G.R. No.
L-26461 November 27, 1968 On the same date,2 ALU preferred, in the Court of Industrial Relations — hereinafter referred to as
ASSOCIATED LABOR UNION, petitioner,
vs.
JUDGE JOSE C. BORROMEO and ANTONIO LUA doing business under the name CEBU HOME &
INDUSTRIAL SUPPLY, respondents.
Original action for certiorari and prohibition, with preliminary injunction, to annul writs of preliminary
injunction issued in Case No. R-9414 of the Court of First Instance of Cebu, entitled "Cebu Home and
Industrial Supply and Antonio Lua vs. Associated Labor Union", and to restrain the Honorable Jose C.
Borromeo, as Judge of that Court, from hearing said case.
Petitioner herein, Associated Labor Union — hereinafter referred to as ALU — is a duly registered
labor organization. Among the members thereof are employees of Superior Gas and Equipment
Company of Cebu, Inc. hereinafter referred to as SUGECO — a domestic corporation with offices at
Juan Luna Street, Cebu City and a factory plant in Basak, Mandaue, province of Cebu. On January 1,
1965, ALU and SUGECO entered into a collective bargaining contract, effective up to January 1, 1966.
Negotiations for the renewal of the contract between ALU and SUGECO were begun prior to the date
last mentioned. While said negotiations were going on, late in February, 1966, twelve (12) SUGECO
employees resigned from ALU. Thereupon, the negotiations stopped. On March 1, 1966, ALU wrote
SUGECO requesting that the twelve (12) resigned employees be not allowed to report for work unless
they produced a clearance from ALU;1 but this request was immediately rejected by SUGECO, upon
the ground that it would cause irreparable injury, that the bargaining contract had lapsed already,
and that SUGECO could no longer demand said clearance from its employees. SUGECO intimated,
however, that, should the twelve (12) men rejoin ALU, negotiations "for the renewal of the collective
bargaining contract" could be resumed.
On the same date, ALU wrote SUGECO charging that the latter was bargaining in bad faith and that its
supervisors had campaigned for the resignation of ALU members, as well as serving notice that,
unless these unfair labor practice acts were stopped immediately and a collective bargaining contract
between SUGECO and ALU forthwith entered into, the latter would declare a strike and establish the
corresponding picket lines "in any place where your business may be found." Counsel for SUGECO
replied to the ALU, on March 3, 1966, stating that, with the resignation of the aforementioned ALU
members, ALU no longer represented the majority of the SUGECO employees for purposes of
negotiation and recognition.
On March 4, 1966, ALU struck and picketed the SUGECO plant in Mandaue. The next day, March 5,
SUGECO commenced Civil Case No. R-9221 of the Court of First Instance of Cebu, against ALU, to
restrain the same from picketing said plant and the SUGECO offices at Cebu City and elsewhere in the
Philippines. Forthwith, the Honorable Amador E. Gomez, as Judge of the Court of First Instance of
Cebu, Branch II, caused to be issued, ex parte, the writ of preliminary injunction prayed for by
SUGECO.
CIR unfair labor practice charges against SUGECO, its general manager, Concepcion Y. Lua —
hereinafter referred to as Mrs. Lua — and its two (2) supervisors, alleging, inter alia, that these
respondents had coerced and exerted pressure upon the aforementioned ALU members to resign, as
they did resign from ALU, and that their resignations were seized upon by SUGECO to refuse further
negotiations with ALU. On April 29, 1966, an acting prosecutor of the CIR filed therein against
SUGECO the corresponding complaint for unfair labor practice. 3
Meanwhile, ALU had moved for a reconsideration of the order of Judge Gomez, dated March 5, 1966,
sanctioning the issuance of the writ of preliminary injunction against ALU. This motion was later
denied by Judge Jose C. Borromeo, who presided Branch IV of the Court of First Instance of
Cebu.4 Hence, on May 9, 1966, ALU instituted Case No. L-25999 of the Supreme Court, for certiorari
and prohibition, with preliminary injunction, against Judges Gomez and Borromeo and the SUGECO,
and prayed therein that the CFI of Cebu be declared without jurisdiction over the subject-matter of
said Case No. R-9221; that the writ of preliminary injunction therein issued be annulled; that Judges
Gomez and Borromeo be directed to dismiss said case; and that, meanwhile, they be ordered to
desist from further proceedings in said case, and from enforcing the writ aforementioned. On May
16, 1966, we issued the writ of preliminary injunction sought by ALU in L-25999. Subsequently, or on
February 9, 1967, we rendered judgment therein in favor of ALU, annulling the writ of preliminary
injunction issued in said Case No. R-9221, on March 5, 1966, directing respondent Judges to dismiss
the same, and declaring permanent the writ of preliminary injunction issued by us on May 16, 1966.
Soon after the issuance of the latter writ, ALU resumed the picketing of the SUGECO plant in
Mandaue. Moreover, it began to picket the house of Mrs. Lua, SUGECO's general manager, and her
husband Antonio Lua — hereinafter referred to as Mr. Lua — at Abellana Street, Cebu City, and the
store of the Cebu Home and Industrial Supply — hereinafter referred to as Cebu Home — at Gonzalez
Street, Cebu City. The Cebu Home, which belongs to and is managed by Mr. Lua, deals in general
merchandise, among which are oxygen, acetylene and cooking gas produced by SUGECO. On June 21,
1966, Cebu Home and Mr. Lua — hereinafter referred to as respondents — filed a complaint,
docketed as Civil Case No. 9414 of the CFI of Cebu, against ALU, to restrain the latter from picketing
the store and residence aforementioned and to recover damages. Thereupon, Judge Borromeo issued
an order requiring the ALU to show cause why the writ sought should not be issued. In a
memorandum filed on June 25, 1966 and a motion to dismiss dated June 29, 1966, the ALU assailed
the Court's jurisdiction to hear the case upon the ground that it had grown out of a labor dispute.
This, notwithstanding, on June 30, 1966, Judge Borromeo issued an order the dispositive part of
which reads:
WHEREFORE, upon filing of a bond by the petitioners5 in the amount of P3,000.00 to answer
for damages which the respondent6 may be entitled, let a writ of preliminary injunction be
issued, restraining the respondent, its officers, employees, agents or persons acting in its
behalf:
 1) From picketing the office of the Cebu Home and Industrial Supply in Gonzales Street, Cebu
City and the residence of the petitioner Antonio Lua in Abellana Street, Cebu City;
2) From preventing the employees of the petitioners from entering inside or going out the
office of the Cebu Home and Industrial Supply and the residence of the petitioner Antonio
Lua;
3) From stopping the car, truck or other vehicles entering or going out the office of Cebu
Home and Industrial Supply and the residence of Antonio Lua;
4) From preventing the sale and distribution by the petitioners of its merchandise in
connection with its business; and
5) From performing acts which cause disturbance of the tranquility and privacy of the
petitioner and his family.
On July 4, 1966, respondents herein moved to amend the foregoing order so as to broaden its scope.
Upon the other hand, on July 6, 1966, ALU sought a reconsideration of said order and the lifting of
the writ of preliminary injunction issued on June 30, 1966. Acting upon a motion to amend of
respondents herein, Judge Borromeo issued, on July 22, 1966, another order, from which we quote:
Considering the evidence presented and the facts stated in the previous order of the Court,
it is believed that the petition is justified and that the acts complained of, if not restrained,
will render the writ of preliminary injunction ineffective.
WHEREFORE, in connection with the writ of preliminary injunction which was previously
issued, the respondent union, its members, agents or persons acting in its behalf are hereby
restrained:
a) From preventing the petitioners, their employees or representatives from unloading their
merchandise and other supplies coming from Manila or other places and from hauling them from the
waterfront for the purpose of delivering them to the place of the petitioners;b) From preventing the
petitioners or their representatives from delivering and loading their empty tanks and other supplies
to the boat or other means of transportation for Manila or other places; andc) From preventing,
obstructing or molesting the petitioners, their employees or representatives from performing acts in
connection with their business.
On July 25, 1966, Judge Borromeo denied ALU's motion to dismiss Case No. R-9414 and to reconsider
his order and dissolve the writ of preliminary injunction of June 30, 1966. Thereupon, or on August
26, 1966, ALU commenced the present action for certiorari and prohibition with preliminary
injunction, to annul the writs of preliminary injunction issued, on June 30 and July 22, 1966, in Case
No. R-9414 and to restrain the lower court from hearing the same.
ALU maintains that the lower Court has no jurisdiction over Case No. R-9414 because it had grown
out of a labor dispute, is intimately connected with an unfair labor practice case pending before the
CIR and involves a strike the injunction against which had already been lifted by the Supreme Court in
G.R. No. L-25999.7 Moreover, ALU claims that even if the lower court had jurisdiction over Case No. R-
9414, the writs of preliminary injunction issued therein are null and void, not only because of said
lack of jurisdiction, but, also, because it failed to observe the requirements of Sec. 9(f) of Republic Act
No. 875, as well as the provisions of Sec. 9 (d) (5) of the same Act, requiring findings of facts on
matters enumerated therein.
Upon the other hand, respondents argue that the issue in the lower court does not fall within the
jurisdiction of the CIR, there being no employer-employee relationship and "no labor dispute"
between the ALU members and Cebu Home; and that, at any rate, the SUGECO products distributed
and sold by Cebu Home, came, not from the SUGECO plant in Mandaue, but from other parts of the
Philippines. Respondents further deny that the residence of Mr. Lua was being used as a place to
store and refill SUGECO gas for resale.
Respondents' pretense is untenable. To begin with, Section 5 (a) of Republic Act No. 8758 vests in the
Court of Industrial Relations exclusive jurisdiction over the prevention of any unfair labor practice.
Moreover, for an issue "concerning terms, tenure or conditions of employment, or concerning the
association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to
arrange terms or conditions of employment" to partake of the nature of a "labor dispute", it is not
necessary that "the disputants stand in the proximate relation of employer and employee."9
Then, again, in order to apply the provisions of Sec. 9 of Republic Act No. 875, governing the
conditions under which "any restraining order" or "temporary or permanent injunction" may issue in
any "case involving or growing out of a labor dispute", it is not indispensable that the persons
involved in the case be "employees of the same employer", although this is the usual case. Sec.
9,10 likewise, governs cases involving persons: 1) "who are engaged in the same industry, trade, craft,
or occupation"; or 2) "who ... have direct or indirect interests therein", or 3) "who are members of the
same or an affiliated organization of employers or employees"; or 4) "when the case involves any
conflicting or competing interests in a "labor dispute" (as hereinbefore defined) or "persons
participating or interested" therein (as hereinafter defined)". Furthermore, "a person or association
shall be held to be a person participating or interested in a labor dispute if relief is sought against him
or it" and "he or it is engaged in the same industry, trade, craft, or occupation in which such dispute
occurs, or has a direct or indirect interest therein, or is a member, officer, or agent of any association
composed in whole or in part of employees or employers engaged in such industry, trade, craft, or
occupation."11
Now, then, there is no dispute regarding the existence of a labor dispute between the ALU and
SUGECO-Cebu; that SUGECO's general manager, Mrs. Lua, is the wife of the owner and manager of
Cebu Home, Antonio Lua; and that Cebu Home is engaged in the marketing of SUGECO products. It is,
likewise, clear that as managing member of the conjugal partnership between him and his wife, Mr.
Lua has an interest in the management by Mrs. Lua of the business of SUGECO and in the success or
failure of her controversy with the ALU, considering that the result thereof may affect the condition
of said conjugal partnership. Similarly, as a distributor of SUGECO products, the Cebu Home has, at
least, an indirect interest in the labor dispute between SUGECO and the ALU and in Case No. R-9221.
In other words, respondents herein have an indirect interest in said labor dispute, for which reason,
we find that Section 9 of Republic Act No. 875 squarely applies to Case No. R-9414.
Thus, in Goldfinger v. Feintuch,12 it was held:
Within the limits of peaceful picketing, however, picketing may be carried on not only against the
manufacturer but against a non-union product sold by one in unity of interest with the
manufacturer who is in the same business for profit. Where a manufacturer pays less than union
wages, both it and the retailers who sell its products are in a position to undersell competitors who
pay the higher scale, and this may result in unfair reduction of the wages of union members.
Concededly the defendant union would be entitled to picket peacefully the plant of the
manufacturer. Where the manufacturer disposes of the product through retailers in unity of interest
with it,13 unless the union may follow the product to the place where it is sold and peacefully ask the
public to refrain from purchasing it, the union would be deprived of a fair and proper means of
bringing its plea to the attention of the public.
Besides, the ALU introduced evidence to the effect that the SUGECO products had been brought to
Cebu Home and were being distributed in the latter, as a means to circumvent, defeat or minimize
the adverse effects of the picketing conducted in the SUGECO plant and offices in Mandaue and Cebu
City respectively by ALU. It is true that respondents averred that said products were purchased by
Cebu Home before the strike was declared against SUGECO and that some of said products were
obtained from SUGECO in other parts of the country; but, even if true, these circumstances did not
place the picketing of the Cebu Home beyond the pale of the aforesaid Section 9 of Republic Act No.
875 because, as distributor of SUGECO products, Cebu Home was engaged in the same trade as
SUGECO. Neither does the claim that some SUGECO products marketed by Cebu Home had come, not
from the Mandaue plant, but from other parts of the Philippines, detract from the applicability of said
provisions, considering that ALU had struck against SUGECO and had announced, as early as March 1,
1966 — or three (3) days before it struck — its intent to picket "any place where your business may
be found" and that SUGECO in Cebu is a sister company of SUGECO elsewhere in the Philippines.For,
a similar reason, in American Brake Shoe Co. v. District Lodge 9 of International Association of
Machinists,14the Supreme Court of Pennsylvania ruled:
Where corporate employer had separate plants in Missouri and Pennsylvania, and labor dispute
existed at Missouri plant, but not at the Pennsylvania plant, peaceful picketing at Pennsylvania plant
by members of union representing employees at Missouri plant was not an unfair labor practice as
defined by Labor Management Relations Act.... 15
In the language of the American Jurisprudence: 16
It seems now generally agreed that a state cannot either by its common law or by statute prohibit the
peaceful picketing of a place of business solely on the ground that the picketing is carried on by
persons not employed therein. The United States Supreme Court has held that the constitutional
guaranty of free speech is infringed by the judicial policy of a state to forbid peaceful picketing on the
ground that it is being conducted by strangers to the employer affected, that is, by persons not in the
relation of employer and employee with him. Rules limiting picketing to the occasion of a labor
dispute are not offended by the act of a union having a grievance against a manufacturer in picketing
a retail establishment in which its products are sold when there is a unity of interest between the
manufacturer and the retailer; this is true even when the shopkeeper is the sole person required to
run his business. And the right of employees on strike at one plant of an employer to picket another
plant of the same employer has been upheld even though some of the employees of the picketed
plant as a result refused to work despite a no-strike agreement. Also, a union may picket a retail store
selling goods made in a nonunion factory between which and the union there is an industrial
dispute, provided there is a unity of interest between the retailer and the manufacturer.17
Apart from the foregoing, it will be recalled that, prior to the expiration of the collective bargaining
contract between ALU and SUGECO, on January 1, 1966, negotiations had started for the renewal of
said contract; that during said negotiations, late in February 1966, twelve (12) SUGECO employees
resigned from ALU, owing — according to charges preferred by ALU and confirmed by a complaint
filed by a CIR prosecutor — to unfair labor practices allegedly committed by SUGECO and its
supervisors who, it was also claimed, had induced and coerced said employees to quit the ALU, which
they did; that, thereupon, SUGECO stopped negotiating with ALU alleging that, with the resignation
of said twelve (12) members, ALU no longer represented a majority of the SUGECO employees; that
on March 4, 1966, ALU declared a strike and picketed the SUGECO plant in Mandaue; that the next
day, SUGECO filed Case No. R-9221 of the CFI of Cebu, which forthwith issued a writ of preliminary
injunction restraining ALU from picketing, not only the plant, but, also, the SUGECO offices elsewhere
in the Philippines; that said injunction was dissolved by the Supreme Court on May 16, 1966; 18 and
that the premises of respondents herein were not picketed until after our injunction was enforced,
subsequently to May 16, 1966.
This factual background reveals that, from sometime before January 1, 1966 — when negotiations for
the renewal of the collective bargaining agreement between SUGECO and ALU were begun — to
sometime after May 16, 1966,19or, at least, from late in February 1966 — when the aforementioned
unfair labor practices were allegedly committed by SUGECO — to sometime before June 21,
1966,20 there was ample opportunity to store SUGECO products in respondents' premises. There was,
therefore, reasonable ground for the ALU to believe or suspect that SUGECO was using said premises
to circumvent and blunt the ALU strike and picketing in the SUGECO plant in Mandaue or to defeat or
offset the adverse effects of both.
Respondent Judge seemed to be of the opinion that, for the subject-matter of Case No. 9414 to be
within the exclusive jurisdiction of the CIR, it was necessary to establish, as a fact, the truth of ALU's
contention that respondents' premises were being used as an outlet for SUGECO products.
Such view suffers from a basic flaw. It overlooks the fact that the jurisdiction of a court or quasi-
judicial or administrative organ is determined by the issues raised by the parties, not by their success
or failure in proving the allegations in their respective pleadings.21 Said view would require the
reception of proof, as a condition precedent to the assumption of jurisdiction, when precisely
jurisdiction must exist before evidence can be taken, since the authority to receive it is in itself an
exercise of jurisdiction. Moreover, it fails to consider that, to affect the jurisdiction of said court, or
organ, the main requirement is that the issue raised be a genuine one. In other words, the question
posed must be one that is material to the right of action or which could affect the result of the
dispute or controversy.22 Such is, manifestly, the nature of ALU's contention in the lower court, which
should have, accordingly, granted the motion to dismiss and lifted the writs of preliminary injunction
complained of.
Finally, respondents herein have not alleged, let alone proved, that the conditions enumerated in
Section 9 (d) of Republic Act No. 875,23 as a prerequisite to an injunction in labor disputes, have been
complied with. Such failure is, as has been repeatedly held24 fatal to the validity of said injunction.
WHEREFORE, the orders of respondent Judge dated June 30, and July 22, 1966 and the writs of
preliminary injunction issued in accordance therewith are hereby declared null and void ab initio,
with costs against respondents herein, the Cebu Home and Industrial Supply and Antonio Lua. It is so
ordered.
DELTAVENTURES RESOURCES, INC., petitioner, vs. HON. FERNANDO P. CABATO, Presiding Judge
Regional Trial Court, La Trinidad, Benguet, Branch 62; HON. GELACIO L. RIVERA, JR., Executive Labor
Arbiter, NLRC-CAR, Baguio City, ADAM P. VENTURA, Deputy-Sheriff, NLRC-CAR, Baguio City;
ALEJANDRO BERNARDINO, AUGUSTO GRANADOS, PILANDO TANGAY, NESTOR RABANG, RAY
DAYAP, MYRA BAYAONA, VIOLY LIBAO, AIDA LIBAO, JESUS GATCHO and GREGORIO
DULAY, respondents. Manikan
This special civil action for certiorari seeks to annul the Order dated November 7, 1994,[1] of
respondent Judge Fernando P. Cabato of the Regional Trial Court of La Trinidad, Benguet, Branch 62,
in Civil Case No. 94-CV-0948, dismissing petitioner's amended third-party complaint, as well as the
Order dated December 14, 1994,[2] denying motion for reconsideration.
On July 15, 1992, a Decision[3] was rendered by Executive Labor Arbiter Norma Olegario, National
Labor Relations Commission - Regional Arbitration Board, Cordillera Autonomous Region
(Commission), in NLRC Case No. 01-08-0165-89 entitled "Alejandro Bernardino, et al. vs. Green
Mountain Farm, Roberto Ongpin and Almus Alabe", the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered declaring the respondents guilty of Illegal Dismissal and
Unfair Labor Practice and ordering them to pay the complainants, in solidum, in the amounts herein
below listed:
1. Violy Libao P131,368.07
2. Myra Bayaona 121,470.23
3. Gregorio Dulay 128,362.17
4. Jesus Gatcho 26,475.17Oldmis o
5. Alejandro Bernardino 110,158.20
6. Pilando Tangay 107,802.66
7. Aida Libao 129,967.34
8. Rey Dayap 123,289.21
9. Nestor Rabang 90,611.69
10. Augusto Granados 108,106.03
plus attorney's fees in the amount of P10,000.00.
Respondent Almus Alabe is also ordered to answer in exemplary damages in the
amount of P5,000.00 each to all the complainants.
SO ORDERED."[4]
On May 19, 1994, complainants in the abovementioned labor case, filed before the Commission a
motion for the issuance of a writ of execution as respondent's appeal to the Commission and this
Court[5] were respectively denied. Ncm
On June 16, 1994, Executive Labor Arbiter Gelacio C. Rivera, Jr. to whom the case was reassigned in
view of Labor Arbiter Olegario's transfer, issued a writ of execution [6] directing NLRC Deputy Sheriff
Adam Ventura to execute the judgment against respondents, Green Mountain Farm, Roberto Ongpin
and Almus Alabe. Sheriff Ventura then proceeded to enforce the writ by garnishing certain personal
properties of respondents. Finding that said judgment debtors do not have sufficient personal
properties to satisfy the monetary award, Sheriff Ventura proceeded to levy upon a real property
covered by Tax Declaration No. 9697, registered in the name of Roberto Ongpin, one of the
respondents in the labor case. Thereafter, Sheriff Ventura caused the publication on the July 17, 1994
edition of the Baguio Midland Courier the date of the public auction of said real property.
On July 27, 1994, a month before the scheduled auction sale, herein petitioner filed before the
Commission a third-party claim[7] asserting ownership over the property levied upon and subject of
the Sheriffs notice of sale. Labor Arbiter Rivera thus issued an order directing the suspension of the
auction sale until the merits of petitioner's claim has been resolved.[8]
However, on August 16, 1994, petitioner filed with the Regional Trial Court of La Trinidad, Benguet a
complaint for injunction and damages, with a prayer for the issuance of a temporary restraining order
against Sheriff Ventura, reiterating the same allegations it raised in the third party claim it filed with
the Commission. The petition was docketed as Civil Case No. 94-CV-0948, entitled "Deltaventures
Resources, Inc., petitioner vs. Adam P. Ventura, et. al., defendants." The next day, August 17, 1994,
respondent Judge Cabato issued a temporary restraining order, enjoining respondents in the civil
case before him to hold in abeyance any action relative to the enforcement of the decision in the
labor case.[9]Ncmmis
Petitioner likewise filed on August 30, 1994, an amended complaint [10] to implead Labor Arbiter
Rivera and herein private respondent-laborers.
Further, on September 20, 1994, petitioner filed with the Commission a manifestation [11] questioning
the latter's authority to hear the case, the matter being within the jurisdiction of the regular courts.
The manifestation, however, was dismissed by Labor Arbiter Rivera on October 3, 1994. [12]
Meanwhile, on September 20, 1994, private respondent-laborers, moved for the dismissal of the civil
case on the ground of the court's lack of jurisdiction.[13] Petitioner filed its opposition to said motion
on October 4, 1994.[14]
On November 7, 1994, after both parties had submitted their respective briefs, respondent court
rendered its assailed decision premised on the following grounds:
"First, this Court is of equal rank with the NLRC, hence, has no jurisdiction to issue
an injunction against the execution of the NLRC decision. x x x.
Second, the NLRC retains authority over all proceedings anent the execution of its
decision. This power carries with it the right to determine every question which
may be involved in the execution of its decision. x x x.
Third, Deltaventures Resources, Inc. should rely on and comply with the Rules of
the NLRC because it is the principal procedure to be followed, the Rules of Court
being merely suppletory in application, x x x. Scnc m
Fourth, the invocation of estoppel by the plaintiffs is misplaced. x x x. [B]efore the
defendants have filed their formal answer to the amended complaint, they moved
to dismiss it for lack of jurisdiction.
Lastly, the plaintiff, having in the first place addressed to the jurisdiction of the
NLRC by filing with it a Third Party Claim may not at the same time pursue the
present amended Complaint under the forum shopping rule."[15]
Their motion for reconsideration having been denied by respondent Judge,[16] petitioner promptly
filed this petition now before us.
In spite of the many errors assigned by petitioner,[17] we find that here the core issue is whether or
not the trial court may take cognizance of the complaint filed by petitioner and consequently provide
the injunctive relief sought. Such cognizance, in turn, would depend on whether the acts complained
of are related to, connected or interwoven with the cases falling under the exclusive jurisdiction of
the Labor Arbiter or of the NLRC.
Petitioner avers that court a quo erred in dismissing the third-party claim on the ground of lack of
jurisdiction. Further, it contends that the NLRC-CAR did not acquire jurisdiction over the claim for it
did not impugn the decision of the NLRC-CAR but merely questioned the propriety of the levy made
by Sheriff Ventura. In support of its claim, petitioner asserts that the instant case does not involve a
labor dispute, as no employer-employee relationship exist between the parties. Nor is the petitioner's
case related in any way to either parties' case before the NLRC-CAR hence, not within the jurisdiction
of the Commission. Sdaa miso
Basic as a hornbook principle, jurisdiction over the subject matter of a case is conferred by law and
determined by the allegations in the complaint[18] which comprise a concise statement of the
ultimate facts constituting the petitioner's cause of action.[19] Thus we have held that:
"Jurisdiction over the subject-matter is determined upon the allegations made in
the complaint, irrespective of whether the plaintiff is entitled or not entitled to
recover upon the claim asserted therein - a matter resolved only after and as a
result of the trial."[20]
Petitioner filed the third-party claim before the court a quo by reason of a writ of execution issued by
the NLRC-CAR Sheriff against a property to which it claims ownership. The writ was issued to enforce
and execute the commission's decision in NLRC Case No. 01-08-0165-89 (Illegal Dismissal and Unfair
Labor Practice) against Green Mountain Farm, Roberto Ongpin and Almus Alabe.
Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but
in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of
execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing
the writ. The complaint was in effect a motion to quash the writ of execution of a decision rendered
on a case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and Unfair
Labor Practice. Considering the factual setting, it is then logical to conclude that the subject matter of
the third party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional
trial courts. Sdaad
Precedent abound confirming the rule that said courts have no jurisdiction to act on labor cases or Relations Commission, has no jurisdiction to issue any restraining order or injunction to enjoin the
various incidents arising therefrom, including the execution of decisions, awards or execution of any decision of the latter.[27]Juris
orders.[21] Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor official
concerned under the Department of Labor and Employment. To hold otherwise is to sanction split WHEREFORE, the petition for certiorari and prohibition is DENIED. The assailed Orders of respondent
jurisdiction which is obnoxious to the orderly administration of justice.[22] Judge Fernando P. Cabato dated November 7, 1994 and December 14, 1994, respectively are
AFFIRMED. The records of this case are hereby REMANDED to the National Labor Relations
Petitioner failed to realize that by filing its third-party claim with the deputy sheriff, it submitted itself Commission for further proceedings.
to the jurisdiction of the Commission acting through the Labor Arbiter. It failed to perceive the fact
that what it is really controverting is the decision of the Labor Arbiter and not the act of the deputy Costs against petitioner.
sheriff in executing said order issued as a consequence of said decision rendered.
SO ORDERED. Sc juris
Jurisdiction once acquired is not lost upon the instance of the parties but continues until the case is
terminated.[23] Whatever irregularities attended the issuance an execution of the alias writ of
execution should be referred to the same administrative tribunal which rendered the decision. [24] This
is because any court which issued a writ of execution has the inherent power, for the advancement of
justice, to correct errors of its ministerial officers and to control its own processes. [25]Scs daad

