventually, the unions rejected the Labor Arbiter's proposal, for they believed that
they would lose out if they were to abandon their appeal. On 15 November 1985, the
unions filed a motion for execution, relative to the Fund residue, before the NLRC
[Second Division). 9 However, the companies opposed said motion for execution on the
ground that "to establish the remaining balances in the retirement funds, so that they
could be ripe for liquidation, there must be a final resolution as to what are the exact
amounts thereof; that execution was not possible at that point in time because the Labor
Unions' appeal had prevented the final determination of the amount involved." 10

On 4 December 1985, NLRC (Second Division) promulgated a Resolution affirming the

decision of Labor Arbiter Son "with modification." The dispositive portion of said
Resolution reads:

WHEREFORE, the appealed decision is, as it is hereby, modified.

Consequently, respondents are hereby ordered to pay in full the
retirement pay, the amount to be taken from the retirement plan, to those
complainants who are entitled to retirement pay and to shoulder whatever
balances to be paid according to the Retirement plan (Art. XVII, Sec. 5).

In all other aspects, the decision is hereby affirmed.

SO ORDERED. 11

Affirmed were the right of the companies to deduct separation benefits from the
Retirement Fund pursuant to the "integration provision," and the order to distribute the
Fund residue among the employees after liquidation of the Fund. But, as to the
modifying portion of the aforequoted dispositive portion of the Resolution, it seemed both
superfluous and confusing, considering that the employees' separation benefits
(inadvertently referred to by NLRC as "retirement benefits") were already long fully
paid. 12

Because of the superfluous modifying portion of the Resolution, the unions filed a Motion
for Clarification and/or Reconsideration on 9 December 1985. They particularly inquired
as to what portion of the Decision of the Labor Arbiter was modified, and why retirement
benefits were being ordered to be paid, and asking for reconsideration of the Resolution
sustaining the companies' right to pay the employees' separation benefits from the
Retirement Fund. 13

The Motion for Clarification and/or Reconsideration was elevated by the Second Division
to the NLRC en banc, which in turn issued a Resolution dated 4 February 1986, denying
the motion for lack of merit, and at the same time stating that the Decision of the Second
Division of the Commission (NLRC) in its entirety clearly orders the respondents
(companies) to pay the complainants the remaining amount of the retirement fund, after
deducting the separation pay as provided for in the integration provision. 14

On 13 February 1986, the unions filed a Second (Urgent) Motion for Reconsideration
with a prayer for oral argument, which prayer for oral argument was granted. Oral
arguments were held on 6 March 1986 before the NLRC en banc. During the oral
arguments, the unions called the attention of the NLRC regarding their then pending
motion for execution earlier filed on 15 November 1985, for the distribution of the Fund
residue. 15

71
On 20 May 1986, NLRC en banc issued a Resolution granting the unions' Motion for
Execution with specific order for Ford and Ensite to set aside 10% of the Fund residue
as attorney's fees for the unions' counsel.

The dispositive portion of the Resolution states: 16

Wherefore, the complainants' motion for issuance of a writ of execution is

hereby granted.

Accordingly, let a writ of execution be issued for P10,117,016.20, ten

percent (10%) of which is to set (sic) aside by the respondent company
for the complainant's counsel as attorney's fees in accordance with the
Decision of Labor Arbiter Virginia G. Son dated 25 June 1985.

On 5 June 1986, Ford and Ensite filed a motion for reconsideration of the foregoing
resolution. On 19 June 1986, the NLRC en banc issued another Resolution 17 denying
the companies' Motion for Reconsideration relative to the execution over the Fund
residue, and at the same time dismissing the unions' Urgent Motion for Reconsideration
concerning the deduction from the Fund of the separation benefits of the employees.

Hence, these two (2) petitions, separately filed by Ford Philippines Salaried Employees
Association et al. (G.R. No. 75347) and Ford Philippines and Ensite Ltd. (G.R. No.
75628).

The issue in G.R. No. 75347 is whether or not the companies' action in charging the
Retirement Fund for payment of the employees' separation benefits is valid, while the
issue in G.R. No. 75628 is whether or not the issuance of a writ of execution against the
companies, for the distribution of the Fund residue of P10,117,016.20 to the employees
is legal.

