1

FIRST DIVISION Procedure. Petitioner sought reconsideration but the same was x xxx
March 5, 2018 also denied.9 Lastly, the Motion to Dismiss is denied for being filed beyond the
G.R. No. 215281 Ruling of the Labor Arbiter period allowed by the rules, thus, a prohibited pleading. Also, the
ROLANDO DE ROCA, Petitioner  In the above-mentioned June 29, 2012 Decision10 in NLRC-NCR- Motion to implead Oceanic Travel and Tours Agency as
vs.EDUARDO C. DABUY AN, JENNIFER A. BRANZUELA, Case No. 02-02490-12, Labor Arbiter J. Potenciano F. Napenas, additional respondent is denied for the same reason.
JENNYL YN A. RI CARTE, and HERMINIGILDO F. Jr. held, among others, that - SO ORDERED.11
SABANATE, Respondents x xx [R]espondent Rolando De Roca surprisingly filed a "Motion Ruling of the National Labor Relations Commission
DECISION to Dismiss" on the ground of lack of jurisdiction. In substance, the Instead of filing an appeal before the National Labor Relations
DEL CASTILLO, J.: motion is anchored on the alleged lack of employer-employee Commission (NLRC), petitioner instituted the petition for
This Petition for Review on Certiorari1 seeks to set aside the June relationship between the parties thereto. In support thereof: annulment of judgment referred to above, which the NLRC
19, 2014 Decision2 and October 28, 2014 Resolution3 of the Court respondent De Roca further alleged that it was rather the Oceanic dismissed in its September 28, 2012 Resolution12 for being tardy,
of Appeals (CA) dismissing the Petition for Certiorari4 in CA- Travel and Tour Agency and respondent Ewayan in whose favor as it was filed beyond the 10-day reglementary period prescribed
G.R. SP No. 127974 and denying herein petitioner's Motion for respondent De Roca leased the subject Hotel, rule the true under Section 3, Rule XII of the 2011 NLRC Rules of Procedure.
Reconsideration,5 respectively. employers of the complainants as evidenced by the Contract of Ruling of the Court of Appeals
Factual Antecedents Lease of Buildings (Annex "1" respondent’s Motion to Dismiss). Petitioner filed a Petition for Certiorari before the CA, where he
As found by the CA, the facts are as follows: Subsequent thereof [sic], complainants filed an Opposition with argued, among others, that he was never an employer of the
In 2012, private respondents filed a complaint6 for illegal Motion to Implead (to Respondent’s Motion to Dismiss), seeking, respondents, as he was merely the owner of the premises which
dismissal against "RAF Mansion Hotel Old Management and among others, that the corporation "Oceanic Travel and Tour were leased out to and occupied by respondents' true employer,
New Management and VictorianoEwayan." Later, private Agency" be impleaded as additional respondent. VictorianoEwayan (Ewayan), who owned Oceanic Travel and
respondents amended the complaint and included petitioner x xxx Tours Agency which operated the RAF Mansion Hotel where
Rolando De Roca as [co]-respondent. Summons was sent through Anent the Motion to Dismiss, Rule V, Sections 6 and 7 of the respondents were employed as cook, waitress, and housekeeper;
registered mail to petitioner but it was returned. Revised 2011 NLRC Rules of Procedure explicitly provide: and that his inclusion in the labor case was borne of malice which
‘SECTION 6. MOTION TO DISMISS. - Before the date set for is shown by the fact that when the labor complaint was filed, he
Thereafter, a conference was set but only complainants attended. the mandatory conciliation and mediation conference, the was not originally impleaded as a respondent, and was made so
Thus, another summons was issued and personally served to respondent may file a motion to dismiss on grounds provided only after respondents discovered that their employer had already
petitioner by the bailiff of the NLRC as evidenced by the latter’s under Section 5, paragraph (a) hereof Such motion shall be absconded - in which case he was impleaded under the pretext
return dated 14 March 2012. Despite service of summons, immediately resolve[ d] by the Labor Arbiter through a written that he constituted the "new management of RAF Mansion Hotel".
petitioner did not attend the subsequent hearings prompting the order. An order denying the motion to dismiss, or suspending its On June 19, 2014, the CA rendered the assailed Decision
labor arbiter to direct private respondents to submit their position resolution until the final determination of the case, is not dismissing the petition, decreeing thus:
paper. appealable. At the outset, We note that the issue raised by petitioner is
SECTION 7. EFFECT OF FAILURE TO FILE. - No motion to imprecise because the NLRC did not rule on the propriety of
dismiss shall be allowed or entertained after the lapse of the finding petitioner liable to private respondents. It is obvious from
On 18 April 2012, private respondents submitted their position period provided in Section 6 hereof.’ the assailed resolution that the petition for annulment of judgment
7
paper. On the same day, petitioner filed his motion to dismiss  on was denied because it was filed after the lapse of the period
the ground of lack of jurisdiction. He alleged that[,] while he prescribed under the 2011 NLRC Rules of Procedure and this is
[was] the owner of RA.F Mru1sion Hotel building, the same [was Clearly, respondent De Roca’s Motion to Dismiss, having been the issue that this Court will resolve.
being] leased by VictorianoEwayan., the owner of Oceanics filed long after the date set for the mandatory conference, should
be dismissed on such ground being a prohibited pleading. x xxx
Travel and Tour Agency. Petitioner claims that Ewayan was the Record shows that petitioner received the decision of the labor
employer of private respondents, Consequently, he asserted that arbiter on 3 August 2012 but he filed his petition on 4 September
there was no employer-employee relationship between him and Coming now on [sic] the meat of the controversy, since 2012 or thirty-one days after such receipt. In this regard, the
private respondents and the labor arbiter had no jurisdiction. respondents obviously failed to controvert the allegations by the NLRC did not commit any error in denying the petition much
complainants in their Position Papers accompanied with more grave abuse of discretion. The rule is clear and the NLRC
On 29 June 2012. the labor arbiter rendered a decision directing supporting evidence, We have no recourse but to accord them may not ‘arbitrarily disregard specific provisions of the Rules
petitioner, among others, to pay backwages and other monetary credence for being uncontradicted.x xxx which are precisely intended to assist the parties in obtaining just,
award to private respondents. In said decision, the labor arbiter Obviously, respondents had failed to discharge such burden. expeditious and inexpensive settlement of labor disputes.’
also denied the motion to dismiss for having been filed beyond the
reglementary period. Petitioner received a copy of the decision on WHEREFORE, premises considered, judgement is hereby Similarly, the labor arbiter did not commit any grave abuse of
3 August 2012. rendered finding all the respondents liable for illegal dismissal. discretion because he just observed the NLRC rules when he
denied petitioner's motion to dismiss. x xx
On 4 September 2012, petitioner filed a petition8 for annulment of Accordingly, all of them are hereby ordered to pay complainants
judgment on the ground of lack of jurisdiction before the NLRC. their full backwages and other monetary claims computed from In addition, We also cannot attribute grave abuse of discretion in
However, the petition was dismissed because it was also filed date of their dismissal up to the promulgation of this decision plus the labor arbiter’s resolution of the motion to dismiss in the
beyond the period allowed by the 2011 NLRC Rules of 10% of the total monetary award as attorney’s fees. decision itself: While this may seem peculiar, it must be

emphasized that the motion to dismiss was filed at about the
period when the case was about to be submitted for decision. x xx
In the case at bar, the inclusion of the denial of the motion to
dismiss in the decision is not without justification. Petitioner not
only failed to submit the motion to dismiss on time but also
forfeited the right to submit his position paper because he did not
attend the conference and subsequent hearings. Even if the labor
arbiter denied the motion to dismiss in a separate order, petitioner
would still be precluded from submitting a position paper where
he can buttress his claim of lack of jurisdiction. The labor arbiter,
therefore, could not be said to have committed grave abuse of
discretion in denying the motion to dismiss and in incorporating
its order in the decision.
x xxxAs regards the claim of petitioner on the merits of his
ground, We cannot consider his arguments and assume that his
allegation of lack of employer-employment [sic] relationship
between him and private respondents is true. First, he did not
present any evidence to support his claim because he lost the
opportunity to submit a position paper. Thus, his allegations will
remain mere allegations.
Second, it would transgress fairness if his allegations in this
petition should be given any attention because the private
respondents never had the [opportunity to] present evidence to
meet his claims. Private respondents' arguments were correctly
centered on the provisions of the 2011 NLRC Rules of Procedure
because they were the bases for the denial of petitioner's motion to
dismiss and petition for annulment of judgment.
Furthermore, petitioner did not submit the position paper of
private respondents where We can find their averments on the
employment relationship between them and petitioner or lack
thereof. This omission not only rendered useless the evaluation of
the asseverations in the petition but also gave Us another reason to
dismiss this petition under Section 3, Rule 46 of the Rules of
Court. Petitioner is well-aware that this pleading is material to the
resolution of his petition and in neglecting to attach the same to
his petition, the same would warrant the dismissal of this petition.
Lastly, the ultimate aim of petitioner is for Us to review the
findings of the labor arbiter on the employment relationship
between him and the private respondents. 'The basic issue of
whether or not the NLRC has jurisdiction over the case resolves
itself into the question of whether an employer-employee
relationship existed' between them. 111us, it is an issue which
necessitates presentation of evidence on the part of petitioner and
evaluation of the pieces of evidence of each party. Again, this is
not proper in a petition for certiorari.
WHEREEFORE, the petition is DISMISSED.
SO ORDERED.13
2
Petitioner filed a motion for reconsideration, but the CA denied
the same via its October 28, 2014 Resolution. Hence, the instant
Petition, which includes a prayer for injunctive relief against
execution of the judgment pending appeal.
On December 10, 2014 and January 12, 2015, the Court issued
Resolutions14 respectively granting temporary injunctive relief and
issuing in favor of petitioner a Temporary Restraining
Order15 upon filing of a cash or surety bond.
In a November 9, 2015 Resolution,16 the Court resolved to give
due course to the Petition.
Issue
Petitioner frames the issue in this Petition thus -
Petitioner submits before this Honorable Court that the Court of
Appeals erred in affirming the findings of both the labor arbiter
and the NLRC and in concluding that they did not abuse their
discretion and acted beyond their jurisdiction when they asserted
their authorities and found petitioner DE ROCA solidarily liable
with EWAYAN/ OCEANIC TRAVEL AND TOUR AGENCY to
private respondents, despite the patent lack of employer-employee
relationship between the petitioner and private respondents.17
Petitioner’s Arguments
In his Petition and Reply18 seeking reversal of the assailed CA
dispositions as well as the nullification of the decisions of the
labor tribunals, petitioner argues that the Labor Arbiter's decision
is null and void as there was no determination of facts and
evidence relative to his supposed liability to respondents; that he
was not at any time the respondents' employer, but merely the
owner-lessor of the premises where Ewayan and his Oceanic
Travel and Tours Agency operated the RAF Mansion Hotel where
respondents were employed as hotel staff; that the labor tribunals
did not acquire jurisdiction over him since the element of
employer-employee relationship was lacking; that he was
impleaded in the case only because respondents could no longer
trace the whereabouts of their true employer, Ewayan, who
appears to have absconded - for which reason respondents aim to
unduly recover their claims from him; that the labor tribunals and
the CA strictly applied the labor procedural laws and rules, when
the rule in labor cases is that technical rules of procedure are not
binding and must yield to the merits of the case and the interests
of justice and due process; and that since the labor tribunals did
not have jurisdiction over him as he was not at any given period
the respondents' employer, their decisions are a nullity.
Respondents’ Arguments
In their Comment19 to the Petition, respondents argue that the
Petition should be denied for lack of merit; that the CA's
dispositions are just and correct; that the issue in this case does
not involve the merits of the labor arbiter's decision, but merely
the propriety of the NLRC’s dismissal of petitioner's petition for
annulment of judgment; that nonetheless, they have satisfactorily
proved below that petitioner is their employer, by the evidence
they submitted - consisting of identification cards (IDs) issued to
them and signed by Ewayan, and pay envelopes and advise slips
showing their salaries as the basis for their claims; that since
petitioner owned the building which was a hotel, it follows that he
is their employer; that since he is their employer, the labor arbiter
acquired jurisdiction over him; and that since the decision of the
labor arbiter on the merits became final and executory for
petitioner's failure to appeal the same, the same may no longer be
impugned.
Our Ruling
The Court grants the Petition.
All throughout the proceedings, petitioner has insisted that he was
not the employer of respondents; that he did not hire the
respondents, nor pay their salaries, nor exercise supervision or
control over them, nor did he have the power to terminate their
services. In support of his claim, he attached copies of a lease
agreement - a Contract of Lease of a Building20 - executed by him
and Oceanic Tours and Travel Agency (Oceanic) represented by
Ewayan through his attorney-in- fact Marilou Buenafe. The
agreement would show that petitioner was the owner of a building
called the RAF Mansion Hotel in Roxas Boulevard, Baclaran,
Parañaque City; that on September 25, 2007, Oceanic agreed to
lease the entire premises of RAF Mansion Hotel, including the
elevator, water pump, airconditioning units, and existing
furnishings and all items found in the hotel and included in the
inventory list attached to the lease agreement, except for certain
portions of the building where petitioner conducted his personal
business and which were leased out to other occupants, including
a bank; that the lease would be for a period of five years, or from
October 15, 2007 up to October 15, 2012; that the monthly rental
would be ₱450,000.00; and that all expenses, utilities,
maintenance, and taxes - except real property truces - incurred and
due on the leased building would be for the lessee's account.
Petitioner likewise attached to the instant Petition copies of: 1) a
January 23, 2012 letter21 of demand to pay and vacate sent to
Ewayan, directing the latter's attention to previous demand letters
sent to him and making a final demand to pay rentals in arrears;
and 2) a written waiver and acknowledgment22 executed by
respondents - except respondent HerminigildoSabanate - and
other Oceanic employees to the effect that petitioner should not be
held liable as owner of the premises for the "problems" caused by
Ewayan.
Thus, it would appear from the fact on record and the evidence
that petitioner's building was an existing hotel called the "RAF
Mansion Hotel", which Oceanic agreed to continue to operate
under the same name. There is no connection between petitioner
and Oceanic other than through the lease agreement executed by
them; they are not partners in the operation of RAF Mansion
Hotel. It just so happens that Oceanic decided to continue
operating the hotel using the original name – "RAF Mansion
Hotel".

The only claim respondents have in resorting to implead petitioner
as a corespondent in the labor case is the fact that he is the owner
of the entire building called "RAF Mansion Hotel" which happens
to be the very same name of the hotel which Ewayan and Oceanic
continued to adopt, for reasons not evident in the pleadings. It
must be noted as well that when they originally filed the labor
case, respondents did not include petitioner as respondent therein.
It was only later on that they moved to amend their complaint,
impleading petitioner and thus amending the title of the case to "x
xx, Complainants, versus RAF Mansion Hotel Old Management
and New Management/VictorianoEwayan and Rolando De
Roca, Respondents."
As correctly observed by petitioner, such belated attempt to
implead him in the labor case must be seen as an afte1thought.
Moreover, the fact that respondents recognize petitioner as
embodying the "new management" of RAF Mansion Hotel
betrays an admission on their part that he had no hand in the "old
management" of the hotel under Ewayan, during which they were
hired and maintained as hotel employees - meaning that petitioner
was never considered as Ewayan's partner and co-employer;
respondents merely viewing petitioner as the subsequent manager
taking over from Ewayan, which bolsters petitioner’s allegation
that Ewayan had absconded and left respondents without recourse
other than to implead him as the "new management" upon whom
the obligation to settle the claims abandoned by Ewayan now fell.
"Contracts take effect only between the parties, their assigns and
heirs, except in case where the lights and obligations arising from
the contract are not transmissible by their nature, or by stipulation
or by provision of law."23The contract of employment between
respondents, on the one hand, and Oceanic and Ewayan on the
other, is effective only between them; it does not extend to
petitioner, who is not a party thereto. His only role is as lessor of
the premises which Oceanic leased to operate as a hotel; he cannot
be deemed as respondent's employer - not even under the pretext
that he took over as the "new management" of the hotel operated
by Oceanic. There simply is no truth to such claim.
Thus, to allow respondents to recover their monetary claims from
petitioner would necessarily result in their unjust enrichment.
There is unjust enrichment ‘when a person unjustly retains a
benefit to the loss of another, or when a person retains money or
property of another against the fundamental principles of justice,
equity and good conscience.’ The principle of unjust enrichment
requires two conditions: (1) that a person is benefited without a
valid ba5is or justification, and (2) that such benefit is derived at
the expense of another.
3
The main objective of the principle against unjust enrichment is to
prevent one from enriching himself at the expense of another
without just cause or consideration. x x x24
"In rendering justice, courts have always been, as they ought to
be, conscientiously guided by the norm that on the balance,
technicalities take a backseat against substantive rights, and not
the other way around."25 In short, substantive law outweighs
procedural technicalities as in this case.
Indeed, where as here, there is a strong showing that grave
miscarriage of justice would result from the strict application of
the [r]ules, we will not hesitate to relax the same in the interest of
substantial justice. It bears stressing that the rules of procedure are
merely tools designed to facilitate the attainment of justice. They
were conceived and promulgated to effectively aid the court in the
dispensation of justice. Courts are not slaves to or robots of
technical rules, shorn to be, conscientiously guided by the norm
that on the balance, technicalities take a backseat against
substantive rights, and not the other way around. Thus, if the
application of the rules would tend to frustrate rather than promote
justice. it is always within our power to suspend the rules, or
except a particular case from its operation.26
Taking this to mind, the labor tribunals and the CA should have
considered petitioner’s repeated pleas to scrutinize the facts and
particularly the lease agreement executed by him and Oceanic,
which would naturally exculpate him from liability as this would
prove the absence of an employment relation between him and
respondents. Instead, the case was determined on pure technicality
which in labor disputes, is not necessarily sanctioned –given that
proceedings before the Labor Arbiter and the NLRC are non-
litigious in nature where they are encouraged to avail of all
reasonable means to ascertain the facts of the case without regard
to technicalities of law or procedure.27Petitioner's motion to
dismiss, though belated, should have been given due attention.
In arriving at the foregoing conclusions, the Court is guided by the
allegations and arguments of the parties on the existence of an
employment relation between them, which may be found in their
pleadings - even at this stage. In particular, respondents squarely
addressed the issue in their Comment to the herein Petition. On
the other hand, petitioner has consistently raised the issue and
argued against it all throughout. Since the issue was raised in the
Petition and adequately met by the respondents in their Comment
thereto, the Court is not precluded from ruling thereon. There is
thus no need to remand the case to the Labor Arbiter for further
proceedings. Finally, this resolves respondents' claim that the
issue here involves only the propriety of the NLRC's dismissal of
petitioner’s petition for annulment of judgment; having argued
against petitioner's claim of absence of an employment relation
between them - and having presented documentary evidence
below to prove their case against petitioner - the issue relative to
existence or non-existence of an employment relation is ripe for
adjudication before this Court.
With the view taken of the case, it necessarily follows that the
decision of the Labor Arbiter must be set aside for being grossly
erroneous and unjust. At worst, it is null and void, and, as
petitioner correctly put it, it is a "lawless thing, which can be
treated act an outlaw and slain at sight, or ignored wherever it
exhibits its head."28 Being of such nature, it could not have
acquired finality, contrary to what respondents believe - as it
"creates no rights and imposes no duties. Any act performed
pursuant to it and any claim emanating from it have no legal
effect."29
WHEREFORE, the Petition is GRANTED. The June 19, 2014
Decision and October 28, 2014 Resolution of the Court of
Appeals in CA-G.R. SP No. 127974
are REVERSED and SETASIDE. NLRC-NCR-Case No. 02-
02490-12 is ordered DISMISSED, but only as against petitioner
Rolando De Roca.
SO ORDERED.
SECOND DIVISION
G.R. No. 198587, January 14, 2015
SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J.
BETIA, Petitioners, v. MA. JOPETTE M. REBESENCIO, MONTASSAH B.
SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE S.
SCHNEIDER-CRUZ, Respondents.
DECISION
LEONEN, J.:
All Filipinos are entitled to the protection of the rights guaranteed in the
Constitution.
This is a Petition for Review on Certiorari with application for the issuance of
a temporary restraining order and/or writ of preliminary injunction under Rule
45 of the 1997 Rules of Civil Procedure praying that judgment be rendered
reversing and setting aside the June 16, 2011 Decision 1 and September 13,
2011 Resolution2 of the Court of Appeals in CA-G.R. SP. No. 113006.
Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established
and existing under the laws of Jeddah, Kingdom of Saudi Arabia. It has a
Philippine office located at 4/F, Metro House Building, Sen. Gil J. Puyat
Avenue, Makati City.3 In its Petition filed with this court, Saudia identified itself
as follows:
1. Petitioner SAUDIA is a foreign corporation established and existing under
the Royal Decree No. M/24 of 18.07.1385H (10.02.1962G) in Jeddah,
Kingdom of Saudi Arabia ("KSA"). Its Philippine Office is located at 4/F Metro

House Building, Sen, Gil J. Puyat Avenue, Makati City (Philippine Office) . It
may be served with orders of this Honorable Court through undersigned
counsel at 4th and 6th Floors, Citibank Center Bldg., 8741 Paseo de Roxas,
Makati City.4 (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and
hired by Saudia as Temporary Flight Attendants with the accreditation and
approval of the Philippine Overseas Employment Administration. 5 After
undergoing seminars required by the Philippine Overseas Employment
Administration for deployment overseas, as well as training modules offered
by Saudia (e.g., initial flight attendant/training course and transition training),
and after working as Temporary Flight Attendants, respondents became
Permanent Flight Attendants. They then entered into Cabin Attendant
contracts with Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on May 16,
1990;6 Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth A. Cristobal
(Rouen Ruth) on May 22, 1993;7 and Loraine Schneider-Cruz (Loraine) on
August 27, 1995.8
Respondents continued their employment with Saudia until they were
separated from service on various dates in 2006.9
Respondents contended that the termination of their employment was illegal.
They alleged that the termination was made solely because they were
pregnant.10
As respondents alleged, they had informed Saudia of their respective
pregnancies and had gone through the necessary procedures to process their
maternity leaves. Initially, Saudia had given its approval but later on informed
respondents that its management in Jeddah, Saudi Arabia had disapproved
their maternity leaves. In addition, it required respondents to file their
resignation letters.11
Respondents were told that if they did not resign, Saudia would terminate
them all the same. The threat of termination entailed the loss of benefits, such
as separation pay and ticket discount entitlements. 12
Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's
Base Manager, AbdulmalikSaddik (Abdulmalik). 13 Montassah was informed
personally by Abdulmalik and a certain Faisal Hussein on October 20, 2006
after being required to report to the office one (1) month into her maternity
leave.14Rouen Ruth was also personally informed by Abdulmalik on October
17, 2006 after being required to report to the office by her Group
Supervisor.15 Loraine received a call on October 12, 2006 from her Group
Supervisor, Dakila Salvador.16
Saudia anchored its disapproval of respondents' maternity leaves and
demand for their resignation on its "Unified Employment Contract for Female
Cabin Attendants" (Unified Contract).17 Under the Unified Contract, the
employment of a Flight Attendant who becomes pregnant is rendered void. It
provides:
(H) Due to the essential nature of the Air Hostess functions to be physically fit
on board to provide various services required in normal or emergency cases
on both domestic/international flights beside her role in maintaining
continuous safety and security of passengers, and since she will not be able
to maintain the required medical fitness while at work in case of pregnancy,
accordingly, if the Air Hostess becomes pregnant at any time during the term
of this contract, this shall render her employment contract as void and she
will be terminated due to lack of medical fitness.18 (Emphasis supplied)
4
In their Comment on the present Petition, 19 respondents emphasized that the
Unified Contract took effect on September 23, 2006 (the first day of
Ramadan),20 well after they had filed and had their maternity leaves
approved. Ma. Jopette filed her maternity leave application on September 5,
2006.21 Montassah filed her maternity leave application on August 29, 2006,
and its approval was already indicated in Saudia's computer system by
August 30, 2006.22 Rouen Ruth filed her maternity leave application on
September 13, 2006,23 and Loraine filed her maternity leave application on
August 22, 2006.24
Rather than comply and tender resignation letters, respondents filed separate
appeal letters that were all rejected.25
Despite these initial rejections, respondents each received calls on the
morning of November 6, 2006 from Saudia's office secretary informing them
that their maternity leaves had been approved. Saudia, however, was quick to
renege on its approval. On the evening of November 6, 2006, respondents
again received calls informing them that it had received notification from
Jeddah, Saudi Arabia that their maternity leaves had been disapproved.26
Faced with the dilemma of resigning or totally losing their benefits,
respondents executed handwritten resignation letters. In Montassah's and
Rouen Ruth's cases, their resignations were executed on Saudia's blank
letterheads that Saudia had provided. These letterheads already had the
word "RESIGNATION" typed on the subject portions of their headings when
these were handed to respondents.27
On November 8, 2007, respondents filed a Complaint against Saudia and its
officers for illegal dismissal and for underpayment of salary, overtime pay,
premium pay for holiday, rest day, premium, service incentive leave pay,
13th month pay, separation pay, night shift differentials, medical expense
reimbursements, retirement benefits, illegal deduction, lay-over expense and
allowances, moral and exemplary damages, and attorney's fees. 28 The case
was initially assigned to Labor Arbiter Hermino V. Suelo and docketed as
NLRC NCR Case No. 00-11-12342-07.
Saudia assailed the jurisdiction of the Labor Arbiter. 29 It claimed that all the
determining points of contact referred to foreign law and insisted that the
Complaint ought to be dismissed on the ground of forum non conveniens.30 It
added that respondents had no cause of action as they resigned voluntarily. 31
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco
rendered the Decision32dismissing respondents' Complaint. The dispositive
portion of this Decision reads:
WHEREFORE, premises' considered, judgment is hereby
rendered DISMISSING the instant complaint for lack of jurisdiction/merit. 33
On respondents' appeal, the National Labor Relations Commission's Sixth
Division reversed the ruling of Executive Labor Arbiter Jambaro-Franco. It
explained that "[considering that complainants-appellants are OFWs, the
Labor Arbiters and the NLRC has [sic] jurisdiction to hear and decide their
complaint for illegal termination." 34 On the matter of forum non conveniens, it
noted that there were no special circumstances that warranted its abstention
from exercising jurisdiction. 35 On the issue of whether respondents were
validly dismissed, it held that there was nothing on record to support Saudia's
claim that respondents resigned voluntarily.
The dispositive portion of the November 19, 2009 National Labor Relations
Commission Decision36reads:
WHEREFORE, premises considered, judgment is hereby rendered finding
the appeal impressed with merit. The respondents-appellees are hereby
directed to pay complainants-appellants the aggregate amount of
SR614,001.24 corresponding to their backwages and separation pay plus ten
(10%) percent thereof as attorney's fees. The decision of the Labor Arbiter
dated December 12, 2008 is hereby VACATED and SET ASIDE. Attached is
the computation prepared by this Commission and made an integral part of
this Decision.37
In the Resolution dated February 11, 2010,38 the National Labor Relations
Commission denied petitioners' Motion for Reconsideration.
In the June 16, 2011 Decision,39 the Court of Appeals denied petitioners' Rule
65 Petition and modified the Decision of the National Labor Relations
Commission with respect to the award of separation pay and backwages.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the instant petition is hereby DENIED. The Decision dated
November 19, 2009 issued by public respondent, Sixth Division of the
National Labor Relations Commission - National Capital Region
is MODIFIED only insofar as the computation of the award of separation pay
and backwages. For greater clarity, petitioners are ordered to pay private
respondents separation pay which shall be computed from private
respondents' first day of employment up to the finality of this decision, at the
rate of one month per year of service and backwages which shall be
computed from the date the private respondents were illegally terminated until
finality of this decision. Consequently, the ten percent (10%) attorney's fees
shall be based on the total amount of the award. The assailed Decision is
affirmed in all other respects.
The labor arbiter is hereby DIRECTED to make a recomputation based on the
foregoing.40
In the Resolution dated September 13, 2011,41 the Court of Appeals denied
petitioners' Motion for Reconsideration.
Hence, this Appeal was filed.
The issues for resolution are the following:
First, whether the Labor Arbiter and the National Labor Relations Commission
may exercise jurisdiction over Saudi Arabian Airlines and apply Philippine law
in adjudicating the present dispute;
Second, whether respondents' voluntarily resigned or were illegally
terminated; and
Lastly, whether Brenda J. Betia may be held personally liable along with
Saudi Arabian Airlines.
I
Summons were validly served on Saudia and jurisdiction over it validly
acquired.
There is no doubt that the pleadings and summons were served on Saudia
through its counsel.42 Saudia, however, claims that the Labor Arbiter and the
National Labor Relations Commission had no jurisdiction over it because
summons were never served on it but on "Saudia Manila." 43 Referring to itself
as "Saudia Jeddah," it claims that "Saudia Jeddah" and not "Saudia Manila"
was the employer of respondents because:

First, "Saudia Manila" was never a party to the Cabin Attendant contracts
entered into by respondents;
Second, it was "Saudia Jeddah" that provided the funds to pay for
respondents' salaries and benefits; and
Lastly, it was with "Saudia Jeddah" that respondents filed their resignations. 44
Saudia posits that respondents' Complaint was brought against the wrong
party because "Saudia Manila," upon which summons was served, was never
the employer of respondents.45
Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other
than its bare allegation, there is no basis for concluding that "Saudia Jeddah"
is distinct from "Saudia Manila."
What is clear is Saudia's statement in its own Petition that what it has is a
"Philippine Office . . . located at 4/F Metro House Building, Sen. Gil J. Puyat
Avenue, Makati City."46 Even in the position paper that Saudia submitted to
the Labor Arbiter,47 what Saudia now refers to as "Saudia Jeddah" was then
only referred to as "Saudia Head Office at Jeddah, KSA," 48 while what Saudia
now refers to as "Saudia Manila" was then only referred to as "Saudia's office
in Manila."49
By its own admission, Saudia, while a foreign corporation, has a Philippine
office.
Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign
Investments Act of 1991, provides the following:
The phrase "doing business" shall include . . . opening offices, whether called
"liaison" offices or branches; . . . and any other act or acts that imply a
continuity of commercial dealings or arrangements and contemplate to that
extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of commercial
gain or of the purpose and object of the business organization. (Emphasis
supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no
other conclusion than that Saudia is a foreign corporation doing business in
the Philippines. As such, Saudia may be sued in the Philippines and is
subject to the jurisdiction of Philippine tribunals.
Moreover, since there is no real distinction between "Saudia Jeddah" and
"Saudia Manila" — the latter being nothing more than Saudia's local office —
service of summons to Saudia's office in Manila sufficed to vest jurisdiction
over Saudia's person in Philippine tribunals.
II
Saudia asserts that Philippine courts and/or tribunals are not in a position to
make an intelligent decision as to the law and the facts. This is because
respondents' Cabin Attendant contracts require the application of the laws of
Saudi Arabia, rather than those of the Philippines. 50 It claims that the difficulty
of ascertaining foreign law calls into operation the principle of forum non
conveniens, thereby rendering improper the exercise of jurisdiction by
Philippine tribunals.51
A choice of law governing the validity of contracts or the interpretation of its
provisions dees not necessarily imply forum non conveniens. Choice of law
and forum non conveniens are entirely different matters.
Choice of law provisions are an offshoot of the fundamental principle of
autonomy of contracts. Article 1306 of the Civil Code firmly ensconces this:
5
Article 1306. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against forum
shopping. It is designed to frustrate illicit means for securing advantages and
vexing litigants that would otherwise be possible if the venue of litigation (or
dispute resolution) were left entirely to the whim of either party.
Contractual choice of law provisions factor into transnational litigation and
dispute resolution in one of or in a combination of four ways: (1) procedures
for settling disputes, e.g., arbitration; (2) forum, i.e., venue; (3) governing law;
and (4) basis for interpretation. Forum non conveniens relates to, but is not
subsumed by, the second of these.
Likewise, contractual choice of law is not determinative of jurisdiction.
Stipulating on the laws of a given jurisdiction as the governing law of a
contract does not preclude the exercise of jurisdiction by tribunals elsewhere.
The reverse is equally true: The assumption of jurisdiction by tribunals does
not ipso factomean that it cannot apply and rule on the basis of the parties'
stipulation. In Hasegawa v. Kitamura:52
Analytically, jurisdiction and choice of law are two distinct concepts.
Jurisdiction considers whether it is fair to cause a defendant to travel to this
state; choice of law asks the further question whether the application of a
substantive law V'hich will determine the merits of the case is fair to both
parties. The power to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law. While jurisdiction and the choice of
the lexfori will often, coincide, the "minimum contacts" for one do not always
provide the necessary "significant contacts" for the other. The question of
whether the law of a state can be applied to a transaction is different from the
question of whether the courts of that state have jurisdiction to enter a
judgment.53
As various dealings, commercial or otherwise, are facilitated by the
progressive ease of communication and travel, persons from various
jurisdictions find themselves transacting with each other. Contracts involving
foreign elements are, however, nothing new. Conflict of laws situations
precipitated by disputes and litigation anchored on these contracts are not
totally novel.
Transnational transactions entail differing laws on the requirements Q for the
validity of the formalities and substantive provisions of contracts and their
interpretation. These transactions inevitably lend themselves to the possibility
of various fora for litigation and dispute resolution. As observed by an
eminent expert on transnational law:
The more jurisdictions having an interest in, or merely even a point of contact
with, a transaction or relationship, the greater the number of potential fora for
the resolution of disputes arising out of or related to that transaction or
relationship. In a world of increased mobility, where business and personal
transactions transcend national boundaries, the jurisdiction of a number of
different fora may easily be invoked in a single or a set of related disputes. 54
Philippine law is definite as to what governs the formal or extrinsic validity of
contracts. The first paragraph of Article 17 of the Civil Code provides that
"[t]he forms and solemnities of contracts . . . shall be governed by the laws of
the country in which they are executed"55 (i.e., lex loci celebrationis).
In contrast, there is no statutorily established mode of settling conflict of laws
situations on matters pertaining to substantive content of contracts. It has
been noted that three (3) modes have emerged: (1) lex loci contractus or the
law of the place of the making; (2) lex loci solutionis or the law of the place of
performance; and (3) lex loci intentionis or the law intended by the parties.56
Given Saudia's assertions, of particular relevance to resolving the present
dispute is lex loci intentionis.
An author observed that Spanish jurists and commentators "favor lex loci
intentionis."57 These jurists and commentators proceed from the Civil Code of
Spain, which, like our Civil Code, is silent on what governs the intrinsic
validity of contracts, and the same civil law traditions from which we draw
ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan
Guarantee v. V.P. Eusebio Construction, Inc.,58 manifested preference for
allowing the parties to select the law applicable to their contract":
No conflicts rule on essential validity of contracts is expressly provided for in
our laws. The rule followed by most legal systems, however, is that the
intrinsic validity of a contract must be governed by the lexcontractus or
"proper law of the contract." This is the law voluntarily agreed upon by the
parties (the lex loci voluntatis) or the law intended by them either expressly or
implicitly (the lex loci intentionis). The law selected may be implied from such
factors as substantial connection with the transaction, or the nationality or
domicile of the parties. Philippine courts would do well to adopt the first and
most basic rule in most legal systems, namely, to allow the parties to select
the law applicable to their contract, subject to the limitation that it is not
against the law, morals, or public policy of the forum and that the chosen law
must bear a substantive relationship to the transaction.59 (Emphasis in the
original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require
the application of the laws of Saudi Arabia. It insists that the need to comply
with these stipulations calls into operation the doctrine of forum non
conveniens and, in turn, makes it necessary for Philippine tribunals to refrain
from exercising jurisdiction.
As mentioned, contractual choice of laws factors into transnational litigation in
any or a combination of four (4) ways. Moreover, forum non
conveniens relates to one of these: choosing between multiple possible fora.
Nevertheless, the possibility of parallel litigation in multiple fora — along with
the host of difficulties it poses — is not unique to transnational litigation. It is a
difficulty that similarly arises in disputes well within the bounds of a singe
jurisdiction.
When parallel litigation arises strictly within the context of a single jurisdiction,
such rules as those on forum shopping, litis pendentia, and res judicata come
into operation. Thus, in the Philippines, the 1997 Rules on Civil Procedure
provide for willful and deliberate forum shopping as a ground not only for
summary dismissal with prejudice but also for citing parties and counsels in
direct contempt, as well as for the imposition of administrative
sanctions.60 Likewise, the same rules expressly provide that a party may seek
the dismissal of a Complaint or another pleading asserting a claim on the
ground "[t]hat there is another action pending between the same parties for
the same cause," i.e., litis pendentia, or "[t]hat the cause of action is barred
by a prior judgment,"61 i.e., res judicata.
Forum non conveniens, like the rules of forum shopping, litis pendentia,
and res judicata, is a means of addressing the problem of parallel litigation.
While the rules of forum shopping, litis pendentia, and res judicata are
designed to address the problem of parallel litigation within a single

jurisdiction, forum non conveniens is a means devised to address parallel
litigation arising in multiple jurisdictions.
Forum non conveniens literally translates to "the forum is inconvenient."62 It is
a concept in private international law and was devised to combat the "less
than honorable" reasons and excuses that litigants use to secure procedural
advantages, annoy and harass defendants, avoid overcrowded dockets, and
select a "friendlier" venue.63 Thus, the doctrine of forum non
conveniens addresses the same rationale that the rule against forum
shopping does, albeit on a multijurisdictional scale.
Forum non conveniens, like res judicata,64 is a concept originating in common
law.65 However, unlike the rule on res judicata, as well as those on litis
pendentia and forum shopping, forum non conveniens finds no textual
anchor, whether in statute or in procedural rules, in our civil law system.
Nevertheless, jurisprudence has applied forum non conveniens as basis for a
court to decline its exercise of jurisdiction. 66
Forum non conveniens is soundly applied not only to address parallel
litigation and undermine a litigant's capacity to vex and secure undue
advantages by engaging in forum shopping on an international scale. It is
also grounded on principles of comity and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in exercising
jurisdiction on account of forum non conveniens is a deferential gesture to the
tribunals of another sovereign. It is a measure that prevents the former's
having to interfere in affairs which are better and more competently
addressed by the latter. Further, forum non conveniens entails a recognition
not only that tribunals elsewhere are better suited to rule on and resolve a
controversy, but also, that these tribunals are better positioned to enforce
judgments and, ultimately, to dispense justice. Forum non
conveniens prevents the embarrassment of an awkward situation where a
tribunal is rendered incompetent in the face of the greater capability — both
analytical and practical — of a tribunal in another jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is as much
a matter of efficiency and economy as it is a matter of international courtesy.
A court would effectively be neutering itself if it insists on adjudicating a
controversy when it knows full well that it is in no position to enforce its
judgment. Doing so is not only an exercise in futility; it is an act of frivolity. It
clogs the dockets of a.tribunal and leaves it to waste its efforts on affairs,
which, given transnational exigencies, will be reduced to mere academic, if
not trivial, exercises.
Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts
of law cases, may refuse impositions on its jurisdiction where it is not the
most 'convenient' or available forum and the parties are not precluded from
seeking remedies elsewhere." 67 In Puyat v. Zabarte,68 this court recognized
the following situations as among those that may warrant a court's desistance
from exercising jurisdiction:
1) The belief that the matter can be better tried and decided elsewhere,
either because the main aspects of the case transpired in a foreign
jurisdiction or the material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice
known as forum shopping[,] merely to secure procedural advantages or to
convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non residents or
6
aliens when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right
sought to be maintained; and
5) The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of
Appeals,70 this court underscored that a Philippine court may properly
assume jurisdiction over a case if it chooses to do so to the extent: "(1) that
the Philippine Court is one to which the parties may conveniently resort to; (2)
that the Philippine Court is in a position to make an intelligent decision as to
the law and the facts; and (3) that the Philippine Court has or is likely to have
power to enforce its decision."71
The use of the word "may" (i.e., "may refuse impositions on its jurisdiction" 72)
in the decisions shows that the matter of jurisdiction rests on the sound
discretion of a court. Neither the mere invocation of forum non
conveniens nor the averment of foreign elements operates to automatically
divest a court of jurisdiction. Rather, a court should renounce jurisdiction only
"after 'vital facts are established, to determine whether special circumstances'
require the court's desistance."73 As the propriety of applying forum non
conveniens is contingent on a factual determination, it is, therefore, a matter
of defense.74
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil
Procedure is exclusive in its recital of the grounds for dismissal that are
exempt from the omnibus motion rule: (1) lack of jurisdiction over the subject
matter; (2) litis pendentia; (3) res judicata; and (4) prescription. Moreover,
dismissal on account offorum non conveniens is a fundamentally
discretionary matter. It is, therefore, not a matter for a defendant to foist upon
the court at his or her own convenience; rather, it must be pleaded at the
earliest possible opportunity.
On the matter of pleading forum non conveniens, we state the rule,
thus: Forum non conveniens must not only be clearly pleaded as a ground for
dismissal; it must be pleaded as such at the earliest possible opportunity.
Otherwise, it shall be deemed waived.
This court notes that in Hasegawa,76 this court stated that forum non
conveniens is not a ground for a motion to dismiss. The factual ambience of
this case however does not squarely raise the viability of this doctrine. Until
the opportunity comes to review the use of motions to dismiss for parallel
litigation, Hasegawa remains existing doctrine.
Consistent with forum non conveniens as fundamentally a factual matter, it is
imperative that it proceed from & factually established basis. It would be
improper to dismiss an action pursuant to forum non conveniens based
merely on a perceived, likely, or hypothetical multiplicity of fora. Thus, a
defendant must also plead and show that a prior suit has, in fact, been
brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered by
duplicitous litigation, the embarrassment of intruding into the affairs of another
sovereign, and the squandering of judicial efforts in resolving a dispute
already lodged and better resolved elsewhere. As has been noted:
A case will not be stayed o dismissed on [forum] non conveniens grounds
unless the plaintiff is shown to have an available alternative forum elsewhere.
On this, the moving party bears the burden of proof.
A number of factors affect the assessment of an alternative forum's
adequacy. The statute of limitations abroad may have run, of the foreign court
may lack either subject matter or personal jurisdiction over the defendant. . . .
Occasionally, doubts will be raised as to the integrity or impartiality of the
foreign court (based, for example, on suspicions of corruption or bias in favor
of local nationals), as to the fairness of its judicial procedures, or as to is
operational efficiency (due, for example, to lack of resources, congestion and
delay, or interfering circumstances such as a civil unrest). In one noted case,
[it was found] that delays of 'up to a quarter of a century' rendered the foreign
forum... inadequate for these purposes.77
We deem it more appropriate and in the greater interest of prudence that a
defendant not only allege supposed dangerous tendencies in litigating in this
jurisdiction; the defendant must also show that such danger is real and
present in that litigation or dispute resolution has commenced in another
jurisdiction and that a foreign tribunal has chosen to exercise jurisdiction.
III
Forum non conveniens finds no application and does not operate to divest
Philippine tribunals of jurisdiction and to require the application of foreign law.
Saudia invokes forum non conveniens to supposedly effectuate the
stipulations of the Cabin Attendant contracts that require the application of the
laws of Saudi Arabia.
Forum non conveniens relates to forum, not to the choice of governing law.
Thai forum non conveniensmay ultimately result in the application of foreign
law is merely an incident of its application. In this strict sense, forum non
conveniens is not applicable. It is not the primarily pivotal consideration in this
case.
In any case, even a further consideration of the applicability of forum non
conveniens on the incidental matter of the law governing respondents'
relation with Saudia leads to the conclusion that it is improper for Philippine
tribunals to divest themselves of jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a forum
and'its incidents must grapple with two (2) considerations: first, the availability
and adequacy of recourse to a foreign tribunal; and second, the question of
where, as between the forum court and a foreign court, the balance of
interests inhering in a dispute weighs more heavily.
The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to
a foreign tribunal and can be resolved by juxtaposing the competencies and
practical circumstances of the tribunals in alternative fora. Exigencies, like the
statute of limitations, capacity to enforce orders and judgments, access to
records, requirements for the acquisition of jurisdiction, and even questions
relating to the integrity of foreign courts, may render undesirable or even
totally unfeasible recourse to a foreign court. As mentioned, we consider it in
the greater interest of prudence that a defendant show, in pleading forum non
conveniens, that litigation has commenced in another jurisdiction and that a
foieign tribunal has, in fact, chosen to exercise jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of interests
inhering in a dispute: first, the vinculum which the parties and their relation
have to a given jurisdiction; and second, the public interest that must animate
a tribunal, in its capacity as an agent of the sovereign, in choosing to assume
or decline jurisdiction. The first is more concerned with the parties, their
personal circumstances, and private interests; the second concerns itself with
the state and the greater social order.