The broad powers granted to the Labor Arbiter and to the National Labor Relations Commission by
Articles 217, 218 and 224 of the Labor Code can only be interpreted as vesting in them jurisdiction
over incidents arising from, in connection with or relating to labor disputes, as the controversy under
consideration, to the exclusion of the regular courts.

Having established that jurisdiction over the case rests with the Commission, we find no grave abuse
of discretion on the part of respondent Judge Cabato in denying petitioner's motion for the issuance
of an injunction against the execution of the decision of the National Labor Relations Commission.

Moreover, it must be noted that the Labor Code in Article 254 explicitly prohibits issuance of a
temporary or permanent injunction or restraining order in any case involving or growing out of labor
disputes by any court or other entity (except as otherwise provided in Arts. 218 and 264). As correctly
observed by court a quo, the main issue and the subject of the amended complaint for injunction are
questions interwoven with the execution of the Commission's decision. No doubt the aforecited
prohibition in Article 254 is applicable. Sup rema

Petitioner should have filed its third-party claim before the Labor Arbiter, from whom the writ of
execution originated, before instituting said civil case. The NLRC's Manual on Execution of
Judgment,[26] issued pursuant to Article 218 of the Labor Code, provides the mechanism for a third-
party claimant to assert his claim over a property levied upon by the sheriff pursuant to an order or
decision of the Commission or of the Labor Arbiter. The power of the Labor Arbiter to issue a writ of
execution carries with it the power to inquire into the correctness of the execution of his decision and
to consider whatever supervening events might transpire during such execution.

Moreover, in denying petitioner's petition for injunction, the court a quo is merely upholding the
time-honored principle that a Regional Trial Court, being a co-equal body of the National Labor

SAN MIGUEL CORPORATION and BERNARDO NOEL in his capacity as Industrial Relations
Manager, petitioners, vs. ALFREDO ETCUBAN, BERNABE ETCUBAN, NORBERTO LABUCA,
FELIPE ECHAVEZ, BERNARDINO ENJAMBRE, ROGELIO ABELLANOSA, ROMULO CATALAN,
PEDRO EBOT, ANATOLIO GERALDIZO, JOSE ALFANTA, EDUARDO LOFRANCO, LECERIO
PARBA, RAFAEL AGUILAR, RICARDO LACUAREN, BENJAMIN ALESNA, ANTONIO BACUS,
PRIMO SOTEROL, JESUS JADORMEO, MANUEL MANKIKIS, APRONIANO ANG, RENATO
VILLALON, SAMUEL OUANO, JOSE DELA, JESUS BASILGO, CATALINO COLE, SR., ALFREDO
GONZALES, RAMON FLORES, MARCOS VITO CRUZ, JACINTO DIVINAGRACIA, ALAN
ALINSUGAY and CLAUDIO AGAN, respondents.
Before the Court is a petition for review on certiorari of the Decision, dated 16 May 1996 of the
Court of Appeals in CA-G.R. CV No. 46554 and of its Resolution, dated November 1996 denying
petitioners motion for reconsideration of said decision. The Court of Appeals decision reversed and
set aside the resolution of the Regional Trial Court of Cebu, Branch 19, in Civil Case No. CEB-15310,
dismissing for lack of jurisdiction respondents complaint for damages against petitioners for
terminating their employment by fraudulently inducing them to accept petitioners retrenchment
program.
The antecedents of this case are as follows:
In 1981, San Miguel Corporation (SMC) informed its Mandaue City Brewery employees that it
was suffering from heavy losses and financial distress which could eventually lead to its total
closure. In several meetings convened by SMC with its employees, it was explained to them that the
distressed state of SMC was caused by its poor sales performance which, in order to survive, called
for a cutback in production and a corresponding reduction in the work force. Because of this, SMC
offered its Retrenchment to Prevent Loss Program to its employees. The offering of the retrenchment
program was coupled with an unsolicited advise from SMC that it would be in the best interest of the
affected employees to avail of the said program since, by doing so, they would be able to obtain their
retrenchment benefits and privileges with ease. SMC admonished its employees that their failure to
avail of the retrenchment program might lead to difficulty in following-up and obtaining their
separation pay from SMCs main office in Manila.
Convinced by the representations and importunings of SMC, respondents, who had been
employees of SMC since the 1960s, availed of the retrenchment program at various times in 1981,
1982 and 1983.After their inclusion in the retrenchment program, respondents were given their
termination letters and separation pay. In return, respondents executed receipt and release
documents in favor of SMC.
Sometime in May of 1986, respondents got hold of an SMC publication allegedly revealing that
SMC was never in financial distress during the time when they were being retrenched but was, in
fact, enjoying a growth in sales. Respondents also learned that, during their retrenchment, SMC was
engaged in hiring new employees. Thus, respondents concluded that SMCs financial distress story
and retrenchment program were merely schemes to rid itself of regular employees and, thus, avoid
the payment of their actual benefits.
On 17 October 1988, respondents filed a complaint before the Regional Arbitration Branch No.
VII of the National Labor Relations Commission (NLRC) for the declaration of nullity of the
retrenchment program. In their complaint, respondents alleged that they were former regular
employees of SMC who were deceived into severing their employment due to SMCs concocted
financial distress story and fraudulent retrenchment program. Respondents prayed for
reinstatement, backwages and damages. On 25 July 1989, the Labor Arbiter dismissed the complaint
on the ground of prescription, stating:
What is apparent from their allegations, however, is that complainants are contesting their respective
terminations pursuant to the Retrenchment Program effected by San Miguel Corporation in 1981,
1982, and 1983. These then are claims for illegal dismissal which fall within the ambit of Article 291 of
the New Labor Code. It provides:
ART. 291. Money claims. All money claims arising from employer-employee relations accruing during
the effectivity of this Code, shall be filed within three (3) years from the time the cause of action
accrued; otherwise they shall be forever barred. x x x
Under the aforequoted provision therefore, complainants causes of action have already prescribed.
Even if this Office were to apply the more liberal interpretation of the above provisions enunciated by
the Honorable Supreme Court in the case of Callanta vs. Carnation Phils., Inc., G.R. No. 70615, Nov. 3,
1986, an interpretation that views illegal dismissal as an injury upon the rights of a person, hence,
under Article 1146 of the Civil Code prescribes in 4 years, those who were retrenched in 1983, at the
very latest, had only until 1987 to institute a complaint against SMC.
The records will show that all the above captioned cases were filed in 1988.
Clearly, therefore, complainants causes of action have already prescribed. [1]
Respondents then appealed to the NLRC which, on 20 December 1990, dismissed the appeal and
affirmed the decision of the labor arbiter.
On 14 December 1993, respondents, who were thirty-one (31) in number, again filed a
complaint[2] against SMC, but this time before the Regional Trial Court of Cebu City, Branch
19. Although their complaint was captioned as an action for damages, respondents sought the
declaration of nullity of their so-called collective contract of termination with SMC. Respondents
theorized that SMCs offer of retrenchment and their acceptance of the same resulted in the
consummation of a collective contract of termination between themselves and SMC. Respondents
asserted that since the cause of their contract of termination was non-existent, i.e., the claim of SMC
that it was under financial distress, the said contract is null and void. In this regard, respondents
claimed that they were entitled to damages because of the deception employed upon them by SMC
which led to their separation from the company. They further asseverated that their separation from
employment resulted in the loss of earnings and other benefits.Hence, they prayed that petitioners
jointly and severally be ordered, among others, to pay each of them the sum of P650,000.00 as actual
and compensatory damages, P100,000.00 as moral damages, P50,000.00 as exemplary damages, and
25% of whatever may be awarded to them as attorneys fees.
Instead of filing an answer, SMC filed a motion to dismiss on the bases of lack of jurisdiction, res
judicata, payment, prescription and failure to state a cause of action. On 21 June 1994, the RTC
issued a resolution granting SMCs motion to dismiss on the grounds of lack of jurisdiction and
prescription. The pertinent portion of the resolution reads:
Although plaintiffs, among others, pray for the declaration of nullity of the contract of termination,
their main cause is for damages, actual, compensatory and moral damages in the aggregate amount
of P650,000.00 each and P1,200,000.00 each for plaintiffs Bernabe Etcuban and Jose Dela. The
alleged acts leading to their signing of the contract of termination are acts constituting labor
disputes. It is a case for damages resulting from illegal termination. Under Article 217 of the Labor
Code, such cases fall within the exclusive original jurisdiction of the Labor Arbiter and the National
Labor Relations Commission. In fact, in 1988, plaintiffs instituted the same case for Implementation
of Art. 217, par. 5, now (sic) Labor Code and Declaration of Nullity of Retrenchment Program, and
Damages (see annex A to motion to Dismiss) with the National Labor Relations Commission. Their
cases were dismissed, not because of lack of jurisdiction, but because their cause of action already
prescribed, the cases having been filed after the three-year prescriptive period. Plaintiffs have
already submitted to the jurisdiction of the NLRC when they filed their cases with that agency. And
they prayed for the declaration of nullity of the retrenchment program of defendant corporation. It
was only after the dismissal of those cases that they instituted this present suit.
Moreover, the contract of termination which plaintiffs were allegedly induced to sign is not void from
the beginning. At most, such contract is voidable, plaintiffs consent thereto being allegedly vitiated by
fraud and deceit.
Thus plaintiffs allege that the brainwashing conducting (ted) on the affected employees through
briefings and pulong-pulongs relative to the actual economic condition of defendant corporation
finally led plaintiffs to believe that indeed said defendant was incurring losses and has opted to
reduce its production to arrest an immediate collapse of its operations. Thus, the corresponding need
to cut down on its work force; (par. 11, complaint); This distressed state of affairs of the defendant
corporation inculcated into their (sic) minds of defendants and the worry of non-recovery of their
benefits in the event defendant corporation closes down, induced plaintiffs to accept the offer of
retrenchment. Thereupon, they were paid their so-called separation pay. Hence, the contract of
termination evidenced by individual termination letters and benefits paid to each plaintiff was
consummated. (par. 12). But that records, however, revealed that from 1973 up to 1983, inclusive,
defendant corporation never suffered any business reverses or losses in its operation.; (par. 13,
complaint).
When the consent of one of the contracting parties is vitiated by fraud or deceit, the resulting
contract is only voidable or annulable, not void or inexistent. The action to annul the same should be
filed within four (4) years from discovery of the fraud or deceit. According to plaintiffs complaint,
they acquired knowledge of the actual business condition of defendant corporation only in May 1986
when one of them got hold of a copy of the companys publication. That was the time they discovered
that indeed, defendants deceived them x x x. (par. 14, complaint.) From May 1986 to January 14,
1993, more than six (6) years have already elapsed. Clearly, the action, has already prescribed.
The rest of the grounds need not be discussed.
WHEREFORE, for want of jurisdiction, and on the further ground of prescription, the above-entitled
case is dismissed.
SO ORDERED.[3]
Respondents seasonably appealed to the Court of Appeals (CA). In its Decision dated 16 May
1996, the CA reversed and set aside the lower courts order of dismissal and remanded the case to the
RTC for further proceedings. The pertinent portion of the decision reads:
A scrutiny of the allegations of the present complaint reveals that plaintiffs cause of action is not
actually based on an employer-employee relationship between the plaintiffs and the defendants. It
primarily involves a civil dispute arising from the claim of plaintiffs that the cause for the contract of
termination of their services is inexistent rendering said contract as null an void from the beginning. x
xx
Guided thereby, we find that recourse by plaintiffs-appellants to the civil law on contracts by raising
the issue [of] whether or not the contract of termination of services entered into by plaintiffs with
defendants is void from the beginning due to inexistent cause of action under Article 1409 of the Civil
Code, places the case within the jurisdiction of the civil courts.
As refined by the Supreme Court, where the resolution of the dispute requires expertise, not in labor
management relations nor in wage structures and other terms and conditions of employment, but
rather in the application of the general civil law, such claim falls outside the area of competence of
expertise ordinarily ascribed to Labor Arbiters and the NLRC. Thus, the trial court erred in finding that
it has no jurisdiction over the case.
Secondly, the trial court erred in ruling that the complaint of plaintiffs-appellants has
prescribed. Article 1410 of the Civil Code, in relation to Article 1409 as herein before quoted,
specifically provides that the action for the declaration of the inexistence of a contract on ground (3)
above does not prescribe.
Thirdly, one of the requisites for the application of the principle of res judicata is that there must be a
judgment on the merits in the earlier case involving the same parties and the same issues. Plaintiffs-
appellants complaint was dismissed by the NLRC on the ground that their cause of action had
prescribed; no trial has been held on the first complaint. Thus, the dismissal of the first complaint is
not a judgment on the merits and therefore not applicable to the present case.
WHEREFORE, the order of dismissal is reversed and set aside. Let the original records of Civil Case No.
CEB-15310, be remanded to the Regional Trial Court (Branch 19), Cebu City for further
proceedings. Costs against defendants-appellees.
SO ORDERED.[4]
SMC filed a motion for reconsideration but was denied in the CAs Resolution dated 14
November 1996[5]. Hence, this petition.
In its petition, SMC contends that the CA erred:
I
IN HOLDING THAT THE REGIONAL TRIAL COURT OF CEBU, BRANCH 19, HAS JURISDICTION OVER THE
INSTANT CASE AND THE CAUSE OF ACTION OF THE RESPONDENTS ARE NOT ACTUALLY BASED ON AN
EMPLOYER-EMPLOYEE RELATIONSHIP WHEN THE COMPLAINT SHOWS THAT THE RESPONDENTS ARE
CLAIMING TO HAVE BEEN UNJUSTLY SEPARATED FROM THEIR REGULAR EMPLOYMENTS (sic) BY THE
PETITIONERS AND ARE DEMANDING TO BE PAID ACTUAL AND COMPENSATORY DAMAGES
CONSISTING OF THEIR EXPECTED INCOME BY WAY OF SALARIES AND OTHER FRINGE BENEFITS DUE
THEM UNDER THE LAW FROM THE TIME OF THEIR SEPARATION AND UNTIL THEIR RETIREMENT DUE
TO AGE OR LENGTH OF SERVICE . . . SOCIAL SECURITY SYSTEM BENEFITS . . . RETIREMENT BENEFITS.
II
IN RULING THAT THE COMPLAINT OF THE RESPONDENTS HAVE NOT YET PRESCRIBED WHEN THE
RESPONDENTS HAVE CLAIMED IN THEIR COMPLAINT THAT THEY HAVE BEEN ALLEGEDLY
BRAINWASHED BY THE PETITIONERS AND THEIR COMPAINT (sic) WAS FILED ONLY AFTER MORE THAN
SIX (6) YEARS HAVE LAPSED FROM THE TIME THAT THE RESPONDENTS CLAIMED TO HAVE
DISCOVERED THAT INDEED, DEFENDANTS (Petitioners) DECEIVED THEM INTO BELIEVING THAT
DEFENDANT CORPORATION WAS INCURRING LOSSES IN ITS OPERATION HENCE, THE NECESSITY TO
TRIM DOWN ITS WORK FORCE TO INDUCE THEM TO ACCEPT THE OFFER OF RETRENCHMENT (sic).
III
IN RULING THAT THE DISMISSAL OF THE FIRST COMPLAINT IS NOT A JUDGMENT ON THE MERITS AND
THEREFORE NOT APPLICABLE TO THE PRESENT CASE WHEN IT IS THE SAID DIVISIONS OWN FINDING
THAT: THE COMPLAINT FILED BY HEREIN PLAINTIFFS-APPELLANTS (Respondents) WITH THE
REGIONAL ARBITRATION BRANCH PRAYED FOR THE DECLARATION OF THE TERMINATION SCHEME
ALLEGEDLY DECEPTIVELY FORCED UPON THEM TO BE NULL AND VOID WITH THE SAME PRAYER THAT
THEY BE REINSTATED TO THEIR REGULAR EMPLOYMENT WITHJOUT ANY LOSS OF ANY RIGHTS (sic)
AND BENEFITS (sic) AS WELL AS PAYMENT OF THEIR BACKWAGES AND DAMAGES.[6]
We find the petition impressed with merit.
The demarcation line between the jurisdiction of regular courts and labor courts over cases
involving workers and their employers has always been the subject of dispute. We have recognized
that not all claims involving such groups of litigants can be resolved solely by our labor
courts.[7] However, we have also admonished that the present trend is to refer worker-employer
controversies to labor courts, unless unmistakably provided by the law to be otherwise. [8] Because of
this trend, jurisprudence has developed the reasonable causal connection rule. Under this rule, if
there is a reasonable causal connection between the claim asserted and the employer-employee
relations, then the case is within the jurisdiction of our labor courts. [9] In the absence of such nexus, it
is the regular courts that have jurisdiction.[10]
The jurisdiction of labor courts is provided under Article 217 of the Labor Code, to wit:
ART. 217. Jurisdiction of Labor Arbiters and the Commission.-- (a) Except as otherwise provided under
this Code the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or 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 employer-
employee relations;
5. Cases arising from any violation of Article 264 of this Code including questions involving
the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including
those of persons in domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether accompanied with a claim
for reinstatement.
(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 form 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.[11]
With regard to claims for damages under paragraph 4 of the above article, this Court has
observed that:
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
the damages be considered as arising from employer-employee relations.[12]
In the present case, while respondents insist that their action is for the declaration of nullity of
their contract of termination, what is inescapable is the fact that it is, in reality, an action for damages
emanating form employeremployee relations. First, their claim for damages is grounded on their
having been deceived into serving their employment due to SMCs concocted financial distress and
fraudulent retrenchment program a clear case of illegal dismissal. Second, a comparison of
respondents complaint for the declaration of nullity of the retrenchment program before the labor
arbiter and the complaint for the declaration of nullity of their contract of termination before the RTC
reveals that the allegations and prayer of the former are almost identical with those of the latter
except that the prayer for reinstatement was no longer included and the claim for backwages and
other benefits was replaced with a claim for actual damages. These are telltale signs that respondents
claim for damages is intertwined with their having been separated from their employment without
just cause and, consequently, has a reasonable causal connection with their employer-employee
relations with SMC. Accordingly, it cannot be denied that respondents claim falls under the
jurisdiction of the labor arbiter as provided in paragraph 4 of Article 217.
Respondents assertion that their action is for the declaration of nullity of their contract of
termination is merely an ingenious way of presenting their actual action, which is a claim for damages
grounded on their having been illegal terminated. However, it would seem that respondents
committed a Freudian slip when they captioned their claim against SMC as an action for
damages.[13] Even the term used for designating the contract, i.e. contract of termination, was
formulated in a shrewd manner so as to avoid a semblance of employer-employee relations. This
observation is bolstered by the fact that if respondents designation for the contract were to be made
complete and reflective of its nature, its proper designation would be a contract of termination of
employment.
The Court is aware that the Civil Code provisions on contracts and damages may be used as
bases for addressing the claim of respondents. However, the fact remains that the present action
primarily involves an employer-employee relationship. The damages incurred by respondents as a
result of the alleged fraudulent retrenchment program and the allegedly defective contract of
termination are merely the civil aspect of the injury brought about by their illegal dismissal. [14] The
civil ramifications of their actual claim cannot alter the reality that it is primordially a labor matter
and, as such, is cognizable by labor courts. In Associated Citizens Bank vs. Japson,[15] we held:
For the unlawful termination of employment, this Court in Primero v. Intermediate Appellate
Court, supra, ruled that the Labor Arbiter had the exclusive and original jurisdiction over claims for
moral and other forms of damages, so that the employee in the proceedings before the Labor Arbiter
should prosecute his claims not only for reliefs specified under the Labor Code but also for damages
under the Civil Code. This is because an illegally dismissed employee has only a single cause of action
although the act of dismissal may be a violation not only the Labor Code but also of the Civil
Code. For a single cause of action, the dismissed employee cannot institute a separate action before
the Labor Arbiter for backwages and reinstatement and another action before the regular court for
the recovery of moral and other forms of damages because splitting a single cause of action is
procedurally unsound and obnoxious to the orderly administration of justice. (Primero v.
Intermediate Appellate Court, supra, citing Gonzales v. Province of Iloilo, 38 SCRA 209; Cyphil
Employees Association-Natu v. Pharmaceutical Industries, 77 SCRA 135; Calderon v. Court of Appeals, PATRICIA HALAGUEA, MA. ANGELITA L. PULIDO, MA. G.R. No. 172013
100 SCRA 459, etc.)[16] TERESITA P. SANTIAGO,
MARIANNE V. KATINDIG, Present:
Even assuming arguendo that the RTC has jurisdiction, it is obvious from respondents own BERNADETTE A. CABALQUINTO,
pleadings that their action for the declaration of nullity of the contract of termination will not LORNA B. TUGAS, MARY CHRISTINE A. VILLARETE,
YNARES-SANTIAGO, J.,
prosper.Respondents allege that they were deceived by SMC into believing that it was under financial CYNTHIA A. STEHMEIER, ROSE ANNA G. VICTA, NOEMI
Chairperson,
distress which, thus, led them into concluding the contract of termination with the R. CRESENCIO, and other flight attendants of
CHICO-NAZARIO,
latter.[17] Respondents then posit that since the cause of the contract, SMCs alleged financial distress, PHILIPPINE AIRLINES,
VELASCO, JR.,
was inexsistent, the contract is null and void. The argument is flawed. Petitioners,
NACHURA, and
The fact that SMC was never in financial distress does not, in any way, affect the cause of their PERALTA, JJ.
- versus -
contract of termination. Rather, the fraudulent representations of SMC only affected the consent of
respondents in entering into the said contract.[18] If the consent of a contracting party is vitiated by
fraud, the contract is not void but, merely, voidable.[19] In Abando vs. Lozada,[20] we ruled: PHILIPPINE AIRLINES INCORPORATED,
Respondent.
As correctly pointed out by the appellate court, the strategem (sic), the deceit, the
misrepresentations employed by Cuevas and Pucan are facts constitutive of fraud which is defined in
Article 1338 of the Civil Code as that (sic) insidious words or machinations of one of the contracting
parties, by which the other is induced to enter into a contract which, without them, he would not
have agreed to. When fraud is employed to obtain the consent of the other party to enter into a
contract, the resulting contract is merely a voidable contract, that is, a valid and subsisting contract
until annulled or set aside by a competent court. x x x[21]