The unions contend that the "integration provision" in the Retirement Plan authorizing
Ford and Ensite to integrate the retirement, death and disability benefits under the Plan
with and in lieu of statutory benefits under the provisions on termination pay and
retirement benefits in the Labor Code, is applicable only in cases of death, disability or
retirement, but not to termination of employment due to closure of business.

Article XIII, Section 5 of the Retirement Plan, otherwise known as the integration
provision is again hereunder quoted:

xxx xxx xxx

Section 5. To the fullest extent the retirement, death and disability

benefits accorded participants under the terms of this Plan shall be
deemed integrated with and in lieu of, statutory benefits under the
provisions on termination pay and retirement benefits in the New Labor
Code, as well as other similar laws, as now or hereafter amended,
analogous benefits granted under present or future Collective Bargaining-
Agreements, and other employee benefit plans providing analogous
benefits which may be imposed by future legislations. In the event private
benefits due under the Plan are less than those due and demandable
under the provisions of the termination pay law and/or present or future
Collective Bargaining Agreement and/or future benefit plans of similar
nature imposed by law, the Company shall respond for the
difference. 18 (Annex A)

A careful perusal of the foregoing provision shows that the retirement, death and
disability benefits paid under the Plan are deemed integrated with and in lieu of
termination benefits required to be paid under the Labor Code, which in turn includes
instances where the employees are terminated due to closure of business.

The pertinent provision of the Labor Code is found in Article 283 which reads:

72
 Art. 283. Closure of establishment and reduction of personnel ... in cases
of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.

Consequently, the deduction of P13,000,000.00 from the Retirement Fund, utilized for
the payment of separation benefits is well in accord with the "integration provision," and,
as such, cannot be seriously assailed.

Likewise, the fact that the "integration provision" was incorporated in the respective
CBAs of the companies and the unions, is a clear manifestation that the same was
acceptable to, and accepted by the employees, and that they recognized the right of the
companies to charge the Retirement Fund for payment of separation benefits. The
pertinent provisions of the different Collective Bargaining Agreements CBAs entered into
between management and the various unions provide the following: 19

FORD SALARIED UNION CBA

ENSITE SALARIED UNION CBA —

Section 4(3). Retirement and Ternination. — The severance and/or

retirement benefits stipulated in the preceding three sections include and
are in lieu of any severance or termination pay provided by law. The
Company may pay the foregoing retirement or severance benefits from a
fund established for that purpose.

FORD WORKERS' UNION CBA

FORD DEPOT UNION CBA

ENSITE WORKERS'UNION CBA —

Section 4. (15.05). The severance or disability benefits stipulated in the

preceding section include and are in lieu of any severance or termination
pay provided by law.

The fact that, since the establishment and effectivity of the Retirement Plans, it had been
the policy and practice of the companies to charge termination, retirement and
analogous benefits for separated employees to the Retirement Fund, 20 without a single
complaint or dissent on the part of the unions or any employee, for that matter, is a
manifestation on the part of the unions that separation benefits (not necessarily
retirement benefits) are covered by the "integration provision" of the Retirement Plans
and are chargeable to and deductible from the Retirement Fund.

The purpose of the Plans or Fund, as provided in Article 1, Section 2 of the Retirement
Plans, is "to assist the employees financially in providing for their retirement
years." 21 This purpose, however, is subject to the terms and conditions set forth in the
Plan. And one such condition is the integration of separation benefits with and in lieu of
the retirement, death, and disability benefits under the Plan. Such being the case, and
considering that the Retirement Plan should be interpreted in its entirety so as to give
meaning to an the provisions therein, the phrase retirement years should not be literally
construed as referring only to cases of employees' retirement from the companies, but
should be broadly interpreted as inclusive of all other instances of employees' separation
from the companies, such as, by reason of death, disability or closure of business.