In considering the vinculum, a court must look into the preponderance of
linkages which the parties and their transaction may have to either
jurisdiction. In this respect, factors, such as the parties' respective
nationalities and places of negotiation, execution, performance, engagement
or deployment, come into play.
In considering public interest, a court proceeds with a consciousness that it is
an organ of the state. It must, thus, determine if the interests of the sovereign
(which acts through it) are outweighed by those of the alternative jurisdiction.
In this respect, the court delves into a consideration of public policy. Should it
find that public interest weighs more heavily in favor of its assumption of
jurisdiction, it should proceed in adjudicating the dispute, any doubt or
.contrary view arising from the preponderance of linkages notwithstanding.
Our law on contracts recognizes the validity of contractual choice of law
provisions. Where such provisions exist, Philippine tribunals, acting as the
forum court, generally defer to the parties' articulated choice.
This is consistent with the fundamental principle of autonomy of contracts.
Article 1306 of the Civ:l Code expressly provides that "[t]he contracting
parties may establish 'such stipulations, clauses, terms and conditions as
they may deem convenient."78 Nevertheless, while a Philippine tribunal
(acting as the forum court) is called upon to respect the parties' choice of
governing law, such respect must not be so permissive as to lose sight of
considerations of law, morals, good customs, public order, or public policy
that underlie the contract central to the controversy.
Specifically with respect to public policy, in Pakistan International Airlines
Corporation v. Ople,79 this court explained that:
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 inta 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. 80(Emphasis
supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall
ensure the fundamental equality before the law of women and men."
Contrasted with Article II, Section 1 of the 1987 Constitution's statement that
"[n]o person shall ... be denied the equal protection of the laws," Article II,
Section 14 exhorts the State to "ensure." This does not only mean that the
Philippines shall not countenance nor lend legal recognition and approbation
to measures that discriminate on the basis of one's being male or female. It
imposes an obligation to actively engage in securing the fundamental equality
of men and women.
The Convention on the Elimination of all Forms of Discrimination against
Women (CEDAW), signed and ratified by the Philippines on July 15, 1980,
and on August 5, 1981, respectively,81 is part of the law of the land. In view of
the widespread signing and ratification of, as well as adherence (in practice)
to it by states, it may even be said that many provisions of the CEDAW may
have become customary international law. The CEDAW gives effect to the
Constitution's policy statement in Article II, Section 14. Article I of the CEDAW
defines "discrimination against women" as:
any distinction, exclusion or restriction made on the basis of sex which has
the effect or purpose of impairing or nullifying the recognition, enjoyment or
7
exercise by women, irrespective of their marital status, on a basis of equality
of men and women, of human rights and fundamental freedoms in the
political, economic, social, cultural, civil or any other field. 82
The constitutional exhortation to ensure fundamental equality, as illumined by
its enabling law, the CEDAW, must inform and animate all the actions of all
personalities acting on behalf of the State. It is, therefore, the bounden duty of
this court, in rendering judgment on the disputes brought before it, to ensure
that no discrimination is heaped upon women on the mere basis of their being
women. This is a point so basic and central that all our discussions and
pronouncements — regardless of whatever averments there may be of
foreign law — must proceed from this premise.
So informed and animated, we emphasize the glaringly discriminatory nature
of Saudia's policy. As argued by respondents, Saudia's policy entails the
termination of employment of flight attendants who become pregnant. At the
risk of stating the obvious, pregnancy is an occurrence that pertains
specifically to women. Saudia's policy excludes from and restricts
employment on the basis of no other consideration but sex.
We do not lose sight of the reality that pregnancy does present physical
limitations that may render difficult the performance of functions associated
with being a flight attendant. Nevertheless, it would be the height of iniquity to
view pregnancy as a disability so permanent and immutable that, it must
entail the termination of one's employment. It is clear to us that any individual,
regardless of gender, may be subject to exigencies that limit the performance
of functions. However, we fail to appreciate how pregnancy could be such an
impairing occurrence that it leaves no other recourse but the complete
termination of the means through which a woman earns a living.
Apart from the constitutional policy on the fundamental equality before the law
of men and women, it is settled that contracts relating to labor and
employment are impressed with public interest. Article 1700 of the Civil Code
provides that "[t]he relation between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts
must yield to the common good."
Consistent with this, this court's pronouncements in Pakistan International
Airlines Corporation83 are clear and unmistakable:
Petitioner PIA cannot take refuge in paragraph 10 of its employment
agreement which specifies, firstly, the law of Pakistan as the applicable law of
the agreement, and, secondly, lays the venue for settlement of any dispute
arising out of or in connection with the agreement "only [in] courts of Karachi,
Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the
application of Philippine labor laws and'regulations to the subject matter of
this case, i.e., the employer-employee relationship between petitioner PIA
and private respondents. We have already pointed out that the relationship is
much affected with public interest and that the otherwise applicable Philippine
laws and regulations cannot be rendered illusory by the parties agreeing
upon some other law to govern their relationship. . . . Under these
circumstances, paragraph 10 of the employment agreement cannot be given
effect so as to oust Philippine agencies and courts of the jurisdiction vested
upon them by Philippine law.84 (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the
illegal termination of respondents' employment, this case is immutably a
matter of public interest and public policy. Consistent with clear
pronouncements in law and jurisprudence, Philippine laws properly find
application in and govern this case. 'Moreover, as this premise for Saudia's
insistence on the application forum non conveniens has been shattered, it
follows that Philippine tribunals may properly assume jurisdiction over the
present controversy. Philippine jurisprudence provides ample illustrations of
when a court's renunciation of jurisdiction on account of forum non
conveniens is proper or improper.'
In Philsec Investment Corporation v. Court of Appeals ,85 this court noted that
the trial court failed to consider that one of the plaintiffs was a domestic
corporation, that one of the defendants was a Filipino, and that it was the
extinguishment of the latter's debt that was the object of the transaction
subject of the litigation. Thus, this court held, among others, that the trial
court's refusal to assume jurisdiction was not justified by forum non
conveniens and remanded the case to the trial court.
In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained the trial
court's assumption of jurisdiction considering that the trial court could properly
enforce judgment on the petitioner which was a foreign corporation licensed
to do business in the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no reason to
disturb the trial court's assumption of jurisdiction over a case in which, as
noted by the trial court, "it is more convenient to hear and decide the case in
the Philippines because Todaro [the plaintiff] resides in the Philippines and
the contract allegedly breached involve[d] employment in the Philippines." 88
In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this court held
that the fact that the complainant in an illegal dismissal case was a Canadian
citizen and a repatriate did not warrant the application of forum non
conveniens considering that: (1) the Labor Code does not include forum non
conveniens as a ground for the dismissal of a complaint for illegal dismissal;
(2) the propriety of dismissing a case based on forum non
conveniens requires a factual determination; and (3) the requisites for
assumption of jurisdiction as laid out in Bank of America, NT&SA90 were all
satisfied.
In contrast, this court ruled in The Manila Hotel Corp. v. National Labor
Relations Commission91 that the National Labor Relations Q Commission was
a seriously inconvenient forum. In that case, private respondent Marcelo G.
Santos was working in the Sultanate of Oman when he received a letter from
Palace Hotel recruiting him for employment in Beijing, China. Santos
accepted the offer. Subsequently, however, he was released from
employment supposedly due to business reverses arising from political
upheavals in China (i.e., the Tiananmen Square incidents of 1989). Santos
later filed a Complaint for illegal dismissal impleading Palace Hotel's General
Manager, Mr. Gerhard Schmidt, the Manila Hotel International Company Ltd.
(which was, responsible for training Palace Hotel's personnel and staff), and
the Manila Hotel Corporation (which owned 50% of Manila Hotel International
Company Ltd.'s capital stock).
In ruling against the National Labor Relations Commission's exercise of
jurisdiction, this court noted that the main aspects of the case transpired in
two (2) foreign jurisdictions, Oman and China, and that the case involved
purely foreign elements. Specifically, Santos was directly hired by a foreign
employer through correspondence sent to Oman. Also, the proper defendants
were neither Philippine nationals nor engaged in business in the Philippines,
while the main witnesses were not residents of the Philippines. Likewise, this
court noted that the National Labor Relations Commission was in no position
to conduct the following: first, determine the law governing the employment

contract, as it was entered into in foreign soil; second, determine the facts, as
Santos' employment was terminated in Beijing; and third, enforce its
judgment, since Santos' employer, Palace Hotel, was incorporated under the
laws of China and was not even served with summons.
Contrary to Manila Hotel, the case now before us does not entail a
preponderance of linkages that favor a foreign jurisdiction.
Here, the circumstances of the parties and their relation do not approximate
the circumstances enumerated in Puyat,92 which this court recognized as
possibly justifying the desistance of Philippine tribunals from exercising
jurisdiction.
First, there is no basis for concluding that the case can be more conveniently
tried elsewhere. As established earlier, Saudia is doing business in the
Philippines. For their part, all four (4) respondents are Filipino citizens
maintaining residence in the Philippines and, apart from their previous
employment with Saudia, have no other connection to the Kingdom of Saudi
Arabia. It would even be to respondents' inconvenience if this case were to
be tried elsewhere.
Second, the records are bereft of any indication that respondents filed their
Complaint in an effort to engage in forum shopping or to vex and
inconvenience Saudia.
Third, there is no indication of "unwillingness to extend local judicial facilities
to non-residents or aliens."93That Saudia has managed to bring the present
controversy all the way to this court proves this.
Fourth, it cannot be said that the local judicial machinery is inadequate for
effectuating the right sought to be maintained. Summons was properly served
on Saudia and jurisdiction over its person was validly acquired.
Lastly, there is not even room for considering foreign law. Philippine law
properly governs the present dispute.
As the question of applicable law has been settled, the supposed difficulty of
ascertaining foreign law (which requires the application of forum non
conveniens) provides no insurmountable inconvenience or special
circumstance that will justify depriving Philippine tribunals of jurisdiction.
Even if we were to assume, for the sake of discussion, that it is the laws of
Saudi Arabia which should apply, it does not follow that Philippine tribunals
should refrain from exercising jurisdiction. To. recall our pronouncements in
Puyat,94 as well as in Bank of America, NT&SA,95 it is not so much the mere
applicability of foreign law which calls into operation forum non conveniens.
Rather, what justifies a court's desistance from exercising jurisdiction is
"[t]he difficulty of ascertaining foreign law"96 or the inability of a "Philippine
Court to make an intelligent decision as to the law[.]" 97
Consistent with lex loci intentionis, to the extent that it is proper and
practicable (i.e., "to make an intelligent decision" 98), Philippine tribunals may
apply the foreign law selected by the parties. In fact, (albeit without meaning
to make a pronouncement on the accuracy and reliability of respondents'
citation) in this case, respondents themselves have made averments as to
the laws of Saudi Arabia. In their Comment, respondents write:
8
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and
unlawful to terminate the employment of any woman by virtue of pregnancy.
The law in Saudi Arabia is even more harsh and strict [sic] in that no
employer can terminate the employment of a female worker or give her a
warning of the same while on Maternity Leave, the specific provision of Saudi
Labor Laws on the matter is hereto quoted as follows:
"An employer may not terminate the employment of a female worker or give
her a warning of the same while on maternity leave." (Article 155, Labor Law
of the Kingdom of Saudi Arabia, Royal Decree No. M/51.)99
All told, the considerations for assumption of jurisdiction by Philippine
tribunals as outlined in Bank of America, NT&SA100 have been satisfied. First,
all the parties are based in the Philippines and all the material incidents
transpired in this jurisdiction. Thus, the parties may conveniently seek relief
from Philippine tribunals. Second, Philippine tribunals are in a position to
make an intelligent decision as to the law and the facts. Third, Philippine
tribunals are in a position to enforce their decisions. There is no compelling
basis for ceding jurisdiction to a foreign tribunal. Quite the contrary, the
immense public policy considerations attendant to this case behoove
Philippine tribunals to not shy away from their duty to rule on the case.
IV
Respondents were illegally terminated.
In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary resignation
as "the voluntary act of an employee who is in a situation where one believes
that personal reasons cannot be sacrificed in favor of the exigency of the
service, and one has no other choice but to dissociate oneself from
employment. It is a formal pronouncement or relinquishment of an office, with
the intention of relinquishing the office accompanied by the act of
relinquishment."102 Thus, essential to the act of resignation is voluntariness. It
must be the result of an employee's exercise of his or her own will.
In the same case of Bilbao, this court advanced a means for determining
whether an employee resigned voluntarily:
As the intent to relinquish must concur with the overt act of
relinquishment, the acts of the employee before and after the alleged
resignation must be considered in determining whether he or she, in fact,
intended, to sever his or her employment.103 (Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of
work because 'continued employment is rendered impossible, unreasonable
or unlikely, as an offer involving a demotion in rank or a diminution in pay' and
other benefits."104
In Penaflor v. Outdoor Clothing Manufacturing Corporation,105 constructive
dismissal has been described as tantamount to "involuntarily [sic] resignation
due to the harsh, hostile, and unfavorable conditions set by the
employer."106 In the same case, it was noted that "[t]he gauge for constructive
dismissal is whether a reasonable person in the employee's position would
feel compelled to give up his employment under the prevailing
circumstances."107
Applying the cited standards on resignation and constructive dismissal, it is
clear that respondents were constructively dismissed. Hence, their
termination was illegal.
The termination of respondents' employment happened when they were
pregnant and expecting to incur costs on account of child delivery and infant
rearing. As noted by the Court of Appeals, pregnancy is a time when they
need employment to sustain their families.108 Indeed, it goes against normal
and reasonable human behavior to abandon one's livelihood in a time of
great financial need.
It is clear that respondents intended to remain employed with Saudia. All they
did was avail of their maternity leaves. Evidently, the very nature of a
maternity leave means that a pregnant employee will not report for work only
temporarily and that she will resume the performance of her duties as soon
as the leave allowance expires.
It is also clear that respondents exerted all efforts to' remain employed with
Saudia. Each of them repeatedly filed appeal letters (as much as five [5]
letters in the case of Rebesencio109) asking Saudia to reconsider the
ultimatum that they resign or be terminated along with the forfeiture of their
benefits. Some of them even went to Saudia's office to personally seek
reconsideration.110
Respondents also adduced a copy of the "Unified Employment Contract for
Female Cabin Attendants."111This contract deemed void the employment of a
flight attendant who becomes pregnant and threatened termination due to
lack of medical fitness.112 The threat of termination (and the forfeiture of
benefits that it entailed) is enough to compel a reasonable person in
respondents' position to give up his or her employment.
Saudia draws attention to how respondents' resignation letters were
supposedly made in their own handwriting. This minutia fails to surmount all
the other indications negating any voluntariness on respondents' part. If at all,
these same resignation letters are proof of how any supposed resignation did
not arise from respondents' own initiative. As earlier pointed out, respondents'
resignations were executed on Saudia's blank letterheads that Saudia had
provided. These letterheads already had the word "RESIGNATION" typed on
the subject portion of their respective headings when these were handed to
respondents.113
"In termination cases, the burden of proving just or valid cause for dismissing
an employee rests on the employer."114 In this case, Saudia makes much of
how respondents supposedly completed their exit interviews, executed
quitclaims, received their separation pay, and took more than a year to file
their Complaint.115 If at all, however, these circumstances prove only the fact
of their occurrence, nothing more. The voluntariness of respondents'
departure from Saudia is non sequitur.
Mere compliance with standard procedures or processes, such as the
completion of their exit interviews, neither negates compulsion nor indicates
voluntariness.
As with respondent's resignation letters, their exit interview forms even
support their claim of illegal dismissal and militates against Saudia's
arguments. These exit interview forms, as reproduced by Saudia in its own
Petition, confirms the unfavorable conditions as regards respondents'
maternity leaves. Ma. Jopette's and Loraine's exit interview forms are
particularly telling:
a. From Ma. Jopette's exit interview form:
    3. In what respects has the job met or failed to meet your expectations?
THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY
LEAVE.116

b. From Loraine's exit interview form:
    1. What are your main reasons for leaving Saudia? What company are you
joining?
        xxx xxxxxx  Having been compelled to litigate to seek reliefs for their illegal and unjust
        Others
CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY) 117
As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc.
v. Paramio,118 this court noted that "[i]f (a) there is clear proof that the waiver
was wangled from an unsuspecting or gullible person; or (b) the terms of the
settlement are unconscionable, and on their face invalid, such quitclaims
must be struck down as invalid or illegal." 119 Respondents executed their
quitclaims after having been unfairly given an ultimatum to resign or be
terminated (and forfeit their benefits).
V In Ever Electrical Manufacturing, Inc. (EEMI) v. SamahangManggagawa ng
Having been illegally and unjustly dismissed, respondents are entitled to full
backwages and benefits from the time of their termination until the finality of
this Decision. They are likewise entitled to separation pay in the amount of
one (1) month's salary for every year of service until the fmality of this
Decision, with a fraction of a year of at least six (6) months being counted as
one (1) whole year.
Moreover, "[m]oral damages are awarded in termination cases where the
employee's dismissal was attended by bad faith, malice or fraud, or where it
constitutes an act oppressive to labor, or where it was done in a manner
contrary to morals, good customs or public policy."120 In this case, Saudia
terminated respondents' employment in a manner that is patently
discriminatory and running afoul of the public interest that underlies employer-
employee relationships. As such, respondents are entitled to moral damages.
121
To provide an "example or correction for the public good"  as against such
discriminatory and callous schemes, respondents are likewise entitled to
exemplary damages.
In a long line of cases, this court awarded exemplary damages to illegally
dismissed employees whose "dismissal[s were] effected in a wanton,
oppressive or malevolent manner."122 This court has awarded exemplary
damages to employees who were terminated on such frivolous, arbitrary, and
unjust grounds as membership in or involvement with labor unions, 123 injuries
sustained in the course of employment,124development of a medical condition
due to the employer's own violation of the employment contract, 125and lodging
of a Complaint against the employer.126 Exemplary damages were also
awarded to employees who were deemed illegally dismissed by an employer
in an attempt to evade compliance with statutorily established employee
benefits.127 Likewise, employees dismissed for supposedly just causes, but in
violation of due process requirements, were awarded exemplary damages. 128
These examples pale in comparison to the present controversy. Stripped of
all unnecessary complexities, respondents were dismissed for no other
reason than simply that they were pregnant. This is as wanton, oppressive,
and tainted with bad faith as any reason for termination of employment can
be. This is no ordinary case of illegal dismissal. This is a case of manifest
gender discrimination. It is an affront not only to our statutes and policies on
employees' security of tenure, but more so, to the Constitution's dictum of
fundamental equality between men and women.129
9
The award of exemplary damages is, therefore, warranted, not only to remind
employers of the need to adhere to the requirements of procedural and
substantive due process in termination of employment, but more importantly,
to demonstrate that gender discrimination should in no case be
countenanced.
dismissal, respondents are likewise entitled to attorney's fees in the amount
of 10% of the total monetary award.130
VI
Petitioner Brenda J. Betia may not be held liable.
A corporation has a personality separate and distinct from those of the
persons composing it. Thus, as a rule, corporate directors and officers are not
liable for the illegal termination of a corporation's employees. It is only when
they acted in bad faith or with malice that they become solidarity liable with
the corporation.131
Ever Electrical,132 this court clarified that "[b]ad faith does not connote bad
judgment or negligence; it imports a dishonest purpose or some moral
obliquity and conscious doing of wrong; it means breach of a known duty
through some motive or interest or ill will; it partakes of the nature of fraud." 133
Respondents have not produced proof to show that Brenda J. Betia acted in
bad faith or with malice as regards their termination. Thus, she may not be
held solidarity liable with Saudia.
WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia
is not solidarity liable with petitioner Saudi Arabian Airlines, and second, that
petitioner Saudi Arabian Airlines is liable for moral and exemplary damages.
The June 16, 2011 Decision and the September 13, 2011 Resolution of the
Court of Appeals in CA-G.R. SP. No. 113006 are hereby AFFIRMED in all
other respects. Accordingly, petitioner Saudi Arabian Airlines is ordered to
pay respondents:
(1) Full backwages and all other benefits computed from the respective dates
in which each of the respondents were illegally terminated until the finality
of this Decision;
(2) Separation pay computed from the respective dates in which each of the
respondents commenced employment until the finality of this Decision at
the rate of one (1) month's salary for every year of service, with a fraction
of a year of at least six (6) months being counted as one (1) whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;
(4) Exemplary damages in the amount of P200,000.00 per respondent; and
(5) Attorney's fees equivalent to 10% of the total award.
Interest of 6% per annum shall likewise be imposed on the total judgment
award from the finality of this Decision until full satisfaction thereof.
This case is REMANDED to the Labor Arbiter to make a detailed computation
of the amounts due to respondents which petitioner Saudi Arabian Airlines
should pay without delay.
SO ORDERED
THIRD DIVISION
September 23, 2015
G.R. NOS. 178382-83
CONTINENTAL MICRONESIA, INC., Petitioner,  consideration of the Php1,140,000.00 housing advance that CMI promised
vs.
JOSEPH BASSO, Respondent.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the Revised
Rules of Court assailing the Decision2dated May 23, 2006 and
Resolution3 dated June 19, 2007 of the Court of Appeals in the consolidated
cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281. These assailed
Decision and Resolution set aside the Decision4dated November 28, 2003 of
the National Labor Relations Commission (NLRC) declaring Joseph Basso's
(Basso) dismissal illegal, and ordering the payment of separation pay as
alternative to reinstatement and full backwages until the date of the Decision.
The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation
organized and e:xisting under the laws of and domiciled in the United States
of America (US). It is licensed to do business in the Philippines. 5 Basso, a US
citizen, resided in the Philippines prior to his death. 6
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden),
Managing Director-Asia of Continental Airlines, Inc. (Continental), offered
Basso the position of General Manager of the Philippine Branch of
Continental. Basso accepted the offer.7
It was not until much later that Mr. Braden, who had since returned to the US,
sent Basso the employment contract8dated February 1, 1991, which Mr.
Braden had already signed. Basso then signed the employment contract and
returned it to Mr. Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of
Continental, with Basso retaining his position as General Manager. 9
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr.
Schulz), who was then CMI’s Vice President of Marketing and Sales,
informing Basso that he has agreed to work in CMI as a consultant on an "as
needed basis" effective February 1, 1996 to July 31, 1996. The letter also
informed Basso that: (1) he will not receive any monetary compensation but
will continue being covered by the insurance provided by CMI; (2) he will
enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for the
payment of housing lease for 12 months.10
On January 11, 1996, Basso wrote a counter-proposal11 to Mr. Schulz
regarding his employment status in CMI. On March 14, 1996, Basso wrote
another letter addressed to Ms. Marty Woodward (Ms. Woodward) of CMI’s
Human Resources Department inquiring about the status of his
employment.12 On the same day, Ms. Woodward responded that pursuant to
the employment contract dated February 1, 1991, Basso could be terminated
at will upon a thirty-day notice. This notice was allegedly the letter Basso
received from Mr. Schulz on December 20, 1995. Ms. Woodward also
reminded Basso of the telephone conversation between him, Mr. Schulz and
Ms. Woodward on December 19, 1995, where they informed him of the
company’s decision to relieve him as General Manager. Basso, instead, was
offered the position of consultant to CMI. Ms. Woodward also informed Basso
that CMI rejected his counter-proposal and, thus, terminated his employment
effective January 31, 1996. CMI offered Basso a severance pay, in
him13 Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary
Damages against CMI on December 19, 1996.14 Alleging the presence of

foreign elements, CMI filed a Motion to Dismiss 15 dated February 10, 1997 on
the ground of lack of jurisdiction over the person of CMI and the subject
matter of the controversy. In an Order16 dated August 27, 1997, the Labor
Arbiter granted the Motion to Dismiss. Applying the doctrine of lex loci
contractus, the Labor Arbiter held that the terms and provisions of the
employment contract show that the parties did not intend to apply our Labor
Code (Presidential Decree No. 442). The Labor Arbiter also held that no
employer-employee relationship existed between Basso and the branch office
of CMI in the Philippines, but between Basso and the foreign corporation
itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the
determination of certain facts to settle the issue on jurisdiction. NLRC ruled
that the issue on whether the principle of lex loci contractus or lex loci
celebrationis should apply has to be further threshed out. 17
Labor Arbiter’s Ruling
Labor Arbiter Madjayran H. Ajan in his Decision 18 dated September 24, 1999
dismissed the case for lack of merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was
executed in the US "since the letter-offer was under the Texas letterhead and
the acceptance of Complainant was returned there."19 Thus, applying the
doctrine of lex loci celebrationis, US laws apply. Also, applying lex loci
contractus, the Labor Arbiter ruled that the parties did not intend to apply
Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that
Philippine laws were not written into it. More specifically, the Philippine law on
taxes and the Labor Code were not intended by the parties to apply,
otherwise Par. 7 on the payment by Complainant U.S. Federal and Home
State income taxes, and Pars. 22/23 on termination by 30-day prior notice,
will not be there. The contract was prepared in contemplation of Texas or
U.S. laws where Par. 7 is required and Pars. 22/23 is allowed. 20
The Labor Arbiter also ruled that Basso was terminated for a valid cause
based on the allegations of CMI that Basso committed a series of acts that
constitute breach of trust and loss of confidence.21
The Labor Arbiter, however, found CMI to have voluntarily submitted to his
office’s jurisdiction. CMI participated in the proceedings, submitted evidence
on the merits of the case, and sought affirmative relief through a motion to
dismiss.22
NLRC’s Ruling
On appeal, the NLRC Third Division promulgated its Decision 23 dated
November 28, 2003, the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET
ASIDE. Respondent CMI is ordered to pay complainant the amount of
US$5,416.00 for failure to comply with the due notice requirement. The other
claims are dismissed.
SO ORDERED.24
The NLRC did not agree with the pronouncement of the Labor Arbiter that his
office has no jurisdiction over the controversy. It ruled that the Labor Arbiter
acquired jurisdiction over the case when CMI voluntarily submitted to his
office’s jurisdiction by presenting evidence, advancing arguments in support
of the legality of its acts, and praying for reliefs on the merits of the case. 25
10
On the merits, the NLRC agreed with the Labor Arbiter that Basso was
dismissed for just and valid causes on the ground of breach of trust and loss
of confidence. The NLRC ruled that under the applicable rules on loss of trust
and confidence of a managerial employee, such as Basso, mere existence of
a basis for believing that such employee has breached the trust of his
employer suffices. However, the NLRC found that CMI denied Basso the
required due process notice in his dismissal. 26
Both CMI and Basso filed their respective Motions for Reconsideration dated
January 15, 200427 and January 8, 2004.28 Both motions were dismissed in
separate Resolutions dated March 15, 200429 and February 27,
2004,30respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of
Appeals docketed as CA-G.R. SP No. 83938.31 Basso imputed grave abuse
of discretion on the part of the NLRC in ruling that he was validly dismissed.
CMI filed its own Petition for Certiorari dated May 13, 2004 docketed as CA-
G.R. SP No. 84281,32 alleging that the NLRC gravely abused its discretion
when it assumed jurisdiction over the person of CMI and the subject matter of
the case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated
the two cases33 and ordered the parties to file their respective Memoranda.
The Court of Appeal’s Decision
The Court of Appeals promulgated the now assailed Decision 34 dated May 23,
2006, the relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No.
84281 is DENIED DUE COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938
is GIVEN DUE COURSE and GRANTED, and accordingly, the assailed
Decision dated November 28, 2003 and Resolution dated February 27, 2004
of the NLRC are SET ASIDE and VACATED. Instead judgment is rendered
hereby declaring the dismissal of Basso illegal and ordering Continental to
pay him separation pay equivalent to one (1) month pay for every year of
service as an alternative to reinstatement. Further, ordering Continental to
pay Basso his full backwages from the date of his said illegal dismissal until
date of this decision. The claim for moral and exemplary damages as well as
attorney’s fees are dismissed.35
The Court of Appeals ruled that the Labor Arbiter and the NLRC had
jurisdiction over the subject matter of the case and over the parties. The
Court of Appeals explained that jurisdiction over the subject matter of the
action is determined by the allegations of the complaint and the law. Since
the case filed by Basso is a termination dispute that is "undoubtedly
cognizable by the labor tribunals", the Labor Arbiter and the NLRC had
jurisdiction to rule on the merits of the case. On the issue of jurisdiction over
the person of the parties, who are foreigners, the Court of Appeals ruled that
jurisdiction over the person of Basso was acquired when he filed the
complaint for illegal dismissal, while jurisdiction over the person of CMI was
acquired through coercive process of service of summons to its agent in the
Philippines. The Court of Appeals also agreed that the active participation of
CMI in the case rendered moot the issue on jurisdiction.
On the merits of the case, the Court of Appeals declared that CMI illegally
dismissed Basso. The Court of Appeals found that CMI’s allegations of loss of
trust and confidence were not established. CMI "failed to prove its claim of
the incidents which were its alleged bases for loss of trust or
confidence."36 While managerial employees can be dismissed for loss of trust
and confidence, there must be a basis for such loss, beyond mere whim or
caprice.
After the parties filed their Motions for Reconsideration,37 the Court of
Appeals promulgated Resolution38 dated June 19, 2007 denying CMI’s
motion, while partially granting Basso’s as to the computation of backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING
THE FACTUAL FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS
INQUIRY INTO WHETHER OR NOT THE NLRC COMMITTED GRAVE
ABUSE OF DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
THE LABOR ARBITER AND THE NLRC HAD JURISDICTION TO HEAR
AND TRY THE ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT
BASSO WAS NOT VALIDLY DISMISSED ON THE GROUND OF LOSS OF
TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and
the NLRC in the illegal dismissal case. The first and third issues will be
discussed jointly.
The labor tribunals had jurisdictionover the parties and the subjectmatter of
the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to
determine proper jurisdiction over the parties and the subject matter of the
case. It also alleges that the existence of foreign elements calls for the
application of US laws and the doctrines of lex loci celebrationis (the law of
the place of the ceremony), lex loci contractus (law of the place where a
contract is executed), and lex loci intentionis (the intention of the parties as to
the law that should govern their agreement). CMI also invokes the application
of the rule of forum non conveniens to determine the propriety of the
assumption of jurisdiction by the labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be
resolved first. Where the facts establish the existence of foreign elements, the
case presents a conflict-of-laws issue.39 The foreign element in a case may
appear in different forms, such as in this case, where one of the parties is an
alien and the other is domiciled in another state.
In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of conflict-
of-laws problems, three consecutive phases are involved: jurisdiction, choice
of law, and recognition and enforcement of judgments. In resolving the
conflicts problem, courts should ask the following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the
parties to this case?
2. "If the answer is yes, is this a convenient forum to the parties, in light of the
facts?

3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly
pleaded and proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one
of the basic exceptions to the application of foreign law? In short, is there any
strong policy or vital interest of the forum that is at stake in this case and
which should preclude the application of foreign law? 41
Jurisdiction is defined as the power and authority of the courts to hear, try and
decide cases. Jurisdiction over the subject matter is conferred by the
Constitution or by law and by the material allegations in the complaint,
regardless of whether or not the plaintiff is entitled to recover all or some of
the claims or reliefs sought therein.42 It cannot be acquired through a waiver
or enlarged by the omission of the parties or conferred by the acquiescence
of the court.43 That the employment contract of Basso was replete with
references to US laws, and that it originated from and was returned to the US,
do not automatically preclude our labor tribunals from exercising jurisdiction
to hear and try this case.
This case stemmed from an illegal dismissal complaint. The Labor Code,
under Article 217, clearly vests original and exclusive jurisdiction to hear and
decide cases involving termination disputes to the Labor Arbiter.
Hence, the Labor Arbiter and the NLRC have jurisdiction over the subject
matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals
that the Labor Arbiter acquired jurisdiction over the person of Basso,
notwithstanding his citizenship, when he filed his complaint against CMI. On
the other hand, jurisdiction over the person of CMI was acquired through the
coercive process of service of summons. We note that CMI never denied that
it was served with summons. CMI has, in fact, voluntarily appeared and
participated in the proceedings before the courts. Though a foreign
corporation, CMI is licensed to do business in the Philippines and has a local
business address here. The purpose of the law in requiring that foreign
corporations doing business in the country be licensed to do so, is to subject
the foreign corporations to the jurisdiction of our courts.44
Considering that the Labor Arbiter and the NLRC have jurisdiction over the
parties and the subject matter of this case, these tribunals may proceed to try
the case even if the rules of conflict-of-laws or the convenience of the parties
point to a foreign forum, this being an exercise of sovereign prerogative of the
country where the case is filed.45
The next question is whether the local forum is the convenient forum in light
of the facts of the case. CMI contends that a Philippine court is an
inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-
of-laws case may assume jurisdiction if it chooses to do so, provided, that the
following requisites are met: (1) that the Philippine Court is one to which the
parties may conveniently resort to; (2) that the Philippine Court is in a position
to make an intelligent decision as to the law and the facts; and (3) that the
11
Philippine Court has or is likely to have power to enforce its decision. 46 All
these requisites are present here.
Basso may conveniently resort to our labor tribunals as he and CMI had
physical presence in the Philippines during the duration of the trial. CMI has a
Philippine branch, while Basso, before his death, was residing here.
Thus, it could be reasonably expected that no extraordinary measures were
needed for the parties to make arrangements in advocating their respective
cases.
The labor tribunals can make an intelligent decision as to the law and facts.
The incident subject of this case (i.e. dismissal of Basso) happened in the
Philippines, the surrounding circumstances of which can be ascertained
without having to leave the Philippines. The acts that allegedly led to loss of
trust and confidence and Basso’s eventual dismissal were committed in the
Philippines. As to the law, we hold that Philippine law is the proper law of the
forum, as we shall discuss shortly. Also, the labor tribunals have the power to
enforce their judgments because they acquired jurisdiction over the persons
of both parties.
Our labor tribunals being the convenient fora, the next question is what law
should apply in resolving this case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the
following important questions: (1) What legal system should control a given
situation where some of the significant facts occurred in two or more states;
and (2) to what extent should the chosen legal system regulate the
situation.47 These questions are entirely different from the question of
jurisdiction that only seeks to answer whether the courts of a state where the
case is initiated have jurisdiction to enter a judgment. 48 As such, the power to
exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law.49
CMI insists that US law is the applicable choice-of-law under the principles of
lex loci celebrationis and lex loci contractus. It argues that the contract of
employment originated from and was returned to the US after Basso signed
it, and hence, was perfected there. CMI further claims that the references to
US law in the employment contract show the parties’ intention to apply US
law and not ours. These references are:
a. Foreign station allowance of forty percent (40%) using the "U.S. State
Department Index, the base being Washington, D.C."
b. Tax equalization that made Basso responsible for "federal and any home
state income taxes."
c. Hardship allowance of fifteen percent (15%) of base pay based upon the
"U.S. Department of State Indexes of living costs abroad."
d. The employment arrangement is "one at will, terminable by either party
without any further liability on thirty days prior written notice." 50
CMI asserts that the US law on labor relations particularly, the US Railway
Labor Act sanctions termination-at-will provisions in an employment contract.
Thus, CMI concludes that if such laws were applied, there would have been
no illegal dismissal to speak of because the termination-at-will provision in
Basso’s employment contract would have been perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an
essential element of conflict rules is the indication of a "test" or "connecting
factor" or "point of contact". Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting fact or
point of contact, such as the situs of the res, the place of celebration, the
place of performance, or the place of wrongdoing. Pursuant to Saudi Arabian
Airlines, we hold that the "test factors," "points of contact" or "connecting
factors" in this case are the following:
(1) The nationality, domicile or residence of Basso;
(2) The seat of CMI;
(3) The place where the employment contract has been made, the locus
actus;
(4) The place where the act is intended to come into effect, e.g., the place of
performance of contractual duties;
(5) The intention of the contracting parties as to the law that should govern
their agreement, the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or
done.52
Applying the foregoing in this case, we conclude that Philippine law is the
applicable law. Basso, though a US citizen, was a resident here from the time
he was hired by CMI until his death during the pendency of the case. CMI,
while a foreign corporation, has a license to do business in the Philippines
and maintains a branch here, where Basso was hired to work. The contract of
employment was negotiated in the Philippines. A purely consensual contract,
it was also perfected in the Philippines when Basso accepted the terms and
conditions of his employment as offered by CMI. The place of performance
relative to Basso’s contractual duties was in the Philippines. The alleged
prohibited acts of Basso that warranted his dismissal were committed in the
Philippines.
Clearly, the Philippines is the state with the most significant relationship to the
problem. Thus, we hold that CMI and Basso intended Philippine law to
govern, notwithstanding some references made to US laws and the fact that
this intention was not expressly stated in the contract. We explained in
Philippine Export and Foreign Loan Guarantee Corporation v. V. P. Eusebio
Construction, Inc.53 that the law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or domicile of
the parties.54 We cautioned, however, that while Philippine courts would do
well to adopt the first and most basic rule in most legal systems, namely, to
allow the parties to select the law applicable to their contract, the selection is
subject to the limitation that it is not against the law, morals, or public policy of
the forum.55
Similarly, in Bank of America, NT & SA v. American Realty Corporation, 56 we
ruled that a foreign law, judgment or contract contrary to a sound and
established public policy of the forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application would work
undeniable injustice to the citizens or residents of the forum. To give justice is
the most important function of law; hence, a law, or judgment or contract that
is obviously unjust negates the fundamental principles of Conflict of Laws.57
Termination-at-will is anathema to the public policies on labor protection
espoused by our laws and Constitution, which dictates that no worker shall be

dismissed except for just and authorized causes provided by law and after
due process having been complied with.58 Hence, the US Railway Labor Act,
which sanctions termination-at-will, should not be applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As
any other fact, it must be alleged and proved.59 If the foreign law is not
properly pleaded or proved, the presumption of identity or similarity of the
foreign law to our own laws, otherwise known as processual presumption,
applies. Here, US law may have been properly pleaded but it was not proved
in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third
issues.
The Court of Appeals may review thefactual findings of the NLRC in aRule 65
petition.
CMI submits that the Court of Appeals overstepped the boundaries of the
limited scope of its certiorari jurisdiction when instead of ruling on the
existence of grave abuse of discretion, it proceeded to pass upon the legality
and propriety of Basso’s dismissal. Moreover, CMI asserts that it was error on
the part of the Court of Appeals to re-evaluate the evidence and
circumstances surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a Petition for
Certiorari under Rule 65 of the Revised Rules of Court was settled in our
decision in St. Martin Funeral Home v. NLRC.60 The general rule is that
certiorari does not lie to review errors of judgment of the trial court, as well as
that of a quasi-judicial tribunal. In certiorari proceedings, judicial review does
not go as far as to examine and assess the evidence of the parties and to
weigh their probative value.61 However, this rule admits of exceptions. In
Globe Telecom, Inc. v. Florendo-Flores,62 we stated:
In the review of an NLRC decision through a special civil action for certiorari,
resolution is confined only to issues of jurisdiction and grave abuse of
discretion on the part of the labor tribunal. Hence, the Court refrains from
reviewing factual assessments of lower courts and agencies exercising
adjudicative functions, such as the NLRC.
Occasionally, however, the Court is constrained to delve into factual matters
where, as in the instant case, the findings of the NLRC contradict those of the
Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look
into the records of the case and reexamine the questioned findings. As a
corollary, this Court is clothed with ample authority to review matters, even if
they are not assigned as errors in their appeal, if it finds that their
consideration is necessary to arrive at a just decision of the case. The same
principles are now necessarily adhered to and are applied by the Court of
Appeals in its expanded jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis reversed the ruling of
the NLRC.63(Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual findings
complained of are not supported by the evidence on record; when it is
necessary to prevent a substantial wrong or to do substantial justice; when
the findings of the NLRC contradict those of the Labor Arbiter; and when
12
necessary to arrive at a just decision of the case.64 To make these findings,
the Court of Appeals necessarily has to look at the evidence and make its
own factual determination.65
Since the findings of the Labor Arbiter differ with that of the NLRC, we find
that the Court of Appeals correctly exercised its power to review the evidence
and the records of the illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI. Managerial
employees enjoy security of tenure and the right of the management to
dismiss must be balanced against the managerial employee’s right to security
of tenure, which is not one of the guaranties he gives up.66
In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to
validly dismiss an employee on the ground of loss of trust and confidence
under Article 282 (c) of the Labor Code, the employer must observe the
following guidelines: 1) loss of confidence should not be simulated; 2) it
should not be used as subterfuge for causes which are improper, illegal or
unjustified; 3) it may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary; and 4) it must be genuine, not a mere afterthought
to justify earlier action taken in bad faith. More importantly, it must be based
on a willful breach of trust and founded on clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was not
founded on clearly established facts and evidence sufficient to warrant
dismissal from employment. While proof beyond reasonable doubt is not
required to establish loss of trust and confidence, substantial evidence is
required and on the employer rests the burden to establish it. 68 There must be
some basis for the loss of trust, or that the employer has reasonable ground
to believe that the employee is responsible for misconduct, which renders him
unworthy of the trust and confidence demanded by his position. 69
CMI alleges that Basso committed the following:
(1) Basso delegated too much responsibility to the General Sales Agent and
relied heavily on its judgments.70
(2) Basso excessively issued promotional tickets to his friends who had no
direct business with CMI.71
(3) The advertising agency that CMI contracted had to deal directly with
Guam because Basso was hardly available.72 Mr. Schulz discovered that
Basso exceeded the advertising budget by $76,000.00 in 1994 and by
$20,000.00 in 1995.73
(4) Basso spent more time and attention to his personal businesses and was
reputed to own nightclubs in the Philippines. 74
(5) Basso used free tickets and advertising money to promote his personal
business,75 such as a brochure that jointly advertised one of Basso’s
nightclubs with CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI
merely submitted affidavits of its officers, without any other corroborating
evidence. Basso, on the other hand, had adequately explained his side. On
the advertising agency and budget issues raised by CMI, he explained that
these were blatant lies as the advertising needs of CMI were centralized in its
Guam office and the Philippine office was not authorized to deal with CMI’s
advertising agency, except on minor issues.76 Basso further stated that under
CMI’s existing policy, ninety percent (90%) of the advertising decisions were
delegated to the advertising firm of McCann- Ericsson in Japan and only ten
percent (10%) were left to the Philippine office.77 Basso also denied the
allegations of owning nightclubs and promoting his personal businesses and
explained that it was illegal for foreigners in the Philippines to engage in retail
trade in the first place.
Apart from these accusations, CMI likewise presented the findings of the
audit team headed by Mr. Stephen D. Goepfert, showing that "for the period
of 1995 and 1996, personal passes for Continental and other airline
employees were noted (sic) to be issued for which no service charge was
collected."78 The audit cited the trip pass log of a total of 10 months. The trip
log does not show, however, that Basso caused all the ticket issuances.
More, half of the trips in the log occurred from March to July of 1996,79 a
period beyond the tenure of Basso. Basso was terminated effectively on
January 31, 1996 as indicated in the letter of Ms. Woodward. 80
CMI also accused Basso of making "questionable overseas phone calls".
Basso, however, adequately explained in his Reply81 that the phone calls to
Italy and Portland, USA were made for the purpose of looking for a technical
maintenance personnel with US Federal Aviation Authority qualifications,
which CMI needed at that time. The calls to the US were also made in
connection with his functions as General Manager, such as inquiries on his
tax returns filed in Nevada. Basso also explained that the phone lines 82 were
open direct lines that all personnel were free to use to make direct long
distance calls.83
Finally, CMI alleged that Basso approved the disbursement of Php80,000.00
to cover the transfer fee of the Manila Polo Club share from Mr. Kenneth
Glover, the previous General Manager, to him. CMI claimed that "nowhere in
the said contract was it likewise indicated that the Manila Polo Club share
was part of the compensation package given by CMI to Basso."84 CMI’s
claims are not credible. Basso explained that the Manila Polo Club share was
offered to him as a bonus to entice him to leave his then employer, United
Airlines. A letter from Mr. Paul J. Casey, former president of Continental,
supports Basso.85 In the letter, Mr. Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental
Airlines, he was given the Manila Polo Club share and authorized to have the
share re-issued in his name. In addition to giving Mr. Basso the Manila Polo
Club share, Continental agreed to pay the dues for a period of three years
and this was embodied in his contract with Continental. This was all done with
my knowledge and approval.86
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for
membership in a club in Manila that your immediate supervisor and I agree is
of at least that value to Continental through you in your role as our General
Manager for the Philippines.87
Taken together, the above pieces of evidence suggest that the Manila Polo
Club share was part of Basso’s compensation package and thus he validly
used company funds to pay for the transfer fees. If doubts exist between the

evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the latter.88
Finally, CMI violated procedural due process in terminating Basso. In King of
Kings Transport, Inc. v. Mamac89 we detailed the procedural due process
steps in termination of employment:
To clarify, the following should be considered in terminating the services of
employees:
(1) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that
the employees are given the opportunity to submit their written explanation
within a reasonable period. "Reasonable opportunity" under the Omnibus
Rules means every kind of assistance that management must accord to the
employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt
of the notice to give the employees an opportunity to study the accusation
against them, consult a union official or lawyer, gather data and evidence,
and decide on the defenses they will raise against the complaint. Moreover, in
order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge against the employees.
A general description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which
among the grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity
to: (1) explain and clarify their defenses to the charge against them; (2)
present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management.
During the hearing or conference, the employees are given the chance to
defend themselves personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or hearing could be used
by the parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the
employers shall serve the employees a written notice of termination indicating
that: (1) all circumstances involving the charge against the employees have
been considered; and (2) grounds have been established to justify the
severance of their employment. (Emphasis in original.)
Here, Mr. Schulz’s and Ms. Woodward’s letters dated December 19, 1995
and March 14, 1996, respectively, are not one of the valid twin notices.
Neither identified the alleged acts that CMI now claims as bases for Basso’s
termination. Ms. Woodward’s letter even stressed that the original plan was to
remove Basso as General Manager but with an offer to make him consultant.
It was inconsistent of CMI to declare Basso as unworthy of its trust and
confidence and, in the same breath, offer him the position of consultant. As
the Court of Appeals pointed out:
13
But mark well that Basso was clearly notified that the sole ground for his
dismissal was the exercise of the termination at will clause in the employment
contract. The alleged loss of trust and confidence claimed by Continental
appears to be a mere afterthought belatedly trotted out to save the day.90
Basso is entitled to separation pay and full backwages.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and
other privileges, and to his full backwages, inclusive of allowances and to his
other benefits or their monetary equivalent computed from the time his
compensation was withheld up to the time of actual reinstatement.
Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be
awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.91 In the case of Basso, reinstatement is no longer
possible since he has already passed away. Thus, Basso’s separation pay
with full backwages shall be paid to his heirs.
As to the computation of backwages, we agree with CMI that Basso was
entitled to backwages only up to the time he reached 65 years old, the
compulsory retirement age under the law.92 This is our consistent ruling.93
When Basso was illegally dismissed on January 31, 1996, he was already 58
years old.94 He turned 65 years old on October 2, 2002. Since backwages are
granted on grounds of equity for earnings lost by an employee due to his
illegal dismissal,95 Basso was entitled to backwages only for the period he
could have worked had he not been illegally dismissed, i.e. from January 31,
1996 to October 2, 2002.
WHEREFORE, premises considered, the Decision of the Court of Appeals
dated May 23, 2006 and Resolution dated June 19, 2007 in the consolidated
cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281 are
AFFIRMED, with MODIFICATION as to the award of backwages. Petitioner
Continental Micronesia, Inc. is hereby ordered to pay Respondent Joseph
Basso’s heirs: 1) separation pay equivalent to one (1) month pay for every
year of service, and 2) full backwages from January 31, 1996, the date of his
illegal dismissal, to October 2, 2002, the date of his compulsory retirement
age.
SO ORDERED.
SECOND DIVISION
G.R. No. 205703, March 07, 2016
INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS),
SNC LAVALIN ENGINEERS & CONTRACTORS, INC. AND ANGELITO C.
HERNANDEZ, Petitioners, v. JOSE G. DE VERA AND ALBERTO B.
ARRIOLA, Respondents.
DECISION
MENDOZA, J.:
When can a foreign law govern an overseas employment contract? This is
the fervent question that the Court shall resolve, once and for all.
This petition for review on certiorari seeks to reverse and set aside the
January 24, 2013 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No.
118869, which modified the November 30, 2010 Decision2 of the National
Labor Relations Commission (NLRC) and its February 2, 2011 Resolution,3 in
NLRC LAC Case No. 08-000572-10/NLRC Case No. NCR 09-13563-09, a
case for illegal termination of an Overseas Filipino Worker (OFW).
The Facts
Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a
local placement agency duly organized and existing under Philippine laws,
with petitioner Angelito C. Hernandez as its president and managing director.
Petitioner SNC Lavalin Engineers & Contractors, Inc. (SNC-Lavalin) is the
principal of IPAMS, a Canadian company with business interests in several
countries. On the other hand, respondent Alberto Arriola (Arriola) is a
licensed general surgeon in the Philippines.4
Employee's Position
Arriola was offered by SNC-Lavalin, through its letter, 5 dated May 1, 2008, the
position of Safety Officer in its Ambatovy Project site in Madagascar. The
position offered had a rate of CA$32.00 per hour for forty (40) hours a week
with overtime pay in excess of forty (40) hours. It was for a period of nineteen
(19) months starting from June 9, 2008 to December 31, 2009.
Arriola was then hired by SNC-Lavalin, through its local manning agency,
IPAMS, and his overseas employment contract was processed with the
Philippine Overseas Employment Agency (POEA)6 In a letter of
understanding,7 dated June 5, 2008, SNC-Lavalin confirmed Arriola's
assignment in the Ambatovy Project. According to Arriola, he signed the
contract of employment in the Philippines.8 On June 9, 2008, Arriola started
working in Madagascar.
After three months, Arriola received a notice of pre-termination of
employment,9 dated September 9, 2009, from SNC-Lavalin. It stated that his
employment would be pre-terminated effective September 11, 2009 due to
diminishing workload in the area of his expertise and the unavailability of
alternative assignments. Consequently, on September 15, 2009, Arriola was
repatriated. SNC-Lavalin deposited in Arriola's bank account his pay
amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight
Centavos (CA$2,636.80), based on Canadian labor law.
Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal
and non-payment of overtime pay, vacation leave and sick leave pay before
the Labor Arbiter (LA). He claimed that SNC-Lavalin still owed him unpaid
salaries equivalent to the three-month unexpired portion of his contract,
amounting to, more or less, One Million Sixty-Two Thousand Nine Hundred
Thirty-Six Pesos (P1,062,936.00). He asserted that SNC-Lavalin never
offered any valid reason for his early termination and that he was not given
sufficient notice regarding the same. Arriola also insisted that the petitioners
must prove the applicability of Canadian law before the same could be
applied to his employment contract.
Employer's Position
The petitioners denied the charge of illegal dismissal against them. They
claimed that SNC-Lavalin was greatly affected by the global financial crises
during the latter part of 2008. The economy of Madagascar, where SNC-
Lavalin had business sites, also slowed down. As proof of its looming
financial standing, SNC-Lavalin presented a copy of a news item in the
Financial Post,10 dated March 5, 2009, showing the decline of the value of its
stocks. Thus, it had no choice but to minimize its expenditures and
operational expenses. It re-organized its Health and Safety Department at the
Ambatovy Project site and Arriola was one of those affected.11