An action to annul a voidable contract based on fraud should be brought within four (4) years
from the discovery of the same.[22] In the present case, respondents discovered SMCs fraud in May
1986.However, the action to question the validity of the contract was only brought on 14 December
1993, or more than seven (7) years after the discovery of the fraud. Clearly, respondents action has
already prescribed.
The issue of jurisdiction and prescription having been resolved, it is no longer necessary to
discuss the issue on res judicata raised in this petition.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 16 May 1996 and
its Resolution dated 14 November 1996 are hereby REVERSED and SET ASIDE and the Resolution
dated 21 June 1994 of the Regional Trial Court of Cebu, Branch 19, in CEB-15310, REINSTATED.
SO ORDERED.
PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision[1] and the Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP.
No. 86813.
Petitioners were employed as female flight attendants of respondent Philippine Airlines (PAL) on
different dates prior to November 22, 1996. They are members of the Flight Attendants and Stewards
Association of the Philippines (FASAP), a labor organization certified as the sole and exclusive
certified as the sole and exclusive bargaining representative of the flight attendants, flight stewards
and pursers of respondent.

On July 11, 2001, respondent and FASAP entered into a Collective Bargaining
Agreement[3] incorporating the terms and conditions of their agreement for the years 2000 to 2005,
hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For the Cabin Attendants hired before 22 November 1996:

 xxxx
3. Compulsory Retirement
Subject to the grooming standards provisions of this Agreement, compulsory
retirement shall be fifty-five (55) for females and sixty (60) for males. x x x.
In a letter dated July 22, 2003,[4] petitioners and several female cabin crews manifested that the
aforementioned CBA provision on compulsory retirement is discriminatory, and demanded for an
equal treatment with their male counterparts. This demand was reiterated in a letter [5] by petitioners'
counsel addressed to respondent demanding the removal of gender discrimination provisions in the
coming re-negotiations of the PAL-FASAP CBA.
On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA
proposals[6] and manifested their willingness to commence the collective bargaining negotiations
between the management and the association, at the soonest possible time.
On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the
Issuance of Temporary Restraining Order and Writ of Preliminary Injunction [7] with the Regional Trial
Court (RTC) of Makati City, Branch 147, docketed as Civil Case No. 04-886, against respondent for the
invalidity of Section 144, Part A of the PAL-FASAP CBA. The RTC set a hearing on petitioners'
application for a TRO and, thereafter, required the parties to submit their respective memoranda.
On August 9, 2004, the RTC issued an Order[8] upholding its jurisdiction over the present case. The
RTC reasoned that:
In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA which is
allegedly discriminatory as it discriminates against female flight attendants, in
violation of the Constitution, the Labor Code, and the CEDAW. The allegations in
the Petition do not make out a labor dispute arising from employer-employee
relationship as none is shown to exist. This case is not directed specifically against
respondent arising from any act of the latter, nor does it involve a claim against the
respondent. Rather, this case seeks a declaration of the nullity of the questioned
provision of the CBA, which is within the Court's competence, with the allegations
in the Petition constituting the bases for such relief sought.
The RTC issued a TRO on August 10, 2004,[9] enjoining the respondent for implementing Section 144,
Part A of the PAL-FASAP CBA.
The respondent filed an omnibus motion[10] seeking reconsideration of the order overruling its
objection to the jurisdiction of the RTC the lifting of the TRO. It further prayed that the (1) petitioners'
application for the issuance of a writ of preliminary injunction be denied; and (2) the petition be
dismissed or the proceedings in this case be suspended.
On September 27, 2004, the RTC issued an Order[11] directing the issuance of a writ of preliminary
injunction enjoining the respondent or any of its agents and representatives from further
implementing Sec. 144, Part A of the PAL-FASAP CBA pending the resolution of the case.
Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with Prayer
for a Temporary Restraining Order and Writ of Preliminary Injunction [12]with the Court of Appeals
(CA) praying that the order of the RTC, which denied its objection to its jurisdiction, be annuled and
set aside for having been issued without and/or with grave abuse of discretion amounting to lack of
jurisdiction.
The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and ruled
that:
WHEREFORE, the respondent court is by us declared to have NO JURISDICTION
OVER THE CASE BELOW and, consequently, all the proceedings, orders and
processes it has so far issued therein are ANNULED and SET ASIDE. Respondent
court is ordered to DISMISS its Civil Case No. 04-886.
SO ORDERED.
Petitioner filed a motion for reconsideration,[13] which was denied by the CA in its Resolution dated
March 7, 2006.
Hence, the instant petition assigning the following error:
THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR
DISPUTE OR GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.
The main issue in this case is whether the RTC has jurisdiction over the petitioners' action challenging
the legality or constitutionality of the provisions on the compulsory retirement age contained in the
CBA between respondent PAL and FASAP.
Petitioners submit that the RTC has jurisdiction in all civil actions in which the subject of the litigation
is incapable of pecuniary estimation and in all cases not within the exclusive jurisdiction of any court,
tribunal, person or body exercising judicial or quasi-judicial functions. The RTC has the power to
adjudicate all controversies except those expressly witheld from the plenary powers of the court.
Accordingly, it has the power to decide issues of constitutionality or legality of the provisions of
Section 144, Part A of the PAL-FASAP CBA. As the issue involved is constitutional in character, the
labor arbiter or the National Labor Relations Commission (NLRC) has no jurisdiction over the case
and, thus, the petitioners pray that judgment be rendered on the merits declaring Section 144, Part A
of the PAL-FASAP CBA null and void.
Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the present
case, as the controversy partakes of a labor dispute. The dispute concerns the terms and conditions
of petitioners' employment in PAL, specifically their retirement age. The RTC has no jurisdiction over
the subject matter of petitioners' petition for declaratory relief because the Voluntary Arbitrator or
panel of Voluntary Arbitrators have original and exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation or implementation of the CBA. Regular courts
have no power to set and fix the terms and conditions of employment. Finally, respondent alleged
that petitioners' prayer before this Court to resolve their petition for declaratory relief on the merits
is procedurally improper and baseless.
The petition is meritorious.
Jurisdiction of the court is determined on the basis of the material allegations of the complaint and
the character of the relief prayed for irrespective of whether plaintiff is entitled to such relief. [14]
In the case at bar, the allegations in the petition for declaratory relief plainly show that petitioners'
cause of action is the annulment of Section 144, Part A of the PAL-FASAP CBA. The pertinent portion
of the petition recites:
CAUSE OF ACTION
24. Petitioners have the constitutional right to fundamental equality with men
under Section 14, Article II, 1987 of the Constitution and, within the specific
context of this case, with the male cabin attendants of Philippine Airlines.
26. Petitioners have the statutory right to equal work and employment
opportunities with men under Article 3, Presidential Decree No. 442, The Labor
Code and, within the specific context of this case, with the male cabin attendants
of Philippine Airlines.
27. It is unlawful, even criminal, for an employer to discriminate against women
employees with respect to terms and conditions of employment solely on account
of their sex under Article 135 of the Labor Code as amended by Republic Act No.
6725 or the Act Strengthening Prohibition on Discrimination Against Women.
28. This discrimination against Petitioners is likewise against the Convention on the
Elimination of All Forms of Discrimination Against Women (hereafter, CEDAW), a
multilateral convention that the Philippines ratified in 1981. The Government and
its agents, including our courts, not only must condemn all forms of discrimination
against women, but must also implement measures towards its elimination.
29. This case is a matter of public interest not only because of Philippine Airlines'
violation of the Constitution and existing laws, but also because it highlights the
fact that twenty-three years after the Philippine Senate ratified the CEDAW,
discrimination against women continues.
31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory
retirement from service is invidiously discriminatory against and manifestly
prejudicial to Petitioners because, they are compelled to retire at a lower age (fifty-
five (55) relative to their male counterparts (sixty (60).
33. There is no reasonable, much less lawful, basis for Philippine Airlines to
distinguish, differentiate or classify cabin attendants on the basis of sex and
thereby arbitrarily set a lower compulsory retirement age of 55 for Petitioners for
the sole reason that they are women.
37. For being patently unconstitutional and unlawful, Section 114, Part A of the
PAL-FASAP 2000-2005 CBA must be declared invalid and stricken down to the
extent that it discriminates against petitioner.
38. Accordingly, consistent with the constitutional and statutory guarantee of
equality between men and women, Petitioners should be adjudged and declared
entitled, like their male counterparts, to work until they are sixty (60) years old.
PRAYER
WHEREFORE, it is most respectfully prayed that the Honorable Court:
c. after trial on the merits:
(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA
INVALID, NULL and VOID to the extent that it discriminates
against Petitioners; x x x x
From the petitioners' allegations and relief prayed for in its petition, it is clear that the issue raised is
whether Section 144, Part A of the PAL-FASAP CBA is unlawful and unconstitutional. Here, the
petitioners' primary relief in Civil Case No. 04-886 is the annulment of Section 144, Part A of the PAL-
FASAP CBA, which allegedly discriminates against them for being female flight attendants. The
subject of litigation is incapable of pecuniary estimation, exclusively cognizable by the RTC, pursuant
to Section 19 (1) of Batas Pambansa Blg. 129, as amended.[15] Being an ordinary civil action, the same
is beyond the jurisdiction of labor tribunals.
The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the
application of the Constitution, labor statutes, law on contracts and the Convention on the
Elimination of All Forms of Discrimination Against Women, [16] and the power to apply and interpret
the constitution and CEDAW is within the jurisdiction of trial courts, a court of general jurisdiction.
In Georg Grotjahn GMBH & Co. v. Isnani,[17] this Court held that 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.
Not every controversy or money claim by an employee against the employer or vice-versa is within
the exclusive jurisdiction of the labor arbiter. 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.[18] Here, the
employer-employee relationship between the parties is merely incidental and the cause of action
ultimately arose from different sources of obligation, i.e., the Constitution and CEDAW.
Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or other
labor relations statute or a collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and not to the labor arbiter and
the NLRC. In such situations, resolution of the dispute requires expertise, not in labor management
relations nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to labor arbiters and the NLRC and the rationale for granting jurisdiction
over such claims to these agencies disappears.[19]
If We divest the regular courts of jurisdiction over the case, then which tribunal or forum shall
determine the constitutionality or legality of the assailed CBA provision?
This Court holds that the grievance machinery and voluntary arbitrators do not have the power to
determine and settle the issues at hand. They have no jurisdiction and competence to decide
constitutional issues relative to the questioned compulsory retirement age. Their exercise of
jurisdiction is futile, as it is like vesting power to someone who cannot wield it.
In Gonzales v. Climax Mining Ltd.,[20] this Court affirmed the jurisdiction of courts over questions on
constitutionality of contracts, as the same involves the exercise of judicial power. The Court said:
Whether the case involves void or voidable contracts is still a judicial question. It
may, in some instances, involve questions of fact especially with regard to the
determination of the circumstances of the execution of the contracts. But the
resolution of the validity or voidness of the contracts remains a legal or judicial
question as it requires the exercise of judicial function. It requires the
ascertainment of what laws are applicable to the dispute, the interpretation and
application of those laws, and the rendering of a judgment based thereon. Clearly,
the dispute is not a mining conflict. It is essentially judicial. The complaint was not
merely for the determination of rights under the mining contracts since the very
validity of those contracts is put in issue.
In Saura v. Saura, Jr.,[21] this Court emphasized the primacy of the regular court's judicial power
enshrined in the Constitution that is true that the trend is towards vesting administrative bodies like
the SEC with the power to adjudicate matters coming under their particular specialization, to insure a
more knowledgeable solution of the problems submitted to them. This would also relieve the
regular courts of a substantial number of cases that would otherwise swell their already clogged
dockets. But as expedient as this policy may be, it should not deprive the courts of justice of their
power to decide ordinary cases in accordance with the general laws that do not require any
particularexpertise or training to interpret and apply. Otherwise, the creeping take-over by the
administrative agencies of the judicial power vested in the courts would render the judiciary
virtually impotent in the discharge of the duties assigned to it by the Constitution.
To be sure, in Rivera v. Espiritu,[22] after Philippine Airlines (PAL) and PAL Employees Association
(PALEA) entered into an agreement, which includes the provision to suspend the PAL-PALEA CBA for
10 years, several employees questioned its validity via a petition for certiorari directly to the Supreme
Court. They said that the suspension was unconstitutional and contrary to public policy. Petitioners
submit that the suspension was inordinately long, way beyond the maximum statutory life of 5 years
for a CBA provided for in Article 253-A of the Labor Code. By agreeing to a 10-year suspension,
PALEA, in effect, abdicated the workers' constitutional right to bargain for another CBA at the
mandated time.
In that case, this Court denied the petition for certiorari, ruling that there is available to petitioners a
plain, speedy, and adequate remedy in the ordinary course of law. The Court said that while the
petition was denominated as one for certiorari and prohibition, its object was actually the
nullification of the PAL-PALEA agreement. As such, petitioners' proper remedy is an ordinary civil
action for annulment of contract, an action which properly falls under the jurisdiction of the regional
trial courts.
The change in the terms and conditions of employment, should Section 144 of the CBA be held
invalid, is but a necessary and unavoidable consequence of the principal relief sought, i.e.,
nullification of the alleged discriminatory provision in the CBA. Thus, it does not necessarily follow
that a resolution of controversy that would bring about a change in the terms and conditions of
employment is a labor dispute, cognizable by labor tribunals. It is unfair to preclude petitioners from
invoking the trial court's jurisdiction merely because it may eventually result into a change of the
terms and conditions of employment. Along that line, the trial court is not asked to set and fix the
terms and conditions of employment, but is called upon to determine whether CBA is consistent with
the laws.
Although the CBA provides for a procedure for the adjustment of grievances, such referral to the
grievance machinery and thereafter to voluntary arbitration would be inappropriate to the
petitioners, because the union and the management have unanimously agreed to the terms of the
CBA and their interest is unified.
In Pantranco North Express, Inc., v. NLRC,[23] this Court held that:
x x x 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. x x x
. The rule in Article 1306, of our Civil Code is that the contracting parties may
Applying the same rationale to the case at bar, it cannot be said that the "dispute"
is between the union and petitioner company because both have previously
agreed upon the provision on "compulsory retirement" as embodied in the CBA.
Also, it was only private respondent on his own who questioned the compulsory
retirement. x x x.
In the same vein, the dispute in the case at bar is not between FASAP and respondent PAL, who have
both previously agreed upon the provision on the compulsory retirement of female flight attendants
as embodied in the CBA. The dispute is between respondent PAL and several female flight attendants
who questioned the provision on compulsory retirement of female flight attendants. Thus, applying
the principle in the aforementioned case cited, referral to the grievance machinery and voluntary
arbitration would not serve the interest of the petitioners.
Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator under the
CBA would be futile because respondent already implemented Section 114, Part A of PAL-FASAP CBA
when several of its female flight attendants reached the compulsory retirement age of 55.
Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its association's
bargaining proposal for the remaining period of 2004-2005 of the PAL-FASAP CBA, which includes the
renegotiation of the subject Section 144. However, FASAP's attempt to change the questioned
provision was shallow and superficial, to say the least, because it exerted no further efforts to pursue
its proposal. When petitioners in their individual capacities questioned the legality of the compulsory
retirement in the CBA before the trial court, there was no showing that FASAP, as their
representative, endeavored to adjust, settle or negotiate with PAL for the removal of the difference
in compulsory age retirement between its female and male flight attendants, particularly those
employed before November 22, 1996. Without FASAP's active participation on behalf of its female
flight attendants, the utilization of the grievance machinery or voluntary arbitration would be
pointless.
The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA.
Interpretation, as defined in Black's Law Dictionary, is the art of or process of discovering and
ascertaining the meaning of a statute, will, contract, or other written document. [24] The provision
regarding the compulsory retirement of flight attendants is not ambiguous and does not require
interpretation. Neither is there any question regarding the implementation of the subject CBA
provision, because the manner of implementing the same is clear in itself. The only controversy lies in
its intrinsic validity.
Although it is a rule that a contract freely entered between the parties should be respected, since a
contract is the law between the parties, said rule is not absolute.
In Pakistan International Airlines Corporation v. Ople, [25] this Court held that:
The principle of party autonomy in contracts is not, however, an absolute principle.
establish such stipulations as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy. Thus, counter-
balancing the principle of autonomy of contracting parties is the equally general
rule that provisions of applicable law, especially provisions relating to matters
affected with public policy, are deemed written into the contract. Put a little
differently, the governing principle is that parties may not contract away applicable
provisions of law especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and employment is clearly
such an area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting
with each other.
Moreover, the relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.x x x [26] The
supremacy of the law over contracts is explained by the fact that labor contracts are not ordinary
contracts; these are imbued with public interest and therefore are subject to the police power of the
state.[27] It should not be taken to mean that retirement provisions agreed upon in the CBA are
absolutely beyond the ambit of judicial review and nullification. A CBA, as a labor contract, is not
merely contractual in nature but impressed with public interest. If the retirement provisions in the
CBA run contrary to law, public morals, or public policy, such provisions may very well be voided. [28]
Finally, the issue in the petition for certiorari brought before the CA by the respondent was the
alleged exercise of grave abuse of discretion of the RTC in taking cognizance of the case for
declaratory relief. When the CA annuled and set aside the RTC's order, petitioners sought relief
before this Court through the instant petition for review under Rule 45. A perusal of the petition
before Us, petitioners pray for the declaration of the alleged discriminatory provision in the CBA
against its female flight attendants.
This Court is not persuaded. The rule is settled that pure questions of fact may not be the proper
subject of an appeal by certiorari under Rule 45 of the Revised Rules of Court. This mode of appeal is
generally limited only to questions of law which must be distinctly set forth in the petition. The
Supreme Court is not a trier of facts.[29]
The question as to whether said Section 114, Part A of the PAL-FASAP CBA is discriminatory or not is a
question of fact. This would require the presentation and reception of evidence by the parties in
order for the trial court to ascertain the facts of the case and whether said provision violates the
Constitution, statutes and treaties. A full-blown trial is necessary, which jurisdiction to hear the same
is properly lodged with the the RTC. Therefore, a remand of this case to the RTC for the proper
determination of the merits of the petition for declaratory relief is just and proper.

WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of Appeals,
dated August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813
are REVERSED and SET ASIDE. The Regional Trial Court of Makati City, Branch 147 is DIRECTED to
continue the proceedings in Civil Case No. 04-886 with deliberate dispatch.

SO ORDERED.

G.R. No. 164888 December 6, 2006

RURAL BANK OF CORON (PALAWAN), INC., EMPIRE COLD STORAGE AND DEVELOPMENT
CORPORATION, CITIZENS DEVELOPMENT INCOPRORATED, CARIDAD B. GARCIA, SANDRA G. ESCAT,
LORNA GARCIA, and OLGA G. ESCAT, petitioners,
vs.
ANNALISA CORTES, respondent

CARPIO MORALES, J.:

In 1987, Virgilio Garcia, "founder" of petitioner corporations (the corporations), hired the then still
single Annalisa Cortes (respondent) as clerk of the Rural Bank of Coron (Manila Office).