Furthermore, the companies cannot be charged with "diversion of funds" for deducting
the separation benefits from the Retirement Fund, because payment of separation
benefits is among the liabilities contemplated in Section 3, Article 1 of the Plan, which
reads:

73
 xxx xxx xxx

Section 3. Exclusive Benefit of the Employees

xxx xxx xxx

Under no circumstances, prior to the satisfaction of all liabilities with

respect to the participants and their beneficiaries under the plan, shall any
income or corpus of the Trust Fund or any Funds contributed to the Trust
Fund by the Company be diverted to or used for purposes other than for
the exclusive benefit of the Plan participants and their beneficiaries.
(emphasis supplied)

It cannot also be said that, by deducting the separation benefits from the Retirement
Fund, the companies are paying the employees who have earned vested rights under
the plan, with separation benefits out of their own money, and that in effect, a "recovery"
is made by the companies of their contribution to the Plan.

The Retirement Fund was fully and solely funded by Ford and Ensite, that is, without
contributions from any of their employees. And the "vested right" of the employees in the
Plan simply means that they are entitled to the Fund even in cases of their voluntary
resignation from the companies. But, as it happened, the companies closed down,
thereby pre-empting any voluntary resignation on the part of the employees. Still, the
employees are paid full separation benefits.

Based on the foregoing, the NLRC and the Labor Arbiter were justified in sustaining the
companies' action in charging the Retirement Fund for payment of the employees'
separation benefits occasioned by the companies' closure of business in the Philippines.

With regard to the issue in G.R. No. 75628, Ford and Ensite allege that the Resolution of
20 May 1986 granting the unions' Motion for Execution relative to the non-controverted
amount of P10,117,016.20 is void, having been allegedly issued after the NLRC had lost
jurisdiction over the case. The companies contend that the NLRC Resolution dated 4
February 1986 denying the unions' first motion for reconsideration, is a final resolution of
all the issues in the case, so that when the unions filed their second urgent motion for
reconsideration, dated 13 February 1986, the NLRC could not and should not have
legally entertained the same, because under the Interim Guidelines of the Rules of
Court, second motions for reconsideration of final orders or judgments are not allowed.

The contention of the companies is without merit, because the Fund residue of
P10,117,016.20 was never the subject of any motion for reconsideration, much less a
second motion for reconsideration on the part of the unions. Instead, said amount had
been the subject only of the Urgent Manifestation and Motion for Writ of Execution, and
the Urgent Motion for Resolution of Motion for Writ of Execution, respectively filed by the
unions on 15 November and 9 December 1985, both before the NLRC. In any event, the
filing of a second motion for reconsideration is not barred under the Labor Code or the
NLRC Rules. Administrative and quasi-judicial bodies, like the NLRC, are not bound by
the technical rules of procedure in the adjudication of cases filed before them. 22

Ford and Ensite admit that the Retirement Fund indeed has a balance of 10,117,016.20.
Likewise, they recognize the right of the employees to receive their respective shares in
the Fund residue, pursuant to Article XI, Section 3 of the Retirement Plan, to wit:

Section 3. In the event of termination of the Plan, no future obligation

shall be payable under the Fund. The Trustee shall pay all debts or
claims then outstanding against the trust. Thereafter, the Trustee shall
distribute the property held in the Fund to the pensioners, participants and
their beneficiaries on the basis of the mortality and other present value
tables approved by the company.23

74
The companies' alternative excuse that it is "actuarially impossible" for them to compute
the individual shares of the employees in the Fund residue, is likewise untenable. This is
because the residue amounting to P10,117,016.20 is obviously Identifiable up to the last
centavo. Not only that. The companies have in their possession all the necessary
documents upon which the computations can be based, to wit: list of all the entitled
employees; their respective service records; and books of accounts in the possession of
the trustee bank (BPI).

Moreover, in one of their conciliation conferences in 1985, before Labor Arbiter Son, the
companies agreed to the distribution of the Fund residue if only the unions would
withdraw their appeal. The fact that the companies agreed to such a proposal (which
however was eventually rejected by the unions as they would allegedly lose out if their
appeal were abandoned), is also an indication that the computations of the employees'
individual shares in the Fund residue were already prepared and ready at that time, or
that at least the companies were then prepared and willing to immediately make the
desired computations on the basis of the pertinent documents in their possession.