The petitioners also invoked EDI-Staffbuilders International, Inc. v.
NLRC12 (EDI-Staffbuilders), pointing out that particular labor laws of a foreign
country incorporated in a contract freely entered into between an OFW and a
foreign employer through the latter's agent was valid. In the present case, as
all of Arriola's employment documents were processed in Canada, not to
mention that SNC-Lavalin's office was in Ontario, the principle of lex loci
celebrationis was applicable. Thus, the petitioners insisted that Canadian
laws governed the contract.
The petitioners continued that the pre-termination of Arriola's contract was
valid for being consistent with the provisions of both the Expatriate Policy and
laws of Canada. The said foreign law did not require any ground for early
termination of employment, and the only requirement was the written notice of
termination. Even assuming that Philippine laws should apply, Arriola would
still be validly dismissed because domestic law recognized retrenchment and
redundancy as legal grounds for termination.
In their Rejoinder,13 the petitioners presented a copy of the Employment
Standards Act (ESA) of Ontario, which was duly authenticated by the
Canadian authorities and certified by the Philippine Embassy.
The LA Ruling
In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for
lack of merit. The LA ruled that the rights and obligations among and between
the OFW, the local recruiter/agent, and the foreign employer/principal were
governed by the employment contract pursuant to the EDI-Staffbuilders case.
Thus, the provisions on termination of employment found in the ESA, a
foreign law which governed Arriola's employment contract, were applied.
Given that SNC-Lavalin was able to produce the duly authenticated ESA, the
LA opined that there was no other conclusion but to uphold the validity of
Arriola's dismissal based on Canadian law. The fallo of the LA decision reads:
WHEREFORE, all the foregoing premises being considered, judgment is
hereby rendered dismissing the complaint for lack of merit.
SO ORDERED.15
Aggrieved, Arriola elevated the LA decision before the NLRC.  Court in its resolution, dated August 8, 2014, because it was belatedly filed
The NLRC Ruling
In its decision, dated November 30, 2010, the NLRC reversed the LA decision
and ruled that Arriola was illegally dismissed by the petitioners. Citing PNB v.
Cabansag,16 the NLRC stated that whether employed locally or overseas, all
Filipino workers enjoyed the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary notwithstanding. Thus, the
Labor Code of the Philippines and Republic Act (R.A.) No. 8042, or the
Migrant Workers Act, as amended, should be applied. Moreover, the NLRC
added that the overseas employment contract of Arriola was processed in the
POEA.
Applying the Philippine laws, the NLRC found that there was no substantial
evidence presented by the petitioners to show any just or authorized cause to
terminate Arriola. The ground of financial losses by SNC-Lavalin was not
supported by sufficient and credible evidence. The NLRC concluded that, for
being illegally dismissed, Arriola should be awarded CA$81,920.00
representing sixteen (16) months of Arriola's purported unpaid salary,
pursuant to the Serrano v. Gallant17 doctrine. The decretal portion of the
NLRC decision states:
WHEREFORE, premises considered, judgment is hereby rendered finding
complainant-appellant to have been illegally dismissed. Respondents-
14
appellees are hereby ordered to pay complainant-appellant the amount of
CA$81,920.00, or its Philippine Peso equivalent prevailing at the time of
payment. Accordingly, the decision of the Labor Arbiter dated May 31, 2010 is
hereby VACATED and SET ASIDE.
SO ORDERED.18
The petitioners moved for reconsideration, but their motion was denied by the
NLRC in its resolution, dated February 2, 2011.
Undaunted, the petitioners filed a petition for certiorari before the CA arguing
that it should be the ESA, or the Ontario labor law, that should be applied in
Arriola's employment contract. No temporary restraining order, however, was
issued by the CA.
The Execution Proceedings
In the meantime, execution proceedings were commenced before the LA by
Arriola. The LA granted the motion for execution in the Order,19 dated August
8, 2011.
The petitioners appealed the execution order to the NLRC. In its
Decision,20 dated May 31, 2012, the NLRC corrected the decretal portion of
its November 30, 2010 decision. It decreased the award of backpay in the
amount of CA$26,880.00 or equivalent only to three (3) months and three (3)
weeks pay based on 70-hours per week workload. The NLRC found that
when Arriola was dismissed on September 9, 2009, he only had three (3)
months and three (3) weeks or until December 31, 2009 remaining under his
employment contract.
Still not satisfied with the decreased award, IPAMS filed a separate petition
for certiorari before the CA. In its decision, dated July 25, 2013, the CA
affirmed the decrease in Arriola's backpay because the unpaid period in his
contract was just three (3) months and three (3) weeks.
Unperturbed, IPAMS appealed before the Court and the case was docketed
as G.R. No. 212031. The appeal, however, was dismissed outright by the
and it did not comply with Sections 4 and 5 of Rule 7 of the Rules of Court.
Hence, it was settled in the execution proceedings that the award of backpay
to Arriola should only amount to three (3) months and three (3) weeks of his
pay.
The CA Ruling
Returning to the principal case of illegal dismissal, in its assailed January 24,
2013 decision, the CA affirmed that Arriola was illegally dismissed by the
petitioners. The CA explained that even though an authenticated copy of the
ESA was submitted, it did not mean that the said foreign law automatically
applied in this case. Although parties were free to establish stipulations in
their contracts, the same must remain consistent with law, morals, good
custom, public order or public policy. The appellate court wrote that the ESA
allowed an employer to disregard the required notice of termination by simply
giving the employee a severance pay. The ESA could not be made to apply in
this case for being contrary to our Constitution, specifically on the right of due
process. Thus, the CA opined that our labor laws should find application.
As the petitioners neither complied with the twin notice-rule nor offered any
just or authorized cause for his termination under the Labor Code, the CA
held that Arriola's dismissal was illegal. Accordingly, it pronounced that
Arriola was entitled to his salary for the unexpired portion of his contract
which is three (3) months and three (3) weeks salary. It, however, decreased
the award of backpay to Arriola because the NLRC made a wrong calculation.
Based on his employment contract, the backpay of Arriola should only be
computed on a 40-hour per week workload, or in the amount of
CA$19,200.00. The CA disposed the case in this wise:
WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY
GRANTED. The assailed Order of the National Labor Relations Commission
in NLRC LAC No. 08-000572-10/NLRC Case No. NCR 09-13563-09 is
MODIFIED in that private respondent is only entitled to a monetary judgment
equivalent to his unpaid salaries in the amount of CA$19,200.00 or its
Philippine Peso equivalent.
SO ORDERED.21
Hence, this petition, anchored on the following
ISSUES
I
WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED
PURSUANT TO THE EMPLOYMENT CONTRACT.
II
GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT
BAR, WHETHER OR NOT THE SIX-WEEK ON, TWO-WEEK OFF
SCHEDULE SHOULD BE USED IN THE COMPUTATION OF ANY
MONETARY AWARD.
III
GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT
THE AMOUNT BEING CLAIMED BY RESPONDENTS HAD ALREADY
BEEN SATISFIED, OR AT THE VERY LEAST, WHETHER OR NOT THE
AMOUNT OF CA$2,636.80 SHOULD BE DEDUCTED FROM THE
MONETARY AWARD.22
The petitioners argue that the rights and obligations of the OFW, the local
recruiter, and the foreign employer are governed by the employment contract,
citing EDI-Staffbuilders; that the terms and conditions of Arriola's employment
are embodied in the Expatriate Policy, Ambatovy Project - Site, Long Term,
hence, the laws of Canada must be applied; that the ESA, or the Ontario
labor law, does not require any ground for the early termination of
employment and it permits the termination without any notice provided that a
severance pay is given; that the ESA was duly authenticated by the Canadian
authorities and certified by the Philippine Embassy; that the NLRC Sixth
Division exhibited bias and bad faith when it made a wrong computation on
the award of backpay; and that, assuming there was illegal dismissal, the
CA$2,636.80, earlier paid to Arriola, and his home leaves should be deducted
from the award of backpay.
In his Comment,23 Arriola countered that foreign laws could not apply to
employment contracts if they were contrary to law, morals, good customs,
public order or public policy, invoking Pakistan International Airlines
Corporation v. Ople (Pakistan International);24 that the ESA was not
applicable because it was contrary to his constitutional right to due process;
that the petitioners failed to substantiate an authorized cause to justify his
dismissal under Philippine labor law; and that the petitioners could not
anymore claim a deduction of CA$2,636.80 from the award of backpay
because it was raised for the first time on appeal.
In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the
applicability of foreign laws on labor contracts; that the Pakistan
International case was superseded by EDI-Staffbuilders and other
subsequent cases; and that SNC-Lavalin suffering financial losses was an

authorized cause to terminate Arriola's employment.
In his Memorandum,26 Arriola asserted that his employment contract was
executed in the Philippines and that the alleged authorized cause of financial
losses by the petitioners was not substantiated by evidence.
In their Consolidated Memorandum,27 the petitioners reiterated that the ESA
was applicable in the present case and that recent jurisprudence recognized
that the parties could agree on the applicability of foreign laws in their labor
contracts.
The Court's Ruling
The petition lacks merit.
Application of foreign laws with labor contracts
At present, Filipino laborers, whether skilled or professional, are enticed to
depart from the motherland in search of greener pastures. There is a
distressing reality that the offers of employment abroad are more lucrative
than those found in our own soils. To reap the promises of the foreign dream,
our unsung heroes must endure homesickness, solitude, discrimination,
mental and emotional struggle, at times, physical turmoil, and, worse, death.
On the other side of the table is the growing number of foreign employers
attracted in hiring Filipino workers because of their reasonable
compensations and globally-competitive skills and qualifications. Between the
dominant foreign employers and the vulnerable and desperate OFWs,
however, there is an inescapable truth that the latter are in need of greater
safeguard and protection.
In order to afford the full protection of labor to our OFWs, the State has
vigorously enacted laws, adopted regulations and policies, and established
agencies to ensure that their needs are satisfied and that they continue to
work in a humane living environment outside of the country. Despite these
efforts, there are still issues left unsolved in the realm of overseas
employment. One existing question is posed before the Court -when should
an overseas labor contract be governed by a foreign law? To answer this
burning query, a review of the relevant laws and jurisprudence is warranted.
R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the
policies on overseas employment and to establish a higher standard of
protection and promotion of the welfare of migrant workers.28 It emphasized
that while recognizing the significant contribution of Filipino migrant workers
to the national economy through their foreign exchange remittances, the
State does not promote overseas employment as a means to sustain
economic growth and achieve national development. 29 Although it
acknowledged claims arising out of law or contract involving Filipino
workers,30 it does not categorically provide that foreign laws are absolutely
and automatically applicable in overseas employment contracts.
The issue of applying foreign laws to labor contracts was initially raised
before the Court in Pakistan International. It was stated in the labor contract
therein (1) that it would be governed by the laws of Pakistan, (2) that the
employer have the right to terminate the employee at any time, and (3) that
the one-month advance notice in terminating the employment could be
dispensed with by paying the employee an equivalent one-month salary.
Therein, the Court elaborated on the parties' right to stipulate in labor
contracts, to wit:
15
A contract freely entered into should, of course, be respected, as PIA argues,
since a contract is the law between the parties. The principle of party
autonomy in contracts is not, however, an absolute principle. The rule in
Article 1306, of our Civil Code is that the contracting parties may establish
such stipulations as they may deem convenient, "provided they are not
contrary to law, morals, good customs, public order or public policy." Thus,
counterbalancing the principle of autonomy of contracting parties is the
equally general rule that provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed written into the
contract. Put a little differently, the governing principle is that parties may not
contract away applicable provisions of law especially peremptory provisions
dealing with matters heavily impressed with public interest. The law relating to
labor and employment is clearly such an area and parties are not at liberty to
insulate themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other. x x x31
[Emphases Supplied]
In that case, the Court held that the labor relationship between OFW and the
foreign employer is "much affected with public interest and that the otherwise
applicable Philippine laws and regulations cannot be rendered illusory by the
parties agreeing upon some other law to govern their relationship." 32 Thus,
the Court applied the Philippine laws, instead of the Pakistan laws. It was also
held that the provision in the employment contract, where the employer could
terminate the employee at any time for any ground and it could even
disregard the notice of termination, violates the employee's right to security of
tenure under Articles 280 and 281 of the Labor Code.
In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was
reiterated that, "[i]n formulating the contract, the parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or
public policy."33 In that case, the overseas contract specifically stated that
Saudi Labor Laws would govern matters not provided for in the contract. The
employer, however, failed to prove the said foreign law, hence, the doctrine of
processual presumption came into play and the Philippine labor laws were
applied. Consequently, the Court did not discuss any longer whether the
Saudi labor laws were contrary to Philippine labor laws.
The case of Becmen Service Exporter and Promotion, Inc. v. Spouses
Cuaresma,34 though not an illegal termination case, elucidated on the effect of
foreign laws on employment. It involved a complaint for insurance benefits
and damages arising from the death of a Filipina nurse from Saudi Arabia. It
was initially found therein that there was no law in Saudi Arabia that provided
for insurance arising from labor accidents. Nevertheless, the Court concluded
that the employer and the recruiter in that case abandoned their legal, moral
and social obligation to assist the victim's family in obtaining justice for her
death, and so her family was awarded P5,000,000.00 for moral and
exemplary damages.
In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private
recruitment agency invoked the defense that the foreign employer was
immune from suit and that it did not sign any document agreeing to be held
jointly and solidarily liable. Such defense, however, was rejected because
R.A. No. 8042 precisely afforded the OFWs with a recourse against the local
agency and the foreign employer to assure them of an immediate and
sufficient payment of what was due. Similar to EDI-Staffbuilders, the local
agency therein failed to prove the Kuwaiti law specified in the labor contract,
pursuant to Sections 24 and 25 of Rule 132 of the Revised Rules of Court.
Also, in the recent case of Sameer Overseas Placement Agency, Inc. v.
Cabiles36 (Sameer Overseas), it was declared that the security of tenure for
labor was guaranteed by our Constitution and employees were not stripped of
the same when they moved to work in other jurisdictions. Citing PCL
Shipping Phils., Inc. v. NLRC37 (PCL Shipping), the Court held that the
principle of lex loci contractus (the law of the place where the contract is
made) governed in this jurisdiction. As it was established therein that the
overseas labor contract was executed in the Philippines, the Labor Code and
the fundamental procedural rights were observed. It must be noted that no
foreign law was specified in the employment contracts in both cases.
Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer
therein asserted the doctrine of forum non conveniens because the overseas
employment contracts required the application of the laws of Saudi Arabia,
and so, the Philippine courts were not in a position to hear the case. In
striking down such argument, the Court held that while a Philippine tribunal
was called upon to respect the parties' choice of governing law, such respect
must not be so permissive as to lose sight of considerations of law, morals,
good customs, public order, or public policy that underlie the contract central
to the controversy. As the dispute in that case related to the illegal termination
of the employees due to their pregnancy, then it involved a matter of public
interest and public policy. Thus, it was ruled that Philippine laws properly
found application and that Philippine tribunals could assume jurisdiction.
Based on the foregoing, the general rule is that Philippine laws apply even to
overseas employment contracts. This rule is rooted in the constitutional
provision of Section 3, Article XIII that the State shall afford full protection to
labor, whether local or overseas. Hence, even if the OFW has his
employment abroad, it does not strip him of his rights to security of tenure,
humane conditions of work and a living wage under our Constitution. 39
As an exception, the parties may agree that a foreign law shall govern the
employment contract. A synthesis of the existing laws and jurisprudence
reveals that this exception is subject to the following requisites:
1. That it is expressly stipulated in the overseas employment
contract that a specific foreign law shall govern;
2. That the foreign law invoked must be proven before the courts
pursuant to the Philippine rules on evidence;
3. That the foreign law stipulated in the overseas employment
contract must not be contrary to law, morals, good customs, public
order, or public policy of the Philippines; and
4. That the overseas employment contract must be processed
through the POEA.
The Court is of the view that these four (4) requisites must be complied with
before the employer could invoke the applicability of a foreign law to an
overseas employment contract. With these requisites, the State would be
able to abide by its constitutional obligation to ensure that the rights and well-
being of our OFWs are fully protected. These conditions would also invigorate
the policy under R.A. No. 8042 that the State shall, at all times, uphold the
dignity of its citizens whether in country or overseas, in general, and the
Filipino migrant workers, in particular. 40 Further, these strict terms are
pursuant to the jurisprudential doctrine that "parties may not contract away
applicable provisions of law especially peremptory provisions dealing with
matters heavily impressed with public interest," 41 such as laws relating to

labor. At the same time, foreign employers are not at all helpless to apply
their own laws to overseas employment contracts provided that they faithfully
comply with these requisites.
If the first requisite is absent, or that no foreign law was expressly stipulated
in the employment contract which was executed in the Philippines, then the
domestic labor laws shall apply in accordance with the principle of lex loci
contractus. This is based on the cases of Sameer Overseas and PCL
Shipping.
If the second requisite is lacking, or that the foreign law was not proven
pursuant to Sections 24 and 25 of Rule 132 of the Revised Rules of Court,
then the international law doctrine of processual presumption operates. The
said doctrine declares that "[w]here a foreign law is not pleaded or, even if
pleaded, is not proved, the presumption is that foreign law is the same as
ours."42 This was observed in the cases of EDI-Staffbuilders and ATCI
Overseas.
If the third requisite is not met, or that the foreign law stipulated is contrary to
law, morals, good customs, public order or public policy, then Philippine laws
govern. This finds legal bases in the Civil Code, specifically: (1) Article 17,
which provides that laws which have, for their object, public order, public
policy and good customs shall not be rendered ineffective by laws of a foreign
country; and (2) Article 1306, which states that the stipulations, clauses,
terms and conditions in a contract must not be contrary to law, morals, good
customs, public order, or public policy. The said doctrine was applied in the
case of Pakistan International.
Finally, if the fourth requisite is missing, or that the overseas employment
contract was not processed through the POEA, then Article 18 of the Labor
Code is violated. Article 18 provides that no employer may hire a Filipino
worker for overseas employment except through the boards and entities
authorized by the Secretary of Labor. In relation thereto, Section 4 of R.A. No.
8042, as amended, declares that the State shall only allow the deployment of
overseas Filipino workers in countries where the rights of Filipino migrant
workers are protected. Thus, the POEA, through the assistance of the
Department of Foreign Affairs, reviews and checks whether the countries
have existing labor and social laws protecting the rights of workers, including
migrant workers.43 Unless processed through the POEA, the State has no
effective means of assessing the suitability of the foreign laws to our migrant
workers. Thus, an overseas employment contract that was not scrutinized by
the POEA definitely cannot be invoked as it is an unexamined foreign law.
In other words, lacking any one of the four requisites would invalidate the
application of the foreign law, and the Philippine law shall govern the
overseas employment contract.
As the requisites of the applicability of foreign laws in overseas labor contract
have been settled, the Court can now discuss the merits of the case at bench.
A judicious scrutiny of the records of the case demonstrates that the
petitioners were able to observe the second requisite, or that the foreign law
must be proven before the court pursuant to the Philippine rules on evidence.
The petitioners were able to present the ESA, duly authenticated by the
Canadian authorities and certified by the Philippine Embassy, before the LA.
The fourth requisite was also followed because Arriola's employment contract
was processed through the POEA. 44
16
Unfortunately for the petitioners, those were the only requisites that they
complied with. As correctly held by the CA, even though an authenticated
copy of the ESA was submitted, it did not mean that said foreign law could be
automatically applied to this case. The petitioners miserably failed to adhere
to the two other requisites, which shall be discussed in seratim.
The foreign law was not expressly specified in the employment contract
The petitioners failed to comply with the first requisite because no foreign law
was expressly stipulated in the overseas employment contract with Arriola. In
its pleadings, the petitioners did not directly cite any specific provision or
stipulation in the said labor contract which indicated the applicability of the
Canadian labor laws or the ESA. They failed to show on the face of the
contract that a foreign law was agreed upon by the parties. Rather, they
simply asserted that the terms and conditions of Arriola's employment were
embodied in the Expatriate Policy, Ambatovy Project - Site, Long
Term.45 Then, they emphasized provision 8.20 therein, regarding
interpretation of the contract, which provides that said policy would be
governed and construed with the laws of the country where the applicable
SNC-Lavalin, Inc. office was located.46 Because of this provision, the
petitioners insisted that the laws of Canada, not of Madagascar or the
Philippines, should apply. Then, they finally referred to the ESA.
It is apparent that the petitioners were simply attempting to stretch the
overseas employment contract of Arriola, by implication, in order that the
alleged foreign law would apply. To sustain such argument would allow any
foreign employer to improperly invoke a foreign law even if it is not anymore
reasonably contemplated by the parties to control the overseas employment.
The OFW, who is susceptible by his desire and desperation to work abroad,
would blindly sign the labor contract even though it is not clearly established
on its face which state law shall apply. Thus, a better rule would be to
obligate the foreign employer to expressly declare at the onset of the labor
contract that a foreign law shall govern it. In that manner, the OFW would be
informed of the applicable law before signing the contract.
Further, it was shown that the overseas labor contract was executed by
Arriola at his residence in Batangas and it was processed at the POEA on
May 26, 2008.47 Considering that no foreign law was specified in the contract
and the same was executed in the Philippines, the doctrine of lex loci
celebrationis applies and the Philippine laws shall govern the overseas
employment of Arriola.
The foreign law invoked is contrary to the Constitution and the Labor Code
\Granting arguendo that the labor contract expressly stipulated the
applicability of Canadian law, still, Arriola's employment cannot be governed
by such foreign law because the third requisite is not satisfied. A perusal of
the ESA will show that some of its provisions are contrary to the Constitution
and the labor laws of the Philippines.
First, the ESA does not require any ground for the early termination of
employment.48 Article 54 thereof only provides that no employer should
terminate the employment of an employee unless a written notice had been
given in advance.49 Necessarily, the employer can dismiss any employee for
any ground it so desired. At its own pleasure, the foreign employer is
endowed with the absolute power to end the employment of an employee
even on the most whimsical grounds.
Second, the ESA allows the employer to dispense with the prior notice of
termination to an employee. Article 65(4) thereof indicated that the employer
could terminate the employment without notice by simply paying the
employee a severance pay computed on the basis of the period within which
the notice should have been given.50 The employee under the ESA could be
immediately dismissed without giving him the opportunity to explain and
defend himself.
The provisions of the ESA are patently inconsistent with the right to security
of tenure. Both the Constitution51 and the Labor Code52 provide that this right
is available to any employee. In a host of cases, the Court has upheld the
employee's right to security of tenure in the face of oppressive management
behavior and management prerogative. Security of tenure is a right which
cannot be denied on mere speculation of any unclear and nebulous basis. 53
Not only do these provisions collide with the right to security of tenure, but
they also deprive the employee of his constitutional right to due process by
denying him of any notice of termination and the opportunity to be
heard.54 Glaringly, these disadvantageous provisions under the ESA produce
the same evils which the Court vigorously sought to prevent in the cases
of Pakistan International and Sameer Overseas. Thus, the Court concurs with
the CA that the ESA is not applicable in this case as it is against our
fundamental and statutory laws.
In fine, as the petitioners failed to meet all the four (4) requisites on the
applicability of a foreign law, then the Philippine labor laws must govern the
overseas employment contract of Arriola.
No authorized cause for dismissal was proven
Article 279 of our Labor Code has construed security of tenure to mean that
the employer shall not terminate the services of an employee except for a just
cause or when authorized by law.55 Concomitant to the employer's right to
freely select and engage an employee is the employer's right to discharge the
employee for just and/or authorized causes. To validly effect terminations of
employment, the discharge must be for a valid cause in the manner required
by law. The purpose of these two-pronged qualifications is to protect the
working class from the employer's arbitrary and unreasonable exercise of its
right to dismiss.56
Some of the authorized causes to terminate employment under the Labor
Code would be installation of labor-saving devices, redundancy, retrenchment
to prevent losses and the closing or cessation of operation of the
establishment or undertaking.57 Each authorized cause has specific requisites
that must be proven by the employer with substantial evidence before a
dismissal may be considered valid.
Here, the petitioners assert that the economy of Madagascar weakened due
to the global financial crisis. Consequently, SNC-Lavalin's business also
slowed down. To prove its sagging financial standing, SNC-Lavalin presented
a copy of a news item in the Financial Post, dated March 5, 2009. They insist
that SNC-Lavalin had no choice but to minimize its expenditures and
operational expenses.58 In addition, the petitioners argued that the
government of Madagascar prioritized the employment of its citizens, and not
foreigners. Thus, Arriola was terminated because there was no more job
available for him.59
The Court finds that Arriola was not validly dismissed. The petitioners simply

argued that they were suffering from financial losses and Arriola had to be
dismissed. It was not even clear what specific authorized cause, whether
retrenchment or redundancy, was used to justify Arriola's dismissal. Worse,
the petitioners did not even present a single credible evidence to support their
claim of financial loss. They simply offered an unreliable news article which
deserves scant consideration as it is undoubtedly hearsay. Time and again
the Court has ruled that in illegal dismissal cases like the present one, the
onus of proving that the employee was dismissed and that the dismissal was
not illegal rests on the employer, and failure to discharge the same would
mean that the dismissal is not justified and, therefore, illegal. 60
As to the amount of backpay awarded, the Court finds that the computation of
the CA was valid and proper based on the employment contract of Arriola.
Also, the issue of whether the petitioners had made partial payments on the
backpay is a matter best addressed during the execution process.
WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the
Court of Appeals in CA-G.R. SP No. 118869 is AFFIRMED in toto.
SO ORDERED.
SECOND DIVISION
G.R. No. 200114, August 24, 2015
SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE UBAÑA, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the July 29, 2011
Decision2 of the Court of Appeals (CA) denying the Petition for Certiorari in
CA-G.R. SP No. 110006 and affirming the March 6, 2007 Order3 of the
Regional Trial Court (RTC) of Daet, Camarines Norte, Branch 39 in Civil
Case No. 7304; and 2) the CA's January 10, 2012 Resolution4 denying
petitioner's Motion for Reconsideration of the herein assailed Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubana filed a civil case for
damages against the DBP Service Corporation, petitioner Social Security
System (SSS), and the SSS Retirees Association 5 before the RTC of Daet,
Camarines Norte. The case was docketed as Civil Case No. 7304 and
assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995, she applied for
employment with the petitioner. However, after passing the examinations and
accomplishing all the requirements for employment, she was instead referred
to DBP Service Corporation for "transitory employment." She took the pre-
employment examination given by DBP Service Corporation and passed the
same. On May 20, 1996, she was told to report for training to SSS, Naga City
branch, for immediate deployment to SSS Daet branch. On May 28, 1996,
she was made to sign a six-month Service Contract Agreement7 by DBP
Service Corporation, appointing her as clerk for assignment with SSS Daet
branch effective May 27, 1996, with a daily wage of only P171.00. She was
assigned as "Frontliner" of the SSS Members Assistance Section until
December 15, 1999. From December 16, 1999 to May 15, 2001, she was
assigned to the Membership Section as Data Encoder. On December 16,
2001, she was transferred to the SSS Retirees Association as Processor at
the Membership Section until her resignation on August 26, 2002. As
Processor, she was paid only P229.00 daily or P5,038.00 monthly, while a
regular SSS Processor receives a monthly salary of P18,622.00 or P846.45
daily wage. Her May 28, 1996 Service Contract Agreement with DBP Service
Corporation was never renewed, but she was required to work for SSS
continuously under different assignments with a maximum daily salary of only
17
P229.00; at the same time, she was constantly assured of being absorbed
into the SSS plantilla. Respondent claimed she was qualified for her position
as Processor, having completed required training and passed the SSS
qualifying examination for Computer Operations Course given by the National
Computer Institute, U.P. Diliman from May 16 to June 10, 2001, yet she was
not given the proper salary. Because of the oppressive and prejudicial
treatment by SSS, she was forced to resign on August 26, 2002 as she could
no longer stand being exploited, the agony of dissatisfaction, anxiety,
demoralization, and injustice. She asserted that she dedicated six years of
her precious time faithfully serving SSS, foregoing more satisfying
employment elsewhere, yet she was merely exploited and given empty and
false promises; that defendants conspired to exploit her and violate civil
service laws and regulations and Civil Code provisions on Human Relations,
particularly Articles 19, 20, and 21.8 As a result, she suffered actual losses by
way of unrealized income, moral and exemplary damages, attorney's fees
and litigation expenses.
Respondent prayed for an award of P572,682.67 actual damages
representing the difference between the legal and proper salary she should
have received and the actual salary she received during her six-year stint with
petitioner; P300,000.00 moral damages; exemplary damages at the discretion
of the court; P20,000.00 attorney's fees and P1,000.00 appearance fees; and
other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and DBP Service
Corporation filed their respective motions to dismiss, arguing that the subject
matter of the case and respondent's claims arose out of employer-employee
relations, which are beyond the RTC's jurisdiction and properly cognizable by
the National Labor Relations Commission (NLRC).
Respondent opposed the motions to dismiss, arguing that pursuant to civil
service rules and regulations, service contracts such as her Service Contract
Agreement with DBP Service Corporation should cover only a) lump sum
work or services such as janitorial, security or consultancy services, and b)
piece work or intermittent jobs of short duration not exceeding six months on
a daily basis.9 She posited that her service contract involved the performance
of sensitive work, and not merely janitorial, security, consultancy services, or
work of intermittent or short duration. In fact, she was made to work
continuously even after the lapse of her 6-month service contract. Citing Civil
Service Commission Memorandum Circular No. 40, respondent contended
that the performance of functions outside of the nature provided in the
appointment and receiving salary way below that received by regular SSS
employees amount to an abuse of rights; and that her cause of action is
anchored on the provisions of the Civil Code on Human Relations.
Ruling of the Regional Trial Court
On October 1, 2003, the RTC issued an Order10 dismissing respondent's
complaint for lack of jurisdiction, stating that her claim for damages "has a
reasonable causal connection with her employer-employee relations with the
defendants"11 and "is grounded on the alleged fraudulent and malevolent
manner by which the defendants conspired with each other in exploiting [her],
which is a clear case of unfair labor practice," 12 falling under the jurisdiction of
the Labor Arbiter of the NLRC. Thus, it decreed:
WHEREFORE, premises considered, the aforementioned Motion to Dismiss
the complaint of the herein plaintiff for lack of jurisdiction is hereby
GRANTED. The above-entitled complaint is hereby DISMISSED.
SO ORDERED.13
Respondent moved for reconsideration. On March 6, 2007, the RTC issued
another Order14 granting respondent's motion for reconsideration. The trial
court held:
Section 2(1), Art. K-B, 1987 Constitution, expressly provides that "the civil
service embraces all branches, subdivisions, instrumentalities, and agencies
of the government, including government-owned or controlled corporation[s]
with original charters." Corporations with original charters are those which
have been created by special law[s] and not through the general corporation
law. In contrast, labor law claims against government-owned and controlled
corporations without original charters fall within the jurisdiction of the
Department of Labor and Employment and not the Civil Service Commission.
(Light Rail Transit Authority vs. Perfecto Venus, March 24, 2006.)
Having been created under an original charter, RA No. 1161 as amended by
R.A. 8282, otherwise known as the Social Security Act of 1997, the SSS is
governed by the provision[s] of the Civil Service Commission. However, since
the SSS denied the existence of an employer-employee relationship, and the
case is one for Damages, it is not the Civil Service Commission that has
jurisdiction to try the case, but the regular courts.
A perusal of the Complaint filed by the plaintiff against the defendant SSS
clearly shows that the case is one for Damages.
Paragraph 15 of her complaint states, thus:
xxx. Likewise, they are contrary to the Civil Code provisions on human
relations which [state], among others, that Every person, must in the exercise
of his rights and in the performance of his duties, act with justice, give
everyone his due and observe honesty and good faith (Article 19) and that
Every person who, contrary to law, willfully or negligently [causes] damages
to another, shall indemnify the latter for the same. (Art. 20)
"Article 19 provides a rule of conduct that is consistent with an orderly and
harmonious relationship between and among men and women It codifies the
concept of what is justice and fair play so that abuse of right by a person will
be prevented. Art. 20 speaks of general sanction for all other provisions of
law which do not especially provide their own sanction. Thus, anyone, who,
whether willfully or negligently, in the exercise of his legal right or duty,
causes damage to another, shall indemnify his or her victim for injuries
suffered thereby." (Persons and Family Relations, Sta. Maria, Melencio, Jr.
(2004) pp. 31-32.)
Wherefore, all premises considered, the Motion for Reconsideration is hereby
GRANTED. The case against defendant Social Security System represented
by its President is hereby reinstated in the docket of active civil cases of this
court.
SO ORDERED.15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its ground in its June
24, 2009 Order16
Ruling of the Court of Appeals
In a Petition for Certiorari17 filed with the CA and docketed as CA-G.R. SP No.
110006, petitioner sought a reversal of the RTC's June 24, 2009 and March
6, 2007 Orders and the reinstatement of its original October 1, 2003 Order
dismissing Civil Case No. 7304, insisting that the trial court did not have
jurisdiction over respondent's claims for "unrealized salary income" and other
damages, which constitute a labor dispute cognizable only by the labor
tribunals. Moreover, it claimed that the assailed Orders of the trial court were
issued with grave abuse of discretion. It argued that the trial court gravely

erred in dismissing the case only as against its co-defendants DBP Service
Corporation and SSS Retirees Association and maintaining the charge
against it, considering that its grounds for seeking dismissal are similar to
those raised by the two. It maintained that DBP Service Corporation and SSS
Retirees Association are legitimate independent job contractors engaged by it
to provide manpower services since 2001, which thus makes respondent an
employee of these two entities and not of SSS; and that since it is not the
respondent's employer, then there is no cause of action against it.
On July 29, 2011, the CA issued the assailed Decision containing the
following pronouncement:
Hence, petitioner seeks recourse before this Court via this Petition
for Certiorarichallenging the RTC Orders. For the resolution of this Court is
the sole issue of:
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND
DECIDE CIVIL CASE NO. 7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter thereof, as well
as, which court or agency of the government has jurisdiction over the same,
are determined by the material allegations of the complaint in relation to the
law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A prayer or
demand for relief is not part of the petition of the cause of action; nor does it
enlarge the cause of action stated or change the legal effect of what is
alleged. In determining which body has jurisdiction over a case, the better
policy is to consider not only the status or relationship of the parties but also
the nature of the action that is the subject of their controversy.
A careful perusal of Ubana's Complaint in Civil Case No. 7304 unveils that
Ubana's claim is rooted on the principle of abuse of right laid in the New Civil
Code. She was claiming damages based on the alleged exploitation
[perpetrated] by the defendants depriving her of her rightful income. In
asserting that she is entitled to the damages claimed, [she] invoked not the
provisions of the Labor Code or any other labor laws but the provisions on
human relations under the New Civil Code. Evidently, the determination of the
respective rights of the parties herein, and the ascertainment whether there
were abuses of such rights, do not call for the application of the labor laws but
of the New Civil Code. Aproposthereto, the resolution of the issues raised in
the instant complaint does not require the expertise acquired by labor
officials. It is the courts of general jurisdiction, which is the RTC in this case,
which has the authority to hear and decide Civil Case No. 7304.
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. Where the claim to the principal relief
sought is to be resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by the general civil
law, the jurisdiction over the dispute belongs to the regular courts of justice
and not to the Labor Arbiter and the NLRC. In such situations, [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.
18
It is the character of the principal relief sought that appears essential in this
connection. Where such principal relief is to be granted under labor legislation
or a collective bargaining agreement, the case should fall within the
jurisdiction of the Labor Arbiter and the NLRC, even though a claim for
damages might be asserted as an incident to such claim.
The pivotal question is whether the Labor Code has any relevance to the
principal relief sought in the complaint. As pointed out earlier, Ubana did not
seek refuge from the Labor Code in asking for the award of damages. It was
the transgression of Article[s] 19 and 20 of the New Civil Code that she was
insisting in wagering this case. The primary relief sought herein is for moral
and exemplary damages for the abuse of rights. The claims for actual
damages for unrealized income are the natural consequence for abuse of
such rights.
While it is true that labor arbiters and the NLRC have jurisdiction to award not
only reliefs provided by labor laws, but also damages governed by the Civil
Code, these reliefs must still be based on an action that has a reasonable
causal connection with the Labor Code, other labor statutes, or collective
bargaining agreements. Claims for damages under paragraph 4 of Article 217
must have a reasonable causal connection with any of the claims provided for
in the article in order to be cognizable by the labor arbiter. Only if there is
such a connection with the other claims can the claim for damages be
considered as arising from employer-employee relations. In the present case,
Ubana's claim for damages is not related to any other claim under Article 217,
other labor statutes, or collective bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic] jurisdiction to
hear and decide Civil Case No. 7304. In Tolosa v. NLRC,18 the Supreme
Court held that, "[i]t is not the NLRC but the regular courts that have
jurisdiction over action for damages, in which the employer-employee
relations is merely incidental, and in which the cause of action proceeds from
a different source of obligation such as tort. Since petitioner's claim for
damages is predicated on a quasi-delict or tort that has no reasonable causal
connection with any of the claims provided for in Article 217, other labor
statutes or collective bargaining agreements, jurisdiction over the action lies
with the regular courts not with the NLRC or the labor arbiters." The same
rule applies in this case.
WHEREFORE, premises considered, the instant petition is DENIED and the
Order dated March 6, 2007 of the Regional Trial Court, Branch 39 of Daet,
Camarines Norte in Civil Case No. 7304 is hereby AFFIRMED.
SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied the same in
its January 10, 2012 Resolution.21 Hence, the present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are contrary to law
and jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that the RTC's
October 1, 2003 Order dismissing Civil Case No. 7304 be reinstated,
petitioner essentially maintains in its Petition and Reply 22that respondent's
claims arose from and are in fact centered on her previous employment. It
maintains that there is a direct causal connection between respondent's
claims and her employment, which brings the subject matter within the
jurisdiction of the NLRC. Petitioner contends that respondent's other claims
are intimately intertwined with her claim of actual damages which are
cognizable by the NLRC. Moreover, petitioner alleges that its existing
manpower services agreements with DBP Service Corporation and SSS
Retirees Association are legitimate; and that some of respondent's claims
may not be entertained since these pertain to benefits enjoyed by
government employees, not by employees contracted via legitimate
manpower service providers. Finally, petitioner avers that the nature and
character of the reliefs prayed for by the respondent are directly within the
jurisdiction not of the courts, but of the labor tribunals.
Respondent's Arguments
In her Comment,23 respondent maintains that her case is predicated not on
labor laws but on Articles 19 and 20 of the Civil Code for petitioner's act of
exploiting her and enriching itself at her expense by not paying her the correct
salary commensurate to the position she held within SSS. Also, since there is
no employer-employee relationship between her and petitioner, as the latter
itself admits, then her case is not cognizable by the Civil Service Commission
(CSC) either; that since the NLRC and the CSC have no jurisdiction over her
case, then it is only the regular courts which can have jurisdiction over her
claims. She argues that the CA is correct in ruling that her case is rooted in
the principle of abuse of rights under the Civil Code; and that the Petition did
not properly raise issues of law.
Our Ruling
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on Audit,24 it was held
that while they performed the work of regular government employees, DBP
Service Corporation personnel are not government personnel, but employees
of DBP Service Corporation acting as an independent contractor. Applying
the foregoing pronouncement to the present case, it can be said that during
respondent's stint with petitioner, she never became an SSS employee, as
she remained an employee of DBP Service Corporation and SSS Retirees
Association - the two being independent contractors with legitimate service
contracts with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee relation exists
between the principal and the job contractor's employees. The principal is
responsible to the job contractor's employees only for the proper payment of
wages."25
In her Complaint, respondent acknowledges that she is not petitioner's
employee, but that precisely she was promised that she would be absorbed
into the SSS plantilla after all her years of service with SSS; and that as SSS
Processor, she was paid only P229.00 daily or P5,038.00 monthly, while a
regular SSS Processor receives a monthly salary of P18,622.00, or P846.45
daily wage. In its pleadings, petitioner denied the existence of an employer-
employee relationship between it and respondent; in fact, it insists on the
validity of its service agreements with DBP Service Corporation and SSS
Retirees Association - meaning that the latter, and not SSS, are respondent's
true employers. Since both parties admit that there is no employment relation
between them, then there is no dispute cognizable by the NLRC. Thus,
respondent's case is premised on the claim that in paying her only P229.00
daily - or P5,038.00 monthly - as against a monthly salary of P18,622.00, or
P846.45 daily wage, paid to a regular SSS Processor at the time, petitioner
exploited her, treated her unfairly, and unjustly enriched itself at her expense.
For Article 217 of the Labor Code to apply, and in order for the Labor Arbiter
to acquire jurisdiction over a dispute, there must be an employer-employee
relation between the parties thereto.

x xx It is well settled in law and jurisprudence that where no employer-
employee relationship exists between the parties and no issue is involved
which may be resolved by reference to the Labor Code, other labor statutes
or any collective bargaining agreement, it is the Regional Trial Court that has
jurisdiction, x xx The action is within the realm of civil law hence jurisdiction
over the case belongs to the regular courts. While the resolution of the issue
involves the application of labor laws, reference to the labor code was only for
the determination of the solidary liability of the petitioner to the respondent
where no employer-employee relation exists. Article 217 of the Labor Code
as amended vests upon the labor arbiters exclusive original jurisdiction only
over the following:
1. Unfair labor practices;
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 legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer- employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requisite x x x.26
Since there is no employer-employee relationship between the parties herein,
then there is no labor dispute cognizable by the Labor Arbiters or the NLRC.
There being no employer-employee relation or any other definite or direct
contract between respondent and petitioner, the latter being responsible to
the former only for the proper payment of wages, respondent is thus justified
in filing a case against petitioner, based on Articles 19 and 20 of the Civil
Code, to recover the proper salary due her as SSS Processor. At first glance,
it is indeed unfair and unjust that as, Processor who has worked with
petitioner for six long years, she was paid only P5,038.00 monthly, or
P229.00 daily, while a regular SSS employee with the same designation and
who performs identical functions is paid a monthly salary of P18,622.00, or
P846.45 daily wage. Petitioner may not hide under its service contracts to
deprive respondent of what is justly due her. As a vital government entity
charged with ensuring social security, it should lead in setting the example by
treating everyone with justice and fairness. If it cannot guarantee the security
of those who work for it, it is doubtful that it can even discharge its directive to
promote the social security of its members in line with the fundamental
mandate to promote social justice and to insure the well-being and economic
security of the Filipino people.
In this jurisdiction, the "long honored legal truism of 'equal pay for equal
work'" has been "impregnably institutionalized;" "[p]ersons who work with
substantially equal qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries." 27 "That public policy abhors
inequality and discrimination is beyond contention. Our Constitution and laws
reflect the policy against these evils. The Constitution in the Article on Social
Justice and Human Rights exhorts Congress to 'give highest priority to the
enactment of measures that protect and enhance the right of all people to
19
human dignity, reduce social, economic, and political inequalities.' The very
broad Article 19 of the Civil Code requires every person, 'in the exercise of
his rights and in the performance of his duties, [to] act with justice, give
everyone his due, and observe honesty and good faith'." 28
WHEREFORE, the Petition is DENIED. The assailed July 29, 2011 Decision
and January 10, 2012 Resolution of the Court of Appeals in CA-G.R. SP No.
110006 are AFFIRMED. The case is ordered remanded with dispatch to the
Regional Trial Court of Daet, Camarines Norte, Branch 39, for continuation of
proceedings.
SO ORDERED.
G.R. Nos. 174941               February 1, 2012
ANTONIO P. SALENGA and NATIONAL LABOR
RELATIONS COMMISSION, Petitioners, 
vs.COURT OF APPEALS and CLARK DEVELOPMENT
CORPORATION, Respondents.
DECISION
SERENO, J.:
The present Petition for Certiorari under Rule 65 assails the
Decision1 of the Court of Appeals (CA) promulgated on 13
September 2005, dismissing the Complaint for illegal dismissal
filed by petitioner Antonio F. Salenga against respondent Clark
Development Corporation (CDC). The dispositive portion of the
assailed Decision states:
WHEREFORE, premises considered, the original and
supplemental petitions are GRANTED. The assailed resolutions
of the National Labor Relations Commission dated September 10,
2003 and January 21, 2004 are ANNULLED and SET ASIDE.
The complaint filed by Antonio B. Salenga against Clark
Development is DISMISSED. Consequently, Antonio B. Salenga
is ordered to restitute to Clark Development Corporation the
amount of P3,222,400.00, which was received by him as a
consequence of the immediate execution of said resolutions, plus
interest thereon at the rate of 6% per annum from date ofsuch
receipt until finality of this judgment, after which the interest shall
be at the rate of 12% per annum until said amount is fully
restituted.
SO ORDERED.2

The undisputed facts are as follows:
On 22 September 1998, President/Chief Executive Officer (CEO)
RufoColayco issued an Order informing petitioner that, pursuant
to the decision of the board of directors of respondent CDC, the
position of head executive assistant – the position held by
petitioner – was declared redundant. Petitioner received a copy of
the Order on the same day and immediately went to see Colayco.
The latter informed him that the Order had been issued as part of
the reorganization scheme approved by the board of directors.
Thus, petitioner’s employment was to be terminated thirty (30)
days from notice of the Order.
On 17 September 1999, petitioner filed a Complaint for illegal
dismissal with a claim for reinstatement and payment of back
wages, benefits, and moral and exemplary damages against
respondent CDC and Colayco. The Complaint was filed with the
National Labor Relations Commission-Regional Arbitration
Branch (NLRC-RAB) III in San Fernando, Pampanga. In defense,
respondents, represented by the Office of the Government
Corporate Counsel (OGCC), alleged that the NLRC had no
jurisdiction to entertain the case on the ground that petitioner was
a corporate officer and, thus, his dismissal was an intra-corporate
matter falling properly within the jurisdiction of the Securities and
Exchange Commission (SEC).
On 29 February 2000, labor arbiter (LA) Florentino R. Darlucio
issued a Decision3 in favor of petitioner Salenga. First, the LA
held that the NLRC had jurisdiction over the Complaint,
considering that petitioner was not a corporate officer but a
managerial employee. He held the position of head executive
assistant, categorized as a Job Level 12 position, not subject to
election or appointment by the board of directors.
Second, the LA pointed out that respondent CDC and Colayco
failed to establish a valid cause for the termination of petitioner’s
employment. The evidence presented by respondent CDC failed
to show that the position of petitioner was superfluous as to be
classified "redundant." The LA further pointed out that respondent
corporation had not disputed the argument of petitioner Salenga
that his position was that of a regular employee. Moreover, the
LA found that petitioner had not been accorded the right to due
process. Instead, the latter was dismissed without the benefit of an
explanation of the grounds for his termination, or an opportunity
to be heard and to defend himself.
Finally, considering petitioner’s reputation and contribution as a
government employee for 40 years, the LA awarded moral
damages amounting to ₱2,000,000 and exemplary damages of
₱500,000. The dispositive portion of the LA’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
declaring respondent Clark Development Corporation and
20
RufoColayco guilty of illegal dismissal and for which they are
ordered, as follows:
1. To reinstate complainant to his former or equivalent position
without loss of seniority rights and privileges;
2. To pay complainant his backwages reckoned from the date of
his dismissal on September 22, 1998 until actual reinstatement or
merely reinstatement in the payroll which as of this date is in the
amount of P722,400.00;
3. To pay complainant moral damages in the amount of
P2,000,000.00; and,
4. To pay complainant exemplary damages in the amount of
P500,000.00.
SO ORDERED.4
At the time the above Decision was rendered, respondent CDC
was already under the leadership of Sergio T. Naguiat. When he
received the Decision on 10 March 2000, he subsequently
instructed Atty. Monina C. Pineda, manager of the Corporate and
Legal Services Department and concurrent corporate board
secretary, not to appeal the Decision and to so inform the OGCC.5
Despite these instructions, two separate appeals were filed before
LA Darlucio on 20 March 2000. One appeal6 was from the OGCC
on behalf of respondent CDC and RufoColayco. The OGCC
reiterated its allegation that petitioner was a corporate officer, and
that the termination of his employment was an intra-corporate
matter. The Memorandum of Appeal was verified and certified by
HilanaTimbol-Roman, the executive vice president of respondent
CDC. The Memorandum was accompanied by a UCPB General
Insurance Co., Inc. supersedeas bond covering the amount due to
petitioner as adjudged by LA Darlucio. Timbol-Roman and
OGCC lawyer Roy Christian Mallari also executed on 17 March
2000 a Joint Affidavit of Declaration wherein they swore that they
were the "respective authorized representative and counsel" of
respondent corporation. However, the Memorandum of Appeal
and the Joint Affidavit of Declaration were not accompanied by a
board resolution from respondent’s board of directors authorizing
either Timbol-Roman or Atty. Mallari, or both, to pursue the case
or to file the appeal on behalf of respondent.
It is noteworthy that Naguiat, who was president/CEO of
respondent CDC from 3 February 2000 to 5 July 2000, executed
an Affidavit on 20 March 2002,7 wherein he stated that without his
knowledge, consent or approval, Timbol-Roman and Atty. Mallari
filed the above-mentioned appeal. He further alleged that their
statements were false.
The second appeal, meanwhile, was filed by former CDC
President/CEO RufoColayco. Colayco alleged that petitioner was
dismissed not on 22 September 1998, but twice on 9 March 1999
and 23 March 1999. The dismissal was allegedly approved by
respondent’s CDC board of directors pursuant to a new
organizational structure. Colayco likewise stated that he had
posted a supersedeas bond – the same bond taken out by Timbol-
Roman – issued by the UCPB General Insurance Co. dated 17
March 2000 in order to secure the monetary award, exclusive of
moral and exemplary damages.
Petitioner thereafter opposed the two appeals on the grounds that
both appellants, respondent CDC – as allegedly represented by
Timbol-Roman and Atty. Mallari – and RufoColayco had failed to
observe Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure;
and that appellants had not been authorized by respondent’s board
of directors to represent the corporation and, thus, they were not
the "employer" whom the Rules referred to. Petitioner also alleged
that appellants failed to refute the findings of LA Darlucio in the
previous Decision.
In the meantime, while the appeal was pending, on 19 October
2000, respondent’s board chairperson and concurrent
President/CEO Rogelio L. Singson ordered the reinstatement of
petitioner to the latter’s former position as head executive
assistant, effective 24 October 2000.8
On 28 May 2001, respondent CDC’s new President/CEO
Emmanuel Y. Angeles issued a Memorandum, which offered all
managers of respondent corporation an early
separation/redundancy program. Those who wished to avail
themselves of the program were to be given the equivalent of their
1.25-month basic salary for every year of service and leave credits
computed on the basis of the same 1.25-month equivalent of their
basic salary.9
In August 2001, respondent CDC offered another retirement plan
granting higher benefits to the managerial employees. Thus, on 12
September 2001, petitioner filed an application for the early
retirement program, which Angeles approved on 3 December
2001.
Meanwhile, in the proceedings of the NLRC, petitioner received
on 12 September 2001 its 30 July 2001 Decision10on the appeal
filed by Timbol-Roman and Colayco. It is worthy to note that the
said Decision referred to the reports of reviewer arbiters Cristeta
D. Tamayo and Thelma M. Concepcion, who in turn found that
petitioner Salenga was a corporate officer of CDC. Nevertheless,
the First Division of the NLRC upheld LA Darlucio’s ruling that
petitioner Salenga was indeed a regular employee. It also found
that redundancy, as an authorized cause for dismissal, has not
been sufficiently proven, rendering the dismissal illegal. However,
the NLRC held that the award of exemplary and moral damages
were unsubstantiated. Moreover, it also dropped Colayco as a
respondent to the case, since LA Darlucio had failed to provide
any ground on which to anchor the former’s solidary liability.