After Virgilio died, his son Victor took over the management of the corporations.
Anita Cortes (Anita), the wife of Victor Garcia, was also involved in the management of the
corporations. Respondent later married Anita’s brother Eduardo Cortes.
Anita soon assumed the position of Vice President of petitioner Citizens Development Incorporated
(CDI) and practically controlled the financial operations of almost all of the other corporations in the
course of which she allowed some of her relatives and in-laws, including respondent, to hold several
key sensitive positions thereat.
Respondent later became the Financial Assistant, Personnel Officer and Corporate Secretary of The
Rural Bank of Coron, Personnel Officer of CDI, and also Personnel Officer and Disbursing Officer of
The Empire Cold Storage Development Corporation (ECSDC). She simultaneously received salaries
from these corporations.
On examination of the financial books of the corporations by petitioner Sandra Garcia Escat, a
daughter of Virgilio Garcia who was previously residing in Spain, she found out that respondent was
involved in several anomalies,1drawing petitioners to terminate respondent’s services on November
23, 1998 in petitioner corporations.2
By letter of November 25, 19983 addressed to individual petitioners Caridad B. Garcia (widow of
Virgilio Garcia), Sandra G. Escat, and Olga G. Escat (another daughter of Virgilio Garcia), respondent’s
counsel conveyed respondent’s willingness to abide by the decision to terminate her but reminded
them that she was entitled to separation pay equivalent to 11 months salary as well as to the other
benefits provided by law in her favor.
Respondent’s counsel thus demanded the payment of respondent’s unpaid salary for the months of
October and November 1998, separation pay equivalent to 12 months salary, 4 13th month pay and
other benefits.
As the demand remained unheeded, respondent filed a complaint 5 for illegal dismissal and non-
payment of salaries and other benefits, docketed as NLRC-NCR Case No. 00-05-05738-99.
Petitioners moved for the dismissal of the complaint on the ground of lack of jurisdiction, contending
that the case was an intra-corporate controversy involving the removal of a corporate officer,
respondent being the Corporate Secretary of the Rural Bank of Coron, Inc., hence, cognizable by the
Securities and Exchange Commission (SEC) pursuant to Section 5 of PD 902-A.6
In resolving the issue of jurisdiction, the Labor Arbiter noted as follows:
It is to be noted that complainant, aside from her being Corporate Secretary of Rural Bank of
Coron, complainant was likewise appointed as Financial Assistant & Personnel Officer of all
respondents herein, whose services w[ere] terminated on 23 November 1998, hence, the
instant complaint.
Verily, a Financial Assistant & Personnel Officer is not a Corporate Officer of the
[petitioners’] corporation, thus, pursuant to Article 217 of the Labor Code, as amended, the
instant case falls within the ambit of original and exclusive jurisdiction of this
Office.7 (Emphasis and underscoring supplied).
Eventually, the Labor Arbiter found for respondent, computing the monetary award due her as
follows:
Backwages P658,000.00
13th Month Pay for 1998, 1999 & 63,000.00
2000
P721,000.00
Separation Pay 315,000.00
Unpaid Salary 25,900.00
Attorney’s fees 106,190.00
P1,168,090.00
Thus, the Labor Arbiter, by Decision of July 18, 2001, disposed:
WHEREFORE, in view of all the foregoing, respondents are hereby ordered to jointly and
severally pay complainant the total amount of ONE MILLION ONE HUNDRED SIXTY-EIGHT
THOUSAND NINETY (P1,168,090.00) PESOS as discussed above.8
On August 13, 2001, the tenth or last day of the period of appeal,9 petitioners filed a Notice of Appeal
and Motion for Reduction of Bond10 to which they attached a Memorandum on Appeal.11 In
their Motion for Reduction of Bond, petitioners alleged that the corporations were under financial
distress and the Rural Bank of Coron was under receivership. They thus prayed that the amount of
bond be substantially reduced, preferably to one half thereof or even lower.12
By Resolution of October 16, 200113, the National Labor Relations Commission (NLRC), while noting
that petitioners timely filed the appeal, held that the same was not accompanied by an appeal bond,
a mandatory requirement under Article 22314 of the Labor Code and Section 6, Rule VI of the NLRC
New Rules of Procedure. It also noted that the Motion for Reduction of Bond was "premised on self-
serving allegations." It accordingly dismissed the appeal.
Petitioners’ Motion for Reconsideration15 was denied by the NLRC by November 26, 2001
Resolution,16 hence, they filed a Petition for Certiorari17 before the Court of Appeals.
By Decision dated May 26, 200418, the appellate court dismissed the petition for lack of merit.
Petitioners’ motion for reconsideration was also denied by Resolution of August 13, 2004. 19
Hence, this petition,20 petitioners faulting the appellate court for:
I
. . . FAIL[URE] TO RULE THAT THE NLRC’S RULE OF PROCEDURE WHICH PROVIDES FOR THE
POSTING OF A BOND AS A CONDITION PRECEDENT FOR PERFECTING AN APPEAL AS A
CONDITION PRECEDENT FOR PERFECTING AN APPEAL IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
II
. . . DISMISS[ING] PETITIONERS[’] PETITION FOR [CERTIORARI] BASED ON TECHNICALITY AND
FAIL[URE] TO DECIDE THE SAME BASED ON ITS MERIT.
III
. . . DISMISSING PETITIONERS’ PETITION FOR CERTIORARI FROM THE DECISION OF THE NLRC
FOR NON-PERFECTION THEREOF.
IV
. . . DISMISSING PETITIONERS’ PETITION FOR [CERTIORARI] FROM THE DECISION OF THE
NLRC WITHOUT RESOLVING THE CASE BASED ON ITS MERITS.
V period for appeal. However, in this case, the motion for reduction of appeal bond, which was
. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL PETITIONERS ARE NOT SOLIDARY LIABLE TO
PAY THE RESPONDENT FOR HER MONETARY CLAIM IN VIEW OF THE ABSENCE OF ANY
EVIDENCE SHOWING THAT THEY WERE MOTIVATED BY ILL-WILL OR MALICE IN SEVERING
HER EMPLOYMENT.
VI
. . . FAIL[URE] TO RESOLVE THE ISSUE OF JURISDICTION.21
While, indeed, respondent was the Corporate Secretary of the Rural Bank of Coron, she was also its
Financial Assistant and the Personnel Officer of the two other petitioner corporations. 22
Mainland Construction Co., Inc. v. Movilla23 instructs that a corporation can engage its corporate
officers to perform services under a circumstance which would make them employees.24
The Labor Arbiter has thus jurisdiction over respondent’s complaint.
On the first three assigned errors which bear on whether petitioners’ appeal before the NLRC was
perfected:
As before the Court of Appeals, petitioners cite Cosico, Jr. v. NLRC[25] and Taberrah v. NLRC[26] in
support of their contention that their appeal before the NLRC was perfected. As correctly ruled by the
Court of Appeals, however, the cited cases are not in point.
… The appellant in Taberrah filed a motion to fix appeal bond instead of posting an appeal
bond; and the Supreme Court relaxed the requirement considering that the labor arbiter’s
decision did not contain a computation of the monetary award. In Cosico, the appeal bond
posted was of insufficient amount but the Supreme Court ruled that provisions of the Labor
Code on requiring a bond on appeal involving monetary awards must be given liberal
interpretation in line with the desired objective of resolving controversies on their merits.
Herein, no appeal bond, whether sufficient or not, was ever filed by the
petitioners.27 (Italics in the original; emphasis and underscoring supplied)
Petitioners additionally cite Star Angel Handicraft v. NLRC[28] to support their position that there is a
distinction between the filing of an appeal within the reglementary period and its perfection. In the
parallel case of Computer Innovations Center v. National Labor Relations Commission,29 this Court
hesitated to reiterate the doctrine in Star Angel in this wise:
Petitioners invoke the aforementioned holding in Star Angel that there is a distinction
between the filing of an appeal within the reglementary period and its perfection, and that
the appeal may be perfected after the said reglementary period. Indeed, Star Angel held
that the filing of a motion for reduction of appeal bond necessarily stays the reglementary
incorporated in the appeal memorandum, was filed only on the tenth or final day of the
reglementary period. Under such circumstance, the motion for reduction of appeal bond
can no longer be deemed to have stayed the appeal, and the petitioner faces the risk, as
had happened in this case, of summary dismissal of the appeal for non-perfection.
Moreover, the reference in Star Angel to the distinction between the period to file the
appeal and to perfect the appeal has been pointedly made only once by this Court in Gensoli
v. NLRC thus, it has not acquired the sheen of venerability reserved for repeatedly-cited
cases. The distinction, if any, is not particularly evident or material in the Labor Code; hence,
the reluctance of the Court to adopt such doctrine. Moreover, the present provision in the
NLRC Rules of Procedure, that "the filing of a motion to reduce bond shall not stop the
running of the period to perfect appeal" flatly contradicts the notion expressed in Star
Angel that there is a distinction between the filing an appeal and perfecting an appeal.
Ultimately, the disposition of Star Angel was premised on the ruling that a motion for
reduction of the appeal bond necessarily stays the period for perfecting the appeal, and that
the employer cannot be expected to perfect the appeal by posting the proper bond until
 such time the said motion for reduction is resolved. The unduly stretched-out distinction
between the period to file an appeal and to perfect an appeal was not material to the
resolution of Star Angel, and this could be properly considered as obiter dictum.30(Italics in
the original; emphasis and underscoring supplied)

The appellate court did not thus err in dismissing the petition before it. And contrary to petitioners’
assertion, the appellate court dismissed its petition not "on a mere technicality." For the non-posting
of an appeal bond within the reglementary period divests the NLRC of its jurisdiction to entertain the
appeal. Thus, in the same case of Computer Innovations Center, this Court held:

Petitioners also characterize the appeal bond requirement as a technical rule, and that the
dismissal of an appeal on purely technical grounds is frowned upon. However, Article 223,
which prescribes the appeal bond requirement, is a rule of jurisdiction and not of
procedure. There is a little leeway for condoning a liberal interpretation thereof, and
certainly none premised on the ground that its requirements are mere technicalities. It must
be emphasized that there is no inherent right to an appeal in a labor case, as it arises solely
from grant of statute, namely the Labor Code.

We have indeed held that the requirement for posting the surety bond is not merely
procedural but jurisdictional and cannot be trifled with. Non-compliance with such legal
requirements is fatal and has the effect of rendering the judgment final and executory. The
petitioners cannot be allowed to seek refuge in a liberal application of rules for their act of
negligence.31 (Emphasis and underscoring supplied)

It bears emphasis that all that is required to perfect the appeal is the posting of a bond to ensure that
the award is eventually paid should the appeal be dismissed. Petitioners should thus have posted a
bond, even if it were only partial, but they did not. No relaxation of the Rule may thus be
considered.32

In the case at bar, petitioner did not post a full or partial appeal bond within the prescribed period, IENVENIDO C. GILLES, Petitioner, v. COURT OF APPEALS, SCHEMA KONSULT, and EDGARDO
thus, no appeal was perfected from the decision of the Labor Arbiter. For this reason, the decision ABORES, Respondents.
sought to be appealed to the NLRC had become final and executory and therefore immutable. Clearly
then, the NLRC has no authority to entertain the appeal, much less to reverse the decision of the
DECISION
Labor Arbiter. Any amendment or alteration made which substantially affects the final and executory
judgment is null and void for lack of jurisdiction, including the entire proceeding held for that
purpose.33 (Emphasis and underscoring supplied) NACHURA, J.:

As the decision of the Labor Arbiter had become final and executory, a discussion of the fourth and Before the Court is a petition for certiorari under Rule 65 of the Rules of Court assailing the
fifth assigned errors is no longer necessary. Decision1dated January 29, 2001 and the Resolution dated June 14, 2001 of the Court of Appeals (CA)
in CA-G.R. SP No. 58467.
WHEREFORE, the petition is DENIED.
The Facts
SO ORDERED.
The antecedents of the case are as follows: It is, therefore, with deep regret that I should tender my irrevocable resignation effective 15 May
1993.
Respondent Schema Konsult, Inc. (SKI) is a company engaged in all phases of project consulting,
management, and supervision of services, including investment studies, feasibility studies, micro- Thank you for giving me the opportunity to work with a great team.
processing analysis, and detailed scheme formulation, for all types of industrial plants, and
installation, infrastructure, and development projects. 2 Respondent Edgardo C. Abores (Abores) was On May 11, 1993, Gilles left India.15
the President of SKI at the time material to the case. 3 On the other hand, petitioner Bienvenido C.
Gilles (Gilles) was an incorporator, stockholder, and member of the Board of Directors from 1987 to On May 14, 1993, Schou faxed a Letter16 to Abores, informing him of the abrupt departure of Gilles
March 1993, Vice-President for Finance and Administration from 1992 to 1993 and Principal Engineer from the Project and its attendant consequences. The letter reads:
of SKI from 1987 to March 1993.4
We have on 10 May 1993 received Mr. Gilles' resignation, dated 5 May 1993, which was incorrectly
In 1993, SKI entered into an Agreement Regarding Staff Provision 5 (Agreement) with Carl Bro addressed to us, and we understand that he left India on 11 May 1993. We regret that his personal
International (CBI), a corporation organized under the laws of Denmark. CBI entered into a joint problems caused this to happen.
venture with Aquatic Farms, Ltd., a foreign corporation under contract with the government of India
for the provision of consultancy assistance on the "Shrimp and Fish Culture Project" (Project).6 The
His decision has resulted in a very serious and critical situation as regards our contractual obligations
Project involved the development of shrimp farms in different parts of India, funded from a loan
towards the Min. of Agric. in India, and Aquatic Farms Ltd. (AFL) has informed that Bien's work has
extended to the Government of India, particularly its Ministry of Agriculture, by the International
been very unsatisfactory for several weeks before his departure. In order to ensure that we meet the
Bank for Reconstruction and Development.7 The Ministry of Agriculture signed a contract with
deadlines for design, AFL has brought in a temporary substitute for Bien, but this substitute is not
Aquatic Farms, Ltd., in association with CBI, for provision of consultancy assistance to the Project. CBI
billable to the project.
contracted SKI to provide a qualified aquaculture engineer for the Project. 8
You are kindly requested to inform what actions you propose to take regarding replacement of Bien.
Gilles applied for, and was accepted as, Water Systems/Irrigation Engineer of the Project for a period
of two (2) years, commencing on January 24, 1993.9 The Agreement provided that: (1) CBI would pay
An Inter-Office Memorandum,17 dated May 18, 1993, was sent to Gilles requesting him to attend the
SKI a monthly fee of US$4,000.00; (2) Gilles' basic salary of US$2,500.00 would be taken from the said
Board of Directors meeting scheduled on May 19, 1993 at 2:00 p.m., at which the matter of his
fee; and (3) during Gilles' first sixty (60) days in India, he would receive a subsistence allowance of
resignation would be discussed.
US$87.00 per calendar day to defray his expenses for accommodation, board and lodging, and hotel
room accommodation during project travels away from the duty station. 10 For the duration of Gilles'
assignment in India, he would be considered as a regular employee of SKI, but all the conditions in At the board meeting on May 19, 1993, Abores explained that the meeting was called precisely to
the Agreement between SKI and CBI would apply.11 discuss the resignation of Gilles from his assignment in India. Abores read before the Members of the
Board the Letter18 of Gilles dated May 15, 1993, pertinent portions of which state:
In January 1993, prior to Gilles' departure for India, he received US$5,000.00 from SKI as an advance
of his subsistence allowance to sustain him during his initial months in India. 12 While in India, he twice Resigning from my assignment in India as a Carl Bro employee was one of the most difficult and
received 43,000 Indian Rupees (INR), equivalent to Php43,000.00, to cover his expenses from April 1- painful decisions I made in my life. I did not only give up the chance to be better off financially but
30, 1993 and from May 1-15, 1993.13 most of all end my career as a consultant.

On May 10, 1993, Gilles tendered his Resignation Letter 14 to Mr. Torben R. Schou (Schou) of CBI. The The following has created a very discouraging and depressing working environment for me in India
pertinent portions of the letter read: which pushed me to make such decision.

For the past several weeks, I have been burdened by serious personal and financial problems. I have 1) In our contract with Carl Bro (page 3/6, Annex 1 which is the same Annex in the contract between
tried to put these problems out of my mind but they still keep on bothering me that my physical Aquatic Farms and the Indian Government), it is stated that design works for the 13 proposed prawn
condition and capacity to concentrate with my work are affected. Because of these, I have decided to farms are to be undertaken from the 5th month (May 1993) to the 27th month. The attached
go back to the Philippines and face these problems. memorandum of Mr. Clyde Simon supported the aforementioned schedule by recommending that
construction of only three farms be started this year. In this memorandum, Mr. Clyde emphasized
that quality of work should never be compromised.
In our initial review of the design undertaken by CICEF on all 13 proposed farms (the design costs the
Indian Government approximately 8.0 million Rupees), we found that major changes on the design
criteria should be made (pages 12 to 18 of the Inception Report). Although these changes necessitate
redesign for all proposed farms, the original work schedule can still be made applicable with only
slight modifications.
However, on April 1 during a meeting in Delhi attended by our Project Advisor, he committed the
completion of the design (including construction drawings, cost estimates, feasibility and design
reports, technical specifications and other documents necessary for tendering) of three proposed
farms by the end of May and the completion of the design for the other 10 sites by the end of 1993.
This means that we have to finish the design for 1.5 sites per month (the farm area ranges from 52 to
1,671 ha.) This commitment was made by our Senior Project Advisor to the World Bank, India's
Central Government and State Officials.
Since I was the water systems engineer in the group, much of the pressure of keeping up with our
Senior Project Advisor's commitment was passed on to me. I had to work 18 hours on the average
every day seven days a week.
xxx
4) I was made to expect when I left for this assignment that I will be better off financially. However,
for the last three and a half months now, Carl Bro has not paid my salary (3.5 months) and my
subsistence allowance for my first 60 days stay in Bangalore. How could I be expected to fulfill my
financial obligations here in the Philippines? I have an 80-year old mother to support, loans to
amortize, relatives to help with their medical expenses, etc. Although, SCHEMA was kind to have
given me an advance of US$5,000. During my first sixty days in Bangalore, as consultants, we were
made to stay in five star hotel. I spent on the average US$70 per day for a total of US$4,200 in 60
days.
Several times I have made personal long distance calls to SCHEMA to follow-up on my salary and to
talk to management about the other items mentioned above. RMS, EEA and EAV were so kind to
listen to my problems as well as do something within the limits of their positions. However, the
person who could have helped me most refused to talk to me. I felt that I was abandoned by SCHEMA
management.
I was already in a very discouraged, depressed, exhausted and dejected state hence, I decided to
leave Bangalore before my replacement was found.
I wrote this letter to explain the reasons why I left my post in India before my replacement was
found. This is not intended to ask management for reconsideration on its decision of terminating my
services with SCHEMA. My request to management is to be kind enough to grant me separation
benefits of one month per year of service and other benefits normally given to leaving employees. I
am also requesting management to facilitate the payment of my 3.5 months salary by Carl Bro. I can
claim, with a clear conscience, that I have earned, up to the last cent, my wage in India.
As I have already mentioned in the earlier part of this letter that my resignation from my assignment
in India has ended my career as a consultant. Hence, the granting of my aforementioned request
would help me in venturing into new sources of livelihood.
Abores explained that the management was unaware of the difficulties encountered by Gilles in
India, as no communication, official or otherwise, was received from Gilles. He said that Gilles never
submitted any written progress report on the Project, contrary to the company's standard operating
procedures.19 The Board of Directors then decided to terminate the services of Gilles effective June 7,
1993,20 and a notice of termination was sent to him.21
On September 6, 1993, Gilles filed a complaint for illegal dismissal against respondents, seeking
reinstatement, moral damages, and other monetary claims. 22
Gilles alleged that there was a deliberate scheme to ease him out of the Project and ultimately out of
SKI. He believed that Abores was behind it. He said that while he was in India, his salary from the
Project was not given to him on time. He claimed that he tried to communicate with SKI
representatives, particularly with Abores, relative to the difficulties he encountered in India, but his
calls were ignored. Moreover, the March 20, 1993 election of officers of SKI was not relayed to him
on time, which resulted in his failure to attend the meeting or to send a proxy and, thus, was not
elected officer of the company, a position that he consistently held in the past. 23 He also challenged
the May 19, 1993 Board of Directors meeting as a hoax. He alleged that the meeting did not take
place. He claimed that he talked to two (2) or three (3) members of the Board of Directors and they
confirmed to him that his termination from employment was not the subject of the said meeting.
However, to his disbelief, Abores was able to produce minutes of the alleged meeting where his
termination by the Board was the principal item in the agenda. 24
On the other hand, SKI dismissed the allegations of Gilles as mere fabrication. SKI averred that Gilles
was well provided in India; that his resignation from CBI and his departure from India were not
known nor approved by SKI; that the May 19, 1993 board meeting was real and Gilles was informed
of such meeting at which his side was heard, but he was asked to step out of the meeting for
displaying a temper; that the proceedings were properly recorded in the minutes; that the Board of
Directors decided to terminate Gilles' services effective June 7, 1993; and that SKI paid Gilles what
was due him from the Project in India even if CBI had yet to pay the consultancy fees. 25
On July 10, 1997, the Labor Arbiter rendered a Decision,26 the dispositive portion of which reads:
WHEREFORE, the respondents are hereby ordered, jointly and severally:
1.) To reinstate the complainant to his former position as Vice-President for Finance/Administration,
with full backwages from the date his salary was withheld until he is actually reinstated which as of
date has reached P1,274,000.00. If reinstatement should become improbable, then, the complainant
should be paid separation pay equivalent to one-half month salary for every year of service rendered
in addition to the grant of backwages; [and]
2.) To pay the complainant the sum of P500,000.00 as moral damages.
The respondents are, likewise, assessed the sum of P127,400.00 representing 10% of the benefits
awarded as attorney's fees.
SO ORDERED.27
On appeal, the National Labor Relations Commission (NLRC) affirmed the decision of the Labor
Arbiter with modification in a Resolution28 dated November 29, 1999. The fallo of the resolution
reads:
WHEREFORE, the decision appealed from is AFFIRMED, with modification deleting the award of
attorney's fee and reducing the award of moral damages to P100,000.00.
SO ORDERED.29
SKI moved for reconsideration. The motion was denied in a Resolution dated January 31,
2000.30Unsatisfied, SKI filed a petition for certiorari and prohibition under Rule 65 of the Rules of
Court before the CA, raising the following issues: (a) the controversy was an intra-corporate dispute
exclusively cognizable by the Securities and Exchange Commission (SEC), and beyond the jurisdiction
of the NLRC; and (b) the finding of the Labor Arbiter that Gilles was illegally dismissed was bereft of
merit.
On January 29, 2001, the CA rendered a Decision granting the petition of SKI, 31 disposing, as follows:
WHEREFORE, foregoing premises considered, the petition having merit, in fact and in law, is hereby
GIVEN DUE COURSE. ACCORDINGLY, the decision/judgment of the Labor Arbiter and public
respondent National Labor Relations Commission (3rd Division), are hereby SET ASIDE and ANNULLED
for having been rendered without jurisdiction, and the complaint of private respondent ordered
DISMISSED. Public respondents or any of their agent/s are hereby permanently enjoined/restrained
from executing their judgment. No costs.
SO ORDERED.32
The CA ratiocinated that the removal of Gilles as Vice-President of SKI was an intra-corporate
controversy that was within the jurisdiction of the SEC. Furthermore, Gilles was not illegally dismissed
from service, considering that he resigned from his assignment in India even before a replacement
was found.33
Gilles filed a motion for reconsideration. On June 14, 2001, the CA issued a Resolution dismissing the
motion.
Hence, this petition.
The Issues
Gilles raises the following issues for our resolution:
I
WHETHER [OR] NOT THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION IN HOLDING THAT THE LABOR ARBITER HAS NO JURISDICTION OVER THE ILLEGAL
DISMISSAL CASE OF HEREIN PETITIONER?
II
WHETHER OR NOT THE DISPOSITIVE PORTION OF THE LABOR ARBITER'S DECISION CONTAINING
REINSTATEMENT FOR THE POSITION OF VICE-PRESIDENT INSTEAD OF HIS REGULAR EMPLOYMENT AS
PRINCIPAL ENGINEER WOULD DIVEST THE JURISDICTION OF NLRC OVER THE ILLEGAL DISMISSAL CASE
OF HEREIN PETITIONER?
III
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE IN DISTURBING
THE FINDING OF THE LABOR ARBITER AND AFFIRMED BY THE NATIONAL LABOR RELATIONS
COMMISSION (3rd DIVISION) THAT THE PETITIONER WAS ILLEGALLY DISMISSED FROM HIS REGULAR
EMPLOYMENT?34
These issues may be reduced to the following: (1) whether the NLRC has jurisdiction over the illegal
dismissal case; and (2) whether Gilles was illegally dismissed from employment.
The Ruling of the Court
I
Article 217 of the Labor Code vests in Labor Arbiters and the NLRC exclusive jurisdiction to hear and
decide cases involving termination disputes and all other cases arising from employer-employee
relations, as it provides:
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; [and]
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
(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.
Based on this provision, the NLRC has jurisdiction over the illegal dismissal case filed by Gilles.
Contrary to the stance of SKI, the case is not an intra-corporate dispute but a labor controversy. Gilles
sought reinstatement; he wanted to recover his position as Principal Engineer of SKI. He also prayed
for backwages, moral damages, and attorney's fees.
However, the Labor Arbiter committed an error when, in the dispositive portion of the July 10, 1997
Decision, he ordered the reinstatement of Gilles to his former position as Vice-President for Finance
of SKI. That ruling finds no legal support in the ratio decidendi of the Decision itself, which reads:
Respondents, through counsel, moved for the dismissal of the case on the ground that this Office
lacks the jurisdiction to arbitrate the same. It is argued that the complainant is not an ordinary
employee, being the Vice-President for Finance/Administration and Treasurer, in addition to his job
position as Principal Engineer. It is[,] likewise[,] claimed that the issue involved is an intra-corporate
controversy which falls under the exclusive jurisdiction of the Securities and Exchange Commission.
The motion must be denied. The complainant lost his position as VP-Finance/Administration and
Treasurer when he was not voted in the 20 March 1993 stockholders' meeting. His remaining
relationship with the respondent firm after that date was his job position of Principal Engineer.
Moreover, the issue here is one of termination of employment, arising from circumstances on
complainant's assignment in India. No incident of intra-corporate character has been linked to the
employment issue. It appears, therefore, that the element of intra-corporate controversy is absent [in
the case which gives this Office the jurisdiction] to arbitrate the termination issue. 35
Based on the records of the case, Gilles never sought to regain his seat in the Board of Directors; he
actually claimed reinstatement as Principal Engineer of SKI. The Labor Arbiter's decision was muddled
with a lengthy discussion on the Board of Directors positions that Gilles held in the past, his failure to
participate in the March 19, 1993 SKI Board of Directors elections due to the delayed receipt of the
notice of the meeting, and the circumstances which led him to believe that there was an overt plan to
oust him from the company.
Nonetheless, despite the tangled web of premises in the Labor Arbiter's disquisition, what emerges is
a clear case of a labor dispute, properly cognizable by the NLRC.
II
Employment may be severed either by the employee or by the employer. An employer-initiated
termination must be based on just or authorized causes enumerated in Articles 282, 283, 36 284,37 and
28738 of the Labor Code. On the other hand, an employee may terminate his employment with or
without just cause for any of the grounds enumerated under Article 285 39 of the Labor Code.
A valid termination of employment by the employer must comply with two requisites, namely: (1) the
dismissal must be for any of the causes provided under Article 282 of the Labor Code; and (2) the
employee must be afforded an opportunity to be heard and to defend himself. Substantively, the
employer can terminate the services of an employee for just and valid causes, which must be
supported by clear and convincing evidence; and procedurally, the employee must be given notice
and an adequate opportunity to be heard before his actual dismissal for cause. 40
In this case, Gilles questions the validity of his dismissal as the Principal Engineer of SKI. He contends
that he only resigned as a consultant for the Project in India and not as a regular employee of SKI.
Furthermore, he contests the genuineness of the May 19, 1993 board meeting and denies that he
was given the opportunity to explain his side.
SKI maintains that Gilles was terminated for willful disobedience and gross neglect of his duties, just
causes recognized in Article 282 of the Labor Code, viz.:
Art. 282. Termination by employer.
An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; andcralawlibrary
already spent. Rickie Sarque, the Chief Accountant of SKI, admitted on the witness stand that Gilles
was paid his salaries for the 3 - months when he was already back in Manila.44 Added to this were the
problems he encountered due to the acceleration of the job completion period, the obligations he
had to meet at home for his aged mother at that time, now deceased, and the relatives who needed
his financial support. Clearly, Gilles had a valid reason to leave India.
It should be noted that all the time Gilles was employed as Aquaculture Engineer of the Project, he
remained a regular employee of SKI.45 This is borne out by the Agreement which pertinently reads:
Based on these TOR [Terms of Reference], SK [Schema Konsult, Inc.] has selected Mr. Bienvenido C.
Gilles as the qualified Aquaculture (Water Systems) Engineer, and [the] MOA [Ministry of Agriculture]
has accepted his assignment as a member of the AFL/CBI [Aquatic Farms Ltd./Carl Bro International]
team. B.C. Gilles shall be employed by SK.46
SKI, as the principal employer of Gilles, had the responsibility to pay Gilles his salaries and to defray
his expenses while he was engaged in the Project in India. Again, the Agreement explicitly covers this
obligation, viz.:

4. Remuneration and Expenses

(e) Other causes analogous to the foregoing.

During the period of assignment, CBI shall pay to SK a total monthly rate of USD4,000.00, broken
Willful disobedience of the employer's lawful orders, as a just cause for dismissal of an employee,
down as follows:
requires the concurrence of two (2) elements: (1) the employee's assailed conduct must have been
willful, i.e., characterized by a wrongful and perverse attitude; and (2) the order violated must have
been reasonable, lawful, made known to the employee, and must pertain to the duties which he had USD
been engaged to discharge.41
Basic Salary to B.C. Gilles 2,500.00
Gilles' resignation from CBI and sudden departure from India was not approved by SKI. When he
SK Office overhead and profit 1,500.00
asked the company's permission to return to Manila, the management instructed him to stay in India
until a suitable replacement was found.42 He knew of the critical stage of the Project due to the Total monthly rate 4,000.00
accelerated period of its completion.43 Thus, when he left the Project, despite the clear and lawful
instructions of the management for him to stay, his act constituted willful disobedience and gross
neglect of duty under Article 282 of the Labor Code. In case B.C. Gilles' assignment commences or terminates during a month, a daily rate of USD
140.00/per working day shall be used for calculating the payment to SK.
But SKI was guilty of violating Article 103 of the Labor Code. SKI was remiss in paying the
compensation of Gilles as Aquaculture Engineer of the Project on time. Based on the findings of fact The total monthly or daily rate is the full remuneration to SK for the services of B.C. Gilles, and
of the Labor Arbiter, as confirmed by the NLRC, Gilles was not paid his salaries for the three and half includes:
(3' ) months of his stay in India. Article 103 of the Labor Code mandates that wages shall be paid at
least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days and that Salary to B.C. Gilles
no employer shall make payment with less frequency than once a month.
Social charges
Gilles' departure from India, despite the instruction of SKI for him to stay, was impelled by the
financial difficulties he encountered thereat. The money given to him before he left for India was All personal insurances, including:
Health insurance
Travel insurance
Personal belongings insurance
Accident and life insurance
Employer's liability and workers compensation insurance
Leave pay and sick leave pay
Leave on official Indian Holidays and on non-Indian holidays
Taxes and duties
Relocation costs
All living expenses beyond the subsistence allowance
Third party motor vehicle liability insurance
The total monthly rate, the USD subsistence allowance, the international travel per diem and
expenses to be reimbursed by CBI shall be invoiced monthly and paid by CBI to SK not later than 30
days after CBI's receipt from SK of invoice and documentation acceptable to CBI including copies of
receipts and filled in timesheets approved by the AFL/CBI SPA. Payment shall be effected by a bank
transfer to a bank account informed by SK. CBI shall pay only for the bank charges payable to CBI's
bank.
Reimbursement of eligible expenses in INR shall be effected directly to B.C. Gilles in India by the
AFL/CBI SPA on behalf of CBI against presentation of receipts.47
SKI's failure to pay Gilles' salary on time was intolerable. For neglecting its duties as an employer, SKI
may, thus, be considered to have acted in bad faith. It may be deemed as utter disregard by SKI of the
welfare and well-being of its employee, especially at a time when he was far away from home.
We, therefore, find that Gilles was constructively dismissed from employment. Constructive dismissal
exists when the employee involuntarily resigns due to the harsh, hostile, and unfavorable conditions
set by the employer. It arises when there is clear discrimination, insensibility, or disdain by an
employer and this becomes unbearable to the employee. 48
Invariably, the law recognizes and resolves such a situation in favor of the employees in order to
protect their rights from the coercive acts of the employer. Resignation contemplates a voluntary act;
thus, an employee who is forced to relinquish his position due to the employer's unfair or
unreasonable treatment is deemed to have been illegally terminated or discharged. The test of
constructive dismissal is whether a reasonable person in the employee's position would have felt
compelled to give up his position under the circumstances.49
The disobedience committed by Gilles cannot be characterized as wrongful or perverse per se, given
the conditions he was subjected to while in India. He left the Project primarily because of the
financial difficulties he encountered, owing to his failure to receive his salary and because of the
adverse working conditions in India.50 The Senior Project Advisor accelerated the time schedule of the
Project, and Gilles had to work on the job at an average of eighteen (18) hours
daily.51 ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Further, SKI alleges neglect of duty as a ground for dismissing Gilles, saying Gilles' unceremonious
return to the Philippines constituted abandonment. The contention is untenable. As a just cause for
an employee's dismissal, neglect of duty must not only be gross but also habitual. A single or isolated
act of negligence does not constitute a just cause for the dismissal of the employee. Prior to his
abrupt departure from India, Gilles had no derogatory record in the company. Besides, if it was true
that the performance of Gilles was unsatisfactory or if he habitually neglected his duties, SKI or CBI
should have initiated his removal prior to his departure from India. The Agreement 52 contains an
adequate provision for the removal or replacement of Gilles if the employers are dissatisfied with his
performance. The said provision reads:
15. Removal and/or Replacement of Personnel
If CBI (i) finds that B.C. Gilles has conducted serious misconduct or has been charged with having
committed a criminal action, or (ii) has reasonable cause to be dissatisfied with the performance of
B.C. Gilles, then SK shall, at CBI's written request specifying the ground thereof, forthwith provide a
replacement with qualifications and experience similar to B.C. Gilles or better and acceptable to CBI,
AFL and MOA.53
Article 279 of the Labor Code mandates that an employee who was unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, as well as to other benefits or their monetary equivalent
computed from the time his compensation was withheld up to the time of his actual reinstatement.
Since the circumstances obtaining in this case do not warrant Gilles' reinstatement due to his strained
relations with the company, an award of separation pay, in lieu of reinstatement, equivalent to one
month pay for every year of service, in addition to full backwages, allowances, and other benefits or
the monetary equivalent thereof, is in order.
As to the liability of Abores as President of SKI, it is basic that a corporation, being a juridical entity,
may act only through its directors, officers and employees. Obligations incurred by them, while acting
as corporate agents, are not their personal liability but the direct accountability of the corporation
they represent. As a rule, they are only solidarily liable with the corporation for the termination of
employees if they acted with malice or bad faith.54 In the case at bar, malice or bad faith on the part
of Abores in the constructive dismissal of Gilles was not sufficiently proven to justify holding him
solidarily liable with SKI.
WHEREFORE, the assailed Decision dated January 29, 2001 and Resolution dated June 14, 2001 of the
Court of Appeals in CA-G.R. SP No. 58467 are hereby SET ASIDE. Petitioner Bienvenido C. Gilles is
awarded separation pay equivalent to one month pay for every year of service and full backwages,
other privileges and benefits, or the monetary equivalent thereof, computed from the date of his
illegal dismissal on June 7, 1993 until the finality of this decision. Respondent Edgardo C. Abores is
ABSOLVED from any liability adjudged against co-respondent Schema Konsult, Inc. Respondent
Schema Konsult, Inc. is likewise ORDERED to pay Gilles One Hundred Thousand Pesos
(Php100,000.00) as moral damages.SO ORDERED.
G.R. No. L-58877 March 15, 1982
PEPSI-COLA BOTTLING COMPANY, COSME DE ABOITIZ, and ALBERTO M. DACUYCUY, petitioners,
vs.
HON. JUDGE ANTONIO M. MARTINEZ, in his official capacity, and ABRAHAM TUMALA,
JR., respondents.
This petition for certiorari, prohibition and mandamus raises anew the legal question often brought
to this Court: Which tribunal has exclusive jurisdiction over an action filed by an employee against his
employer for recovery of unpaid salaries, separation benefits and damages — the court of general
jurisdiction or the Labor Arbiter of the National Labor Relations Commission [NLRC]?
The facts that gave rise to this petition are as follows:
On September 19, 1980, respondent Abraham Tumala, Jr. filed a complaint in the Court of First
Instance of Davao, docketed as Civil Case No. 13494, against petitioners Pepsi-Cola Bottling Co., Inc.,
its president Cosme de Aboitiz and other company officers. Under the first cause of action, the
complaint averred inter alia that Tumala was a salesman of the company in Davao City from 1977 up
to August 21, 1980; that in the annual "Sumakwel" contest conducted by the company in 1979,
Tumala was declared winner of the "Lapu-Lapu Award" for his performance as top salesman of the
year, an award which entitled him to a prize of a house and lot; and that petitioners, despite
demands, have unjustly refused to deliver said prize Under the second cause of action, it was alleged
that on August 21, 1980, petitioners, "in a manner oppressive to labor" and "without prior clearance
from the Ministry of Labor", "arbitrarily and ilegally" terminated his employment. He prayed that
petitioners be ordered, jointly and severally, to deliver his prize of house and lot or its cash
equivalent, and to pay his back salaries and separation benefits, plus moral and exemplary damages,
attorney's fees and litigation expenses. He did not ask for reinstatement.
Petitioners moved to dismiss the complaint on grounds of lack of jurisdiction and cause of action.
Petitioners further alleged that Tumala was not entitled to the "Sumakwel" prize for having misled
the company into declaring him top salesman for 1979 through various deceitful and fraudulent
manipulations and machinations in the performance of his duties as salesman and depot in-charge of
the bottling company in Davao City, which manipulations consisted of "unremitted cash collections,
fictitious collections of trade accounts, fictitious loaned empties, fictitious product deals, uncollected
loaned empties, advance sales confirmed as fictitious, and route shortages which resulted to the
damage and prejudice of the bottling company in the amount of P381,851.76." The alleged
commission of these fraudulent acts was also advanced by petitioners to justify Tumala's dismissal.
The court below, sustaining its jurisdiction over the case, denied the motion for reconsideration.
Hence the present recourse.
We rule that the Labor Arbiter has exclusive jurisdiction over the case.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority
which organizes the court; and it is given only by law. 1 Jurisdiction is never presumed; it must be
conferred by law in words that do not admit of doubt. 2
Since the jurisdiction of courts and judicial tribunals is derived exclusively from the statutes of the
forum, the issue efore Us should be resolved on the basis of the law or statute now in force. We find
that law in Presidential Decree 1691 which took effect on May 1, 1980, Section 3 of which reads as
follows:
SEC. 3. Article 217, 222 and 262 of Book V of the Labor Code are hereby amended
to read as follows:
Article 217. Jurisdiction of Labor Arbiters and the Commission. — The Labor
Arbiters shall have the original and exclusive jurisdiction to hear and decide the
following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Unresolved issues in collective bargaining, including those that involve waged
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 employees'
compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and
 5. All other claims arising from employer-employee relations, unless expressly
excluded by this Code.
Under paragraphs 3 and 5 of the above Presidential Decree, the case is exclusively cognizable by the
Labor Arbiters of the National Labor Relations Commission.
It is to be noted that P.D. 1691 is an exact reproduction of Article 217 of the Labor Code (P.D. 442),
which took effect on May 1, 1974. In Garcia vs. Martinez 3, an action filed on August 2, 1976 in the
Court of First Instance of Davao by a dismissed employee against his employer for actual, moral and
exemplary damages, We held that under Article 217 of the Labor Code, the law then in force, the
case was within the exclusive jurisdiction of the Labor Arbiters and the National Labor Relations
Commission [NLRC]. This Court, per Justice Aquino, rational this holding thus:
The provisions of paragraph 3 and 5 of Article 217 are broad and comprehensive
enough to cover Velasco's [employee's] claim for damages allegedly arising from his
unjustified dismissal by Garcia [employer]. His claim was a consequence of the
termination of their employer-employee relations [Compare with Ruby Industrial
Corporation vs. Court of First Instance of Manila, L- 38893, August 31, 1977, 78
SCRA 499].
Article 217 of the Labor Code words amended by P.D. 1367, which was promulgated on May 1, 1978,
the full text of which is quoted as follows:
SECTION 1. Paragraph [a] of Art, 217 of the Labor Code as amended is hereby
further amended to read as follows:
[a] The Labor Arbiters shall have exclusive jurisdiction hear and decide the following
cases involving all workers, whether agricultural or non-agricultural:
1] Unfair labor practice cases;
2] Unresolved issues in collective bargaining, including those
which involve wages, hours of work, and other terms conditions
of employment; and
3] All other cases arising from employer-employee relations duly
indorsed by the Regional Directors in accordance with the
provisions of this Code.
Provided, that the Regional Directors shall not indorse and Labor Arbiters shall not
entertain claims for moral or other forms of damages.
It will be noted that paragraphs 3 and 5 of Article 217 were deleted from the text of the above decree
and a new provision incorporated therein, to wit: "Provided that the Regional Directors shall not
indorse and Labor Arbiters shall not en certain claims for moral or other forms of damages." This
amendatory act thus divested the Labor Arbiters of their competence to pass upon claims for
damages by employees against their employers.
However, on May 1, 1980, Article 217, as amended by P.D. 1367, was amended anew by P.D. 1691.
This last decree, which is a verbatim reproduction of the original test of Article 217 of the Labor Code,
restored to the Labor Arbiters of the NLRC exclusive jurisdiction over claims, money or otherwise,
arising from employer-employee relations, except those expressly excluded therefrom.
In sustaining its jurisdiction over the case at bar, the respondent court relied on Calderon vs. Court of
Appeals 4 , where We ruled that an employee's action for unpaid salaries, alowances and other
reimbursable expenses and damages was beyond the periphery of the jurisdictional competence of
the Labor Arbiters. Our ruling in Calderon, however, no longer applaies to this case because P.D.
1367, upon which said decision was based, had already been superceded by P.D. 1691. As heretofore
stated, P.D. 1691 restored to the Labor Arbiters their exlcusive jurisdiction over said classes of claims.
Respondent Tumala maintains that his action for delivery of the house and lot, his prize as top
salesman of the company for 1979, is a civil controversy triable exclusively by the court of the general
jurisdiction. We do not share this view. The claim for said prize unquestionably arose from an
employer-employee relation and, therefore, falls within the coverage of par. 5 of P.D. 1691, which
speaks of "all claims arising from employer-employee relations, unless expressly excluded by this
Code." Indeed, Tumala would not have qualitfied for the content, much less won the prize, if he was
not an employee of the company at the time of the holding of the contest. Besides, the cause
advanced by petitioners to justify their refusal to deliver the prize—the alleged fraudulent
manipulations committed by Tumala in connection with his duties as salesman of the company—
involves an inquiry into his actuations as an employee.
Besides, to hold that Tumala's claim for the prize should be passed upon by the regular court of
justice, independently and separately from his claim for back salaries, retirement benefits and
damages, would be to sanction split juridiction and multiplicity of suits which are prejudicial to the
orderly administration of justice.
One last point. Petitioners content that Tumala has no cause of action to as for back salaries and
damages because his dimissal was authorized by the Regional Director of the MInistry of Labor. This
question calls for the presentaiton of evidence and the same may well be entilated before the labor
Arbiter who has jurisdiction over the case. Besides, the issue raised is not for Us to determine in this
certiorari proceeding. The extraordinary remedy of certiorari proceeding. The extraordinary remedy
of certiorari offers only a limited form of review and its principal function is to keep an inferior
tribunal within its jurisdiction. 5
WHEREFORE, the petition is granted, and respondent judge is hereby directed to dismiss Civil Case
No. 13494, without prejudice to the right of respondent Tumala to refile the same with the Labor
Arbiter. No costs.
SO ORDERED.
SAN MIGUEL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, Second
Division, ILAW AT BUKLOD NG MANGGAGAWA (IBM), respondents.
DECISION
AZCUNA, J.:
Before us is a petition for certiorari and prohibition seeking to set aside the decision of the
Second Division of the National Labor Relations Commission (NLRC) in Injunction Case No. 00468-94
dated November 29, 1994,[1] and its resolution dated February 1, 1995[2] denying petitioners motion
for reconsideration.
Petitioner San Miguel Corporation (SMC) and respondent Ilaw at Buklod ng Manggagawa (IBM),
exclusive bargaining agent of petitioners daily-paid rank and file employees, executed a Collective
Bargaining Agreement (CBA) under which they agreed to submit all disputes to grievance and
arbitration proceedings. The CBA also included a mutually enforceable no-strike no-lockout
agreement. The pertinent provisions of the said CBA are quoted hereunder:
ARTICLE IV
GRIEVANCE MACHINERY
Section 1. - The parties hereto agree on the principle that all disputes between labor and
management may be solved through friendly negotiation;. . . that an open conflict in any form
involves losses to the parties, and that, therefore, every effort shall be exerted to avoid such an open
conflict. In furtherance of the foregoing principle, the parties hereto have agreed to establish a
procedure for the adjustment of grievances so as to (1) provide an opportunity for discussion of any
request or complaint and (2) establish procedure for the processing and settlement of grievances.
xxx xxx xxx
ARTICLE V
ARBITRATION
Section 1. Any and all disputes, disagreements and controversies of any kind between the COMPANY
and the UNION and/or the workers involving or relating to wages, hours of work, conditions of
employment and/or employer-employee relations arising during the effectivity of this Agreement or
any renewal thereof, shall be settled by arbitration through a Committee in accordance with the
procedure established in this Article. No dispute, disagreement or controversy which may be
submitted to the grievance procedure in Article IV shall be presented for arbitration until all the steps
of the grievance procedure are exhausted.
ARTICLE VI
STRIKES AND WORK STOPPAGES
Section 1. The UNION agrees that there shall be no strikes, walkouts, stoppage or slowdown of work,
boycotts, secondary boycotts, refusal to handle any merchandise, picketing, sit-down strikes of any
kind, sympathetic or general strikes, or any other interference with any of the operations of the
COMPANY during the term of this Agreement.
Section 2. The COMPANY agrees that there shall be no lockout during the term of this Agreement so
long as the procedure outlined in Article IV hereof is followed by the UNION. [3]
On April 11, 1994, IBM, through its vice-president Alfredo Colomeda, filed with the National
Conciliation and Mediation Board (NCMB) a notice of strike, docketed as NCMB-NCR-NS-04-180-94,
against petitioner for allegedly committing: (1) illegal dismissal of union members, (2) illegal transfer,
(3) violation of CBA, (4) contracting out of jobs being performed by union members, (5) labor-only
contracting, (6) harassment of union officers and members, (7) non-recognition of duly-elected union
officers, and (8) other acts of unfair labor practice.[4]
The next day, IBM filed another notice of strike, this time through its president Edilberto Galvez,
raising similar grounds: (1) illegal transfer, (2) labor-only contracting, (3) violation of CBA, (4)
dismissal of union officers and members, and (5) other acts of unfair labor practice. This was
docketed as NCMB-NCR-NS-04-182-94.[5]
The Galvez group subsequently requested the NCMB to consolidate its notice of strike with that
of the Colomeda group,[6] to which the latter opposed, alleging Galvezs lack of authority in filing the
same.[7]
 Petitioner thereafter filed a Motion for Severance of Notices of Strike with Motion to Dismiss,
on the grounds that the notices raised non-strikeable issues and that they affected four corporations
which are separate and distinct from each other.[8]
After several conciliation meetings, NCMB Director Reynaldo Ubaldo found that the real issues
involved are non-strikeable. Hence on May 2, 1994, he issued separate letter-orders to both union
groups, converting their notices of strike into preventive mediation. The said letter-orders, in part,
read:
During the conciliation meetings, it was clearly established that the real issues involved are illegal
dismissal, labor only contracting and internal union disputes, which affect not only the interest of the
San Miguel Corporation but also the interests of the MAGNOLIA-NESTLE CORPORATION, the SAN
MIGUEL FOODS, INC., and the SAN MIGUEL JUICES, INC.
Considering that San Miguel Corporation is the only impleaded employer-respondent, and
considering further that the aforesaid companies are separate and distinct corporate entities, we
deemed it wise to reduce and treat your Notice of Strike as Preventive Mediation case for the four (4)
different companies in order to evolve voluntary settlement of the disputes. . . . [9] (Emphasis
supplied)
On May 16, 1994, while separate preventive mediation conferences were ongoing, the
Colomeda group filed with the NCMB a notice of holding a strike vote. Petitioner opposed by filing a
Manifestation and Motion to Declare Notice of Strike Vote Illegal, [10] invoking the case of PAL v.
Drilon,[11] which held that no strike could be legally declared during the pendency of preventive
mediation. NCMB Director Ubaldo in response issued another letter to the Colomeda Group
reiterating the conversion of the notice of strike into a case of preventive mediation and emphasizing
the findings that the grounds raised center only on an intra-union conflict, which is not strikeable,
thus:
A perusal of the records of the case clearly shows that the basic point to be resolved entails the
question of as to who between the two (2) groups shall represent the workers for collective
bargaining purposes, which has been the subject of a Petition for Interpleader case pending
resolution before the Office of the Secretary of Labor and Employment. Similarly, the other issues
raised which have been discussed by the parties at the plant level, are ancillary issues to the main
question, that is, the union leadership...[12] (Emphasis supplied)
Meanwhile, on May 23, 1994, the Galvez group filed its second notice of strike against
petitioner, docketed as NCMB-NCR-NS-05-263-94. Additional grounds were set forth therein,
including discrimination, coercion of employees, illegal lockout and illegal closure. [13] The NCMB
however found these grounds to be mere amplifications of those alleged in the first notice that the
group filed. It therefore ordered the consolidation of the second notice with the preceding one that
was earlier reduced to preventive mediation.[14] On the same date, the group likewise notified the
NCMB of its intention to hold a strike vote on May 27, 1994.
On May 27, 1994, the Colomeda group notified the NCMB of the results of their strike vote,
which favored the holding of a strike.[15] In reply, NCMB issued a letter again advising them that by
virtue of the PAL v. Drilon ruling, their notice of strike is deemed not to have been filed, consequently