With regard to the automatic deduction by the companies of 10% of the Fund residue for
attorney's fees of the unions' counsel, based on the Decision of Labor Arbiter Son, we
find no rule of law or tenet of judicial ethics violated thereby. Considering that the
workplaces of the employees have been closed simultaneously with the companies'
closure of business, it would be almost impossible for the unions' counsel to be able to
personally collect attorney's fees from his clients who are presently spread out here and
abroad.

Being the custodian of the Fund residue duly belonging to the employees, and from
which Fund, the attorney's fees of unions' counsel are to be paid, the companies are in a
proper position to effect the automatic deduction of the attomey's fees of the unions'
counsel. By doing so, the companies wig not be acting as agents of the unions, but
merely complying with a legal order of the labor court.

The questioned motion for execution should, however, include only the individual shares
of the members of the unions which are party litigants in these cases, and should not
include the shares of employees who are non- union members, such as the managerial,
supervisory and other non-rank- and-file employees. The 10% attorney's fees of the
unions counsel should also be charged exclusively against the individual shares of the
union members in the Fund residue.

With regard to the motion for supplemental relief of the unions counsel, dated 23 March
1987, praying that Ford Philippines, Inc. should be ordered to pay the former the amount
of ten percent (10%) of P5,700,000.00 (corresponding to the employee's share in the
selling price of the real estate of Ford Philippines Inc. located in Sucat Road) which were
allegedly distributed to the employees without the knowledge of the unions'
counsel, 24the same is denied for being unsubstantiated.

WHEREFORE, the petition in G.R. No. 75347 is DENIED. The Resolutions of the
NLRC en banc, dated 19 June 1986 in NLRC Case No. 11-4073-84, together with NLRC
Resolutions, dated 28 January 1986, and 4 December 1985, insofar as they sustain the
companies' right and action of deducting the amount of P13,000,000.00 from the
Retirement Fund as separation benefits for the employees, are AFFIRMED.

In G.R. No. 75628, the temporary restraining order dated 25 August 1986 is LIFTED.
The Resolutions of the NLRC dated 20 May 1986 and 19 June 1986, insofar as they
authorize the issuance of a writ of execution in favor of the unions, are AFFIRMED, as
above qualified, with the modification that the writ of execution issued as to the union
members' shares in the amount of P10,117,016.20, shall include the corresponding
interests earned from 30 September 1985, up to the actual payment of such award.

SO ORDERED.

75
 THIRD DIVISION

[G.R. No. 155278. September 16, 2003]

PRUDENCIO J. TANJUAN, petitioner, vs. PHILIPPINE POSTAL SAVINGS BANK,

INC.; PEDRITO TORRES; and CHAIRMAN and MEMBERS OF THE
BOARD, respondents.

DECISION
PANGANIBAN, J.:

Well-settled is the rule that technical rules of procedure shall not be strictly applied
in labor cases. Pursuant to this policy, employers may, on cogent grounds, be allowed to
present, even on appeal, evidence of business losses to justify the retrenchment of
workers.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing
the May 28, 2002 Decision[2] and September 12, 2002 Resolution[3] of the Court of
Appeals (CA) in CA-GR SP No. 67233. The CA disposed as follows:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE

COURSE and accordingly DISMISSED for lack of merit. Consequently, the Resolution
dated August 31, 2001 issued by the National Labor Relations Commission in CA No.
026604-00/NCR-30-11-00567-99 is hereby AFFIRMED with MODIFICATION in the
sense that in the event petitioner Prudencio J. Tanjuan is absolved from any liability
arising from the act or omission complained of in OMB-0-98-2342 filed before the Office
of the Ombudsman, respondent Philippine Postal Savings Bank, Inc. is hereby ordered
to promptly release his separation pay, after the usual clearance/s as required by law. [4]

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA narrated the facts as follows:

Petitioner Prudencio J. Tanjuan (petitioner for brevity) was employed by respondent

Philippine Postal Savings Bank, Inc. (respondent PPSBI for brevity), a government
financing institution and a subsidiary of the Philippine Postal Corporation (Philpost), as
Property Appraisal Specialist and Officer-in-Charge of its Credit Supervision and Control
Department. At the time material to this case, he was on his fourth year of service.