Petitioner Salenga thereafter moved for a partial reconsideration
of the above-mentioned Decision. He sought the reinstatement of
the award of exemplary and moral damages. He likewise insisted
that the NLRC should not have entertained the appeal on the
following grounds: (1) respondent CDC did not file an appeal and
did not post the required cash or surety bond; (2) both Timbol-
Roman and Colayco were admittedly not real parties-in-interest;
(3) they were not the employer or the employer’s authorized
representative and, thus, had no right to appeal; and (4) both
appeals had not been perfected for failure to post the required cash
or surety bond. In other words, petitioner’s theory revolved on the
fact that neither Timbol-Roman nor Colayco was authorized to
represent the corporation, so the corporation itself did not appeal
LA Darlucio’s Decision. As a result, that Decision should be
considered as final and executory.
For its part, the OGCC also filed a Motion for
Reconsideration11 of the NLRC’s 30 July 2001 Decision insofar as
the finding of illegal dismissal was concerned. It no longer
questioned the commission’s finding that petitioner was a regular
employee, but instead insisted that he had been dismissed as a
consequence of his redundant position. The motion, however, was
not verified by the duly authorized representative of respondent
CDC.
On 5 December 2002, the NLRC denied petitioner Salenga’s
Motion for Partial Reconsideration and dismissed the Complaint.
The dispositive portion of the Resolution12 reads as follows:
WHEREFORE, complainant’s partial motion for reconsideration
is denied. As recommended by Reviewer Arbiters Cristeta D.
Tamayo in her August 2, 2000 report and Thelma M. Concepcion
in her November 25, 2002 report, the decision of Labor Arbiter
Florentino R. Darlucio dated 29 February 2000 is set aside.
The complaint below is dismissed for being without merit.
SO ORDERED.13
Meanwhile, pending the Motions for Reconsideration of the
NLRC’s 30 July 2001 Decision, another issue arose with regard to
the computation of the retirement benefits of petitioner.
Respondent CDC did not immediately give his requested
retirement benefits, pending clarification of the computation of
these benefits. He claimed that the computation of his retirement
benefits should also include the forty (40) years he had been in
government service in accordance with Republic Act No. (R.A.)
8291, or the GSIS Act, and should not be limited to the length of
his employment with respondent corporation only, as the latter
insisted.
In a letter dated 14 March 2003, petitioner Salenga’s counsel
wrote to the board of directors of respondent to follow up the
payment of the retirement benefits allegedly due to petitioner.14
21
Pursuant to the NLRC’s dismissal of the Complaint of petitioner
Salenga, Angeles subsequently denied the former’s request for his
retirement benefits, to wit:15
Please be informed that we cannot favorably grant your client’s
claim for retirement benefits considering that Clark Development
Corporation's dismissal of Mr. Antonio B. Salenga had been
upheld by the National Labor Relations Commission through a
Resolution dated December 5, 2002...
x xx           x xx          x xx
As it is, the said Resolution dismissed the Complaint filed by Mr.
Salenga for being without merit. Consequently, he is not entitled
to receive any retirement pay from the corporation.
Meanwhile, petitioner Salenga filed a second Motion for
Reconsideration of the 5 December 2002 Resolution of the
NLRC, reiterating his claim that it should not have entertained the
imperfect appeal, absent a proper verification and certification
against forum-shopping from the duly authorized representative of
respondent CDC. Without that authority, neither could the OGCC
act on behalf of the corporation.
The OGCC, meanwhile, resurrected its old defense that the NLRC
had no jurisdiction over the case, because petitioner Salenga was a
corporate officer.
The parties underwent several hearings before the NLRC First
Division. During these times, petitioner Salenga demanded from
the OGCC to present a board resolution authorizing it or any other
person to represent the corporation in the proceedings. This, the
OGCC failed to do.
After giving due course to the Motion for Reconsideration filed by
petitioner Salenga, the NLRC issued a Resolution16 on 10
September 2003, partially granting the motion. This time, the First
Division of the NLRC held that, absent a board resolution
authorizing Timbol-Roman to file the appeal on behalf of
respondent CDC, the appeal was not perfected and was thus a
mere scrap of paper. In other words, the NLRC had no jurisdiction
over the appeal filed before it.
The NLRC further held that respondent CDC had failed to show
that petitioner Salenga’s dismissal was pursuant to a valid
corporate reorganization or board resolution. It also deemed
respondent estopped from claiming that there was indeed a
redundancy, considering that petitioner Salenga had been
reinstated to his position as head executive assistant. While it
granted the award of moral damages, it nevertheless denied
exemplary damages. Thus, the dispositive portion of its Decision
reads:
WHEREFORE, premises considered, the complainant’s Motion
for Reconsideration is GRANTED and We set aside our
Resolution of December 5, 2002. The Decision of the Labor
Arbiter dated February 29, 2000 is REINSTATED with the
MODIFICATION that:
1.) Being a nominal party, respondent RufoColayco is declared to
be not jointly and severally liable with respondent Clark
Development Corporation;
2.) Respondent Clark Development Corporation is ordered to pay
the complainant his full backwages and other monetary claims to
which he is entitled under the decision of the Labor Arbiter;
3.) Respondent CDC is likewise ordered to pay the complainant
moral and exemplary damages as provided under the Labor
Arbiter’s Decision; and
4.) All other money claims are DENIED for lack of merit.
In the meantime, respondent CDC is ordered to pay the
complainant his retirement benefits without further delay.
SO ORDERED.17
On 3 October 2003, the OGCC filed a Motion for
Reconsideration18 despite the absence of a verification and the
certification against forum shopping.
On 21 January 2004, the motion was denied by the NLRC for lack
of merit.19
On 5 February 2004, the executive clerk of the NLRC First
Division entered the judgment on the foregoing case. Thereafter,
on 9 February 2004, the NLRC forwarded the entire records of the
case to the NLRC-RAB III Office in San Fernando, Pampanga for
appropriate action.
On 4 March 2004, petitioner Salenga filed a Motion for Issuance
of Writ of Execution before the NLRC-RAB III, Office of LA
Henry D. Isorena. The OGCC opposed the motion on the ground
that it had filed with the CA a Petition for Certiorari seeking the
reversal of the NLRC Decision dated 30 July 2001 and the
Resolutions dated 10 September 2003 and 21 January 2004,
respectively. It is noteworthy that, again, there was no board
resolution attached to the Petition authorizing its filing.
Despite the pending Petition with the CA, LA Isorena issued a
Writ of Execution enforcing the 10 September 2003 Resolution of
the NLRC. On 1 April 2004, the LA issued an Order20 to the
manager of the Philippine National Bank, Clark Branch, Angeles
City, Pampanga, to immediately release in the name of NLRC-
RAB III the amount of ₱3,222,400 representing partial
satisfaction of the judgment award, including the execution fee of
₱31,720.
Respondent CDC filed with the CA in February 2004 a Petition
for Certiorari with a prayer for the issuance of a temporary
restraining order and/or a writ of preliminary injunction.

However, the Petition still lacked a board resolution from the
board of directors of respondent corporation authorizing its then
President Angeles to verify and certify the Petition on behalf of
the board. It was only on 16 March 2004 that counsel for
respondent filed a Manifestation/Motion21 with an attached
Secretary’s Certificate containing the board’s Resolution No. 86,
Series of 2001. The Resolution authorized Angeles to represent
respondent corporation in prosecuting, maintaining, or
compromising any lawsuit in connection with its business.
Meanwhile, in the proceedings before LA Isorena, both
respondent CDC’s legal department and the OGCC on 6 April
2004 filed their respective Motions to Quash Writ of
Execution.22 They both cited the failure to afford to respondent
due process in the issuance of the writ. They claimed that the pre-
conference hearing on the execution of the judgment had not
pushed through. They also reiterated that the Petition for
Certiorari dated 11 February 2004 was still pending with the CA.
Both motions were denied by LA Isorena for lack of factual and
legal bases.
On 6 May 2004, respondent filed with LA Isorena another Motion
to Quash Writ of Execution, again reiterating the pending Petition
with the CA.
This active exchange of pleadings and motions and the delay in
the payment of his money claims eventually led petitioner Salenga
to file an Omnibus Motion23 before LA Isorena. In his motion, he
recomputed the amount due him representing back wages, other
benefits or allowances, legal interests and attorney’s fees. He also
prayed for the computation of his retirement benefits plus interests
in accordance with R.A. 829124 and R.A. 1616.25 He insisted that
since respondent CDC was a government-owned and -controlled
corporation (GOCC), his previous government service totalling 40
years must also be credited in the computation of his retirement
pay. Thus, he demanded the payment of the total amount of
₱23,920,772.30, broken down as follows:
a. From the illegal dismissal suit: (In Philippine peso)
a. Recomputed award 3,758,786
b. Legal interest 5,089,342.58
c. Attorney’s fees 1,196,052.80
d. Litigation expenses 250,000
b. Retirement pay
a. Retirement gratuity 6,987,944
b. Unused vacation and sick leave 1,440,328
c. Legal interest 4,050,544.96
d. Attorney’s fees 1,147,781.90
On 11 May 2004, the CA issued a Resolution26 ordering petitioner
Salenga to comment on the Petition and holding in abeyance the
issuance of a temporary restraining order.
The parties thereafter filed their respective pleadings.
22
On 19 July 2004, the CA temporarily restrained the NLRC from
enforcing the Decision dated 29 February 2000 for a period of 60
days.27 After the lapse of the 60 days, LA Isorena issued a Notice
of Hearing/Conference scheduled for 1 October 2004 on
petitioner’s Omnibus Motion dated 7 May 2004.
Meanwhile, on 24 September 2004, the CA issued another
Resolution,28 this time denying the application for the issuance of
a writ of preliminary injunction, after finding that the requisites
for the issuance of the writ had not been met.
Respondent CDC subsequently filed a Supplemental
Petition29 with the CA, challenging the computation petitioner
Salenga made in his Omnibus Motion filed with the NLRC.
Respondent alleged that the examiner had erred in including the
other years of government service in the computation of
retirement benefits. It claimed that, since respondent corporation
was created under the Corporation Code, petitioner Salenga was
not covered by civil service laws. Hence, his retirement benefits
should only be limited to the number of years he had been
employed by respondent.
Subsequently, respondent CDC filed an Omnibus Motion30 to
admit the Supplemental Petition and to reconsider the CA’s
Resolution denying the issuance of a writ of preliminary
injunction. In the motion, respondent alleged that petitioner
Salenga had been more than sufficiently paid the amounts
allegedly due him, including the award made by LA Darlucio. On
12 March 2002, respondent CDC had issued a check amounting to
₱852,916.29, representing petitioner’s retirement pay and terminal
pay. Meanwhile, on 2 April 2004, ₱3,254,120 representing the
initial award was debited from the account of respondent CDC.
On 7 February 2005, respondent CDC filed a Motion31 once again
asking the CA to issue a writ of preliminary injunction in the light
of a scheduled 14 February 2005 conference called by LA
Mariano Bactin, who had taken over the case from LA Isorena.
At the 14 February 2005 hearing, the parties failed to reach an
amicable settlement and were thus required to submit their
relevant pleadings and documents in support of their respective
cases.
32 
On 16 February 2005, the CA issued a Resolution admitting the
Supplemental Petition filed by respondent, but denying the prayer
for the issuance of an injunctive writ.
Thereafter, on 8 March 2005, LA Bactin issued an
Order33 resolving the Omnibus Motion filed by petitioner Salenga
for the recomputation of the monetary claims due him. In the
Order, LA Bactin denied petitioner’s Motion for the
recomputation of the award of back wages, benefits, allowances
and privileges based on the 29 February 2000 Decision of LA
Darlucio. LA Bactin held that since the Decision had become final
and executory, he no longer had jurisdiction to amend or to alter
the judgment.
Anent the second issue of the computation of retirement benefits,
LA Bactin also denied the claim of petitioner Salenga, considering
that the latter’s retirement benefits had already been paid. The LA,
however, did not rule on whether petitioner was entitled to
retirement benefits, either under the Government Service
Insurance System (GSIS) or under the Social Security System
(SSS), and held that this issue was beyond the expertise and
jurisdiction of a LA.
Petitioner Salenga thereafter appealed to the NLRC, which
granted the appeal in a Resolution34 dated 22 July 2005. First, it
was asked to resolve the issue of the propriety of having the
Laguesma Law Office represent respondent CDC in the
proceedings before the LA. The said law firm entered its
appearance as counsel for respondent during the pre-execution
conference/hearing on 1 October 2004. On this issue, the NLRC
held that respondent corporation’s legal department, which had
previously been representing the corporation, was not validly
substituted by the Laguesma Law Office. In addition, the NLRC
held that respondent had failed to comply with Memorandum
Circular No. 9, Series of 1998, which strictly prohibits the hiring
of lawyers of private law firms by GOCCs without the prior
written conformity and acquiescence of the Office of Solicitor
General, as the case may be, and the prior written concurrence of
the Commission on Audit (COA). Thus, the NLRC held that all
actions and submissions undertaken by the Laguesma Law Office
on behalf of respondent were null and void.
The second issue raised before the NLRC was whether LA Bactin
acted without jurisdiction in annulling and setting aside the
former’s final and executory judgment contained in its 10
September 2003 Resolution, wherein it held that the appeal had
not been perfected, absent the necessary board resolution allowing
or authorizing Timbol-Roman and Atty. Mallari to file the appeal.
On this issue, the NLRC stated:
The final and executory judgment in this case is clearly indicated
in the dispositive portion of Our Resolution promulgated on
September 10, 2003 GRANTING complainant’s motion for
reconsideration, SETTING ASIDE Our Resolution of December
5, 2002, and REINSTATING the Decision of the Labor Arbiter
dated February 29, 2000 with the following modification[s]: (1)
declaring respondent RufoColayco not jointly and severally liable
with respondent Clark Development Corporation; (2) ordering
respondent CDC to pay the complainant his full backwages and
other monetary claims to which he is entitled under the decision

of the Labor Arbiter; (3) ordering respondent CDC to pay
complainant moral and exemplary damages as provided under the
Labor Arbiter’s Decision; and (4) ordering respondent CDC to
pay the complainant his retirement benefits without further delay.
This was entered in the Book of Entry of Judgment as final and
executory effective as of February 2, 2004.
Implementing this final and executory judgment, Arbiter Isorena
issued an Order dated May 24, 2004, DENYING respondent’s
Motion to Quash the Writ of Execution dated March 22, 2004,
correctly stating thusly:
"Let it be stressed that once a decision has become final and
executory, it becomes the ministerial duty of this Office to issue
the corresponding writ of execution. The rationale behind it is
based on the fact that the winning party has suffered enough and it
is the time for him to enjoy the fruits of his labor with dispatch.
The very purpose of the pre-execution conference is to explore the
possibility for the parties to arrive at an amicable settlement to
satisfy the judgment award speedily, not to delay or prolong its
implementation."
Thus, when Arbiter Bactin, who took over from Arbiter Isorena
upon the latter’s filing for leave of absence due to poor health in
January 2005, issued the appealed Order nullifying, instead of
implementing, the final and executory judgment of this
Commission, the labor arbiter a quo acted WITHOUT
JURISDICTION.35
x xx           x xx          x xx
WHEREFORE, premises considered, the appeal of herein
complainant is hereby GRANTED, and We declare NULL AND
VOID the appealed Order of March 8, 2005 and SET ASIDE said
Order; We direct the immediate issuance of the corresponding
Alias Writ of Execution to enforce the final and executory
judgment of this Commission as contained in Our September 10,
2003 Resolution.
SO ORDERED.36
Unwilling to accept the above Resolution of the NLRC, the
Laguesma Law Office filed a Motion for Reconsideration dated
29 August 2005 with the NLRC. Again, the motion lacked proper
verification and certification against non-forum shopping.
In the meantime, the OGCC also filed with the CA a Motion for
the Issuance of a Writ of Preliminary Injunction dated 30 August
200537 against the NLRC’s 22 July 2005 Resolution. The OGCC
alleged that the issues in the Resolution addressed monetary
claims that were raised by petitioner Salenga only in his Omnibus
Motion dated 7 May 2004 or after the issuance of the 10
September 2003 Decision of LA Darlucio. Thus, the OGCC
insisted that the NLRC had no jurisdiction over the issue, for the
matter was still pending with the CA.
23
The OGCC likewise filed another Motion for
Reconsideration38 dated 31 August 2005 with the NLRC. The
OGCC maintained that it was only acting in a collaborative
manner with the legal department of respondent CDC, for which
the former remained the lead counsel. The OGCC reiterated that,
as the statutory counsel of GOCCs, it did not need authorization
from them to maintain a case, and thus, LA Bactin had
jurisdiction over that case. Finally, it insisted that petitioner
Salenga was not covered by civil service laws on retirement, the
CDC having been created under the Corporation Code.
On 13 September 2005, the CA promulgated the assailed
Decision. Relying heavily on the reports of Reviewer Arbiters
Cristeta D. Tamayo and Thelma M. Concepcion, it held that
petitioner Salenga was a corporate officer. Thus, the issue before
the NLRC was an intra-corporate dispute, which should have been
lodged with the Securities and Exchange Commission (SEC),
which had jurisdiction over the case at the time the issue arose.
The CA likewise held that the NLRC committed grave abuse of
discretion when it allowed and granted petitioner Salenga’s
second Motion for Reconsideration, which was a prohibited
pleading.
Petitioner subsequently filed a Motion for Reconsideration on 7
October 2005, alleging that the CA committed grave abuse of
discretion in reconsidering the findings of fact, which had already
been found to be conclusive against respondent; and in taking
cognizance of the latter’s Petition which had not been properly
verified.
The CA, finding no merit in petitioner’s allegations, denied the
motion in its 17 August 2006 Resolution.
On 4 September 2006, petitioner Salenga filed a Motion for
Extension of Time to File a Petition for Review on Certiorari
under Rule 45, praying for an extension of fifteen (15) days within
which to file the Petition. The motion was granted through this
Court’s Resolution dated 13 September 2006. The case was
docketed as G.R. No. 174159.
On 25 September 2006, however, petitioner filed a
Manifestation39 withdrawing the motion. He manifested before us
that he would instead file a Petition for Certiorari under Rule 65,
which was eventually docketed as G.R. No. 174941. On 7 July
2008, this Court, through a Resolution, considered the Petition for
Review in G.R. No. 174159 closed and terminated.
Petitioner raises the following issues for our resolution:
I.
The Court of Appeals acted without jurisdiction in reviving and
re-litigating the factual issues and matters of petitioner’s illegal
dismissal and retirement benefits.
II.
The Court of Appeals had no jurisdiction to entertain the original
Petition as a remedy for an appeal that had actually not been filed,
absent a board resolution allowing the appeal.
III.
The Court of Appeals acted with grave abuse of discretion when it
did the following:
a. It failed to dismiss the original and supplemental Petitions
despite the lack of a board resolution authorizing the filing
thereof.
b. It failed to dismiss the Petitions despite the absence of a proper
verification and certification against non-forum shopping.
c. It failed to dismiss the Petitions despite respondent’s failure to
inform it of the pending proceedings before the NLRC involving
the same issues.
d. It failed to dismiss the Petitions on the ground of forum
shopping.
e. It did not dismiss the Petition when respondent failed to attach
to it certified true copies of the assailed NLRC 30 July 2001
Decision; 10 September 2003 Resolution; 21 January 2004
Resolution; copies of material portions of the record as are
referred to therein; and copies of pleadings and documents
relevant and pertinent thereto.
f. It did not act on respondent’s failure to serve on the Office of
the Solicitor General a copy of the pleadings, motions and
manifestations the latter had filed before the Court of Appeals, as
well as copies of pertinent court resolutions and decisions, despite
the NLRC being a party to the present case.
g. It disregarded the findings of fact and conclusions of law
arrived at by LA Darlucio, subjecting them to a second analysis
and evaluation and supplanting them with its own findings.
h. It granted the Petition despite respondent’s failure to show that
the NLRC committed grave abuse of discretion in rendering the
latter’s 30 July 2001 Decision, 10 September 2003 Resolution and
21 January 2004 Resolution.
i. It dismissed the complaint for illegal dismissal and ordered the
restitution of the P3,222,400 already awarded to petitioner, plus
interest thereon.
In its defense, private respondent insists that the present Petition
for Certiorari under Rule 65 is an improper remedy to question the
Decision of the CA, and thus, the case should be dismissed
outright. Nevertheless, it reiterates that private petitioner was a
corporate officer whose employment was dependent on board
action. As such, private petitioner’s employment was an intra-
corporate controversy cognizable by the SEC, not the NLRC.
Private respondent also asserts that it has persistently sought the
reversal of LA Darlucio’s Decision by referring to the letters sent
to the OGCC, as well as Verification and Certificate against
forum-shopping. However, these documents were signed only

during Angeles’ time as private respondent’s president/CEO, and
not of the former presidents. Moreover, private respondent
contends that private petitioner is not covered by civil service
laws, thus, his years in government service are not creditable for
the purpose of determining the total amount of retirement benefits
due him. In relation to this, private respondent enumerates the
amounts already paid to private petitioner.
The Court’s Ruling
The Petition has merit.
This Court deigns it proper to collapse the issues in this Petition to
simplify the matters raised in what appears to be a convoluted
case. First, we need to determine whether the NLRC and the CA
committed grave abuse of discretion amounting to lack or excess
of jurisdiction, when they entertained respondent’s so-called
appeal of the 29 February 2000 Decision rendered by LA
Darlucio.
Second, because of the turn of events, a second issue – the
computation of retirement benefits – cropped up while the first
case for illegal dismissal was still pending. Although the second
issue may be considered as separate and distinct from the illegal
dismissal case, the issue of the proper computation of the
retirement benefits was nevertheless considered by the relevant
administrative bodies, adding more confusion to what should have
been a simple case to begin with.
The NLRC had no jurisdictionto entertain the appeal filed by
Timbol-Roman and formerCDC CEO Colayco.
To recall, on 29 February 2000, LA Darlucio rendered a Decision
in favor of petitioner, stating as follows:
xxxComplainant cannot be considered as a corporate officer
because at the time of his termination, he was holding the position
of Head Executive Assistant which is categorized as a Job Level
12 position that is not subject to the election or appointment by
the Board of Directors. The approval of Board Resolution Nos.
200 and 214 by the Board of Directors in its meeting held on
February 11, 1998 and March 25, 1998 clearly refers to the New
CDC Salary Structure where the pay adjustment was based and
not to complainant’s relief as Vice-President, Joint Ventures and
Special Projects. While it is true that his previous positions are
classified as Job Level 13 which are subject to board
confirmation, the status of his appointment was permanent in
nature. In fact, he had undergone a six-month probationary period
before having acquired the permanency of his appointment.
However, due to the refusal of the board under then Chairman
VictorinoBasco to confirm his appointment, he was demoted to
the position of Head Executive Assistant. Thus, complainant
correctly postulated that he was not elected to his position and his
tenure is not dependent upon the whim of the boardxxxx xx           It is clear from the NLRC Rules of Procedure that appeals must be
x xx          x xx
24
Anent the second issue, this Office finds and so holds that
respondents have miserably failed to show or establish the valid
cause in terminating the services of complainant.
x xx           x xx          x xxIn the case at bar, respondents failed to
adduce any evidence showing that the position of Head Executive
Assistant is superfluous. In fact, they never disputed the argument
advanced by complainant that the position of Head Executive
Assistant was classified as a regular position in the Position
Classification Study which is an essential component of the
Organizational Study that had been approved by the CDC board
of directors in 1995 and still remains intact as of the end of 1998.
Likewise, studies made since 1994 by various management
consultancy groups have determined the need for the said position
in the Office of the President/CEO in relation to the vision,
mission, plans, programs and overall corporate goals and
objectives of respondent CDC. There is no evidence on record to
show that the position of Head Executive Assistant was abolished
by the Board of Directors in its meeting held in the morning of
September 22, 1998. The minutes of the meeting of the board on
said date, as well as its other three meetings held in the month of
September 1998 (Annexes "B", "C", "D" and "E", Complainant’s
Reply), clearly reveal that no abolition or reorganization plan was
discussed by the board. Hence, the ground of redundancy is
merely a device made by respondent Colayco in order to ease out
the complainant from the respondent corporation.
Moreover, the other ground for complainant’s dismissal is unclear
and unknown to him as respondent did not specify nor inform the
complainant of the alleged recent developmentsxxx
This Office is also of the view that complainant was not accorded
his right to due process prior to his termination. The law requires
that the employer must furnish the worker sought to be dismissed
with two (2) written notices before termination may be validly
effected: first, a notice apprising the employee of the particular
acts or omissions for which his dismissal is sought and, second, a
subsequent notice informing the employee of the decision to
dismiss him. In the case at bar, complainant was not apprised of
the grounds of his termination. He was not given the opportunity
to be heard and defend himselfxxx40
The OGCC, representing respondent CDC and former CEO
Colayco separately appealed from the above Decision. Both
alleged that they had filed the proper bond to cover the award
granted by LA Darlucio.
verified and certified against forum-shopping by the parties-in-
interest themselves. In the case at bar, the parties-in-interest are
petitioner Salenga, as the employee, and respondent Clark
Development Corporation as the employer.
A corporation can only exercise its powers and transact its
business through its board of directors and through its officers and
agents when authorized by a board resolution or its bylaws. The
power of a corporation to sue and be sued is exercised by the
board of directors. The physical acts of the corporation, like the
signing of documents, can be performed only by natural persons
duly authorized for the purpose by corporate bylaws or by a
specific act of the board. The purpose of verification is to secure
an assurance that the allegations in the pleading are true and
correct and have been filed in good faith.41
Thus, we agree with petitioner that, absent the requisite board
resolution, neither Timbol-Roman nor Atty. Mallari, who signed
the Memorandum of Appeal and Joint Affidavit of Declaration
allegedly on behalf of respondent corporation, may be considered
as the "appellant" and "employer" referred to by Rule VI, Sections
4 to 6 of the NLRC Rules of Procedure, which state:
SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. -
(a) The Appeal shall be filed within the reglementary period as
provided in Section 1 of this Rule; shall be verified by appellant
himself in accordance with Section 4, Rule 7 of the Rules of
Court, with proof of payment of the required appeal fee and the
posting of a cash or surety bond as provided in Section 6 of this
Rule; shall be accompanied by memorandum of appeal in three
(3) legibly typewritten copies which shall state the grounds relied
upon and the arguments in support thereof; the relief prayed for;
and a statement of the date when the appellant received the
appealed decision, resolution or order and a certificate of non-
forum shopping with proof of service on the other party of such
appeal. A mere notice of appeal without complying with the other
requisites aforestated shall not stop the running of the period for
perfecting an appeal.
(b) The appellee may file with the Regional Arbitration Branch or
Regional Office where the appeal was filed, his answer or reply to
appellant's memorandum of appeal, not later than ten (10)
calendar days from receipt thereof. Failure on the part of the
appellee who was properly furnished with a copy of the appeal to
file his answer or reply within the said period may be construed as
a waiver on his part to file the same.
(c) Subject to the provisions of Article 218, once the appeal is
perfected in accordance with these Rules, the Commission shall
limit itself to reviewing and deciding specific issues that were
elevated on appeal.
SECTION 5. APPEAL FEE. -The appellant shall pay an appeal
fee of one hundred fifty pesos (P150.00) to the Regional
Arbitration Branch or Regional Office, and the official receipt of
such payment shall be attached to the records of the case.

SECTION 6. BOND. - In case the decision of the Labor Arbiter or
the Regional Director involves a monetary award, an appeal by
the employer may be perfected only upon the posting of a cash or
surety bond. The appeal bond shall either be in cash or surety in
an amount equivalent to the monetary award, exclusive of
damages and attorney’s fees.
In case of surety bond, the same shall be issued by a reputable
bonding company duly accredited by the Commission or the
Supreme Court, and shall be accompanied by:
(a) a joint declaration under oath by the employer, his counsel,
and the bonding company, attesting that the bond posted is
genuine, and shall be in effect until final disposition of the case.
(b) a copy of the indemnity agreement between the employer-
appellant and bonding company; and
(c) a copy of security deposit or collateral securing the bond.
A certified true copy of the bond shall be furnished by the
appellant to the appellee who shall verify the regularity and
genuineness thereof and immediately report to the Commission
any irregularity.
Upon verification by the Commission that the bond is irregular or
not genuine, the Commission shall cause the immediate dismissal
of the appeal.
No motion to reduce bond shall be entertained except on
meritorious grounds and upon the posting of a bond in a
reasonable amount in relation to the monetary award.
The filing of the motion to reduce bond without compliance with
the requisites in the preceding paragraph shall not stop the running
of the period to perfect an appeal. (Emphasis supplied)
The OGCC failed to produce any valid authorization from the
board of directors despite petitioner Salenga’s repeated demands.
It had been given more than enough opportunity and time to
produce the appropriate board resolution, and yet it failed to do
so. In fact, many of its pleadings, representations, and
submissions lacked board authorization.
We cannot agree with the OGCC’s attempt to downplay this
procedural flaw by claiming that, as the statutorily assigned
counsel for GOCCs, it does not need such authorization. In
Constantino-David v. Pangandaman-Gania,42we exhaustively
explained why it was necessary for government agencies or
instrumentalities to execute the verification and the certification
against forum-shopping through their duly authorized
representatives. We ruled thereon as follows:
25
But the rule is different where the OSG is acting as counsel of
record for a government agency. For in such a case it becomes
necessary to determine whether the petitioning government body
has authorized the filing of the petition and is espousing the same
stand propounded by the OSG. Verily, it is not improbable for
government agencies to adopt a stand different from the position
of the OSG since they weigh not just legal considerations but
policy repercussions as well. They have their respective mandates
for which they are to be held accountable, and the prerogative to
determine whether further resort to a higher court is desirable and
indispensable under the circumstances.
The verification of a pleading, if signed by the proper officials of
the client agency itself, would fittingly serve the purpose of
attesting that the allegations in the pleading are true and correct
and not the product of the imagination or a matter of speculation,
and that the pleading is filed in good faith. Of course, the OSG
may opt to file its own petition as a "People's Tribune" but the
representation would not be for a client office but for its own
perceived best interest of the State.
The case of Commissioner of Internal Revenue v. S.C. Johnson
and Son, Inc., is not also a precedent that may be invoked at all
times to allow the OSG to sign the certificate of non-forum
shopping in place of the real party-in-interest. The ruling therein
mentions merely that the certification of non-forum shopping
executed by the OSG constitutes substantial compliance with the
rule since "the OSG is the only lawyer for the petitioner, which is
a government agency mandated under Section 35, Chapter 12,
Title III, Book IV, of the 1987 Administrative Code (Reiterated
under Memorandum Circular No. 152 dated May 17, 1992) to be
represented only by the Solicitor General."
By its very nature, "substantial compliance" is actually inadequate
observance of the requirements of a rule or regulation which are
waived under equitable circumstances to facilitate the
administration of justice there being no damage or injury caused
by such flawed compliance. This concept is expressed in the
statement "the rigidity of a previous doctrine was thus subjected
to an inroad under the concept of substantial compliance." In
every inquiry on whether to accept "substantial compliance," the
focus is always on the presence of equitable conditions to
administer justice effectively and efficiently without damage or
injury to the spirit of the legal obligation.x xx           x xx          x
xx
The fact that the OSG under the 1987 Administrative Code is the
only lawyer for a government agency wanting to file a petition, or
complaint for that matter, does not operate per se to vest the OSG
with the authority to execute in its name the certificate of non-
forum shopping for a client office. For, in many instances, client
agencies of the OSG have legal departments which at times
inadvertently take legal matters requiring court representation into
their own hands without the intervention of the OSG.
Consequently, the OSG would have no personal knowledge of the
history of a particular case so as to adequately execute the
certificate of non-forum shopping; and even if the OSG does have
the relevant information, the courts on the other hand would have
no way of ascertaining the accuracy of the OSG's assertion
without precise references in the record of the case. Thus, unless
equitable circumstances which are manifest from the record of a
case prevail, it becomes necessary for the concerned government
agency or its authorized representatives to certify for non-forum
shopping if only to be sure that no other similar case or incident is
pending before any other court.
We recognize the occasions when the OSG has difficulty in
securing the attention and signatures of officials in charge of
government offices for the verification and certificate of non-
forum shopping of an initiatory pleading. This predicament is
especially true where the period for filing such pleading is non-
extendible or can no longer be further extended for reasons of
public interest such as in applications for the writ of habeas
corpus, in election cases or where sensitive issues are involved.
This quandary is more pronounced where public officials have
stations outside Metro Manila.
But this difficult fact of life within the OSG, equitable as it may
seem, does not excuse it from wantonly executing by itself the
verification and certificate of non-forum shopping. If the OSG is
compelled by circumstances to verify and certify the pleading in
behalf of a client agency, the OSG should at least endeavor to
inform the courts of its reasons for doing so, beyond
instinctively citing City Warden of the Manila City Jail v.
Estrella and Commissioner of Internal Revenue v. S.C. Johnson
and Son, Inc.
Henceforth, to be able to verify and certify an initiatory pleading
for non-forum shopping when acting as counsel of record for a
client agency, the OSG must (a) allege under oath the
circumstances that make signatures of the concerned officials
impossible to obtain within the period for filing the initiatory
pleading; (b) append to the petition or complaint such authentic
document to prove that the party-petitioner or complainant
authorized the filing of the petition or complaint and understood
and adopted the allegations set forth therein, and an affirmation
that no action or claim involving the same issues has been filed or
commenced in any court, tribunal or quasi-judicial agency; and,
(c) undertake to inform the court promptly and reasonably of any
change in the stance of the client agency.
Anent the document that may be annexed to a petition or
complaint under letter (b) hereof, the letter-endorsement of the
client agency to the OSG, or other correspondence to prove that

the subject-matter of the initiatory pleading had been previously
discussed between the OSG and its client, is satisfactory evidence
of the facts under letter (b) above. In this exceptional situation
where the OSG signs the verification and certificate of non-forum
shopping, the court reserves the authority to determine the
sufficiency of the OSG's action as measured by the equitable
considerations discussed herein. (Emphasis ours, italics provided)
The ruling cited above may have pertained only to the Office of
the Solicitor General’s representation of government agencies and
instrumentalities, but we see no reason why this doctrine cannot
be applied to the case at bar insofar as the OGCC is concerned.
While in previous decisions we have excused transgressions of
these rules, it has always been in the context of upholding justice
and fairness under exceptional circumstances. In this case, though,
respondent failed to provide any iota of rhyme or reason to
compel us to relax these requirements. Instead, what is clear to us
is that the so-called appeal was done against the instructions of
then President/CEO Naguiat not to file an appeal. Timbol-Roman,
who signed the Verification and the Certification against forum-
shopping, was not even an authorized representative of the
corporation. The OGCC was equally remiss in its duty. It ought to
have advised respondent corporation, the proper procedure for
pursuing an appeal. Instead, it maintained the appeal and failed to
present any valid authorization from respondent corporation even
after petitioner had questioned OGCC’s authority all throughout
the proceedings. Thus, it is evident that the appeal was made in
bad faith.
The unauthorized and overzealous acts of officials of respondent
CDC and the OGCC have led to a waste of the government’s time
and resources. More alarmingly, they have contributed to the
injustice done to petitioner Salenga. By taking matters into their
own hands, these officials let the case drag on for years, depriving
him of the enjoyment of property rightfully his. What should have
been a simple case of illegal dismissal became an endless stream
of motions and pleadings.
Time and again, we have said that the perfection of an appeal
within the period prescribed by law is jurisdictional, and the lapse
of the appeal period deprives the courts of jurisdiction to alter the
final judgment.43 Thus, there is no other recourse but to respect the
findings and ruling of the labor arbiter. Clearly, therefore, the CA
committed grave abuse of discretion in entertaining the Petition
filed before it after the NLRC had dismissed the case based on
lack of jurisdiction. The assailed CA Decision did not even
resolve petitioner Salenga’s consistent and persistent claim that
the NLRC should not have taken cognizance of the appeal in the
first place, absent a board resolution. Thus, LA Darlucio’s
Decision with respect to the liability of the corporation still
stands.
26
However, we note from that Decision that RufoColayco was made
solidarily liable with respondent corporation. Colayco thereafter
filed his separate appeal. As to him, the NLRC correctly held in
its 30 July 2001 Decision that he may not be held solidarily
responsible to petitioner. As a result, it dropped him as
respondent. Notably, in the case at bar, petitioner does not
question that ruling.
Based on the foregoing, all other subsequent proceedings
regarding the issue of petitioner’s dismissal are null and void for
having been conducted without jurisdiction. Thus, it is no longer
incumbent upon us to rule on the other errors assigned in the
matter of petitioner Salenga’s dismissal.
CDC is not under the civil service laws on retirement.
While the case was still persistently being pursued by the OGCC,
a new issue arose when petitioner Salenga reached retirement age:
whether his retirement benefits should be computed according to
civil service laws.
To recall, the issue of how to compute the retirement benefits of
petitioner was raised in his Omnibus Motion dated 7 May 2004
filed before the NLRC after it had reinstated LA Darlucio’s
original Decision. The issue was not covered by petitioner’s
Complaint for illegal dismissal, but was a different issue
altogether and should have been properly addressed in a separate
Complaint. We cannot fault petitioner, though, for raising the
issue while the case was still pending with the NLRC. If it were
not for the "appeal" undertaken by Timbol-Roman and the OGCC
through Atty. Mallari, the issue would have taken its proper
course and would have been raised in a more appropriate time and
manner. Thus, we deem it proper to resolve the matter at hand to
put it to rest after a decade of litigation.
Petitioner Salenga contends that respondent CDC is covered by
the GSIS Law. Thus, he says, the computation of his retirement
benefits should include all the years of actual government service,
starting from the original appointment forty (40) years ago up to
his retirement.
Respondent CDC owes its existence to Executive Order No. 80
issued by then President Fidel V. Ramos. It was meant to be the
implementing and operating arm of the Bases Conversion and
Development Authority (BCDA) tasked to manage the Clark
Special Economic Zone (CSEZ). Expressly, respondent was
formed in accordance with Philippine corporation laws and
existing rules and regulations promulgated by the SEC pursuant to
Section 16 of Republic Act (R.A.) 7227.44 CDC, a government-
owned or -controlled corporation without an original charter, was
incorporated under the Corporation Code. Pursuant to Article IX-
B, Sec. 2(1), the civil service embraces only those government-
owned or -controlled corporations with original charter. As such,
respondent CDC and its employees are covered by the Labor
Code and not by the Civil Service Law, consistent with our ruling
in NASECO v. NLRC,45 in which we established this distinction.
Thus, in Gamogamo v. PNOC Shipping and Transport Corp.,46 we
held:
Retirement results from a voluntary agreement between the
employer and the employee whereby the latter after reaching a
certain age agrees to sever his employment with the former.
Since the retirement pay solely comes from Respondent's funds, it
is but natural that Respondent shall disregard petitioner's length of
service in another company for the computation of his retirement
benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1
August 1979. Ordinarily, his creditable service shall be reckoned
from such date. However, since Respondent took over the
shipping business of LUSTEVECO and agreed to assume without
interruption all the service credits of petitioner with
LUSTEVECO, petitioner's creditable service must start from 9
November 1977 when he started working with LUSTEVECO
until his day of retirement on 1 April 1995. Thus, petitioner's
creditable service is 17.3333 years.
We cannot uphold petitioner's contention that his fourteen years of
service with the DOH should be considered because his last two
employers were government-owned and controlled corporations,
and fall under the Civil Service Law. Article IX(B), Section 2
paragraph 1 of the 1987 Constitution states —
Sec. 2. (1)The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original
charters.
It is not at all disputed that while Respondent and LUSTEVECO
are government-owned and controlled corporations, they have no
original charters; hence they are not under the Civil Service Law.
In Philippine National Oil Company-Energy Development
Corporation v. National Labor Relations Commission, we ruled:
xxx "Thus under the present state of the law, the test in
determining whether a government-owned or controlled
corporation is subject to the Civil Service Law are [sic] the
manner of its creation, such that government corporations created
by special charter(s) are subject to its provisions while those
incorporated under the General Corporation Law are not within its
coverage." (Emphasis supplied)

Hence, petitioner Salenga is entitled to receive only his retirement
benefits based only on the number of years he was employed with
the corporation under the conditions provided under its retirement
plan, as well as other benefits given to him by existing laws.
WHEREFORE, in view of the foregoing, the Petition in G.R. No.
174941 is partially GRANTED. The Decision of LA Darlucio is
REINSTATED insofar as respondent corporation’s liability is
concerned. Considering that petitioner did not maintain the action
against RufoColayco, the latter is not solidarily liable with
respondent Clark Development Corporation.
The case is REMANDED to the labor arbiter for the computation
of petitioner’s retirement benefits in accordance with the Social
Security Act of 1997 otherwise known as Republic Act No. 8282,
deducting therefrom the sums already paid by respondent CDC. If
any, the remaining amount shall be subject to the legal interest of
6% per annum from the filing date of petitioner’s Omnibus
Motion on 11 May 2004 up to the time this judgment becomes
final and executory. Henceforth, the rate of legal interest shall be
12% until the satisfaction of judgment.
SO ORDERED.
THIRD DIVISION
G.R. No. 181416               November 11, 2013
MEDICAL PLAZA MAKATI CONDOMINIUM
CORPORATION, Petitioner,  The said letter further stressed that plaintiff is considered a
vs.ROBERT H. CULLEN, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the Court of Appeals (CA)
Decision1 dated July 10, 2007 and Resolution2 dated January 25,
2008 in CA-G.R. CV No. 86614. The assailed decision reversed
and set aside the September 9, 2005 Order3 of the Regional Trial
Court (RTC) of Makati, Branch 58 in Civil Case No. 03-1018;
while the assailed resolution denied the separate motions for
reconsideration filed by petitioner Medical Plaza Makati
Condominium Corporation (MPMCC) and Meridien Land
Holding, Inc. (MLHI).
The factual and procedural antecedents are as follows:
Respondent Robert H. Cullen purchased from MLHI
condominium Unit No. 1201 of the Medical Plaza Makati covered
by Condominium Certificate of Title No. 45808 of the Register of
Deeds of Makati. Said title was later cancelled and Condominium
Certificate of Title No. 64218 was issued in the name of
respondent.
On September 19, 2002, petitioner, through its corporate
secretary, Dr. Jose Giovanni E. Dimayuga, demanded from
respondent payment for alleged unpaid association dues and
assessments amounting to ₱145,567.42. Respondent disputed this
demand claiming that he had been religiously paying his dues
27
shown by the fact that he was previously elected president and
director of petitioner.4 Petitioner, on the other hand, claimed that
respondent’s obligation was a carry-over of that of
MLHI.5 Consequently, respondent was prevented from exercising
his right to vote and be voted for during the 2002 election of
petitioner’s Board of Directors.6 Respondent thus clarified from
MLHI the veracity of petitioner’s claim, but MLHI allegedly
claimed that the same had already been settled.7 This prompted
respondent to demand from petitioner an explanation why he was
considered a delinquent payer despite the settlement of the
obligation. Petitioner failed to make such explanation. Hence, the
Complaint for Damages8 filed by respondent against petitioner
and MLHI, the pertinent portions of which read:
x xxx6. Thereafter, plaintiff occupied the said condominium unit
no. 1201 and religiously paid all the corresponding monthly
contributions/association dues and other assessments imposed on
the same. For the years 2000 and 2001, plaintiff served as
President and Director of the Medical Plaza Makati Condominium
Corporation;
7. Nonetheless, on September 19, 2002, plaintiff was
shocked/surprised to receive a letter from the incumbent
Corporate Secretary of the defendant Medical Plaza Makati,
demanding payment of alleged unpaid association dues and
assessments arising from plaintiff’s condominium unit no. 1201.
delinquent member of the defendant Medical Plaza Makati.
x xx;8. As a consequence, plaintiff was not allowed to file his
certificate of candidacy as director. Being considered a
delinquent, plaintiff was also barred from exercising his right to
vote in the election of new members of the Board of Directors x x;
9. x xx Again, prior to the said election date, x xx counsel for the
defendant [MPMCC] sent a demand letter to plaintiff, anent the
said delinquency, explaining that the said unpaid amount is a
carry-over from the obligation of defendant Meridien. x xx;
10. Verification with the defendant [MPMCC] resulted to the
issuance of a certification stating that Condominium Unit 1201
has an outstanding unpaid obligation in the total amount of
₱145,567.42 as of November 30, 2002, which again, was
attributed by defendant [MPMCC] to defendant Meridien. x xx;
11. Due to the seriousness of the matter, and the feeling that
defendant Meridien made false representations considering that it
fully warranted to plaintiff that condominium unit 1201 is free and
clear from all liens and encumbrances, the matter was referred to
counsel, who accordingly sent a letter to defendant Meridien, to
demand for the payment of said unpaid association dues and other
assessments imposed on the condominium unit and being claimed
by defendant [MPMCC]. x xx;
12. x xx defendant Meridien claimed however, that the obligation
does not exist considering that the matter was already settled and
paid by defendant Meridien to defendant [MPMCC]. x xx;
13. Plaintiff thus caused to be sent a letter to defendant [MPMCC]
x xx. The said letter x xx sought an explanation on the fact that, as
per the letter of defendant Meridien, the delinquency of unit 1201
was already fully paid and settled, contrary to the claim of
defendant [MPMCC]. x xx;
14. Despite receipt of said letter on April 24, 2003, and to date
however, no explanation was given by defendant [MPMCC], to
the damage and prejudice of plaintiff who is again obviously
being barred from voting/participating in the election of members
of the board of directors for the year 2003;
15. Clearly, defendant [MPMCC] acted maliciously by insisting
that plaintiff is a delinquent member when in fact, defendant
Meridien had already paid the said delinquency, if any. The
branding of plaintiff as delinquent member was willfully and
deceitfully employed so as to prevent plaintiff from exercising his
right to vote or be voted as director of the condominium
corporation; 16. Defendant [MPMCC]’s ominous silence when
confronted with claim of payment made by defendant Meridien is
tantamount to admission that indeed, plaintiff is not really a
delinquent member;
17. Accordingly, as a direct and proximate result of the said acts
of defendant [MPMCC], plaintiff experienced/suffered from
mental anguish, moral shock, and serious anxiety. Plaintiff, being
a doctor of medicine and respected in the community further
suffered from social humiliation and besmirched reputation
thereby warranting the grant of moral damages in the amount of
₱500,000.00 and for which defendant [MPMCC] should be held
liable;
18. By way of example or correction for the public good, and as a
stern warning to all similarly situated, defendant [MPMCC]
should be ordered to pay plaintiff exemplary damages in the
amount of ₱200,000.00;
19. As a consequence, and so as to protect his rights and interests,
plaintiff was constrained to hire the services of counsel, for an
acceptance fee of ₱100,000.00 plus ₱2,500.00 per every court
hearing attended by counsel;
20. In the event that the claim of defendant [MPMCC] turned out
to be true, however, the herein defendant Meridien should be held
liable instead, by ordering the same to pay the said delinquency of
condominium unit 1201 in the amount of ₱145,567.42 as of
November 30, 2002 as well as the above damages, considering

that the non-payment thereof would be the proximate cause of the
damages suffered by plaintiff;9
Petitioner and MLHI filed their separate motions to dismiss the
complaint on the ground of lack of jurisdiction.10MLHI claims
that it is the Housing and Land Use Regulatory Board (HLURB)
which is vested with the exclusive jurisdiction to hear and decide
the case. Petitioner, on the other hand, raises the following
specific grounds for the dismissal of the complaint: (1) estoppel as
respondent himself approved the assessment when he was the
president; (2) lack of jurisdiction as the case involves an intra-
corporate controversy; (3) prematurity for failure of respondent to
exhaust all intra-corporate remedies; and (4) the case is already
moot and academic, the obligation having been settled between
petitioner and MLHI.11
On September 9, 2005, the RTC rendered a Decision granting
petitioner’s and MLHI’s motions to dismiss and, consequently,
dismissing respondent’s complaint.
The trial court agreed with MLHI that the action for specific
performance filed by respondent clearly falls within the exclusive
jurisdiction of the HLURB.12 As to petitioner, the court held that
the complaint states no cause of action, considering that
respondent’s obligation had already been settled by MLHI. It,
likewise, ruled that the issues raised are intra-corporate between
the corporation and member.13
On appeal, the CA reversed and set aside the trial court’s decision
and remanded the case to the RTC for further proceedings.
Contrary to the RTC conclusion, the CA held that the controversy
is an ordinary civil action for damages which falls within the
jurisdiction of regular courts.14 It explained that the case hinged on
petitioner’s refusal to confirm MLHI’s claim that the subject
obligation had already been settled as early as 1998 causing
damage to respondent.15 Petitioner’s and MLHI’s motions for
reconsideration had also been denied.16
Aggrieved, petitioner comes before the Court based on the
following grounds:
I.
THE COURT A QUO HAS DECIDED A QUESTION OF
SUBSTANCE, NOT THERETOFORE DETERMINED BY THE
SUPREME COURT, OR HAS DECIDED IT IN A WAY NOT
IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT
DECLARED THE INSTANT CASE AN ORDINARY ACTION
FOR DAMAGES INSTEAD OF AN INTRA-CORPORATE
CONTROVERSY COGNIZABLE BY A SPECIAL
COMMERCIAL COURT.
II.
THE COURT A QUO HAS DECIDED THE INSTANT CASE
IN A WAY NOT IN ACCORD WITH LAW OR WITH THE
28
APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT TOOK COGNIZANCE OF THE APPEAL WHILE
RAISING ONLY PURE QUESTIONS OF LAW.17
The petition is meritorious.
It is a settled rule that jurisdiction over the subject matter is
determined by the allegations in the complaint. It is not affected
by the pleas or the theories set up by the defendant in an answer or
a motion to dismiss. Otherwise, jurisdiction would become
dependent almost entirely upon the whims of the
defendant.18 Also illuminating is the Court’s pronouncement in Go
v. Distinction Properties Development and Construction, Inc.:19
Basic as a hornbook principle is that jurisdiction over the subject
matter of a case is conferred by law and determined by the
allegations in the complaint which comprise a concise statement
of the ultimate facts constituting the plaintiff’s cause of action.
The nature of an action, as well as which court or body has
jurisdiction over it, is determined based on the allegations
contained in the complaint of the plaintiff, irrespective of whether
or not the plaintiff is entitled to recover upon all or some of the
claims asserted therein. The averments in the complaint and the
character of the relief sought are the ones to be consulted. Once
vested by the allegations in the complaint, jurisdiction also
remains vested irrespective of whether or not the plaintiff is
entitled to recover upon all or some of the claims asserted therein.
x x x20
Based on the allegations made by respondent in his complaint,
does the controversy involve intra-corporate issues as would fall
within the jurisdiction of the RTC sitting as a special commercial
court or an ordinary action for damages within the jurisdiction of
regular courts?
In determining whether a dispute constitutes an intra-corporate
controversy, the Court uses two tests, namely, the relationship test
and the nature of the controversy test.21
An intra-corporate controversy is one which pertains to any of the
following relationships: (1) between the corporation, partnership
or association and the public; (2) between the corporation,
partnership or association and the State insofar as its franchise,
permit or license to operate is concerned; (3) between the
corporation, partnership or association and its stockholders,
partners, members or officers; and (4) among the stockholders,
partners or associates themselves.22 Thus, under the relationship
test, the existence of any of the above intra-corporate relations
makes the case intra-corporate.23
Under the nature of the controversy test, "the controversy must
not only be rooted in the existence of an intra-corporate
relationship, but must as well pertain to the enforcement of the
parties’ correlative rights and obligations under the Corporation
Code and the internal and intra-corporate regulatory rules of the
corporation."24 In other words, jurisdiction should be determined
by considering both the relationship of the parties as well as the
nature of the question involved.25
Applying the two tests, we find and so hold that the case involves
intra-corporate controversy. It obviously arose from the intra-
corporate relations between the parties, and the questions involved
pertain to their rights and obligations under the Corporation Code
and matters relating to the regulation of the corporation.26
Admittedly, petitioner is a condominium corporation duly
organized and existing under Philippine laws, charged with the
management of the Medical Plaza Makati. Respondent, on the
other hand, is the registered owner of Unit No. 1201 and is thus a
stockholder/member of the condominium corporation. Clearly,
there is an intra-corporate relationship between the corporation
and a stockholder/member.
The nature of the action is determined by the body rather than the
title of the complaint. Though denominated as an action for
damages, an examination of the allegations made by respondent in
his complaint shows that the case principally dwells on the
propriety of the assessment made by petitioner against respondent
as well as the validity of petitioner’s act in preventing respondent
from participating in the election of the corporation’s Board of
Directors. Respondent contested the alleged unpaid dues and
assessments demanded by petitioner.
The issue is not novel. The nature of an action involving any
dispute as to the validity of the assessment of association dues has
been settled by the Court in Chateau de Baie Condominium
Corporation v. Moreno.27 In that case, respondents therein filed a
complaint for intra-corporate dispute against the petitioner therein
to question how it calculated the dues assessed against them, and
to ask an accounting of association dues. Petitioner, however,
moved for the dismissal of the case on the ground of lack of
jurisdiction alleging that since the complaint was against the
owner/developer of a condominium whose condominium project
was registered with and licensed by the HLURB, the latter has the
exclusive jurisdiction. In sustaining the denial of the motion to
dismiss, the Court held that the dispute as to the validity of the
assessments is purely an intra-corporate matter between petitioner
and respondent and is thus within the exclusive jurisdiction of the
RTC sitting as a special commercial court. More so in this case as
respondent repeatedly questioned his characterization as a
delinquent member and, consequently, petitioner’s decision to bar
him from exercising his rights to vote and be voted for. These
issues are clearly corporate and the demand for damages is just
incidental. Being corporate in nature, the issues should be
threshed out before the RTC sitting as a special commercial court.
The issues on damages can still be resolved in the same special