invalidating any subsequent strike for lack of compliance with the notice requirement. [16] Despite this
and the pendency of the preventive mediation proceedings, on June 4, 1994, IBM went on strike. The
strike paralyzed the operations of petitioner, causing it losses allegedly worth P29.98 million in daily
lost production.[17]
Two days after the declaration of strike, or on June 6, 1994, petitioner filed with public
respondent NLRC an amended Petition for Injunction with Prayer for the Issuance of Temporary
Restraining Order, Free Ingress and Egress Order and Deputization Order. [18] After due hearing and
ocular inspection, the NLRC on June 13, 1994 resolved to issue a temporary restraining order (TRO)
directing free ingress to and egress from petitioners plants, without prejudice to the unions right to
peaceful picketing and continuous hearings on the injunction case. [19]
To minimize further damage to itself, petitioner on June 16, 1994, entered into a Memorandum
of Agreement (MOA) with the respondent-union, calling for a lifting of the picket lines and
resumption of work in exchange of good faith talks between the management and the labor
management committees. The MOA, signed in the presence of Department of Labor and
Employment (DOLE) officials, expressly stated that cases filed in relation to their dispute will continue
and will not be affected in any manner whatsoever by the agreement. [20] The picket lines ended and
work was then resumed.
Respondent thereafter moved to reconsider the issuance of the TRO, and sought to dismiss the
injunction case in view of the cessation of its picketing activities as a result of the signed MOA. It
argued that the case had become moot and academic there being no more prohibited activities to
restrain, be they actual or threatened.[21] Petitioner, however, opposed and submitted copies of flyers
being circulated by IBM, as proof of the unions alleged threat to revive the strike.[22] The NLRC did not
rule on the opposition to the TRO and allowed it to lapse.
On November 29, 1994, the NLRC issued the challenged decision, denying the petition for
injunction for lack of factual basis. It found that the circumstances at the time did not constitute or no
longer constituted an actual or threatened commission of unlawful acts. [23] It likewise denied
petitioners motion for reconsideration in its resolution dated February 1, 1995. [24]
Hence, this petition.
Aggrieved by public respondents denial of a permanent injunction, petitioner contends that:
A.
THE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT FAILED TO ENFORCE, BY INJUNCTION, THE
PARTIES RECIPROCAL OBLIGATIONS TO SUBMIT TO ARBITRATION AND NOT TO STRIKE.
 B. THE NLRC GRAVELY ABUSED ITS DISCRETION IN WITHHOLDING INJUNCTION WHICH IS THE ONLY
IMMEDIATE AND EFFECTIVE SUBSTITUTE FOR THE DISASTROUS ECONOMIC WARFARE THAT
ARBITRATION IS DESIGNED TO AVOID.
C. THE NLRC GRAVELY ABUSED ITS DISCRETION IN ALLOWING THE TRO TO LAPSE WITHOUT
RESOLVING THE PRAYER FOR INJUNCTION, DENYING INJUNCTION WITHOUT EXPRESSING THE FACTS
AND THE LAW ON WHICH IT IS BASED AND ISSUING ITS DENIAL FIVE MONTHS AFTER THE LAPSE OF
THE TRO.[25]
We find for the petitioner.
Article 254 of the Labor Code provides that no temporary or permanent injunction or restraining
order in any case involving or growing out of labor disputes shall be issued by any court or other
entity except as otherwise provided in Articles 218 and 264 of the Labor Code. Under the first
exception, Article 218 (e) of the Labor Code expressly confers upon the NLRC the power to enjoin or
restrain actual and 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. The second exception, on the other hand, is when the labor organization or the
employer engages in any of the prohibited activities enumerated in Article 264.
Pursuant to Article 218 (e), the coercive measure of injunction may also be used to restrain an
actual or threatened unlawful strike. In the case of San Miguel Corporation v. NLRC,[26]where the
same issue of NLRCs duty to enjoin an unlawful strike was raised, we ruled that the NLRC committed
grave abuse of discretion when it denied the petition for injunction to restrain the union from
declaring a strike based on non-strikeable grounds. Further, in IBM v. NLRC,[27] we held that it is the
legal duty and obligation of the NLRC to enjoin a partial strike staged in violation of the law. Failure
promptly to issue an injunction by the public respondent was likewise held therein to be an abuse of
discretion.
In the case at bar, petitioner sought a permanent injunction to enjoin the respondents strike. A
strike is considered as the most effective weapon in protecting the rights of the employees to
improve the terms and conditions of their employment. However, to be valid, a strike must be
pursued within legal bounds.[28] One of the procedural requisites that Article 263 of the Labor Code
and its Implementing Rules prescribe is the filing of a valid notice of strike with the NCMB. Imposed
for the purpose of encouraging the voluntary settlement of disputes, [29] this requirement has been
held to be mandatory, the lack of which shall render a strike illegal. [30]
In the present case, NCMB converted IBMs notices into preventive mediation as it found that
the real issues raised are non-strikeable. Such order is in pursuance of the NCMBs duty to exert all
efforts at mediation and conciliation to enable the parties to settle the dispute amicably,[31] and in
line with the state policy of favoring voluntary modes of settling labor disputes. [32] In accordance with
the Implementing Rules of the Labor Code, the said conversion has the effect of dismissing the
notices of strike filed by respondent.[33] A case in point is PAL v. Drilon,[34]where we declared a strike
illegal for lack of a valid notice of strike, in view of the NCMBs conversion of the notice therein into a
preventive mediation case. We ruled, thus:
The NCMB had declared the notice of strike as appropriate for preventive mediation. The effect of
that declaration (which PALEA did not ask to be reconsidered or set aside) was to drop the case from
the docket of notice of strikes, as provided in Rule 41 of the NCMB Rules, as if there was no notice of
strike. During the pendency of preventive mediation proceedings no strike could be legally
declared... The strike which the union mounted, while preventive mediation proceedings were
ongoing, was aptly described by the petitioner as an ambush. (Emphasis supplied)
Clearly, therefore, applying the aforecited ruling to the case at bar, when the NCMB ordered the
preventive mediation on May 2, 1994, respondent had thereupon lost the notices of strike it had
filed. Subsequently, however, it still defiantly proceeded with the strike while mediation was ongoing,
and notwithstanding the letter-advisories of NCMB warning it of its lack of notice of strike. In the case
of NUWHRAIN v. NLRC,[35] where the petitioner-union therein similarly defied a prohibition by the
NCMB, we said:
Petitioners should have complied with the prohibition to strike ordered by the NCMB when the latter
dismissed the notices of strike after finding that the alleged acts of discrimination of the hotel were
not ULP, hence not strikeable. The refusal of the petitioners to heed said proscription of the NCMB is
reflective of bad faith.
Such disregard of the mediation proceedings was a blatant violation of the Implementing Rules,
which explicitly oblige the parties to bargain collectively in good faith and prohibit them from
impeding or disrupting the proceedings.[36]
The NCMB having no coercive powers of injunction, petitioner sought recourse from the public
respondent. The NLRC issued a TRO only for free ingress to and egress from petitioners plants, but
did not enjoin the unlawful strike itself. It ignored the fatal lack of notice of strike, and five months
after came out with a decision summarily rejecting petitioners cited jurisprudence in this wise:
Complainants scholarly and impressive arguments, formidably supported by a long line of
jurisprudence cannot however be appropriately considered in the favorable resolution of the instant
case for the complainant. The cited jurisprudence do not squarely cover and apply in this case, as
they are not similarly situated and the remedy sought for were different. [37]
Unfortunately, the NLRC decision stated no reason to substantiate the above conclusion.
Public respondent, in its decision, moreover ruled that there was a lack of factual basis in issuing
the injunction. Contrary to the NLRCs finding, we find that at the time the injunction was being
sought, there existed a threat to revive the unlawful strike as evidenced by the flyers then being
circulated by the IBM-NCR Council which led the union. These flyers categorically declared: Ipaalala
nyo sa management na hindi iniaatras ang ating Notice of Strike (NOS) at anumang oras ay pwede
nating muling itirik ang picket line.[38] These flyers were not denied by respondent, and were dated
June 19, 1994, just a day after the unions manifestation with the NLRC that there existed no threat of
commission of prohibited activities.
 Moreover, it bears stressing that Article 264(a) of the Labor Code[39] explicitly states that a
declaration of strike without first having filed the required notice is a prohibited activity, which may
be prevented through an injunction in accordance with Article 254. Clearly, public respondent should
have granted the injunctive relief to prevent the grave damage brought about by the unlawful strike.
Also noteworthy is public respondents disregard of petitioners argument pointing out the
unions failure to observe the CBA provisions on grievance and arbitration. In the case of San Miguel
Corp. v. NLRC,[40] we ruled that the union therein violated the mandatory provisions of the CBA when
it filed a notice of strike without availing of the remedies prescribed therein. Thus we held:
x x x For failing to exhaust all steps in the grievance machinery and arbitration proceedings provided
in the Collective Bargaining Agreement, the notice of strike should have been dismissed by the NLRC
and private respondent union ordered to proceed with the grievance and arbitration proceedings. In
the case of Liberal Labor Union vs. Phil. Can Co., the court declared as illegal the strike staged by the
union for not complying with the grievance procedure provided in the collective bargaining
agreement. . . (Citations omitted)
As in the abovecited case, petitioner herein evinced its willingness to negotiate with the union by
seeking for an order from the NLRC to compel observance of the grievance and arbitration
proceedings. Respondent however resorted to force without exhausting all available means within its
reach. Such infringement of the aforecited CBA provisions constitutes further justification for the
issuance of an injunction against the strike. As we said long ago: Strikes held in violation of the terms
contained in a collective bargaining agreement are illegal especially when they provide for conclusive
arbitration clauses. These agreements must be strictly adhered to and respected if their ends have to
be achieved.[41]
As to petitioners allegation of violation of the no-strike provision in the CBA, jurisprudence has
enunciated that such clauses only bar strikes which are economic in nature, but not strikes grounded
on unfair labor practices.[42] The notices filed in the case at bar alleged unfair labor practices, the
initial determination of which would entail fact-finding that is best left for the labor arbiters.
Nevertheless, our finding herein of the invalidity of the notices of strike dispenses with the need to
discuss this issue.
We cannot sanction the respondent-unions brazen disregard of legal requirements imposed
purposely to carry out the state policy of promoting voluntary modes of settling disputes. The states
commitment to enforce mutual compliance therewith to foster industrial peace is affirmed by no less
than our Constitution.[43] Trade unionism and strikes are legitimate weapons of labor granted by our
statutes. But misuse of these instruments can be the subject of judicial intervention to forestall grave
injury to a business enterprise.[44]
WHEREFORE, the instant petition is hereby GRANTED. The decision and resolution of the NLRC
in Injunction Case No. 00468-94 are REVERSED and SET ASIDE. Petitioner and private respondent are
hereby directed to submit the issues raised in the dismissed notices of strike to grievance procedure
and proceed with arbitration proceedings as prescribed in their CBA, if necessary. No pronouncement
as to costs.
SO ORDERED.
ATIVIDAD PONDOC, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fifth Division,
Cagayan de Oro City) and EMILIO PONDOC, respondents.
The novel issue that confronts us in this case is whether the Fifth Division of the National Labor
Relations Commission (NLRC) can validly defeat a final judgment of the labor arbiter in favor of the
complainant in a labor case by: (a) entertaining a petition for injunction and damages, and an appeal
from the Labor Arbiters denial of a claim for set-off based on an alleged indebtedness of the laborer
and order of execution of the final judgment; and, (b) thereafter, by receiving evidence and adjudging
recovery on such indebtedness and authorizing it to offset the Labor Arbiters final award.
The petitioner takes the negative view. In its Manifestation and Motion in Lieu of
Comment,[1] the Office of the Solicitor General joins her in her plea, hence we required the NLRC to
file its own comment.
We resolved to give due course to the petition after the filing by the NLRC and the private
respondent of their separate comments.
Petitioner Natividad Pondoc was the legitimate wife of Andres Pondoc. After her death on 5
December 1994, she was substituted by Hipolito Pondoc, her only legitimate son. [2]
The Office of the Solicitor General summarized the factual antecedents of this case in its
Manifestation and Motion in Lieu of Comment:
Private respondent Eulalio Pondoc is the owner-proprietor of Melleonor General Merchandise and
hardware Supply located at Poblacion, Sindangan, Zamboanga del Norte. Respondent is engaged,
among others, in the business of buying and selling copra, rice, corn, binangkol, junk iron and empty
bottles. He has in his employ more than twenty (20) regular workers (Records, pp. 9-11).
Records disclose that Andres Pondoc was employed by Eulalio Pondoc as a laborer from October
1990 up to December 1991, receiving a wage rate of P20.00 per day. He was required to work twelve
(12) hours a day from 7:00 AM to 8:00 PM, Monday to Sunday. Despite working on his rest days and
holidays, he was not paid his premium pay as required by law (Ibid).
Consequently, on May 14, 1992, Natividad Pondoc, on behalf of her husband, filed a complaint for
salary differential, overtime pay, 13th month pay, holiday pay and other money claims before the Sub-
Regional Arbitration Branch No. 9 of the NLRC, docketed as Sub-RAB Case No. 09-05-10102-92
(Records, p. 1).
In his position paper, private respondent questioned, among others, the existence of [an] employer-
employee relationship between them. He further averred that Melleonor General Merchandise and
Hardware Supply is a fictitious establishment (Records, pp. 64-68).
On June 17, 1993, labor Arbiter Esteban Abecia rendered a Decision finding the existence of [an]
employer-employee relationship between the parties. The dispositive portion of the Decision reads:
WHEREFORE, judgment is hereby rendered: (a) ordering respondent Eulalio Pondoc to pay
complainant the following claims:
(1) Salary differential for
reason of underpayment P35,776.00;
(2) Regular holiday and
premium pay for holiday
services 902.00;
(3) Premium pay for rest day
services 3,840.00;
(4) 13th month pay 3,600.00
or the total amount of FOURTY-FOUR [sic] THOUSAND AND ONE HUNDRED EIGHTEEN PESOS
(P44,118.00).
Other claims are denied for lack of merit.
SO ORDERED (Records, pp. 323-324).
On his last day to perfect an appeal, private respondent filed a manifestation before the Labor Arbiter
praying that his liabilities be set-off against petitioners alleged indebtedness to him (Records, pp. 325-
327). The Labor Arbiter denied, however, the compensation, and instead, issued a writ of execution
as prayed for by petitioner (Records, p. 328).
Before the execution order could be implemented, however, private respondent was able to obtain a
restraining order from the NLRC, where he filed a Petition for "Injunction and Damages, docketed as
NLRC Case No. ICM-000065.
On February 28, 1994, public respondent NLRC allowed compensation between petitioners monetary
award and her alleged indebtedness to private respondent. It disposed:
WHEREFORE, the appealed order is hereby vacated and set aside. A new one is entered declaring the
setting-off of complainants indebtedness which allegedly amounted to P41,051.35 against the
complainants monetary award in the amount of P44,118.00. The additional amount of P5,000.00
which complainant allegedly got from respondent on 10 July 1993 could not be credited in view of
appellants failure to submit evidence to prove that complainant was really paid P5,000.00.
Accordingly, respondent Eulalio Pondoc is hereby directed to pay complainant Natividad Pondoc the
amount of P3,066.65.
The Temporary restraining order issued herein is hereby made permanent.
SO ORDERED (Annex D of Petition).[3]
Her motion for reconsideration of the judgment having been denied by the NLRC, the petitioner
instituted this special civil action for certiorari under Rule 65 of the Rules of Court wherein she prays
this Court annul the challenged decision of the NLRC, Fifth Division (Cagayan de Oro City), in NLRC
Case No. IC No. M-000065, and direct the enforcement of the writ of execution in NLRC Case No.
SRAB-09-05-10102-92, on the ground that the NLRC, Fifth Division, acted without or in excess of
jurisdiction or with grave abuse of discretion when it proceeded to determine the alleged
indebtedness of the petitioner and set-off the same against the liabilities of the private
respondent. The petitioner asserts that the decision of the labor Arbiter in NLRC Case No. SRAB-09-
05-10102-92 was already final and executory when the private respondent tried to defeat the
judgment by asserting an alleged indebtedness of Andres Pondoc as a set-off, a claim not pleaded
before the Labor Arbiter at any time before judgment, hence deemed waived. Moreover, the
indebtedness did not evolve out [sic] employer-employee relationship, hence, purely civil in aspect.
The Office of the solicitor General agreed with the petitioner and stressed further that the
asserted indebtedness was never proven to have arisen out of or in connection with the employer-
employee relationship between the private respondent and the late Andres Pondoc, or to have any
causal connection thereto. Accordingly, both the Labor Arbiter and the NLRC did not have jurisdiction
over the private respondents claim.
As expected, the private respondent and the NLRC prayed for the dismissal of this case.
We rule for the petitioner.
The proceedings before the NLRC were fatally flawed.
In the first place, the NLRC should not have entertained the private respondents separate or
independent petition for Injunction and Damages (NLRC IC No. M-000065). It was obvious that the
petition was a scheme to defeat or obstruct the enforcement of the judgment in NLRC Case No.
SRAB-09-05-10102-92 where, in fact, a writ of execution had been issued. Article 218(e) of the Labor
Code does not provide blanket authority to the NLRC or any of its divisions to issue writs of
injunction, while Rule XI of the New Rules of Procedure of the NLRC makes injunction only an
Ancillary remedy in ordinary labor disputes such as the one brought by the petitioner in NLRC Case
No. SRAB-09-05-10102-92. This is clear from Section 1 of the said Rule which pertinently provides as
follows:
Section 1. Injunction in Ordinary Labor Disputed. -- A preliminary injunction or a restraining order may
be granted by the Commission through its divisions pursuant to the provisions of paragraph (e) of
Article 218 of the Labor Code, as amended, when it is established on the bases of the sworn
allegations in the petition that the acts complained of, involving or arising from any labor dispute
before the Commission, which, if not restrained or performed forthwith, may cause grave or
irreparable damage to any party or render ineffectual any decision in favor of such party.
 xxx
The foregoing ancillary power may be exercised by the Labor Arbiters only as an incident to the cases
pending before them in order to preserve the rights of the parties during the pendency of the case,
but excluding labor disputes involving strike or lockout. (emphasis supplied)
Hence, a petition or motion for preliminary injunction should have been filed in the appeal
interposed by the private respondent, i.e., in NLRC Case No. SRAB-09-05-10102-92. This matter,
however, became academic when the NLRC consolidated the two cases as shown by the captions in
its challenged decision of 28 February 1994 and resolution of 6 May 1994.
Secondly, the appeal of the private respondent in NLRC Case No. SRAB-09-05-10102-92 was not
from the decision therein, but from the order of the Labor Arbiter denying the set-off insisted upon
by the private respondent and directing the execution of the judgment. Therefore, the private
respondent admitted the final and executory character of the judgment.
The Labor Arbiter, in denying the set-off, reasoned [I]t could have been considered if it was
presented before the decision of this case.[4] While this is correct, there are stronger reasons why the
set-off should, indeed, be denied. As correctly contended by the Office of the Solicitor General, there
is a complete want of evidence that the indebtedness asserted by the private respondent against
Andres Pondoc arose out of or was incurred in connection with the employer-employee relationship
between them. The Labor Arbiter did not then have jurisdiction over the claim as under paragraph (a)
of Article 217 of the Labor Code, Labor Arbiters have exclusive and original jurisdiction only in the
following cases:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
4. Claim for actual, moral, exemplary and other forms of damages arising from employer-
employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving
the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanies with a claim for
reinstatement.
On the other hand, under paragraph (b) thereof, the NLRC has exclusive appellate jurisdiction over all
cases decided by the Labor Arbiters. This simply means that the NLRC does not have original
jurisdiction over the cases enumerated in paragraph (a) and that if a claim does not fall within the
exclusive original jurisdiction of the labor Arbiter, the NLRC cannot have appellate jurisdiction
thereon.
The conclusion then is inevitable that the NLRC was without jurisdiction, either original or
appellate, to receive evidence on the alleged indebtedness, render judgment thereon, and direct that
its award be set-off against the final judgment of the Labor Arbiter.
Finally, even assuming arguendo that the claim for the alleged indebtedness fell within the
exclusive original jurisdiction of the Labor Arbiter, it was deemed waived for not having been pleaded
as an affirmative defense or barred for not having been set up as a counterclaim before the Labor
Arbiter at any appropriate time prior to the rendition of the decision in NLRC Case No. SRAB-09-05-
10102-92. Under the rules of Court, which is applicable in a suppletory character in labor cases before
the Labor Arbiters or the NLRC pursuant to Section 3, Rule 1 of the New Rules of Procedure of the
NLRC, defenses which are not raised either in a motion to dismiss or in the answer are deemed
waived[5] and counterclaims not set up in the answer are barred. [6] Set-off or compensation is one of
the modes of extinguishing obligations[7] and extinguishment is an affirmative defense and a ground
for a motion to dismiss.[8]
We do not then hesitate to rule that the NLRC acted without jurisdiction or with grave abuse of
discretion in entertaining an independent action for injunction and damages (NLRC IC No. M-000065),
in receiving evidence and rendering judgment on the alleged indebtedness of Andres Pondoc, and in
ordering such judgment to offset the final award of the Labor Arbiter in NLRC Case No. SRAB-09-05-
10102-92.
WHEREFORE, the instant petition is GRANTED and the challenged decision of 28 February 1994
and resolution of 6 May 1994 of the National labor Relations Commission in NLRC Case No. IC No. M-
000065 and NLRC Case No. SRAB-09-05-10102-92 are ANNULLED and SET ASIDE. The judgment of the
Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92 should forthwith be enforced without any
further delay, the award therein bearing interest at the rate of twelve percentum (12%) per annum
from the finality of such judgment until it shall have been fully paid.
Costs against the private respondent.
SO ORDERED.
& A CONSTRUCTION CO., INC. and ATTY. MELECIO ARRANZ, JR., petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and LORNA E. PIMENTEL, respondents.