On November 13, 1998, respondent Pedrito Torres (respondent Torres for brevity),
PPSBIs President and Chief Executive Officer, issued Memorandum 145-98 addressed
to petitioner and five (5) other employees belonging to its Accounts Management
Department and Credit Supervision and Control Department charging them with
negligence in the performance of duties and misrepresentation in violation of Article VI,
Sections 2 (d) and 3 (d) of the banks rules and regulations for approving the applications
for loan of Corinthian de Tagaytay and Clavecilla Marine Service. They were given five
(5) days within which to submit their written explanations otherwise they shall be
considered to have waived the filing of the same.

76
On November 27, 1998, petitioner submitted his written explanation alleging that he
merely reviewed and validated the findings of the Property Appraiser.

On January 11, 1999, OP Order No. 003-99 was issued by respondent Torres to
petitioner informing him of his preventive suspension for a period of ninety (90) days in
view of the pending administrative investigation against him. The next day, petitioner,
represented by counsel, wrote respondent Torres asking for the lifting of the order of
preventive suspension on the ground that pursuant to Secs. 24 and 36 of The
Ombudsman Act of 1989 (R.A. No. 6770), only the Ombudsman may preventively order
his suspension. Respondent Torres, on January 14, 1999, replied that the preventive
suspension was an internal decision of respondent PPSBI in connection with the
pending administrative case against petitioner and not pursuant to any complaint filed
with the Office of the Ombudsman. Moreover, being a subsidiary of a government-
owned and controlled corporation with [an] original charter, the pertinent civil service
rules and regulations are not applicable to respondent PPSBI.

In riposte, petitioner countered that his preventive suspension should therefore not
exceed thirty (30) days in accordance with the provisions of the Labor Code, as
amended.

As a result of petitioners manifestation, on February 1, 1999, respondent Torres issued

OP Order No. 011-99 ordering the amendment of the order of preventive suspension
against the former from ninety (90) days to thirty (30) days. Consequently, petitioners
suspension would only be up to February 11, 1999, after which he could already report
back to work.

On April 27, 1999, the Board of Directors of respondent PPSBI issued Board Resolution
No. 99-14 approving the banks reorganization via retrenchment of employees and re-
alignment of functions and positions for the purpose of preventing further serious
losses. In furtherance of the Boards decision, a letter dated July 15, 1999 was released
by respondent Torres addressed to all employees of respondent PPSBI, informing them
of the impending reorganization and enjoining them to apply for their desired plantilla
positions under the new organizational set-up not later than July 20, 1999, otherwise
they shall not be included in the selection process and shall be deemed to have opted to
be separated instead. Petitioner did not apply for any position in the new organizational
set-up.

On October 5, 1999, petitioner received a Notice of Termination dated October 4, 1999

informing him that pursuant to respondent PPSBIs adoption of a new organizational
structure under Board Resolution No. 99-14, his employment therewith shall cease [at]
the close of office hours on November 4, 1999 or thirty (30) calendar days from date of
receipt of the notice on the ground of abolition of position. The Department of Labor and
Employment was likewise seasonably notified prior to the effectivity date of petitioners
termination as required by law. However, the release of his separation pay of one and a
half (1 1/2) months salary for every year of service was withheld in view of the pendency
of a criminal case against him with the Office of the Ombudsman for alleged irregularities
in the granting of loans for which he could likewise be held pecuniarily liable.

Displeased with his termination, petitioner filed a complaint for illegal dismissal with
money claims against respondent on November 15, 1999.

Petitioner alleged that there was no just or authorized cause to warrant his termination
from service and that the procedural requirements as mandated by law were not
complied with. He pointed out that no other measures were first taken before resort to
retrenchment or any other mode of reducing personnel was made. Moreover,
respondents were guilty of bad faith in terminating its employees considering that
despite the retrenchment, new positions were created for which they were invited to
apply.