commercial court just like a regular RTC which is still competent
to tackle civil law issues incidental to intra-corporate disputes
filed before it.28
Moreover, Presidential Decree No. 902-A enumerates the cases
over which the Securities and Exchange Commission (SEC)
exercises exclusive jurisdiction:
x xxx
b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members, or associates, respectively; and between such
corporation, partnership or association and the State insofar as it
concerns their individual franchise or right to exist as such entity;
and
c) Controversies in the election or appointment of directors,
trustees, officers, or managers of such corporations, partnerships,
or associations.29
To be sure, this action partakes of the nature of an intra-corporate
controversy, the jurisdiction over which pertains to the SEC.
Pursuant to Section 5.2 of Republic Act No. 8799, otherwise
known as the Securities Regulation Code, the jurisdiction of the
SEC over all cases enumerated under Section 5 of Presidential
Decree No. 902-A has been transferred to RTCs designated by
this Court as Special Commercial Courts.30 While the CA may be
correct that the RTC has jurisdiction, the case should have been
filed not with the regular court but with the branch of the RTC
designated as a special commercial court. Considering that the
RTC of Makati City, Branch 58 was not designated as a special
commercial court, it was not vested with jurisdiction over cases
previously cognizable by the SEC.31The CA, therefore, gravely
erred in remanding the case to the RTC for further proceedings.
Indeed, Republic Act (RA) No. 9904, or the Magna Carta for
Homeowners and Homeowners’ Associations, approved on
January 7, 2010 and became effective on July 10, 2010, empowers
the HLURB to hear and decide inter-association and/or intra-
association controversies or conflicts concerning homeowners’
associations. However, we cannot apply the same in the present
case as it involves a controversy between a condominium unit
owner and a condominium corporation. While the term
association as defined in the law covers homeowners’ associations
of other residential real property which is broad enough to cover a
condominium corporation, it does not seem to be the legislative
intent. A thorough review of the deliberations of the bicameral
conference committee would show that the lawmakers did not
intend to extend the coverage of the law to such kind of
association. We quote hereunder the pertinent portion of the
Bicameral Conference Committee’s deliberation, to wit:
29
THE CHAIRMAN (SEN. ZUBIRI). Let’s go back, Mr. Chair,
very quickly on homeowners.
THE ACTING CHAIRMAN (REP. ZIALCITA). Ang sa akin
lang, I think our views are similar, Your Honor, Senator Zubiri,
the entry of the condominium units might just complicate the
whole matters. So we’d like to put it on record that we’re very
much concerned about the plight of the Condominium Unit
Homeowners’ Association. But this could very well be addressed
on a separate bill that I’m willing to co-sponsor with the
distinguished Senator Zubiri, to address in the Condominium Act
of the Philippines, rather than address it here because it might just
create a red herring into the entire thing and it will just complicate
matters, hindiba?
THE CHAIRMAN (SEN. ZUBIRI). I also agree with you
although I sympathize with them---although we sympathize with
them and we feel that many times their rights have been also
violated by abusive condominium corporations. However, there
are certain things that we have to reconcile. There are certain
issues that we have to reconcile with this version.
In the Condominium Code, for example, they just raised a very
peculiar situation under the Condominium Code --- Condominium
Corporation Act. It’s five years the proxy, whereas here, it’s three
years. So there would already be violation or there will be already
a problem with their version and our version. Sino ang
matutupaddoon? Will it be our version or their version?
So I agree that has to be studied further. And because they have a
law pertaining to the condominium housing units, I personally feel
that it would complicate matters if we include them. Although I
agree that they should be looked after and their problems be
looked into.
Probably we can ask our staff, Your Honor, to come up already
with the bill although we have no more time. Hopefully we can
tackle this again on the 15th Congress. But I agree with the
sentiments and the inputs of the Honorable Chair of the House
panel.
May we ask our resource persons to also probably give
comments?
Atty. Dayrit.
MR. DAYRIT.
Yes I agree with you. There are many, I think, practices in their
provisions in the Condominium Law that may be conflicting with
this version of ours.
For instance, in the case of, let’s say, the condominium, the so-
called common areas and/or maybe so called open spaces that
they may have, especially common areas, they are usually owned
by the condominium corporation. Unlike a subdivision where the
open spaces and/or the common areas are not necessarily owned
by the association. Because sometimes --- generally these are
donated to the municipality or to the city. And it is only when the
city or municipality gives the approval or the conformity that this
is donated to the homeowners’ association. But generally, under
PD [Presidential Decree] 957, it’s donated. In the Condominium
Corporation, hindi. Lahat ng mga open spaces and common areas
like corridors, the function rooms and everything, are owned by
the corporation. So that’s one main issue that can be conflicting.
THE CHAIRMAN (SEN. ZUBIRI). I’ll just ask for a one-minute
suspension so we can talk.
THE ACTING CHAIRMAN (REP. ZIALCITA). Unless you
want to put a catchall phrase like what we did in the Senior
Citizen’s Act. Something like, to the extent --- paanobaiyon? To
the extent that it is practicable and applicable, the rights and
benefits of the homeowners, are hereby extended to the ---
mayroonkamingginamitna phrase eh...to the extent that it be
practicable and applicable to the unit homeoweners, is hereby
extended, something like that. It’s a catchall phrase. But then
again, it might create a...
MR. JALANDONI. It will become complicated. There will be a
lot of conflict of laws between the two laws.
THE ACTING CHAIRMAN (REP. ZIALCITA). Kaya nga eh. At
saka, I don’t know. I think the --- mayroonnamansilang protection
saano eh, di ba? Buyers decree doonsa Condominium Act. I’m
sure there are provisions there eh. Huwagnalang, huwagna lang.
MR. JALANDONI. Mr. Chairman, I think it would be best if your
previous comments that you’d be supporting an amendment. I
think that would be --- Well, that would be the best course of
action with all due respect.
THE ACTING CHAIRMAN (REP. ZIALCITA). Yeah. Okay.
Thank you. So iyonnalang final proposal naming ‘yung catchall
phrase, "With respect to the..."32
x xxx
THE CHAIRMAN (SEN. ZUBIRI). xxx And so, what is their
final decision on the definition of homeowners?
THE ACTING CHAIRMAN (REP. ZIALCITA).
We stick to the original, Mr. Chairman. We’ll just open up a
whole can of worms and a whole new ball game will come into
play. Besides, I am not authorized, neither are you, by our
counterparts to include the condominium owners.
THE CHAIRMAN (SEN. ZUBIRI).
Basically that is correct. We are not authorized by the Senate nor
– because we have discussed this lengthily on the floor, actually,
several months on the floor. And we don’t have the authority as
well for other Bicam members to add a provision to include a
separate entity that has already their legal or their established
Republic Act tackling on that particular issue. But we just like to

put on record, we sympathize with the plight of our friends in the
condominium associations and we will just guarantee them that
we will work on an amendment to the Condominium Corporation
Code. So with that – we skipped, that is correct, we have to go
back to homeowners’ association definition, Your Honor, because
we had skipped it altogether. So just quickly going back to Page 7
because there are amendments to the definition of homeowners. If
it is alright with the House Panel, adopt the opening phrase of
Subsection 7 of the Senate version as opening phrase of
Subsection 10 of the reconciled version.
x xx x33
To be sure, RA 4726 or the Condominium Act was enacted to
specifically govern a condominium. Said law sanctions the
creation of the condominium corporation which is especially
formed for the purpose of holding title to the common area, in
which the holders of separate interests shall automatically be
members or shareholders, to the exclusion of others, in proportion
to the appurtenant interest of their respective units.34 The rights
and obligations of the condominium unit owners and the
condominium corporation are set forth in the above Act.
Clearly, condominium corporations are not covered by the
amendment. Thus, the intra-corporate dispute between petitioner
and respondent is still within the jurisdiction of the RTC sitting as
a special commercial court and not the HLURB. The doctrine laid
down by the Court in Chateau de Baie Condominium Corporation
v. Moreno35 which in turn cited WackWack Condominium
Corporation, et al v. CA36 is still a good law.
WHEREFORE, we hereby GRANT the petition and REVERSE
the Court of Appeals Decision dated July 10, 2007 and Resolution
dated January 25, 2008 in CA-G.R. CV No. 86614. The
Complaint before the Regional Trial Court of Makati City, Branch
58, which is not a special commercial court, docketed as Civil
Case No. 03-1018 is ordered DISMISSED for lack of jurisdiction.
Let the case be REMANDED to the Executive Judge of the
Regional Trial Court of Makati City for re-raffle purposes among
the designated special commercial courts.
SO ORDERED.
SECOND DIVISION
January 23, 2017
G.R. No. 212774
WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner  University on April 27, 2009. 10
vs.GUILLERMO T. MAGLAYA, SR., Respondent
DECISION
PERALTA, J.:
For this Court's resolution is a petition for review
on certiorari filed by petitioner Wesleyan University-Philippines
(WUP) assailing the Resolution1 dated January 20, 2014 of the
Court of Appeals (CA) which denied its petition for certiorari.
The facts are as follows:
30
WUP is a non-stock, non-profit, non-sectarian educational
corporation duly organized and existing under the Philippine laws
on April 28, 1948.2
Respondent Atty. Guillermo T. Maglaya, Sr. (Maglaya) was
appointed as a corporate member on January 1, 2004, and was
elected as a member of the Board of Trustees (Board) on January
9, 2004 - both for a period of five (5) years. On May 25, 2005, he
was elected as President of the University for a five-year term. He
was re-elected as a trustee on May 25, 2007. 3
In a Memorandum dated November 28, 2008, the incumbent
Bishops of the United Methodist Church (Bishops) apprised all
the corporate members of the expiration of their tenns on
December 31, 2008, unless renewed by the former. 4 The said
members, including Maglaya, sought the renewal of their
membership in the WUP's Board, and signified their willingness
to serve the corporation. 5
On January 10, 2009, Dr. DominadorCabasal, Chairman of the
Board, informed the Bishops of the cessation of corporate terms
of some of the members and/or trustees since the by-laws
provided that the vacancy shall only be filled by the Bishops upon
the recommendation of the Board. 6
On March 25, 2009, Maglaya learned that the Bishops created
an Ad Hoc Committee to plan the efficient and orderly turnover of
the administration of the WUP in view of the alleged "gentleman's
agreement" reached in December 2008, and that the Bishops have
appointed the incoming corporate members and trustees. 7 He
clarified that there was no agreement and any discussion of the
turnover because the corporate members still have valid and
existing corporate terms.8
On April 24, 2009, the Bishops, through a formal notice to all the
officers, deans, staff, and employees of WUP, introduced the new
corporate members, trustees, and officers. In the said notice, it
was indicated that the new Board met, organized, and elected the
new set of officers on April 20, 2009.9 Manuel Palomo (Palomo),
the new Chairman of the Board, informed Maglaya of the
termination of his services and authority as the President of the
Thereafter, Maglaya and other fonner members of the Board
(Plaintiffs) filed a Complaint for Injunction and Damages before
the Regional Trial Court (RTC) of Cabanatuan City, Branch
28. 11 In a Resolution12 dated August 19, 2009, the RTC dismissed
the case declaring the same as a nuisance or harassment suit
prohibited under Section l(b), 13 Rule 1 of the Interim Rules for
Intra-Corporate Controversies. 14 The RTC observed that it is clear
from the by-laws of WUP that insofar as membership in the
corporation is concerned, which can only be given by the College
of Bishops of the United Methodist Church, it is a precondition to
a seat in the WUP Board. 15Consequently, the expiration of the
terms of the plaintiffs, including Maglaya, as corporate members
carried with it their termination as members of the
Board. 16 Moreover, their continued stay in their office beyond
their terms was only in hold-over capacities, which ceased when
the Bishops appointed new members of the corporation and the
Board. 17
The CA, in a Decision18 dated .March 15, 2011, affirmed the
decision of the RTC, and dismissed the petition for certiorari filed
by the plaintiffs for being the improper remedy. The CA held that
their status as corporate members of WUP which expired on
December 31, 2008 was undisputed. The CA agreed with the RTC
that the plaintiffs had no legal standing to question the Bishops'
alleged irregular appointment of the new members in their
Complaint on May 18, 2009 as the termination of their
membership in the corporation necessarily resulted in the
conclusion of their positions as members of the Board pursuant to
the WUP by-laws. 19
Thereafter, Maglaya filed on March 22, 2011 the present illegal
dismissal case against WUP, Palomo, Bishop Lito C. Tangonan
(Tangonan), and Bishop Leo A. Soriano (Soriano ).20 Maglaya
claimed that he was unceremoniously dismissed in a wanton,
reckless, oppressive and malevolent manner on the eve of April
27, 2009.21 Tangonan and Soriano acted in evident bad faith when
they disregarded his five-year term of office and delegated their
protege Palomo as the new university president.22 Maglaya alleged
that he faithfully discharged his necessary and desirable functions
as President, and received ₱75,000.00 as basic salary, Pl0,000.00
as cost of living allowance, and ₱10,000.00 as representation
allowance. He was also entitled to other benefits such as: the use
of university vehicles; the use of a post paid mobile cellular phone
in his official transactions; the residence in the University
Executive House located at Inday Street, Magsaysay Sur,
Cabanatuan City, with free water, electricity, and services of a
household helper; and receipt of 13th month pay, vacation leave
pay, retirement pay, and shares in related learning
experience.23 On May 31, 2006, his basic salary was increased to
P95,000.00 due to his additional duty in overseeing the operations
of the WUP Cardiovascular and Medical Center.
Maglaya presented the following pieces of evidence: copies of his
appointment as President, his Identification Card, the WUP
Administration and Personnel Policy Manual which specified the
retirement of the university president, and the check disbursement
in his favor evidencing his salary, to substantiate his claim that he
was a mere employee.24

WUP, on the other hand, asseverated that the dismissal or removal
of Maglaya, being a corporate officer and not a regular employee,
is a corporate act or intra-corporate controversy under the
jurisdiction of the RTC. 25 WUP also maintained that since
Maglaya's appointment was not renewed, he ceased to be a
member of the corporation and of the Board; thus, his term for
presidency has also been tenninated. 26
Meanwhile, this Court, in a Resolution dated June 13, 2011,
denied the petition for review on certiorari filed by Maglaya and
the other former members of the Board for failure to show any
reversible error in the decision of the CA. The same became final
and executory on August 24, 2011.27
In a Decision28 dated September 20, 2011, the Labor Arbiter (LA)
ruled in favor of WUP. The LA held that the action between
employers and employees where the employer-employee
relationship is merely incidental is within the exclusive and
original jurisdiction of the regular courts.29 Since he was
appointed as President of the University by the Board, Maglaya
was a corporate officer and not a mere employee. The instant case
involves intra-corporate dispute which was definitely beyond the
jurisdiction of the labor tribunal.30 The dispositive portion of the
decision reads:
WHEREFORE, premises considered, the instant complaint is
hereby dismissed for lack of jurisdiction.
SO ORDERED.31
In a Decision32 dated April 25, 2012, the National Labor Relations
Commission (NLRC) in· NLRC-LAC No. 01-000470-12,
reversed and set aside the Decision of the LA ruling that the
illegal dismissal case falls within the jurisdiction of the labor
tribunals. Since the reasons for his termination cited by WUP
were not among the just causes provided under Article 28233 (now
Article 297) of the Labor Code, Maglaya was illegally dismissed.
The NLRC observed that the Board did not elect Maglaya, but
merely appointed him. Maglaya was appointed for a fixed period
of five (5) years from May 7, 2005 to May 6, 2010, while the
period of his appointment as member of the corporation was five
(5) years from January 2004.34 The decretal portion of the decision
reads:
WHEREFORE, premises considered, the appealed decision is
hereby REVERSED and SET ASIDE, declaring:
(a) jurisdiction over this case by virtue of the employer-employee
relation of the parties
(b) the illegality of the dismissal of [respondent] by [petitioner]
[Petitioner] therefore [is] hereby ordered to pay [respondent]:
1. separation pay - ₱375,000.00
2. full backwages - 1,252,462.50
3. retirement pay - 500,000.00
31
4. moral damages - 100,000.00
5. exemplary damages - 50,000.00
10% of the above as
6. - 227,746.25
attorney's fees
  [₱]2,505,208.7
TOTAL AWARDS -
5
Based on the attached computation of this Commission’s
Computation Unit.
SO ORDERED.35
Ruling in favor of Maglaya, the NLRC explicated that although
the position of the President of the University is a corporate
office, the manner of Maglaya' s appointment, and his duties,
salaries, and allowances point to his being an employee and
subordinate. 36 The control test is the most important indicator of
the presence of employer-employee relationship. Such was
present in the instant case as Maglaya had the duty to report to the
Board, and it was the Board which terminated or dismissed him
even before his term ends.37
Thereafter, the NLRC denied the motion for reconsideration filed
by WUP in a Resolution38 dated February 11, 2013.
In a Resolution, the CA dismissed the petition for certiorari filed
by WUP. The CA noted that the decision and resolution of the
NLRC became final and executory on March 16, 2013.39 WUP's
attempt to resurrect its lost remedy through filing the petition
would not prosper since final and executory judgment becomes
unalterable and may no longer be modified in any respect.40 Thus:
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.41
Upon denial of his Motion for Reconsideration, WUP elevated the
case before this Court raising the issue:
The Court of Appeals committed an error of law when it
summarily dismissed the special civil action for certiorari raising
lack of jurisdiction of the NLRC filed by [WUP] where it was
very clear that the NLRC had no jurisdiction over the case
involving a corporate officer and where the nature of the
controversy is an intra-corporate dispute.
We find the instant petition impressed with merit.
WUP alleges that while the NLRC decision became final and
executory on March 16, 2013, it did not mean that the said
decision had become immutable and unalterable as the CA ruled.
WUP maintains that the remedy of the aggrieved party against a
final and executory decision of the NLRC is the filing of the
petition for certiorari under Rule 65 of the Rules of Court. As
such, it was able to meet the conditions set forth in filing the said
remedy before the CA.
Settled is the rule that while the decision of the NLRC becomes
final and executory after the lapse of ten calendar days from
receipt thereof by the parties under Article 22342 (now Article
229) of the Labor Code, the adverse party is not precluded from
assailing it via Petition for Certiorari under Rule 65 before the
CA and then to this Court via a Petition for Review under Rule
45.43
This Court has explained and clarified the power of the CA to
review NLRC decisions, viz. :
The power of the Court of Appeals to review NLRC decisions via
Rule 65 or Petition for Certiorari has been settled as early as in
our decision in St. Martin Funeral Home v. National Labor
Relations Commission. This Court held that the proper vehicle for
such review was a Special Civil Action for Certiorari under Rule
65 of the Rules of Court, and that this action should be filed in the
Court of Appeals in strict observance of the doctrine of the
hierarchy of courts. Moreover, it is already settled that under
Section 9 of Batas Pambansa Blg. 129, as amended by Republic
Act No. 7902[10] (An Act Expanding the Jurisdiction of the Court
of Appeals, amending for the purpose of Section Nine of Batas
Pambansa Blg. 129 as amended, known as the Judiciary
Reorganization Act of 1980), the Court of Appeals - pursuant to
the exercise of its original jurisdiction over Petitions
for Certiorari – is specifically given the power to pass upon the
evidence, if and hwen necessary, to resolve factual issues.44
Consequently, the remedy of the aggrieved party is to timely file
a motion for reconsideration as a precondition for any further
or subsequent remedy, and then seasonably avail of the special
civil action of certiorari under Rule 65, for a period of sixty (60)
days from notice of the decision.45
Records reveal that WUP received the decision of the NLRC on
May 12, 2012, and filed its motion for reconsideration on May 24,
2012.46 WUP received the Resolution dated February 11, 2013
denying its motion on March 12, 2013.47 Thereafter, it filed its
petition for certiorari before the CA on March 26, 2013.48
We find that the application of the doctrine of immutability of
judgment in the case at bar is misplaced.To reiterate, although the
10-day period for finality of the decision of the NLRC may
already have lapsed as contemplated in the Labor Code, this Court
may still take cognizance of the petition for certiorari on
jurisdictional and due process considerations if filed within the
reglementary period under Rule 65.49 From the abovementioned,
WUP was able to discharge the necessary conditions in availing
its remedy against the final and executory decision of the NLRC.

There is an underlying power of the courts to scrutinize the acts of
such agencies on questions of law and jurisdiction even though no
right of review is given by statute.50 Furthermore, the purpose of
judicial review is to keep the administrative agency within its
jurisdiction and protect the substantial rights of the parties.51
Now on the issue of whether or not the NLRC has jurisdiction
over the illegal dismissal case filed by Maglaya.
The said issue revolves around the question on whether Maglaya
is a corporate officer or a mere employee. For purposes of
identifying an intracorporate controversy, We have defined
corporate officers, thus:
"Corporate officers" in the context of Presidential Decree No.
902- A are those officers of the corporation who are given that
character by the Corporation Code or by the corporation's
by-laws. There are three specific officers whom a corporation
must have under Section 25 of the Corporation Code. These are
the president, secretary and the treasurer. The number of officers
is not limited to these three. A corporation may have such other
officers as may be provided for by its by-laws like, but not limited
to, the vice-president, cashier, auditor or general manager. The
number of corporate officers is thus limited by law and by the
corporation's by-laws.52
The president, vice-president, secretary and treasurer are
commonly regarded as the principal or executive officers of a
corporation, and they are usually designated as the officers of the
corporation. However, other officers are sometimes created by the
charter or by-laws of a corporation, or the board of directors may
be empowered under the by-laws of a corporation to create
additional offices as may be necessary. This Court expounded that
an "office" is created by the charter of the corporation and the
officer is elected by the directors or stockholders, while an
"employee" usually occupies no office and generally is employed
not by action of the directors or stockholders but by the managing
officer of the corporation who also determines the compensation
to be paid to such employee. 53
From the foregoing, that the creation of the position is under the
corporation's charter or by-laws, and that the election of the
officer is by the directors or stockholders must concur in order for
an individual to be considered a corporate officer, as against an
ordinary employee or officer. It is only when the officer claiming
to have been illegally dismissed is classified as such corporate
officer that the issue is deemed an intracorporate dispute which
falls within the jurisdiction of the trial courts. 54 In its position
paper before the LA, WUP presented its amended ByLaws55 dated
November 28, 1988 submitted to the SEC to prove that Maglaya,
as the University President, was a corporate officer whose rights
do not fall within the jurisdiction of the labor tribunal. It also
32
presented the Resolution dated. August 19, 2009 of the RTC, and
the Decision dated March 15, 2011 of the CA to show that the
earlier case was filed by Maglaya and others, as members of the
Board, questioning the Bishops' appointment of the new members
without their recommendation.
The relevant portions of the amended By-Laws provide:
ARTICLE VI. BOARD OF TRUSTEES
x xxx
Section 2. Membership - (a) The Board of Trustees shall be
composed of Ten (10) members of the corporation from among
themselves provided, that six (6) shall come from the Ministry
and Laity of the United Methodist [C]hurch in the Philippines,
tlu·ee (3) shall be non-Methodist, friends and sympathizers of the
Wesleyan UniversityPhilippines and of the United Methodist
Church, and one (1) representative of the Wesleyan Alumni
Association, as provided in section 1 (c), Aiiicle IV hereof, and
(b) provided further that the incumbent area bishop and the
President of the Wesleyan University-Philippines shall be
honorary members of the Board.
x xx x56
ARTICLE VIII. OFFICERS
Section 1. Officers -The officers of the Board of Trustees shall be:
(a) Chairman
(b) Vice-Chairman
(c) Secretary
(d) Treasurer
x xxx
Section 6. The President of Wesleyan University-Philippines -The
President of the University, who must be an active member of the
United Methodist Church in the Philippines at the time of his
election shall be incharge of and be responsible for the
administration of the University and other institutions of learning
that [ m]ay hereafter be established by the corporation, and
(a) May, with the Board of Trustees;
(1) Organize and/or reorganize the administrative set up of the
Wesleyan University-Philippines to effect efficiency and upgrade
institutional administration and supervision;
(2) Employ, suspend, dismiss, transfer or replace personnel and
prescribe and enforce rules and regulations for their proper
conduct in the discharge of their duties;
(3) Shall make reports during the different ammal conference of
the United Methodist Church and to such agencies as may be
deemed necessary on the operations of the university and related
matters;
(4) Shall prescribe and enforce rules and regulations for the
promotion and maintenance of discipline in the proper conduct
and discharge of the functions and duties of subordinate
administrative officers, professors, teachers, employees and
students and other personnel.
(b) Shall make reports and recommendations to the Board of
Trustees or to the Chairman of the Board of Trustees on matters
pertaining to the institution as he may find necessary;
(c) Shall countersign all checks drawn by the Treasurer from the
depository of the University, and
(d) Shall exercise, perform and discharge all such other powers,
functions and duties as are interest in the office of the President.
x x x57
It is apparent from the By-laws of WUP that the president was one
of the officers of the corporation, and was an honorary member of
the Board. He was appointed by the Board and not by a managing
officer of the corporation. We held that one who is included in the
by-laws of a corporation in its roster of corporate officers is an
officer of said corporation and not a mere employee58
The alleged "appointment" of Maglaya instead of "election" as
provided by the by-laws neither convert the president of
university as a mere employee, nor amend its nature as a corporate
officer. With the office specifically mentioned in the by-laws, the
NLRC erred in taking cognizance of the case, and in concluding
that Maglaya was a mere employee and subordinate official
because of the manner of his appointment, his duties and
responsibilities, salaries and allowances, and considering the
Identification Card, the Administration and Personnel Policy
Manual which specified the retirement of the university president,
and the check disbursement as pieces of evidence supporting such
finding.
A corporate officer's dismissal is always a corporate act, or an
intracorporate controversy which arises between a stockholder
and a corporation, and the nature is not altered by the reason or
wisdom with which the Board of Directors may have in taking
such action.59 The issue of the alleged termination involving a
corporate officer, not a mere employee, is not a simple labor
problem but a matter that comes within the area of corporate
affairs and management and is a corporate controversy in
contemplation of the Corporation Code.60
The long-established rule is that the jurisdiction over a subject
matter is conferred by law.61 Perforce, Section 5 (c) of PD 902-A,
as amended by Subsection 5.2, Section 5 of Republic Act No.
8799, which provides that the regional trial courts exercise
exclusive jurisdiction over all controversies in the election or
appointment of directors, trustees, officers or managers of
corporations, partnerships or associations, applies in the case at
bar.62
To emphasize, the determination of the rights of a corporate
officer dismissed from his employment, as well as the
corresponding liability of a corporation, if any, is an intra-
corporate dispute subject to the jurisdiction of the regular courts.63
As held in Leonor v. Court of Appeals,64 a void judgment for want
of jurisdiction is no judgment at all. It cannot be the source of any
right nor the creator of any obligation. All acts perfonned pursuant
 33

to it and all claims emanating from it have no legal effect. Hence,

it can never become final and any writ of execution based on it
is void. 65

Since this Court is now reversing the challenged decision of the

CA and affirming the decision of the LA in dismissing the case
for want of jurisdiction, Maglaya is not entitled to collect the
amount of ₱2,505,208.75 awarded from the time the NLRC
decision became final and executory up to the time the CA
dismissed WUP's petition for certiorari.

In sum, this Court finds that the NLRC eITed in assuming

jurisdiction over, and thereafter in failing to dismiss, Maglaya's
complaint for illegal dismissal against WUP, since the subject
matter of the instant case is an intra-corporate controversy which
the NLRC has no jurisdiction.

WHEREFORE, the petition for review on certiorari filed by

petitioner Wesleyan University-Philippines is
hereby GRANTED. The assailed Resolution dated January 20,
2014 of the Court of Appeals in CAG.R. SP No. 129196 is
hereby REVERSED and SET ASIDE. Respondent Atty.
Guillermo T. Maglaya, Sr. is
hereby ORDERED toREIMBURSE the petitioner the amount of
₱2,505,208.75 awarded by the National Labor Relations
Commission.
SO ORDERED.
SECOND DIVISION

G.R. No. 202961               February 4, 2015
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO
DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, et al., Petitioners,  assistance on an equal monthly installments basis based on the following
vs.NATIONAL LABOR RELATIONS COMMISSION, ·SOLID MILLS, INC.,
and/or PHILIP ANG, Respondents.
DECISION
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the
employee's return of its properties.
Petitioners are respondent Solid Mills, Inc.' s (Solid Mills) employees. 1 They
are represented by the National Federation of Labor Unions (NAFLU), their
collective bargaining agent.2
As Solid Mills’ employees, petitionersand their families were allowed to
occupy SMI Village, a property owned by Solid Mills. 3 According to Solid Mills,
this was "[o]ut of liberality and for the convenience of its employees . . . [and]
on the condition that the employees . . . would vacate the premises anytime
the Company deems fit."4
In September 2003, petitioners were informed that effective October 10,
2003, Solid Mills would cease its operations due to serious business
losses.5 NAFLU recognized Solid Mills’ closure due to serious business
losses in the memorandum of agreement dated September 1, 2003. 6 The
memorandum of agreement provided for Solid Mills’ grant of separation pay
less accountabilities, accrued sick leave benefits, vacation leave benefits, and
13th month pay to the employees.7 Pertinent portions of the agreement
provide:
WHEREAS, the COMPANYhas incurred substantial financial losses and is
currently experiencing further severe financial losses;
WHEREAS, in view of such irreversible financial losses, the COMPANY will
cease its operations on October 10, 2003;
WHEREAS, all employees of the COMPANY on account of irreversible
financial losses, will bedismissed from employment effective October 10,
2003;
In view thereof, the parties agree as follows:
1. That UNION acknowledges that the COMPANY is experiencing severe
financial losses and as a consequence of which, management is constrained
to cease the company’s operations.
34
2. The UNION acknowledges that under Article 283 of the Labor Code,
separation pay is granted to employees who are dismissed due to closures or
cessation of operations NOT DUE to serious business losses.
3. The UNION acknowledges that in view of the serious business losses the
Company has been experiencing as seen in their audited financial
statements, employees ARE NOT granted separation benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to
grant financial assistance less accountabilities to members of the Union
based on length of service to be computed as follows: (Italics in this
paragraph supplied)
Number of days - 12.625 for every year of service
5. In view of the above, the members of the UNION will receive such financial
schedule:
First Check due on January 5, 2004 and every 5th of the month thereafter
until December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the Union members
are entitled to, specifically those arising from sick and vacation leave benefits
and 13th month pay, less accountabilities based on the following schedule:
One Time Cash Payment to bedistributed anywhere from. . . .
8. The foregoing agreement is entered into with full knowledge by the parties
of their rights under the law and they hereby bind themselves not to conduct
any concerted action of whatsoever kind, otherwise the grant of financial
assistance as discussed above will be withheld. 8 (Emphasis in the original)
Solid Mills filed its Department of Labor and Employment termination report
on September 2, 2003.9
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices
to vacate SMI Village.10
Petitioners were no longer allowed to report for work by October 10,
2003.11 They were required to sign a memorandum of agreement with release
and quitclaim before their vacation and sick leave benefits, 13th month pay,
and separation pay would be released.12 Employees who signed the
memorandum of agreement were considered to have agreed to vacate SMI
Village, and to the demolition of the constructed houses inside as condition
for the release of their termination benefits and separation pay.13 Petitioners
refused to sign the documents and demanded to be paid their benefits and
separation pay.14
Hence, petitioners filed complaintsbefore the Labor Arbiter for alleged non-
payment of separation pay, accrued sick and vacation leaves, and 13th
month pay.15 They argued that their accrued benefits and separation pay
should not be withheld becausetheir payment is based on company policy
and practice.16 Moreover, the 13th month pay is based on law, specifically,
Presidential Decree No. 851.17 Their possession of Solid Mills property is not
an accountability that is subject to clearance procedures. 18 They had already
turned over to SolidMills their uniforms and equipment when Solid Mills
ceased operations.19
On the other hand, Solid Mills argued that petitioners’ complaint was
premature because they had not vacated its property.20
The Labor Arbiter ruled in favor of petitioners.21 According to the Labor
Arbiter, Solid Mills illegallywithheld petitioners’ benefits and separation
pay.22 Petitioners’ right to the payment of their benefits and separation pay
was vestedby law and contract.23 The memorandum of agreement dated
September 1, 2003 stated no condition to the effect that petitioners must
vacate SolidMills’ property before their benefits could be given to
them.24 Petitioners’ possession should not be construed as petitioners’
"accountabilities" that must be cleared first before the release of
benefits.25 Their possession "is not by virtue of any employer-employee
relationship."26 It is a civil issue, which isoutside the jurisdiction of the Labor
Arbiter.27
The dispositive portion of the Labor Arbiter’s decision reads:
WHEREFORE, premises considered, judgment is entered ORDERING
respondents SOLID MILLS, INC. and/or PHILIP ANG (President), in solido to
pay the remaining 21 complainants:
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO
JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN, NORA MENDOZA,
MYRNA IGCAS, RAUL DE LAS ALAS, RENATO ESTOLANO, REX S.
DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA,
ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA
MAHILOM, MARILOU LINGA, RENATO LINGA their separation pay of
12.625 days’ pay per year of service, pro-rated 13th month pay for 2003 and
accrued vacation and sick leaves, plus 12% interest p.a. from date of filing of
the leadcase/judicial demand on 12/08/03 until actual payment and/or finality;
2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she
already received on 12/19/03 her accrued 13th month pay for 2003, accrued
VL/SL total amount of ₱15,435.16, likewise, complainant Jerry L. Sesma as
he already received his accrued 13th month pay for 2003, SL/VL in the total
amount of ₱10,974.97, shall be paid only their separation pay of 12.625 days’
pay per year of service but also with 12% interest p.a. from date of filing of
the lead case/judicial demand on 12/08/03 until actual payment and/or finality,
which computation as of date, amount to as shown in the attached
computation sheet.
3) Nine (9) individual complaintsviz., of Maria Agojo, Joey Suarez, Ronaldo
Vergara, Ronnie Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P.
Durano, Sr., Elizabeth Duarte and PurificacionMalabanan are DISMISSED
WITH PREJUDICE due to amicable settlement, whereas, that of [RONIE
ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA
PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE, for
lack of interest and/or failure to prosecute.
The Computation and Examination unit is directed to cause the computation
of the award in Pars. 2 and 3 above.28(Emphasis in the original)
Solid Mills appealed to the National Labor Relations Commission. 29 It prayed
for, among others, the dismissal of the complaints against it and the reversal
of the Labor Arbiter’s decision.30
The National Labor Relations Commission affirmed paragraph 3 of the Labor
Arbiter’s dispositive portion, but reversed paragraphs 1 and 2. Thus:

WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated
10/17/05 is AFFIRMED in so far as par. 3 thereof is concerned but modified in
that paragraphs 1 and 2 thereof are REVERSED and SET ASIDE.
Accordingly, the following complainants, namely: Emir Milan, Ramon
Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora
Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S.
Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza, Roberto
Igcas, Cleopatra Zacarias and Jerry L. Sesma’s monetary claims in the form
of separation pay, accrued 13th month pay for 2003, accrued vacation and
sick leave pays are held in abeyance pending compliance of their
accountabilities to respondent company by turning over the subject lots they
respectively occupy at SMI Village Sucat
Muntinlupa City, Metro Manila to herein respondent company. 31
The National Labor Relations Commission noted that complainants Marilou
Linga, Renato Linga, IsmaelMata, and Carlito Damian were already paid their
respective separation pays and benefits. 32 Meanwhile, Teodora Mahilom
already retired longbefore Solid Mills’ closure.33 She was already given her
retirement benefits.34
The National Labor Relations Commission ruled that because of petitioners’
failure to vacate Solid Mills’ property, Solid Mills was justified in withholding
their benefits and separation pay.35 Solid Mills granted the petitioners the
privilege to occupy its property on accountof petitioners’ employment. 36 It had
the prerogative toterminate such privilege.37 The termination of Solid Mills and
petitioners’ employer-employee relationship made it incumbent upon
petitioners to turn over the property to Solid Mills.38
Petitioners filed a motion for partial reconsideration on October 18,
2010,39 but this was denied in the November 30, 2010 resolution. 40
Petitioners, thus, filed a petition for certiorari 41 before the Court of Appeals to
assail the National LaborRelations Commission decision of August 31, 2010
and resolution of November 30, 2010.42
On January 31, 2012, the Court of Appeals issued a decision dismissing
petitioners’ petition,43 thus:
WHEREFORE, the petition is hereby ordered DISMISSED.44
The Court of Appeals ruled thatSolid Mills’ act of allowing its employees to
make temporary dwellingsin its property was a liberality on its part. It may be
revoked any time at its discretion.45 As a consequence of Solid Mills’ closure
and the resulting termination of petitioners, the employer-employee
relationship between them ceased to exist. There was no more reason for
them to stay in Solid Mills’ property.46 Moreover, the memorandum of
agreement between Solid Mills and the union representing petitioners
provided that Solid Mills’ payment of employees’ benefits should be "less
accountabilities."47
On petitioners’ claim that there was no evidence that Teodora Mahilom
already received her retirement pay, the Court of Appeals ruled that her
complaint filed before the Labor Arbiter did not include a claim for retirement
pay. The issue was also raised for the first time on appeal, which is not
allowed.48 In any case, she already retired before Solid Mills ceased its
operations.49
35
The Court of Appeals agreed with the National Labor Relations Commission’s
deletion of interest since it found that Solid Mills’ act of withholding payment
of benefits and separation pay was proper. Petitioners’ terminal benefits and
pay were withheld because of petitioners’ failure to vacate Solid Mills’
property.50
Finally, the Court of Appeals noted that Carlito Damian already received his
separation pay and benefits.51 Hence, he should no longer be awarded these
claims.52
In the resolution promulgated on July 16, 2012, the Court of Appeals denied
petitioners’ motion for reconsideration.53
Petitioners raise in this petition the following errors:
I benefits.64
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT PAYMENT OF
THE MONETARY CLAIMS OF PETITIONERS SHOULD BE HELD IN
ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO
RESPONDENT SOLID MILLS BY TURNING OVER THE SUBJECT LOTS
THEY RESPECTIVELY OCCUPY AT SMI VILLAGE, SUCAT, MUNTINLUPA
CITY.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE RULING OF
THE NLRC DELETING THE INTEREST OF 12% PER ANNUM IMPOSED
BY THE HONORABLE LABOR ARBITER HERNANDEZ ON THE
AMOUNTDUE FROM THE DATE OF FILING OF THE LEAD
CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL ACTUAL
PAYMENT AND/OR FINALITY.
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE RULING OF
THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM FOR
PAYMENT OF RETIREMENT BENEFITS DESPITE LACK OF ANY
EVIDENCE THAT SHE RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS
MONETARY BENEFITS FROM RESPONDENT SOLID MILLS.54
Petitioners argue that respondent Solid Mills and NAFLU’s memorandum of
agreement has no provision stating that benefits shall be paid only upon
return of the possession of respondent Solid Mills’ property. 55 It only provides
that the benefits shall be "less accountabilities," which should not be
interpreted to include such possession.56 The fact that majority of NAFLU’s
members were not occupants of respondent Solid Mills’ property is evidence
that possession of the property was not contemplated in the
agreement.57 "Accountabilities" should be interpreted to refer only to
accountabilities that wereincurred by petitioners while they were performing
their duties asemployees at the worksite.58 Moreover, applicable laws,
company practice, or policies do not provide that 13th month pay, and sick
and vacation leave pay benefits, may be withheld pending satisfaction of
liabilities by the employee.59
Petitioners also point out thatthe National Labor Relations Commission and
the Court of Appeals have no jurisdiction to declare that petitioners’ act of
withholding possession of respondent Solid Mills’ property is illegal. 60The
regular courts have jurisdiction over this issue. 61 It is independent from the
issue of payment of petitioners’ monetary benefits. 62
For these reasons, and because, according to petitioners, the amount of
monetary award is no longer in question, petitioners are entitled to 12%
interest per annum.63
Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled
to their claims. They insistthat Teodora Mahilom did not receive her
retirement benefits and that Carlito Damian did not receive his separation
Respondents Solid Mills and Philip Ang,in their joint comment, argue that
petitioners’ failure to turn over respondentSolid Mills’ property "constituted an
unsatisfied accountability" for which reason "petitioners’ benefits could
rightfully be withheld."65 The term "accountability" should be given its natural
and ordinary meaning.66 Thus, it should be interpreted as "a state of being
liable or responsible," or "obligation." 67 Petitioners’ differentiation between
accountabilities incurred while performing jobs at the worksite and
accountabilities incurred outside the worksite is baseless because the
agreement with NAFLUmerely stated "accountabilities," without qualification. 68
On the removal of the award of 12% interest per annum, respondents argue
that such removal was proper since respondent Solid Mills was justified in
withholding the monetary claims.69 Respondents argue that Teodora Mahilom
had no more cause of action for retirement benefits claim. 70 She had already
retired more than a decade before Solid Mills’ closure. She also already
received her retirement benefits in 1991.71 Teodora Mahilom’s claim was also
not included in the complaint filed before the Labor Arbiter.It was improper to
raise this claim for the first time on appeal. In any case, Teodora Mahilom’s
claim was asserted long after the three-year prescriptive period provided in
Article 291 of the Labor Code.72
Lastly, according to respondents, it would be unjust if Carlito Damian would
be allowed to receive monetary benefits again, which he, admittedly, already
received from Solid Mills.73
I
The National Labor Relations Commission may preliminarily determine issues
related to rights arising from an employer-employee relationship
The National Labor Relations Commission has jurisdiction to determine,
preliminarily, the parties’rights over a property, when it is necessary to
determine an issue related to rights or claims arising from an employer-
employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original jurisdiction,
and the National Labor Relations Commission, in its appellate jurisdiction,
may determine issues involving claims arising from employeremployee
relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION.
– (1) 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 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 (₱5,000.00), regardless
of whether accompanied with a claim for reinstatement.
(2) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters. (Emphasis supplied)
Petitioners’ claim that they have the right to the immediate release of their
benefits as employees separated from respondent Solid Mills is a question
arising from the employer-employee relationship between the parties.
Claims arising from an employer-employee relationship are not limited to
claims by an employee. Employers may also have claims against the
employee, which arise from the same relationship. In Bañez v.
Valdevilla,74 this court ruled that Article 217 of the Labor Code also applies to
employers’ claim for damages, which arises from or is connected with the
labor issue. Thus: Whereas this Court in a number of occasions had applied
the jurisdictional provisions of Article 217 to claims for damages filed by
employees, we hold that by the designating clause "arising from the
employer-employee relations" Article 217 should apply with equal force to the
claim of an employer for actual damages against its dismissed employee,
where the basis for the claim arises from or is necessarily connected with the
factof termination, and should be entered as a counterclaim in the illegal
dismissal case.75
Bañez was cited in Domondon v. National Labor Relations
Commission.76 One of the issues in Domondonis whether the Labor Arbiter
has jurisdiction to decide an issue on the transfer of ownership of a vehicle
assigned to the employee. It was argued that only regular courts have
jurisdiction to decide the issue.77
This court ruled that since the transfer of ownership of the vehicle to the
employee was connected to his separation from the employer and arose from
the employer-employee relationship of the parties, the employer’s claim fell
within the LaborArbiter’s jurisdiction.78
As a general rule, therefore, a claim only needs to be sufficiently connected to
the labor issue raisedand must arise from an employeremployee relationship
for the labortribunals to have jurisdiction.
36
In this case, respondent Solid Mills claims that its properties are in petitioners’
possession by virtue of their status as its employees. Respondent Solid Mills
allowed petitioners to use its property as an act of liberality. Put in other
words, it would not have allowed petitioners to use its property had they not
been its employees. The return of its properties in petitioners’ possession by
virtue of their status as employees is an issue that must be resolved to
determine whether benefits can be released immediately. The issue raised by
the employer is, therefore, connected to petitioners’ claim for benefits and is
sufficiently intertwined with the parties’ employeremployee relationship. Thus,
it is properly within the labor tribunals’ jurisdiction.
II
Institution of clearance procedures has legal bases
Requiring clearance before the release of last payments to the employee is a
standard procedure among employers, whether public or private. Clearance
procedures are instituted to ensure that the properties, real or personal,
belonging to the employer but are in the possession of the separated
employee, are returned tothe employer before the employee’s departure.
As a general rule, employers are prohibited from withholding wages from
employees. The Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited.It shall be unlawful
for any person, directly or indirectly, to withhold any amount from the wages
of a worker or induce him to give up any part of his wages by force, stealth,
intimidation, threat or by any other means whatsoever without the worker’s
consent.
The Labor Code also prohibits the elimination or diminution of benefits. Thus:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in
this Book shall be construed to eliminate or in any way diminish supplements,
or other employee benefits being enjoyed at the time of promulgation of this
Code.
However, our law supports the employers’ institution of clearance procedures
before the release of wages. As an exception to the general rule that wages
may not be withheld and benefits may not be diminished, the Labor Code
provides:
Art. 113. Wage deduction.No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except:
1. In cases where the worker is insured with his consent by the employer, and
the deduction is to recompense the employer for the amount paid by him as
premium on the insurance;
2. For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by the
individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by
the Secretary of Labor and Employment. (Emphasis supplied)
The Civil Code provides that the employer is authorized to withhold wages for
debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not be
made by the employer.
"Debt" in this case refers to any obligation due from the employee to the
employer. It includes any accountability that the employee may have to the
employer. There is no reason to limit its scope to uniforms and equipment, as
petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union representing
petitioners, agreed that the release of petitioners’ benefits shall be "less
accountabilities."
"Accountability," in its ordinary sense, means obligation or debt. The ordinary
meaning of the term "accountability" does not limit the definition of
accountability to those incurred in the worksite. As long as the debt or
obligation was incurred by virtue of the employer-employee relationship,
generally, it shall be included in the employee’s accountabilities that are
subject to clearance procedures.
It may be true that not all employees enjoyed the privilege of staying in
respondent Solid Mills’ property. However, this alone does not imply that this
privilege when enjoyed was not a result of the employer-employee
relationship. Those who did avail of the privilege were employees of
respondent Solid Mills. Petitioners’ possession should, therefore, be included
in the term "accountability."
Accountabilities of employees are personal. They need not be uniform among
all employees in order to be included in accountabilities incurred by virtue of
an employer-employee relationship. Petitioners do not categorically deny
respondent Solid Mills’ ownership of the property, and they do not claim
superior right to it. What can be gathered from the findings ofthe Labor
Arbiter, National Labor Relations Commission, and the Court ofAppeals is
that respondent Solid Mills allowed the use of its property for the benefit of
petitioners as its employees. Petitioners were merely allowed to possess and
use it out of respondent Solid Mills’ liberality. The employer may, therefore,
demand the property at will. 79
The return of the property’s possession became an obligation or liability on
the part of the employees when the employer-employee relationship ceased.
Thus, respondent Solid Mills has the right to withhold petitioners’ wages and
benefitsbecause of this existing debt or liability. In Solas v. Power and
Telephone Supply Phils., Inc., et al., this court recognized this right of the
employer when it ruled that the employee in that case was not constructively
dismissed.80 Thus:
There was valid reason for respondents’ withholding of petitioner’s salary for
the month of February 2000. Petitioner does not deny that he is indebted to
his employer in the amount of around 95,000.00. Respondents explained that
petitioner’s salary for the period of February 1-15, 2000 was applied as partial
payment for his debt and for withholding taxes on his income; while for the
period of February 15-28, 2000, petitioner was already on absence without
leave, hence, was not entitled to any pay.81
 37