DECISION
GONZAGA-REYES, J.:

Danilo S. Pimentel was the head of the maintenance division of C & A Construction Co.
(Company for short). It was his duty, among others, to supervise the personnel belonging to the
maintenance division.
On July 3, 1993, second hand spare parts of the Companys motor vehicle were discovered stolen
from the maintenance area of the Company. Investigation disclosed that the said spare parts were
pilfered by three employees of the maintenance division who admitted their guilt in separate
statements. Informed by his co-employees that he was implicated in the theft that occurred on July 3,
1993 Pimentel addressed a letter to the General Manager dated July 21, 1993, stating that he had
nothing to do with the theft committed by the employees in his division because he was allegedly sick
at the time. Petitioner decided to dismiss Pimentel together with the three employees effective July
22, 1993.
On October 8, 1993 Pimentel filed a complaint with the NLRC (NCR Case No. 10-06304-93) for
illegal dismissal, non-payment of legal holiday pay, indemnity pay, premium pay for holiday, for
attorneys fees and violation of P. D. 851.
Pimentel died on October 22, 1993. His widow Lorna Pimentel was substituted as complainant.
It appears that on October 18, 1993, the Company gave Lorna Pimentel the amount
of P15,000.00 as financial assistance, on account of which the latter executed a statement that she
has no other claim against the company.
The Labor Arbiter ruled that Pimentels dismissal was illegal, his liability for the theft of the
Companys property was not sufficiently established. Additionally, it was held that the dismissal was
effected without observance of due process, and in bad faith. However, the amount of P15,000.00
was deducted from the total monetary judgment. The Arbiter disposed as follows in its Decision of
December 14, 1994.
WHEREFORE, the respondents are hereby ordered to pay, jointly and severally substitute
complainant Lorna Pimentel the total amount of fifty one thousand five hundred pesos (P51,500.00)
representing backwages and exemplary damages as computed above.
The Company appealed to the NLRC arguing that:
I In its comment, public respondent reiterates that Pimentel was dismissed without due process
IT IS ERROR ON THE PART OF THE LABOR ARBITER TO STILL TAKE COGNIZANCE OF SUBSTITUTE
COMPLAINANTS CLAIM FOR BACKWAGES OF COMPLAINANT AFTER THE FORMER HAS ALREADY
WAIVED THE CLAIM THEREFOR.
II
IT IS ERROR FOR THE LABOR ARBITER TO HOLD THAT THE DISMISSAL OF THE COMPLAINANT WAS
ILLEGAL AND WITHOUT DUE PROCESS.
III
IT IS NOT ONLY ERROR BUT GRAVE ABUSE OF DISCRETION ON THE PART OF THE LABOR ARBITER TO
AWARD P50,000 AS EXEMPLARY DAMAGES.[1]
The NLRC dismissed the appeal for being without merit. It held in its Resolution dated June 21,
1995-
The appeal has to be dismissed.
Firstly, it is not correct, for respondents to claim that the complainant was validly dismissed because
no less than their documentary evidence attached as Annexes 1 to 3 of their Position Paper (Record,
pp. 117-118) show that the respondents were not able to establish the guilt of the complainant.
On respondents argument that the complainant, through his surviving spouse, waived his backwages
as a consequence of the latters (surviving spouse) receiving P15,000.00 on October 18, 1993 (when
the complainant died) we note that the complaint below was filed by complainant Danilo Salonga
Pimentel on October 8, 1993. If his claims are to be extinguished by any waiver such as that brought
about the wifes receiving [ten (10) after complainant filed the complaint) P15,000.00, such a waiver,
to be valid, just the same necessitated the approval of the Arbiter below [St. Gothard Disco Pub &
Restaurant vs. NLRC, 218 SCRA 327 (1993)]. With no such approval from Labor Arbiter Leda obtained
and/ or appearing on record, the respondents cannot therefore validly invoke the defense of
waiver.[2]
Motion for Reconsideration of the above resolution having been denied, the Company filed this
petition for certiorari, claiming that the NLRC committed grave abuse of discretion in absolving
Pimentel for liability for the theft of the Companys property, and in ruling that the waiver executed
by Lorna Pimentel was invalid because it was not approved by the Labor Arbiter. The petitioner also
assails the award of exemplary damages, as the dismissal of Pimentel was not done in a wanton,
fraudulent, reckless or oppressive manner; at any rate the award of P50,000.00 is excessive and
exorbitant, as the actual loss suffered by Pimentel was only P16,500.00.
as there was no investigation conducted on Pimentels involvement in the alleged theft of scrap
materials, Pimentel learned of his dismissal only on July 28, 1993 when his co-workers visited him in
his residence. Moreover, the evidence against Danilo consisted merely of the affidavits of his co-
workers, none of which establish his participation in the theft. Besides, Pimentel was never given
notice of the charges against him and it was only after his death that a final notice of termination was
given to his widow. As regards the defense of waiver invoked by the petitioners, the quitclaim
executed by Lorna Pimentel is not valid without the Labor Arbiters approval.
Petitioners reply to comment reiterates its earlier contention that the evidence against Pimentel
is more than sufficient to establish his liability for pilferage of its property. It is claimed that Pimentel
was able to submit his explanation even if there was no formal hearing. Moreover, the quitclaim was
voluntarily executed by Lorna Pimentel because she was in dire need of money. The award
of P50,000.00 exemplary damages, which was assailed for having been issued in grave abuse of
discretion, was not controverted in public respondents comment.
The parties filed their respective memorandum, essentially reiterating their previous arguments,
while private respondent submitted its memorandum by adaption reproducing the comment it filed
earlier.
The petition is partly meritorious.
Well-settled is the rule that findings of fact of the National Labor Relations Commission,
affirming those of the Labor Arbiter, are entitled to great weight and will not be disturbed if they are
supported by substantial evidence.[3]
Petitioner Company attempted to prove the complicity of Pimentel in the theft of company
materials by way of the following statements of Ricardo Mangahas, Eduardo Laureano, and the
report of Ismael U. Gulani (annexes 1 to 3 of Position Paper of petitioner), to wit:
Annex 1
(As of July 3, 1993)
Sir.
Ako po si Ricardo Mangahas na nagsasabi ng pawang katotohanan tungkol po sa pyesang nawawala,
ay isa po ako sa nagbenta non, sa kadahilanang, na ang pinagbilhan ay ipinambili ng
pananghalian. Kaya po sa kasalanang aking nagawa, sana po mapatawad nyo ko at ipinapangako kong
hindi na po ito uulitin. Kung bibigyan pa po ninyo ako ng isa pang pagkakataon.
 Lubos na gumagalang
(SGD) RICARDO MANGAHAS
Annex 2
13 July 93
C & A Office
Ako si Eduardo Laureano noong araw ng Sabado ika 3 ng Hulyo, 1993 ay mag-iigib ng tubig at nataong
nakita ako ni Mang Danny pinasakay nila si Ricky at Gulante ang sakong may lamang lumang peyesa,
at pumayag naman akong isakay, ang sako dahil sa akala ko ay may pahintulot na mula sa kina-tataas
at umalis akong karga ang nasabing sako kasama si Ricky at ibinaba sa Tieres Junk Shop. At ang
pinagbintahan na piyesa ay binili ng pagka-in ng mga tao.
Labis ko pong pinag-sisihan ang aking pagkakasangkot sa ganitong problema at ipinapangako ko po
na hindi na ako uulit sa ganitong gawiin na hindi ko naman po sinasadya.
(SGD) EDUARDO LAUREANO
Annex 3
July 16, 1993
To the Office of the C & A
To Vitas Reclamation project
To Engr. Rentao C. Vellarama
Sa pangyayari nito noong araw Sabado pitsa 3 1993 nakita namin na sa sako ang laman ay mga piza sa
mga oras nayon hindi namin nasita dahil isa naman siyang katiwala sa trabaho at hindi namin alam
kong magagamit pa o hindi dahil siya ang may alam noon at mickanica.
Ang alam ko bawal talaga ang bagbinta o pag-nakaw sa mga magagamit na bagay o piza.
Sa pangyayari nito hindi na maoolit kahit sira, sira, ipagbawal namin ang lahat.
Sa pangyayari nito naghintay kami sa kaunting pasia sa aming pagkakamali.
Rikie Mangahas
Dany Pomentel
Edie Laureano
(SGD) Ismael U. Gulani.[4]
We agree with the Labor Arbiter that there is nothing in the above statements that clearly point
to any participation of Danilo Pimentel; the statements are ambiguous and therefore insufficient as a
basis to establish the guilt or liability of Danilo Pimentel. The statements of Mangahas and Gulani
failed to mention Danilo Pimental at all; while the statement of Laureano does not categorically state
that Pimentel permitted the taking of spare parts from the company premises. Laureanos statement
was to the effect that Pimentel saw him load the sack containing the spare parts and he was of the
impression that the loading had the imprimatur of the superiors (kina-tataas).
We find no grave abuse of discretion on the part of public respondent in concluding that
Pimentels complicity was not substantially proved.
Before an employee can be validly dismissed, the Labor Code requires the employer to furnish
the employee with two written notices: (a) a written notice containing a statement of the cause for
termination to afford the employee ample opportunity to be heard and defend himself with the
assistance of a representative if he so desires, and (b) if the employer decides to terminate the
services of the employee, the employer must notify him in writing of the decision to dismiss him,
stating clearly the reason therefor.[5] What is not disputed is that no notice was given by the
petitioner to private respondent that he was being charged for complicity in the theft confessed to by
the three employees. Pimentel was not apprised of the cause of his dismissal nor was he given an
opportunity to explain his side. He was merely informed by his co-employees that he was implicated
in the said theft, and although he voluntarily sent a letter disclaiming liability, he was not given an
opportunity to substantiate his claim. After his death, his widow received a formal notice of his
dismissal when she was given a copy of a memorandum of dismissal addressed not to him but to
Engr. Bonifacio Beltran. He was not able to prove his defense that he was sick and confined at the
Tondo General Hospital when the incident happened and he had entrusted the key to the bodega to
his assistant Ismael Gulani. In his sworn statement dated October 9, 1993, he affirmed that his wife
was informed that the secretary to the manager recommended his dismissal and was told that in case
of theft, no investigation is necessary bastat nakaw ang investigasyon hindi na kailangan ang
suspension, deretso na ang dismissal, sa ganoon hindi pamarisan ng iba. Clearly, Pimentels dismissal
was summarily done. At any rate, as earlier stated, his complicity in the theft was not supported by
substantial evidence. With no showing that the Labor Arbiter or the NLRC gravely abused their
discretion, or otherwise acted without jurisdiction or in excess of the same [6], we are bound by their
findings as factual issues are beyond the ambit of our review.
We likewise find no grave abuse of discretion in the Labor Arbiters ruling rejecting the claim of
the Company that the amount of P15,000.00 was given to Lorna Pimentel after the death of her
husband.The Labor Arbiter upheld that version of Lorna Pimentel that the said amount was offered to
the deceased Pimentel before his death, and was angrily refused by him, and that she was
constrained to accept the said amount on October 22, 1993 when her husband was already dead and
lying in the state as she needed money for his burial. Moreover, the respondent NLRC correctly ruled No pronouncement as to costs.
that the waiver executed by the wife not having been approved by the Labor Arbiter would not
amount to estoppel and would not divest an employee of his right to pursue his claim against the SO ORDERED.
employer. In labor jurisprudence, it is well-established that quitclaims are against public policy.[7] And
in St. Gothard Disco Pub and Restaurant vs. NLRC[8], this Court held:

While the Labor Code encourages all efforts toward the amicable settlement of a labor dispute (Art.
221, Labor Code, as amended by R. A. 6715), and a quitclaim partakes the nature of a compromise,
the implementing rules require that such a settlement shall be approved by the Labor Arbiter (before
whom the case is pending) after being satisfied that it was voluntarily entered into by the parties and
after having explained to them the terms and consequences thereof (Sec. 2, Rule V, The New Rules of
the NLRC).

The reason for this rule is not hard to find. It is for the employees protection for the Labor Arbiter
before whom the case is pending would be in a better position than just any labor arbiter to
personally determine the voluntariness of the agreement and certify its validity.

The quitclaims presented by the petitioners were executed in the NLRC, Regional Arbitration Branch
No. II, in Cebu City and signed by Labor Arbiters Dominador A. Almirante, Nicasio C. Anion and
Executive Labor Arbiter Gelacio L. Rivera, Jr. who had no participation in any aspect of this
case. Hence, those quitclaims are not valid compromises. Nevertheless, since no party may unjustly
enrich himself at the expense of another, the amounts received by the private respondents under
those quitclaims should be deducted from the amounts respectively due them under the decision of
the NLRC.
The award of P50,000.00 by way of exemplary damages is also assailed by petitioner for being
scandalously excessive if not unwarranted. Notably, the Labor Arbiter did not mention the
justification for the said award, and the public respondent NLRC, in dismissing the appeal, did not rule
on this issue despite the fact that it was raised in the third assigned error.
We find the petitioners contention meritorious.
Recovery of moral and other forms of damages in proceedings before labor arbiters in all cases
are matters arising from employer-employee relations, including without doubt, instances where an
employee has been unlawfully dismissed has been allowed. [9] Such an award is based on the Civil
Code, and cannot be justified solely upon the premise (otherwise sufficient for redress under the
Labor Code) that the employer fired his employee without just cause. [10] Exemplary damages may be
awarded only if the dismissal was affected in a wanton, oppressive or malevolent manner [11]. None of
those grounds has been proven in this case, and the Court accordingly finds the award to be lacking
in legal and factual basis. We are constrained to delete the award of P50,000 for exemplary damages.
WHEREFORE, the petition is partially granted. The assailed Resolution of the NLRC dated June
21, 1995 dismissing the appeal of C & A Construction Co., Inc. in NLRC NCR Case No. 10-06304-93 is
affirmed, with the modification that the award of P50,000.00 as exemplary damages is set aside.
VELINO LAMBO and VICENTE BELOCURA, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and J.C. TAILOR SHOP and/or JOHNNY CO, respondents.
This is a petition for certiorari to set aside the decision[1] of the National Labor Relations
Commission (NLRC) which reversed the awards made by the Labor Arbiter in favor of petitioners,
except one for P4,992.00 to each, representing 13th month pay.
The facts are as follows.
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private
respondents J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and March 3, 1985,
respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As in the
case of the other 100 employees of private respondents, petitioners were paid on a piece-work basis,
according to the style of suits they made. Regardless of the number of pieces they finished in a day,
they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal
dismissal and sought recovery of overtime pay, holiday pay, premium pay on holiday and rest day,
service incentive leave pay, separation pay, 13th month pay, and attorneys fees.
After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty of illegal
dismissal and accordingly ordered them to pay petitioners claims. The dispositive portion of the Labor
Arbiters decision reads:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring the complainants WHEREFORE, in view of the foregoing, the appealed decision is hereby vacated and a new one
to have been illegally dismissed and ordering the respondents to pay the complainants the following entered ordering respondents to pay each of the complainants their 13th month pay in the amount
monetary awards: of P4,992.00. All other monetary awards are hereby deleted.

AVELINO LAMBO VICENTE BELOCURA SO ORDERED.[3]

I. BACKWAGES P64,896.00 P64,896.00 Petitioners allege that they were dismissed by private respondents as they were about to file a
petition with the Department of Labor and Employment (DOLE) for the payment of benefits such as
II. OVERTIME PAY 13,447.90 13,447.90 Social Security System (SSS) coverage, sick leave and vacation leave. They deny that they abandoned
their work.
III. HOLIDAY PAY 1,399.30 1,399.30 The petition is meritorious.

IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
TOTAL P94,719.20 P96,383.20 = P191,102.40
Add: 10% Attorneys Fees 19,110.24
GRAND TOTAL P210,212.64
======
or a total aggregate amount of TWO HUNDRED TEN THOUSAND TWO HUNDRED TWELVE AND 64/100
(P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED.[2]
On appeal by private respondents, the NLRC reversed the decision of the Labor Arbiter. It found
that petitioners had not been dismissed from employment but merely threatened with a closure of
the business if they insisted on their demand for a straight payment of their minimum wage, after
petitioners, on January 17, 1989, walked out of a meeting with private respondents and other
employees.According to the NLRC, during that meeting, the employees voted to maintain the
company policy of paying them according to the volume of work finished at the rate of P18.00 per
dozen of tailored clothing materials. Only petitioners allegedly insisted that they be paid the
minimum wage and other benefits. The NLRC held petitioners guilty of abandonment of work and
accordingly dismissed their claims except that for 13th month pay. The dispositive portion of its
decision reads:
First. There is no dispute that petitioners were employees of private respondents although they
were paid not on the basis of time spent on the job but according to the quantity and the quality of
work produced by them. There are two categories of employees paid by results: (1) those whose time
and performance are supervised by the employer. (Here, there is an element of control and
supervision over the manner as to how the work is to be performed. A piece-rate worker belongs to
this category especially if he performs his work in the company premises.); and (2) those whose time
and performance are unsupervised. (Here, the employers control is over the result of the
work. Workers on pakyao and takay basis belong to this group.) Both classes of workers are paid per
unit accomplished. Piece-rate payment is generally practiced in garment factories where work is done
in the company premises, while payment on pakyao and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations where the work is performed in bulk or in volumes
difficult to quantify.[4] Petitioners belong to the first category, i.e., supervised employees.
In determining the existence of an employer-employee relationship, the following elements
must be considered: (1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the employees conduct. [5] Of these elements,
the most important criterion is whether the employer controls or has reserved the right to control
the employee not only as to the result of the work but also as to the means and methods by which
the result is to be accomplished.[6]
In this case, private respondents exercised control over the work of petitioners. As tailors,
petitioners worked in the companys premises from 8:00 a.m. to 7:00 p.m. daily, including Sundays
and holidays.The mere fact that they were paid on a piece-rate basis does not negate their status as
regular employees of private respondents. The term wage is broadly defined in Art. 97 of the Labor
Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the relations. [7] Nor does the fact that petitioners
are not covered by the SSS affect the employer-employee relationship.
Indeed, the following factors show that petitioners, although piece-rate workers, were regular
employees of private respondents: (1) within the contemplation of Art. 280 of the Labor Code, their
work as tailors was necessary or desirable in the usual business of private respondents, which is
engaged in the tailoring business; (2) petitioners worked for private respondents throughout the
year, their employment not being dependent on a specific project or season; and, (3) petitioners Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday pay, 13th month pay,
worked for private respondents for more than one year.[8] separation pay and attorneys fees, corresponding to 10% of the total monetary awards, in favor of
petitioners.
Second. Private respondents contend, however, that petitioners refused to report for work after
learning that the J.C. Tailoring and Dress Shop Employees Union had demanded their (petitioners) As petitioners were illegally dismissed, they are entitled to reinstatement with
dismissal for conduct unbecoming of employees. In support of their claim, private respondents backwages. Considering that petitioners were dismissed from the service on January 17,
presented the affidavits[9] of Emmanuel Y. Caballero, president of the union, and Amado Cabaero, 1989, i.e., prior to March 21, 1989,[18] the Labor Arbiter correctly applied the rule in the Mercury
member, that petitioners had not been dismissed by private respondents but that practically all Drug case,[19] according to which the recovery of backwages should be limited to three years without
employees of the company, including the members of the union had asked management to terminate qualifications or deductions. Any award in excess of three years is null and void as to the excess. [20]
the services of petitioners.The employees allegedly said they were against petitioners request for
The Labor Arbiter correctly ordered private respondents to give separation pay. Considerable
change of the mode of payment of their wages, and that when a meeting was called to discuss this
issue, a petition for the dismissal of petitioners was presented, prompting the latter to walk out of time has lapsed since petitioners dismissal, so that reinstatement would now be impractical and
hardly in the best interest of the parties. In lieu of reinstatement, separation pay should be awarded
their jobs and instead file a complaint for illegal dismissal against private respondents on January 17,
to petitioners at the rate of one month salary for every year of service, with a fraction of at least six
1989, even before all employees could sign the petition and management could act upon the same.
(6) months of service being considered as one (1) year.[21]
To justify a finding of abandonment of work, there must be proof of a deliberate and unjustified
The awards for overtime pay, holiday pay and 13th month pay are in accordance with our
refusal on the part of an employee to resume his employment. The burden of proof is on the
finding that petitioners are regular employees, although paid on a piece-rate basis.[22] These awards
employer to show an unequivocal intent on the part of the employee to discontinue
are based on the following computation of the Labor Arbiter:
employment.[10] Mere absence is not sufficient. It must be accompanied by manifest acts unerringly
pointing to the fact that the employee simply does not want to work anymore. [11]
AVELINO LAMBO
Private respondents failed to discharge this burden. Other than the self-serving declarations in
the affidavits of their two employees, private respondents did not adduce proof of overt acts of I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.
petitioners showing their intention to abandon their work. On the contrary, the evidence shows that
petitioners lost no time in filing the case for illegal dismissal against private respondent. This fact
P 64.00/day x 26 days =
negates any intention on their part to sever their employment relationship. [12] Abandonment is a
matter of intention; it cannot be inferred or presumed from equivocal acts. [13]
1,664.00/mo. x 36 mos. = P 59,904.00
Third. Private respondents invoke the compromise agreement,[14] dated March 2, 1993,
between them and petitioner Avelino Lambo, whereby in consideration of the sum of P10,000.00, 13th Mo. Pay:
petitioner absolved private respondents from liability for money claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public policy. But those (1) where P 1,664.00/yr. x 3 yrs. = 4, 992.00 P64,896.00
there is clear proof that the waiver was wangled from an unsuspecting or gullible person or (2) where
the terms of settlement are unconscionable on their face are invalid. In these cases, the law will step II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
in to annul the questionable transaction.[15] However, considering that the Labor Arbiter had given
petitioner Lambo a total award of P94,719.20, the amount of P10,000.00 to cover any and all Jan. 17/86 - April 30/87 = 15 mos. & 12 days =
monetary claims is clearly unconscionable. As we have held in another case,[16] the subordinate
position of the individual employee vis-a-vis management renders him especially vulnerable to its (15 mos. x 26 days + 12 days) = 402 days
blandishments, importunings, and even intimidations, and results in his improvidently waiving
benefits to which he is clearly entitled. Thus, quitclaims, waivers or releases are looked upon with *2 hours = 25%
disfavor for being contrary to public policy and are ineffective to bar claims for the full measure of
the workers legal rights.[17] An employee who is merely constrained to accept the wages paid to him
402 days x 2 hrs./day = 804 hrs.
is not precluded from recovering the difference between the amount he actually received and that
amount which he should have received.
P 32.00/day 8 hrs. =
4.00/hr. x 25% = 8.00/hr. x 25% =