In refutation, respondents averred that in view of the dwindling financial position of the
bank, the Board of Directors approved the banks reorganization plan to prevent or

77
minimize business losses which involved the retrenchment of employees and the
subsequent right-sizing of the organization through elimination or merger of overlapping
functions or divisions which resulted to the abolition of thirty-six (36) positions, one (1) of
which was then occupied by petitioner. Consequently, petitioner and the DOLE were
served the required termination notice one (1) month before the effectivity date of his
separation from service. However, the payment of his separation pay was deferred in
view of the case against him which is pending resolution before the Office of the
Ombudsman [and] which could x x x find him pecuniarily liable aside from the penalty of
forfeiture of benefits x x x. In the event though that he is exonerated, they manifested
that his separation pay and other benefits shall be promptly released to him.

As to the required proof of business losses, a reservation was made as to its submission
on the ground of confidentiality of records due to the nature of respondent PPSBIs
business. However, respondents avowed that the same shall be presented if and when
required by the Labor Arbiter to do so.

On June 30, 2000, Labor Arbiter Isabel G. Panganiban-Ortiguerra rendered a Decision,

the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring Philippine

Postal Savings Bank, Inc. guilty of illegal dismissal and it is hereby ordered as follows:

1. To reinstate complainant to his former position which may now have a different title,
without loss of seniority rights and with full backwages reckoned from the date of his
dismissal up to his actual or payroll reinstatement as of this date is in the amount
of P124,638.40; and

2. To pay complainants attorneys fee in an amount equivalent to 10% of whatever he

may receive by virtue of this decision.

The claims for moral and exemplary damages are dismissed for lack of merit.

SO ORDERED.

Aggrieved, respondents appealed to the x x x NLRC asseverating that they were denied
due process of law when Labor Arbiter Panganiban-Ortiguerra allegedly hastily decided
that they did not adduce evidence to support their claim of business losses to justify
retrenchment. In support of their appeal, respondents submitted in evidence the
following documents: (A) Audited Consolidated Statements of Condition, Income and
Loss Statements for the periods 1996-1997, 1997-1998 and 1998-1999; (B) Statement
of Financial Condition for the periods June 23, 1998, December 24, 1998 and December
21, 1999; (C) COA Annual Audit Report for the years ended December 31, 1997 and
1996; (D) COA Annual Audit Report for the years ended December 31, 1998 and 1997;
(E) COA Annual Audit Report for the years ended December 31, 1999 and 1998; (F)
PDIC Preliminary Findings as of March 31, 1996; (G) PDIC Results of Follow-Through
Examination as of March 31, 1997; (H) PDIC Preliminary Findings as of May 31, 1998;
(I) BSP Letter to the PPSBI Board of Directors dated December 28, 1995; (J) BSP Letter
to the PPSBI Board of Directors dated March 18, 1997, with attached detailed report; (K)
BSP Letter to the PPSBI Board of Directors dated May 14, 1997; and (L) BSP Letter to
the PPSBI Board of Directors dated October 25, 1999.

Petitioner duly opposed the presentation of the aforesaid documents contending that
[these] cannot be presented for the first time on appeal. Moreover, even if the same can
be admitted on appeal, the aforesaid documents are insufficient to prove the existence
of business losses. Finally, petitioner posits that if serious losses were in fact incurred by
respondent PPSBI, the same was due to the mismanagement of its officers which
should not be borne by its rank and file employees.

On August 31, 2001, x x x NLRC issued a Resolution admitting the evidence presented
by respondents on appeal and finding the same adequate to prove the existence of
business losses on the part of respondent PPSBI. x x x.

78
 Dissatisfied with the NLRC Decision, petitioner elevated the case to the CA.

Ruling of the Court of Appeals

Affirming the NLRC, the CA ruled that proof of respondents business losses had
been correctly admitted, pursuant to the NLRC Rules of Procedure and the mandate of
the Labor Code that technical rules of evidence are not binding in labor cases.[5] It noted
that, before the labor arbiter, respondents had made a clear reservation to present the
subject evidence if required to do so.
The CA thereafter held that the evidence presented had sufficiently proved the
existence of business losses, and that petitioners retrenchment was legal.
As to the withholding of petitioners separation pay, the appellate court ruled that the
pendency of the criminal complaint against him had barred Respondent PPSBIs
issuance of a certificate clearing him of any accountability to the agency. Under the rules
of the Commission on Audit, the accountability clearance is one of several supporting
documents needed for the payment of separation pay.
Hence, this Petition.[6]