The law does not sanction a situation where employees who do not even Clearly, in this case, it is for the workers to return their housing in exchange I beginning on August 25, 1997. PHILEC undertook to pay Lipio training
assert any claim over the employer’s property are allowed to take all the for the release of their benefits. This is what they agreed upon. It is what is allowance as provided in the memorandum:
benefits out of their employment while they simultaneously withhold fair in the premises.
possession of their employer’s property for no rightful reason. Withholding of WHEREFORE, the petition is DENIED. The Court of Appeals' decision is
This will confirm your selection and that you will undergo training for the
payment by the employer does not mean that the employer may renege on its AFFIRMED. position of Foreman I (PG B) of the Tank Finishing Section, Distribution
obligation to pay employees their wages, termination payments, and due
Transformer Manufacturing and Repair effective August 25, 1997.
benefits. The employees’ benefits are also not being reduced. It is only SECOND DIVISION
subjectedto the condition that the employees return properties properly G.R. No. 168612               December 10, 2014
belonging to the employer. This is only consistent with the equitable principle PHILIPPINE ELECTRIC CORPORATION (PHILEC), Petitioner,  You will be trained as a Foreman I,and shall receive the following training
that "no one shall be unjustly enriched or benefited at the expense of vs.COURT OF APPEALS, NATIONAL CONCILIATION AND MEDIATION allowance until you have completed the training/observation period which
another."82 BOARD (NCMB), Department of Labor and Employment, RAMON T. shall not exceed four (4) months.
JIMENEZ, in his capacity as Voluntary Arbitrator, PHILEC WORKERS' First Month - - - - - 350.00
For these reasons, we cannot hold that petitioners are entitled to interest of UNION (PWU), ELEODORO V. LIPIO, and EMERLITO C.
IGNACIO, Respondents. Second month - - - - - 815.00
their withheldseparation benefits. These benefits were properly withheld by
respondent Solid Mills because of their refusal to return its property. DECISION Third month - - - - - 815.00
LEONEN, J.:
III Fourth month - - - - - 815.00
Mahilom and Damian are not entitled to the benefits claimed An appeal to reverse or modify a Voluntary Arbitrator's award or decision
must be filed before the Court of Appeals within 10 calendar days from Please be guided accordingly.10
Teodora Mahilom is not entitled to separation benefits.
receipt of the award or decision. Ignacio, Sr., then DT-Assembler with Pay Grade VII,11 was likewise selected
This is a petition1 for review on certiorari of the Court of Appeals’ for training for the position of Foreman I.12 On August 21, 1997, PHILEC
Both the National Labor Relations Commission and the Court of Appeals decision2 dated May 25, 2004, dismissing the Philippine Electric Corporation’s served Ignacio, Sr. a memorandum,13 instructing him to undergo training with
found that Teodora Mahilom already retired long before respondent Solid petition for certiorari for lack of merit. Philippine Electric Corporation the following schedule of allowance:
Mills’ closure. They found that she already received her retirement benefits. (PHILEC) is a domestic corporation "engaged in the manufacture and repairs
We have no reason to disturb this finding. This court is not a trier of facts. of high voltage transformers."3 Among its rank-and-file employees were This will confirm your selection and that you will undergo training for the
Findings of the National Labor Relations Commission, especially when Eleodoro V. Lipio (Lipio) and Emerlito C. Ignacio, Sr. (Ignacio, Sr.), former position of Foreman I (PG B) of the Assembly Section, Distribution
affirmed by the Court of Appeals, are binding upon this court. 83 members of the PHILEC Workers’ Union (PWU).4 PWU is a legitimate labor Transformer Manufacturing and Repair effectiveAugust 25, 1997.
organization and the exclusive bargaining representative of PHILEC’s rank- You will be trained as a Foreman I,and shall receive the following training
Moreover, Teodora Mahilom’s claim for retirement benefits was not included and-file employees.5 allowance until you have completed the training/observation period which
in her complaint filed before the Labor Arbiter. Hence, it may not be raised in shall not exceed four (4) months.
the appeal. From June 1, 1989 to May 31, 1997, PHILEC and its rank-and-file employees First Month ----- 255.00
were governed by collective bargaining agreements providing for the
following step increases in an employee’s basic salary in case of promotion: 6 Second month - - - - - 605.00
Similarly, the National Labor Relations Commission and the Court of Appeals
found that Carlito Damian already received his terminal benefits. Hence, he Rank-and-File (PWU) Third month - - - - - 1,070.00
may no longer claim terminal benefits. The fact that respondent Solid Mills Pay Fourth month - - - - - 1,070.00
June 1, 1994
has not yet demolished Carlito Damian’s house in SMI Village is not evidence Grade June 1, 1989 to June 1, 1992 to
to Please be guided accordingly.14
that he did not receive his benefits. Both the National Labor Relations May 31, 1992 May 31, 1994
May 31, 1997 On September 17, 1997, PHILEC and PWU entered into a new collective
Commission and the Court of Appeals found that he executed an affidavit
stating that he already received the benefits. I – II 50 60 65 bargaining agreement, effective retroactively on June 1, 1997 and expiring on
May 31, 1999.15 Under Article X, Section 4 of the June 1, 1997 collective
II – III 60 70 78 bargaining agreement, a rank-and-file employee promoted shall be entitled to
A bsent any showing that the National Labor Relations Commission and the the following step increases in his or her basic salary: 16
III – IV 70 80 95
Court of Appeals misconstrued these facts, we will not reverse these findings.
IV – V 80 110 120
Section 4. STEP INCREASES. [Philippine Electric Corporation] shall adopt
Our laws provide for a clear preference for labor. This is in recognition of the V- VI 100 140 150 the following step increases on the basic salary in case of promotion effective
asymmetrical power of those with capital when they are left to negotiate with June 1, 1997. Such increases shall be based on the scale below or upon the
their workers without the standards and protection of law. In cases such as VI – VII 120 170 195
minimum of the new pay grade to which the employee is promoted,
these, the collective bargaining unit of workers are able to get more benefits VII – VIII 170 230 255 whichever is higher:
and in exchange, the owners are able to continue with the program of cutting Pay Grade Step Increase
their losses or wind down their operations due to serious business losses. VIII – IX 220 290 340
I - II ₱80.00
The company in this case did all that was required by law. IX – X 260 350 455 II - III ₱105.00
III - IV ₱136.00
The preferential treatment given by our law to labor, however, is not a license
On August 18, 1997 and with the previous collective bargaining agreements IV - V ₱175.00
for abuse.84 It is not a signal to commit acts of unfairness that will
already expired, PHILEC selected Lipio for promotion from Machinist under V - VI ₱224.00
unreasonably infringe on the property rights of the company. Both labor and
Pay Grade VIII7 to Foreman I under Pay Grade B.8 PHILEC served Lipio a VI - VII ₱285.00
employer have social utility, and the law is not so biased that it does not find a
memorandum,9 instructing him to undergo training for the position of Foreman
middle ground to give each their due. VII - VIII ₱361.00
 38

VIII - IX ₱456.00 First Month ----- ₱456.00 To preserve the hierarchical wage structure within PHILEC’s enterprise,
IX - X ₱575.00 PHILEC and PWU allegedly agreed to implement the uniform pay grade scale
Second month - - - - - ₱1,031.00 under the "Modified SGV" pay grade system, thus:34
To be promoted, a rank-and-file employee shall undergo training or
observation and shall receive training allowance as provided in Article IX, Third month ----- ₱1,031.00 Pay Grade
Section 1(f) of the June 1, 1997 collective bargaining agreement: 17 Step Increase
Fourth month - - - - - ₱1,031.00. Rank-and-File Supervisory
Section 1. JOB POSTING AND BIDDING:
.... I – II ₱65.00
(f) Allowance for employees under Training or Observation shall be on a With respect to Ignacio, Sr., he was holding the position of DTAs sembler II-III ₱78.00
graduated basis as follows: under Pay Grade VII when hewas selected to train for the position of
For the first month of training, the allowance should be equivalent to one step Foreman I under Pay Grade X. Thus, for his first month of training, Ignacio, III-IV ₱95.00
increase of the next higher grade. Every month thereafter the corresponding Sr. should be paid training allowance equal to the step increase under pay IV-V ₱120.00
increase shall be equivalent to the next higher grade until the allowance for grade bracket VII-VIII. For the second month, he should be paid an allowance
the grade applied for is attained. equal to the step increase under pay grade bracket VIIVIII plus the step V-VI ₱150.00
increase under pay grade bracket VIII-IX. For the third and fourth months, VI-VII ₱195.00
As an example, if a Grade I employee qualifies for a Grade III position, he will Ignacio, Sr. should receive an allowance equal to the amount he received for
receive the training allowance for Grade I to Grade II for the first month. On the second month plus the amount equal to the step increase under pay VII-VIII ₱255.00
the second month, he will receive the training allowance for Grade I to Grade grade bracket IX-X, thus:26 VIII-IX A ₱350.00
II plus the allowance for Grade II to Grade III. He will then continue to receive First Month ----- ₱361.00
this amount until he finishes his training or observation period. 18 IX-X A-B ₱465.00
Second month - - - - - ₱817.00
X-XI B-C ₱570.00
Claiming that the schedule of training allowance stated in the memoranda Third month ----- ₱1,392.00
XI-XII C-D ₱710.00
served on Lipio and Ignacio,Sr. did not conform to Article X, Section 4 of the Fourth month - - - - - ₱1,392.00.
June 1, 1997 collective bargaining agreement, PWU submitted the grievance D-E ₱870.00
to the grievance machinery.19 E-F ₱1,055.00
For PHILEC’s failure to apply the schedule of step increases under Article X
of the June 1, 1997 collective bargaining agreement, PWU argued that
PWU and PHILEC failed to amicably settle their grievance. Thus, on PHILEC committed an unfair labor practice under Article 24827 of the Labor
December 21, 1998, the parties filed a submission agreement 20 with the Pay grade bracket I–IX covered rank-and-file employees, while pay grade
Code.28 bracket A–F covered supervisory employees.35
National Conciliation and Mediation Board, submitting the following issues to
voluntary arbitration:
I In its position paper,29 PHILEC emphasized that it promoted Lipio and Under the "Modified SGV" pay grade scale, the position of Foreman I fell
WHETHER OR NOT PHILEC VIOLATED SECTION 4 (Step Increases) Ignacio, Sr. while it was still negotiating a new collective bargaining under Pay Grade B. PHILEC then computed Lipio’s and Ignacio, Sr.’s training
ARTICLE X (Wage and Position Standardization) OF THE EXISTING agreement with PWU. Since PHILEC and PWU had not yet negotiated a new allowance accordingly.36
COLLECTIVE BARGAINING AGREEMENT (CBA) IN IMPLEMENTING THE collective bargaining agreement when PHILEC selected Lipio and Ignacio, Sr.
STEP INCREASES RELATIVE TO THE PROMOTION OF INDIVIDUAL for training, PHILEC applied the "Modified SGV" pay grade scale in
computing Lipio’s and Ignacio, Sr.’s training allowance. 30 PHILEC disputed PWU’s claim of unfair labor practice. According to PHILEC,
COMPLAINANTS.
it did not violate its collective bargaining agreement with PWU when it
II
implemented the "Modified SGV" scale. Even assuming that it violated the
WHETHER OR NOT PHILEC’s MANNER OF IMPLEMENTING THE STEP This "Modified SGV" pay grade scale, which PHILEC and PWU allegedly collective bargaining agreement, PHILEC argued that its violation was not
INCREASES IN CONNECTION WITH THE PROMOTION OF INDIVIDUAL agreed to implement beginning on May 9, 1997, covered both rank-and-file "gross" or a "flagrant and/or malicious refusal to comply with the economic
COMPLAINANTS IN RELATION TO THE PROVISIONS OF SECTION 4, and supervisory employees.31 According to PHILEC, its past collective provisions of [the collective bargaining agreement]." 37 PHILEC, therefore, was
ARTICLE X OF THE CBA CONSTITUTES UNFAIR LABOR PRACTICE. 21 bargaining agreements withthe rank-and-file and supervisory unions resulted not guilty of unfair labor practice.38
In their submission agreement, PWU and PHILEC designated Hon. Ramon T. in an overlap of union membership in Pay Grade IX of the rank-and-file
Jimenez as Voluntary Arbitrator (Voluntary Arbitrator Jimenez).22 employees and Pay Grade A of the supervisory employees. 32 Worse, past
Voluntary Arbitrator Jimenez, in the order23 dated January 4, 1999, directed collective bargaining agreements resulted in rank-and-file employees under Voluntary Arbitrator Jimenez held in the decision39 dated August 13, 1999,
the parties to file their respective position papers. Pay Grades IX and X enjoying higher step increases than supervisory that PHILEC violated its collective bargaining agreement with
In its position paper,24 PWU maintained that PHILEC failed to follow the employees under Pay Grades A and B:33 PWU.40 According to Voluntary Arbitrator Jimenez, the June 1, 1997 collective
schedule of step increases under Article X, Section 4 of the June 1, 1997 bargaining agreement governed when PHILEC selected Lipio and Ignacio, Sr.
Pay Grade for promotion on August 18 and 21, 1997.41 The provisions of the collective
collective bargaining agreement. Machinist I, Lipio’s position before he Pay Grade
Scale bargaining agreement being the law between the parties, PHILEC should
underwent training for Foreman I, fell under Pay Grade VIII, while Foreman I Scale under the Step
under the Step Increase have computed Lipio’s and Ignacio, Sr.’s training allowance based on Article
fell under Pay Grade X. Following the schedule under Article X, Section 4 of Rank-and-File Increase
Supervisory X, Section 4 of the June 1, 1997 collective bargaining agreement. 42
the June 1, 1997 collective bargaining agreement and the formula under CBA
CBA
Article IX, Section 1(f), Lipio should be paid training allowance equal to the
step increase for pay grade bracket VIII-IX for the first month of training. For VIII-IX ₱340.00 A ₱290.00 As to PHILEC’s claim that applying Article X, Section 4 would result in salary
the succeeding months, Lipio should be paid an allowance equal to the step distortion within PHILEC’s enterprise, Voluntary Arbitrator Jimenez ruled that
IX-X ₱455.00 A-B ₱350.00
increase for pay grade bracket VIII-IX plus the step increase for pay grade this was "a concern that PHILEC could have anticipated and could have
bracket IX-X, thus:25 taken corrective action"43 before signing the collective bargaining agreement.

Voluntary Arbitrator Jimenez dismissed PWU’s claim of unfair labor
practice.44 According to him, PHILEC’s acts "cannot be considered a gross
violation of the [collective bargaining agreement] nor . . . [a] flagrant and/or
malicious refusal to comply withthe economic provisions of the
[agreement]."45
Thus, Voluntary Arbitrator Jimenez ordered PHILEC to pay Lipio and Ignacio,
Sr. training allowance based on Article X, Section 4 and Article IX, Section 1
of the June 1, 1997 collective bargaining agreement. 46
PHILEC received a copy of Voluntary Arbitrator Jimenez’s decision on August
16, 1999.47 On August 26, 1999, PHILEC filed a motion for partial
reconsideration48 of Voluntary Arbitrator Jimenez’s decision.
In the resolution49 dated July 7, 2000, Voluntary Arbitrator Jimenez denied
PHILEC’s motion for partial reconsideration for lack of merit. PHILEC
received a copy of the July 7, 2000 resolution on August 11, 2000. 50
On August 29, 2000, PHILEC filed a petition 51 for certiorari before the Court of
Appeals, alleging that Voluntary Arbitrator Jimenez gravely abused his
discretion in rendering his decision.52 PHILEC maintained that it did not
violate the June 1, 1997 collective bargaining agreement. 53 It applied the
"Modified SGV" pay grade rates toavoid salary distortion within its
enterprise.54
In addition, PHILEC argued that Article X, Section 4 of the collective
bargaining agreement did not apply to Lipio and Ignacio, Sr. Considering that
Lipio and Ignacio, Sr. were promoted to a supervisory position, their training
allowance should be computed based on the provisions of PHILEC’s
collective bargaining agreement with ASSET, the exclusive bargaining
representative of PHILEC’s supervisory employees.55
The Court of Appeals affirmed Voluntary Arbitrator Jimenez’s decision. 56 It
agreed that PHILEC was bound to apply Article X, Section 4 of its June 1,
1997 collective bargaining agreement with PWU in computing Lipio’s and
Ignacio, Sr.’s training allowance.57 In its decision, the Court of Appeals denied
due course and dismissed PHILEC’s petition for certiorari for lack of merit. 58
PHILEC filed a motion for reconsideration, which the Court of Appeals denied
in the resolution59 dated June 23, 2005.
On August 3, 2005, PHILEC filed its petition for review on certiorari before
this court,60 insisting that it did not violate its collective bargaining agreement
with PWU.61 PHILEC maintains that Lipio and Ignacio, Sr. were promoted to a
position covered by the pay grade scale for supervisory
employees.62 Consequently, the provisions of PHILEC’s collective bargaining
agreement with its supervisory employees should apply, not its collective
bargaining agreement with PWU.63 To insist on applying the pay grade scale
in Article X, Section 4, PHILEC argues, would result in a salary distortion
within PHILEC.64
In the resolution65 dated September 21, 2005,this court ordered PWU to
comment on PHILEC’s petition for review on certiorari.
39
In its comment,66 PWU argues that Voluntary Arbitrator Jimenez did not
gravely abuse his discretion in rendering his decision. He correctly applied
the provisions of the PWU collective bargaining agreement, the law between
PHILEC and its rank-and-file employees, in computing Lipio’s and Ignacio,
Sr.’s training allowance.67
On September 27, 2006, PHILEC filed its reply,68 reiterating its arguments in
its petition for review on certiorari.
The issue for our resolution is whether Voluntary Arbitrator Jimenez gravely
abused his discretion in directing PHILEC to pay Lipio’s and Ignacio, Sr.’s
training allowance based on Article X, Section 4 of the June 1, 1997 rank-
and-file collective bargaining agreement.
This petition should be denied.
I
The Voluntary Arbitrator’s decisiondated August 13, 1999 is already final
andexecutory
We note that PHILEC filed before the Court of Appeals a petition for certiorari
under Rule 65 of the Rules ofCourt against Voluntary Arbitrator Jimenez’s
decision.69
This was not the proper remedy.
Instead, the proper remedy to reverse or modify a Voluntary Arbitrator’s or a
panel of Voluntary Arbitrators’ decision or award is to appeal the award or
decision before the Court of Appeals. Rule 43, Sections 1 and 3 of the Rules
of Court provide:
Section 1. Scope.
This Rule shall apply to appeals from judgments or final orders of the Court of
Tax Appeals and from awards, judgments, final orders or resolutions of
orauthorized by any quasi-judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the Civil Service Commission, Central
Board of Assessment Appeals, Securities and Exchange Commission, Office
of the President, Land Registration Authority, Social Security Commission,
Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology
Transfer, National Electrification Administration, Energy Regulatory Board,
National Telecommunications Commission, Department of Agrarian Reform
under Republic Act No. 6657, Government Service Insurance System,
Employees Compensation Commission, Agricultural Inventions Board,
Insurance Commission, Philippine Atomic Energy Commission, Board of
Investments, Construction Industry Arbitration Commission, and voluntary
arbitrators authorized by law.
....
Sec. 3. Where to appeal.
An appeal under this Rule may be taken to the Court of Appeals within the
period and in the manner herein provided, whether the appeal involves
questions of fact, of law, or mixed questions of fact and law. (Emphasis
supplied)
A Voluntary Arbitrator or a panel of Voluntary Arbitrators has the exclusive
original jurisdiction over grievances arising from the interpretation or
implementation of collective bargaining agreements. Should the parties
agree, a Voluntary Arbitrator or a panel of Voluntary Arbitrators shall also
resolve the parties’ other labor disputes, including unfair labor practices and
bargaining deadlocks. Articles 261 and 262 of the Labor Code provide:
ART. 261. JURISDICTION OF VOLUNTARY ARBITRATORS OR PANEL OF
VOLUNTARY ARBITRATORS.
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original
and exclusive jurisdiction to hear and decide all unresolved grievances arising
from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article.
Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor
practice and shall be resolved as grievances under the Collective Bargaining
Agreement. For purposes of this article, gross violations of Collective
Bargaining Agreement shall mean flagrant and/or malicious refusal to comply
with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances, or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator orpanel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement.
ART. 262. JURISDICTION OVER OTHER LABOR DISPUTES.
The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of
the parties, shall also hear and decide all other labor disputes including unfair
labor practices and bargaining deadlocks.
In Luzon Development Bank v. Association of Luzon Development Bank
Employees,70 this court ruled that the proper remedy against the award or
decision of the Voluntary Arbitratoris an appeal before the Court of Appeals.
This court first characterized the office ofa Voluntary Arbitrator or a panel of
Voluntary Arbitrators as a quasi-judicial agency, citing Volkschel Labor Union,
et al. v. NLRC71 and Oceanic Bic Division (FFW) v. Romero:72
In Volkschel Labor Union, et al. v. NLRC, et al.,on the settled premise that the
judgments of courts and awards of quasi-judicial agencies must become final
at some definite time, this Court ruled that the awards of voluntary arbitrators
determine the rights of parties; hence, their decisions have the same legal
effect as judgments of a court. In Oceanic Bic Division (FFW), et al. v.
Romero, et al., this Court ruled that "a voluntary arbitrator by the nature of her
functions acts in a quasi-judicial capacity." Under these rulings, it follows that
the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the
status of a quasijudicial agency but independent of, and apart from, the NLRC
since his decisions are not appealable to the latter. 73 (Citations omitted)
This court then stated that the office of a Voluntary Arbitrator or a panel of
Voluntary Arbitrators, even assuming that the office is not strictly a quasi-
judicial agency, may be considered an instrumentality, thus:
Assuming arguendo that the voluntaryarbitrator or the panel of voluntary
arbitrators may not strictly be considered as a quasi-judicial agency, board or
commission, still both he and the panel are comprehended within the concept
of a "quasi-judicial instrumentality." It may even be stated that it was to meet
the very situation presented by the quasi-judicial functions of the voluntary
arbitrators here, as well as the subsequent arbitrator/arbitral tribunal
operating under the Construction Industry Arbitration Commission, that the
broader term "instrumentalities" was purposely included in the above-quoted
provision.

An "instrumentality" is anything used as a means or agency. Thus, the terms
governmental "agency" or "instrumentality" are synonymous in the sense that
either of them is a means by which a government acts, or by which a certain
government act or function is performed. The word "instrumentality," with
respect to a state, contemplates an authority to which the state delegates
governmental power for the performance of a state function. An individual
person, like an administrator or executor, is a judicial instrumentality in the
settling of an estate, in the same manner that a sub-agent appointed by a
bankruptcy court is an instrumentality of the court, and a trustee in bankruptcy
of a defunct corporation is an instrumentality of the state.
The voluntary arbitrator no less performs a state function pursuant to a
governmental power delegated to him under the provisions therefor in the
Labor Code and he falls, therefore, within the contemplation of the term
"instrumentality" in the aforequoted Sec. 9 of B.P. 129. 74 (Citations omitted)
Since the office of a Voluntary Arbitrator or a panel of Voluntary Arbitrators is
considered a quasi-judicial agency, this court concluded that a decision or
award rendered by a Voluntary Arbitrator is appealable before the Court of
Appeals. Under Section 9 of the Judiciary Reorganization Act of 1980, the
Court of Appeals has the exclusive original jurisdiction over decisions or
awards of quasi-judicial agencies and instrumentalities:
Section 9. Jurisdiction. The Court of Appeals shall exercise:
....
3. Exclusive appellate jurisdiction over all final judgements, resolutions,
orders or awardsof Regional Trial Courts and quasijudicial agencies,
instrumentalities, boards or commission, including the Securities and
Exchange Commission, the Social Security Commission, the Employees
Compensation Commission and the Civil Service Commission, except those
falling within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act, and of subparagraph
(1) of the third paragraph and subparagraph 4 of the fourth paragraph of
Section 17 of the Judiciary Act of 1948. (Emphasis supplied)
Luzon Development Bankwas decided in 1995 but remains "good law." 75 In
the 2002 case of Alcantara, Jr. v. Court of Appeals,76 this court rejected
petitioner Santiago Alcantara, Jr.’s argument that the Rules of Court,
specifically Rule 43, Section 2, superseded the Luzon Development Bank
ruling:
Petitioner argues, however, that Luzon Development Bank is no longer good
law because of Section 2, Rule 43 of the Rules of Court, a new provision
introduced by the 1997 revision. The provision reads:
SEC. 2. Cases not covered. -This Rule shall not apply to judgments or final
orders issued under the Labor Code of the Philippines.
The provisions may be new to the Rules of Court but it is far from being a
new law. Section 2, Rule 42 of the 1997 Rules of Civil Procedure, as
presently worded, is nothing more but a reiteration of the exception to the
exclusive appellate jurisdiction of the Court of Appeals, as provided for in
Section 9, Batas Pambansa Blg. 129,7 as amended by Republic Act No.
7902:8
(3) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Courts and quasi-judicial
40
agencies, instrumentalities, boards or commissions, including the Securities
and Exchange Commission, the Employees’ Compensation Commission and
the Civil Service Commission, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948.
The Court took into account this exception in Luzon Development Bank but,
nevertheless, held that the decisions of voluntary arbitrators issued pursuant
to the Labor Codedo not come within its ambit:
x xx. The fact that [the voluntary arbitrator’s] functions and powers are
provided for in the Labor Code does not place him within the exceptions to
said Sec. 9 since he is a quasi-judicial instrumentality as contemplated
therein. It will be noted that, although the Employees’ Compensation
Commission is also provided for in the Labor Code, Circular No. 1-91, which
is the forerunner of the present Revised Administrative Circular No. 1-95, laid
down the procedure for the appealability of its decisions to the Court of
Appeals under the foregoing rationalization, and this was later adopted by
Republic Act No. 7902 in amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of
arbitrators should likewise be appealable to the Court of Appeals, in line with
the procedure outlined in Revised Administrative Circular No. 1-95, just like
those of the quasi-judicial agencies, boards and commissions enumerated
therein.77 (Emphases in the original)
This court has since reiterated the Luzon Development Bankruling in its
decisions.78
Article 262-A of the Labor Code provides that the award or decision of the
Voluntary Arbitrator "shall befinal and executory after ten (10) calendar days
from receipt of the copy of the award or decision by the parties":
Art. 262-A. PROCEDURES. The Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have the power to hold hearings, receive evidences and take
whatever action isnecessary to resolve the issue or issues subject of the
dispute, including efforts to effect a voluntary settlement between parties.
All parties to the dispute shall beentitled to attend the arbitration proceedings.
The attendance of any third party or the exclusion of any witness from the
proceedings shall be determined by the Voluntary Arbitrator or panel of
Voluntary Arbitrators. Hearing may be adjourned for cause or upon
agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the Voluntary
Arbitrator or panel of Voluntary Arbitrators to render an award or decision
within twenty (20) calendar days from the date of submission of the dispute to
voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary
Arbitrators shall contain the facts and the law on which it is based. It shall be
final and executory after ten (10) calendar days from receipt of the copy of the
award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of
Voluntary Arbitrators or the Labor Arbiter in the region where the movant
resides, in case of the absence or incapacity of the Voluntary Arbitrator or
panel of Voluntary Arbitrators, for any reason, may issue a writ of execution
requiring either the sheriff of the Commission or regular courts or any public
official whomthe parties may designate in the submission agreement to
execute the final decision, order or award. (Emphasis supplied)
Thus, in Coca-Cola Bottlers Philippines, Inc. Sales Force UnionPTGWO-
BALAIS v. Coca Cola-Bottlers Philippines, Inc., 79 this court declared that the
decision of the Voluntary Arbitrator had become final and executory because
it was appealed beyond the 10-day reglementary period under Article 262-A
of the Labor Code.
It is true that Rule 43, Section 4 of the Rules of Court provides for a 15-day
reglementary period for filing an appeal:
Section 4. Period of appeal. — The appeal shall be taken within fifteen (15)
days from notice of the award, judgment, final order or resolution, or from the
date of its last publication, if publication is required by law for its effectivity, or
of the denial of petitioner's motion for new trial or reconsideration duly filed in
accordance with the governing law of the court or agency a quo. Only one (1)
motion for reconsideration shall be allowed. Upon proper motion and the
payment of the full amount of the docket fee before the expiration of the
reglementary period, the Court of Appeals may grant an additional period of
fifteen (15) days only within which to file the petition for review. No further
extension shall be granted except for the most compelling reason and in no
case to exceed fifteen (15) days. (Emphasis supplied)
The 15-day reglementary period has been upheld by this court in a long line
of cases.80 In AMA Computer College-Santiago City, Inc. v. Nacino, 81 Nippon
Paint Employees Union-OLALIA v. Court of Appeals, 82 Manila Midtown Hotel
v. Borromeo,83 and Sevilla Trading Company v. Semana,84 this court denied
petitioners’ petitions for review on certiorari since petitioners failed to appeal
the Voluntary Arbitrator’s decision within the 15-day reglementary period
under Rule43. In these cases, the Court of Appeals had no jurisdiction to
entertain the appeal assailing the Voluntary Arbitrator’s decision.
Despite Rule 43 providing for a 15-day period to appeal, we rule that the
Voluntary Arbitrator’s decision mustbe appealed before the Court of Appeals
within 10 calendar days from receipt of the decision as provided in the Labor
Code.
Appeal is a "statutory privilege,"85 which may be exercised "only in the
manner and in accordance withthe provisions of the law." 86 "Perfection of an
appeal within the reglementary period is not only mandatory but also
jurisdictional so that failure to doso rendered the decision final and executory,
and deprives the appellate court of jurisdiction to alter the final judgment
much less to entertain the appeal."87
We ruled that Article 262-A of the Labor Code allows the appeal of decisions
rendered by Voluntary Arbitrators.88Statute provides that the Voluntary
Arbitrator’s decision "shall befinal and executory after ten (10) calendar days
from receipt of the copy of the award or decision by the parties." Being
provided in the statute,this 10-day period must be complied with; otherwise,
no appellate court willhave jurisdiction over the appeal. This absurd situation
occurs whenthe decision is appealed on the 11th to 15th day from receipt as

allowed under the Rules, but which decision, under the law, has already
become final and executory.
Furthermore, under Article VIII, Section 5(5) of the Constitution, this court
"shall not diminish, increase, or modify substantive rights" in promulgating
rules of procedure in courts.89 The 10-day period to appeal under the Labor
Code being a substantive right, this period cannot bediminished, increased,
or modified through the Rules of Court.90
In Shioji v. Harvey,91 this court held that the "rules of court, promulgated by
authority of law, have the force and effect of law, if not in conflict with positive
law."92 Rules of Court are "subordinate to the statute."93 In case of conflict
between the law and the Rules of Court, "the statute will prevail." 94
The rule, therefore, is that a Voluntary Arbitrator’s award or decision shall be
appealed before the Court of Appeals within 10 days from receipt of the
award or decision. Should the aggrieved party choose to file a motion for
reconsideration with the Voluntary Arbitrator, 95 the motion must be filed within
the same 10-day period since a motion for reconsideration is filed "within the
period for taking an appeal."96
A petition for certiorari is a special civil action "adopted to correct errors of
jurisdiction committed by the lower court or quasi-judicial agency, or when
there is grave abuse of discretion on the part of such court or agency
amounting to lack or excess of jurisdiction." 97 An extraordinary remedy,98 a
petition for certiorari may be filed only if appeal is not available. 99 If appeal is
available, an appeal must be taken even if the ground relied upon is grave
abuse of discretion.100
As an exception to the rule, this court has allowed petitions for certiorari to be
filed in lieu of an appeal "(a) when the public welfare and the advancement of
public policy dictate; (b) when the broader interests of justice so require; (c)
when the writs issued are null; and (d) when the questioned order amounts to
an oppressive exercise of judicial authority." 101
In Unicraft Industries International Corporation, et al. v. The Hon. Court of
Appeals,102 petitioners filed a petition for certiorari against the Voluntary
Arbitrator’s decision. Finding that the Voluntary Arbitrator rendered an award
without giving petitioners an opportunity to present evidence, this court
allowed petitioners’ petition for certiorari despite being the wrong remedy. The
Voluntary Arbitrator’s award, thiscourt said, was null and void for violation of
petitioners’ right to due process. This court decided the case on the merits.
In Leyte IV Electric Cooperative, Inc. v. LEYECO IV Employees Union-
ALU,103 petitioner likewise filed a petition for certiorari against the Voluntary
Arbitrator’s decision, alleging that the decision lacked basis in fact and in law.
Ruling that the petition for certiorari was filed within the reglementary period
for filing an appeal, this court allowed petitioner’s petition for certiorari in "the
broader interests of justice."104
In Mora v. Avesco Marketing Corporation,105 this court held that petitioner
Noel E. Mora erred in filing a petition for certiorari against the Voluntary
Arbitrator’s decision. Nevertheless, this court decided the case on the merits
41
"in the interest of substantial justice to arrive at the proper conclusion that is
conformable to the evidentiary facts."106
None of the circumstances similar toUnicraft, Leyte IV Electric Cooperative,
and Moraare present in this case. PHILEC received Voluntary Arbitrator
Jimenez’s resolution denying its motion for partial reconsideration on August
11, 2000.107 PHILEC filed its petition for certiorari before the Court ofAppeals
on August 29, 2000,108 which was 18 days after its receipt of Voluntary
Arbitrator Jimenez’s resolution. The petition for certiorari was filed beyond the
10-day reglementary period for filing an appeal. We cannot consider
PHILEC’s petition for certiorari as an appeal.
There being no appeal seasonably filed in this case, Voluntary Arbitrator
Jimenez’s decision became final and executory after 10 calendar days from
PHILEC’s receipt of the resolution denying its motion for partial
reconsideration.109 Voluntary Arbitrator Jimenez’s decision is already "beyond
the purview of this Court to act upon."110
II
PHILEC must pay training allowancebased on the step increases provided
inthe June 1, 1997 collective bargainingagreement
The insurmountable procedural issue notwithstanding, the case will also fail
on its merits. Voluntary Arbitrator Jimenez correctly awarded both Lipio and
Ignacio, Sr. training allowances based on the amounts and formula provided
in the June 1, 1997 collective bargaining agreement.
A collective bargaining agreement is "a contract executed upon the request of
either the employer or the exclusive bargaining representative of the
employees incorporating the agreement reached after negotiations with
respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions
arising under such agreement."111 A collective bargaining agreement being a
contract, its provisions "constitute the law between the parties"112 and must be
complied with in good faith.113
PHILEC, as employer, and PWU, as the exclusive bargaining representative
of PHILEC’s rank-and-file employees, entered into a collective bargaining
agreement, which the parties agreed to make effective from June 1, 1997 to
May 31, 1999. Being the law between the parties, the June 1, 1997 collective
bargaining agreement must govern PHILEC and its rank-and-file employees
within the agreed period.
Lipio and Ignacio, Sr. were rank-and-file employees when PHILEC selected
them for training for the position of Foreman I beginning August 25, 1997.
Lipio and Ignacio, Sr. were selected for training during the effectivity of the
June 1, 1997 rank-and-file collective bargaining agreement. Therefore, Lipio’s
and Ignacio, Sr.’s training allowance must be computed based on Article X,
Section 4 and ArticleIX, Section 1(f) of the June 1, 1997 collective bargaining
agreement.
Contrary to PHILEC’s claim, Lipio and Ignacio, Sr. were not transferred out of
the bargaining unit when they were selected for training. Lipio and Ignacio,
Sr. remained rank-and-file employees while they trained for the position of
Foreman I. Under Article IX, Section 1(e) of the June 1, 1997 collective
bargaining agreement,114 a trainee who is "unable to demonstrate his ability to
perform the work . . . shall be reverted to his previous
assignment. . . ."115According to the same provision, the trainee "shall hold
that job on a trial or observation basis and . . . subject to prior approval of the
authorized management official, be appointed to the position in a regular
capacity."116
Thus, training is a condition precedent for promotion. Selection for training
does not mean automatic transfer out of the bargaining unit of rankand-file
employees.
Moreover, the June 1, 1997 collective bargaining agreement states that the
training allowance of a rank-and-file employee "whose application for a
posted job is accepted shall [be computed] in accordance with Section (f) of
[Article IX]."117 Since Lipio and Ignacio, Sr. were rank-and-file employees
when they applied for training for the position of Foreman I, Lipio’s and
Ignacio, Sr.’s training allowance must be computed based on Article IX,
Section 1(f) of the June 1, 1997 rank-and-file collective bargaining
agreement.
PHILEC allegedly applied the "Modified SGV" pay grade scale to prevent any
salary distortion within PHILEC’s enterprise. This, however, does not justify
PHILEC’s non-compliance with the June 1, 1997 collective bargaining
agreement. This pay grade scale is not provided in the collective bargaining
agreement. In SamahangManggagawasa Top Form Manufacturing United
Workers of the Philippines (SMTFM-UWP) v. NLRC, 118 this court ruled that
"only provisions embodied in the [collective bargaining agreement] should be
so interpreted and complied with. Where a proposal raised by a contracting
party does not find print in the [collective bargaining agreement], it is not part
thereof and the proponent has no claim whatsoever to its implementation." 119
Had PHILEC wanted the "Modified SGV" pay grade scale applied within its
enterprise, "it could have requested or demanded that [the ‘Modified SGV’
scale] be incorporated in the [collective bargaining agreement]." 120 PHILEC
had "the means under the law to compel [PWU] to incorporate this specific
economic proposal in the [collective bargaining agreement]." 121 It "could have
invoked Article 252 of the Labor Code"122 to incorporate the "Modified SGV"
pay grade scale in its collective bargaining agreement with PWU. But it did
not. Since this "Modified SGV" pay grade scale does not appear in PHILEC’s
collective bargaining agreement with PWU, PHILEC cannot insist on the
"Modified SGV" pay grade scale’s application. We reiterate Voluntary
Arbitrator Jimenez’s decision dated August 13, 1999 where he said that:
. . . since the signing of the current CBA took place on September 27, 1997,
PHILEC, by oversight, may have overlooked the possibility of a wage
distortion occurring among ASSET-occupied positions. It is surmised that this
matter could have been negotiated and settled with PWU before the actual
signing of the CBA on September 27. Instead, PHILEC, again, allowed the
provisions of Art. X, Sec. 4 of the CBA to remain the way it is and is now
suffering the consequences of its laches.123 (Emphasis in the original)
We note that PHILEC did not dispute PWU’s contention that it selected
several rank-and-file employees for training and paid them training allowance
based on the schedule provided in the collective bargaining agreement
effective at the time of the trainees’ selection.124 PHILEC cannot choose when

and to whom to apply the provisions of its collective bargaining agreement.
The provisions of a collective bargaining agreement must be applied
uniformly and complied with in good faith.
Given the foregoing, Lipio’s and Ignacio, Sr.’s training allowance should be
computed based on Article X, Section 4 in relation to Article IX, Section 1(f) of
the June 1, 1997 rank-and-file collective bargaining agreement. Lipio, who
held the position of Machinist before selection for training as Foreman I,
should receive training allowance based on the following schedule:
First Month ----- ₱456.00
Second month - - - - - ₱1,031.00
Third month - - - - - ₱1,031.00
Fourth month - - - - - ₱1,031.00
Ignacio, Sr., who held the position of DT-Assembler before selection for
training as Foreman I, should receive training allowance based on the
following schedule:
First Month ----- ₱361.00
Second month - - - - - ₱817.00
Third month - - - - - ₱1,392.00
Fourth month - - - - - ₱1,392.00
Considering that Voluntary Arbitrator Jimenez’s decision awarded sums of
money, Lipio and Ignacio, Sr. are entitled to legal interest on their training
allowances. Voluntary Arbitrator Jimenez’s decision having become final and
executory on August 22, 2000, PHILEC is liable for legal interest equal to
12% per annum from finality of the decision until full payment as this court
ruled in Eastern Shipping Lines, Inc. v. Court of Appeals: 125
When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest. . . shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then as
equivalent to a forbearance of credit.126
The 6% legal interest under CircularNo. 799, Series of 2013, of the
BangkoSentral ng Pilipinas Monetary Board shall not apply, Voluntary
Arbitrator Jimenez’s decision having become final and executory prior to the
effectivity of the circular on July 1, 2013. In Nacar v. Gallery Frames,127 we
held that:
. . . with regard to those judgments that have become final and executory
prior to July 1, 2013, said judgments shall not be disturbed and shall continue
to be implemented applying the rate of interest fixed therein. 128
WHEREFORE, the petition for review on certiorari is DENIED. The Court of
Appeals' decision dated May 25, 2004 is AFFIRMED.
Petitioner Philippine Electric Corporation is ORDERED to PAY respondent
Eleodoro V. Lipio a total of ₱3,549.00 for a four (4)-month training for the
42
position of Foreman I with legal interest of 12% per annum from August 22,
2000 until the amount's full satisfaction.
For respondent Emerlito C. Ignacio, Sr., Philippine Electric Corporation is
ORDERED to PAY a total of ₱3,962.00 for a four (4)-month training for the
position of Foreman I with legal interest of 12% per annum from August 22,
2000 until the amount's full satisfaction.
SO ORDERED
SECOND DIVISION
January 13, 2016
G.R. No. 208986
HIJO RESOURCES CORPORATION, Petitioner,  the ground that there was no employer-employee relationship between
vs.EPIFANIO P. MEJARES, REMEGIO C. BAL URAN, JR., DANTE
SAYCON, and CECILIO CUCHARO, represented by NAMABDJERA-
HRC, Respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 29 August 2012 Decision 2 and the 13
August 2013 Resolution3 of the Court of Appeals in CA-G.R. SP No. 04058-
MIN. The Court of Appeals reversed and set aside the Resolutions dated 29
June 2009 and 16 December 2009 of the National Labor Relations
Commission (NLRC) in NLRC No. MIC-03-000229-08 (RAB XI-09-00774-
2007), and remanded the case to the Regional Arbitration Branch, Region XI,
Davao City for further proceedings.
The Facts
Respondents Epifanio P. Mejares, Remegio C. Baluran, Jr., Dante Saycon,
and CecilioCucharo (respondents) were among the complainants,
represented by their labor union named "NagkahiusangMamumuo ng Bit,
Djevon, at Raquilla Farms saHijo Resources Corporation" (NAMABDJERA-
HRC), who filed with the NLRC an illegal dismissal case against petitioner
Hijo Resources Corporation (HRC).
Complainants (which include the respondents herein) alleged that petitioner
HRC, formerly known as Hijo Plantation Incorporated (HPI), is the owner of
agricultural lands in Madum, Tagum, Davao del Norte, which were planted
primarily with Cavendish bananas. In 2000, HPI was renamed as HRC. In
December 2003, HRC’s application for the conversion of its agricultural lands
into agri-industrial use was approved. The machineries and equipment
formerly used by HPI continued to be utilized by HRC.
Complainants claimed that they were employed by HPI as farm workers in
HPI’s plantations occupying various positions as area harvesters, packing
house workers, loaders, or labelers. In 2001, complainants were absorbed by
HRC, but they were working under the contractor-growers: Buenaventura
Tano (Bit Farm); DjeramePausa (Djevon Farm); and Ramon Q. Laurente
(Raquilla Farm). Complainants asserted that these contractor-growers
received compensation from HRC and were under the control of HRC. They
further alleged that the contractor-growers did not have their own
capitalization, farm machineries, and equipment.
On 1 July 2007, complainants formed their union NAMABDJERA-HRC, which
was later registered with the Department of Labor and Employment (DOLE).
On 24 August 2007, NAMABDJERA-HRC filed a petition for certification
election before the DOLE.
When HRC learned that complainants formed a union, the three contractor-
growers filed with the DOLE a notice of cessation of business operations. In
September 2007, complainants were terminated from their employment on
the ground of cessation of business operations by the contractor-growers of
HRC. On 19 September 2007, complainants, represented by NAMABDJERA-
HRC, filed a case for unfair labor practices, illegal dismissal, and illegal
deductions with prayer for moral and exemplary damages and attorney’s fees
before the NLRC.
On 19 November 2007, DOLE Med-Arbiter Lito A. Jasa issued an
Order,4 dismissing NAMABDJERA-HRC’s petition for certification election on
complainants (members of NAMABDJERA-HRC) and HRC. Complainants did
not appeal the Order of Med-Arbiter Jasa but pursued the illegal dismissal
case they filed.
On 4 January 2008, HRC filed a motion to inhibit Labor Arbiter Maria
Christina S. Sagmit and moved to dismiss the complaint for illegal dismissal.
The motion to dismiss was anchored on the following arguments: (1) Lack of
jurisdiction under the principle of res judicata; and (2) The Order of the Med-
Arbiter finding that complainants were not employees of HRC, which
complainants did not appeal, had become final and executory.
The Labor Arbiter’s Ruling
On 5 February 2008, Labor Arbiter Sagmit denied the motion to inhibit. Labor
Arbiter Sagmit likewise denied the motion to dismiss in an Order dated 12
February 2008. Labor Arbiter Sagmit held that res judicata  does not apply.
Citing the cases of Manila Golf & Country Club, Inc. v. IAC 5 and Sandoval
Shipyards, Inc. v. Pepito,6 the Labor Arbiter ruled that the decision of the
Med-Arbiter in a certification election case, by the nature of that proceedings,
does not foreclose further dispute between the parties as to the existence or
non-existence of employer-employee relationship between them. Thus, the
finding of Med-Arbiter Jasa that no employment relationship exists between
HRC and complainants does not bar the Labor Arbiter from making his own
independent finding on the same issue. The non-litigious nature of the
proceedings before the Med-Arbiter does not prevent the Labor Arbiter from
hearing and deciding the case. Thus, Labor Arbiter Sagmit denied the motion
to dismiss and ordered the parties to file their position papers.
HRC filed with the NLRC a petition for certiorari with a prayer for temporary
restraining order, seeking to nullify the 5 February 2008 and 12 February
2008 Orders of Labor Arbiter Sagmit.
The Ruling of the NLRC
The NLRC granted the petition, holding that Labor Arbiter Sagmit gravely
abused her discretion in denying HRC’s motion to dismiss. The NLRC held
that the Med-Arbiter Order dated 19 November 2007 dismissing the
certification election case on the ground of lack of employer-employee
relationship between HRC and complainants (members of NAMABDJERA-
HRC) constitutes res judicata  under the concept of conclusiveness of
judgment, and thus, warrants the dismissal of the case. The NLRC ruled that
the Med-Arbiter exercises quasi-judicial power and the Med-Arbiter’s
decisions and orders have, upon their finality, the force and effect of a final
judgment within the purview of the doctrine of res judicata.

On the issue of inhibition, the NLRC found it moot and academic in view of
Labor Arbiter Sagmit’s voluntary inhibition from the case as per Order dated
11 March 2009.
The Ruling of the Court of Appeals
The Court of Appeals found the ruling in the Sandoval  case more applicable
in this case. The Court of Appeals noted that the Sandoval  case, which also
involved a petition for certification election and an illegal dismissal case filed
by the union members against the alleged employer, is on all fours with this
case. The issue in Sandoval  on the effect of the Med-Arbiter’s findings as to
the existence of employer-employee relationship is the very same issue
raised in this case. On the other hand, the case of Chris Garments Corp. v.
Hon. Sto. Tomas7 cited by the NLRC, which involved three petitions for
certification election filed by the same union, is of a different factual milieu.
The Court of Appeals held that the certification proceedings before the Med-
Arbiter are non-adversarial and merely investigative. On the other hand,
under Article 217 of the Labor Code, the Labor Arbiter has original and
exclusive jurisdiction over illegal dismissal cases. Although the proceedings
before the Labor Arbiter are also described as non-litigious, the Court of
Appeals noted that the Labor Arbiter is given wide latitude in ascertaining the
existence of employment relationship. Thus, unlike the Med-Artbiter, the
Labor Arbiter may conduct clarificatory hearings and even avail of ocular
inspection to ascertain facts speedily.
Hence, the Court of Appeals concluded that the decision in a certification
election case does not foreclose further dispute as to the existence or non-
existence of an employer-employee relationship between HRC and the
complainants.
On 29 August 2012, the Court of Appeals promulgated its Decision, the
dispositive portion of which reads:
WHEREFORE, the petition is hereby GRANTED and the assailed
Resolutions dated June 29, 2009 and December 16, 2009 of the National
Labor Relations Commission are hereby REVERSED AND SET ASIDE. Let
NLRC CASE No. RAB-XI-09-00774-0707 be remanded to the Regional
Arbitration Branch, Region XI, Davao City for further proceedings.
SO ORDERED.8
The Issue
Whether the Court of Appeals erred in setting aside the NLRC ruling and
remanding the case to the Labor Arbiter for further proceedings.
The Ruling of the Court
We find the petition without merit.
There is no question that the Med-Arbiter has the authority to determine the
existence of an employer-employee relationship between the parties in a
petition for certification election. As held in M.Y. San Biscuits, Inc. v. Acting
Sec. Laguesma:9
Under Article 226 of the Labor Code, as amended, the Bureau of Labor
Relations (BLR), of which the med-arbiter is an officer, has the following
jurisdiction –
"ART. 226. Bureau of Labor Relations. – The Bureau of Labor Relations and
the Labor Relations Division[s] in the regional offices of the Department of
43
Labor shall have original and exclusive authority to act, at their own initiative
or upon request of either or both parties, on all inter-union and intra-union
conflicts, and all disputes, grievances or problems arising from or affecting
labor-management relations in all workplaces whether agricultural or non-
agricultural, except those arising from the implementation or interpretation of
collective bargaining agreements which shall be the subject of grievance
procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on labor cases before
it, subject to extension by agreement of the parties." (Italics supplied)
From the foregoing, the BLR has the original and exclusive jurisdiction
to inter alia, decide all disputes, grievances or problems arising from or
affecting labor-management relations in all workplaces whether agricultural or
non-agricultural. Necessarily, in the exercise of this jurisdiction over labor-
management relations, the med-arbiter has the authority, original and
exclusive, to determine the existence of an employer-employee relationship
between the parties.
Apropos to the present case, once there is a determination as to the
existence of such a relationship, the med-arbiter can then decide the
certification election case. As the authority to determine the employer-
employee relationship is necessary and indispensable in the exercise of
jurisdiction by the med-arbiter, his finding thereon may only be reviewed and
reversed by the Secretary of Labor who exercises appellate jurisdiction under
Article 259 of the Labor Code, as amended, which provides –
"ART. 259. Appeal from certification election orders.  – Any party to an
election may appeal the order or results of the election as determined by the
Med-Arbiter directly to the Secretary of Labor and Employment on the ground
that the rules and regulations or parts thereof established by the Secretary of
Labor and Employment for the conduct of the election have been violated.
Such appeal shall be decided within fifteen (15) calendar days." 10
In this case, the Med-Arbiter issued an Order dated 19 November 2007,
dismissing the certification election case because of lack of employer-
employee relationship between HRC and the members of the respondent
union. The order dismissing the petition was issued after the members of the
respondent union were terminated from their employment in September 2007,
which led to the filing of the illegal dismissal case before the NLRC on 19
September 2007. Considering their termination from work, it would have been
futile for the members of the respondent union to appeal the Med-Arbiter’s
order in the certification election case to the DOLE Secretary. Instead, they
pursued the illegal dismissal case filed before the NLRC.
The Court is tasked to resolve the issue of whether the Labor Arbiter, in the
illegal dismissal case, is bound by the ruling of the Med-Arbiter regarding the
existence or non-existence of employer-employee relationship between the
parties in the certification election case.
The Court rules in the negative. As found by the Court of Appeals, the facts in
this case are very similar to those in the Sandoval  case, which also involved
the issue of whether the ruling in a certification election case on the existence
or non-existence of an employer-employee relationship operates as res
judicata  in the illegal dismissal case filed before the NLRC. In Sandoval, the
DOLE Undersecretary reversed the finding of the Med-Arbiter in a certification
election case and ruled that there was no employer-employee relationship
between the members of the petitioner union and Sandoval Shipyards, Inc.
(SSI), since the former were employees of the subcontractors. Subsequently,
several illegal dismissal cases were filed by some members of the petitioner
union against SSI. Both the Labor Arbiter and the NLRC ruled that there was
no employer-employee relationship between the parties, citing the resolution
of the DOLE Undersecretary in the certification election case. The Court of
Appeals reversed the NLRC ruling and held that the members of the
petitioner union were employees of SSI. On appeal, this Court affirmed the
appellate court’s decision and ruled that the Labor Arbiter and the NLRC
erred in relying on the pronouncement of the DOLE Undersecretary that there
was no employer-employee relationship between the parties. The Court cited
the ruling in the Manila Golf11 case that the decision in a certification election
case, by the very nature of that proceeding, does not foreclose all further
dispute between the parties as to the existence or non-existence of an
employer-employee relationship between them.
This case is different from the Chris Garments  case cited by the NLRC where
the Court held that the matter of employer-employee relationship has been
resolved with finality by the DOLE Secretary, whose factual findings were not
appealed by the losing party. As mentioned earlier, the Med-Arbiter’s order in
this case dismissing the petition for certification election on the basis of non-
existence of employer-employee relationship was issued after the members
of the respondent union were dismissed from their employment. The purpose
of a petition for certification election is to determine which organization will
represent the employees in their collective bargaining with the
employer.12 The respondent union, without its member-employees, was thus
stripped of its personality to challenge the Med-Arbiter’s decision in the
certification election case. Thus, the members of the respondent union were
left with no option but to pursue their illegal dismissal case filed before the
Labor Arbiter. To dismiss the illegal dismissal case filed before the Labor
Arbiter on the basis of the pronouncement of the Med-Arbiter in the
certification election case that there was no employer-employee relationship
between the parties, which the respondent union could not even appeal to the
DOLE Secretary because of the dismissal of its members, would be
tantamount to denying due process to the complainants in the illegal
dismissal case. This, we cannot allow.
WHEREFORE, we DENY the petition. We AFFIRM the 29 August 2012
Decision and the 13 August 2013 Resolution of the Court of Appeals in CA-
G.R. SP No. 04058-MIN.
SO ORDERED.
SECOND DIVISION
January 25, 2016
G.R. No. 201595
ALLAN M. MENDOZA, Petitioner, 
vs.OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU), namely,
EDUARDO B. BORELA, BUENAVENTURA QUEBRAL, ELIZABETH
COMETA, ALEJANDRO TORRES, AMORSOLO TIERRA, SOLEDAD
YEBAN, LUIS RENDON, VIRGINIA APILADO, TERESITA BOLO, ROGELIO
BARBERO, JOSE CASAÑAS, ALFREDO MAGA, EMILIO FERNANDEZ,
ROSITA BUENA VENTURA, ALMENIO CANCINO, ADELA IMANA, MARIO
MANCENIDO, WILFREDO MANDILAG, ROLANDO MANLAP AZ, EFREN
MONTEMAYOR, NELSON PAGULAYAN, CARLOS VILLA, RIC BRIONES,
and CHITO BERNARDO, Respondents.

DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the April 24, 2012 Decision2 of
the Court of Appeals (CA) which dismissed the Petition for Certiorari3 in CA-
G.R. SP No. 115639.
Factual Antecedents
Petitioner was a member of the Manila Water Employees Union (MWEU), a
Department of Labor and Employment (DOLE)-registered labor organization
consisting of rank-and-file employees within Manila Water Company (MWC).
The respondents herein named – Eduardo B. Borela (Borela), Buenaventura
Quebral (Quebral), Elizabeth Cometa (Cometa), Alejandro Torres (Torres),
Amorsolo Tierra (Tierra), Soledad Yeban (Yeban), Luis Rendon (Rendon),
Virginia Apilado (Apilado), Teresita Bolo (Bolo), Rogelio Barbero (Barbero),
Jose Casañas (Casañas), Alfredo Maga (Maga), Emilio Fernandez
(Fernandez), Rosita Buenaventura (Buenaventura), AlmenioCancino
(Cancino), Adela Imana, Mario Mancenido (Mancenido), Wilfredo Mandilag
(Mandilag), Rolando Manlapaz (Manlapaz), Efren Montemayor
(Montemayor), Nelson Pagulayan, Carlos Villa, Ric Briones, and Chito
Bernardo – were MWEU officers during the period material to this Petition,
with Borela as President and Chairman of the MWEU Executive Board,
Quebral as First Vice-President and Treasurer, and Cometa as Secretary.4
In an April 11, 2007 letter, 5 MWEU through Cometa informed petitioner that
the union was unable to fully deduct the increased P200.00 union dues from
his salary due to lack of the required December 2006 check-off authorization
from him. Petitioner was warned that his failure to pay the union dues would
result in sanctions upon him. Quebral informed Borela, through a May 2, 2007
letter,6 that for such failure to pay the union dues, petitioner and several
others violated Section 1(g), Article IX of the MWEU’s Constitution and By-
Laws.7 In turn, Borela referred the charge to the MWEU grievance committee
for investigation.
On May 21, 2007, a notice of hearing was sent to petitioner, who attended the
scheduled hearing. On June 6, 2007, the MWEU grievance committee
recommended that petitioner be suspended for 30 days.
In a June 20, 2007 letter,8 Borela informed petitioner and his corespondents
of the MWEU Executive Board’s "unanimous approval" 9 of the grievance
committee’s recommendation and imposition upon them of a penalty of 30
days suspension, effective June 25, 2007.
In a June 26, 2007 letter10 to Borela, petitioner and his co-respondents took
exception to the imposition and indicated their intention to appeal the same to
the General Membership Assembly in accordance with Section 2(g), Article V
of the union’s Constitution and By-Laws,11 which grants them the right to
appeal any arbitrary resolution, policy and rule promulgated by the Executive
Board to the General Membership Assembly. In a June 28, 2007
reply,12 Borela denied petitioner’s appeal, stating that the prescribed period
for appeal had expired.
13
Petitioner and his co-respondents sent another letter  on July 4, 2007,
reiterating their arguments and demanding that the General Membership
Assembly be convened in order that their appeal could be taken up. The letter
was not acted upon.
44
Petitioner was once more charged with non-payment of union dues, and was
required to attend an August 3, 2007 hearing.14 Thereafter, petitioner was
again penalized with a 30-day suspension through an August 21, 2007
letter15by Borela informing petitioner of the Executive Board’s "unanimous
approval"16 of the grievance committee recommendation to suspend him
effective August 24, 2007, to which he submitted a written reply, 17 invoking
his right to appeal through the convening of the General Membership
Assembly. However, the respondents did not act on petitioner’s plea.
Meanwhile, MWEU scheduled an election of officers on September 14, 2007.
Petitioner filed his certificate of candidacy for Vice-President, but he was
disqualified for not being a member in good standing on account of his
suspension.
On October 2, 2007, petitioner was charged with non-payment of union dues
for the third time. He did not attend the scheduled hearing. This time, he was
meted the penalty of expulsion from the union, per "unanimous approval" 18 of
the members of the Executive Board. His pleas for an appeal to the General
Membership Assembly were once more unheeded.19
In 2008, during the freedom period and negotiations for a new collective
bargaining agreement (CBA) with MWC, petitioner joined another union, the
Workers Association for Transparency, Empowerment and Reform, All-
Filipino Workers Confederation (WATER-AFWC). He was elected union
President. Other MWEU members were inclined to join WATER-AFWC, but
MWEU director Torres threatened that they would not get benefits from the
new CBA.20
The MWEU leadership submitted a proposed CBA which contained
provisions to the effect that in the event of retrenchment, non-MWEU
members shall be removed first, and that upon the signing of the CBA, only
MWEU members shall receive a signing bonus.21
Ruling of the Labor Arbiter
On October 13, 2008, petitioner filed a Complaint 22 against respondents for
unfair labor practices, damages, and attorney’s fees before the National
Labor Relations Commission (NLRC), Quezon City, docketed as NLRC Case
No. NCR-10-14255-08. In his Position Paper and other written
submissions,23 petitioner accused the respondents of illegal termination from
MWEU in connection with the events relative to his non-payment of union
dues; unlawful interference, coercion, and violation of the rights of MWC
employees to self-organization – in connection with the proposed CBA
submitted by MWEU leadership, which petitioner claims contained provisions
that discriminated against non-MWEU members. Petitioner prayed in his
Supplemental Position Paper that respondents be held guilty of unfair labor
practices and ordered to indemnify him moral damages in the amount of
P100,000.00, exemplary damages amounting to P50,000.00, and 10%
attorney’s fees.
In their joint Position Paper and other pleadings, 24 respondents claimed that
the Labor Arbiter had no jurisdiction over the dispute, which is intra-union in
nature; that the Bureau of Labor Relations (BLR) was the proper venue, in
accordance with Article 226 of the Labor Code25 and Section 1, Rule XI of
Department Order 40-03, series of 2003, of the DOLE;26 and that they were
not guilty of unfair labor practices, discrimination, coercion or restraint.
On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her
Decision27 which decreed as follows:
Indeed the filing of the instant case is still premature. Section 5, Article X-
Investigation Procedures and Appeal Process of the Union Constitution and
By-Laws provides that:
Section 5. Any dismissed and/or expelled member shall have the rights to
appeal to the Executive Board within seven (7) days from the date of notice of
the said dismissal and/or expulsion, which in [turn] shall be referred to the
General Membership Assembly. In case of an appeal, a simple majority of the
decision of the Executive Board is imperative. The same shall be
approved/disapproved by a majority vote of the general membership
assembly in a meeting duly called for the purpose.
On the basis of the foregoing, the parties shall exhaust first all the
administrative remedies before resorting to compulsory arbitration. Thus,
instant case is referred back to the Union for the General Assembly to act or
deliberate complainant’s appeal on the decision of the Executive Board.
WHEREFORE PREMISES CONSIDERED, instant case is referred back to
the Union level for the General Assembly to act on complainant’s appeal.
SO ORDERED.28
Ruling of the National Labor Relations Commission
Petitioner appealed before the NLRC, where the case was docketed as
NLRC LAC No. 07-001913-09. On March 15, 2010, the NLRC issued its
Decision,29 declaring as follows:
Complainant30 imputes serious error to the Labor Arbiter when she decided
as follows:
a. Referring back the subject case to the Union level for the General
Assembly to act on his appeal.
b. Not ruling that respondents are guilty of ULP as charged.
c. Not granting to complainant moral and exemplary damages and attorney’s
fees.
Complainant, in support of his charges, claims that respondents restrained or
coerced him in the exercise of his right as a union member in violation of
paragraph "a", Article 249 of the Labor Code,31particularly, in denying him the
explanation as to whether there was observance of the proper procedure in
the increase of the membership dues from P100.00 to P200.00 per month.
Further, complainant avers that he was denied the right to appeal his
suspension and expulsion in accordance with the provisions of the Union’s
Constitution and By-Laws. In addition, complainant claims that respondents
attempted to cause the management to discriminate against the members of
WATER-AFWC thru the proposed CBA.
Pertinent to the issue then on hand, the Labor Arbiter ordered that the case
be referred back to the Union level for the General Assembly to act on
complainant’s appeal. Hence, these appeals.
After a careful look at all the documents submitted and a meticulous review of
the facts, We find that this Commission lacks the jurisdictional competence to
act on this case.
Article 217 of the Labor Code,32 as amended, specifically enumerates the
cases over which the Labor Arbiters and the Commission have original and

exclusive jurisdiction. A perusal of the record reveals that the causes of action
invoked by complainant do not fall under any of the enumerations therein.
Clearly, We have no jurisdiction over the same.
Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department
Order No. 40-03 in particular, Item A, paragraphs (h) and (j) and Item B,
paragraph (a)(3), respectively, provide:
"A. Inter-Intra-Union disputes shall include:
"(h) violation of or disagreements over any provision of the Constitution and
By-Laws of a Union or workers’ association.
"(j) violation of the rights and conditions of membership in a Union or workers’
association.
"B. Other Labor Relations disputes, not otherwise covered by Article 217 of
the Labor Code, shall include –
"3. a labor union and an individual who is not a member of said union."
Clearly, the above-mentioned disputes and conflict fall under the jurisdiction
of the Bureau of Labor Relations, as these are inter/intra-union disputes.
WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is
hereby declared NULL and VOID for being rendered without jurisdiction and
the instant complaint is DISMISSED.
SO ORDERED.33
Petitioner moved for reconsideration,34 but in a June 16, 2010
Resolution,35 the motion was denied and the NLRC sustained its Decision.
Ruling of the Court of Appeals
In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP No.
115639, petitioner sought to reverse the NLRC Decision and be awarded his
claim for damages and attorney’s fees on account of respondents’ unfair
labor practices, arguing among others that his charge of unfair labor practices
is cognizable by the Labor Arbiter; that the fact that the dispute is inter- or
intra-union in nature cannot erase the fact that respondents were guilty of
unfair labor practices in interfering and restraining him in the exercise of his
right to self-organization as member of both MWEU and WATER-AFWC, and
in discriminating against him and other members through the provisions of the
proposed 2008 CBA which they drafted; that his failure to pay the increased
union dues was proper since the approval of said increase was arrived at
without observing the prescribed voting procedure laid down in the Labor
Code; that he is entitled to an award of damages and attorney’s fees as a
result of respondents’ illegal acts in discriminating against him; and that in
ruling the way it did, the NLRC committed grave abuse of discretion.
On April 24, 2012, the CA issued the assailed Decision containing the
following pronouncement:
The petition lacks merit.
Petitioner’s causes of action against MWEU are inter/intra-union disputes
cognizable by the BLR whose functions and jurisdiction are largely confined
to union matters, collective bargaining registry, and labor education. Section
1, Rule XI of Department Order (D.O.) No. 40-03, Series of 2003, of the
Department of Labor and Employment enumerates instances of inter/intra-
union disputes, viz:
Section 1. Coverage. – Inter/intra-union disputes shall include:
x xxx
(b) conduct of election of union and workers’ association officers/nullification
of election of union and workers’ association officers;
(c) audit/accounts examination of union or workers’ association funds;
x xxx
45
(g) validity/invalidity of impeachment/ expulsion of union and workers’
association officers and members;
x xxx
(j) violations of or disagreements over any provision in a union or workers’
association constitution and by-laws;
x xxx
(l) violations of the rights and conditions of union or workers’ association
membership;
x xxx
(n) such other disputes or conflicts involving the rights to self-organization,
union membership and collective bargaining –
(1) between and among legitimate labor organizations;
(2) between and among members of a union or workers’ association.
In brief, "Inter-Union Dispute" refers to any conflict between and among
legitimate labor unions involving representation questions for purposes of
collective bargaining or to any other conflict or dispute between legitimate
labor unions. "Intra-Union Dispute" refers to any conflict between and among
union members, including grievances arising from any violation of the rights
and conditions of membership, violation of or disagreement over any
provision of the union’s constitution and by-laws, or disputes arising from
chartering or affiliation of union. On the other hand, the circumstances of
unfair labor practices (ULP) of a labor organization are stated in Article 249 of
the Labor Code, to wit:
Article 249. Unfair labor practices of labor organizations. It shall be unlawful
for labor organization, its officers, agents, or representatives to commit any of
the following unfair labor practices:
(a) To restrain or coerce employees in the exercise of their right to self-
organization; Provided, That the labor organization shall have the right to
prescribe its own rules with respect to the acquisition or retention of
membership;
(b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with respect to whom
membership in such organization has been denied or terminated on any
ground other than the usual terms and conditions under which membership or
continuation of membership is made available to other members;
x xxx
Applying the aforementioned rules, We find that the issues arising from
petitioner’s right to information on the increased membership dues, right to
appeal his suspension and expulsion according to CBL provisions, and right
to vote and be voted on are essentially intra-union disputes; these involve
violations of rights and conditions of union membership. But his claim that a
director of MWEU warned that non-MWEU members would not receive CBA
benefits is an inter-union dispute. It is more of an "interference" by a rival
union to ensure the loyalty of its members and to persuade non-members to
join their union. This is not an actionable wrong because interfering in the
exercise of the right to organize is itself a function of self-organizing. 37 As long
as it does not amount to restraint or coercion, a labor organization may
interfere in the employees’ right to self-organization.38 Consequently, a
determination of validity or illegality of the alleged acts necessarily touches on
union matters, not ULPs, and are outside the scope of the labor arbiter’s
jurisdiction.
As regards petitioner’s other accusations, i.e., discrimination in terms of
meting out the penalty of expulsion against him alone, and attempt to cause
the employer, MWC, to discriminate against non-MWEU members in terms of
retrenchment or reduction of personnel, and signing bonus, while We may
consider them as falling within the concept of ULP under Article 249(a) and
(b), still, petitioner’s complaint cannot prosper for lack of substantial evidence.
Other than his bare allegation, petitioner offered no proof that MWEU did not
penalize some union members who failed to pay the increased dues. On the
proposed discriminatory CBA provisions, petitioner merely attached the
pages containing the questioned provisions without bothering to reveal the
MWEU representatives responsible for the said proposal. Article 249
mandates that "x xx only the officers, members of the governing boards,
representatives or agents or members of labor associations or
organizations who have actually participated in, authorized or ratified unfair
labor practices shall be held criminally liable ." Plain accusations against all
MWEU officers, without specifying their actual participation, do not suffice.
Thus, the ULP charges must necessarily fail.
In administrative and quasi-judicial proceedings, only substantial evidence is
necessary to establish the case for or against a party. Substantial evidence is
that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion. Petitioner failed to discharge the burden of
proving, by substantial evidence, the allegations of ULP in his complaint. The
NLRC, therefore, properly dismissed the case.
FOR THESE REASONS, the petition is DISMISSED.
SO ORDERED.39
Thus, the instant Petition.
Issue
In an August 28, 2013 Resolution,40 this Court resolved to give due course to
the Petition, which claims that the CA erred:
A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION
CONFLICTS NEGATES THE COMPLAINT FOR UNFAIR LABOR
PRACTICES AGAINST A LABOR ORGANIZATION AND ITS OFFICERS,
AND IN AFFIRMING THAT THE NLRC PROPERLY DISMISSED THE CASE
FOR ALLEGED LACK OF JURISDICTION.
B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR
LABOR PRACTICES UNDER ARTICLE 249(a) AND (b) OF THE LABOR
CODE.
C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER
AGAINST MEMBERS OF A RIVAL UNION IS (sic) MERELY AN
"INTERFERENCE" AND DO NOT AMOUNT TO "RESTRAINT" OR
"COERCION".
D. IN DECLARING THAT PETITIONER FAILED TO PRESENT
SUBSTANTIAL EVIDENCE IN PROVING RESPONDENTS’ SPECIFIC ACTS
OF UNFAIR LABOR PRACTICES.
E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO
PETITIONER FOR MORAL AND EXEMPLARY DAMAGES, AND
ATTORNEY’S FEES.41
Petitioner’s Arguments
Praying that the assailed CA dispositions be set aside and that respondents
be declared guilty of unfair labor practices under Article 249(a) and (b) and
adjudged liable for damages and attorney’s fees as prayed for in his
complaint, petitioner maintains in his Petition and Reply42 that respondents
are guilty of unfair labor practices which he clearly enumerated and laid out in
his pleadings below; that these unfair labor practices committed by

respondents fall within the jurisdiction of the Labor Arbiter; that the Labor
Arbiter, the NLRC, and the CA failed to rule on his accusation of unfair labor
practices and simply dismissed his complaint on the ground that his causes of
action are intra- or inter-union in nature; that admittedly, some of his causes
of action involved intra- or inter-union disputes, but other acts of respondents
constitute unfair labor practices; that he presented substantial evidence to
prove that respondents are guilty of unfair labor practices by failing to observe
the proper procedure in the imposition of the increased monthly union dues,
and in unduly imposing the penalties of suspension and expulsion against
him; that under the union’s constitution and by-laws, he is given the right to
appeal his suspension and expulsion to the general membership assembly;
that in denying him his rights as a union member and expelling him,
respondents are guilty of malice and evident bad faith; that respondents are
equally guilty for violating and curtailing his rights to vote and be voted to a
position within the union, and for discriminating against non-MWEU members;
and that the totality of respondents’ conduct shows that they are guilty of
unfair labor practices.
Respondent’s Arguments
In their joint Comment,43 respondents maintain that petitioner raises issues of
fact which are beyond the purview of a petition for review on certiorari; that
the findings of fact of the CA are final and conclusive; that the Labor Arbiter,
NLRC, and CA are one in declaring that there is no unfair labor practices
committed against petitioner; that petitioner’s other allegations fall within the
jurisdiction of the BLR, as they refer to intra- or inter-union disputes between
the parties; that the issues arising from petitioner’s right to information on the
increased dues, right to appeal his suspension and expulsion, and right to
vote and be voted upon are essentially intra-union in nature; that his
allegations regarding supposed coercion and restraint relative to benefits in
the proposed CBA do not constitute an actionable wrong; that all of the acts
questioned by petitioner are covered by Section 1, Rule XI of Department
Order 40-03, series of 2003 as intra-/inter-union disputes which do not fall
within the jurisdiction of the Labor Arbiter; that in not paying his union dues,
petitioner is guilty of insubordination and deserved the penalty of expulsion;
that petitioner failed to petition to convene the general assembly through the
required signature of 30% of the union membership in good standing
pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-Laws or
by a petition of the majority of the general membership in good standing
under Article VI, Section 3; and that for his failure to resort to said remedies,
petitioner can no longer question his suspension or expulsion and avail of his
right to appeal.
Our Ruling
The Court partly grants the Petition.
In labor cases, issues of fact are for the labor tribunals and the CA to resolve,
as this Court is not a trier of facts. However, when the conclusion arrived at
by them is erroneous in certain respects, and would result in injustice as to
the parties, this Court must intervene to correct the error. While the Labor
Arbiter, NLRC, and CA are one in their conclusion in this case, they erred in
failing to resolve petitioner’s charge of unfair labor practices against
respondents.
It is true that some of petitioner’s causes of action constitute intra-union cases
cognizable by the BLR under Article 226 of the Labor Code.
An intra-union dispute refers to any conflict between and among union
members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision of
the union’s constitution and by-laws, or disputes arising from chartering or
disaffiliation of the union. Sections 1 and 2, Rule XI of Department Order No.
46
40-03, Series of 2003 of the DOLE enumerate the following circumstances as
inter/intra-union disputes x x x.44
However, petitioner’s charge of unfair labor practices falls within
the original  and exclusive  jurisdiction of the Labor Arbiters, pursuant to Article
217 of the Labor Code. In addition, Article 247 of the same Code provides
that "the civil aspects of all cases involving unfair labor practices, which may
include claims for actual, moral, exemplary and other forms of damages,
attorney’s fees and other affirmative relief, shall be under the jurisdiction of
the Labor Arbiters."
Unfair labor practices may be committed both by the employer under Article
248 and by labor organizations under Article 249 of the Labor Code, 45 which
provides as follows:
ART. 249. Unfair labor practices of labor organizations. - It shall be unfair
labor practice for a labor organization, its officers, agents or representatives:
(a) To restrain or coerce employees in the exercise of their right to self-
organization. However, a labor organization shall have the right to prescribe
its own rules with respect to the acquisition or retention of membership;
(b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with respect to whom
membership in such organization has been denied or to terminate an
employee on any ground other than the usual terms and conditions under
which membership or continuation of membership is made available to other
members;
(c) To violate the duty, or refuse to bargain collectively with the employer,
provided it is the representative of the employees;
(d) To cause or attempt to cause an employer to pay or deliver or agree to
pay or deliver any money or other things of value, in the nature of an
exaction, for services which are not performed or not to be performed,
including the demand for fee for union negotiations;
(e) To ask for or accept negotiation or attorney’s fees from employers as part
of the settlement of any issue in collective bargaining or any other dispute; or
(f) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the officers,
members of governing boards, representatives or agents or members of labor
associations or organizations who have actually participated in, authorized or
ratified unfair labor practices shall be held criminally liable. (As amended by
Batas Pambansa Bilang 130, August 21, 1981).
Petitioner contends that respondents committed acts constituting unfair labor
practices – which charge was particularly laid out in his pleadings, but that the
Labor Arbiter, the NLRC, and the CA ignored it and simply dismissed his
complaint on the ground that his causes of action were intra- or inter-union in
nature. Specifically, petitioner claims that he was suspended and expelled
from MWEU illegally as a result of the denial of his right to appeal his case to
the general membership assembly in accordance with the union’s constitution
and by-laws. On the other hand, respondents counter that such charge is
intra-union in nature, and that petitioner lost his right to appeal when he failed
to petition to convene the general assembly through the required signature of
30% of the union membership in good standing pursuant to Article VI, Section
2(a) of MWEU’s Constitution and By-Laws or by a petition of the majority of
the general membership in good standing under Article VI, Section 3.
Under Article VI, Section 2(a) of MWEU’s Constitution and By-Laws, the
general membership assembly has the power to "review revise modify affirm
or repeal [sic] resolution and decision of the Executive Board and/or
committees upon petition of thirty percent (30%) of the Union in good
standing,"46 and under Section 2(d), to "revise, modify, affirm or reverse all
expulsion cases."47 Under Section 3 of the same Article, "[t]he decision of the
Executive Board may be appealed to the General Membership which by a
simple majority vote reverse the decision of said body. If the general
Assembly is not in session the decision of the Executive Board may be
reversed by a petition of the majority of the general membership in good
standing."48 And, in Article X, Section 5, "[a]ny dismissed and/or expelled
member shall have the right to appeal to the Executive Board within seven
days from notice of said dismissal and/or expulsion which, in [turn] shall be
referred to the General membership assembly. In case of an appeal, a simple
majority of the decision of the Executive Board is imperative. The same shall
be approved/disapproved by a majority vote of the general membership
assembly in a meeting duly called for the purpose."49
In regard to suspension of a union member, MWEU’s Constitution and By-
Laws provides under Article X, Section 4 thereof that "[a]ny suspended
member shall have the right to appeal within three (3) working days from the
date of notice of said suspension. In case of an appeal a simple majority of
vote of the Executive Board shall be necessary to nullify the suspension."
Thus, when an MWEU member is suspended, he is given the right to appeal
such suspension within three working days from the date of notice of said
suspension, which appeal the MWEU Executive Board is obligated to act
upon by a simple majority vote. When the penalty imposed is expulsion, the
expelled member is given seven days from notice of said dismissal and/or
expulsion to appeal to the Executive Board, which is required to act by a
simple majority vote of its members. The Board’s decision shall then be
approved/ disapproved by a majority vote of the general membership
assembly in a meeting duly called for the purpose.
The documentary evidence is clear that when petitioner received Borela’s
August 21, 2007 letter informing him of the Executive Board’s unanimous
approval of the grievance committee recommendation to suspend him for the
second time effective August 24, 2007, he immediately and timely filed a
written appeal. However, the Executive Board – then consisting of
respondents Borela, Tierra, Bolo, Casañas, Fernandez, Rendon,
Montemayor, Torres, Quebral, Pagulayan, Cancino, Maga, Cometa,
Mancenido, and two others who are not respondents herein – did not act
thereon. Then again, when petitioner was charged for the third time and
meted the penalty of expulsion from MWEU by the unanimous vote of the
Executive Board, his timely appeal was again not acted upon by said board –
this time consisting of respondents Borela, Quebral, Tierra, Imana, Rendon,
Yeban, Cancino, Torres, Montemayor, Mancenido, Mandilag, Fernandez,
Buenaventura, Apilado, Maga, Barbero, Cometa, Bolo, and Manlapaz.

Thus, contrary to respondents’ argument that petitioner lost his right to appeal
when he failed to petition to convene the general assembly through the
required signature of 30% of the union membership in good standing
pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-Laws or
by a petition of the majority of the general membership in good standing
under Article VI, Section 3, this Court finds that petitioner was illegally
suspended for the second time and thereafter unlawfully expelled from
MWEU due to respondents’ failure to act on his written appeals. The required
petition to convene the general assembly through the required signature of
30% (under Article VI, Section 2[a]) or majority (under Article VI, Section 3) of
the union membership does not apply in petitioner’s case; the Executive
Board must first act on his two appeals before the matter could properly be
referred to the general membership. Because respondents did not act on his
two appeals, petitioner was unceremoniously suspended, disqualified and
deprived of his right to run for the position of MWEU Vice-President in the
September 14, 2007 election of officers, expelled from MWEU, and forced to
join another union, WATER-AFWC. For these, respondents are guilty of
unfair labor practices under Article 249 (a) and (b) – that is, violation of
petitioner’s right to self-organization, unlawful discrimination, and illegal
termination of his union membership – which case falls within the original and
exclusive jurisdiction of the Labor Arbiters, in accordance with Article 217 of
the Labor Code.
The primary concept of unfair labor practices is stated in Article 247 of the
Labor Code, which states:
Article 247. Concept of unfair labor practice and procedure for prosecution
thereof. –– Unfair labor practices violate the constitutional right of workers
and employees to self-organization, are inimical to the legitimate interests of
both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual
respect, disrupt industrial peace and hinder the promotion of healthy and
stable labor-management relations.
"In essence, [unfair labor practice] relates to the commission of acts that
transgress the workers’ right to organize."50"[A]ll the prohibited acts
constituting unfair labor practice in essence relate to the workers’ right to self-
organization."51 "[T]he term unfair labor practice refers to that gamut of
offenses defined in the Labor Code which, at their core, violates the
constitutional right of workers and employees to self-organization." 52
Guaranteed to all employees or workers is the ‘right to self-organization and
to form, join, or assist labor organizations of their own choosing for purposes
of collective bargaining.’ This is made plain by no less than three provisions
of the Labor Code of the Philippines. Article 243 of the Code provides as
follows:
ART. 243. Coverage and employees’ right to self-organization. — All persons
employed in commercial, industrial and agricultural enterprises and in
religious, charitable, medical, or educational institutions whether operating for
profit or not, shall have the right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes or collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection.
47
Article 248 (a) declares it to be an unfair labor practice for an employer,
among others, to ‘interfere with, restrain or coerce employees in the exercise
of their right to self-organization.’ Similarly, Article 249 (a) makes it an unfair
labor practice for a labor organization to ‘restrain or coerce employees in the
exercise of their rights to self-organization . . .’
x xxxThe right of self-organization includes the right to organize or affiliate
with a labor union or determine which of two or more unions in an
establishment to join, and to engage in concerted activities with co-workers
for purposes of collective bargaining through representatives of their own
choosing, or for their mutual aid and protection, i.e., the protection, promotion,
or enhancement of their rights and interests.53
As members of the governing board of MWEU, respondents are presumed to
know, observe, and apply the union’s constitution and by-laws. Thus, their
repeated violations thereof and their disregard of petitioner’s rights as a union
member – their inaction on his two appeals which resulted in his suspension,
disqualification from running as MWEU officer, and subsequent expulsion
without being accorded the full benefits of due process – connote willfulness
and bad faith, a gross disregard of his rights thus causing untold suffering,
oppression and, ultimately, ostracism from MWEU. "Bad faith implies breach
of faith and willful failure to respond to plain and well understood
obligation."54This warrants an award of moral damages in the amount of
P100,000.00. Moreover, the Civil Code provides:
Art. 32. Any public officer or employee, or any private individual, who directly
or indirectly obstructs, defeats, violates or in any manner impedes or impairs
any of the following rights and liberties of another person shall be liable to the
latter for damages:
x xxx
(12) The right to become a member of associations or societies for purposes
not contrary to law;
In Vital-Gozon v. Court of Appeals,55 this Court declared, as follows:
Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. They may be recovered if they are the
proximate result of the defendant’s wrongful act or omission. The instances
when moral damages may be recovered are, inter alia, ‘acts and actions
referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code,’
which, in turn, are found in the Chapter on Human Relations of the
Preliminary Title of the Civil Code. x xx
Under the circumstances, an award of exemplary damages in the amount of
P50,000.00, as prayed for, is likewise proper. "Exemplary damages are
designed to permit the courts to mould behavior that has socially deleterious
consequences, and their imposition is required by public policy to suppress
the wanton acts of the offender."56 This should prevent respondents from
repeating their mistakes, which proved costly for petitioner.
Under Article 2229 of the Civil Code, ‘[e]xemplary or corrective damages are
imposed, by way of example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory damages.’ As this court has
stated in the past: ‘Exemplary damages are designed by our civil law to
permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such
behaviour.’57
Finally, petitioner is also entitled to attorney’s fees equivalent to 10 per
cent  (10%) of the total award. The unjustified acts of respondents clearly
compelled him to institute an action primarily to vindicate his rights and
protect his interest. Indeed, when an employee is forced to litigate and incur
expenses to protect his rights and interest, he is entitled to an award of
attorney’s fees.58
WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April 24,
2012 Decision of the Court of Appeals in CA-G.R. SP No. 115639 is
hereby MODIFIED, in that all of the respondents - except for Carlos Villa, Ric
Briones, and Chito Bernardo - are declared guilty of unfair labor practices
and ORDERED TO INDEMNIFY petitioner Allan M. Mendoza the amounts of
Pl00,000.00 as and by way of moral damages, PS0,000.00 as exemplary
damages, and attorney's fees equivalent to 10 per cent  (10%) of the total
award.
SO ORDERED
SECOND DIVISION
G.R. No. 197309               October 10, 2012
ACE NAVIGATION CO., INC., VELA INTERNATIONAL MARINE LTD.,
and/or RODOLFO PAMINTUAN,Petitioners, 
vs.TEODORICO FERNANDEZ, assisted by GLENITA
FERNANDEZ, Respondent.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari1 which seeks to nullify the
decision2 dated September 22, 2010 and the resolution3 dated May 26,2011
ofthe Court of Appeals (CA)  in CA-G.R. SP No. 112081.
The Antecedents
On October 9, 2008, seaman Teodorico Fernandez (Fernandez), assisted by
his wife, Glenita Fernandez, filed with the National Labor Relations
Commission (NLRC) a complaint for disability benefits, with prayer for moral
and exemplary damages, plus attorney’s fees, against Ace Navigation Co.,
Inc., Vela International Marine Ltd., and/or Rodolfo Pamintuan ( petitioners).
The petitioners moved to dismiss the complaint, 4 contending that the labor
arbiter had no jurisdiction over the dispute. They argued that exclusive
original jurisdiction is with the voluntary arbitrator or panel of voluntary
arbitrators, pursuant to Section 29 of the POEA Standard Employment
Contract (POEA-SEC), since the parties are covered by the AMOSUP-TCC
or AMOSUP-VELA (as later cited by the petitioners) collective bargaining
agreement (CBA). Under Section 14 of the CBA, a dispute between a
seafarer and the company shall be settled through the grievance machinery
and mandatory voluntary arbitration.
Fernandez opposed the motion.5 He argued that inasmuch as his complaint
involves a money claim, original and exclusive jurisdiction over the case is
vested with the labor arbiter.
The Compulsory Arbitration Rulings
On December 9, 2008, Labor Arbiter Romelita N. Rioflorido denied the motion
to dismiss, holding that under Section 10 of Republic Act (R.A.) No. 8042, the
Migrant Workers and Overseas Filipinos Act of 1995, the labor arbiter has
original and exclusive jurisdiction over money claims arising out of an

employer-employee relationship or by virtue of any law or contract,
notwithstanding any provision of law to the contrary.6
The petitioners appealed to the NLRC, but the labor agency denied the
appeal. It agreed with the labor arbiter that the case involves a money claim
and is within the jurisdiction of the labor arbiter, in accordance with Section 10
of R.A. No. 8042. Additionally, it declared that the denial of the motion to
dismiss is an interlocutory order which is not appealable. Accordingly, it
remanded the case to the labor arbiter for further proceedings. The
petitioners moved for reconsideration, but the NLRC denied the motion,
prompting the petitioners to elevate the case to the CA through a petition
for certiorari  under Rule 65 of the Rules of Court.
The CA Decision
Through its decision of September 22, 2010,7 the CA denied the petition on
procedural and substantive grounds.
Procedurally, it found the petitioners to have availed of the wrong remedy
when they challenged the labor arbiter’s denial of their motion to dismiss by
way of an appeal to the NLRC. It stressed that pursuant to the NLRC
rules,8 an order denying a motion to dismiss is interlocutory and is not subject
to appeal.
On the merits of the case, the CA believed that the petition cannot also
prosper. It rejected the petitioners’ submission that the grievance and
voluntary arbitration procedure of the parties’ CBA has jurisdiction over the
case, to the exclusion of the labor arbiter and the NLRC. As the labor arbiter
and the NLRC did, it opined that under Section 10 of R.A. No. 8042, the labor
arbiter has the original and exclusive jurisdiction to hear Fernandez’s money
claims.
Further, the CA clarified that while the law9 allows parties to submit to
voluntary arbitration other labor disputes, including matters falling within the
original and exclusive jurisdiction of the labor arbiters under Article 217 of the
Labor Code as this Court recognized in Vivero v. Court of Appeals,10 the
parties’ submission agreement must be expressed in unequivocal language.
It found no such unequivocal language in the AMOSUP/TCC CBA that the
parties agreed to submit money claims or, more specifically, claims for
disability benefits to voluntary arbitration.
The CA also took note of the POEA-SEC 11 which provides in its Section 29
that in cases of claims and disputes arising from a Filipino seafarer’s
employment, the parties covered by a CBA shall submit the claim or dispute
to the original and exclusive jurisdiction of the voluntary arbitrator or panel of
voluntary arbitrators. The CA explained that the relevant POEA-SEC
provisions should likewise be qualified by the ruling in the Vivero  case, the
Labor Code, and other applicable laws and jurisprudence.
In sum, the CA stressed that the jurisdiction of voluntary arbitrators is limited
to the seafarers’ claims which do not fall within the labor arbiter’s original and
exclusive jurisdiction or even in cases where the labor arbiter has jurisdiction,
the parties have agreed in unmistakable terms (through their CBA) to submit
the case to voluntary arbitration.
The petitioners moved for reconsideration of the CA decision, but the
appellate court denied the motion, reiterating its earlier pronouncement that
48
on the ground alone of the petitioners’ wrong choice of remedy, the petition
must fail.
The Petition
The petitioners are now before this Court praying for a reversal of the CA
judgment on the following grounds:
1. The CA committed a reversible error in disregarding the Omnibus
Implementing Rules and Regulations (IRR) of the Migrant Workers and
Overseas Filipinos Act of 1995,12 as amended by R.A. No. 10022,13 mandating
that "For OFWs with collective bargaining agreements, the caseshall be
submitted for voluntary arbitration in accordance with Articles 261 and 262 of
the Labor Code."14
The petitioners bewail the CA’s rejection of the above argument for the
reason that the remedy they pursued was inconsistent with the 2005 Revised
Rules of Procedure of the NLRC. Citing Municipality of Sta. Fe v. Municipality
of Aritao,15 they argue that the "dismissal of a case for lack of jurisdiction may
be raised at any stage of the proceedings."
In any event, they posit that the IRR of R.A. No. 10022 is in the nature of an
adjective or procedural law which must be given retroactive effect and which
should have been applied by the CA in resolving the present case.
2. The CA committed a reversible error in ruling that the AMOSUP-VELA
CBA does not contain unequivocal wordings for the mandatory referral of
Fernandez’s claim to voluntary arbitration.
The petitioners assail the CA’s failure to explain the basis "for ruling that no
explicit or unequivocal wordings appeared on said CBA for the mandatory
referral of the disability claim to arbitration." 16 They surmise that the CA
construed the phrase "either party may refer the case to a MANDATORY
ARBITRATION COMMITTEE" under Section 14.7(a) of the CBA as merely
permissive and not mandatory because of the use of the word "may." They
contend that notwithstanding the use of the word "may," the parties
unequivocally and unmistakably agreed to refer the present disability claim to
mandatory arbitration.
3. The CA committed a reversible error in disregarding the NLRC
memorandum prescribing the appropriate action for complaints and/or
proceedings which were initially processed in the grievance machinery of
existing CBAs. In their motion for reconsideration with the CA, the petitioners
manifested that the appellate court’s assailed decision had been modified by
the following directive of the NLRC:
As one of the measures being adopted by our agency in response to the
Platform and Policy Pronouncements on Labor Employment, you are hereby
directed to immediately dismiss the complaint and/or terminate proceedings
which were initially processed in the grievance machinery as provided in the
existing Collective Bargaining Agreements (CBAs) between parties, through
the issuance of an Order of Dismissal and referral of the disputes to the
National Conciliation Mediation Board (NCMB) for voluntary arbitration.
FOR STRICT COMPLIANCE.17
4. On July 31, 2012,18 the petitioners manifested before the Court that on
June 13, 2012, the Court’s Second Division issued a ruling in G.R. No.
172642, entitled Estate of Nelson R. Dulay, represented by his wife Merridy
Jane P. Dulay v. Aboitiz Jebsen Maritime, Inc.,  and General Charterers,
Inc.,  upholding the jurisdiction of the voluntary arbitrator or panel of voluntary
arbitrators over a seafarer’s money claim. They implore the Court that since
the factual backdrop and the issues involved in the case are similar to the
present dispute, the Dulay  ruling should be applied to this case and which
should accordingly be referred to the National Conciliation and Mediation
Board for voluntary arbitration.
The Case for Fernandez
In compliance with the Court’s directive,19 Fernandez filed on October 7, 2011
his Comment20 (on the Petition) with the plea that the petition be dismissed for
lack of merit. Fernandez presents the following arguments:
1. The IRR of the Migrant Workers and Overseas Filipinos Act of 1995 (R.A.
No. 8042), as amended by R.A. No. 10022,21 did not divest the labor arbiters
of their original and exclusive jurisdiction over money claims arising from
employment, for nowhere in said IRR is there such a divestment.
2. The voluntary arbitrators do not have jurisdiction over the present
controversy as can be deduced from Articles 261 and 262 of the Labor Code.
Fernandez explains that his complaint does not involve any "unresolved
grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement [nor] from the interpretation or enforcement of
company personnel policies[.]" 22 As he never referred his claim to the
grievance machinery, there is no "unresolved grievance" to speak of. His
complaint involves a claim for compensation and damages which is outside
the voluntary arbitrator’s jurisdiction under Article 261. Further, only disputes
involving the union and the company shall be referred to the grievance
machinery and to voluntary arbitration, as the Court held in Sanyo Philippines
Workers Union-PSSLU v. Cañizares23 and Silva v. CA.24
3. The CA correctly ruled that no unequivocal wordings appear in the CBA for
the mandatory referral of Fernandez’s disability claim to a voluntary arbitrator.
The Court’s Ruling
We first rule on the procedural question arising from the labor arbiter’s denial
of the petitioners’ motion to dismiss the complaint. On this point, Section 6,
Rule V of The 2005 Revised Rules of Procedure of the NLRC provides:
On or before the date set for the mandatory conciliation and mediation
conference, the respondent may file a motion to dismiss. Any motion to
dismiss on the ground of lack of jurisdiction, improper venue, or that the
cause of action is barred by prior judgment, prescription, or forum shopping,
shall be immediately resolved by the Labor Arbiter through a written order. An
order denying the motion to dismiss, or suspending its resolution until the final
determination of the case, is not appealable. [underscoring ours]
Corollarily, Section 10, Rule VI of the same Rules states:
Frivolous or Dilatory Appeals. – No appeal from an interlocutory order shall
be entertained. To discourage frivolous or dilatory appeals, including those
taken from interlocutory orders, the Commission may censure or cite in
contempt the erring parties and their counsels, or subject them to reasonable
fine or penalty.
In Indiana Aerospace University v. Comm. on Higher Educ.,25 the Court
declared that "[a]n order denying a motion to dismiss is interlocutory"; the
proper remedy in this situation is to appeal after a decision has been

rendered. Clearly, the denial of the petitioners’ motion to dismiss in the
present case was an interlocutory order and, therefore, not subject to appeal
as the CA aptly noted.
The petition’s procedural lapse notwithstanding, the CA proceeded to review
the merits of the case and adjudged the petition unmeritorious. We find the
CA’s action in order. The Labor Code itself declares that "it is the spirit and
intention of this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process." 26
We now address the focal question of who has the original and exclusive
jurisdiction over Fernandez’s disability claim — the labor arbiter under
Section 10 of R.A. No. 8042, as amended, or the voluntary arbitration
mechanism as prescribed in the parties’ CBA and the POEA-SEC?
The answer lies in the State’s labor relations policy laid down in the
Constitution and fleshed out in the enabling statute, the Labor Code. Section
3, Article XIII (on Social Justice and Human Rights) of the Constitution
declares:
x xxxThe State shall promote the principle of shared responsibility between
workers and employers and the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce their mutual compliance
therewith to foster industrial peace.
Article 260 of the Labor Code (Grievance machinery and voluntary arbitration)
states:
The parties to a Collective Bargaining Agreement shall include therein
provisions that will ensure the mutual observance of its terms and conditions.
They shall establish a machinery for the adjustment and resolution of
grievances arising from the interpretation or implementation of their Collective
Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies.
Article 261 of the Labor Code (Jurisdiction of Voluntary Arbitrators or panel of
Voluntary Arbitrators), on the other hand, reads in part:
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original
and exclusive jurisdiction to hear and decide all unresolved grievances arising
from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of
company personnel policies[.]
Article 262 of the Labor Code (Jurisdiction over other labor disputes)
declares:
The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of
the parties, shall also hear and decide all other labor disputes including unfair
labor practices and bargaining deadlocks.
Further, the POEA-SEC, which governs the employment of Filipino seafarers,
provides in its Section 29 on Dispute Settlement Procedures:
49
In cases of claims and disputes arising from this employment, the parties
covered by a collective bargaining agreement shall submit the claim or
dispute to the original and exclusive jurisdiction of the voluntary arbitrator or
panel of voluntary arbitrators. If the parties are not covered by a collective
bargaining agreement, the parties may at their option submit the claim or
dispute to either the original and exclusive jurisdiction of the National Labor
Relations Commission (NLRC), pursuant to Republic Act (RA) 8042
otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995
or to the original and exclusive jurisdiction of the voluntary arbitrator or panel
of voluntary arbitrators. If there is no provision as to the voluntary arbitrators
to be appointed by the parties, the same shall be appointed from the
accredited voluntary arbitrators of the National Conciliation and Mediation
Board of the Department of Labor and Employment. [emphasis ours]
We find merit in the petition.
Under the above-quoted constitutional and legal provisions, the voluntary
arbitrator or panel of voluntary arbitrators has original and exclusive
jurisdiction over Fernandez’s disability claim. There is no dispute that the
claim arose out of Fernandez’s employment with the petitioners and that their
relationship is covered by a CBA — the AMOSUP/TCC or the AMOSUP-
VELA CBA. The CBA provides for a grievance procedure for the resolution of
grievances or disputes which occur during the employment relationship and,
like the grievance machinery created under Article 261 of the Labor Code, it
is a two-tiered mechanism, with voluntary arbitration as the last step.
Contrary to the CA’s reading of the CBA’s Article 14, there is unequivocal or
unmistakable language in the agreement which mandatorily requires the
parties to submit to the grievance procedure any dispute or cause of action
they may have against each other. The relevant provisions of the CBA state:
14.6 Any Dispute, grievance, or misunderstanding concerning any ruling,
practice, wages or working conditions in the COMPANY or any breach of the
Contract of Employment, or any dispute arising from the meaning or
application of the provisions of this Agreement or a claim of violation thereof
or any complaint or cause of action that any such Seaman may have against
the COMPANY, as well as complaints which the COMPANY may have
against such Seaman shall be brought to the attention of the GRIEVANCE
RESOLUTION COMMITTEE before either party takes any action, legal or
otherwise. Bringing such a dispute to the Grievance Resolution Committee
shall be unwaivable prerequisite or condition precedent for bringing any
action, legal or otherwise, in any forum and the failure to so refer the dispute
shall bar any and all legal or other actions.
14.7a) If by reason of the nature of the Dispute, the parties are unable to
amicably settle the dispute, either party may refer the case to a
MANDATORY ARBITRATION COMMITTEE. The MANDATORY
ARBITRATION COMMITTEE shall consist of one representative to be
designated by the UNION, and one representative to be designated by the
COMPANY and a third member who shall act as Chairman and shall be
nominated by mutual choice of the parties. xxx
h) Referral of all unresolved disputes from the Grievance Resolution
Committee to the Mandatory Arbitration Committee shall be unwaivable
prerequisite or condition precedent for bringing any action, claim, or cause of
action, legal or otherwise, before any court, tribunal, or panel in any
jurisdiction. The failure by a party or seaman to so refer and avail oneself to
the dispute resolution mechanism contained in this action shall bar any legal
or other action. All parties expressly agree that the orderly resolution of all
claims in the prescribed manner served the interests of reaching settlements
or claims in an orderly and uniform manner, as well as preserving peaceful
and harmonious labor relations between seaman, the Union, and the
Company.27 (emphases ours)
What might have caused the CA to miss the clear intent of the parties in
prescribing a grievance procedure in their CBA is, as the petitioners’ have
intimated, the use of the auxiliary verb "may" in Article 14.7(a) of the CBA
which, to reiterate, provides that "if by reason of the nature of the Dispute, the
parties are unable to amicably settle the dispute, either party may refer the
case to a MANDATORY ARBITRATION COMMITTEE."28
While the CA did not qualify its reading of the subject provision of the CBA, it
is reasonable to conclude that it viewed as optional the referral of a dispute to
the mandatory arbitration committee when the parties are unable to amicably
settle the dispute.
We find this a strained interpretation of the CBA provision. The CA read the
provision separately, or in isolation of the other sections of Article 14,
especially 14.7(h), which, in clear, explicit language, states that the "referral
of all unresolved disputes from the Grievance Resolution Committee to the
Mandatory Arbitration Committee shall be unwaivable prerequisite or
condition precedent for bringing any action, claim, or cause of action, legal or
otherwise, before any court, tribunal, or panel in any jurisdiction" 29 and that
the failure by a party or seaman to so refer the dispute to the prescribed
dispute resolution mechanism shall bar any legal or other action.
Read in its entirety, the CBA’s Article 14 (Grievance Procedure) unmistakably
reflects the parties’ agreement to submit any unresolved dispute at the
grievance resolution stage to mandatory voluntary arbitration under Article
14.7(h) of the CBA. And, it should be added that, in compliance with Section
29 of the POEA-SEC which requires that in cases of claims and disputes
arising from a seafarer’s employment, the parties covered by a CBA shall
submit the claim or dispute to the original and exclusive jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators.
Since the parties used unequivocal language in their CBA for the submission
of their disputes to voluntary arbitration (a condition laid down in Vivero  for
the recognition of the submission to voluntary arbitration of matters within the
original and exclusive jurisdiction of labor arbiters), we find that the CA
committed a reversible error in its ruling; it disregarded the clear mandate of
the CBA between the parties and the POEA-SEC for submission of the
present dispute to voluntary arbitration.
Consistent with this finding, Fernandez’s contention — that his complaint for
disability benefits is a money claim that falls within the original and exclusive
jurisdiction of the labor arbiter under Section 10 of R.A. No. 8042 — is
untenable. We likewise reject his argument that he never referred his claim to
the grievance machinery (so that no unresolved grievance exists as required
under Article 261 of the Labor Code), and that the parties to the case are not
the union and the employer.30 Needless to state, no such distinction exists in
the parties’ CBA and the POEA-SEC.