1.00/hr. + P4.00/hr. = 2.00/hr. + P8.00/hr. =

5.00/hr. x 804 hrs. = P 4,020.00 10.00/hr. x 680 hrs. = P6,800.00 P13,447.90

May 1/87-Sept. 30/87 = 4 mos. & 26 days = III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89

(4 mos. x 26 days + 26 days) = 130 days Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs

130 days x 2 hrs./day = 260 hrs. P 32.00/day x 200% =

P 41.00/day 8 hrs. = 64.00/day x 12 days = P768.00

5.12/hr. x 25% = 32.00/day x 12 days = (384.00) P384.00

1.28/hr. + P5.12/hr. = 32.00/day x 30% =

6.40/hr. x 260 hrs. = P 1,664.00 9.60/day x 8 days = 76.80 460.80

Oct. 1/87-Dec. 13/87 = 2 mos. & 11 days = May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs

(2 mos. x 26 days + 11 days) = 63 days P 41.00/day x 200% =

63 days x 2 hrs./day = 126 hrs. 82.00/day x 3 days = P246.00

P 49.00/day 8 hrs. = 41.00/day x 3 days = (123.00) P123.00

6.12/hr. x 25% = 41.00/day x 30% =

1.53/hr. + P6.12/hr. = 12.30/day x 3 days = 36.90 159.90

7.65/hr. x 126 hrs. = P963.90 Oct. 1/87 - Dec. 13/87 = 1 RH

Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days = P 49.00/day x 200% =

(13 mos. x 26 days + 2 days) = 340 days 98.00/day x 1 day = P98.00

340 days x 2 hrs./day = 680 hrs. 49.00/day x 1 day = (49.00) 49.00

P 64.00/day 8 hrs. = Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs

P 64.00/day x 200% =
128.00/day x 9 days = P1,152.00
64.00/day x 9 days = (576.00) P 576.00
64.00/day x 30% =
19.20/day x 8 days = 153.60 729.60 1,399.30
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3 yrs.
P 64.00/day x 26 days =
1,664.00/yr. x 3 yrs. = 4,992.00
V. SEPARATION PAY: Sept. 10/85 - Jan. 17/92 = 6 yrs.
1,664.00/mo. x 6 yrs. = 9,984.00
TOTAL AWARD OF AVELINO LAMBO P94,719.20
======
VICENTE BELOCURA
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.
Same computation as A. Lambo P64,896.00
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo 13,447.90
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo 1,399.30
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo 4,992.00
V. SEPARATION PAY: March 3/85 - Jan. 17/92 = 7 yrs.
P1,664.00/mo. x 7 yrs. = 11,648.00
TOTAL AWARD OF VICENTE BELOCURA P96,383.20
=====
SUMMARY
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MO. PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
TOTAL P94,719.20 P96,383.20
= P191,102.40
ADD: 10% Attorneys Fees 19,110.24
GRAND TOTAL P 210,212.64
=======
Except for the award of attorneys fees in the amount of P19,110.24, the above computation is
affirmed. The award of attorneys fees should be disallowed, it appearing that petitioners were
represented by the Public Attorneys Office. With regard to petitioner Avelino Lambo, the amount
of P10,000.00 paid to him under the compromise agreement should be deducted from the total
award of P94,719.20.Consequently, the award to each petitioner should be as follows:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P 64,896.00
II. OVERTIME PAY 13,447.90 13,447.90

III. HOLIDAY PAY 1,399.30 1,399.30

IV. 13TH MONTH PAY 4,992.00 4,992.00

V. SEPARATION PAY 9,984.00 11,648.00

P 94,719.20

Less 10,000.00

TOTAL P84,719.20 P96,383.20

GRAND TOTAL P181,102.40

======

vvvvvvvvvv

WHEREFORE, the decision of the National Labor Relations Commission is SET ASIDE and another
one is RENDERED ordering private respondents to pay petitioners the total amount of One Hundred
Eighty-One Thousand One Hundred Two Pesos and 40/100 (P181,102.40), as computed above.
SO ORDERED.

[G.R. No. 106518. March 11, 1999]

ABS CBN SUPERVISORS EMPLOYEE UNION MEMBERS, petitioner, vs. ABS CBN BROADCASTING
CORP., HERBERT RIVERA, ALBERTO BERBON, CINDY MUNOZ, CELSO JAMBALOS, SALVADOR
DE VERA, ARNULFO ALCAZAR, JAKE MADERAZO, GON CARPIO, OSCAR LANDRITO, FRED
GARCIA, CESAR LOPEZ and RUBEN BARRAMEDA, respondents.
At bar is a special civil action for Certiorari[1] seeking the reversal of the Order[2] dated July 31,
1992 of public respondent Department of Labor and Employment Undersecretary Bienvenido E.
Laguesma[3] in Case No. NCR OD M 90 07 - 037.
From the records on hand, it can be gathered, that:
 On December 7, 1989, the ABS-CBN Supervisors Emloyees Union (the Union), represented by
respondent Union Officers, and ABS-CBN Broadcasting Corporation (the Company) signed and
concluded a Collective Bargaining Agreement with the following check-off provision, to wit:
Article XII The [C]ompany agrees to advance to the Union a sum equivalent to 10% of the sum total of
all the salary increases and signing bonuses granted to the Supervisors under this collective
Bargaining Agreement and upon signing hereof to cover the Unions incidental expenses, including
attorneys fees and representation expenses for its organization and (sic) preparation and conduct
hereof, and such advance shall be deducted from the benefits granted herein as they accrue.
On September 19, 1990, Petitioners[4] filed with the Bureau of Labor Relations, DOLE-NCR,
Quezon City, a Complaint against the Union Officers[5] and ABS-CBN Broadcasting corporation,
praying that (1) the special assessment of ten percent (10%) of the sum total of all salary increases
and signing bonuses granted by respondent Company to the members of the Union be declared
illegal for failure to comply with the labor Code, as amended, particularly Article 241, paragraphs (g),
(n), and (o); and in utter violation of the Constitution and By-Laws of the ABS-CBN Supervisors
Employees Union; (2)respondent Company be ordered to suspend further deductions from
petitioners salaries for their shares thereof.
In their Answers, respondent Union Officers and Company prayed for the dismissal of the
Complaint for lack of merit. They argued that the check-off provision is in accordance with law as
majority of the Union members individually executed a written authorization giving the Union officers
and the Company a blanket authority to deduct subject amount.
On January 21, 1991, Med-Arbiter Rasidali C. Abdula issued the following Order:[6]
WHEREFORE, premises considered, judgment is hereby rendered:
a) declaring the special assessment of 10% of the sum total of CBA benefits as illegal;
b) ordering respondents union officers to refund to the complainants and other union members the
amount of five Hundred Thousand Pesos (P500,000.00) advanced by the respondent Company as part
of the 10% sum total of CBA benefits without unnecessary delay;
c) ordering the respondent company to stop and desist from further making advances and deductions
from the union members salaries their share in the advances already made to the union;
d) ordering the respondent Company to remit directly to the complainants and other union members
the amount already deducted from the union members salaries as part of their share in the advances
already made to the union and which it had kept in trust during the pendency of this case; and
e) directing the respondents union officers and respondent Company to submit report on the
compliance thereof.
SO ORDERED.
On appeal, respondent DOLE Undersecretary Bienvenido E. Laguesma handed down a
Decision[7] on July 1, 1991, disposing as follows:
WHEREFORE, the appeals are hereby denied, the Order of the Med-Arbiter is affirmed en toto.
On July 5, 1991, the aforesaid Decision was received by the respondent Union Officers and
respondent Company. On July 13, 1991, they filed their Motion for Reconsideration stating, inter
alia that the questioned ten percent (10%) special assessment is valid pursuant to the ruling in Bank
of the Philippine Islands Employee Union ALU vs. NLRC.[8]
On July 31, 1992, Undersecretary B.E. Laguesma issued an Order[9]; resolving, thus:
"WHEREFORE, the Decision dated 01 July 1991 is hereby SET ASIDE. In lieu thereof, a new one is
hereby entered DISMISSING the Complaint/Petition for lack of merit."
Hence, the present petition seeking to annul and set aside the above-cited Order of public
respondent Undersecretary B.E. Laguesma, for being allegedly tainted with grave abuse of discretion
amounting to lack of jurisdiction.
Did the public respondent act with grave abuse of discretion in issuing the challenged Order
reversing his own Decision of July 1, 1991? Such is the sole issue posited,which we resolve in the
negative.The petition is unmeritorious.
Petitioners claim[10] that the Decision of the Secretary of Labor and Employment dated July 1,
1991, affirming in toto the Order of Med-Arbiter Rasidali Abdullah dated January 31, 1991, cannot be
a subject of a motion for reconsideration because it is final and unappealable pursuant to Section 8,
Rule VIII, Book V of the Omnibus Rule Implementing the Labor Code. It is further argued that the only
remedy of the respondent Union Officers' is to file a petition for certiorari with this Court.
Section 8, Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code, provides:
"The Secretary shall have fifteen (15) calendar days within which to decide the appeal from receipt of
the records of the case. The decision of the Secretary shall be final and inappealable." [Underscoring
supplied]. (Comment, p. 101)
The aforecited provision cannot be construed to mean that the Decision of the public
respondent cannot be reconsidered since the same is reviewable by writ of certiorari under Rule 65
of the Rules of Court. As a rule, the law requires a motion for reconsideration to enable the public
respondent to correct his mistakes, if any. In Pearl S. Buck Foundation, Inc., vs. NLRC,[11] this Court
held:
"Hence, the only way by which a labor case may reach the Supreme Court is through a petition for
certiorari under Rule 65 of the Rules of Court alleging lack or excess of jurisdiction or grave abuse of
discretion. Such petition may be filed within a reasonable time from receipt of the resolution denying
the motion for reconsideration of the NLRC decision." [Underscoring; supplied].
Clearly, before a petition for certiorari under Rule 65 of the Rules of Court may be availed of, the
filing of a motion for reconsideration is a condition sine qua non to afford an opportunity for the
correction of the error or mistake complained of.
So also, considering that a decision of the Secretary of Labor is subject to judicial review only
through a special civil action of certiorari and, as a rule, cannot be resorted to without the aggrieved
party having exhausted administrative remedies through a motion for reconsideration, the aggrieved
party, must be allowed to move for a reconsideration of the same so that he can bring a special civil
action for certiorari before the Supreme Court.[12]
Furthermore, it appears that the petitioners filed with the public respondent a Motion for Early
Resolution[13] dated June 24, 1992. Averring that private respondents' Motion for Reconsideration did
not contain substantial factual or legal grounds for the reversal of subject decision. Consequently,
petitioners are now estopped from raising the issue sought for resolution. In Alfredo Marquez vs.
Secretary of Labor,[14] the Court said:
"xxx The active participation of the party against whom the action was brought, coupled with his
failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the
case and will bar said party from later on impugning the court or body's jurisdiction."
What is more, it was only when the public respondents issued the Order adverse to them that
the petitioners raised the question for the first time before this Court. Obviously, it is a patent
afterthought which must be abhorred.
Petitioners also argued that the check-off provision in question is illegal because it was never
submitted for consideration and approval to "all the members at a general membership meeting
called for the purpose"; and further alleged that the formalities mandated by Art. 241, paragraphs (n)
and (o) of the Labor Code, as amended, were not complied with.
"A check-off is a process or device whereby the employer, on agreement with the Union,
recognized as the proper bargaining representative, or on prior authorization from its employees,
deducts union dues or agency fees from the latter's wages and remits them directly to the
union."[15] Its desirability in a labor organization is quite evident. It is assured thereby of continuous
funding. As this Court has acknowledged, the system of check-off is primarily for the benefit of the
Union and only indirectly, for the individual employees.
The legal basis of check-off is found in statutes or in contracts.[16] The statutory limitations on
check-offs are found in Article 241, Chapter II, Title IV, Book Five of the Labor Code, which reads:
"Rights and conditions of membership in a labor organization. - The following are the rights and
conditions of membership in a labor organization:
xxx
(g) No officer, agent, member of a labor organization shall collect any fees, dues, or other
contributions in its behalf or make any disbursement of its money or funds unless he is duly
authorized pursuant to its constitution and by-laws.
xxx
(n) No special assessment or other extraordinary fees may be levied upon the members of a labor
organization unless authorized by a written resolution of a majority of all the members of a general
membership meeting duly called for the purpose. The secretary of the organization shall record the
minutes of the meeting including the list of all members present, the votes cast, the purpose of the
special assessment or fees and the recipient of such assessment or fees. The record shall be attested
to by the president.
(o) Other than for mandatory activities under the Code, no special assessments, attorney's fees,
negotiation fees or any other extraordinary fees may be checked off from any amount due to an
employee with an individual written authorization duly signed by the employee. The authorization
should specifically state the amount, purpose and beneficiary of the deductions. [Underscoring;
supplied]
Article 241 of the Labor Code, as amended, must be read in relation to Article 222, paragraph
(b) of the same law, which states:
"No attorney's fees, negotiation fees or similar charges of any kind arising from collective bargaining
negotiations or conclusion of the collective agreement shall be imposed on any individual member of
the contracting union: Provided, however, that attorney's fees may be charged against union funds in
an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to
the contrary shall be null and void." [Underscoring; supplied]
And this court elucidated the object and import of the said provision of law in Bank of Philippine
Islands Employees Union - Association Labor Union (BPIEU-ALU) vs. National Labor Relations
Commission:[17]
"The Court reads the afore-cited provision (Article 222 [b] of the Labor Code) as prohibiting the
payment of attorney's fees only when it is effected through forced contributions from the workers
from their own funds as distinguished from the union funds. xxx"
 Noticeably, Article 241 speaks of three (3) requisites that must be complied with in order that
the special assessment for Union's incidental expenses, attorney's fees and representation expenses,
as stipulated in Article XII of the CBA, be valid and upheld namely: 1) authorization by a written
resolution of the majority of all the members at the general membership meeting duly called for the
purpose; (2)secretary's record of the minutes of the meeting; and (3) individual written authorization
for check-off duly signed by the employee concerned.
After a thorough review of the records on hand, we find that the three (3) requisites for the
validity of the ten percent (10%) special assessment for Union's incidental expenses, attorney's fees
and representation expenses were met.
It can be gleaned that on July 14, 1989, the ABS-CBN Supervisors Employee Union held
its general meeting, whereat it was agreed that a ten percent (10%) special assessment from the total
economic package due to every member would be checked-off to cover expenses for negotiation,
other miscellaneous expenses and attorney's fees. The minutes of the said meeting were recorded by
the Union's Secretary, Ma. Carminda M. Munoz, and noted by its President, Herbert Rivera.[18]
On May 24, 1991, said Union held its General Membership Meeting, wherein majority of the
members agreed that "in as much as the Union had already paid Atty. P. Pascual the amount
of P500,000.00, the same must be shared by all the members until this is fully liquidated." [19]
Eighty-five (85) members of the same Union executed individual written authorizations for
check-off, thus:
"Towards that end, I hereby authorize the Management and/or Cashier of ABS-CBN BROADCASTING
CORPORATION to deduct from my salary the sum of P30.00 per month as my regular union dues and
said Management and/or Cashier are further authorize (sic) to deduct a sum equivalent to 10% of all
and whatever benefits that will become due to me under the COLLECTIVE BARGAINING AGREEMENT
(CBA) that may be agreed upon by the UNION and MANAGEMENT and to apply the said sum to the
advance that Management will make to our Union for incidental expenses such as attorney's fees,
representations and other miscellaneous expenses pursuant to Article XII of the proposed CBA." [20]
Records do not indicate that the aforesaid check-off authorizations were executed by the
eighty-five (85) Union members under the influence of force or compulsion. There is then, the
presumption that such check-off authorizations were executed voluntarily by the signatories
thereto. Petitioners contention that the amount to be deducted is uncertain[21] is not persuasive
because the check-off authorization clearly stated that the sum to be deducted is equivalent to ten
percent (10%) of all and whatever benefits may accrue under the CBA. In other words, although the
amount is not fixed, it is determinable.
Petitioners further contend that Article 241 (n) of the Labor Code, as amended, on special
assessments, contemplates a general meeting after the conclusion of the collective bargaining
agreement.
Subject Article does not state that the general membership meeting should be called after the
conclusion of a collective bargaining agreement. Even granting ex gratia argumenti that the general
meeting should be held after the conclusion of the CBA, such requirement was complied with since
the May 24, 1991 General Membership Meeting was held after the conclusion of the Collective
Bargaining Agreement, which was signed and concluded on December 7, 1989.
Considering that the three requisites afforesaid for the validity of a special assessment were
observed or met, we uphold the validity of the ten percent (10%) special assessment authorized in
Article XII of the CBA.
We also concur in the finding by public respondent that the Bank of the Philippine Islands
Employees Union ALU vs. NLRC[22] is apposite in this case. In BPIEU-ALU, the petitioners, impugned
the Order of the NLRC, holding that the validity of the five percent (5%) special assessment for
attorneys fees is contrary to Article 222, paragraph (b) of the Labor Code, as amended. The court
ratiocinated, thus:
The Court reads the aforecited provision as prohibiting the payment of attorneys fees only when it is
effected through forced contributions from the workers from their own funds a distinguished
from the union funds. The purpose of the provision is to prevent imposition on the workers of the
duty to individually contribute their respective shares in the fee to be paid the attorney for his
services on behalf of the union in its negotiations with the management. xxx [Underscoring supplied]
However, the public respondent overlooked the fact that in the said case, the deduction of the
stipulated five percent (5%) of the total economic benefits under the new collective bargaining
agreement was applied only to workers who gave their individual signed authorizations. The Court
explained:
xxx And significantly, the authorized deduction affected only the workers who adopted and signed
the resolution and who were the only ones from whose benefits the deductions were made by
BPI. No similar deductions were taken from the other workers who did not sign the resolution and so
were not bound by it. [Underscoring; supplied]
While the court also finds merit in the finding by the public respondents that Palacol vs. Ferrer-
Calleja[23] is inapropos in the case under scrutiny, it does not subscribe to public respondents
reasoning that Palacol should not be retroactively applied to the present case in the interest of
justice, equity and fairplay.[24] The inapplicability of Palacol lies in the fact that it has a different
factual milieu from the present case. In Palacol, the check-off authorization was declared
invalid because majority of the Union members had withdrawn their individual authorizations, to wit:
Paragraph (o) on the other hand requires an individual written authorization duly signed by every
employee in order that special assessment maybe validly check-off. Even assuming that the special
assessment was validly levied pursuant to paragraph (n), and granting that individual written
authorizations were obtained by the Union, nevertheless there can be no valid check-off considering
that the majority of the Union members had already withdrawn their individual authorizations. A
withdrawal of individual authorization is equivalent to no authorization at all. xxx [Underscoring;
supplied]
In this case, the majority of the Union members gave their individual written check-off authorizations
for the ten percent (10%) special assessment. And they have never withdraw their individual written
authorizations for check-off.
There is thus cogent reason to uphold the assailed Order, it appearing from the records of the
case that twenty (20)[25] of the forty-two (42) petitioners executed as Compromise
Agreement[26] ratifying the controversial check-off provision in the CBA.
Premises studiedly considered, we are of the irresistable conclusion and, so find, that the ruling
in BPIEU-ALU vs. NLRC that (1) the prohibition against attorneys fees in Article 222, paragraph (b) of
the Labor Code applies only when the payment of attorneys fees is effected through forced
contributions from the workers; and (2) that no deductions must be taken from the workers who did
not sign the check-off authorization, applies to the case under consideration.
WHEREFORE, the assailed Order, dated July 31, 1992, of DOLE Undersecretary B.E. Laguesma is
AFFIRMED except that no deductions shall be taken from the workers who did not give their
individual written check-off authorization. No pronouncement as to costs.
SO ORDERED.