Issues

Petitioner submits the following issues for our consideration:

A. Whether or not the petitioner was illegally dismissed by respondents;

B. Whether or not the Court of Appeals can disregard the findings of the Labor
Arbiter [that] there was no valid retrenchment;

C. Whether or not respondents are estopped from attaching [as] annexes to the
Memorandum on Appeal evidenc[e] not submitted to the Labor Arbiter x x
x after they were given opportunity to do so.[7]

Since the question of whether petitioner was validly retrenched hinges on the
admission of evidence proving alleged business losses, we shall discuss issues A and B
in reverse sequence.

The Courts Ruling

The Petition has no merit.

First Issue:
Proof of Business Losses
May Be Admitted on Appeal

It is well-settled that the NLRC is not precluded from receiving evidence, even for
the first time on appeal, because technical rules of procedure are not binding in labor
cases.[8] This rule applies equally to both the employee and the employer. In the interest
of due process, the Labor Code directs labor officials to use all reasonable means to
ascertain the facts speedily and objectively, with little regard to technicalities or
formalities.[9] However, delay in the submission of evidence should be clearly explained
and should adequately prove the employers allegation of the cause for termination.[10]

79
 In the instant case, it is undisputed that the evidence of business losses for the
years 1996 up to 1999 was introduced before the NLRC only. The CA correctly noted,
however, that respondents reserved the right to introduce the evidence to the labor
arbiter, if and when required to do so. Reasons of confidentiality and the volatile nature
of PPSBIs business as a banking institution prompted respondents to limit the
presentation of this evidence at the outset.[11] Indeed, it would have been foolhardy for the
NLRC and the CA to reject the evidence, just because it had not been presented before the
labor arbiter. Such evidence was absolutely necessary to resolve the issue of whether
petitioners employment was validly terminated. For strictly adhering to technical rules of
procedure at the expense of equity, the Commission has in fact been chided by the Court
in Philippine Telegraph and Telephone Corporation v. NLRC,[12] from which we quote:

Thus, even if the evidence was not submitted to the labor arbiter, the fact that it was duly
introduced on appeal to respondent commission is enough basis for the latter to have
been more judicious in admitting the same, instead of falling back on the mere
technicality that said evidence can no longer be considered on appeal. Certainly, the first
course of action would be more consistent with equity and the basic notions of
fairness.[13]

As to petitioners claim that he was denied due process because of the belated
admission of the evidence, suffice it to say that he was given every opportunity to refute
it and to submit counter-evidence. The essence of due process consists simply in
according parties reasonable opportunity to be heard and to submit any evidence they
may have in support of their defense.[14]

Second Issue:
The CAs Power to Review Findings of Fact

Petitioner argues that the CA erred in disregarding the labor arbiters factual
findings. It is well to remind him that those findings were rejected in the first instance by
the NLRC, pursuant to its exclusive appellate jurisdiction over all cases decided by labor
arbiters.[15] Thereafter, its Decision was reviewed by the CA via a petition for certiorari
under Rule 65 of the Rules of Court.
St. Martin Funeral Home v. NLRC[16] laid down the mode of judicial review of NLRC
decisions. In that case, this Court held that the proper vehicle for such review was a
special civil action for certiorari under Rule 65 of the Rules of Court, and that this action
should be filed in the CA in strict observance of the doctrine of the hierarchy of
courts.[17] As the rule now stands, special civil actions for certiorari of NLRC cases filed
in this Court after June 1, 1999 are to be dismissed, not referred to the CA.[18]
Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No.
7902,[19] expanded the jurisdiction of the CA as follows:

SEC. 9. Jurisdiction. - The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas

corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of its
appellate jurisdiction;

xxxxxxxxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in
cases falling within its original and appellate jurisdiction, including the power to grant and
conduct new trials or further proceedings. x x x.