It bears stressing at this point that we are upholding the jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators over the present dispute,
not only because of the clear language of the parties’ CBA on the matter;
more importantly, we so uphold the voluntary arbitrator’s jurisdiction, in
recognition of the State’s express preference for voluntary modes of dispute
settlement, such as conciliation and voluntary arbitration as expressed in the
Constitution, the law and the rules.
In this light, we see no need to further consider the petitioners’ submission
regarding the IRR of the Migrant Workers and Overseas Filipinos Act of 1995,
as amended by R.A. No. 10022, except to note that the IRR lends further
support to our ruling.
In closing, we quote with approval a most recent Court pronouncement on the
same issue, thus –
It is settled that when the parties have validly agreed on a procedure for
resolving grievances and to submit a dispute to voluntary arbitration then that
procedure should be strictly observed.31 (emphasis ours)
WHEREFORE, premises considered, the petition is GRANTED. The assailed
decision and resolution of the Court of Appeals are SET ASIDE. Teodorico
Fernandez's disability claim is REFERRED to the Grievance Resolution
Committee of the parties' collective bargaining agreement and/or the
Mandatory Arbitration Committee, if warranted.
SO ORDERED.
SECOND DIVISION
G.R. No. 203957               July 30, 2014
UNIVERSITY OF SANTO TOMAS FACULTY UNION, Petitioner,  According to [USTFU], Section D(2) of the 1996-2001 CBA provides that:
vs.UNIVERSITY OF STO. TOMAS, Respondent.
DECISION
CARPIO, J.:
The Case
G.R. No. 203957 is a petition for review1 assailing the Decision2 promulgated
on 13 July 2012 as well as the Resolution 3 promulgated on 19 October 2012
by the Court of Appeals (CA) in CA-G.R. SP No. 120970. The CA set aside
the 8 June 2011 Decision4 and 29 July 2011 Resolution5 of the Fourth
Division of the National Labor Relations Commission (NLRC) in NLRC LAC
No. 10-003370-08, as well as the 24 September 2010 Decision 6 of the Labor
Arbiter (LA) in NLRC-NCR Case No. 09-09745-07.
In its 24 September 2010 decision, the LA ordered the University of Santo
Tomas (UST) to remit ₱18,000,000.00 to the hospitalization and medical
benefits fund (fund) pursuant to the mandate of the 1996-2001 Collective
Bargaining Agreement (CBA).The LA also ordered UST to pay 10% of the
total monetary award as attorney’s fees. The other claims were dismissed for
lack of merit. In its 8 June 2011 decision, the NLRC ordered UST to remit to
the University of Santo Tomas Faculty Union (USTFU) the amounts of
₱80,000,000.00 for the fund pursuant to the CBA and ₱8,000,000.00 as
attorney’s fees equivalent to 10% of the monetary award. The NLRC denied
UST’s motion for reconsideration for lack of merit.
In its 13 July 2012 decision, the CA found grave abuse of discretion on the
part of NLRC and granted UST’s petition. The CA set aside the decisions of
the NLRC and the LA, without prejudice to the refiling of USTFU’s complaint
in the proper forum. The CA denied USTFU’s motion for reconsideration for
lack of merit.
50
The Facts
The CA recited the facts as follows:
In a letter dated February 6, 2007, [USTFU] demanded from [UST], through
its Rector, Fr. Ernesto M. Arceo, O.P. ("Fr. Arceo"), remittance of the total
amount of ₱65,000,000.00 plus legal interest thereon, representing
deficiency in its contribution to the medical and hospitalization fund ("fund") of
[UST’s] faculty members. [USTFU] also sent [UST] a letter dated February
26, 2007, accompanied by a summary of its claims pursuant to their 1996-
2001 CBA.
On March 2, 2007, Fr. Arceo informed [USTFU] that the aforesaid benefits
were not meant to be given annually but rather as a one-time allocation or
contribution to the fund.[USTFU] then sent [UST] another demand letter dated
June 24, 2007 reiterating its position that [UST] is obliged to remit to the fund,
its contributions not only for the years 1996-1997 but also for the subsequent
years, but to no avail.
Thus, on September 5, 2007 [USTFU] filed against [UST], a complaint for
unfair labor practice, as well as for moral and exemplary damages plus
attorney’s fees before the arbitration branch of the NLRC.
[UST] sought the dismissal of the complaint on the ground of lack of
jurisdiction. It contended that the case falls within the exclusive jurisdiction of
the voluntary arbitratoror panel of voluntary arbitrators because it involves the
interpretation and implementation of the provisions of the CBA; and the
conflict between the herein parties must be resolved as grievance under the
CBA and not as unfair labor practice.
[UST’s] motion to dismiss was denied by the LA in its August 8, 2008 order.
[UST] appealed the Order to the NLRC. The NLRC Seventh Division,
however, dismissed the appeal on May 12, 2009 and remanded the case to
the LA for further proceedings.
The NLRC, in its assailed decision, correctly summarized the issues and
submissions of the hereinparties in their respective position papers, as
follows:
According to [UST], the parties had, in the past, concluded several Collective
Bargaining Agreements for the mutual benefit of the union members and
[UST], and one of these agreements was the 1996-2001 CBA. It is
undisputed that one of the economic benefits granted by [UST] under the said
CBA was the "Hospitalization Fund," provided under Section 1-A(4) of the
Article XIII thereof, the pertinent provisions of which state:
ARTICLE XIII
ECONOMIC BENEFITS
Section 1. ECONOMIC BENEFITUpon ratification and approval and for the
term of this Agreement, the economic benefits to be granted by the
UNIVERSITY and the schedule of such releases are as follows:
A. School Year 1996-97 (June 1, 1996 to May 31, 1997):
x xx
4. Hospitalization Fund: Upon ratification and approval hereof, the
UNIVERSITY shall establish a perpetual hospitalization and medical benefits
fund in the sum of TWO MILLION PESOS (₱2,000,000) to be managed
conjointly by a hospitalization and medical benefits committee where both
management and union are equally represented.
x xx
B. School Year 1997-98 (June 1, 1997-May 31, 1998);
x xx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE
MILLION PESOS (₱1,000,000) to augment the Hospitalization and Medical
Benefits fund. The saidsum shall be addedto the remaining balance of
theaforementioned fund;
x xx
C. School Year 1998-99 (June 1, 1998-May 31, 1999);
x xx
2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE
MILLION PESOS (₱1,000,000) to augment the Hospitalization and Medical
Benefits Fund. The said sum shall be added to the remaining balance of the
aforementioned fund;
D. Miscellaneous Provisions:
x xx
2. All the economic benefits herein given and those elsewhere provided under
this agreement, other than retirement benefits and one-half of the signing
bonus, are chargeable to the tuition fee share, if any, of the faculty members;
x xx           x xx          x xx
[USTFU] added that the amount offour (4) million pesos was agreed to be
paid by the Universityto the Hospitalization Fund annually for the fourth and
fifth year of their CBA, pursuant to the parties’ Memorandum of Agreement
(MOA) which embodied the renegotiated economic provisions of the said
CBAfor the years 1999-2000 and 2000-2001.
‘All the economic benefitsherein given and those elsewhere provided under
thisagreement, other than retirement benefits and one-half of the signing
bonus, are chargeable to the tuition fee share, if any, of the faculty members.’
[USTFU] explained that the rationale for the above-quoted provision is that
the economic benefits under the said CBA like the Hospitalization and
Medical BenefitsFund, are sourced from the tuition fee increases and
pursuant thereto, [UST] is obligated to remit the amount of ₱2,000,000.00 not
only in the first year of the CBA (1996-1997) but also in the subsequent years
because the said amount became an integral part of the current or existing
tuition fee. Furthermore, [UST] is likewise obligated to slide in the amounts
allocated for the Hospitalization and Medical Benefits Fund for the
succeeding years to the next CBA year and so on and so forth. [USTFU]
claimed that the tuition fee increase once integrated to the old amount of
tuition fee becomes and remains an integral part of the existing tuition fee.
[USTFU] averred that while [UST] remitted the amount of ₱2,000,000.00
during the first year of the 1996-2001 CBA, [UST] did not slide-in or remit the
said amount in the succeeding year (1997-1998). [UST] only remitted the
amount of ₱1,000.000,000.00 [sic] for the CBA year 1998-1999. Moreover,
[UST] remitted only the amount of ₱1,000,000.00 on the third year of the
CBA instead of ₱4,000,000.00 (2 Million + 1 Million + 1 Million). And though
[UST] remitted the amount of ₱4,000,000 during the fourth year (2) [sic] of
the 1996-2001 CBA, it did not remit any amount at all during the fifth year of
the said Agreement.
 51

[USTFU] claimed that during the period of the 1996-2001 CBA, [UST] should scheduled school year. Accordingly, [UST] averred that it was not guilty of In fine, the total unremitted amountto the [hospitalization and medical
have remitted the total amount of ₱25,000,000.00 instead of ₱8,000,000.00 unfair labor practice. benefits] fund is eighteen million (₱18,000,000.00) pesos. ₱8M for SY 1996-
only. Thus, a deficiency of ₱17,000,000.00. [USTFU’s] assertion is based on [UST] further argued that the claim of [USTFU] had already been barred by 2001 and ₱10M for SY 2001-2006.9
the following illustration: prescription since under Article 290 of the Labor Code all unfair labor practice
Year 1 Year 2 Year 3 Year 4 Year 5 Actual Total [cases] should be filed within one (1) year from the accrual thereof otherwise The LA did not find UST’s non-compliance with the 1996-2001 CBA as acts
1996-97 1997-98 1998-99 1999-00 2000-01 amount amount to they shall forever be barred. And assuming that the instance [sic] case may that constituteunfair labor practice.
remitted [be] be considered as a money claim, the same already prescribed after three (3)
remitted years fromthe time the cause of action accrued.
The failure of [UST] to slide in yearly the ₱2M hospitalization fund is not
2M 2M did not 2M did not 2M did not 2M did 2M 10M violation of the CBA but an error in the interpretation of the provision of the
Finally, [UST] maintained that the present dispute should not be treated as
remitted slide slide slide not CBA. It could not be said eitherthat [UST] acted with malice and bad faith in
unfair labor practice but should be resolved as a grievance under the CBA
slide view of the compliance with the other economic provision[s] of the CBA. An
and referred to a Voluntary Arbitrator.
error in the interpretation of a provision in the CBA, absent any malice or bad
  1M 1M did not 1M did not 1M did 1M 4M The parties thereafter submitted their respective Replies and Rejoinders
faith could not be considered as unfair laborpractice as held in the case of
remitted slide slide not amplifying their arguments while refuting those made by the other. 7
Singapore Airlines Local Employees Association vs. NLRC, et al., 130 SCRA
slide The Labor Arbiter’s Ruling
472.10
The LA ruled in favor of USTFU.The LA classified USTFU’s complaint as one
The dispositive portion of the LA’s Decision reads:
    1M 1M did not 1M did 1M 3M for "unfair labor practice, claims for sliding in of funds to hospitalization and
WHEREFORE, premised on the foregoing considerations, judgment is hereby
remitted slide not medical benefits under the CBA, damages and attorney’s fee with prayer for
rendered ordering [UST] to remit the amount of eighteen million
slide slide-in and restoration of medical benefits under the CBA." 8 The LA ruled
(₱18,000,000.00) pesos to [the] hospitalization and medical benefits fund
that UST was not able to comply with Article XIII, Section 1A-(4) of the 1996-
      4M 4M did 4M 8M pursuant tothe mandate of the Collective Bargaining Agreement on economic
2001 CBA. However, despite UST’s alleged non-compliance, the LA ruled
remitted not benefits.
that UST did not commit unfair labor practice.
slide
[UST is] likewise directed to pay attorney’s fee[s] equivalent to ten (10)
        Total 8M 25M The LA interpreted the pertinent CBA provisions to mean that UST bound
percent of the total monetary award in this case.
itself to contribute to the fund ₱2,000,000.00 every school year, regardless of
Other claims dismissed for lack of merit.
the appropriated augmentation amount. The LA computed UST’s liability in
[USTFU] added that after the fifth year of the CBA, i.e. 2001 onwards, [UST] SO ORDERED.11
this manner:
ought to remit the amount of ₱8,000,000.00 ([2]M+1M+1M+4M) annually to USTFU filed a Memorandum of Partial Appeal12 from the LA’s Decision.
the Hospitalization and Medical Benefits Fund. Hence, for the school USTFU claimed that the LA erred in holding that UST is liable to USTFU in
year2001-2002 up to the school year 2005-2006, an additional amount of Considering that the pertinent provision of the [1996-2001] CBA Article XIII, the amount of ₱18 million only, and in not holding that the amounts claimed
₱24,000,000.00 (8M x 3) should have been remitted by [UST] to the Section 1A(4) stated that"The University shall establish a perpetual by USTFU should beremitted by UST to USTFU. USTFU claimed that, as of
aforesaid fund.All in all, the total amount yet to be remitted had ballooned to hospitalization and medical benefits fund in the sum of two million pesos 2011, UST’s total liability to the fund is ₱97 million: ₱17 million for CBA years
₱81,000,000.00. (₱2,000,000.00) x xxx" it follows that the amount of ₱2M every school year 1996 to 2001, ₱40 million for CBA years 2001 to 2006, and ₱40 million for
must beslided in regardless of the augmentation amount as may be CBA years 2006 to 2011. USTFU also claimed that the amount should be
appropriated. The wordshall is mandatory and the word perpetual [is] remitted byUST to USTFU for proper turnover to the fund.
Furthermore, [USTFU] averred that [UST] likewise failed and refused to continuous thus, [UST] is obligated to remit the actual amount to wit:
render a proper accounting ofthe monies it paid or released to the covered
SY 1996-1997 – ₱2M = ₱2M UST, on the other hand, filed an Appeal Memorandum. 13 UST claimed that
faculty as well as the money it received as tuition fee increase starting from
school year 1997-1998 onwards thereby violating Section D (1), Article XIII of SY 1997-1998 – ₱2M + ₱1M = ₱3M the LA committed grave abuse of discretion in taking cognizance over the
the 1996-2001 CBA which provides that: case because the issue is within the jurisdiction of the voluntary arbitrator.
SY 1998-1999 – ₱2M + ₱1M = ₱3M UST further claimed that the LA committed grave abuse of discretion in
SY 1999-2000 – ₱4M (Renegotiated) = ₱4M finding that UST erred in its interpretation of the CBA and in not finding that
‘At the end of this agreement, and within three (3) months therefrom, the USTFU’s claims are already barred by prescription.
UNIVERSITY shall render an accounting of the monies it paid or released to SY 2000-2001 – ₱4M = ₱4M The NLRC’s Ruling
the covered faculty in consequence hereof.’ The NLRC granted USTFU’s appeal and denied UST’s appeal for lack of
TOTAL REMITTANCE = ₱16M
merit. The NLRC ordered UST to pay USTFU ₱80,000,000.00 and attorney’s
On the other hand, [UST] claimed that it religiously complied with the fees equivalent to ten percent of the monetary award.
economic provisions of the 1996-2001CBA particularly its obligation to remit Thus, [UST] therefore has an unremitted fund of Eight Million
to the Hospitalization and Medical Benefits Fund as the renegotiated (₱8,000,000.00) pesos. The NLRC pointed out that UST’s refusal to comply, despite repeated
economic provisions under the MOA by remitting the total amount of Corollarily, the CBA covering the period SY 2001-2006 [UST] is under demands, with the CBA’s economic provisions is tantamount to a gross and
₱8,000,000.00. [UST] claimed that it was never the intention of the parties to obligation to remit two (2) million (₱2,000,000.00) [sic] pesos every year or a flagrant violation. Thus, the present case properly falls under the LA’s original
the CBA that the amounts deposited to the Hospitalization fund for each year total of ten million (₱10,000,000.00) pesos in addition to whatever jurisdiction as well as the NLRC’s appellate jurisdiction. The issue of
shall be carried over to the succeeding years. UST added that the MOA augmented amount stipulated in the CBA. prescription also cannot be heldagainst USTFU because the cause of action
likewise madeno mention that the amount of ₱4,000,000.00 corresponding to accrued only when UST refused to comply with USTFU’s 6 February 2007
the school year 1999-2000 should be carried over to the next school year. demand letter. The demand letter was sent only after the conduct of
Thus, it was safe to conclude that the clear intention of the parties was that proceedings in the Permanent Union-University Committee (PUUC).
the amounts indicated on the CBA should only be remitted once on the
 52

The NLRC noted that the subsequent CBAs between UST and USTFU show 2011 CBAs. The NLRC also ordered UST to pay USTFU attorney’s fees at 2. The Court of Appeals acted in a way not in accord with the applicable
that the parties intendedthat the amount appropriated each year to augment 10% of the monetary award. decisions of the Supreme Court in holding that the voluntary arbitrator has
the fund shall be carried over to the succeeding years and is chargeable to jurisdiction over the instant case despite the fact that Article XIII ("Grievance
the tuition fee increment. The NLRC ruled that the amounts appropriated for Machinery") of the CBA is not applicable.
UST filed a motion for reconsideration of the NLRC decision. UST again
each year during the effectivity of the 1996-2001 CBA should still be claimed that the Voluntary Arbitrator, and not LA, had jurisdiction over the
appropriated to the succeeding years. From school year 1997-1998 and 3. The Court of Appeals committed grave abuse of discretion in the
interpretation of the CBA; the ₱80,000,000.00 award had no basis; and the
onwards, the basis for suchcarry over is that the amounts were sourced from appreciation of facts in not finding that under Art. XXII of the CBA, the
fund should be remitted to the Hospital and Medical Benefits Committee, not
tuition increases corresponding to a given school year. Since any increase in Permanent University-Union Committee (PUUC) is the proper forum to
to USTFU, as stated in the CBA.
tuition is integrated into the subsequent tuition, the amount allocated to the resolve the dispute betweenUST and USTFU. However, Art. XXII does not
fund because of the tuition increaseshould be remitted to the fund. The 2001-
provide for a "voluntary arbitration" clause and therefore, USTFU validly filed
2006 and 2006-2011 CBAs have express provisions on the carry over. The In a Resolution promulgated on 29 July 2011, the NLRC denied UST’s motion
for reconsideration for lack of merit. the complaint for ULP before the Labor Arbiter.
NLRC computed UST’s deficiency14 as follows:
4. The Honorable Court of Appeals committed grave abuse of discretion in its
For the 1996-2001 CBA: UST filed a petition for certiorari and prohibition under Rule 65 of the Rules of appreciation of evidence in not finding that the parties agreed to have the
Court before the CA. UST still questioned the jurisdiction of the LA, as well as dispute resolved by the labor tribunals and UST had actively participated in
Year 1 Year 2 Year 3 Year 4 Year 5 Total amount
the award of ₱80,000,000.00. UST also claimed that USTFU’s money claims the proceedings before the Labor Arbiter and the NLRC which is tantamount
1996-97 1997-98 1998-99 1999-00 2000-01 that should
are barred byprescription, and that the proper recipient of the award should to a recognitionof the jurisdiction of the said bodies.
be submitted
bethe Hospital and Medical Benefits Committee. Finally, UST also questioned
2M 2M 2M 2M 2M   the award for attorney’s fees.15 5. The Court of Appeals departed from the usual course of proceedings in
referring back the case to voluntary arbitration despite the fact that the parties
  1M 1M 1M 1M  
On 8 November 2011, USTFU filed a comment before the CA. USTFU already fully and exhaustively litigated the case before the Labor Arbiter and
    1M 1M 1M   claimed that the NLRC did not commit grave abuse of discretion in finding the NLRC which both correctly found in favor of USTFU. Moreover, referral to
that USTFU is entitled to its claims for payment of the unremitted benefits. voluntary arbitration would result in waste of precious time in relitigating the
      4M 4M   USTFU also claimed that certiorari is not a proper remedy for UST because case all over again.21
the NLRC did not commit any grave abuse of discretion. 16
2M + 3M + 4M + 8M + 8M = 25M
The Court of Appeals’ Ruling UST, for its part, enumerated the following grounds for opposing USTFU’s
The CA, in its decision promulgated on 13 July 2012, disposed of the present petition:
Since it is undisputed that [UST] remitted the amount of Ph₱8,000,000.00 case by agreeing with UST’s argument that the LA and the NLRC did not 1. The Court of Appeals correctly ruled that it is the Voluntary Arbitrator which
only, there is stilla deficiency of Ph₱17,000,000.00 corresponding to the have jurisdiction to hear and decide the present case. The CA stated that has jurisdiction over the instant case.
1996-2001 CBA. since USTFU’s ultimateobjective is to clarify the relevant items in the CBA,
2. Assuming arguendo that NLRC has jurisdiction over the instant case, it
x xxx then USTFU’s complaint should have been filed with the voluntary arbitrator
clearly erred when it made an award not prayed for in petitioner USTFU’s
For the 2001-2006 CBA: or panel of voluntary arbitrators.
The dispositive portion of the CA’s decision reads: complaint, in effect mandating double payment.
Year 1 Year 2 Year 3 Year 4 Total amount WHEREFORE, finding grave abuse of discretion on the part of public 3. Assuming arguendo that NLRC has jurisdiction over the instant case, it
2001-02 2002-03 2003-04 2005-06 that should be respondent NLRC, the petition isGRANTED. Without prejudice to the re-filing erred in ruling that respondent UST is still liable to pay the amount of
submitted of private respondent’s complaint with the proper forum, the assailed NLRC ₱17,000,000.00 for the period 1996-2001 under the 1996-2001 CBA
decision dated June 8,2011 and resolution dated July 29, 2011 in NLRC LAC considering that:
2M 2M 2M 2M  
No. 10-003370-08, as well as the decision dated September 24, 2010 of the a. There is no slide-in provision in the 1996-2001 CBA.
  3M 3M 3M   Labor Arbiter in NLRC-NCR Case No. 09-09745-07 are hereby SET ASIDE. b. The amounts allocated for the Hospitalization Fund during SYs 1996-2001
SO ORDERED.17 were not sourced from the 70% share of the teaching and non-teaching
    3M 3M   USTFU filed its motion for reconsideration18 before the CA. USTFU personnel in the tuition fee increases.
2M + 5M + 8M + 8M = 23M maintained that the LA and the NLRC had jurisdiction over the subject matter 4. The complaint for money claims ofpetitioner USTFU arising from the
of the complaint. interpretation of the 1996-2001 CBA isalready barred by prescription.
5. Assuming arguendo that NLRC has jurisdiction over the instant case, it
For the 2006-2011 CBA: In a resolution19 promulgated on 19 October 2012, the CA denied USTFU’s unjustly and erroneously ordered respondent UST to pay the subject amount
Year 1 Year 2 Year 3 Year 4 Year 5 Total amount motion for reconsideration for lack of merit. to petitioner USTFU and notto the Hospital and Medical Benefits Committee
2006-07 2007- 2008-09 2009-10 2010-11 that should USTFU filed the present petition for review20 before this Court on 7 December under the CBA.22
08 be submitted 2012. The Court’s Ruling
The Issues The petition has no merit. We shall address the issues raised by the parties
8M + 8M + 8M + 8M + 8M = 40M USTFU enumerated the following grounds warranting allowance of its
one by one.
petition:
Jurisdiction over the Present Case
1. The Honorable Court of Appeals departed from the usual course of judicial
The NLRC computed UST’s total liability for school years 1996-1997 up to On the issue of jurisdiction, we affirm with modification the ruling of the CA.
proceedings in holding that the Labor Arbiter and the NLRC have no
2010-2011 at ₱80,000,000.00. The records show that UST remitted The Labor Arbiter has no jurisdiction over the present case; however, despite
jurisdiction over the complaint for unfair labor practice (ULP) filed by USTFU.
₱8,000,000.00 for 1996-2001 CBA, and there is absence of proof that the the lack of jurisdiction, we rule on the issues presented. We recognize that a
additional contributions to the fund were made for the 2001-2006 and 2006- remand to the voluntary arbitration stage will give rise to the possibility that

this case will still reach this Court through the parties’ appeals. Furthermore, it
does not serve the cause of justice if we allow this case to go unresolved for
aninordinate amount of time.
We quote the pertinent Articles of the Labor Code of the Philippines below:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as
otherwise provided underthis Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after
the submission of the case by the parties for decision without extension, x x x:
1. Unfair labor practices cases;
x xxx(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective
bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the Labor
Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may beprovided in said agreements.
Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators.
– The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original
and exclusive jurisdiction to hear and decide all unresolved grievances arising
from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article.
Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor
practice and shall be resolved as grievances under the Collective Bargaining
Agreement. For purposes of this article, gross violations of Collective
Bargaining Agreement shall mean flagrant and/ormalicious refusal to comply
with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel ofVoluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement.
Art. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator or
panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear
and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.
Art. 262-A. Procedures. – The Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have the power to hold hearings, receive evidences and take
whatever action isnecessary to resolve the issue or issues subject to the
dispute, including efforts to effect a voluntary settlement between the parties.
All parties to the dispute shall be entitled to attend the arbitration
proceedings. The attendance of any third party to the exclusion of any
witness from the proceedings shall be determined by the Voluntary Arbitrator
or panel of Voluntary Arbitrators. Hearing may be adjourned for cause or
upon agreement by the parties.
53
Unless the parties agree otherwise,it shall be mandatory for the Voluntary
Arbitrator or panel of Voluntary Arbitrators to render an award or decision
within twenty (20) calendar days from the date of submission of the dispute to
voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary
Arbitrators shall contain the facts and the law on which it is based. It shall be
final and executory after ten (10) calendar days from receipt of the copy of the
award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of
Voluntary Arbitrators or the Labor Arbiter in the region where the movant
resides, in case of the absence or incapacity of the Voluntary Arbitrator or
panel of Voluntary Arbitrators for any reason, may issue a writ of execution
requiring either the sheriff of the Commission or regular courts or any public
official whom the parties may designate in the submission agreement to
execute the final decision, order or award.
On the other hand, the pertinent provisions in the 1996-2001 CBA between
UST and USTFU provide:
ARTICLE X
GRIEVANCE MACHINERY
Section 1. Grievance.– Any misunderstanding concerning policies and
practices directly affecting faculty members covered by this [collective
bargaining] agreement ortheir working conditions in the UNIVERSITY or any
dispute arising as to the meaning, application or violation of any provisions of
thisAgreement or any complaint that a covered faculty member may
haveagainst the UNIVERSITY shall be considered a grievance.
Section 2. Exclusion. – Termination of employment and preventive
suspension shall be exempted from the provisions of this Article as the same
shall be governed by the procedure in the Labor Code and its Implementing
Rules.
Section 3. Procedure. – A grievance shall be settled as expeditiously as
possible in accordance with the following procedure:
STEP I. Upon presentation of a grievance in writing by the aggrieved faculty
member, to the FACULTY UNION Grievance Officer, the said officer shall
present the same to the Dean or school/department head concerned who
shall render his decision on the matter within five (5) school days from the
date of the presentation. If the aggrieved party is not satisfied with the
decision, or if the Dean or school/department head fails toact within the five-
schoolday period, appeal may be made to Step II within five (5) school days
from receipt of the decision or, in the absence of a decision, the expiration
ofthe period for its rendition. If no appeal is made within the period of appeal,
the grievance shall be deemed settled on the basis of Step I.
STEP II. All appeals from StepI shall be presented to and considered by an
Adjudication Committee which shall be composed of two (2) representatives
chosen by the UNIVERSITY and two (2) representatives chosen by the
FACULTY UNION. The Committee shall meet within ten (10) school days
after the elevation to this step and and try to settle the grievance to the
satisfaction of all concerned. It shall render its decision within twenty (20)
school days following the presentation of the grievance to the Adjudication
Committee. A quorum for any meeting of the Committee shall consist of a
majority of its entire membership. The affirmative vote of at least three (3)
members of the Committee shall be necessary to reach a decision. If the
Committee renders a decision, the grievance shall be deemed settled
accordingly. If the Committee fails to make a decision within the period of
twenty (20) days above stated, the FACULTY UNION President may, within
ten (10)days thereafter elevate the grievance to Step III.
STEP III. The grievance appealed to this step shall be handled by the
FACULTY UNION President who shall take it up with the Rector of the
UNIVERSITY who, in turn, shall settle the grievance within ten (10) days. If
no settlement is arrived at within the aforementioned period, the grievance
will automatically be referred to voluntary arbitration.
STEP IV. The mechanics of arbitration shall be as follows:
(a) The UNIVERSITY and the FACULTY UNION shall select within three (3)
days, by raffle or process of elimination, an arbitrator mutually agreeable to
them preferably from the list provided by the Bureau of Labor Relations.
(b) The voluntary arbitrator shall render an award within ten (10) days after
the issue in dispute is submitted for decision and his award shall be final and
binding upon all parties to the grievance. (c) Arbitration costs shall be shared
equally by the UNIVERSITY and the FACULTY UNION. 23
ARTICLE XXII
PERMANENT UNIVERSITY-UNION COMMITTEE (PUUC)
Permanent UNION-UNIVERSITY Committee (PUUC). – The UNIVERSITY
and the FACULTY UNION realize that notwithstanding this CBA, there will
remain problems and irritants which will require the continuing attention of
both parties. Symbolic of the mutual good faith of the parties, they have
agreed to establish a permanent committee, where the UNIVERSITY and the
FACULTY UNION are equally represented, to address these problems as
they arise.
a. Within thirty (30) days from signing of this Agreement, the Committee shall
meet. The members of the Committee are the following:
1) For the ADMINISTRATION:
a) Rector or his representative;
b) Vice Rector for Academic Affairs or his representative;
c) Vice Rector for Finance or his representative; and d) Appointee of the
Rector.
2) For the FACULTY UNION:
a) President of the UNION;
b) Executive Vice President of the UNION or his representative;
c) Secretary General orhis representative; and
d) Appointee of the UNION President.
b. The regular meetings of this Committee shall be held at least bimonthly or
as the need arises. c. The decision reached in the PUUCMeetings shall be
binding to all UNIVERSITY functionaries.24
Jurisdiction is determined by the allegations of the complaint. In the present
case, USTFU alleged that UST committed unfair labor practice in its blatant
violation of the economic provisions of the 1996-2001 CBA, and
subsequently, the 2001-2006 and 2006-2011 CBAs. UST, meanwhile, has
consistently questioned USTFU’s act of bringing the case before the LA, and
of not submitting the present case to voluntary arbitration. The LA assumed
jurisdiction, but ruled that UST did not commit any unfair labor practice in

UST’s interpretation of the economic provisions of the 1996-2001 CBA. The
NLRC, on the other hand, ruled that there was indeed unfair labor practice.
The CA ruled that the LA and the NLRC did not have jurisdiction as there was
no unfair labor practice. Reading the pertinent portions of the 1996-2001 CBA
along with those of the Labor Code, we see that UST and USTFU’s
misunderstanding arose solely from their differing interpretations of the CBA’s
provisions on economic benefits, specifically those concerning the fund.
Therefore, it was clearly error for the LA to assume jurisdiction over the
present case. The case should have been resolved through the voluntary
arbitrator or panel of voluntary arbitrators.
Article 217(c) of the Labor Code provides that the Labor Arbiter shall refer to
the grievance machinery and voluntary arbitration as provided in the CBA
those cases that involve the interpretation of said agreements. Article 261 of
the Labor Code further provides that all unresolved grievances arising from
the interpretation or implementation of the CBA, including violations of said
agreement, are under the original and exclusive jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators. Excluded from this original and
exclusive jurisdiction is gross violation of the CBA, which is defined in Article
261 as "flagrant and/or malicious refusal to comply with the economic
provisions" of the CBA. San Jose v. NLRC25 provides guidelines for
understanding Articles 217, 261, and 262:
1. The jurisdiction of the Labor Arbiter and Voluntary Arbitrator or Panel of
Voluntary Arbitrators over the cases enumerated in Articles 217, 261, and
262 can possibly include money claims in one form or another.
2. The cases where the Labor Arbiters have original and exclusive jurisdiction
are enumerated in Article 217, and that of the Voluntary Arbitrator or Panel of
Voluntary Arbitrators in Article 261.
3. The original and exclusive jurisdiction of Labor Arbiters is qualified by an
exception as indicated in the introductory sentence of Article 217 (a), to wit:
"Art. 217. Jurisdiction of Labor Arbiters ... (a) Except as otherwise provided
under this Code the Labor Arbiter shall have original and exclusive jurisdiction
to hear and decide ... the following cases involving all workers..."
The phrase "Except as otherwise provided under this Code" refers to the
following exceptions:
A. Art. 217. Jurisdiction of Labor Arbiters...
x xx
(c) Cases arising from the interpretation or implementation of collective
bargaining agreement and those arising from the interpretation or
enforcement of company procedure/policies shall be disposed of by the Labor
Arbiter by referring the same to the grievance machinery and voluntary
arbitrator as may be provided in said agreement.
B. Art. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator
or panel of Voluntary Arbitrators, upon agreement of the parties, shall also
hear and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.
Parenthetically, the original and exclusive jurisdiction of the Labor Arbiter
under Article 217 (c), for money claims is limited only to those arising from
54
statutes or contracts other than a Collective Bargaining Agreement. The
Voluntary Arbitrator or Panel of Voluntary Arbitrators will have original and
exclusive jurisdiction over money claims "arising from the interpretation or
implementation of the Collective Bargaining Agreement and, those arising
fromthe interpretation or enforcement of company personnel policies," under
Article 261.
4. The jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is
provided for in Arts. 261 and 262 of the Labor Code as indicated above.
1. A close reading of Article 261 indicates that the original and exclusive
jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is limited
only to:
"... unresolved grievances arising from the interpretation or implementation of
the Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies... Accordingly, violations of a
collective bargaining agreement, except those which are gross in character,
shall no longer be treated as unfair labor practice and shall be resolved
asgrievances under the Collective Bargaining Agreement. x xx."
2. Voluntary Arbitrators or Panel of Voluntary Arbitrators, however, can
exercise jurisdiction over any and all disputes between an employer and a
union and/or individual worker as provided for in Article 262.
"Art. 262. Jurisdiction over other labor disputes. - The voluntary arbitrator or
panel of voluntary arbitrators, upon agreement of the parties, shall also hear
and decide all other labor disputes including unfair labor practices and
bargaining deadlocks."
It must be emphasized that the jurisdiction of the Voluntary Arbitrator or Panel
of Voluntary Arbitrators under Article 262 must be voluntarily conferred upon
by bothlabor and management. The labor disputes referred to in the same
Article 262 can include all those disputes mentioned in Article 217 over which
the Labor Arbiter has original and exclusive jurisdiction.
As shown in the above contextual and wholistic analysis of Articles 217, 261,
and 262 of the Labor Code, the National Labor Relations Commission
correctly ruled that the Labor Arbiter had no jurisdiction to hear and decide
petitioner’s money-claim underpayment of retirement benefits, as the
controversy between the parties involved an issue "arising from the
interpretationor implementation" of a provision of the collective bargaining
agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators has
original and exclusive jurisdiction over the controversy under Article 261 of
the Labor Code, and not the Labor Arbiter.
Despite the allegation that UST refused to comply with the economic
provisions of the 1996-2001 CBA, we cannot characterize UST’s refusal as
"flagrant and/or malicious." Indeed, UST’s literal interpretation of the CBA
was, in fact, what led USTFU to fileits complaint. To our mind, USTFU
actually went beyond the text of the 1996-2001 CBA when it claimed that the
integrated tuition fee increase as described in Section 1D(2) is the basis for
UST’s alleged deficiency.
We cannot subscribe to USTFU’s view that the 1996-2001 CBA’s Article X:
Grievance Machinery is not applicable to the present case. When the issue is
about the grievance procedure, USTFU insists on a literal interpretation of the
1996-2001 CBA. Indeed, the present case falls under Section 1’s definition of
grievance:"[a]ny misunderstanding concerning policies and practices directly
affecting faculty members covered by this [collective bargaining] agreement
ortheir working conditions in the UNIVERSITY or any dispute arising as to the
meaning, application or violation of any provisions of this Agreement or any
complaint that a covered faculty member may have against the
UNIVERSITY." Section 2 excludes only termination and preventive
suspension from the grievance procedure.
USTFU’s focus is on the 1996-2001 CBA’s provisions about the grievance
process rather than the provision about the subject matters covered by the
grievance process. Despite UST’s alleged violation of the economic
provisions of the CBA by its insufficient remittances to the fund, a dispute
arising as to the meaning, application or violation of the CBA, USTFU used
Step I in Section 3, and ignored Steps III and IV, to rule out any referral to
voluntary arbitration. USTFU concludes that the 1996-2001 CBA’s provisions
on grievance machinery only refer to a grievance of a faculty member against
UST, and that said provisions do not contemplate a situation where USTFU
itself has a grievance against UST.
USTFU argues that the PUUC is the proper forum to resolve the issue, and
that the filing of a complaint beforethe LA is proper inthe absence of a
voluntary arbitration clause in the 1996-2001 CBA’s Article XXII: Permanent
University-Union Committee. However, as provided in the 1996-2001 CBA,
PUUC is established for "continuing problems and irritants which will require
the continuing attention" of UST and USTFU. Clearly, the PUUC addresses
mattersnot covered by the CBA.
USTFU’s adamant refusal to considervoluntary arbitration ignores Articles
261 to 262-A of the Labor Code, as well as Steps III and IV of Section 3 of the
1996-2001 CBA.
Accrual of Cause of Action andPrescription of Claims
USTFU’s claims arose from UST’s alleged failure to contribute the correct
amounts to the fund during the 1996-2001 CBA. However, USTFU did not
complain of any violation by UST during the lifetime of the 1996-2001 CBA.
Neither did USTFU complain of any violation by UST during the lifetime of the
succeeding 2001-2006 CBA. It was only on 6 February 2007 that USTFU
sent a demand letter to UST Rector Fr. Ernesto M. Arceo, O.P., for the
claimed hospitalization and medical benefits under the 1996-2001 CBA. On 2
March 2007, UST, through its Rector, Fr. Ernesto M. Arceo, O.P., informed
USTFU, through its President, Dr. Gil Gamilla, that "the hospitalization and
medical benefits contained in [the 1996-2001 CBA] were a one-time give, and
therefore not meant to slide." USTFU notified UST on 24 June 2007 about its
intent to file the necessary complaint. On 6 September 2007, USTFU filed a
complaint against UST before the LA.
The 1996-2001 CBA, as well as the applicable laws, is silent as to when
UST’s alleged violation becomes actionable. Thus, we apply Article 1150 of
the Civil Code of the Philippines: "The time for prescription for all kinds of
actions, when there is no special provision which ordains otherwise, shall be
 55

counted from the day they may be brought."26 Prescription of an action is SY 1999-2000 ₱8,000,000.00 ₱4,000,000.00 ₱4,000,000.00 fund in the sum of TWO MILLION PESOS (₱2,000,000) to be managed
counted from the time the action may be brought.27 conjointly by a hospitalization and medical benefits committee where both
management and union are equally represented.
It is error to state that USTFU’s cause of action accrued only upon UST’s SY 2000-2001 ₱8,000,000.00 - ₱8,000,000.00
categorical denial of its claims on 2 March 2007. USTFU’s cause of action The joint committee shall promulgate its internal rules and regulations, and on
accrued when UST allegedly failed to comply with the economic provisions of 2001 to 2006       the second year of this agreement, i.e., SY 1997-98, may allocate such
the 1996-2001 CBA. Upon such failure by UST, USTFU could have brought CBA amount as required, but not to exceed ten per cent (10%) of the gross income
an action against UST. of the fund,for administrative expenses. For the duration of the first year of
operation of the fund, the UNIVERSITY and the FACULTY UNION shall
Article 290 of the Labor Code provides that unfair labor practices prescribe SY 2001-2002 ₱8,000,000.00 ₱2,000,000.00 ₱6,000,000.00
equally subsidize the operations of the fund.
within one year "from accrual of such unfair labor practice; otherwise, they
shall be forever barred." Article 291 of the same Code provides that money SY 2002-2003 ₱8,000,000.00 ₱5,000,000.00 ₱3,000,000.00 The hospitalization costs and medical benefits of the members of the faculty
claims arising from employer-employee relations prescribe "within three (3) as provided in Article XVIof this agreement shall be taken from this fund.
years from the time the cause of action accrued; otherwise they shall be
SY 2003-2004 ₱8,000,000.00 ₱8,000,000.00 0 This fund is independently managed by the aforementioned joint committee,
forever barred." USTFU’s claims under the 1996-2001 CBA, whether
characterized as one for unfair labor practice or for money claims from subject to independent audit. The yearly state of finances of the fund shall be
employer-employee relations, have already prescribed when USTFU filed a SY 2004-2005 ₱8,000,000.00 ₱8,000,000.00 0 reported, appended to the FACULTY UNION’s own annual report, to all
complaint before the LA. members of the university faculty.
SY 2005-2006 ₱8,000,000.00 ₱8,000,000.00 0
USTFU filed its complaint under the theory of unfairlabor practice. Thus, B. School Year 1997-98 (June 1, 1997-May 31, 1998):
USTFU had one year from UST’s alleged failure to contribute, or "slide in,"
2006-2011 CBA       x xxx
the correct amount to the fund to file its complaint. USTFU had one year for
every alleged breach by UST: school year (SY) 1997-1998, SY 1998-1999, 2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE
SY 1999-2000, SY 2000-2001, SY 2001-2002, and SY 2002-2003. USTFU SY 2006-2007 ₱8,000,000.00 ₱8,000,000.00 0 MILLION PESOS (₱1,000,000) to augment the Hospitalization and Medical
did not file any complaint within the respective one-year prescriptive periods. Benefits fund.The said sum shall be added to the remaining balance of the
USTFU decided to file its complaint only in 2007, several years after the SY 2007-2008 ₱8,000,000.00 ₱8,000,000.00 0 aforementioned fund;
accrual of its several possible causes of action. Even if USTFU filed its
complaint under the theory of money claims from employer-employee x xxx
relations, its cause of action still has prescribed. SY 2008-2009 ₱8,000,000.00 ₱8,000,000.00 0
C. School Year 1998-99 (June 1, 1998-May 31, 1999):
Determination of the Benefits Due SY 2009-2010 ₱8,000,000.00 ₱8,000,000.00 0
x xxx
We consolidate USTFU’s claims, UST’s remittances, and UST’s alleged
balances in the table below: SY 2010-2011 ₱8,000,000.00 ₱8,000,000.00 0 2. Hospitalization Fund: The UNIVERSITY shall contribute the sum of ONE
MILLION PESOS (₱1,000,000) to augment the Hospitalization and Medical
  UST’s UST’s alleged Total ₱105,000,000.00 ₱79,000,000.00 ₱26,000,000.00 Benefits fund.The said sum shall be added to the remaining balance of the
USTFU’s claims28 aforementioned fund;
remittances29 Balances
We restate the following provisions inthe pertinent CBAs to establish what
D. Miscellaneous Provisions:
1996 to 2001       USTFU claims as its bases for additional funds:
CBA 1. At the end of this agreement, and within three months therefrom, the
1996-2001 CBA
UNIVERSITY shall render an accounting of the monies it paid or released to
ARTICLE XIII the covered faculty in consequence thereof;
SY 1996-1997 ₱2,000,000.00 ₱2,000,000.00 0
ECONOMIC BENEFITS
2. All the economic benefits herein given and those elsewhere provided under
SY 1997-1998 ₱3,000,000.00 ₱1,000,000.00 ₱2,000,000.00 Section 1. ECONOMIC BENEFIT- Upon ratification and approval and for the this agreement, other than retirement benefits and one-half of the signing
term of this Agreement. the economic benefitsto be granted by the bonus, are chargeable to the tuition fee share, if any, of the faculty members;
SY 1998-199 ₱4,000,000.00 ₱1,000,000.00 ₱3,000,000.00 UNIVERSITY and the schedule ofsuch releases are as follows:
3. In the event that the tuition fee benefits of the faculty for any of the three
A. School Year 1996-97 (June 1, 1996 to May 31, 1997): years covered by this part of this agreement i.e., the University decides to
1999       raise tuition fees in the coming two school years, exceed those provided
Memorandum x xxx herein, the same may be allocated for salaries and other benefits as
of Agreement determined by the FACULTY UNION and the matter duly communicated to
4. Hospitalization Fund: Upon ratification and approval hereof, the the UNIVERSITY; and,
UNIVERSITY shall establish a perpetual hospitalization and medical benefits
 56

4. None of the benefits provided herein, both distributable immediately after
ratification and those to be given during the term hereof, other than the
amounts checked-off and the Hospitalization and Medical Benefits are to be
directly distributed to the faculty members by the University. 30 1999
Memorandum of Agreement
1.0 The University hereby agrees to grant increase in salary and fringe
benefits as provided for by the tuition fee increase of school year 1999-2000
according to the following scheme:
x xxx
6.0 If there is any tuition fee increase for school year 2000-2001, there will be
an additional increase in salary/fringe benefitsto be agreed upon by both
parties.
7.0An additional amount of four million pesos will be deposited in the
hospitalization fund of the faculty.31
The 1996-2001 CBA established the fund, with an initial remittance of ₱2,
000, 000. 00 for school year 1996-1997. UST bound itself to augment the
fund by contributing ₱1,000,000.00 per year for school years 1997-1998 and
1998-1999. The 1999 Memorandum of Agreement merely stated that UST
will deposit ₱4,000,000.00 to the fund. Express mention of the carryover is
found onlv in Section 1, Article XX of the 2001-2006 CBA: "It is understood
that the amount appropriated for each year is carried over to the succeeding
years xx x." The 1996-2001 CBA does not have this carry-over provision.
During the lifetime of the 1996-2001 CBA, the 1999 Memorandum of
Agreement, and the 2001-2006 CBA, USTFU never questioned the non-
compliance by UST with an alleged carry-over agreement applicable to the
1996-2001 CBA. This Court is well aware of Article 1702 of the Civil Code,
which provides that "[i]n case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living for the
laborer." This Court is also well aware that when the provisions of the CBA
are clear and unambiguous, the literal meaning of the stipulations shall
govern.34 In the present case, the CBA provisions pertaining to the fund are
clear and should be interpreted according to their literal meaning.

2001-2006 CBA WHEREFORE, we DENY the petition. We DECLARE that the claims of the
University of Santo Tomas Faculty Union have prescribed and that there is no
carry-over provision for the Hospitalization and Medical Benefits Fund in the
Article XX 1996-2001 Collective Bargaining Agreement and in the 1999 Memorandum of
HOSPITALIZATION AND MEDICAL BENEFITS Agreement. The carry-over provision for the Hospitalization and Medical
Benefits Fund is found only in the 2001-2006 and 2006-2011 Collective
Section 1. Hospitalization and Medical Benefits Fund. – The UNION and the Bargaining Agreements.
UNIVERSITY shall buildup and maintain the perpetual Hospitalization and
Medical Benefits Fund. For this purpose, the UNIVERSITY agrees to
appropriate for AY 2001-2002 two million pesos (Ph₱2,000,000.00); for AY
2002-2003 three million pesos (Ph₱3,000,000.00); and for AY 2003-2004
another three million pesos (Ph₱3,000,000.00). It is understood that the
amount appropriated for each year is carried over to the succeeding years
and is chargeable to the tuition fee increment. x x x32 2006-2011 CBA
Article XX
HOSPITALIZATION AND MEDICAL BENEFITS
Section 5. Miscellaneous Provisions. a. The UNIVERSITY will continue to
slide in the amounts set aside in the 2001-2006 CBA to augment the fund.
Fifty percent of the amount due shall be remitted within a month from the start
of the first semester and the other fifty percent within a month from the start of
the second semester of the academic year. These sums of money shall be
remitted without necessity of demand on the part of the union and may not be
garnished or held by the university on account of disputesin hospital billings
between the University and the Union.
x xx x33
USTFU claims that UST’s contributions should have been cumulative, with
the amount appropriated for each year carried over to the succeeding years
and is chargeable to the tuitionfee increment. However, USTFU’s claims are
not supported by the economic provisions of the 1996-2001 CBA and the
1999 Memorandum of Agreement reproduced above.

We wholly agree with UST’s interpretation of the economic provisions of the

1996-2001 CBA, the 1999 Memorandumof Agreement, and the 2001-2006
and 2006-2011 CBAs, as well as its remittances to the fund for the covered
periods. UST faithfully followed the clear provisions of these agreements.