Verily, the appellate court, pursuant to the exercise of its original jurisdiction over
petitions for certiorari, has the power to review NLRC cases. Such review extends to the

80
factual findings of the labor arbiter when, as in this case, these are at variance with
those of the NLRC.[20]
The CA thus acted within its power when it disregarded the labor arbiters findings
and upheld the contrary ruling of the NLRC. In turn, the factual findings of the former
affirming those of the latter are generally binding on this Court and will not as a rule be
reviewed on appeal.[21] Petitioner has not shown any reason for us to depart from this
rule.

Third Issue:
Validity of Petitioners Retrenchment

This Court has consistently recognized and affirmed the employers management
right and prerogative to terminate the services of its employees in order to obviate or
minimize business losses.[22] Retrenchment, one of the authorized causes for termination
under the Labor Code, has been defined as the termination of employment initiated by
the employer through no fault of the employees and without prejudice to the latter,
resorted by management during periods of business recession, industrial depression, or
seasonal fluctuations[;] or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the introduction of
new methods or more efficient machinery, or of automation.[23]
For the exercise of such prerogative, Article 283 of the Labor Code provides these
conditions:

Art. 283. Closure of establishment and reduction of personnel. -- The employer may also
terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the worker and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half () month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered as one (1) whole
year. (Italics supplied)

Thus, the requisites for valid retrenchment are the following: (1) necessity of the
retrenchment to prevent losses, and proof of such losses; (2) written notice to the
employees and to the Department of Labor and Employment (DOLE) at least one month
prior to the intended date of retrenchment; and (3) payment of separation pay equivalent
to one-month pay or at least one-half month pay for every year of service, whichever is
higher.[24]
There is no dispute that respondents have seasonably complied with the procedural
requirement of serving written notice to petitioner and the DOLE. On the other hand, the
withholding of separation pay, which has not been raised as an issue in this Petition,
was satisfactorily resolved by the CA.
The only remaining question is whether respondents have sufficiently and
convincingly established business reverses of the kind or the amount that would justify
the retrenchment. As this Court has held, before any reduction of personnel becomes
legal, any claim of actual or potential business losses must satisfy established standards
as follows: (1) the losses incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is
likely to be effective in preventing the expected losses; and (4) the alleged losses, if
already incurred, or the expected imminent losses sought to be forestalled are proven by

81
sufficient and convincing evidence.[25] The employer has the burden of proving that the
losses are serious, actual and real.[26]
In the instant case, both the NLRC and the CA found that the audited financial
statements submitted by respondents adequately supported their claim of actual, real
and substantial losses. The Court had previously ruled that financial statements audited
by independent external auditors constituted the normal method of proof of the profit-
and-loss performance of a company.[27] The CA appreciated the evidence as follows:

A perusal of respondent PPSBIs audit reports conducted by no less than the

Commission on Audit (COA) pursuant to Section 4, Article IX-D of the Constitution and
Section 43 of Presidential Decree No. 1445, otherwise known as the Government
Auditing Code of the Philippines, for the years 1996, 1997, 1998 and 1999 reveal the
following significant facts:

Surplus (Deficit) Undivided profits (net loss)

1996 P 11,413,884.00 P 22,617,592.00

1997 33,569,370.00 2,950,989.00
1998 35,875,290.00 31,374,806.00
1999 66,274,745.00 79,588,715.00

Based on the foregoing, the losses alleged by respondents to have been the primary
reason for the Board of Directors decision to effect retrenchment and reorganization
were clearly not at all fictitious, imaginary or mere conjectures as claimed by petitioner.
Furthermore, the fact that respondent PPSBI was being regularly monitored by the
Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corporation
(PDIC) due to its precarious financial position for several years positively affirms
respondents asseveration of continuous serious business losses. There is then no doubt
that respondent PPSBI, prior to, at the time [of], and immediately after the termination of
petitioner, was suffering from real and serious business losses.[28]

The findings of the CA affirming those of the NLRC showed real and grave financial
reverses, which made downsizing the only recourse for the bank to follow. [29] Indeed, the
retrenchment of petitioner was the consequence of the banks reorganization and a cost-
saving device recognized by jurisprudence.[30]
WHEREFORE, the Petition is DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioner.
SO ORDERED.

82